Reverse auction preparation

Add comment February 23rd, 2007 David Bush - Iasta

Part of successfully launching a reverse auction project is preparing for the related questions and issues that might occur. Preemptively addressing some will avoid confusion and help the process. Suppliers might have questions about the process they are being involved in once an auction invitation and package is issued and accepted. Have these answers ready and suppliers will feel more comfortable with proceeding:

• How many auctions have you conducted?
• Has this category ever been auctioned previously?
• Did the buyer qualify the invited suppliers?
• Is the buyer willing to work with any of the invited suppliers?
• Is the actual buyer aware of the auction and involved in this process?
• What is the expected outcome of the auction and time expected to award?
• What other costs are included in the bid price (e.g. escalators, transportation costs, pallet exchange, etc.)?
• Is this a “winner-takes-all” auction for several products or will the lots be awarded individually?
• Is the buyer bound to award the order to the supplier that submits the lowest bid?
• Is the buyer obligated to re-open the auction if the winning bidder is disqualified?
• Are all terms and conditions for the order included in the auction specifications?
• Will any further negotiation take place after the event closes?
• Will finalists be invited for further presentations and award conclusion?

One other suggestion would be to limit the use of the term “reverse auction” as it tends to remind suppliers of the old days with wild and uncontrolled auction environments. We normally use terms like sourcing projects/events, competitive bids, or online negotiations which shows that the bid is more of a involved process, not just a price war.

There will always be questions about the project itself, as well. Being prepared with solid answers will show that a buyer is prepared and the event should be taken seriously. You cant expect a bidder to “sharpen their pencils” if you haven’t done it yourself.

Entry Filed under: General, Reverse Auctions, Suppliers, Supply Management Best Practices