Suppliers and Reverse Auctions
For suppliers its love / hate...
...Comfortable incumbents hate it, previously excluded suppliers love it.
It's short, intense and millions of dollars worth of business can hinge on the outcome. But even if a supplier isn't successful, they can learn a lot about where they sit competitively.
The chart below highlights some of the characteristics and information available to suppliers participating in a reverse auction. Note: This chart is seen by the buyer only. The supplier will only see their own position and bid status.
In submitting a quotation as part of a tender or some other process, a supplier has to perform a balancing act between the price they'd like to get for their products and services and their level of desire for the business. If they get it wrong they can be eliminated in the first round. With a reverse auction they can immediately see where they sit competitively. At no time can they see the names or bids of their competitors but they will see their bid position (1st, 2nd….6th, 7th etc). Depending on the auction set up, they may even see their price difference compared with the leading bid.
As they improve their offers, their position changes. The usual pattern is that the suppliers will make a series of lower bids in an effort to gain 1st position. The lead can change hands many times, ultimately settling on the true market price for a particular supply with that particular group of suppliers. For the supplier that has exhausted their bidding capacity and finds themselves in 6th or 7th place they have some serious thinking to do about their organisation and their capacity to compete. It is a very clear and tangible signal that is often used by salespeople or agents to go back to their management or supplier to trigger review and change.
