How Reverse Auctions Work
Reverse auctions have become a popular and beneficial trend in procurement. Essentially, they work by having the seller of the service or goods do the bidding while they buyer gets to select the winner. Unlike traditional auctions, the winner is not chosen based solely on the amount of their bid, so the highest or the lowest bidder does not automatically get to claim a victory. The buyer actually gets to select a winner from the available bids based on his own criteria, which might include price, qualifications, delivery time, vendor reputation, etc.
Creating RFP's and RFQ's
In order to conduct reverse auctions, companies need to invest in reverse auction software. Generally, this software has a number of features that make it easier for businesses to start saving money and time on their procurement activities. One of these features is a tool that allows businesses to quickly and easily create RFP's and RFQ's. By simply selecting criteria and information from a list or creating their own, procurement managers can develop these requests without having to spend hours on writing them up. Plus, once a request has been written, it can easily be called up and used a second time which saves even more time.
Sending Out Invitations and Instructions
Another feature of the software is that it makes it easy for procurement managers to contact potential vendors about their needs. Once the RFP or RFQ is posted online, the manager can begin sending out invitations and instructions to select vendors via e-mail. This process saves time and money since most of these requests were once delivered by mail or by fax. Not to mention, there's no printing or copying costs (i .e. paper, ink, toner, etc.) to deal with.
Managing Bid Parameters
A third feature of reverse auction software is that is allows the procurement managers to set parameters that will help them more efficiently manage the bidding. For example, managers can manually review bids along with information about their reputation and qualifications in order to make a decision based on more comprehensive information. Also, reverse auction software makes it easier for businesses to narrow down vendors and bids based on price, delivery time, and other criteria so choosing a bid doesn't have to be as difficult as it once was.
Benefits of Reverse Auction Software
While these features represent just the tip of the iceberg when it comes to how reverse auctions can make a difference in procurement, reverse auction software provides a number of general benefits for businesses. First, it saves time. With all of the features included in the software, procurement managers have to spend less time creating requests, reviewing proposals, and determining appropriate vendors. Many of the processes are either completely automated or they are streamlined to lessen time requirements significantly. Additionally, reverse auction software helps businesses save more money on their procurement. Because vendors compete with one another that competition drives prices down and forces some vendors to figure in added services to their offer. Both of these aspects of reverse auctions are good for buyers. Reverse auction software is also beneficial because it can be used easily even by novice computer users. The software comes with wizards and step-by-step guidelines for deployment, for auction creations, and for additional processes involved in dealing with the reverse auctions.
Implementing Reverse Auction Software with Clear Goals In Mind
Even though there are a number of benefits for businesses, reverse auction software should be implemented with a clear goals. Many businesses begin using reverse auctions with the anticipation that they'll see savings miracles and that the entire procurement staff will eagerly adopt the new approach. The reality is that most workers will view the new applications with apprehension. Thorough training is a must so users can begin to feel comfortable using the reverse auctions, even for indirect purchases, such as office supplies. Also, companies that begin by using reverse auctions for these minor procurement areas build a base of success that demonstrates the software's effectiveness and that will cause the employees to come on board even easier. The bottom line is that a carefully thought out implementation strategy helps businesses get the most from those features and their benefits.