In a previous post, https://alanbuxton.wordpress.com/2007/09/05/i-was-auctioned-part-1/ I gave some details about a reverse e-auction I took part in as a supplier and explained that we held back in our bidding. Here are some of the reasons why:
- Lack of clarity of what was being sourced. The documentation accompanying the e-auction was only about 1 page long. So even if though we had our own interpretation of what we were bidding on, how could we be sure that we were bidding like for like against other bidders, or even whether the first placed bidder was a genuine bidder or a shill.
- Lack of competitor information during the e-auction. This particular format only showed us whether we were first, second or worse.
- Lack of professional e-auction management. The e-auction manager did not give us any reasons or encouragement to bid during the event
- Lack of clarity over the award process. When would it be awarded? Would it be awarded at all? Would it be awarded to the supplier with the lowest price?
With all this in mind it seemed to me that we had two choices:
A. Take a very narrow definition of what the buyer was sourcing, bid very aggressively based on that interpretation and then make money through charging for add on services.
B. Take the negotiation offline if possible. Place some bids during the e-auction but not bid too aggressively and then try to talk to the buyer after the event.
We chose option B. We weren’t awarded the business so to some degree this is an academic debate. However I am sure that many suppliers who take part in e-auctions ask themselves exactly the same questions. If we had been encouraged to bid more aggressively during the e-auction, who knows, maybe more competition would have been generated and maybe the buyer would have achieved better prices.
The moral of the story is for buyers to approach their e-auctions in a professional way, to ensure they are completely clear with suppliers about where the e-auction fits into the overall sourcing process, and to make it worth the while of suppliers to bid as aggresively as possible.