Implementing Reverse E-Auctions: A Learning Process The Cutting Edge in Auctions: Dutch Auctions

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Implementing Reverse E-Auctions A Learning
ProcessThe Cutting Edge in Auctions Dutch
Auctions

• MIS 434

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Reverse Auctions

• A reverse auction (also called procurement
  auction, e-auction, sourcing event, e-sourcing or
  eRA) is a tool used in industrial
  business-to-business procurement.
• The role of the buyer and seller are reversed,
  with the primary objective to drive purchase
  prices downward.
• In an ordinary auction (or also known as forward
  auction), buyers compete to obtain a good or
  service.
• In a reverse auction, sellers compete to obtain
  business.

Source Wikipedia
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Focus of the Reverse Auctions Paper?

• To illustrate how firms using e-reverse auctions
  have succeeded
• The main focus is to illustrate how
  organizational learning is important in managing
  the auction process and the relationships this
  creates with suppliers

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Build e-Auction Competencies

• All five case study firms initially used
  third-party service providers to explore and gain
  experience with the e-auction process.
• Once e-auctions became a permanent fixture,
  supply managers had to decide between continuing
  to outsource e-auctions and developing their own
  internal e-auction competencies.
• All firms eventually developed competencies

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Build e-auction competencies

• Two factors influenced the decision to build
  competencies
• Third-party e-auction administration costs
• E-auction and supply market knowledge.

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e-Auction Competencies Summing Up

• All case study firms started with a third-party
  service provider to acquire e-auction knowledge
  and experience.
• As their internal competencies developed, the
  firms reduced their reliance on full-service
  providers and moved e-auction processes in-house.
• The direction in which they move depends on their
  knowledge and the auction administration costs

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Organize for knowledge management

• Organization-wide learning of e-auctions occurred
  when the pertinent experience and knowledge of
  supply managers is captured, accumulated, and
  shared within the firm.
• The Point? Firms need to organize processes and
  personnel around the e-auction function

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Create a Holistic Sourcing Process

• The e-auction must be considered as a holistic
  process that extends from the first step of
  selecting the items or services, through all
  other steps required to implement and realize the
  savings
• The Point? As with other supply chain sourcing
  activities, the full value chain must be
  considered

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Focus on Total Cost of Ownership (TCO)

• The TCO philosophy emphasizes that sourcing
  decisions should consider all costs associated
  with acquisition, possession, use, and
  disposition
• The lowest price doesnt always win
• TCO is influenced by switching costs,
  infrastructure issues, and trust

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Experiment with e-auction Designs

• Supply managers explored new auction designs
• Multi-lot e-auctions
• Changing the type of real-time information
  visible to bidders (price feedback versus rank
  feedback)
• Using different pricing rules
• Enabling multi-attribute auctions that focus on
  more than just price.

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The Future of e-Auctions

• Most Supply Chain Managers thought e-auctions
  were helpful
• Greatest savings occurred earlier
• Moved from standard items to more specialized
• Price declines would occur if
• New suppliers, in particular, from foreign
  countries participate in the bidding
• Suppliers' costs are reduced, due to raw material
  price reductions, new process changes, and/or
  product innovations
• Industry-wide excess production capacity or
  inventory exists temporarily, and/or
• Suppliers focus on revenue generation rather than
  profit maximization, such that they are willing
  to lower prices below their break-even levels.

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Benefits of e-Auctions

• Save time
• Reduce the number of suppliers used
• Standardize the sourcing process
• Help organizations standardize contract terms and
  conditions
• Buyers can be assured the obtained price is
  competitive

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The Cutting Edge in Auctions Dutch Auctions

• Dutch auction the auctioneer begins with a high
  asking price which is lowered until some
  participant is willing to accept the auctioneer's
  price, or a predetermined reserve price (the
  seller's minimum acceptable price) is reached

Source Wikipedia
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The Cutting Edge in Auctions Dutch Auctions

• Dutch Auctions are a fast way to dispose of
  materials
• Bidding is easier
• There is typically only one bid
• Bidders typically bid earlier
• Dutch Auctions tend to generate higher prices

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