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Successful Online Bidding and Contract Management

86th Annual International Purchasing Conference & Educational Exhibit

May 2001


Julie S. Roberts

Tuesday, May 1
Workshop DF

Keven Gray
VP Strategy & Procurement

Before taking a flying leap into an e-procurement initiative, it's important to not only understand why electronic procurement might benefit the organization, but also to have a basic understanding of many of the terms and buzz words under the e-procurement umbrella. Terms of particular interest to the group were "reverse auction" and "open bidding."

Reverse auctions are bidding sessions for a buyer's requirements where the buyer submits RFQ/RFP and potential suppliers submit bids in a live bidding session of a limited duration. Open bidding is where suppliers see other bids after their bids, then have the option to bid lower in various parameters of the composite bid. The difference between the two? Open bidding sessions take place in a compressed time frame but may have a longer duration for the bidding.

Following an explanation of the pertinent terms, a case study was analyzed. To begin with, the organization's e-commerce objectives were identified as:

  • Reduce time and effort in RFQ process
  • Realize tangible cost savings
  • Increase reach to universe of potential sources

After identifying the objectives, the organization reviewed possible platforms for their auction. The following criteria were used to identify organizations and software to work with to achieve this initiative:

  • Ease of use
  • Investment - must show ROI
  • Potential for major cost savings - by utilizing reverse auctions/open bidding and by extending the "reach" to large supplier bases

After finding a few platforms for various parts, bids were returned within a few days with great results. To quantify these results to the organization, the value of these reverse auctions was shown in terms of sales dollars. Using sales dollars to depict the savings achieved from the use of an online auction puts the data in terms everyone in the organization can understand. It shows the direct bottomline impact.

So what are the best things about online bidding? Gray offers the following advantages:

  • Immediate ROI
  • Complete suite of products and services
  • Drive cost savings
  • Streamline procurement processes
  • Strategic sourcing vs. transaction mechanics
  • More effectively manage the supply chain
  • Quick and painless implementation

Online bidding is not the only e-procurement tool available to supply managers, but it may represent a good place for supply managers to begin to realize the advantages and possible savings through e-procurement tools.

By Julie S. Roberts, Writer for Purchasing Today®.

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