Buying and selling goods, is an age-old problem. From prehistoric times humans have thought of new and advantageous ways of buying and selling goods – from either side of the transaction.
From barters and bargaining to online shopping and bitcoin trading, we have always been creative with the way we buy and sell goods. Indeed, we have come a long way since the beginning of human history, and even more so in the last 100 years.
Trading, as we call this process, has been the topic of some serious debates especially in the business world, as businesses are always looking for advantageous ways to buy and sell goods. One heavily discussed way of doing this in the business world, is to utilise eAuctions. We plan to make eAuctions the topic of this blog, and look into the benefits and challenges this process can bring.
So, let’s start with a definition.
“eAuctions promote fair competition and transparency, driven by market dynamics”
An auction is a process of buying and selling goods or services by offering them up for a bid, taking the bid and selling them to the most competitive bidder. An eAuction is an auction that takes place on an electronic marketplace, to negotiate terms of contract between suppliers and buyers mainly in the industrial sector.
eAuctions are usually a way to accelerate the negotiation process between buyers and sellers, as it concludes a bidding process providing a dynamic alternative to final negotiations.
There is, of course, more than one option to this process, as there are multiple variations of eAuctions that can be used in different situations. If you want to learn more about the types of eAuctions available, and when you should use them, read our The Different Types of eAuction article.
For the Buyer
For the Buyer, the dynamic nature of auctions drives pricing to levels that cannot be achieved in one-on-one negotiations and saves a significant amount of time compared with these individual negotiations. Auctions also provide objectivity, transparency and auditability in the supplier selection process.
With a reduction in manual processes more events can be run on a regular basis, providing increased sourcing opportunities across the organisation. It is always important to remember to clearly set out your success criteria, which may for some items, be much more than pricing alone.
For the Seller
For the Seller, Auctions can reduce the sales cycle time, as award decisions can be made very quickly upon the completion of the bidding event. These awards are made on the basis of more factors than just price, including quality and service levels. Overall, auctions promote fair competition and transparency, driven by market dynamics.
In addition to this, there are a few other benefits to engaging into eAuctions, from the seller’s perspective:
As with any other business process, there are certain things that can go wrong in eAuctions, and both the buyers and sellers need to keep an eye out for them. These are some of the challenges that we believe companies should consider when running or participating in eAuctions:
So, are eAuctions worth it? We believe so. If preparing beforehand and proceeding with caution eAuctions can bring value both to the buyers and sellers. eAuctions create a competitive environment that you just can’t emulate on paper and the dynamic nature of auctions drives pricing to levels that cannot be achieved in a one-on-one negotiation. In addition, it can be a great way to collect market feedback.
If you haven’t tried eAuctions before, we recommend you give it a chance, as there are a great deal of cloud-based e-sourcing tools that are easy to use, and make the process more transparent and collaborative. Have a chat with our procurement experts to learn more about the process.
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