What is a Reverse eAuction?
A reverse eAuction is an online, real-time purchasing negotiation where suppliers compete by providing lowest price for goods or services to a buyer. Unlike traditional auctions where buyers compete to purchase products or services, in a reverse eAuction, the roles are reversed: multiple suppliers bid against each other to secure the buyer's business, typically driving the price down as the auction progresses.
Why should one choose reverse eAuction over traditional manual negotiation?
Negotiating via reverse eAuction compared to manual negotiation offers several advantages:
Efficiency and Speed: eAuctions can be completed in a fraction of the time it takes for traditional negotiations, especially when dealing with multiple suppliers.
Transparency: All participating suppliers have a clear view of the product specifications and process, ensuring that bidding is transparent and fair. This can lead to better supplier relationships and trust.
Competitive Pricing: The real-time bidding process often drives prices down as suppliers compete against each other to win the Order, resulting in better deals for the buyer.
Data Collection: eAuctions provide immediate, organized data on supplier bids, making analysis and decision-making more streamlined.
Global Reach: eAuctions allow businesses to engage with a wider array of suppliers, including those from different geographical locations, without the need for physical meetings.
Reduced Bias: The automated nature of eAuctions can help reduce the potential for any personal biases or favoritism that might come into play during manual negotiation.
Documentation: Every step of the eAuction process is documented, providing a clear audit trail for future reference.
In contrast, manual negotiations can be time-consuming, may lack the same level of transparency, and might not leverage the full competitive potential of the supplier base.
Is Reverse eAuction suitable for every Negotiation?
While it's perfect for most of the products or services where price is the main focus, complexities arise in procurements with intricate technical specifications and delivery considerations. In such scenarios, it's recommended to initiate with an RFQ, allowing suppliers to submit initial bids. This approach helps buyers filter suppliers offering comparable parameters, ensuring an apples-to-apples comparison.
After pinpointing this group of suppliers, a reverse eAuction becomes an optimal strategy for price negotiation. At eSupplier, we've facilitated eAuctions for a diverse range of items, from walnuts to electrical cables.
Can I re-negotiate price after reverse eAuction is conducted?
Generally No, but if you have reasons you can re-negotiate the price after a reverse eAuction, but there are a few considerations to keep in mind:
Trust & Credibility: Re-negotiating after the eAuction may undermine the trust and credibility of the process. Suppliers participate in reverse eAuctions with the understanding that the process is transparent and final. Re-opening negotiations might lead them to question the integrity of the auction and be less likely to participate in future events
Contractual Obligations: Depending on the terms set before the auction, there may be binding agreements in place. Ensure that you are not breaching any terms by re-negotiating.
Reason for Re-negotiation: If there are valid reasons for the re-negotiation, such as changes in project scope, market conditions, or unforeseen challenges, communicate these clearly and transparently to the suppliers.
Alternative Methods: Instead of a full re-negotiation, consider discussing volume discounts, longer-term contracts, or other incentives that might provide additional value without changing the initial price.
Supplier Relationship: Always consider the supplier relationship. If a supplier feels they are being treated unfairly, it could strain future collaborations.
Transparency: If you decide to re-negotiate, be transparent about your reasons and ensure all participating suppliers are aware and are given an equal opportunity to respond.
In summary, while it's technically possible to re-negotiate after a reverse eAuction, it's essential to approach the process thoughtfully and consider the potential impacts on supplier relationships and the credibility of future eAuctions.