Steel Buying: The Digital Evolution using Reverse eAuction

Steel Buying: The Digital Evolution using Reverse eAuction

The steel sector stands as a foundational pillar of the global economy, underpinning industries such as construction, automobiles, transportation, energy, food, water, tools, and machinery.

While the steel manufacturing process has seen subtle changes over the decades, the business side—particularly buying and selling—has evolved significantly. With the advent of digital technologies worldwide, the steel industry now leans on online eAuctions. This platform enables buyers and sellers to quickly engage and strike deals that hinge on the principles of supply and demand economics. Through eAuctions, companies negotiate prices for items including Mild steel CRCA sheets and plates, TMT Bars, Structural Steel, and Stainless Steel.

Given that steel is a crucial raw material for many manufacturing industries, it accounts for a substantial portion of the raw material expenditure. Traditionally, end-users primarily source steel through distributors for low-volume purchases. However, for bulk acquisitions, they liaise directly with the manufacturers.

For substantial steel orders, certain mills might set non-negotiable prices for specific steel grades. In scenarios where SMBs source steel via distributors, procurement teams gather quotes from various distributors, comparing prices and negotiating where possible.

For those procuring steel regularly, the traditional manual negotiation method can prove limiting. A more efficient approach in such situations is to organize a Buying eAuction or reverse eBidding. Here, buyers initiate a Reverse eAuction event, detailing the steel type, required quantity, delivery timelines, and payment terms.

Buyers then invite trusted distributors or resellers to this event, scheduled online at a specified date and time. During the live eBidding Auction, suppliers submit their prices, competing by dropping their rates to achieve the L1 (lowest) position.

Typically, steel eAuctions last around 30 minutes, with buyers inviting 4-7 pre-approved suppliers to participate. The supplier offering the best price secures the order, crafting a private marketplace comprising select suppliers.

Many potential buyers might wonder how this system would benefit their business. Here are some clarifications to help SMB buyers get started:

  • Creating an Online Reverse eAuction: Begin by registering on an eAuction software platform, such as eSupplier. This cloud-based platform requires no installations – simply log in and commence.

  • Pre-Auction Preparation: First, catalog all approved suppliers you'd like to invite. Inform these suppliers about your intention to conduct online steel purchase events.

  • Drafting the Reverse eAuction Template: Clearly state the steel specifications, desired quantity, payment terms, delivery date, and even the steel brand preference, ensuring all distributors receive consistent information.

  • Choosing the eAuction Format: eSupplier offers various Reverse eAuction types. Depending on whether you've received initial quotes, you can choose between Fixed Price, Open Price, or Variable Price formats.

  • Setting the eAuction Duration: Given the volatile nature of steel prices, distributors may be hesitant to maintain their quoted prices for extended periods. Hence, while the general practice is a 30-minute window, adjust as per your requirement.

  • Distributing Quantity Among Suppliers: To mitigate supply chain risks, you can divide your order between two suppliers. Typically, 80% goes to the L1 supplier and 20% to the L2.

  • Manual Negotiation vs. eAuction: While manual price negotiation has been a staple since industrialization began, it's often cumbersome and restrictive, especially with multiple suppliers. Online Reverse eAuctions provide an egalitarian platform where each supplier can participate, ensuring a transparent, efficient process.

    Buyers utilizing reverse auction software for their procurement price negotiations often achieve savings ranging from 2% to 8% compared to traditional manual methods. Additionally, the time efficiency gained is a significant advantage.

    Learn how SMB companies can adapt Digital Sourcing Software

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