eAuctions enhance transparency and efficiency, creating a better procurement process for all parties involved including buyers and sellers.
Minimize Price Increases
Prices increase overtime, not only due to inflation but also due to years of repeat business. Suppliers know they are the “easier” choice and increase rates just enough to increase their profits, but not too much to drive you away. Incumbent suppliers can often feel they are guaranteed your business after repeat purchases because they know buyers do not want the hassle of researching, contacting and negotiating with new businesses.
With e-auctions, current suppliers will be notified they are being challenged by other vendors for business so they must present their most competitive price to retain you as a customer. It is not uncommon for incumbent suppliers to offer new discounts to avoid going to auction. It is also possible for incumbent suppliers to withdraw from the auction all together, knowing they cannot compete in the market. This is a solid indication that you made the right choice and a better deal awaits.
Uniform Buying Practices
A structured and uniform buying procedure through e-auctions makes knowledge transfer easier across teams. Buyers can streamline the process by using templates from previous negotiations. The process is improved through experience by using what works and changing what is not working. The organization's negotiation capabilities are continually developed over time thanks to the contributions of the team during e-auctions. Uniform corporate negotiation procedures also make the buying organization appear more professional to potential suppliers, upping your reputation in the industry as a forward-focused, tech-savvy company.
Improved Market Data
Essential market intelligence is gained in e-auctions as well as material cost savings. Buyers get a glimpse of each participating supplier's competitiveness as they fight to win the bid in real time using e-auctions. Adding more suppliers increases competition and ultimately decreases the final price. The buyer will get in-depth knowledge about the market when keeping this principle in mind and can apply their newly gained information in future sourcing strategy decisions.
Line-by-line comparisons are essential to getting the best buy. The increased transparency and direct comparisons make evaluating the offers quicker and easier for both the buyer and the supplier. Single-factor analysis is optimal for making clear decisions. eAuctions remove the opportunity for multiple variables to be considered. Unlike traditional face-to-face negotiations where many factors contribute to the overall price such as service levels, payment terms or quality, e-auctions only allow a single factor to be considered. The suppliers appreciate the straight-forward approach and know exactly what each company is bidding for, which creates trust and openness between the buyers and vendors.
Transparency for the Suppliers
Participating suppliers and the buyers get beneficial market feedback in an e-auction. Even the unsuccessful suppliers get a better gauge on how they rank against others and can potentially use that information to improve their supply chains to win at the next e-auction. Competitive advantage is solidified for both the buyer and the seller through access to information, flexibility and transparency.
eAuctions are a sound way to avoid overpaying for goods and services and gain market intelligence. Strengthen supplier relationships and improve your procurement processes with e-auctions.