There are a lot of pros and cons to both traditional and dynamic e-auction negotiations, but the bottom line is that there are a lot more savings generated with dynamic e-auctions.
Traditional Face-to-Face Negotiation
The duration of a traditional face-to-face negotiation process is typically 3 to 4 weeks, during which the buyer negotiates with approximately 3 or 4 suppliers. This results in a process where each new bid is followed by an analysis in order to determine how to proceed in relation to the negotiations with the remaining suppliers. The cycle time for a face-to-face negotiation is extensive due to the necessity of having several rounds with each supplier individually. The comprehensive process limits the number of negotiations as it is not feasible for either the buyer or supplier to constantly travel back and forth.
Dynamic eAuction Negotiation
The structure of an e-auction differs significantly from the traditional process. All the suppliers are gathered in one virtual negotiation room and submit bids simultaneously. The supplier can immediately respond to another supplier's bid, and the buyer can immediately see the impact on the bid hierarchy. The duration of an e-auction will last an average of 50 minutes with 5 to 6 participating suppliers who improve their bids an average of 23 times during the e-auction.