Quote: “In a Step Auctions, savings are generated because suppliers are unaware about their competitiveness compared to the other suppliers.” If you are sourcing for a category that has a limited supply base, you may want to consider a Step Auction. A Step Auction is called such because it takes place with pre-determined “steps” or intervals with regard to price and time.
Step Auction FormatsIn this format, suppliers have no transparency regarding their position, how many suppliers are participating in the Auction or the other suppliers’ prices. The supplier can only see when their bid has been accepted or rejected. For this reason, a Step Auction can take place with only one supplier. Seeing one’s own position is a key driver to bid in a Reverse Auction. Suppliers are motivated to submit bids in order to improve their position in the auction. The opposite is true in a Step Auction. In this format, the lack of transparency is the key driver to submit bids. The insecurity about what the other suppliers might be willing to accept is drives each supplier to submit more bids.
Types of Step AuctionsThere are two types of Step eAuctions: Dutch eAuctions and Japanese eAuctions. Dutch and Japanese eAuctions are very similar in regard to setup, but very different in the way they develop and how the suppliers bid.