#9 e-Auction

Yesterday saw the release of SI’s new sponsored white-paper on the Top 10 Technologies for Supply Management Savings Today. Sponsored by BravoSolution, this new whitepaper introduces the top 10 technologies that can help a company realize the goldmine of untapped savings opportunities it is sitting on. Properly employed, these technologies could help an organization tap cost reduction and savings opportunities that could collectively add up to 30%, or more, of spend across major direct and indirect categories.

e-Auction technology, which stands for electronic reverse auction technology, is typically the second entry point for a company moving from a paper-based sourcing process to a modern technology-enabled supply management solution and an organization’s second stop to supply management savings.

The savings from e-Auction technology are essentially the same direct savings, from goods and services cost reductions, and indirect savings, from process efficiency and value generated from supply base expansion, found in RFX technology, with the major difference being the speed at which the event can be conducted.

With electronic auctions, once the sourcing manager creates the specifications and sets up the auction, including the weighting and award rules, the process drives itself. The suppliers sign on at the appropriate time and place their bids. When a time-limit or bid floor is reached, the auction ends and the award is made.

The major advantages of e-Auctions are the ability to define precise lot requirements and acceptable bid ranges, which can ensure cost reductions meet a minimal threshold; the ability to define different auction types, which can drive more competitive behaviour in the supply base if properly selected; and the extreme efficiency that can allow a large number of non-strategic or low-value categories to be brought under management

Properly applied on the right categories at the right time, e-Auctions have been generating savings for over a decade. Back in 2003, in one of the first significant studies on e-Auctions, CAPS Research found that direct cost reductions usually averaged between 10% and 20%, that cycle time reductions could be as much as 40%, and that there could be a “power shift” from strong suppliers to weaker buyers not previously attainable. One company realized 165 Million of savings on 912 Million of spend, a major service provider estimated average savings of 20% on 30 Billion of reverse auctions, and a recent report from the IBM Centre is estimating that the Federal Government could save 8.9 Billion annually through reverse auctions alone.

And this technology is only #9 on the list of the Top 10 Technologies for Supply Management Savings Today. Imagine what could be saved with the top technology, or even the third best technology. Or better yet, instead of imagining, download Top 10 Technologies for Supply Management Savings Today and find out! (Registration is required for this one but the doctor believes it’s worth it!)