The benefits of an E-Auction
E-Auction is an electronic negotiation with multiple suppliers during a pre-defined time slot. With the help of an E-Auction, it is possible to determine the market price of a chosen product and/or service in a transparent manner.
Contrary to what is thought, non-functional requirements as long as these are quantifiable can also be incorporated into an E-Auction event.
An E-Auction is often used to buy indirect goods that can be well compared and at the same time are also subject to a competitive environment. The positive effects on the outcome of an E-Auction can be attributed to the fact that the negotiation process takes place in real time and is visualised to the host of the event by a graph as shown below.
In other words, the participants are very much aware of the stakes and will do their utmost best to contend for the assignment.
Clear rules of engagement are therefore paramount in the preparation towards the E-Auction event.
What are the benefits of an E-Auction?
All participants know exactly what they can expect, which inherently means that they are on par with each other. This is also important for the integrity of the company that leads the E-Auction, as there can be no hidden agendas. For companies that have a high level of compliance and integrity, this method is a consequence of this.
All data resides in one location.
Good auditing capabilities.
The entire process is completely recorded with time stamps, which allows for auditing. Where applicable, when a notary is present to monitor the entire auction, auction reports can be handed over instantaneously after the event.
Time-saving on both the buyer and supplier side.
There is no need to negotiate endlessly. In a period of around 30-60 minutes, the market price has been reached. The road to the E-Auction requires more preparation time and especially in cases where suppliers are not familiar with this method.
For the supplier, an E-Auction also means an increase in productivity as the supplier does not need to invest the time for follow-up calls after having submitted a quote. In addition, he is sure that he is taken seriously during the entire procedure leading to the E-Auction, which by default, creates equal opportunities.
A supplier who has become enthusiastic about participating in E-Auctions reports here:
Retention of relationship.
Because the whole process is completely transparent, the parties who have failed to win the E-Auction understand this and know that there will be a next time, where they again will have a fair chance of winning the order.
Element of surprise.
Sometimes during the E-Auction process, a surprising action may ensue, which is due to the fact that the E-Auction in itself is in a different negotiation setting, that sometimes calls for unexpected creativity from the part of the suppliers.
These surprises usually do not occur at the negotiating table as prior going into a negotiation the limits are set, while during the E-Auction process this suddenly may change.
In my next blog, I report of two of such stunning moments
When is it better not to conduct an E-Auction?
There are also circumstances where an E-Auction should not be used:
– There is only one provider. (Monopolist)
– The customer has a strong preference for a supplier.
– The offered products are difficult to compare.
– There is a reciprocity between supplier and customer.
– There is too little competition to achieve good pricing.
– Pricing is subject to regulations ( finance world- Pensions)
Why E-Auction as an SAAS solution?
After a thorough market research, I chose the SAAS solution from Marketdojo, who are a UK based company with customers all over the world. Especially in the UK, E-Auction is used extensively.
What are the benefits of a Software As a Service (SAAS) solution?
– It is a solution that is geared to conduct E-Auctions.
– There is only a one-time fee applicable, which means that it can be used without any risk.
– The solution meets all security requirements that are important for an E-Auction.
– The service is continually developed on the basis of customer input.
– Because the SAAS service is used by a large number of customers, this provides a solid picture based on the meta data that can be translated into “best practices”.
– The metadata also gives insight into the various categories, which gives a good idea of what is still possible after the best offer from a supplier.
Please have a look at my blog on this topic with examples.
What do customers have to say about the Marketdojo SAAS solution?
Please find below a link to a large number of reviews.
Why involve an external consultant?
The software itself is extremely user-friendly, so the temptation is there to do it yourself. The use of an experienced consultant learns that the first step will be in any case be easier, as it has been done before. In addition, the consultant can also look at the properties of the products and/or services to be auctioned. From the whole context, it may be useful to use a different type of auction than the commonly used reversed E-Auction. The consultant can also advise on the inclusion of non-functional requirements and how to translate them into the final auction.
For a simple auction, the one-time fee is 1,500 Euros excluding V.A.T. If an auction takes place within 3 weeks of the first auction then the cost is 800 Euros per auction. At a second or third auction on the same day, no additional costs will be calculated.
This amount includes:
– The preparation.
– The “trial auction” to get the participants accustomed to the system.
– The actual auction.
When an auction becomes more complex, because of adding non-functional requirements, then a fixed price will be agreed in advance.