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Implementing Reverse E-Auctions: A Learning Process The Cutting Edge in Auctions: Dutch Auctions

Implementing Reverse E-Auctions: A Learning Process The Cutting Edge in Auctions: Dutch Auctions. MIS 434. Reverse Auctions. A reverse auction (also called procurement auction, e-auction, sourcing event, e-sourcing or eRA) is a tool used in industrial business-to-business procurement.

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Implementing Reverse E-Auctions: A Learning Process The Cutting Edge in Auctions: Dutch Auctions

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  1. Implementing Reverse E-Auctions: A Learning ProcessThe Cutting Edge in Auctions: Dutch Auctions MIS 434

  2. Reverse Auctions • A reverse auction (also called procurement auction, e-auction, sourcing event, e-sourcing or eRA) is a tool used in industrial business-to-business procurement. • The role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. • In an ordinary auction (or also known as forward auction), buyers compete to obtain a good or service. • In a reverse auction, sellers compete to obtain business. Source: Wikipedia

  3. Focus of the Reverse Auctions Paper? • To illustrate how firms using e-reverse auctions have succeeded • The main focus is to illustrate how organizational learning is important in managing the auction process and the relationships this creates with suppliers

  4. Build e-Auction Competencies • All five case study firms initially used third-party service providers to explore and gain experience with the e-auction process. • Once e-auctions became a permanent fixture, supply managers had to decide between continuing to outsource e-auctions and developing their own internal e-auction competencies. • All firms eventually developed competencies

  5. Build e-auction competencies • Two factors influenced the decision to build competencies: • Third-party e-auction administration costs • E-auction and supply market knowledge.

  6. e-Auction Competencies: Summing Up • All case study firms started with a third-party service provider to acquire e-auction knowledge and experience. • As their internal competencies developed, the firms reduced their reliance on full-service providers and moved e-auction processes in-house. • The direction in which they move depends on their knowledge and the auction administration costs

  7. Organize for knowledge management • Organization-wide learning of e-auctions occurred when the pertinent experience and knowledge of supply managers is captured, accumulated, and shared within the firm. • The Point? Firms need to organize processes and personnel around the e-auction function

  8. Create a Holistic Sourcing Process • The e-auction must be considered as a holistic process that extends from the first step of selecting the items or services, through all other steps required to implement and realize the savings • The Point? As with other supply chain sourcing activities, the full value chain must be considered

  9. Focus on Total Cost of Ownership (TCO) • The TCO philosophy emphasizes that sourcing decisions should consider all costs associated with acquisition, possession, use, and disposition • The lowest price doesn’t always win • TCO is influenced by switching costs, infrastructure issues, and trust

  10. Experiment with e-auction Designs • Supply managers explored new auction designs • Multi-lot e-auctions • Changing the type of real-time information visible to bidders (price feedback versus rank feedback) • Using different pricing rules • Enabling multi-attribute auctions that focus on more than just price.

  11. The Future of e-Auctions • Most Supply Chain Managers thought e-auctions were helpful • Greatest savings occurred earlier • Moved from standard items to more specialized • Price declines would occur if… • New suppliers, in particular, from foreign countries participate in the bidding • Suppliers' costs are reduced, due to raw material price reductions, new process changes, and/or product innovations • Industry-wide excess production capacity or inventory exists temporarily, and/or • Suppliers focus on revenue generation rather than profit maximization, such that they are willing to lower prices below their break-even levels.

  12. Benefits of e-Auctions • Save time • Reduce the number of suppliers used • Standardize the sourcing process • Help organizations standardize contract terms and conditions • Buyers can be assured the obtained price is competitive

  13. The Cutting Edge in Auctions: Dutch Auctions • Dutch auction: the auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer's price, or a predetermined reserve price (the seller's minimum acceptable price) is reached Source: Wikipedia

  14. The Cutting Edge in Auctions: Dutch Auctions • Dutch Auctions are a fast way to dispose of materials • Bidding is easier • There is typically only one bid • Bidders typically bid earlier • Dutch Auctions tend to generate higher prices

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