This week's Knowledge Nugget will touch on the benefits of auctions.  This 3 part post will cover why auctions work, auction decision making,  tangible benefits of auctions, proof of savings, when not to used  auctions, and common misconceptions of auctions. Part 3 will close wrap up auctions with the subjects - alternative strategies to auctions and common misconceptions of auctions as well as best practices.


Of course, auctions aren’t always the right answer…


Try Different Strategies IF:

1. Category is on the black list

    • Challenging to create “apples to apples” scenario
    • Suppliers won’t participate
    • Ex: Small Parcel

2. You don’t know what you’re buying

    • Supplier proposals are used to define service levels
    • RFP to finalize SLAs

3. Not enough players

    • Single source scenario or 2-bidder market
    • Few suppliers with large difference in RFP pricing

4. You plan to negotiate after the event

    • Undermines the auction process
    • Borderline unethical practice

5. Proprietary Technology or Patents are an issue

    • Suppliers control technology and might have product patents


Common Auction Misconceptions


1. Auctions are only for “commodity” items
2. Auctions only work in markets where there are large numbers of suppliers with similar capabilities
3. Auctions are only about price
4. Auction benefits are not sustainable or fully implementable
5. Auctions ruin supplier relationships and long-term partnerships


Best Practice Tip for eSourcing


WORK WITH SUPPLIERS for performance assessment and new savings ideas!

Suppliers can help drive costs out of the supply chain in a range of areas including logistics improvements (such as packaging/handling, warehousing and inventory management), better resource utilization (this would include long-term planning, forecasting and production planning), better transactional interaction (ordering, tracking and payment) and better product cost management (such as NPI co development and design). Suppliers, for their part, can often bring a new perspective to the situation. They are more familiar with their own cost drivers, of course, and sometimes even have a more intimate understanding of their customers’ supply chain practices.


To view the previous parts of this post please follow the links below

Ariba Knowledge Nuggets: Ariba Sourcing - Why Auctions Work! Part 1

Ariba Knowledge Nuggets: Ariba Sourcing - Why Auctions Work! Part 2



This has been another Knowledge Nugget post brought to you by Beverly Dunn.

For more information or details please feel free to contact me!