3 Replies Latest reply on Jul 21, 2010 5:42 AM by jaideep mallick

    Reverse Auction Discussion (2) - Negotiations after Event

    Ellen LaPort Apprentice
      For those who are running reverse auction events: Are you open to negotiations with bidders after the event has move to "pending selection" status? This would be negotiations for factors other than price.
        • Re: Reverse Auction Discussion (2) - Negotiations after Event
          David Morel Master

          I have always thought of it as best to handle all such negotiations on the front end so that you can have the auction to be all about price.  This way you can use transformational price factors to balance the suppliers out so if a supplier is #1 in rank, they know they are getting the business.  That leads to the most activity and greatest price compression.  Obviously, this can't always be the case and in such instances, I would make it clear that you might negotiate other elements post bid, but price will not be.

           

          David Morel

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            • Re: Reverse Auction Discussion (2) - Negotiations after Event
              Florian Boehme Expert

              I agree with upfront clearance of all details - if possible.

               

              We do COMMUNICATE a few exceptions to suppliers upfront, one of those is in a situation where you have competition on Line Items and we are not prepared to award each Line Item to the "Lead-Bidder".

              In a final negotiation we then try to see, what additional rewards we could get from suppliers for packaging of a group of Line Items.

              Obviously this does not work for too many categories e.g. where transportation is involved.

            • Re: Reverse Auction Discussion (2) - Negotiations after Event
              jaideep mallick Newbie

              I think there are the following situations, wherein you may have to recourse to off line negotiation after the event.

              a) Formation of Cartel: During the online bidding, you may get hints that the suppliers are not participating and therefore, you may not get the desired result. It is difficult to break cartels online.

              b) Not all the candidates willing to participate in Reverse Auction: There are suppliers, who won't like to participate in the event. In such cases, I recommend to conduct the event with the available Suppliers so as to get the benchmark and then do offline negotiation with the non-participating candidate, only if the Supplier is potential and you do not have many Suppliers to bank upon.

              c) In case the desired result is far away from the expectations: After running the event, you may feel that it is not coming to your expectations(say historical price), after factoring all increases and inflation. One good thing about Ariba reauctioning is that it is a powerful negotiation tool, through which you get the best of the prices. However, at times, it may not give you the desired result and therefore, you get compeled to do off line negotiation.

               

              Regards,

              Jaideep