4 Replies Latest reply on Jul 27, 2012 5:59 AM by SundarK

    Dutch Reverse Auction Best Practices

    Nick Matuszewski Novice

      We are looking to run our first Dutch Reverse Auction.  Would anyone be willing to share best practice information for setting up and running a Dutch Reverse Auction?


      I am looking for best practices or strategies surrounding the following:

      -          What do you recommend setting the starting price at, i.e. 40% off current lowest quote?

      -          How often should the we increase the price, i.e. every 30 seconds?

      -          By how much should we increase the price?

             What is the maximum length of time the overall auction should last?  Should we seek to cap the auction at historical lowest quote after a specific time period, e.g. 10 minutes?

       

      If anyone is willing to share best practice information, I would greatly appreciate a five minute discussion in which I can provide a few more details about the auction we are hoping to run.  I would like to solicit your input and advice for our specific effort based upon your past experiences.


      Thank you,

       

      Nick Matuszewski

      nmatuszewski@ulta.com

        • Re: Dutch Reverse Auction Best Practices
          SundarK Expert

          Hi Nick - Attached is a document which provides an intro to Dutch Auctions. The starting price and increments are driven by the category you are trying to source and the competition you have for this particular category. Best Practice for time increments is 1 minute which provides enough time for suppliers to respond. The maximum length of auction timeframe is determined by the highest price you would like to pay mapped to time increments. Example if your floor for particular item is $30 and you are setting the time increment to 1 min and the starting price is $15, then auction timeframe should not exceed 15 mins.

           

          Hope this helps,

           

          Sundar

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            • Re: Dutch Reverse Auction Best Practices
              Nick Matuszewski Novice

              Hi Sundar,


              Thank you very much for the presentation. The tips are helpful.  Thanks for the best practice tip on the 1 minute increments as well. 

               

              In regard to the overall length of a Dutch Auction, does Ariba have any statistics as to at what point suppliers usually place their bid, i.e. 4 to 7 minutes into the auction?  For example, I am assuming we want to set the opening price low enough so that a bid is not placed within this first 4 to 5 minutes; thus allowing time to build some anticipation.  However, I am also assuming that we don't want the auction to exceed about15 minutes either (losing the supplier's interests).  Does Ariba have any best practice information or thoughs on this?


              Thanks,

              Nick

                • Re: Dutch Reverse Auction Best Practices
                  Aniket Taral Novice

                  Hi Nick,

                   

                  We generally run the Dutch auctions for 12 to 15 minutes only.

                   

                  As suggested by Sundar, the total time or the end price of the auction will depend on the category and the competition level.

                   

                  But other than that while providing supplier training you need to stress on the part that the supplier/participant to accept the bid first wins the business at that price and also, the supplier needs to be ready with a best price they can offer before participating in the live auction.

                   

                  Regards,

                  Aniket

                  1 of 1 people found this helpful
                  • Re: Dutch Reverse Auction Best Practices
                    SundarK Expert

                    Hi Nick - Bidding dynamics in a Dutch Auction depends on the category, volume and whether the auction is setup to accept partial quantity or full quantity bids. We have seen Dutch Auctions ending in the first 2 minutes (for full Quantity only events) and in some cases close with no bids. The key is to setup a starting price that is not too aggressive, adequate supplier training and communication throughout.

                     

                    -Sundar