A reverse auction is just opposite to the general auction; in this, the role of buyer and seller are reversed. Contrary to the general auction, the buyer is the organizer in the case of reverse auction and he invites the suppliers to compete for meeting the best purchasing conditions.
Reverse eAuction, the term used for electronic reverse auction, is an important part of telco eProcurement, where suppliers compete online to deliver their services/products at best prices. Actually, it has changed the way the business organizations used to select and deal with the suppliers. Telecom reverse auctions act as a negotiation tool; the contracts are finalized by selecting one among the various contract proposals after ensuring that the delivery conditions would be effectively met.
Though reverse auctions are the way to make sourcing process more effective for the buyers and let them have access to the new suppliers but at the same time, it also offers advantages to the suppliers. For an instance, it creates a leveled playing field for the suppliers and offers full transparency of the negotiation process. However, there are some myths related to the telecom reverse auctions. Here are those myths and the reality behind them.
Suppliers don’t like the reverse auctions
Most of the people believe that suppliers do not like reverse auctions. They think so because suppliers need to compete and reduce the prices for their services and products. Well, the reality is non-incumbents like the reverse auctions, provided that the rules are clear to them. No doubt the suppliers need to compete for selling their telco products and services but it also provides them full transparency of the negotiation process.
Reverse auctions are used in the case where the main decision variable is price
It is a common myth that reverse auctions are used only in the case buyers need to reduce their expenses. But in reality, various criteria are defined in the reverse auction, which include average prices, delivery time, warranty periods and some others that influence bid’s final score. It is not only the price, but all purchasing factors are included in the telecom reverse auction procedure.
Reverse auctions are not good for buyer-supplier relationship
It has been believed that reverse auctions do not lead to the healthy buyer-supplier relationships. Well, the relationships are well established when suppliers are clear about the rules and know why they have been selected (as it lets them deliver what is expected from them). And if their services/products are meeting buyer’s requirements and are available at affordable rates then there is no hurdle in the way of buyer-supplier bonding.
If you are planning to organize a telecom reverse auction for completing the sourcing process, then you need to mention your requirements and rules clearly. This would let only the relevant suppliers bid for your auction (who would be interested in delivering their telco services/products as per your recommendations) and you would be able to find the best contracts by creating competition among the suppliers.