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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 l.jpg

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

MIS 434


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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


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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


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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


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Build e-auction competencies

  • Two factors influenced the decision to build competencies:

    • Third-party e-auction administration costs

    • E-auction and supply market knowledge.


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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


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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


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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


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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


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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.


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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.


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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


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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


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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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