Chapter 4
When to Use Reverse Auctions
Clearly defined specifications A competitive market with willing, qualified suppliers At least three: ensure competition Less than 7: avoid unnecessary cost/complexity Knowledge of market conditions: set a reserve price Buyer and seller competency with auction technology Clear rules of conduct Buyer is prepared to switch suppliers if necessary Projected savings justify a reverse auction
Potential Problems with Using Online Auction
Buyer knowingly accepts bids from suppliers with unreasonably low prices Buying firm submits phantom bids during the event to increase the competition artificially Buyer includes unqualified suppliers to increase price competition
Radio Frequency Identification (RFID) Tags
Contain a chip and antenna that emit a signal, using energy from a radio frequency reader, which contains information about a shipping container or its individual contents Can be passive, active, or battery-assisted passive Vary in memory, frequency, power source, and cost Three primary applications in the supply chain: real-time inventory tracking product tracking transportation
Online Reverse Auction
Online, real-time, dynamic, declining-price auction for goods or services between one buying organization and a group of prequalified suppliers Suppliers compete by bidding against each other online using specialized software Suppliers see the status of their bids in real time The supplier with the lowest bid or lowest total cost bid is usually awarded the business
Three Types of Online Reverse Auctions
Open offer auctions Suppliers select items, see competitive offers, and enter offers up until a specified closing time. Names not disclosed to other bidders Private offer auctions The buyer offers a target price and quantity Suppliers enter offer(s) by a specific time The buyer evaluates and posts a status level Accepted; closed; best and final offer (BAFO); open Posted price Buyer posts price and accepts first supplier to meet price
even more Potential Problems with using online auctions
Risk of interrupting good supplier relationships Risk of developing a reputation for aggressive price-buying over other considerations Costs of running auction versus expected savings Cost savings potential of auctions versus sourcing processes such as RFP/RFQ and negotiation Significant up-front preparation and cost required compared to determining price through an RFP/RFQ Actual price versus bid price given unforeseen costs
Key Questions When Adopting New Information Systems Technology
Should we be a leader or a follower? leader has the leg up. follower - less risky but you didnt set the standard. What should be acquired through e‑commerce? office materials What tools should we use to acquire those items? Mro- p-cards electronic catalogs- and the pros and cons- and what transactions saving u can realize. Who should we use as a service provider? its an aquisition Should we enter into an alliance, and if so, what type, or work privately?
More Potential Problems with Using Online Auctions
Supplier collusion Suppliers bid unrealistically low prices and attempt to renegotiate afterwards Suppliers "bird watch" or participate, but do not bid to collect market intelligence. Buyer may require bids before entering the auction to preclude this behavior Suppliers submit bids after the auction event in an attempt to secure the business
