enversa p. o. v.

Online reverse auctions are used more and more frequently in numerous industries and the public sector as a tool for buyers to save costs. In an online reverse auction, a buyer places a request to buy a particular product or service and sellers bid against each other with the lowest price they are willing to offer. The process is automated by software using internet access to bring the buyer and sellers together in an efficient system that saves costs over the traditional three bid paper bidding system. “The success of online reverse auctions is measured by how much purchasers’ and sellers’ costs are reduced, estimated to be about 29 percent.” In another study by Wagner and Schwab, “65 percent of auctions resulted in purchase price savings of 5 percent.” According to Marc Pickren, president of the Enversa Companies, “Our experience is that the values gained using reverse auction bring exceptional ROI.”

Online reverse auctions are used in the advertising industry to buy media (a $429 billion market), providing a competitive advantages for advertisers and agencies, while also offering new sales opportunities for media properties. By using online reverse auctions such as Enversa for print, online, outdoor, TV, and radio media buys, agencies gain increased buying power, a competitive advantage over other agencies, stronger client relationships, time savings, and efficiency. Advertisers gain more media inventory for their budget, access to qualified media properties, a significant return on investment, and faster speed to market. Media properties gain a guaranteed budget, a very short sales cycle, low cost of sales, and new opportunities. In an increasingly competitive industry, online reverse auctions are changing the competitive climate with advantages to both buyers and sellers.

For products, the online reverse auction system works well for supply-chain commodities and low-tech components; those products a buyer needs in which quality and reliability are fairly standard, suppliers are numerous, and price is the primary factor considered in a purchase. Plastic components, fasteners, packaging , office and cleaning supplies are some of the products commonly purchased in online reverse auctions. “FreeMarkets is the largest player in online industrial procurement,” but they use software to handle only the auction itself. Increasingly, companies are automating the entire process online. Auctions can be highly complex, for example combinatorial auctions in which simultaneous auctions are conducted. A supplier submits a set of bidding rules upfront, which are kept hidden from a buyer. For instance, a supplier may choose not to supply if they don’t win enough in a package of products or locations. In most product-bassed auctions, when a seller bids they will specify quality, delivery time and warranty terms, in addition to price. Then the buyer chooses the winner based on best value, not on just best price.

The biggest savings contributing to this 10 percent average reduction of costs is due to savings in paperwork. Automated online software saves both time and money because of a reduction in transaction costs and faster automated transactions.

In addition to the savings in time and money, software solutions can increase the amount of information available to a buyer. For example, software can include sophisticated vendor performance analysis applications with in-depth graphing and reporting functionality to provide information on suppliers’ performance histories. This type of information was never possible with traditional paper bidding processes and gives a buyer improved negotiation capability.

Strategic sourcing is becoming the norm in most industries as companies compete globally. The Internet is breaking down barriers for competition and online reverse auctions are leading the way towards the future, saving an average of 10 percent in costs.

This entry was posted on Tuesday, January 20th, 2009 at 7:26 am and is filed under Enversa POV. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.