In a dynamic global economy, effectively managing the procurement process to help cut costs is critical to long-term success. Many firms have recently adopted Internet-based reverse auction tools and techniques for purchasing materials and services from their suppliers. In a reverse auction, the buyer takes on the role of seller by advertising its intent to purchase a specific quantity of an item or service, and providers bid for the business. As a result, prices descend rather than ascend as they would in a traditional auction. Reaction to the concept has been mixed, including both spectacular statements of success and concerns about applicability to the total procurement function. The authors present actual case studies that illustrate the tasks required to conduct a reverse auction, the third-party aid available, and the potential benefits.
Originally published in: Business Horizons, v. 45, no. 4, July-August 2002, pp. 70-76.
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