August 12, 2019 | 4 min read
Reverse auctions are a fantastic tool to save time and money.
Reverse auction services are famous for efficiency. Though the business world often focuses on the money-saving elements, the new generation of e-Procurement software can leverage a reverse auction for extreme savings in time as well. In the business world, we know that time is money so all of these savings result in a significant positive impact on the bottom line.
Though reverse auctions have been a mainstay of procurement for years, cloud-hosted software with full integration capabilities is making a bigger difference than ever before. ProcurePort provides state of the art reverse auction software to assist organizations of all sizes in capturing the savings produced by this unique negotiation method. Here are 6 ways that a reverse auction saves you time.
To understand the components, you need to investigate the fundamentals of reverse auction services. At its core, reverse auction services empower the buyer to collect bids and manage them. It saves time by attracting more suppliers than traditional sourcing tactics. The increased competitive process helps buyers and sellers trade information on goods and services with real time efficiency.
Essentially, a reverse auction works to put more potential buyers on your RFx. Since the RFx is the best way to communicate your needs, this means multiple sellers join the bidding. Expect to see new faces show up to a reverse auction. Expect also to see smaller and lesser-known businesses getting involved. When you open up the auction, agile businesses can respond to the market in ways that larger corporations struggle with. Give these newcomers a chance. Emerging businesses are hungrier for sustainable growth relationships.
The more open the market, the more quickly you can find what you are looking for. Supplier diversity translates into time savings. From a buyer’s perspective, you are looking at fairer prices much earlier in the timeline.
Not only does a reverse auction bring more suppliers to the bargaining table, but it attracts the right vendors. You save time by avoiding all the duds. No sifting through piles of random proposals that don’t meet your specific procurement needs. By casting a wider net, you accurately target suppliers with niche products and services instead of limiting yourself to large suppliers who have the manpower to reach out to every buyer that comes along.
In a typical procurement process, buyers invite potential suppliers to submit proposals. Then the buyer waits for a response. When received, the buyer combs through all the information and compares responses for relevant offers. There are disparate terms and conditions. Outside proposals are difficult to standardize. Buyers could also face technical issues accessing and sharing proposal formats across departments. All of this difficulty prolongs the decision-making process. Long waits can be off-putting, especially when establishing new business relationships.
Reverse auction services give buyers the ability to establish the RFx parameters upfront. Instead of sitting back and waiting passively, a reverse auction is proactive. The onus is on the supplier to undertake the legwork. Suppliers review requirements ahead of time in a transparent way—no surprises. The auction procedure itself is finished quickly, sometimes in less than an hour. This cuts man-hours and resources and enables faster decision-making from a strong negotiating position.
When sellers bid against each other during the actual auction, the buyer can optimize benefits early on not only in the lowest bid or lowest price, but in the relationship. This is referred to as downward pressure on market prices. Vendors bid based on a relationship so they are willing to move towards lower prices and greater benefits for the buyer. The decision is quick. Even large volume transactions can be managed quickly to benefit all parties. At ProcurePort, our client case studies have revealed a real-term cost savings of 18-50% based on this downward pressure. Some of that savings is the result of competition, but some can be attributed to time savings in this type of auction process.
Not only do decisions happen faster in a reverse auction, but moving onto the next step is a major advantage of using e-Procurement technology. Once a supplier’s reserved price is chosen, there is zero wait time before the partnership is in writing, ready for signatures. Thanks to automated business process management (BPM) workflows, an e-Procurement platform with integrated reverse auction services can automatically grab the auction winner’s data and build a standard contract within seconds. From there, it goes through approvals and an e-signature process. All of a sudden you have a new procurement contract on the books without having to wait on follow-up. What used to take months can be done in a single week.
Discover more about the time-saving and efficiency benefits of integrated reverse auction solutions. Contact the ProcurePort team of experts fort advice today.