Three Reasons Why You Should Be Using Reverse Auctions

Reverse auctions’ ascent to sourcing fame has been fairly rapid; just six years after their inception in 1995, GE claimed savings of more than $600 million — and net savings of more than 8% — by sourcing through reverse auctions. Their star power has no sign of fading; last year, Australia’s reverse auction scheme led to the cheapest wind power ever contracted in the country.

We know that the Australian government and GE are using reverse auctions, but why should you be using them? We asked over 100 sourcing, procurement, and finance professionals from around the world to rank the biggest benefits to using reverse auctions:

  1. Reduction of purchasing costs
  2. Enhancement of the procurement process
  3. Increased efficiency in the market:

Reverse auctions generate cost savings that, ultimately, lead to better business outcomes across the enterprise. This applies to organizations of all sorts and sizes; one of the world’s largest tech companies reports that they save over 15% between the reverse auction pre-bid and final bid of contracted suppliers, while the U.S. General Services Administration reported resultant savings of 12-48% from using reverse auctions.

Money saved isn’t the only benefit to reverse auctions. Sourcing professionals can manage more spend and more events due to the efficiency of running an auction, which can often be concluded in under an hour. This frees up category managers to focus on strategic sourcing and analysis — again, ultimately leading to better business outcomes.

By carefully planning a reverse auction, educating all parties involved, and executing it using technology properly equipped for the job, enterprises can attain significant cost savings without forfeiting quality or deteriorating supplier relations. As a figurative cherry on top, they can also enjoy savings that exceed 20%. Are you convinced yet? Download Scout’s white paper to learn more.

Reverse Auctions: The Way Everyone Wins

Kimberly Dimicco | Tags: , ,

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