Should Tata Motors Use Reverse Auction Does Not Work For All Items?
2. Why do you think Reverse auction does not work for all items? Should Tata Motors use reverse auction for Procuring Crank Shafts – Discuss
How Reverse Auctions Work
In a normal bidding or auction, an individual or a company will offer a contract or a product for sale and bidders will offer as per what they believe the product or contract cost is worth with increasing the price over the time. In an online auction, like eBay, the auction has a time limit and when the time auction expires the one who will have the highest bid gets the contract. In reverse auctions, it is just the opposite of normal bidding, a company will offer a contract for which number of vendors will be bidding, based on all the conditions and terms of the contract, and …show more content…
• Specification of Service or Product – A reverse auction might be suitable for a service or product which is simple to define. A product that has some detailed specifications which would require time bound explanations might not be a right item for a reverse auction due to the reason that vendors may not feel comfortable while bidding without enough information. Product that requires customization is also not so suitable for the reverse auctions.
• Lead Time – If a company needs a service or product quickly, then offering the product or service on a reverse auction would not be suitable. A potential vendor would need some time to calculate the best bid they can offer on the reverse auction and due to a reasonably short lead time, they would be unwilling to bid. Services or products where the lead time is enough for multiple bids would be best suited for reverse …show more content…
• Buyer-supplier relationships are unlikely to be damaged while using a reverse auction.
Generally negotiating the price by reverse auctions is not suitable for goods from the critical and specialised (high risk) quadrants of the supply positioning matrix mentioned above. Goods and services belonging to high risk quadrants would have characteristics which prevent them being potential for reverse auctions, and these are listed below.
• Long-term relationships with suppliers are much important which is being secured through supplier relationship management.
• If the focus shifts too much on price then a number of risk elements which need to be managed but may have to be compromised.
• Products may be customized than being off the shelf.
• The cost is high when switching suppliers.
• There may less number of suppliers participating in a reverse auction.
Some examples of commodities or products which might be suitable in using reverse auctions include:
• Xerox paper
• Standard information technology equipment (e.g. modems, specified desktop computers, toner cartridges)
• Major building products (e.g. steel, timber, concrete, iron, copper
How Reverse Auctions Work
In a normal bidding or auction, an individual or a company will offer a contract or a product for sale and bidders will offer as per what they believe the product or contract cost is worth with increasing the price over the time. In an online auction, like eBay, the auction has a time limit and when the time auction expires the one who will have the highest bid gets the contract. In reverse auctions, it is just the opposite of normal bidding, a company will offer a contract for which number of vendors will be bidding, based on all the conditions and terms of the contract, and …show more content…
• Specification of Service or Product – A reverse auction might be suitable for a service or product which is simple to define. A product that has some detailed specifications which would require time bound explanations might not be a right item for a reverse auction due to the reason that vendors may not feel comfortable while bidding without enough information. Product that requires customization is also not so suitable for the reverse auctions.
• Lead Time – If a company needs a service or product quickly, then offering the product or service on a reverse auction would not be suitable. A potential vendor would need some time to calculate the best bid they can offer on the reverse auction and due to a reasonably short lead time, they would be unwilling to bid. Services or products where the lead time is enough for multiple bids would be best suited for reverse …show more content…
• Buyer-supplier relationships are unlikely to be damaged while using a reverse auction.
Generally negotiating the price by reverse auctions is not suitable for goods from the critical and specialised (high risk) quadrants of the supply positioning matrix mentioned above. Goods and services belonging to high risk quadrants would have characteristics which prevent them being potential for reverse auctions, and these are listed below.
• Long-term relationships with suppliers are much important which is being secured through supplier relationship management.
• If the focus shifts too much on price then a number of risk elements which need to be managed but may have to be compromised.
• Products may be customized than being off the shelf.
• The cost is high when switching suppliers.
• There may less number of suppliers participating in a reverse auction.
Some examples of commodities or products which might be suitable in using reverse auctions include:
• Xerox paper
• Standard information technology equipment (e.g. modems, specified desktop computers, toner cartridges)
• Major building products (e.g. steel, timber, concrete, iron, copper