When NOT to Use a Reverse Auction

Took a week off, so you're getting a double-dose of the Procurex blog this week.

Despite the fact that Procurex has run over a thousand reverse auctions, they have also conducted several purchasing projects without using the reverse auction. Why? It simply is not the right strategy in some cases. There are definitely instances where reverse auctions are inappropriate. These factors should be weighed carefully when implementing strategic sourcing:

• Where item specifications or auction conditions are dynamic and cannot be specified with a high degree of certainty.

• Where vendor qualifications are critical, lengthy, or uncommon (e.g. a defense, security, or medical application).

• Where price is not the primary concern or the other conditions of sale cannot easily be translated into an auction specification.

• In cases where the use of auctions may erode long-term vendor relationships that are vital to supply or buyer outcomes. In these situations traditional methods may be more appropriate. On the other hand, the systematic approach of strategic sourcing should still be considered, even though a reverse auction is not the appropriate tool. Strategic sourcing may be used with other tools (or even traditional methods) to produce improved results. A consultant may be able to suggest alternatives, so that more can be done with less, even in these circumstances.

More on General Procurement

The platform provided by Procurex enables companies to obtain the best possible value for the best possible price. Those in search of large amounts of a specific good or service will be adequately equipped with tools that will maximize strategic sourcing efforts. This platform has proved to be extremely successful in the market for energy, as seen in the blog post written by Matt. However, many businesses partner up with Procurex for the services provided in general procurement. In other words, I’m talking about the tangible commodities that are central to the functionality of a business. Desks, seats, tables, computer accessories, and paper, for instance, all fall under this category. These are the assets that must be given careful consideration prior to purchasing, especially when buying in bulk. As a business, don’t you think that overpaying for, say, computer monitors reflects poorly financially on the business? Rather, shouldn’t time and effort be allocated to the business’s overarching goal or mission, as opposed to miniscule commodities that are essential to the goal? Even though this doesn’t seem like a big deal, those little expenses can accumulate. This in turn may restrict a company’s budget, and that is unacceptable in these current economic times. Among other things, Procurex provides closure to the uncertainty attached with many business transactions; large or small. Here are a couple examples of how the services provided by Procurex can work in general procurement.

Several institutions have recognized the advantages of Procurex’s general procurement platform. For instance, one Big Ten school procured wireless microphones and other computer related accessories for their computer lab using Procurex’s reverse auction technology. In this auction, there were a total of 190 bids between the suppliers, and the price was lowered by approximately 30%. Another large university saved almost 40% on their purchases of ink and toner for their printers. Again, a reverse auction was used, and it took 153 bids to decide the winner.

There are numerous examples that show similar savings to the ones discussed above. In my opinion, the most valuable thing that Procurex provides for our clients is one thing; closure. Today’s economic situation forces businesses to think and rethink every business move. Are we paying too much? Are there alternative options? Did we get the best possible value for the amount of money we paid? These are all questions that must be asked in any business. Procurex puts those questions to bed. Our business model is intended to put them to bed; it’s our job. If you’re a business that wants to be sure you’re receiving the maximum return on investment, then you should look further into what we do and how we do it here at Procurex.

Breaking New Ground

Midwest Energy Efficiency Leaders Recognized for Groundbreaking Achievements with Procurex as reverse auction and technology provider

We have blogged about how Procurex, Inc. ran the first-ever Online Reverse Auction for Energy Efficiency Grants for the State of Missouri that resulted in up to 75 Million kWh of energy saved in the past. This was uncharted territory for both parties involved. This historic auction that was conducted in the summer of 2010 was recognized at the Inspiring Efficiency Awards held by the Midwest Energy Efficiency Alliance (MEEA).

The Missouri Department of Natural Resources won the Innovation Award for its Best Price Energy Efficiency Program. This program would not have thrived if it weren’t for Procurex’s software. Procurex was integral in helping the state of Missouri award $3 million in American Reinvestment and Recovery Act funded energy efficiency grants to businesses. You can see the official link below:

http://www.prnewswire.com/news-releases/midwest-energy-efficiency-leaders-recognized-for-groundbreaking-achievements-113580569.html

This was the first online reverse auction of its kind, and the state of Missouri, with Procurex, has proven that even energy is a product that can yield savings through a specific vision of strategic sourcing.