Page 136 - Introduction to Electronic Commerce and Social Commerce

116 4 Business-to-Business E-Commerce

The Major Benefits of Reverse Auctions ally. This problem has been addressed with the introduc-
tion of online directories that list open RFQs. Another way
The major benefits of the technology to a buyer are: (a) lower to solve this problem is through the use of monitoring soft-
cost of items purchased, (b) reduction of administrative costs ware agents. Software agents also can aid in the bidding
of procurement, (c) reduction of corruption and bribes, and process itself. Examples of agents that monitor and support
(d) decrease in time to receive the goods, which may result the bidding process are auctionsniper.com and auction-
from the suppliers’ ability to produce their products and ser- flex.com.
vices faster (see closing case). Alternatively, third-party intermediaries may run the
For suppliers, as seen in the opening case, savings comes electronic bidding, as they do in forward auctions (e.g., see
from a reduction in: (a) time required to find customers, (b) Opentext Corporation; opentext.com). Auction sites such
administrative costs, and (c) time needed by managers to as ebay.com, and liquidation.com also belong to this cat-
conduct manual bids. egory. Conducting reverse auctions in B2B can be a fairly
Note that some question the value of reverse auctions complex process. This is why using an intermediary may be
(e.g., see Rockwell 2013). beneficial.
The reverse auction process is demonstrated in Figure 4.7.
As shown in the figure, the first step for the would-be buyer
Conducting Reverse Auctions is to post bid invitations. When bids arrive, contract and pur-
chasing personnel for the buyer evaluate the bids and decide
As the number of reverse auction sites increases, suppliers which one(s) to accept.
may not be able to monitor all relevant open RFQs manu- An example of e-tendering is provided in Case 4.1.

Step I Posting Bid Invitations
Suppliers
Internal Contract and Buyers (Bidders)
Buyers Purchasing
Department
Buyer A E-mail Bid

Send B Posted on
Bid Preparation Bid Invitation Enterprise Web Bid
Buyers E-mail or
Restricted Bid
C Invitations Web Posting

Step II Evaluation of Bids by Buyer
Bids Evaluators

Contract & Rejection
Bid 1 Purchasing Supplier 1
Department
Rejection
Bid 2 Supplier 2
Evaluation
Acceptance
Bid 3 Supplier 3

Figure 4.7 The reverse auction process