Why is it advantageous to run an online bid?
- When applied correctly, online bidding is an extremely fair, ethical and transparent process.
- Online bidding ensures that all suppliers receive the same information at the same time.
- Online bidding ensures robust competition to win the buyer’s business.
- Online bidding helps to maintain a competitive supply base by helping suppliers understand what it takes to win a competitive bid.
- Online bidding is highly auditable due to the electronic transmission of all key information and transactions associated with bidding and negotiation, and therefore provides an extremely fair and ethical bidding process.
As a buyer, how do I make sure my online bid is ethical?
These guidelines for conducting online bids ethically appeared in Purchasing magazine and have been modified specifically for SourcingFactory.com™.
- Mean it if you do it. Significant supplier resources are devoted to preparation for online bids. Intend to award business at the end of the process.
- No reconnaissance from online bidding. Don’t use the online bid process as an attempt to gather market intelligence. It’s insulting to the suppliers you will want to do business with. They are your most important partners.
- No outside quotes. All deals must be executed according to the stated rules and conditions of your online bid.
- Keep out the shills. Only invite participants if you absolutely are willing to do business with them.
- State all terms and conditions up front.
- Make sure that all participants receive the same information and clarifications in a timely manner.
- Award business quickly and inform participants of online bid results. The actual award, of course, is confidential, but let participants know the process is completed.
- Don’t make changes to the structure of your bidding event after the bidding is completed. You made the rules, and you are responsible for living by them. Bids are made based on the requirements as originally structured. Changing the rules is a breach of trust.
- Set realistic price expectations. If those aren’t achieved, let the bidders know in a timely manner.
- Hold suppliers accountable for what they said they would do.
How do I run a better online bid?
“5 Tips for Better Reverse Auctions” – by James Carbone – Purchasing magazine, September 11, 2008. (Please note that SourcingFactory.com™ uses the terminology “online bid” in place of “reverse auction.”
http://www.purchasing.com/article/CA6591829.html
Can suppliers see each others’ names?
In accordance with our policy of being “fair and ethical,” suppliers’ names are never used in the supplier view. This means everyone can see their rank, or in some cases pricing, but “who bid what” (a named supplier’s pricing) is never shown. We know you will all agree that this policy is the right one. It is so much more ethical than the current practice of “shopping a bid,” i.e. going from supplier to supplier and getting them to lower their bid based upon specific price knowledge. Quite frankly, this is unethical behavior that our system doesn’t support.
Are online bids less or more ethical than offline bids?
We believe in creating a “level playing field” where all suppliers gain the same information at the same time, and where all transactions are auditable and transparent to everyone involved. We believe that putting a bid online is fairer to suppliers because they all have the same information and none gains an unfair advantage such as “inside information.”
Don’t online bids attract only low-cost, low-quality suppliers?
No, these online events are attractive to suppliers who are willing and able to compete for your business. These suppliers can be cost-competitive because they put good processes in place that also allow them to provide quality. Of course, the buyer can control the quality of the suppliers, to some extent, by inviting only those they believe will provide the right quality and service. Many times, suppliers can price individual bids lower than what might be expected because they have excess inventory, excess capacity (the ability to do more) or maybe need additional cash and are willing to reduce their price to win your business.
How many suppliers does a buyer need to get for an online bid?
Online bids are more effective when three or more suppliers are bidding on business. This, of course, makes the bid more competitive. If only two suppliers are bidding, configuring the bid so that the suppliers can only see their bid rank could help make it more competitive than showing both rank and the price of the lowest bid.
Is it acceptable to include a supplier I know I will not buy from in order to make the bid more competitive?
It would not be fair to include a supplier in a bid if you know for certain that you will not buy from that supplier. This takes up that supplier’s time/resources and it also is not fair to the other suppliers because they would be competing against a “non-contender.”
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