Monday, 23 January 2012

Some key tips for participating in a Reverse Auction

A short while ago we assisted a large company with their invitation to bid in an e-auction, as they were looking for some advice on how to maximise their chances of success.  We provided a list of key tips to look out for and has crossed our minds that you might also like to see our suggestions.

The key tips listed below for taking part in an auction are more applicable to private sector e-auctions, perhaps less so for public sector ones, however it could make a difference for you:

1) Involve your supply chain in the process (even during the auction itself), not just the internal team but external suppliers too.  They can help you identify areas to reduce costs so that your overall bid is more competitive, as afterall it is in the suppliers interest for you to win more business as it means more business for them.  It also gives you an opportunity to discover which of your suppliers have aligned themselves with your best interests at heart and which have little motivation to see you succeed.

2) Counter bid shadowing (where other bidders are hot on your tail) by making large decrements.  This damages morale of other competitors in the auction as they chip away at their bid and see no change in their position.  This can encourage them to prematurely drop out of the bidding.

3) Do not put your best foot forward right from the word go.  Firstly it is useful to understand how many other bidders are involved, so by hanging back (but not so much that you don’t qualify) you can obtain such an assessment.  If there are multiple Lots, you can hold back in some Lots to similarly gain this knowledge.  Secondly, buyers love to see movement during their auction and they will think more favourably of those bidders that are active (you are making them look like they’ve done a great job).

4) Very important to do all the groundwork up front and to be very aware what you best offer is.  Make sure what you are bidding on is de-risked, i.e. how long is the contract and are you allowed to adjust pricing during it to account for volatile commodity movements?

5) Build a strong relationship with the buying team.  This gives a great impression of your company and can influence award decisions ahead of straightforward price analysis (more applicable to private sector though and not public sector MEAT tenders).  Regular phone calls, asking sensible questions, politely suggesting where provided information can be improved and so on are good ways to do this.  If you can help the buyer do a great job, they will hopefully reciprocate.

6) Get an understanding of the bigger picture.  The auction is the way to get the foot in the door.  There may be larger opportunities once you have done this, such as rolling contract potential, increase in contract value during the contract, new products/services that are bolted on during the contract duration and so on.  Asking the buying company whether they envisage more business in this area or enquiring about the past growth of their business needs is a good way to find out more. Simiarly, by demonstrating an active role in such an auction, you will very likely be invited to take part in others.

About: Market Dojo provides accessible e-sourcing software. Find out more at www.marketdojo.com

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