eAuctions (Reverse Auctions)

Reverse auctions create an environment where suppliers bid against each other for a contract. This environment encourages competition with the result that goods and services are offered at their current market value (Improvement and Development Agency).

Information about eAuctions (Reverse Auctions)

An EAuction is a well-known e-Sourcing concept. EAuctions work by putting a downward pressure on the price by introducing competition into the procurement process and determine the winner - the firm to whom the contract is awarded (Engelbrecht-Wiggans and Katok, 2006).

EAuctions were popular in the early 1990s. This popularity was driven by the focus on price and the perception of purchasing organisations and departments that inviting many suppliers to bid competitively in an online auction would reduce the price. Thus, the early eAuctions were designed as 'open descending price-only events' (Elmaghraby, 2007). However, instead of generating low costs the price-focus of eAuctions alienated suppliers, especially in industries in which suppliers could be differentiated in terms of quality, reliability, delivery times etc. In addition, buyers often incurred considerably higher costs when dealing with an eAuction winner. Quickly, companies realised that the price-only focus was limiting the potential for growth and the popularity of eAuctions, and the industry moved away from the price-focused approach.

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