16 March 2006

My organisation is introducing e-auctions over the next six months and I would like to find out more about them. I have heard that e-auctions work best for commodities. Is this true?

Paul Cook, commercial director at TradingPartners writes: Suppliers of particular goods or services never like to hear them described as "commodities". Yet most buyers would prefer to buy items that possess many or all of the attributes that define a commodity - or in any case, to try to commoditise what they are buying. This is a simple but effective way of enhancing purchasing capability.

It is true that e-auctions have always worked well for relatively simple or "generic" products such as stationery, commodity foodstuffs or IT hardware. However, e-sourcing processes have come a long way and are now highly sophisticated, so service providers have become much more experienced in the market structures and processes that make for successful sourcing projects.

As a consequence, more complex and mission-critical products, such as direct materials, high-level services and goods for re-sale, are being e-auctioned by a variety of businesses on a global basis.

E-auctions can work well for most direct and vital areas. The key to delivering a successful event usually lies in the ability to provide clear and unambiguous specifications, and the ability to engage and condition suppliers and communicate in their local language - where appropriate.

Provided there are enough suppliers capable and willing to bid for the business, an e-auction can work - irrespective of the level of complexity.

There are many examples of organisations, ranging from small public-sector authorities to large manufacturing businesses, running complex and project-dependent e-auctions for a variety of complicated products, services and goods.

These are often run as multi-national, multi-currency projects that take many weeks of detailed planning to put together. Delivered benefits include greatly reduced process timelines, real cash delivery to the bottom line and the knowledge that the very best price for the quality and service required is achieved in competitive markets.

Examples of some of the more complex categories that are now sourced through e-auction include travel management, fleet management, legal services, media and a range of high-level direct materials for manufacturing.



Please note: responses can only be given on this page, represent writers' personal views and should be regarded as general guidance only.

SMmar2006