Implications For Reverse Auctions From A Supply Chain Management Perspective

Abstract

This chapter considers reverse auctions in the context of the supply chain and the type of end user product being produced. It contends that in order to successfully utilize a reverse without alienating their suppliers’ buyers need to classify their product as innovative or standardized. An innovative product is one that is undergoing rapid changes in functionality or specifications. A standardized or functional product is one that has stabilized its specifications and functionality. It also argues that the buyer must consider if their supply chain is responsive or efficient. A responsive supply chain is one that rapidly adapts to changes in product characteristics without placing undue financial burdens on any members of the supply chain. An efficient supply chain being one that has reduced costs to their minimum but has a reduced flexibility when compared with a responsive supply chain. It is hoped that an understanding of this relationship will allow purchasers to better evaluate their use of reverse auctions as a purchasing tool in the context of buyer supplier relations.