Supply chain management using electronic reverse auctions: a multi-firm case study

Online reverse auctions provide several benefits, not only for the buying company, but also to the supplier as well. Opposite of auctions where buyers raise their purchasing prices to outbid another buyer, reverse auctions allow buyers to purchase goods or services from the supplier that will sell for the lowest price. With the many advantages, cost savings seem to be the major attraction to the electronic reverse auctions. On the basis of a number of case studies performed by the authors (General Electric, Giant Eagle and the selected branches of the US federal government), it is important to consider the hidden costs associated with electronic reverse auctions. Savings measured at the time the auction closes are often times higher than those measured at the end of the transaction.