Inherent in strategic sourcing management is the management of activities and transactions that may be perceived as cumbersome. The management of order requests, budget allocations, approvals, releases, legalization of contractual documents, policies, among others, means that for many people our management as buyers is defined as “a brick.” However, for us, as it is part of our daily life, this “brick” becomes the means to execute and  develop our strategic supply management , which impacts results for the business at a high level.

Within the framework of daily management, electronic auctions emerge as a task that can be included as a type of negotiation. It is clear that not all goods and services are susceptible to being managed as a reverse or downward auction; However, it has been proven that a well-executed electronic auction can bring very good returns. An example of this is summarized in how Bogota residents achieved savings close to USD 1,000,000 during less than 60 minutes of executing an  electronic auction.

Structuring an electronic auction is less complicated than any supply professional or user area may initially imagine. However, it is key to follow specific steps to maximize the probability of success in its execution.  Key chronological stages are listed below:

1.Define the good or service to be auctioned

According to the  Kraljic matrix,  the ideal quadrant for conducting electronic auctions is the quadrant of leveraged goods and services, in which we have an attractive volume of spending in monetary terms and a low risk/impact for the operation.

However,  it is not unreasonable to think about auctions of routine items  with the premise of adding demand and maximizing purchase volume. For example, why not think about a contract for stationery supplies for a long period of time? Holding an auction for a contract of more than 5 years for this type of inputs leads to a drastic decrease in transactionality and makes an auction attractive to suppliers, given that it is a long-term business.

The strategic quadrant can be taken into account for electronic auctions , without putting at risk the availability of supply or strategic alliances with suppliers. While the quadrant of “bottleneck” items normally does not apply to auctions, until the category is strategically relocated to another of the quadrants, given that due to the supply risk, these types of negotiations are not beneficial.

2.Carry out a rigorous process of pre-selection of bidders

It is essential to carry out a supplier analysis at a legal, financial and technical level.  Some inexorable steps to define qualified bidders that can participate in the electronic auction are to carry out a pre-qualification of suppliers, a prior RFI that allows analyzing the market and the suitability of bidders, as well as understanding technical and economic aspects of the process.

In an auction  the key factor is the price , once we execute it it becomes the decisive element. Except for logistical factors to match offers in terms of Incoterms, or quality factors, which must be managed with extreme objectivity so as not to affect the transparency of the process under any circumstances.

3.Analyze the applicable auction type

There are different types of electronic auctions and rules applicable to them:  extensions, open and closed envelopes, factors, etc. This analysis depends on each case, the competitiveness and the objectives of the buyer. Choosing the best strategy is a key success factor.

4.Train suppliers

Suppliers must be given space to know the rules of the game, become familiar with the system and the concept of electronic auction and clarify all their doubts.  Mock auctions are essential to complete this step,  as well as to provide peace of mind and a feeling of total transparency in the process.

5.Monitor the electronic auction

It is key and totally necessary to be able to see the auction. The buyer defines  which roles can monitor the auction  to keep track of its progress in real time and have complete minute-by-minute certainty.

An auction does not guarantee immediate savings, but a well-structured and executed auction maximizes the probability that they will be obtained.  It is clear that electronic auctions are the means, however, the strategy and work of the strategic buyer is an essential factor  for the process to be brought to a successful conclusion. Likewise, auctions must be structured at a strategic level and executed with a system that meets all standards to maximize savings and guarantee the transparency of the process.