This case study examines the impact of reverse auctions (R/As) on buyer-supplier

relationships and the broader sourcing process. Let's break down the key points and
findings:

1. Introduction to Reverse Auctions: Reverse auctions emerged in the late 1990s as

a tool for buyers to establish prices during the bidding cycle. They involve a
buyer-initiated bidding event conducted online, aiming to obtain a rational market
price for the commodity or service being procured.
2. Benefits of Reverse Auctions: Reverse auctions are praised for reducing the time
associated with supplier selection and award processes. This time-saving allows
supply management professionals to focus more on strategic sourcing activities
like in- and outsourcing decisions, cost management, benchmarking, and supplier
development. Additionally, they are believed to lead to price reductions for
products and services.
3. Concerns about Buyer-Supplier Relationships: Despite the benefits, concerns
exist about how reverse auctions affect buyer-supplier relationships. Some fear
that they convey a message of seeking price reductions without regard to
existing or future business relationships, potentially leading to mistrust and lack
of cooperation.
4. Research Methodology: The study involved 142 experienced purchasing
managers with an average of 12 years of experience. The respondents'
companies varied in size and industry. All had experience with reverse auctions,
averaging 22 auctions.
5. Positive Impact on Relationships: The research provided positive results
regarding the impact of reverse auctions on buyer-supplier relationships. It
suggests that firms valuing relationships with their suppliers tend to opt for
relational-type structures in subsequent contracts.
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