How do I compete in a reverse auction?
Running a reverse auction is a way for buyers to speed the negotiation process with multiple prospective vendors. If you've never participated in a reverse auction, it's worth thinking about the conventional (forward) auctions that you may have seen on television or in movies. An auctioneer holds up an item and the people in the room bid the price up. A reverse auctions works -- unsurprisingly -- in reverse. Rather than bidding prices up, the vendors will lower their price in an attempt to win the buyer's business. Unlike conventional auctions where the high bidder is always the winner, delivering the lowest price among the vendors doesn't necessarily guarantee victory. Most buyers will tell you, in advance of the auction, whether or not the contract will be awarded to the low bidder or whether price is one of multiple considerations in the vendor selection process. And if that information isn't shared proactively, it's never a bad idea to ask.
For those who prefer to see a video overview, we have you covered. You can find it immediately after this paragraph. After the video, we provide a comprehensive written walkthrough with screenshots as well.
Once you've been invited to a reverse auction in Vendorful, you can click the link in the email you received and go directly to the landing page of the reverse auction. (Alternatively, if you are already logged into Vendorful, go to the top navigation bar and find Sourcing-->Inbound Auctions and you will see a list of the auctions to which you've been invited. Click the relevant one, which will be at or near the top of the list.) The landing page will look like this:
Let's break down what we're seeing.... Just under the title, you will see a description that is provided by the buyer. This will typically provide some context around the auction. Below that, you'll see that there are three boxes with text. The number of boxes is tied to the number of lots in the auction. A lot will consist of one or more items and has its own set of rules including auction style, start time and end time, starting bid, and minimum bid decrement. We'll learn more about those in a second. In the above screenshot, there are two lots: Widgets and Doodads. The final box sets the quiet time rules, which apply to the entire auction -- not just to a lot. There's also an explanation of some of the key concepts.
In the above auction, we have two lots. The Widgets lot has three line items and the Doodads lot just has one. Starting bids for each lot can not exceed $100,000.00. However, while bids must be reduced by $1,000.00 to be considered valid for Widgets, the threshold is just $250.00 for Doodads. You will notice that each has its own start and end time as well as its own style. You can read about the types of auction styles in the bottom box.
Once you've had a chance to evaluate everything on this page, you can elect to "Decline" or "Accept" the invitation to participate in the reverse auction. If you opt out, you're done and the rest of this article doesn't apply to you. On the other hand, if you "Accept," you should keep reading.
Upon clicking the "Accept" button, you will see a page that looks like this:
This is the bidding page and where you will spend your time during the auction. When you arrive here, you'll want to get set yourself setup for success. To do so, there are two areas where you should focus.
- Note the text areas in the column under the word "Bid." It is recommended that you set initial bids even before the auction starts. You can do this by simply typing in the value you want. Before you do so, shift your eyes left to the "Quantity" column. There are two key pieces of information here. There is the number of units and the unit of measure. This is critical to note as the unit price might be per item/each, per box, per pallet, etc. In the above example, there are two line items for which you would enter the price per pallet and one other line item where you would enter the price per box.
- The other setting you should consider at this point is "Safety," which has three options. When "On" is selected, a pop-up window will be displayed each time you try to submit a bid during the auction. This allows you to validate that you do indeed want to submit the bid. When "10%" is selected, a pop-up window will be displayed only when a bid is more than 10% below the number specified next to "Next bid must be at or below." The idea here is to prevent accidentally submitting a bid that is much lower than you intended. Finally, you can turn this feature off altogether and there won't be any pop-ups when you submit your bid.
Let's take a look at the other information on this page:
- There are two tabs, one for each lot. The selected tab (in blue) is Widgets and the other one is Doodads. Vendorful will always show you the current status of the auction lots. In the above example, they are both pending, i.e., they haven't started yet. Beneath the tab, you will see a clock, which counts down until the auction starts and later counts down until the auction ends. If you were to switch to the other tab, it would look like this:
- As a vendor, you have the ability to decrease all of the line items in one fell swoop by entering a number into the text box adjacent to "Decrease all by." Once you enter a number her and click apply, it will reduce all of the line items by the specified percentage. Bear in mind that this simply updates the value, it does not submit the bid. You will need to click the "Submit" button to do that.
- In the middle of the page, you will see all of the line item info. The name of the line item, its quantity and unit of measure, your current bid, your prospective next bid, and the extended price, which is calculated by multiplying the unit price by the quantity.
- On the bottom of the bidding box, you will later see your current state in the auction (winning/losing or rank) as well as information about what would constitute a valid bid and your prospective bid. It looks like this:
We temporarily skipped over the green icon in the blue area. This isn't related to the auction per se, but the data it provides could influence the outcome.
Vendorful is unique in how to manages both time and network. It would be terribly unfair if the auction ended at different times for different vendors simply because their clocks had drifted. Beyond that, it would be incredibly frustrating for vendors to click "Submit" on a bid only to wait and wait for it to go through. A details explanation of Clock Skew, Latency, and Jitter is available to you if you click the "Click for more info" link when looking at this information. (You'll see if in the screenshot above. It's at the bottom.) There are three takeaways here, but only one requires potential action on your part. First, Vendorful adjusts for clock skew, ensuring that the auction ends at the same time for everyone, regardless of clock settings. Second, Vendorful is mindful of latency and accounts for it. The third takeway is the actionable one. Jitter measures how variable your connection is. If it's clocking in below 100ms, you're in good shape. However, if it gets much higher than that, it means that you connection might be a bit "flakey." In practice, jitter tends to increase when you're using WiFi and are pretty far from the router or if you are on a shared network and there are spurts of activity like streaming videos. If you're seeing high levels of jitter, get closer to your router and see if you can have people limit more network-heavy activity during the reverse auction.
Even though we've covered setting initial bids, it's prudent to understand what you'll be bidding on. To see that, click on the "Line Items" step on the left side of your screen. Once there, you can expand the line items to see descriptive data provided by the buyer. Below, you can take a look at the specifications for the line items in each of the two lots in our auction.
Once the countdown to the start of the auction his zero, the timer will reset and display how much time remains. The auction is now live and your initial bid is now considered with all of the other vendors' initial bids. One thing you will note is that the number next to "Next bid must be at or below" will move down.
In an open auction, the requirement for your next bid considers both the minimum decrement and the leading bid. For example, if the minimum decrement is $1000, the leading bid is $499,500 and you have a bid of $500,000, you will not be able to bid $499,499. That would imply a reduction of $501 from your previous bid, which is below the $1000 threshold. The next acceptable bid in that scenario is $499,000. On the other hand, if the scenario were the same, but the current leading bid was $499,000, then you could bid $498,999 as that would clear the decrement threshold ($1001 > $1000) and beat the leading bidder by $1.
On the other hand, if you have the current low bid and want to lower it further, you simply need to clear the decrement threshold.
A ranked auction is less stringent in that the next acceptable bid only requires that you improve your previous bid by an amount that equals of exceeds the minimum decrement. You will also note that in a ranked auction, you don't just see that you're losing, but you see what place you're in. Ranked auctions don't show the number of participants in the auction so being ranked 2nd might mean 2 out of 2 or 2 out of 10.
While you are bidding, you can expand the time stamps in the "Previous Bids" section to get details on your bid history. This data will remain available to you even when the auction completes.
When bids come in during the quiet period, the auction clock will be reset to the amount of time specified in the summary.
So let's say, for example, that the auction is winding down and you have the leading bid. There are 2 seconds left and then -- all of a sudden -- another vendor comes in and undercuts you. You don't have time to update your bid and the auction ends. Quiet time and overtime prevent this scenario from occurring. If a vendor submitted a bid with 2 seconds left in this auction, the auction clock would be reset to 60 seconds, giving you an opportunity to counter. Each time a vendor bids, the clock will be reset to 60 seconds The auction will continue in this fashion until 60 seconds pass with no new bids.
After the Auction
When the auction finishes, there is not much else to do. You're welcome to review your bid history or revisit the summary screens.