The “Killer” E-Business Application: Strategic Procurement Through Electronic Reverse Auctions

In the late 1990’s, online Business-to-Business (B2B) reverse auctions (E-RA’s) proliferated and were adopted in a wide variety of circumstances. The reverse auction format evolved to take advantage of Internet technology and reverse auctions have been identified by many large organisations as a tool to achieve substantial procurement savings. As companies adopt this technology it is important for them to understand the implications of this type of procurement. This paper adopts a case study approach to identify the issues for both buyers and sellers using this type of B2B application. It describes the conduct of multiple reverse auctions in a large Australian global company viewed through the eyes of the buyer undertaking a reverse auction. The main finding of the paper is the keen acceptance of the E-RA model and its ability to drive down costs across the procurement process.