{"id":3223,"date":"2006-01-31T09:44:00","date_gmt":"2006-01-31T09:44:00","guid":{"rendered":"https:\/\/www.thirdeyesight.in\/?p=3223"},"modified":"2022-11-04T11:09:05","modified_gmt":"2022-11-04T11:09:05","slug":"reverse-auction-will-it-change-the-way-sourcing-is-done","status":"publish","type":"post","link":"https:\/\/myechoproject.com\/TES\/reverse-auction-will-it-change-the-way-sourcing-is-done\/","title":{"rendered":"Reverse Auction – Will it Change the Way Sourcing is done\u00a0?"},"content":{"rendered":"\n

Written By Dr. H K Sehgal<\/a><\/p>\n\n\n

In their frantic efforts to reduce cost to attract and retain \n customers, retailers \/ buyers have now innovated a new way to \n source – through reverse auction. Under this system, buyers \/ \n retailers issue specifications and invite, online, lowest bids \n for the garments from across the world. <\/b><\/p>\n

Online discussed this new phenomenon with Devangshu Dutta, \n a textile and apparel industry professional and international \n consultant, on the future of this alternative to sourcing as is \n being done today. This, he felt, could only be possible for mass \n product categories rather than small, niche products that we specialize \n in. We also spoke to Lalit Gulati of Modelama and Richa Exports \n who has actually participated in reverse auctions, but failed \n to click, as suppliers from Bangladesh and Indonesia could quote \n much less that what he could possibly afford. <\/b>
\n
\n Dr. H. K. SEHGAL <\/p>\n

In the sheer fight for survival, retailers are attempting \n to attempting to give more respect to “value for money”, which \n the consumer is seeking more vigorously than ever before. They \n are cutting corners to provide products to the consumer at the \n lowest rates to pass on the benefit to their consumer. One of \n their latest tools is “Reverse Auction”, which places the onus \n for competitive bidding on their suppliers with the support \n of new electronic methods. <\/p>\n

Now imagine a fictional scenario. The room is dimly lit. All \n eyes stare transfixed at the projection of a computer screen. \n Every number must be legible to those gathered around the conference \n table this early morning. <\/p>\n

Suddenly the image projected on the wall comes to life. The \n reverse auction pilot test has begun. Dollar figures flash as \n vendors from around the globe bid for the apparel order at hand. \n The atmosphere in the conference room has changed from one of \n apprehension to excitement as it becomes evident that the price \n that will be paid for today’s order will become quite competitive \n indeed. <\/p>\n

Someone whispers encouragement for a long-time vendor as the \n group watches the contractor place his online bid in real-time. \n This spurs another buyer at the table to rally behind one of \n her favourite supplier, “Come on, you can do it! Just a little \n lower.” And all the while the dollar amounts on the screen become \n smaller and smaller and smaller still. <\/p>Will the increasing use of business-to-business (B2B) exchanges \n and reverse autions to procure apparel and soft goods change the \n way the retailers and the vendors conduct business with each other? \n

First let us understand how the system works. <\/p>\n


\n What are B2B Exchanges?<\/b> <\/p>\n

B2B exchanges are online marketplaces that enable trading \n partners to conduct real-time business communications with each \n other, whether they are issuing requests for quotes (RFQs), \n bidding for orders, sharing product forecasts or collaborating \n on product development. Exchanges usually are classified as \n public or private. Examples of public exchanges include Global \n NetXchange and the WorldWide Retail Exchange (WWRE). <\/p>\n

Examples of private exchanges include Wal-Mart’s Retail Link \n and other portals that individual retailers, brands and trading \n companies have established for B2B communications with their \n own networks of customers and suppliers. (Article continued \n below)…<\/i><\/b> <\/p>\n   \n \n \n \n   \n \n \n \n
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What are Reverse Auctions and How Do They Work?<\/b> \n <\/p>\n

Reverse auctions involve bidding for orders – such \n as for a new type of product that a retailer needs \n produced to its specifications. The orders could be \n for everything from basic towels to private label \n jeans and dresses. <\/p>\n

Typically, before an online auction takes place \n via an exchange, the retail buyer issues product specifications \n and order requirements via the exchange to a select \n pool of approved vendors who are invited to participate \n in the auction. Request for product samples are usually \n issued at this time so that the buyer will have samples \n on hand to examine \/ approve prior to the auction. \n At the designated auction start time, the vendors \n log into the auction via the Internet, and begin submitting \n their prices to win the business. Bids are automatically \n processed in real-time, and the exchange automatically \n guides the vendors through the auction process. In \n some cases, vendors can see the prices being offered \n by competing vendors, although the identity of the \n other vendors is not revealed to them. The auction \n typically closes after a pre-determined period of \n time, which may be hours or days, and the retailer \n then determines which vendor will win the business \n based on the price and other variables at the retailer’s \n discretion, such as each vendor’s quality record, \n shipping history, etc. <\/p>\n

There can be many variations of the reverse auction \n business model, depending on differing retail procedures \n and exchange tools, but this is the gist of the process. \n <\/p>\n


\n Who Is Using Exchanges and to What Extent?<\/b> <\/p>\n

Pertaining to apparel and soft goods procurement, \n the major public exchanges are being used by some \n of the world’s largest retailers but not many mid-tier \n or smaller retailers. For instance, among GNX’s members \n are retail heavyweights like Sears, Roebuck and Co., \n Federated Department Stores, Pinault-Printemps-Redoute \n (PPR), Carrefour, Linens’n’Things and Bed, Bath and \n Beyond. WWRE members include such major players as \n JCPenney, Kmart, Target, Target, Gap, ShopKo. <\/p>\n <\/div><\/td>\n

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\n BREAKING MYTHS <\/font>
\n <\/b> <\/p>\n

A study by M. L. Emiliani of Lally School of Management, \n Hartford, USA and D. J. Stec of the Centre for Lean \n Business Management, Kensington, USA has listed some \n pointers relating to the concept of reverse auction. \n The key highlights, though not specific to the garment \n industry, are:<\/b> <\/p>\n