Reverse Auctions In Corporate Procurement

Reverse auction is worth for research, because of its huge businessvalue for purchase. Lots of researchers and industrial practitioners pay muchattention to reverse auction in order to take advantage of this technologysuccessfully. This paper first introduces the history of auctions, some basictheories and models. Based on these, reverse auction's principles, conditions,opportunities and risks, advantages and shortages, differences againsttraditional purchase ways are discussed as well. The author puts a specialemphasis on the application of reverse auction in companies' purchase. Firstof all, the paper states four conditions for companies taking this technologysuccessfully, which contain: (1) the product or service specifications must beclear and comprehensive, (2) the purchase quantity must be large enough toprovide an incentive for the supplier to participate in the auction, (3) theappropriate supply market conditions must exist, and (4) the appropriateinfrastructure must exist within the buying organization;Second, the paperdiscusses an appropriate reverse auction's procedure using in companies tochoose qualified suppliers related to several aspects with two rounds auctionmechanism;Finally, effects on every side in the supply chain are concerned.In the last part of this paper, the author presents some problems of purchasingin Chinese companies and gives some proposals.