INDEX 1. Executive Summary.................................................................................................2 2. Introduction.. 3 3. E-auctions 4 4.

Format variations of e-

auctions...7 5. Benefits of e-auctions

. !. "y#es of on$ine auction .. 7. %&aracterstic of 'ood on$ine auction site .. . (a)in' an on$ine auction *usiness mode$ +or) . ,. -o+ e auction +or)s ......................................................................................... 1/. Barriers to success.

.13 11. Et&ics..1 7 12. "ec&nica$ re0uirements of e-auctions...

.27

13. Foundations

for

next

'enerations

of

e-

auctions.31 14. 1ey ste#s to successfu$ e-auctions..

...3, 11.E*ay 2ction 12.3eferences..42

EXECUTIVE SUMMARY E$ectronic auctions 4or e$ectronic reverse auctions as t&ey are sometimes ca$$ed5 are on$ine auctions +&ere se$ected *idders su*mit offers e$ectronica$$y a'ainst t&e #urc&aser6s s#ecification. 2$$ communication fo$$o+in' and inc$udin' t&e invitation to #re-0ua$ified *idders to su*mit ne+ #rices and7or va$ues must *e instantaneous 4e$ectronic5. E$ectronic auctions can *e used for 'oods8 services and +or)s. 9n$y #rice and 0ua$ity e$ements +&ic& can *e ex#ressed as a va$ue suita*$e for incor#oration +it&in a formu$a can *e inc$uded at t&e auction sta'e. 9t&er 0ua$ity as#ects must *e assessed #rior to t&e auction sta'e.

9n$ine 3everse 2uctions 4sometimes )no+n as e-2uctions or Buyers 2uctions5 are an effective and efficient too$ for #romotin' com#etition and trans#arency in your tender activities and rea$i:in' t&e mar)et #rice for 'oods and services."&ere are various )inds of on$ine auctions t&at are t&e variants of reverse on$ine auctions. 9n$ine reverse auctions come +it& a num*er of *ui$t-in *enefits. "&ese *enefits formed t&e *asis of on$ine reverse auction success in t&e #ast8 and +i$$ continue to #$ay a stron' ro$e in on$ine auction success in t&e future. "&ese *enefits are neutra$8 o#en and efficient #rocess for settin' tender varia*$es8 trans#arency8 decreased error rate8 *etter communication c&anne$ etc. "&ere are various externa$ and interna$ *arriers as +e$$ ena*$ers of success for e-auctions +&ic& &ave *een discussed in detai$ in t&e #a#er. Et&ics are a$so considered to *e a very im#ortant #art of a successfu$ auction8 *ot& on t&e #art of t&e *uyer and on t&e #art of t&e su##$ier.

INTRODUCTION "&e e$ectronic auction 4eauction5 is an e-*usiness *et+een auctioneers and *idders8 +&ic& ta)es #$ace on an e$ectronic mar)et#$ace. It is an e$ectronic commerce +&ic& occurs *usiness to *usiness 4*2*58 *usiness to consumer 4*2c58 or consumer-to-consumer 4c2c5.t&e auctioneer offers &is 'oods8 commodities or services on an auction side on t&e internet. Interested #arties can su*mit t&eir *id for t&e #roduct to *e auctioned in certain s#ecified #eriods. "&e auction is trans#arent8 a$$ interested #arties are a$$o+ed to #artici#ate t&e auction in a time$y manner. "&e t+o ma;or ty#es of t&e e$ectronic auction are for+ard auction in +&ic& severa$ *uyers *id for one se$$er<s 'oods and reverse

auction in +&ic& severa$ se$$ers *id for one *uyer<s order.for+ard auctions ta)e t&e form of a sin'$e se$$er offerin' an item for sa$e8 +it& *uyers com#etin' to secure t&e item *y *iddin' t&e #rice u#+ard. For+ard auctions are far-*etter understood *y t&e #u*$ic at $ar'e t&an reverse auctions as to &o+ t&ey o#erate8 due #rimari$y to t&e fact t&at t&ey are +ide$y used at t&e consumer $eve$. In fact8 for+ard auctions under$ie everyt&in' from e*ay and ot&er on$ine auction sites to auctions of art8 +ine8 and ot&er co$$ecti*$es. "&ey are a$so +ide$y used for auctionin' everyt&in' from autos8 rea$ estate8 mac&inery8 etc.8 +&ere t&e 'oa$ is for t&e se$$er to receive t&e most money #ossi*$e for t&e item *ein' offered at auction. "&us8 a for+ard auction s&ou$d *e uti$i:ed for sa$es of 'oods and services of a$$ ty#es8 +&et&er conducted on$ine8 off$ine8 or a &y*rid of t&e t+o. 3everse auctions are t&e ot&er ma;or form of auctions. In a reverse auction8 a sin'$e *uyer ma)es #otentia$ se$$ers a+are of t&eir intent to *uy a s#ecified 'ood or service .durin' t&e course of t&e actua$ reverse auction event8 t&e se$$ers *id a'ainst one anot&er to secure t&e *uyer6s *usiness8 drivin' t&e #rice to *e #aid for t&e item do+n+ard. "&us8 t&e +innin' *idder is t&e se$$er +&o offers t&e $o+est #rice. 3everse auctions are most ty#ica$$y used for #rocurement *y #rivate com#anies8 #u*$ic sector a'encies8 and non#rofit or'ani:ations.

(eanin'= 9n$ine auctions mirror traditiona$ auctions and usua$$y invo$ve mu$ti#$e *idder #artici#ation. In *ot& scenarios8 *idders and se$$ers *uy and se$$ tan'i*$e and intan'i*$e #roducts and services. Startin' *ids are $o+ *ut increase at steady rates to meet mar)et demand and item #o#u$arity. "&e time s#an of an on$ine auction ran'es from one to 1/ days for items offered 2477 +or$d+ide. 9n$ine auctions are a +ide$y acce#ted *usiness mode$ for t&e fo$$o+in' reasons=

>o fixed time constraint F$exi*$e time $imits

>o 'eo'ra#&ica$ $imitations 9ffers &i'&$y intensive socia$ interactions Inc$udes a $ar'e num*ers of se$$ers and *idders8 +&ic& encoura'es a &i'&-vo$ume on$ine *usiness

9n$ine auctions inc$ude *usiness to *usiness 4*2*58 *usiness to consumer 4*2c58 and consumer to consumer 4c2c5 auctions. E*ay is t&e *est exam#$e of an auction site t&at uses a$$ t&ree met&odo$o'ies. "&e on$ine auction *usiness mode$ continues to evo$ve accordin' to mar)et needs. Exam#$es inc$ude e*ay8 +e*store8 on$ineauction and overstoc). E*ay and ot&er #roviders encoura'e $e'itimate *iddin' activity t&rou'& *idder *$oc) $ists. E*ay a$so offers dutc& auctions for $ar'e inventories8 +&ere auction *idders #ay accordin' to an item<s &i'&est sa$e #rice. 2n on$ine auction is a service in +&ic& auction users or #artici#ants se$$ or *id for #roducts or services via t&e internet. ?irtua$ auctions faci$itate on$ine activities *et+een *uyers and se$$ers in different $ocations or 'eo'ra#&ica$ areas. ?arious auction sites #rovide users +it& #$atforms #o+ered *y different ty#es of auction soft+are.S$o+$y *ut sure$y8 t&e +or$d is $earnin' to transact on t&e >et. E$ectronic commerce8 or E-commerce8 is fast catc&in' t&e ima'ination of #eo#$e and *usinesses. In fact8 it is c&an'in' t&e very #aradi'm of t&e manner in +&ic& *usiness is *ein' conducted. @&i$e E-commerce is t&e Afront end< for se$$in' #roducts over t&e Internet8 E$ectronic Business covers t&e use of tec&no$o'y8 #rocesses and mana'ement #ractices t&at en&ances com#etitiveness. "&ou'& E-commerce is on Business-to-Business 4B2B58 Business-to-consumer 4B2%5 and %onsumer-to-Business 4%2B58 it is *ein' increasin'$y rea$i:ed t&at t&e B2B &o$ds t&e most #otentia$. @&i$e t&e '$o*a$ B2% E-commerce is ex#ected to 'ro+ from B7. / *i$$ions in 1,, to B1/ *i$$ions *y 2//38 t&at for B2B is forecast to 'ro+ from B43 *i$$ions to B1.4/ tri$$ions. Citt$e +onder t&at t&e focus +or$d over is no+ on B2B Ecommerce.

+ou$d *e to #rocess t&e #ayment sc&edu$e. "&ou'& t&ere are very fe+ exc&an'es +&ic& offer t&e entire 'amut of t&e a*ove services8 t&ere are many +&ic& 'o u# to order matc&in'. E-AUCTIONS The evolution of the e-auction 2uctions &ave *een around for centuries. Deo#$e +it& 'oods +anted an efficient +ay to se$$ t&ose 'oods to #eo#$e +&o +anted t&ose 'oods. For many #eo#$e8 t&e memory of an auction invo$ves a fast-ton'ued auctioneer *e$tin' out num*ers to a $oose$y or'ani:ed cro+d. -istorica$$y8 t&e &i'&est $eve$ of tec&no$o'y used for an auction invo$ved #$u''in' a micro#&one into a +a$$. "&en someone rea$i:ed t&at t&e Internet cou$d *e more t&an a #a#er$ess cata$o'. "&e Internet cou$d *e used to ex#and t&e universe of #otentia$ *uyers for any one item. It cou$d *e used *y *uyers to com#are 'oods more efficient$y and accurate$y. 2nyone cou$d en;oy an auction from a comforta*$e seat unencum*ered *y time or $ocation. "&e on$ine auction #roved to *e a 'reat a##$ication of tec&no$o'y for t&ose +is&in' to se$$ #roducts. "raditiona$$y8 t&e auction re#resented t&e se$$er and invo$ved one se$$er to many *uyers. 2uctions &e$#ed drive u# #rices for t&e se$$er But +&at a*out t&ose #eo#$e +is&in' to *uy 'oods and services. Fortunate$y8 tec&no$o'y +or)ed e0ua$$y +e$$ for *uyers8 es#ecia$$y *uyers +or)in' on *e&a$f of a #rofessiona$ or'ani:ation. >o+ auctions cou$d *e used to re#resent t&e *uyer and &e$# drive #rices do+n. 9ver t&e years8 various auction formats +ere devised and executed8 inc$udin' t&e most +e$$-)no+n format8 t&e reverse auction. 3at&er t&an &avin' one se$$er +it& many *uyers8 a reverse auction invo$ved one *uyer +it& many se$$ers. Se$$ers #$aced decreasin' *ids on a set of 'oods or services and fo$$o+ed t&e same set of ru$es. FORMAT VARIATIONS OF E-AUCTIONS !

Before +e discuss reverse auctions in detai$8 +e +ou$d $i)e to overvie+ some standard variations of t&e standard reverse auction t&at exist to demonstrate t&at mu$ti#$e o#tions exist and t&at not a$$ vendor #roducts on t&e mar)et are created e0ua$. "&is is not meant to *e an ex&austive $ist of t&e variations t&at &ave *een devised *y some of t&e $eadin' #roviders of auction tec&no$o'y8 *ut a $ist of t&e ma;or o#tions t&at one is $i)e$y to encounter. Sealed id-Auction In a sea$ed *id reverse auction8 se$$ers &ave a fe+ days 4and #ossi*$y +ee)s5 to su*mit one *est and fina$ *id. Bidders never &ave any )no+$ed'e of +&at t&e ot&er se$$ers are *iddin'. "&is is dramatica$$y different from a standard reverse auction8 +&ere eac& *idder )no+s exact$y &o+ &e com#ares to ot&er *iddersE t&ey &ave a s&orter time frame to #$ace a 0uote8 and can reduce t&eir #rice as often as t&ey +ant +it&in t&e time $imitations8 un$ess t&e #arameters sti#u$ate t&at on$y a sin'$e8 F*est and fina$ offerG *e su*mitted.

Reve!"e #!ice Reve!"e Auction In a reserve #rice reverse auction8 t&e *uyer esta*$is&es a Freserve #riceG8 t&e maximum amount t&e *uyer +i$$ #ay for t&e 'ood or service. It can a$so *e ca$$ed a F0ua$ification #riceG. If t&e *iddin' does not reac& t&e Freserve #riceG8 t&e *uyer is not o*$i'ated to a+ard t&e *usiness *ased on t&e resu$ts of t&e auction. 9nce t&e reserve #rice is met8 t&e *uyer is o*$i'ated to a+ard t&e *usiness to a #artici#atin' su##$ier.

Fo!$a!d Auction @it& for+ard auctions8 *ids increase in va$ue rat&er t&an decrease in va$ue. "&ere are situations +&ere t&is ty#e of auction format +ou$d *e a##ro#riate. 2n exam#$e +ou$d *e +&en t&e Sourcin' "eam +ants to se$$ or $i0uidate assets.

Fi%ed #!ice Auction "&e *uyer esta*$is&es a *uyout #rice at +&ic& t&e *uyer can sim#$y *uy t&e item *ein' auctioned and end t&e auction. ?ariations su##ort a minimum *id t&at +i$$ *e acce#ted and *idders +i$$ *e #revented from 'oin' *e$o+ t&is *id. "&e first *idder4s5 to reac& t&is *id +in4s5 t&e auction. &a'ane"e Auction In a Ha#anese reverse auction8 after every *id8 eac& se$$er must si'na$ t&eir +i$$in'ness to remain in t&e auction at t&e current #rice. "&e auction is over +&en on$y one se$$er remains8 or +&en on$y a #re-set num*er of se$$ers remain 4+&en t&e *uyer &as indicated t&e need to source from a minimum num*er of se$$ers5. !a(ilian Auction In a Bra:i$ian auction8 t&e *uyer esta*$is&es t&e #rice s&e is +i$$in' to #ay for t&e $ot and t&e se$$ers *id on &o+ many units t&ey are +i$$in' to #rovide at t&at #rice. "&e auction continues unti$ a se$$er ma)es a *id t&at no ot&er se$$er is +i$$in' to to#.

Vic)!e* Auction In a ?ic)rey reverse auction8 a variant of a sea$ed *id auction8 su##$iers su*mit *ids +it&out receivin' any feed*ac) re'ardin' t&ey *id6s com#etitive ran)in'. "&e item is t&en a+arded to t&e successfu$ *idder at t&e second $o+est *id. For exam#$e8 if *idder 2 *ids B1/ and *idder B *ids B128 t&en *idder 2 +ins t&e auction *ut receives t&e a+ard at B6s *id of B12. En+li"h Auction En'$is& auctions are #ro*a*$y t&e most common ty#e of auction format. Isers *id t&e &i'&est #rice t&ey are +i$$in' to #ay for an item and *iddin' activity sto#s +&en t&e auction duration is com#$ete. "&e item is so$d to t&e &i'&est *idder at t&eir *id #rice. %onverse$y8 se$$ers *id t&e $o+est #rice t&ey are +i$$in' to se$$ an item for and *iddin' activity sto#s +&en t&e auction duration is com#$ete. "&e item is *ou'&t from t&e $o+est *idder at t&eir *id #rice. En'$is& auctions a$so a$$o+ t&e *uyer7se$$er to s#ecify a reserve #rice *e$o+ +&ic& t&e item +i$$ not *e so$d. *uyer 2 offered to #rovide 5 units J B758 *uyer B offered to #rovide 3 units J B /8 *uyer % offered to #rovide ! units J B,/8 and *uyer K offered to #rovide a$$ 1/ units J ENEFITS OF E-AUCTIONS 9n$ine reverse auctions come +it& a num*er of *ui$t-in *enefits. "&ese *enefits formed t&e *asis of on$ine reverse auction success in t&e #ast8 and +i$$ continue to #$ay a stron' ro$e in on$ine auction success in t&e future. Ma!)et T!an"'a!enc* 2n e$ectronic reverse auction +it& mu$ti#$e8 0ua$ified *idders can *e used to f$us& out t&e true mar)et #rice of t&e auctioned items. Furt&ermore8 t&is information can *e used as t&e *asis for rea$-time *enc&mar)s for future sourcin' 1/

#ro;ects. 2uctions s#ar) &ea$t&y com#etition8 +&ic& can &e$# a$$ #artici#ants understand t&e true mar)et va$ue and identify areas +&ere t&ey need im#rovement. 2 *uyer *enefits *y )no+in' true L often $o+er L costs. Su##$iers *enefit *y )no+in' t&e mar)et rate so t&ey can revie+ t&eir o+n *usiness or #ricin' mode$. Dec!ea"ed E!!o! Rate Since t&e se$$ers enter t&eir o+n *ids8 t&ere is $ess c&ance of &uman error durin' *id transcri#tion and im#ortation into a common *id fi$e. "&e a*i$ity to run #re$iminary #rice rounds and t&e ease of on$ine editin' a$$ serve to &e$# catc& mista)es and c$arify re0uirements *efore t&e auction commences. Si,'lified A''le"-to-A''le" Co,'a!i"on" Since a$$ t&e su*mitted *ids are in a common format contained +it&in a sin'$e too$8 t&e *uyer can more easi$y ma)e an easy a##$es-to-a##$es com#arison8 even +it& Kutc&8 Man)ee8 or ot&er reverse auction variants. Inc!ea"ed u*in+ Reach In$i)e traditiona$ auctions t&at $imit a *uyer to t&e su##$iers +&o can conver'e to a common $ocation and time8 e$ectronic reverse auctions 'ive a *uyer access to a '$o*a$ su##$y *ase8 inc$udin' su##$iers in $o+ cost countries. Unif*in+ Fo!ce fo! #!oce"" I,'!ove,ent 2n e$ectronic auction is one of t&e cornerstones of an efficient8 executa*$e8 strate'ic sourcin' #rocess. It ena*$es Sourcin' "eams to stream$ine #urc&asin' #rocesses *y creatin' standard formats for #urc&asin' across any s#end cate'ory. E$ectronic reverse auctions sim#$ify *id co$$ection8 *id com#arison and centra$i:e re$evant data in a centra$ $ocation for easy 0uery and dis#$ay. "&is reduces cyc$e

11

time8 decreases t&e c&ance for &uman error8 and #rovides a so$id foundation for a+ard ana$ysis and o#timi:ation. 2uctions encoura'e &i'& cost #roducers to increase t&eir em#&asis on t&e identification and e$imination of #rocess +aste8 an effort t&at sometimes $eads to revo$utionary im#rovements and si'nificant cost reductions in t&e $on' term. C*cle Ti,e Reduction" 9n$ine auctions can *e coordinated in a manner of days and conducted in an &our L s&avin' +ee)s from t&e traditiona$ off$ine #rocess. Furt&ermore8 auctions force )ey #$ayers to focus and ma)e decisions in a time$y manner. "&ey a$so acce$erate a+ards8 and t&is *enefits a$$ #artici#ants +&o +ant to 'ro+ sa$es faster.

Mo!e Ti,e fo! -i+h Value Activitie" "&e drastic reduction in data co$$ection efforts and cyc$e time $eave more time for &i'& va$ue activities suc& as s#end ana$ysis8 strate'y se$ection8 and a+ard o#timi:ation.

Di!ect Co"t Reduction" Successfu$ reverse auctions immediate$y reduce t&e cost of ac0uisition 4t&at +ou$d ot&er+ise *e #aid5 for eac& item successfu$$y auctioned.

enefit" fo! the Su''lie!"

12

"&ere are a$so *enefits for su##$iers +&o #artici#ate in on$ine auctions. "&ere are numerous success stories discussin' &o+ su##$ier or'ani:ations 're+ t&eir *usiness '$o*a$$y t&rou'& t&eir #artici#ation in on$ine auctions. Cess time to com#$ete Since t&is #rocess &e$#s t&e *uyers *e more efficient8 t&e su##$iers +i$$ receive more information8 receive it faster8 and *enefit from a 0uic)er a+ard decision. Mo!e .enefit f!o, havin+ ,o!e u'f!ont 'lannin+ Su##$iers can *e confident t&at t&e a+ard #rocess &as *een more t&orou'&$y t&ou'&t t&rou'& and t&e c&ance of contract *ein' a+arded is very &i'&. Auction let" "u''lie!" )no$ $he!e the* "tand ,o!e /uic)l* $ith i,,ediate feed.ac) 2$t&ou'& su##$iers may not $i)e t&e #rice com#ression resu$t of an auction8 t&ey cannot ar'ue a'ainst t&e rea$ity t&at t&ey are 'ettin' rea$ time #ricin' and mar)et #osition information. "&ey &ave t&e a*i$ity to ma)e ad;ustments8 if t&ey c&oose. T!an"'a!enc* of '!oce"" "&ere +i$$ *e far fe+er un)no+ns at t&e conc$usion of t&e #rocess from t&e su##$ier #ers#ective. If ot&er *est #ractices are ad&ered to8 t&ey s&ou$d *e very a+are of +&at +as im#ortant in t&e a+ard decision and a$so +i$$ )no+ &o+ com#etitive t&eir #ricin' +as8 re$ative to ot&er su##$iers. #ro;ect. Better communication and data accuracy *ui$ds more confidence in t&e *uyer 'oa$ and stron'er #artici#ation.

TY#ES OF ON0INE AUCTION=

13

"&ere are various ty#es of on$ine auctions= 1.Chine"e auction= "&e ot&er name of c&inese auction is tric)y tray and #ic)-a-#rice. It is usua$$y &e$d at c&arity or fund raisin' events. "&e *idders *uy tic)ets and t&e c&ance of +innin' is #ro#ortiona$ to t&e num*er of tic)ets #urc&ased. 2.Dutch auction= In t&is ty#e of *iddin'8 t&e auctioneer dec$ares a &i'& #rice for t&e #roduct or service and su*se0uent$y8 it is $o+ered de#endin' on +&et&er t&e #artici#ants are +i$$in' to #ay t&e #re determined amount. 3.Sealed-.id fi!"t '!ice auction= In t&is ty#e of *iddin'8 a$$ t&e *idders simu$taneous$y su*mit t&eir *iddin' amount. 1no+ *idder )no+s t&e *iddin' amount of &is7&er com#etitor. "&e one +&o *ids t&e &i'&est amount 'ets t&e #roduct7service. 4.Sealed-.id "econd-'!ice auction= 2$so )no+n as vic)ery auction. It is exact$y simi$ar to sea$ed *id first #rice auction8 exce#t t&at t&e &i'&est *idder #ays t&e second &i'&est amount and not t&e &i'&est *id. "&is is t&e *iddin' system used *y e*ay. 51All-'a* auction= In t&is auction ty#e a$$ t&e *idders &ave to #ay t&eir *iddin' amount irres#ective of t&e fact t&at t&ey &ave +on or not. !.En+li"h auction = "&is is t&e most common auction ty#e round t&e '$o*e. In t&is ty#e of auction8 a reserve #rice is fixed for t&e 'oods and t&e customers offer $ar'er and $ar'er *id. Fina$$y8 t&e #roduct is so$d to t&e &i'&est *idder. En'$is& auction is t&e most common auction ty#e in t&e us and most of t&e on$ine auction sites use t&e en'$is& auction ty#e. "&e *i''est disadvanta'e of t&e en'$is& auction8 +&ic& ma)es it a $itt$e un#o#u$ar is somet&in' )no+n as N+inner<s curseN. En'$is& auctions are often com#$icated and most interestin' *ecause of strate'ies $i)e sni##in' and #roxy *iddin'. "&ere are four im#ortant ty#e of on$ine auction =

14

1. "&e first on$ine auction ty#e is a strai'&t auction. "&is is #ro*a*$y t&e most common$y used. Isin' t&is ty#e of an auction you are a*$e to set a minimum #rice and $et *idders &ave at it. 9nce t&e auction is over8 t&e &i'&est *idder +i$$ *e deemed t&e +inner of t&e auction. Sim#$y meanin'8 you +i$$ need to s&i# your item to t&is #erson *ecause t&ey +on t&e #ricin' +ar +&en time ran out.

2. 2 second ty#e of auction is ca$$ed a reserve auction. 3eserve auctions are 'reat8 &o+ever +i$$ cost you a $itt$e more t&an a strai'&t auction. 3eserve auctions a$$o+ a se$$er to #$ace a #rice on t&e #roduct +&ic& t&ey +i$$ not se$$ *e$o+. Kurin' t&e auction8 t&is #rice is not s&o+n to *idders8 it +i$$ sim#$y state t&at t&e reserve &as *een met8 or it &asn6t. "&is ty#e of an auction is #erfect for items +&ic& &ave a &i'& #rice ta' to t&e se$$er +&o doesn6t +ant to $ose money durin' t&e auction. Biddin' can start *e$o+ t&e reserve +&en t&e se$$er *e'ins t&e auction8 *ut t&e item +i$$ not se$$ if t&e *id #rices are *e$o+ t&e reserve +&en t&e auction ends. 3. "&e dutc& auction is t&e t&ird ty#e of auction. In t&is auction a se$$er is 'iven t&e o##ortunity of se$$in' mu$ti#$e items at once. "&is doesn6t mean you can se$$ a *ase*a$$ '$ove8 tennis s&oes8 and a su#er >intendo at once8 *ut rat&er mu$ti#$e items of t&e same 'ood8 suc& as 1// $aser #ens at once. "&en *idders can come in and s#ecify &o+ many of t&e item t&ey +ou$d $i)e to #urc&ase and &o+ muc& t&ey +i$$ #ay for eac&.

4. Drivate auctions are #ro*a*$y t&e $east used. In a #rivate auction a se$$er is 'iven t&e o##ortunity to +it&&o$d t&eir identity. "&ere must *e s#ecia$ cases +&ere t&is +ou$d *e re0uired8 *ut i +ou$dn6t t&in) t&is is t&e *est +ay to 'o a*out se$$in' an item *ecause of t&e feed*ac) o#tions avai$a*$e at an auction site. Se$$ers and *uyers a$i)e receive feed*ac) from ot&er users +&o &ave used t&eir *usiness in t&e #ast and $eave remar)s a*out t&e ex#erience8 +&et&er it +as a 'ood or a &orri*$e ex#erience to assist ot&ers +&o may *uy from t&em in t&e future. "&e 15

identity of t&e #rivate auction is revea$ed after t&e auction c$oses8 t&en information is exc&an'ed in order to transfer t&e 'oods #urc&ased.t&ere are many different auction sites +&ic& are avai$a*$e to use. Eac& &as uni0ue features +&ic& may *e suita*$e for your needs if you are #$annin' on *uyin' or se$$in'. 2uctions are an exce$$ent +ay to do *usiness and if t&ey are used correct$y you can find items to #urc&ase at un*e$ieva*$e #rices. 9verstoc) auctions may &ave t&e features +&ic& you re0uire.

%-232%"E3IS"I%S 9F 2 O99K 9>CI>E 2I%"I9> SI"E= Site must &ave #rominent #rivacy #o$icy t&at 'uarantees t&at t&e site +i$$ #rovide secure $in) +&en a customer enter credit card detai$s and do not se$$ customer information.

?ery c$ear defined #o$icies and #rocedures must *e enacted u#on +&en and if any +ron' transaction occurs. o ratin' of *uyers and se$$ers faci$itate t&e identification of se$$ers +&o do not exist to t&e end of *ar'ain.

Fees and commissions must *e mentioned on t&e site. (ost of t&e sites do not c&ar'e any fees from *idders *ut se$$ers often &ave to #ay sma$$ fees for $istin' t&e items and commission on se$$in' any item.

So t&e *idders must com#are on$ine auction sites for t&e fees and commission rates to 'et an idea of t&e current rates. 2 'ood on$ine auction site must &ave escro+ services o#tion suc& as #ay#a$. "&ese services ma)e t&e se$$in' and

1!

*uyin' more 0uic) *y #reventin' *uyers and se$$ers from *ecomin' intermediary.

"&e *uyer can direct$y send t&e sma$$ fees and #ayment to t&e escre+ service8 after receivin' funds escre+ 'ives instruction to se$$ers to s&i# t&e 'oods. @&en *uyer receives t&e 'oods in acce#ta*$e condition8 funds are transferred to se$$er via escre+ service.

2 'ood on$ine auction site must &ave t&e internationa$ #ayment and s&i##in' o#tion. %ommercia$ sites su##ort internationa$ sa$es.

(21I>O 2> 9>CI>E 2I%"I9> BISI>ESS (9KEC @931 F93 M9I = "&ere are many different ty#es of on$ine *usinesses t&at can *e #rofita*$e if you )no+ +&at you6re doin'8 *ut one of t&e most uni0ue mode$s is t&e on$ine auction *usiness mode$. 9n t&e surface8 it seems very sim#$e. Mou t&ro+ u# a site t&at #rovides a #$ace for #eo#$e to *uy and se$$ 'oods. But t&ere6s a $ot t&at 'oes into #$annin' and creatin' a successfu$ on$ine auction *usiness. In fact8 you can even ma)e money from on$ine auctions on eBay or ot&er a$ready-esta*$is&ed on$ine auction sites. -ere6s everyt&in' you need to )no+ a*out se$$in' on$ine t&rou'& auctions. The a"ic Online Auction u"ine"" Model = 9f course t&e num*er one on$ine auction +e*site exam#$e a$most everyone )no+s is eBay. "&e site *ecame )no+n as a #$ace for #eo#$e to se$$ t&eir 'ent$y used items8 *ut it ra#id$y 're+ into an on$ine mar)et#$ace t&at se$$s ne+ items as +e$$. In a nuts&e$$8 #eo#$e #$ace t&in's for sa$e on eBay8 and ot&ers *id on t&em in an auction. ut $hat if *ou $anted to c!eate an e a* alte!native2 3hat $ould *ou need2

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9f course t&e first t&in' you6$$ need is a +e*site +it& a catc&y name. Mou6$$ need to #ut your t&in)in' ca# on for t&is one. If t&e site name isn6t easy to remem*er8 t&en it +i$$ never ta)e off. Mou need a s&ort +ord8 #refera*$y four five $etters. Mou can even ma)e one u# if you come u# +it& somet&in' catc&in'."&en you6$$ need to desi'n t&e +e*site from t&e inside out8 inc$udin' an interface t&at ena*$es users to create auctions and #$ace *ids. 2 #ro'rammer and 7 or +e*site desi'ner can &e$# you +it& t&is.2fter a$$ t&e #ieces are in #$ace8 t&en it6s time to start mar)etin' your site. Mou6$$ face an u#&i$$ *att$e a'ainst eBay8 *ut *y offerin' some incentives $i)e $o+er fees8 you cou$d start 'ro+in' your mar)et s&are. "&is is a very $on' #rocess8 *ut after consumers trust your site8 it +i$$ *e a*$e to 'ro+ and *ecome #rofita*$e. 2 si'nificant investment may *e needed on your #art to advertise and 'et t&e name of your site out t&ere and mar)et your *usiness. -o$ You Ma)e Mone* on an Auction 3e."ite4 2fter you &ave t&e name reco'nition and consumer trust in #$ace8 t&e on$ine auction *usiness mode$ ma)es it easy to ma)e money. 2$$ you &ave to do is re'u$ar maintenance on t&e site and #o$icin' it to ma)e sure #eo#$e are fo$$o+in' t&e ru$es. 2s a *usiness mode$8 t&ere6s a $ot of +or) on t&e front end *ut not as muc& after everyt&in' is u# and runnin'."o 'et t&e money ro$$in' in8 you *asica$$y c&ar'e a fee on every auction t&at occurs on your site. It6s $um#ed in +it& t&e transaction8 so users #ay it automatica$$y. "&e *est +ay to co$$ect money t&rou'& an on$ine auction *usiness mode$ is t&rou'& DayDa$. "&ey6$$ &o$d t&e money for t&e *uyer unti$ t&e se$$er s&i#s t&e item. "&en +&en t&e *uyer receives it8 t&e funds are re$eased. Everyone is #rotectedE everyone is &a##y. Ma)in+ Mone* f!o, Online Auction"= If creatin' your o+n on$ine auction *usiness mode$ seems a $itt$e muc&8 t&ere are ot&er +ays you can cas& in on auctions8 suc& as t&e fo$$o+in' sim#$e strate'y. "a)e a tri# t&rou'& eBay and $oo) at t&e #rices in a cate'ory you are fami$iar +it&. Some items seem to s$i# t&rou'& t&e crac)s unnoticed. "&ey6re eit&er $isted incorrect$y8 so #otentia$ *uyers t&in) t&ey are somet&in' t&at6s not as 'reat as +&at t&ey actua$$y are8 or t&ere6s a Buy >o+ *utton on an item for a #rice t&at6s muc& $o+er t&an +&at you cou$d actua$$y 'et for it if you did a rea$ auction +it& t&e item.

"&ere is certain$y a de'ree of ris) +it& t&is ty#e of on$ine auction *usiness mode$8 and it does re0uire you to &ave some cas& u# front. -o+ever8 if you )no+ &o+ to s#ot a 'reat dea$ t&at6s underva$ued8 you can ma)e #urc&ases at $o+ #rices and rese$$ t&em on eBay for +&at t&ey6re actua$$y +ort&. (any on$ine entre#reneurs ma)e a 'reat $ivin' usin' t&is one sim#$e strate'y. Some of t&em focus on$y on one item8 suc& as smart#&ones or ot&er e$ectronic devices8 and t&ey *ecome very 'ood at *uyin' and rese$$in' t&ese items at very &ea$t&y #rofits. "&is one easy-to-im#$ement on$ine se$$in' tec&ni0ue cou$d *e a##$ied to a$most any #roduct you can t&in) of. 2$so8 you can use any #$atform to *uy and se$$ your #roducts8 and it doesn6t necessari$y &ave to *e eBay. Dro*a*$y t&e *i''est c&a$$en'e you6$$ face in esta*$is&in' an on$ine auction mode$ is *ein' a*$e to s#ot 'reat dea$s. But if you )no+ your tar'et mar)et +e$$ and are a*$e to researc& it and stay on t&e to# of it8 you +i$$ *e foo$is& not to ta)e advanta'e of t&e o##ortunities it #resents. E auction +or)s =

(ost on$ine auctions are centra$ +e*sites t&at a$$o+ mu$ti#$e #eo#$e to $ist t&eir items u# for auction on t&e site. 9n t&is ty#e of auction site8 t&e site does not &ave t&e items in stoc) and does not s&i# items or co$$ect t&e #ayments for t&e items. "&e individua$ #eo#$e +&o se$$ items t&rou'& t&e site are res#onsi*$e for everyt&in' re'ardin' t&e sa$e8 +it& t&e site actin' on$y as a t&ird-#arty venue to ma)e t&e sa$e #ossi*$e.

"o se$$ an item t&rou'& an on$ine auction site8 it is first necessary to si'n u# +it& t&e site and to #ut a credit card on fi$e +it& t&e auction site. "&is cuts do+n on se$$er fraud and ma)es it #ossi*$e for t&e site to co$$ect its fees +&en you $ist and se$$ items. (em*ers must a$so create t&eir IK name and 'ive t&e site t&eir *asic contact information *efore t&ey +i$$ *e a$$o+ed to se$$. "&en8 t&e mem*er must 'o t&rou'& t&e site<s ste#s to se$$ eac& item t&at t&ey +ant to auction off. "&e mem*er 'enera$$y ta)es a di'ita$ #icture of t&e item and +rites a t&orou'& descri#tion of it to interest *uyers.

9nce t&e item is u# for sa$e on t&e auction site8 ot&er mem*ers can find it eit&er t&rou'& a centra$ searc& t&rou'& t&e auction site or t&rou'& a searc& en'ine searc& for t&e item<s )ey+ords. Buyers can as) t&e se$$er 0uestions if t&ey don<t understand 1,

everyt&in' a*out an item t&at t&ey need to )no+ *efore *uyin'. 9nce t&e *uyer ma)es u# &is mind to *uy t&e item8 t&e *uyer #$aces a *id on t&e item. "&e *uyer may +in t&e item for t&is amount or &e may *e out*id *y anot&er *uyer *efore t&e end of t&e auction.

9n some sites8 $i)e eBay8 t&e *uyer can #$ace a maximum *id t&at is &i'&er t&an +&at &e needs to +in t&e auction. "&en8 if anyone *ids a'ainst &im $ater t&e site +i$$ increase t&e first *idder<s *id amount u# to t&e maximum *id #rice t&at t&e #erson a$$o+ed. "&is is )no+n as a #roxy *id *ecause t&e auction site +i$$ automatica$$y *id t&e maximum if t&e *uyer needs to *id t&at amount to +in t&e item and does so +it&out t&e *uyer &avin' to do anyt&in' furt&er.

9nce a *uyer &as +on an auction8 t&e *uyer must #ay t&e se$$er direct$y rat&er t&an #ayin' t&e site itse$f. "&ere are a num*er of +ays t&at some sites a$$o+ #ayments to *e made8 inc$udin' t&rou'& on$ine #ayments8 or sendin' a money order or c&ec). "&e on$y form of #ayment a$$o+ed on eBay is an e$ectronic #ayment. 9nce t&e item &as *een #aid for8 t&e se$$er s&i#s t&e item direct$y to t&e *uyer. 9n most auction sites8 t&e *uyers and se$$ers can $eave feed*ac) for eac& ot&er *ased on &o+ +e$$ t&e transaction +ent in order to $et ot&ers )no+ +&et&er or not to trust t&eir transaction #artner.

Internet auctions are 'iant f$ea mar)ets. Se$$ers may offer one item at a time or mu$ti#$e $ots of t&e same item. In t&eory8 on$ine auctions run muc& $i)e $oca$ auctions8 *ut *e&ind t&e scenes t&ere is a co$$ection of data 'oin' on continuous$y. Hust $i)e $oca$ auctions8 t&ere are se$$ers and *idders and +inners and $osers. @inners are ex#ected to #ay for +&at t&ey *id on at t&e conc$usion of t&e auction. But t&at is +&ere t&e simi$arities *et+een on$ine and $oca$ auctions end. Re+i"t!ation4 2t on$ine auctions you +i$$ *e re0uired to re'ister *efore you can *uy or se$$ an item 4s5. "&is is re0uired to trac) items you *id on or se$$8 )ee# u# +it& t&e *ids8 determine t&e +innin' *ids and *ui$d a data*ase on se$$er and *idder feed*ac).

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"i#= Settin' u# an on$ine emai$ account se#arate from your main emai$ account is recommended to &e$# you trac) t&e #ro'ress of t&e auction and #revent s#am from comin' into your main account. 3innin+ id"4 "&e *iddin' for eac& auction c$oses at t&e sc&edu$ed time. In t&e case of sa$es of mu$ti#$e $ots8 t&e #artici#ants +it& t&e &i'&est *ids at t&e c$ose of t&e auction are o*$i'ated to *uy t&e items. If no one *ids at or a*ove t&e reserve #rice8 t&e auction c$oses +it&out a +inner. 2t t&e c$ose of a successfu$ auction8 t&e *uyer and se$$er communicate8 usua$$y *y emai$8 to arran'e for #ayment and de$ivery of t&e 'oods. 5ind" of Auction"4 "&ere are t+o ty#es of Internet auctions - *usiness-to-#erson or #erson-to-#erson. Se$$ers of *usiness-to-#erson auction sites &ave #&ysica$ contro$ of t&e merc&andise *ein' offered and acce#t #ayment for t&e 'oods. In #erson-to-#erson auctions8 individua$ se$$ers or sma$$ *usinesses offer t&eir items for auction direct$y to consumers. Oenera$$y8 t&e se$$er8 not t&e site8 &as #&ysica$ #ossession of t&e merc&andise. 2fter t&e auction c$oses8 t&e se$$er is res#onsi*$e for dea$in' direct$y +it& t&e &i'&est *idder to arran'e for #ayment and de$ivery. #a*,ent O'tion"4 Buyers may &ave severa$ #ayment o#tions8 inc$udin' credit card8 de*it card8 #ersona$ c&ec)8 cas&ier<s c&ec)8 money order8 cas& on de$ivery and escro+ services. -o+ever8 a$$ se$$ers do not acce#t a$$ forms of #ayment. %redit cards offer *uyers t&e most consumer #rotections8 inc$udin' t&e ri'&t to see) a credit from t&e credit card issuer if t&e #roduct is not de$ivered or if t&e #roduct received is not t&e #roduct ordered.

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"y#ica$$y8 se$$ers usin' *usiness-to-#erson auction sites acce#t #ayment *y credit card. But many se$$ers in #erson-to-#erson auctions do not. Isua$$y t&ey re0uire #ayment *y cas&ier<s c&ec) or money order *efore t&ey send t&e item to t&e +innin' *idder. E"c!o$ Se!vice"4 Some se$$ers a'ree to use an escro+ service. For a fee8 'enera$$y 5 #ercent of t&e cost of t&e item #aid *y t&e *uyer8 an escro+ service acce#ts #ayment from t&e *uyer via c&ec)8 money order or credit card. "&e service re$eases t&e money to t&e se$$er on$y after t&e *uyer receives and a##roves t&e merc&andise. "&is &e$#s #rotect *uyers from endin' u# em#ty-&anded after #ayin' t&eir money. Isin' an escro+ service can de$ay t&e dea$. 2s +it& any *usiness transaction8 investi'ate t&e escro+ service<s re#utation *efore si'nin' on to t&e service. Con"u,e! Conce!n"4 2ccordin' to t&e Federa$ "rade %ommission8 Internet auction fraud &as *ecome a si'nificant #ro*$em. (ost consumer com#$aints center on se$$ers +&o=

Ko not de$iver t&e advertised 'oods. Ke$iver somet&in' far $ess va$ua*$e t&an t&ey advertised. Ko not de$iver in a time$y +ay. Fai$ to disc$ose a$$ t&e re$evant information a*out t&e #roduct or terms of t&e sa$e. ARRIERS TO SUCCESS

E$ectronic reverse auctions are not +it&out t&eir ris)s. Before underta)in' a reverse auction8 eac& of t&e fo$$o+in' ris) #ossi*i$ities s&ou$d *e revie+ed and any #erceived ris)s a##ro#riate$y dea$t +it& *efore t&e auction *e'ins. "&is +i$$ &e$# to insure a smoot& and successfu$ auction event. 1ee# in mind t&at many of t&e *arriers to success are a$so *arriers for traditiona$8 manua$ sourcin' #rocesses. By $evera'in' tec&no$o'y8 Sourcin' "eams can over come t&ese *arriers more 0uic)$y and effective$y.

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INTERNA0 ARRIERS AND SUCCESS ENA 0ERS Inte!nal a!!ie!4 Intent 2ny sourcin' #ro;ect8 +&et&er on$ine or off$ine8 re0uires a$$ #artici#ants to enter +it& #ure intentions. "&is is es#ecia$$y true for on$ine #ro;ects due to t&e s#eed of information transmission. u*e!" ,u"t4 Intend to a+ard *usiness Intend to serious$y consider a+ardin' *usiness to a non-incum*ent su##$ier 2+ard *usiness on$y to one Por moreQ of t&e su##$iers #artici#atin' in t&e sourcin' #ro;ect 3es#ect non-disc$osure a'reements Su''lie!" ,u"t= 2ccurate$y re#resent t&emse$ves and t&eir ca#a*i$ities Su*mit va$id *ids

Succe"" Ena.le!4 Standa!di(ed '!ocedu!e" and co,,unication "&e )ey to overcomin' t&is *arrier is communication8 standardi:ation and consistent a##$ication of et&ica$ *est #ractices. (a)e sure t&at everyone invo$ved in t&e sourcin' #rocess L *uyers8 sta)e&o$ders and su##$iers L is a+are of t&e #rocesses8 t&at everyone uses t&e same standardi:ed sourcin' a'reements and t&at everyone &as received8 read8 and si'ned off on t&e code of et&ics. 2 su##$ier code of et&ics is a$so recommended and often si'ned as #art of t&e *idder a'reement. 23

Inte!nal a!!ie!4 Sta)eholde! 'olitic" and 'olicie" "o *e successfu$8 a$$ sta)e&o$ders s&ou$d *e committed to t&e auction #rocess. 9t&er+ise8 an auction #ro;ect may end #remature$y and #ossi*$y $ead to animosity amon' a$$ #arties. Be a+are t&at many sta)e&o$ders &ave Femotiona$G attac&ments to incum*ent su##$iers and to informa$ or forma$ F#artners&i#G a'reements. (any sta)e&o$ders 'enera$$y dis$i)e e-2uctions8 most $i)e$y due to misconce#tions or #revious fai$ures. 2dditiona$$y8 no one $i)es to *e $a*e$ed as ca$$ous and many #eo#$e fee$ t&at auctions and &ead-to-&ead com#etition are mean-s#irited8 es#ecia$$y to $on'-standin' su##$iers +&o &ave de$ivered &i'& 0ua$ity 'oods and services over time.

Succe"" Ena.le!4 Sta)eholde! education and 'a!tici'ation In order to 'et a$$ sta)e&o$ders to #artici#ate and acce#t t&e auction8 t&e Sourcin' "eam may need to s#end time educatin' t&e sta)e&o$der community on &o+ e2uctions im#rove or'ani:ationa$ efficiency and cost-effectiveness as +e$$ as individua$ ;o* res#onsi*i$ities. 2dditiona$$y8 t&ey s&ou$d *e )e#t informed t&rou'&out t&e entire #rocess so t&ey do not fee$ t&in's are &a##enin' +it&out t&eir )no+$ed'e. It is a$so im#ortant to insist on a$$ communication &a##enin' t&rou'& one centra$i:ed $ocation 4suc& as an on$ine forum5 to ensure F#referredG vendors are not #rivy to information ot&er did not receive. "&is a$so assists in removin' some of t&e c&a$$en'es around Femotiona$ attac&mentsG to incum*ent su##$iers.

Inte!nal a!!ie!4 -idden Co"t" "&e su##$y and uti$i:ation dynamics must *e +e$$ understood *efore an item is #ut u# to *id on an auction. If t&ere +ou$d *e a si'nificant cost for s+itc&in' su##$iers8 or if uti$i:ation costs vary across t&e su##$y *ase due to differences in 0ua$ity8 t&en t&ese costs must *e considered *efore an item is #ut u# for *id. 2$so8 a commitment to su##$ier diversification or minority su##$iers mi'&t add

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cost a*ove and *eyond t&e $o+est cost a+ard +it&out t&ese commitments and t&ese costs a$so need to *e understood. Succe"" Ena.le!4 Uncove! t!ue co"t" "&e )ey to 'ettin' #ast t&is *arrier is active sta)e&o$der #artici#ation to understand t&e true costs of usin' current or ne+ su##$iers and senior mana'ement commitments to diversification or minority su##$iers and ot&er commitments t&at mi'&t increase cost. (any or'ani:ations conduct interna$ 3FIs to root out )ey issues and costs. Some com#anies 'o direct$y to t&e incum*ent su##$ier *ecause t&e su##$ier &as t&e current s#ecifications8 #rices and vo$umes. Inte!nal a!!ie!"4 Technolo+* 9n$ine reverse auctions use so#&isticated soft+are #$atforms t&at uti$i:e t&e convenience of t&e @or$d @ide @e*. "&ou'& t&ese #$atforms are sta*$e and &ave *een t&orou'&$y tested8 t&ere is a$+ays a c&ance t&at durin' t&e event t&e #$atform cou$d fai$8 access to t&e Internet is disru#ted causin' one or more su##$iers to $ose connectivity or t&e su##$iers6 o+n com#uters cou$d fai$. Succe"" Ena.le!4 Redundanc* 'lan" 6"u''o!ted .* '!oce"" and technolo+*7 "o minimi:e t&e #otentia$ adverse effects resu$tin' from disru#ted systems8 c&oose a #$atform t&at is ca#a*$e of detectin' if su##$ier4s5 $ose connectivity. If a$$ su##$iers $ose connectivity8 ma)e sure t&ere is a *ac)u# #$an. 2dditiona$$y8 *ui$d in redundancy for acce#tin' su##$ier *ids via #roxy *iddin' #rocesses. EXTERNA0 ARRIERS AND ENA 0ERS E%te!nal a!!ie!"4 Su''lie! confu"ion "&e su##$iers mi'&t not understand t&e #ur#ose of t&e auction8 t&e ru$es of t&e auction or &o+ to use t&e auction too$. 2ny misunderstandin' cou$d $ead to a

25

mar)et fai$ure. If su##$iers mista)e a standard reverse auction for a sin'$e sea$ed *id auction8 t&ey mi'&t enter a fina$ *id u# front8 +&ic& is not as a''ressive as t&ey cou$d *id8 and not *id a'ain t&in)in' t&e ot&er su##$iers +i$$ *e fo$$o+in' t&e same strate'y. 2nd if t&ey do not )no+ &o+ to use t&e too$8 t&ey mi'&t end u# not #artici#atin' at a$$. Succe"" Ena.le!4 Su''lie! t!ainin+ 2void t&is *arrier *y #rovidin' a$$ su##$iers +it& a detai$ed overvie+ of t&e #rocess to *e fo$$o+ed u# front 4communicated *ot& ver*a$$y and on$ine58 on$ine education and refres&er c$asses for ne+ and existin' su##$iers and ma)in' sure t&e su##$iers &ave a forum to as) 0uestions8 'et ans+ers8 and revie+ avai$a*$e information at a$$ times. Before su##$iers are invited to an auction8 deve$o# a su##$ier trainin' #$an and sc&edu$e. 2ssess t&e educationa$ met&od t&at +i$$ *e most *eneficia$ ta)in' into account t&e com#$exity of your auction= on$ine &e$# fi$es8 on$ine trainin' demos8 one-on-one $ive trainin'8 or $ive +e* meetin' trainin'. "&is #$an can *e deve$o#ed interna$$y. (any Sourcin' "eams $evera'e su##$ier trainin' services #rovided *y t&eir e-Sourcin' vendor. E%te!nal a!!ie!4 u*e! c!edi.ilit* If t&e *uyer &as run events in t&e #ast and &as not fo$$o+ed t&rou'& on a+ard and contract ne'otiations 0uic)$y8 t&e *uyer may &ave $ost credi*i$ity in t&e mar)et#$ace. Succe"" Ena.le!4 Standa!di(ed .u*e! !ule" In t&is case8 t&e *uyer +i$$ &ave to acce#t and admit to t&eir #revious mista)es u# front8 communicate t&eir ne+ #rocess and code of et&ics and convey to t&e su##$iers t&e c&an'es t&ey &ave made to ensure t&at t&ey can $ive u# to t&eir commitments. %ommunication is a )ey e$ement. Ensure t&at t&rou'&out t&e tender #rocess su##$iers are notified via e-mai$ or #&one a*out t&e next ste#s. "&is is #articu$ar$y im#ortant after t&e com#$etion of an auction. Su##$iers s&ou$d 2!

)no+ &o+ $on' it +i$$ ta)e you to ma)e an a+ard decision8 +&en a decision &as *een made and +&et&er or not t&ey &ave *een a+arded *usiness. It is *est to *e #re#ared +it& concrete evidence as to +&y t&ey +ere not a+arded *usiness8 es#ecia$$y if t&ey finis&ed first. Fina$$y8 if t&ere are 'oin' to *e any de$ays in any of t&e a*ove #oints8 *e sure vendors are )e#t in t&e $oo#. E%te!nal a!!ie!4 #e!ce'tion and di"t!u"t "&e su##$y *ase mi'&t not #erceive t&e auction #ositive$y or in t&e manner t&e *uyer intended. "&e *uyer mi'&t *e introducin' t&e auction to #rovide a *asis for a fair com#etition *ut t&e su##$y *ase mi'&t #erceive it as a tactic so$e$y to drive do+n #rices to unreasona*$e $eve$s. If su##$iers t&in) t&e on$y 'oa$ is to s0uee:e out mar'ins from t&e incum*ent su##$ier8 ne+ su##$iers +i$$ not *e inc$ined to *id. "&is can create distrust amon' t&e incum*ent su##$iers and t&e ot&er su##$iers +&o fee$ t&at t&ey are not *ein' invited to #artici#ate in a serious auction. Succe"" ena.le!4 O'en co,,unication and con"i"tentl* !un ethical "ou!cin+ '!o8ect" 2void t&is *arrier *y o#en$y communicatin' +it& su##$iers at a$$ times8 #articu$ar$y +it& re'ards to t&e a+ard criteria. Be very c$ear as to +&at +i$$ *e t&e critica$ factors determinin' +&o +i$$ +in t&e *usiness8 +&en #ossi*$e +&at +ei'&t is 'iven to eac&8 and &o+ it +i$$ *e assessed. 9n$y use t&e #re-esta*$is&ed forums for communication8 consistent$y and &onest$y fo$$o+ u# on any and a$$ issues t&at arise8 and stic) to t&e code of et&ics8 +&ic& s&ou$d *e avai$a*$e to a$$ su##$iers at a$$ times. Furt&ermore8 if t&e *uyer doesn6t fo$$o+ t&rou'& on a+ard and contract ne'otiations 0uic)$y8 t&e *uyer cou$d $ose credi*i$ity in t&e mar)et#$ace. It is very im#ortant t&at a$$ auctions conducted *y t&e Sourcin' "eam are mana'ed in

27

a consistent and et&ica$ manner. >e+s trave$s fast8 es#ecia$$y +&en su##$iers fee$ t&ey &ave *een treated unet&ica$$y or unfair$y. E%te!nal a!!ie!4 Ma!)et condition" Sometimes t&e mar)et conditions mi'&t not *e suita*$e for a reverse auction. Kemand may current$y exceed su##$y8 #rices mi'&t *e unsta*$e8 and su##$iers may not see #artici#ation as im#ortant. Be sure to Identify t&e 3i'&t Ooods7Services *efore underta)in' an auction and see t&e section on Success Strate'ies for more information. 2nd sometimes conditions c&an'e in t&e midst of an auction #ro;ect8 t&ere*y re0uirin' a s&ift in strate'y a+ay from an auction. Succe"" ena.le!4 Evaluate each co,,odit* Eva$uate eac& auction ri'&t u# to t&e day of t&e auction. Ko not underta)e an event +it&out t&orou'& mar)et researc&8 +&ic& can inc$ude consu$tation +it& commodity ex#erts. (ar)et conditions constant$y c&an'e. 2 commodity successfu$$y auctioned in t&e #ast may not *e a 'ood auction candidate due to externa$ factors. 2 commodity t&at +as unsuccessfu$$y auctioned in t&e #ast may no+ *e a 'ood auction candidate due to c&an'in' factors. 1. 2s a revie+8 #ro;ect strate'y is determined as #art of s#end ana$ysis. 2 s#end ana$ysis initiative identifies commodities8 com#onents and cate'ories +&ere contracts are ex#irin' and t&ere are o##ortunities for cost savin's 7 avoidance. "&ere are t+o )ey factors t&at &e$# determine t&e most a##ro#riate strate'y. %ontract StatusL eva$uate s#end *ased on= %ontract status 4avai$a*$e8 unavai$a*$e5

2. %ommodity %&aracteristicsL eva$uate s#end *ased on= %ommercia$ attractiveness 4&i'&8 medium8 $o+5

Kefina*$e re0uirements 4&i'&8 medium8 $o+5 %om#etitive su##$y *ase 4&i'&8 medium8 $o+5 Savin's o##ortunities 4&i'&8 medium8 $o+5 In&erent ris) 4&i'&8 medium8 $o+5

"&e fina$ decision is made *y t&e ex#erienced Sourcin' Drofessiona$ *ased on t&eir inter#retation of t&e c&aracteristics. "&e com#$exity of t&e sourcin' #rocess is t&en determined *y t&e com#$eteness of t&e re0uirements8 t&e num*er of su##$iers t&at &ave *een 0ua$ified8 ex#ected com#etition in t&e su##$ier *ase8 in&erent ris) in t&e sourcin' effort8 and #ro;ected savin's or cost avoidance o##ortunities. "&e fo$$o+in' ta*$e8 +&ic& uses a -i'&-(edium-Co+ c$assification of re$evant sourcin' factors8 can *e used to determine +&et&er conditions are $i)e$y ri#e for an 3FI8 3FD8 3FR8 sea$ed *id ne'otiation8 or auction.

2,

E%te!nal a!!ie!4 Un"u"taina.le id" "&ere is a$+ays t&e ris) t&at a ne+ su##$ier8 over:ea$ous to +in ne+ *usiness8 mi'&t #$ace a *id so $o+ t&at it is unsustaina*$e in t&e $on' term. "&is cou$d resu$t in t&e su##$ier *ac)in' out or8 even +orse8 acce#tin' t&e *id and t&en 'oin' out of *usiness. In many cases8 t&e su##$ier misinter#reted t&e s#ecifications and su*mitted a *id not re#resentin' t&e actua$ costs and re0uirements.

Succe"" Ena.le!4 Collect '!eli,ina!* .id" "o catc& inconsistencies ear$y in t&e #rocess8 most successfu$ auctions inc$ude a #re$iminary *id #&ase. "&is ste# &e$#s identify su##$ier *ids t&at are dramatica$$y over or under t&e mar)et. "o &e$# minimi:e t&e t&reat of unsustaina*$e *ids8 t&e Sourcin' Drofessiona$ can &ave a 0uic) conversation +it& t&e su##$ier to ma)e sure t&ey understand t&e s#ecifications and are 0uotin' correct$y. 3/

2dditiona$$y8 after t&e auction conc$udes8 successfu$ Sourcin' "eams conduct a more t&orou'& #ost-*id 0ua$ification ste# for ne+ su##$iers. "&is #&ase revie+s8 verifies and documents one to t&ree #artici#atin' su##$iers and assesses +&et&er t&ey can su##ort t&e *id and7or t&e *usiness. (any teams re0uire t&e #otentia$ su##$ier to #roduce test #roducts so t&e Sourcin' "eam can assess its 0ua$ity. In t&e rare event t&at t&e a+arded su##$ier cannot su##ort t&eir su*mitted *id8 t&e Sourcin' "eam s&ou$d &ave a *ac)u# #$an in #$ace. "&e #$an s&ou$d inc$ude=

2+ardin' t&e *usiness to t&e second #$ace 4or t&ird8 etc.5 su##$ier Kocumentin' #oor feed*ac) on t&e offendin' su##$ier and s&arin' information +it& t&e rest of t&e or'ani:ation 4often ca$$ed a FDena$ty BoxG5

2$$ ste#s s&ou$d *e c$ear$y articu$ated in t&e 3FR document associated +it& t&e auction. E%te!nal a!!ie!4 Collu"ion If t&e su##$y *ase is sma$$8 t&ere is a$+ays t&e #ossi*i$ity t&at su##$iers mi'&t *and to'et&er to maintain current #rice $eve$s *y refusin' to #artici#ate or $o+er *ids t&rou'& an auction 4even t&ou'& t&is may *e i$$e'a$5. "&is &as *een documented in some construction cate'ories and ra+ food #roducts8 amon' ot&ers. Succe"" Ena.le!4 !oad "u''l* .a"e (a)e sure t&ere is an ade0uate #re-0ua$ified su##$y *ase for a commodity *efore initiatin' an auction. It is a$so im#ortant to inc$ude non-incum*ent su##$iers 4t&ose ea'er to com#ete in order to +in ne+ *usiness5. 9#en$y communicate +it& a$$ su##$iers at a$$ time. (ar)ets t&at are at ris) for #otentia$ co$$usion inc$ude=

?ery sma$$8 '$o*a$ mar)ets 41-3 #otentia$ su##$iers5 +it& sma$$ mar'ins

31

Oovernment re'u$ated industries

ET-ICS FOR E-AUCTIONS Et&ics are a very im#ortant #art of a successfu$ auction8 *ot& on t&e #art of t&e *uyer and on t&e #art of t&e su##$ier. u*e! Ethic" "&is section covers et&ica$ ru$es t&at a *uyer s&ou$d a$+ays ad&ere to in order to ac&ieve a successfu$ auction. From t&e very *e'innin' of t&e sourcin' #ro;ect8 t&ese ru$es s&ou$d *e out$ined and communicated to t&e Sourcin' "eam and a$$ su##$iers. 1. "&e Buyer +i$$ communicate and consistent$y ad&ere to t&e auction ru$es as out$ined in t&e 3FR. 2. "&e Buyer +i$$ &o$d a$$ su##$ier information in confidence and s&a$$ not disc$ose it to t&ird #arties. 3. "&e Buyer +i$$ on$y invite 0ua$ified su##$iers. "&is a$so means no Fra**its.G 2 ra**it is a tactic used *y a *uyer mas0ueradin' as a su##$ier in an attem#t to drive *iddin' activity and #rice reductions. "&is &as a$so *een referred to as F#&antom *iddin'G in t&e #ast. 4. "&e Buyer +i$$ communicate time$y8 accurate information re'ardin' t&e *usiness e0ua$$y to a$$ su##$iers. "&is inc$udes any c&an'es or corrections to re0uirements8 s#ecifications and time$ines. "&e initia$ 3FR #ostin' and any c&an'es s&ou$d a$so #rovide su##$iers ade0uate time for revie+. 9#en and &onest communication is one of t&e foundations of a successfu$ auction. "&is dictates t&at eac& and every su##$ier &ave t&e same unrestricted access to a$$ re$evant event information. 5. "&e Buyer intends to a+ard t&e *usiness and +i$$ not use t&e auction as a #rice discovery mission. "&e Buyer +i$$ a+ard t&e *usiness on$y to t&ose su##$iers su*mittin' *ids in t&e auction. Interested su##$iers cannot sa*ota'e t&e auction #rocess *y su*mittin' *ids via emai$8 fax or #ost. "o *e considered8 a$$ *ids must *e su*mitted via t&e on$ine auction. 32

In situations +&ere a reserve #rice is esta*$is&ed8 and no su*mitted *ids meet t&e reserve #rice8 a Buyer can c&oose a$ternative so$utions. -o+ever8 t&e reserve #rice standard and #rocess must *e c$ear$y communicated to t&e su##$y *ase u# front. !. "&e Buyer +i$$ a+ard t&e *usiness *ased on 0uotes su*mitted in t&e auction. "&e Buyer s&a$$ not #artici#ate in off$ine8 after-t&e-auction ne'otiations. 2$$ *ids must *e su*mitted durin' t&e auction so t&at ot&er su##$iers are 'iven t&e o##ortunity to res#ond. In situations +&ere a reserve #rice is esta*$is&ed8 and no su*mitted *ids meet t&e reserve #rice8 a Buyer can c&oose a$ternative so$utions. -o+ever8 t&e reserve #rice standard and #rocess must *e c$ear$y communicated to t&e su##$y *ase u# front. 7. "&e Buyer +i$$ communicate t&e a+ard decision +it&in t&e timeframe s#ecified in t&e 3FR. "o add an even 'reater $eve$ of #rofessiona$ism to t&e auction #rocess8 many or'ani:ations deve$o# and #u*$is& a forum to a$$o+ su##$iers to reso$ve et&ica$ dis#utes +it& t&eir *uyers. In many cases8 t&e e-Sourcin' soft+are #rovider can &e$# mana'e t&e dis#ute #rocess. Su''lie! Ethic" "&is section covers et&ica$ ru$es t&at su##$iers must ad&ere to in order for t&em to tru$y *enefit from an auction. 1. "&e Su##$ier8 *y #artici#atin' in any sourcin' #ro;ect constitutes acce#tance of a$$ referenced and re0uired terms and conditions. Ko not try to recou# #erceived $osses #ost-auction *y c&ar'in' exor*itant fees for c&an'e orders. In addition to ex#ectin' t&at a su##$ier +i$$ maintain t&e same $eve$ of 0ua$ity8 *uyers ex#ect t&at t&e su##$ier +i$$ maintain t&e same et&ics and fair #rice structures t&at t&ey &ave in t&e #ast. %&ar'in' more mi'&t &e$# a 33

su##$ier6s #rofits in t&e s&ort term8 *ut +&en t&e contract ends8 c&ances are t&e *uyer +i$$ dro# t&e su##$ier. Furt&ermore8 if a su##$ier 'ains a re#utation in t&e mar)et#$ace as *ein' deceitfu$8 t&e c&ances of t&at su##$ier *ein' invited to ot&er auctions +i$$ severe$y diminis&. 2. "&e Su##$ier +i$$ &o$d a$$ information of t&e Buyin' com#any in confidence and s&a$$ not disc$ose it to t&ird #arties. 3. "&e Su##$ier +i$$ #artici#ate in an auction on$y if 0ua$ified to su##$y t&e s#ecified 'oods and services. 4. 2$$ *ids su*mitted in an auction are $e'a$$y va$id 0uotes +it&out 0ua$ificationE t&erefore Su##$iers s&ou$d on$y su*mit *ids t&ey can su##ort. Exce#tions are made for &onest8 data entry errors. 2ny errors su*mitted durin' an auction s&ou$d *e immediate$y re#orted to t&e Buyer to #revent disru#tion of t&e auction. (any e-Sourcin' soft+are #roviders can su##ort a #rocess for mana'in' auction-re$ated errors. It is im#ortant t&at t&e e-Sourcin' soft+are can tec&nica$$y remove *ids #$aced in error. 5. "&e Su##$ier +i$$ communicate to t&e Buyer in a time$y8 accurate manner. "&is inc$udes any discre#ancies or inaccuracies t&e su##$ier may find in t&e 3FR and time$ine. "&e *uyin' team s&ou$d esta*$is& a #rocess for &and$in' t&is ty#e of feed*ac). 2dditiona$$y8 t&e e-Sourcin' soft+are s&ou$d &ave a tec&nica$ a*i$ity to acce#t comments from t&e su##$iers. !. "&e Su##$ier intends to #rovide 'oods and7or services and +i$$ not use t&e auction as a fact-findin' #ro;ect. If t&e *uyer t&in)s a su##$ier is #artici#atin' so$e$y to co$$ect mar)et inte$$i'ence8 not on$y is it $i)e$y t&at t&e *uyer +i$$ not a+ard t&at su##$ier any *usiness8 *ut it is a$so $i)e$y t&at t&e su##$ier +i$$ not *e invited to #artici#ate in future auctions. If a su##$ier 'ets a *ad re#utation *y +ord of mout&8 it cou$d *e a $on' time *efore t&at su##$ier is invited to anot&er auction.

34

7. "&e Su##$ier +i$$ on$y su*mit *ids t&rou'& t&e auction. Interested su##$iers cannot sa*ota'e t&e auction #rocess *y su*mittin' *ids via emai$8 fax8 #ost or ora$$y. "o *e considered8 a$$ *ids must *e su*mitted via t&e on$ine auction. In t&e rare event t&at a #artici#atin' su##$ier *e&aves unet&ica$$y8 many or'ani:ations deve$o# and #u*$is& a #rocess re'ardin' unet&ica$ su##$ier *e&avior. "&e #$an s&ou$d inc$ude=

documentin' t&e unet&ica$ su##$ier *e&avior a #rocess t&e su##$ier can use to res#ond to t&e incident s&arin' information +it& t&e rest of t&e or'ani:ation 4often ca$$ed a FDena$ty BoxG5 if necessary8 $iti'ation.

35

ON0INE AUCTION TEC-NICA0 RE9UIREMENTS "&ere is a 'reat dea$ of functiona$ity avai$a*$e in today6s on$ine auction too$s8 so muc& t&at it can *e over+&e$min' for t&e Sourcin' Drofessiona$. "&e Sourcin' "eam s&ou$d ma)e sure t&at its e-Sourcin' too$ &as some core8 *asic functiona$ity. "&is core functiona$ity &e$#s im#rove sourcin' efficiency t&rou'& increased s#eed8 im#roved accuracy and consistency8 'reater co$$a*oration +it& sta)e&o$ders and su##$iers8 *roader )no+$ed'e transfer and security.

id ,ana+e,ent cont!ol" Sourcin' Drofessiona$s need to &ave contro$ durin' a $ive auction. %ontro$ &e$#s t&em mana'e su##$ier and system #ro*$ems t&at may arise. Im#ortant *id mana'ement contro$s inc$ude=

#ausin' auctions resumin' auctions cance$in' auctions erroneous *id remova$ #roxy *iddin'

"&e #resence of *id mana'ement contro$s affects s#eed8 accuracy8 consistency and security. %onfi'ura*$e $ot cascadin' and overtime "&is functiona$ity a$$o+s t&e Sourcin' "eam to structure t&e auction so t&at a$$ interested su##$iers can #artici#ate. Su##$iers can focus on one or more $ots since t&e endin' times are different and de#endent on t&e conc$usion of ear$ier $ots. 9vertime a$$o+s *iddin' to continue *eyond t&e sc&edu$ed $ot c$osin' time. 9vertime ena*$es a$$ su##$iers t&e o##ortunity to res#ond to t&e most recent *id. @it& overtime8 su##$iers do not need to time t&eir *est *ids to *eat t&e mar)et. Sourcin' "eams are secure )no+in' t&at t&ey received t&e *est *ids.

3!

"&e #resence of confi'ura*$e $ot cascadin' and overtime affects s#eed8 accuracy and consistency.

Confi+u!a.le .id vie$" and !e'o!t"

"o im#rove ease of use and access to information for t&e Sourcin' "eam8 it is im#ortant t&at t&e user can see t&e *ids as t&ey come in and ma)e ad;ustments to t&e 'ra#&ica$ dis#$ay +&en necessary. "&e a*i$ity to f$exi*$y ran) su##$iers *y $ots or *und$es of $ots &e$#s t&e Sourcin' "eam antici#ate a+ard scenarios. 2fter an auction8 it is im#ortant to *e a*$e to access *id resu$ts for ana$ysis and documentation eit&er via inte'rated re#orts or s#reads&eets. "&e #resence of confi'ura*$e *id vie+s and re#orts affects s#eed8 accuracy8 consistency8 co$$a*oration and )no+$ed'e transfer.

Data i,'o!t:e%'o!t ca'a.ilit*

"o im#rove ease of use and access to information for t&e Sourcin' "eam8 it is im#ortant t&at information can *e easi$y im#orted into or ex#orted from t&e auction too$. "&e #resence of data im#ort7ex#ort ca#a*i$ities affects s#eed8 accuracy8 consistency and security.

Inte+!ation 'oint"
Inte'ration &e$#s stream$ine t&e entire sourcin' #rocess. 2 user s&ou$d *e a*$e to effort$ess$y8 +it& fe+ )ey stro)es8 move *et+een different sourcin' tas)s. Some )ey inte'ration #oints inc$ude=

communication too$s L suc& as an on$ine communication forum for as)in' and ans+erin' 0uestions8 emai$ s#reads&eets

37

e-3Fx L so a *uyer does not need to create a se#arate8 distinct #ro;ect for an auction 9#timi:ation L so a *uyer does not need to ex#ort auction data t&en im#ort it into an o#timi:ation en'ine for data ana$ysis and scenario *ui$din'

"&e #resence of inte'ration #oint affects s#eed8 accuracy8 consistency8 )no+$ed'e transfer and security.

Secu!it* and acce"" cont!ol"

Security and access contro$s a$$o+ com#anies t&e a*i$ity to $imit users to +&at t&ey can see or do +it&in an e-Sourcin' too$. "&e contro$s reinforce o#erationa$ #rocedures de#endin' on security $eve$s8 or'ani:ationa$ $eve$ or ro$e $eve$. "&e #resence of security and access contro$s affects s#eed8 consistency and security.

FOUNDATIONS FOR NEXT ;ENERATION E-AUCTIONS 2s indicated in #revious sections8 e-auction too$s must 'o a*ove and *eyond t&e ca#a*i$ities of current auction too$s if t&ey are to continue to de$iver sustaina*$e va$ue to t&e sourcin' or'ani:ations t&at use t&em. For sim#$e and *asic commodities8 a sim#$e auction +it& core tec&no$o'y is sufficient. 2s or'ani:ations6 e-Sourcin' ca#a*i$ities evo$ve8 t&ey source more com#$ex commodities +it& various varia*$es t&at affect #rice. "&ese more com#$ex sourcin' #ro;ects need to &ave auctions +it& more features to ena*$e t&e Sourcin' "eam to identify t&e *est a+ard scenario. In fact8 t&ere are 4at $east5 five ma;or ca#a*i$ities t&at next 'eneration e-auctions must interna$$y su##ort if t&ey are to ena*$e sourcin' or'ani:ations to continue to ac&ieve and maintain savin's tar'ets t&rou'& use of t&e tec&no$o'y. "&ese ca#a*i$ities are discussed in detai$ in t&e fo$$o+in' sections.

3,

 T!ue Co"t iddin+ Su''o!t

"oday8 most auctions on$y ca#ture #rice #er unit or $anded cost 4#rice #er unit and frei'&t5 *ids for t&e items or item $ots under consideration. -o+ever8 as out$ined in detai$ in t&e +i)i on Kecision 9#timi:ation for strate'ic sourcin'8 t&is does not 0ua$ify as sufficient for strate'ic sourcin'8 es#ecia$$y for or'ani:ations t&at source accordin' to t&e #rinci#$es of "ota$ ?a$ue (ana'ement. "&e rea$ity is t&at even +it& t&e sim#$est of #roducts8 t&ere are fixed cost and varia*$e costs and t&ese costs often c&an'e +it& different $eve$s of #roduction. 4For exam#$e8 t&ere are fixed costs to set u# and start a #roduction $ine and t&en varia*$e costs for eac& #roduction $eve$ de#endin' on t&e amount of ra+ resources8 ener'y8 and man#o+er re0uired.5 2ny attem#t to co$$a#se t&ese costs into a sin'$e num*er is very $i)e$y to *e inaccurate8 es#ecia$$y since t&is cou$d *e forcin' t&e su##$ier to *id &i'& to cover t&eir costs in t&e event t&ey are on$y se$ected for a sma$$ #art of t&e *usiness. Furt&ermore8 since varia*$e costs may decrease at &i'&er #roduction $eve$s8 t&e su##$iers s&ou$d *e a*$e to su*mit tiered vo$ume-*ased *ids t&at are indicative of t&eir true costs8 and t&e savin's t&ey can #ass on8 if t&ey are a+arded vo$umes t&at o#timi:e t&eir #roduction costs. Frei'&t costs s&ou$d *e *id se#arate$y so t&at t&ird #arty carriers can *e invited and frei'&t a+arded durin' t&e same auction event usin' a##$es-to-a##$es com#arisons. Furt&ermore8 carriers s&ou$d *e a*$e to *id 4varia*$e unit-*ased5 rates for $ess t&e truc)$oad s&i#ments and fu$$ truc)$oad 4fixed5 costs. Fina$$y8 t&e auction s&ou$d su##ort *und$in' discounts. Every 'ood #urc&aser )no+s t&at t&ere are savin's to *e 'ained and va$ue to *e found *y sourcin' mu$ti#$e items from t&e same su##$ier -- even more if t&e su##$ier is a$$o+ed to define its o+n o#tima$ *und$es. "&us8 t&e auction s&ou$d a$$o+ su##$iers to

4/

define t&eir o+n mu$ti-item 7 mu$ti-$ot discounts and ta)e t&ose into account +&en determinin' o#tima$ cost a+ards.

undlin+ Su''o!t 2s indicated in t&e #revious section8 t&e auction too$s s&ou$d a$$o+ t&e definition of *und$es from t&e su##$ier and frei'&t carrier vie+#oint as +e$$ as t&e *uyer vie+#oint. "&is +i$$ su##ort f$exi*$e cost mode$s t&at +i$$ a$$o+ t&e su##$iers to accurate$y mode$ t&eir costs and 0uote t&eir *est #rice L every time. It +i$$ a$so assist in t&e $ocation of efficiencies and economies of sca$e and identify o##ortunities for cost savin's t&at may not &ave *een feasi*$e +it& #revious 'eneration e-sourcin' too$s.

Multi-Att!i.ute Su''o!t
>ext 'eneration auction too$s s&ou$d *e ca#a*$e of eva$uatin' *ids a'ainst more t&en ;ust cost factors. "&ey s&ou$d *e a*$e to com#are and ran) *ids on 0ua$itative factors as +e$$8 usin' scores t&at come from 4inte'rated5 su##$ier scorecards. 2fter a$$8 strate'ic sourcin' va$ue is more t&an ;ust t&e $o+est cost of ac0uisition it is t&e $o+est cost of ac0uisition t&at meets or'ani:ationa$ needs and a$$o+s t&e or'ani:ation to offer t&e most va$ue to its customers 4"ota$ ?a$ue (ana'ement5. Co+est cost is not tru$y $o+est cost if t&e 0ua$ity is inferior and t&e reduced re$ia*i$ity resu$ts in a $ar'e num*er of cost$y customer returns or com#$aints.

;oal Su''o!t
If t&e auction is *ein' used strate'ica$$y as #art of a $ar'er sourcin' #rocess8 t&en t&e or'ani:er usua$$y &as one or more 'oa$s in mind8 consistent +it& t&e overa$$ su##$y c&ain strate'y. "&e auction too$ s&ou$d *e a*$e to su##ort t&e end 'oa$s of t&e user.

41

"+o common 'oa$s are a$$ocative efficiency and #ayoff maximi:ation. 2$$ocative efficiency is t&e maximi:ation of t&e tota$ a+ard across a$$ successfu$ *idders. "&is is a common strate'y used to miti'ate su##$y c&ain ris). Dayoff maximi:ation is t&e maximi:ation of t&e tota$ a+ard to a sin'$e #artici#ant. "&is is a common strate'y in su##$y *ase rationa$i:ation. Real-Ti,e Deci"ion O'ti,i(ation "rue cost *iddin'. Bund$in'. 9verridin' 'oa$s. (u$ti-attri*ute su##ort. -o+ can a$$ of t&ese ca#a*i$ities *e incor#orated into a rea$ time auction and sti$$ do a##$es-to-a##$es com#arison across seemin'$y dis#arate *ids from t&e su##$y *ase. Ise decision o#timi:ation L in rea$ timeS Kecision o#timi:ation is desi'ned to find t&e o#tima$ a+ard decision to a com#$ex sourcin' scenario. Bui$t on com#$ex mat&ematics8 true strate'ic sourcin' decision o#timi:ation is desi'ned to &and$e f$exi*$e cost mode$s +it& fixed and varia*$e costs8 tiered vo$ume-*ased 0uotes8 and discounts and a #$et&ora of constraints to address ca#acity constraints8 ris) miti'ation constraints8 0ua$itative re0uirements8 and *usiness ru$es. @it& *ui$t in decision o#timi:ation8 one can ac&ieve a##$es-to-a##$es com#arisons across seemin'$y dis#arate su##$ier *id structures t&at res#ect rea$ +or$d constraints. KEY STEPS TO SUCCESSFUL E-AUCTIONS

Define Re/ui!e,ent" and ;oal"

E-2uctions s&ou$d *e #art of a +e$$-defined sourcin' #rocess +it& c$ear re0uirements t&at s&ou$d *e communicated to8 and acce#ted *y8 a$$ re$evant sta)e&o$ders and c$ear 'oa$s L +&ic& s&ou$d extend *eyond ;ust $o+erin' cost. @&at is t&e strate'y for $o+erin' costs and stream$inin' #rocesses. Su##$y *ase conso$idation or differentiation. Dartners&i#s +it& )ey su##$iers for #rocess im#rovements. Identification and se$ection of 'eneric #roducts to reduce t&e costs contained in sourcin' customi:ed com#onents from a se$ect su##$ier. 2 ma;or success factor of any sourcin' #rocess is 'ood u#-front #$annin'. 42

Invite all #otential Su''lie!" to an O'en RFI Ko not $imit t&e or'ani:ation6s su##$y *ase to t&e current set of su##$iers sometimes t&e *est cost savin's can come from ne+ su##$iers +it& stream$ined #rocesses8 su##$iers +it& innovative 4#roduction5 tec&no$o'ies8 or su##$iers in $o+ cost countries +it& $o+er overa$$ #roduction costs. -o$d an o#en 3FI *efore t&e auction to identify a$$ su##$iers +&o mi'&t *e ca#a*$e of meetin' t&e or'ani:ation6s needs.

#!e-9ualif* Ca'a.le Su''lie!"

9nce #otentia$ su##$iers &ave *een identified and initia$ 3FI res#onses &ave *een co$$ected8 t&e next ste# is to determine +&ic& su##$iers are ca#a*$e of meetin' t&e or'ani:ation6s needs. "&is is im#ortant *ecause it is critica$ t&at su##$iers are not inc$uded in t&e auction un$ess #art of t&e *usiness can *e a+arded to t&em. "o minimi:e costs8 #re0ua$ification may entai$ a mu$ti-round 3Fx. 9t&er met&ods inc$ude offsite or onsite meetin's +it& ne+ su##$ier candidates8 or even faci$ity tours. Be sure to verify t&at every su##$ier se$ected understands t&e re0uirements and cou$d commit to t&e vo$umes t&at +i$$ *e needed at t&e re0uired de$ivery times and at t&e re0uired $eve$ of 0ua$ity and safety.

Clea!l* Docu,ent all Re/ui!e,ent"

"&e )ey to a successfu$ sourcin' #rocess in 'enera$8 and an e-3Fx7e-2uction in #articu$ar8 is t&e c$ear documentation of a$$ re0uirements. "&is a##$ies *ot& to items u# for *id and t&e auction #rocess and ru$es. Ko not re$y on ver*a$ communications or assume common$y acce#ted definitions for common terms. @it& a '$o*a$ su##$y *ase8 staffed *y individua$s #art of distinct cu$tures8 eac& +it& t&eir o+n interna$ understandin' of +&at a 4forei'n5 term or re0uirement means8 t&ere rea$$y are no common terms or common definitions. Ketai$ed documentation can avert misunderstandin' *y c$ear$y s#e$$in' out +&at is8 and is not8 re0uired L and #rom#t 0uestions +&ere additiona$ information is re0uired. If

43

you $eave room for assum#tions8 you create t&e #otentia$ for *idders over#ricin' or even under #ricin'. Be sure to a$so c$ear$y state success terms L es#ecia$$y if su##$iers are *ein' eva$uated on more t&an ;ust tota$ cost of ac0uisition *ids. If 0ua$ity8 re$ia*i$ity8 on-time de$ivery8 etc. are a factor8 t&en t&at information s&ou$d *e made )no+n and &o+ it factors into tota$ cost of o+ners&i# ca$cu$ations from a tota$ va$ue mana'ement stand#oint s&ou$d *e c$ear$y defined.

-old a 9<A T!ainin+ Se""ion

Ko not assume t&at t&e auction too$ is as easy or natura$ for su##$iers to use as it is for users in t&e *uyin' or'ani:ation. %&ances are t&at *uyers &ave *een trained on it8 &ave a$ready used it8 and are accustomed to usin' tec&no$o'y as #art of t&e sourcin' #rocess. "&is mi'&t not *e t&e case for a su##$ier. Furt&ermore8 +&at is natura$ to t&e desi'ners of an e-Sourcin' too$ or a strate'ic sourcin' 'rou# may not *e natura$ for a '$o*a$ su##$y *ase t&at is not as accustomed to modern +e*ena*$ed soft+are and t&e under$yin' sourcin' #rocesses t&ey are *ui$t on. -o$d a #re-auction trainin' session t&ose overvie+s t&e too$s t&at +i$$ *e used8 ans+ers any 0uestions8 and inc$udes a moc) auction t&at a$$o+s su##$iers to test drive t&e too$ and *ecome comforta*$e +it& its use *efore t&e auction *e'ins. "&is +i$$ &e$# to ensure a smoot& runnin' auction.

Co,,unicate= Co,,unicate= Co,,unicate=

"&is #oint cannot *e stressed enou'&. (any fee$ t&at *y uti$i:in' an on$ine sourcin' too$8 a$$ communication on$y ta)es #$ace e$ectronica$$y. "&e e-Sourcin' too$ s&ou$d faci$itate communication8 not re#$ace it. It is im#ortant to sti$$ maintain #rofessiona$ re$ations&i#s +it& your *idders and sta)e&o$ders t&rou'& one-on-one meetin's or #&one conversations. Before initiatin' any on$ine sourcin' initiative8 su##$iers s&ou$d *e notified a*out +&at t&ey +i$$ *e receivin' and +&at to do +it& t&at information. "&is a$so 'ives you t&e o##ortunity to

44

minimi:e any fears and #reconceived notions t&ey may &ave a*out on$ine sourcin' tec&no$o'ies. "&e Sourcin' "eam s&ou$d a$so #ro#er$y monitor su##$iers6 #ro'ress on different tas)s set out for t&em to do8 and fo$$o+ u# +it& a #&one ca$$ +&enever t&ey are not *ein' res#onsive. "&is +i$$ ensure maximum understandin' and #artici#ation from su##$iers. 2##ro#riate times to reac& out and ta$) +it& #artici#atin' su##$iers= *efore an invitation to #artici#ate in an auction8 notifyin' t&em of t&e u#comin' event after t&e invitation is sent8 confirmin' t&e su##$ier received it and as)in' if t&ey &ave any 0uestions +&en t&ere are dramatic c&an'es to t&e 3FR inc$udin' ne+ dead$ines8 dates or s#ecifications 24 &ours #rior to t&e auction to verify #artici#ation and ans+er any o#en 0uestions durin' t&e auction if t&ere are noticea*$e issues +it& a su##$ier 4$i)e not $o''in' in8 $o''in' off too soon5 after t&e auction to communicate t&e a+ard decision

Monito! the Auction

(onitor t&e auction carefu$$y to ma)e sure *iddin' activity is runnin' smoot&$y. If one or more su##$iers fai$ to *id or t&e refres& rate is s$u''is&8 eit&er t&e Sourcin' "eam8 or one 4or more5 su##$iers mi'&t *e ex#eriencin' #ro*$ems. 2 *uyer s&ou$d *e ready to intervene to so$ve t&e #ro*$em. If a su##$ier is not *iddin'8 contact &er and ma)e sure s&e does not &ave any 0uestions and is not &avin' connection #ro*$ems. If t&e refres& rate is s$o+8 ma)e sure t&e #$atform is o#erationa$ and t&at su##$iers are not &avin' #ro*$ems as +e$$. If some su##$iers $ose connectivity8 or t&e #$atform 'oes do+n8 *e #re#ared to immediate$y contact t&e su##$iers t&rou'& ot&er means to $et t&em )no+ t&at somet&in' &as &a##ened and t&e auction is *ein' #ost#oned to t&e *ac)u# time and t&at t&ey +i$$ 45

immediate$y *e contacted if #ro*$ems #ersist or t&e auction needs to *e furt&er de$ayed. "&e Sourcin' "eam s&ou$d &ave a +e$$ documented #rocess for dea$in' +it& issues durin' an auction. "&e Sourcin' "eam s&ou$d *e trained to &and$e issues $i)e #roxy *iddin'8 tec&nica$ #ro*$em reso$ution and su##$ier re$uctance. (any e-Sourcin' soft+are #roviders can a$so #rovide t&is service. (any su##$iers fee$ more comforta*$e &avin' a neutra$8 t&ird #arty mana'e t&e $ive auction t&an t&e *uyer. @&et&er t&e Sourcin' "eam or t&e e-Sourcin' soft+are #rovider &and$es $ive auction monitorin'8 t&e Sourcin' "eam s&ou$d *e #re#ared to acce#t and ans+er 0uestions durin' t&e auction. %onfusion is a foundation for fai$ure. Be sure to re#$y to a$$ #artici#ants +&en communicatin' information L t&ere s&ou$d *e no favoritism in8 or im#$ied *y8 any action.

Follo$ Th!ou+h and A$a!d #!o,'tl*

In order to ca#ita$i:e on auction success and maintain t&e trust and 'ood+i$$ *e #re#ared to a$$ocate a+ards and fo$$o+ t&rou'& on ne'otiations #rom#t$y and +it&in t&e timeframe #romised in t&e #re-auction 4e-3Fx5 communications t&at out$ined t&e auction #rocess

4!

E AY Unde!"tandin+ Online Auction" 2*out &a$f of a$$ eBay transactions are in t&e on$ine auction format. 4eBay used to *e 1//T auctions8 *ut in recent years it &as mi'rated to more fixed-#rice transactions.5 If you +ant to *uy and se$$ on eBay8 you need to understand &o+ on$ine auctions +or). Cet<s start +it& t&e *asics. 2n eBay on$ine auction is an Internet-*ased version of a traditiona$ $ive auctionUt&e ty#e +&ere a fast-ta$)in' auctioneer stands in t&e front of t&e room8 tryin' to coax #otentia$ *uyers into *iddin' ;ust a $itt$e *it more for t&e #iece of merc&andise u# for auction. "&e *i' difference is t&at t&ere<s no fast-ta$)in' auctioneer on$ineE instead8 t&e *iddin' #rocess is executed *y s#ecia$ auction soft+are on t&e eBay site. In addition8 your fe$$o+ *idders aren<t in t&e same room +it& youE t&ey mi'&t *e $ocated any+&ere in t&e +or$d. 2nyone any+&ere can *e a *idder8 as $on' as t&ey &ave Internet access. "&e )ey to +innin' an on$ine auction is to &ave t&e &i'&est *idE it<s as sim#$e as t&at. @&en t&e auction is overUmost auctions $ast seven daysUt&e *idder +it& t&e &i'&est *id +ins t&e item. It doesn<t matter +&en t&e *id +as #$acedE t&e &i'&est *id a$+ays +ins Ueven if it<s ;ust a #enny more t&an t&e next &i'&est *id. It<s im#ortant to remem*er t&at t&rou'&out t&is entire #rocess8 eBay is ;ust t&e Nmidd$eman.N eBay isn<t t&e actua$ se$$er of 'oodsE it on$y faci$itates t&e transactionU ;ust $i)e a traditiona$ auctioneer does. "&erefore8 eBay can<t *e &e$d res#onsi*$e for anyt&in' t&at 'oes +ron' +it& any #articu$ar auction or sa$e. @&en you *uy an item8 you *uy it from t&e individua$ +&o #ut it u# for sa$eUyou don<t #ay anyt&in' to eBay. Online Auction"> Ste' .* Ste' Cet<s examine +&at<s invo$ved in a ty#ica$ eBay auction8 from t&e #ers#ectives of *ot& *uyers and se$$ers.

47

1. 2.

Mou *e'in 4as eit&er a *uyer or a se$$er5 *y re'isterin' +it& eBay. "&e se$$er creates a $istin' for a #articu$ar item and $aunc&es t&e auction on t&e eBay site. 4eBay c&ar'es u# to B2.// to $ist an item.5 In t&e item $istin'8 t&e se$$er s#ecifies t&e $en't& of t&e auction 418 38 58 78 or 1/ days5 and t&e minimum *id &e or s&e +i$$ acce#t for t&at item.

3.

2 #otentia$ *uyer searc&in' for a #articu$ar ty#e of item 4or ;ust *ro+sin' t&rou'& a$$ t&e merc&andise $isted in a s#ecific cate'ory5 reads t&e item $istin' and decides to ma)e a *id. "&e *idder s#ecifies t&e maximum amount &e or s&e is +i$$in' to #ayE t&is amount &as to *e e0ua$ to or more t&an t&e se$$er<s minimum *id8 or more t&an any ot&er existin' *ids from #revious *idders.s

4.

eBay<s *ui$t-in *iddin' soft+are automatica$$y #$aces a *id for t&e *idder t&at *ests t&e current *id *y a s#ecified amount. "&at is8 t&e soft+are *ids on$y t&e minimum amount necessary to create a &i'& *id8 u# to *ut never 'oin' over t&e maximum amount s#ecified *y t&e *idder. 4In fact8 t&e *idder<s maximum *id is never revea$ed.5 For exam#$e8 $et<s say t&at t&e current *id on an item is B25. 2 *idder is +i$$in' to #ay u# to B4/ for t&e item8 and enters a maximum *id of B4/. eBay<s *iddin' soft+are #$aces a *id for t&e ne+ *idder in t&e amount of B2!U&i'&er t&an t&e current B25 *id8 *ut $ess t&an t&e s#ecified maximum *id of B4/. If t&ere are no ot&er *ids8 t&is *idder +i$$ +in t&e auction +it& a B2! *id. 9t&er #otentia$ *uyers8 &o+ever8 can #$ace additiona$ *idsE un$ess t&eir maximum *ids are more t&an t&e current *idder<s B4/ maximum8 t&ey are informed 4*y emai$5 t&at t&ey &ave *een out*idUand t&e first *idder<s current *id is automatica$$y raised to matc& t&e ne+ *ids 4u# to t&e s#ecified maximum *id #rice5.

5.

2t t&e conc$usion of an auction8 eBay informs t&e &i'& *idder of &is or &er +innin' *id and re0uests #ayment.

Diffe!ent T*'e" of Auction" "&e #revious section descri*ed a norma$ eBay auction. eBay offers some variations on t&is traditiona$ auction format8 &o+ever. "&ese variations inc$ude t&e fo$$o+in'= 3eserve #rice auction. In t&is ty#e of auction8 t&e se$$er sets a &i'&er NreserveN #rice a*ove t&e initia$ *id #rice. "&e item doesn<t se$$ unti$ t&e reserve #rice is met. Note4 Re"e!ve #!ice 3eserve #rice auctions are ty#ica$$y used to $ist &i'&er-end items +&ere t&e se$$er )no+s t&e item is +ort& a certain amount *ut +ants to 'et *iddin' started +it& a $o+er initia$ #rice. Buy It >o+ o#tion. "&is is a traditiona$ auction +&ere t&e se$$er offers t&e o#tion of #urc&asin' t&e item at a fixed #rice *efore t&e end of t&e auction. 4"&e Buy It >o+ #rice must *e 1/T &i'&er t&an t&e initia$ *id #rice.5 Fixed-#rice $istin'. "&is is a non-auction $istin' in +&ic& t&e item is offered at a set #riceE t&e first *uyer o#tin' to #ay t&is #rice *uys t&e item.

The Co"t" of U"in+ e a* Mou don<t &ave to #ay eBay anyt&in' to *ro+se t&rou'& items on its site. Mou don<t &ave to #ay eBay anyt&in' to *id on an item. Mou don<t even &ave to #ay eBay anyt&in' if you actua$$y *uy an item 4a$t&ou'& you +i$$ *e #ayin' t&e se$$er direct$y8 of course5. 9n eBay8 it<s t&e se$$ers +&o #ay t&e fees. eBay c&ar'es t+o main ty#es of fees=

4,

Insertion 4$istin'5 fees are +&at t&e se$$er is c&ar'ed every time an item is $isted for sa$e on eBay. "&ese fees are *ased on t&e minimum *id or reserve #rice of t&e item $isted8 and are nonrefunda*$e.

Fina$ va$ue 4se$$in'5 fees are +&at t&e se$$er is c&ar'ed +&en an item is actua$$y so$d to a *uyer. "&ese fees are *ased on t&e item<s fina$ se$$in' #rice 4t&e &i'&est *id5. If an item doesn<t se$$8 t&e se$$er isn<t c&ar'ed a fina$ va$ue fee.

eBay a$so c&ar'es various fees for different ty#es of $istin' en&ancements8 suc& as su*tit$es and fancy $istin' t&emes. "a*$e 2.1 $ists a$$ t&e fees eBay c&ar'es8 current as of Kecem*er 2/1/. 4Fees for items $isted in t&e eBay 3ea$ Estate and eBay (otors cate'ories are ty#ica$$y &i'&er.5 Ta.le ?1@1 e a* Fee" T*'e of Fee Insertion 4auctions5 E%'lanation Fee

fee In a re'u$ar auction8 *ased on Items #riced B/./1LB/.,,= B/.1/ t&e o#enin' *id amount. In a 4first 1// $istin's free5 3eserve #rice auction8 *ased on t&e reserve #rice. Items #riced B1.//LB,.,,= B/.25 Items #riced B1/.//LB24.,,= B/.5/ Items #riced B25.//LB4,.,,= B/.75 Items B1.// Items #riced B2//.// or more= B2.// #riced B5/.//LB1,,.,,=

5/

T*'e of Fee

E%'lanation

Fee

Insertion fee 4fixed- Items must &ave a Buy It >o+ B/.5/ #rice $istin'5 Fina$ va$ue #rice of at $east B/.,,. fee Based on t&e c$osin' *id. ,./T of sa$e #rice 4maximum c&ar'e B5/.//5 fee Based on fina$ se$$in' #rice. $istin'= Items so$d for B/.,,LB5/.//= ./T Items so$d for B5/./1LB18///.//= ./T of initia$ B5/.//8 #$us 5./T of remainin' sa$e #rice Items so$d for B18///./1 or more= ./T of initia$ B5/.//8 #$us 5./T of next B5/./1LB18///.//8 #$us 2./T of remainin' sa$e #rice Fina$ va$ue fee Based on fina$ se$$in' #rice. $istin'= Items 12./T Items so$d for B5/./1LB18///.//= 12./T of initia$ B5/.//8 #$us ,./T of remainin' sa$e #rice Items so$d for B18///./1 or more= 12./T of initia$ B5/.//8 #$us ,./T of next B5/./1LB18///.//8 #$us 2./T of remainin' sa$e #rice so$d for B/.,,LB5/.//=

4auctions5 Fina$ va$ue

4fixed-#rice e$ectronics5

4fixed-#rice accessories5

c$ot&in'8 s&oes8 and

51

T*'e of Fee Fina$ *oo)s8 'ames5 va$ue K?Ks

E%'lanation fee Based on fina$ se$$in' #rice. $istin'= V

Fee Items 15./T Items so$d for B5/./1LB18///.//= 15./T of initia$ B5/.//8 #$us 5./T of remainin' sa$e #rice Items so$d for B18///./1 or more= ./T of initia$ B5/.//8 #$us 5./T of next B5/./1LB18///.//8 #$us 2./T of remainin' sa$e #rice so$d for B/.,,LB5/.//=

4fixed-#rice

movies8 music8 video

Fina$

va$ue

fee Based on fina$ se$$in' #rice. $istin'=

Items 12./T

so$d

for

B/.,,LB5/.//=

4fixed-#rice

a$$ ot&er cate'ories5

Items so$d for B5/./1LB18///.//= 12./T of initia$ B5/.//8 #$us !./T of remainin' sa$e #rice Items so$d for B18///./1 or more= 12./T of initia$ B5/.//8 #$us !./T of next B5/./1LB18///.//8 #$us 2./T of remainin' sa$e #rice

52

T*'e of Fee 3eserve auction

E%'lanation

Fee

#rice 2dditiona$ fee for &o$din' a 3eserve #rice from B/./1LB1,,.,,= reserve #rice auction B2.// 3eserve #rice B2//.// and u#= 1./T of reserve #rice 4maximum B5/5

Buy It >o+

Fee to use t&e Buy It >o+ Buy It >o+ #rice B/./5LB,.,,= o#tion in a traditiona$ auction B/./5 $istin' Buy It >o+ #rice B1/.//LB24.,,= B/.1/ Buy It >o+ #rice B25.//LB4,.,,= B/.2/ But It no+ #rice B5/.// and u#= B/.25

Sc&edu$ed $istin's

Sc&edu$es your item to *e $isted B/.1/ at a s#ecific date and time8 u# to t&ree +ee)s in advanced

1/-day $istin'

Fee to $ist an item for 1/ days B/.4/ for auction items 4free for instead of t&e norma$ 7 days fixed-#rice items5

53

T*'e of Fee Internationa$ visi*i$ity

E%'lanation

Fee startin' at B/./1LB,.,,=

site Cists item on non-I.S. eBay Items sites B/.1/

Items startin' at B1/.//LB4,.,,= B/.2/ Items startin' at B5/.//W= B/.4/ Fixed-#rice B/.5/ items 4any #rice5=

Bo$d

Bo$dfaces t&e tit$e of your item B2.// on searc& resu$ts #a'es

Su*tit$e

2dds a su*tit$e to your item on B/.5/ searc& resu$ts #a'es

Cistin' Kesi'ner

2##$ies fancy tem#$ates to your B/.1/ item $istin's

54

T*'e of Fee Oa$$ery D$us

E%'lanation

Fee

Kis#$ays a $ar'er #icture of your B/.35 item 4+&en t&e t&um*nai$ is c$ic)ed5 on searc& resu$ts #a'esE a$so #rovides access to mu$ti#$e #ictures on searc& resu$ts #a'es

Note4 Cu!!ent Fee" ?ie+ eBay<s current fee structure at &tt#=77#a'es.e*ay.com7&e$#7se$$7fees.&tm$. "&ese fees a##$y to its #rimary auction siteE ot&er s#ecia$ty sites8 suc& as eBay Stores and -a$f.com8 &ave different fee structures. "&ere is a$$ manner of fine #rint associated +it& t&ese fees. -ere are some of t&e more im#ortant #oints to )ee# in mind=

Insertion fees are nonrefunda*$eUa$t&ou'& if a *uyer ends u# not #ayin' for an item8 t&e se$$er can re$ist t&e item and receive a credit for t&e second insertion fee.

55

"&e se$$er +i$$ not *e c&ar'ed a fina$ va$ue fee if t&ere +ere no *ids on t&e item or 4in a reserve #rice auction5 if t&ere +ere no *ids t&at met t&e reserve #riceUt&at is8 if t&e item didn<t se$$.

It doesn<t matter +&et&er t&e *uyer actua$$y #ays t&e se$$er 4or &o+ muc& &e or s&e actua$$y #ays5E t&e se$$er sti$$ o+es eBay t&e fu$$ fina$ va$ue fee.

REFERENCES &tt#=77+++.&induonnet.com7*usiness$ine7i+72///7/572 7stories7/72 '1/1.&tm &tt#=77en.+i)i#edia.or'7+i)i73everseXauction &tt#=77+++.rcoe.'ov.u)7rce7aio73/,41 &tt#=77+++.a$$*usiness.com7mana'ement734,,513-1.&tm$ &tt#=77recruiter.mad'ex.com72rtic$es732777372reWeauctionsWaW'oodW+ayWtoW*uyWserv ices.&tm$

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