1. MIS 7003 MIS Core Course The MBA Program The University of Tulsa Professor: Akhilesh Bajaj Ecommerce: Reverse Auctions in Industrial Marketing & Buying © Akhilesh Bajaj, 2008. All Rights Reserved.

2. Value Propositions of B2B Exchanges Dramatically Increased Reach of Supplier Base www.alibaba.com http://www.steelstrip.co.uk/esteel.htm Reduced Transaction Costs Automatic ordering, reduced inventory Deep Customization Facilities Preferred suppliers for each business, listing documentation required for procurement on the exchange, customized environment and community for suppliers to a business, or for a supplier to its customers (allows lock in of the suppliers or the customers).

3. Advantages of Reverse Auctions Suppliers: -Greater access to customer businesses -Understand efficiency of competitive vendors, and hence become more efficient oneself -Reduced red tape Buyers: -Cost savings -Reduced red tape (purchasing personnel) -Reduced Inventory

4. Disadvantages of Reverse Auctions Suppliers: -Commoditization of Product -Commoditization of Relationship with customer company -Overall reduction in quality of end product -Negotiating ploy by buyers to reduce price Buyers: -Commoditization of Relationship with customer company -Overall reduction in quality of end product -Vendor rebellion & lack of commitment of resources from vendor -Some top vendors may refuse to be subject to reverse auctions -Vendor may bid unrealistically low and not deliver service, so customer company may lose sunk costs as well and get nothing.

5. When is a Reverse Auction Appropriate? Clearly defined projects. State requirements very definitely & in detail Large enough contract to justify vendor commitment. customer companies can pool demand from across divisions. Lots of vendors, customer driven market (too many vendors chasing too little business), products that can be easily commoditized. Discussion: Should car companies use reverse auctions? Should Harley Davidson use reverse auctions? Should Walmart use reverse auctions? Resurgence of Reverse auctions: www.guru.comwww.guru.com Excellent website: http://www.technology.ccsu.edu/personnel/information/emiliani/ra_research.html