To use or not to use a preliminary price round?
From eSourcingWiki
Articles
E-Sourcing Forum
| To use or not to use a preliminary price round? by Agatha Degasperi June 5, 2006 | Go Back |
|---|
In case you have not been asking yourself this question, here are a few reasons why you might want to begin...
What is a preliminary bid round? This is a 1st round of pricing where suppliers are asked to enter their starting prices into the event anywhere from 2 weeks to a couple of days prior to taking part in an online bidding event.
How does this benefit the buying organization?
- Ensures you have enough interest in the event (i.e. sufficient participation across lots)
- Catch potential inconsistencies in the bidding
- Determine how well suppliers understood your requirements and how to price
- Get a better understanding of the pricing range
How does this benefit the suppliers?
- Helps familiarize them with the technology as this is like a practice run
- Encourages them to get their “game plan” together ahead of the actual bid day
- Helps them determine how well they understood your requirements
- Removes some of the stress of bid day seeing as preliminary bids are generally saved in the system and automatically submitted for them on the day of the event
This will also assist you in developing and/or fine tuning your online bidding event strategy:
- Catching inconsistencies prior to the auction is essential, otherwise you risk having results that are of no value. The more you are able to clean up the event prior to the final bid day, the easier it will be to implement your results.
- It can assist you in determining event parameters:
- Lotting structure
- Whether or not you truly have a competitive bidding environment (based on supplier interest) – this gives you the chance to possibly switch the event to a sealed bid or decide to pull negotiations offline
- Pricing parameters: will ceiling prices, starting prices, reserve prices, etc... be needed
- Serving as a qualifying round in the event you have too many bidders and need to eliminate the less competitive ones
For the record, I have noticed a considerable difference between events that have used a preliminary bid round and those that haven’t. However, take note – if you are bidding out raw materials for instance where prices are very volatile, the preliminary bid round would only serve as a preparation and overall check into how suppliers understood your requirements as these prices will hold no value.
