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Lifeworld International The Proven Advantage of Reverse Online Auctions—
Introduction
In recent years, Reverse Online Auctions have become extremely popular for purchasing everything from accounting services to securing raw materials. Driving this popularity is the need for business managers in charge of procurement to find the best quality products at the best price in a timely manner. In world-wide competitive markets, this task is quite challenging. Managers worry about how long it will take to find quality suppliers and negotiate the details of a contract. Every week lost is a potential hit to productivity.
Reverse Online Auctions save time and money by providing procurement managers with a pool of pre-qualified suppliers who will compete with one another to offer the lowest price for an order. Lifeworld® Reverse Online Auctions first became popular in Europe and are now available in the USA, raising the benefits to a global scale. This page describes the process and benefits of Reverse Online Auctions as well as their demonstrated successes and how to get started with Lifeworld International.
What is a Reverse Online Auction?
A Reverse Online Auction is a web-based portal for marketing goods and services from pre-qualified Sellers through bidding on requests from pre-qualified Buyers during a given time period. Unlike a traditional auction in which prices are bid higher, the winner of a reverse auction is typically the company that submits the lowest bid. The bidding is done by the Seller, not the Buyer, so the Buyer remains in control.
Diagram 1 – Traditional Auction vs. Reverse Auction
To participate in auctions, Sellers and Buyers register with an online auction service like Lifeworld International . The Buyer company or government agency lists online what it intends to purchase. For Lifeworld International members, this is easily accomplished via our web form “Request for an Auction”. The request is pre-formatted as a Request for Proposal (RFP) commonly used in procurement, and may include time or funding limitations, as well as other specifications. Registered member Sellers are notified of the RFP and may respond by placing a bid on the same web page. After the Buyer has ranked the bids, Buyer and Sellers are brought together to negotiate their final transaction. For more details, click here on How it Works.
Benefits of Reverse Online Auctions
For Buyers—
Reverse Online Auctions became popular in the late 1990s and have been credited with millions of dollars in savings for companies throughout the world. There is no middle man and no question on how to find the lowest price. Buyers save time by compressing traditionally lengthy price product search and negotiations into a matter of hours. Price per unit, product specifications, delivery terms and service details are listed by the Buyer, and the Seller must respond as closely as possible to what the Buyer is seeking. In addition, Lifeworld International’s software allows Buyers to communicate with Sellers so that they can refine their bids or offer clarification, and the auction environment facilitates a mutually beneficial transaction.
Additional benefits of Reverse Online Auctions include security and untapped access to new supply sources and markets. Buyers and Sellers are pre-screened for credibility. Their reputations for reliability and quality are complete and available for review. The online environment enables Buyers to reach new suppliers who, because of remote location or small size, never bid for their business before. Once reserved for large scale, Global 1000 firms, improvements in technology have also led to increased reverse auction usage by smaller scale firms.
For Sellers—
With Lifeworld International, Sellers profit equally. By requiring proof of funding, Lifeworld International brings competent Buyers to the table, reducing Sellers’ costs for advertising and marketing agents. That in turn allows small and medium-sized firms to participate in a global market. Lifeworld International’s technology provides member Sellers access to private and public sector Buyers from around the globe, with equal access to requests and an equal footing at winning the contract.
How successful are Reverse Online Auctions?
While Reverse Online Auction technology has been around for fewer than 10 years, it has already gained widespread acceptance. In its June 1, 2003 issue, CIO Magazine, published the article Reverse Online Auctions. Accordingly, Reverse Online Auctions can lower the cost of procuring products and services by as much as 20 percent. In 2006, Lifeworld transactions showed savings of 20-25%. Click here to see Examples of Past Transactions.
Who uses Reverse Online Auctions?
Reverse Online Auctions are used to purchase a variety of products, not just commodities. Some examples include:
- Made-to-order printed circuit boards for an electronics manufacturer
- Construction materials for a cell-phone transmission tower by a construction engineering company
- Packaging materials for a specialty chemical manufacturer
- Cylinders and valves for an industrial gas manufacturer
General Electric
In 2001, General Electric CIO Gary Reiner claimed approximately $600 million in savings by using reverse auctions. Source: CIO Magazine, June 1, 2003
U.S. General Services Administration
"The U.S. General Services Administration implemented reverse auctions in fiscal year 2003, and has seen 12 to 48 percent savings over the last few years within the Defense Finance and Accounting Service, Air Force and Coast Guard." Source: ZDNet Research, December 21, 2004
U.S. State of Maryland
"Maryland's Department of General Services (DGS) will realize more than US$7 million in savings by having procured electricity through an online energy auction. This is the fourth time the DGS has used the World Energy Exchange reverse online energy auction to purchase electricity for state-operated facilities.
Savings are a measure of cost avoidance realized through the online auction compared to the published utility rates in various Maryland service territories. In the most recent DGS auction, contracts for supply — valued at $78.2 million — were awarded within one hour of the auction's end.…The DGS received 135 bids from six pre-qualified suppliers, all in a matter of two days.” Source: Transmission and Distribution World, September 1, 2006
U.S. State of Virginia
"Virginia Gov. Mark R. Warner recently announced the state created $350,000 in savings by purchasing its IT media storage through a "reverse online auction." The results, which amount to a 30 percent reduction in the materials' cost, represent savings success from Virginia's Partners in Procurement (VAPP) "spend management" initiative." Source: Government Technology, February 17, 2004
Go Green Solar Consumers and Contractors
(April 10, 2007 Press Release) Go Green Solar is the first company to offer comprehensive access to online reverse auctions for renewable energy services. Consumers and businesses can enjoy a variety of benefits which include:
- Buyers can upload pictures, blueprints, roofing diagrams to assist contractors to make accurate bids.
- Contractors have access to state of the art satellite and aerial surveying before bidding.
- Buyers can review contractor feedback and past projects before awarding a contract.
- Contractors have the ability to create branded portfolios, which showcase past projects.
- Marketplace conserves time for both buyers and contractors.
How can you get started?
Lifeworld International provides Buyers a legally safe environment to meet their purchase needs from a wide selection of reliable member Sellers, more quickly and at considerable cost savings than with traditional procurement methods. To learn more or to get started with your next purchasing project, click here to visit Lifeworld International’s registration page.
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