Table of contents:
What is a Japanese Auction?
Reverse Japanese auctions are a type of auction that is used in procurement. They are also called reverse descending price auctions. These types of auctions allow bidders to compete by offering their prices for goods or services rather than bidding against each other through competitive bids.
Suppliers in a Japanese reverse e-auction only see the price and a countdown timer. The auction begins at a high price and is lowered at set intervals. Some suppliers will not be able to meet the displayed price and will "opt out" of the auction as the price decreases. The last supplier standing wins the contract.
Reverse Japanese auctions are great for buyers because they can find the lowest price. Suppliers love reverse Japanese auctions in procurement as well because it is a quick way to win new contracts. In addition, it creates more transparency between buyer and supplier.
What is Japanese auction Software?
The main benefits of reverse Japanese auction software include the ability to host live online auctions so that sellers and bidders do not have to meet or bid face-to-face. It also provides flexibility with setting up and customizing your own reverse auctions.
In addition, buyers will be able to view and compare all current bidding activity at a glance, as well as the availability of data analytics to help you make better business decisions. Likewise, a reverse Japanese auction software will allow you to monitor all bids in real-time, which makes it easy to manage numerous reverse auctions.
When to use Japanese auction Software?
There are several scenarios when Japanese Auctions are best employed. Among these, we can include the following:
A buyer is looking for a single quote supplier - like for example, for a unique or specialized product. This refers to a situation where there is little supplier differentiation and the product is easily understood by potential suppliers.
A buyer needs to quickly build a shortlist of suppliers - when a buyer is looking for suppliers who are interested in selling their product or service and they need to build up this list quickly.
A buyer is faced with a difficult competitive market - this refers to a situation where the market is very competitive, there are several suppliers for each product or service and they all have similar prices. This is a great scenario for Japanese Auctions because it enables the buyer to buy at a lower price.
A buyer wants the most favorable prices for various products - a buyer may want to purchase a variety of products and services, but they don't want to spend too much money on any one single product. This is another great scenario for reverse Japanese auction because it enables the buyer to get the best prices for all of the products that they are interested in.
A buyer has a potential bias toward a particular vendor - a buyer might have a preferred vendor for a particular product or service, but they want to make sure that all potential vendors are fairly considered. In this case, the reverse Japanese auction can help by ensuring that all interested suppliers get an equal opportunity to bid on the product or service in question.
A buyer’s procurement journey is complex because of varying demands - in this scenario, a reverse Japanese auction can help by taking care of the more routine and straightforward procurement tasks so that buyers can focus on more complex ones. This allows buyers to save time and effort while still getting the best deals for their products and services.
The services or products offered by vendors cannot be easily compared - in this case, reverse Japanese auctions can help by allowing buyers to see all the different offers side-by-side so they can easily compare them. This makes it much easier for buyers to find the best deals and make an informed decision.
How to implement a Japanese auction Solution?
The first step towards implementing this process is to analyze your current situation. The purpose of this initial phase is to accurately determine where you stand, how your current supplier base is performing, and what necessary steps need to be taken in order to improve efficiency, build stronger vendor relationships, and streamline processes.
The next viable phase is to decide on a pilot project that will be able to satisfy all of your goals established in the previous step. Lastly, you will have to choose a procurement manager and/or team capable of seeing the project to fruition.
First of all, identify your target supplier list by using some sort of screening process that will help you choose who participates in the reverse Japanese auction. This could be done by using questionnaires, focus groups, or conferences with suppliers to discuss your needs and expectations of the reverse auction process.
In this auction type, the buyer specifies the following values:
The starting price - the price at which the auction begins.
The steps - the number of steps on which the price of the item decreases after the fixed interval
The value - the amount or percentage by which the price decreases.
The auction begins at the start price and proceeds for a set period of time, at which point the item's price falls by the amount specified for the step. All suppliers wanting to stay in the competition must make bids.
The suppliers must submit bids in the "Interval between Price Changes" column. The value for the step is decreased by the amount specified until no supplier remains to bid in the auction, or the item price reaches zero. Buyers can keep extending the reverse Japanese auctions even after all of the suppliers have dropped out by customizing their settings for this feature.
Main benefits of Japanese auction
Reverse Japanese auctions are an effective tool that has been used in many for numerous types of purchases. They provide both buyers and suppliers who participate in the auction with benefits. When it comes to procurement, reverse Japanese auctions offer a number of advantages, including:
1. Better Supplier Sourcing Visibility
Furthermore, utilizing Japanese e-auction software enhances your company's capacity to increase transparency throughout its whole supply chain by allowing them access to more detailed information about what each supplier has to offer as well as where each product or service originates. This makes it simpler for firms to avoid any bad press about their vendor sourcing problems and discover potential issues before they become widespread.
2. Competitive Rate Increase
Reverse Japanese Auctions assist buyers in receiving more competitive prices for goods and services by lowering the barrier to entry for businesses in terms of price, features, and other aspects. This is especially true when dealing with specific goods with a lot of supplier differentiation or a product that doesn't have much information in terms of what each vendor has to offer.
3. Ensuring a Good Price Every Time
Businesses may also profit from Japanese reverse auctions since it is simple for them to show that they obtained the most competitive pricing while also receiving exactly what was requested in terms of features. It implies there is no danger in using Japanese reverse auctions. This helps both buyers and suppliers since they will be able to sell their items or services faster and more simply owing to less competition on each other.
Other benefits of Japanese auction
1. Improved Supplier Relationships
Reverse Japanese e-auction software allows businesses to improve their interactions with suppliers by giving both sides a clear idea about what they're looking for ahead of time. This provides transparency throughout the procurement process, from sales through contract and payment to delivery deadline.
2. Better Rate Negotiation
Japanese reverse auctions are also beneficial for negotiating rates since this sort of auction gives businesses the option to establish a maximum price they are willing to pay for a service or product before beginning contract talks with suppliers. This adds greater clout during these sorts of negotiations, allowing them to obtain better prices on their purchases as a whole.
3. Faster Time to Market
The process of selecting a supplier can be simplified by using reverse Japanese auctions. This is particularly true for firms that utilize reverse Japanese e-auctions software to negotiate rates and contracts with their suppliers, as they will be able to automate several phases of the bid solicitation and negotiation process, resulting in lower costs and improved efficiency throughout the purchasing cycle.
How can Prokuria help and why is it different?
You can set different levels of competition exposure when starting a Japanese Reverse e-auction with Prokuria. For example, buyers may choose to reveal to potential suppliers that there are other offers at the same price, without stating how many. In this case, the psychological pressure on suppliers is higher.
Alternatively, buyers can state that are X additional offers at the same price - in which case suppliers have room for employing varied bidding strategies.
Prokuria Japanese Reverse auction feature also provides Multi-Factor Auction (MFA) and Supplier Engagement Monitor, where you can track supplier engagements and reply status in real-time. Prokuria also provides Audit Logs where all background changes will be captured, as well as a private and secure supplier webpage where they can reply quickly and efficiently without having to set up their own account on the platform.
Try our free trial and see how easy it is to get started with the Prokuria Japanese Reverse auction! No credit card is required, just create your free account or contact us for more details on this great service.