Getting the most out of reverse e-auction investment

In 1990s, with dramatic price reductions, reverse e-auctions were projected to be a widely used procurement tool. However, not all buyers saw the economic benefits of reverse e-auctions and the current usage is more limited than expected. This study identifies important organizational characteristics that determine the net return of e-auction programs and addresses why adopters of e-auctions experience varying profitability levels from their usage. The first step in the study concentrated on gathering interview and archival data from five large U.S. manufacturing firms that have used reverse e-auctions. Based on the field study findings, controlled experiments were conducted using a simulation model to assess identified influential factors for e-auctions. Implications for supply managers are presented and future research directions are discussed.