Reverse electronic auctions: Cases in Taiwan's high-tech industry

Internet auction business models have become greatly diversified, and the amount traded grows annually. The traditional auction is initiated by the seller and buyers send in bids. Recently, however, more auctions have been initiated by buyers with sellers sending in bids. The lowest bid then obtains a purchase order. This has become known as a “reverse electronic auction.” Taiwan is the major manufacturing base for global IT products. Many manufacturers have begun to participate in reverse Internet auctions held by global OEMs such as Nokia, Motorola, and Sony Ericsson. Several Taiwan manufacturers have requested that their suppliers do the same thing. In this study, a literature review and case studies analyze the reasons for implementing reverse electronic auctions. We found that not all procurement items are suitable for reverse electronic auctions; also, the characteristics of procurement items and relationships with suppliers must be considered. Enterprises that want to adopt reverse electronic auctions will need to consider the short- and long-term payoffs.