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Increasingly, reverse e-auctions are replacing traditional competitive bidding for sourcing decisions. Using the Internet, reverse e-auctions allow suppliers to compete dynamically, in real-time, for a buyer's business. During a reverse e-auction, suppliers submit multiple electronic bids over a fixed time period, often 30 min or less. Typically, the price of the item or service being purchased drops, often dramatically, during the bidding process. E-auctions offer a range of benefits to buying organizations including lower transaction costs, shorter order-cycle times, a large pool of potential suppliers, and competitive purchase prices. Some buyers are concerned that the emphasis on price will overshadow other important performance characteristics. The differences between buying organizations that have adopted reverse e-auctions and those that have not used e-auctions for sourcing decisions are explored in this paper. Data for the study were gathered using a survey of vice presidents and directors of purchasing. Chi-squared analysis shows that there are no differences between reverse e-auction adopters and nonadopters on the level of importance placed on the purchasing objectives of cost management and on supplier collaboration. There is a significant difference considering organization size, where reverse e-auction adopters have higher annual sales than nonadopters. The findings suggest that contrary to expectations, e-auction use and supplier collaboration are not mutually exclusive. Opportunities for future research are discussed.
Date of Publication: May 2004