Cooper Business School

In the days when Gartner Studios is trying to lock the primary sales, Greg Gartner employee space turned out into a space war. An arsenal of laptop and cellphone and reams of data that is brought for employees to use. Shouting match between the common worker. So heavy sweating. If the team wins Gartner deal, there are a lot of whooping and hand out boss shot of tequila. This breaks the session back dealmaking can last for eight hours or more.

For Gartner, a company that supplies stationery products and associated with mass market retailers and office superstore, selling paper is not what it used to be. Transactions that 10 years ago will begin with cold calling and ends months later with a handshake is now governed by a process that is almost unheard of when Stillwater, Minnesota, the company was founded in 1998: a reverse auction online.

During the reverse auction, the customer allows the supplier is only a short window of time to bargain for lower prices on their products or services. The practice was pioneered by the automotive and aerospace buyer, which is used to reverse auction procurement commodity parts. Today, many large companies use it to buy everything from paper clips to their employee health care plans. Reverse auction is loved by the company, purchasing managers are hated by the supplier, and rarely discussed publicly by anyone involved.

Typically, the buyer’s auction announced months in advance. After the qualifying process which may include interviews, presentations, and the initial bid, a group of suppliers – usually between three and 12-was selected to participate. On the date and time are set (often between 6 and 8 in the morning to accommodate Asian bidder), log on to a secure Web-based programs and bid against each other anonymously. Most auction is limited to one or two hours, but they can draw on as long as it bids to roll in.

Fairly easy, isn’t it? It depends on who you ask. Professional procurement, reverse auction is considered a best practice, tool that can reduce costs as much as 20 percent. Target (NYSE: TGT), Dell (NASDAQ: DELL), and General Electric (NYSE: GE) is said to use it freely. Sandy Jap, a professor at Emory University who studies reverse auctions, says, it is possible that half of all corporate expenditures someday can be decided by the reverse auction.

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