The procedure of the Reverse Auction
Invitation For: Reverse Auction for XXXXXX
Product: EAF/LFxxxxx Consumables
Date of Auction: 11/14/2006
Item No. 1
Item Name: &&&&&&&&&
Product Specification: &&&&&&&&&&&&&&&&&
Contract Validity: Monthly
Other Terms: Please bid reduction on multiple of USD 7500. The lowest bidder to provide to bid conformation and break of prices immediately after the close of the auction. Buyer reserves the right to accept the lowest bid either in full or in part thereof or totally rejected the same. Delivery will be confirmed Ispat on Dec. 06.
Auction Should Begin At USD. 1 500 000 or Less.
Decrement At: Rs. 7500
Auction Start Time 1: 00: 00 PM
Auction End Time : 3: 00: 00 PM
Remember to Login for the above Auction using the following information:
Login ID: XXXXXXXXXX
Remarks: Please bid on CIF price net of taxes and duties and inclusive of all conditions like packing and fright etc
Contact Us at Mr xxx
Steps to follow for participating
1)Login to www. xxxxxx. Com
2) On the left side, under the Business With xxx Section, click on the IMAGE button. A new window will be displayed
3) Click on the button Reverse Auction
4)Click on Login Button. Enter your User name and Password
5) Click on Online Reverse Auctions button
6) Click on the link with the Auction Name you are invited for
7) Click on the BID button to enter your bid against the Item
8) An entry box will open below the auction list. Enter your bid and submit
The buyer reserves the right to extend the closing time of the Auction in the event of disconnectivity or technical reason or power cut of any of the bidders.
The buyer reserves the right to accept the lowest bid either in full or in part thereof or totally reject the same.
Description of the Background
I had been supplying this Indian customer for three years before the online reverse auction. Besides some minor problems in packaging, there were no problems with the quality and delivery date. The customer had always been satisfied.
The customer invited me to attend in an online bid for the product for the whole of 2007. Actually, I was preparing to raise prices in 2007. Because the exchange rate changed, the tax rebate rate decreased, my profit was little. In 2006, I shipped the product valuing $60, 000 to $80, 000 a month. The quality of the product was good, and the payment was in place quickly. So we had been maintaining a cooperative relationship.
The customer asked me to quote first. I added 10% to the original price, but the customer refused in a good manner. He said that he would increase the number, basically 5,000 tons a year, but at least maintained the original price. If I raised prices, I could not attend the competition for this product in 2007. I hesitated for a week. But the Indian client was anxious and ask me to maintain the price. So, I discussed with the factory and agreed to keep the original price. Then, he invited me to attend the online bidding mentioned above.
I was not optimistic about this online bidding. So, I make an excuse that I have no experience with ONLINE BID but can maintain the price. However, the Indian client called me every day to make sure I took part in the bid. He also hinted that they have unofficially decided our company. Even if my price is not the lowest, I can still get the same amount as in 2006, or even get the full amount. So, I promised that I would join it.
The steel mill sent me the password to enter their website, the username and password used during the bid, also the specific notification. That day, I got into their website in advance to learn some rules. At 1:00 in India time, the beginning time, I entered the bidding interface, and then the reverse auction started. The rule was that the latter price must be at least 0.5% lower than the previous one, and each drop must be a multiple of 0.5%.
After almost 5 minutes, I could quote. My first offer was my previous price. About two minutes later, there was a price of 0.5% lower than mine. But I was 0.5% lower than him right away. That is to say, my price was 1% lower than I had quoted. I was not going to cut it anymore.
The next 15 minutes, the screen updated every half minute. But the price did not change. Until the last minute, my price was on the screen.
The bidding had just ended, and I received an email. I got the order, and the Indian customer asked me to sort out the final quotation.
- Companies that can enter the reverse auction are promising. Therefore, there is no problem with quoting firstly, but try not to reduce the price from the beginning. Even if you want to cut prices, you have to wait until the last few minutes. Otherwise, you will suffer the consequence.
- This open bidding is In this way. Even if you do not win the bid, you know how much the price is different from others, how to quote next time to ensure the transaction. Similarly, get yourself room to adjust prices.
- Be sure to prepare adequately. Never bid at a loss in order to get an order.
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