New Approaches to Online Procurement

The dramatic growth of the Internet and the rise of online commerce are providing new hope for changing many costly, time consuming, and inefficient procurement processes. In recent years, many major industries have begun using Internet technologies to improve negotiation tactics and re-engineer procurement processes in ways that reduce the cost of doing business. A key Internet technology used to improve negotiations is the electronic reverse auction. This paper outlines the potential of reverse auctions for procurement negotiations, evaluates the current use of reverse auctions by major companies, and reviews the advantages and disadvantages of reverse auctions. The paper concludes with some specific recommendations about when to use and when not to use reverse auctions in procurement negotiations.