Reverse e-auctions revolutionising the packaging industry in the UK

Abstract

Reverse e-auctions are increasingly being used in business-to-business procurement and have been reported to yield significant price reductions for buyer firms. However, the adoption of online auction formats has raised many concerns among suppliers, often being criticized for damaging supplier-buyer relationships and for being antithetical to what is currently regarded as good supply chain management. Against this background this paper aims to examine the reverse auction phenomenon in the UK packaging sector. Data were collected from the direct experiences of one large food-packaging supplier, using case studies of reverse e-auctions, and from exploratory interviews with other suppliers in the sector. While buyers are reaping significant short-term price reductions, the benefits to suppliers are less obvious. In fact, little reference was detected to the often-quoted reductions in overall transaction costs for either buyers or suppliers. However, most respondents were not able to specify their transaction costs and associated risks and did not appear to have adequate costing systems to enable such quantification.