Situation before usage of forward auctions:
SAP IT sells old IT equipment (Laptop, Desktops and Monitors) to recycling companies. In the past email communication was used to offer the recyclers the old equipment and negotiate a price. The back and forth email communication led to many emails with long negotiation cycles and the missing competitiveness of the process to lower prices for the old equipment.
SAP IT decided to use forward auctions in SAP Sourcing instead of the email communication for selling of the old IT equipment. Now, a couple of forward auctions are conducted every week globally.
What is a Forward Auction?
SAP Sourcing supports many different auction types; one of them is a forward auction. Forward auction are electronic auctions, which can be used by sellers to sell their items to many potential buyers. In a forward auction the price increases as the auction proceeds.
What were the results for SAP IT by using forward auctions?
- More than 10.000 units will be sold via forward auction per year
- At least 2 auctions conducted per week
- Price increase between 8-12 % due to competitiveness of the auction format
- Assurance that max price/market price was achieved
- Shortened event cycle time from one week to one hour
- Auditable negotiation history
- Global rollout of a single process for all used standard end user equipment
What were the important steps to success?
- Keep it simple for the seller: setup of some easy to use templates for the different regions to enable the user to create a new auction with just a few clicks in less than 5 minutes.
- Enable the auction event creator through training sessions and test events
- Training for the bidders (buy side users) and conduct a test event
- Transparency regarding auction process and auction rules to ensure acceptance from the bidder side
- Keep it simple for the bidder. Number of line items should be limited to a small number to guarantee that bidders can focus and compete. If multiple lines items are required use staggered line items to ensure that bidders are able concentrate on current line item.
- Enable preview of the auction line items/lots to ensure that the bidders are able to learn about the equipment which is going to be auctioned and allow them to focus on the bidding to 100%.
- Select auction runtime from 30min to 1hour to come achieve quick results and full attention of the bidders
- Use last minute time extension to ensure that bidders are able to submit their best quote and that no price increase opportunity is missed. Extension time for new bidders should be longer as for experienced bidders
- Last but not least, ensure auction support during the runtime of the auction to support bidders and manage auction event
Please feel free to share with the community your forward auction experience.