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1. Introduction
• In general auction is referred to as a public sale in which goods or property are sold to the highest bidder. A reverse auction is a type of auction in which the roles of buyer and seller are reversed. In an ordinary auction (also known as a forward auction), buyers compete to obtain a good or service by offering increasingly higher prices
• A reverse auction is similar to a unique bid auction as the basic principle remains the same; however a unique bid auction follows the traditional auction format more closely as each bid is kept confidential and one clear winner is defined after the auction finishes.
• A reverse auction is different from the normal auction. In reverse auction a single buyer offers a contract out for bidding (by either using specialized software or through an online marketplace). Multiple sellers are then able to offer bids on the contract. As the auction progresses, the price decreases as sellers compete to offer lowerbids than their competitors whilst still meeting all of the specifications of the original contract.
• In 2003, researchers claimed an average of 5% of total corporate spending was sourced using reverse auctions.[2] They have been found to be more appropriate and suitable in industries and sectors like advertising, auto components, bulk chemicals, consumer durables, computers and peripherals, contract manufacturing, courier, FMCG, healthcare, hospitality, insurance, leasing, logistics, maritime shipping, MRO, retail, software licensing, textiles, tourism, transport and warehousing.
1.1 Purpose
• Due to the increasing price of goods in the current trend, public are attracted towards the lower prices and best deals.
• These days there are hundreds of suppliers among all the sectors such as Computers and peripherals, home appliances, electronic devices, logistics etc. Competition among these suppliers has grown so much that each and every single customer has become important.
• Also high demand of online market place has increased the need of most ecommerce applications.
• With our application traditional auction is accomplished online.
• Visibility of User’s needs is very important. With this application this goal is accomplished and user specific needs are clearly visible to the suppliers.
• Large and small value contracts for both public and private commercial organizations.
• Buyer designed goods and services can also be auctioned using our concept of “Reverse Auction”.
• Many sectors or industries such as computers, health care, logistics, hospitality etc can be covered.
1.2 Scope
• Reverse Auctions is not just limited to certain type of services.
• Reverse Auctions can also be successfully used in complex spend categories with highly engineered specifications and with direct impact on business operations.
• Reverse Auctions have proved to be a successful enabler in the negotiation of direct and indirect goods and services.
1.3 Definitions, Acronyms and Abbreviations
Auction: In general Auction is referred to as a public sale in which goods or property are sold to the highest bidder.
Reverse Auction: Reverse auctions are schemes where to win a prize participants must make the lowest unique bid. Depending on the format (online, TV, radio, SMS or print) the prize is shown or described (including the retail value) and participants are asked to submit a bid. Operators charge participants for each bid they make. Bids are generally made via text message (at a premium rate) or through registering and paying by debit/credit card or pre-purchased credits.
Suppliers: Supplier is a person or entity that is the source for goods or services.
1.5 Overview
2. This document holds the information relating to stakeholders or users problems and assumed solutions relating to the problems.
3. Establish Stakeholder or User Profile
• Name: Ashamaduri Company / Industry: Amazon
• Job Title: Quality analyst
• What are your key responsibilities?
Quality assurance engineer and process consultant
• What deliverables do you produce? For whom?
The team produces the reports on customer reviews about the application and delivers it to the managers
• How is success measured?
The success is measured when all the requirements of the applications are satisfied.
• Which problems interfere with your success?
The cost overruns and schedule overruns are the main problems that interfere with our success.
• Which, if any, trends make your job easier or harder?
Continuous update of the new features that are needed to be included in our application makes the job easier.
4. Assessing the Problem
• For which <application type> problems do you lack good solutions?
Though there are several applications available online for purchasing the required products their existing cost variations among different e-commerce sites.
• What are they?
Users are facing troubles due to the uncertain cost differences and they cannot ensure that they are receiving the products at the reliable costs.
• Why does this problem exist?
The problem existing because while purchasing products through online user cannot feel the quality of the product directly.
• How do you solve it now?
As the application is demanding the reverse bidding concept the user can be satisfied with the lesser cost of the product.
• How would you like to solve it?
The users’ needs the application to be designed in such a way that it should give the products at the relevant costs.
5. Understanding the User Environment
• Who are the users?
• All customers who are interested to buy the products will be the users.
• What is their educational background?
• All users from any educational background can access our application.
• What is their computer background?
• Users with basic computer knowledge on how to use the online shopping can use this website.
• Are users experienced with this type of application?
• Most of the people of this generation have experience using e-commerce applications.
• Which platforms are in use? What are your plans for future platforms?
• Currently everyone uses self websites and host it using some external servers. We plan to build our system in self hosted website which will be a personal platform.
• Which additional applications do you use that we need to interface with?
• Users who are currently using some of the e-commerce websites ask for the visibility of the encapsulated price of the product directly from the manufacturers. So data is collected from manufacturers and we sync in with their external applications.
• What are your expectations for usability of the product?
• We make our application usable by making it easily accessible and quick in response and we try to make our interface most easily understandable.
• What are your expectations for training time?
• Less than one month
• What kinds of hard copy and on-line documentation do you need?
• We would require hard copies of System RequirementSpecification and FunctionalRequirement document which explains both the hardware and software requirements of an application. We would require ProductCatalog from the manufacturers which describes the product information and this can be an onlinedocument. We can link the document related to products to our web application.
6. Recap for Understanding
Does this represent the problems you are having with your existing solution?
Lack of supplier preparation:
• Inadequate review of documentation.
• Incomplete commercial considerations.
• Fail to explain the goals of the business to suppliers.
Inviting the Wrong Suppliers:
• Time consuming and expensive to pre-qualify suppliers.
• Hard to prepare suppliers thoroughly.
• Can discourage the best suppliers from bidding.
What, if any, other problems you are experiencing?
Starting with Difficult Materials:
• Avoid complex printed circuit boards.
• Avoid parts where the incumbent supplier owns expensive tooling.
• Bid packages of less than $100,000.
7. Analyst’s Inputs on Stakeholder’s Problem (validate or invalidate assumptions)
• Which, if any, problems are associated with:
• In traditional purchase the buyer obtains offers from vendors(through single or two bid process) and based on well-established corporate procedures, places order on the lowest technically acceptable bidder.
• In traditional purchase, the price at which the goods and servicesare procured would depend to a large extent on the number of bidders in the process, the availability of resources and the negotiating skills of the buyer.
• The buyer may or may not have the requisite knowledge of the market, to conduct the negotiations.
• Thus there is a risk that the buyer could end up paying a price much higher than the market price for the goods or services sought.
• Ask for each suggested problem:
• Is this a real problem?
• What are the reasons for this problem?
• How do you currently solve the problem?
• How would you like to solve the problem?
• How would you rank solving these problems in comparison to others you’ve mentioned?
8. Assessing Your Solution (if applicable)
What if you could summarize the key capabilities of your proposed solution?
• Qualify suppliers before running the event.
• Start with material packages that can be easily organized and quoted.
• Carefully review and correct technical and commercial requirements.
• Set reasonable target pricing.
• Invite 6 to 8 qualified suppliers that meet the program requirements.
• Explain the process to suppliers thoroughly and project the vision of your organization.
• Enforce the bidding rules that were established prior to running an auction.
• Don’t underestimate organizational resistance.
• Get started, the risks are low and the upside is high.
• How would you rank the importance of these?
9. Assessing the Opportunity
• Who needs this application in your organization?
Everybody who is willing to buy the products online needs this application
• How many of these types of users would use the application?
Users with basic knowledge on computer internet and accessing E-commerce sites would use the system.
• How would you value a successful solution?
The successful solution will ultimately increase the number of customers.
10. Assessing Reliability, Performance and Support Needs
• What are your expectations for reliability?
The application must be updated time to time based on the reviews.
• What are your expectations for performance?
The products that users purchase from this application must be delivered on time without any damage.
• Will you support the product, or will others support it?
The users with direct access to the application about product will support.
• Do you have special needs for support? What about maintenance and service access?
If the delivered item is not matching the requested item as in online then users need an exchange facility by the maintenance team.
• What are the security requirements?
The items that are purchased must be delivered to the right person.
• What are the installation and configuration requirements?
As the application is online it should be easy to access from any kind of operating system.
• What are the special licensing requirements?
There should not be any legal issues for the products that the application sells online. It should have the certification for online marketing with qualified providers.
• How will the software be distributed?
The software is distributed among the developers for continuous monitoring of its performance.
• What are the labeling and packaging requirements?
The packaging should be convenient enough so that the products must be damage free and labelled must contain the expiry dates and directions to use if the product is related to medicinal or food items.
Other Requirements
• Which, if any regulatory or environmental requirements or standards must be supported?
The products must be delivered on time so that products should not be effected by external environmental conditions.
• Can you think of any other requirements we should know about?
Some users demand for the visibility of the manufacturing prices.
11. Wrap-Up
• Are there any other questions I should be asking you?
Will the support team maintain the tract of the product after being delivered? And follow up with the customer.
• If I need to ask follow up questions, may I give you a call?
Users agreed to give a call in specified times for asking follow up questions.
• Would you be willing to participate in a requirements review?
Users are willing to participate in requirements review.
12. Analyst’s Summary
1. A common mistake of organizations is that they cover the technical and commercial terms, but fail to adequately explain the nature of the opportunity beyond the bid package.
2. Obtaining quality and performance data on new suppliers is expensive and time consuming. Too frequently the process of supplier selection is haphazard and relies solely upon contacts from a few people either in engineering or procurement.
3. The result of this process is a pool of suppliers who may or may not have similar quality and performance capabilities.
13.CHALLENGES IN IMPLEMENTING REVERSE AUCTIONS
• There are several challenges associated with implementing successful online reverse auction projects.
• While suppliers face most of the challenges, buyers can face serious obstacles as well.
• Reverse auctions seem to contradict the recent trend focusing on strategic relationships and partnership with suppliers which is needed in order to maximize efficiency and effectiveness in the supply chain.
CHALLENGES FACING BUYERS
• Higher Ultimate Purchase Cost.
• Access to a Larger Supplier Base
CHALLENGES FACING SUPPLIERS
• Buyers Acting Opportunistically.
• Reducing Their Products to a Commodity
• The Winner’s Curse Risk