These are purchases of commercial commodities that have well-defined specifications and universally accepted standards. For example, a specialty chemical company used an electronic reverse auction to buy packaging material. The product was considered a commodity, and the need was not urgent. The supply base included many suppliers; some were prequalified and some were not. Two suppliers won the reverse auction, one of which was prequalified and the other was not. The prequalified supplier was awarded 100 percent of the business, while the other was offered the opportunity to become qualified. A purchase price decrease of 20 percent was achieved, plus one new supplier was later qualified.
Specialized products have requirements that may not be accurately specified and do not have universally accepted standards. A reverse auction would not be the best sourcing strategy for the purchase of a specialized good because the market is not competitive. A proprietary good or service would not be appropriate for reverse auction, because there may be only one potential supplier that holds a trademark/copyright/patent.
