Dynamic auction in procurement management helps companies and organizations in negotiating for the highest quality production processes and resources. The auctions have many advantages in the corporate marketplace especially when buying a wide range of related items and divisible things. This is because the related goods are usually auctioned simultaneously. However, the conditions under which the items or goods are auctioned are highly determined by the environment where the bidding is taking place so as the buyer’s objective. What’s of great importance however is ensuring that a unique auction design is set so that the buyer pays more attention to the minimization of the goods being purchased and their combination efficiency.
Dynamic Auction System
In designing the perfect dynamic auction, the person(s) representing the procurement departments should analyze the bidding in order to it to yield an equilibrium which is competitive enough. In this case, one may opt to use various forms of auctions like the descending auction or a sequel auction. These forms of dynamic auction as a result make it easier for the auction to be understood and implemented. Alternatively, depending on the form of bidding being implemented, one can choose to either bid on individual items or, package items. However, package bidding is always preferred.
Benefits of Dynamic Auction
The greatest advantage of adopting the dynamic auction in procurement management is to enhance the flexibility of the bidder. For example, a bidder would be free to decrease the quantity of products she/he is bidding for and to later increase the quantity. This flexibility is however not just limited to the bidder alone but may also apply to the buyer. The main purpose of the dynamic auction in these cases is to ensure that the competitive nature of both the bidder and the seller is addressed appropriately so as not to favor any of the party.
The nature of the dynamic auction is in fact addresses in accordance to the situation of the procured items. If for instance the auctioneer announces the price of each product/good, the bidders can then express what products they intend to provide that they feel match the announced price. All types of bidding in this case should therefore be consistent. At the end of the day though, the market power is what determines the trend that the auction is going to take. If properly utilized, the dynamic auction formula in procurement management can come in handy especially when buying large quantities of products and economic resources from suppliers.