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Read some tips on how to use reverse auctions ... TIPS

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Telecom Services
Client Type: Large
Client: A Municipality
Pre-Auction best bid: 6.7M EUR
Auction result: 3.8M EUR
A municipality requested proposals for a its data network and voice traffic the Bill of materials list included 150 locations for data connections with several connection speeds, and over 1800 voice lines. The Bill of materials also included voice destination profiles and maintenance services. The RFP was answered by 8 telecom operators, with total estimated prices ranging from 9M EUR to 6.7M EUR for a 3 year contract. The municipality then decided to auction the contract inviting the best 5 proposals. The auction was organized just for bidding the best total value. All the bidders were required to submit a detailed price list that justified the global bid after the auction. The auction was configured to last 30 minutes, with 5 minutes automatic extention each time a new winning bid was placed. New bid had to improve the previous bid by 10.000 EUR. The auction lasted for 6 hours until all but the winner gave up. More than 400 bids were placed during the 6 hours. The municipality saved 2.9M EUR for the 3 year contract! (966.000 EUR/year)

Construction Contract
Client Type: Medium
Client: A private firm
Pre-Auction best bid: 2.9M USD
Auction Result: 2.2M USD
A private company decided to build new headquarters on a pre-owned terrain. It issued a contractor quotation request for 5 construction companies. The resulting quotations ranged from 4.5M to 3.1M. After preliminary meetings with contractors some details where corrected by competitors and the new quotations ranged from 4.1M to 2.9M. The best three offers where shortlisted and invited to an auction. The bidders agreed to present details B.O.M. prices after the auction. The auction took one hour. The best bid was 2.2M USD. The client saved 700.000 USD.

Client Type: Small
Client: Vending machines operator
Pre-auction costs: 100.000 EUR/year
Auction Result: 85.0000 EUR/year
A vending machine firm buys beverages for restocking its machines every 2 weeks. Each time re-stocking was required a set of RFQ's were issued. Beverage negotiation is a time consuming task because prices vary a lot, depending on the distributors monthly targets.
The client started using reverse auctions to perform this task, and savings were very interesting (15%), but, above all, the previously time consuming negotiations are now fast auctions that usually takes less than an hour.
Even though different beverages are ordered to different suppliers, the auction is performed for all beverages at the same time, and the best bid is chosen for each ordering lot.

Office Supplies
Client Type: Small
Client: Law firm
Pre-auction costs: 30.000 EUR/year
Auction Result: 18.0000 EUR/year
Office supplies are a great application for reverse auctions: lot's of potential suppliers and lots of brands.
This law firm was ordering supplies on a stock management basis, and the small orders it placed wouldn't allow much negotiation power.
After estimating the total yearly needs, the total amount was auctioned for a one year exclusivity contract.
The results were amazing! A total svaing of 40% was achieved!

Electricity Costs
Client Type: Medium
Client: Refrigeration industry
Pre-auction costs: 1.8M USD/year
Auction Result: 1.6M USD/year
The electricity is an important cost in the commodity refrigeration industry. On a liberalised energy market it is possible to negotiate tariffs, and this was what the client set out to do. Energy is a commodity, and reverse auctions work very well to negotiate tariffs.
Using the hourly and yearly consumption profile, the client estimated the total energy consumption divided by season and hour of day, enabling the competitors to provide unit costs for each of the profile segments.
Agressive competition among suppliers provided an extra 10% compared to pre-auction negotiations.

Boat Freight
Client Type: Medium
Client: Agriculture Industry
Pre-auction costs: 50.000 EUR
Auction Result: 42.000 EUR
Freight costs are an important factor in the agro-industrial business. 5.000 ton freights were frequenty hired by the client to transport feedstock (corn, palm, grain) from south America to Europe.
After trying reverse auctions to negotiate the price of each freight, the client got savings of 16% on average on freight costs.

Office computer desktops and laptops
Client Type: Small
Client: Import/Export Firm
Pre-auction costs: 40.000 USD/year
Auction Result: 29.000 /year
Total cost of ownership is what has to be negotiated, and this was what the client decided it should be the bidding base for renewal of its office computer desktops and laptops.
The RFP was based on a 3 year contract (renting), including computer maintenance.
The initial offers from suppliers had distinct characteristics that were leveled during technical discussions.
The final offers were then based on the leveled specs. The initial offers ranged from 55.000USD/year to 40.000USD/year.
The best three offers (in terms of price and product quality) were invited to a reverse auction where the final price reached 29.000USD/year.

Call center outsourcing
Client Type: Large
Client: non-durable goods brand distributor
Pre-auction costs: 3M EUR/3years
Auction Result: 2.3M EUR/3years
A consumer support line was operated internaly by the client, and outsourcing it was a goal, making it a variable cost.
The business model that the client wanted was task driven payment, so some 70 different call center tasks were typified, each with a different unit cost.
Responses to the RFP with unit prices, applied to the total estimate of tasks for the next 3 years, ranged from 7M EUR to 3M EUR.
The client then decided that there was room for improvement, and choose 5 contenders for an auction. The bidders only bid total contract value, slipt into 3 categories (inbound tasks, outbound tasks and backoffice tasks) that later would have to be fundamented using unit prices and tasks amount projections.
As a final result of the auction, there were 2 winners: one competitor won the contract for the inbound outbound tasks, and other competitor won the backoffice contract.
The final value of the contracts was 2.3M EUR, 23% below the best bid of the RFP!

Building Security Services
Client Type: Medium
Client: Logistics operator
Pre-auction costs: 17.5M INR/year
Auction Result: 14.0M INR/year
Securing a logistics central warehouse 24h per day is an expensive operation. It takes human and technical assets to take on the responsability, but it also takes a lot of optimization to make it affordable for the client.
Auctions increase the ingenuity of the competitors, and one of them won a 14M INR/year (India Rupee) contract in this client's auction.

Car Fleet Renting
Client Type: Small
Client: Express deliveries firm
Pre-auction costs: 82.000 EUR/year
Auction Result: 57.000 EUR/year
Car fleet is a strategic contract for an express delivery operation. Brand doesn't matter, all it matters is contract duration and conditions (mileage, parts and replacement cars).
After all the initial bids were clarified and negotiated, an excellent value of 82.000 EUR/year for 20 vans including up to 50.000Km per year was achieved.
However, the client decided to implement an auction, and a suprising extra 30% saving was achieved!

Turnkey industrial Maintenance
Client Type: Large
Client: Petrochemical plant
Pre-auction costs: 7M EUR/year
Auction Result: 6.1M EUR/year
Turnkey maintenance on a industrial envirnment is a extremely complex tender, because numerous responsability boundaries must be defined, and usually the contractor takes on workforce responsabilities in their contract.
After months of RFP adjustments and several versions of bids, the final terms were clear, and numerous "round-room" regotiations achieved a winning bid of 7M EUR.
Not yet happy with the result, and for the sake of transparency, the client decided to implement an electronic auction to finalize the negotiation. You would not expect much room for improvement after all the previous negotiations, but you would be wrong!
The electronic tender took 2 days. Each time a new winning bid was placed the auction would be extended for 30 minutes (instead of the typical 5 minutes) to allow competitors to reassess their positions on such a complex bid.
The final winner value was 6.1M EUR/year, for a 5 year duration. An extra 13% cost reduction was achieved!

Banking Commissions
Client Type: Large
Client: Sports Club
Pre-auction costs: 900.000 EUR/year
Auction Result: 350.000 EUR/year
A sports club with 300.000 associates receives most of members dues through ATM transfer or Bank transfer. Bank commission are an heavy charge on the club's budget, so it decided to negotiate with several bank to eventually decide to change the bank it worked with.
Most of the backs bidded standard conditions that would result in 900.000 EUR/year on comissions.
The clube then decided than an auction was in order, to try to get a more fair deal, and invited smaller banks to the auction. The result was an amazing 61% reduction!

Travel Services
Client Type: Small
Client: Speciallized electronics manufacturer
Pre-auction costs: 400.000 EUR/year
Auction Result: 295.000 EUR/year
Travel agencies have average margins, but when confronted with a big deal they may talk to operators to try and lower its costs to win the deal.
This business client had its sales team flying about 170 trips per year and this had a big impact on sales costs.
It decided to try to use auctions to negotiate yearly "bundles" with travel agencies and got a 25% reduction on earlier tariffs!

Other areas ...

invoice finishing
electronic equipment refurbishing
prospect database
callcenter outbound campaign
industrial automation software
heavy machinery
staff recruiting services
sanitation services
markey survey
accountancy services
installation services
construction materials
project management

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