Electronic Reverse Auction (e-RA) and Supply Chain Management: A Blessing or a Curse

Electronic reverse auction (e-RA), an online and real-time auction between a buying organization and two or more invited suppliers, has recently received substantial attention in supply chains. While a recent survey has found a dramatic increase in firms’ interest and participation in e-RA, it also revealed that a large number of purchasing managers are not willing to use e-RA. With the potential cost savings of up to 20% over the traditional purchasing process, why do so many companies hesitate to participate in e-RA? In this paper, we first present the potential benefits and issues of e-RA from the perspectives of both the buyer and supplier. Through the lens of supply chain management (SCM), we then explore what implications e-RA might have for SCM. In particular, we closely examine the impact of e-RA on strategic purchasing, trust, information sharing, inter-organizational communication, and long-term relationship orientation, five of the most important constructs characterizing the notion of supply chain management. Three mini-cases were provided to offer added support for our arguments.