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Adaptive Reverse Auction

Find excess supply and exploit it
  [vote for,

If you look at the market trend, at different stages of it different industries have too little work. For the cleaning industry this is basicaly the case at all times, in part due to the simplicity of the work and how easy it is to make a cleaning company (simply too much supply). For the construction industry, it is clearly on the decline of the market trend that the companies run into trouble with no work.

Part of the reason are the crazy prices construction companies charge in the high market trend period. The idea is to make a profit on lowering the prices towards the equilibrium. A business2business service offering reverse auctions (auctions where sellers compeete on offering the lovest price, much like licitations). This service should not be bound to one industry, but to a broad spectrum, with one significant strategy: focus on the industries that have excess supply during a certain market trend. If you follow markets, you know that at any time there is such an industry to be found.

The money would be made by taking a % off every deal, or something in the lines of.

The cost of this enterpreneureal venture could be minimised by making the service a web portal and avoiding all excessive spending by presenting the idea to lawyers & bankers and asking for some free counseling & legal/financial aid in return for future association. The costs can be so low that you can avoid investors all together just by taking a small loan and keeping all the company equity in house.

The end goal is going international, since international contracts are bloody huge. This would be hard, but that is the only way. Everything about this idea has to be dynamic, staying local would have you work against yourself: what you are doing is actually bringing the price closer to the equilibrium, or maybe even below, diminishing both your profit pr contract & opportunity for work. With this idea one would have to bet on many horses, and as big as possible.

Zus, Sep 16 2006


       I'm sorry, I don't think I understand this idea. What makes an 'Adaptive Reverse Auction' any different to the already well adopted concept of tendering - which companies are already perfectly capable of managing by themselves?
zen_tom, Sep 18 2006

       phlish illustrates exactly what the benefit of using an intermediary would be. Although he is a private person, and the model is buit for business-to-business, you can clearly see what is going on:   

       the customer is dealing with one, two or a few suppliers at a time, with little or no prior knowledge about their quality, capacity and track record.   

       the pricing can go on for weeks, without any guarantee that the customer is getting a good price even after all that time spent.   

       all the legal paperwork, insurrance, anything else, goes directly through the customer, inducing additional cost.   

       it is the customer that superwises the project, taking time off and allocating resources just for this purpose.   

       The company that would cover all this for a customer, incurring some margin % on the hourly wage the supplier is paid and maybe some advertising space on the customer's/supplier's advertising media of choice, would hold great value for the customer.   

       How would we do this? It is a part of a larger business plan, but simple outline goes like this:   

       We cover legal bits by generating standard contracts for B2B services, with special arrangements for reviewal of each contract by a professional business lawyer.   

       We run an online portal sporting membership for suppliers (we could run a profit here too, but that would not account for the weight of the income), where they can be evaluated through assessment & practical experience with their company, rated according to capacity & quality of product/service. This will help us match the potentially best suppliers for the customer, according to the job spec.   

       We run the spec through our database returning compatible suppliers, send them invitations to a tour of the facilities (say cleaning company job) or an introductory meeting (in case of non-spacial services & products). After this, the suppliers are sent home and informed on when the auction starts & ends, what the starting offer must be, good luck & have fun.   

       Once the auction is done, contracts are signed. Insurrance goes through us as well. We would guarantee quick replacement in case of dissatisfaction, depending on legal posibilities. After that, our customer becomes our suppliers customer, and we get %. Supplier is then monitored & the newly formed relationship closely observed.   

       Value for the customer: prices most probably lower than what they could bargain for, supplier fitting their demands (quality & otherwise), freedom to replace supplier under specified conditions and, most importantly, elimination of most costs generated by this process.   

       Value to supplier: job when there is none to be found.
Zus, Sep 18 2006

       Now that I've actually taken the time to read this idea, it looks to me as though it is not in the least bit new.   

       Many, many companies during the Internet bubble hoisted general purpose supplier/vendor auction auction sites. I think some few are still operational.   

       Either way, [marked-for-deletion] Widely Baked.
DrCurry, Sep 18 2006

       Internet bubble? The only thing this company does on the internet is the auction itself, perfect way to have several rounds of offers without knowing who offered what. Everything else is up close & personal.
Zus, Sep 19 2006


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