Read the case and submit a group case report answering the following questions. Attach all supporting analysis to your group case report.
Which of the given parts should be taken to auction? Support your recommendation with a total cost analysis.
The part Pin and Sleeve should be taken to auction. Based on the excel analysis below, the part Spool does not even have one supplier that could provide saving. But on part Pin and Sleeve, there are many suppliers could provide saving to the company, so those multi suppliers can make the competitive happen, therefore to create a chance for the company to get a lower price. So, the part Pin and Sleeve should be taken to auction.
Do you recommend a pre-auction technical review or a post-auction technical review for this auction? Explain.
Should the auction have a reserve price? Should that price be visible to suppliers? Explain.
Yes, the auction should have a reserve price and should be visible to the suppliers. If some suppliers find out that the reserve price is higher than their expect or is lower than their costs, they will not continuously participate in the auction. So a visible reserve price can help the Castun save time and ensure the success.
For each part in Question 1, do you recommend an open descending reverse auction or a sealed-bid first-price auction? Explain.
1. For the Part Pin, I reconmend and Sealed-bid first-price auction. There are three main competitors, which is not too many competitive, and their lowest bid price are 0.19, 0.24,and 0.25. If the company choose to run descending auction, due to not too many competitors, the supplier will carefully and slowly reduce the bid price, therefore the final bid price will have a great chance to stop at somewhere just a little bit lower than 0.24, which is far away from 0.19. However, if running the sealed-bid first-price auction, the Supplier Browne will not be able to adjust the other two competitors bid ability, so there will be a great chance that the Browne bid a price close to 0.19.
2. For the Part Sleeve, I recommend the Open descending reverse auction. There are five possible suppliers, which can create a more competitive bid environment, so the supplier may not slowly reduce the price. Therefore if the supplier GlobalTools bid their final price at 2.45, the supplier HNC may bid a price a little more lower than 2.45, and close to 2.1. So the Sealed-bid first-price auction may get a result that the final bid price between 2.45 and 2.1, and there is a great chance the bid price close to 2.1, which is the possible lowest bid price.
