These 'downward price' internet auctions are revolutionising the way corporations source products and services, and could lead to fleet services being traded like commodities.
This buying process has already been applied to international daily rental services, and extended to leasing in the United States.
Global healthcare giant SmithKline Beecham has used the FreeMarkets.com on-line auction to acquire car hire as part of a strategic purchasing programme.
Willie Deese, senior vice-president of worldwide purchasing at Smithkline Beecham, said: 'Electronic commerce is the way of the future and not to embrace it is just putting off the inevitable.
'FreeMarkets is an important tool in our chest which we are using to set market prices for the products and services we purchase.' FreeMarkets describes its service as an auction where 'suppliers compete in real time for the purchase orders of large buying organisations by lowering their prices until the auction is closed. Buyers watch as prices fall in real time before their eyes.'
It acknowledges that 'few industrial purchases are as simple as pens and pencils' and insists it works with buyers and suppliers to ensure all parties are fully prepared before the auction begins.
Neil McCrossan, international sales vice-president of National Car Rental, described on-line auctions as 'the coming thing', and said NCR had already been involved in several (it won the Smithkline Beecham account).
He said the auctions required an enormous amount of preparation but that this process ensured the qualitative elements of a supplier's service were fully assessed before the customer invited it to participate in the auction.
'It's very intense in a bid situation, but it's still probably quicker and more efficient than the traditional process of tender, sales presentation then negotiation,' he said. (May 2000)