Method and system for partial quantity evaluated rank bidding in online auctions

Abstract

A method and system for conducting electronic online auctions having partial quantity evaluated rank bidding is disclosed. Submitted bids are ordered on a basis of a comparative bid parameter used by an originator of an auction. The quantity required by the originator of the auction is then allocated to the offered quantities of the submitted bids based upon a ranked ordering of the bids.

Claims

What is claimed is:

1. A method for processing bidding information in the auctioning of a lot, defined by an originator of the auction, amongst a plurality of bidders, comprising the steps of:

(a) determining a first allocation of a total quantity required by the originator of the auction, among a first set of bids submitted by the plurality of bidders, based upon a relative competitiveness of said first set of bids, said bids each having a price and a quantity set by said bidders and said relative competitiveness determined from at least said price and said quantity; and

(b) determining, upon a submission of a new bid in the auction, a second allocation of said total quantity required by the originator of the auction, among a second set of bids that includes said first set of bids and said new bid, based upon a relative competitiveness of said second set of bids, wherein said second allocation splits said total quantity among at least two bidders,

wherein steps (a) and (b) are performed by at least one computer, and said steps (a) and (b) comprise the steps of:

(1) generating a ranked ordered list of said received bids based upon relative values of a comparative bid parameter of said submitted bids; and

(2) repeating the following steps for said ranked ordered list of said received bids until an unfilled quantity requirement is entirely satisfied:

(i) selecting a bid in said ranked ordered list;

(ii) determining whether an offered quantity for said bid is less than an unfilled quantity requirement;

(iii) if said offered quantity is less than said unfilled quantity requirement, then identifying said offered quantity as being accepted and identifying the difference between said offered quantity and said unfilled quantity requirement as an updated unfilled quantity requirement;

(iv) if said offered quantity is greater than said unfilled quantity requirement, then identifying a portion of said offered quantity, equivalent to said unfilled quantity requirement, as being accepted; and

(v) if said updated unfilled quantity requirement is zero, then rejecting all remaining bids in the ranked ordered list.

2. A computer program product for enabling a processor in a computer system to process bidding information in the auctioning of a lot, defined by an originator of the auction, amongst a plurality of bidders, said computer program product comprising:

a computer usable medium having computer readable program code means embodied in said medium for causing an application program to execute on the computer system, said computer readable program code means comprising,

computer readable program code means for enabling the computer system to determine a first allocation of a total quantity required by the originator of the auction, among a first set of bids submitted by a plurality of bidders, based upon a relative competitiveness of said first set of bids, and, upon a submission of a new bid in the auction, a second allocation of said total quantity required by the originator of the auction, among a second set of bids that includes said first set of bids and said new bid, based upon a relative competitiveness of said second set of bids, wherein said second allocation splits said total quantity among at least two bidders,

wherein said computer readable program code means comprises a second computer readable program code means for enabling the computer system to generate a ranked ordering of submitted bids,

wherein said second computer readable program code means comprises a third computer readable program code means for enabling the computer system to generate a ranked ordering of submitted bids in accordance with a comparative bid parameter used by the originator of the auction, and

wherein said third computer readable program code means comprises:

computer readable program code means for enabling the computer system to generate a ranked ordered list of said submitted bids based upon relative values of a comparative bid parameter of said submitted bids;

computer readable program code means for enabling the computer system to select a bid in said ranked ordered list;

computer readable program code means for enabling the computer system to determine whether an offered quantity for said bid is less than an unfilled quantity requirement;

computer readable program code means for enabling the computer system to identify said offered quantity as being accepted and identifying the difference between said offered quantity and said unfilled quantity requirement as an updated unfilled quantity requirement, if said offered quantity is less than said unfilled quantity requirement;

computer readable program code means for enabling the computer system to identify a portion of said offered quantity, equivalent to said unfilled quantity requirement, as being accepted, if said offered quantity is greater than said unfilled quantity requirement; and

computer readable program code means for enabling the computer system to identify said offered quantity as being rejected if said updated unfilled quantity requirement is zero.

3. A system for processing bidding information in the auctioning of a lot, defined by an originator of the auction, amongst a plurality of bidders, comprising:

means for identifying a total quantity required by the originator of the auction; and

means for determining a first allocation of said total quantity required by the originator of the auction, among a first set of bids submitted by a plurality of bidders, based upon a relative competitiveness of said first set of bids; and, upon a submission of a new bid in the auction, determining a second allocation of said total quantity required by the originator of the auction, among a second set of bids that includes said first set of bids and said new bid, based upon a relative competitiveness of said second set of bids, wherein said second allocation splits said total quantity among at least two bidders,

wherein said means for determining includes means for generating a ranked ordering of submitted bids, and

wherein said means for generating includes:

means for generating a ranked ordered list of said submitted bids based upon relative values of a comparative bid parameter of said submitted bids used by the originator of the auction;

means for selecting a bid in said ranked ordered list;

means for determining whether an offered quantity for said bid is less than an unfilled quantity requirement;

means for identifying said offered quantity as being accepted and identifying the difference between said offered quantity and said unfilled quantity requirement as an updated unfilled quantity requirement, if said offered quantity is less than said unfilled quantity requirement; and

means for identifying a portion of said offered quantity, equivalent to said unfilled quantity requirement, as being accepted, if said offered quantity is greater than said unfilled quantity requirement.

4. A method for processing bidding information in the auctioning of a lot amongst a plurality of bidders comprising:

generating, using at least one computer, a ranked ordered list of bids received from said plurality of bidders based upon relative values of a comparative bid parameter of said submitted bids; and

repeating the following steps for said ranked ordered list of said received bids until an unfilled quantity requirement is satisfied:

(i) selecting a bid in said ranked ordered list;

(ii) determining whether an offered quantity for said bid is less than an unfilled quantity requirement;

(iii) if said offered quantity is less than said unfilled quantity requirement, then identifying said offered quantity as being accepted and identifying the difference between said offered quantity and said unfilled quantity requirement as an updated unfilled quantity requirement;

(iv) if said offered quantity is greater than said unfilled quantity requirement, then identifying a portion of said offered quantity, equivalent to said unfilled quantity requirement, as being accepted; and

(v) if said updated unfilled quantity requirement is zero, then rejecting all remaining bids in the ranked ordered list.

Description

BACKGROUND OF THE INVENTION

The disclosed invention relates generally to conducting online electronic auctions, and in particular to online electronic auctions featuring partial quantity evaluated rank bidding.

Traditional Procurement Models

Procurement of supplies has traditionally involved high transaction costs, especially information search costs. The introduction of electronic commerce has introduced new methods of procurement that lower some of the transaction costs associated with procurement. Online procurement, or business-to-business electronic commerce, matches buyers and suppliers so that transactions can take place electronically. There are three models for online procurement: catalog, buyer-bidding auction, and supplier-bidding auction.

The "catalog" model of online procurement was the first to be developed. The first electronic catalogs were developed by suppliers to help customers obtain information about products and order supplies electronically. These first electronic catalogs were single-source; i.e. they only allowed customers to obtain information and products from that supplier.

However, customers are not typically satisfied with being "locked in" to one supplier--they wanted to be able to compare a number of competing products to be sure of getting the product features they wanted, at the best price. So suppliers with single-source electronic catalogs started to include competitors' products on their systems. An example of this is American's SABRE system, which includes offerings from competing suppliers (airlines), thereby further reducing information search costs. By offering competing products, the electronic catalog that offers competitor's products becomes an "electronic market".

Many of these systems are biased towards the supplier offering the electronic market. Procurement costs can be further lowered with an unbiased electronic market that promotes competition.

For standard products and services, the need to have an unbiased market has been met for many industries by third party "market makers." For example, Inventory Locator Services has compiled a database that lists all airplane parts suppliers that have a certain item in stock. Buyers dial into the database to get information on the parts they need. Here, it is a third party, Inventory Locator Service, not a supplier, creating the unbiased electronic market.

The electronic catalog model of electronic commerce involves one buyer and one supplier at a time. When many buyers compete for the right to buy from one supplier, a buyer-bidding auction model is created. A noteworthy example of the buyer-bidding auction model is that operated by PriceLine.com and described in U.S. Pat. No. 5,794,207 issued to Walker et al. In this system, potential buyers compete for airline tickets by submitting a bid for an airline ticket on the PriceLine website, and airlines can choose to accept a bid, thereby committing the buyer to buy the ticket.

The catalog and buyer-bidding auction types of electronic markets do not work in some situations however. If the required product is custom made for the buyer, it is not possible for suppliers to publish a set price in advance for a catalog market. Likewise, it is not possible for buyers to specify all of the details of the product they want to purchase in a buyer-bidding auction. Traditionally, when a company requires a custom industrial product, procurement is made by a buyer for the company who searches for a potential supplier and acquires custom-tailored price quotes from a supplier for the needed custom product. The search is slow and somewhat random because it usually relies heavily on personal relationships. The costs associated with locating vendors, comparing their products, negotiating, and paperwork become big factors in a purchase decision. The cost of switching suppliers is very large, which means that the quoted price is probably not the lowest fair price and that it is hard for a new supplier to enter the market.

As an alternative, buyers use auctions to save money. The assignee of the present application developed a system wherein suppliers downwardly bid against one another to achieve the lowest market price in a supplier-bidding auction.

Supplier-Bidding Auction

In a supplier-bidding auction, bid prices typically start high and move downward in reverse-auction format as suppliers interact to establish a closing price. The auction marketplace is one-sided, i.e. one buyer and many potential suppliers. Typically, the products being purchased are components or materials. "Components" typically mean fabricated tangible pieces or parts that become part of assemblies of durable products. Example components include gears, bearings, appliance shelves, or door handles. "Materials" typically mean bulk quantities of raw materials that are further transformed into product. Example materials include corn syrup or sheet steel.

Industrial buyers do not typically purchase one component at a time. Rather, they purchase whole families of similar components. At times, components are strongly related to one another. As an example, a buyer might purchase a given plastic knob in two different colors, or might purchase a nameplate in four different languages. These parts are so similar that by definition they must be purchased from the same supplier--all of the knobs are made using the same mold. These items are therefore grouped into a single lot. Suppliers in industrial auctions must provide unit price quotes for all line items in a lot.

Auction Process

The process for a supplier-bidding auction is described below with reference to FIGS. 1 and 2. FIG. 1 illustrates the functional elements and entities in a supplier-bidding auction, while FIG. 2 is a process diagram that identifies the tasks performed by each of the involved entities.

The supplier-bidding auction model requires that the bidding product or service be defined by the buyer 10. An auction coordinator 20 works with buyers 10 to prepare for and conduct an auction and to define the potentially new supply relationships resulting from the auction.

As shown in FIG. 2, in the Initial Contact phase 102 of the auction process, the coordinator 20 contacts the buyer 10, and the buyer 10 provides data to the coordinator 20. The coordinator 20 prepares a specification 50 for each desired product or part 52. Once the product 52 is defined, potential suppliers 30 for the product are identified. The coordinator 20 and buyer 10 work together to compile this list of potential suppliers from suppliers already known to the buyer 10 as well as suppliers recommended by the coordinator 20.

The buyer 10 makes a decision regarding which potential suppliers 30 will receive invitations to the upcoming Auction. Suppliers 30 that accept Auction invitations are then sent notices regarding the upcoming Auction, as well as client software to install in preparation of participating in the Auction.

In the RFQ phase 104, the coordinator 20 works with the buyer 10 to prepare a Request for Quotation ("RFQ") 54. The coordinator 20 collects and maintains the RFQ data provided by buyer 10, and then publishes the RFQ 54, and manages the published RFQ 54. The RFQ 54 includes specifications 50 for all of the parts 52 covered by the RFQ 54. In the RFQ 54, buyer 10 aggregates similar part or commodity line items into job "lots." These lots allow suppliers 30 to bid on that portion of the business for which they are best suited.

During the auction 56, bids 58 will be taken against individual lots (and their constituent parts 52) within RFQ 54. While suppliers 30 must submit actual unit prices for all line items, the competition in an Auction is based on the aggregate value bid for lots. The aggregate value bid for a lot depends upon the level and mix of line item bids and the quantity for each line item. Therefore, suppliers 30 submit bids at the line item level, but compete on the lot level.

In the Auction Administration phase 106, coordinator 20 coordinates the Auction and administers the Auction setup and preparation. The coordinator 20 sends a RFQ 54 to each participating supplier 30, and assists participating suppliers 30 with preparation for the Auction.

In the Auction phase 108, suppliers 30 submit bids 58 on the lots and monitor the progress of the bidding by the participating suppliers 30. The coordinator 20 assists, observes, and administers the Auction.

When the bidding period is over, the auction enters the Auction Results Administration phase 110. In this phase, coordinator 20 analyzes and administers the Auction results, which are viewed by buyer 10. The buyer 10 begins to conduct final qualification of the low bidding supplier(s). The buyer 10 retains the right not to award business to a low bidding supplier 30 based on final qualification results or other business concerns.

In the ensuing Contract Administration phase 112, the coordinator 20 facilitates settlements 60 awarded by the buyer 10 to suppliers 30. Contracts 52 are then drawn up between buyer 10 and suppliers 30.

Communications and Software

The Auction is conducted electronically between potential suppliers 30 at their respective remote sites and the coordinator 20 at its site. As shown in FIGS. 3 and 4, information is conveyed between the coordinator 20 and the suppliers 30 via a communications medium such as a network service provider 40 accessed by the participants through, for example, dial-up telephone connections using modems, or direct network connections. A computer software application is used to manage the Auction. The software application has two components: a client component 31 and a server component 23. The client component 31 operates on a computer at the site of each of the potential suppliers 30. The client component is used by suppliers 30 to make bids during the Auction. The bids are sent via the network service provider 40 to the site of the coordinator, where it is received by the server component 23 of the software application. The client component 31 includes software used to make a connection through telephone lines or the Internet to the server component 23. Bids 58 are submitted over this connection and updates are sent to connected suppliers.

Bids 58 can only be submitted using the client component 31 of the application--this ensures that buyers do not circumvent the bidding process, and that only invited suppliers participate in the bidding. Typically, bidders can see their bids and bids placed by other suppliers for each lot on the client component 31. When a bidder submits a bid, that bid is sent to the server component 23 and evaluated to determine whether the bid is from an authorized bidder, and whether the bid has exceeded a pre-determined maximum acceptable price. Bids placed by a supplier are broadcast to all connected bidders thereby enabling every participating bidder to see quickly the change in market conditions and begin planning their competitive responses.

SUMMARY OF THE INVENTION

Conventional auctions focus on price as the sole variable upon which the competition for an auction item is based. Price is the primary bidding parameter that is provided by the bidders and hence is the primary parameter upon which a selection process is made.

In many auction markets, however, quantity is an equally significant parameter that can influence the dynamics of an auction. Consider, for example, a downward-price, supplier-bidding auction for 50,000 tons of coal. Participation in the bidding for the lot of 50,000 tons of coal is often restricted to large coal suppliers. Smaller, hungry coal suppliers that can offer more competitive pricing are often precluded from participating in the auction because they cannot supply the entire requested 50,000 tons.

The present invention increases the competitiveness within such an auction by enabling the auction system to process bids for portions of a specified lot. Offering the entire specified lot quantity is not a condition for participation in the auction. In the present invention, the offered quantities in the submitted bids are used to allocate all or part of the specified lot quantity based upon an ordered ranking of received bids.

The ordered ranking can be based upon values of a competitive bid parameter that is used by the originator of the auction. In one embodiment, the ordered ranking is based upon price values submitted by the bidders. In another embodiment, the ordered ranking is based upon a competitive bid parameter that is generated through a transformation function defined by the originator of the auction. The transformation function takes as inputs price and non-price variables that affect the overall valuation of the transaction.

In a still further embodiment, an optimization routine can be implemented to minimize the total cost. In this embodiment, bids are evaluated together by an optimization program using linear programming or integer programming techniques. For example, in a coal auction where suppliers are offering different types of coal, the optimization routine can be designed to determine whether some mix of coal "a" and "c" would in fact be more attractive than "b" alone given their respective current bid prices and the values of non-price parameters.

BRIEF DESCRIPTION OF THE DRAWINGS

The accompanying drawings, which are included to provide a further understanding of the invention and are incorporated in and constitute a part of this specification, illustrate embodiments of the invention that together with the description serve to explain the principles of the invention.

In the drawings:

FIG. 1 illustrates the elements and entities involved in an auction process;

FIG. 2 illustrates the tasks performed by the entities involved in an auction process;

FIG. 3 illustrates the communications links between the coordinator and the potential suppliers in an auction;

FIG. 4 illustrates the client and server components of the computer software application that conducts the auction and the hardware at the sites of the coordinator and the potential suppliers on which the client and server components operate;

FIGS. 5A and 5B illustrate an example user interface according to the present invention.

FIG. 6 illustrates a stacked-ranked ordering process; and

FIG. 7 illustrates a generic transformation function.

DETAILED DESCRIPTION

Reference will now be made in detail to the preferred embodiments of the present invention, examples of which are illustrated in the accompanying drawings. The present invention described below extends the functionality of the inventive electronic auction system and method described in greater detail in co-pending application Ser. No. 09/252,790, entitled "Method and System for Conducting Electronic Auctions," filed Feb. 19, 1999, the disclosure of which is hereby expressly incorporated in the present application.

Online electronic auctions provide a powerful interactive medium for creating and capitalizing upon traditional auction dynamics. The extensive reach of online electronic auctions combined with inherent forms of anonymity make it an attractive choice for virtually any auction sale. Online electronic auctions enable potential bidders to view a rapidly changing auction landscape as hundreds of bids can easily be processed within a few hours.

One of the key elements in creating an electronic auction market is the identification of a uniform auction item upon which competition will be based. The specification of a uniform auction item enables the auction system to process the various competing bids based solely upon the price quotes submitted by the participating bidders. For example, an originator of an auction can define an item (e.g., golf club) that the originator is willing to sell or can define an item that the originator is willing to buy.

In most cases, this conventional auction system is sufficient to capture the necessary interest required to create a viable auction competition. In some markets, however, the auction originator's demands might be too great. For example, consider an industrial auction market where the originator of the auction is a buyer seeking to purchase a lot of 50,000 tons of coal. Eligible bidders for the sale of the entire 50,000 tons of coal would be confined to large coal suppliers. Smaller coal suppliers that cannot deliver 50,000 tons of coal would be ineligible to participate in the auction. Restricting the set of potential suppliers (or bidders) in the auction market also limits the potential auction dynamic. Smaller, hungry suppliers can often offer lower prices for a smaller volume. Unfortunately, while the smaller suppliers are in a position to drive the market lower, they are precluded from participating.

This limitation on the market is illustrated in the context of a set of potential suppliers A-G. For each supplier A-G, Table 1 identifies the maximum quantity (tons) of coal that the individual supplier can supply as well as that supplier's best "walk-away" price. For example, supplier A can offer 60,000 tons of coal at a minimum of $19.75/ton. In this example, it is assumed that suppliers A-G are each offering coal of the same quality.

                             TABLE 1
                   Potential Supplier Offerings
                         Available
         Supplier      Quantity (tons)    Best Price if Pushed
            A             60,000             $19.75/ton
            B             50,000             $21.00/ton
            C             75,000             $20.25/ton
            D             10,000             $19.00/ton
            E             20,000             $19.30/ton
            F             15,000             $19.10/ton
            G             18,000             $20.00/ton

                             TABLE 2
                   Scenario #1 (50,000 ton lot)
                         Available          Competitive
         Supplier      Quantity (tons)           Status
            A             60,000          In at $20.24/ton
            B             50,000         Out at $21.00/ton
            C             75,000         Out at $20.25/ton
            D             10,000            Not Eligible
            E             20,000            Not Eligible
            F             15,000            Not Eligible
            G             18,000            Not Eligible

                             TABLE 3
                Scenario #2 (Two 25,000 ton lots)
                Available            Competitive Status
    Supplier  Quantity (tons)       Lot 1            Lot 2
       A         60,000       In at $20.30/ton Out at $20.75/ton
       B         50,000       Out at $21.00/ton Out at $21.00/ton
       c         75,000       Out at $20.31/ton  In at $20.74/ton
       D         10,000        Not Eligible      Not Eligible
       E         20,000        Not Eligible      Not Eligible
       F         15,000        Not Eligible      Not Eligible
       G         18,000        Not Eligible      Not Eligible

                             TABLE 4
        Scenario #3 (50,000 ton lot w/10,000 ton Minimum)
                        Available
        Supplier      Quantity (tons)      Competitive Status
            A            60,000         Stops at $19.75/ton
            B            50,000          Out at $21.00/ton
            C            75,000          Out at $20.25/ton
            D            10,000       Stops at < $19.75/ton
            E            20,000       Stops at < $19.75/ton
            F            15,000       Stops at < $19.75/ton
            G            18,000          Out at $20.00/ton

• Inventors
  Kinney, Jr., Sam E.; Stevens, Robert G.; Levis, III, John P.;
• Published
  Mar-22-2005
• Current US Classes:
  705/37
• Application #
  490877
• International Classes
  G06F 017//60
• Field of Search
  705/26 705/35 705/36 705/37
• Examiner
  Elisca; Pierre E.
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