How English Reverse Auction Works

How English Reverse Auction Works

A reverse auction, in the context of procurement and supply chain management, is an online, real-time dynamic auction which sees the roles of the buyer and seller reversed. Instead of sellers (or suppliers) competing to offer higher prices, they compete to offer lower prices for their goods or services to a buyer.

Here's a breakdown of how English Reverse Auction Works:

1. Initiation: A buyer who needs a particular good or service initiates the auction. They provide specifications, terms, and conditions for what they need.

2. Bidding: Pre-qualified suppliers are invited to the auction. These suppliers then bid against each other to provide the requested good or service. Unlike traditional auctions where prices increase with each bid, in a reverse auction, the price decreases with each bid.

3. Winning Bid: The supplier who offers the lowest price (or meets other stipulated criteria set by the buyer) typically wins the auction and is awarded the contract.

4. Purpose: The primary objective of a reverse auction is to drive purchase prices down. It capitalizes on the competitive nature of the market, allowing buyers to obtain goods or services at the best possible price.

Industry where reverse English reverse auction is wildly use are -

1) Consumer Industry
2) Textile
3) Chemicals
4) Automotive
5) Electrical Industry
6) Construction
7) Metal manufacturing
8) Plastic processing
9) Medical & Hospitals
10) Pharma manufacturing

Reverse auctions are commonly used in industries with standardized goods and services, such as commodities, manufacturing, and even in some service sectors. However, it's essential to ensure that the focus isn't solely on price but also on quality, reliability, and the long-term viability of the supplier relationship. Procurement teams have been using English Reverse Auction not only to negotiate better price with Suppliers, online auction negotiation allows them to save time and improve work flow process transparency at every stage, the digitization process also helps audit compliance team to validate and approve procurement projects.


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