Reverse auctions have been around since the late 1990s, and have been regularly used as a tool by procurement professionals to obtain better pricing and lower supply costs.
The use of reverse auctions can benefit companies of all sizes, but it really comes into its element when used by professionals within the procurement industry.
In an ordinary auction, buyers would compete with each other to obtain a product or service, yet in a reverse auction, the roles of the buyer and seller are reversed, and involve sellers competing to supply goods or services to a buyer. Over time, the price in the auction will start to decrease. Think of it like an eBay for the supply chain.
For procurement professionals who still haven’t started on the reverse auction or e-auction game, we’ve taken a look at how some of the finest procurement professionals use reverse auctions in their daily lives, and what benefits there are to using the service.
Time is of the Essence
When it comes to reverse auctions, as the supplier does most of the work, one of the greatest benefits is that the procurement professional can save time.
In the case of a traditional contract, businesses send out a request for a proposal which would have to be completed by the seller. The business would then sort through the proposals to make a qualified decision. The process of a reverse auction means that the whole process can be done online, cutting the requirements for manpower and time, with a decision being made much quicker.
Most reverse auctions won’t last longer than an hour either, meaning that the actual process can be wrapped up quicker, and both business and supplier can get on with what they do best.