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Benefits of Reverse Auction
 

 

A Reverse auction is an auction in which the roles of buyers and sellers are reversed.

In a reverse auction, sellers compete to obtain business, and prices typically decrease over time.

It is an online real time dynamic auction between a single buyer and a group of pre-qualified suppliers competing against each other to win the business of supplying goods or services.

 

Benefits of Reverse Auction :

1. New Supplier Discovery
2. Lower Cost due to competitive process
3. Market Determined Best Practice
4. Fair & Transparent Process
5. Global Sourcing at a Lower Price

6. Since final price (L1) is arrived through auction participated by all the techno-commercially suitable parties, probability of getting the right market price remains high.

7. RA breaks the barrier of monopoly of suppliers
.
8. Auction is hosted by a 3rd party and online, which is seen by all the participating parties thus transparency is ensured.

9. Although the decision to negotiate with L1 party, even after completion of Reverse auction process, rests with the purchaser, there will hardly be any need to call the party for price negotiation. This will save time and energy for the purchaser

Thus, to understand, Reverse auction is an online price decrement process (reversal) where a host facilitates price competition among the bidders such that each bidder, if he feels so, reduces his previously quoted price, seeing on PC terminal, the price being quoted by his competitors.

Bidders are allotted codes to conceal their identity. That

 

is, no bidder knows as to who others are bidding. A bidder only sees on a computer terminal his price as well as the prices being quoted by his competitors.
 

Reverse Auction Strategies:

S.No

RA Strategies

Conditions in which they are used
     
1 Sealed Bid In this case one estimated price is taken from all the participating parties. Sealed bid is normally followed by one or more of the other RA strategy.
2 Reverse auction The standard RA is generally suited for those items where it possible to fix a fair estimate of the prevailing market price.
3 Rank based reverse auction

hisThis applied when the Sealed bid value quoted by bidders have significant difference between them.

•      The rank based bidding discovers the fair market price and helps to counter cartelization.

4 Price match

This Auction strategy is used when the client want to split order quantity in more than one supplier.

•      All interested parties have to match L1 rate.

 Reverse Auction                    Reverse Auction Strategies