How to Optimize the Reverse Auction Process

Just like it sounds, a reverse auction is the opposite of that of a regular auction. If you’re wondering, “what is an e-reverse auction?” it is a step in the procurement process where sellers compete against each other to sell you their product or service as opposed to buyers competing, Typically, in regular or forward auction, the buyers compete against each other, with the highest bidder “winning” the good or service. 

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In a reverse auction process, sellers compete against each other in a live setting to drive the purchase price down to a true market level. Reverse auction procurement strategy requires some knowledge and easy-to-use software to make the process more seamless for you. 

Read on to learn more about how to make your eSourcing reverse auction bidding more successful. 

Preparing for a Reverse Auction

 

While having a successful strategy is important, one of the critical things to do before holding a reverse auction is to obtain software to help make the process run smoothly. Some of the best reverse auction websites can help lead you to find reverse auction software reviews that can help you make an informed decision. There are some key things to look for as you’re looking at software to help you refine the reverse auction process. These include:

 

  • Software that is cloud-hosted
  • Multi-round capabilities
  • Excel compatible
  • Multilingual
  • Global time zone and multi-currency capabilities
  • Audit trails
  • Start price and bid decrements as well as halt and extension options 

You may have other features more specific to your company’s needs, but overall, you want software that makes the process simpler for you, not more complicated.

 

The Reverse Auction Process: Strategies

 

As you’re preparing to hold a reverse auction, one of the things you want to take a look at is your suppliers. Ensure that the suppliers you invite are ones you trust and are qualified to do business with you. It is advised that you invite two to three suppliers to your auction. You may or may not want to ask your strategic suppliers to a reverse auction—it depends on the nature of the business and the reverse auction process. It may not be a good fit for your business. 

There are several different types of reverse auctions. You may want to have a completely open auction, where suppliers can see their bids and the lowest bids, but this isn’t always a winning strategy in the reverse auction process, and this may not be a win for you. Consider a ranked auction (and software that supports running a ranked auction). This way, vendors can see where they rank, but not the lowest bids. This could lead them to bid more aggressively, which results in a better outcome for you.

Before the auction, you should consider a pre-bid to ensure that all suppliers are qualified and that they have fully understood your needs and specifications. 

You might also run a mock eAuction or auction just so you and the suppliers get a feel for the software and movement of the auction, especially if this is your first time running a reverse auction and if suppliers aren’t particularly comfortable with reverse auction style yet. This can give everyone a chance to acclimate to the “live feel” and pace of how a live auction runs. 

Although it may feel like you’re “showing your hand,” but instead, this may result in a win for you because suppliers will be more comfortable with the process.

If you want to hear more and are interested in the reverse auction process and reverse auction software, contact us at EC Sourcing Group today by dialing 973-936-9672 to speak to a member of our team to get more information or to request a demo.