Reverse Auction Software Applications: What You Need to Know
What Is a Reverse Auction?
A reverse auction is a type of auction where the buyer and seller reverse roles. In a standard type of online auction, a seller would have goods or services up for sale, and buyers would bid. However, if you’re wondering, “what is reverse bidding?,” the sellers bid competitively when a buyer has demonstrated a need. Some types of reverse auctions include:
- Ranked: This is one of the more common types, where only the winning bidder sees the best price.
- Japanese: The buyer sets the opening bid, and suppliers bid. The original bid amount will go down, and participants will continue to bid until only the winning bidder remains.
- Dutch: The buyer is very specific, and lets suppliers know the quantity, product, and price they are willing to pay. Sometimes, multiple suppliers will fulfill the overall need in this type of auction.
- Open Outcry/English Reverse: This is a very transparent type of auction where all suppliers see the current winning bid.
What Are the Benefits of a Reverse Auction?
There are many benefits to reverse auction bidding for buyers and suppliers. This type of auction has a global reach and is not limited to those present. A reverse auction is time-saving for the buyer and offers the buyer more choices and access to more suppliers.
For the seller, it offers new opportunities and gives smaller businesses a chance to grow. Smaller suppliers have a chance to throw their ring into the hat, particularly if their criteria matches the buyer’s needs. A reverse auction is not about the lowest price, and buyers consider other factors during the process.
What Are the Drawbacks of a Reverse Auction?
There are some drawbacks to this type of auction, as with many things. For the buyer, they may incur possible monitoring costs. Because they are not familiar with the seller, there may be additional monitoring and project management costs. For the seller, they may end up lowering their price significantly to win a bid. Reverse auctions provide new opportunities for suppliers. However, sometimes they must take a loss to win the contract.
How Does Reverse Auction Software Work?
The type of auction software you choose can have a big impact on how seamless the process is. This web-based software and both buyers and suppliers will log into a web portal to complete the auction process. Typically, a buyer will place an RFQ (request for quote) or RFP, sellers will show interest in the auction, and the bidding process starts. Not all software is the same, however. Must-have features include:
- Ability to watch bids in real-time
- Integration with enterprise platforms, such as ERP or central repository
- Ability to alter bid strategy
- A function that allows the supplier to note other criteria the buyer may be interested in
- A way to determine stability and assess spend
- Big data post-bid analysis and robust analytic features
Because of the many benefits, reverse auction software is used in many industries, from governmental sectors to professional services.
If you’re interested in hearing more about reverse auction software or would like to schedule a demo, contact Simfoni eSourcing today at 973-936-9672. We want to help you reimagine the way you think about procurement.