Nearly everyone is familiar with a “normal” auction, in which a vendor puts up a good for sale, buyers compete for it, and the highest bidder wins the good. However, in an ereverse auction, it is the exact opposite: a buyer makes it known that they need a good or service; instead, the vendors compete for the contract. Reverse auctions are not a fit for every type of transaction, but they are a viable choice for many goods and services, offering benefits for both buyers and suppliers.
An electronic reverse auction (or eReverse auction) is the most efficient way to conduct any reverse auction.
The right reverse auction software will streamline your procurement strategies, saving time and money. There are different types of reverse auctions, such as a reverse Dutch auction, a ranked reverse auction, a Japanese type, and an open outcry/English reverse type.
Read on to learn more about reverse auctions, what a reverse auction is, and how it can improve your procurement process.
eReverse Auctions: Decrease Sourcing Time
Performing reverse auctions with Excel spreadsheets and paper can be tedious and rife with errors. With an eReverse auction, sourcing time can decrease from weeks and months to as little as days.
Again the most vital key to decreasing sourcing time and cost is having the right type of eSourcing software.
You want to look for robust features, such as:
- Integration with enterprise platforms, such as ERP or central repository
- Ability to watch bids in real-time
- Analytic features and post-bid analysis
- A way to alter bid strategy
In an eReverse auction, typically, the buyer will place an RFQ (request for quote) or RFP through the software, sellers will show interest in the auction, and the bidding process starts. Not all software is the same. However—it needs to be intuitive with only a slight learning curve so that you, your team, and your suppliers feel comfortable using it for reverse auctioning.
eReverse Auctions: Auctions for Your Most Common Goods
A smart tip for using reverse auctions is to only run these auctions for the services and goods you need most often, which will help improve your procurement strategy.
This way, suppliers will be familiar with your needs and will be on the lookout for your auctions. Doing this can also open up the supplier pool so you have access to more suppliers.
When to Use an eReverse Auction
It’s also important to know when to use a reverse auction and when not to. Reverse auctions are not optimal for every good and service. Technically, you can use a reverse auction for anything, but some goods and services are strategically better than others. Situations ideal for reverse auctions include:
- Printed materials
- Direct materials
It’s best not to use reverse auctions when you are not 100 percent sure of your needs—for example, if you were hiring a technical consultant or needed graphic design work done.
eReverse Auctions: Benefits for Both Buyers and Suppliers
Suppliers are historically wary of eReverse auctions because they are not certain the process can benefit them. However, using reverse auctions does benefit suppliers in several ways, including:
- New opportunities
- Gives smaller businesses a chance to be part of the auction
- A more level playing field
For the buyer, there is access to more suppliers, a streamlined process, cost savings, and eReverse auctions have a global reach, giving buyers the ability to grow their business. The transparency of the reverse auction can foster better relationships between buyer and supplier.
If you’re interested in hearing more about eReverse 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.