Spend Management

Reverse Auctions

Optimize savings with eAuction solutions to run effective reverse auctions at the right time.

Create an Even Playing Field Facilitating Equal Competition

Reverse Auctions
Leverage Industry-leading Technology Platforms To Rapidly Reduce Costs

Velocity helps procurement teams enable true partnerships with their suppliers through transparent processes. Reverse auctions allow you to focus on innovate solutions for your sourcing challenges.

Reverse Auctions

Reverse Auction Simplified

01

SPECIFICATION
Ensure the requirements and specifications are universal across bidders

02

PREPARE
Train bidders on rules, procedures and award criteria

03

LIVE EVENT
Run live auction event with key business users present

04

AWARD
Run award scenarios and select winning bidder

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What’s a Reverse Auction?

A reverse auction is defined as an auction where the traditional roles of both the seller and buyer have reversed. In this type of auction, sellers submit their bids and buyers sit in the driver’s seat. In a regular auction, you will find the highest bidder as the winner, but in a reverse auction, it is the bidder with the lowest price that usually wins the business.

Reverse auctions can deliver large cost savings, reduce cycle times, improve supplier negotiation, and allow a procurement function to focus resources on high value activities. However, in order to realize these benefits, a reverse auction must be set up and conducted with precision. This means you need to use the right system or tool, invite the right suppliers, structure the event optimally, and properly execute the event.

Knowing When the Time is Right for Using a Reverse Auction

Reverse Auctions are not appropriate for all sourcing projects and need to meet certain key criteria:
COMPETITION
Reverse Auctions are best for categories with a strong competitive environment with many qualified suppliers that have a strong understanding of the items up for bid and the cost/price models associated with them.
COMPLEXITY
Use Reverse Auctions when there is a low level of procurement complexity and specifications are well-defined industry standards. It is key that you define the level complexity to be able to make apples-to-apples comparisons.
COMMITMENT
A Reverse Auction is not the best time to test a new supplier for a large spend category. When making the final selection based on the eAuction result, price should not be the only factor.

Benefits of Sourcing Automation

Some of the other benefits of using eSourcing tools for managing reverse auctions:

SPEED
Using an eSourcing solution for reverse auctions typically reduce the price negotiations timing to less than an hour. This increase in efficiency not only benefits the buyer, but also the participating bidders, making the eSourcing solution an exceptional idea for everyone—not just the buying team. It increases market efficiency and integrity as a whole.

VALUE
Savings are typically greater that traditional negotiations when we use an eSourcing tool. On average, we’ve achieved upwards of 19% in cost savings for our clients when we utilize reverse auctions. This reductions in procurement costs, allow procurement organizations to achieve a higher ROI.

INTEGRITY
eSourcing solutions offer full market transparency, meaning that all the participating bidders have the same information in real time and can act on as they see fit. The bidder has the ability to modify their bid proposal in a live environment resulting in immediate market feedback.
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