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.