Procurement Glossary & Terminologies

Glossary / Letter R / Reverse Auction

Reverse Auction

Reverse auctions are the type of eAuctions where suppliers place bids and compete against others to win the eAuction. Unlike other eAuction strategies, buyers put up a price on desired products/services and lets suppliers compete amongst themselves until the supplier offering the lowest bid emerges victorious. Since the advent of procurement softwares, reverse auctions have gained immense popularity and are widely implemented by companies to create a competitive bidding environment.

One of the major benefits of reverse auction is it enables buyers to procure goods at seemingly low cost while avoiding the manual task of individually negotiating with multiple suppliers. While reverse auctions are a great technique to achieve cost savings, they might not work well for every product/service. This eAuction strategy focuses more on price rather than value. Under the right circumstances, reverse auction can help companies expedite the entire procurement process from months of negotiation to 1-2 hours while delivering the expected ROI.

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