Benefits of Reverse Auction in procurement

Procurement in many organizations acts as a foundation of the business. Industries like manufacturing, infrastructure, eCommerce to name a few heavily rely on procurement procedure. 

It refers to structural methods and means to organize a company’s procurement process and seek desired outcomes. It also saves time, cost, and improves existing supplier relationships. 

What is Reverse Auction?

When a seller places an item for auction, interested buyers place bids until the auction ends. The highest bidder is awarded the item. A reverse auction is where certain sellers bid mostly on prices on which they are willing to sell their goods and services.

The buyer posts a query for a necessary good or service in a reverse auction. Sellers after which place bids for the amount they are willing to charge for the good or service. Also, the seller with the lowest bid wins at the end of the auction.

Moreover, a negotiating method used in strategic sourcing is the opposite of a forward auction. When auctions are started mostly by the seller wherein the buyer bids up the price it is called a forward auction. Industries that have incorporated reverse auction include construction, insurance, and law.

It has further lead to Dutch reverse auction and Japanese reverse auction. 

Unlike traditional Dutch Auction, a Reverse Dutch Auction starts at a low price and increases gradually. The price increases after fixed intervals and stops when the reserved price is obtained. However, if a supplier places a bid before the reserved price is reached, the item is awarded, and the bid closes. A Japanese auction begins with an opening price, and the participants have to accept the price or withdraw from the auction. If accepted, it signifies that the buyer is eligible to supply at the price level. The auction continues until no participant is left to bid. 

How Reverse Auction Gained Popularity?

With the advent of social media online auction techniques allowed various sellers to communicate with a buyer at the actual time. And reverse auctions grew in popularity. Today, large corporations and government entities use reverse auctions. It is used as a competitive procurement route for raw materials, materials, and services.

Types of Reverse Auction

English Reverse Auction – Sellers compete solely based on having the lowest price in the market.

Energy Reverse Auction – Online auction platforms that specialize in assisting businesses that want to reverse auction commercial and residential energy purchases, as well as reverse auction renewables.

Global Reverse Logistics Auction – An e-Auction is specifically developed for making deals logistics and for transportation pricing.

Insurance Reverse Auction – A reverse auction process that is designed specifically for negotiating insurance policies. Legal Services e-Auction – Reverse Auction Internet Reverse Auction is software that can be provisioned to auction legal services provided by law firms. 

Benefits of Reverse Auction in Procurement Process

Supplier Competition Has Increased – Many controls are available in reverse auction software that can enable the creation of unique bidding strategies. This increases the sense of competition among the participating suppliers. Controls such as Rank Only or Lead Bid Visibility are examples of controls that can be used to ensure that participating suppliers provide their best possible price to win.

Enhanced Transparency- It is critical to have simple and direct involvement guidelines, as well as specific requirements of the product/service users, who are looking to procure to conduct an effective reverse auction. Sellers should ensure that all eligible suppliers must have the same information and are on the same page when it comes to the procurement requirement. 

Enhanced Efficiency- The use of online e-Sourcing software significantly reduces both the preparation and execution time of an effective reverse auction. All communication and participation take place online. The process drastically reduces phone calls and emails to participating suppliers. Furthermore, because reverse auctions are time-limited, the buyer receives instant and real-time pricing from all of their suppliers. No more arguing on the phone or chasing down suppliers for quotes.

Enhanced Compliance- Companies are expected to keep clear records of transactions for compliance and reporting purposes. Using online reverse auction software not only benefits the organization but also captures all of the transaction information required to remain compliant. ProcurePort’s solution captures all login information as well as the timestamp, IP address, as well as identity of the bidder.

Cost savings have increased- Reverse auctions can produce cost savings of up to 40% when they are used in the right category. These are best suited for the requirement of bulk orders. Office equipment, office furniture, janitorial services, building maintenance, equipment rental, and cleaning suppliers to name a few. 



Reverse auction in procurement is very much important as the process is the same as the tender system in India for any project. Where there are many sellers available for the potential buyer. Hence it gives the option to choose among all the factors be it cost efficiency or quality of the work. Hence the method of Reverse auction is a must need.

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