Reverse Auction

Reverse Auctions are widely adopted as an effective negotiation tool. The advantages of using online auctions are several and the downsides, if managed effectively, are minimal.

  • Save time in the negotiation process especially when multiple suppliers are involved
  • Enhance transparency of the bidding process
  • Achieve a cost-saving of ~18 to 40 % for amenable categories

Why will you use it?

While there are several tools available, some critical features impact the outcome of a reverse auction.

Krinati is meant to simplify the sourcing process


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What should you consider in a reverse auction tool?

  • Supplier-specific ceiling prices are an absolute must. Since an auction ideally follows an RFP, the prices quoted by each supplier prior to the auction become their ceiling price. Having a common ceiling price for all suppliers can cause a loss of some ‘identified’ savings.
  • The ability to compare prices from dis-similar suppliers by transforming their online bids with multiple price and non-price factors. e.g. the need to transform the submitted bids with factors related to their technical competence, manufacturing capability, service quality levels, etc. The key aspect here is that suppliers are unaware of this price transformation and the competitive feedback displayed about other supplier bids is also computed accordingly.

  • Depending on the supplier and category dynamics, the supplier (competitive) feedback during the auction is important. The commonly used ones are Best Bid only, Rank and Best Bid, Rank Only. Rank for leading bid only, Rank and Next Bid, Blind (or no feedback) are other feedback options that can be used very effectively under specific scenarios.
  • From a suppliers’ perspective, have a simple and uncluttered UI that reveals the needed information with zero to minimal clicks. Giving the suppliers a stress-free experience goes a long way in ensuring positive results in the auction.

Frequently Asked Questions:

Are there any costs for the supplier to participate in the reverse auction?

No, suppliers can participate in reverse auctions for no extra cost.

Can reverse auctions be conducted for all types of goods & services?

Simply put, reverse auctions work best when the market is competitive and the number of qualified suppliers exceeds the number of suppliers that would be eventually awarded the business. This is why indirect items are best suited for reverse auctions.

That said, auctions are deployed for strategic buying by many organizations across the globe. In such scenarios, managing the suppliers and addressing their concerns are vital.

Are suppliers comfortable participating in online auctions?

Reverse auctions have been used as an effective negotiation tool for more than 2 decades. Suppliers understand that this is a transparent mechanism and lowers their cost of customer acquisition greatly. Suppliers however could have some concerns that need to be proactively addressed by the buyer.

Do suppliers need to install any IT software on their computers in order to participate?

No. Our eSourcing solutions are securely hosted on the cloud via AWS. Suppliers need a reasonably stable internet connection and a computer/ laptop/ phone in order to place their online bids.

Want to understand how the Krinati solution suite can help you ?