First things first, before getting to see about the benefits of reverse auction, let us have a look at what is reverse auction. Reverse auction is where a single buyer makes potential sellers aware of their intent to buy a specified product/service. Strongly interconnected with big deals, reverse auctions are typically used for procurement by private companies, public sector agencies and non-profit organizations. During the course of the actual forward auction event, the buyers compete and bid against one another to secure the seller’s business, thereby driving the price to be paid for the item upward. Thus, the winning bidder is the buyer who offers the highest price. Now that you are aware of what reverse auction is all about, lets get to the essentials of the title i.e. the benefits of reverse auction in detail.
Benefits of reverse auction
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Efficiency in procurement process: The rapidness in procurement process is another benefit enjoyed by both buyers and sellers in reverse auction. While traditional auctions take about more than four weeks for completion, online reverse auction takes less than that of the traditional one, thus helping in easy procurement process. This is because online auction eliminates the paperwork and helps in easy and instant communication. In addition, this is also allowing greater productivity, visibility and cost efficiency.
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Access to a large supplier base: The traditional method of auctioning and bidding had certain confinements. Access to limited suppliers was one of the major setback and because of this companies were limited to selecting suppliers in their geographic regions with whom they were acquainted with. Supplier diversity benefits the auction community and provides distinct competitive advantage for businesses. The modern auctioning method having broken this, it has given access to a large supplier base and have allowed companies thousands of miles away to compete. This has paved way to being more open and transparent and has allowed companies to compete on a global scale.
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Increased market efficiency: This is one of the most important factors and increased market efficiency has contributed to several things and because of it, suppliers are able to see the bids, buyer benefits from vendors fighting the price out, eliminates geographical limitations, helps in global searches, transparent bidding process enables suppliers excess capacity to be impressively utilized to meet buyers demand and so on.
With all that said, there are more than just a few advantages associated with reverse auction.