Reverse auction: fast and efficient electronic trading

Reverse auction: fast and efficient electronic trading

You’ve probably heard the expression “I’ll give you once, I’ll give you twice, I’ll give you three” in a movie or TV series. But did you know that it’s possible to use the auction technique in a corporate environment to optimize the negotiation process and achieve significant savings?

In the market, one of the basic premises of the purchasing department of any company is to obtain quotes from several suppliers to arrive at the best cost-benefit ratio before closing the deal. This process is usually very laborious and slow, as it requires long negotiations. In this context, an interesting option is reverse auction.

As the name suggests, this activity is the opposite of a direct or traditional auction, meaning that the supplier who bids the lowest price during a pre-established period, which can generally last from 20 minutes to 1 hour, wins. It takes place on an online platform, where suppliers access a virtual room to place their bids. The buyer monitors the bids by consulting an online panel that is updated in real time.

Reverse auctions are recommended for high-value purchases with a good number of suppliers. The more competition there is between participants, the better the result will be.

Regarding the advantages of choosing this option, the main one is, without a doubt, the savings, but there are other positive points that should be taken into consideration, such as the strategy of using the reverse auction. Below, check out each of them:

Reduction of operating costs

In addition to reducing the cost of the product or service being negotiated, reverse auction negotiation is cheaper for the corporation. The time spent by buyers on a complex negotiation is transformed into minutes with a reverse auction tool.

Lead time and negotiation efficiency

The differences in negotiation times are significant, as conventional processes take days to complete. In reverse auctions, all participants, both buyers and suppliers, meet at the same time. The average time spent in each session varies between 20 minutes and 1 hour. It is important to remember that the more time a buyer has, the more strategic they will be for the corporation.

Transparent negotiation

A recurring concern in the purchasing sector, procedural transparency and legality have never been so in vogue. Knowing that this is a complex task, in reverse auctions it is possible to count on a tool that will record all bids, as well as all communication made during the event.

The system provides the necessary information to the buyer, who at the end of the negotiation will receive a descriptive and auditable report of the entire process. This transparency is also essential to the supplier, who will have complete security to make new bids.

Geographic location

Because the reverse auction is conducted online, suppliers can participate regardless of their geographic location. This increases supply possibilities, including to other countries. Therefore, it is important that the platform supports multiple languages ​​and works with multiple currencies.

* Written by Alexandre Moreno, director of services at Mercado Eletrônico

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