What is Reverse auction?
An auction format where suppliers compete by lowering prices or improving commercial terms.
Definition
A reverse auction inverts the familiar auction. Instead of buyers competing to pay the highest price, pre-qualified suppliers compete to offer the buyer the most competitive terms for a defined scope. The buyer sets the rules up front - the specification, the eligible bidders, the auction window and, where relevant, a ceiling price - then opens the event.
How it works in practice
A buyer running a steel lot invites five pre-qualified mills. Each sees its live rank as bids are submitted and can revise before the clock runs out. What was a sequence of private one-to-one conversations over two weeks becomes a single time-boxed event where every participant is negotiating against the same live market signal.
Why it matters
The format suits categories where price is a meaningful part of the decision and suppliers can compete like for like - which maps closely onto Kraljic leverage categories. It is a poor fit where value depends on deep collaboration or where switching is not realistic.
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