Reverse Auctions and the Price and Process Savings Associated with Competitive Bidding

This article serves as the first part of a two-part series that will provide an overview of the reverse auction concept, building on the best research in the field of supply chain management. In this instalment, we examine the growth of reverse auctions in both private and public sector procurement. We then provide a differentiation between the more readily understood forward auction concept and the emerging practice of reverse auctioning. We then examine the two-sides of the reverse auction savings equation, looking at the “first order” savings to be derived from the use of competitive bidding to secure lower purchase prices, as well as the “second order” savings that can be achieved through making the procurement process more efficient.