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Practical Aspects of Reverse Auction - Best Practices By Kunal Kumar Ghosh -
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Are you considering to keep reverse auction provision in the tender?
Do you know the pros and cons of RA?
As a Procurement Solutions Provider with expertise in procurement and contracting, we'll take a deep dive into what reverse auctions are, how they work, and the benefits and challenges of using them in the procurement process.
At the end of this article, you'll have a better understanding of how reverse auctions can help you optimize your procurement process and drive cost savings.
TABLE OF CONTENTS
#1 Reverse auction as a negotiation tool
#2 Challenges of RA
#3 Start price for Reverse auction
REVERSE AUCTION AS A NEGOTIATION TOOL
Reverse auction is a procurement technique in a bidding process where bidders compete against each other to win the contract. This is a simultaneous negotiation with all the qualified bidders to get the lowest price. The suppliers place bids, and the bidder with the lowest price wins the contract.
As a procurement solutions provider, we have found that reverse auctions are a popular transparent tool for negotiation in the procurement process. They give equal opportunity to all the qualified bidders to participate in the negotiation process and thus increase the competition among suppliers, resulting in driving down the price of goods and services. Online Reverse Auction/e-Reverse Auction has brought fairness and transparency in the process.
CHALLENGES OF REVERSE AUCTION
One of the most significant challenges is the pressure on suppliers to reduce their prices, which can lead to a compromise in quality. Suppliers may resort to reducing their costs by cutting corners, which can have a significant impact on the quality of goods and services being provided. This, in turn, can affect the reputation of the organization and lead to long-term costs.
Another challenge of reverse auctions is the focus on price over value. In a reverse auction, the lowest bidder wins, regardless of their quality or ability to provide benefit to the organization. This can result in the organization missing the benefits that can be provided by a higher-priced supplier who can offer better quality, better delivery times, or other value-added benefits.
We understand these challenges and work with our clients to use reverse auctions in a way that balances price and value. By using digital solutions and our expertise in procurement consultancy and logistics and supply chain management, we help our clients make informed decisions that result in long-term benefits.
START PRICE FOR REVERSE AUCTION
Start price can be any of the following options:
i) Lowest price received against the tender
ii) Original quoted price of all the respective bidder against the tender
Reverse auctions can be a powerful tool for negotiation in the procurement process when used correctly.
Contact us here to learn more about how we can help you optimize your procurement process using reverse auctions and other digital solutions.
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