🛒 Procurement & Supply Chain
Professional procurement
Procurement tools applied to negotiation: Kraljic matrix (HBR, 1983), total cost of ownership, target costing, auctions, SRM; work by P. Kraljic, A. van Weele, R. Monczka.
Full detail in the “Origin & history” section below.
Author of the library
Negotiation lecturer at KEDGE Business School
A rare threefold background serving negotiation: teaching, commercial justice and audit, backed by experience as a company director in Bordeaux.
The reverse auction is a dynamic competitive-bidding mechanism in which several pre-selected suppliers submit, in real time and most often online, decreasing price offers to win a contract. Unlike a conventional auction where the price rises, here it is the buyer who captures the value: competitive pressure and the transparency of the rankings drive prices downwards. A powerful lever for savings on well-specified commodity purchases, the tool presupposes a locked-down set of requirements, a qualified panel and ethical governance. Poorly used, it damages the supplier relationship and shifts the risk onto quality and delivery.
At a glance
Vigilance: low (3.0/10) · Preparation required: 9/10
Indicative profile: it situates the “Procurement & supply chain” family as the Procurement & Supply Chain school practises it, not this technique taken in isolation. Techniques from the same family and school therefore share the same profile. NEGOCOACH editorial rating out of 10, non-experimental · the higher the “relational risk” value, the more costly the technique is to the relationship.
NEGOCOACH assessment
Tactical potential 5.7/10 (effectiveness, impact, discretion) and vigilance low (relational and ethical risk): two distinct readings, deliberately never merged into a single score that would reward risk. NEGOCOACH editorial rating calibrated from the “Procurement & supply chain” family and the “Procurement & Supply Chain” school. Each criterion is rated out of 10; click to understand what it measures.
How far the technique can carry the negotiation in the intended direction when it is well executed.
Strength of the effect produced on the counterpart's perceptions, emotions and decisions.
How hard it is for the other party to notice the technique is being used. A high value = very discreet.
The information, analysis and rehearsal required upfront to use it effectively.
Potential cost to the relationship and to trust if the technique is spotted, refused or fails. A high value = riskier.
Moral acceptability: fairness, transparency and respect for the counterpart's autonomy. A high value = more defensible.
Documented school
The school this technique stems from is documented by recognised work and established practice, without experimental consensus. This indicator qualifies the school, not this technique taken in isolation.
Indicative NEGOCOACH editorial rating, for teaching purposes. For “Relational risk”, a high value signals a cost to the relationship, not a quality.
The practice of descending auctions has long existed in public procurement, but the modern reverse auction, electronic and dynamic, was born in the United States in the mid-1990s. FreeMarkets, founded in 1995 in Pittsburgh by Glen Meakem (a former General Electric executive who had passed through McKinsey) with Sam Kinney, industrialised the process: its first 'Competitive Bidding Event' was organised for Frigidaire in November 1995, followed by Phillips in early 1996. In parallel, General Electric developed its own online purchasing platform (Trading Process Network) over the same period. The tool then spread massively through the procurement departments of large groups (United Technologies, Caterpillar, General Motors), FreeMarkets being acquired by Ariba in 2004 for nearly $493m. On the academic side, the work of Sandy Jap (Journal of Marketing, JAMS, 2002-2003) and M. L. Emiliani (2000) formalised its effects on the buyer-supplier relationship.
The reverse auction is an award mechanism based on competitive bidding in which the buyer defines a precise requirement (specification, volumes, conditions), qualifies a restricted panel of suppliers, then opens a timed session during which each bidder may lower its offer as many times as it wishes. Each participant sees either its ranking or the best current price (open auction), without knowing the identity of the competitors. The session is extended by 'overtime' each time a new offer is placed in the final minutes, which sustains the tension until the close. The award is not necessarily made at the lowest price: it may be multi-criteria (a 'scored' auction incorporating quality, lead times and CSR through a weighted score). Operationally, the tool transforms a sequential bilateral negotiation into a simultaneous and transparent competition on price.
Application by context
A key-account buyer puts three equivalent providers into competition on a standardised service and has them bid online in a downward direction, telling each its ranking without disclosing the competing amounts, in order to capture the best price without resorting to bilateral rounds.
Its natural terrain: the procurement department locks down the specification of a commodity (fasteners, road transport, supplies), qualifies a panel of 4 to 6 suppliers and opens a scored e-auction in which price and quality/CSR scores combine to designate the successful bidder.
Transposed to collective bargaining, the logic inspires a transparent call for tenders among several bodies (mutual insurer, contingency provider, training organisation) put into open competition before the social partners, each revising its offer downwards to be selected by the committee.
In supply-crisis management (shortage, price surge), a lightning reverse auction on a broadened panel makes it possible to secure a volume quickly at the best available price, provided one accepts the quality risk inherent in urgency.
In public procurement, the electronic reverse auction is a mechanism governed by the procurement code: after an initial evaluation of offers, the admitted candidates reformulate their prices electronically, the award remaining based on announced and weighted criteria.
A client puts the pre-qualified general contractors of a construction package into dynamic competition, each revising its quote downwards during the session; the process, known as 'bid shopping', is effective but controversial because it can push contractors to cut corners on delivery.
Faced with suppliers from different cultures, the organiser adapts the format (duration, transparency of rankings, overtime rules) because head-on, public competition on price is experienced as a loss of face in certain relationship-based cultures, which may drive the best suppliers away.
By way of pedagogical analogy, a private individual renovating their kitchen obtains quotes from three comparable tradespeople, then calls them back telling them they are 'the most expensive' to trigger a revision, reproducing on a small scale the competitive lever of the reverse auction.
Counter-techniques
Negotiation is also played on defence. Here is how to recognise this technique when it is used against you, and turn it around.
The signals that give it away
The counters that defuse it
Turn it into an advantage
Name the manoeuvre: said out loud, a technique loses most of its power.
Reacting emotionally instead of coming back to the facts.
Strengths: the ability to generate rapid, measurable savings on mature purchases; a drastic compression of negotiation time; transparency and traceability of the decision; the revelation of the market price and of the competitive structure; a reduction in relational bias and favouritism. Weaknesses: effectiveness limited to well-specified, substitutable requirements; the risk of damaging the relationship and eroding suppliers' trust ('we are being used'); an incentive towards aggressive, unsustainable offers (the winner's curse, corners cut on quality, subsequent variation orders); high preparation and qualification costs; unsuited to strategic, innovative or heavily co-designed purchases; a crowding-out effect on the best suppliers, who refuse to take part.
To be favoured when the requirement is clearly specified and stable, the product or service standardised and substitutable, the market sufficiently competitive (at least 3-4 credible, interchangeable suppliers), price a dominant criterion, and supplier switching costs low. Ideal for commodities, MRO, transport, raw materials, supplies and recurring services. To be avoided for strategic, high-value-added, innovative or co-developed purchases, in situations of dependency or shortage, or when the long-term relationship and trust take precedence over immediate price gains.
Business · FreeMarkets and the birth of the reverse e-auction, In November 1995, the start-up FreeMarkets, founded in Pittsburgh by Glen Meakem, organised for the household-appliance manufacturer Frigidaire one of the first online 'Competitive Bidding Events': pre-selected component suppliers bid downwards in real time on precisely specified lots. The savings achieved validated the model, which then won over United Technologies, Caterpillar and General Motors. FreeMarkets became the emblem of 2000s e-sourcing before its acquisition by Ariba in 2004 for nearly $493 million. The case illustrates the tool's power on well-defined commodities, but also the debates it opens up about the durability of supplier relationships.
Everyday life · The tradesperson's three quotes (representative scenario), Representative, non-attributed scenario: a private individual obtains quotes for a bathroom renovation from three tradespeople with comparable services. After receiving the quotes, they call each back indicating their relative position ('you are the highest of the three') and invite them to review their proposal. Two tradespeople lower their price to stay in the running. The mechanism reproduces, on a domestic scale, the core of the reverse auction: transparent competition on ranking that pushes offers downwards, with the same risk, if one goes too far, of seeing the best professional withdraw.
Warning signals on the supplier side: a sudden invitation to an 'e-auction', a broadened and anonymous panel, a standardised specification, communication centred on price and ranking. To defend yourself: first, assess the sincerity of the exercise (is the market genuinely open, or has the successful bidder already been chosen?); refuse to take part if the requirement is in reality differentiated and your added value is not comparable to that of the competitors. Set yourself a disciplined price floor in advance and stick to it to avoid the winner's curse. Shift the conversation from price to total value (TCO, quality, service, CSR) to turn a price auction into a scored auction. Document the assumptions behind your offer to lock down the scope and prevent the discount granted from becoming a norm in future contracts. As a last resort, decline: the best defence against a purely margin-destroying auction is sometimes absence.
Effectiveness limits: the tool does not create value, it redistributes the chain's margin towards the buyer; it only makes sense on commoditised requirements and competitive markets. Beyond that, it destroys trust and collaboration where these would be more value-creating. Ethical and legal limits: sham auctions (a fake tender to force down a supplier already chosen), the use of phantom bidders ('shill bidding') or the manipulation of rankings are unfair, even punishable. In public procurement, the electronic auction is strictly governed (announced criteria, non-discrimination, traceability). Ethics require transparency of the rules, equal treatment of candidates, respect for award commitments and vigilance over social effects (price pressure that may be passed on to working conditions further down the chain).
Variants: the descending English reverse auction (rankings or best price visible); the Japanese auction (a displayed price descends in steps, each supplier staying in or dropping out); the reverse Dutch auction; the scored or multi-criteria auction (price weighted by quality/CSR); the reserve-price auction; the auction by lots or combinatorial auction (the supplier bids on bundles). Related techniques: the classic call for tenders (RFP/RFQ) and e-procurement sourcing; the Kraljic matrix for deciding where the auction is relevant; total cost of ownership (TCO) analysis; BATNA/MESORE and the use of competition in negotiation; 'bid shopping' in construction (a controversial variant).
Quick exercise
Answer in your head, then reveal the solution. Memory is built through active recall.
Frequently asked questions
The reverse auction is a dynamic competitive-bidding mechanism in which several pre-selected suppliers submit, in real time and most often online, decreasing price offers to win a contract. Unlike a conventional auction where the price rises, here it is the buyer who captures the value: competitive pressure and the transparency of the rankings drive prices downwards. A powerful lever for savings on well-specified commodity purchases, the tool presupposes a locked-down set of requirements, a qualified panel and ethical governance. Poorly used, it damages the supplier relationship and shifts the risk onto quality and delivery.
Yes. Used in good faith it stays within a fair negotiation: it structures the exchange without deceiving the other party. Being transparent about your intentions strengthens the long-term relationship.
Reacting emotionally instead of coming back to the facts. The right reflex: slow down and reformulate.
NEGOCOACH does not assess the experimental validation of this technique in isolation. What we document is the grounding of its source school (Procurement & Supply Chain): documented school. Full detail is in the "At a glance" section of this page.
Practise with AI
Copy, paste into your assistant, replace the [brackets]. Works with ChatGPT, Claude, Gemini, Mistral, Perplexity.
Build your plan before the meeting
You are an expert negotiation coach. Help me prepare to use the "The Reverse Auction" technique in the following situation: [describe your situation]. Give me: the conditions for success, a 3-step script, my counterpart's likely objections and how to answer them.
Rehearse against an AI counterpart
Play the role of my counterpart in a negotiation. I am going to test the "The Reverse Auction" technique. React realistically and with resistance, do not give in too quickly, then at the end analyse my performance and suggest 3 concrete improvements.
Analyse a past negotiation
Here is how my negotiation went: [paste the exchanges]. Analyse whether the "The Reverse Auction" technique was used well, what worked, the mistakes made, and spell out precisely what I could have done better.
References
Founding works of the 🛒 Procurement & Supply Chain school this technique belongs to.
Purchasing Must Become Supply Management (Harvard Business Review)
ArticleP. Kraljic · 1983
Purchasing and Supply Chain Management
BookA. J. van Weele · 2018
Purchasing and Supply Chain Management
BookR. M. Monczka et al. · 2015
Category Management in Purchasing
BookJ. O'Brien · 2019
Procurement tools applied to negotiation: Kraljic matrix (HBR, 1983), total cost of ownership, target costing, auctions, SRM; work by P. Kraljic, A. van Weele, R. Monczka.
On video
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Technique map
Every technique sits within a network: what it draws on, what it combines with, where it applies, and how to defend against it.
Spot its signals, neutralise it and turn it around with the defensive playbook on this page.
See the counter-techniquesThe reverse auction is a dynamic competitive-bidding mechanism in which several pre-selected suppliers submit, in real time and most often online, decreasing price offers to win a contract. Unlike a conventional auction where the price rises, here it is the buyer who captures the value: competitive pressure and the transparency of the rankings drive prices downwards. A powerful lever for savings on well-specified commodity purchases, the tool presupposes a locked-down set of requirements, a qualified panel and ethical governance. Poorly used, it damages the supplier relationship and shifts the risk onto quality and delivery.
Name the manoeuvre: said out loud, a technique loses most of its power.
Reacting emotionally instead of coming back to the facts.
Our programmes turn theory into a concrete advantage.