Forward auctions push the price up and are used for selling. Reverse auctions push it down and are used for buying. Choosing the wrong one costs money in both directions.
The two words describe the direction the price moves. That sounds obvious until you see a plant run a forward auction on a purchase, or apply reverse-auction rules to a scrap sale, and wonder why the result feels wrong.
Buyers compete by raising their bid. It fits scrap, surplus inventory, obsolete stock, used machinery and plant assets. The seller’s protection is a reserve price — below it, nothing sells. The buyer’s protection is a clear description: weight, grade, location and loading terms, so nobody bids on something they have not understood.
Suppliers compete by lowering their quote. It fits raw material, consumables, services, freight and transport. The buyer’s protection is supplier qualification — only approved vendors bid, so the lowest number is from someone who can actually deliver. The supplier’s protection is a specification that cannot change after the auction.
In a forward auction the minimum increment prevents a win by one rupee. In a reverse auction the minimum decrement prevents the same thing in the other direction. In a forward auction you often want the widest possible bidder group. In a reverse auction you usually want a narrow, qualified one — an open auction on a technical item attracts bidders who cannot supply and drives away the ones who can.
A manufacturing company does both every month: it buys raw material and it sells scrap. Running them on two systems means two vendor lists, two audit trails and two sets of habits. Running them on one means the buying and selling sides of the same metal index are visible on one screen.
In a forward auction the highest bid wins, and it is used when you are selling something — scrap, surplus stock, used machinery. In a reverse auction the lowest responsible bid wins, and it is used when you are buying — raw material, consumables, freight or transport. The mechanics are mirror images; the rules that protect each side are not.
Read more about Sales & Scrap Bidding on BidBegin.
Ten minutes is enough to see whether this fits how you buy or sell.
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