Reverse Auction Types – SCM Digest

SCM Digest recently summarised a piece of mine from ISM magazine here: Procurement and Sourcing News: Understanding the Options for E-Auctions. In it I describe the main reverse auction variants.

In the first draft I used the standard names I was always taught: English, Dutch, Japanese. But ISM were uncomfortable with these names because of possible racial overtones and so I chose something far more dry: Bid Auctions and Clock Auctions.

At first I put this down to Political Correctness Gone Mad. But on reflection I think there is some value to the duller names.

  1. I didn’t make these terms up. (Ascending/Descending) Bid  and (Ascending/Descending) Clock auctions have as credible a pedigree as English and Dutch auctions – certainly in the wider world outside of procurement. For example, when I was talking about possible auction formats with the UK government department tasked with auctioning Carbon Emission permits, the language we used was all about ascending/descending bid auctions and ascending/descending clock auctions.
  2. Bid and Clock auctions don’t suffer from the ambiguity of terms like English and Dutch.  I come across many people who confuse Dutch and Japanese auctions. And even some who confuse Dutch and English.
  3. This terminology does not run the risk of inflaming national prejudices. This is a very real issue – for example TradingPartners China is not comfortable talking to Chinese buyers and suppliers about “Japanese” auctions because of historical tensions between the two countries.

So I am definitely now increasingly in favour of the drier terms. To summarise the auction format types:

Reverse English = Descending Bid. Each supplier places a bid; these bids decrease over time.

Reverse Japanese = Descending Clock(*). The clock ticks down the price and suppliers must accept each tick to stay in the auction.

Reverse Dutch = Ascending Clock(*). The clock ticks up the price until a supplier accepts the price and wins.
(*) Clock auctions: Imagine a clock face that, instead of hours and minutes, has prices written on it. Apparently the original Dutch flower auctions did actually use a clock face with prices instead of hours and minutes.

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