Certified Supply Chain Professional (CSCP) Practice Exam

What is a reverse auction?

1. An auction where multiple sellers compete by lowering their bids

2. A traditional auction with a single seller

3. An online bidding system for services

4. A sealed-bid auction

The correct answer is: An auction where multiple sellers compete by lowering their bids

A reverse auction is defined as a process in which multiple sellers engage in competition by lowering their bids in order to win a contract or sell their goods and services. In this type of auction, the buyer typically announces the project or product needed, and sellers then place bids that decrease over time, striving to offer the lowest price. This format of auction is particularly beneficial for buyers as it can lead to better pricing and improved cost efficiency. Sellers, in turn, must be strategic in making their offers while considering their own costs and competitive positioning, which fosters a competitive environment. The other options do not accurately describe a reverse auction. A traditional auction involves a single seller who offers an item to multiple buyers, while an online bidding system encompasses a broader range of scenarios not limited to reverse auctions. Sealed-bid auctions refer to situations where bidders submit their offers without any knowledge of competing bids, which is also a fundamentally different process.