Identifying the Key Attributes of Total Cost Events
After completing this lesson, you will be able to:
After completing this lesson, you will be able to:
Identify the Key Attributes of Total Cost Events
Selecting Event Templates and Understanding Pricing Tactics
Pricing Strategies within SAP Ariba Sourcing Event Templates
When creating events in SAP Ariba Sourcing, there are many standard event templates available to choose from, and knowing which one to select may not be instinctive for new SAP Ariba Sourcing users. These event templates are available to accommodate different response options, pricing strategies, cost factors, and other advanced settings within the event rules and the line item and lot settings. This course will help identify key terms like total cost, price breakdown, bid transformation, alternative responses, and help event creators know how and when to use certain pricing strategies.
Alternative Response Event Key Characteristics
What are Alternative Responses in SAP Ariba Sourcing events?
Alternative bids allow suppliers to bid alternate quantities, term values, and/or bundles to show the project owner how to save more money. Suppliers can also be allowed to add their own items.
Alternative Response Event Attributes
Suppliers must first respond to the original bid before they can submit an alternate bid.
Three Types of Alternative Responses: Alternative Pricing, Bundles, and Tiers.
The Can participants create alternative responses? rule only appears if the Specify how lot bidding will begin and end timing rule is set to Parallel.
When bidding is complete, the project owner can award business in that event or create follow-on events, such as an auction, using the quantities, terms, and bundles that will likely yield best savings.
When to use Alternative Responses
Sometimes suppliers would like to respond to your RFP or auction in a slightly different way in order to provide you with better pricing. As experts in providing that particular item or service, they can often make suggestions that can save you money.
When alternative responses are enabled in a sourcing event, suppliers first submit a bid on the items/services and terms that the project owner has created. For example, 100 units of product x in color blue. This is the primary bid. Once the primary bid has been submitted, suppliers can submit an alternate bid such as product x in color red.
Alternative Response Type Overview
Alternative Pricing allows suppliers to submit an alternate bid by providing a different value for term(s). For example, a supplier may suggest a different brand of an item, an alternate material or component in an assembly, or a different time frame for a service. Suppliers first submit the primary bid based on the term value dictated by the project owner, but then can submit an alternate bid using alternate values as desired.
Participant Bundles allow suppliers to group the items in the event together as bundles to provide discount pricing. Each supplier could potentially bundle items together differently to offer discounts, depending upon their own unique capabilities and costs. Suppliers must first submit a primary bid based on the items, lots, and/or bundles specified by the project owner.
Tier Alternatives allow suppliers to create multiple volume tiers for one or more line items and provide a distinct price for each tier. This allows each supplier to communicate where their price breaks are, based on quantity. For example, they could give you one price for quantities 1-100, another price for quantities 101-500, and a third price for quantities 500-1000.
Bid Transformation Key Characteristics
What is Bid Transformation?
Bid Transformationauctions are used to collect additional cost components to more accurately compare awarding one vendor over another. Bid Transformation allows project owners to transform suppliers’ bids by adding cost terms and values to compare bids more accurately.
Bid Transformation Event Key Attributes
Bid Transformation is enabled by a Bidding Rule
Project owners transform suppliers’ bids by adding cost terms and values to compare bids more accurately
The terms can be different for each supplier
Each supplier sees "a bid to beat" that is adjusted based on how their own bid is being transformed
When to use Bid Transformation
Bid transformation allows Project Owners to transform a participant’s bid by adding cost terms you define, and can be unique for each supplier, such as adding an import duty for one supplier and a switching cost for another. Yet, it enables each bidder to see a "bid to beat" that is adjusted for them and brings suppliers into competition with one another and creates a unified market where none existed before.
For example, companies will likely invite a mix of your incumbent suppliers as well as new suppliers to an event, and may want to consider using a Bid Transformation event to add a switching cost to new vendors. This will allow Project Owners to more accurately compare a bid from the incumbent with a bid from a new supplier, without informing the supplier about the cost factor. These types of events serve to allow the buyer to include various costs and charges for different suppliers using Participant Specific Initial values.
How are Total Cost and Bid Transformation Different?
Suppliers bid on price and cost components.
Suppliers bid only one price for each item.
Cost components are the same for all suppliers.
Cost components can vary for each supplier.
Cost components are visible and bid on by suppliers.
Cost components are not usually visible to the supplier.
The suppliers submit values for cost components as part of their bids.
The project owner sets values of the cost components for each supplier.
All suppliers see the same Bid to Beat, Bid Decrement and Ceiling Price.
Suppliers may have unique values for Bid to Beat, Bid Decrement and Ceiling Price.