"I was asked to create an auction, and I started a quick project. I completed the header fields, but I was unsure of which template to choose as there are so many choices. How do I know which one is best?"
"That is a common question. The fact is that SAP Ariba Sourcing comes with a lot of great standard auction templates, but not all templates will be used by some customers as some of the pricing collection strategies might not be suitable for all companies and their sourcing opportunities.
Some of the main differences between the auction templates are timing, pricing strategies, response options and how lots are presented to suppliers.
Let me cover some of the basic attributes of auctions first, and then we can get into the different event and bidding formats that are available within the templates."
What is an Auction?
An auction is a dynamic bidding session where bidders submit legally binding bids in real time, and price is the most important factor.
There are two types of event types for auctions within SAP Ariba Sourcing:
Reverse Auctions are used to buy goods and services.
- Suppliers compete against each other, driving price down.
- Most SAP Ariba auctions are reverse auctions, in which you are buying items and suppliers submit bids.
Forward Auctions allow the project owner to sell items online to the highest bidder.
Instead of inviting suppliers to compete to offer you the lowest cost, you invite participants as potential buyers to compete to offer you the highest price.
Why Use an Auction?
Auctions can be a great source of savings through the competitive online market.
Auctions are created in SAP Ariba like other events, and much of the functionality that is used in an RFI or RFP can be used in an auction.
In order for the auction to be successful, there are some key considerations:
How many suppliers will be attracted to participate in the online market?
How should the goods and services be described to ensure all suppliers are bidding "apples to apples"?
How can lotting be used to maximize supplier coverage and participation?
Where should the ceiling price be set for each lot?
Benefits of Using Auctions
Online pricing negotiation
Conducted in real-time with all parties in attendance
Drives price up or down by sharing competitive information such as:
Rank: the supplier’s own place in the auction
Lead Bid: the current best available price
Runs over a short period of time
Price is the most important factor
In an Ideal Auction
Auctions are directly competitive and allow the real-time exchange of information between participants. Project owners should:
Carefully schedule their auctions so that all participants can participate at the same time
Ensure bidding rules show rank and/or lead bid
Have suppliers determine their lowest possible offer prior to the auction
Know what the key drivers are for that market
Use an appropriate auction type, template and rules settings to achieve best results
Leverage SAP Ariba Sourcing review feature to provide recommendations