Understanding Auction Formats and Attributes

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 Guided Sourcing:

Reverse Auctions are used to buy goods and services.

1. Suppliers compete against each other, driving prices down.
2. Most SAP Ariba auctions are reverse auctions, in which you buy 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.

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.

For the auction to be successful, there are some key considerations:

• How many suppliers are attracted to participate in the online market?
• How must the goods and services be described to ensure that all suppliers are bidding in the same way?
• How can lotting be used to maximize supplier coverage and participation?
• Where must the ceiling price be set for each lot?

• Online pricing negotiation.
• Conducted in real-time with all parties in attendance.
• Drives prices 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.

Auctions are directly competitive and allow the real-time exchange of information between participants. Project owners must:

• Carefully schedule their auctions so that all participants can participate at the same time.
• Ensure that bidding rules show the rank and/or lead bid.
• Ensure that suppliers determine their lowest possible offer before the auction.
• Know what the key drivers are for that market.
• To achieve the best results. use an appropriate auction type, template, and rules settings.
• Use the SAP Ariba Sourcing review feature to provide recommendations.

There are several standard auction templates within SAP Ariba Sourcing:

1. Reverse Auction - Guided Sourcing Template: In a reverse auction, or English reverse auction, suppliers submit bids, offering progressively lower prices to outdo their competition and offer you the best price.
2. Reverse Auction with Bid Transformation - Guided Sourcing Template: This auction enables you to create an event that allows the project owner to transform participant bids by defining more cost factors. This process is similar to total cost events, except that only one cost factor is visible to the participants.
3. Total Cost Auction - Guided Sourcing Template: This auction enables you to create an event that allows the project owner to define more cost factors to calculate the total cost for each item or lot.
4. Dutch Reverse Auction - Guided Sourcing Template: This auction pressures participants to bid the best price they can before their competitors take business away. The buyer sets initial prices that automatically rise periodically, until a supplier accepts the price.
5. Dutch Reverse Auction with Bid Transformation - Guided Sourcing Template: A Dutch Reverse Auction that allows the project owner to "transform" participant bids by defining more cost factors. Only one cost factor is visible to participants.
6. Japanese Reverse Auction with Bid Transformation - Guided Sourcing Template: This auction allows the project owner to "transform" participant bids by defining more cost factors. Only one cost factor is visible to participants.

In Reverse English, the buyer wants to purchase an item at a lower price. The bid direction is downwards. The price ceiling is specified, which means the supplier can't bid above this value.

In Reverse Dutch, the bid direction is upwards as prices are automatically adjusted until one of the participants accepts the price or the configured time expires.

Dutch auctions are suitable for events in which cost is the primary concern and when there are few, prequalified suppliers. Participants are pressured to bid the best price they possibly can and to bid before their competitors can take the business away.

Follow the procedure in the Event Management Guide.

In Reverse Japanese auctions, participants choose to accept price levels as they drop. Any participant who doesn’t accept a price level for an item becomes inactive and is unable to accept any further price levels for the item.

Used to reduce the amount of active participants in a live event, if they don't meet certain requirements. Participants must act quickly when bidding opens, or they risk being dropped from the event.

Follow the Procedure indicated in the Event Management Guide.

• Participants can’t submit bids during the preview period.
• Disables the overtime option as it's not needed.
• Disables the ability to import responses by using Microsoft Excel.
• Forces lots to use serial bidding.