Using Bid Transformation within SAP Ariba Sourcing Events

Objectives

After completing this lesson, you will be able to:

  • Use Bid Transformation within SAP Ariba Sourcing Events

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?

Total CostBid Transformation
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.

Creating Transformation Cost Terms

Preparing a line item within a Bid Transformation events requires using a template with Bid Transformation bidding rules enabled, and adding new terms with participant specific values.

Step 1: Add cost terms to the event line items

Create an event using the Bid Transformation template, and add line items that include all identified cost factors into the event as new terms, including the term(s) that vary across suppliers.

Step 2: Designate each cost term as an adder, subtractor, multiplier, or % discount, and set the Answer Type

Complete all required fields by setting the Include in Cost factor to include the component into the cost, Answer Type, and its Acceptable Values.

Step 3: Set visibility settings and response term requirements

A key component of Bid Transformation is to be mindful of the Response Required, and Visible to Participant values to be sure that the appropriate terms are visible and completed by the correct people. There may be terms that will be completed by the Project Owner creating the event, and not the Supplier Participant, and they should be marked hidden.

Ensure that Use participant-specific initial values? is enabled.

Step 4: Set Participant Specific Values

Once participants have been invited to the event, the List of Invited Participants at the bottom of the line item will allow the project owner to specify values for each supplier, that may or may not be hidden in the term settings.

Bid Transformation Example

In the example in the above image, the cost term Import Duty is being added as a multiplier, with varying percentages assigned to each supplier. If all three suppliers submitted a bid of $1000, the system would transform each bid using the total cost formula.

The system would transform the bid per the total cost formula for the project owner:

Supplier Bidding within Bid Transformation

With Bid Transformation, the system will transform bids differently for each supplier’s view, and each supplier will see their competitors’ bids transformed to a value they must beat.

The first supplier to bid is incumbent TechCorp. Since no one else has bid yet, TechCorp does not see any competitor bids. TechCorp submits a bid of $1000. The system displays this bid of $1000 to TechCorp as $1000. The system does not display any transformation to a supplier for their own bid.

The second supplier, Computer Co., logs in to bid and see the TechCorp’s bid of $1000 as $952.38. Note that this is different than the project owner’s view of the same bid because the system has transformed the bid, so Computer Co. sees what price they must bid to beat their competitor.

A 5% import duty will be added to their bid, and the system calculated the value they must bid, which, when the added 5% import duty is added, will equal TechCorp’s bid of $1000. This is because $952.38 + (5% * $952.38) = $1000.

Log in to track your progress & complete quizzes