513: Integrating Auction
Technology into Your Bidding
Strategy
Breakout Session #513
Whitney Taylor
Advanced Micro Devices, Inc. (AMD)
July 20, 2010
Time: 2:30-3:45PM
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“Of the best-in class enterprises that source
strategically using best practice strategic
sourcing techniques, 67% have deployed
sourcing automation in either a dedicated
hosting environment or shared, multi-tenant
(On Demand) model.“
From: Strategic Sourcing in the Mid-Market
Benchmark: The Echo Boom in Supply
Management, Aberdeen Group, December 2005
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13 Minute Auction Results
in 11% Reduction
Source: AMD 2010 Example
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Agenda
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Interactive Discussion
Auction Overview & Value
Auction Types
RFx & Auction Strategy & Preparation
Stakeholder Buy-In
Supplier Participation
RFx Evaluation
Summary
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3 Steps in Sourcing Process
can be influenced by auction
•Internal & external analysis
•Define business requirements
•e-RFx and supplier management
•Bid collection and negotiation
•Decision optimization
•Award and contract
•Manage supplier performance
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Auction Overview
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Considered online negotiation
Creates marketplace pressure
Provides supplier marketplace insight
Provides immediate feedback
RFx (I, Q, P, Auction)
Standard initial savings 10-15% w/ additional
subsequent savings
• RFx tools & templates can reduce time to
complete RFx
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Auction Types
• Forward Auction – Drives price up (Example:
Selling on eBay, selling reclaimed materials)
• Reverse Auction – Drives price down
– Traditional Bidding – Considers straight price;
other evaluation components are considered
outside bidding process
– Transformational Bidding – Considers value in
rankings; Ex. Shorter lead time = improved
ranking
– Optimized Bidding – Define optimal outcome,
rankings encourage this model; Ex. More
geographies = improved ranking
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Auction Tools
Ability to Execute
Challengers
Leaders
Bravo
Ariba
Iasta
Solution
Global
SynerTrade eProcure Emptoris SAP
Zycus
Curtis Fitch
Pool4Tool
AEC Soft USA Ivalua
Fullstep
Niche Players
Visionaries
Source: Gartner Magic Quadrant for Strategic Sourcing Application
Suites Feb 2010
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Auction Strategy
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Define scope & requirements
Global, regional, local needs
Determine desired award scenario
Define decision criteria & integrate into technology
Define pricing scenario (fees, rates, units, items,
lots, lump sum)
Develop bidding timeline
Determine confidentiality needs
Determine auction dynamics – timeframe to input
bids, overtime extensions, bidding blocks to inhibit
marketplace observers, reserve price (must beat)
Reveal rank only or rank and bids
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Stakeholder Buy-In
• Identify senior executive champion
• Ensure stakeholder buy-in prior to RFx
• Agree that this should be competitively bid then
pursue auction as a tool to facilitate bidding
• Conduct auction demonstration
• Show previous outcomes
• Collaboratively develop bidding strategy, timeline,
bidder’s conference
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Bidder Strategy
• RFI enables early input from bidders to determine
bidding strategy
• Lowest cost supplier strategy will drive prices down
further
• # of suppliers per location
• Ensure service coverage
• Pricing is only one of the criteria (quality/service, etc.)
• Reveal only rank or rank and bids
• Determine bidding requirements vs options
• 3 or more suppliers per bidding opportunity
• Determine Q&A process; use tool to track
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Preparation is critical to
auction success
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Qualify suppliers before auction
Consider currency exchange rates
Obtain historical cost prior to auction
Define evaluation criteria; cost is just
one component (service, quality,
technology, flexibility)
• Use automated scoring and have
sourcing team evaluate within tool
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Example Law Firm Rate Auction
Source: AMD Example
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When not to use Auctions
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Highly customized or ill-defined scope
Spend is not significant to suppliers
Effort required to bid exceeds business value
Supply base <3
Over-use may deter participation
Do not plan to auction every RFx, mixing formats
will keep pricing fresh
• Do not plan to negotiate after an auction as it
reduces validity of process (bidding pressure) over
time
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Supplier Participation
• Host online bidder’s conference including training on
bidding tool
• RFI may help bidder’s understand tool before RFP
• Proactive communication still required
• If a supplier is not bidding it may mean they don’t
understand technology
• Publish Help Desk #
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Summary
• Increasing market pressure & insight
decreases cost
• Technology adoption can be
challenging
• Use breeds acceptance
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Whitney Taylor
Advanced Micro Devices, Inc. (AMD)
Global Supply Management
Whitney.taylor@amd.com
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