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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

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

13 Minute Auction Results


in 11% Reduction

Source: AMD 2010 Example


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Agenda

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

Auction Overview

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

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,
bidders 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

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

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 bidders conference including training on
bidding tool
RFI may help bidders understand tool before RFP
Proactive communication still required
If a supplier is not bidding it may mean they dont
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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