SAP Sourcing Webcast - Auction Configuration and Types

SAP Sourcing

Auction Configuration and Types

June 2014

© 2014 SAP AG. All rights reserved. 2

Topics

What is an Auction Type?

Configuring Auction Types

Key Auction Type Configurations





An Auction Type is a foundational construct in the system

An Auction Type Includes the various parameters and

controls that can be set for the types of Auctions that you

may need to run

An Auction Type must be created prior to creating either

an Auction Template or an actual Auction

There can be one or many Auction Types defined in the

system

New Auction Types can be added at any time if needed

When creating an Auction, users will choose the Auction

Type that best suits their needs for a specific Auction


Navigation Path to Configure Auction Types

Use the following navigation path to configure one or

more Auction Type(s):

Setup > Document Setup > Auction Types


Navigation Path to Configure Auction Types

Setup


Configuring Auction Types


Auction Type Configuration

General Section

You can determine the Order in which the Auction Type is displayed to users

when they are in the process of creating an Auction. Commonly used Auction

Types should be ordered first for convenience.

© 2014 SAP AG. All rights reserved. 9 9

Configuring Auction Types:

General Settings

Field Definition

Inactive Checking this box will make an Auction Type not active and not available for use. This is

normally NOT checked. If it is checked, the Auction Type will not be displayed to the user when

creating an Auction.

Name This is the short name given to the Auction Type. Usually the name will be something similar to

“Reverse Auction – Rank Only” which means that the direction of the Auction will be in

decreasing prices and the type of disclosure to the suppliers will be that they see only their rank

in the Auction.

Description This is a more detailed description of the Auction Type. For example, you might include other

key configurations enabled by a particular Auction Type.

Order This is a number that determines the order in which an Auction Type is displayed to the user in

relationship to other Auction Types. It is recommended that the Auction Type that is most likely

going to be used most often be the first in order. This means that it will be displayed first in the

list displayed to the users. You can change the order at any time by changing the value

displayed here. For this reason, it is recommended that you leave spaces in between the

numbers assigned to each Auction Type, for example, 10, 20, 30 should be used over 1, 2, 3.

This will make it much easier to change the order if necessary.

Numbering Table The Auction Type is associated with a Numbering Table which defines the numbering format that

will be assigned to an Auction at the time it is saved. The numbering table must be defined

BEFORE assigning it to the Auction Type. A common numbering format is similar to the

following: AUC-2014-001. This format will order the Auctions logically when using queries. It

will also cause the year to change in the numbering when the year changes annually. It is

recommended to keep the numbering format relatively simple.



Bidding Section

In the Bidding section, you determine the Bidding Format and the Auction

Direction.



Bidding Settings – Bidding Format

Bidding Format Definition

Open Bidding Suppliers must place a bid that is lower than their own

previous bid by the bid improvement amount. This is the

most commonly used bid format.

Standard Bidding Suppliers must place a bid that is lower than the leading bid

by the bid improvement amount. This format is rarely used.

Any Price Bidding Suppliers can place a bid that is higher or lower than their.

last bid. This format is rarely used.

Dutch Bidding The buyer sets a start price, a price increment and a time

increment during which the price will increase by the price

increment if no bid is placed. The first supplier to place a

bid wins the Auction. This format is generally used for

categories where the demand is greater than the supply.

Proxy Bidding Each bidder places one best-offer bid. The system

evaluates all bids and places incremental bids on behalf of

each supplier. Each bid is reduced by minimum bid

improvement. The winning bid must meet the reserve price,

if it is set. This format is rarely used.



Bidding Settings – Auction Direction


Reverse Auction Prices are generally decreasing. Suppliers are competing

for the buyer’s business by decreasing their prices during

the Auction. This is the most commonly used setting for

sourcing events.

Forward Auction Prices are generally increasing. Buyers are increasing their

prices during the Auction. This is a commonly used format

when a user is looking to sell excess inventory or obsolete

equipment at the best price possible.

The Auction Direction always refers to whether bids

submitted by the “participants” in the Auction are

decreasing (I want to buy for the lowest possible price) or

increasing (I want to sell for the highest possible price).



Bidding Settings (cont’d)

Field Definition

Disallow tying

bids for open

bidding

Checking this box will prevent suppliers from submitting a tying bid when

using the Open Bidding format. If a supplier submits a tying bid, they

will receive an error message and will need to submit a new bid.

Enable factored

cost bidding

When this box is enabled, the user is able to define cost factors (either

fixed or as a percentage) and then apply them to suppliers’ bids. An

example of when this functionality might apply is when you are

considering switching from an incumbent supplier to a new supplier. In

this particular case, there will likely be switching costs that need to be

considered so, even though a new supplier may provide a lower price,

the total cost of doing business with a new supplier may be higher due

to the costs associated with switching to a new supplier.

Allow bids in

multiple

currencies

When this box is enabled, a new tab (Exchange Rates) is enabled for

the Auction Type. This feature enables the buyer to allow suppliers to

bid in their local currencies. When using this feature, Currency

Exchange Rates must be defined either at the System level or at the

Auction level. The system will automatically convert prices to the Base

Currency used at the Auction level.



Bidding Settings (cont’d)

Field Definition

Enable comments

with bids

Checking this box will allow suppliers to submit comments with their

bids. This is most often NOT enabled.

Bidder must meet

or beat their

previous bids on

all Line Items

within a Packaged

Line Item

A Packaged Line Item consists of a “top level” line and generally

includes two (2) or more “sub-lines”. When this box is enabled, the

supplier cannot reduce their prices on some sub-lines while increasing

their prices on other sub-lines.in an attempt to give the appearance of

“bettering” their pricing.

Allow bids in

multiple

currencies

When this box is enabled, a new tab (Exchange Rates) is enabled for

the Auction Type. This feature enables the buyer to allow suppliers to

bid in their local currencies. When using this feature, Currency

Exchange Rates must be defined either at the System level or at the

Auction level. The system will automatically convert prices to the Base

Currency used at the Auction level.



Features Section

For the Phase Configuration, you want to consider using either Preview or

Prebid to allow the suppliers an opportunity to view the Auction prior to

competitive bidding. You also want to consider using Close Pending because

this will give you an opportunity to reopen the Auction if there are any issues at

all. The Open phase is required as this is when the competitive bidding

occurs.



Features Settings

Field Definition

Discussions Enabling this flag will make the Discussions feature available in the Toolbar of the

Auction Toolbar. This feature enables you to communicate with the suppliers using

Discussion messages as needed. It is recommended that this always be enabled

for every type of auction.

Chat Enabling this flag will make the Chat feature available during the Auction. Chat

allows you to communicate with the suppliers in real time during the Auction. It is

strongly recommended that this feature always be enabled for every type of

auction.

Attachments Enabling this flag will make the Attachments feature available in the Toolbar of the

Auction document.

Accounting Enabling this flag will make the Accounting tab available in the Auction document.

When turned on, this tab allows you to add “header” level accounting information

such as G/L accounts and Cost Centers. These accounting entities must first be

set up as master data before they can be used. This tab is almost never used. It

is recommended that this feature not be enabled.

Information Sections Enabling this flag will make the Information tab available in the Auction. This tab

allows you to provide important information and attachments to the suppliers. It is

recommended that this always be enabled.



Features Settings – Phase Configuration

Field Definition

Preview “Preview” is an optional phase that enables suppliers to “preview” the Auction

before the bidding actually starts. This gives the suppliers an opportunity to get

familiar with the Auction on their own time before the Auction is live with

competitive bidding.

Pre-bid “Pre-bid” is an optional phase enables suppliers to place a bid before the

competitive bidding starts. This gives the suppliers an opportunity to place a bid at

their own pace and to get familiar with placing bids in he Auction – without the

pressure of the competitive aspect of the real-time nature of an Auction.

Open “Open” is a required phase and is the phase during which competitive bidding

takes place.

Close Pending “Close Pending” is an optional, but strongly recommended, phase during which the

buyer can re-open the Auction for any reason. If this phase is not used AND the

buyer decides that the Auction should be re-opened, the only way to do it is to

create a new Auction. Using this phase enables the buyer to re-open the same

Auction if necessary.

Best Practice is to include either the “Preview” or

“Pre-bid” as well as the “Close Pending” phase.



Features Settings (cont’d)

Field Definition

Formulas Enabling this flag will enable formula-based pricing and allow the user to create an

Auction using a Formula to solicit bids from the suppliers for Price Components

that make up the Unit Price versus bidding only the total Unit Price. It is suggested

that this flag always be enabled so that, if the users want to use a formula, they

can. It is not required to use a formula just because it is enabled.

Line Item

Specifications

Line Item Specifications are used to provide information to the suppliers and can

be used as part of the Formula. If Formulas are enabled, Line Item Specifications

should also be enabled. In general, it is recommended that Line Item

Specifications be enabled on every Auction Type. They are not required to be

used just because they are enabled.

Supplier-Entered

Attributes

Supplier-Entered Attributes are used to obtain information from the suppliers and

can be used as part of the Formula. If Formulas are enabled, Supplier-Entered

Attributes should also be enabled. In general, it is recommended that Supplier-

Entered Attributes be enabled on every Auction Type. They are not required to be

used just because they are enabled.



Rules Section

The “Enable automatic early close” feature must be enabled in order to allow time

extensions. When this flag is turned on, there are two fields that will open on the

Schedule tab of the Auction where you can determine when you want a time

extension to kick in and how long (in minutes) you want that time extension to be.



Schedule Tab – Early Close

When the “Enable automatic early close” feature is enabled, the Inactivity Period

and Extension fields are opened up for input which determine at what point a time

extension should be added and how long that time extension should be.



Rules Settings

Field Definition

Allow Duplication Enabling this flag allows the user to duplicate an Auction in its entirety if necessary.

It is recommended that this flag always be enabled.

Require Product

Category

Enabling this flag forces the user to enter a Product Category on the Auction

before successfully saving the Auction. If reporting based on Product Category

(Material Group) is important, then some consideration should be given to making

this a required field.

Enable staggered

start or end times for

line items

Enabling this flag will allow the user to stagger the opening and closing of line

items’ start times, end times, or both. This means that if an Auction with 5 line

items, each line item can start or end (or both) by some pre-defined time period set

by the user which means that not all line items will open or close at the same time.

This allows the supplier to focus their attention on the line items that are open at

any given time. If this is turned on, then staggering of line items is enforced.

Some consideration should be given to this option before turning it on. It is most

frequently used when there are many line items in an Auction.

Enable automatic

early close

Enabling this flag will enable key fields on the Schedule tab that enable time

extensions on the Auction. It is recommended that this flag ALWAYS be enabled

as the most active bidding in an Auction typically takes place at the end of the

Auction – causing the need for automatic time extensions.



Rules Settings (cont’d)

Field Definition

Start Type This parameter defines how the start times are determined. The two (2) options

are: (a) User-entered dates and times; or (b) System-calculated based on

phase durations. Depending on your selection, phase durations will be computed

from the phase start dates and times or the phase start dates and times computed

from phase durations. This is simply a matter of preference as either choice leads

to the same end result. However, it is important to ensure that the Start Type is

consistent across all Auction Types that are configured in order to ensure

consistency and simplify the user experience.

Publish as public

event

Enabling this flag will make the Auction available to all suppliers in the Sourcing

system. This flag is almost ALWAYS not enabled. Suppliers typically participate

by invitation.

Access Type This parameter defines who from the supplier can access an Auction. The two (2)

options are: (a) Company-wide event with access by all contacts; or (b)

Contact-specific event with access limited to invited contacts. Depending on

your selection, an Auction will be accessible to all supplier contacts or only the

specific supplier contact that has been invited to the specific Auction. It is important

to ensure that the Access Type is consistent across all Auction Types that are

configured in order to ensure consistency and simplify the user experience.



Rules Settings (cont’d)

Field Definition

Automatic awards

at auction close

Enabling this flag will cause Award notifications to go out to the lowest

bidder. This flag is almost ALWAYS not enabled. Generally, there are

other factors that the buyers want to evaluate before awarding the

business. There may be additional steps in the process – including

management approvals.

Create Default

Line Item Group

This flag is used in conjunction with the “Default Line Item Group Name”

parameter. Enabling this flag simply tells the system that a Line Item

Group should be created by default. If it is enabled, then a “Default Line

Item Group Name” must be defined.

Default Line Item

Group Name

This flag is used in conjunction with the “Create Default Line Item

Group” parameter. When the “Create Default Line Item Group”

parameter is enabled, then the system expects to find a name for the

Line Item Group. There is one in the system called “Default Line Item

Group Name”. This can be used as the default and then changed when

creating an Auction.



Disclosure Section

Unless you want to allow the suppliers to see all of the Bid History, you will want to

set the Bid History to “Sealed” in most cases.



Disclosure Settings

Field Definition

Bid History This parameter can be set to either: (a) Public or (b) Sealed. Public means that

Bid History is available to all the suppliers participating in an Auction. Sealed

means that Bid History is sealed from all suppliers participating in an Auction. The

Bid History parameter is almost ALWAYS set to Sealed.

Supplier Rank This parameter can be set to one of three (3) choices: (a) Do not display rank

information, (b) Display rank, or (c) Display rank and number of participants.

If “Do not display rank information” is selected then the suppliers will not see their

rank in the Auction. If the “Display rank” option is selected, then the suppliers will

see their rank in the Auction. If the “Display rank and number of participants”

option is selected, then the suppliers will see their rank in the Auction as well as

the number of participants (other suppliers) that they are ranked against. The

“Display rank” option is the most used option. Typically, it is used exclusively – this

means that the Leading Bid is generally NOT displayed to the suppliers if the rank

is displayed.

Anonymous bidders This flag is enabled to retain the anonymity of the suppliers so the suppliers don’t

know who else is participating. The flag is almost ALWAYS enabled to ensure that

suppliers remain anonymous.



Disclosure Settings (cont’d)

Field Definition

Leading bid This flag is enabled to display the Leading bid to the suppliers.

Generally, either the Leading bid or the Rank is displayed to the

suppliers but NOT both.

Require Bid

before View

This flag is enabled to force suppliers to place a bid before they are able

to view activity during the Open phase of an Auction. This prevents

suppliers from watching the activity to gain market information without

having any intent to place a bid. This flag is most often enabled.

Supplier's

factored cost

bidding

This flag is checked when the user wants to enable suppliers to see the

impact of factored cost bidding factors on their bids.


Key Auction Type Configurations


Auction Types: Auction Direction


Reverse Auction Prices are generally decreasing. Suppliers are competing

for the buyer’s business by decreasing their prices during

the Auction. This is the most commonly used setting for

sourcing events.

Forward Auction Prices are generally increasing. Buyers are increasing their

prices during the Auction. This is a commonly used format

when a user is looking to sell excess inventory or obsolete

equipment at the best price possible.

The Auction Direction always refers to whether bids

submitted by the “participants” in the Auction are

decreasing (I want to buy for the lowest possible price) or

increasing (I want to sell for the highest possible price).


Auction Types: Bidding Format


Open Bidding Suppliers must place a bid that is lower than their own

previous bid by the bid improvement amount. This is the

most commonly used bid format.

Standard Bidding Suppliers must place a bid that is lower than the leading bid

by the bid improvement amount. This format is rarely used.

Any Price Bidding Suppliers can place a bid that is higher or lower than their.

last bid. This format is rarely used.

Dutch Bidding The buyer sets a start price, a price increment and a time

increment during which the price will increase by the price

increment if no bid is placed. The first supplier to place a

bid wins the Auction. This format is generally used for

categories where the demand is greater than the supply.

Proxy Bidding Each bidder places one best-offer bid. The system

evaluates all bids and places incremental bids on behalf of

each supplier. Each bid is reduced by minimum bid

improvement. The winning bid must meet the reserve price,

if it is set. This format is rarely used.



Features Settings – Phase Configuration

Field Definition

Preview “Preview” is an optional phase that enables suppliers to “preview” the Auction

before the bidding actually starts. This gives the suppliers an opportunity to get

familiar with the Auction on their own time before the Auction is live with

competitive bidding.

Pre-bid “Pre-bid” is an optional phase enables suppliers to place a bid before the

competitive bidding starts. This gives the suppliers an opportunity to place a bid at

their own pace and to get familiar with placing bids in he Auction – without the

pressure of the competitive aspect of the real-time nature of an Auction.

Open “Open” is a required phase and is the phase during which competitive bidding

takes place.

Close Pending “Close Pending” is an optional, but strongly recommended, phase during which the

buyer can re-open the Auction for any reason. If this phase is not used AND the

buyer decides that the Auction should be re-opened, the only way to do it is to

create a new Auction. Using this phase enables the buyer to re-open the same

Auction if necessary.

Best Practice is to include either the “Preview” or

“Pre-bid” as well as the “Close Pending” phase.


Auction Types: Disclosure Rules

Disclosure rules are set to determine what feedback the suppliers will receive

during the Auction:

Display Rank – Suppliers will see their rank in the Auction – whether they are in first

place or ranked in some other order; for example, Rank = 2

Display Rank and Number of Participants – Suppliers will see their rank as well as the

number of other suppliers participating in the Auction; for example, Rank = 2 out of 4

participants (the number of participants is rarely disclosed)

Leading Bid – Suppliers will see the Leading Bid and will be able to compare it to their

own current bid

It is rare that both Rank and Leading Bid are disclosed in a single Auction

Bid History can be set to:

Sealed – Suppliers can only see their own bids

Public – Suppliers can see their bids and other suppliers’ bids; rarely used


Auction Types: Other Important Controls

Enable Automatic Early Close

This flag should be selected to enable time extensions to be added at the end

of the auction

Anonymous Bidders

This flag should be selected to ensure that suppliers’ names are not visible to

the other suppliers that are participating in the Auction

Disallow Tying Bids For Open Bidding

This flag should be selected if you want to ensure that suppliers cannot place a

tying bid during an Auction that is using the Open Bidding format


Thank You!

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SAP Sourcing Webcast - Auction Configuration and Types