Running Complex Sourcing Events – A Best Practices Approach

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Sometimes setting up a Sourcing event in Ariba is very straightforward, but oftentimes the requirements drive the need to stretch Ariba's capabilities to the max. Ariba's Sourcing solution has a great …

Sometimes setting up a Sourcing event in Ariba is very straightforward, but oftentimes the requirements drive the need to stretch Ariba's capabilities to the max. Ariba's Sourcing solution has a great deal of flexibility and options for running complex sourcing events, and we will discuss some of these scenarios and recommended approaches in this session.

You will hear from a customer who has used Ariba to run a complex event, and will also hear from an Ariba Best Practice Center consultant about topics such as how to approach very large events, set ups requiring formulas, and when to use functions like custom offline bidding.

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  • English/dutch/japanese StyleSpreadsheet usage in an auction environment
  • Ariba Sourcing was brought online at SHC in December of 2011.
  • English/dutch/japanese StyleSpreadsheet usage in an auction environment
  • Ariba Sourcing was brought online at SHC in December of 2011.
  • Ariba Sourcing was brought online at SHC in December of 2011.

Transcript

  • 1. Running Complex Sourcing Events – A Best Practices Approach David Nasser, Procurement Director, Sears Holdings Christopher Bertram, Sourcing Manager, American Tire Distributors March 19, 2014 #AribaLIVE @ariba © 2014 Ariba, Inc. All rights reserved.
  • 2. Agenda: • • • Welcome Complex Sourcing Events – Ariba BPC Team Customer Stories: Sears Holdings – Non ‘Traditional’ Auctions American Tire Distributors – Multi-Scenario, Multi-Location RFP • 2 Closing Remarks and Takeaways © 2014 Ariba, Inc. All rights reserved.
  • 3. Best Practice Center: Complex Sourcing Events • What makes a Sourcing Event complex? Gathering more than just a simple price Use of Auction formats that include transformation, buyer-determined goals/ceilings A large number of line items Supplier-specific item bidding Alternate pricing Custom formulas… 3 © 2014 Ariba, Inc. All rights reserved. …to name a few
  • 4. Best Practice Center: Complex Sourcing Events • Sourcing Set-up Options for Complex Events RFP or Auction Total Cost Templates Price Breakdown RFP Templates Matrix Pricing Transformation Bidding Custom Offline Response Sheet Custom Event Templates 4 © 2014 Ariba, Inc. All rights reserved.
  • 5. Sears Holdings: E-Sourcing Case Study David Nasser, Procurement Director, Sears Holdings March 2014 #AribaLIVE @ariba © 2014 Ariba – an SAP company. All rights reserved.
  • 6. Agenda • • • • • 6 Sears Holdings Info Ariba Sourcing Utilization Decision on Negotiation Style – Auction? Process Recommendations Ariba Best Practice Center (BPC) © 2014 Ariba – an SAP company. All rights reserved.
  • 7. Sears Holdings • • Almost 2,500 full line and specialty retail stores Shop Your Way Social Shopping and Reward Points • • • Leading home appliance retailer in US Brands Nation’s largest service provider 14 million service and installation calls annually 7 © 2014 Ariba – an SAP company. All rights reserved.
  • 8. Ariba Sourcing Utilization • • Embedded within procurement process at Sears Holdings All RFx content flows through Ariba Sourcing Legal docs, Scope of Work, Pricing, etc. • • Final negotiation occurs – auction or other Sourcing Library holds core information Legal templates, PPI/commodity info, process maps, etc. 8 © 2014 Ariba – an SAP company. All rights reserved.
  • 9. Auction Style – English ENGLISH (OR STANDARD) REVERSE AUCTION PRICE POINT $10K 0 Supplier 1 Supplier 2 Supplier 3 $9K $8K $7K 1 2 3 4 5 Suppliers can see their rank, and lowest bid at buyer's discretion All participants start at agreed-upon pricing (usually preliminary bids) Suppliers systematically lower their bids to overtake Rank 1 position Auction automatically extends as long as valid bids are being placed Once no more bids have been placed, lowest valid bid wins $6K $5K $4K $3K $2K 1 Generally used when preliminary bids are close to each other 2 Generally used when supplier pool is 3 or more 3 Used when buyer wishes visibility to price decrease history during event $1K 20 minutes (Variable) DURATION 9 © 2014 Ariba – an SAP company. All rights reserved. Ext. #1 Ext. #2 Ext. #3 Ext. #4 Ext. #5 Ext. #6 ETC…
  • 10. Auction Style - Dutch DUTCH AUCTION PRICE POINT 1 2 3 4 $10,000 $9,000 Suppliers are blind to rank and lowest bid Price starts 20-30% lower than current lowest preliminary bid Price Increases in small increments over a series of time intervals First supplier to place a bid within the current interval wins $8,000 0 Supplier 1 Supplier 2 Supplier 3 $7,000 $6,000 $5,000 Supplier 2 enters first bid in 5th interval Auction ends and Supplier 2 is awarded business $4,000 $3,000 1 Can be used when preliminary bids are widely divergent 2 Can be used when supplier pool is less than 3 $2,000 $1,000 1 2 3 4 TIME INTERVALS 10 © 2014 Ariba – an SAP company. All rights reserved. 5 6 7 8 9 10
  • 11. Auction Style - Japanese JAPANESE AUCTION PRICE POINT $10,000 ◄ All three suppliers bid in 1st round 0 ◄ All three suppliers bid in 2nd round 0 $9,000 0 Supplier 1 Supplier 2 Supplier 3 ◄ All three suppliers bid in 3rd round 0 $8,000 ◄ Supplier 1 declines to bid in 4th round and is not invited to round 5 $7,000 ◄ Both remaining suppliers bid in 5th round $6,000 ◄ Supplier 2 declines to bid in 6th round ◄ Round closes and Supplier 3 is awarded the business $5,000 $4,000 $3,000 1 2 3 4 $2,000 Suppliers are blind to rank and lowest bid Price starts slightly above highest preliminary bid Price decreases in increments over a series of rounds Supplier is awarded business when all other competitors have declined to bid in the current round/interval $1,000 1 2 TIME INTERVALS 11 3 4 5 6 7 8 9 10 1 Can be used when preliminary bids are widely divergent 2 Can be used when supplier pool is less than 3 3 This auction style keeps suppliers in the dark as to rank/position but is not as sudden and cut-throat as a Dutch Auction
  • 12. Process Recommendations • Conduct all facets of your normal sourcing process All suppliers invited to an auction • • 12 Determine all factors of TCO Transportation, transition, rebates, qualitative differences Build all TCO factors into the ranking of the auction To bid sheet or not? © 2014 Ariba – an SAP company. All rights reserved.
  • 13. Ariba Best Practice Center (BPC) • Transition to Ariba Sourcing Auctions Added functionality comes with increased complexity • • • Auction build verified by BPC BPC monitors key auctions in real time Valued advisor to auction build issues-ideas Japanese Style mock auction build 13 © 2014 Ariba – an SAP company. All rights reserved.
  • 14. Sears Holdings: Q&A • 14 Questions for David? © 2014 Ariba, Inc. All rights reserved.
  • 15. American Tire Distributors: eSourcing Case Study Christopher Bertram Sourcing Manager American Tire Distributors 15 © 2014 Ariba, Inc. All rights reserved.
  • 16. American Tire Distributors: eSourcing Case Study Agenda • • About ATD Why Ariba Adoption, Modules and ATD Evolution LT Goals • ATD eSourcing / Project Management Process Process Map Event Examples • Retrofit Lighting Case Study Project Scope eRFP Strategy & Project Set-up  Custom Off-Line bidding  Lotting Strategy  Multiple markets, de-coupled supply base approach  Utilization of UI and Baseline Pricing (CapEx Budget) 16
  • 17. American Tire Distributors: eSourcing Case Study About ATD (slide 1 of 2) 17
  • 18. American Tire Distributors: eSourcing Case Study About ATD (slide 2 of 2) 18
  • 19. American Tire Distributors: eSourcing Case Study Why Ariba? Challenges Limited indirect spend visibility and spend management control Increased focus on sourcing and driving negotiated savings but need to ensure spend compliance for savings retention All invoicing done via paper or p-card No formal mechanisms to enforce policies and procedures impacting procurement Limited insight into level of compliance Limited visibility into what is being spent and with which supplier Lack of standardization across business units, field locations, and geographies 19
  • 20. American Tire Distributors: eSourcing Case Study ATD eSourcing: The ATD Process (ex. 2 of 2) 20
  • 21. American Tire Distributors: eSourcing Case Study ATD eSourcing: eSourcing Examples 21
  • 22. American Tire Distributors: eSourcing Case Study Retrofit Lighting Case Study: Project Scope, General Approach and Value Adds     10 locations in our network with metal-halide lighting CapEx budget approved for project Evaluate National, Regional and Local (Manufacturers, Resellers and Installers) Utilization of site survey results, SOW and BOM to level-set supplier RFP submissions  Estimated operational cost reduction of 40-65% per location  Project ROI realized within 36 months 22
  • 23. American Tire Distributors: eSourcing Case Study Retrofit Lighting Case Study: RFP Strategy and Project Set-up  10 location lots      23  3 pricing lots (Turnkey, Materials Only and Installation Only)  30 lots total Custom Off-line bidding UI Savings Calculations  Cost Avoidance vs. Budget per location  Cost Avoidance vs. Total Project Budget Supplier lot selection relative to capabilities vs. invitation by lot Ariba Discovery Alternative bid responses (alternative specs (fixtures) and finance options
  • 24. American Tire Distributors: eSourcing Case Study Retrofit Lighting Case Study: Ariba Project Elements (Custom-offline bidding, lotting, budget and TCO calculations). (ex. 1 of 2) 24
  • 25. American Tire Distributors: eSourcing Case Study Thank you! QUESTIONS? 25
  • 26. Closing Remarks & Takeaways • • • • 26 Understand Ariba Sourcing capabilities and consider conducting your next complex Sourcing event via the tool Build/modify Templates using specific settings to meet various complexity needs (Alternative Bidding, Custom Offline, etc.) Take advantage of the Sourcing Library to build core information Utilize available help and information (BPC, Webinars, Training) © 2014 Ariba – an SAP company. All rights reserved.