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513: Integrating AuctionTechnology into Your BiddingStrategy

B r eako u t Se s s io n #51 3

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 sourcestrategically using best practice strategicsourcing techniques, 67% have deployedsourcing 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 SupplyManagement, Aberdeen Group, December 2005

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13 Minute Auction Resultsin 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 Processcan be influenced by auction

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Internal & external analysisDefine business requirementse-RFx and supplier managementBid collection and negotiationDecision optimization Award and contract

Manage supplier performance

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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 Tools

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Source: Gartner Magic Quadrant for Strategic Sourcing ApplicationSuites Feb 2010

IastaSynerTrade

Ariba

AEC Soft USAPool4Tool

ZycusSAP

BravoSolution

Emptoris

FullstepIvalua

Curtis Fitch

GlobaleProcure

Challengers Leaders

Niche Players Visionaries

A b i l i t y

t o E x e c u

t e

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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 inputbids, overtime extensions, bidding blocks to inhibitmarketplace observers, reserve price (must beat)

Reveal rank only or rank and bids

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Stakeholder Buy-In

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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 toauction 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

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Supplier Participation

Host online bidders conference including training onbidding 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 & insightdecreases cost

Technology adoption can bechallenging Use breeds acceptance

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Whitney Taylor

Advanced Micro Devices, Inc. (AMD)Global Supply ManagementWhitney.taylor@amd.com