SAP Sourcing

Auction Configuration and Types

June 2014

Topics

What is an Auction Type?

Configuring Auction Types
Key Auction Type Configurations

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What is an Auction Type?

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What is an Auction Type?

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

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Navigation Path to Configure Auction Types

Use the following navigation path to configure one or

more Auction Type(s):

Setup > Document Setup > Auction Types

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Navigation Path to Configure Auction Types

Setup

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Configuring Auction Types

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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.
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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.

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Auction Type Configuration

Bidding Section

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

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Configuring Auction Types:

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.

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Configuring Auction Types:

Bidding Settings Auction Direction
Bidding Format

Definition

Reverse Auction

Prices are generally decreasing. Suppliers are competing

for the buyers 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).
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Configuring Auction Types:

Bidding Settings (contd)
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.

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Configuring Auction Types:

Bidding Settings (contd)
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.

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Auction Type Configuration

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.
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Configuring Auction Types:

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.

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Configuring Auction Types:

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.
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Configuring Auction Types:

Features Settings (contd)
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 SupplierEntered Attributes be enabled on every Auction Type. They are not required to be
used just because they are enabled.

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Auction Type Configuration

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.
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Auction Type Configuration

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.
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Configuring Auction Types:

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.

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Configuring Auction Types:

Rules Settings (contd)
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.

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Configuring Auction Types:

Rules Settings (contd)
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.

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Auction Type Configuration

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.

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Configuring Auction Types:

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 dont
know who else is participating. The flag is almost ALWAYS enabled to ensure that
suppliers remain anonymous.

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Configuring Auction Types:

Disclosure Settings (contd)
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.

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Key Auction Type Configurations

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Auction Types: Auction Direction

Bidding Format

Definition

Reverse Auction

Prices are generally decreasing. Suppliers are competing

for the buyers 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).
2014 SAP AG. All rights reserved.

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Auction Types: 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.

2014 SAP AG. All rights reserved.

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Configuring Auction Types:

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.
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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

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Auction Types: Other Important Controls

Enable Automatic Early Close

Anonymous Bidders

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

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Thank You!

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