BPC Advanced Webinar Series Sourcing Pro Standard Sourcing Templates 101 2/13/2013 © 2012 Ariba, Inc. All rights reserved.

BPC Advanced Webinar Series Standard Sourcing Templates 101 Presented by: Ariba’s Best Practice Center (BPC) Today’s Presenter: Mauricio Roveri Sourcing Consultant © 2012 Ariba, Inc. All rights reserved.

Overview When you’re creating an event, do you ever wonder which sourcing template is best suited to meet your needs? This session will take you through the differences between the out of the box templates, and how to make better decisions about what template to use and when to use them. It is expected that you are already somewhat familiar with the Ariba Sourcing Technology. © 2012 Ariba, Inc. All rights reserved.

How strong are our incumbents? Let’s start at the beginning…..how do you choose the right opportunity for eSourcing? Below are common questions you may ask... Creating the Project - Selecting the right opportunity Is the business even available? How strong are our incumbents? What’s the best strategy for awarding the business? How much information do I need? How soon can I award this business? Can I expect any savings? How much time do I have? Who are my suppliers? What are the gaps in my information? What is the risk? Do I have my data and specifications ..... and are they accurate? How attractive is this business? How will my incumbents react? How well do I know this industry? Will I have internal resistance to new suppliers? How will success be defined? Will my suppliers be resistant to the new technology? These questions are not unique…buyers ask them anytime they need to address a basic business need

Contractually Available Commercially Attractive The easiest and quickest method for selecting an opportunity for Sourcing is the use of the “Six C’s” Make sure your project meets all the Six C’s requirements Contractually Available Commercially Attractive Competitive Supply Base Clearly Defined Requirements Compressible Margins Commitment

When you consider projects for eSourcing, don’t be swayed by any of the following myths….. Creating the Project - Selecting the right opportunity Myth Truth Contract award is based on price alone You as the buyer make the final award decision, and price is only one factor in that decision. The solution is designed to find market price. Small businesses are placed at a disadvantage Projects can be configured (i.e. lotted) in such a way to carve out parts of the business for smaller suppliers. You as the buyer make that decision. Process works well for commodities but not complex goods or services. The process has proven to be effective for most categories of spend… use the “Six C’s” as the litmus test for identifying projects

The Sourcing Process

Sourcing Analysis Sourcing Analysis Phase 1 Phase 1 Phase 2 Phase 2 The Two Phase Sourcing Process is Recommended for All Sourcing Projects Phase 1 Phase 1 Phase 2 Phase 2 Request for Proposal Request for Proposal Negotiate Negotiate Sourcing Analysis Sourcing Analysis Present initial requirements Collect initial bids Collect creative options In-depth options analysis Short list suppliers Determine Phase 2 approach RFP/Sealed Bid Reverse Auction Final presentation of requirements Final Price and Performance Evaluation Award Recommendation Final presentation of requirements Final Price and Performance Evaluation Award Recommendation Preliminary Market Assessment Preliminary Plan Initial Supplier List Preliminary Market Assessment Preliminary Plan Initial Supplier List

Creating the Project: Choosing the Appropriate RFx Type

Request for Information (RFI) Create a Questionnaire, gather supplier feedback and qualify suppliers based on their responses. Items/Lots can be created for informational purposes but pricing cannot be collected at this stage, only qualitative information. Buyers can weigh and grade supplier responses, and create an overall score for each supplier. © 2012 Ariba, Inc. All rights reserved.

RFPs – Non-Competitive Request for Proposal RFP with Total Cost Collect Pricing Information through Line Items/Lots Contains the Essential Features to conduct most RFPs Buyers can weigh and grade supplier responses, and create an overall score for each supplier. Contains features that allow the buyer to additional cost factors (terms) which will calculate additions, subtractions, multiplications, on top of an Extended Price to calculate a Total Cost per line item/lot for each supplier. © 2012 Ariba, Inc. All rights reserved.

Auctions - Competitive Reverse Auction Total Cost Auction Competitive and Dynamic Bidding Event where suppliers compete for business Contains the Essential Features to conduct most RFPs Focused on Price Time Compressed Contains features that allow the buyer to additional cost factors (terms) which will calculate additions, subtractions, multiplications, on top of an Extended Price to calculate a Total Cost per line item/lot for each supplier. © 2012 Ariba, Inc. All rights reserved.

Ariba Sourcing provides you with three event types to assist you in your buying decision Request for Information (RFI) “In order to make intelligent purchasing decisions, factors other than price must often be considered. The RFI enables you to create a questionnaire and assign preliminary scores and grades to each question.” Request for Proposal (RFP) “An RFP provides an efficient means of gathering competitive market and pricing information. RFPs provide a non-competitive negotiation format.” Auction “…is a dynamic online bidding session in which suppliers submit legally binding bids for business. Suppliers can receive feedback about others bids…..and can then adjust their own bids.”

Use the RFI type when: You need additional information about the capabilities of the supply base. You are anticipating a future need You are not prepared to go to market because of incomplete data

Use the RFP type when: You may not be sure what you need and are asking suppliers to offer suggestion to include pricing You want the option to award business now or in the future via auction You know the supply base will reject an online auction

Use the Auction type when: There are clear indicators of a competitive landscape You know what you want and can satisfy all Six C’s

Event Process Phase 1 RFx Execute Phase 1 RFx to determine Phase 2 approach Draft Phase 2 RFx Construct RFX Internal Practice Auction Test event settings with internal practice event Publish RFx Publish event for supplier review and response Supplier Practice Auction Conduct practice event to complete suppliers’ training Always start with Phase 1 RFx – RFP, Sealed Bid, RFI then determine your Phase 2 Approach based on the results from Phase 1. In this training we took the direction of a reverse auction approach which should always include an Internal Practice Auction and Supplier Practice Auction prior to running the Live Auction. Reach out to the BPC for assistance with your events! Internal Practice Auction Supplier Practice Auction Spend Assessment Sourcing Analysis Initial Planning Draft Phase 2 RFx Publish RFx Live Bidding Event Prebids Post Communication Phase 1

Recommended Sourcing Process Always focus on Total Best Value regardless of which sourcing approach is used. The best buyers know which Phase 2 tactic to utilize and are skilled at executing that tactic. Avoid negotiations after Phase 2 RFP or Reverse Auction. It undermines the effect of the competitive bidding process. The goal of all sourcing approaches is the same: Total Best Value for the company. Many problems reported about auctions all come from the fact that they have been used to make “price only” decisions. We have all seen in our personal lives the negative effects of buying goods or services based on price only. Quality and performance are worth the difference. All sourcing approaches should always be striving to deliver the best combination of price, quality, and performance: Total Best Value. The strongest sourcing organizations develop their sourcing professionals in all three approaches. You don’t want pitchers who can only throw a fast ball. If all the pitchers on the team can throw a fast ball, a curve ball, and a change up equally well, it is a much stronger team. It has been quite common for organizations to follow a sealed bid with 3 rounds of negotiations. This process is typically used in many competitive arenas and much of the negotiation is focused on price reduction. That process becomes well known by their suppliers. So the suppliers know that they should not give their best bid in the sealed bid. They lower their price just enough to get into the first round of negotiation. That tactic is repeated through each round. It is a time consuming process which yields widely varying results. When a buyer has competition in their favor they should use it and let the competition do the most of the work for them.

Wrap-Up Questions and answers will be posted on Ariba Exchange by close-of-business today http://exchange.ariba.com Help us improve this offering You’ll be prompted at the conclusion of the webinar 10-question multiple-choice survey Please join us for our next sessions: February 27th, 2013 @ 2:00pm ET – Working with Notifications (Sourcing & Contracts) February 28th, 2013 @ 9:00am ET – Administration Best Practices (Sourcing & Contracts) © 2012 Ariba, Inc. All rights reserved.

Follow Up on Ariba Exchange To sign up for Ariba Exchange: Go to http://exchange.ariba.com/welcome Click on the “Register” link, and enter your email address to begin the quick and easy registration process. Access the Community on the left-hand side of the screen for the product you are interested in to see what other customers are saying, and to ask questions and interact. Use to tag of “BPC_Webinar” in any of your posts. We will do the same with any follow up, making it easy for you to use the search term “BPC_Webinar.” © 2012 Ariba, Inc. All rights reserved.

The BPC and Your Company Subscribers to Ariba’s Best Practice Center gain access to experts consultants like your presenter today and get strategic advice and guidance on getting the most out of your Ariba solutions when you need it. Customers Subscribing to the BPC can access additional Advanced Webinar Recordings via Exchange. Topics include: Administrative Features: Enumerations and Mass Edit Administrative Features: User Management, Data Imports and Exports Contracts: Preparing the Main Agreement: Document Preparation, Cleansing and Styles Contracts: The Contract Request Process Sourcing: Matrix Pricing Sourcing: Custom Offline Response Sheet Many more topics on the way! © 2012 Ariba, Inc. All rights reserved.

The BPC and Your Company For more information on how the BPC could have an impact at your company, contact your Customer Engagement Manager. If you are currently a BPC subscriber, ask your BPC Representative or your Customer Engagement Manager about how to access these recordings. © 2012 Ariba, Inc. All rights reserved.