2. 1 1 513: Integrating Auction Technology into Your Bidding Strategy Breakout Session #513 Whitney Taylor Advanced Micro Devices, Inc. (AMD) July 20, 2010 Time: 2:30-3:45PM

3. 2 “Of the best-in class enterprises that source strategically using best practice strategic sourcing techniques, 67% have deployed sourcing 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 Supply Management, Aberdeen Group, December 2005

4. 3 13 Minute Auction Results in 11% Reduction Source: AMD 2010 Example

5. 4 Agenda Interactive Discussion Auction Overview & Value Auction Types RFx & Auction Strategy & Preparation Stakeholder Buy-In Supplier Participation RFx Evaluation Summary

6. 3 Steps in Sourcing Process can be influenced by auction 5 Internal & external analysis Define business requirements e-RFx and supplier management Bid collection and negotiation Decision optimization Award and contract Manage supplier performance

7. 6 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

8. 7 Auction Types Forward Auction – Drives price up (Example: Selling on eBay, selling reclaimed materials) Reverse Auction – Drives price down –Traditional Bidding – Considers straight price; other evaluation components are considered outside bidding process –Transformational Bidding – Considers value in rankings; Ex. Shorter lead time = improved ranking –Optimized Bidding – Define optimal outcome, rankings encourage this model; Ex. More geographies = improved ranking

9. Auction Tools 8 Source: Gartner Magic Quadrant for Strategic Sourcing Application Suites Feb 2010 Iasta SynerTrade Ariba AEC Soft USA Pool4Tool Zycus SAP Bravo Solution Emptoris Fullstep Ivalua Curtis Fitch Global eProcure ChallengersLeaders Niche PlayersVisionaries Ability to Execute

10. 9 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 input bids, overtime extensions, bidding blocks to inhibit marketplace observers, reserve price (must beat) Reveal rank only or rank and bids

11. Stakeholder Buy-In 10 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, bidder’s conference

12. 11 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

13. 12 Preparation is critical to auction 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

14. 13 Example Law Firm Rate Auction Source: AMD Example

15. 14 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 <3 Over-use may deter participation Do not plan to auction every RFx, mixing formats will keep pricing fresh Do not plan to negotiate after an auction as it reduces validity of process (bidding pressure) over time

16. 15 Supplier Participation Host online bidder’s conference including training on bidding tool RFI may help bidder’s understand tool before RFP Proactive communication still required If a supplier is not bidding it may mean they don’t understand technology Publish Help Desk #

17. 16 Summary Increasing market pressure & insight decreases cost Technology adoption can be challenging Use breeds acceptance

18. 17 Whitney Taylor Advanced Micro Devices, Inc. (AMD) Global Supply Management Whitney.taylor@amd.com