Example of MetaBid Formula

Example #1: ABC Company Adjusts Bids to Include Supplier Quality Rankings and Additional Taxes

ABC Company has discovered that sourcing decisions where items were delivered from certain suppliers and some countries resulted in much higher overall costs. These costs were hidden from the people making the sourcing decisions. Analyzing historical sourcing decisions enabled them to discover that the following key elements contributed to the real cost of items they purchased but were not revealed in a simple price comparison:

Awarding projects to some suppliers resulted in high costs associated with delivery, quality, and inventory problems. To better predict these costs, ABC Company reviewed supplier performance metrics and survey responses and ranked suppliers as Superior, Satisfactory, or Poor.
Due to excessive transportation costs, time delays, quality, and customer satisfaction issues, analysis determined that sourcing to superior suppliers results in an overall cost decrease of 2% and sourcing to poor suppliers results in an overall cost increase of 2%. To improve total cost visibility, ABC Co. decides to make the following adjustments to bids:

2% discount on bids from superior suppliers
no adjustment on bids from satisfactory suppliers
2% penalty to bids from poor suppliers

Some items that the ABC Co. purchases are subject to an additional import tax of 7% if they are purchased from countries where there are no applicable trade agreements. There are clear benefits to incorporating knowledge about this tax into the sourcing process.

With MetaBid Formulas, ABC can set up the project to automatically apply both pieces of business intelligence to bids entered in an auction or sealed-bid process. The formula, including two custom fields, Supplier Quality Ranking and Tax, would look like this:

%BidAmount% * (1 + %Tax% + %SupplierRanking%)

The project owner enters the variable values for tax (0 or .07) and supplier ranking (-.02 for a discount, 0, or .02 for a penalty) for each supplier and each lot/item. When the bidder enters a bid it calculates a result that becomes the "adjusted" bid that enables sourcing professionals to view the bids in terms of real cost rather than price.

Using this formula the following types of adjustments would be made:

A superior supplier who doesn't qualify for the import tax bids $100.00. Their bid is automatically discounted to $98.00.
A superior supplier who qualifies for the import tax bids $100.00. Their bid is automatically adjusted to $105.00
A satisfactory supplier who doesn't qualify for the import tax bids $100.00. Their bid receives no adjustment.
A satisfactory supplier who qualifies for the import tax bids $100.00. Their bid is automatically adjusted to $107.00
A poor supplier who doesn't qualify for the import tax bids $100.00 and their bid is adjusted to $102.00.
A poor supplier who qualifies for the import tax bids $100.00 and their bid is automatically adjusted to $109.00.