Tenders using SAP IBP

Asking our AI friend chatGPT, below is the definition of tenders in the context of supply chain management.

"Tenders" refer to the formal process by which organizations invite suppliers to submit bids or proposals for the supply of goods, services, or works. This process, also known as procurement or sourcing, involves several steps aimed at ensuring transparency, competitiveness, and obtaining the best value for money. Here is an overview of the tender process and its significance in the supply chain:

1. Preparation and Planning:
2. Tender Invitation:
3. Submission and Evaluation:
4. Awarding the Contract:
5. Contract Management:

Significance of Tenders in Supply Chain

• Transparency and Fairness: Ensures a fair and transparent process, reducing the risk of corruption and favoritism.
• Cost Efficiency: Encourages competition among suppliers, which can lead to more cost-effective procurement.
• Quality Assurance: Helps in selecting suppliers who meet the required quality and standards.
• Risk Management: Proper tendering can mitigate risks by ensuring that suppliers are financially stable and capable of fulfilling the contract.
• Regulatory Compliance: Adheres to legal and regulatory requirements, particularly in public procurement.

In supply chain planning, the tenders management in most cases is often done with lots of assumptions and probabilities. It is important to consider what is 'known' and 'unknown' in your supply chain to have the most accurate assumption and probability. The known part is easy, and it could play as a starting point of your planning. For example, you know for sure your capacity according to different goods or services that you are providing to your customers. You also probably know how much was the awarded tenders to you in the past and who are the possible competitors. Sometimes, you can also get some idea of what are the capacities of your competitors. Of course, you would know for sure the total tenders that you would like to bid. This can be used as planning inputs.

Enter SAP Integrated Business Planning. You can use the planning inputs as your basis to manage tenders. Below you can see the key figures depicted in the SAP IBP using the Planner Workspace app.

Once you have the known planning inputs, you can now start playing with assumptions and probabilities to depict the unknown.

With the help of key figure calculation in SAP IBP, you can calculate the probability of winning the tenders (in value) and leverage the scenario management feature at the same time. You can create a scenario for example, not join the bidding and calculate the likelihood of evaluating the revenue that could impact your supply chain. Or, you can create another scenario where you would join and submit tenders with 'X' price and your competitor could also submit with 'Y' price.

In below PWS, planners can perform a lot of scenario management by playing with different assumptions.

Let's check closely the definition of each of the key figure.

• Tender Price Own (in EUR) - this is the tender price that your company would like to use when the bid has been submitted
• Tender Price by Competitor 'A' (in EUR) - this is the tender price that your competitor would like to use when the bid has been submitted
• Tender Probability vs Competitor 'A' - this is the tender probability that your company can use to assess the likelihood of submitting or not the tenders.

With those assumptions, you can therefore in the end calculate the tenders value against your competitors. Adding the analytics chart in PWS, would also give you a quick and high-level overview.

In this example, scenario 5 (Yes Bid with 3 EUR price) means that if this will occur your company could gain around 900k EUR revenue.

In summary, there's a lot of other aspects that you can also include here like putting alerts to identify quickly, if the total tenders have significant impact in your capacity, introduce an approval workflow to always monitor tenders if it reaches to a certain threshold, and many more. Thanks to SAP IBP, they are all can be modelled according to your business requirements.

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