Lots and Line Items Overview
Line items are things you intended to purchase, organized in to lots.
Lots
Lots provide a basic unit of organization for the things you intend to purchase. Some attributes of lots are:
- They can have multiple line items, or just one
- Auction configuration is set at a lot level
- Timer parameters
- Ranking algorithm
- Auction type
- Bidder screen settings
- Bidders can have their access restricted at a lot level
Line Items
Line items are the items you intend to purchase, but can also represent groups of items, or even entire lump sum prices. Some attributes of lots are:
- Provides details about what is being purchased
- Some line item specific auction rules are set at the line item level
- Bid required
- Ties allowed
- Weighting is configured per line item
- Bidders can also have their access restricted at a line item level
Using Lots And Line Items
Lots and line items are the backbone of the reverse auction. When conducting a reverse auction for your sourcing effort, your team will need to understand what is being purchased, and how to best organize it in to lots.
Some common lot strategies include:
Number of items
During a reverse auction, bidders are asked to update their prices in a competitive environment. There is a limit to the number of items that a bidder can actively monitor and price in real time. To promote as much competition as possible, we recommend no more than 150 line items per lot, but you may wish to configure as many as 250 to reduce the total number of lots. Be sure to remember the impact to bidders.
Geography
For example, you may choose to organize line items in to lots by region or delivery location.
Supplier groups
It is often beneficial to break out items with dissimilar supplier pools. For example, let's say you have the following bidder matrix:
| Bidder A | Bidder B | Bidder C | Bidder D | |
|---|---|---|---|---|
| Item 1 | NO BID | NO BID | BID | BID |
| Item 2 | NO BID | NO BID | BID | BID |
| Item 3 | BID | BID | NO BID | NO BID |
| Item 4 | BID | BID | NO BID | NO BID |
In this simple, example scenario, it would be beneficial to group the items in to lots:
| Lot | Items |
|---|---|
| Lot A | Item 1, Item 2 |
| Lot B | Item 3, Item 4 |
This allows you to provide an overall rank to bidders, based on the total value of the lot.
Other Lot Strategy Considerations
In a reverse auction, bidders compete to improve their rank. The software provides a means to show bidders' rank at a line item level, as well as a lot level. When ranking at a lot level, it is important that all bidders prices are comparable. This sometimes requires splitting line items up in to lots.
For example, let's consider the bid matrix below:
| Bidder A | Bidder B | Bidder C | Bidder D | |
|---|---|---|---|---|
| Item 1 | $12 | $14 | $14 | $11 |
| Item 2 | $10 | $18 | $14 | $12 |
| Item 3 | $10 | $12 | $9 | NO BID |
| Item 4 | $7 | $6 | $5 | NO BID |
| Total: | $39 | $50 | $42 | $23 |
In the scenario above, Bidder D has the lowest price. However, their total pricing cannot be compared to bidders A through C, because they are not bidding all line items.
Any time bidders are not bidding all line items, lot level ranking should be disabled, or an alternative lot strategy must be used.
The only exception to this rule is if the unbid items are optional items, or items that only some bidders would require to provide the product required.