Traffic light feedback and target rates

Target rates

Target rates are a useful means of indicating to bidders what you consider to be a competitive bid. However, choosing an effective target can be difficult. If a target is too aggressive, bidders may feel disincentivized to improve their bids — why improve their bid if their initial bid is so far off the target? Similarly, if the target is too lenient, the more competitive bidders in your event may not feel incentivized to improve their bids.

When setting target rates, ensure that you consider your award strategy. If the low-cost offering is a credible award candidate, setting targets that outperform low-cost bids may lead to additional savings. However, if the low-cost offering is not a credible award candidate, setting targets that could improve the bids of lower-ranking bidders may be preferable.

Other common conventions for setting target rates involve using historic or benchmark rates. For example, setting target rates at five percent less than last year's rates.

Adding a target column

Sourcing Optimizer provides different methods for providing target rate feedback to bidders. If you want to directly provide target rate information to bidders, you can easily configure a standalone column in the bid sheet with the target rates.

You can create and populate the target column offline in the bid sheet using Excel and then upload the bid sheet, or create and populate the column within Sourcing Optimizer on the Columns tab.

For additional information, see Columns tab and Adding an input column.

A target column must be a purchaser-input, numeric, mandatory column. You must enter a target rate for each lot.

This simple and straightforward approach enables a bidder to see the exact difference between their bids and the target rates. However, this may not always be the most effective method for driving bidder competition and maximizing savings.

Target-based traffic light feedback

Sourcing Optimizer offers additional, alternative approaches for target-based feedback which leverage the target rate information to increase competitive tension in your events. Traffic light feedback obscures the exact difference to the target rate and instead offers a green, amber, and red, color-based system to indicate bid performance.

The feedback provided to bidders can be based on their proximity to the target or on their rank subject to them meeting the target. Before configuring traffic light feedback settings, you must first assign the Target column role to the target column in your bid sheet. If you are using traffic light feedback for target-based feedback, ensure that you configure the target column to be hidden from bidders so that they cannot see the actual target values.

For additional information, see Assigning a column role, Adding a feedback column, and Editing a column.

Assigning the Target column role

1. Go to Design > Bid Sheet.
2. Click the Columns tab.
3. In the Column roles area, click Assign roles.
4. Under Target, select the column with the target rates.
5. At the top of the page, click Save changes.

Proximity to target value traffic light feedback

Proximity to target value traffic light feedback indicates to each bidder how close their bid is to the target for each lot. You can configure the percentage threshold for each traffic light color. For example, setting the green light at 5 means that any bids up to and including 5 percent from the target receive a green light for that lot; setting the amber light at 10 means that bids between 5 and up to 10 percent from the target receive an amber light for that lot; and bids greater than 10 percent from the target receive a red light for that lot.

To configure a proximity to target traffic light feedback column, complete the following steps:

1. Go to Design > Bid Sheet.
2. Click the Columns tab.
3. In the Add a column area, next to Feedback, click add.
4. Under Feedback type, click Traffic light.
5. Enter a column name in the Name field.
6. Optional: Enter a column description in the Description field.
7. Select where in the bid sheet you want to place the column from the Placement list.
8. Under Visibility, click Visible to bidders.
9. Under Bid source, click an option for when the feedback is updated. The feedback can be updated after each round or after each bid.
10. Select which formula or column you want to base the feedback on from the Base feedback on list.
11. Under Base traffic light colour on, click Proximity to target value.
12. Configure the traffic light feedback settings by entering the threshold values in the Green rank bracket ends at and Amber rank bracket ends at fields.

Bidder rank subject to meeting a target traffic light feedback

Bidder rank subject to meeting a target traffic light feedback indicates to bidders whose bids have met the target what rank set they belong to for each lot. You can configure the threshold for each traffic light color. For example, setting the green light at 3 means that bidders who are ranked first, second, or third receive a green light for that lot; setting the amber light at 5 means that bidders who are ranked fourth or fifth receive an amber light for that lot; and bidders who are ranked from sixth upwards receive a red light for that lot.

To configure a bidder rank subject to meeting a target traffic light feedback column, complete the following steps:

1. Go to Design > Bid Sheet.
2. Click the Columns tab.
3. In the Add a column area, next to Feedback, click add.
4. Under Feedback type, click Traffic light.
5. Enter a column name in the Name field.
6. Optional: Enter a column description in the Description field.
7. Select where in the bid sheet you want to place the column from the Placement list.
8. Under Visibility, click Visible to bidders.
9. Under Bid source, click an option for when the feedback is updated. The feedback can be updated after each round or after each bid.
10. Select which formula or column you want to base the feedback on from the Base feedback on list.
11. Under Base traffic light colour on, click Bidder rank subject to meeting a target.
12. Configure the traffic light feedback settings by entering the threshold values in the Green rank bracket ends at and Amber rank bracket ends at fields.