Help Home/Creating Negotiations
Generally you award business to the supplier who responds with the best price. But sometimes other negotiation attributes may be more important. For example, the date by which a supplier can supply a negotiation line may be more important than simply the price being offered. Or the best response may be from the supplier who can supply the largest amount of the line quantity you need even though the price is not as good as that offered by a different supplier.
When creating your RFQ or auction, you can select from two different types of response ranking: Price Only or Multi-Attribute Weighted Scoring. Multi-Attribute Weighted Scoring allows you to enter scores and weights to line attributes, Quantity and/or Need-By Date. Based on how a supplier responds, the system calculates a total score for the response. Responses are then ranked based on a ratio of price to total score. The lower the ratio, the more desirable the response. Note that you can still award the negotiation to any response or multiple responses regardless of the rank determined by the system.
The rank indicator is displayed to the buyer and suppliers and is selected by the buyer.
Planning weights and scores:
Identify the important attributes of your negotiation.
You can only score attributes which are defined as Required. For each attribute you wish to score, identify all the possible responses you will accept and group them into acceptable Quote/Bid responses. You can enter as many acceptable values as you need to indicate the importance of the different responses adequately. For number and date attributes, you may enter acceptable ranges. For text attributes you enter text values. These values are displayed to the trading partner in a list of values.
Assign each acceptable Quote/Bid response a score, with 100 indicating the most desirable and 0 indicating the least desirable response. Different Quote/Bid responses can have the same score. Scores cannot have decimals.
After scoring each acceptable Quote/Bid response value, rank the relative importance of the attributes by assigning each attribute a weight. Unlike scores, the sum of the attribute weights cannot total more than 100. Weights will be used as a percentage when the system calculates a response's value as explained below. See "Defining Weighted Attributes and Scores for Negotiation Lines" for actual details on defining scores and weights.
How weights and scores are used to calculate a response's rank
Once you have identified the important attributes of your negotiation and assigned them weights and scores, the system uses them to determine the total score for the responses to your negotiation. Since all weighted attributes are required attributes, each respondent must specify a value for that attribute. The system calculates the value of a response as follows:
For each response to a weighted attribute, the system determines the score based on the attribute value scores you defined. For date and number attributes, the system determines which accepted range the value falls in. If the response does not fall in an acceptable range, the response receives a score of 0 for the attribute.
The score determined is then multiplied by the weight assigned to the attribute.
The adjusted scores are added to determine the total score for the response. The total score is then divided by 100 to convert it to a percentage. The price is then divided by the total score to determine the price to total score ratio. The response with the lowest ratio is considered the more desirable response.
Example:
Assume a buyer has defined a negotiation and selected the following attributes to be weighted:
| Attribute | Weight |
| Quantity | 50 |
| Need-by Date | 30 |
| Color (user defined attribute) | 20 |
For each of these attributes, the buyer has also defined and scored all acceptable values:
| Attribute | Acceptable Values | Score |
| Quantity | <1000 | 60 |
| Quantity | > 1001 | 100 |
| Color | Red | 100 |
| Color | Blue | 75 |
Given these definitions, the price to total score ratios for the following two possible responses are calculated as shown, and Response 2 would be designated as the best response even though the bid price for Response 2 is higher.
Response 1:
| Attribute | Response Value |
| Quantity | 980 |
| Color | Blue |
| Price | $250 |
Total Score: (60 * 50) + (75 * 20) / 100 = 45
Price to Total Score Ratio: 250 / 45=5.56
Response 2:
| Attribute | Response Value |
| Quantity | 1200 |
| Color | Red |
| Price | $300 |
Total Score: : (100 * 50) + (100 * 20)/100 = 70
Price to Total Score Ratio = 300 / 70 =4.29