In today’s post we take you through the Request for Quote and the best way to build the best, quickest, and most successful RFQ.
Today’s post is by Heather Powell, Project Manager for SafeSourcing
You have read a lot of information on how to create a successful RFI and RFP. In today’s blog we take you through the Request for Quote and the best way to build the best, quickest, and most successful RFQ.
An RFQ as defined by www.businessdictionary.com is “a document used in soliciting price and delivery quotations that meet minimum quality specifications for a specific quantity of specific goods and/or services. RFQ are usually not advertised publicly, and are used commonly for (1) standard, off-the-shelf items, (2) items built to known specifications, (3) items required in small quantities, or (4) items whose purchase price falls below sealed-bidding threshold. Suppliers respond to a RFQ with firm quotations, and generally the lowest-priced quotation is awarded the contract.”
Though this is the industry standard of what an RFQ means, today we will be digging into each of these to validate their merit. We will expand upon them, heighten them, and discuss how to expect increased value within an RFQ. With online eProcurement tools you can give suppliers an indicator of where they stand and give them an opportunity to lower their pricing should they choose. In standard practice this is done by phone calls or e-mails and one at time. It is very time consuming and does show some lower savings, but not with the rate of success online tools can provide.
Let’s take a closer look at the points to the definition above.
Standard, off-the-shelf items. This is a standard misconception of procurement departments everywhere. The fact is that virtually any product or service can be taken through the eRFx process. We have over 427,000 suppliers within our database to invite to participate in bidding on whatever your items or service may be and we have experience successfully running events in every part of the organization from HR, to Legal, to construction, to IT.
Items built to known specifications. While this is a valid point, it is also the biggest reason why projects are never taken out; no beginning specifications. At SafeSourcing we help build a specification to fit the current need and in those in the future. By covering all of your needs and taking into consideration all of the moving parts that affect your items, for example, freight, fuel surcharges, additional fees, hourly rates to name a few, you can achieve results that are comprehensive enough to allow you to make strong decisions well after the project has been completed.
Items required in small quantities. There are no limits to quantities within the RFQ we help you build. There are no limits at all, including number of items to have the suppliers bid on. That being said there are always strategies that go with every event so that you end up with the most information you can get while allowing suppliers to focus on those areas you are most concerned with. This is part of the service that you should be taking time to consider as you develop your sourcing projects.
Items whose purchase price falls below sealed-bidding threshold. The pricing we recommend within your RFQ would be analyzed by our team based on your historical spend, also taking into account any price indexes that can affect future pricing increases. Using your historical spend and any additional information, a max quote is established that the suppliers must meet first. We recommend a set price decrement, meaning once a supplier inputs their pricing at the max quote or lower, they must lower their pricing by that decrement amount, already showing lower pricing than what you currently are paying or price avoidance of future price increases. This is the start to showing you savings.
Knowing the differences between historical RFQ strategies and changes that are resulting in stronger results is the beginning of assembling the right structure for your project. Tomorrow we will discuss, practically, how this is accomplished.
For more information on how we can help you with your procurement needs or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.
We look forward to your comments.