Details, Details, Details
Today’s post is by Heather Powell, Project Manager for SafeSourcing
As we wrap up this 6-part series on RFx strategies, looking specifically at RFQs the past two days, we will take a look at some strategies that successfully increase the two most important aspects of every project you run; value results, supplier participation. The two are separate but both must be achieved to truly create a successful project.
Today we will focus on how to drive supplier participation in your events.
Details, Details, Details- In the RFQ, send an invitation to potential suppliers containing in a detailed list or description of all relevant parameters of the intended purchase, such as:
• Personnel skills, training level or competencies
• Part descriptions/specifications or numbers
• Description or drawings
• Quality levels
• Delivery requirements
• Term of contract
• Terms and conditions
• Other value added requirements or terms
• Draft contract
By breaking the mold, you can typically have 8-10 suppliers or more participate in your project. They are all actively participating within the RFQ in a set timeframe, which is usually 15 minutes, but can be adjusted with a line item count of over 25 items. Within the 15 minutes, suppliers can lower their bid pricing an unlimited amount of times. Like sealed bidding, suppliers cannot see one another’s pricing. There is only one way they know they have a low quote on an items and that is by a low quote indicator.
Missing Pieces- An easy way to establish your specifications and already have base pricing is from your RFP! Many times you already have a list of suppliers that are educated on entering pricing within the system. The RFQ gives the supplier the opportunity within the live event to see if they have any low quotes and to “sharpen their pencils” to lower their pricing if they wish. From this event you can potentially award a business based on the pricing, or offer another supplier you may feel fit your business better the opportunity to negotiate their pricing closer to what the lowest bidder provided. This is a win-win for you and the future supplier.
Training and Communication – Suppliers should be trained on how to use the eProcurement system, how to place their bids, to look for the low quote indicator, and at the same time communicated with on questions and the pricing and products and services you are looking for. The overall goal is to get the best value for your company, and so suppliers should have an opportunity to enter in notes within the RFQ live event. This additional information can offer you even more additional savings, i.e. if you purchase 1,000 cases rather than 900, additional discounts, or other value added services such as waived for the first 6 months of a 1 year contract if awarded the business. These additional notes can provide and overall benefit, rather than just a low price wins.
If we go back to our original example of owning a building you would like to turn into a distribution center, we have discussed an RFI to understand what your needs could be, an RFP to collect further information and pricing proposal, and an RFQ to compress than pricing from the list of supplier who participated in the RFP. It would be recommended in this last stage to run your line items as a complete list of materials rather than an item by item list, total cost of freight, total installation pricing- which could include teardown pricing or to have it as its own line item. These four items represent the largest spend items of your proposal and have the opportunity to lower your pricing 5, 10, 15, or even 20% from the original RFP pricing.
Determining what stage of the RFx process to begin with and how to assemble those pieces can be a difficult puzzle to put together especially if your procurement team is already swamped. A good Stratgeic Sourcing partner, however should be able to help you put these pieces together in a way that requires less time and resources from your procurement department than doing it yourself. For more information on how we can help you with this process from gathering external and internal data to running RFIs, RFPs and RFQs or for more information 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.