How does the Law of Diminishing Return apply to eProcurement RFQ reporting?

October 10th, 2023

When designing your eProcurement RFQ reporting, Don't ask for more than you need!



Today’s re-post is from our archives at SafeSourcing

My experience with eProcurement RFQ reporting is that procurement team’s eyes are often bigger than their stomachs.  I say that because there are lots of numbers gathered during an eProcurement RFQ.  That data can be sliced and diced many different ways in order to show many different scenarios.  What procurement teams need from an eProcurment RFQ is just a few options.

One option is to look at all of the Low Quotes.  What this identifies is how many vendors would need to be awarded  in order to realize maximum savings.  As an example when  a company has 81 current suppliers and they can now award 14 companies in order to maximize savings it makes good sense to explore this opportunity because 14 suppliers represents an 83% reduction in sources of supply and the administrative improvements associated with that reduction..

A second option  to consider is that of the Low Company.  This  provides a single source of supply option.  In some cases it’s just plane scary to put all of a companies eggs in one basket.  In most cases this option is a reduction in savings compared to the all low quote scenario.

A third option to consider is a hybrid award scenario.  This  takes into consideration low quotes, overall low companies and another potential option like by division or number of vendors.  Typically, the top performers are defined globally and then  an analysis is  conducted by location.  This data shows which of the top companies show the most savings by location.

A final option  might be to identify what savings look like when vendors are selected by division and a split award is considered.  For instance if a company has 10 locations 3 locations are awarded to one vendor  and the remaining  to another.  When you do this type of scenario analysis  savings numbers are typically reduced.

When you apply the Law of Diminishing return to eProcurement RFQ reporting please keep in mind anything outside of what procurement teams need to make the award decision is an over abundance of data.

If you are interested in learning how  SafeSourcing’s team can help your company get the right amount of data in order to make a decision please contact our customer service team.

We look forward to and appreciate your comments


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