Today’s post is from Ron Southard, CEO at SafeSourcing Inc. This post also includes input from the many talented teammates I work with every day and my Whitepaper by the same title.

In  parts one, two, three items 1-4 and four items 5-8 we have discussed  that the world of procurement is continually changing, and this includes the world of eProcurement when it comes to the request for information, a proposal, or a quote and why this process when used properly even with newer tools is still the most effective results delivering procurement process available.

The Request for Quote (RFQ)

A Request for Quote is typically used to solicit price and price related details such as freight, that meet minimum quality specifications for a specific quantity of specific goods and/or services. “RFQs 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 an RFQ with firm quotations, and generally the lowest-priced quotation is awarded the contract.” ⁴

Though the above historically represented the industry standard as to what an RFQ was, it is important to expand on each of the points and understand the pieces from a historical and practical standpoint.  With online eProcurement tools suppliers have an indication of where they stand and an opportunity to adjust their pricing should they choose. In standard practice this is done by phone calls or e-mails and one at time. As such it is very time consuming and does show some savings, but not nearly the rate of success online tools have historically provided.

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.  Strategic Sourcing solutions providers with extensive global supplier databases can invite a number of new suppliers to participate in the bidding process on whatever items or service may be required.  Many will have some level of experience in successfully participating in eRFX events in a variety of functional areas within the organization such as HR, Marketing, Construction, and IT to name a few.

Items Built to Known Specifications. While this is a valid concern, it is also the biggest reason why projects are never taken out to bid; not having specifications or having the time to assemble them.  Working with 3^rd party procurement solution providers companies are more able to cover all their needs, taking into consideration all of the moving parts that affect these items. Such as freight, fuel surcharges, additional fees, and hourly rates.  Results can be achieved that are comprehensive enough to allow strong decisions once the project has been completed.

Items Required in Small Quantities. Another misconception about RFQs are the quantities of items that can be sourced and duration of time for which those quantities are needed.  There should be no limits at all, including number of items to have the suppliers bid on. With that established, however, there are always unique strategies to every RFQ so that the host company can end up with the most complete set of information while allowing suppliers to focus on those areas that need the most attention.  This is part of the service that needs time to be considered as sourcing projects are strategized and developed.

Items Whose Purchase Price Falls Below Sealed-Bidding Thresholds. The recommended approach for pricing within the RFQ should be analyzed based on the historical spend, also taking into account any price indexes that can affect future pricing increases. Using historical spends and any additional information available, a max quote is often established that the suppliers must meet prior to participation. Setting a price decrement is also strongly recommended, and often plays a key role in the strategy as to how you would like to have the suppliers act, giving them the flexibility to make price adjustments they are comfortable with while driving savings as part of the process.

Understanding the differences between historical RFQ strategies and changes that are resulting in stronger results is the beginning of assembling the right strategy for your project.  Strategies that have proven successful in the past generally have similar features in common and drive the two most important aspects of every project, valuable results, and supplier participation.

Check Back tomorrow for our final post of this series the RFQ Details, Missing Pieces and Communication.

If you’d like to learn more and can’t wait for the series conclusion, please contact a SafeSourcing Customer Services associate, they’d be thrilled to hear from you.

Thanks.

Todays post is from Ron Southard, CEO at SafeSourcing Inc. This post also includes input from the many talented teammates I work with every day and my Whitepaper by the same title.

In  parts one and two we have discussed  that the world of procurement is continually changing, and this includes the world of eProcurement when it comes to the request for information, a proposal, or a quote and why this process when used properly even with newer tools is still the most effective results delivering procurement process available.

The Request for Proposal (RFP)

A Request for Proposal (RFP) is a document used in sealed or electronic bid procurement procedures through which a purchaser advises the potential suppliers of (1) statement and scope of work, (2) specifications, (3) schedules or timelines, (4) contract type, (5) data requirements, (6) terms and conditions, (7) description of goods and/or services to be procured, and (8) instructions for preparation of technical, management, and/or cost proposals.  As an example, government RFPs are publicly advertised and suppliers respond with a detailed proposal, not with only a price quotation. They provide clearly quoted specifications for negotiations after sealed proposals are opened, and the award of contract may not necessarily go to the lowest bidder.²

Breaking down each of these 8 pieces of information will help to form an  understanding as to whether there is enough detail to move straight to an RFP,  thus skipping the Request for Information altogether.

1. Scope of Work: This refers to all of the elements that should be included in the proposal for the project and is generally specific to each customer along with the data and metrics provided to shape it. Simply, this is the definition of the needs and expectations for the work needing to be completed.
2. Specifications: “An exact statement of the particular needs to be satisfied, or essential characteristics that a customer requires (in a good, material, method, process, service, system, or work) and which a vendor must deliver. Specifications are written usually in a manner that enables both parties (and/or an independent certifier) to measure the degree of conformance. They are, however, not the same as control limits (which allow fluctuations within a range), and conformance to them does not necessarily mean quality (which is a predictable degree of dependability and uniformity).”³ Generally, specifications will be broken into either performance or technical specifications that define the types of goods or services needed from the vendor community. Developing strong specifications ensures proposals containing exactly what is needed. As a result, vendors will know not to over bid or under bid.
3. Schedules or Timelines: This is the time frame of the expectation of when the RFP is sent to the vendors, when questions (about the specifications or the RFP process) are due from the vendors, when the vendors can expect the questions with answers to be returned, and when the RFP is due to be completed.
4. Contract Type: This defines to the vendor if the contract is a spot buy, a one year, two year, or longer contract. There may also be additional special contractual requirements added within this area.

Tune back in tomorrow when we will explore the Request for Proposal or RFP items 5-8.

If you’d like to learn more and can’t wait for the series conclusion, please contact a SafeSourcing Customer Services associate, they’d be thrilled to hear from you.

Thanks.

Todays post is from Ron Southard, CEO at SafeSourcing Inc. This post also includes input from the many talented teammates I work with every day and my Whitepaper by the same title.

In yesterday’s post we discussed  that the world of procurement is continually changing, and this includes the world of eProcurement when it comes to the request for information, a proposal, or a quote and why this process when used properly even with newer tools is still the most effective results delivering procurement process available.

The Request for Information (RFI)

A Request for Information (RFI) is a request made typically during the project planning phase where a buyer cannot clearly identify product requirements, specifications, and purchase options. RFIs clearly indicate that award of a contract will not automatically follow.¹

An example for use of an RFI would be if a company acquired a used warehouse that needed to be turned into a distribution center. The facility has some racking installed but needs more.  There has not been a defined idea of what layout will be needed to improve the warehouse for DC use, nor what types of rack are needed, how much material is needed, nor how long it will take to install the racking. The existing racking is in adequate shape, but it is unknown whether it is safe, placed appropriately, outdated, or even needed in any way. A situation like this is often a good time to rely on experts to provide feedback as to these needs.  The best practice would be to get a minimum of 3 sets of data submissions, but I would recommend getting 4 to 6 submissions from your request for information from racking manufactures, distributors, and/or installers.

The higher supplier count, in an area where you have no knowledge, provides the necessary data to begin to make more informed decisions.  With at least 3 submissions it becomes clearer if there are major differences between suppliers and how they operate.  Lead time, outsourcing, and geographical coverage are all very important pieces of information to gather from the suppliers at this stage of a sourcing project.

The application of an RFI can be used on new goods for use, re-sale, packaging design, any and all services, software, hardware, equipment of any kind, actually it is limitless as to what you can utilize an RFI for in business.

Tune back in tomorrow when we will explore the Request for Proposal or RFP?

If you’d like to learn more and can’t wait for the series conclusion, please contact a SafeSourcing Customer Services associate, they’d be thrilled to hear from you.

Thanks.

SafeSourcing Inc., a leading eProcurement company offering a complete Procure to Pay suite of applications, has been recognized as one of the World‘s top auction application companies by CIO magazine.

CIO magazine has listed SafeSourcing, Inc. as one of the top ten auction platforms in its recent magazine edition. The article recognizes SafeSourcing as being a one-stop e-procurement and sourcing center, striking a balance of quality, affordability, product, and service.

“A strategic sourcing firm, SafeSourcing is at the forefront of offering a full suite of procure-to-pay tools under the SafeSourceIt™ banner which helps in reducing costs and improving efficiency” ~CIO magazine

CIO sat down with SafeSourcing CEO, Ronald D. Southard, to discuss the company’s value proposition, solutions, customer base, and future plans. In addition, the featured article elaborates on how SafeSourcing plays a role in e-procurement and how it accelerates efficiency and innovation.

SafeSourcing, Inc. provides cost effective tools under the SafeSourceIt™ product family that allows companies to dramatically reduce cost of goods, capital spending, and expenses in a timely manner while also reinforcing environmental and product safety programs. Focus is placed on a company’s entire spend for all products and services.

SafeSourcing’s early stage client engagement is specifically focused on cost reduction through the use of a white glove service based  on a detailed six step process using the SafeSourceIt™ e-RFX application suite.

Please visit www.safesourcing.com in order to  learn more.