Managing a procurement process through spreadsheets, PDFs, and emails can work for a period, however, for many organizations the time will eventually come to invest in a Request for Quote (RFQ) Management System. Without a dedicated supplier bidding software solution, many things can fall through the cracks, deadlines can be missed, and critical pieces of information can be misplaced. This is in addition to the difficulty in accessing historical spending data and overall lack of transparency into the procurement process without a dedicated RFQ software solution.
RFQ Software, also known as eBidding software, is an electronic form of document used by a buyer to request pricing and other terms from a supplier for their products & services. RFQ software provides an electronic form of this document that a supplier can use to input their pricing, lead times, and other relevant contract terms. Then, unlike with spreadsheets and emails, the supplier does not have to fill out a spreadsheet or PDF form nor do they have to worry about sending an email with all necessary attachments. The buyer also does not have to worry about downloading the attachments from the suppliers email, opening each document, and then copying the relevant information over to another spreadsheet for comparison. Instead, the supplier can simply log into their online portal, view all their RFQ opportunities, submit their pricing electronically and all of the information will be automatically sent to the buyer.
This streamlined RFQ process can help better facilitate competitive bidding amongst suppliers, ensuring the buyers get the best pricing and terms – while also ensuring real-time, secure, and accurate transmission of information between all their supplier partners.
Gather Requirements: The first step is to gather requirements. These include the part numbers, part description, unit of measure, quantity required, need-by date, terms & conditions, and any relevant technical data, such as an engineering drawing if it is a build to print part.
Select Bid List: Once the requirements are understood, the sourcing team must analyze the capabilities in their supply base and identity which suppliers they feel are most suited to meet the set of defined requirements. Among things to consider are the supplier’s technical capabilities, current capacity, project management abilities, and financial health.
Send Out RFQ: The RFQ document is then sent out through the procurement bidding software system to the suppliers on the bid list. The buying organization is responsible for defining when the due date is for RFQ responses. The response deadline should be enough time for each supplier to adequately review the requirements, but not substantially more than the supplier would need.
Receive & Analyze Responses: After the bid deadline has occurred, the sourcing team can review and analyze the responses. RFQ Management software makes it easy for sourcing teams to review several competitive bids against one another.
Identify Best Value Supplier: Many RFQ Management systems have formulas that can be programmed to automatically calculate the best-value supplier based on a mixture of pre-determined weights of various relevant factors including price, lead time, quality and on-time delivery. This is critical because best-value suppliers may not necessarily always have the lowest price. Once all things are considered including lead-time, quality, and performance, it may very well be the conclusion of the sourcing team that the most expensive supplier is the best value.
Notify Unsuccessful Bidders: Once the best-value supplier has been selected and awarded, the unsuccessful bidders should be notified. The eBidding software will typically do this automatically once the selected supplier is awarded in the RFQ system.
Automated RFQ Creation: Procurement bidding software should be able to automatically create an RFQ for all selected suppliers based on a purchase requisition with the click of a button. This includes all the logic to transmit the purchase requisition information to the RFQ. The buyer can then make modifications to the RFQ, such as revising the need-by dates or technical data as needed.
Supplier Management: Perhaps one of the most critical pieces of an RFQ Software platform is managing the suppliers on the platform. The suppliers must be able to create their own accounts, login to their portal, view all their eBidding opportunities, and respond to buyer requests. This requires that the online RFQ software to be intuitive and easy to set up for the supplier. This also includes all communications that go out to the supplier including emails sent to suppliers to notify them of an opportunity available in their queue.
Real-time Bid Comparison: Rather than having to manually compile information from multiple documents, eBidding software allows for the simple comparison of pricing and terms in real-time.
Technical Data Management: The extent to which technical data plays a role varies from one procurement to another, however, RFQ software should have the ability to securely store and transmit required technical data to and from the supplier.
Reporting & Analytics: It is also important to have historical supplier bid data for consideration in future RFQ opportunities. If a supplier is consistently competitive, then they will typically be a good supplier to continue inviting. In contrast, if a supplier is consistently very far off the mark, then it may be an indication that these types of requirements are not in the supplier’s set of core-competencies at the present time.
Organizations that adopt RFQ software can expect numerous advantages, including:
Cost Savings: Competitive bidding ensures businesses receive the best pricing and terms. Further, buyers can easily compare all pricing, terms, and delivery terms side-by-side or even through an automated formula that can calculate best best.
Time Efficiency: Automated workflows reduce manual tasks, speeding up the procurement cycle. Create, updating, and spreadsheets takes a great deal of manual effort. Then trying trying to keep track of all documents transmitted to and from suppliers can cost additional administrative time.
Improved Supplier Relationships: A structured bidding process fosters better communication and collaboration with suppliers. Inviting and collecting quotes for multiple packages across multiple suppliers can be a disjointed process that leads to miscommunications between buyers and suppliers.
Enhanced Accuracy: Digital RFQs minimize errors and inconsistencies often found in manual methods. Manually updating spreadsheets, PDFs, and emails is bound to run into human errors eventually. Software systems have been in checks and rules to prevent many common human errors.
Greater Transparency: The centralized platform ensures fair competition among suppliers and provides an audit trail for accountability. It will be incredibly useful to easily access information from historical procurements for multiple use-cases including insights analysis, auditing, or simply an ad hoc request.
One of the key considerations when deciding among various RFQ management solutions is the number of users an organization will have, which systems it will need to integrate with, and how many workstreams and user roles need to be available. Large organizations typically require software that can support thousands of users and integrate into a myriad of diverse systems. In contrast mid-size and small businesses often need much fewer users with much simpler workflows.
One other consideration is the cost of a system and the pricing model. Large systems typically have a fixed multi-year contract that can be difficult to adjust based on actual usage. In contrast other systems can offer per-seat pricing or even usage based pricing whereby an organization may hardly have to pay anything in periods with a low volume of business. This can be especially helpful for a seasonal business or a business with a product lifecycle such that there are periods of time with high volumes of goods procured and subsequent periods with low volumes of goods that need to be procured.
Lasso is an online RFQ software solution that offers intuitive workflows for buyers and suppliers. Buyers can easily gather requirements from requisitions, manage suppliers, select a bid list, analyze quotes, and award a contract to the best-value supplier. Lasso is also free to start – create your free account and get started with Lasso!
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