There are complex concepts in procurement that are difficult to decode for purchasing managers. For example, RFP (request for proposal) and RFQ (request for quotation).
What is the difference between RFP and RFQ?
Instead of explaining we’ll start with problems RFP and RFQ solve.
Let’s imagine two situations:
1) Equipment broke down and engineers indicated which part should be replaced. There are 4 suppliers that supply such parts for equipment. What are their prices and conditions?
2) IT-company needs to buy 2000 T-shirts with a corporate logo for the annual corporate. They work with 3 printing houses фтв purchase branded pens, cups and notebooks there. Who is best to purchase these T-shirts?
In the first case, the Request for Proposals will help us. RFP is a document that describes the need (goods or services) and is sent to potential suppliers. It helps to determine who has the best price, terms and delivery conditions, payment terms, etc.
This is a simple document in Microsoft Excel or a web-page where supplier must fill in his terms.
In the second case, everything is simpler a bit. RFQ allows you to send a request to suppliers and ask them for prices. Often it means specific goods in a certain count. As a result, you can choose the supplier with the most suitable price for this supply.
You can fill in RFQ and RFP at office apps and sent them to suppliers or use a simply specific software.
We try to describe briefly how such document is created in companies:
Need. Initiators create a request for needed goods/services to perform work;
Coordination. Such requests are often submitted by superiors and after approval goes the procurement department.
Create RFQ/RFP. The procurement department collects information from the initiators and depending on it prepares a request for proposals/quotes and sends it to suppliers.
Getting answers. The Procurement Division compares the responses of the suppliers’ proposal and chooses the best of the proposed conditions.
Placing an order. Based on the answer from the winner, the purchasing department forms and places the order or initiates the procedure for signing the contract, if it hasn’t been signed yet.
The problems faced by the purchasing department
- Manual collection of requests and merge proposals.
Working in Excel, email, Skype, Slack and other unsuitable tools leads to errors, makes work with the collection of proposals, their comparison and sending to suppliers slow.
Result: failure to work, lost orders entail company money losing.
- Manual proposals comparison.
Collapsing tables, manual comparing, approvals with colleagues and additional questions from email or phone spend a much employees time on routine work. It makes work less effective.
Result: choosing unsuitable suppliers, wasting a lot of time for comparing proposals.
- Manual orders approval and placing.
You can make any number of orders from one selected supplier proposal – both 1 and 1000. For placing and approval 1 order manually, on average you need a working hour, then 1000 orders = 1000 hours.
The result: wasted time of employees, which can be spent on agreeing the best conditions with suppliers, increasing the delay, etc.
To solve these problems you can use special software that automates the process and saves time and nerves of your employees. This software allows you to cover the whole RFP or RFQ process from purchase requests collection, processing and comparison suppliers’ proposals on one screen to the automatic creation and sending orders to selected supplier.
Often the process optimization with help of new solutions seems to us very expensive and too long.
Just estimate the results of manual work and multiply by 80%. This is how much time you can save if you solve the problem on time and use a special online service.