When to use RFI, RFQ, e-auction and when to combine

When to use RFI, RFQ, e-auction and when to combine

The Promitea purchasing software offers three basic tender types and their combinations. Each is suited to a slightly different type of purchasing problem and it's definitely worth reminding yourself when to use which one. It's not rocket science.

RFI - Request for Information: if your company does not conduct enough RFIs, something is wrong, because RFIs can be described as market research, "pre-market consultation with suppliers" and are used to clarify the need, identify potential suppliers, sharpen technical specifications, obtain information on price levels, etc. At this stage, the buyer does not want a fixed price offer or a precise technical solution, but wants to understand what he is actually buying and what options the market offers. Promitea allows this whole process to be computerised and made available to all members of the cross-disciplinary team, so that everyone can see and work with the information from suppliers in real time. RFIs should be used whenever we are buying something for the first time or there has been a significant shift in requirements or technology.

The willingness to conduct frequent RFIs and the ability to conduct quality RFIs separates great buyers from mediocre ones. Because only a fool knows everything, whereas a smart guy always takes advice. I recommend getting a report on ongoing RFIs run at least once a month (in Promitea it is generated automatically on all types of tenders).

RFQ - Request for Quotation: this is a classic tendering process where we issue a classic request for quotation, invite suppliers to tender, send them the technical specification and commercial requirements, obtain specific quotations, evaluate them, select the best supplier, submit our recommendation for approval and then create a contract and purchase order and implement the purchase. The tender process can have one or more rounds, depending on our strategy. For new purchases, we typically start with an RFI, once we know what we need, we create the final specifications and implement the first round of RFQs. Then, for larger purchases, we negotiate final price, technical and commercial terms with suppliers in a second round of RFQs, and for major purchases we may still conduct an E-auction.

If your company implements all RFQs in the same way, you have a problem and are leaving money on the table. That's because modern purchasing is based on a well-thought-out purchasing strategy that takes advantage of every opportunity to get value for money-sometimes it's sealed envelopes and "one shot," other times it's multiple rounds of negotiation, and sometimes a competitive mechanism in the form of an e-auction works best. And for the most essential tenders, you should use the whole gamut.

E-auctions: twenty years ago it seemed that electronic auctions would dominate the world of corporate purchasing. However, their potential was only fulfilled for very specific types of fulfillment: standardized, high value-added components and a large number of suppliers. The principle of e-auctions is to gradually reduce prices as suppliers compete for the best bid (market mechanism). Typically, e-auctions take place within a short time frame (about 5-15 minutes) and can be extended if necessary, in the event of a large competitive battle. They can compete on price only or multi-criteria. In addition to traditional auctions, there are also so-called ticker auctions, which are used in a less competitive market where suppliers do not see bids from competitors. The biggest advantage of e-auctions is the shortness, transparency and use of competition. But it is not suitable for critical and strategic commodities where e-auctions can spoil the relationship with the supplier.

Each company has purchasing categories where e-auctions are most appropriate. If you're not using this tool at all, you're leaving money on the table. Promitea offers standardized templates to set up an e-auction with just a few clicks.

From the preceding lines it is evident that the form of the inquiry procedure has to be very carefully thought out with regard to the category being purchased, the novelty of the purchase, and the objectives of the contracting authority. A good purchasing software must offer these three basic types of RFPs and a combination of them.

Give us a call and let's talk if Promitea is the right solution for your inquiry.