Evaluating your Spend

Evaluating SpendEvery business needs to be constantly evaluating spend regardless of how big your company is. What does it mean to be evaluating your spend? If you asked your accounting department to provide a list of the top 20% vendors in relation to how much money you spend with them annually this would be the start of how to evaluate spend. This list of suppliers should represent close to 80% of your operating budget spend.

Prudent business owners will dedicate a large portion of their time or their purchasing department’s time analyzing this 80%. These are the target vendors you need to be keying in on. Requesting price concessions for your guaranteed or long term business, requesting they partner with you to provide productivity improvements and so on.

There are multiple ways to approach this:
1. Gather specific details on this spend. How many widgets am I buying of a specific product in a 12 month period? This is known as your annual usage. What is our cost to procure these items? Is there a better quality product which will perform the same function and reduce operating costs? Are there other vendors that can provide a similar material or service?

2. Approach your existing vendor directly or by way of a RFQ and request firm pricing for a 12 month period. In exchange for this commitment, you are asking for preferred pricing. This does two things, stabilizes your costs for the next 12 months; reduces ordering costs as items can be covered under a standing order contract.

3. Competition is the best way to achieve fair market pricing for goods and services. To achieve this you would need to issue a Request for Quotation (RFQ) for the above item(s). If your spend warrants, you should do your homework and pre-qualify vendors for these items. Ensure they are of similar quality by asking for samples and get a sense whether these suppliers can meet price and delivery timelines based on your existing requirements. No use getting something for 10% less than what you are presently paying if the new vendor cannot deliver.

4. It gives the vendor comfort knowing they have your business for the next 12 months in exchange for better pricing. By granting them a contract for the next year, the expectation is the vendor would guarantee they carry relevant inventory in their local branch which would then allow you to reduce on-hand inventory. In this instance you are reducing carrying cost, cash outlay for inventory and achieving preferred or reduced item unit costs. Savings all the way around!

Issuing a RFQ (Request for Quote) to determine present market pricing is always the preferred way of doing business. It is ethical, transparent and begins to condition your suppliers of your intention on watching your spend. It sends the message that your company is focused on ensuring you are receiving the best possible product at the best possible price.

If creating a RFQ to help manage costs is now on your radar, there are many sample RFQ templates available on-line or the team at RFQPro would love to help you get the ball rolling.

See a list of our templates and forms by visiting our In the Pack Page

Here is to your success — Mark.

How effective are your RFP’s?

How Effective are your RFP’s?

That is the question and unfortunately many professionals do not have this question on their radars. They often roll them out the door not truly realizing how ineffective they are.

Request for Proposals are quickly becoming the go to procurement form. They are on the rise because more and more companies are using them for all kinds of project work. Whether this is the right form they should be using for the task at hand is another blog post altogether! In this post we are going to focus on how to improve the effectiveness of your RFP which will help you produce the desired results and how to write a RFP without spending extensive amounts of resources.

To get right to the point, you will save time, money and energy if you focus your efforts on the content you include in your RFP. Increasing and including the correct content will increase its potential for success.

What determines the effectiveness of the RFP you have spent hours developing?

  • Is it the number of questions your supplier’s ask during the response period? YES, if you are getting lots of questions then the Statement of Work is not detailed enough.
  • The actual number of quality vendor responses received?  YES, responding to a RFP is expensive and vendors will put in the effort to provide a quality response if the deliverables are clear. A win for both parties.
  • The prices quoted by your vendors? YES, this will be a factor. If your RFP content is clear the quoted prices will reflect this. Removing unknowns will reduce costs.

[Read more…]

How our Quotation Forms can Help

Creating a procurement form from scratch is not in every business manager’s top 20 list of items they want to be doing at work each day. For most of us, it is not even in the top 100! Purchasing people are results oriented…they want to be reporting to management on $ savings, contracts, trends and not that they spent their day writing a tender.  The RFQ and other procurement related forms are important and do require an attention to detail. Is there an easier way to accomplish this task so you can spend your time on more fruitful projects?

At RFQPro.com we supply sample Procurement Templates for a variety of potential quotation requirements and this is how our quotation forms can help you in your day to day tasks.

Here is a link to the list of some of the forms we offer: http://www.rfqpro.com/pack-breakdown

In this list you will notice we provide both generic and specific types of tender documents which can be used [Read more…]

The Dreaded RFP Response

Dreaded RFP Response

As a vendor or supplier of product or services, one of the biggest challenges you have in today’s marketplace is finding the time to respond to all the information requests you receive from your customers in any given week. Your responses need to be professional, representative of your organization, accurate and detailed enough to ensure you are shortlisted for potential projects.

Information requests might be for price and delivery, product specifications, tenders or quote requests and even the dreaded RFP response which is likely the most time consuming task out of all the inquiries presently filling up your inbox. RFPs are on the rise because more and more companies are using them as a catch all for dealing with requirements the purchasing department receives from internal departments.

If the purchasing department does not receive a clear scope or specification on a need, they will often use a RFP to solicit a response and hopefully a solution from a vendor. What is often over-looked by the Buyer is the amount of time and effort the Vendor has to put into generating a worthy response and you cannot blame them as they have enough fires of their own to put out and most supplier’s understand responding to a request for proposal is a cost of doing business. Are there ways to mitigate the cost of responding to RFQ’s and RFP’s?  Yes and no and we will address this piece shortly.

As a vendor you should keep track of your success rate and the approximate cost of preparing your response. If you are spending $10,000 to submit a response and being awarded a $150,000 contract then you can clearly justify your ROI. If you are spending the same $10,000 to be awarded a $15,000 contract then not so much unless it leads to further work or a long term relationship with a new client.

I am not sure most companies can answer how much it costs to deliver a RFP response or tender call however I do know that if they can find a way to do this quicker, save money and achieve better results then everyone would consider doing it. Having a clean versus cluttered response is a start and taking the time to have more than one person review the RFP request are two solid ways of improving your chances. Each RFP response you craft requires a specific or unique response however some of the pieces and verbiage used in the response can be cookie cutter.

Your company references, testimonials, company bio, contact coordinates, past project successes, financials, safety and equipment lists can be prepared ahead of time. Other areas like your cover letter can also be saved in a format which allows you to tweak and go. All these pieces will help you get your responses out quicker and quicker means cheaper.

Since 2008, RFQPro has been helping both Buyers and Suppliers succeed with the request for quote and request for proposal process by providing web-based RFQ Software and edit friendly procurement related word templates to help users expedite this process and improve departmental productivity. Why start from scratch?

Vendor Agreements

Agreements – Vendor Managed Inventory

When it comes to the contract portion or contract piece for consignment inventory or vendor managed inventory you will want your form to include details on how the inventory will be managed both by the Consignee and the Vendor.  Items like storage, replenishment, returns are just a few areas you need to cover.

Before we get too deep into details lets clarify or define the parties typically involved in a consignment transaction. Consignee is the business, person, agent, organization which merchandise is consigned or Consignee is the receiver of the goods not yet owned.  Consignor is the Vendor or company which owns the inventory until it is used or sold by the consignee.  Now that we have that straight, lets move into some areas you should address in your vendor consignment agreement.

Inventory Management: Consignee shall store and manage products produced or supplied by Vendor (the “Products”). All products shall be delivered to Consignee on a consignment basis. Consignee and Vendor shall mutually agree on which Products will be consigned to Consignee under this Agreement before the Products are delivered to Consignee’s Facilities. For purposes of this Agreement, all Products which have been delivered to and received at the Facilities shall be referred to as “Managed Inventory”.

Another piece which will need to be negotiated or identified is where you will store or house the inventory

Space Allocation. Consignee shall store the Managed Inventory at the ________________ (location). Consignee reserves the right to store the Managed Inventory at other Consignee facilities or at a third party warehouse location, provided that it advises Vendor of where the Managed Inventory is located and that it bears all costs associated with relocating the Managed Inventory to the other Consignee facilities.

The next part of the contract will address [Read more…]

Vendor Inventory

There are many types of arrangements aka vendor contracts you can enter into with your suppliers. If you are looking at employing a partnership philosophy, one to consider is Consignment Buying. What is consignment buying or vendor owned inventory? A definition of vendor owned inventory or vendor managed inventory (VMI) is when a supplier (the company you purchase from) maintains an inventory bank in the buyer’s facility which is under the buyer’s control. The buyer assumes responsibility for perpetual activity or accounting for withdrawals or usage of stock from the consignment inventory, payment for quantities used and notification to the supplier of the need to replenish inventory. Verification of quantities remaining in inventory is jointly done at periodic intervals.

This strategy has advantages for both the supplier and buyer. The buyer benefits by having reduced inventory investment which can free up funds for capital or other investments and the supplier is assured supply or captive volume. This type of partnership arrangement is often used in the distribution industry.

Some of the other benefits the buyer gains is it removes or eliminates the risk of obsolescence. Obsolescence is often overlooked and it is when the inventory no longer meets your requirements and therefore is returned or sold as surplus. Under a consignment arrangement, the Vendor still owns it therefore they assume the risk.

There is a cost associated with tying your vendor into a consignment arrangement. You can be assured that you will be paying more for your inventory vs a spot buy for the same goods but as a business owner you have to weigh the pros and cons and make your decision based on your existing financial and staffing requirements. For some, the opportunity of using your capital elsewhere, eliminating dealing with obsolete stock, managing the inventory surpasses the extra cost incurred or paid for vendor inventory.

What should a consignment contract look like? What should be included? Stay tuned or subscribe to our feed as the next post will answer these questions and provide further insight on sample consignment or vendor managed inventory agreements.

RFQ Sample for Telecommunications

RFQ for Telecommunications:

RFQPro template #24 is a 13 page sample request for quote for Telecommunications. When issuing a RFQ of this nature it is going to be much more technical than the average proposal you would issue. In fact, it is all about the specifications so having a third party expert to consult or provide the technical component should be strongly considered. After meeting with all the parties in your organization they would be able to provide a solution which will meet with all the departments and overall companies needs. Keeping this in mind, this template will provide you with a strong sense of what is needed to issue a quotation for a new telecommunications system.

It provides details on Evaluation Criteria, Bid Instructions, RFQ Addenda details, Warranty verbiage, General Terms and Conditions as well as many other standard terms you would typically use.

For the Technical component there is a sample specification which covers installation, system specifications, system requirements, physical characteristics, cabling, VoIP, performance specifications, basic phone features, call processing, warranty and maintenance so much can be gleaned by using this template to help you kick start the process.

Not all organizations would have in-house expertise available to assist in crafting a RFQ of this nature so stick to your strengths and ask for direction where needed.

Let RFQPro.com help – this RFQ Sample for Telecommunications is included in our Premium Pack (90 plus templates) and in the Mega Pack.

Evolution of the RFQ

Evolution of the RFQ:

Acronyms are becoming a part of everyday purchasing lingo. Here are just a few we are becoming accustomed to: TCO, RFQ, RFI, RFP, LOU, LOI, ABC, SPC. It does seem like every year there is a new term being introduced into the purchasing arena. For the experienced purchasing agent, the most familiar of the above terms would be the RFQ and it is a document which has evolved and become more complex over the years.

Well TCO is Total Cost of Ownership, SPC is Statistical Process Control and it is used in manufacturing, ABC relates to classification of your inventory and RFQ is a Request for Quote.   The good old RFQ which all of us COP’s – Crusty Old Purchasers understand very well as it was the only document utilized in early purchasing. A request for quote has been around the longest and in the old days everything went out or was issued as a request for quotation or quote. It was sometimes called an invitation to quote or invitation to tender and these both are part of the RFQ family.

Then came the RFP which is a request for proposal. This is where the vendor [Read more…]

RFP for LTL Freight Services

RFP for LTL Freight Services:

truck_servicesSelecting a freight broker or transportation service provider is one of the most important decisions you will make for your organization.
Why? Because in the event orders are not delivered on-time you will have potentially lost a customer if you are a supplier and if you are a buyer you could be in for production delays which equate into profit loss. Like it or not freight shipping services can make or break your business and they are an integral part of the supply chain.

The Bureau of Transportation Statistics in the USA reported that the trucking and transportation market on a typical business day ships approximately 43 million tons of merchandise, valued at about $29 billion, moved almost 12 billion ton-miles on the nation’s interconnected transportation network.  These statistics imply the significance this industry sector has in regards to transporting our goods. In fact, if it is shutdown for any period it can cripple a country and your business.

Designing a request for proposal for Less than Truckload (LTL) services might include some of the following details: [Read more…]

Vendor Contracts

Vendor Contracts:

vendor_contractThere are many types of vendor contracts a purchasing manager will encounter in their day to day tasks. Service, consultant, supply,  inventory, blanket order, equipment, standing order contracts just to name a few. All are different and each one is unique in respect to what you are trying to accomplish.

Service Contract – This vendor agreement might be used for a contract employee providing a specialized service to your organization. The focus of the service agreement would likely be the hours of work, hourly rate and actual service areas this individual would be responsible for.  [Read more…]