The Dreaded RFP Response

Dreaded RFP Response

As a vendor or supplier of product or services, one of the biggest challenges in today’s marketplace is finding the time to respond to the constant stream of information requests arriving in your inbox each week. Your responses need to be professional, representative of your organization, accurate and detailed enough to ensure you are shortlisted for potential projects.

These information requests may include price and delivery inquiries, product specifications, tenders or quote requests, and-most time-consuming of all-the dreaded RFP response which is likely the most time consuming task out of all the inquiries presently filling up your inbox. RFPs continue to rise in popularity because many organizations now use them as a catch all tool for handling internal requirements submitted to the purchasing department.

When the purchasing team doesn’t receive a clear scope or specification, they often issue an RFP in hopes that a vendor will propose a solution. What is frequently overlooked by the Buyer is the amount of time and effort required for the Vendor to prepare a strong RFP response. You can’t blame them—purchasing teams have their own fires to put out—and most suppliers accept that responding to a request for proposal is simply a cost of doing business. Can you reduce the cost of responding to RFQs and RFPs? Yes and no, and we’ll address that 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. While every RFP response requires a unique approach, many components can be standardized.

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 editable procurement related word templates to help users expedite this process and improve departmental productivity. Why start from scratch? Visit the RFP Response Page for more details.

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

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.