While the use of competition between suppliers offers a simple and effective route to savings through allowing a number of suppliers to compete over a given range of equipment / commodity – a lack of clear process and robust information can result in issues.
Competition works best with both a clear specification of requirement coupled with a clear process of how the competition / tender will work including a suitable supplier scoring method.
The tendering process can become overtly complicated and messy for a number of reasons – namely :-
Supplier Pre-qualification
Your process may include supplier down selection prior to tender issue. This enables you to review the market place first – inviting potential candidates to apply before measuring key requirements you might have on that supplier (for example capability, quality, process etc). Often this stage is carried out by utilizing a pre-qualification questionnaire which is sent to suppliers and then reviewed on completion. Where problems occur it is usually down to unclear ambiguous questions which are subjective at best. It’s crucial to ensure you waste neither the suppliers or your own time and ensure any pre-qualification questionnaires are targeted concise and relevant to the package being tendered.
Vague specification documentation
Tenders often hinge on the business need or requirements and its crucial that you convey your business need in clear and precise detail. Ambiguity can result in either each supplier trying to do their best resulting in different interpretations or swamping you with questions – both of which result in your evaluation and award far more complicated than it needs to be.
Feedback and FAQ
Ensure that you have suitable points of contact available for questions and issues that might arise from issuing the tender. Ensuring that you have the correct support structure in place to clarify any details is vital to the success of your RFP – without you might find suppliers that do not submit a proposal!
Selection criteria
Selection criteria should be considered at the beginning of the process – ideally ensure that your suppliers complete their proposals in a standard format that can be easily scored and compared against each other – where you may have a number of requirements you should break these down into appropriate sections – where the quotation might be formulated from a number of different inputs (e.g. materials and services) consider what weighting will be applied to each.
The purchasing function typically acts as the interface between the customer (internal or external) and suppliers. Purchasing’s primary role of taking a business requirement – finding a supplier, negotiating a deal and then ordering the item is hinged on that first step – without knowing what’s really needed – costs can be far higher than required and the purchasing process inefficient.
Specification can be attributed in two ways, attributes related to things – (i.e. the part, component or raw material) and actions (functions, processes, ,procedures, services, performance)
Let’s consider this practically:
Requisition 1) A loose specification – “I want something to drink my coffee out of”
Requisition 2) A tight specification – “I want a red cup to drink my coffee from – it must be no more than 15 inches high – and it must have a white handle – it must be microwave safe.”
Consider in the above simple example that both orders want things (a cup) but they want different attributes. Requisition 2 enables the buyer to measure the market against specific needs and where he can achieve cost reduction it’s done directly against the specification without detriment to the fit form and function. Requisition 1 provides the buyer with much more scope however there is the chance that the person who raised the requisition may well change their mind / refine the specification as quotes begin to arrive.
Once the item is delivered the specification can be used to compare the delivered item to what was ordered. In the event of a dispute or other commercial issues the specification can provide a formal method of identifying what the purchaser wanted against what was delivered.