We all are aware of the fact- how big the procurement management process is. There are many complex and sophisticated area of concept in e-procurement services that are difficult to decode for purchasing managers, such as Request for Proposal (RFP) and Request for Quotation (RFQ).
What is the difference between RFP and RFQ?
Rather than explaining, let’s start with the issues RFP and RFQ solves.
Let us consider two situations where RFQ and RFP show how useful they are:
- In case an equipment breaks down and the engineers show the part that should be replaced. There are 4 suppliers that supply the same part of different brands with specific costs and other conditions?
In the above scenario, the Request for Proposals (RFP) will help us. RFP is a document that analyses the needs (goods and services) and accordingly sent it to the potential suppliers. RFP helps us to figure out who is providing the best price, terms, payments, delivery condition etc.
RFP is basically a simple document in Microsoft Excel or a web page where provider/ supplier can fill in his condition and terms.
- In this case, an IT-organization needs to purchase 2000 T-shirts with a corporate logo for the annual corporate meet. They are already in talks with 3 printing houses to buy branded pens, glasses, and notepads. Now, who is the best to buy the T-shirts from?
In this scenario, everything is more straightforward. RFQ enables you to send a request to suppliers and inquire them about the prices. It implies particular products in a specific count. Therefore, you can pick the supplier who is best suited for this supply.
You can fill in RFQ and RFP at office applications and sent them to suppliers or use a simple software.
In here, let us describe how such records are made in an organization:
Need: Initiators make a request for required goods and service to perform work.
Coordination: Such requests for are regularly submitted by supervising officials and after approval, this proceeds to the procurement division.
Create RFQ/RFP: The Procurement division gathers data from the initiators and based on this, prepares a request for proposals & quotes and sends it to suppliers.
Getting solutions: The Procurement Division analyses the responses from the suppliers and picks the best suited for the working condition.
Placing an order: Based on the response from the successful bidder, the purchasing department structures and place the order or starts the procedure for signing the agreement, in case it hasn’t been signed yet.
The issues faced by the purchasing division
- Manual collection of requests and combining proposals.
Working in Excel, email, Skype and other unacceptable devices may end up in errors, more time has to be spent on the collection of approvals, which have moderate performance in comparison and response time to suppliers.
Result: failure of work and loss of orders affect the organization financially.
- Manual proposal comparison.
The employees have to spend a large proportion of their time in working with approvals, manual comparing and in addition the inquiries in the phone and via email, making their work less effective.
Result: Selecting inadmissible suppliers, wasting time looking at the proposals.
- Manual order approval and placing.
You can make as many orders from one selected supplier proposal, say from 1 to 1000 depending on your needs. On an average note, it takes about 1 hour to place and approve an order manually, so it takes about 1000 hours to complete 1000 orders.
Result: Time wasted by the employees on agreeing on the terms and condition with the suppliers, increasing the delay.
To take care of these issues you can utilize a procurement solution/ software that automates the procedure and spares time and nerves of your employees. Such procurement solution/ software enables you to cover the entire RFP or RFQ process from collecting purchase requests, preparing and compare the supplier proposals on one screen and automated creation and notifying the update to the selected supplier.
Simply analyze the result of manual work and multiply by 80%. This is how much time you can spare if you take care of the issue on time and utilize a unique online service. To know more about procurement process and the advantages that an organization could earn from such services, Contact us.