By Kevin Iwamoto, Senior Consultant
Having been both buyer and supplier in my diverse career, I have firsthand experience and opinions about the value and use of corporate sourcing standards such as the request for proposal (RFP), the request for information (RFI) and the request for quote (RFQ).
All three have been used globally for decades to obtain relevant information from potential suppliers and are meant to create and establish a fair and equal weighted process where all vendors, incumbent and potential, have a chance to become a “preferred” supplier for a corporation. They have been instrumental in enterprise risk mitigation, process standardization, cost savings and cost avoidance.
Sending out such requests has been automated over the course of several years, allowing for less manual processes and human errors, and better resource management. This technology has been a blessing for many, especially in procurement, but contrarily has been a nightmare for suppliers — especially those whose services and products are not purely transactional. But it doesn’t stop there. I’ve witnessed the use of RFPs, RFIs and RFQs becoming blurred from their original intentions, as in the RFP “spamming” of hotels and venues that have spiraled out of control. This practice alone has resulted in many hotels and venues needing to hire more people simply to process and respond to the influx of electronic requests.
Technology suppliers in this transactional space have also created challenges for the supplier community in terms of having to learn how to manage and respond to the various new formats. In addition, there has been an increase in independent and third-party planners and intermediaries, all adding to the volume of RFPs put into the system and requiring responses.
Replying to RFPs, RFIs and RFQs is time consuming and very costly for suppliers from a resource management perspective. Indeed, both buyers and suppliers acknowledge that the current RFP process is spiraling out of control. It causes stress and sometimes even the loss of integrity in the buyer-supplier relationship.
As the lines have become blurred and confusing, here’s a recap of definitions to refresh everyone’s memory and help bring back some clarity to the sourcing process.
Request for Proposal
An RFP is a document fashioned by an agency or company interested in the procurement of a commodity, service or valuable asset and sent to potential suppliers, requesting that they submit business proposals based on a variety of qualification questions. These questions usually cover a gamut of details about the supplier, their products and services, legal terms and conditions, pricing and overall ability to meet the needs of the sender.
Request for Information
An RFI is a request for written information about the capabilities of a supplier and usually sent to a variety of vendors in a format that can be used for comparative purposes. It is best optimized by using 100 questions or fewer that prequalify which suppliers move to the next finalist stage of an RFP or in some cases an RFQ.
Request for Quotation
The purpose of an RFQ is to invite suppliers into a bidding process to provide specific products or services. This typically involves more than a simple price per item.
We should all make a commitment to stay within the standard guidelines of all three sourcing strategies and processes, so that both buyers and suppliers can mutually benefit from the original intent of these procurement requests. Take a moment to review what strategy to use for your corporate sourcing process, and most importantly, understand the time and resource impact to both parties when issuing an RFP, RFI or RFQ.
In part two of this blog post, I will write about the trend by suppliers to not actually bid when responding to RFPs, RFIs and RFQ.Back to all news