SIG University Certified Sourcing Professional (CSP) program graduate Karina Swanson discusses the RFx process and how it allows you to analyze real-time market dynamics to ensure you are receiving the right service or product.
There are several reasons you may be considering an RFx strategy as the correct process to pilot for your business. If so, I highly recommend taking a closer look at your portfolio and ask yourself these questions:
- Have you seen a pricing change in the last 12 months?
- Do you have a diverse number of suppliers?
- Do you see small gaps in pricing from dual or multi-sourced products or services?
- Is your portfolio consolidated?
- Have you eliminated all risk factors from your portfolio?
If you answered “no” to any of those questions, then launching an RFx will bring value to your business.
RFx is a term used to describe multiple types of requests. Choosing the right requests for your business is dependent on your end goal. Start by having discussions with your team and stakeholders to identify what you aim to accomplish.
If you are looking for a general understanding of services or products, you can launch a Request for Information (RFI). Most people use this as the first step in their RFx strategy to evaluate their suppliers’ capabilities. An RFI is a useful tool to involve new suppliers on a new project, assess the market for better suppliers, create a short list of suppliers for your portfolio or the next phase of your strategy.
A Request for Proposal (RFP) is sent to specific suppliers (possibly your short list) requesting a solution for specific problems and gives suppliers the opportunity to bid on your services or products. This request also allows you to evaluate the supplier’s skills.
When managing standardized products or services, a Request for Quotation (RFQ) is the simplest approach. Once you know exactly what you need from your suppliers, you will provide them with a detailed list or description of all the items or services. The hope here is to receive competitive bids. By launching your demand and giving every supplier the same timeframe to submit their proposals you demonstrate to them that you are a fair customer.
Benefits of the RFx Process
All three requests allow you to send inquiries to a small or large group of suppliers, making it clear to them the potential of competition. This is the exact position you want to be in to analyze real-time market dynamics and ensure you are receiving the right service or product at the right price.
This strategy allows for an organized and structured approach when receiving a formal reply from suppliers. There are numerous software options available that will provide a step by step guide to building your RFx. You can also create a bid sheet and questionnaire in Excel and send it via e-mail. Either way, each supplier will receive the same formatted template that will allow you an apples-to-apples evaluation.
An added bonus is the time you save. Instead of holding multiple meetings with each supplier to review the company, capabilities, products, services and pricing, one RFx is sent to all suppliers at the same time. In return, this allows you to evaluate everything at once, provide feedback and launch your changes sooner. All bids can also be saved in your records as a reference.
No matter the request you choose, you will either learn more about your market dynamics, receive savings, or launch creative solutions to your business. Once you complete your first RFx and see the positive outcome to your category, you can implement this process as part of your business strategy every 12 to 14 months depending on your business needs.
The Certified Sourcing Professional (CSP) program is a 10-week course that focuses on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
I started my career working for the Minneapolis Public Schools managing their free and reduced program. Within that position I launched several grants to increase the opportunities for healthy meals in the school system. I later transitioned to a sourcing specialist role for Target Corporate where I managed the purchase orders and pricing entries for several different clothing departments. My interest in a career as a sourcing lead was sparked as I grew in this role. I accepted a job with the Valspar Corporation as a corporate buyer managing indirect corporate and marketing spend. This position brought about a whole new way of sourcing and interactions with my stakeholders. Eventually Valspar was acquired by Sherwin-Williams and I accepted my current role with the company as a sourcing manager for the additives raw material division.