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Friday, April 25, 2014

Looking at RFI with a Fresh Set of “I”s

Kelly_Barner_2013There are numerous tools available to run strategic sourcing projects, but they are not all used with equal frequency. One of the least leveraged tools, or “event types,” is the Request for Information, or RFI. Joe Payne and William R. Dorn, authors of the book Managing Indirect Spend, wrote, “RFIs are typically used by companies as fact-finding tools to learn more about the supply base and help narrow down the lost list of suppliers to a shorter list that should be considered to be invited to respond to an RFP or RFQ.” Most simply, an RFI is a list of questions — without items, specifications, or prices — that all suppliers respond to.

Fact-finding and short-listing are both important steps in the strategic sourcing process, but when  buying organizations are up against time and resource constraints, those steps have a way of being either passed over or lumped into a Request for Proposal (RFP). This has resulted in a perception problem for RFIs because gathering broad information is not a high-enough priority at the outset of a project. The real issue with RFIs may not be with the data collected but with the questions asked.

RFIs should be short and contain to-the-point questions that require non-subjective responses. The combined results from an RFI should be immediately actionable and move the project forward to the next stage. But what if the “I” that differentiates RFIs from other RFx types stood for something other than “Information”? There are plenty of applications that justify more frequent use of the RFI’s simple question-and-answer format..

Here are some other possible RF”I”s that offer value to buying organizations:

Request for Intelligence

Collecting market intelligence is a critical part of a sourcing project because the factors that affect the availability and cost of the products or services in a bid also drive the suppliers of those goods. While a Request For Intelligence cannot be a substitute for market research, getting input from suppliers may be the best way to fill in any remaining holes in the buyer’s understanding of the spend before the bid is finalized. Questions should be specific to the category of spend, and responses should demonstrate a supplier’s perspective on the market in terms that can be validated. Examples include understanding the impact of relevant financial? indexes, timing any expected raw material price fluctuation or availability issue, and getting visibility into the cost structure of new materials or processes that improve quality or lower costs.

Credit: zirconicusso at FreeDigitalPhotos.net

Credit: zirconicusso at FreeDigitalPhotos.net

Request for Input

A significant portion of the work that goes into preparing to run an RFP or Request for Quotation (RFQ) is collecting the specifications for the product or service to be purchased. While properly representing current demand and product details is important, particularly for savings calculations, considering requirements in terms of their cost impact is an opportunity to create additional value for the organization. Allowing suppliers to consider a list of design or delivery requirements and identify opportunities for lower-cost alternatives gives internal stakeholders something to consider before the bid goes out and ensures that all suppliers have the opportunity to bid on all current and alternative specifications.

Request for Innovation

While a Request For Information usually precedes other sourcing events, a negotiation, and a contract award, there is no reason why the format cannot be put to other uses. Even after contracts are put in place, challenges may arise that are better resolved collectively. When multiple suppliers fulfill the same need across operating units or regions, an Request For Innovation is an effective way to crowdsource a solution from all of them at the same time. If an e-sourcing solution is in place, all of the responses are stored centrally so they can be scored and reviewed by internal stakeholders and operational leaders before being considered for implementation.

Regardless of what the “I” means, it will have little impact without good quality responses from suppliers. Incumbent suppliers need to see that their customers understand the market they operate in, and prospective suppliers need to feel that they have an opportunity to win business. There is a cost to completing any RFx, and sales teams are trained to weigh the time and effort required against the likelihood of revenue.

The administration of the RFI is an opportunity to demonstrate buying intent. Targeted questions indicate that the majority of the preparatory work has been done. A swift response schedule, such as one week, indicates that a bid is imminent. A desire to save money by making design or operational changes indicates intent to spend money and sign a contract. If suppliers think they are nurturing a future opportunity, they will be glad to provide intelligence, input, and innovation.

Kelly Barner is the co-owner of Buyers Meeting Point, at www.buyersmeetingpoint.com, an online resource for procurement and purchasing professionals. Her unique perspective on supply management is based on her time as a practitioner, a consultant at a solution provider, and now as an independent thought leader. Kelly has led projects involving members of procurement, supplier, and purchasing teams and has practical skills in strategic sourcing program design and management, opportunity assessment, knowledge management, and custom taxonomy design. She earned her MBA from Babson College, a Master of Science in Library and Information Science from Simmons College, and a Bachelor of Arts in English and History from Clark University. In 2012 and 2013 Kelly was awarded a Provider ‘Pro to Know’ award by Supply & Demand Chain Executive magazine, and in 2013 she was also recognized as one of 28 “Top Female Supply Chain Executives.” 

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