Request for Proposal – Introduction
This RFP Request Proposal Assignment is aiming to identify the potential problems and challenges associated with the pre contact agreement between an organization and its vendors. Further most appropriate method of pre contact agreements would be discussed here. It is based on the context provided by a small article written by Adam Leach. This article is titled as “RFPs are sick, not dead”. In this article author has emphasized on the fact that RFP’s are not entirely outdated and lost their usability but they are in a very tough stage and they need to be improved by the collective efforts of both suppliers and buyers. In second chapter of this report a critical evaluation of RFP is done along with identification and analysis of challenges and obstacles associated with RFP. On the basis of this critical evaluation and analysis some recommendations to improve RFP’s situation and role in supply chain management are provided in chapter 3.
RFP Request for proposal Assignment is a conventional method of solicitation in which a organization which is in need of a product, service or a combination of both would request its vendors and suppliers to submit a detailed proposal. In this proposal there would be information regarding price quotations, terms and conditions, jurisdiction areas and other details. A RFP also uses a bidding procedure to ask organizations to submit their proposals and then make detailed analysis of them individually. A RFP is generally submitted at the early stage of a purchase or supply cycle and it is generally used as an initiating point from which entire structure of procurement would be designed. There are other similar solicitations like Request for quotation and request for information. A RFP also provides a brief glimpse of organization’s risk and supply conditions before initiating the process which indicates organization’s strategy, their business analysis model and risk taking capacity (Le Blanc, 2008).
According to the article authored by Adam leach, RFP’s still have the potential to be a preferred method of requesting a proposal or informing supplies about a need if it is properly supported and improved by both concerned parties. It is a true fact that conventional RFP’S are a very lengthy document and they require way too much details and information, even for a small supply. Sometimes RFP’s are a put downer and many organizations lose interest in supplying because of that. This loss is not only for the supplier companies but essentially purchase making company also has to satisfy with the companies who are willing to go through the cumbersome procedure and in return these companies would be making good enough profit to keep them motivated. RFP’s in a way are incorporating inefficiency in the procedure and reducing cost related competition in supplying products and services. According to author and same opinion is supported by many industry veterans that process of RFP is slow and tedious which needs improvement but principles and basic concept of RFP are very strong and they cannot be challenged or removed easily (Pooler, 1997).
There is a huge demand for a simplified and easy to understand RFP because essentially at this level an organization and a supplier are only exchanging primary information and extending a greeting, there would be many meetings and other discussions which would follow after the RFP. Many intricate details of the supply like number of employees which are needed by the supplier for this particular supply is neither a concern for the purchasing company and nor do they need it at RFP level. At this level a basic idea of the price, major terms and conditions, time line and payment mode along with quality level regarding consent are more than sufficient.
Similarly another human resource manager belonging to a tour and travel company is stating in the article that there is much information in a RFP which is important for the purchasing company but Supplier Company is not aware of it and they find this activity cumbersome. In such situation it is better if communication between the organization which is making the purchase and the vendor is very good and they have a relationship where they understand each other’s need. Many times an organization can take a step ahead and explain the interested parties why they need a great range of information etc (Leach, 2012).
Challenges and obstacles
According to the opinion expressed in the article and further literature review it is observed that organizations especially small to medium size organizations are facing various challenges and problems because of a cumbersome RFP procedure. This is the reason why many small suppliers are not able to make supplies directly to a large purchaser and they need a big size and experienced mediator. Here mediator would take his commission and lastly product would cost more to the purchaser. If RFP procedure would have been simpler cost of the entire procedure can be decreased and purchase related benefits can be passed on to the profits of the organization (Richards and Schmidt, 2009).
Another challenge which is associated with the RFP procedure is the current format in which it is sent to the suppliers. Many questions and information which is sought in the RFP would consume time of the supplier company to gather. During this time other companies might take advantage in a biased manner. In essence it is claimed in this challenge that RFP procedure in its conventional form are not helping new comers in the markets and dependency on the experienced suppliers who understand the entire RFP procedure are taking advantage of it (Tilanus, 1997).
Third problem or challenge with RFP procedure is the fact that majority of organizations follow a single template RFP which is analogues to one size fits all marketing strategy. Such generic RFP are very long documents and they include a long range of questions which are majorly non applicable or even absurd for many companies. For example in a RFP there are 10 questions asked about the safety procedures of transportation a liquid fuel and at the same time similar RFP template is sent for purchase of cement or iron pipes. For these products safety procedure like number of safety valves in tankers is almost close to absurdness (Krajewski and Ritzman, 2005).
Sourcing and supplier relationship
Request for proposal is an important step of the entire procurement cycle. According to policy related framework of sourcing it is very important that purchasing organization and suppliers should be maintained. decision Making on the selection of final supplier and also agreeing on mutual terms and condition is important part of sourcing. RFP is the ideal choice to initiate such developments because they cover the terms properly. Sourcing can be done through multiple suppliers as well, especially when order of purchase is very high or organization does not want to remain dependent on one supplier as a matter of policy. In multiple sources sourcing RFP plays a very important role by providing minimal bench mark standard for each activity of entire supply process.
RFP also helps in appraising the supplier. These suppliers are evaluated by the organization in order to review their performance; to give them grade as per their working and suppliers in previous year and it also helps in setting the priority suppliers for the future needs. There are various areas on which evaluation is based. Quality, responsiveness, on time delivery, availability of the required product, accuracy in weight and measurement, on time billing and accurate pricing as per the terms and conditions are some of the parameters on which this evaluation is done.
Appraisal is generally done when sourcing is done in large quantities, a global sourcing model is adopted or there is an incorporation of JIT model in sourcing. RFP can be used in all methods of performance appraisal of suppliers.
Recommendation and conclusion
- On the basis of discussion and analysis it is recommended that RFP should be simplified to a great extent and each RFP should be customized for a particular group of products or services making it relevant and close to the ground reality (Lewis, 2006).
- Online RFP distribution and online submission should be encouraged to reduce the time which is consumed in transfer of physical document from one place to another.
- RFP system should be developed as a introductory system where organization and vendor should be agreeing on broad aspects of supplies. Minor details and other terms and conditions can be decided at the time of formal agreement. In this process valuable time of many companies would be saved (Maginn, 2007).
In conclusion it can be stated that RFP as a practice is very important for transparency of the sourcing process. If properly supported and sorted by both supplier and purchaser using some of the methods provided in recommendation of report then RFP can be brought back as a core activity of sourcing.
- Krajewski, J. and Ritzman, P. (2005) Operations Management: Processes and Value Chains. Upper Saddle River, New Jersey: Prentice Hall.
- Leach, A. (2012) RFPs are sick, not dead [online] available on http://www.supplymanagement.com/news/2012/rfps-are-sick-not-dead/ [accessed on 25th October 2012]
- Le Blanc, R. (2008) Achieving Objectives Made Easy! Practical goal setting tools & proven time management techniques. Maarheeze: Cranendonck Coaching. ISBN 90-79397-03-2
- Lewis, R. (2006) Project Management. McGraw-Hill Professional, pp 18-30.
- Lysons, K. and Farrington, B. (2006) Purchasing and Supply Chain Management – 7th edition, Prentice Hall – Financial Times press, P.12-187 ISBN 13 : 9780273694380
- Maginn M, (2007). Managing In Times of Change – 24 Tools for managers, individuals and teams. Berkshire, McGraw-Hill p.76-98
- Pooler, H. (1997) Purchasing and Supply Management: Creating the Vision, Chapman & Hall, p.187-254
- Richards, J C.; Schmidt, R, eds. (2009) “Communication strategy” Longman Dictionary of Language Teaching and Applied Linguistics, New York: Longman.
- Tilanus, B., (1997) Information Systems in Logistics and Transformation, 2nd Ed., Elsevier Science Ltd., p. 34-65