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PICS 2012 Q1 Newsletter

Two Approaches to Sending an RFQ via Email: Advantages & Disadvantages

There are many factors involved in the decision-making process of an end-user when they are selecting a vendor to purchase equipment from. Warranty, availability, pricing, lead-times, and relationships are probably the top factors in the procurement process.  Nowadays a Request for Quote is usually sent/received via email because it’s a much more convenient vehicle for tracking bids of equipment. It also allows the end-user to contact several vendors at one time which saves valuable time compared to what it takes to call them each individually. If you are a vendor in the telecom industry whose daily goal is to provide equipment to end-users, an RFQ email is among the most common you will receive. What is interesting from my standpoint is how the end-user decides to acquire these bids through email.

There are two ways to approach this:

1. Send a broadcast email Bcc’ing all vendors and stating their expectations to qualify for bid acceptance.

2. Send a broadcast email with all vendors clearly visible in the “To” Line and stating their expectations to qualify for bid acceptance.

When done effectively, the two approaches are very powerful from the end-user’s perspective. Both can help save money in their own ways.  However, not using them appropriately can almost guarantee that you will overpay.  What a procurement manager, telecom engineer, or field technician must realize is what specific equipment they are asking for and how it relates to the current market conditions and availability.

I interviewed two Senior Procurement managers (Bill P. & Don B.) separately on how and why they choose the different approaches for their purchasing needs. Both have been in the telecom industry for over 25 years, and each has successfully managed to systematically save their respective companies millions of dollars throughout their tenure by utilizing these different approaches. In the end, they both came up with the same answer; you have to know what you’re asking for and how to ask for it.

Although Bill P. & Don B. take different approaches on how they list their vendors on email requests, both are equally effective and here is why:

Bill P. chooses to Bcc all vendors when sending out a RFQ.

Some advantages:

  • Never discloses the amount of vendors that are in the specific bid.
  • Limits the amount of vendors who will actively look for equipment that is not in their stock.  This serves to avoid driving up the price of equipment.
  • Can discretely work pricing by pitching vendor against vendor to drive down the cost of equipment.

Some possible disadvantages:

  • Can be a catalyst for price-gouging if the availability of the equipment is limited to one or two vendors. A sudden surge of requests can lead a vendor to raise the price dramatically.
  • Vendors may not respond to RFQ. Not knowing the competition can lead to the perception that the “other” vendor will find that particularly hard to find item thus saving them the time.
  • Vendors might perceive the end-user as “price-only” conscious. This is expected with some equipment, but other gear may require a more thoughtful and planned approach.

Don B. chooses to include all vendors on the To line when sending out an RFQ.

Some advantages:

  •  Knowing the competition can make a vendor lower their pricing immediately. Vendors will price-discount strategically in order to win business, and knowing names helps them know where they’ll need to be on price.
  • Tends to limit the “fluff” a vendor may tax on the quote because they’ll know up-front what and whom they’re up against.
  • Avoids the unnecessary “buzz” because vendors know which other vendors are stocking the equipment. They will know who to call and who not to call for pricing which can ultimately save the end-user money.

Some of the possible disadvantages:

  • If equipment is in low supply and the vendor knows they are the only ones stocking the particular equipment they can essentially name the price.
  • Depending on the quantity needed, a vendor may quote same stock thus giving a false sense of the true quantity available.
  • Vendors have better visibility to buy or secure equipment based on market trends and knowledge of equipment availability and competition. This can also drive up price.

These two styles emphasize that there can be several variables that go into sourcing telecom gear. That isn’t to say that this is always the case. Based on company needs or requirements at a given time all of the above mentioned can be thrown out of the window. We see this when there is an outage and a company needs equipment the next business day. This calls to mind the old telecom sayings “hurry up and wait” or “I need it yesterday.” Our industry mandates adaptation by both end-users and vendors.

If you are a procurement manager, telecom engineer, or field technician that has the luxury of time to work with your vendors, then you may want to consider the above options.  Tailoring your approach to an RFQ can ensure savings. Just remember that the most important thing to take into consideration is knowledge of the equipment you are buying. This is how Bill P. and Don B. have become so successful. They understand that not every RFQ is the same nor will they all bring the same results. Knowing how you can strategically use your vendors to your advantage can keep you in the business for over 25 years. It also doesn’t hurt to show your company that you have saved them money in their CAPEX budget.

What is your preference? Do you use the Bcc or To line when emailing an RFQ?