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Request For Quotation (RFQ) |
- Group parts, but only similar ones; not too few, not too many
- Think like a supplier – what would make the package more attractive to them, without increasing your cost or the difficulty to run the event?
- Make sure all invited suppliers can provide all parts in a lot bid
- Remember: order frequency, quantity and value are drivers
- Make sure to set “Reserve” price at a level above which you will not place the business
- Set the “Target” price at a level below the “Reserve”, and at a level you really would like to obtain
- Tell suppliers what type of pricing they are to submit: individual item prices or lot prices
- Load data well in advance; account for time necessary to revise documents if necessary
- Establish clear, written rules – Bind suppliers to them
- Plan ahead - your auction package may need review by Legal, Environmental, Logistics
- Ideal e-Auction size: valued between US$100k and US$10 million, 2-4 line items with no more than 8 line items
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Online Bidding Preparation |
- Verify Internet connectivity for all users (Buyers, Admin., Suppliers)
- Have suppliers who need connectivity to begin work now, and report progress weekly
- Give suppliers adequate time to prepare for an event; first ones require more
- Avoid Mondays; Thursday pm is best
- Post all information 4-5 days ahead, so suppliers can gain connectivity and review data
- Suppliers must see your approach, event and actions as consistent, open and fair
- Post FAQs to address usual questions
- Tell suppliers to know their costs ahead of time – total cost and incremental costs
- And to have their decision-maker available during the auction. Most companies would rather retain business at a slightly lower margin, than lose it. If you are auctioning a large package, remind the suppliers that your business can positively change their cost structure (overhead costs spread over a larger volume).
- Make sure new suppliers have gone through training; hold practice session for new suppliers, or do an RFI
- Have suppliers use same computer/browser in training & mock auction as for when a real auction
- Some international suppliers must sign terms, in order to be bound
- If less than 50% of your invited suppliers accept your invitation, your online auction has a greater chance of failure - consider revising your event or question your choice of suppliers
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Best Practices