Back to Basics: The RFP for outsourcing

(Note: This post is a continuation of Michael Higgs’ previous “Back to Basics” blog post on outsourcing.)

Now that you have your documents and you know what you are looking for, you can put your RFP together. You should also have defined the suppliers that you would like to target, but before you share anything, get your NDAs (non-disclosure agreements) signed and filed.

For the most part, your RFP should be as inclusive as possible, you need to be specific about what you want to see back. (For example, if are you expecting a fully costed BOM back, you may want to include the format for reply).

Below are some basic things you should include in your RFP:
1. Due date
2. BOMs
3. Drawings
4. Packaging requirements
5. Specs (specific to your product and any general ones you may have)
6. Payment terms
7. Shipping terms (FOB, etc.)
8. Quantities to quote
9. Any year-over-year reduction expectations
10. Format for how you want the quote back (this will make comparing easier)
11. Contacts
12. Scenarios you would like to see quoted (vendor managed inventory, consigned high dollar part, etc.)

Now these are some of the things I include, and you may have others. You should always ask for everything and let your suppliers tell you what they will and will not share.

Once you put this together you are ready to hit send. In most cases, I would only recommend five or six suppliers, but ultimately that is up to you. I also tend to have a individual quote reviews early on so I can roll this out to higher level management, and get in front of the decision makers. If you choose too many suppliers you will not be able to do this.

While your suppliers are quoting and asking questions, you should:
1. Capture issues and try to address the list midway through your due date so you are not driving your engineering team crazy with last-minute requests.
2. Develop a comparison tool that everyone agrees to (you must include quality).

Once your time is up, you will want to schedule individual times for the suppliers to come in and present their proposal. After they have all presented, call a long meeting with your team, put everything in your comparison tool and get your suppliers down to two finalists. You may or may not want to dual-source, but this will allow you to negotiate a better deal with the supplier you will ultimately will end up with.

Remember just before award you have the most influence, so now is your time to get the best deal possible.

Well I hope you can use the advice and let me know if you would add anything to this process or disagree with anything I’ve included here.