The three types of negotiations are Requests for Information (RFIs)’, request for quotes (RFQs), and auctions.
Requests for Information (RFIs)
RFI’s are used to qualify suppliers and their goods and services for subsequent procurement activities. RFIs are used more for gathering information on goods and service provided by a supplier than to lock in particular price information. Therefore, RFIs typically do not make reference to item price or quantity. RFIs identify important item criteria on which the buyer needs information. The supplier responds by answering the buyer’s questions. The buyer uses supplier responses to identify the group of suppliers who should be included in the subsequent negotiation. RFIs can be (and typically are) taken to multiple rounds until the buyer has enough information to identify supplier(s) with which to deal. At the conclusion of the RFI cycle, the information contained in the RFI can be copied into an RFQ or buyer’s auction.
Requests for quotes (RFQs)
RFQs enable buyers to collect quotes from suppliers for complex and hard to- define items or services, such as made-to-order manufacturing or construction projects. The RFQ process is generally the longest of the negotiation processes. Once suppliers have submitted an initial round of proposals (quotes), the buyer has the power to fine-tune the RFQ and initiate detailed negotiations, as necessary. This process may go through multiple rounds of negotiations and quotes. RFQs can be blind (buyer can see the quotes during the RFQ, but suppliers cannot) or sealed (neither buyer nor suppliers can see the quotes until the RFQ is closed and the quotes are unsealed), so suppliers can never see each other’s quotes while the negotiation is in progress.
Auctions enable buyers to solicit bids for goods and services that are clearly defined, such as office furniture and memory chips. Buyers can discover new suppliers or buyers and get competitive pricing or improved service. Buyers can tailor each auction to control who can see bids during the auction, whether multiple rounds of bidding are possible, and whether partial bids are allowed. Many different items can be included in an auction. If permitted by the buyer, suppliers can view all bids submitted while the auction is open. This information generates competition and encourages suppliers to submit their best possible price. Once the auction is completed, suppliers are immediately notified of the auction results via online notifications.
Metalink Document ID: – 471221.1