Page 71 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes 5.7 Request for Quotation (RFQ)

Non-government purchasing departments continue to offer a range of prequalified vendors a
Request for Quotation (RFQ) for items or services that it wishes to purchase. The competitive bid
process can produce a range of bids and conditions that the purchasing department will evaluate
and then award the business. This may or may not involve some form of negotiation. Most
negotiated business will involve items or services that are not necessarily definable by an RFQ.
The purchasing department and the vendor will negotiate more than a price. The negotiation
will usually cover what is to be manufactured or what is the extent of the service to be provided,
the warranty, the transportation services, technical assistance, packaging alternative, payment
plans, etc. Purchasing items or services of significant cost will require extended negotiations to
arrive at a final contract.

Purchasing professionals are required to participate in these types of negotiation to ensure their
companies obtain the best price with the most favorable terms, and staff may need to be trained
in negotiation methods as it becomes more commonplace in a difficult economic climate.

Self Assessment

Fill in the blanks:
14. The ……………… phase is the stage of actual discussion and negotiation.
15. The post negotiation phase may also be called ……………… phase.

16. Purchasing items or services of significant cost will require extended ……………… to
arrive at a final contract.



Case Study Paving the Way for Greater Negotiation Power at

Delphi Delco Electronics Systems

t Delphi Delco Electronics Systems, the need to stop suppliers from pitting
engineering against purchasing was evident if the company wanted to remain
Acompetitive at the bargaining table. With the help of a unique training
programme, the company mapped out a strategy to team purchasing, engineering — and
actually everyone who talks to outside suppliers — to achieve greater negotiation power.
The Challenge

In the past, the purchasing road was paved with suppliers and manufacturing
representatives who were well entrenched with the engineering community.
Unfortunately, it was impacting the company’s leverage to negotiate the best value.

”Our suppliers grew up with our company — embedded in our purchasing process — and
greatly influenced the purchasing decisions to their advantage,” according to Mark Hosking,
purchasing manager at Delphi Delco. He explained that a positive result of the Worldwide
Purchasing Process was to put a little more distance between the supplier and purchasing,
and the supplier and engineering. That’s when it was determined to educate everyone
who interfaces with salespeople to understand that they are involved in the negotiation
process.
Contd...

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