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Requests for Quotation Overview

Requests for quotation (RFQs) are documents that allow you to manage the bid process for supplier resources. You can create RFQs for purchase demands on work orders or requisitions (“for demands” RFQ) or to renew supplier resource prices for resources in your resource catalog (“catalog prices” RFQ).

This topic discusses concepts related to the RFQ process in the APM system.

Types of RFQs

You can create either “for demand” or “catalog price” RFQs. The life-cycle and processes are basically the same for both types of RFQs. The main differences are in the creation process and the updates that occur when the RFQ life-cycle is completed.

Direct-Purchase (“For Demand”) RFQs

The “for demand” RFQ life-cycle starts when a resource is added to a requisition or to a work order task. In either case, within APM, this is called a purchase demand. Before the purchase demand is added to a purchase order, one or more suppliers are asked to bid on the purchase. This ensures that the requestor receives the best possible price and conditions. The work planner can manually request an RFQ for selected resources, or the system can be set up to automatically request an RFQ.

A buyer can also create an RFQ for demands for which an RFQ was not requested. A buyer can create an RFQ for a purchase demand at any stage before the purchase order line is created, including after the demand has been sent for approval or approved.

Once quotations are requested for purchase demands, the buyer can review the requests through the My Desk view and then create an RFQ document. For each resource, the RFQ identifies the quantity required, delivery requirements, and any special terms or conditions required. The RFQ also defines the bidding process, the deadline by when the bids are required, and contact information.

Bid-Sheet (Catalog-Price) RFQs

Catalog price RFQs are used to solicit prices for future purchases. This type of RFQ is not related to a specific purchase request. For example, an RFQ might be sent to obtain supplier prices for all electrical wires used for maintenance activities. The result of this type of RFQ is a collection of supplier-resource prices.

Catalog price RFQs are similar to “for demand” RFQs, with the following exceptions:

•	The RFQ resources are based on a group of resources whose existing supplier-resource prices are about to expire or for which no pricing information exists.

•	The buyer can select specific resources for inclusion on an RFQ.

•	Each resource quantity is an estimate of the usage over a period that is identified on the RFQ and is based on the past purchase history. The expected quantity is based on purchase receipts for the resource during the same amount of time as the effective period of the RFQ.

•	When the RFQ is awarded, the following updates can be made:

•	For the winning supplier, the supplier-resource pricing information is updated with the RFQ pricing information and it can become the preferred supplier for the resources when the prices become effective. If the purpose of the RFQ was to create a contract, a new contract is created.

•	For the rest of the bidders, supplier-resource pricing information can be updated based on the bids to be used as alternate suppliers of the resource.

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RFQs and Work Orders

For demand RFQs, ensure that a work order’s planned costs and schedules are as accurate as possible. When they have accurate cost estimates, approvers can approve or reject the work order based on the best available information. Accurate lead times ensure that work is scheduled when the material is available.

There are two ways in which the RFQ process can be added to the work order cycle: manually or automatically when the work order is sent for approval.

Manually Initiating the RFQ Process

The work order planner can manually request an RFQ. When manually requesting an RFQ, the planner can select the purchase requirements to be included. When the RFQ process is completed, the requirements are updated with the winning supplier and pricing information, and the work order’s planned costs are updated. After reviewing the prices, the planner can send the work order for approval or revise the work order definition.

While the RFQ process is open, the planner can:

•	Continue planning the work order. This includes adding new requirements and tasks to the work order.

•	Initiate a second RFQ. The second RFQ could be to a different set of suppliers or for requirements added after the first RFQ was created.

While the RFQ process is open, the planner can:

•	Have the work order approved. The RFQ process must be completed before the work order approval process can be completed. However, the work order can be sent for approval.

•	Modify the requirements that were included on the RFQ.

•	Include the requirements on a second RFQ. Each requirement can be included on only one open RFQ at a time.

RFQ Process on Send for Approval

The second way the RFQ process can be added to the work order cycle is for the RFQ to be automatically requested when the work order is sent for approval. This occurs when the planner sends the work order for approval and one or more of its requirements require an RFQ. In this case, the system initiates the RFQ process prior to the work order being sent to the first approver. Once the RFQ process has been completed, the system sends the work order to the first approver.

Redrafting the work order while the RFQ is still open does not affect the RFQ. If the work order is later re-sent for approval while the RFQ is still open, the approval process is delayed until the RFQ has been completed.

If Work Order Approvals Are Not Being Used

When work order approvals are not being used, the RFQ process can be manually initiated, as described earlier. The work order can still be marked as planned, whether or not any of its requirements require an RFQ. The RFQ process does not need to be completed before the work order is marked as planned. If automatic RFQs are being used, the system initiates the RFQ process when the work order is marked as planned.

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RFQs and Requisitions

RFQs can be added to the requisition process in much the same way as work orders:

•	An RFQ can be manually requested prior to the requisition being sent for approval or, if approval is not required, before the requisition is marked as complete.

•	The system can automatically request an RFQ when the requisition is sent for approval if one or more lines require an RFQ.

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RFQ Site Settings

Before you begin using “for demand” RFQs, you must determine the business rules for automatic RFQ requests for each of the four purchase types at your site. For repair orders, rentals and/or service orders, you must select whether or not an RFQ is required when a purchase demand is created. If you select that RFQs are required, work orders or requisitions containing demands for that purchase type cannot be approved and planned without completing the RFQ process.

For each of the purchase types, you can further define when an RFQ is required:

•	No effective price: If there is no supplier-resource price or if the price has expired, an RFQ is required.

•	Cost exceeds: If the estimated cost of the purchase demand is less than or equal to the entered threshold, an RFQ is not required. If the cost of the requirement exceeds the threshold, an RFQ is required.

Note: If a resource is used at a site that uses a different currency, the resource’s RFQ threshold value is converted to the demand’s site currency.

•	Last ordered: If the resource has not been ordered recently, an RFQ is required. You can set the period of time that is considered “recently ordered”. For example, if the resource has not been ordered for 180 days, an RFQ is required.

Note: If a requested supplier resource references a contract and has a currently valid price, an RFQ will not be requested for the requirement.

RFQ Resource Settings

You can override the direct-purchase site policies on any individual resource or trade. This allows you to tailor the rules for each of your resources.

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Direct-Purchase RFQ Life Cycle

The life cycle of a “for demand” RFQ is shown in the following diagram.

The steps in the life cycle are:

•	An RFQ is requested. RFQs can be requested manually or automatically when a work order or requisition document is sent for approval or marked as planned.

•	The new RFQ request is added to the buyer’s list of purchase demands that require an RFQ. The buyer reviews the purchase demand and makes changes, as necessary.

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The buyer creates the RFQ. The requestor’s preferred supplier is automatically added to the RFQ. For a catalogue resource, if the resource has additional suppliers, they are automatically added to the RFQ. The buyer can optionally add additional suppliers or remove ones that were automatically added.

•	The RFQ is sent to the suppliers. Depending upon the suppliers, this may consist of:

•	Printing a copy of the RFQ and mailing it to the supplier

•	Faxing a copy to the supplier

•	Emailing the RFQ with an Excel spreadsheet to the supplier

•	Other. Usually this is a phone call.

•	As supplier bids are received, the RFQ is updated with the supplier prices and related values. If the RFQ was emailed to the supplier, this is a simple matter of importing the supplier’s bid from the Excel spreadsheet; otherwise, the bid is manually entered.

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The bids are analyzed. If cost is the only factor being used, the bid analysis function allows the bids to be quickly analyzed and the winning bid(s) selected. Both a best overall bid (where the bid with the lowest overall cost is selected) and a best bid by resource (where the lowest bid per resource selected) are supported. If other factors (lead-time, local supplier preference, past supplier performance) are being used, the bids are manually compared and the winning bid(s) selected.

•	After the bid analysis is complete and the winning supplier(s) selected, the results are processed. Processing the results consists of:

•	Updating the originating demands and document prices

•	Optionally, updating the supplier-resource prices so they are available for use on later purchases

•	The RFQ is closed.

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Bid-Sheet RFQ Life Cycle

The life cycle of a catalog price RFQ for is shown in the following diagram.

The steps in the life cycle are:

•	A buyer creates the RFQ.

•	The buyer adds the resources to be bid on to the RFQ. The resources can be added in a number of ways including reviewing and selecting from the catalog or by copying the resources from an existing contract.

•	The buyer enters a bid quantity for each resource. The quantity can be calculated based on historical usage or entered manually.

•	The buyer adds bidding suppliers to the RFQ.

•	The RFQ is sent to each of the suppliers.

•	The supplier bids are imported or entered.

•	The bids are analyzed and the winning bid(s) selected.

•	The results of the RFQ are processed:

•	Supplier-resources are updated or created.

•	A new purchasing contract may be created.

•	The RFQ is closed.

Adding Resources to a Catalog Price RFQ and Calculating the Bid Sheet Quantity

Two of the unique characteristics of the catalog price RFQ are the large number of resources that can be included and the fact that the RFQ quantity represents the expected usage of the resource over an extended period of time (the next 12 months for example).

The system calculates the quantity to be bid on for a resource based on the quantity that has been received in a selected period of time. For example, when generating a bid sheet to supply parts for the next 6 months, each resource’s bid quantity is calculated based on the last 6 months of purchase receipts.

Receipts are used as the basis for the bid sheet quantity instead of issues for the following reasons:

•	Issues represent only a portion of the usage for a resource. Depending on the reason for the adjustment, an inventory adjustment can be considered to be “usage”. Likewise, a transfer may or may not be included in “usage”. Receipts represent a more accurate picture of purchasing activity.

•	Receipts include direct purchases of inventoried resources. Issues do not.

•	Receipts work for all resources including non-stocked materials, services, tools, equipment rentals, and repair orders.

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RFQ Exchange Rates

An RFQ can occasionally have suppliers from one or more foreign countries. Some of these suppliers provide bid information in their domestic currencies, which might be different than the currency used by your site.

To facilitate bid analysis, all prices must be converted to your site’s currency. For this reason, exchange rates are required for each foreign currency included in the RFQ. The system automatically adds or removes currencies on an RFQ whenever a supplier with a different currency is added or removed. The system extracts the current exchange rates for the RFQ from the currency exchange rates defined for the enterprise.

Although RFQ exchange rates are not directly added to the RFQ by users, from time to time, the rate may need to be changed. For convenience, you can do this from the Tools menu on any RFQ. The exchange rates that you enter here are exclusive to this RFQ and do not affect the enterprise’s exchange rate settings.

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Sending RFQs to Suppliers

These methods are available for communicating an RFQ to a supplier:

•	Mail: A copy of the document is printed to your default printer. You can then send the printout to the supplier by mail.

•	Fax: A copy of the document is faxed to the supplier. If the selected contact already has a fax number, the system enters it here. Otherwise, you must enter the fax number for this contact.

Note: Before you can send a document by fax, your APM administrator must have set up the Microsoft fax service.

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Email: APM creates a report using the file format specified in Purchasing Management settings. The report is then attached to an email message and emailed to the supplier. If the selected contact already has an email address, the system enters it here. Otherwise, you must enter the email address for this contact.

You can export an RFQ bid sheet in Microsoft Excel format to one or more suppliers. On the RFQ, the supplier must be set to have the RFQ sent to them by email, and on the Email Info tab, the Spreadsheet option must be selected as the attachment type.

If you are sending an Excel spreadsheet to suppliers, they can enter their bid information in the document and email it back to you. You can then import the bid information into the RFQ.

Note: To send a purchasing document by email you must be using a MAPI-compliant messaging application such as Microsoft Outlook or Outlook Express.

Note: If you will be sending the document as an Excel spreadsheet, you must have MS Excel 2010 or later installed on your computer.

•	Phone: The document is communicated to the supplier in some other manner (for example, over the telephone). If the selected contact already has a telephone number, the system enters it here. Otherwise, you must enter the telephone number for this contact.

•	Courier: A copy of the document is printed to your default printer. You can then send the printout to the supplier using the selected courier.

For mail transmission, a cover letter is included with the RFQ containing the following text:

•	Heading: The heading shows the requesting site’s address, logo, telephone number, and fax number. The requesting site is the site that owns the RFQ. Also included is the current date.

•	Contact: The buyer’s name, title, and contact information (for example, phone, fax, email)

•	Issued To: The address of the supplier is identified on the RFQ

•	Bid Instructions: The bid instructions, as entered on the General tab of the RFQ

For email and fax transmission, you can specify the messages that will be used for the subject line and body. These are defined for the site in the Purchasing Management Settings, Printing, Faxing and Email tab, RFQs tab.

Using Email and Excel

Sending a supplier a copy of the RFQ in an email as an Excel spreadsheet has a number of advantages over sending a printed copy or even faxing a copy:

•	Speed of delivery: The RFQ can be delivered to the supplier practically instantaneously.

•	Ease of price entry: The supplier’s prices are automatically transferred from the response to the RFQ.

•	Minimal errors: Because the prices are not keyed into the RFQ, keying errors are eliminated.

•	Process time: Because the supplier’s response can be transferred quickly and without errors to the RFQ, the RFQ can be updated within minutes of receipt of the email.

The RFQ Worksheets

The Excel spreadsheet contains two worksheets: a summary worksheet and a detail worksheet. The summary worksheet contains information about the RFQ as a whole and the bidding process in general. This includes:

•	RFQ number

•	Buyer’s name

•	Bid required by date

•	Supplier name

The detail worksheet identifies the RFQ resources. A row is added to the spreadsheet for each resource on the RFQ. The following information is included for each resource and is not changed by the supplier:

•	Resource description

•	Quantity required

•	Date required

•	Preferred manufacturer

•	OEM number

•	Lead time unit of measure

Columns are included for the supplier to enter for the following:

•	Manufacturer

•	Declined (yes/no)

•	Price per unit: The supplier’s price in the supplier’s pricing unit of measure

•	Ordering unit of measure

•	Lead-time: The supplier’s lead time

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Notes

•	Effective date

•	Expiry date

Warning: Do not add or remove columns on the details worksheet or change the column headings. The information cannot be imported into the RFQ.

You can add information to the summary worksheet by editing the “RFQ bid information for export to Excel” table configuration, which is available in the Enterprise window, Customization Center view, User Interface tab, Configurations tab.

Note: You must log on to APM with the administrator privilege in order to add properties to the workbook header. See Logging on as an Administrator.

In the Configuration dialog, select the Export to Excel and Workbook Header tabs. Click Browse to open the Browse Model for Excel Header dialog. You can select attributes and relationships for the available classes or add a join path to a related class. For example, the RFQ number was added to the header by setting the join path from Bid sheet to RFQ.

Once the join path is set, the attribute RFQ number is then available for selection in the Browse Model for Excel Header dialog.

Note: Only properties that can be accessed by cardinality-1 relationships can be selected.

Importing the Supplier’s Bid

After suppliers receive the RFQ in an Excel spreadsheet, they can enter their bid information and email the spreadsheet back to the buyer. The buyer can then import the bid information into the RFQ.

Before the RFQ is updated with the supplier’s reply, the system scans the spreadsheet for errors. If any errors are found, the system attempts to correct the error and creates an error message. Some possible errors are:

•	Units of measure or lead-time are not valid values

•	Items were left blank that should be filled in

After the import is complete, you can review the error messages and make any necessary corrections.

Manually Entering a Supplier’s Bid

If you have not sent the supplier an Excel spreadsheet (for example, you used a mail, fax, or verbal contact method), you can manually enter the supplier’s bid into the RFQ. When entering the bid, you can record:

•	The supplier’s price and related information (lead time, part number, and so on) for each resource

•	Any comment the supplier may have recorded for each resource

•	The date and time when the bid was received

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Analyzing RFQs

When all the RFQ suppliers’ bids are either entered or declined, the RFQ has the status of “All bids received” and the bids are ready to be analyzed. The bid analysis function provides a quick and easy means to compare and rank the suppliers’ bids. The purpose of this analysis is to determine the winning supplier (if the RFQ is awarded to one supplier) or the winning suppliers (if each resource is awarded individually).

Several bid ranking options are provided:

Ranking the Bids for The Entire RFQ	Ranking the Bids for Each Resource
• Lowest Total Bid Cost • Most “Number 1” Rankings • Manual	• Best Price for the Resource • Best Lead Time for the Resource • Manual

For each RFQ, you can use any one of these ranking methods or a combination of ranking methods to determine how the RFQ will be awarded.

Best Total Cost

With the total cost analysis, the total cost of each supplier’s bid is calculated by multiplying the required quantity by the supplier’s price to determine the total resource cost. Discounts, loaded taxes, and loaded extra charges are all included when calculating the total resource cost. The cost of the all of the resources is summed to give the supplier’s total bid cost. The suppliers are ranked from first (lowest bid) to last (highest bid) based on the total cost of their bid. For example:

Supplier	Rank	Total Cost of Bid
C	1	$10,000.00
B	2	$11,000.00
A	3	$12,000.00
D	4	$13,000.00

If a supplier has declined to bid on one or more individual resources, a total cost analysis will not be relevant for that supplier.

Most Number 1 Rankings

With the most “number 1” rankings method, the system analyzes each resource and determines the highest ranked supplier for the resource. This can be the supplier with the lowest cost or with the shortest lead time (depending on the ranking method selected for each resource). Then, suppliers are ranked based on the number of resources for which they are the leading supplier, as shown in the following table.

Supplier	Rank	Number of Resources Selected as Leading Supplier	Total Cost of Bid
B	1	90	$11,000.00
C	2	80	$10,000.00
A	3	20	$12,000.00
D	4	10	$13,000.00

As you can see, supplier C is ranked second, despite having the lowest total bid cost.

Excluding Suppliers From Analysis

If appropriate, you can exclude one or more of the supplier bids from the analysis. Because one of the goals of purchasing is to limit the number of suppliers dealt with, excluding a supplier’s bid from the analysis can help with this goal.

For example, after running the total cost and number 1 rankings analyses, you can see that suppliers A and D are both at the bottom of the list. To get a more accurate comparison of the other suppliers, at this point you can decide to remove the A and D bids from further analysis.

After excluding these suppliers, the number 1 rankings analysis is now:

Supplier	Rank	Number of Resources with the Lowest Price	Total Cost of Bid
C	1	105	$10,000.00
B	2	95	$11,000.00
A	3	20	$12,000.00
D	4	10	$13,000.00

At this point, you can see that supplier C is ranked number 1 for both total cost and number 1 resources. You might now decide to award the entire RFQ to supplier C or to do a more detailed analysis of each resource.

Ranking Bids For Each Resource

You can analyze the bids for each resource on an RFQ independently. You can rank supplier resource bids either by cost or by lead time. Each resource on an RFQ can be ranked using a different method.

When you rank resource bids by cost, the supplier with the lowest cost for the resource is ranked first. Discounts, loaded taxes, and loaded extra charges are all included when calculating the total resource cost. Suppliers that have not submitted a bid for the resource or that have declined to bid on the resource are excluded from the ranking. Suppliers that have been manually excluded from analysis are also not ranked.

When you rank resource bids by lead time, the supplier with the shortest lead time is ranked first. The supplier with the longest lead time duration is ranked last. For example, if supplier A’s bid for a resource has a lead time of five days and supplier B’s bid for the same resource has a lead time of six days, supplier A is ranked 1st and supplier B is ranked 2nd.

Breaking Ties

In the case of a tie in any ranking method, the following rules are used to break the tie:

1.	If the RFQ was created from a contract, the system selects the original contract’s supplier.

2.	For a whole RFQ analysis, if the bids were ranked by most number 1 rankings, the system ranks a lower-cost supplier ahead of a higher-cost one.

If the bids were ranked by total cost, the system ranks a supplier with more number 1 rankings ahead of a supplier with fewer number 1 rankings.

3.	For an individual resource analysis, if the bids were ranked by cost, the system selects the supplier with the shortest lead time.

If the bids were ranked by lead time, the system selects the supplier with the lowest cost.

4.	If a tie still exists, the system selects the supplier that is in the same country as the site the RFQ is for.

5.	If a tie still exists, the system selects the supplier that is in the same state/province as the site the RFQ is for.

6.	If a tie still exists, the system selects the supplier that is in the same city as the site the RFQ is for.

7.	After applying these tie breaking rules, a tie might still exist. If so, then the system selects one of the tied suppliers randomly. The buyer can always change the ranking manually.

Ranking Bids Manually

You can manually rank suppliers on an RFQ. This method is used when you want to set the number 1 supplier, regardless of any previously used ranking methods. You can manually set the number 1 supplier for the entire RFQ or for an individual resource.

Locking Rankings

Once you are happy with the supplier bid rankings for a resource, you can lock the ranking so that it cannot be changed by further analyses. If you later want to change a locked ranking, you can unlock it.

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Awarding RFQs

The last step in the RFQ life-cycle is to award the resources to one or more suppliers. An RFQ resource is awarded to either:

•	The number 1 supplier for the whole RFQ.

•	Each resource’s number 1 supplier.

The award process varies, based on the type of RFQ. For demand RFQs, awarding the RFQ performs the following:

•	Updates the resource demands with the selected supplier and price information. If a resource demand’s site currency differs from the currency in which the RFQ’s values are recorded, the values are converted to the currency used at the site where the demand originates.

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If there are no other open RFQs for the source document (work order or requisition), the document is notified that the RFQ process is complete. Depending upon the status of the source document, this notification either releases the document for approval (if the approval process is waiting for the RFQ process to be complete) or simply updates the document that the RFQ process is complete.

•	The supplier-resource prices from the RFQ are made available for use with future purchases.

•	If indicated, the supplier-resource prices for the other suppliers (the non-winning prices) are made available as alternate prices.

For catalog price RFQs, the following steps are performed:

•	A purchasing contract(s) is created for the winning supplier(s), if requested.

•	The supplier-resource prices for the awarded suppliers are made available for use with future purchases.

•	If indicated, the supplier-resource prices for the non-winning suppliers are made available as alternate prices.

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Multi-Site Considerations

The following rules apply to an RFQ in a multi-site environment:

•	A “for demand” RFQ contains purchase demands from a single site only. This rule is by default because a work order or requisition exists in a single site, and an RFQ is created for one work order or one requisition only.

•	The RFQ is created at the source document’s site. If the source document’s site does not allow RFQ ownership, the RFQ is created at the first site above the source document’s site that can own RFQs.

•	The supplier-resources created from the RFQ are created at the site that the supplier prices are for, as identified on the RFQ. Only sites that are allowed to own supplier resource prices can be selected on an RFQ.

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The resources referenced on the RFQ must exist at the RFQ’s site or at a parent site. A resource from a lower-level site cannot be referenced on an RFQ. This means that ownership of RFQs must be at either the same site type where resources are owned or at a lower-level site type. This is consistent with the general approach that resources are ideally owned and created at higher-level sites.

•	The suppliers referenced on the RFQ must exist at the RFQ’s site or at a parent site. A supplier from a lower-level site cannot be referenced on an RFQ.

In a multi-site environment in which sites use different currencies, note that the RFQ’s base currency cost, supplier bid cost, and bid information are recorded in the RFQ’s site currency. However, when the RFQ is awarded and the resource demand is updated, the RFQ values are converted to the resource demand’s site currency.

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