Direct Procurement - Challenges in RFX ProcessBusiness | September 30, 2022 | By
Challenges in the RFX process in Direct Procurement
Let’s consider a hypothetical scenario. Jane is a procurement manager in a product manufacturing company that has a strong reputation in the industry. They are currently working on almost a hundred different NPD projects with each program having a complex and lengthy Bill of Materials (BOMs). And as is the case with every procurement team, the onus lies on her team to work with the right suppliers for every project. This will enable her to bring in the required materials at the right price, right time, and right quality. Despite Jane’s company being an industry leader with a stellar reputation, her team still struggles with the procurement and sourcing process for direct materials, starting with the RFx process.
Also, with an increase in consumer demand, shrinking product lifecycles, and tight program deadlines, the company’s employees are working long hours, often burning the midnight oil. And no matter what they try, things are not going as planned.
Here are some of the challenges that Jane and her team face.
Large Volumes of Data during RFX Process
Generally, there are multiple divisions within Design, each handling different components or sub-assemblies. For example, in an EV manufacturing company, one team handles the chassis, another the battery pack, and so on. And every design team will send their own purchase requisitions. Also, the design team will have their own system such as a PLM to manage all their design-related data – Bill of materials, drawings, and 3D models.
When the design teams have to communicate the design details to the buyer – they have to download the data, collate the details in the spreadsheet and share it with the buyers along with PDFs of the drawing. So for the same project, every buyer will receive purchase requisitions from multiple teams, in separate emails. The buyer will then have to gather all the data and consolidate them in a single spreadsheet and folders. Imagine the same process happening across 100 projects.
Because of such large volumes, it becomes extremely difficult for the buyers to manage all of them manually. And this opens the doors to human errors, delivery delays, etc. all postponing the product launch.
Disconnected Data Flow
As per the RFX process, the designers share the part list with the buyers. The buyers then send RFQs to the suppliers. We know that when developing a product, design changes happen. When that occurs, buyers receive an updated version of the part list. This may contain additional parts, deleted parts, and a new version of the design for the existing parts. First, the buyers must map the older version to the newer version, then create another spreadsheet and send it separately to suppliers. The buyers also have to update the changes in their own database, if they maintain one.
Now, let’s look at it from the supplier’s side. Initially, the supplier would have started working based on the RFQ received from the buyer. But after some time, the supplier receives emails from the buyer team conveying the changes. With multiple emails containing the RFQ and otherwise, it becomes difficult for the supplier to decide which version of the part list to refer to.
Moreover, design teams share drawings with buyers, who then share them with their suppliers. In some cases, the supplier may have doubts and ask the buyer for clarification. The buyer then forwards the email to the designer, gets it clarified, and conveys the response to the supplier. In this process, the involved parties correspond using multiple emails. If the buyer misses any communication, the whole conversation is lost. Since the data transmission is disconnected, it is difficult for Jane and her team to trace the data, and retrieving this data becomes more cumbersome as time passes.
Absence of In-context Communication in RFX Process
There will be continuous communications within the team and outside the team (suppliers) right from the RFP process. And we know that Jane and her team have to deal with multiple suppliers and multiple parts at the same time. The problem for Jane’s team here is that they handle the RFX process using emails, spreadsheets, phone calls, and other common platforms. So communication, for example, RFQ negotiations, becomes difficult to track.
Let’s go through a negotiation scenario. When a supplier and buyer negotiate, there will be multiple correspondences. Some happen via emails, and some via phone calls. And when Jane wants to know how the negotiation happened, and review the correspondences, it becomes a task for her buyer to consolidate all the emails, and think over and write the call correspondence. Jane would like the same report from all her buyers. Just imagine the number of emails, and phone discussions the buyer has to report. Moreover, the digital thread showing how the purchase requisition transformed into purchase orders will be missing. And any communication will not be in-context. This means it becomes difficult to pull the communication thread for a particular part right from the start of the RFX process. Also, it is difficult to maintain the same communication thread throughout the RFX process.
Insecure Design Data Sharing in the RFX Process
Every time a buyer shares an RFQ with the supplier, they have to share the design documents also. But, right now the process isn’t as seamless and secure as we would expect it to be.
What happens currently is that the designers open their design system, pull the required design drawing, and convert it to a shareable format. They then share the same via email or any other platform that the organization uses. In some cases, the file sizes can exceed ‘n GBs’. Then it becomes difficult to share. The buyer has to contact the IT team, get access to the File Transfer Protocol (FTP) server and share the credentials with the supplier, for which they need approvals. Which takes a lot of time. Again, Jane’s team has to go through a convoluting process, ensuring that a basic requirement is met. What’s more? Buyers share none of this data using encrypted platforms, making it vulnerable. Emails, dropbox, etc. will not suffice.
No Bird’s Eye View of Complete RFX Process
When working on multiple programs, it is difficult for the buyer to handle all the related data manually. And it is a cumbersome task to track the status of every part of the RFX process. As a procurement manager, Jane has to answer multiple questions related to the status of the part in the RFX pipeline.
Here are some of them,
- As per the program timeline, how many parts are yet to be received from the design team?
- When was the request made? For how much time has a particular part been in the queue?
- For how many parts is the buyer behind schedule?
- For how many parts are RFQs pending? And to which supplier?
- Which parts need to be handled on an urgent basis?
- What are the other supplier selection factors to be considered apart from time, cost, and quality?
- Who are the suppliers under consideration? And for which project?
- What are the quote values? And what are the quotes’ variance from the target cost, buyer estimates, and value analyst estimates?
The more answers Jane has to these questions, the more she will be able to make informed and strategic decisions about what to procure when to procure, and from whom to procure.
And, because of a lack of complete information, buyers are always working on a reactive basis.
For example, if a designer comes and asks for the status of a particular program/project with regards to the RFX status of the parts, the buyer has to dig through the data trove and pull that particular data the designer asked for. And all this time, the designer has to wait in the dark. But why should the designer or any other stakeholder involved in the project wait for the buyer or anyone else for that matter to provide the status? Shouldn’t it be available to them as well?
Moreover, when the buyer receives the data from the design teams, they will not know whether the parts were sourced earlier unless they sieve through the ERP data and find out. If this is not known, the buyers might spend time working from scratch on all the parts.
Everyone on the team feels the pinch. Jane’s team is inundated with multiple activities and endless meetings with stakeholders with out-of-date or incomplete data. But Jane can change this and you can too! Get access to complete, contextual, and granular-level data and the complete digital thread of the process under one roof. With Zumen. To know more, contact [email protected] or schedule a free demo.