Supplier Selection & Agreements
Supplier selection in the fleet environment is now a most professional service requiring the evaluation of many criteria far beyond the single issue of price. How do we initiate the supplier selection process?
There is a structured process that may include – (It may not be necessary to utilise all 3 options);
- RFI (Request for Information) - gather research information to help make a decision on next steps
- RFP (Request for Proposal) – used to identify a refined list of available services and potential suppliers.
- RFQ (Request for Quotation) – requesting a formal supplier quotation of pricing, specification and commercial requirements.
In preparation for these processes the goods or service requirements need to be fully identified and defined through a stakeholder and / or expert discussion process. Issues to include in these discussions, and to convey to bidders, can be;
- Cost parameters
- Service delivery capability
- Quality
- Critical requirements and weighting
- B-BBEE and Social Responsibility.
- Experience and references
- Implementation plan
- Risk and security
- Use of local dealers / suppliers
- Training
- Warranties and Guarantees
- Inclusions / exclusions
The evaluation of responses is intended to shortlist suppliers. The evaluation process will initially exclude those who do not comply with critical issues. The responses should be evaluated by a team of stakeholders who will score bidder responses. The application of the weighting can identify the probable supplier. To be finalised upon adjudication.
Experience from the review of RFP / RFQ responses is that insufficient attention is given to the experience of the potential supplier. Call for a demonstration and / or references and ask for “proof” of capability.
Although this process has a dominant focus of best pricing the operational capability of the potential supplier must be an integral part of selection. The failure of a supplier may have serious consequences for your business and your commitment to a supplier must include your own expectation of a long and mutually beneficial relationship.
Assuming a long term relationship, it may be beneficial to include innovation and cost reduction objectives in your agreements.
The above process is both detailed and extensive and may not be necessary for the selection of a single service or goods supply.
The finalisation of the process should include content for Commercial and Service Level Agreements (SLA). The SLA will typically include
- Ordering and delivery processes
- Price adjustments / escalations
- Performance measurement, review, corrective action and penalties.
- Cancellation & Termination obligations and requirements
- Innovation and cost reduction
Having selected your supplier and agreed the terms of Commercial and Service Level Agreements, the day to day management of a supplier should include good administration and prompt payments. Manage service delivery as a partner.
Have a question?
Contact Nigel Webb - Latitude Fleet Services - nigelw@latitudefleet.co.za