For Custom Manufacturing, Buyers Turn to Online RFQs More and More

July 25, 2002

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Almost 70% of industrial buyers find it difficult to identify appropriate suppliers of custom manufactured products.

Almost 70% of industrial buyers find it difficult to identify appropriate suppliers of custom manufactured products. This information comes from a recent Thomas Regional survey, which also indicates that more and more buyers are turning to online requests for quotation, or RFQs, as an easier way to find appropriate suppliers.

32% of the industrial buyers surveyed indicated that they have posted an online RFQ in the past—but a whopping 77% say that they are likely to do so within the next year.

What makes the online RFQ option so appealing to buyers of custom manufactured products and services? For the most part, it's the appeal of quicker, more efficient sourcing that is provided by these services. Posting an online RFQ streamlines the process when a buyer needs custom parts or services. Rather than calling, faxing, and e-mailing shops individually, a buyer can now post a single RFQ online. The RFQ will then be matched and sent to appropriate suppliers for quotes. The buyer can compare and analyze quotes, perform any further research needed, and choose the best supplier for the job at hand, in much less time than it takes to go through traditional methods. Through the online RFQ process, a buyer may also be introduced to a supplier he or she never would have found otherwise.

Let's take a real life example. An article in Line56 details the experience of Chris Rockhold, mechanical engineer at Payload Systems. He states, "[in the past] I found most of my suppliers from medical exhibitions, trade shows and conferences. I'd look at the products…get a load of business cards and then…call them up." Recently, Rockhold began issuing RFQs through an online B2B service. The result was a quote that saved Payload 40% on its usual payment for the products purchased. In addition to saving time and money, Rockhold adds that the ability to screen suppliers based on a variety of criteria makes the online RFQ process even more appealing. (Line56 June 8, 2001)

In the past, suppliers may have been reluctant to use online RFQ services. There was the perception that all jobs would be awarded to the suppliers with the lowest quotes. We are learning, however, that price isn't everything. According to Mitch Free, CEO of MFGQuote, an online RFQ service (and partner of Thomas Publishing), 92% of the RFQs awarded do not go to the low bidder. (Modern Machine Shop Online, 2002)

Both suppliers and purchasers see now that posting an online RFQ is not necessarily the equivalent of an online auction. While some RFQ services use a reverse-auction format, where price is the deciding factor, the format used by MFGQuote, which allows buyers to take quality, expertise, and other factors into account, is fast becoming the preferred model. Buyers have the opportunity to perform due diligence for any quote that seems appropriate, so that they can make a decision that is not based solely on the lowest prices.

According to an article in Modern Machine Shop Online, Request for Quote sites are generating more and more interest, as RFQ models continue to develop in response to the markets they serve. (MMS Online, Aug. 2001)

As more purchasers and suppliers use online RFQ services, the services themselves will continue to change to meet users' needs. The end result will be better sourcing options that save time, energy and money for those involved in purchasing custom parts and services.

Sources: Reaching for the Stars
Richard Brown
Line56, June 8, 2001
http://www.line56.com/articles/default.asp?ArticleID=2599&ml=3

What Do Online Marketplaces Really Deliver to Job Shops
Tom Beard
Modern Machine Shop Online, 2002
http://www.mmsonline.com/articles/moi0204.html

RFQ Review
Allan Sweatt
Modern Machine Shop Online, August 2001
http://www.mmsonline.com/columns/0801web.html

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