What Is an RFI And How Can You Construct a Well-Written One to Make Informed Decisions?
Businesses often face challenges that require advanced solutions, but where do you start? How do you keep track of potential vendors and suppliers while comparing what each of them can offer? Conducting a detailed, feature focused Request for Information (RFI) process can significantly help in making the right decision.
An RFI is a formal document that collects information from potential suppliers about their products, capabilities, experience, and pricing. This process is aimed at gathering knowledge about a potential supplier’s ability to meet the company’s requirements in order to reach the best decision when it comes to selecting vendors.
Importance of Knowing Your Suppliers
Security purchases are often expensive. To ensure optimal allocation of the buying budget, it is crucial to know whether the shortlisted potential suppliers will be able to fulfill the specific requirements of the business. The RFI document identifies these requirements and enquires the possible vendors to specific answers on how they would be able to meet them.
Market Application of RFIs
RFIs are widely used in the IT, Marketing, and Construction industries.
In the IT sector, RFIs are helpful in making decisions on which supplier to acquire the ideal software from. These are often strategic decisions for IT companies that are to last them a long time, thus elevating the importance of RFIs in the decision-making process. Good RFIs in this market clarify the detailed business requirements; for instance, the compatibility and integration of the software with other applications, maintenance protocols, use cases, or limitations of any kind.
In the construction industry, RFIs are used for more than just considering which vendor to partner with. It is a way of submitting queries from one department to another – from a contractor to a designer, from the subcontractor to a general contractor, or from a general contractor to an AOR – regarding materials, standards, specifications, or contract information.
In the marketing industry, RFIs are important to evaluate advertising agencies by requesting a list of industry-specific clients, core expertise, and details of how well they understand the buying party’s project requirements.
RFIs & Cost of Ownership Analysis
Identifying funding costs is another important benefit of the RFI process. There may be additional, hidden, or indirect costs that might not be known upfront. Businesses must thus create cost scenarios and run total cost of ownership analysis to evaluate the entire cost of making the purchase in order to make an informed decision. A total cost of ownership analysis is a management accounting-based financial estimate that helps buyers assess all kinds of factors that drive up the total cost of procuring a product from a specific supplier.
This assessment not only paints a clearer picture in terms of the cost perspective of a purchase decision but also makes it easier to reach one. This is because the total cost of ownership analysis brings all prospective vendors on to one page, with all costs uncovered, making relative comparisons between vendors easier and more transparent. A vendor with a higher quote price may prove to be more cost-effective in the long run, contrary to a supplier who might claim a low price but becomes a rather expensive cost of ownership long term. Thus, an RFI must go hand in hand with the cost of ownership analysis to ensure accurate and transparent assessment of options that would help lead to informed purchase decisions.
RFI Best Practices
A good RFI asks the recipients to respond to it in a standard, structured manner. This process not only makes assessment straightforward for the organization, on whether the responding party is the ideal choice, but the standardized response makes the comparison between vendors much easier.
When preparing an RFI, the organization looking forward to making a purchase must note down detailed requirements – on the basis of which, the vendors’ capabilities would be judged. It is imperative to note, however, that the RFI’s are based on the functional requirements of the customer environment and not Architectural and Engineering (A&E) specifications of the product.
A well-written RFI would focus on the following:
What is the Ideal RFI Format?
A crucial component of a well-constructed RFI is its format. RFI’s must include:
- Introduction to your business
- Reason for writing the RFI
- Table of contents
- The scope of the product volume
- Response instructions
Moreover, a good RFI must be to the point and easy to understand and navigate through. Many businesses use the RFI format template, or online applications for creating a vendor’s profile.
Here are some important pointers that can help build a well-written RFI.
- Be Concise
A good RFI must be written in a concise manner, with specific requirements laid out so it is easy for the potential vendor to understand what is being enquired.
- Be Thoughtful
The tone of the RFI must be considerate and its format should be easy to navigate as a consideration of the supplier’s time and effort.
- Set a Reasonable Response Time Frame
The time frame to expect a response to the RFI from the supplier should be specified beforehand and must be adequate for the supplier to evaluate the RFI and respond accordingly.
In conclusion, RFIs are extremely helpful in providing insights to organizations to assist them in making purchase decisions. Each RFI is unique to its respective organization and industry but using an already built template can be a huge time-saver for decision-makers in the vendor evaluation process. In case one is not used, the above-mentioned points – paired with prior knowledge of what is sought to resolve through the RFI – can help make sure the RFI goes above and beyond to serve its key purpose.