When you’re ready to work with a supplier, where do you start? It’s one of the most-frequently-asked questions from our community of makers and small businesses. Most businesses start with an RFP (request for proposal) or RFQ (request for quotation) that they send out to potential suppliers to bid on.
The Manufacturing Extension Partnership (MEP) is one place to begin. A nationwide network of American manufacturing experts, they’re a matchmaker for local and regional U.S. business and suppliers. We reached out to MEP partners Elena Gurac (FuzeHub, New York) along with Gene Russell, and Bill Browne (Manex, Northern California) for their tips on what to include in a clear and comprehensive RFP:
- Background & Objectives: Include a brief overview of what your company does, why you’re soliciting bids and what products and/or services the contract manufacturer will provide.
- Deadline/RFP Schedule: Give contractors a reasonable timeline for writing their proposals. You can get very specific, including a deadline for any questions, a date they can expect responses, proposal due dates, review times, announcement and start dates.
- Bidders’ Meeting: Hold a bidders’ conference so that all potential suppliers hear the same message. Include the date, time and conference number in your RFP.
- Submission Guidelines: Tell vendors how they must write and deliver their proposals, including a response structure (you can provide them with an outline or forms) and delivery method (email, mail, spreadsheets, PDFs, etc).
- Timelines: Get as specific as possible with your expectations for a production timeline. For example, include date ranges for pre-production samples, ramp-up plan, inventory plan, etc.
- Scope/Capability Requirements: Clearly specify the scope of work required and your quality needs.
a. Systems & Certifications: Industry-specific certifications and requirements vary, so find out which ones the manufacturer maintains or at least knows about:
i. Systems: For example, do they have ISO 9001 certification (the International Organization for Standardization’s criteria for a quality management system)? Do they have SFQ certification (the Safe Food Quality Institute’s standard for food production, processing and handling)?
ii. Workforce: How many full-time employees are on staff? How many part-time? Which skills and certifications do employees have, and is there a plan to develop talent and provide additional training? It’s critical that you ask the supplier to clearly specify if any subcontractors will be used.
iii. Environmental Sustainability: If this is important to your business, find out whether the contract manufacturer has any green initiatives or certifications.
b. Equipment Capabilities: Ask about minimum and maximum part sizes, and whether the company specializes in producing the volume of parts that you need. Ask also for the percent of content made in-house.
c. Shipping & Logistics: Shipping, logistics, company safety records, and evidence of online deliveries should also drive your decision making.
7. Target Prices/Costs: It’s important to consider metrics that are related to responsiveness and cost. Examples include total order cycle time, lead time, share cost, etc. You can request a detailed line-item breakdown of costs with optional items priced separately. It’s also good to remember that, generally, the contract manufacturer receives a down payment of one-third to cover materials.
8. Protections and Guarantees
a. Warranties & Pricing Guarantees: Ask the manufacturer to provide any warranty and pricing protections, conditions and exclusions. You can ask for a signed Not-To-Exceed (NTE) amount for the actual cost of the total project. It’s important to also include a stipulation that no changes to the process or design can be made without approval of the customer.
b. Security & Intellectual Property (IP): What are the contract manufacturer’s IP policies? What privacy and IT security policies do they have in place?
c. Insurance: Ask them to provide any certificates of insurance you need, like Workers Compensation, Disability or General Liability coverage.
9. Finances: Financial discussions are sensitive, but they’re important. How long has the company been in business, and how is it funded? For small businesses especially, it’s critical to avoid potential partners who are at risk of bankruptcy.
Are you confident the company will remain in business after cashing your down payment check? Does their enterprise resource planning system (ERP) capture metrics you need to see? What’s their DSO (or accounts receivable days outstanding)? This number tells you generally how long it takes the supplier to be paid after a sale—in general, the lower the number the better the supplier is at managing sales and customers.
10. Project Examples & References: Ask for examples of relevant projects that convey the manufacturer’s readiness to take on your project. It’s also a good idea to request at least three businesses references with contact information, then follow up for first-hand reviews of the contractor.
Need more help drafting an RFP for your business? Your local MEP Center can work with you to organize the RFP process and find the supplier that fits your particular needs.
This blog appeared on the Manufacturing Innovation Blog. For more information about MEP workforce programs, click here.