ONLINE EXCLUSIVE: PURCHASING POWER
Buying Thermal Processing Equipment - Part 5:
Proposal Comparison and Evaluation
Once you start receiving proposals for your project from potential suppliers, it's time to start sorting out the details. The proposals received will often be for differing approaches to your needs, and this can present a challenge when trying to make an apples-to-apples comparison. The following guidelines can help you evaluate the data in an objective and effective manner.
Comparative MatrixFor all process, production and business issues identified in your technical specification, you need to create a matrix that compares the following data for each supplier:
- Critical parameters
- Desirable, but non-critical capabilities
- Future considerations
What other capabilities are available? The objective here is to identify value-added extras that may provide benefits not requested, accounting for technology and price differences. Some of these capabilities may be highly desirable. Others cannot be financially justified at present. By addressing them as non-essential, you can evaluate each on its own merits.
You should also think about the impact of changes in your business as you evaluate proposals. For example, do you believe additional capacity will be needed in a year or two? Should this project have a provision for future expansion? Perhaps you are considering the eventual addition of integrated automation. How might that impact the design of this new system? Identify aspects of the design that could be slightly altered now to avoid significant future expense.
Oranges and BananasOften, supplier proposals will contain variances from your technical specification. Sometimes these are simply oversights that need to be corrected. However, such variances might be due to technical or other issues that you should carefully evaluate. To aid you in this process, your matrix should contain the following information for specification variances:
- Description of each variance
- Reason for the variance
- Cost impact of the variance
Commercial IssuesIn addition to technical specifications and price, many commercial issues can impact your decision making process. Add the following information to your comparative matrix:
- Terms and conditions of sale
- Shipping schedule
- Installation, start-up and commissioning
- Spare parts
Don't Settle for Skin DeepIt's common for professional friendships to have developed between team members and suppliers, including a certain amount of trust. You must be careful that this trust does not prevent you from conducting an appropriate amount of due diligence to confirm key elements of a supplier's capabilities and experience. When you have narrowed your supplier list down to perhaps two or three contenders, a more in-depth evaluation of vendor qualifications might be appropriate. This qualification could include any or all of the following:
- Visit the supplier factory
- Interview key supplier employees
- Visit a similar or identical installation of the equipment under evaluation
- Check supplier references
- Talk to industry experts that have direct knowledge of the supplier
- Conduct a financial and credit rating check on supplier
Supplier IntelligenceYour team members might learn things about suppliers during the course of the evaluation process. This information may be positive, negative, or neutral, but should be included in the proposal evaluation documentation. It could be very important data during the final negotiations. Encourage your team to keep notes on supplier issues they become aware of.
For example, a salesperson might indicate a major order was just received that could impact their ability to meet your delivery schedule. Or perhaps a supplier made an off-handed comment about how slow their business was.
When this kind of data is incorporated in your comparative matrix, you will be able to address each of the issues with suppliers in a way that will be both fair and reasonable. Some unpleasant surprises are preventable if the right information gets to the right people on your team. Make a point of gathering and communicating this information.
A Team SportThe creation of your comparative matrix can be managed by a single person, but all members of your project team should participate in filling in the details and making sure all the data is correct.
Conduct an internal review of your completed matrix. All team members must approve of specifications and variances within their area of responsibility. They should review each proposal to confirm full compliance with each of your key project objectives and measures of success. All specifications should be addressed in this manner. This process helps eliminate subjective decision-making and can be used as a powerful tool in negotiating with suppliers.
Subsequent to this review, your potential supplier list can be reduced in size, and your final specification modified if needed for distribution to remaining suppliers for the best and final proposals. These proposals should be reviewed in the same manner to confirm compliance.