Project procurement is one of the few areas where digitization increases speed by a factor of 100 (one hundred). Such a result comes at a cost of fundamental changes in the OEM – customer relationships, decision-making automation, and moving to unified standards for data exchange and processing. No doubt, this cost is high as both sides shall unlearn what they are accustomed to, and build a new digital mindset from scratch.
RFQ processing is the first component of Digital Procurement Platform (DPP) outlined in the previous article.
To join DPP, original equipment manufacturer (OEM) should register its business with DPP and subscribe to email alerts on RFQ. Once it is created, the link to the online quotation (OQ) page is emailed to OEM.
In procurement two terms are in use - quote and tender. The difference between both is subtle: the quote is tender with some conditions being discarded. Here the purpose is to shorten the bidding time and attract more bidders. While a quote has a quality attribute (ranging from budgetary to best-and-final), a tender is always best-and-final.
OQ uses only the quote term with conditions being tailored to purchase order contents automatically.
OQ collects data describing the scope, quality, and commercial terms of supplying goods or services. Data may be instantly validated for completeness or deviations from the requested ones.
While the process itself has undergone little change on the macroscale, the volume of analyzed data has increased substantially due to the ease and speed of interaction between the parties.
The biggest differentiator of OQ is a complete replacement of OEM data formats (or native formats) for the buyer's format.
One can define the native format as the OEM way of representing the product to customers. Native formats are disparate and non-shareable, they pose insurmountable challenges for DPP development. OQ replaces all of them – from simple to most elaborate - by introducing universal standards for data type, structure, scope, and terminology.
Prequalification
OQ starts with business registration including the following steps.- OEM identification
- OEM agent identification
- OEM survey
- OEM references list compilation
OEM survey shall determine if OEM can effectively meet the obligations and needs of the business (standards, technology, and quality). It is a questionnaire covering a broad range of subjects like company management, quality system, product design and development, resources, handling non-conformities, sub-vendors selection, risk management, and financial security.
Normally References List is a list of orders executed in the past similar to the one quoted. It is intended to convince the buyer that OEM has needed skills, capabilities, and know-how. It does not happen as in 90% of cases the similarity/affinity proofs are unattainable. OEM is unwilling to disclose details needed to compare the orders, while the buyer has no time for internet research.
Crenger References Builder makes this process beneficial to both parties. It allows OEM to match its products to the ones procured in past projects. The more matches found the less is the risk to miss the specification objectives.
The second part of References Builder is OEM online presence scoring. It defines how OEM products are correlated with what OEM shares online. OEM survey and References List are updated annually.
The information collected during business registration is automatically processed to decide whether OEM passes the minimum threshold for OQ or not.
Missing or inaccurate information or low score may substantially weaken the OEM position but does not block it from OQ. It is done to give OEM the possibility to learn the whole process, understand the points of concern, and adapt OEM marketing to common standards.
After registration OEM is granted access to online advertising with crenger.com using the website and PlantDesigner platform.
Quotation
There are 2 distinct requirements levels for OQ data: bulk or standardized goods and materials, and bespoke equipment and engineered systems. The latter deals with higher costs and longer delivery times, and is more involved. Except for the first 2 OQ steps, all others for this level are unordered.- Find the order packages related to your domain
- Select the package
- Accept the non-disclosure agreement
- Read the attached documents online or offline
- Fill out the product data form
- Add reliability data if any
- Add drawings and documents if any
- Fill commercial data form
- Customize the warranty
- Add manufacturing schedule and payment terms
- Sign terms and conditions (TAC) and build the cancellation charges graph
- Fill the spare parts data form and add part drawings
- Acknowledge the inspections and tests schedule
- Add preventive maintenance tasks list
- Fill out the troubleshooting data form
- Accept the documentation submission schedule
Order packages include similar equipment pieces. Their search is tied to the equipment category and project. The search output is the package navigation menu and its dashboard. It shows, for example, the package weight and the bidders count. Each P&ID item in the package is hyperlinked; when clicked, the P&ID fragment pops up.
It is not required to quote all the items in the package: it may be easily split between the bidders with winning quotes in procurement streaming technology.
From the package menu, one may jump to the attached images and documents and the OEM submittals schedule. They supplement the technical requirements of RFQ.
Product Data Form replaces native datasheets and "for information" files normally submitted with the product offer. They include general arrangements, cross-sections, part drawings, etc. The upload option is also used for native datasheets submission.
Item prices may be fixed with time-limited validity or be indexed – tied to Producer Price Indices. The last option is recommended for items with a lead time above 8 months and spare parts.
Pricing covers the item, spare parts for commissioning and two-year operation, and optional installation. OEM reserves the right to amend prices before the closing date, a new quote overriding the old one is not allowed.
Native commercial offer may be uploaded as well. It will be taken into account only if the offer is found to have a strong chance to win.
Lead time is defined as a period from purchase order acceptance to packing and shipping to the site. Both points belong to the generic manufacturing schedule given below.
- Purchase order acceptance
- Engineering and drawings approval
- Materials and components order
- Materials and components receipt
- Parts manufacturing and assembly
- Testing and inspection approval
- Packing and shipping to site
- Installation
- Site acceptance inspections and tests
Against current practice, the cancellation charges curve is mandatory. It is a first step towards moving to the product price indexation. It protects OEM from the market prices fluctuation for raw materials. Cancellation charges curve may be easily transformed into the indexation equation.
A better warranty package substantially improves the chances to win. It may be done by adding extended or prorated warranties. Typical extended warranty may cover corrosion, performance, structural integrity, etc.
OEM with winning quote is automatically granted access to ADAQ – any data acquisition system of the plant. It may be used for tracking the OEM product usage.
Operation and Maintenance (O&M)
O&M is well neglected in conventional procurement driven by the lowest bidding price - the main criterion in the EPC projects. In the BOO ones built around life-cycle costs, such a strategy invariably leads to wrong decisions. In the last 5 years, BOO projects became a dominant trend. This explains why OQ is extended to O&M data collection on spare parts, preventive maintenance, reliability, and troubleshooting. This data not only allows comparing bids based on the lowest life-cycle costs but provides a painless transition to CMMS - computerized maintenance management software.