Why RFQ Volume Is the Wrong Metric
In the fast-paced world of procurement and supply chain management, leaders are often inundated with metrics. Among the most commonly analyzed is RFQ volume—the number of requests for quotations issued to suppliers. While it may seem like a straightforward measure of activity and engagement, placing too much emphasis on RFQ volume can lead organizations to miss the bigger picture. A focus on quantity can create a false sense of efficiency, overlooking quality, vendor relationships, and strategic alignment. Let's explore why RFQ volume might be the wrong metric and what you should focus on instead.
The Myth of Volume as a Success Indicator
Leaders may naturally gravitate towards metrics that indicate progress. RFQ volume can provide a tangible figure that depicts how active your procurement function is. For many, a high volume of RFQs feels like a positive indicator—more engagement with suppliers, increased competition, and thereby better pricing. However, this perspective can be misleading.
Consider a procurement department that issues a high number of RFQs but ultimately secures few valuable contracts. The team may be busy generating requests, but if those requests do not align with the organization’s strategic needs, that volume does not translate into meaningful benefits. In this scenario, the RFQs serve more as noise than signals of success.
Focus on Relationship Quality Over Quantity
Rather than chasing numbers, procurement leaders should prioritize the quality of supplier relationships over mere volume. Building trust with a select group of strategic suppliers can yield better outcomes than dividing attention among many. When procurement teams invest time in developing these relationships, they cultivate collaboration that goes beyond simple transactions.
For instance, consider a manufacturing company that chooses to partner with a limited number of suppliers. Through regular communication, site visits, and joint problem-solving, the company fosters genuine collaboration. This focus leads to improved innovation, tailored solutions, and better responsiveness to market changes—all of which can drive significant value. In contrast, a team solely focused on RFQ volume may miss out on these advantages by spreading their efforts too thin.
Performance Metrics Should Align with Business Goals
When evaluating procurement processes, the metrics used should reflect the organization's overarching objectives. If a company aims to reduce lead times or enhance product quality, key performance indicators should measure the impact of procurement efforts on these goals, rather than the volume of RFQs sent.
For example, an electronics manufacturer may emphasize improving the lead time on sourcing components. Instead of issuing multiple RFQs to countless suppliers, this company could concentrate on a few key partnerships that provide consistent quality and faster turnaround times. By aligning metrics with specific business goals, procurement teams can better assess how their initiatives contribute to organizational success.
Measuring Total Cost of Ownership
Another flaw in focusing solely on RFQ volume is that it often overlooks total cost of ownership (TCO). The TCO is a metric that accounts for all costs associated with acquiring a product or service, including purchase price, maintenance, shipping, and disposal. RFQ volume may indicate an organization is exploring options, but it fails to provide insight into the long-term cost implications of those choices.
Imagine a company frequently sourcing low-priced components through numerous RFQs. Initially, these low quotes might seem attractive, but hidden costs such as poor quality, unexpected delays, or insufficient supplier support can inflate the total cost over time. Instead of chasing RFQ volume, organizations should focus on comprehending and calculating TCO. This approach promotes smarter decision-making and ensures that procurement aligns with the company’s financial health and market competitiveness.
Profitability Is More Than Just Cost Savings
Moreover, fostering a culture that values RFQ volume can lead to a short-sighted approach that prioritizes immediate cost savings over long-term profitability. When the procurement department thinks in terms of volume, it might accidentally invite competitors who can deliver services at lower costs but cut corners elsewhere.
For instance, a grocery retailer could issue multiple RFQs for fresh produce, focused solely on price. If it results in partnering with a supplier that provides lower-cost produce, the initial decision might seem rational. However, over time, if that supplier delivers inconsistent quality or arrives late to loading docks, it could erode customer loyalty and ultimately reduce revenues.
Instead, focusing on value creation involves seeking suppliers who partner with the organization to drive mutual growth. Such strategic partnerships can enhance customer experience, create shared understanding, and build brand loyalty. Procurement leaders should rethink how they evaluate suppliers and demand more than just cost efficiency—they need to foster collaboration that drives profitability in the long run.
Transforming Procurement for Sustainable Impact
To ensure procurement remains a driving force in an organization, leaders should consider adopting a holistic view of vendor relationships and outcomes. Transitioning from a quantity-based approach to one that emphasizes the qualitative aspects of supplier engagement will enable teams to create sustainable procurement strategies.
By focusing on strategic partnerships, aligning metrics with business goals, and considering total cost rather than just purchase price, procurement leaders can tap into the true potential of their function. This requires a mindset shift away from chasing RFQ volume towards nurturing supplier relationships that contribute to the overall success of the business.
In today’s rapidly evolving marketplace, procurement leaders must embrace a more comprehensive framework of evaluation that transforms the procurement function from a transactional role into a value-driven partner. As organizations prioritize quality and collaboration, the result will not only be measurable savings but renewed competitiveness and resilience.
By redefining success beyond RFQ volume, procurement can emerge as a key component in driving organizational growth and profitability. Engaging strategically with suppliers today lays the groundwork for lasting partnerships that fuel innovation and efficiency tomorrow.
