RFQs: Get Value from your VAR
Today we’re going to take a look at a very specific aspect the network project delivery workflow; seeking a quote from a value added reseller or VAR. A VAR re-sells equipment and services on behalf of network equipment vendors. In this post we’ll look at what a VAR is and how to reduce the time lost on equipment ordering. Like RMAs, RFQs are not sexy, but mishandled RFQs can burn a lot of time that you could otherwise spend designing and improving your network.
VARs and value
It’s not cost effective for large vendors to build out a sales channel (a.k.a hire people) to deal it’s myriad customers directly. So vendors outsource this customer account management function to a VAR. The VAR adds a percentage markup on equipment sales to make a few bucks, in addition to offering support and professional services.
Sadly, when the VAR resells hardware there is no actual value-add for the customer. For hardware resale, the value in VAR seems to go the vendor and the VAR itself. To be fair to VARs, they do offer value when providing professional services, but that ‘systems integration’ not ‘reselling’. Professional services are where the real money lies for a VAR, but they need to resell hardware so that that they can up-sell professional services.
Hardware resale isn’t a cash cow
The margins in hardware resale are pretty low, so the VARs hire sales administrators rather than shit-hot engineers to prepare your quote. When you’re submitting a ‘request for quote’ (or RFQ), don’t expect your ordering contact to know the product inside and out. I’ll create a follow-up post on how to avoid ordering the wrong hardware type or quantity. For now let’s say that you need to know precisely what you need, before you submit an RFQ.
However there is still a lot of unnecessary thrashing and time-wasting in the RFQ process which can be avoided. The best approach is for the customer to remove all assumptions from the process and provide clear and precise instructions in your RFQ. Have a look at the RFQ checklist below:
- Build a BoM – that’s a Bill Of Materials. This is the list of parts you require.
- Ensure that every line in the BoM contains the correct SKUs (or Shop Keeping Unit), a unique code assigned by the vendor to describe each part.
- Know the list price of the devices. Also, know your discount, tell your VAR what discount to apply or inform you if they cannot apply this discount.
- Be specific and accurate. Get a peer to review your BOM against your deisgn. Commonly forgotten items are licenses, optics (both ends of the link please) & power cables.
- Some companies like to capitalise the first 12-18 months of support, if so ask for this to be included.
- Provide a shipping-address as it often impacts your shipping costs and sometimes your taxes. Ask them them to include taxes and shipping charges.
- If you have a drop dead delivery date then ask your VAR if they can meet this date.
- If this is a critical milestone, tell the VAR that if they cannot meet the required delivery date, they should seek to fulfill the quote from a ‘distributor’ rather than ‘factory-direct’. Distributors charge a premium for the risk and storage-costs of holding stock.
- Remember the clock starts when the VAR receives the purchase order (PO). It’s common practice to beat up the VAR and vendor on dates, then have the customer take 3-4 weeks or longer to issue the PO.
Sample Email Template
If that all seems a little complicated then the TextExpander template below should help. Edit and adjust to suit your process and style.
I’m writing to request a quote for network equipment as per the attached bill of materials. The delivery address will be: %fill:shipping_address%.
Please apply our standard discount of %fill:current_discount% or revert if you cannot apply that discount. Please include appropriate shipping, taxes, and %fill:months% of support under %fill:support_level% contract.
I need to have all items in the order equipment arrive on site no later than the %fill:drop_dead_date%. Please provide the current lead times for all items in your quote. If there are long-lead items please provide a quote from a distribution partner for those items and highlighting the dates and costs.
The basic take-away here is to minimise the time you spend on boring stuff. Focus on providing clear and accurate quote requests. Quench the need for follow-up emails, by providing the answers to what-if situations like long-lead times. Hopefully this will be useful to you. Let me know if the comments if I’ve missed anything.