The management of material and services purchasing is primarily based on the process of buying particular supplies. The process incorporates the critical aspects of the requirement, identifying and selecting a supplier, as well as negotiating price. Given that purchasing is inherent to a broader procurement operation, it encompasses various activities, such as “ordering, expediting, receipt and payment” (Benton, 2020, p. 12). The main responsibilities of purchasing management imply obtaining the materials, supplies, and services required to produce a product or provide a service. However, the most pivotal aspect of the purchasing cycle starts with a request from within the organization to purchase specific material or supplies outside the organization.
Application of the Request Types
SpaceX is a leading private organization in the aerospace industry with a strong competitive advantage. The company’s procurement process is confined explicitly to the components and materials required for manufacturing the spacecraft (Jorge, 2015). It is crucial to apply the RFI (Request for Information) to get information from potential suppliers. It is a tender document designed to obtain general information about “products, services, or suppliers” (O’Brien, 2019, p. 476). RFI will help get acquainted with the current market eligible for SpaceX’s procurement regarding the outside company’s supply and service and, thus, enable data gathering in a structured and corresponding manner. Moreover, supply management includes the most critical tendering method to ensure the selection of the most appropriate and qualified suppliers. RFT (Request for Tender) and RFP (Request for Proposal) will be applied to submit a tender to agree with the principal (O’Brien, 2019). Such documents delineate the specific requirements, criteria, and instructions, which need to be adopted by the tenderer.
The Required Criteria
The supplier selection and evaluation process is a crucial activity in purchasing or procurement. Therefore, it is essential to formulate the selection criteria for materials and services purchased to designate the prospective suppliers. SpaceX is commonly considered a market leader in the aerospace industry, predominantly focused on its short supply chain, unique in the aerospace industry. Therefore, the supplier evaluation criteria need to be aligned with the organizational requests and primary demands developed in the spirit of the company’s marketing purpose. The purchasing criteria for the SpaceX organization are fixed and entail on-time delivery commitment, high quality of raw materials, excellent technical performance, vast production capabilities, design verification, and innovation and management expertise. In addition, the criteria involve suppliers’ financial sustainability, customer service, reliability, and reactivity, as well as performance on past projects.
SpaceX main procurement criteria include:
- The requirements, design approaches, and conceptual designs meet the mission needs within the estimated costs;
- Agreement developed for the top-level requirements, including mission success criteria, Technical Performance Measures, and sponsor-imposed constraints;
- The preliminary design meets requirements at the acceptable level of risk;
- Definition of technical interfaces is aligned with overall technical maturity;
- Safety and mission assurances are addressed;
- Technically sound operational concept;
- Mission goals are defined, documented, and agreed upon.
Criteria Incorporation into the Request Types
The established procurement management plan leads to supplier identification, supported by RFI, which provides an opportunity to obtain relevant information from the selected suppliers. The following step after criteria selection is a Request for Quotation (RFQ). It is explicitly addressed to preferred suppliers and incorporates the required details on the product or service needed. The RFQ process helps create competitive tendering for suppliers that meet the developed criteria. Each selection criteria will be included in the RFQ with detailed requirement specifications, including mandatory requirements, evaluation criteria, and item prices. Hence, RFQ is applied when the materials and services for purchase are clearly defined based on RFI and helps get the best price offer.
This analysis of the request types is based on the procurement process of SpaceX, a leading aerospace manufacturer and space transportation services organization. Each of the requests and related evaluation criteria of the materials and services purchased build the complex purchasing cycle. Ultimately, the process ends after the materials are delivered in a satisfactory condition that meets the requirements regulated by managerial accounting.
Benton, W. C. (2020). Purchasing and supply chain management (4th ed.). SAGE Publications.
Jorge, A. (2015). Space X – Lowering cost of access to space. Digital Initiative.
O’Brien, J. (2019). Category management in purchasing: A strategic approach to maximize business profitability. Kogan Page Publishers.