The Effect of Buyer-Imposed Bidding Requirements and Bundle Structure on Purchase Performance

In industrial procurement the buying organization usually initiates and sets the stage for purchase negotiations by sending out a request for quotation (RFQ). The business tendered in the RFQ most often does not consist of just a single item, but of a group of different stockkeeping units (SKUs). How this order lot is structured, and whether suppliers are required to strictly adhere to its composition (i.e., quote on all items in the bundle versus a subset) may significantly impact the competitiveness of the bidding and the buyer’s perceived performance of the purchase. To better understand bundling practices and experiences, this study surveyed members of the Institute for Supply Management (ISM) that aggregate several SKUs into a single bundled RFQ. Within this context, respondent replies are categorized by buyer-imposed bidding requirements according to whether suppliers are either required to submit bids on all items in the bundle, merely encouraged, or free to bid on any item combination in the bundle. The resulting bundle structure is examined and its impact on purchase (bundle) performance, as perceived by the buying company, is explored. Results are discussed, with managerial insights provided for purchasing professionals.

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