Are Your RFPs Delivering the Cost Savings and Efficiencies Promised?
RFPs that fail to deliver expected cost savings and/or efficiency gains frustrate procurement professionals and stakeholders.
The issues typical revolve around insufficient planning or conflicting goals.
As you read the points that have been shared with me, consider how these issues have impacted your organization.
Insufficient Planning – This is mentioned as an issue virtually 100% of the time. It is often assumed that prior success in a category can be repeated with the same approach. It is also common to decide that items that appear to be non-critical don’t need a lot of planning. Who would have thought that toilet paper would be in short supply during the current coronavirus crises? I like to ask this question: “What would happen if we could only get 50% of this or if it cost 200% more than the current price?” This is my simplistic version of the worst-case scenario.
Impractical deadlines – If you are a supplier this is one of the results of insufficient planning by buyers. If you don’t give suppliers enough time to thoughtfully respond you are sending a message that crisis mode is how you operate. Expect that your suppliers will build in a nice cushion on their bids to insure they don’t get burned by an unrealistic delivery timeframe or changes in specs after the fact.
Limiting How Many Suppliers You Invite – When I first heard this, I was very surprised. Then I was told that a manual system of spreadsheets, email and PDFs made inviting more suppliers a huge time challenge for some categories and items. Cutting, pasting and combining 8 bids just wasn’t possible with the time available. A client recently shared a success story that they were able to save 5% on a significant spend category by increasing the number of invited suppliers from 5 to 8. The cloud-based system they had put in place automatically summarizes the results and cuts the analysis time by 40%. The ROI on this one event paid for the tool for the initial year.
Changing Specs – This is another example of poor planning. This probably aggravates and demotivates your suppliers more than a short deadline. If you want the best bid, provide clear definitions of what is expected. Changes in specs should be the exception and not a common occurrence.
Back Door Negotiating – Suppliers must believe that there is a level playing field. Transparency is also vital. Both sides need to negotiate in good faith.
Ghosting Your Suppliers – Your suppliers deserve to know where they stand. I love buyers that provide bid feedback after a round. This allows suppliers to decide if this is business they can win and/or make an acceptable profit on. I have never understood why people are afraid to let you know that your bid is not going to cut it. It is far better to let a supplier know that there isn’t an update than to ignore their emails or calls. I was recently told this: “our company policy does not allow us to provide any feedback during the RFP process”. How does that approach lead to the best bid? I think I can write a book on why this is poor business practice, but I am sure you get it.
Multiple Contacts – It is understandable that more that one person will be involved with the decision. One point of contact makes for a smoother process and minimizes misunderstandings.
Lowest Bid Versus Total Cost of Ownership – Tools that are readily available today allow all factors that impact the total cost to be included in the analysis. A common example is the cost to change suppliers. This can be difficult to determine with spreadsheets or common RFP software. Optimization tools can calculate the impact of each incremental change in minutes. Now that is power that your operations team will appreciate. Some organizations must accept the lowest bid. If that is your situation, planning to ensure all factors impacting cost are included is critical.
There are more issues, but these are the most common ones shared with me.
If you deal with these issues or similar ones and have had enough, perhaps we should chat.
Unlike some consultants that might ghost you or promise more than they can deliver, I will let you know quickly if your issues are something I can help with.
Action Step: Finding the right tools for your needs can be a challenging process but it doesn’t have to be. If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want. If you want to go explore this topic in greater detail, please contact me. I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672.
If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.
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Until Next Time, I Wish You Great Success in Your Business and in Your Life