CFOs and CPOs who are able to reduce costs will stand out in their organization.
Sourcing professionals with significant RFP experience understand the mechanics and the psychology of the process.
An RFP should not just be a mechanical exercise. Let me provide some examples of market intelligence that can be gained when it is run properly.
- A national company was able to reduce the number of vendors handling janitorial services from five to two. In the process they were able to reduce their costs and the administrative burden of managing so many vendors. During the qualification process the company realized that some of their suppliers could service many more locations than previously thought.
- A national retailer with hundreds of suppliers and over fifteen hundred items was able to significantly reduce cycle time, increase competition and reduce costs using an online sourcing platform. The platform provided the means to organize what have been a chaotic process. The retailer had thought that the process was too big and complex to be handled by an automated process.
- A company in the medical services industry utilized initial RFP bids to set a baseline that was then the jumping off point for a reverse auction. The company realized over a 30% savings versus the price they were paying under the existing agreement. The company was aware that there was some downward price pressure in the industry but they certainly didn’t think that a 30% savings was possible.
- A large manufacturing company was using nine vendors for one type of materials. They used a 150 questions RFI to qualify the vendors. After the initial round six suppliers that considered qualified were invited to participate in an auction which included three auction baskets. The company was able to reduce the spend on this key material by 30% while reducing the number of vendors from nine to two. Prior to the RFP the company believed that they could achieve some savings and reduce complexity by reducing the number of vendors. The resulting savings in cost and complexity far exceeded their expectations.
The companies in these examples benefited from the experience of the sourcing professionals behind the online platform. The step-by-step guidance on the qualification and auction process was invaluable. Knowing what questions to include in the RFI was key to eliminating unqualified suppliers. Understanding how to structure an auction to maximize competitive bidding is another key to success. All of this insight, guidance and training are necessary to make the RFP process successful. This is not something that can be learned from video training or general “how to” manuals.
Action Step: What would be the next step?
If your procurement team is still using Excel, Word and Email or they are working around a more cumbersome solution because hands-on training isn’t available, call me to set up a demo. In 30 to 60 minutes you will know if the solution I represent will work for your team. The benefits go way beyond cost savings. Your team will be smiling because they will know they are making a significant contribution to the profitability of your organization.
Next week I will continue on this same theme so your organization can improve your bottom line.
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.
You Won’t Drift to Success©
Think about it.
Until Next Time, I Wish You Great Success in Your Business and in Your Life