Apr 07, 2017
For a procurement professional who’s perpetually overstretched, conducting a request for proposal (RFP) guarantees one thing, and it’s not better pricing. It’s time.
Conducting an RFP means spending minutes, hours, days, weeks and maybe months on the project. Time to develop the requirements, format the document, invite the suppliers, collect the responses, analyze the responses…all of these take up your valuable time.
But have you considered the value of the suppliers’ time?
Before you write your next RFP, read Dr. Robert Handfield’s article “Red Flags that Every Supplier Business Development Team Knows to Look For”. He doesn’t mince words.
Procurement people think that every supplier will go after every RFP they put out. Think again. Request for proposals require a business development team to expend resources. An RFP can be just to gather ideas and do nothing. And so suppliers may often push back…
Dr. Handfield offers 9 “red flags” that suppliers look for to determine whether or not they will participate in your RFP. For example:
Does the client have data that can be compiled through interviews and templates? If there is low access to data, we can’t build a case. However, we may not want to work to collect data to present to the client, which they in turn present to their incumbent!
Are we just a third supplier added to the bid list? Are they really committed to a change in the incumbent? Or are they just shopping for bids […] to put pressure on the incumbent for a price reduction?
Reading Dr. Handfield’s full list might make you wonder why suppliers ever respond to an RFP! And he doesn’t even mention what RFPs tend to miss. So, are RFPs the right way to go?
The answer, of course, depends on a lot of moving targets. But for your indirect spend, the answer is usually no. The average RFP process takes between 350 and 500 hours. That’s 2-3 months of someone working 40 hours a week on a project that may not apply to a strategic element of the business.
Indirect spend categories can be sourced more efficiently by using a group purchasing organization. Rather than spending your team’s resources to source an agreement, you can assess a GPO’s program for that category. Since they’ve already sourced the agreement and conducted market checks, you get quick access to cost savings, not to mention the other benefits of belonging to a GPO.
So the next time there’s an RFP looming, keep Dr. Handfield’s 9 red flags in mind and decide if an RFP is indeed the smartest option for that particular category.
Nicole Shedden: Marketing Strategist at Corporate United
As a marketing strategist for Corporate United, Nicole's goal is to get the word out about group purchasing organizations – CU in particular. Since GPOs free up time, money and resources for indirect procurement teams, she focuses most of her blogging on those three elements. Nicole has been marketing to a procurement audience for nearly a decade; prior to that, she worked in sales and marketing consulting.