Procurement teams face a number of challenges as companies take an increasingly critical look at their processes in the hopes of producing more value. It might not surprise anyone that the value-driving RFP process is still regularly met with resistance from departments outside of procurement. Even procurement teams have been known to push back, describing the process as too time-consuming and antiquated. Sourcing professionals know that RFPs are critical components of well-run procurement practice, but pressure — both external and internal — can result in teams’ skirting or completely abandoning the process altogether. The risks are significant as the organization is far more likely to be dealing with the consequences of an ensemble of mismatched services and low-value purchases as a result. Here are the 4 of the biggest challenges facing your Request for Proposal process today.
- Costly RFPs – Even if one ignores the common gripes about RFPs taking too much expertise and being an arduous process, there’s the very real issue that some companies are running RFPs that cost more than they are worth. If the cost to run an RFP for a $300,000 purchase is $50,000, you’re going to have a very difficult time proving to your company that you can justify the cost of the sourcing event. There are a number of different factors that lead to expensive RFP processes, but the most important thing is to understand how much you are spending on procurement process flow. From there, you can identify what conditions need to change for your RFPs to become the value-driving tool that they are supposed to be. Otherwise, if the process itself is too costly, it undermines the rationale for leveraging the RFP for strategic purchasing decisions.
- Lack of Internal Expertise – Think of an RFP like a polygraph test; it’s only useful if you ask the right questions. If your team isn’t establishing relevant questions, appropriate evaluation criteria, and a painless way for internal stakeholders to communicate then there’s a good chance that you won’t see value from your RFPs. A lack of internal expertise can lead to suboptimal outcomes. There might not be an easy fix; not even an organization has category managers and there is a natural information asymmetry between buyers and sellers, but this concern can only be addressed if you are aware of it.
- Communication between Stakeholders – With mounting pressure to make today’s decisions yesterday, a sourcing process that — by design — prevents impulse buys is bound to frustrate some. Billowing email chains, interminable conference calls, and answering the same questions over-and-over causes massive frustration on both sides of an RFP. Examples of critical communication checkpoints in an RFP include developing clear objectives, evaluating the competing proposals, and having specific evaluation criteria. Fortunately, many of the problems people have with RFPs can be solved with streamlined communication… which also has the added benefit of directly reducing the cost to run RFPs.
- Vendors Refusing to Respond – When you’re a Fortune 500 company, you can ask suppliers to respond to an RFP via smoke signals and the odds are decent that you will receive multiple proposals. However, when the perceived stakes for suppliers are lower, some may not even want to respond. Much of the frustration experienced by buyers is mirrored by vendors. The vendor procurement process shouldn’t be managed manually, but the reality is that it’s difficult for sales professionals to commit to spending both their own time and the time of internal subject-matter experts, responding to a lengthy RFP that is being sent out to a number of competing vendors. From the perspective of a sales department, dealing with RFPs is a necessary evil. Most salespeople would prefer to invest their time in developing relationships with prospects — not filling out forms. The relationship between buyer and prospective supplier is important, but should not, on its own, dictate how a contract is awarded. To maximize the odds that vendors respond to your RFP, offer them an experience with streamlined communication, collaboration, and more. If you make the RFP response process better for them, you are more likely to have strong competitive bids for your business.
I’m fond of the expression, “The road to hell is paved with good intentions.” Such is the case with the RFP. The intention is clear — optimize supplier selection. But the road to get there can be riddled with potholes and distracted drivers. Here’s the good news. These challenges can be addressed quite easily. By recognizing and then eliminating the frustrations that others have with the RFP process, you can drive increased engagement by stakeholders and suppliers alike, improving the quality of your outcomes.
Learn more about effective RFPs in our Essential Guide to Understanding the RFP Process.