Strategic Sourcing Checklist

A Handy Checklist for Sourcing Managers

How do Sourcing Managers go about choosing the right supplier for a project? Are there specific steps that you should follow to ensure that you get the best results? Are there benchmark practices that you, as a procurement manager, should take note of?

Strategic sourcing is a multi-step process with several considerations. And cost-efficient, systematic sourcing is a process that requires thoughtful preparation. 

To help you keep track of all the necessary steps, the following simple vendor relationship management checklist is offered as a guideline:

 1. Have you identified your requirements?

Before you even start crafting your RFP (Request for Proposal), take a moment to consider whether or not the service or product that you want is actually essential to your business. Is it something that is required for your business? Is the service critical to operations? Is it something that will improve business performance?

Make sure the product or service that you are trying to procure isn’t already readily available in your company. 

Remember, one of the most important goals of streamlining your strategic sourcing and procurement processes is saving money. This requires taking a closer look at resources already available in your organization.

2. Identify and estimate the cost of your procurement

A Deloitte study notes that 74% of CPOs (Chief Procurement Officers) cite cost reduction as a strong business priority. That said, it’s essential that companies ensure due diligence when it comes to researching market prices of services and products.

Establishing an estimate will provide an overview regarding whether your procurement costs meet or exceed your allotted budget.

3. Seek funding approval

Before you send out an RFP, make sure you have the necessary funding to back it up. You don’t want to jumpstart the process by seeking suppliers first, only to find out executives don’t agree with your proposed budget. This will only lead to ruining supplier relationships.

4. Determine the best procurement strategy

A strong purchasing strategy is one of the most cost-effective and efficient ways companies can create value for their business. It will help ensure longevity of supplier relationships, create positive working environments, and establish transparency in business processes. Often, automating the process via an eSourcing platform is the best way to go about it. Not only is the whole process simplified, sourcing managers can also monitor and track the entire process every step of the way.

5. Evaluating suppliers and awarding projects

Be sure to create clear criteria for evaluation that potential suppliers can access and review. This will help them identify key areas about the project that they need to focus on. For example, if you’re trying to expedite the completion of a project, it might be to your advantage to identify speed as a priority. If saving money is a priority, cost might be something that requires greater emphasis.

The strategic sourcing process can be complex. Fortunately, keeping this simple checklist in mind will help make sure that you have every critical element in place to make the right decisions regarding suppliers. 

Take advantage of Vendorful’s eSourcing functionality and find out how you can get the most value out of it for your business. It’s as simple as point and click. Speaking of which, you can point a click your way to a demo of Vendorful.

Craft your RFP

7 Key Components of an Effective Marketing RFP

If you work in the marketing industry then you know just how important good vendor relations are to the success of any project. This means you should put a strong focus on finding good vendors; beginning with a streamlined and efficient marketing RFP (request for proposal) that you can send out to potential candidates.

At this stage of the RFP process, your proposal essentially represents your company to future partners and collaborators. Well-written and thoughtfully planned RFPs yield good proposals. And good proposals result in great working relationships with vendors you can rely on. All things considered, a good RFP will ultimately ensure the positive outcome of your project.

With this in mind, the following key components should be a part of any marketing RFP you send out:

 1. Executive Summary

This is one of the most critical components of your marketing RFP. Vendors will often refer to the executive summary to determine if your project interests them and is worth bidding for. Keep it short and succinct. The very reason you’re crafting a summary is so your potential vendors can get a quick idea of your requirements. Be sure to include important milestones and objectives you want to achieve so that there is a clear understanding of what they will be working towards.

 2. Company Overview

Do not assume that your potential vendors are already familiar with your brand. No matter how big your company is, or well known, always introduce your business and share pertinent information about your brand. As part of your vendor’s research, it’s likely that they will also refer to other sources of information that will give them additional insight into your business, such as your LinkedIn or Facebook page. Be sure to keep these up to date.

3. Target Audience

Indicate in your RFP who you want to reach. To accurately identify who your intended audience is, think about who you’re speaking to, who you want to engage, and the kind of user experience you want create for them. This will ensure that your vendors are able to deliver quality bids that are relevant and therefore, more engaging to your target audience. 

4. Objectives

What goals or metrics do you want to achieve? How do you intend to determine whether or not these goals are met? How will you evaluate the success of your project?

Do you want to create a website for your client that prioritizes interactivity? Do you want to produce marketing materials within a very specific period of time? Discuss your objectives internally and communicate this clearly in your RFP. 

Your objectives will determine the kind of solutions that your vendors will provide. This is critical information for your vendors as it will help them prepare a better, more relevant bid.

5. Budget

Like any business, a big part of the success of any project comes down to budget. In fact, marketing budgets represent 11.4% of a company’s overall spend. 

Budgets, however, should always be considered in the context of quality. While you will always want to get the best value for the lowest possible price, try not to compromise quality just so you can get the cheapest bid. Keep this in mind when you indicate your budget. Be realistic about what your budget can achieve and find a balance between quality and cost-efficiency.

6. Requests for Additional Information

Are there any other details that you want your vendors to provide? Should they include organizational charts? Do you want a list of previous industry experience? Think about the information you need from your vendors so you get a better picture of what they can do for you. Make sure, however, that you keep your requests simple. Asking for something complicated might just turn potential bidders off. 

7. Selection Criteria

Finally, be sure to clearly indicate how you will be choosing your vendors. Apart from specific criteria, it might help if you assign a point-value or percentage for each to help vendors identify the top priority elements. For example, you may have multiple criteria for evaluation but if price and speed are priorities, show that it carries more weight by assigning more points to it. 

Ensuring these key components are included in your RFP as you search for vendors for your next marketing project means you’re increasing your chances of engaging them and building good relationships with them. Remember, the better written your proposal, the better response you’ll likely get.

Take advantage of Vendorful’s eSourcing module and find out how we can help you streamline your RFP process. Schedule a demo today.

Reverse auctions can revolutionize your procurement process

4 Ways Reverse Auctions Can Revolutionize the Procurement Process

The premise of reverse auctions is simple—buyers who want suppliers for a specific product or service ask suppliers to submit bids online. To win the bid, suppliers must then compete with the lowest cost, over a defined period of time.

This new process has naturally attracted the attention of procurement teams. And those teams have definitely experienced savings: according to a recent GAO report, in 2016 the Federal Government saved over $100 million on roughly $1.5 billion of purchases made via reverse auction or almost 7% on average. . Auctions are a definitive way to reduce sourcing costs, in addition to increasing efficiencies and driving better business. In short, reverse auctions—when used correctly—have the potential to revolutionize the procurement process. How? Check out the top 4 ways below.

1. Significantly cuts sourcing time

Traditional sourcing methods can typically take weeks, if not months, to complete. However, strategic automated sourcing platforms are great for getting fast and positive results.

By using a reverse auction platform, months of negotiations and back and forth communication can be reduced to days. A centralized communication platform allows you to easily communicate what you want and need from your potential bidders seamlessly–no need to reach out and communicate your requirements to bidders individually.

Additionally, with standard templates available and by having all the relevant documents in a single platform, procurement teams can focus more on value-added work instead of the tedium of setting up bids manually or tracking down paperwork.

2. Opens more business opportunity

Reverse auctions have proven to be a very effective way for businesses to expand their reach.

For buyers, reverse auctions allow them to access a wider supplier base. You’re no longer limited to your personal network; which means you gain a bigger talent pool.

For suppliers, it also opens up opportunities for them to participate in a bid that they would not have been aware of, if the company used traditional sourcing methods.

3. Levels the playing field for suppliers

Reverse auctions offer a transparent playing field for suppliers. Critical information about the project is available for all vendors participating in the bid on a central message board. This not only ensures easy access to directions and details, but it also means that the same information is given to all the bidders. Suppliers can also see how their bids compare to others.

4. Improves working relationships

Reverse auction platforms conveniently facilitate the price negotiations for a particular project. This is critical in maintaining a healthy working relationship with potential suppliers. Without it, you’ll basically be playing the middle man between all your suppliers. You will have the task of communicating to them directly about what others are willing to offer, ultimately pitting your suppliers against one another. It also establishes an adversarial undercurrent early into your working relationship.

Using an automated sourcing platform goes a long way towards easing the mistrust that is common in traditional sourcing practices.

Streamlining your business’ procurement process through reverse auctions is advantageous. It’s known for cutting down costs and its benefits can potentially revolutionize the entire procurement process.

To find out how Vendorful can help streamline your company’s procurement process, get in touch with us today.

Biggest challenges in eSourcing

4 Biggest Challenges in eSourcing

For a long time, procurement managers were focused on one thing—reducing costs.

Through the years, however, business needs have evolved such that cost efficiency, while still important, is now joined by a whole new list of concerns that can similarly impact a company’s bottom line.

Given this, procurement teams are now seeing their roles expand beyond simply finding the most affordable sources for materials or services. Procurement teams must also consider the broader relationship, including whether their chosen supplier reflects their own organization’s brand values and whether it’s a working relationship that will spur innovation or yield other less tangible benefits for the company.

Fortunately, eSourcing has proven to be an effective tool to help manage these concerns. eSourcing software offers robust tools and applications that facilitate traditional procurement processes with more efficiency. Still, to truly maximize what it can do for your organization, the following challenges should be addressed:

1. Declining value of cost-savings

Cost reduction has long been the primary driver of eSourcing. But often, focusing too much on affordability – especially after significant savings have already been achieved – leads to declines in quality or in service level, leaving businesses feeling unsatisfied with their suppliers despite achieving excellent pricing.

Of course, the ability of eSourcing to deliver cost efficiencies for businesses still remains very relevant, no matter how significant the gains made in the past. However, communicating to suppliers and upper management the importance of other factors in supplier selection is just as critical. At some point, this requires a significant shift from a business’s tendency to focus on year-over-year savings instead of considering the annuity value of past savings achievements.

2. Lack of support for eSourcing’s other benefits

This is the corollary to the declining value of cost-savings outlined above. To maximize the benefits of eSourcing, management and procurement teams must fully buy into the idea that there is much more to strategic sourcing than simply gathering the lowest bids for a project.

Ideally, eSourcing is designed to deliver high quality and relevant proposals for a particular project. This means bids must strike a good balance between cost and quality. Often, upper management is unable to recognize the relevance that quality plays into the whole procurement process—they’re too focused on the costs. Ultimately, this can serve to be detrimental to the success of any project, but especially when savings have already been achieved and the company is enjoying the ongoing dividends of those savings.

3. Insufficient understanding of objectives

With an eSourcing platform, it’s easy to host bidding events and send out requests for proposals (RFPs). However, to attract the attention of quality suppliers and ensure quality bids from them, you need to give them something solid to work on.

Knowing how to create an effective RFP and sending it out means understanding the reasons why you need to do it in the first place. This goes back to your objectives. If the team behind the whole initiative is not provided a clear understanding of what they’re looking for, it will ultimately lead to poor results.

4. Lack of insight into effective decision-making

Related to the previous point, an underappreciated aspect of finding the right suppliers is the proper evaluation of proposals. If procurement teams don’t fully understand their objectives, this also means they won’t be able to create reliable criteria for evaluation. This could result in a business basing their decisions on something that might not be completely relevant or sustainable for a long-term working relationship.

Having identified these challenges, you can take a closer look at your procurement process and reassess how you can maximize your eSourcing platform to deliver the best results.

If you want to learn more about how Vendorful can help address these challenges to improve your procurement process, contact us today.

Gorilla

Amazon: A 217.6-Pound IaaS Gorilla

IaaS Vendor Selection: A Personal History

In my last business, we had to go through three hosting providers before we found one that was a good fit. At the outset, our needs were modest but specific and we finally chanced upon a provider that made sense for us. We didn’t have a formalized purchasing process (or the free cycles to put together an RFP) and it was a struggle for us to reconcile the incredible importance of hosting for our SaaS offering with the financial and temporal constraints faced by most small businesses. While we ultimately found ourselves with a hosting company whose offerings and culture aligned well with our needs, we never wanted to be complacent with regard to our selection. Was there something out there that performed better, cost less, or was still better suited to our requirements?

As our business evolved, so did our requirements. In particular, we would have spikes in computational workload that were unpredictable. Amazon, which to that point, was simply regarded as an online retail giant, launched a beta of a service called EC2, which offered some of their spare compute cycles in an on-demand way. We were quite happy with our hosting provider at this point. So while it didn’t make sense for us to swap out what we had, it made all the sense of the world for us to leverage EC2 and adopt a multi-provider strategy. Suffice to say that things went well enough for us that we happily participated in a case study: https://aws.amazon.com/solutions/case-studies/twistage/.

Roughly a decade after Amazon’s initial foray into IaaS (Infrastructure as a Service), the market for such services has experienced “hockey stick” growth. What was under a $3B global market as recently as 2010 now projects to come close to $25B in 2016.

IaaS Revenue Growth

Chart from: https://www.statista.com/statistics/203598/forecast-for-the-worldwide-public-cloud-services-market-for-iaas-until-2014/

Thus far, Amazon has held on to its first-mover advantage and remains the largest player in the IaaS space. But for all the press that they’ve received, the lion’s share of the market belongs to non-Amazon companies. It wasn’t too long ago that Microsoft promoted their cloud chief, Satya Nadella, into the CEO position. More recently, Urs Hölzle, Senior Vice President for Technical Infrastructure at Google, shared, “My goal is for us to talk about Google as a cloud company in 2020 because our revenue is bigger than the ads revenue and it’s a realistic possibility.” Considering Google generated $67.39 billion in ad revenue in 2015, that’s an extremely lofty ambition.

A Fragmented Market

The growth curve of cloud services as a category is so steep that it makes sense for companies to shoot for the stars. The other side effect of a large and fast-growing market is that new entrants enter the fray at a rapid pace. Add the combined IaaS market share (see the chart below) for the aforementioned companies — Amazon, Google, and Microsoft — and you’re still looking at coverage of less than 50% of the market. In fact, the most successful company offering an IaaS platform is “Other.” With apologies to Other Inc., the “Other” in the chart is not a company at all, but rather represents the combined market share of companies that weren’t fortunate enough to be named on that list.

IaaS Market Share

https://www.statista.com/statistics/478143/iaas-vendor-market-share-ranking-worldwide/

What’s right for your business? It may well be one of the market leaders. However, it might happen that the best fit for you is a company that you haven’t yet discovered. But how do you find them, much less evaluate them? That’s where we come in. We’ll let you explore the offerings of market leaders as well as discover hidden gems. And then we’ll provide the tools to evaluate these vendors side by side so you can make an informed decision about what’s best for your organization’s needs. We’re unbiased and driven by a single goal — to help you make the best buying decision you can.

(For those of you who are still confused by the title, please allow me to explain. Market leaders are sometimes called “800-pound gorillas.” With Amazon’s IaaS market share listed at 27.2% in the chart above, I simply took 27.2% of 800 pounds and voilà — a much smaller gorilla!)

vendor giving you a vendor-written rfp

A vendor wrote your RFP. You won’t believe what happened next.

Corporate purchasing is hard. People who don’t make purchasing decisions probably don’t realize what a challenge it is. How hard can it be to shop for things? We all shop for things, don’t we?

But buying (say) cloud hosting is a lot harder than buying a pair of shoes. For one thing, when you buy shoes you don’t have to worry about how those shoes will affect dozens of other stakeholders; you just have to worry about how they affect you. For another, you know all the right questions to ask about your shoes: are they comfortable, do they look good, and are they the right color?

Odds are unless you are a hardcore IT expert you have no idea what questions to ask a cloud hosting provider. If you’re an executive of a mid-sized e-commerce business, you just want to make a decision and get back to your day job. If you’re a purchasing manager at a large enterprise, you have dozens of other outstanding purchasing requests demanding your attention and don’t have the time to focus on becoming a cloud technology expert in a matter of weeks.

You want to run an RFP to compare multiple options, but you don’t know where to begin. So what do you do? You call up a salesperson and start asking them questions to educate yourself. Before you know it, they’re offering to give you their own vendor-written RFP! Problem solved, right?

Wrong.

scoobie doo smh at vendor-written rfp

It’s tempting. Oh boy, is it tempting! After all, they are domain experts. And if they include anything that biases the results towards their own solution you’ll surely catch it, right?

Actually, you probably won’t. Not because you’re not smart and capable, but because a subtly biased question can sound so reasonable if you aren’t deeply educated in the domain.

Let’s consider a specific example in cloud hosting. Suppose that their vendor-written RFP includes a question about supporting virtualized instances of Linux and Windows servers. Sounds fair, right? I mean, shouldn’t your hosting provider support Linux and Windows servers?

Well, if you really want a virtualized server running one of those operating systems so you can install a bunch of software yourself, then yes they should! But what if what you really want is just for someone to host your website without forcing you to get into those details? The truth is you probably shouldn’t care about the underlying technology. But as it turns out, the company that “helped” with your RFP just so happens to provide virtualized servers running the OS of your choice. By including that question from their RFP template, you’ve guaranteed that you’ll get a “no” from (for example) Google, Microsoft, and many other excellent hosts. And you’ll get a “yes” from the company that gave you the RFP!

Or perhaps they suggest a question on whether classroom training is available. Training is important, isn’t it? Of course! Sounds reasonable! But does training need to be delivered in person, as a lecture, in a group setting? Is that an efficient use of time for your company? There are many ways of efficiently delivering product training these days, and the best hosting solution for your company’s needs might offer training in a better way than this vendor-written RFP leads you towards.

These subtle introductions of bias towards a single vendor add up over the course of a long RFP and are a major contributor to the first touch problem. (For more on that and other problems relating to corporate purchasing, check out Corporate Purchasing Is Broken and the RFP Is a Horrible Thing.) You want to find the best solution, not just the first solution. That’s why it’s much better to lean on community expertise – rather than vendor expertise – when looking for help with an RFP. Rely on the wisdom of other buyers who have been in your position! And use the aggregate expertise of the vendor community, not the single opinion of a biased salesperson.

To get started with an unbiased RFP template, join Vendorful today!