Supplier Management: Strategic vs. Critical

One interesting thing about running a SaaS business is that it gives you a unique perspective on supplier management.

A specific example: we host all of our application infrastructure on Google Cloud Platform. So Google is a pretty important supplier for Vendorful!

Looking at it from the other side, is Vendorful an important customer for Google? Ha. We might be an important customer to our account rep, but not to Google’s overall business.

But here’s the interesting wrinkle: I wouldn’t want to host our infrastructure on any cloud platform where we were an important customer. It would expose us to too much risk should something change about their business or ours.

It’s an interesting dynamic, but not unique to software. If a manufacturing operation is reliant on one supplier of a critical input, and that supplier only has one customer, then that means they don’t have any extra capacity should something go wrong, and the manufacturer has no obvious alternatives to draw from.

On the other hand, some companies have very successfully forged mutually beneficial relationships where both sides are critical to the other. Red Bull and Rauch come to mind.

This is all hinting at a pretty important distinction for optimizing your supplier relationships: a strategic supplier, vs. a critical supplier.

Strategic importance vs. criticality

A strategic vendor is one whose relationship can be a source of competitive advantage to your company. A critical vendor is one where a disruption would have a material negative impact on your business. Those are not necessarily the same thing.

In the case of Vendorful, Google is a critical supplier. A major outage at Google wouldn’t necessarily be disruptive to our customers because of our disaster recovery setup, but it would certainly be disruptive to our business – we would have to invest significant effort to remove all business process dependencies and get completely off of Google.

But Google certainly isn’t strategic to our business – we aren’t likely to get any particular competitive advantage in the marketplace by using Google over (say) AWS.

An example of the opposite – a strategic but not necessarily critical relationship – might be a high-end beef supplier to a restaurant. Odds are very high that the restaurant will be able to find alternative supply on short notice, but if the branding and menus are built around specific locally sourced beef then a disruption to the relationship will have longer-term implications to the business.

Where does spend fit into supplier management?

Let me pause here to make an observation: I haven’t mentioned “spend”. Not one time.

There is a good reason for that – spend might be a proxy for strategic importance or criticality, but it’s only a proxy. And frequently a poor one.

From my perspective, this is the crux of the matter. Spend is just one metric that describes a supplier relationship. It is not the metric. Too many companies are prioritizing their supplier management programs by spend, and not by strategic importance or criticality.

The reason for prioritizing SRM and SXM in this way is simple: it’s easy. Just sort your spreadsheet and off you go. But the suppliers you spend the most with aren’t necessarily the hardest to replace on short notice, nor are they always the ones who can give your company a competitive advantage.

A new approach to segmenting your suppliers

A true strategic supplier is one that can help your company be more successful. They might provide a unique product or service, or they might have some kind of competitive advantage in their market. If they aren’t providing your company with a specific and differentiated source of value vs. their peers, then they are a tactical supplier, not a strategic one.

A critical supplier, on the other hand, is one where a disruption or other incident would have a material negative impact on your business. They might be a supplier of a critical input, they might be the only vendor that can provide a particular service, or they might handle sensitive customer data. If they don’t pose that kind of risk to your business, then they are non-critical.

So instead of thinking in one dimension – spend – I suggest that you segment your suppliers along three dimensions: strategic vs. tactical, critical vs. non-critical, and (of course) spend. This will give you much clearer criteria for understanding your relationships and your supplier management priorities. Then you can direct your limited SRM resources towards measuring and managing those relationships more effectively.

Your Software RFP is Broken – Here’s How to Fix It

Have you ever been involved in a software purchase that failed to meet the stated objectives? That ran way over budget? That launched months or years later than planned? Of course you have. Research shows that only about 30% of digital transformations are successful.

One of the main reasons for this is the way enterprise software is often purchased: through an RFP (request for proposal). On paper, it seems like an RFP is a strong approach: define your goals clearly, evaluate solutions side-by-side on objective criteria, pick the best fit with input from all stakeholders. Unfortunately this approach is fundamentally flawed. It makes a number of incorrect assumptions.

Flawed assumption 1: You fully understand the requirements up-front

You spent weeks building your buying team. You spent months interviewing users. You did your research on the market. You even brought in consultants to help you identify and document your requirements. Surely you know everything you need to know to specify exactly what you need and what you want to buy! Right?

Wrong. You will definitely identify additional requirements – sometimes extremely critical ones! – during implementation. If the project is complex enough to warrant an RFP, then it is too complex to fully document up front. It will affect too many people, touch too many systems, and modify too many business processes for anyone to understand the full impact ahead of time.

Flawed assumption 2: You are picking a static solution

An RFP implies that you are looking for a software solution that will not change. You want to buy a done deal – something that you can install, turn on, and forget about.

In reality, even the best enterprise software solutions are constantly evolving. They have to in order to keep up with the rapidly changing needs of users and the rapidly changing technology landscape. The best enterprise software vendors are constantly innovating and releasing new features and functionality.

And remember: you will miss key requirements in the RFP. Therefore, in order to be successful, the solution you select must be flexible, if only to accommodate the inherent imperfection of the requirements gathering process.

Instead of thinking about a static solution, you should be identifying a partner and platform that can adapt when your own understanding of your needs changes.

Flawed assumption 3: A feature list can define the solution fit

In an RFP, you are essentially comparing feature lists. Yes, you will ask about customer references, support, security, and so on. But to compare functionality, you’re going to ask about a long list of features.

However a feature is not a solution. A feature is just a tool that might or might not be helpful in solving your specific problem.

The challenge is figuring out how all of the features fit together to provide an overall solution that meets your needs. This can be extremely difficult to do in an RFP, because you are not actually seeing the software in action. You are just reading about it.

The only way to really understand how well a solution fits is to see it in action and use it yourself. This is why trial programs are so important (more on that later).

Flawed assumption 4: You can evaluate user experience from a demo

A demo is not the same as using the software. In a demo, you are seeing a pre-planned, rehearsed, and polished presentation of the software. The vendor controls what you see and how you see it. They are carefully selected to show you only the very best parts of the software. Even when you think you have dictated the demo script to the vendor, it is the vendor that is ultimately constructing and driving the demo, not you.

In reality, enterprise software is complex. It is used by lots of different types of users for all sorts of different purposes. There are bound to be areas that are confusing or difficult. The only way to really understand the user experience is to try the software yourself in a real-world setting.

Flawed assumption 5: User experience shortfalls aren’t important

You made your product comparisons. You thought about information security. You considered vendor financial viability. You saw a great demo. You got pricing that you’re happy with. So you make your selection. And most surprising of all, implementation goes right on schedule and according to plan! Then you go live and… users revolt.

What happened?

In the last section I talked about not being to evaluate user experience from a demo. You might have read it and thought to yourself “So what if it’s a little clunky to use? If it does everything we need at the right price it will still be worth it.”

Here’s the thing: User experience shortfalls kill user acceptance, and low user acceptance kills IT projects.

Think about it this way: you can have the most technically perfect, feature-rich, and secure software in the world. But if people can’t figure out how to use it, or don’t like using it, they are not going to use it. And if they’re not using it, you’re not going to get any value from it.

User experience should be one of your top priorities when selecting enterprise software, not an afterthought. And user experience is impossible to evaluate in an RFP.

There is a better way to buy enterprise software

The good news is that there is a better way to buy enterprise software.

Step 1: Use short RFIs to reverse-engineer requirements and eliminate poor fits

An RFI (Request for Information) is a common first step in an RFP process. It is usually a short questionnaire that vendors fill out to provide information about their products.

You can use RFIs to do more than just gather information, though. You can also use them to help reverse-engineer your requirements.

Start by taking a close look at your current pain points. What processes are you trying to improve? What problems are you trying to solve? Then, translate those into broad requirements. Once you have a list of requirements, you can use RFIs to eliminate vendors that are obviously not a good fit.

For example, let’s say you have a requirement that the software must integrate with your existing CRM system. You can use an RFI to ask vendors if their software integrates with CRM systems, and if so, which ones. This will help you quickly eliminate any vendor that does not support your specific CRM system.

There’s a benefit on both sides: Vendors don’t have to fill out lengthy evaluations where they could have qualified themselves out in a couple of questions, and you don’t have to process long, complex responses where a critical mismatch is buried away in hundreds of questions.

Step 2: Run a lengthy trial program with simple user feedback

After you’ve used RFIs to eliminate the obviously poor fits, it’s time to start evaluating the remaining vendors. The best way to do this is with a trial program.

A trial program will give you a chance to try the software in a real-world setting and get feedback from actual users. To make sure you get meaningful feedback, make the trial long. “Long” will vary depending on specific solution you’re looking for – it could range from several weeks to several months, or even a full year if it needs to capture a full financial cycle. And be sure to include a meaningful cross-section of future users in major and minor roles, not just a handful of “power users”.

Throughout the trial program – not just at the end – ask each user to fill out a simple feedback form. NPS (Net Promoter Score) is a great option, but you can also use a short custom form with questions about specific pain points and whether or not they were addressed. Whatever form of feedback you use, make sure it is painless for the end user to provide and easy for the buying team to process – the most important thing is to gather feedback from as many people as possible, even if it’s basic.

Also, the trial isn’t just about you! You’re giving your prospective vendors the opportunity to work with you and develop a much deeper level of understanding of your needs than they could get by looking at a requirements document in an RFP.

Step 3: Identify a very small set of finalists for infosec and pricing evaluations

After you’ve collected feedback from the trial program, you should have a good idea of which vendors are the best fit. From there, you can identify a very small set of finalists to move on to the next stage of evaluation.

At this point, you’ll want to do a more thorough evaluation of information security and pricing. You should also have a much better idea of what you need, so you can make sure the finalist vendors are able to meet your specific requirements.

You’ll also get better responses from your vendors at this stage than you will by opening with a lengthy RFP! The remaining vendors will have a much clearer understanding of your needs thanks to the trial, and since they know they’re on the shortlist they will be willing to invest more time in thoroughly answering your questions and also putting their best foot forward on pricing.

Take the plunge

If you’re still using an RFP to buy enterprise software, it’s time to ditch it. The RFP process for enterprise software is broken. It just doesn’t work in this space. While RFPs not the only reason a majority of digital transformation projects fail, it definitely doesn’t help.

The good news is that by following the steps outlined above, you’ll be able to avoid the most common pitfalls of the RFP process and give yourself a much better chance of selecting best partner for your enterprise software needs. Give it a try on your next project!

Hands at the Table

For Next-Level Strategic Sourcing, Invite Procurement to the Table

For Next-level Strategic Sourcing, Invite Procurement to the
Table

Employers of any size all around the world and in every industry have one thing in common: they must, by necessity, rely heavily on vendors as a vital component of their business operations. In fact, many organizations have more vendors than they do employees. Unfortunately, said reliance on these third-party relationships and on the activities of a vendor can leave businesses open to various hazards in categories called risk management domains: operational, financial; technical; regulatory compliance; reputational; and information security and privacy.

By employing effective vendor risk management, a business actively engages with its third-party vendors to ensure that the vendors’ operations, actions or inactions do not cause disruption to the business’s operations or otherwise have an undesirable effect on performance. Vendor risk management also keeps a business from getting hit with hefty fines or penalties for regulatory noncompliance or witnessing damage to the company’s reputation or brand — all because of something one of its vendors did (or didn’t do). And the group that’s increasingly becoming responsible for performing the critical task of vendor risk management? The Procurement department.

A Bigger Job to Do

Traditionally, Procurement’s primary role was to handle vendor selection, sourcing and negotiating best value/pricing on goods and services and finalizing vendor contracts. Performed optimally, this role alone contributes undeniable strategic value to the business. Today Procurement does far more heavy lifting because its core functions make it uniquely equipped to proactively identify and mitigate the myriad risks that third-party vendors present. 

Why the Need for a More Proactive Approach

The business environment continues to move faster, smarter, with more organizational interdependencies. Vendor networks are evolving from simple supply chains into complex value chains, growing almost exponentially in size and technical intricacy. Businesses rely heavily on their third-party vendors to cost-effectively fulfill their portion of the process, and thus must be capable of forecasting, overseeing and responding with agility should the slightest delay or deviation in the vendor’s actions be observed. Further, regardless of what functions are outsourced to vendors, compliance with all local, state and federal regulations remains the responsibility of the business.

The Damage Can Add Up

Failing to recognize the danger of vendor risk can cost a company dearly. Last year alone, a U.S. health insurer paid $2.09 billion in criminal penalties to the Department of Justice and $8.8 million to the Securities and Exchange Commission after one of its foreign vendors ran afoul of the Foreign Corrupt Practices Act. A major utility company reported a vendor had released the personally identifiable information of nearly 300,000 employees, and a bank reported a data spill at a vendor’s location exposed nearly two million current and former customers’ personal information. Data breaches like these cost a U.S. company an average of $8.1 million, with the intangible costs of reputational damage much harder to estimate.

Yes, They Can!

Procurement is well-positioned to take the lead on vendor risk management because, frankly, it’s already doing much of the job. Consider that the core functions in modern procurement operations are divided into six accountability areas that represent the supplier lifecycle from start to end:

  1. Strategic Sourcing
  2. Contracts Management
  3. Procurement Processes
  4. Invoicing and Payments
  5. Supplier Management
  6. Spend Analytics

Coincidentally, each of these six areas is essential to managing vendor risk. Thus, by monitoring the areas for which it traditionally is responsible (e.g., Sourcing, Contracts, Procurement, Invoicing) and extending its reach to include the other areas of accountability means Procurement can provide vendor risk management at the enterprise level — in particular, identify perceived operational, financial or information security risks and ensure that any fast-breaking regulatory and compliance matters are addressed to avoid any risks of that nature.

Just as the proliferation of technology is a major contributor to vendor risk, so does it figure prominently in providing a solution to manage it. Third-party cloud-based risk platforms are available that can connect a host of flexible tools with the eProcurement platforms and accounts payable system that the Procurement Department already uses, elevating the system’s scope and reach to bring immediate visibility, transparency, order, and application of best practices into every cross-functional transaction underway. The best of these platforms are robust and scalable, offering:

  • Seamless, easy integration with the company’s existing eProcurement system(s)
  • An instinctive, approachable UX
  • Efficient automated workflows and risk management processes
  • Tailoring for unique industry needs
  • Industry compliance and regulatory requirements as they develop
  • Scannable reporting capabilities
  • Freely shareable dashboards for real-time, aligned collaboration
  • Risk domains and assessment forms that can be tailored to the needs of the business 
  • Comprehensive customer service throughout the vendor lifecycle

Personal Relationships Are Key to Success

To monitor supply chain health, Procurement can further enhance the risk management process by once again doing what it already does: cultivating great relationships with vendors. These are people they talk to often to discuss terms and resolve issues so they’ve proven they’re up to the task. Work strategically, focusing first on top-tier and most-at-risk vendors within the risk management domains yet assess the entire group, as even vendors deemed lower-tier can have an outsize impact on a business should they trigger data breach or bribery claims.

There’s a great deal of upside to increasing the breadth of a business’s Procurement operations to include leveraging a cloud-based procurement platform to meld with the company’s P2P system and utilize both, along with personal relationships, to eliminate or minimize the myriad risks inherent with vendor relationships before they can negatively affect the business. At the same time, the wealth of key data and process improvements that are realized will help an employer streamline and optimize daily operations to face the competition with a distinct advantage. 

Sources: Digitalguardian.com, Managing Vendor Risk (The Shelby Group)

4 Key Benefits of Strategic Sourcing

Last week, I was in a meeting where someone described the company’s Strategic Sourcing group as the peacekeepers in their organization. Take a moment to consider that…. What else would you call the team that is responsible for navigating the gulf between upfront costs and long-term savings while meeting the needs of multiple stakeholders? Strategic Sourcing isn’t a job for the faint of heart.

Strategic Sourcing was a term and process coined in the 90s when the dotcom era was transforming industries at record speed. Since then, the methodology has become a staple in successful procurement processes. With strategic sourcing solutions, firms can focus on maximizing the value of the entire procurement process rather than simply choosing what initially has the lowest upfront price – increasing the efficacy of procurement.

If we were to look at driving as a metaphor, it would be the equivalent of plotting your course to a destination rather than picking a route spontaneously at every cross-section you come across. By planning ahead, you end up saving time during your journey. Implementing Strategic Sourcing is to see past the initial pricing and to take a long view of of the goals and needs of the organization.

Like drivers, businesses that use strategic sourcing solutions begin by setting a destination and then figuring out the best way to get there: analyzing their business needs and historical spending, followed by outlining a strategic plan, conducting data collection and market analysis that breaks down the roster of potential suppliers. Strategic sourcing takes into account all activities that happen during the procurement cycle, from specification to receipt and payment of goods and services. As a result, businesses that use Strategic Sourcing can develop channels of supply at the lowest total cost, not just the lowest purchase price.

Here are 4 key benefits to Strategic Sourcing:

Take a Long View

The most obvious benefit businesses will experience from Strategic Sourcing would, of course, be the reduction in cost. Identifying and selecting suppliers that provide the highest value at the best price can open up compelling opportunities for your business. Even if the outcome is identical, paying less for that outcome is always preferable! The opportunity cost saved from investing in a less-than-optimal supplier may then be used to invest and improve other aspects of your business, giving you an edge against competitors.

Align Sourcing Objectives with Business Objectives

It can be difficult to draw direct comparisons between suppliers in the same industry. If you’re overly deferential to your suppliers, they can make it feel like you’re comparing apples to oranges. A supplier that offers the most cost-effective pricing in one aspect may not be the best in another. The key here is to be clear and concise in identifying what you need from the supplier. You will always want to align your sourcing activities to your organizational goals and objectives. Remember that you are optimizing for value, not cost. Cost is a component of a value, not a synonym for it. Strategic Sourcing is what allows these vague differences to become quantifiable and directly comparable in terms of data. Better alignment between between procurement teams and stakeholders allows your business to achieve better performance with higher efficiency while minimizing the risks in your supply chain.

A Long-Term Relationship With Your Suppliers

Most organizations enjoy switching suppliers about as much as people like visiting the dentist. Not only is it disruptive to your business, but it can also be costly and time consuming for your team. Your relationship with your high-value suppliers should be one that is highly collaborative and mutually beneficial (a win-win). Strategic Sourcing helps you achieve that by focusing on the core capabilities of the suppliers and assuring the right fit for the sourcing objective. This creates synergy between the organizations and its suppliers. Both the suppliers and the business should aim towards a mutual goal of success. Put simply, your suppliers should want you to succeed while feeling appreciated for their contributions to your success. Customer success is a key to repeat business and referrals.

Beyond the initial negotiations and contracting, Strategic Sourcing also involves measuring performance and continual process improvement. As you work with a supplier, you should be monitoring KPIs and collecting qualitative feedback from stakeholders. While some of the collected data might be sensitive, it’s worth considering what you can share with your suppliers so they can remediate any issues and double down on the things that are working. A shared emphasis on continuous improvement and sustainability of the supply chain provides increased flexibility in how you cooperate.

Establishing a Systematic Approach to your Procurement Processes

Strategic Sourcing allows your procurement teams to optimize productivity, increase compliance, and lower costs across the board. With improvements in data collection and digital transformations across the procurement industry, Strategic Sourcing is rapidly growing in popularity, revolutionizing procurement and supply chain processes. Coupled with a more systematic approach to cost analysis, negotiations, supplier sourcing, and even contract management, you will always be armed with the information you need to be effective.

Wrapping Up

Strategic Sourcing is an analysis of what your organization buys, from whom, at what price and at what volume. We at Vendorful are here to help you implement and streamline your critical procurement processes. To continue the driving metaphor, we are the GPS that helps guide you to your destination, saving you all the trouble from manually plotting with a map while achieving the best outcome. It’s our job to make your life easier and save you from traditional “Time Sucks.”

If you want to see how Vendorful can help you automate your processes and support you in your efforts to build a world class Strategic Sourcing program, we would be delighted to talk with you. Contact us today. 

Spend Matters Solution Map - Sourcing - Nimble Persona

Spend Matters SolutionMap Q4 2019 – Sourcing and SRM/Risk: Strong First Showing

Ladies and gentlemen, we are on the map!

The latest Spend Matters SolutionMap has been released and we’re pleased to say that Vendorful achieved a higher Customer Score than any other competing solution, in not one but two categories. That’s right: our customers rank both our Strategic Sourcing solution and our Supplier Relationship Management (SRM) and Risk solution above all competing products, from established industry heavyweights like SAP Ariba, Coupa and Zycus, to more comparable solutions like Scout RFP and Bonfire.

As you can see from the charts in this post, Vendorful consistently ranks above peers on Customer Score. And, notably, we rank higher than Scout RFP — our closest peer in terms of features and functionality — on both Customer Score and Analyst Score. We’re extremely proud to have achieved that despite being much newer to the market than Scout RFP.

However, we are not satisfied! There is lots of room for improvement and we are determined to continue doing what we have done from the day we started: provide outstanding customer service, improve our product every day, and drive innovation in the procurement software space.

Below are a few highlights from the SolutionMap results.

Sourcing — “Nimble” persona

Per Spend Matters, the “Nimble” organization is looking for modern, intuitive cloud-based software that can be deployed quickly and is competitively priced.

Spend Matters Solution Map - Sourcing - Nimble Persona

We’re proud to rank well compared to Scout RFP in this category.

Sourcing — “Deep” persona

As Spend Matters defines it, the “Deep” organization is looking for “the most comprehensive, tailorable solution for the job”. They want best-in-class functionality, and the breadth and depth to support sophisticated requirements.

Spend Matters Solution Map - Sourcing - Deep Persona

Our closest peer on this chart is Bonfire, and we’re pleased that the Spend Matters analyst ranking places us level with them. It validates that we have been able to balance market-competitive breadth and depth of functionality with the ease of use and high level of service that makes us the best-loved sourcing solution among real customers.

SRM — “Nimble” persona

Supplier Relationship Management (SRM) is a newer area for us, and to be honest, we’re not exactly sure which competing products are most comparable to our solution! So we’re very pleased that the analyst ranked us comparably to more established SRM-focused solutions like Procurence, HICX and Allocation, while again having a higher customer score than any other SRM solution.

Spend Matters Solution Map - SRM and Supplier Risk- Nimble Persona

Again, SRM is a new area for us and we expect to deliver major leaps in functionality over the coming months, all while striving to keep our customers happier than any other customer group in the procurement space!

Conclusion

From the day Vendorful was founded, we knew that pleasing our customers would be our number one priority. The two phrases we like to use as internal guides are “maniacal focus on customer satisfaction” and “white glove service.” Another concept we emphasize here at Vendorful is Customer-Driven Development. Client business objectives and user experience are the foundation of all of our software development activities — we focus on building what our customers tell us they need rather than what we think they need. It’s all part of our customer-centric culture at Vendorful, and we are extremely happy to see that our approach has paid off with our customers scoring us higher than any other solution in the areas in which we compete.

To find out for yourself why our customers love us so much, schedule a demo today!

Are your sourcing methods as effective as you think?

Quiz: Are Your Sourcing Methods as Effective as You Think?

If your procurement team is like the ones we usually encounter, then it’s a given that you would like to accomplish your work in the most efficient way possible. So, when traditional sourcing methods deliver the results you need, it’s natural that you stick with them.

However, staying competitive and keeping up with the rapid changes in the business world requires you to take a more forward-thinking approach. Technology means you now have the option do things faster and better. For example, eSourcing platforms help expand your reach as you search for new suppliers or product sources, and can do so at a more competitive cost. With a solutions landscape that has evolved considerably in recent years, there’s no better time than now to reevaluate whether your current sourcing methods are as effective as you think. (And if you are part of the aforementioned procurement teams that we encounter, you’re undoubtedly in the midst of this reevaluation process.)

To assess what you can do to improve your processes, take this brief quiz below. Read through the questions and give yourself a point for each YES answer.

  1. My team and I use a lot of documents, emails, and spreadsheets to manage our sourcing and procurement methods efficiently.
  2. The lack of visibility and transparency in traditional procurement methods means I have to spend more time managing and monitoring bids and proposals than doing productive work.
  3. I tend to spend a lot of time coordinating between suppliers and internal stakeholders to ensure everyone is in the loop.
  4. The prospect of sourcing new products or suppliers feels tedious and daunting, and usually costs a lot of money.
  5. It takes us a lot of time to prepare a proposal to send out to prospective bidders.
  6. It regularly takes our team weeks, or even months, to find the right supplier that meets our stakeholders’ requirements.
  7. Our suppliers tend to feel that we’re pitting them against each other, which creates tension in the relationship.
  8. Our relationships with our network of suppliers can be strained, especially when we are trying to get the best price for our requirements.
  9. Our team finds it difficult to find new suppliers to participate in the sourcing process.
  10. Objectively speaking, our team finds that our current processes can definitely be improved to be faster, more transparent, and cost efficient.

Now, add up the number of times you answered YES to the above questions.

If you totaled 3-5:

Reevaluate your current processes. Your methods may be effective at the moment, but there could be room for improvement. At the rate businesses are evolving, you might find it harder to keep up with the demands of clients and suppliers down the line. At this point, it would be very helpful to find new ways to keep your procurement team focused and motivated—whether through additional coaching, training or by introducing new tools to help them improve current practices.

If you added up 5 or more:

You clearly need to find a new approach to ensure that your company maintains efficiency and efficacy in spite of apparent sourcing challenges. You might consider leveraging sourcing tools that can offer transparency, streamline communication, improve sourcing practices, and manage supplier relationships all in a single eSourcing platform.

Take advantage of Vendorful’s eSourcing and vendor management platform and find out how you can use it to improve your sourcing methods. Contact us today.

Improve your procurement process

4 Ways to Improve Procurement Processes and Boost Organizational Value

Procurement teams…those are the people who find an organization’s suppliers, right? If you’ve adopted this sort of limited view about procurement (or are surrounded by people who have), you’re (or they’re) gravely underestimating the impact of these teams. The procurement planning processes themselves and the people who are responsible for implementing them can affect almost all organizational departments directly or indirectly — which is why its role in any business is critical.

So how can you ensure that your procurement processes boost organizational value for your company? Consider some of the following tips:

1. Review your current procurement process

“But we’ve always done it this way.” It’s a familiar refrain, particularly when an organization has reached a certain level of success. Complacency is not an attribute that should be nurtured, however. Indeed, reviewing processes is a critical first step in streamlining the workflow of your procurement team. Doing so will drive new efficiencies, which will ultimately have a positive impact across your entire organization. But first, you have to be willing to conduct an honest assessment of current processes and protocols.

Not motivated to dive in? Remember: beyond obtaining goods and services, procurement teams are responsible for sifting through — and engaging with — suppliers that could potentially become long-term partners of your business. These partners have to align with the big picture goals of the entire organization and should share the complementary priorities and values. Given the strategic importance of this alignment, you can hopefully use the high-stakes nature of this undertaking to motivate yourself to see if the existing processes support this vision and then amending them if they don’t.

2. Focus on increasing employee skills through training

Continuing the training and development of employees is one of the leading factors that contribute to an organization’s success. Yet, in a survey conducted by Middlesex University Institute, 74% of the research subjects felt that they weren’t able to achieve their full potential in the workplace due to limited development opportunities.

This statistic presents a huge opportunity — one that we’ve empirically witnessed in procurement — in that new technology has been adopted to help employees learn new methods to improve their job performance. So much of our attention is devoted to procurement tools. (And this makes sense because we’re in the business of developing procurement tools!) However, to optimize the value of the tools, procurement professionals should be well equipped to use them. Distance learning, on-demand training, and more have created unprecedented access training.

3. Leverage an eSourcing platform

Leveraging a strategic sourcing template for RFPs, RFIs, and RFQs can give your procurement team more transparency and visibility regarding potential suppliers. It should make it easier for procurement teams to acquire a better understanding of what each supplier can bring to the table; as well as identify specific qualities that will allow them to see if they are a great fit for the organization.

Procurement teams are lauded for their ability to provide cost savings for companies as they source the goods and/or services required by their organizations. However, the goal isn’t necessarily to find the lowest price but to optimize for the highest value, a calculation that undoubtedly includes price. A robust eSourcing platform will help disentangle the qualitative and quantitative data, enabling procurement to select the suppliers that provide the best overall value in light of the selection criteria. The result? Strategic sourcing replaces tactical purchasing.

4. Cultivate good supplier relationships

If your organization is large enough to have a procurement team, then the success of the organization will be significantly impacted by the quality of its suppliers. In addition to maintaining active relationships, procurement teams are expected to have a network of qualified suppliers to which they send out bid requests when the need arises. Granted, you can simply seek out new suppliers when a new project or requirement comes along, but that can take a lot of time and effort. Essentially, doing so will require you to start over from scratch each time. Such delays from the procurement team’s side could cause a domino effect across the whole organization.

Similarly, once the people on a procurement team are engaged with a supplier, it’s incumbent on them to be an active participant in the relationship. Be sure to treat your suppliers fairly and conduct business with the utmost professionalism.

Keep these tips in mind if you want to improve your procurement team’s effectiveness. Remember, it’s not just about saving money or about putting out the current fire. Effective sourcing practices can have a positive chain reaction to your entire organization. So take a long view, tighten your processes, and get set up for success.

Take advantage of Vendorful’s eSourcing platform and find out how we can help improve your business operations. Get in touch with us today.

Important RFP Elements

Does Your RFP Contain These Important Elements?

Your ability to attract and engage quality bids is dependent on how well you begin your procurement process.

After all, the search for the right supplier isn’t simply just about cost-savings. It’s important to establish a balance between budget and quality, and assure that you will be forging a partnership that mutually benefits you and the supplier.

In many cases, achieving this starts with crafting a high-quality RFP (request for proposals): when your RFP outline is sub-optimal, the whole sourcing process is likely to deliver sub-optimal results.

With that in mind, it’s crucial that your RFP online contains all the important elements you require. Browse through the checklist below before sending out your next RFP.

1. Statement of Purpose

Your RFP should offer a brief explanation detailing exactly what you need, your purpose for sending the RFP, and what you hope to gain.

It should also include an outline of your target timeframe. Are you seeking a long-term supplier or a partner for a one-time project?

This section should be able to set clear expectations regarding your needs.

2. Introduction

Provide comprehensive background about your company. Your prospective bidders are of course expected to do their own research, but giving them an introduction will point them in the right direction.

Try to provide as much information that you believe will be relevant to your supplier’s ability to deliver a great proposal.

3. Timeline

Map out how long the entire process will take by providing a timeline. Establish closing dates for submitting the intention to bid and be specific about deadlines.

Make sure you provide a feasible timeline for your suppliers. Give them enough time to craft their responses so you receive quality proposals.

4. Goals

Were you able to articulate a clear set of goals in your RFP? Spelling it out clearly for your potential suppliers helps them focus on delivering what you actually need. Think about what your priorities are and what you’re working towards.

5. Deliverables

Explain the deliverables you expect to receive from each proposal. Typically, this should include items such as the plan of action, timelines, and ways forward specific to your project.

6. Pricing Template

While not necessarily a requirement, best practice shows that providing potential suppliers with a pre-designed pricing format where they can detail their pricing structure makes it easier to compare one bidder from another. It also makes it easier to ensure that there are no requirements that were left out.

7. Terms and Conditions

Comprehensive RFPs typically provide a pro-forma contract that details pertinent information about the working engagement. Typically, this includes details such as payment terms, penalties, incentives, breach of contract rules, and dispute resolutions.

8. Criteria for Evaluation

A critical element of the RFP is anchored on knowing exactly how you will make your decisions when it comes to choosing the winning bid. Suppliers have to know what you are prioritizing. For example, are you putting more weight on budget over timelines? Or is price negotiable as long as they are able to ensure quality of service?

9. Wish List

Make sure that your wish list is separate from your non-negotiables. You may want certain elements that would be great to have in the proposal, but aren’t necessarily needed. These could also be items that you’re not quite sure will fit your budget. Regardless of what you want to include, if it’s not a priority or a must-have, be sure to include it as a separate list.

While there isn’t a cut-and-dried way to construct an RFP, ensuring that the above items are included when sending it will raise your chances of receiving high quality, thoughtfully prepared proposals.

Take advantage of Vendorful’s eSourcing platform and find out how we can help you write better RFPs. Get in touch with us today.

Reasons your organization is no adopting eSourcing

Top 4 Reasons Your Organization is not Adopting eSourcing and How You Can Overcome Them

For any business that has used an eSourcing platform, the benefits are evident. Using tailored technology to streamline its procurement needs can provide an organization with significant cost savings, faster cycle times, more transparency, and better control over its sourcing requirements.

Despite the demonstrable success and a strong ROI story, eSourcing adoption remains low. As Jeff Gilkerson asks in his article for Spendmatters, “Why do 30 percent of organizations not have eSourcing tools when the benefits are widely known and accepted, the technology has been around for decades, and the tools can be obtained for a relatively low investment?”

Check out the following top concerns and some ideas about how you can overcome them.

  1. Employees are generally apprehensive about change

Any form of new technology can be overwhelming and intimidating for an organization. This is especially true for procurement teams that might be used to doing things the same way for years. Despite the fact that traditional methods of sourcing are tedious and time-consuming, there is a certain comfort in knowing that you’ve already mastered the steps you have to take to get the job done. A well-worn groove might have compromised structural integrity, but it is comforting. Conversely, anything that might disrupt a familiar sourcing sequence becomes a cause for apprehension.

Addressing potential discomfort from change requires patience from management and a commitment to support the transition to the new tools. Take the time to talk about the advantages of using an eSourcing platform. Make sure you answer the questions and dedicate time to train your employees so that they can see for themselves how eSourcing can help improve their productivity and efficacy.

  1. Some companies assume their sourcing needs can’t be addressed by technology

Without a clear understanding of eSourcing technology and what it can do, it’s very easy to assume that the platform simply won’t fit your specific requirements.

With a little research, however, it’s easy to see just how broadly applicable eSourcing platforms are, regardless of industry or nature of the business. No matter how large or small your company is, no matter how complex your project may be, eSourcing will likely prove to be a useful tool to streamline the bidding process as you search for partners and suppliers. But if you’re not convinced and have lingering concerns? Ask for a demo. Have a discussion with an eSourcing vendor. At the very least, explore the opportunities in front of you before resigning yourself to doing the same thing you’ve been doing.

  1. Some employees feel overwhelmed at the prospect of full transparency

There are numerous advantages to transparency. In fact, this is one of the main advantages of an eSourcing platform. Transparency, however, can have its drawbacks. In certain professional environments, an open process is one that is ripe for judgment as well as micromanagement. The irony here is that a strong eSourcing tool should empower — not disempower — procurement teams.

The key to managing this is to focus on processes and protocols. Leveraging a tool should provide tangible benefits and the opportunity to rethink and re-implement processes. By creating the right framework around the tool, an organization can mitigate the potential “risks” of transparency while setting up its procurement team for success.

  1. Procurement teams tend to use it without proper planning

Inasmuch as eSourcing platforms are intended to make everything easier for employees, it does require a bit of planning to execute everything seamlessly.

Often, in the interest of meeting a procurement team’s urgent sourcing requirements, stakeholders may point to eSourcing as a quick and easy solution, expecting immediate results. However, as with anything in business, great results require some forethought. As detailed above, you should be rethinking the process, not eliminating it. Even a great tool can be used incorrectly. To that end, clear objectives should be identified and workable criteria for evaluation should be defined. Remember eSourcing is a tool, not a replacement for critical thinking. You have to give the tool the right context and inputs to deliver the results you need.

Working with your procurement team regarding the best way to begin the eSourcing process is a great way to ensure that you drive the best outcomes.

When it comes to procurement technology, eSourcing platforms can prove to be a boon for all kinds of organizations. And while there are risks and concerns with adopting any new technology, a thoughtful approach should allow you to address them head-on.

Take advantage of Vendorful’s eSourcing platform and find out how we can help improve your procurement process. Send a message to Vendorful today.

Create an RFP that gets results

How to Create an RFP that Gets Results

The efficacy of procurement teams is tethered to knowing and understanding what they are purchasing and why. Think this seems straightforward? Think again. Large enterprises might have vendor rosters numbering in the thousands that cut across numerous categories. And most of the ongoing vendor engagement is in the hands of stakeholders, who all too often, sit in virtual silos. So what can procurement teams do to address this? Actually, there are lots of things. But for the purpose of this post, let’s focus on maximizing the chances that the best-aligned vendors are engaged. A key tactic to engage involves leveraging procurement’s favorite three-letter acronym — the RFP (request for proposal). An RFP allows an organization to assess whether the supplier’s goods and/or services are actually going to meet its needs.

With that in mind, it’s critical that the RFP proposal is able to draw out the best answers from your potential suppliers. Therefore, it has to be prepared thoughtfully and with care.

The following steps will help to ensure this:

1. Do your research

Start by embracing the requirements gathering process. Engage with stakeholders and establish what problems they are trying to solve and understand both the parameters and constraints surrounding them. Collectively, you should determine what they actually need, which will help you draft an RFP proposal that drives specific results. Are there key areas that you want your prospective suppliers to address? Be sure to understand what elements are actually feasible and in scope. You want to take care to avoid wasting the supplier’s time — and yours — by providing an RFP to which they can reasonably respond.

If you’ve done your homework upfront, then you can be realistic about setting expectations and tie them to measurable and quantifiable company objectives.

2. Identify your ideal supplier

Different suppliers will provide different proposals. Each supplier endeavors to provide its unique viewpoint. Their approaches and solutions will vary and each one will likely have its own strengths and weaknesses. While some suppliers will focus on cost, others will attempt to win you over by providing the most comprehensive service. Others may focus on speed or support. Create a clear picture of your winning criteria to minimize the difficulty in assessing what each bid has to offer. As you write your RFP, be sure to also note what qualities your winning bid will have.

Remember: value is ultimately dynamic in nature and can change situationally. While you might be particularly priced sensitive with one purchase, you might find yourself more time-sensitive with another. By establishing the key drivers of your decision, and if possible, weighting your RFP accordingly, you increase the likelihood of strong alignment with the supplier you ultimately choose.

3. Organize your document

As a standard, any business-related document should be carefully and accurately written. This is especially true for RFPs. After all, your main goal is to find a vendor that will provide valuable goods or services for your company.

That said, be sure to outline what is needed in such a way that your priorities are clearly communicated to the potential supplier.

In general, you should be able to answer the following questions:

Why are you trying to find a supplier for this particular problem?

  • Who is the organization seeking this solution? (Provide a clear description of your organization.)
  • What is the nature of your project and what is required from your suppliers?
  • When do you need the proposal or bid completed?

From here, it is easy to create a brief introduction that summarizes key bid points.

4. Clarify your evaluation criteria

When it comes to evaluation criteria, you are at liberty to provide as much information or as few details as you like. Generally, however, suppliers need some insight you will be judging their bids in order for them to focus their answers on your actual requirements. Undoubtedly, you will be better served by conveying your priorities. However, we would caution you not to share specific weighting criteria as you don’t want suppliers to “game their responses.”

5. Provide a detailed timeline

Explicitly detail the timeframe by which your RFPs need to be answered. Suppliers must know how much time they have to prepare their responses.

For a clear and comprehensive reply, establish reasonable deadlines. Remember, complex bids require weeks of preparation (sometimes more!) and it’s unreasonable to demand that they be submitted hurriedly.

Keep these points in mind the next time you’re writing an RFP. These simple tips can help ensure that you send out an engaging and effective RFP that attracts the best bids from potential suppliers.

Take advantage of Vendorful’s eSourcing platform and find out how we can help improve your procurement process. Send a message to Vendorful today.