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!

White House to Ensure Equity with New Initiatives

The Biden administration recently announced several new initiatives to expand contracting opportunities, particularly for small and disadvantaged businesses.

On Tuesday, the White House announced that in the fiscal year 2021, the federal government awarded small businesses $154.2 billion or 27.2% of total contract dollars—up $8 billion from the previous fiscal year.

The federal government exceeded its small business contracting goals for small disadvantaged and service-disabled veteran-owned businesses.

This summer, the U.S. Departments of Interior and Transportation will host events to provide information on technical and financial assistance opportunities for small, understaffed businesses.

The White House also announced that the Department of Transportation and the Small Business Administration would help expand access to capital for small, disadvantaged businesses by linking them with investment firms. The two agencies will hold business forums to match SBICs with disadvantaged businesses and broker discussions between companies and fund managers.

To ensure equitable procurement opportunities, the government is increasing the contracting goal for small disadvantaged businesses from 5 percent to 15 percent by 2025 and will change how companies are categorized.

European Car Sales Hit Lowest Point Since 1996

Let’s be honest: It has not been an easy recovery from the covid pandemic. Consumers are reluctant to go through with large transactions like buying a car. Meanwhile, global supply chain issues make finding new vehicles at dealerships challenging.

Decline in Europe

The result: car sales are continuously dipping. In Europe, new car sales have plummeted to the lowest rate in over two decades.

European Automobile Manufacturers’ Association (ACEA) reported that passenger car sales in the European Union were down 15.4% from last year. All four of Europe’s leading car markets—Germany, Italy, France, and Spain—saw sales decline by 18% from a year ago.

The decline in sales follows Europe’s trend in the first half of 2022. According to ACEA, new car registrations have decreased by almost 14% compared to last year. The United States has also seen a similar slide at around 16%.

Supply

In a statement Friday, the ACEA said the supply chain crisis is the main culprit for sales decrease.

The global chip shortage has also damaged the automotive industry. East Asian suppliers, which supply about 3/4 of the worldwide computer chip production, have been slowed down by pandemic-related lockdowns and labor shortages. European manufacturers have not been able to keep up with demand. ACEA director general Eric-Mark Huitema told EU officials last year to increase domestic chip production to lower Europe’s dependency on foreign suppliers.

“We see a structural undersupply in 2022, which is only likely to ease somewhat in the third or fourth quarter. The situation should improve in 2023, but the structural problem will not yet have been fully resolved,” said Arno Antlitz, chief financial officer at Volkswagen, back in April. Volkswagen’s sales fell by more than any other European carmaker last month, according to the ACEA.

The chip shortage is not the only factor causing declines. The Ukraine war has also cut off the supply of one essential vehicle production part: wire harnesses. Wire harnesses are the electrical components that run through vehicles and relay information and power. 7% of all wire harness exports to the EU are from Ukraine. The shortage has led some European automakers to produce harnesses in-house.

Although all these factors have led to decreasing auto sales, shortages of semiconductors -or microchips- have seen slight ease in June. European carmakers like Mercedes and BMW have seen supply and production normalize. Volkswagen has also shown optimism for the rest of the year.

Demand

Even with supply chain issues clearing up, automakers have been dealing with falling demand. Rising inflation rates in the U.S and Europe have consumers holding on extra tight to their wallets.

In their latest forecast, LMC Automotive wrote about the “underlying demand that has weakened in recent months—a result of a worsening economic outlook.”

High gas prices have made driving unattractive for future car-buyers. In a recent survey, Quicken loan provider found that Americans are cutting back on driving because of inflation: 66% of respondents said they had reduced their time behind the wheel.

Volkswagen CEO Herbert Diess told Bloomberg last week, “We are a little bit cautious about the outlook next year. We can significantly reduce the waiting times, but we are also not really doubling up capacities because the world will remain unstable. That’s our assumption, so we have to be a bit cautious.”

Supply Chain Forecast for the Rest of Summer

Trying to get through a global pandemic can be challenging. The global supply chain’s unpredictability has consumers and business owners what is available and affordable. Predicting specific outcomes can be a make or break for survival. Unfortunately, we cannot predict the future perfectly, but we have clues to help forecast more accurately.

Understanding the Pandemic

Before the pandemic started, chip manufacturers began to struggle. Microchips, used in everyday items like our smartphones, laptops, and cars, saw a slowdown in production. Then the pandemic hit, and people were stuck at home.

Being home came with many new challenges. People were bored but also needed to work remotely. This increased demand for microchip-dependent items like laptops and computers, but it did not stop there. Consumers also wanted things like desks and equipment for exercising at home. This also increased demand for goods.

With demand increasing but the pandemic putting the world at a halt, companies could not get the microchips or goods needed to produce their items. Consumers were panicked and overbought. Demand rose even higher, and businesses could not meet production and distribution. A bicycle can have the frame made in France but need the tires from Germany, so even if one country was doing better, production of goods could not be met.

As you can see, this was a recipe for disaster.

Moving Forward

Due to everything that has happened in the last two years, companies will look to create more opportunities for operations at a local level instead of having to rely on outsourcing with international partners for the completion of production. For example, Ford, now focusing on transitioning to electric vehicles, is investing in creating new automotive production jobs in Michigan.

 Allocation

Allocation is a term being used in every industry now. If you own a business and usually buy 50 units of one item, a supplier might only allocate 40 units. This could be an issue for your business. What if it is an item that does well? Now you are getting less. What if you want to get 100 units to stockpile, just in case? You may turn to another supplier, which could mean settling for inferior quality items. This can be a considerable risk to customer satisfaction.

Inflation

Another hot topic is inflation. Prices and debts are expected to increase to accommodate the rising inflation rates.

The price increase can be seen in gas stations or even smaller items like bread. A loaf of bread that used to cost $3 is now $5 to help pay for the increased production prices, transportation, and labor.

Interest rates are gradually increasing as well. For example, if you are taking out a loan, the interest rate can be a minimum of 5% as opposed to the usual 3%. According to Bloomberg Economics, the average American family will need to spend an extra $5,200 annually to maintain the same living level as the previous year.

Summer’s (Almost) Over

Summer will not last forever, and the problems contributing to global supply issues will eventually end. The next few months will not be easy, but they will not be impossible to overcome.

When Will Supply Chain Return to Normal?

Supply strains, although still significant, are no longer as menacing as they were six months ago. The stress has eased from peak levels (especially in the U.S.), adding less inflationary pressure. Although there have been modest improvements, as the economy recovers from the pandemic, an oversupply of goods may lead to a slowdown in demand that could reverse growth.

Will the cycle repeat itself?

“Pressures in the global goods sectors, which have been a central driver of inflation, may finally be easing. The bad news is that this looks to be occurring on the back of a slowing in the global consumer’s demand for goods, especially discretionary goods, and thus may also signal rising recession risks,” says Citi economist Nathan Sheets.

Citi analysts cautioned against declaring an “all clear” on the supply front, as global supply chain clogs will likely remain for some time. This year’s holiday shipping can be pressured and obstructed by labor strikes, factory disruptions tied to Covid outbreaks in China, and Russia’s war in Ukraine.

Demand

Demand for merchandise is critical to watch in the coming months, so economists are concerned about whether it will stay consistent. One private indicator suggests that as people dine out, see shows and travel more than they did during the pandemic—demand may return to normal.

The Post-Covid Indicator, created by Flexport Inc., monitors how Americans spend their paychecks. The most recent report:

“Consumer preferences shifted slightly away from goods in May.” The indicator is forecast to “hold close to current levels throughout the third quarter of 2022. That would imply that overall consumer preferences for goods over services will decline but remain slightly above summer 2020 and pre-pandemic levels.”

Federal Reserve

The Federal Reserve is set to raise interest rates later this month to combat the increasing inflation. Also, businesses continue to deal with supply problems, but the central bank’s recent reports suggest that these issues are less severe.

Shortages

Freight rates have dropped abruptly from the record highs they’ve reached in recent months, leading some observers to question whether there is now too much capacity available—a situation that had seemed unlikely just a short time ago.

While container rates have risen above pre-pandemic levels, their trajectory increasingly reflects a slide that still has not found the bottom amid uncertainty about consumer spending.

Returning to Normal

The global supply chain’s recovery depends on China’s ability to keep factories open amid recent covid outbreaks. On Thursday, the country released figures showing that June was its second-highest export month in at least three decades. After Shanghai lifted its restrictions on the spread of viruses, production rebounded and delivery times shortened.

On the other hand, Europe, for its part, is facing problems with shipping because of conflicts in Ukraine and the associated sanctions on items to and from Russia. Labor disruptions in one of Germany’s largest seaports have also slowed the global supply chain.

Supply

Another indication that the supply stress is not likely to recover soon is the Commerce Department’s most recent report. The report showed that American sales rose more than the economists forecast in June.

After examining the latest numbers, Yelena Shulyatyeva and Andrew Husby of Bloomberg Economics concluded that “there’s still enough momentum for the US economy to grow during the rest of 2018 as consumers find ways to cope with surging inflation.”

This could be good news for container imports into the US, which have been consistent all June and most of July in major ports in California.

Optimism for the U.S

Gene Seroka, the executive director of LA’s port, is cautiously optimistic about the rest of 2022.

“We’ll be seeing back-to-school, fall fashion, Halloween, and the all-important year-end holiday goods coming across the Pacific in the weeks and months ahead. Even though some retailers have high inventories and may look to discount goods, I expect imports to remain strong – though tapered -versus last year.”

Despite the optimism, there is congestion building causing delays in one of LA’s docks. Containers are sitting for about eight days; ideally, the time should not exceed two weeks. “Stakeholders need to take action now to avoid a nationwide logjam,” warns Seroka.

DIY Procurement May End up Costing You

More With Less

In the post-pandemic work environment, businesses need to do more with less. Cutting costs in specific places to make every dollar last can be stressful, but companies have no choice but adapt to the fast-paced financial environment to grow. What does doing more with less actually look like? Because of its relevance to an organization’s two most significant expenditures—its workforce and software purchases—tech spend per employee (TSE) has become a key metric for procurement departments to understand.

Cutting Down On TSE

Managing your TSE can be an enormous opportunity by saving money and identifying the significant opportunity costs incurred from ad hoc, DIY procurement. Most companies—particularly those under 600 or 700 employees—do not have dedicated procurement teams.

In startups, indirect spending can spiral out of control because no single department owns the process. This inherent risk stems from an ad hoc procurement approach—one that leaves companies vulnerable to rising costs and lost opportunities. The hard and soft cost savings of ad hoc software procurement can be substantial, but only if you know how to avoid the pitfalls.

Hard Costs: Money

Without a proper procurement process, hard costs such as software spending per employee will compound over time. These budgetary problems can quickly spiral out of control for any company, small or large. These can lead to companies leaving significant savings on the table. Leaving significant savings can corner a company into a corner of layoffs. Hence, the importance of controlling variables is to be in a far better position where you can influence what happens rather than being at the mercy of external forces.

Soft Cost:

Although hard costs are easier to quantify, businesses should still consider soft costs when assessing the overall cost of a given procurement method.

  • Employee Time: On average, companies spend about 4 to 12 hours on a single contract. With an average of 300 contracts, companies could spend 1,200 to 3,600 hours annually.
  • Productivity: Going hand in hand with employee time, almost 3,600 hours could be spent on doing something productive that can lead the company to growth, revenue, or customer satisfaction.

Avoiding Cost Through Procurement:

Most companies can’t afford to implement ad hoc software purchasing policies. Instead, companies that procured and optimized software and related services at a minimum cost had a distinct competitive advantage: they could reduce costs by about 15%. During a market downturn, companies that invest in the foundations of software procurement excellence may reap the rewards down the road.

Although there is no single approach to software procurement that works for every company, one thing is sure: Your ad hoc approach can end up costing you more than it should.

More Supply Chain Clarity Within the Automotive Industry

In the wake of a more than two-year-old pandemic of COVID-19 and a growing global shortage of microchips, auto companies are taking stock of their suppliers to stay on top of unprecedented challenges to their supply chains. As the automotive industry grapples with the challenges ahead, companies and governments are trying to understand the incredibly complex supply chains better.

Past vs. Present

In the past, automakers and Tier 1 suppliers might not have been concerned about where certain raw materials were sourced from Tier 2 suppliers or where widgets were sourced for significant components manufactured elsewhere. The global supply chain operated smoothly despite natural disasters, strikes, or political crises. Nonetheless, COVID-19 upset everything, shutting down factories and making parts once believed to be readily available hard to find.

Overall, the supply chain has been very stable for decades. It took a global natural disaster to really shake the foundation”, said Dan Hearsch, a managing director in AlixPartners’ automotive and industrial practice. “We know we can’t rely on the old playbook anymore, so we have to have better systems to give us visibility and confidence that the suppliers are managing their risks,” he added.

New Developments

In late 2020, German automotive giant ZF Group ran into supply issues. To counteract this, ZF put together a task force to keep track of the latest developments, particularly in the advanced driver-assistance systems and electronics groups department. These efforts proved to be futile.

Rebecca Streng, vice president of supply chain management for ZF’s advanced driver-assistance systems and electronics division, explains how it was simply not enough. “We realized our traditional tools were not satisfactory to manage this situation,” she said.

A prototype of ZF’s eventual customer tracker was developed that uses Microsoft’s Power BI data visualization software to visualize data on incoming supply to help managers know when parts shortages are likely to occur.

If the root cause of an issue is that supplier X is having COVID issues in China or Malaysia, we try to take that information and communicate it to the team to see if that is going to hit us in other places,” Streng said.

ZF is not the only one creating these types of systems. Robert Bosch, the world’s largest auto supplier, has a similar vision. Paul Thomas, Bosch’s executive vice president of mobility solutions, says, “Bosch views transparency as the ‘No. 1 priority’ in its relationships with suppliers and automaker customers.”

 

Robert Bosch’s developers emphasize data-driven software that uses predictive analytics, artificial intelligence, and historical models to help identify problems that could arise in their supply chain before affecting parts deliveries to auto manufacturers.

“We’re looking at being able to predict and forecast demand beyond what our customers can even give us. We’re trying to be more collaborative with suppliers, and that includes engagement from our OEMs. We’re still trying to get our OEMs to give us forecasts beyond 52 weeks,” says Thomas.

Improving Clarity

Several companies have prioritized improving visibility over the past two years, but it’s not the first time. It has been more than a decade since Japanese automakers and suppliers attempted to clarify their supply chains.

After the tsunami and earthquake that hit Japan left the country unable to produce any vehicles, Toyota decided to map out its entire supply chain, including Tier 4 and Tier 5 suppliers. Supply chain Application for Visualization and Enhancement, or SAVE, was launched to see how supplier operations might be affected by future crises.

Dan Hearsch explains that Toyota handled the global microchip shortage better in the early days of the crisis by understanding where parts were coming from and when they would arrive.

Speaking on the 2011 production halt due to the earthquake and tsunami, Hearsch says, “The Japanese automakers were really impacted and couldn’t make cars and were disrupted in a way that many other automakers were not. Ten years later, they still had many of those lessons. Many Western companies hadn’t experienced that viscerally and created systems that were more fragile than they needed to be.”

The stability of the supply chain industry before the COVID-19 pandemic allowed suppliers to take on more risks to satisfy costs. “This sort of created a system where the OEMs simply made the vehicle, and it was the Tier 1’s responsibility to deliver parts,” he said. “Suppliers were willing to take on the risk because the system was robust.”

Trust

Today, suppliers and their customers are almost playing a game of trust. Suppliers and customers must have considerable trust to get more clarity on the supply chain. “You don’t want to give away too much information to your customer because you have to trust that they’re going to do the right thing with it,” says Kristin Dziczek, an automotive policy adviser at the Federal Reserve Bank of Chicago.

Dan Hearsch piggybacks on this point as well. Who knows what automakers would do with such important information? “OEMs have a history of wanting to use this information to reduce their costs, and that often comes at the expense of Tier 1 or Tier 2 suppliers”, says Hearsch.

We don’t want to confuse the supply base, either. If every one of our customers knew that one supplier was the source of a bottleneck, one could only imagine how many confusing messages the supplier would get”, says Bosch’s Paul Thomas.

“That’s not to say we don’t need the help of our OEMs with the bottlenecks, but at the end of the day, it’s difficult to have multiple people directing multiple different directions at our supply base,” he adds.

Number of US Manufacturers May Increase Post-Pandemic

More and more U.S. businesses are bringing their manufacturing back home due to supply chain problems abroad, such as insufficient production caused by the pandemic.

Setting Up Home Base

“It has become a huge incentive to set up shop here in the United States,” Dodge Construction Network Chief Economist Richard Branch said on Yahoo Finance Live.

While American companies have traditionally moved their manufacturing facilities abroad in search of cheaper materials and labor, the global supply chain has been weakened by the recent pandemic—manufacturers are now beginning to bring production back home.

“It’s certainly clear that manufacturers want more control and more predictability over their supply chains than what they’ve gotten used to over the past couple of years,” Branch said.

Billions of dollars in inventory are being tied up due to supply chain delays—which has led to “chip fabrication plants” like semiconductors ramping up U.S. production and steel mills and EV battery factories, amongst others. Data from Dodge Construction Network showed that over the past year, construction of new manufacturing facilities in America has surged by 116%, compared to a 10% overall gain in all building projects. For example, Intel and Taiwan Semiconductor Manufacturing are building factories in Phoenix.

Issues May Arise

Branch points out a “significant risk” for the manufacturing sector in the years to come: its labor force. The U.S. Department of Labor’s data has shown that although manufacturing payrolls are increasing, the pace is not fast enough—there were 797,000 open jobs in May 2022.

A survey from Deloitte found that 45% of manufacturing executives have turned down business opportunities because they didn’t have enough workers. 83% say attracting and retaining a quality workforce is their top focus. “If that’s sustained, that could certainly constrain or put a cap on how much manufacturing can come back to the United States,” Branch explains.

Because the pandemic disrupted the delicate balance between on-shoring and offshoring, many countries, such as the U.S., need to recalibrate that balance to maintain a consumer-driven economy.

“The supply chain issues that currently exist certainly aren’t going away any time soon,” Branch said. “So, at least for the near-to-middle term, I continue to think the manufacturing sector here has some legs to run.”

Massive Overstocked Retailers Give Big Discounts

As a result of the supply chain crisis and resulting shipping delays, deep discounts are available at stores across the U.S., with many items on sale due to overstock from ships stuck offshore waiting for their cargo.

“It’s retail armageddon. That’s good news for shoppers”, says Burt Flickinger, managing director for Strategic Resource Group, to CBS News. While inflation forces consumers to cut back on spending, stores are stocking up beyond capacity. Target recently announced plans for additional markdowns as part of a move to “right-size” its inventory—a response after the retailer admitted overstocking by more than 30 percent at some locations.

“You have too many goods and too many stores chasing too few shoppers with too few dollars,” Flickinger says.

Bargain Hunt, an outlet selling excess goods from other stores at reduced prices, has noticed a different trend this time.

“The condition of the product — it’s never left the case, it didn’t make it to the stores, it’s not dog-eared or wrinkled or ruffled having been on a shelf,” Rankin told CBS News.

Toy seller Maryam Al-Hammami is no different; inventory overload has also hit small businesses like hers. “My first thought was, I’m glad I’m not them,” Al-Hammami says, referring to the big stores. “But then, all of a sudden, I realized I am them!” But her suppliers keep raising prices, so she’s trying to store extra toys until demand returns.

“Sitting on a product that I purchased for 20% less when I ordered it last September is a better option than purchasing it for 20% more next month,” says Al-Hammami.

Even bigger sales could occur after Labor Day. Some retailers are so overstocked that they’re offering full refunds and telling customers to keep the merchandise.

What's out there, lurking in the fog?

The Critical Importance of Supplier Visibility

One of our users – let’s call her Anna – won the assignment to head up a new supplier diversity program at her company. She had authority to drive actions, budget to get things done, and clear targets for diverse supplier spend. She got to work.

There was one small problem. When Anna asked “what are we spending with diverse suppliers today?” the answer came back “we don’t know.” How can you know how far you have to go to reach your goal if you don’t know where you’re starting?

Anna’s story isn’t unique. Procurement teams increasingly face mandates beyond cost savings. These include Environmental, Social and Governance (ESG) goals, risk reduction, supplier innovation, performance optimization, compliance enforcement, and other complex tasks.

However, they also frequently deal with poor or non-existent tools for understanding their supply base. Even basic questions like “How much of our spend is currently allocated to diverse suppliers?” are hard to answer without a lengthy manual data collection process.

In order to meet these new mandates, Procurement teams need better visibility into the supplier base.

Benefits of improved supplier visibility

Organizations enjoy several benefits from improved supplier visibility:

  • A complete picture of supplier performance and supplier risk. This includes a holistic view of financial stability, ESG factors, country risk, customer churn, and other measures.
  • Alignment between performance, risk and spend. As a result procurement teams make informed recommendations about where to allocate business.
  • Better goal tracking. Teams can take the guesswork out of whether they are meeting their objectives and monitor data in real time.
  • Improved compliance. Breaking down internal silos ensures that compliance enforcement is a global process.

Problems that arise from poor supplier visibility

Conversely, major problems can arise when organizations lack sufficient visibility into their supplier base:

  • Poor visibility into supplier performance: Vendor performance assessments are manual – with intensive Excel and email data collection work – if they’re done at all. As a result, assessments are infrequent, incomplete, ad hoc, or all of the above.
  • Poor visibility into supplier risk: Vendor risk management is reactive rather than proactive. Therefore risk management frequently addresses problems after they happen, and mitigates risks on an ad hoc basis.
  • Decisions driven by intuition rather than data: Because procurement and supply chain teams lack supplier visibility, they’re also working with incomplete data sets. This leads to suboptimal decision making around spend allocation as it relates to performance and spend.
  • Siloed supplier relationship management: Because of the lack of a centralized system or repository for supplier information, procurement and supply chain teams often end up managing supplier relationships in silos. This leads to duplication of effort, inconsistency in approach, and communication breakdowns.
  • Inconsistent or nonexistent supplier compliance tracking: Without visibility into supplier performance and a shared understanding of contract terms, it’s difficult to track whether suppliers are meeting their contractual and regulatory obligations. That puts the organization at risk if critical suppliers are not adequately monitored.

The path to becoming a supplier visibility leader

There are three stages on the path to full supplier visibility, and they don’t all need to be done at once:

  1. Develop a shared source of truth about vendor relationships. This means creating a centralized database of supplier information that can be accessed by the whole Procurement team and key stakeholders outside of Procurement and Supply Chain.
  2. Analyze supplier performance on quantitative and qualitative measures across the organization. This will help identify areas where improvement is needed.
  3. Apply business intelligence to data collected in steps 1 and 2 to visualize supplier performance and risk. Simply stated, data captures what is happening right this second, whereas business intelligence uses historical data to make predictions on future trends and problems. Early detection of issues and trends can help you avoid them becoming troubles later.

Organizations need to have visibility into their suppliers in order to manage them effectively. Without visibility, procurement and supply chain teams will suffer from several critical problems.

Conversely. organizations that improve supplier visibility will be able to make better procurement decisions, improve goal tracking, and ensure compliance. Procurement and Supply Chain teams can no longer afford to suffer from poor visibility into their supplier base.

By taking these steps, organizations can begin to improve their supplier visibility and reap the many benefits that come with it.