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.

Deconstructing 4 of the Top eSourcing Myths

Hercules is a mythological. eSourcing? Not so much.

For a lot of businesses, a well-considered and thoughtfully-implemented eSourcing strategy could offer numerous benefits. Increasing sourcing efficiency, bringing down overhead costs, and improving supplier relationships are just some concrete examples. Given that, it’s almost surprising that businesses are all too willing to overlook these advantages due to certain eSourcing myths.

(Thanks, Charles Le Brun for the great Hercules painting! Greek myths…now, those are interesting.)

To address this, we’ve collected four of the top myths about eSourcing in order for you to understand the real value of eSourcing to a business. Hopefully, identifying these pervasive misconceptions about eSourcing will show you how it really works, lead you to informed decisions, and ensure your company has a reliable sourcing strategy.

Myth 1: My category can’t be eSourced

You might think your category is too specific or complex for eSourcing. The truth is, any spend category that you traditionally source using an RFI or RFP process can be eSourced, as long as

  1. your category has a set of definable requirements and
  2. suppliers can evaluate how they can meet the aforementioned requirements

In fact, choosing to automate your workflows via an eSourcing tool means you are able to follow best practices, implementing more stringent buyer guidelines and ensuring more accurate responses from suppliers. Take out your notebook (or simply download what we’ve compiled) and learn the RFP process steps.

Essential Guide to the RFP Process

Myth 2: eSourcing is only about the money

Many organizations assume that eSourcing is only ideal when price is not only a priority, but in fact the only consideration. However, good eSourcing solutions are built to support and provide solutions that go beyond simply cost. They are specifically designed to capture and gather bid information in a streamlined and centralized way to allow thorough and expeditious analysis. Such features can be used to both quantitatively and qualitatively evaluate bids on total value, rather than simply defaulting to the lowest price.

Myth 3: You can’t use eSourcing with trading partners or existing suppliers

Every supplier wants their customers to be customers for life. It’s therefore understandable to expect that some of your current suppliers might feel threatened when they are invited to participate in an eSourcing event. You can reassure them that simply because they are being asked to participate in a competitive sourcing process doesn’t necessarily mean that you’ll be making a change. Moreover, a robust eSourcing tool should provide value for suppliers as well as buyers. Indeed, after dealing with messy inboxes and collating data into different documents, suppliers may well be relieved to use a platform that supports collaboration, consolidates information, and more.

Myth 4: My company is too small for eSourcing

It’s possible, but we doubt it. Today’s tech-centric business landscape demands efficient solutions that will address business needs—regardless of size. Many of the newer eSourcing tools are also subscription based and scalable depending on a company’s needs. Such features actually make eSourcing more affordable and generate a better return on investment, particularly when compared with doing things “the old-fashioned way.”.

While eSourcing must have a strong ROI story and commercial rationale, it is strictly focused on helping organizations squeeze the last pennies out of potential vendors. There is a broader value story at play here. A good platform should enable you to  define and implement better processes that will benefit your business in the long term. Opting to implement an eSourcing solution will help you create a better, more transparent and scalable process for stakeholders as well as the organization at large.

Can you think of more eSourcing myths that weren’t tackled here? Feel free to add any to the comments section below.

For a comprehensive explanation on how Vendorful can help you respond to RFPs and ensure consistent value, get in touch with us today.

Blind scoring. Better than throwing darts.

Why You Should Be Blind Scoring Your Vendors’ RFP Responses

Imagine…. You’ve just finished an incredible dinner at a Michelin-rated restaurant. It’s the capstone on an amazing day that included massages, spa treatments, and tickets to a show. “It’s crazy,” you think to yourself; you’re not even doing business with this vendor yet, but it feels like there is some special connection there. Or perhaps that’s just the wine talking.

Blind scoring. Better than throwing darts.

Even under more normal circumstances, it’s difficult to eliminate bias in your procurement process. Ideally, you’d want your team to be as unbiased as possible so that they can judge RFP responses based on merit, and not what they know (or think they know) about the vendors. And while you might have the RFP essentials tattooed on your forearm, improving the integrity of the process can be challenging. A fair, unbiased purchasing process is the ambition of every procurement director, and blind scoring your vendors’ RFP proposal responses is a great way to work towards that goal.

Blind scoring is a process by which evaluators rate the responses of vendors without specific knowledge of which vendor is tied to which answer. What are the benefits of blind scoring? By adopting blind scoring, a buyer reduces the risk that bias subtly creeps into the purchase process. Of course, there are other ways that a sourcing team can allow an individual vendor to exert undue influence, such as by relying on that vendor to provide an RFP template. While there is no panacea, blind scoring can mitigate the impact of vendors that attempt to curry favor as well as unconscious biases — positive or negative — in the minds of evaluators.

When Blind Scoring is Useful

Let’s say that you are trying to purchase a new CRM for your network of car dealerships. You receive a number of RFP responses and about half are from companies with which you’re familiar. From the start, you may have preconceived notions about these companies, their product, and their reliability. Maybe you have friends who have worked at those companies and you’ve heard about their great work culture; perhaps you’ve heard anecdotes about their products on podcasts. Or maybe you haven’t heard about them at all, which makes you subconsciously dismissive of their offering. These experiences contribute to your opinion on the CRM product you have yet to buy before you’ve read past the name of the company. After all, this is the reason that companies invest so heavily in their brand. They want to drive those preconceived notions in a positive direction.

But you know as well as I do that the brand equity of a company and how well their product fits your needs can be two very different things. You may have heard that Company #1 is reliable, but do they have the numbers to prove that their product has limited downtime? Are they reliable for your industry? Do they deploy their application across multiple locations to prevent downtime? The RFP provides a platform for you to ask questions like these, both qualitative and quantitative, and evaluate the responses.

Eliminating preconceived notions will help your RFP process yield the optimal outcome. The benefits of finding the right vendor are significant along subjective dimensions like “fit” as well as objective ones like “ROI.”

Vendors and the Movement Towards Anonymity

What do vendors think of blind scoring and “anonymized” RFP responses? You may be surprised that the majority prefer them, once they truly understand the implications. We’ve spoken with vendors who, when presented with the idea that Vendorful helps buyers run blind sourcing events, have responded with something less than enthusiasm. “I want to write the RFP for the buyer,” we’ve heard more than one say. But the truth is that vendors usually benefit from blind RFPs as well. Most vendors are not the market leader and don’t necessarily have the support of favorable bias on their side. Nor are they, in many cases, the only party trying to influence the process. By having their answers evaluated on their merits, rather than the perceived merits of the supplier or sales rep, they can compete on a more level playing field.

You may be wondering: if blind scoring is “so great,” then why isn’t it used more frequently? Despite the merits of anonymizing responses, few sourcing teams actually go through the trouble of setting up blind scoring. From our conversations with procurement specialists, we’ve learned that there are two primary reasons for this:

  1. The manual process that most organizations undertake is arduous and time consuming enough without adding additional complexity. While the benefits of blind scoring are significant, there is typically a lot of pressure to “get to the finish line” as soon as possible.
  2. Organizations that have adopted software solutions to run their RFX processes are hamstrung by the limitations of the products they use, which don’t typically support any anonymizing.

Implementing Blind Scoring with a Manual RFX Process

Blind scoring can be particularly challenging when running a manual RFX process. First, it’s necessary to get someone who is not an evaluator to collate all supplier responses. If the responses are being compared side by side — a best practice — the person who handled the collation would omit the actual vendor names from the list. Then, after all the evaluators have completed the scoring, the “collator” shares the names and their associations with their respective responses. This takes quite a bit of time and time, as we know, is money. Although blind scoring ultimately benefits the buyer’s organization, the cost of a manual RFX process can undermine the benefit anonymized RFPs.

How Does Vendorful’s RFP Management Solution Solve the Blind Scoring Issue

At Vendorful, we’ve invested considerable resources to allow organizations to run best practice-based sourcing events with unprecedented ease and speed. As such, we’ve built blind scoring into our standard RFX workflow. You literally don’t have to do anything to anonymize your entire process, ensuring that your evaluators are scoring based on the merit of the vendor response for your specific company, not third-party anecdotes or broad market perception.

See how easy blind scoring can be for your team. Schedule a Vendorful demo.

What to ask before purchasing RFP management software?

7 Questions to Ask before Purchasing RFP Management Software

At this point, you’re convinced that your purchasing process bears the hallmarks of the problems that come from manually-managed RFPs. You’re shopping around for RFP management software to streamline your process and gathering information just as you would for any other purchase that your team makes. (Maybe you’ll even get meta and run an RFP to find an RFP Management solution!) No doubt, you have your own questions that need answering, but here are seven questions you absolutely need to ask in an RFP presentation before purchasing management software.

1. Does the product have features that will address the 

problems I’m experiencing?

Obviously, collating and scoring responses are  critical components of understanding the RFP process and any solution that merits consideration should makes those processes easier. It’s also going to be helpful to ponder some of the less obvious challenges that you might encounter when running a sourcing event. For example, how about all of the requirements gathering, vendor discovery work, and documentation that occurs before the RFP is even crafted, much less sent out? And have you considered showing that inbox of yours a little respect? Does the solution help reduce monstrous email chains and manage attachments?

2. How easy would it be to implement this solution across the team?

There are at least two different parts to consider when thinking about what’s involved in an implementation. First, there is the deployment of the software solution itself. Is it a turnkey SaaS setup or is implementing the software going to take coordination and time? Second, you have to think about how long it would take to bring your colleagues up to speed. How much time will need to be invested to train your procurement team? What about subject matter experts who are unfamiliar with procurement? A strong solution should work for all of the stakeholders who get involved in sourcing, whether they work in the procurement department or not.

3. How do I think about calculating ROI when considering an RFP management solution?

Are there certain thresholds in terms of spend or the number of RFPs that must be reached before a solution makes financial sense?

There are companies that spend billions of dollars per years on suppliers just as there are companies that spend thousands. Likewise, there are organizations with robust procurement teams and sourcing specialists along with other organizations where divisional leaders are tasked with doing their own sourcing. As such, there are no hard-and-fast criteria for rationalizing the expense of RFP management software in absolute terms. Instead, it’s advisable to consider ROI in relative terms. A good solution will likely promise to help your organization recover time and reduce supplier spend, both of which should — directly or indirectly — fall to the bottom line. Measured as a percentage of your spend, how much money will you have to recoup in the form of person hours and reduced costs to justify the expense of RFP management software? 5%? 2%? 1%? Figure out the number that makes sense and then work through some scenarios to determine if it’s achievable.

4. Did you skip the RFP process even though you probably shouldn’t have?

Chances are, your current RFPs are a pain. If they weren’t a pain, then you wouldn’t be looking for a solution and probably wouldn’t be reading this article. And pain, at least in this case, costs money. The pain results from bad process; the bad process requires much more time that it should; the time spent belongs to people; those people earn wages. While it’s possible that you’ve elected not to run a proper sourcing event out of pure frustration, you might also have avoided them on occasion because of cost. For example, if you had to spend $10,000 (primarily in person hours) to run a process for a $20,000 product, you would have an ROI challenge with the product before the ink was dry on the contract. The math is pretty damning. Simply take 8 people x 40 hours x $30/hour and we get to $9600. As you can see, it’s not hard to spend five figures on an RFP. Bottom line: if you’re evaluating RFP management solutions based on how many RFXs you run, and how much spend you manage, you need to contemplate the costs of the RFXs that you didn’t run because your process has been a problem.

5. What are your stakeholders looking for in a solution?

What is your procurement team looking for?

While sourcing software is typically going to end up being the procurement department’s bailiwick, they will not be the exclusive users. Indeed, part of the rationale for licensing an RFP Management solution is to streamline the process for stakeholders outside procurement. It’s helpful to have some potential stakeholders — preferably from different departments — sit in on a demo for a sourcing solution and weigh in with their opinions. Ultimately, their “buy in” will be helpful when you begin using the chosen solution.

6. What is the development approach of the company from which you are licensing the software?

Do they push out annual releases? Or do they quickly iterate on requested features?

In evaluating a solution that works best for your organization, you should think about how your needs will evolve over time. Rarely is software static, but the frequency of updates as well as the method of applying them can vary considerably. On the one hand, you might be looking at classic enterprise software that is deployed on your servers. A common model is for the software provider to offer quarterly patches amid larger upgrades, which might occur every few years. The evolution of SaaS-based solutions has changed that model. Those providers run the solution on their own services and offer subscription-based access to it. Release cadences vary, but there is a strong bias towards much more frequent, iterative releases. This allows for a high degree of responsiveness to customers that advocate for the addition of specific features. Finally, there is a hybrid-model whereby a solution that is usually offered as SaaS can be deployed on the customer’s server infrastructure. When implemented thoughtfully, this approach can allow for the same frequent iteration as its pure SaaS counterpart while allowing customers to control the infrastructure. Ask your prospective vendors about their deployment models and development methodology.

7. Is it easy to use?

If the demo you receive is 90% Powerpoint presentation and 10% product focused, you might not walk away with much confidence that the solution will be easy to use. Remember, the scope of a sourcing product extends beyond the procurement team. Stakeholders from different departments — some technical and some not technical at all — could be included in sourcing events that you run. So ask yourself, “Does it look as smooth, simple, and helpful as promised?” And more importantly, “Does it address many or most of the problems I’ve identified with our RFX process?” Modern solutions shouldn’t generally require days of training sessions. Ask if you can run a practice sourcing event. The software provider should stand behind its product. If you can’t try the software before you buy it, there’s a good chance that the software is confusing to use or might be complicated to implement.

We have invested lots of time and money in simplifying what has traditionally a complex process.. Indeed, Vendorful was created from the ground up with usability in mind. So give it a whirl…. You can knock out question number 7 by signing up for Vendorful and trying it for free.