Enter The Savings Lab

How to RFP

May 10, 2021

RFPs, or Request for Proposals, are useful tools if done right. For those of you who may not have had th pleasure of participating in an RFP, it’s a masochistic tool created by a well intended person somewhere that once unleashed in to the wild of the business jungle morphed in to one of biggest time sucks ever created. On the positive side, RFPs do enable you to create competition and learn more about suppliers and their capabilities which is really the intended purpose. If you have had the pleasure of being invited to an RFP process you can most likely identify with the above but hopefully you have had positive experiences as well. Having been on both sides of the RFP process, there are real benefits to the RFP process such as:

 

1) Create competitive tension - The possibility of winning business is a strong motivator made stronger only when you introduce the chance that business could go to a competitor.

2) Market intelligence & Innovation - Speaking and interacting with suppliers - current and potential - will uncover insights, innovations and areas of risk. In order to find this little pot of free gold, you need to ask the right questions within the RFP.

3) Relationship building - In asking the right questions as above in Market Intelligence, you are interacting with your potential supplier which is the beginning of a possible relationship. First impressions are critical on both sides of the equation.

 

Creating and executing a valuable RFP process is critical to realizing sustainable benefits from the investment in time and energy. Classically, RFPs have been over engineered and time intensive for both the buyer and seller. Some things to avoid when developing your RFP:

1) Asking too many questions - Ask only relevant questions that link back to your decision criteria. Look at the RFP as a conversation starter and keep it focused, relevant and helpful.

2) Being process heavy - Too often the RFP process is over engineered and formal. The objective for a good RFP process should be to identify the best supplier as quickly as possible so stay focused and eliminate unnecessary actions, distractions and conversations.

3) False advertising - Responding to RFPs requires an investment in time which is money. Do not start an RFP process without an honest intention to switch away from your current supplier. When this happens you erode credibility with the supply market and with your current supplier.

Before you decide to issue an RFP, you need to decide the best sourcing strategy for your need.

Hopefully the above helped you understand the benefits and pitfalls of the RFP process. I promise that if you take the time to understand what it is and how to best deploy it within your company, you will see your costs come down and value go up from all of your supplier relationships.

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