Procurement BPO strategic sourcing bpo

This post is part of a series discussing BPOs and Strategic Sourcing:

In this lengthy series of posts we’ve been exploring the idea of giving the strategic sourcing function to your procurement BPO provider.   I’ve outlined how they might propose an ROI and define the resources that they’ll provide; but I’ve also outlined that I think the ROI calculations they provide should not be trusted.   Further, I’ve argued, that in many cases, the low-cost nature of their services lends to having bad sourcing practices and overall crappy results.    We call this RFP spam, and onshore/offshore BPO providers are the worse culprits of this in the entire industry.

What is RFP Spam?  If you don’t feel like reading about it in my many previous rants; here is the short of it:   RFP spam is taking a very basic level of requirements, slapping it into a document or online sourcing tool, and blasting it out to as many or supplier addresses that you can find.   If and when you don’t get a response, you move on to the next one.  Maybe if you send 20 or 30 emails out, you’ll get 3-6 responses which become your vendor pool.  And this doesn’t just relate to RFPs, it’s more frequently the RFI itself.  And to be clear, in an RFI, you the procurement expert, should be making as much effort to engage a supplier as they should be to win your business.   If you think that the best suppliers are going to bend over backwards for opportunities they don’t think are real, then you are sorely mistaken (and WILL overpay).   And this is the primary reason these BPOs could never get to the level of performance that your own properly equipped team could achieve.

 “My BPO explained to me that they have solid procurement processes and have smart category leads that will ensure this will not happen.”  Oh really?   I will not name names; but I could produce literally dozens of examples of this RFP spam process from the most recognizable BPO organizations, from this year alone.   Let’s discuss:

  • On average, about once every three weeks, we receive an RFI from one the fastest growing offshore supplemented BPO research companies.   It’s frequently in broken English, and starts with something along the lines of: we identified you as a leader in xxxxx.  We need you to answer these questions (10-20 questions, most of them unrelated to the topic at hand).  Then, it says they need the response within 24-48 hours.    If we attempt to reach out to these BPO providers to gain clarity, we are told that they will only speak to companies that pass their RFI stage, and that due to timing of the event, they do not have time to speak now.   If that doesn’t sound motivating to a supplier, let’s follow it with:
    • Want more?  Track me down at the ISM national conference or give me a call through Source One and I'll show you just how far I've gone with these BPOs that 'just don't get it'.   This includes responding with out-of-this-world outrageous answers to to these repetitive RFPs complete with photoshopped pictures of coffee stains and dead flies on top of my responses to make the page illegible....  And guess what; they still qualified us and asked us for more info!
  • We get the SAME requests from the same research BPO for DIFFERENT clients of theirs about once a month.   This means, that even had we submitted our answers, there is NO institutional knowledge at that organization.   That means that, contrary to what they sales team told you, the BPO does not leverage their internal databases in order to drive efficiency in the work flow.  It means that any client of theirs is paying for redundant services and that the BPO itself is not gaining any efficiency; nor lessons learned about the supply community.
  • Need more?   Another international provider reaches out to us and wants to discuss our services.   They need to execute 2 NDAs, one for the client, and one for themselves (with us). What they hadn’t looked at is the fact that we already had a direct NDA in place with their client; and we had about 3 direct NDAs that covered this same topic in place with them already. To top it off, it took them nearly 2 weeks to get through the NDA process and then release the RFI to us.  And, you guessed it, they need the RFI turned around in 24 hours. Why would any reasonable supplier want to get involved with a RFP process like this?  (They won’t).
  • Then there is the repetitive work.   As suppliers, we’re engaged by an offshore team.  They might do some light research and provide some dialog with us (if they are any good).  Then they introduce us back to their client.  However, the knowledge handoff is non-existent.  All of the discussions we had before are either inaccurate, misrepresented, or completely missing.  Us, the suppliers, have to go through the introduction process all over again.  What do you think that does to our cost/proposal?
  • The subject matter experts are not even familiar with the subject matter.    We see this entirely too often.  A blanket email, phone call, or linkedin request asking for information.  Problem is, the question is irrelevant or doesn’t make any sense.   Any requests for clarification are met with zero response, or an answer such as “just answer as best as you can”.
  • An RFP/RFQ document that is asking for pricing in a way that does not make sense, or would be cost prohibitive to the buyer.    We frequently get requested to provide pricing, but are not giving any specifics on what it is for nor are we provided the opportunity to provide alternative solutions.  Case in point “send us your rate card for benchmarking”.   Rate card for what?  How much volume are you providing us?  How quick is your turn-around requirements?   What are the categories your company wants benchmarked?   What exactly do you want benchmarked, price, business operations, competitive offerings?  It’s not as simple as a “rate card”.   Many of these providers don’t even know how to construct a proper SOW, let alone run a supplier qualification process.
These are just a few of the examples of the non-efficient process that we’ve seen from some of the BPO providers.   Hopefully it’s transparent enough for you to realize that the 30% savings they promised you can quickly disappear by losing just one or two potential suppliers that are lost during the sourcing process for any of your categories.

Are all BPOs bad?  Definitely not.    Will they all under-perform?  Of course not.     
My intention was to highlight some of the overlooked issues that finance and management teams often overlook when they look to outsource the strategic sourcing of their tail-end spend.   In MANY cases, they focus on cost only, and fail to recognize the total value the supplier provides. 

With these posts, I didn’t even focus on how important it is to find the right supplier; I tried to focus more on the savings aspect of it that many of these companies seem to chase.  Hopefully I’ve shed a bit of light on some things to explore during your BPO selection process.   

In the next post, I’ll actually provide some specific talking points and consideration points to keep in mind while you are deciding whether or not to outsource.
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William Dorn

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