Why am I drawing this distinction? Because organizations that build their sourcing road maps for the year will do themselves a disservice by focusing on just this one tool in the overarching strategic sourcing toolbox. In fact, there are plenty of times where running an RFP may not be the best approach… at least not immediately.
When to Avoid RFPsTowards this end, I’ve compiled a few scenarios where Procurement may wish to go a different route. If you’ve earmarked a project that sounds like one of these scenarios, take a moment and ask yourself, “is an RFP really the right way to go?”
New, Uncharted TerritoryAn RFP can be a great thing – when you know exactly what you want. However, many Procurement teams are challenged to identify best-in-class suppliers for products or services that are new to an organization.
In these cases, it can be difficult, if not impossible, for Procurement to develop a detailed RFP, accompanying questionnaire, or fully fleshed-out scope that will be needed for bidders to properly respond.
Look to current supplier relationships to help guide the process. While you may not have a supplier who provides these specific solutions, “nearby” providers will likely have a good understanding of the field and may be able to offer some direction or introduce you to several potential supplier candidates.
Simple, Straight-Forward BuysSome go-to-market initiatives are simple and clear cut. Let’s say you’re buying commoditized products from a supplier you know and trust. You have no interest in changing suppliers if you can help it… but you’ll need your incumbent to come to the table with cost savings to keep your business.
In these cases, the effort of going to market with a full RFP may be overkill. At a minimum, the decision to go this route is premature. Better to find out what an incumbent is willing to do to keep your business before investing the time needed for a full market event.
Gather benchmark data and engage in direct negotiations with your incumbent. Preface these discussions by letting incumbents know that you’ll go to market if you need to, but would rather they offer a competitive enough bid to make a market event unnecessary. Armed with benchmark data, you’ll know if their opening stance is on target or not.
Complex, Multi-dimensional OfferingsThe opposite of the above, some sourcing initiatives are for complex purchases that go beyond commoditized widgets. Think about finding an advertising agency of record or bringing in a tech consulting firm to do a major infrastructure overhaul. Unit price isn’t the only (or even the most important) element of successful buys, here – you need a partner who can carry your organization’s vision through into the future while safeguarding today’s operations.
In these cases, an RFP can be too myopic. An RFP does best when you can break down a supplier’s worth into very discrete/scorable qualitative buckets with a backdrop of price as a major deciding factor… complex and highly strategic relationships don’t work this way, and therefore aren’t well-served through an RFP.
Delving deep into onsite demos, pitch presentations, and planning sessions are going to be critical. Having a market event narrow the field to a handful of suppliers may be beneficial from a time-saving perspective, but don’t hang your hat on three-bids-and-a-buy solving highly complex problems.