Throughout my career, I have been on both the bidding side of RFx exercises and also led such activity in the efforts to select a vendor or portfolio of vendors. In the past year, I also took on an initiative as an Implementation Manager with an e-procurement software provider. These efforts have provided me with extensive exposure to every aspect of the RFx (I will get into the X of RFx in just a moment) process. To provide context, some initiatives that I have been a part of include…
- Submitting dozens of RFPs at a managed services provider for large, multinational IT services opportunities
- Leading an RFI-RFP exercise in the efforts to establish a core portfolio of delivery partners around the world; for one of the largest global PC manufacturer.
- Leading an RFI-RFP exercise to select a global telemarketing agency for one of the global leaders in open source software.
- Assisting half a dozen firms in defining & optimizing their procurement process, in efforts to implement a SaaS-based e-procurement platform.
Needless to say, I have seen a lot of approaches and best practices in the vendor selection space. What amazes me is the consistent lack of standards within companies, the absence of a selection methodology/criteria by which to measure RFx participants, and even a lack of knowledge on basic terminology. I am talking about procurement directors, buyers of 20 years, etc. Enter the RFxcycle. In this post, we are going to cover some of the basic steps/stages of vendor selection process. For more detailed information on common issues in this space and how to overcome them, download our brief whitepaper “Vendor Selection: Get Your House In Order First”. So let’s cover the X…
RFI or Request for Information – An RFI can be used by a firm when they are moving into a new space and either do not know a lot about the specific discipline/industry or have not worked with vendors in this space before. Typically, the buyer will do some initial homework to identify potential vendors…competitive analysis, asking around, internet research, etc. The buyer (company looking to hire the vendor) will create a document that explains who they are as a company, what they are looking to accomplish with the partnership, and what they understand to be some key requirements from the vendor. This is a learning opportunity for the buyer to learn more about the industry/service they are looking to move into. Participating vendors use this as an opportunity to share their capabilities, awards, etc. At this point, specific volumes/quantities/dollars are not shared. The buyer may send this RFI document to 12 potential vendors in hopes of finding 2…2 vendors may respond they are not interested and another 3 may not have the coverage or capabilities to make the cut for the next X.
RFP or Request for Proposal – Now that you have a better understanding of the market, vendor approaches/capabilities, and players in this space you can move forward in the process with the 7 RFP participants. At this stage of the game, the buyer builds out the RFI document to now include more details on the companies requirements….specific volumes/quantities, specs, geographical locations, expected service levels, etc. In turn, the vendors will respond with more details on a customized approach to your firm, specific dollars, account team/support structure for your firm, etc.
*It is beneficial to all parties involved, if the buyer hosts a call to answer any questions the vendors may have. Some folks may do this via open call for all vendors to join at once or individual calls that are then followed with a consolidated email of questions & responses for all to review. Remember that contracts & the on-going partnership will eventually be built off of the RFP, so you want to make sure all assumptions and questions are clearly discussed.
Once all responses have been submitted, the buyer will conduct a review and analysis of the responses. At this point, the buyer may select 4 or 5 potential vendors to come to their offices (or go onsite to do a survey/audit of the vendor facility) to conduct orals presentations. This is an opportunity for the vendor to give their sales pitch, share references of similar clients to you, and bring their response to life. This is also a crucial point for the buyer to dive deeper into the responses, get under the covers and discuss details of the proposed solution/relationship. If there are 2 clear leaders, then you move forward and ‘award’ business. Essentially, inform the others they did not win your business and inform the others they have and contracts will be drawn up. However…you may be looking for 2 and have 4 that are dead-even. You can move to the next and last X.
RFQ or Request for Quote – If you have already been through the process or have established relationships with vendors, then it may simply come down to financials. This is where the buyer will either publish specs/volumes or inform folks that their best and last quote is needed. Again, this is where you have established relationships and looking for a specific project/contract term or have been the RFI-RFP and now down to financial differentiation. The vendor in turn will either update their numbers from the RFP or provide their pricing (in the case of established relationships). The buyer will award business and an SOW or other contract vehicle is drawn up.
Like any other partnership, expectation setting and communication are keys to success. The RFx process may seem daunting, especially when you have 12 participants submitting 40 page documents, but it is one of the undervalued links in your value chain. Get this right and you can reduce costs, operate more efficiently, and create truly positive customer experiences. KPS would be more than happy to assist you in standardizing your process or leading a vendor selection process. Contact us today!