Analyst Insight: Every day, companies create request for proposals (RFPs) as a way to select potential suppliers. The RFP process has become such a mainstay in sourcing that a whole ecosystem of software companies has evolved with the sole aim of making the process streamlined and easily repeatable. But what sourcing professionals fail to recognize is that RFPs are not always the best approach, especially when it comes to developing more strategic supplier relationships. Far better to make the shift to more collaborative bidding methods that are designed to pick a supplier with the best solution and cultural fit.  

Sourcing strategies are evolving in response to changing business requirements. Traditional specification- and price-focused approaches have been effective tools in enabling competitive pricing for tens, if not hundreds of years. However, as organizations mature and their approaches to sourcing become increasingly sophisticated and ambitious, new models must address the need for innovation and more complex sourcing initiatives. This includes services that fall under complex outsourcing or alternative procurement methods such as public-private partnerships. 

A key trend proving successful is the shift to more collaborative approaches with suppliers. Moving beyond transaction-based sourcing models enables organizations to more effectively buy and manage complex goods and services; it is also a path for unlocking value. This means not only turning to more collaborative sourcing business models such as “performance based” or “vested” supplier relationships; it also includes incorporating more collaborative approaches into the competitive bidding process.

Unfortunately, many organizations fall into a common trap. On the one hand, business leaders “talk” strategic partnership, but the procurement professionals sitting down at the table favor a traditional, transactional, winner-takes-all bid process that puts the buyer and supplier on in opposition to one another.  

Today’s procurement professionals should be tapping into a variety of bidding methods. A University of Tennessee (UT) white paper – Unpacking Competitive Bidding Methods – suggests thinking of the various methods as being along a continuum that ranges from limited collaboration to the most amount of collaboration. 

Two of the more collaborative bidding methods are the “request for solution” and “request for partner” process.  A request for solution is a collaborative bidding process in which a buying organization has a dialogue with potential suppliers with the intent of collaborating to determine the best solution to meet the buyer’s needs. The buyer gives limited direction on what the solution may be and has a collaborative dialogue to define and refine the solution. The supplier then develops a formalized proposal that includes their solution.  

A request for partner is a highly interactive process used when a buyer is actively seeking not just a solution from a supplier but a supplier with a high degree of “cultural fit” and compatibility. A request for partner is typically used when there is a need for a high level of investment or collaboration between the buyer and supplier over a longer time horizon. This might include a large outsourcing project that will require significant change for the buyer and supplier, versus a more standard “solution.”  

Outlook: Traditional bidding approaches like the RFP work well for simple sourcing initiatives, but they fall short when seeking more strategic suppliers to work on more complex problems, and in outsourcing relationships where cultural fit is essential. It’s time to challenge using some of the common “best practices,” such as the RFP process, and instead introduce more collaborative approaches when selecting more strategic suppliers.  

Resource Link:

www.utk.edu