There are better ways to select suppliers
RFIs, Requests for Information, are a mainstay of best practice sourcing processes. They operate as the information gathering (and organizing) mechanism for intelligence on what a potential supplier can provide and who they are. Done right, they provide new info to the strategic sourcing manager and his stakeholders so they can qualitatively assess what is available in the market. Coupled with suppliers’ response to an RFQ, Request for Quote, which gives quantitative data like pricing and availability, the strategic sourcing team can whittle down the offers to a supplier award.
Unfortunately, RFIs are not always done right. With hundreds (sometimes thousands!) of questions, they become a significant burden to suppliers and information overload to the buyers who send them out. The result is higher prices from suppliers to cover increased cost of sales and wasted time and effort on the buyer side trying to read and understand every response that comes in.
It is ironic that I am saying this. For over 20 years, I’ve provided software that facilitates writing, sending, analyzing and awarding of RFIs, RFQs and their derivatives. I suppose this makes me the arms dealer who’s running out on the battlefield and screaming “hold your fire!” Guilty as charged. But for years I was also a target of their fire as I answered RFIs for our spend management software, hired a team to handle the workload and saw what the supply-side is going through.
And the vast majority of RFIs seemed like a lot of busy-work. We were answering the same questions, day after day, but stated differently because every buyer put their own stamp on things. This defies automation and, anyway, no self-respecting salesperson would want to leave a response to off-shored resources or robots when this may be the only time to talk to the prospect. But then again, we had our doubts that the prospect was reading our responses when they had over 500 questions and maybe 5-10 vendor responses to read through.
Even more perverse is when buyers created scoring schemes for different responses. This seems like a good idea unless you are sourcing a category made up of services or otherwise bespoke deliverables (which together constitute the majority of big purchases made by companies in the indirect space). And then there are cases where RFI responses (which cover capabilities) are used later by buyers as deliverables under a warranty. Just because your supplier can do something, you may not be paying them to implement or deliver it when the contract is negotiated.
So, yeah, there are some major problems here. The two implications from all this work boil down to increased “cost of sales” for your vendors and a much longer sourcing timeline that means less sourcing can be done in any one year. Neither of these is good for the bottom line.
There are some alternative strategies out there that may apply, however. Let’s explore a few:
Send your Best: if you are sourcing in a category where the vendors are regularly responding to RFIs, you can leverage their past work by asking them to send you their “best” recent response (edited if they like to remove references to the original buyer). This cuts down your time of RFI prep and you can get a quick turnaround on their response. They save time and money by finding and crafting their best response that probably was a recent winner for them. Yes, different suppliers will give a wide range of responses (because the questions will differ among them), but the insights of seeing how they win business and what they are best at is worth it. Also, seeing other people’s questions that you may not have thought to ask gives you some new market insights. Use some of the time saved on prep and response to craft targeted follow-ups and learn even more.
Analyst RFIs: there are a number of industry analysts out there getting sophisticated in their practices. They used to just interview and see demos from vendors, but now they are sending out their own RFIs and using those to create industry ratings like the Gartner Magic Quadrant, Forrester Wave and others. In the spend management software category where I came from, we answered RFIs annually and, in some cases, updated them quarterly! If this exists in the category you are targeting, you may want to engage an analyst and get access to their research and ratings. The good ones are making their research available with an ability for you to change weightings of areas rated to match your specific circumstances.
Essay Responses: it may feel a bit counter-intuitive but asking for a longer response from a vendor can give greater insights and save time in the long run. If you are sourcing a category where the vendors all satisfy the basic requirements, then you want to find what their differentiators are. A good way to do that is with less questions but asking for more thoughtful responses. For example, for services categories, you may ask the vendors to write up how they will be addressing project risk for the specific project situation you’ve laid out. The winners will have a response that reflects they’ve read about your project, mapped out what they would do, given evidence of what they did for similar projects in the past and mentioned risks that you didn’t even think of. The losers will attach a canned document that shows their philosophy for risk management. With a few key open ended questions, you can get to the heart of the differences between vendors without overwhelming all parties with tons of discrete questions.
For all the methods above, consider the follow-up process. Now that you will get interesting insights quicker, you need to drill into those insights with the vendor(s) or go find out more with your stakeholders that would affect how your final RFP will be structured. This is, after all, information gathering in preparation for actual proposals, pricing and an eventual contract. So perform your due diligence, but don’t let the RFI process be the time consuming impediment to getting your sourcing project completed.