Legacy sourcing activities still prevail…..

While these objectives may sound logical, many sourcing teams defeat their efforts to identify and select the optimal supplier by reverting to some bad habits. Those bad habits include:

1). Preventing personal dialogue between prospective suppliers and decision makers
2). Sending RFP’s that require an extremely time-consuming first response

Why do sourcing teams have these bad habits in the first place? What are their underlying interests?

First, the prevention of personal dialogue has a few elements to it. One element is that procurement professionals always strive to ensure a “level playing field” equitable treatment and a fair process for all suppliers. Procurement ethics dictate that one supplier should not be given information that is not made available to all other suppliers because, then, it would appear that someone in the buying organization is trying to facilitate a pre-determined “favorite” supplier being selected. Another element is that prevention of personal dialogue is designed to protect the time of executives within the buying organization. These are busy people, naturally, so the tendency is to block anything from being added to their already full plate.

Second, the voluminous response RFP has its rationale as well. Sourcing teams have the desire to minimize the number of steps required to get from Point A – issuing an RFP – to Point B – selecting a supplier. So, the tendency is to want to capture all of the required information in one fell swoop.
While those are noble interests, the execution of processes to support those interests is flawed.

Here is why.

In terms of preventing personal dialogue, sourcing teams are failing to realize how personal dialogue is an enabler of sourcing success, rather than a hindrance to it. A conversation can be held professionally without tarnishing a fair process or creating a perception of an ethical breach. Actually, preventing personal dialogue can be perceived as an ethically-shady practice. While procurement professionals commonly feel that not permitting conversations between suppliers and decision-makers preserves the perception of an ethical sourcing process, the opposite may be true. Suppliers would argue that not permitting such conversations perpetuates the perception of an unethical sourcing process where the successful bidder is pre-determined, other bidders are being “used” solely to drive down that supplier’s price, and the sourcing team is steadfastly trying to hide that.

There is another flawed line of thinking with regard to preventing personal dialogue during the sourcing process. That line of thinking relates to the interest of protecting procurement executives’ time. Simplified, it is a procurement executive’s job to build the strongest supply chain possible for his or her organization. By refusing to talk to qualified prospective suppliers and, thus, discouraging them from participating in sourcing processes a procurement executive is failing to fulfill his or her duty of building the strongest supply chain. Yes, time is scarce and must be managed wisely, but attracting a strong supply base is a wise investment of time.

Finally, while minimizing the number of steps of the sourcing process may have good intentions, efficiency should never trump effectiveness. Let’s compare two scenarios.
In Scenario A, an RFP was sent to five carefully-selected suppliers. That RFP required a 50-page response. Only two suppliers responded and neither of those suppliers had a reputation for being one of the top two suppliers in the industry. The other three suppliers felt that a 50-page response was too much work for a process with an uncertain outcome and declined to respond.
In Scenario B, an RFI was sent to five carefully-selected suppliers. That RFI required a 10-page response. All five suppliers responded. The sourcing team then sent an RFP to the four suppliers who had the most attractive responses to the RFI. That RFP told the suppliers that they were receiving the RFP because they were shortlisted based on their response to the RFI. The RFP required a 40-page response. All four suppliers responded. Because they had been shortlisted, they each believed that they had a legitimate chance of winning the business. This two-step process took an additional week compared to Scenario A. But was it worth it to have more competition, more options, and more highly-qualified suppliers to choose from? Most procurement professionals would argue that it was indeed worth it.

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