When responding to RFI/RFQ requests what's the biggest obstruction a supply chain project manager can face?

Network Member Question

When responding to RFI/RFQ requests what's the biggest obstruction a supply chain project manager can face?

Thom Spencer

Recruitment & Human Resources Consultant and Contractor

Wakefield, UK

My Response

Historically, questions such as the one you have posed are usually solipsistic in nature in that they focus on the internal aspects of the RFx process.

Part 4 of my critically acclaimed conference series (The Changing Face of Procurement), asks the question "is your current e-procurement strategy a threat or a benefit to your supply base?"

Far too often, the implications of an RFx process indirectly lead to a phenomenon known as supply base erosion whereby there is a steady and gradual decrease in supplier participation leading to an equally (and for most buying organizations imperceptible) increase in costs and a corresponding decrease in service levels.

In a recent reprint of Part 2 of the 7 Part Dangerous Supply Chain Myths series focusing on supplier development and management, I highlight the inherent flaw (or myth if you prefer) associated with the now largely discredited vendor rationalization strategies championed my industry pundits not that long ago (contact the author for the article link).

What should be of particular interest are comments I received from the audience members at a conference in which I was the keynote speaker. Consisting of 200 plus senior executives from the supply side of the automotive industry, the consensus that the RFx process was mostly an exercise in futility was clearly demonstrated by vociferous statements such as:

“It (e-procurement – technology) will have a negative effect on my business.”

“The product (we sell) is commoditized under an e-procurement program . . . we will do everything to resist participating.”

"We should charge the companies that issue RFP's a fee as the exercise is unlikely to generate any tangible revenue."

This malaise even extends to the public sector in which the levels of cynicism on the part of suppliers (especially within the SME community) have literally undermined major government procurement reform initiatives such as the Government of Canada's Way Forward program.

In another article that delved into the critical elements of supplier development and engagement in the public sector, I identified three classes or bands of suppliers. They are as follows: The Masses, The Strategically Displaced, and The In Crowd. (Note: to learn more about these bands and their impact on the RFx process refer to the article The Bands of Public Sector Supplier Engagement on this site.)

Regardless of whether you are in the public or private sector, The Commonwealth of Virginia's eVA program should serve as a case reference in terms of how to effectively establish and implement a successful program.

When the program was originally launched in the fall of 2001, eVA was slated to follow the traditional path of program implementations (and likely would have become just another statistic in terms of the 85% failure rate associated with all e-procurement initiatives).

Shortly after commencing the program, the Commonwealth's leadership had an epiphany, which ultimately led to a greater level of stakeholder involvement (including suppliers) in the planning process.

The numbers speak volumes:

In 2001, just 1% of the targeted $3.5 billion annual spend was processed through eVA. In 2007, more than 80% of the Commonwealth's targeted spend was processed through the program.

The Commonwealth's supply base grew from 21,000 in 2001 to 34,000 by 2007.

Finally (and this is the telling statistic), the distribution of business over the entire supply increased from 26% in 2001 to more than 43% in 2007. Specifically, a significantly greater number of individual suppliers generated tangible revenue through eVA. This is the sign of a dynamic and active supply base. Refer to the 2 Part series Yes Virginia! There is more to e-procurement than software on this site or contact the author for the corresponding links.

In the end, internal machinations ultimately have little effect on the success of your RFx program if you are out of step with your supply base. Extend the collaborative process to include this critical stakeholder, and you will exponentially increase the likelihood for a truly "collective" best result outcome.

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Personal Profile: http://www.linkedin.com/in/jwhansen

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