Successful procurement depends on a well-defined process.
Organizations must ensure their purchases solve key business challenges and net a substantial return on investment (ROI).
Learn how RFP360 supports strategic procurement
But, what exactly goes into an effective procurement process?
7 steps to ensure a successful procurement process
All successful procurement processes begin with identifying a business challenge worth solving.
If you don’t understand what problem you’re trying to overcome, it’s nearly impossible to make the right purchase.
“During my first five years as a coach, I didn’t know how to define problems properly, but in the ten years since, I’ve learned this critical technique. I use it every single day, with every single client. It has transformed how I work with people and has made the work much more impactful. These days, clients will hire me solely based on the fact that I have the ability to define their problems during our very first conversation together. When I hear them begin to differentiate between issues, asking, ‘Which problem are we solving?’ I know that I’ve made a major impact on their business.”
By taking the time to identify the problem you want to solve, you can ensure engaging in the procurement process is worthwhile and increase the likelihood of making a valuable purchase.
Once you clearly understand the challenge you’re solving, it’s time to make a business case for investing in a solution.
Create a document that details:
- The problem you’ve identified.
- The impact it has on productivity and finances.
- The estimated ROI of procurement.
But remember, while people use logic to justify decisions, they make them based on emotion.
A purely rational approach to your business case likely won’t sway your leadership team. That’s why Harvard Business Review suggests taking a storytelling approach.
“You may be tempted to stick to facts and figures to do the persuading for you, but great presenters know that the best way to hook an audience is through a story. This ‘story’ can be as simple as outlining the need, impact, and solution; the key is to present what’s at stake through a clear arc. But the more you can inject an emotional appeal or human connection into your narrative, the stronger and more memorable your case will be.”
After you have leadership on board with finding a solution to your challenge, it’s time to create consensus around what that solution will look like.
While you’ll likely have an ideal solution in mind, you should keep an open mind about the suggestions and concerns brought up by those who have expertise in other areas.
Find out what requirements finance, IT and your CEO have and work with them to determine the best possible solution.
Now comes the fun part — reaching out to vendors.
It should be noted that, in some cases, this step will actually happen before you create consensus internally. If you and your team struggle to envision how you will solve your problem, you may want to reach out to vendors who can educate you about the available options. In this scenario, you’ll want to issue a request for information (RFI). This high-level document solicits suggestions from vendors on how they think you should address your challenge.
It’s generally short — making it easy for vendors to respond — and doesn’t signify an imminent purchasing decision on your part. If you do know what type of solution you’re looking for, you’re probably ready for the more in-depth request for proposal (RFP). The RFP process will allow you to gather crucial information about vendors, which you can use to determine which one best addresses your needs.
If you’d like more information on the difference between RFQs, RFIs and RFPs check out this blog.
To streamline the process of gathering information about potential vendors, consider using vendor profiles. You can create vendor profiles by issuing questionnaires, which vendors can answer on their own time, prior to the procurement process. Then, you simply store their responses, giving you easy access to information about their offerings and capabilities when you need it.
Using RFP360 — the only RFP management software designed to streamline the RFP process for both issuers and responders — you can even empower vendors to update their questionnaire responses at any time. And because you can see when they last updated the profile, you can ensure you always have up-to-date information.
Once you’ve issued your RFPs and gathered proposals, it’s time to evaluate the responses and create your vendor shortlist — a list of five or so vendors you’ll move to the final selection process.
To effectively evaluate vendors, we recommend using a weighted-scoring approach. This will give you an objective measure of which vendors are best suited to your needs, while ensuring the most important requirements have a greater impact on the final score.
Using RFP360, you can automatically score RFP responses and even compare each proposal side by side, section by section and question by question. That way you’ll get a better understanding of where each vendor’s strengths and weaknesses lie.
“We love the automated scoring,” said Mark Rieder, SVP of HR technologies and benefits administration at NFP. “We’re shortlisting faster, and we’re being a true partner to our vendors. It’s a win-win.”
Now that you have a shortlist, you’re almost ready to bring the procurement process to an end and make your final selection. However, before determining which vendor you’ll choose, make sure to bring up any key negotiation points.
For example, if you’re thinking of eliminating a particular vendor based on price, let them know. Vendors are often more than willing to negotiate — especially if they know how close you are to making a selection.
RFP360 supports these negotiations with features that allow you to highlight RFP responses and add notes for vendors to see. They can then update their proposal content based on your feedback.
After seeing where your vendors are flexible and where they refuse to budge, you can make an informed decision about which one you want to purchase from.
While the procurement process is technically complete once you make the purchase, your actions after the fact can have a major impact on its success.
Make sure to continuously engage with your vendor for the length of your partnership. If they see you want to take an active role in your relationship, they’ll be more likely to do the same … and that gives you a much better chance of maximizing the value of your purchase.
James Bucki, director of computing technology at Genesee Community College, even suggests making vendors part of your strategic planning sessions.
“If a vendor supplies a key part or service to your operation, invite that vendor to strategic meetings that involve the product they work with. Remember, you brought in the vendor because they could make the product or service better and/or cheaper than you could. They are the experts in that area, and you can tap into that expertise to gain a competitive edge.”
How RFP360 can help
RFP360 streamlines the RFP process, so your organization can:
- Collaborate internally to create effective RFPs.
- Score, evaluate, and shortlist vendors.
- Start the buyer-seller relationship on the right foot.
Learn more about how RFP360 supports strategic procurement.