Category Archives: RFX

Affordable RFPs – The Real Reason(s) They Are So Rare, Part 1

Two articles ago, we noted that The Key to Procurement Software Selection Success: Affordable RFPs! was critical to getting the right technology to help manage your complex supply chain. This was because a proper RFP required a LOT of understanding to get it right, including, but not limited to:

  • Procurement Maturity
  • Process Maturity
  • (Critical) Use Cases
  • Current Technical Maturity
  • Missing Capabilities
  • Key Solution Types to Address the Gap(s)
  • Key Existing Solutions to Maintain
  • Globalization Requirements
  • Service Requirements
  • Unique Organizational Requirements (less than you think, but those that exist are situation critical)

And this required a breadth of understanding across

  • the market
  • process evolution
  • use case specification
  • … including what must be technology backed
  • … and what should be technology or data enhanced
  • common module/solution types that mind the gap
  • internal foundations
  • the unique requirements, regulations, and resignations of each country you do business in
  • the services your team, and current partners, can and can’t do — even service specializations you didn’t know exist
  • what other organizations do

And most of this you won’t have in house. So you need Affordable RFPs. But we know all too well that you are all asking Affordable RFPs — What Are Those? because, as far as you know, they don’t exist. And we hear you, because they don’t exist at the Big X, rarely exist at the mid-size consultancies the next tier down (because only a select few from their talent pool can do it efficiently and relatively cost-effectively and they are going to be dedicated to any F500/G3000 that could afford a Big X to keep them as a client), and unless you are a larger mid-size buying a mini-suite, they don’t even exist at the Niche Consultancies where they should be common.

We also spent a fair amount of time explaining why they don’t exist, even though one would think that they should be readily available at the niche consultancies (as this could not only make those niche consultancies true leaders in Procurement but also help them grow). In this last case, it was because it was typically only their senior resources that could do these projects, and since these projects aren’t currently quick to complete, it doesn’t take long for a senior resource day rate to add up. And, as we noted before, while this won’t be that much when you are larger mid-sized organization looking for a mini-suite or suite, if you’re just looking for one or two modules to fill a gap, this could add up to quite a bit.

So if this is the case, why are we telling you that Affordable RFPs are the answer if they’re almost impossible to find?

Because:

  1. they are the answer,
  2. they would be affordable at Niche Consultancies if those niche consultancies stopped thinking like consultants and started thinking like enhanced product-and-data-based SaaS Management Providers, and
  3. they only require knowledge management and expert augmentation to get it right.

So what would a Niche Consultancy have to do to get it right?

We’ll outline that in our next part. But it starts with investment. (And how many partners at consultancies want to invest their money? They were brought up on the Wall Street Mantra — Other People’s Money.)

 

Affordable RFPs — What Are Those?

A couple of weeks ago we penned an article on The Key to Procurement Software Selection Success: Affordable RFPs!. This resonated with those of you wanting to improve your Procurement operations who were willing to admit that you could use the help, but it also left you with one big question: where to find these affordable RFPs?

And the doctor hears you on this. You can’t just go to any old consulting firm and get an affordable RFP. Most of you have encountered high price tags, whether you went to a Big X, mid-size consulting company, or even a niche specialist. And you’re probably wondering why. Well, first you need to understand the following.

1. The Big X.

There are a number of reasons you’ll NEVER get an affordable RFP from a Big X.

  • their modus operandi is to get their people embedded on your projects and keep them there for as long as possible at 5X+ their hourly rate
  • they have agreements with a number of big suite vendors where they are a preferred implementation partner and get a big referral check in addition to YOUR implementation fees
  • they’ll put a senior resource / junior partner as lead, but you’ll never see that person, instead, most of the work will be done by a team of inexperienced, poorly educated, technologically inept recent grads “under their guidance” who will rack up the hours just trying to get the basics right (because this senior resource / junior partner will also be attached to 10+ other projects so that they can close the deals, so just how much time will that resource have to even think about your existence?)

2. The mid-size consultancies.

While it is sometimes possible to get an affordable RFP from a mid-size consultancy, the reality is that it’s a rare occurrence (and your odds are about the same as achieving success with an average technology project which, as per Gartner, is less than 1 in 5, largely because they are never scoped and planned right, starting with the RFP), and most of you never will. As with the Big X, there are a number of reasons you’ll RARELY get an affordable RFP from a mid-size consultancy.

  • like the Big X, they want to get projects that keep their people busy (usually at more reasonable 3X to 4X resource hourly rates) as long as possible as they want to grow (and they totally miss the big picture that it is delivered value that wins repeat business)
  • while they are willing to be more impartial than the Big X, they have a few partners they prefer to direct any RFPs (and awards) to as they know the systems well (and can get the implementation work) and it keeps them front and center with the vendors who need to direct implementation work to a third party
  • they can’t afford benchers, so their recent grads are not only the top of their class who have shown aptitude for their domain, but they are balanced by intermediate personnel on the projects who can guide them and there’s usually always at least one senior person, but only the senior people can do the RFPs well enough on their own, so the day rates are almost as high as a Big X as the RFPs tend to be mostly senior and intermediate personnel

3. The niche consultancies.

The niche consultancies are your best bet of getting an affordable RFP, but the reality is that it’s still, unfortunately, hit and miss and it’s likely that less than 1 in 3 of you will see a decent rate when all is said and done (where we measure RFP spend against total system spend over five years and try to maintain the right ratio).

This is despite the facts that:

  • unlike the Big X and mid-size consultancies, they believe in fair costing and keep their bill rates in the 2.5X to 3X range (enough to cover their resources’ hourly rate, overhead, and a fair profit margin)
  • even if they have partnerships with a vendor or three, they tend not to favoured by the vendors who will never direct work to them (and only allow them to implement deals they bring) due to their small size and inability to rapidly scale up (like a Big X or mid-size), which means their bias towards any vendor, if it exists, is quite limited
  • they don’t have junior people, because they can’t afford benchers and resources that don’t deliver with their cost model, and only hire (high-achieving) intermediate and senior personnel, and focus primarily on those who can do small projects entirely on their own or with limited support

When you look at this, you should be able to get a lot of value for a reasonable amount of money. And, make no mistake, you do get value for money.

However, when you look at the total system cost that you can afford as a (smaller) midsize company, and then you look at the cost of getting that good RFP, the problem is that the cost of the RFP is more than you can afford (and should be spending). This means that you end up having to cut corners on the software (and get less from a preferred vendor or go with a more cost effective runner up) or forego more than a modicum of help from the consultancy (where you just get a few advisory days and hope your team to can capture enough of the brain-dump to put together something reasonable).

Even though this shouldn’t be the case.

So why are most niche consultancy RFPs not affordable (unless you are acquiring a mini-suite or significant advanced functionality that comes with a significant price tag and are a larger mid-size with the budget for it)?

We’ll get to that in our next installment.

e-Procurement Implementation Success Goes Well Beyond The Basics

the doctor was quite disappointed with this article over on the WorldBank Blogs on 10 success factors for implementing [an] e-Procurement System because all of these “factors” were generic success factors for the implementation of any technical system. Let’s look at them at a high level (and direct you to the article for a description of what the requirements are if they aren’t immediately clear to you):

Governance Principles
all projects need to be managed and governed, so this is pretty much a “d’uh!”
Transparency on Legal and Regulatory Frameworks
any platform that processes any personal, payment, or classified data HAS to adhere to Legal and Regulatory frameworks of ALL countries the corporation operates in, so this is obvious for any platform that requires it
Strategy Ownership and Sustainability
it’s classic project management, no owner, everything goes to cr@p
Implementation and Integration Challenges
preparing for this is just a given
Technical Infrastructure and SaaS-based Systems
all technology implementations need to integrate with the current infrastructure and SaaS systems that contain the necessary data, so this is pretty much a “d’uh!”
Training & Capacity Building
well, you need the capacity and the training regardless of the system being implemented
Engage Stakeholders Actively
without stakeholder support, it will be hard to get the resources for a timely, successful implementation of any technology
Align with International Standards
technology should always align with any regulatory standards in place
Clear Communication and Change Management
necessary for the success of ANY project, not just a technology project, so this is pretty much a super “D’UH!”
Data Security and Privacy
if the data is personal, payment, classified, trade secret, etc. etc. etc. then security and privacy is of more concern than the tech, so, another ‘d’uh!”

e-Procurement success goes beyond the basics. There are too many six, seven, and, for some multinationals locked into 5-year contracts, eight figure acquisitions that have failed to deliver on the promises made. This is because the selection, implementation, and utilization of such systems goes beyond most back-office tech to get right.

Selection

In our recent article on The Key to Procurement Software Selection Success: Affordable RFPs!, we noted that selecting the right vendor was paramount to success, and a critical requirement in this selection process was a GOOD RFP.

Furthermore, that RFP needed to specify, among a host of requirements:

  • typical use cases
  • target processes
  • globalization requirements
  • data migration requirements
  • integration requirements

Why are we calling these out? Because these define the key factors for implementation success!

Implementation

Key Factors are thus:

Primary Components / Modules
… that are needed to support the critical use cases and target processes, that need to be implemented and demonstrated first
Test Cases
that must be passed, in priority order, to ensure the use cases and target processes can be accomplished
… including multi-lingual use cases
that support not only the customer organization requirements but the supplier requirements
Data Migration Requirements
spelled out in detail, as well as cut-over requirements
Cross-System Bi-Directional Integration Requirements
spelled it in minute detail, not just push to the ERP … and considerably more than just a high level holistic strategy … when it comes to tech, the devil truly is in the details and chaos emerges when you overlook even one

Utilization

A system not utilized is a failed system, even if the implementation and integration goes as well as can be reasonably expected. Utilization is critical, especially early on, or widespread adoption will never be reached. This is why it’s paramount that the functionality required for the critical use cases be implemented and tested first so that utilization of key capabilities can begin as soon as possible, leading to adoption.

In other words, the basic checklist for technology implementation is nowhere near enough for the successful implementation of procurement technology — that success requires going deep.

The Key to Procurement Software Selection Success: Affordable RFPs!

Modern supply chains are risky. Very risky. Nothing made this fragility more clear than COVID where the world essentially broke down due to an illogical (to the point of insanity, thank you McKinsey) over-reliance on outsourcing, especially to China. (There’s a reason that SI has been promoting near-sourcing, home-shoring, and home-sourcing for over sixteen years — because this breakdown was inevitable, the only unknown was whether or not it was to be geopolitical instability/war, a massive natural disaster, or a pandemic that would be the first card to topple in the house of cards.)

Despite the best laid plans, and all the precautions you can implement, something will inevitably go wrong. Very wrong. And the disturbance will cost you greatly. That’s you you buy supply chain insurance which, depending on exposure, limits of dependency, and regionalization, will cost you between 1% and 10% of the policy value (maximum claim amount). If we take 5% as an average (which is not unreasonable), that says for every 1,000,000 of at-risk inventory you need to insure (to prevent devastating loss), you are paying $50,000.

But do you know what’s just as risky as your supply chain? The investment in the technology that you use to power your supply chain. Therefore, you should do everything you can to ensure you get it right! The best way to do this is create a good, proper, RFP to help hone in on software vendors that have appropriate solutions that should be able to fill your need while ensuring that they have the minimum globalization, size, and services you will need to consider giving them an award.

But, as per previous articles, including our last article on why THERE ARE NO FREE RFPs!, you’re probably not capable of doing this on your own. This is because a proper RFP requires

  • understanding your current Procurement Maturity
    (and while you may understand what you’re doing, it’s doubtful you understand how you are faring against the market or best-in-class)
  • understanding your current processes (based on this) vs. your target processes (based on where you should get to within a reasonable time-frame, taking into account that The Hackett Group, based on their book of numbers, discovered that it was typically an eight-year journey to best in class for large global enterprises)
  • understanding how these translate into use cases that must be supported by technology
  • understanding what technological capabilities will be required to get you there and …
  • what additional capabilities would be beneficial to simplify your tasks, identify additional value, or help your team progress in Procurement maturity over time and …
  • understanding which types of solutions / modules on the market contain the bulk of those capabilities so you know which segment of vendors to send the RFP to
  • understanding if the backbone solutions in place are worth keeping or if they should be replaced instead of augmented (i.e. would the solution with the missing capabilities completely subsume these solutions [rending them unnecessary], like simple RFPs in a Sourcing Suite or catalogs in a Procurement suite, or would they still be needed, like an ERP backbone)
  • understanding the globalization needs not just of the company, but the (potential) suppliers
  • understanding the services that will be required for installation, migration, and integration
  • understanding any unique requirements of the organization that will need to be addressed by a vendor (to ensure they can meet them) before negotiations can begin

and if you don’t know

  • what the state of the market is, or what best in class is
  • how your processes should be transformed to advanced up the maturity curve
  • how to define the appropriate use cases
  • … and the key technology capabilities that will be required
  • … and which optional capabilities will be true value add
  • how to identify solution/module types based on these capabilities
  • which solutions you have that you should keep, and which you should replace
  • the full breadth of globalization needs across the extended enterprise
  • the full breadth of services that will be required
  • which of your organizational requirements are truly unique and need to be spelled out

then you CANNOT write a good RFP. So you really, really, should pay an expert, independent, advisor (or consultancy that does not have any preferred provider partnerships) to do the appropriate Procurement and platform maturity assessments and write the RFP that you need.

Especially since this can usually be done for less than 10%, if not 5%, of the 5-year cost of the investment. (Face it, you’re going to be locked into at least three years no matter what you buy, usually five years, and even if not, it’s going to be too costly to switch out even the worst solution in less than five years.) For example, as per previous Sourcing Innovation posts on how much should you pay for a starting platform, as a mid-market you would be looking at about 250K/year in license fees for a good suite across the board (120K for a starter, but that wouldn’t have all the modules or advanced capabilities where you need them), plus implementation, migration, and integration that will run you anywhere from 125K to 500K (or more) up front. Assume 250K, and this gives you a five year baseline cost of 1.5M. 10% of that is 150K, and you can definitely get the help you need for that — and it’s a SMALL price to pay to make sure you get the acquisition right of this make-or-break technology (that can deliver a 3X to 5X+ ROI done right, and cost you Millions done wrong). (And if you’re a larger enterprise, you’d be looking at 3M to 6M for a suite for 5 years, which gives you a budget that even the Big X would be interested in, but which they SHOULD NOT be considered for as they are all preferred implementation partners for at least one of the major suites.)

So if you want true success, big savings (10% for the appropriate strategic sourcing/procurement technologies), and real ROI (3X to 5X or more), put those “FREE” RFPs in the trash where they belong and find the right expert to help you create the right Affordable RFP that will ensure the successful selection that your organization needs.

MeRLIN Sourcing, A Platform With a Twist …

INTRODUCTION

When their founders were young men
they paced the fact’ry floors
from Vellore down to Chennai
they must have walked ’em all
cause they learned all of the problems
that plagued the Procurement side.
Those listen, look, and learn guys
sure made a lean platform.

The founders of MeRLIN, who started Rheinbrucke Consulting in 2013, started developing a stand-alone application for direct source-to-contract (and, for those who need it, source-to-pay) in 2018 using their decades of experience supporting direct manufacturing clients. MeRLIN was then frst released it to the market in 2022, after ensuring it actually solved the problems they were seeing and met the needs of the companies they were working with.

(While some companies might take it as a badge of honour to get a “minimally viable product” to market in a year, the reality is that when it comes to manufacturing enterprises, nothing you can develop in a year will actually solve more than a fraction of their problems, and unless what you deliver can integrate tightly into their existing enterprise software landscape, it won’t be adopted, or even bought. That’s why there are so many offerings in indirect [many of whom will succumb to the marketplace madness] and so few that offer true direct sourcing solutions, and fewer still that offer fully integrated source-to-contract / source-to-pay suites.)

PLATFORM SUMMARY

MeRLIN, which bills itself as a Source-to-Contract platform for Direct Material (primarily Discrete Manufacturing) Sourcing, is actually a Source-to-Pay platform where the Procure-to-Pay platform capabilities are baseline (and wouldn’t go head-to-head with best-in-class) and designed for the mid-market (and large enterprise) clients that don’t have a Procurement solution in place already (either through the ERP, AP, or a third party system). Since most larger enterprises have some form of decent P2P, MeRLIN decided to focus primarily on the critically underserved strategic sourcing marketplace in discrete manufacturing and direct sourcing and the capabilities all of the companies the founders worked with in manufacturing were universally missing.

MeRLIN was designed as a modular solution where

  • a client could license just the modules they wanted/needed,
  • common modules, and capabilities, were broken out into their own modules so their was no duplication of functionality, and
  • key modules could be augmented with additional value-added functionality not typically found in average products.

MeRLIN has all the standard modules you’d expect in a Source-to-Contract:

  • (Program &) BoM Management (Requirement for any Direct Solution)
  • Requisition Management (Intake)
  • Sourcing (Event) Management (Sourcing)
  • Supplier Management (SXM)
  • Contract Management & Contract Authoring (CLM)
  • Reports & Dashboard (Reporting & Analytics)

As well as basics for Procure-to-Pay:

  • Purchase Order Management
  • Invoice & Payment Management

But also has modules for:

  • Demand Management (Consolidation of Requirements from Requisitions, Manufacturing Programs, and MRPs)
  • Category Management (Part/BoM grouping & management)
  • Supply Chain Compliance (GSCA / LkSG)
  • Supply Management (Document & Shipment Management)

and the standard suite foundational modules of:

  • Master Data Management
  • Business Administration
  • Security Management
  • System Management

And even modules for:

  • Strategic Project Management (Project Management/Orchestration)
  • Finance Management (Budgets, Prices)

We’re not going to discuss all the modules and instead focus in on just the core Source-to-Contract modules, as they are the modules that are critical to direct sourcing and the modules that will allow you to understand the value, and potential, MeRLIN has for you.

Supplier Management

Supplier Management is designed to onboard, evaluate, approve, and manage suppliers, including their contacts, surveys, ratings, and documents. Qualification starts with a simple request based on supplier name, country, email, and unique (DUNS) identifier. Based on the supplier category, the next step will be to send the suppliers the qualification surveys and pull in the external risk information, send it to technical and risk reviewers, and if that passes, it will go off to compliance to ensure the supplier can comply with all necessary regulations the company is subject to and then, if that passes, the supplier will get a registration invite to provide all of the additional information necessary to do business with the company as well as details on additional products and services.

Supplier Management captures all of the core company information, locations, accounts, questionnaires, risk information and scores, compliance reviews, scorecards, and approvals. For each of these there are standard fields, and as many additional fields can be added by the customer organization as needed.

Compliance Management

Collects and manages the organizational policies, supplier policy statements, compliance surveys, audits, risks, scorecards, and complaints. It can accept all documents, support custom surveys, import third party data from financial and environmental (and other) risk providers, provide you with compliance scorecards, and automatically extract and centralize all “risks” from the surveys based on scores and/or responses in a risk management view.

Moreover, in full compliance with the German Supply Chain Act (GSCA, known as the LkSG within Germany), MeRLIN provides the buying organization, each of their suppliers, and their entire employee base, a unique portal where they can register complaints. They have upgraded their platform to fully support the GSCA and can also support other supply chain acts as well (and future releases will encode more out-of-the-box support, even though it can already be custom figured on a client-by-client basis to support the majority of acts out there).

Requisition

Requisitions can be used as traditional requisitions for purchase orders against existing contracts for goods and services normally used by the company or as intake requests for sourcing. When they are used as intake requests, they go to a central management screen where the buyer can group them by material, bill of material, and/or category to identify sourcing event requirements and then create a sourcing event off of a bundle of them.

Sourcing

Sourcing is primarily RFX based, but auctions are supported as well off of base RFQs. A sourcing event can be kicked off from one or more requisitions, a category, a BoM, or an event template, which can consist of one or more RFIs, questionnaires, and line-items with custom price breakdowns in the RFQ. Associated with the RFQ can be the suppliers, addendums, budgets, stakeholders, terms and conditions, contract template, event schedule, and ongoing Q&A.

In addition to being able to review bids by total cost per unit and evaluation score (by the relevant stakeholders), the application also supports automatic award recommendation by criteria which can include target award by supplier, range of suppliers to split the award between, minimum and maximum shares, and preferred supplier status.

Contract “Authoring” & Management

The platform is primarily “signature” and “execution” management, as authoring is simply the packing up of contract templates, terms and conditions, specifications, and associated addendums for agreement by electronic signature. The electronic signature capability is compliant with USA regulations and most European regulations for private enterprise contracts. Once the contract is signed, the platform can manage the project timeline, stakeholders, documents, events, milestones, and obligations. In addition, the user can define alerts against any event, milestone, document, obligation or other entity on status change or due date.

Reporting & Dashboards

Reporting and Analysis in MeRLIN is through widget-based dashboards that summarize any data of interest in the system. Right now there are hundreds to select from in the reporting library, with more being added as needed. For each of the built in reports and dashboards (on suppliers, spend, process, etc.), the user can apply multiple filter options and save the configuration to their liking. There is no Do-It-Yourself (DiY) widget report builder yet, but more DiY analytics enhancement is on the roadmap.

Strategic Project Management

This is MeRLIN‘s built in project management capability where a user can define and instantiate RFX templates, supplier onboarding workflows, contracting processes from award specifications, procurement processes, and even entire Source-to-Procure projects which collect all of the necessary templates and workflows together. In addition, leadership is provided with a high level overview of sourcing projects.

Master Data Management

All of the system master data templates can be altered by the user including, but not limited to, currencies and conversions, items, locations, plants, prices, suppliers, contract metadata and milestones, and other key items. The customer can control it’s master data and master data identifiers.

Business Administration

All of the templates in the system can be managed and customized in the business administration section including, but not limited to supplier onboarding, qualification, evaluation, and audit questionnaires, product and item templates, requisitions, RFQs, purchase orders, contract terms, contracts, statements of work, email, and workflow templates.

Bill of Materials Manager

A key aspect of Direct Sourcing is managing the Bill of Materials. In the Merlin platform, that can be done through the BOM Manager, which unlike basic direct sourcing platforms, can maintain as many versions of a Bill Of Materials as the organization wants to maintain (for correlation with historical sourcing and procurement and cost estimates during new product design and/or product modification).

These versions can be uploaded from the ERP (or your PLM of choice with custom integration) or created in the BOM Manager, and this creation can be from scratch or from a previous BoM version which can be copied and modified as needed.

The best part of MeRLIN‘s BOM manager is its built-in ability to allow for easy should-cost analysis during NPD and BOM (re)design. Once a BOM has been uploaded or created, the user can click a button to “cost” and it will automatically find prices for every component in the BOM for which it has a price from a contract (first), catalog/commitment (second), or quote (third). Then, the user can push the remaining items to the Demand Management module for quick quote (or import into the internal catalog from a connected source) or simply create a place holder item (with an estimated cost). They can then return to the BOM Manager and re”cost” the BOM to get a complete cost estimate, which can be compared against the cost of all prior BoM versions (that were costed). This allows the organization to understand the costs associated with BOM changes over time (independent of supplier or distributor pricing changes). Gone are the days where you have to use a completely separate application to do BOM cost estimation.

Finally, the next update to the BOM Manager will allow for the user to enter a cost estimate directly in the BOM manager for materials/parts not yet quoted for even quicker price estimates, and those estimates will be clearly marked as internal estimates only.

Other Capabilities

We’re not going to discuss the procurement modules as they are not MeRLIN‘s focus (but we will assure you that they cover the foundations if you don’t have P2P and need it), demand management as you know what forecasting should do, category management (and category strategy management) as that is rather self explanatory, or finance management, as budget and price management is also straight forward.

The Full Picture

The platform is quite deep in all core areas and one could write pages about each module and its deep capabilities, but hopefully this is enough to convey the facts that

  • the MeRLIN platform was designed from the ground up to support direct and discrete sourcing,
  • has the capability to support these projects from inception to contract signing through the very last order against the award, and
  • goes beyond just raw sourcing capability to related capabilities of supplier risk, compliance, and execution (tracking the order to the delivery and qualification)

CONCLUSION

Given the relative lack of true direct and discrete sourcing platforms in the mid-market, MeRLIN is a platform you should definitely be aware of. If you’re in direct manufacturing, automotive, aerospace, and related industries, you might want to check them out today.


It’s for discrete wizards,
it’s a platform with a twist.
A discrete wizard
needs a tech assist …