Category Archives: RFX

Cost Reduction … it Starts With Cost Increase

It used to be cost reduction, which was focussed on cost cutting, started with the one-trick pony of cost cutting by any means necessary, which typically took the form of e-Auctions, RFPs to new suppliers, and GPOs that could aggregate and leverage huge volumes — all tricks that are rearing their ugly heads again with the rapidly rising costs thanks to inflation, tariffs, and global instability.

They all work just fine in the short term, but they all come back to bite you in the backside in the long term. Here’s why:

  • e-Auctions: find savings by squeezing margins, and you can only take those out once, and once inflation comes back, costs go up
  • RFPs: designed just to find the absolute lowest price attracts suppliers who cut corners, underpay their staff, and offer no service while alienating your current, more trustworthy, suppliers
  • GPOs: can aggregate volumes and lower prices, but then you are dependent on them, and paying their markup … forever

None of these is the long term answer.

When we first started discussing cost reduction two decades ago, the key methods we focussed on were:

  • strategic supplier relationships and customer of choice: so that they put the effort into being your supplier of choice and finding their own ways to keep costs down (streamlined operations, better raw material sourcing, etc.)
  • supplier investment and development: if the supplier is smaller, or not as advanced, they’ll only do so much on their own, so your efforts to invest, improve, and guide them (through early payments, low-cost new line financing, etc.) could greatly lower your costs over a multi-year engagement
  • strategic sourcing decision optimization: where you did a multi-objective optimization that took all of the cost factors (unit, transportation, warranty, service, waste etc.) into account as well as risk (that could cause “savings” to evaporate over night) and quantitative assessments of other key factors

And those are all good techniques in (semi) normal times. But these are not (semi) normal times. These are almost unprecedented times. Between natural disasters, geo-political conflicts and wars, and terrorism, we are dealing with unprecedented simultaneous reductions and closures of major maritime shipping lanes (the Panama Canal, the Red Sea, the Strait of Hormuz), unstable (and rapidly escalating) fuel costs, regular supplier and carrier failures, unpredictable crop and raw material availability, etc. all at the same time. Old friends becoming foes, or at least frenemies; friend-shoring, near-shoring, and home-shoring finally gaining ground (despite being promoted and the right answer for decades); and supply chains being swapped whenever possible.

We’re in times where these techniques, while still good, can’t always address all of the situations. Plus, if you’re constantly adapting to what’s available now, versus focussing on what you should be building, you’ll be in a constant, unstable, state of affairs, caught off guard with every flux, and constantly on the brink of ruin.

You need to stop working sourcing event to sourcing event, procurement to procurement, and disruption to disruption and start working on transforming your supply chain to a more resilient long term supply chain. This will require identifying which safe countries and regions (likely to have long term geo-political and trade stability with your home and/or destination countries) you should be doing business with, where solid supply bases could be, and how you could construct a real supply chain from the source countries to the destination countries that don’t depend on unstable source points.

Then you have to engage the carriers, find partners to help you manage the export and import requirements and take advantage of FTZs (free trade zones), build or acquire intermediate warehouses and cross-docks, and be ready for trade with the local suppliers. Those will typically include multiple suppliers you are not currently working with, and they may need to upgrade their production lines, operations, services, etc. to serve you to your level of expectation. This will incur costs that your suppliers and partners will need to incur, which will need to be passed onto you. Which means, in the short-to-mid-term, your costs will increase. But if you design the right, stable, supply chain networks that you can use for years (or decades), develop the right suppliers, and maintain volumes, as operations improve, up-front costs get amortized, and economies of scale get optimized, costs will go down, and with long-term agreements, over multiple years, your company will see previously unrealized savings while your peers see their costs go through the roof.

So if you want to save money, you better be prepared to spend.

RFP Fantasy

You can thank Joël Collin-Demers and his “magical end state” fantasy for this one!

To the tune of Rock And Roll Fantasy.

Here come the jesters, one, two, three
They’re all party to my RFP
I love the process and I love to woo the crowd
Promising the volumes with a reality shroud, yeah, yeah

Here come the vendors one by one
Your boss’ callin’ but you’re having fun
You find you’re swayin’ to the number 3 pitch
Ignore the risk assessor and make a product switch

It’s all part of your RFP fantasy, yeah
It’s all part of your RFP dream, yeah

It’s all part of your RFP fantasy
It’s all part of your RFP dream, yeah

Focus the spotlights, no one spared
Then comes the bidding, until prices pared
The reps desperate, you can hear them beg
Don’t want to pay much for a big goose egg

It’s all part of your RFP fantasy, yeah
It’s all part of your RFP dream, yeah

It’s all part of your RFP fantasy
It’s all part of your RFP dream, yeah

Fantasy!

Never forget that, in Procurement, you’re always in Bad Company.

Cutting Edge Tech Is NOT Defined by the C-Suite, …

… Financiers, or the Marketers pushing hype (from the A.S.S.H.O.L.E.) at you 24/7.

Nor is it defined by the algorithms it uses, the software stacks it runs on, or the hardware stacks it makes use of.

Cutting edge tech is ANY and ALL tech that

  • solves one or more significant problems that not being solved by your tech today and
  • does it by automating at least 90% of the tactical data processes that can be automated

It can be based on the latest AI algorithm or twenty year old RPA. It doesn’t matter if it shines a light using a LAMP stack, if it is an edgy MEAN stack, an Austin Powers inspired Grails stack, or even a .NET stack (though the doctor personally shuddered typing those last three caps out). The entire point of enterprise software is to solve your problems.

The point of software is NOT to provide

  • an excuse for a C-Suite to cut his tech-bro buddy a fat check,
  • a new Tulip Market for greedy financiers who think they can score big and get out before the crash, or
  • marketers a platform to pump out pompous poop on a daily basis.

As Mr. Koray Köse penned in a recent piece on LinkedIn on how you are in need of cutting edge technology, the last thing you want to do is take your direction from the VC-pumped C-Levels who do nothing but repeat the marketing garbage they are fed, sometimes changing the baseline of the garbage mid-sentence!

You have to remember:

  • All the VCs and most of the PEs want to create the next unicorn and get rich quick overnight. So most of these VCs and PE firms are pumping huge amounts into companies with little to no product (to support their grand vision that even SAP and Oracle haven’t managed to achieve after 5 decades and trillions of dollars) and directing the majority of that to be spent on buzz-creating sales and marketing (and not real product development). After all, you don’t actually have to create anything beyond buzz to get rich — market crashes throughout history have proven that since Tulip Mania. (What was created there of value? Nothing. But hype made a few men rich and many men poor.)
  • Even though today’s LLMs are dumber than a doorknob (and demonstrate more than any previous generation of the tech that AI should stand for Artificial Idiocy), with performance degrading every iteration (because there is no more data to steal, and the AI engines are now training each other on regurgitated digital garbage), marketers are still taking storytelling to a whole new level (and we mean storytelling because ALL the claims are fake) with a spin that even the Spin Doctors of old would be envious of. (Little Miss Can’t Be Wrong now, right? They want to Make You A Believer so you hand over all your Money when you should Exit … Stage Left and Run To The Hills!)
  • This copy is being pushed onto the C-Suites of all of the other investments in their portfolio with assurances that it’s all true, and being similarly echoed to all of the CXOs that attend the conferences they speak at, the golf outings they are invited to, and the exclusive social gatherings they arrange.

Not one of these groups knows what you need, and two of these groups have absolutely no interest in giving it to you — their interest is all about getting your money, building the hype, inflating the value, and, hopefully, cashing out big before the next hype cycle and/or the inevitable market crash that’s coming.

The technology you need is the technology that is:

  • built with real world problems in mind,
  • tested on real world problems in real companies and proven to deliver, and
  • scalable and extendable to your operations and needs.

This type of tech is built over years and doesn’t use unreliable probabilistic AI at the core. (It runs on traditional, configurable, RPA that is 100% reliable and auditable. Now, this tech might employe AI to help with the configuration by analyzing your systems and processes and self-assessed gap analysis by recommending configurations for you to approve, and that’s okay, because it’s not randomly making decisions, its recommending options and letting you confirm or deny. It might also use SLMs for specific problems where they work a high percentage of the time to jump-start searches, documents, and processes for you, and as long as you retain full control and can accept, modify, or reject, that’s okay too. But everything is built on a solid core, with 100% dependable automation for all key data intake, processing, and pushes that is done without any manual intervention, appropriately calibrated to your business rules, processes, and goals.)

It’s also built slow, rolled out to a small group of beta customers or development partners, and hardened in the field before being rolled out en masse.

And, most importantly, it’s built by a company that is boot-strapped or frugally running on a shoe-string budget from minority SEED investors to get that first version up-and-running successfully in its first 10 customers before that company goes for any VC funding to scale up. A company that has the time to get it right before being under constant pressure to make demanding, if not impossible, sales targets.

Moreover, to have any chance of getting this software, you need to know three things:

  1. how to identify what you need that will form the heart and soul of the RFX,
  2. how to write a good technology RFX and analyze the responses, and
  3. how to identify the right companies to invite to the RFX.

What You Need

For Supply Chain, as Mr. Koray Köse points out, if you need help identifying your true needs and cutting through the noise, he can help you out with that with the eyes of a hawk, the skill of a surgeon, and the wit of a Williams (a Robin Williams). For Procurement, Joël Collin-Demers can slice through your organizational landscape like a hot knife through butter and let you know exactly what you need in priority order.

The Technology RFP

Every consultancy and their mascot claims they can help you here, but you need to be very, very careful.

  • many of their consultants are not technology experts and tend to prioritize features over functions, as that’s all they know
  • many of these firms have partnerships with the (mega) suite players, and you don’t maintain sycophant, sorry, Gold/Platinum/Diamond, status unless you direct a LOT of business their way each year, so they tend to try to fit everyone into one of these buckets
  • many follow the old consulting model of “give the client exactly what he thinks he wants” and don’t take the time to figure out what you actually need and educate you, leading to an RFP that is no better than what you would have written yourself, as they spend half their time questioning you, and the other half writing down your responses

For true success, you need someone who is simultaneously:

  • an expert in the domain,
  • an expert in technology, and
  • not incentivized to help any vendor whatsoever and, preferably
  • an expert in project assurance (but not always necessary)

If you need help writing that ProcureTech / Direct Sourcing/Supply Chain RFP, feel free to reach out. This is my expertise. And for some tips, feel free to start with our recent series on How Do You Write A Good RFP?

Vendor Selection

Very few analysts and consultants know more than a handful of vendors. The big firms focus on the big vendors who cut big cheques, which are the 20-ish same vendors you see in their maps year after year after year. They don’t know about the other 700. Only a few of us independent analysts go far and wide and actually know what is out there and how it can help you.

For ProcureTech, SI should be your first stop. It’s the site that gave you the mega map to open your eyes as to just how wide the playing field is. Moreover, if you need something really niche where the doctor doesn’t have the expertise, he’ll find the right expert to refer you to.

For SupplyChain, Mr. Köse knows a lot of the players. But don’t overlook Bob Ferrari of The Ferrari Group. As one of the original supply chain analysts, he knows all the players and what their platforms can and can’t do inside and out.

And if you reach out to the right experts and get the right help, maybe you can get true cutting edge tech that actually helps you!

How Do You Write A Good RFP? Part V: Software

As per the many series we have written on this over the years, this is often the hardest RFP to write, because it’s really hard to specify what you need when you don’t understand software, what’s on the market, what it can do, and when it can’t. Especially when you’re inundated daily with marketing about why you need SoftwareSpectacle Version Seven with the latest and greatest self-sealing AI technology to solve all of your function X business processing needs. And then vendor Y comes along with Binary BitBlaster Release Bravo with the new and improved board-based AI-backed BI technology that will do even better!

As we’ve said again and again in our many series on technology selection and RFPs, which include:

Unless you are a tech expert, you can’t truly know what you want. We’re at the point that even most analysts, especially those who work at the big firms and who need to spend at least half of their time on client advisory to justify their positions, don’t even know half of what’s out there (as evidenced by the maps they publish year after year with the same 20-ish vendors when, in some areas, there are over 100 providers, as can be attested by the Source-to-Pay Mega Map).

As with services, the only way to get close to what you want is to focus on specifying what the software has to do, who it has to do it for, what outputs are required, what systems it needs to integrate with, where it fits in the ecosystem, and how the affected individuals are expecting it to make their job better. The vendors really need to define the specifics of how the software will accomplish its tasks and how they will deliver it to do that.

Keep that it mind, along with the best practices we outlined in Part I, and you’re well on your way to writing a good Tech RFP, as long as you steer clear of the “Free RFPs” (as there is no such thing as a FREE RFP). For more best practice advice and insight, see the prior series.

This concludes our initial series on how do you write a good RFP. Hopefully you found it useful.