This is a reprise of a series that first ran in 2012. It’s as relevant, and important, today as it was then.

Today we continue our series on best-practice vendor selection for your enterprise e-Procurement, e-Sourcing, or Supplier Relationship / Third Party management solution. As per yesterday’s post, this series specifically relates to the selection of technology(-based) vendors for your enterprise software needs, and Supply Management solutions in particular.

In yesterday’s post we reviewed the traditional RFX process outlined at a high-level in the e-RFx for Total Value Management wiki-paper over seven years ago, which is still more-or-less correct, and then reviewed how this process is typically interpreted, which is where the problems begin, especially where multi-nationals are concerned. We noted that there are three big problems with the standard interpretation of the process, which occur in the first part of the RFI process. In particular, we noted that most supply management project managers ask for the wrong information when they:

• ask stakeholders for product/service requirements
• ask stakeholders for preferred vendor recommendations
• ask vendors for capability information and self-assessment

This last request in particular is especially futile as the last thing a vendor who wants your business is going to do is say that they can’t meet your request, even if their chances of success are dismal. You need to start by verifying that the vendor has the potential to serve you, independent of the vendor’s response or self-assessment. To do this, you need to start the process where an average organization ends it. In particular,

Start with the Reference Interviews

Too many organizations do this:

• Collateral-Driven Vendor Identification
• Request for intent to bid
• Request for proposal and quote
• Shortlist
• Negotiations
• Final List
• Reference Interviews

By the time a typical large organization gets to the reference interviews, it’s too late. Months have been spent on the project, which needs to be wrapped up shortly. As a result, the buyer gets stuck with one of the finalists, even if none of the finalists end up being good solutions for the organization.

If you’re a multi-national organization, you have to start with the reference interviews. If you’re a small company, only do business in one or two countries, and only conduct official business in English (and all your international suppliers are Chinese with english-speaking reps), then it doesn’t matter because just about every vendor can serve you. But if you’re a multi-national that:

• has offices in over twenty countries,
• conducts official business in seven languages (English, French, Spanish, Italian, German, Russian, Portuguese, for e.g.),
• has suppliers that speak six more languages (Mandarin, Cantonese, Vietnamese, Thai, Korean, and Japanese, for e.g.),
• and has to support customers in over forty countries

then not every vendor in the supply management technology solution space is going to be able to support you. In fact, despite the plethora of companies in this space even after the last two rounds of M&A frenzy, the number of pure-play best-of-breed companies that will be able to support your global e-Procurement, e-Sourcing, or Supplier Relationship / Third Party management initiative is likely countable on your fingers, thumbs optional.

And the only way you can have any assurance that a vendor is going to be able to support such an initiative is to start with reference interviews with customers who are similar in size, scope, and needs. (Note that this does not mean they have to be in the same vertical as you. As long as they are about the same size, do business in about the same number of countries, require multi-language support, need a cross-section of similar direct and indirect category support, etc., that’s good enough to start. If the company you are looking at is you’re direct competitor’s best kept secret, they are certainly not going to tell you that.)

While this doesn’t mean that the vendor has to have offices in each country that you are in, support every language that you need supported, and have a success story for each of the forty countries you are selling into, it does mean that the vendor needs to have a global presence, should support at least a dozen languages (that meet a majority of your language requirements) with a track record of being able to add new languages quickly, and should be in dozens of countries with a history of successful roll-out initiatives to new countries.

In other words, unless you have been convinced beyond a reasonable doubt that the vendor can support your organizational needs, they shouldn’t even get a detailed RFI. Because it’s not about who can survive the funnel, it’s about who deserves to even be in the funnel. And that’s a very simple determination, as we’ll discuss in the next post.

This is a reprise of a series that first ran in 2012. It’s as relevant, and important, today as it was then.

It’s that time of year again. Your budget has finally been approved — a month late — and you’re ready to begin the process of obtaining that e-Sourcing, e-Procurement, Source-to-Contract (S2C), Procure-to-Pay (P2P), Source-to-Settle (S2S), Source-to-Pay (S2P), Supplier Information Management (SIM), Supplier Relationship Management (SRM), or Third Party Management (3PM) that you’ve been dreaming of. You think you know what you want, but you have to go through an RFP and, more importantly, you know that you’ve only had time to look at a few options while building the business case as you were doing it evenings and weekends on your own time because the project wasn’t approved. Now you want to go to market and either verify that you’ve identified the best solution or find the best solution to meet your needs. Since you are a sourcing organization, that process demands an RFP. However, this RFP is not like your RFP for direct materials or indirect spend. This is a very specific technology solution RFP for a platform to meet your needs and support all of the other RFP / sourcing / procurement / supply management processes of the organization. It’s crucial to get it right.

That’s what we are going to discuss in this series — the proper process and approach to acquiring the right e-Sourcing / e-Procurement / S2C / P2P / S2S / S2P / SIM / SRM &/| 3PM solution for your needs. Furthermore, let us clearly state that this series is specific to the selection of technology and technology-based vendors to provide enterprise software platforms, and/or implementation services, back-office (processing) functions, or technology-driven consulting services for your multi-national organization. While some of the best practices contained herein should also apply to the selection of (strategic) suppliers for high-value and/or complex products and/or services, this series particularly relates to the selection of a vendor to provide an enterprise software backbone, and, in particular, a backbone for e-Procurement and/or e-Sourcing technology for your Supply Management organization. As one size does not fit all where RFX and category selection processes are concerned, no claims, express or implied, are made with respect to any other vendor selection process and, in fact, if you’re only buying paper and pencils, some of the best practices contained herein will, in all likelihood, be overkill.

Now that the preamble is out of the way, let us begin by noting that the traditional RFX processed is well understood, and well documented in many places, including in the e-RFx for Total Value Management wiki-paper, co-authored by the doctor over on the e-Sourcing Wiki over seven years ago. And, in the wiki-paper in particular, the high-level process is still more-or-less correct.

As per the wiki-paper, you start with a three-stage RFI before an RFP, which is solution focussed (and not cost or contract focussed), which is issued before a final RFQ, which is when you collect quotes and start the actual selection / negotiation process. Specifically, the high-level process is:

1. RFI #1: Stakeholder Requirements
2. RFI #2: Vendor Interest
3. RFI #3: Vendor Pre-Qualification
4.    RFP: Solution Inquiry
5.    RFQ: Clearly-Defined Specifications

So what are you doing wrong, especially if you’re a Multi-National? To answer that, let’s look at how this is typically translated:

1. Product Needs, Service Needs, Preferred Vendors
2. Vendor Info. Request, Vendor Interest, NDA
3. Product & Service Capability Profiles
4. Solution Design Request
5. Explicit requirements, process definition, and bid request

See the problems?

1. Stakeholders typically don’t know what they need in a solution. They aren’t technology experts. They aren’t supply management experts. They are domain experts. It doesn’t matter what they think they need in a product or a service, it matters what problems they are having today. You need to ask them what problems they need to solve, so that you can ultimately select a vendor with the solution that solves as many of your stakeholder’s pain points as possible.
2. A preferred vendor is one that can offer you the best product or service from an organizational perspective, not a single stakeholder’s perspective. For example, a stakeholder might rate a vendor A+ because the representatives always responds quickly. But this is not necessarily indicative of great service. If the answer is always “we’ll send someone to fix that with 72 hours”, and you need the machine up 80% of the time, that’s still poor service if the machine breaks down regularly because 3 days downtime every few weeks will not support an operation level of 80%.
3. Asking a vendor if they can provide you with the necessary functionality or service levels after you have shortlisted them as a possibility based upon a review of their collateral is not likely to get you anything other than a “yes we can”, especially if the vendor also offers consulting or “value added services”. One has to remember that most (big) consulting (and value-add) organizations are driven by partners with a strong desire for as many dollars as possible and the reps are told to always say yes and take on as much work as possible, leaving the question of how to get it done (if the organization is already stretched or weak in that area) until after the ink is dry.

Which brings us to the biggest problems with the current selection process, which we will discuss in Part II.