With technology constantly changing the game field, businesses are increasingly turning away from traditional solutions in favour of new innovations. As such, the procurement process is rapidly changing, and the conventional RFP process is now being overthrown by many businesses in favour of a collaborative bidding process – often referred to as ‘request for solutions’ (RFS). But what does this mean for suppliers? And what are the pros and cons of a collaborative approach to tenders? Read on to find out.
In today’s constantly evolving business environment, the ability to keep up with innovation across all aspects of an organisation is near-on impossible. Because of this, businesses are often unaware of the available solutions, making requests for proposals somewhat obsolete.
Further to this, technology and globalisation has also increased the amount of competition between organisations within many industries, with organisations having to work harder than ever to offset the threat of new entrants to the marketplace, whilst also maintaining competitivity against existing competitors. One such way of increasing competitive advantage is through technology. As such, businesses are constantly on the lookout for new solutions to set them ahead of competitors.
The implication of this, is that businesses are now looking for amore collaborative approach to sourcing solutions. In traditional RFPs, the process is linear, with businesses setting a brief for their required service(s) or product(s) and in return, suppliers then submit bids for the contract. Now, with requests for solutions, organisations are paving the way for a collaborative process, with an open dialogue between themselves and suppliers, as well as a line of communication between suppliers.
The main issue with RFPs in today’s environment – where businesses are striving for more innovation – is the rigidity of RFP briefs, with many procurement specialists now claiming that RFPs stifle creativity. In RFPs, the requirements, timeframe, and budget are prescriptive, allowing little room for suppliers to offer alternative solutions which may fall outside of the brief specifics.
On the contrary, an RFS welcomes creative thought and gives businesses the best opportunity to embrace transformative solutions. RFSs also allow organisations to serve the brief to a much more diverse pool of potential suppliers, which in turn increases that chances of receiving more unique and interesting solutions that the buyer may otherwise never have considered.
The collaborative nature of RFSs also brings about further benefits to organisations through simplifying the procurement process when organisations are looking for multiple solutions or more complex outsourcing requirements. Often, these can be stitched together into a single hybrid solution provided by a single, or multiple collaborative supplier(s). As such RFSs can also be a useful mechanism in establishing collaborative relationships between prospective suppliers which will improve communication and efficiency between parties further down the line.
Further to this, RFSs can also offer buyers cost benefits, with a survey by the ISG revealing that bid prices are typically at least 10 percent higher when responding tocomplex RFPs, rather than RFSs. This is likely owing to the prescriptive nature of RFPs, with budgets being set potentially beyond what is necessary for the solution.
Whilst the RFS model offers a myriad of potential benefits for organisations, it also comes with its own unique challenges.
First, clients will need to re-consider their existing approach to reviewing tenders. The RFP process is designed to generate bids from suppliers that can be compared on a like-for-like basis, often assessed quantitively against a set criterion (often MEAT). However, RFSs will likely bring in a huge diversity of solutions that cannot be assessed in the same manner. Instead, organisations will have to adopt a more qualitative approach to reviewing bids, perhaps considering other factors such as the potential ‘cultural fit’ of each supplier or potentiality for each proposed solution to grow with the company long-term.
RFSs can also raise questions around standard pricing and perceived value for the buyer. Unlike known solutions with standardised price ranges and expectations on ROI, innovative solutions proposed by RFS bids can require buyers to take a leap of faith and trust supplier pricing, with little-to-no ability to compare proposed costs against like-for-like services.Ultimately, buyers must look to adopt a more flexible approach when dealing with suppliers from an RFS and must dedicate more time to contract-governance and reporting to assess the impact and value of the provided solution.
Requests for solutions may well be an increasingly used method of sourcing – and certainly one which offers many potential benefits for businesses to increase market competitivity and simplify complex sourcing requirements. Nonetheless, there is still a place for requests for proposals within procurement. Not all business activities require innovative solutions and in instances where traditional solutions are preferred, then RFPs should still be the preferred sourcing method, allowing for an easy comparison of costs and services between suppliers.
At Athena Commercial, we have nearly a decade of experience guiding both buyers and suppliers through the bidding process, helping you to align your organisational goals with the marketplace.
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