Tag: Vendor Management

Fair and open competition is fundamental to public procurement. However, from a vendor’s perspective, public sector bids and RFPs can seem anything but open, thanks to the complex rules and cumbersome submission processes.  

The reality is that many organizations are inadvertently excluding vendors from their opportunities: not through any policy violation or compliance issues, but simply due to the difficulty and hassle of doing business with the organization.

There are many barriers for vendors in public procurement. It starts with the challenge of finding open opportunities in the first place and continues throughout the submission process: interpreting legalese-filled forms, spending hours by the photocopier collating copies, paying for costly shipping, and facing disqualification for postage delays or other wild cards. At the end of the day, many qualified suppliers decide that it’s simply not worth it.

Uncompetitive RFP projects on the rise

Unfortunately, research shows that this problem is worsening rather than improving. The State of the RFP Benchmarking Study, which looked at RFP processes in 190 organizations in North America, found that in 2017, 16% of projects received only one submission. This is a 3% increase from the previous year. Furthermore, 38% of projects received only two submissions, a 5% increase from previous years.

Other studies that included both bids and RFPs have reported even higher numbers, with one study showing that 25% of tenders received only one bid.

A lack of competition signals that your processes are not truly as open and transparent as they should be, but that’s not all — it also seriously impedes your ability to ensure best value.

The price of poor competition in your RFPs

Economists show that the number of bidders in a procurement influences the relative difference between expected price and award price, confirming what most procurement professional already know: more competition equals better prices.

In a typical fixed scope, price-only procurement, one additional bid can result in 3% cost savings. For a more open-ended type of project with defined outcomes but flexible scope, that can be much higher at 8% or more.

For public sector teams under pressure to maximize funding and reduce costs, accepting the status quo of two or three vendors per project is no longer feasible.

How eProcurement software helps improve RFP competitiveness

1. Reach more vendors.

To increase competition, you need to get your opportunities in front of more vendors. Newspaper advertisements and Excel-based vendor lists are a limited and outdated way of reaching vendors in today’s connected world. Clients using Bonfire eProcurement platform have reported a 5x increase in the size of their vendor database. Here’s why:

• Online advertisement and submission makes it easier for vendors all over the country to find and submit to opportunities, removing geographic limitations.
• Buyers can tap into a large pre-existing network of vendors who do work for hundreds of other public organizations.
• Buying teams can invite vendors by commodity code or location, notifying relevant vendors of your opportunities without any manual work.

2. Make it easy for vendors to participate.

Once vendors are aware of your opportunities, it’s up to procuring organizations to demystify the rules and regulations and remove barriers to participation, so vendors have every chance of succeeding.

Here’s how eProcurement software platforms help:

• One central location for vendors to find opportunities, register, and view all details and documents.
• In-platform Q&A and vendor communication so vendors can easily get answers to questions and stay abreast of all addenda or clarifications.
• Structured step-by-step submission to reduce error and ensure complete submissions.
• Online submission removes the cost and expense of printing and shipping, as well as risk of shipping errors, lost packages, etc.
• Instant confirmation of bid receipt, for peace of mind.

3. Visibility into your vendor community through up-to-date records.

Keeping up-to-date vendor lists is a constant struggle for procurement teams, made even more difficult when you’re doing it with paper forms or email and Excel. However, without clear visibility into your vendor community, it’s impossible to know where to invest vendor outreach or other growth initiatives.

eProcurement software provides:

• Easy online vendor registration with custom fields to collect and auto-expire vendor information.
• Visibility into vendor behaviour: how many vendors have viewed your opportunity, how many submit, what time they make their submission.   

Your ability to deliver best value to taxpayers depends on sufficient competition. See how Bonfire could help you get more vendors involved with your opportunities in a 20-minute demo webinar.

Anyone who has experienced the adrenaline rush of participating in an auction — whether in person or vicariously through popular shows like Storage Wars — knows that the rapid-fire competition and the promise of getting a good deal are hard to resist.

Reverse auctions provide that same thrill in public procurement with a twist — instead of participants increasing their bids over time to win a good/service, they try to outbid each other by decreasing their price incrementally to win the business of the procuring organization.

For a quick primer on reverse auctions in the public sector, see last week’s blog Demystifying Reverse Auctions in the Public Sector.

Reverse auctions can be a highly effective tool for public sector procurement teams to achieve best market value and save time on lengthy negotiations. However, they are not widely used thanks in part to some pervasive myths.

Here, we take a look at the truth behind three common misconceptions:

Myth: Reverse auctions are a form of bid shopping.

There’s no question that bid-shopping is an unacceptable practice in the world of public procurement. However, the two are not the same.

Bid-shopping occurs when the buyer seeks out a lower price from a vendor by privately revealing another vendor’s price (without that vendor’s knowledge or consent). In contrast, reverse auctions give all vendors access to the same information at the same time. For that reason, reverse auctions are a fair and transparent practice (The Procurement Office).

The benefits of this transparency extend to vendors, too. Vendors report that reverse auctions provide an even playing field and take the guesswork out of pricing that often occurs in a traditional bidding process.

Myth: Reverse auctions favour larger vendors.

There’s a lingering concern that reverse auctions shut out smaller players. In fact, the research disproves this: in a survey of reverse auction activity at four agencies, the United States Government Accountability Office found that 86% of auctions awarded (valued at more than $22 million) went to small business (Government Accountability Office).

Reverse auctions make it easier for small businesses to compete due to the low barrier to entry and greatly reduced time investment. And when you consider that eBay has been around since 1995, concerns about vendors’ technical ability to participate in an online auction process are receding.  

Clear and proactive communication with all vendors, large and small, is a necessary prerequisite to a successful auction. Teams can take the following steps to assuage fears about vendor participation:

• Clearly communicate how the process will work, from posting to award, and the logistics of participation;
• Choose a simple and easy-to-use reverse auction software platform;
• Consider holding a practice event to ensure vendors are comfortable with the software;
• Answer questions to minimize the unknowns; and
• Be available during the auction by direct phone and email, in order to address any questions as they come up (NASPO).

Myth: Reverse auctions are an unsustainable practice for cost-cutting.

Another pervasive misperception is that reverse auctions yield unsustainably low prices, resulting in a short-term gain that backfires in the long run. However, both private and public sector reverse auction activity shows significant time and cost savings over successive years.

Massive cost savings, such as this school board’s 64% savings on their hamburger patties contract, are certainly possible with reverse auctions in their first use, as you can expect a large margin to be cut off the purchase price. In subsequent uses, you cannot expect the same magnitude of decreases, or your vendors would soon be out of business. Nevertheless, if used judiciously, competitive bidding through reverse auctions ensures that buyers get the best possible price at that moment through real-time market pricing (Reverse Auction Research Centre).

Reverse auctions are a proven tactic for procurement in the long-term — not as a golden ticket, but as a complement to your overarching procurement strategy.

Ready to learn more about reverse auctions?

Join our upcoming webinar Demystifying Reverse Auctions in Higher Education Procurement on February 21 to learn more about the process and methodology of reverse auctions in the public sector, including:

• Strategies for integrating reverse auctions in your procurement process, from commodity bids to more complex RFPs;
• Tips for getting started with reverse auctions; and
• Real-life examples of successful reverse auction projects.

Once the difficult work of sourcing a supplier is completed, where does your contract go?

For all too many teams, it’s into a filing cabinet or a locally-stored spreadsheet, out of sight and out of mind. Without clear visibility over your active contracts, it’s difficult to keep on top of milestones and ensure contractual obligations are being met — let alone monitor performance or build vendor relationships.

Contract management is a key piece of the procurement puzzle. Here are three examples of how a proactive contract management process can benefit your organization.

Manage contract costs and changes

American City and County reports that the majority of contracted projects end up with schedule delays and cost overruns. A certain amount of change is to be expected — in fact, a study from National Association of State Procurement Officials indicates that a 20% increase in contracts is considered typical.  Nevertheless, it’s imperative for teams to be able to effectively track their contracts in order to ensure contractual agreements are being fulfilled and delays or changes are kept to a minimum.

Columnist Darin Matthews, director of procurement for University of California Santa Cruz, advises, “Stay involved with your contracts, even after award. Make sure you are not the last one to know about any changes or increases.”

In terms of metrics, he recommends tracking the awarded contract value vs. the final contract value, in order to be able to demonstrate the value your team is bringing to the organization.

Consolidate contracts for greater impact

With clear visibility into their contracts, public officials are able to proactively identify areas of overlap or inefficiency and maximize the impact of taxpayer dollars.

A good example of this in action is Seattle’s recent reform of their process for contracting homelessness services, as reported in Governing Magazine. The city worked with Government Performance Lab to drastically reform their contracting process for homelessness services, and the first step was consolidation of existing contracts.

Before embarking on this process, the city had more than 200 separate contracts with 60 providers for homelessness services — one provider had 18 separate contracts. Not only was this fragmented for the city, the lack of funding flexibility was an obstacle to service providers in efficiently supporting the needs of the populations they were trying to serve.

They consolidated 26 contracts held by five providers into eight contracts, offering more flexibility to providers and better value. This was an important step in kicking off a process of contracting reform, which included establishing performance metrics and instituting a results-oriented approach to their contract management.

Use data to promote better contract outcomes

With contract management streamlined, teams are able to more effectively use data to collect and improve delivery of their contracted services. This includes not only troubleshooting immediate concerns to keep contracts on track, but also working with contractors to share performance information and continuously improve performance.

As described in this Governing article, the contract management approach that works for some contracts are counterproductive in other types of contracts. For example social services contracts require a more active and continuous approach to move beyond simply checking compliance to be able to continually progress towards outcomes established for the target population.

Once contracts are centralized and the administrative steps streamlined, teams are able to adopt a more strategic approach to their contract management, such as performance-based contracting or results-driven contracting.

Learn more about how Bonfire’s Contract and Performance Management solution helps you stay on top of your active spend.

In a world where technology has continued to improve the way we communicate and gather feedback, why shouldn’t your vendor performance management be as simple and easy?

In brick-and-mortar businesses, wooden suggestion boxes have been replaced by online reviews or kiosks where customers can hit a ‘smiley-face’ button to signal their satisfaction. Businesses can solicit feedback from customers in a way that is convenient and simple for the customer (leading to better response rates) and prompted in the moment when their experience is top-of-mind (leading to more accurate responses). Rather than gathering dust in a box, feedback is collected in real-time, so managers can observe changes and intervene to correct negative trends.

This same approach can take your vendor performance management efforts from a bureaucratic check-box, to a source of valuable insight into contract health and performance trends. 

The case for more user-friendly vendor performance feedback methods

Vendor performance is just as important to procurement teams as customer experience is to restaurants: it can cost time, money, and internal client satisfaction.

However, many procurement teams simply don’t have the bandwidth to collect feedback on vendor performance—and if they do, the standard approach and tools can look suspiciously like the customer suggestion box: long, complicated surveys with low response rates, sent out manually and infrequently.

To be proactive and stay on top of their suppliers’ performance, procurement leaders need to have a finger on the pulse of their supplier poll. This requires a constant stream of data and information so you can determine trends and insights at a glance.

Technology can help you streamline and simplify your vendor performance management activities. Here are some of the reasons you need to evaluate the way you conduct your process:

• Getting to actionable conclusions faster. Vendor Performance Management solutions take care of the manual parts of soliciting vendor performance feedback (creating and sending surveys, collecting and aggregating responses), so procurement teams can maintain an up-to-date picture of their vendor performance without the tedious and time-consuming work.
• Intervening with performance issues before they become a problem. Frequent feedback gives procurement teams more visibility into the progression of contracts, allowing teams to zero in on performance issues before they impact the organization.
• No more pulling teeth to get survey responses. As many teams have learned from experience, getting contract owners to fill out vendor performance surveys can be a headache. Modern survey methods meet stakeholders where they already are—and in today’s world, that means mobile devices—and reap the rewards in their response rates.

See how Bonfire Vendor Performance Management helps you drive continuous improvement in your vendor relationships.

For busy procurement teams, benchmarking your RFP process is often the lowest item on the to-do list. With many teams facing growing project volumes and limited resources, it’s easy to see why.

When it comes to tracking your team’s performance, you don’t need spreadsheets of data to sort through. Instead, you need actionable insights that help you get your job done better and faster.

To help, we’ve pulled three key RFP benchmarks that you can start tracking against today, to improve your sourcing function tomorrow. To put these in perspectives, we’ve included relevant industry benchmarks from the State of the RFP, the most comprehensive RFP study ever conducted. Compiled from 6,600 RFP projects conducted through the Bonfire Strategic Sourcing Platform, this data gives you a unique window into how RFP spending decisions are conducted at 190 organizations across North America.

Use these as a starting point for smart, practical benchmarking that leads to better purchasing performance.

1) RFP Process Duration

When someone in your organization comes to you with a sourcing request, are you able to accurately forecast how long the procurement process might take?

Many teams have an anecdotal knowledge of how long certain types of projects take, but have not put in place a process to regularly track and review their RFP cycle times.

Why you should track this:

• Provide end users with an accurate assessment of how long it will take to procure their good/service, for better customer service and organizational planning.
• Track and identify patterns in project progress, for visibility into common bottlenecks and areas of improvement.
• More accurately allocate staffing resources to projects.

Industry benchmark:
According to the State of the RFP data, the average RFP process takes 56 days.

2) Vendor reach

Reaching a wide community of vendors is key to the success of a project, not only from a transparency standpoint by also a project competitiveness standpoint.

With most procurement teams using some form of electronic posting and submission, most teams have greater visibility into how many vendors are viewing their opportunities and how many go on to submit.

Why you should track this:

• More accurately predict and plan for the number of vendor submissions you can expect to receive.
• Ensure projects are sufficiently competitive and identify which types of projects are not reaching a wide community.
• Determine need and measure success of vendor outreach (e.g. reverse trade shows).

Industry benchmark:
The State of the RFP study finds that 33% of vendors who register to view project details go on to submit to the RFP opportunity.

The average project receives 4 vendor submissions.

3) Vendor Disqualification Rates

Disqualifications are a negative outcome for both vendors and procurement professionals, but there are a variety of reasons that they might occur. These include failure to provide a piece of mandatory qualifications, not meeting necessary certifications, conflicts of interest, or other factors. Tracking your disqualification rate helps you to gain visibility into why this might be happening.

Why you should track this:

• Identify recurring issues or patterns in the types of projects or proposals in which disqualifications are more frequent.
• Modify your submission process to decrease the incidence of disqualifications (e.g. teams have found that separating the proposal into several pieces of content rather than requiring all information in a single PDF reduces the incidence of incomplete responses).
• Identify the need for further vendor outreach or training to ensure vendors understand the process and avoid future disqualifications.

Industry benchmark:
According to the State of the RFP study, 11% of vendor proposals are disqualified. This has decreased slightly from 2015, when the disqualification rate was 17%.  

More RFP Insights

While far from an exhaustive list, these RFP benchmarks are an actionable place to start with tracking your own procurement performance.
For more RFP process benchmarks and best practices, view the State of the RFP Benchmarking Webinar On-Demand, with insights from:

• Omar Salaymeh, Director of Client Success at Bonfire; and
• Diane Horvath, Manager, Procurement Fairness and Advisory Services, BDO.  

For public procurement teams, strong stakeholder relationships are not a nice-to-have or an afterthought. They are at the core of your ability to drive value for your organization. In fact, in Deloitte’s 2018 CPO Survey, public sector procurement leaders identified ‘internal client satisfaction’ as a priority of equal importance to supplier performance.

With this in mind, the best eProcurement platforms go beyond unlocking efficiency for the procurement team; they also deliver enhancements to your stakeholder relationships internally and externally.

This was a key theme that emerged from our webinar discussion The Challenges of Supplier Selection in Transit Sourcing, with special guest Michael Brinton, Principal, Contracts Manager at the Metropolitan Transportation Commission.

Facing growing project volumes, his team implemented Bonfire’s eProcurement platform to bring their time-consuming paper and manual RFx process online. Their team realized significant efficiency gains (which were the subject of a Bonfire Case Study).

However, the impact of their successful implementation extends beyond efficiency. They have also seen improvements in the way that the procurement team is perceived by stakeholders within and outside the organization.

Laying the foundation for a strong business relationship

The procurement process is often the first interaction between an organization and a supplier, setting the tone for the business relationship to follow. When you think about it that way, it’s clear that the method through which you engage suppliers is an important first impression.

Michael Brinton and his team were well aware of the impact their former paper processes might have on the supplier community. Paper submissions present obstacles to suppliers, from the cost and inconvenience of printing and preparing paper copies, to the time required to deliver the bids before the dropbox closes.

But there was another risk to relying on a paper process.

“You want to be an attractive business partner for the consultant community,” explains Brinton. “If you’re still conducting your operations in a method that is 20 to 30 years old while the rest of the community is moving to mobile or cloud-based applications, you can make yourself a hurdle to do business with, because you’re dated.”

In their search for eProcurement software, Brinton and his team sought a platform that represented their organization the way they wanted to be perceived by suppliers: professional and modern. To ensure this, they not only considered the software’s functionality but also how it looked and felt from a user’s perspective.

The result has been “universal positive acceptance” from suppliers, according to Brinton. The seamless digital submission process offers convenience, clarity, and ease to bidding suppliers, setting a positive tone for the business relationship.

Developing trust internally

Every organization has tech enthusiasts, the early adopters who are the first to try out every new app on the market. On the other side of the spectrum are those who are resistant to change and skeptical of the value of technology.

It’s easy to get the first group excited about eProcurement, but much more difficult to sway the latter group. However, Brinton and his team have found that prioritizing an intuitive user experience in their eProcurement software selection has ensured that even the reluctant adopters are now big proponents of the system.

“Psychologically, both for our team and for the rest of the staff, it makes people feel good when they can use a tool that works the way it is supposed to, that looks good, has a good user interface, and that your business partners like.”

A modern eProcurement platform provides structure and simplicity for evaluators and other internal stakeholders, fostering a positive working relationship with procurement departments, and instilling trust and confidence in the agency’s procurement process.

Launching point for further innovation

The smooth adoption and tremendous efficiency improvements following MTC’s implementation of eProcurement software have given the procurement team the ability to pursue other forward-looking process improvements. For example, they have since introduced e-signatures and transitioned their public bid openings to video conferencing.

“Across the board, it has raised the status of our contracts group throughout the agency, and it has put us in the position to lead other efforts of electronic efficiency that are going to have an impact agency-wide.”

Now, the MTC procurement team is preparing to roll out a workflow system to completely eliminate all paper in their procurement and contracting process. They are frequently consulted by local agencies looking to launch similar initiatives at their own organizations. And it all started with the successful implementation of eProcurement, which opened the door for further ambitious projects.

As Brinton reflects, “Taking one small step towards change can really open the door to new things.”

When it comes to ‘free’ upgrades, ‘free’ vacations, or a ‘free’ gift of $5M from an international monarch, we recognize that if something seems too good to be true, it usually is.

However, in the case of free eProcurement software, many procurement professionals are accepting a ‘free’ platform at face value, without the critical lens they apply to other buying decisions. These platforms, in which vendors shoulder the cost of the software, may technically be free for buyers, but they come with high costs — to the competitiveness of your projects, the openness of your process, and the ability of your platform to keep pace with innovation. Last week’s announcement from the Government of Ontario on the elimination of fees for vendors to access contracts is a strong signal that the vendor-supported model, and its negative implications for procurement teams, is on the way out.

The elimination of vendor fees is part of the province’s mandate to make it easier for businesses to submit bids for government contracts, achieving what Minister of Government and Consumer Services Tracy McCharles calls “a modern procurement process that can work for every business.” This points to the first key problem with vendor-supported platforms: they make it more difficult for vendors to access opportunities.

Vendor-supported procurement tools pass the cost of the software onto vendors via fees to view documents, register for notifications, or submit to opportunities. These fees further disincentivize a process that can already be arduous and resource-intensive for vendors — especially small and medium-sized businesses without dedicated staff to prepare bids.

The inevitable result of making participation in your contracts both more expensive and more difficult? A smaller vendor pool, and reduced competition. When you consider that each additional supplier bidding on a given project results in a 5 – 20% greater pricing spread, the potential business cost of limiting competition quickly eclipses the price you might have paid for software in the first place.

Vendor fees also present barriers to open access to information, a concern which is becoming more and more central for public procurement teams in light of recent trade agreements, such as CFTA and CETA. Hiding project details behind a paywall is not consistent with the spirit of open access and a transparent process towards which so many teams are dedicated. Instead, procurement teams should be able to rely on software that prioritizes and facilitates transparency at every step.

Procurement teams also deserve an eProcurement platform that is built to suit their unique needs and evolves with the pace of technology advancement to provide more value. This is another area where vendor-supported models do not deliver. After all, procurement teams are not represented in the revenue structure of these companies, and as a result, there is a natural disconnect between the primary users of the platform, and those who are funding it. Procurement teams need a platform that is built for them, with their needs and feedback at the centre of each decision. In the long run, a platform designed first and foremost to serve procurement’s needs delivers time and cost-savings that far exceed the investment in the software.

Procurement professionals are experts at considering the whole picture when making a buying decision. But when it comes to software for their own team, many procurement leaders are allowing price to significantly outweigh the qualitative factors, an approach they’ve been discouraging for years.

Vendor-supported eProcurement platforms look good on paper. But when examined with a critical lens, it is clear that they come with very real costs, to procurement teams and also to taxpayers.

The good news is that procurement leaders around the world are recognizing this and adjusting their approach to procurement software decisions. The Government of Ontario’s announcement is emblematic of a broader movement away from the vendor-supported model towards software platforms that promote transparency, open competition, and innovation — the same values which public procurement teams are dedicated to upholding every single day.

Further reading: eBook | Vendor Fees & Sourcing Software in the Public Sector

Originally published on LinkedIn.

Technology has made it easier to gather feedback and assess performance in a variety of areas, from student learning to employee performance. This has impacted procurement teams as well, giving them more options than ever to collect feedback and manage their vendor relationships.

In a previous post, we made the case for gathering feedback more frequently to give you better visibility into your vendors’ performance throughout the contract lifecycle.

However, it’s what you do with that visibility that counts. The key benefit of frequent feedback is that it empowers a proactive approach to supplier management and ultimately strengthens your relationships with vendors.

So, how do you go from survey to satisfied stakeholders? To answer this, we dove into the research from a related field which has clear parallels to vendor relationship management: employee performance management.

Like vendors, employees are engaged in a long-term business relationship with an organization and are accountable to certain deliverables. Employee performance management—like vendor performance—is undergoing transformation, as more managers realize the benefits of informal, ongoing feedback as opposed to the formal, infrequent methods of the past (i.e. the dreaded annual performance review).

These insights from employee performance will help you leverage more frequent feedback for better vendor relationships:

1. Clarify expectations

Research on employee performance conducted by Jean Martin and Brian Kropp of corporate research firm CEB found that more frequent feedback can improve employee performance by up to 12% (Washington Post). The reason? They cited managers’ ability to clarify expectations as a key benefit.

In the relationship between a vendor and an organization, the contract establishes the terms of the relationship and specifies a standard of service — nevertheless, opportunities remain for miscommunication, especially given the pace of change in some industries.

Using frequent vendor performance surveys, procurement teams can catch these issues early and intervene to correct the mismatch in expectations and ultimately avert bigger performance issues before they arise.

2. Offer proactive rather than punitive performance management

Nobody likes giving bad feedback. However, there’s good news! Research from leadership development experts Zenger and Folkman suggests that people are more receptive to negative feedback than you might think.

Their research on employee performance concluded that employees actually want to receive negative feedback and believe it is effective in improving their performance. Ninety-two percent of respondents agreed with the assertion: “Negative (redirecting) feedback, if delivered appropriately, is effective at improving performance” (Harvard Business Review).

When it comes to procurement, vendor performance surveys are historically issued at the conclusion of a contract, at which point it’s too late for vendors to make improvements or repair the relationship.

This is a missed opportunity for everyone involved. More frequent feedback allows procurement teams to identify vendor performance issues, notify vendors, and proactively work towards improvements. Negative feedback can be the jumping-off point for conversations that ameliorate vendor performance issues, resulting in happier stakeholders and reduced risk for your organization.

3. Recognize and enhance good performance

Recognition for good work is a powerful force in building trust and improving performance. This has been shown time and again in employee performance. Studies show that 69% of employees would work harder if they felt their efforts were being better recognized, and 78% of employees said being recognized actively motivates them in their job (LinkedIn Talent Blog).

Thus, even if all your surveys come back with rave reviews, frequent feedback still has the potential to improve your vendor performance.

In addition to ensuring continued strong performance, recognition can be the first step in moving from transactional vendor relationships towards partnerships — with attendant benefits in risk mitigation, coordination, and ultimately your bottom line.

Learn more about Bonfire Vendor Performance Management.

The importance of supplier selection

Supplier selection is increasingly becoming the primary value driver in the procurement process: the success of your procurement cycle depends on the success of your procurement decisions.
It’s a process that requires great insight, analysis, and knowledge. But it’s not uncommon for procurement teams to have their attention split and for the focus on supplier selection to take a backseat.

Supplier selection has a big impact

It’s important not to lose focus on the value of supplier selection in the entire procurement process. It’s the key stage where you identify, evaluate, and select your suppliers.
Supplier selection is the stage where you decide what suppliers will get your business and ultimately determines how much risk you’re taking on. It determines the important questions that will influence the success or failure of your procurement process:

• Are we confident we’re selecting the optimal suppliers?
• Are we paying the best price for the good/service?
• Are we adding value (financially or strategically) to our organization?
• How much risk are we assuming when it comes to supplier quality and the service?

Reasons to keep a focus on supplier selection

The decisions made at the supplier selection stage will have an effect on the success of the entire procurement process.
Your supplier selection process needs to determine the best supplier efficiently and effectively with the most competitive prices. If you do not make the most optimal, timely decision, the rest of your procurement process may suffer.
Here are four reasons to ensure your supplier selection performance is an organization focus:

1. Enforcing poor buying decisions

A large part of many procurement cycles is the enforcement of supplier selection decisions, ensuring that organizational processes are followed and that spending is managed.
However, the tools and software you use to control the process can only enforce the decisions you make, regardless of how good or bad that decision might have been.
Poor buying decisions may lead to enforcing decisions with suppliers that aren’t cost-effective or lead to poor quality goods/services. An ERP or the typical eProcurement platform isn’t designed to help you make better, smarter decision. Without a focus on the process for selecting the best and optimal supplier, any benefit to the rest of procurement process is effectively nullified.

2. Dissatisfied stakeholders

If your supplier selection decisions are a poor match for the requirements of your organization or are in any way perceived to be less than optimal, stakeholders in your process will become dissatisfied.
In a world where organizations are increasingly looking to procurement to help achieve financial and strategic goals, dissatisfied stakeholders can have a major impact on your ability to deliver against those goals. This can range from stakeholders dragging their feet when it comes to their next procurement project, all the way to trying to avoid your processes altogether.

3. Driving maverick of spend

When individuals in your organization are dissatisfied or feel like the enforced options are not a good fit for what they need, you run the risk of increased maverick spending. Maverick spending represents purchases made outside of agreed contracts or dodged procurement processes. In an organization with a strong focus on great supplier selection decisions, maverick spend can be an expensive issue. A poor focus on supplier selection can make the issue of controlling and managing spend even worse.

4. Missed performance targets

Ultimately, better supplier selection decisions have a direct financial and strategic impact on the success of procurement, and of the organization as a whole.
It seems obvious but your ability to identify the suppliers who best meet your business requirements, and deliver against those requirements with the best value, is critical to your procurement success. If you’re finding it challenging to meet your sourcing metrics and KPIs, an increased focus on your supplier selection decisions can yield massive positive results.