RFP Pitfalls: Why Supplier Collaboration Starts with Respect
The Paradox
A concerning paradox has emerged. We see that Procurement professionals are increasingly expecting suppliers to collaborate, while simultaneously treating them poorly when going out to market in the RFP/Tender process.
Events over the last few years have highlighted the key role procurement plays in many organisations’ success, whether that be by driving cost savings, ensuring continuity of supply delivering significant improvements to business processes (e.g. risk, performance and contract management), or generating long-term strategic value through collaboration with key suppliers on innovation and sustainability initiatives.
We know from our annual SRM research that in order to realise benefits, it is imperative that procurement teams are able to create and maintain robust relationships with their strategic and preferred suppliers. For new suppliers the relationship starts during the RFP or tender process. Or the RFP / Tender process is a key milestone every few years of the relationship. Either way, the RFP / Tender process is a key step in the relationship and plays a big part in setting the tone of the how the two organisations will collaborate (or not) going forward.
Rightly, when going through an RFP / Tender activity procurement functions often place emphasis on strict adherence to formal processes to ensure fairness, transparency and compliance. While this is understandable, execution often overlooks the relationship and ‘human’ considerations. In many instances, suppliers are given unrealistic timeframes to respond to bids, are subject to last-minute changes in requirements, and / or don’t receive feedback following a significant investment in time and effort.
Naturally, when suppliers are the recipients of negative treatment during the RFP / tender process, it can have several adverse effects, especially in the areas that we define as ‘customer of choice’ benefits – both in the short and long term:
-
An increasingly limited supplier pool: should suppliers feel they have been mistreated, there is the potential that they may opt out of future tenders (and ‘opt out’ might actually just be putting their prices up so they know they won’t win the RFP/Tender). This reduces the number of vendors an organisation has to choose from – particularly an issue if looking to source a niche product / service that can only be provided by a limited number of suppliers
-
Increased costs: It costs suppliers to respond to each of RFP/Tender and these will be built into their final pricing. If we make the process too onerous then the suppliers cost to respond will increase.
-
Legal and compliance implications: More and more organisations are subject to legislative requirements which they push to their suppliers, again increasing the suppliers costs to respond (or if they choose not to comply, increasing the risk within the supply chain). In addition to this there is the potential that legal disputes could arise if suppliers consider organisations to have displayed a lack of transparency, or exhibited favouritism during the RFP/tender process.
-
Lasting relationship damage: our SRM research shows that trust is a critical component of successful long-term customer / supplier relationships. If a supplier is the victim of sub-standard treatment during the process, your organisation will not be a customer of choice, so they will be less willing to go the ‘extra mile’ and mutually beneficial outcomes will be harder to achieve
-
Reputation risk: Bad news travels fast and a procurement function known for treating suppliers poorly quickly develop a negative reputation in the supplier community. This makes it challenging to attract high-quality suppliers in future (no matter how big your brand is).
-
Loss of innovation: suppliers will be less inclined to propose new ideas or innovations, inhibiting the possibility of benefitting from greater efficiencies connected with technology or process development / improvement
The good news is, there are a number of simple measures buying organisations can take during the RFP/tender process in order to ensure that suppliers have a positive experience, and the detrimental impacts outlined in the previous section aren’t realised:
-
Effective, responsive and regular communication: ensure RFP/tender documentation is clear, detailed and concise, and effectively communicates organisational requirements and key evaluation criteria. Pro-actively provide suppliers with updates throughout each stage of the tender process (and do so promptly if there are any changes to the ask). Also respond to supplier queries in a timely fashion, frankly just be Human and don’t hide behind the process.
-
Promote the right behaviours: provide members of the procurement function who are involved in the RFP/tender process with the relevant behavioural-based training to ensure that they treat suppliers correctly. It is recommended a competency assessment is undertaken prior to training to make sure learning is focussed on the most relevant skills gaps. Moreover, developing and disseminating a supplier code of conduct – outlining standards surrounding expected supplier treatment – will promote a more consistent approach
-
Establish realistic timelines: to maximise the quality of the responses received, give suppliers sufficient time to provide a well-thought-out reflection of their capabilities. Tight deadlines can be particularly demanding for SMEs, who often face capacity constraints and don’t always have the required information to hand. Consider extending timelines if there is an alteration to scope
-
Provide two-way feedback: to help drive continuous improvement and make suppliers feel their efforts are valued, provide structured feedback to unsuccessful suppliers. Clearly explain the rationale behind your decision, and explain why another option has been selected. Crucially, give suppliers the opportunity to provide their comments on the RFP/tender process
-
Actually, have the budget: Don’t waste the suppliers time, if you are going to take a requirement out to market, then make sure you actually have the budget. There is nothing more frustrating for a supplier to win the RFP/Tender only to be told that nothing can be started as you don’t have the budget allocated or can’t sign off starting the work.
We have seen from the 16 years of annual SRM research how hard it is to build and maintain leadership in Supplier Management. In-fact we have seen the number of organisations achieving SRM leadership status drop from 9% in 2022, 8% in 2023 to 7% in 2024.
Building and maintaining trust with key suppliers is a vital component of SRM success. Trust that may have taken years to build can be undone in days or weeks by just simply not being Human and communicating effectively.
Take the Next Step Toward Better Supplier Relationships
Don't let poor treatment during the RFP process sabotage your supplier collaborations. Our SRM training courses equip you and your team with the skills to build trust, communicate effectively, and become a customer of choice. Learn how to foster lasting relationships that encourage innovation, mitigate risks, and drive mutual success.