One of the most important elements suppliers seek to avoid involves participation in an RFP when there is a low probability of success. Procurement people think that every supplier will go after every RFP they put out. Think again . Request for proposals require a business development team to expend resources. An RFP can be just to gather ideas and do nothing. And so suppliers may often push back to do a customer assessment upfront, and test whether the organization is all-in or not.
Generally, there are several “red flags” that will lead a supplier to explicitly decide NOT to respond to an RFP:
- Is it the right relationship with the client?
- What is our market position and strength of our portfolio relative to the other competitors? If this is an area that is not our strength, then don’t pursue it.
- What is our ability to deliver and execute over the life of the contract with this customer in the past?
- Is the customer very price-sensitive to the exclusion of other forms of value? (“We will not be the lowest cost supplier.”)
- Do we want to bid and put some hurt on our competitors? (This is generally not a good reason to compete in the RFP, as it is not good for the client)
- Does the client have data that can be compiled through interviews and templates? If there is low access to data, we can’t build a case. However, we may not want to work to collect data to present to the client, which they in turn present to their incumbent!
- Are we just a third supplier added to the bid list? Are they really committed to a change in the incumbent? Or are they just shopping for bids, which they will turn over to procurement to put pressure on the incumbent for a price reduction?
- Is the customer just looking for a “directional quote” (sometimes positioned as a “hypothetical”)? This can lead to confusion, particularly if the scope of work has not been effectively articulated.
- The RFP is sent out with a short time period (less then two weeks), and there is no way to mobilize a well-developed proposal in that period of time. The minimum time required for a typical logistics outsourcing proposal is generally 6-8 weeks.
In all of these cases, suppliers must pick and choose RFP’s that make sense for their limited business development teams to pursue. These teams are often constrained by design, so as to not have to pursue every RFP, and achieve a lower win rate. Many business development groups are expected to complete about 12 major deals in a year, with a 50% win rate yielding 6 major deals. But if the win rate goes up to 9 deals to yield 6 wins, the resources can be better focused and allocated efficiently. That means that the team can be unconstrained, so long as the right resources are dedicated to the right opportunities.