Feb 28, 2024
Follow These RFP Process Steps to Select Best-Fit Vendors
Master the RFP Process Steps with our comprehensive guide.
Introduction
Finding the right partners to build an efficient and effective supply chain is essential and the more successful you are, the greater your competitive edge will be. A chemical company CEO told McKinsey that “These days, to perform well, companies need a different end-to-end view on the business. Procurement is absolutely critical.”
PwC found that spending on third party goods and services, including logistics, can account for up to a quarter of a company’s total cost base. In addition, organizations can achieve savings of up to 12% by more effective management of this area of their business.
This is why the systems you have in place to choose the right supply chain partners are important. And one way to achieve this improvement is to hone your requests for proposal (RFP). This article provides the RFP process steps you need to take to ensure you get quotes from third-party suppliers who bes
What are the RFP process steps?
These are the steps involved in the RFP process:
Pre-RFP phase. Discovery process to understand what needs to be in the RFP, including timelines, budgets and deliverables, who will be involved in running the process and the potential outcomes of the RFP on budgets and business relationships.
Set specific requirements. Draft the wording of the RFP, ensuring that it is accurate and clear and giving as much detail on the task as possible for vendors to consider when they make their proposals.
Develop your scoring matrix. Create a scoring system to rate the responses as they are submitted.
Identify possible vendors. Seek out recommendations to ensure you invite the most suitable vendors to bid.
Evaluate proposals. Once you have sent out the RFP and allowed a window of time to receive and answer questions from prospective partners, you can evaluate the proposals that vendors send. Use the scoring system to set aside those with the highest scores for further consideration.
Make the decision and negotiate terms. Work with the decision maker to select the winning proposal, contacting vendors for further information, if required.
Post-selection. Once you have the price negotiated, send the contract to the winner and notify unsuccessful bidders with reasons for the outcome.
RFP process timeline
The timeline of your RFP process depends on a range of factors. They include:
Size of company
Complexity of the project
Urgency of the task
Number of vendors engaged
Seasonal workload
Whether it is a one-off or ongoing project.
When you create your RFP, you should set realistic timelines for each step of the process. If you have a good idea of the project already, for example, it will take less time to draft the RFP than if you are starting from scratch.
Create a deadline for creating the RFP and then another for issuing the request. At this point, you will have issued a deadline for questions and submissions, which adds onto your timeline. Allow your team some time to process and shortlist proposals, additional time to negotiate with shortlisted vendors and then a deadline for signing the contract with the winning party,
Depending on your unique situation, this could take weeks or months to complete. That being said, here is an example RFP process timeline:
The RFP process steps explained in detail
1. Pre-RFP phase
Before you start the RFP process, you need to ascertain whether you actually need one. After all, it can take significant resources to draft and distribute an RFP. With this in mind, you might choose to use a trusted partner for simple tasks, rather than putting the work out to tender. If you can be sure they are up to the job and can do so in a cost-effective manner, it might be more straightforward to simply task them with the project.
However, for more complex logistical tasks, an RFP is advisable. It encourages you to really break down your requirements and consider each moving part of the project. This helps you gain an insight into the amount of work required to complete the job and allows for vendors to detail how they will carry out your plan and what it will cost.
There are fewer surprises later on in the process, as vendors go into the task knowing what it will entail. You can find new partners to work with that you wouldn’t have otherwise engaged and the RFP creates a route map to follow to gain momentum.
When you decide to use an RFP, start by identifying what your needs are and define the scope of the request so that you can create a watertight document that will deliver on your requirements.
2. Set specific requirements
Once you know you need an RFP and you understand what you want to achieve, start to dig down on the specifics of the task. Which pain points do you want the vendors to help with? What signifies success? This allows you to be clear in the draft of the RFP, which is important for the success of the process.
Be detailed in the description of the project to demonstrate what your expectations are to vendors. This helps them ensure they have the necessary capacity and resources to complete the project or that they can procure the necessary elements from their suppliers at a cost and in a timeline that matches the deadlines of your RFP.
Structure the RFP in a manner that it communicates these requirements clearly. Highlight the most important aspects of your project in the introduction and then set out some questions to ascertain early on whether the vendor will be able to deliver. Your team will be able to filter out unsuitable candidates more easily with this initial assessment.
Include information for vendors relating to the types of shipments involved, the nature of your supply chain and the frequency with which you import or export. Vendors can more clearly understand what will be required of them.
3. Develop your scoring matrix
You will need a scoring matrix to help you compare bids from vendors and work out which proposal is the best fit for your business.
The matrix will be unique to the task and you should add elements that help you meet your requirements. List the requirements and decide on a scoring system and the weight that you give to the answer for each requirement.
For example, if budget is a key driver for you, a vendor with a low-cost proposal but a longer time frame might score more highly than a vendor that can deliver more quickly but at a higher price.
Let vendors know in the RFP the evaluation criteria to help them bid accordingly.
4. Identify possible vendors
Narrow down the vendors who will receive your RFP. Seek out recommendations and research them to ensure that those you invite to bid are aligned with your requirements and stand a chance of winning your business.
If you do not narrow down the pack at this stage, you risk being inundated with unsuitable proposals once the RFP goes out, making it a more laborious process for your team to find the best candidates.
5. Evaluate proposals
Once you have sent out the RFP and allowed a window of time to receive and answer questions from prospective partners, you can evaluate the proposals that vendors send. This takes place in stages to help process the proposals more easily. This is a typical procedure for evaluation:
First review for compliance and eligibility
Reject any proposals from prospective vendors that are incomplete or which do not adhere to the guidelines for submission. If the proposals are not compliant with your working practices or the legislation in relevant jurisdictions, you can reject these at this time.
Broad review of main requirements
At this stage, look at the questions you asked in the introduction about the main requirements of the RFP. If vendors do not meet your needs here, you can filter them out before looking into the rest of their proposal.
In-depth evaluation
Use your scoring matrix to evaluate the remaining proposals more closely. Additionally, make sure they have included the total cost of implementing their proposal and you can also check into their references and details of performance on previous similar projects.
Shortlist the top contenders
When you have the top contenders whittled down, you can inform the vendors and ask any additional questions that you might have to assess their suitability. Compare the proposals directly with each other and prepare to negotiate with the shortlisted entities to get the best possible idea of what they can offer. Have them send over their arguments as to why they deserve your business.
6. Make the decision and negotiate terms
The key stakeholders tasked with making the final decision should consider the proposals, the scores attributed to the contenders and any additional information gained during the negotiations.
By this stage, there should be a front runner and you can approach them to discuss the terms and conditions for the partnership, as well as confirming timelines and other logistical information.
Once this is complete, you can sign the contract and begin your working relationship.
7. Post-selection
After the selection is complete, inform the unsuccessful vendors and provide feedback. This will help them pitch more effectively in the future, making the process of sending out an RFP more efficient and competitive next time.
Inform your internal stakeholders of the decision and implement the partnership, maintaining monitoring over the course of the project to ensure that the vendor is meeting your requirements and delivering on their proposal.
Tips and best practices for an efficient RFP process
Ensure a fair and unbiased process by opening up your RFP to a range of different vendors, evaluating their proposals fairly on the basis of their ability to deliver on the requirements you specified. By maintaining a level playing field, you can gain the best value for your business and not simply rely on working with existing contacts.
Encourage competitive pricing to ensure you get value for money on the deal. However, do not set in place requirements that drive the price down to unrealistic levels, as vendors may find later that they cannot deliver on the project as promised.
Account for complex considerations. If the job was simple, you might not have needed to send an RFP, so do not be deterred by vendors pitching accordingly for complex jobs. The process of creating an RFP should give you a good idea of how intricate the task will be.
Encourage electronic submissions as they take less time to review than paper proposals. You can automate the evaluation process with digital files, and they allow for more secure record-keeping too.
Prioritize critical requirements on the RFP to allow you to make a quick initial assessment of the suitability of the vendor, narrowing down the field to qualified vendors before you look more closely at the detail of the proposals and other evaluation criteria.
Batch queries and clarifications to vendors. If you find yourself receiving the same questions from multiple parties, create an FAQ sheet to send out and consider the additional detail you should add to future RFPs to ensure common queries are answered.
Use the learnings from previous RFP processes to develop your next requests, utilizing the elements that worked well and adjusting those that didn’t.
Use templates for RFP documents to make sure you add all the relevant information that vendors need to be able to pitch accordingly.
FAQ
When should you use an RFP?
Use an RFP when you have a complicated project to complete and need to find the most effective manner of actioning it with a vendor who can meet your major requirements.
How do RFPs differ from other procurement documents (RFQ, RFI)?
A request for information (RFI) is ideal for fact-finding. It can be seen as an initial approach to vendors to assess what they can offer and many companies use it to narrow down the outreach for an RFP.
An RFQ is a request for quote – or a request for quotation – and is simply for finding out pricing options. The RFP asks more about the entire ecosystem of the task at hand, rather than the cost alone as with the RFQ. With an RQF, you usually know exactly the process you want the vendor to undertake. In answering an RFP, the vendor pitches the solution to your problem.
What are the most common mistakes in the RFP process and how can they be avoided?
Some people can overcomplicate the RFP so it is difficult for a vendor to ascertain the key elements that they are pitching on. This can lead to inaccurate proposals that fail to deliver on your requirements. Ensure you are clear and straightforward with what you are asking people to consider.
Another common mistake is to draft the RFP before all internal stakeholders have settled on the strategy they want to achieve from the RFP. This means that the proposed solutions might not achieve the true aims of the business.
How long should the RFP process take from start to finish?
The length of the process is dictated by a range of factors, including the complexity of the request and the type of industry you are in. As you are creating the RFP, you are responsible for setting deadlines and should be conscious of giving vendors enough time to understand the request, ask questions and to formulate an accurate and realistic proposal.
How long should my RFP be?
The RFP needs to strike a balance between providing the vendors with the information they need and not overloading them with details that make it more difficult to accurately scope out the project.
What should I do if I get too many good responses?
Consider your weighting again and see which boxes each of the proposals check. By considering which of your priorities ranks ahead of others, you can narrow down the vendor responses further. You can also use this information to negotiate on price with the vendors, telling them that it is a competitive process.
Conclusion
These RFP process steps will help you create RFPs that attract the best possible vendors to carry out your tasks effectively and efficiently. This, in turn, improves the smooth running of your supply chain to achieve a more streamlined workflow.
Beebolt is an online platform that brings together all elements of your supply chain in one, centralized location. You can easily communicate with vendors through the software, automate custom RFQs that guarantee the best quote, every time. You can maintain an overview of the flow of goods around the world, spotting issues before they cause damage to your business. Become a supply chain super hero today by starting for free with Beebolt.