• 5 min read

5 Reasons Why the RFP Process is Essential for Improving Sourcing ROI

Jesal Mehta
Founder & CEO,Aaviner

Automotive manufacturers sit at the center of a complex, highly integrated, and heavily outsourced supply chain for semiconductors. While the auto industry has faced shortages of microchips before, the disruption this time is more significant due to the volume of chips required in today’s vehicles and because the supply chain has become more concentrated.

The impact of the shortage of semiconductors is significant. Leading equipment manufacturers such as Toyota, Ford, Volkswagen, and Honda have been forced to halt production temporarily at several plants around the world.

Lead times for some chips have tripled to as much as 40 weeks. And prices have risen by up to 15%.

It is high time that the automotive industry needs to fundamentally overhaul its semiconductor sourcing processes – and quickly. To return the supply and demand equation to equilibrium as soon as possible, there are few defined set of recommendations for the automotive industry that take effect fast and follow a medium- to long-term strategy:

  • Reducing monopoly on few concentrated suppliers and working with industry bodies, government agencies and key suppliers to attract new entrants into the auto sector
  • Moving away from the current short-term sourcing cycle for semiconductors and locking in capacity via longer-term contracts
  • Developing cooperative arrangements with key suppliers to pool demand and collectively seeking more attention from the big chip manufacturers

Here are five reasons to improve the RFP creation process, so it can help to enable the right vendors and achieve supplier base rationalization.

5 Reasons RFP Creation Process is Critical to your Organization

1. Forces organization to define requirements

The RFP creation process is an internal exercise and discipline for your company to define what your systems requirements and needs are in detail. It is also the best way for you to get on the same page and get buy-in between departments in your company. A proper RFP creation process helps in aligning the right stakeholders to define the right criteria for their needs and choosing the appropriate set of vendors for the organization.

2. Shortlisting the vendors

In analyzing vendor responses, the RFP’s questions and responses become the basis for detailed comparison in terms of functions, detailed investment, vendor implementation methodology, quality, etc. Organizations should prepare standardized templates for specific departments or buying categories (IT Hardware, Services, Facilities, etc). The sourcing team can prepare templates for each category and store the template in a centralized repository. Business teams or departments can choose templates based on their needs, fill in data in templates and send them to the sourcing team for inviting suppliers.

During the RFP evaluation process, weighted scoring methods can help organizations to make the best decision based on objective input without any biased opinion or favoritism. RFP solution will collate the quantitative score across stakeholders based on weightage assigned in the Questionnaire stage.

3. Gets you thinking about Return on Investment

Analyzing functional differences and advantages of one vendor to another should also get you thinking about how the proposed solution will have a return on investment. ROI is often difficult for many companies – vendor or buyer – to show savings. We can always show a long list of intangible benefits. What reduction in costs, increase in productivity or improved customer service can we “take to the organization”? With RFPs, organizations can focus on the Total Cost of Ownership and analyze all hidden costs across spends. Sourcing Managers can achieve faster efficiency and prepare a better business case across all spend categories

4. Produces an organized selection methodology

An organized methodology and RFP process helps you track and compare what your observations, questions, and conclusions are regarding each vendor. Using an RFP and selection process will help you make the “right” application decision for your company. We all know that in complex businesses, no system can answer all the functionality needed. But the RFP and the analysis are critical to understanding the fit.

RFP helps organizations to prioritize the right needs and assign weightage across all requirements. Each organization has certain processes where each step in the value chain may vary. Organizations can focus on top criteria and be flexible in low-priority requirements.

5. Innovation and Supplier base rationalization

As the organization grows and scales, requirements change with each financial year. sourcing managers need to be innovative in keeping organizations nimble. With RFP, sourcing managers can add criteria that can make organizations remain nimble. Smaller vendors are nimble and innovate faster comparatively. With the addition of such vendors, Sourcing managers bring in new thought processes and may even add those suppliers as future/ potential vendors.

Moreover, sourcing managers need to ensure the organization remains large and also can act nimbly. By inviting a broad set of suppliers in the RFP process, sourcing managers can achieve supplier base rationalization.

The future with Aavenir RFPflow

Based on the above points, we can conclude that RFPs are critical cogs in any organization to achieve strategic objectives of savings, efficiency, and innovation. A correctly prepared RFP solution can help to streamline the RFP process.

1. Source Smarter and Strategically

Embrace e-procurement and enable procurement milestones to launch RFx events and templates quickly. Suppliers can use Microsoft Word to respond and manage RFPs/ RFQs/ RFIs.

2. Collaborative RFP Authoring & Template Hub

Embrace e-procurement and enable procurement milestones to launch RFx events and templates quickly. Suppliers can use Microsoft Word to respond and manage RFPs/ RFQs/ RFIs.

3. Automated Configurable Workflow

Once the RFP Management team is created, all alerts and notifications can be enabled for triggering RFP milestones.

4. Build & Reuse RFPs, RFQs, RFIs

Create a knowledge base. Prepare RFPs using existing templates and improve RFx-to-award approval time.

5. Comparative Supplier Evaluation

Once the RFP Management team is created, all alerts and notifications can be enabled for triggering RFP milestones.

6. Sourcing Management with Mathematical Rigour

RFP evaluation criteria are enabled to apply quantitative rigor in the RFP awarding process.

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