Acquiring an ERP (Enterprise resource Planning) system is a major initiative. It involves large financial outlays for purchase and ongoing maintenance. Perhaps even more significantly, a poor choice can cripple an organization, and in many cases, destroy it. That’s where understanding the supplier selection RFP process comes into play. Here is a brief overview of the Request for Proposal process, why and how!.
Why and How.Considering the potential consequences of a mistake, it is surprising that so many organizations fail to take every precaution in order to minimize risk. I am referring to the preparation of an RFP (Request for Proposal).
Why a Request for Proposal
The RFP is the blueprint of a successful implementation. It starts there. Some of the reasons for its importance:
- Creating an RFP helps everyone in the organization better understand the business processes.
- It provides each vendor the identical view into your organization
- The supplier responses to the RFP are incorporated into the final contract, to help in any potential disputes
- It allows the organization to rank requirements by priority and eliminate redundant or obsolete ones.
So why do so many companies skip this step? Well, simply put, it’s a huge job. The work usually falls to the staff who work those areas, taking time away from the daily responsibilities. Its a task they are ill equipped to handle and often gets pushed aside so their day to day functions can be completed.
Here is the how
- Create a committee of “super users” to assemble the requirements for their area. This will require significant effort on the part of the line staff. Management usually does not have the detailed knowledge of day to day issues.
- Don’t ‘tell’… ‘ask’. Avoid merely documenting what is done today, but phrase the requirements in terms of what the goals are. This will avoid carrying over older processes into the new system, that may be implemented in a far better way with the new system. Put differently, dont document the system, document policy and the user needs. This is a very easy error to commit. Eg:
- Avoid: Every Monday I print a 6 week sales history by style and store indicating sales and inventory and sell-thru,
- State: Our policy is to review styles for markdown on a weekly basis. I need information/data to help with those decisions on a style/store basis.
- For each requirement, provide the supplier candidates with a priority rank. Very often suppliers will decline to respond to a request for proposal because they believe they are a poor fit. Since it is always wise to include your wish-list items in the proposal, this will allow prospective vendors to understand which items are the essential ones.
- For each item on the requirement list, request that the supplier respond with:
- how their system handles it. Eg:
- Handled exactly as indicated
- Handled with a work around (ie: with slightly more effort)
- Not handled at all, but available with modification
- Not handled at any cost
- Cost for customization if required
- Additional information for work arounds
- how their system handles it. Eg:
- Create a scoring system that takes into account the responses and your priorities. Retailmatics has a template that it uses for this scoring, which we would be happy to share with you. Please email us for a copy.
- Before sending out the Request for Proposal, send a formal request to each vendor, asking if they wish to receive one.
- Indicate in the Request for Proposal cover letter, that it is your intention to include the responses in the final contract, to serve as a blueprint. This will keep them honest.
Summary
After 40 years of experience both responding to and creating Request for Proposals, I have learned that there is no substitute for a well prepared blueprint. ‘If you don’t know where you’re going, any road will take you there’… The Talmud