Strategic Sourcing: Vendor Pre-Qualification
By: Expense Management Solutions Printed in: EMS Newsletter
This is the seventh article in a series that provides insight into the key steps and success factors associated with the process of reengineering a services organization. For the next several months we will discuss Strategic Sourcing, beginning with this month's article on Vendor Pre-Qualification.
Since January we have addressed a variety of topics including Operational Assessments, Benchmarking, and Business Process Improvement, concluding last month with our article on Establishing Service Level Agreements. This month we shift our focus toward Strategic Sourcing, specifically Vendor Pre-Qualification. Subsequent monthly articles, taking us through December, will contain information on Bid Strategy, RFP Development, Bid Administration, Contract Negotiations, Transition Management, and Vendor Management.
Now that the team has identified what needs to be done and determined what the delivery strategy is, focus shifts to specific sourcing of these goods and services from outside providers. These could be the goods and services the department procures in the normal course of business on an ongoing basis, or it could be as radical as sourcing an entire process that was identified as an opportunity for outsourcing.
The goal for Vendor Pre-Qualification is to obtain a sufficient list of providers who are qualified to provide the goods or services needed at a competitive price and an appropriate quality. The team has already defined the "what" you need and formally documented it with SLAs. Now they must determine who can provide it.
First approach the experts. Within any organization the most likely experts are those who use the goods or services. Customer organizations can typically identify at least a preliminary list of potential suppliers. Use this opportunity to obtain any information on prior experience with firms on the list, anecdotal perceptions of the suppliers and other services they provide. Beyond this most obvious step, reach out to colleagues in the industry, others who have recently completed similar sourcing initiatives and to the suppliers themselves. Professional organizations such as the Institute for Supply Management - www.ism.ws, International Facility Managers Association -www.ifma.org, or CoreNet Global - www.corenetglobal.org may have a directory of providers. Trade publications will contain an index of advertisers or general articles that may mention particular suppliers. Finally, industry experts who constantly manage sourcing activities can offer some ideas, although this is usually a piece of their service packages and may come at a fee.
At this point the team has a list of potential suppliers - organizations that can, at some level, provide some or all of the goods or services needed. However, the real issue is which of these firms can do so with a quality product at a competitive price for the term that you need. Therefore the second step is to "qualify" the provider. Not only must the team determine who on the list is qualified, they must also determine if the provider is interested in meeting the needs of the organization. Whether the team chooses to undertake a formal Request for Qualifications (RFQ) or Request for Information (RFI), or rely on industry experts to provide the information, four key questions need to be answered.
-
What is the company profile? (financial strength, years of experience, key personnel & customer base)
-
What is their product profile? (goods & services offered, geographic coverage, delivery method, quality results)
-
What is their commitment to the industry? (level of investment, future roadmap, concentration of resources, standing in the industry)
-
Are they willing to meet your needs? (interested in bidding, willing to accept standard Terms and Conditions (T'&C's), meet specifications)
If a formal RFQ/RFI is necessary, it should be structured to provide sufficient information to the provider to ensure their responses are specific enough to adequately answer the above four items. A fairly typical RFQ/RFI would contain:
-
A brief overview of your company and its intention to source a particular good or service;
-
Instructions on how and when to respond as well as contact information and a rough timeline of the potential sourcing initiative;
-
A list of questions focusing on the providers ability to deliver the service needed by your company; and,
-
Any relevant attachments that the potential bidder must agree/adhere to or sign in order to be considered as a potential bidder.
As a final step, the team should assess the information obtained for all of the providers and determine which ones should be included in the next phase of the sourcing process. This assessment should apply pre-determined weights to each response within each category. Clearly the response that most closely aligns with the desired answer should receive the highest score. Those providers who cannot meet the needs of the organization should be eliminated from consideration.
Next month we will address the development of a bid strategy. Depending upon the sourcing technique used, the team may choose to allow many or just a few bidders. As long as the pool contains only qualified potential bidders, and each provider is rated relative to how closely they align with the desired goals, the team will be well positioned to move forward successfully.
If you have any questions about this topic or Expense Management Solutions, please contact us at (508) 460-7014. Also please let us know if there are other topics of particular interest that you would like to see in our newsletter.
