Identifying savings opportunities is common practice in procurement departments, especially in current times. However, it is important to actually realize the projected savings. Professional tender management helps to generate quick- and long-term savings. In this blog post, we discuss common pitfalls in tendering and how to bridge them.
What is Tender Excellence and why now?
A lot of literature describes tender management with a strong focus on negotiation tactics or digital tools. Indeed, both are important aspects, but Tender Excellence is more than these two components. Although professionalizing tender management promises quick wins and strategic potential, its true impact is often not considered. For us, Tender Excellence aims to contribute real business value, like innovation, services and/or savings. The tendering process is a core activity in procurement and an interface to other corporate functions and processes. The tendering lifecycle starts with the category strategy. Consequently, the preparation phase, from finding suitable suppliers to preparing the negotiation, follows. Upon that, the actual execution – financial and technical evaluation, negotiation, and awarding – takes place. Finally, the awarded supplier is contracted, and the supplier and contract management begin.
What are exemplary pitfalls in tender management?
Our discussions with clients show two major hurdles:
Insufficient governance and RFX processes
Even though most companies have documented tendering guidelines and processes, they are often peppered with inefficiencies and unclear steps. For example, technical and commercial evaluations are unaligned, thus their respective weighting and evaluation are poorly executed in tenders. Immature governance, the wrong team set-up, and too little interaction with internal stakeholders exacerbate the issue. Further, many buyers show a lack of tendering routines. All these aspects hamper tendering excellence and achieving expected outcomes.
Lack of routine and quality assurance
Additionally, due to the lack of routine buyers might stick to incorrect habits or miss key elements throughout the tendering process. As there is no quality assurance, poor quality of both the RFX itself and the execution is often inevitable. On top of that, typically no formal review process is implemented to avoid repeating common errors. Therefore, we suggest professionalizing tender management to avoid these pitfalls and eventually achieve the value from tenders which everyone within your organization expects. The pitfalls can be tackled by two major principles:
Establishing an end-to-end view on tender management
Taking a holistic view – across the entire value chain – on the tendering process allows us to streamline the process, as preceding and subsequent processes are also under consideration. Moreover, it also reveals which roles along the value chain should be involved throughout the tendering process. For example, we see financial and technical analysts as great contributors to complex tenders. Consequently, a tailored governance should be defined throughout the entire tendering lifecycle with clear roles and responsibilities. Once the governance is defined, we suggest focusing on implementing the new procedures and provide guidance and coaching to the buyers on the front line.
Define tender coaches and sparring partners
With a dedicated tendering coach or sparring partner, the routine gap of buyers can be closed. Especially for complex tenders, the coach helps to find the right choice of tender mode or supports the preparation for the negotiation. Having a helping hand along the tendering processes will not only increase its quality but also contribute to the buyer’s skill set and ability to properly execute future tenders. Fig. 1: Professional tender management can add real business value Professional tender management adds business value. First, professional tender management helps to realize savings within the sourcing process, e.g. flexible commercial agreements. Second, different supply situations require different RFX approaches, to be flexible, and adapt to the circumstances. Being well prepared and feeling confident with their own capabilities helps buyers to find the best approach to generate not only savings but also innovation and better products or services. Third, mid-term professional tender management streamlines the process and enhances efficiency.
Broaden the perspective on tender management
Our approach to tender management needs to change. In the past, suppliers were only contacted to renegotiate and reduce prices. But isn’t a supplier relationship more than just talking about pricing? To weather upcoming challenges like supplier collaboration and innovation, the common tendering process needs a revision. Finding mutual value gains importance while the pure cost focus is no longer sufficient as a standard approach for all categories. Bear in mind that tenders are an investment from your suppliers as well. Moreover, a highly specified RFQ is not always the solution. Especially in complex sourcing situations, it may even be counterproductive, since the supplier cannot unfold his full capabilities. Most often, highly beneficial components or innovations result from the leeway given to suppliers. In conclusion, tender management needs revision. It should be approached much broader than purely saving-oriented. Eventually, tender management is amongst the highest value-adding tasks of procurement to add real business value. What are your thoughts? Please let us know, we are looking forward to fruitful discussions!
We would like to thank Felix Kesselberg for his contribution to this article.