A Request For Proposal (RFP) is something that just about every large business does in some or all departments that require buying products and services. This is something that small businesses rarely do, unless their business model is based on procurement of some type, similar to what PLP does for Less-Than-Truckload (LTL) services. Mid-sized businesses will start to develop and enhance more sophisticated levels of buying as they grow. RFPs are an asset that all businesses should learn to use, but it is also important that the RFP is conducted properly. Every good RFP should contain 1) authorized documentation, 2) good quality data, and 3) key personnel with industry specific experience involved in the coordination of the RFP project. There are obviously many more details that go into the process, but those are the 3 key components that should lead to a successful RFP. This blog is by no means meant to be anything close to an exhaustive overview of a good RFP. For a more detailed outline on requirements of a successful RFP (from the perspective of a bidder or respondent), I suggest reviewing Anatomy of an RFP by PPI Consulting.
A few years ago, I had the opportunity to “bid” on a rather large LTL opportunity, approximately $45M in annual revenue to be precise. The parent company of the company conducting the RFP was a $5B+ holding company that owned several large, well known retailers and manufacturers, as well as a large procurement firm that conducted the RFP. When I was presented with the information contained in the RFP, I detected several holes in the data, and the proper authority was lacking too. I was just the little guy on the scene, but I had enough industry experience and connections to know that this RFP was not going to yield a successful outcome. I shared a few thoughts with them via email and advised them on industry practice. I also told them they’re going to need to supply more data and tweak the structure of the RFP to meet industry standards. They already had their plans set in place, and it was probably too late to take my suggestions into account.
What was the outcome of the RFP? Well, they invited over 50 LTL carriers to participate and over 80% of them declined to bid. Most likely, the retailers and manufacturers involved ended up staying with incumbent carriers, and whether or not they ended up reducing any costs or saving money, I don’t know. There was a lot of time, money and energy that went into this project, and I’m guessing, with over 80% of carriers declining to bid, they probably did not get a return on their investment.
I have a few final thoughts about this . . . I hope this doesn’t come across as too critical toward the anonymous organization to which I’m referring. The primary reason I’m sharing this is because if you do decide to do an RFP, you want to make sure that you have the right connections with industry experience and the proper analytical tools in place to yield results. If you’re talking about LTL, PLP has a solution . . . stay tuned for our next blog.