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5 Tips and Considerations for Your Next Spend Analysis RFP

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In a rapidly changing market of technology and service delivery providers, it has become increasingly challenging for many of today’s procurement leaders to both keep up with the pace of change to find true differentiation across the evolving vendor community.

Most of the leading procurement organizations we have worked with in the past 12 months are focused on the following strategies: fold more spend under management, more quickly identify and tackle savings opportunities, and drive more value to internal stakeholders. Spend analysis is core to meeting these strategic goals.

A spend analysis project is one of the first components of any procurement transformation initiative or cost optimization project, and is one of the first tasks that should be performed after a large merger or acquisition. Developing an optimized spend analysis process that is scalable and consistently repeatable can not only help your organization rapidly uncover pockets of savings leakage across the company, but will give your procurement team more time to focus on developing and executing strategic initiatives (instead of leaving them buried in spreadsheets, continuously racing to clean up categorization inconsistencies, or configuring software to create desired reports).

Put simply, an optimized spend analysis serves as a sort of GPS for guiding strategic procurement organizations to opportunities. And just as with a GPS, the accuracy of the underlying map makes all the difference between a smooth, efficient journey to your desired destination and a frustrating trip that takes you in circles and doesn’t quite get you where you want to go. Just like a GPS, your spend analysis solution must be updated and refreshed regularly to ensure that procurement’s roadmap aligns with its strategic mission.

If your organization has current spend analysis challenges and is looking to source it competitively, consider the following tips to ensure that your project achieves the desired outcome:

1. Plan the RFP, and Then Execute That Plan

  • Decide which key stakeholders to include, how much spend they own and what potential challenges they face from the current process.
  • Consider these stakeholders’ input directly as you develop your RFP requirements and vendor questions.
  • Identify milestones of the RFP, and ensure that critical stakeholders are included in each key step of the project.
  • Ensure that stakeholders’ desired outcome and yours as their procurement partner are reflected throughout the RFP.
  • Keep in mind that vendors responding to your RFP can quickly spot an unplanned and non-strategic process, and they’ll be far less likely to invest their time and resources in an RFP that your organization isn’t yet invested in.

2. Assess the Market, and Invite Only the Most Appropriate Vendors to Participate

  • Identify the key components of your collective requirements, challenges and desired RFP outcome — then include only those vendors equipped to help you reach that outcome. For example, if your organization’s challenges include categorization inconsistencies and excessive manual effort from your procurement team, then invite participation from solution providers with expertise in delivering data optimization services with their technology, and consider omitting those who might only provide an application or BI tool.
  • Ensure that the vendors you invite to participate in the process have experience performing precisely the type of analysis and services you are seeking for companies like you.

3. Determine the Specific Requirements and Questions that Support the Desired RFP Outcome

  • Focus your RFP to address the requirements and questions most critical to achieving your desired outcome. Be careful around borrowing questions from previous RFPs that were created for alternative purposes, such as those for e-sourcing or P2P.
  • Avoid implementing unnecessary requirements, and ensure that the requirements you do implement actually align with the questions you pose to participating vendors. Failing to align your questions and requirements can signal to a vendor that you are not serious about the process — and implementing unnecessary requirements can adversely impact the cost and total ROI of the project.

4. Ask for References at the Most Appropriate Time to Optimize Value from the Disscussions

  • Avoid asking for client references too early. Obtaining client references is essential to a successful competitive RFP process, but making a premature request for such references increases the likelihood that you will ask for the wrong ones, and dilute the value in your quest achieving your desired outcome.
  • Align your request for references with your specific project requirements. If a vendor’s answer to a specific RFP question causes concern, consider asking the vendor to provide references from clients with specific experience overcoming a similar challenge. For example, if your goal is to transition from a current analysis provider, consider asking specifically for a client reference with experience moving from one solution to another.

5. Make a Post-RFP Plan and Monitor for Ongoing Improvements

  • Develop a plan for driving continuous improvement in your spend analysis process long after the RFP concludes.
  • Be sure to consider scenarios that might impact your spend analysis approach, such as M&As, acquisition of a new financial system or pursuit of an alternative cost containment strategy in this category or that area. 

Remember, keeping your eye on the prize every step of the way is critical to achieving the desired outcome from your RFP. Including misaligned questions, involving the wrong stakeholders, appointing a non-strategic project sponsor or inviting participation from vendors who lack necessary spend analysis expertise will result in a suboptimal outcome.

Shandon Gunter, a senior manager with SpendHQ and Insight Sourcing Group, has been with the firm for over eight years. Shandon is focused on sales operations and engagement success for ISG’s spend analytics, strategic sourcing, procurement transformation and managed services clients. Prior to ISG, Shandon was a director with the Corporate Executive Board, a best practices advisory firm supporting more than 30,000 executives and over 80% of the Fortune 500. Across his career, he has led research, sales and client engagement initiatives for heads of procurement, corporate strategy, finance and legal in areas such as cost reduction,  procurement optimization, electronic discovery, compliance and ethics training, M&A strategy, contract management and spend analytics. Shandon graduated from the University of Virginia, where he majored in economics.  

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