you get every month could detail hundreds or thousands of charges. Many of these charges come with unclear descriptions that are difficult to understand, such as “CD CK Fine Sort” or “ACH NOCS.”
In one client initiative, the authors of this book assisted a client in sourcing banking and treasury services. After collecting recent invoices, we sat down with representatives of the client's bank and reviewed every charge on their invoices. We asked them to explain any charges that were unclear. In the end, we found that many of the charges were based on services that were no longer required or were redundant. In one case, the client was paying for the same reports to be sent to them electronically, on a CD‐ROM, and faxed—each of these services incurred its own charges! This happened primarily because end users were reluctant to retire the old methods when new technologies became available. This concern drove the decision to continue the duplicate services; however, neither the fax nor the CD‐ROM tools had been used for years. Those services were eliminated as part of the initiative. Doing so produced much more in savings than reducing unit prices for them ever could. As you can see from this example, a want‐versus‐need assessment is an integral part of category research.
COLLECTING MARKET INTELLIGENCE THROUGH THE RFI PROCESS
There are many tools you can use to help gather market intelligence and uncover cost savings opportunities, such as trade publications, online directories, and e‐sourcing tools. In Chapter 11, we discuss these tools and distinguish between standard and real‐time market intelligence. In this section, we discuss the predominant method companies use to collect information about the supply base once suppliers have been identified: the request for information, or RFI. An RFI is one of three forms of the RFx (request for “x”; either information, a quote, or a proposal) process. The other two forms, the request for a quote (RFQ) and the request for a proposal (RFP) serve different functions later in the Strategic Sourcing process and are discussed in detail in Chapter 4.
RFIs are typically used by companies as fact‐finding tools to learn more about the supply base and help narrow down the long list of suppliers to a shorter list. Those who make the shorter list are, then, typically invited to respond to an RFP or RFQ. RFIs can be administered in many ways, from a simple list of questions in an e‐mail to a formal document or online questionnaire with specific instructions and formats for responses. Sometimes the process is conducted through a call or by meeting with each participating supplier. Typically, the questions in an RFI revolve around company financials, quality controls, account management, customer service, experience, capabilities, locations, and other general information.
Developing and submitting an RFI to suppliers may be your first exposure to the supply base. This introduction is critical because it sets the tone for your future relationship with them and begins the process of transitioning the initiative out of the Research phase. As such, you should consider some basic concepts when developing the RFI to help you build a motivated supply base.
Do Not Rely Solely on the RFI
One common mistake at this stage is to rely solely on the RFI to gain market intelligence. An RFI should be used to supplement independent research and fill in gaps where information is not available. More specifically, the questions you include in your RFI document should be developed based on your understanding of the market after independent research has been completed. It is a mistake to make the RFI generic and all‐encompassing. At best, this results in generic and all‐encompassing responses, or general copied and pasted marketing content, which does not necessarily help you develop strategies or aid in the decision‐making process. At worst, you will scare away viable suppliers who do not believe there is a real opportunity that warrants the effort of replying.
Consider Your Format
A second common mistake is assuming that an RFI must be a written, formalized document. In fact, asking a few informal questions in an e‐mail or over the phone might make more sense at this stage. In some cases, having suppliers come in to present their service offerings and asking key questions at that time might be the best approach. We discuss this strategy in greater detail in Chapter 4.
The format of your RFI depends largely on two factors—the process suppliers in the category typically prefer and current market conditions and timing factors. If a product or service is in high demand and suppliers have many requests from existing and new customers, taking the time to provide you with a thorough written response can cause delays in acquiring the information you need, if the supplier is willing to participate at all. Conversely, it is rare that a supplier would decline an invitation to meet face‐to‐face or over the phone to discuss their offering.
Always Start with a Phone Call
If you decide on a written format, do not initiate the RFI by sending it via e‐mail. Once suppliers are identified, make voice contact with them before sending the document. Explain what you are trying to accomplish and get a feel for the way they would approach engaging in further discussions. If most of the suppliers with whom you speak recommend delivering a presentation, you may want to include that as a next step.
In Chapter 9, “What Not To Do,” we outline in more detail why it is critical to reach out to suppliers via the phone, and why sending e‐mails to “[email protected]” or “[email protected]” typically does not yield positive results.
Important Considerations for Properly Designing an RFI
While the main purpose of an RFI is to fill in the gaps in your independent research, you can also use the process to begin establishing a working rapport with potential suppliers. Important considerations in this regard include the following:
The first interaction with each potential supplier should take place over the phone. Engaging in casual conversations with the supply base opens the lines of communication and suppliers will be pleased to have some personal interactions with a prospective customer. During these phone calls, make suppliers aware of the incoming RFI, then inquire as to the approach they wish to take in responding to this request.
Giving suppliers the option to respond to the RFI in their chosen format allows them to feel most comfortable and, in turn, deliver the best results. A few points should be remembered:Consistency is not needed in the RFI format, just in the questions being asked.When you initially contact a supplier's representative, they may want to jump right into the RFI. Be prepared.Expect the format chosen by suppliers during the RFI process to be similar to the one preferred for the RFP and RFQ processes.Some suppliers may be willing to pay you a visit to present their offerings face‐to‐face and have open dialogues concerning the goals for the initiative.
Ask specific questions in the RFI. In earlier phases, you have already developed an understanding of the spend category you're sourcing. The RFI should expand that understanding, not just legitimize it. Therefore, the questions you ask should be geared toward discovering this new information. Questions that are too general usually only produce information that has already been gathered.
RFI results and independent research are not interchangeable. The purpose of an RFI is to fill in the missing pieces of your initial results.
In some cases, an informal phone conversation may be the best method to get the message across about your organization's needs. The supplier may give some insight into its ability to compete for the business. This could save both of you some time if you determine it is not a good fit. Alternatively, the conversation may help you drive better savings later on if the company suggests that they very badly want to win your business. An effective way to prequalify