On Demand News: 03/29/18

Rethinking The RFP

29 March, 2018 // In his book, Winning, former General Electric CEO Jack Welch recalls a comment made at one of his no-holds-barred “work out” sessions with employees. “For 25 years, you paid for my hands when you could have had my brain as well—for nothing,” a front-line appliance worker told him. He went on to describe a work environment where workers were too scared to make suggestions or felt their ideas wouldn’t be welcome.

That story sums up our own experience participating in many Request for Proposal (RFP) exercises over the years. The process might more accurately be labeled as “Requests for Pricing.” That’s because the customer has already decided all the important details of a service bid—many times just copying information from a current practice. The requester’s main goals are merely checking rates against their current provider. or squeezing out some incremental cost savings. In other words, they don’t want ideas from their suppliers. Just give us the rates.

Exercises like this miss two important opportunities:

First, companies often define the scope of their request in sub-optimized terms: Instead of reviewing a whole business process, we see only a series of transactions. There’s not a lot of opportunity to improve a “less-than-truckload service from Dallas to Chicago.” Maybe we can save a penny or two, nudge the performance needle up a percentage point. Ho hum.

Second, the bid process may not be designed to accommodate ideas for redesigning the system and transforming efficiency and cost. If requesters are only open to LTL per pound pricing on that Chicago lane, they’ll never know how they could have consolidated that same freight into full truckloads for big cost and quality gains. Or how their distribution could be re-engineered to combine the lane with other movements—or eliminate the Chicago lane altogether.

Think about what’s being lost in this short-sightedness: Suppliers and other service providers are the ones actually out in the supply chain every day, so they know how things actually work—frequently with more detail than the requesters. The suppliers also have the benefit of working for many other customers. All of those practices and experiences are just waiting to be applied to a new operation.

We’ll grant that there are times when you just need a rate. In Morgan’s practice, though, we see many times where companies could have leveraged so much more.

So, send us (and your other bidders) your requests. We’ll be happy to quote you rates, but we thrive on crunching numbers and figuring out how to truly transform in-transit operations. Like the GE worker, we promise no extra charge for our brains.