Under direction from executive leaders, procurement teams must find new ways to be more agile and strategic. Naturally, many turn to technology. Indeed, among new digital processes, there’s one that saves procurement teams a tremendous amount of time while also improving outcomes — the eRFP. Short for electronic request for proposal, the eRFP streamlines the vendor comparison and selection process.
Moving the request for proposal (RFP) process from traditional hard copy formats to digital platforms delivers benefits for buyers and vendors alike. As businesses make digital transformation a priority, eRFPs become more and more common. So, if your RFP process isn’t online, you may be falling behind.
ERFP stands for electronic request for proposal. Essentially, an eRFP is the digital version of a request for proposal, or RFP. Indeed, the eRFP is a questionnaire-style document issued by a buyer to potential vendors to gather information and improve vendor selection, just like a traditional RFP.
It’s important to note that an eRFP isn’t just a digital word processing document or spreadsheet sent by email. A true eRFP is entirely digital. From issuing the RFP to gathering and evaluating supplier responses, the entire RFP process is conducted through an RFP management platform or online RFP portal.
In this blog we’ll provide the definition of an eRFP. Additionally, we’ll briefly explore the history of RFPs, as well as the current shift to online procurement tools. Then, we’ll cover the benefits of eRFPs and how to prepare for and embrace change.
The importance of digital transformation isn’t lost on procurement leaders. In fact, according to the most recent Chief Procurement Officer (CPO) survey from Deloitte, 76 percent of respondents identified digital transformation as a top priority for 2021. So, eRFPs aren’t going away any time soon.
A brief history of RFPs
The elimination of paper processes is decades in the making, but a welcome change for those seeking a more efficient way to find beneficial supplier partnerships.
The RFP process arose out of a need for thorough and data-based comparisons between vendors. Before RFPs, businesses selected vendors using subjective, and often, inconsistent considerations. For example, many organizations formed partnerships based almost exclusively on local networks, word-of-mouth recommendations or advertising. Naturally, this results in limited competition and vendor accountability.
In the late 1880’s, the first RFPs began to appear in newspapers and publications. They were simple notices seeking bids for a particular need. Often, these notices included questions or specific information requested by the buyer. Since then, the RFP has become a common tool used by procurement teams worldwide. Luckily, technology has improved the speed and efficiency of the process. From fax machines to email and now eRFP platforms, technology constantly evolves and subsequent improvements to the RFP process follow.
Digital transformation in procurement
In a world where there’s an app for everything, procurement solutions are only now gaining significant traction. Indeed, over the last several years, many procurement teams invested in e-procurement and e-sourcing tools and strategies.
Recently, as teams quickly pivoted to remote work, these technology investments paid dividends. Indeed, digital tools like strategic sourcing software enabled fully-onboarded organizations to work leanly and efficiently through any circumstances with little disruption.
Fortunately, even for those who were slower to adopt technology, the shift to e-procurement tools and eRFPs delivers tremendous value in a relatively short period of time.
5 big benefits of issuing eRFPs
1. Lower procurement costs
As with all technology purchases, your return on investment is important. Fortunately, shifting to online RFPs reduces the cost of procurement in a few ways. Specifically, eRFPs lead to shorter procurement project timelines. Consequently, digital RFPs require fewer internal resources.
In addition, data-driven vendor selection enables more confident decisions. Ideally, this leads to more beneficial long-term partnerships. Which in turn, enables you maximize value and eliminate the need to go back out to RFP for the same product or service each year.
Adopting software for issuing eRFPs improves nearly every step of the process. First, identifying project scope is faster with centralized collaboration. Next, you can create a digital RFP quickly by uploading and customizing a previous version or template. Alternatively, you can build out individual RFP sections to drag and drop into new RFPs. Then, issue the RFP online to your selected vendors, answer follow up questions and gather responses in a single location. Finally, reviewing proposals is much easier as well.
2. Faster vendor selection
At its core, the RFP process is designed to help businesses find the best partners by collecting data and creating apples-to-apples comparisons between potential vendors. Unfortunately, manual processes make those comparisons difficult. Without technology, the vendor evaluation process is a time-consuming ordeal.
As RFPs become increasingly detailed and complex, copying and pasting RFP responses and data into a centralized spreadsheet may take hours. Consequently, one of the biggest benefits of transitioning to online RFPs is the ability to quickly evaluate vendor responses and identify the best partner.
Sourcing software includes RFP automation to aggregate data, calculate weighted scoring and create data visualizations of proposal scores. In addition to making the evaluation process more efficient, eRFPs lead to more in-depth insights and more confident decision making.
3. Reduced risk and improved transparency
In addition to selecting the right partner, improving transparency and ensuring fairness in procurement is increasingly important. A centralized RFP platform enables clear and consistent communication, so no single vendor has more insight or information than another.
Furthermore, shifting to an eRFP process enhances your ability to audit and report your compliance with relevant regulatory requirements. If questions arise regarding the outcome of a RFP, you can quickly create a scoring report to justify your vendor selection.
In addition to improving RFP auditability, RFP software empowers your team to explore vendor risk in depth as a part of the selection process. Because digital RFPs are faster to answer, vendors can easily address more complex topics. Indeed, many online RFPs include vendor questions that go beyond price and services. For instance, you may need to ask a vendor about their data security protocol, customer success, financial stability or legal policies — eRFPs make it easy to include these questions and more.
4. Improved RFP data intelligence
Recently, procurement leaders have begun to realize the power of RFP data. The same Deloitte survey reports that if granted additional budget, 42 percent of CPOs would invest in analytics and data management. As executive leaders prioritize data analysis, it’s reasonable to expect that digital RFPs will play a significant role in those initiatives.
Naturally, electronic RFPs are full of key data. Once captured, this data delivers insights about vendors and internal processes. For example, you can explore trends in vendor offers, response times and supply chain trends — information you can leverage during negotiation and contracting. Additionally, real-time tracking in RFP management platforms reveals potential challenges, discrepancies and bottlenecks in your internal processes.
5. Better vendor relationships
One benefit of an online RFP tool is often overlooked — the impact on your vendor relationships. Not only do digital RFPs benefit your organization, but they also enable you to cast a wider vendor net, faster proposal creation and less email back and forth for your vendors. As RFP software centralizes interactions between procurement managers and vendors, communication improves.
In addition to using RFP software for online RFPs, you can expand your use (and maximize ROI) by leveraging the questionnaire tool for vendor evaluations, RFIs and vendor profiles. All of these tools are essential to success throughout the vendor relationship lifecycle.
How to adopt a digital approach to RFPs
So, how do you get started? Moving to eRFPs represents a significant change for your organization, so it’s important to prepare. To begin, map your existing RFP process from beginning to end. It may be helpful to create an RFP timeline to visualize the process.
Identify individual steps, teams and staff (both internal and external) involved in each step and what tools you need to be as efficient and effective as possible.
Once you’ve explored your current RFP process, it’s time to find a tool to move that process online. Luckily, there are purpose-built platforms that will deliver efficiency and value, very quickly. As you navigate through features and functionality, consider your needs.
Scope: Do you have the time and budget to invest in a full suite of procurement software. Or, do you need a specialized system to manage RFPs? When discussing these options, consider deployment time, value and impact on your organization and vendors.
Integrations: What systems does your procurement team currently use? How will the new system interact with them? Remember, data collection should be a priority. Can you gather data from more than one system to perform cross-platform analysis?
Ease of use: One of the biggest factors that influences return on investment is user adoption. Unfortunately, it’s also tricky. As you explore options to shift to digital RFPs, consider the user experience for your procurement managers as well as the vendors who will respond to your requests. Is it easy to create an RFP? Is it easy to answer questions? Can vendors navigate the solution without assistance from your team?
The future of RFPs
It seems clear to many that the future of RFPs is entirely digital. So, don’t wait. Now’s the time to shift your team to an online RFP platform. The faster you act, the better off you’ll be. Not to mention it will keep you ahead of the competition and give your organization every possible advantage in an increasingly competitive market.
To explore insights from industry experts about the future of RFPs, download the ebook: The future of RFPs.