How and When to Write an RFP

Requests For Proposals (RFPs) are the best way to escape a hostage situation with your vendors.

They give you control over deadlines, quality, product requirements, service and how materials are shipped. Typically, RFPs are written to solicit a specific service from a vendor for merchandise or raw materials, telecommunications, printing, paper, ordering systems and fulfillment services.

An RFP is a detailed request that provides product requirements, service terms and maintenance necessities to a vendor who responds with a list of capabilities and a price for his or her wares.

Most catalogers begin searching for a vendor about year before they expect to implement a new technology, product or service.

When to Use an RFP

Writing an RFP is a harrowing but empowering exercise. Most catalogers transition into seriously writing proposals at about the $10-million revenue mark.

Smaller catalogers use RFPs when they’re buying equipment or services that critically impact their business, such as ordering systems, fulfillment services or call-center services. Occasionally, a small cataloger will reach an order-volume level that warrants better attention from a vendor and use RFPs selectively.

The process begins when more than one person in a catalog company starts to notice inefficiencies in product ordering, heavy call center loads, fulfillment problems or just a level of dissatisfaction with customer service.

From there, staffers gather to outline what requirements they need and want in a replacement system or product. This process, writing the RFP, typically takes four to six months. And it’s laborious, says Jim Padgitt of Direct Marketing Insights. He doesn’t recommend using RFPs unless necessary.

“If you’re a Williams-Sonoma or an L.L. Bean where purchases are significant, it makes sense to develop an RFP. But an RFP is a lot of work. It’s not something you knock off in an afternoon,” says Padgitt. “Smaller companies don’t need to take what an RFP requires for small purchases, typically the kind small catalogs make. It wouldn’t make sense to take the time and effort.”

Padgitt says there are three benefits to using an RFP.

• It gets everybody at the company who will use a product or system to contribute requirements for it.

• Due to the level of detail contained in the RFP, vendors will understand exactly what a client company needs.

• Vendor responses to RFPs allow complex systems to be compared against one another in an apples-to- apples environment.

Writing and Evaluating the RFP

The RFP process is lengthy, because it’s difficult to get everyone to agree on what’s necessary vs. what they want.

“It should reflect the requirements and needs of the company, with an element of wish,” advises Padgitt.

After the RFP is written, it’s sent to four to 10 vendors. The complexity of your system needs and the amount of money you can spend determine to which vendors you send your RFP. It takes about six months to have the RFPs returned from vendors and evaluated by your company.

Padgitt recommends a scoring system to ease the turbulent waters of vendor selection. Managers often become attached to a vendor that offers a particular bell or whistle they desire.

A scoring system, while still difficult to negotiate, assigns a weight to each of the attributes listed as requirements in the original RFP. Required attributes are weighed based on their impact on functionality and are ranked higher than extras.

RFP in Action

An important key to the RFP process is scheduling implementation of new technology or services for a slow period in your catalog business. This allows you time to work out kinks in a new technology, test the vendor’s reliability for delivery or have a project completed and tested before your crunch season arrives. It’s recommended that you provide at least a four-month window, preferably six, to fully begin using a new service or product.

“You never want to implement a major system change in the middle of your busiest period, because any problems that occur are magnified by the volume,” says Padgitt.

Example: If your busiest time is September to December, start the implementation of your new system in February or March. This allows for vendor delays, training and determining if the scalability is right.

“If you start implementing in August, and orders start flowing heavily in October and November, the problems would pile up in a big way,” says Padgitt.

A Modified Approach

Fairytale Brownies, Chandler, AZ, began using RFPs a year ago, says David Kravetz, co-owner. The company started using them for big-ticket items, but Kravetz liked the results so much he started working some of the RFP language into his contracts for smaller items.

After just a single day working with a fulfillment consultant from Kuipers & Co., Fairytale Brownies realized it had more leverage with its vendors than it imagined and

needed to use it to become more efficient.

“It opened our eyes to the fact that we could demand levels of service. In the past, we took what we could get,” says Kravetz. “It took a certain volume before vendors paid attention.”

He says that point came when the company’s slowest day generated 100 orders. The company ships 5,000-plus orders on its heaviest-volume days.

A particular problem for Fairytale Brownies was its pallet sizes in the warehouse. When the company was small, it didn’t have enough clout to demand that baking or packaging materials come in a specific pallet size. The pallets often didn’t fit in their warehouse racks and had to be disassembled by catalog employees and restacked.

When the cataloger went looking for a new vendor, it required that the pallets be a certain height and width, and company officials instituted penalties for not meeting them.

“We took a pallet of wooden boxes, and all the pallets were too big,” recalls Kravetz. “We had to work out compensation, because the vendors ignored the guidelines. They ended up paying the whole freight bill, which wasn’t small.”

Fairytale Brownies keeps much of its RFP process on a low-key basis. The department head that needs the product contacts a handful of vendors, typically by phone or in person. He describes what he is looking for, briefly discusses what the vendor can supply and asks it to send a proposal.

The catalog intends to put some new baking equipment in place during the spring, after Father’s Day—the last holiday before the winter rush. It began its vendor search last year, so it could begin using the equipment to build staffers’ familiarity.

Kravetz says Fairytale Brownies has outgrown its catalog order-management system. To start the process for selecting a new one, the information systems director will scout for vendors at the National Conference on Operations and Fulfillment.

Fairytale Brownies uses a combination of price and service level to determine the value a vendor is offering. “We’re not interested in the lowest price,” says Kravetz. “We’re interested in the best value.

“There are a lot of vendors,” he continues, “who low-ball the price, but send damaged goods, are not on time or it’s not exactly the product we contracted for. We don’t like any of those surprises.”

He says that as Fairytale Brownies has grown, the proposal process has become more important to doing business.

Definition:

A Request for Proposal (RFP) is a detailed request that provides product requirements, service terms and maintenance necessities to a vendor who responds with a list of capabilities and a price for his or her wares.