Rethinking Digital Transformation in Procurement using e-Bidding platforms
Implementing change management in an agile environment
When approaching the challenge of change management or the digital transformation of an organization’s e-Bidding procurement process, we must understand what is the purpose of the tool and what are we trying to achieve by implementing it.
Many organizations began their journey of digital transformation by applying digitization solutions, such as ERP systems, commercial tools, and in-house developed tools and procedures. That part of the transformation dealt mainly with organizing and digitizing data and processes. It provided better control of the process and removed redundant manual tasks. Fast-forward slightly over a decade, we are seeing more and more companies and organizations launching digital transformation programs to address their link to external partners and suppliers. A common example of such programs is the implementation of e-Bidding platforms.
E-Bidding platforms allow procurement departments to communicate efficiently with suppliers when asking for proposals to purchase requisitions in their pipelines. Buyers of the organization use their suppliers database to identify potential suppliers to participate in the bidding process and submit their RFI/RFP/RFQ documents using the e-Bidding platform. The information then flows to the suppliers, who in return submit their proposals using the platform. When the bidding process deadline has passed, buyers can view the proposals and award the supplier who placed the best bid and complies with additional requirements of the bidding, had such been defined.
Exhibit A — A basic flow of the e-Bidding process
When analyzing the process, there are several key stages we need to look into. The first would be choosing the right suppliers to participate in the bidding process. At this stage, the buyer should have a well classified and organized database, knowledge of historical data of previous purchase activity, and finally, the resources and skills to conduct thorough research using publically available information or paywall databases to identify new suppliers. This stage is critical as the outcome of the bid and the optimal offer heavily depend on contacting the right suppliers. Now, oftentimes buyers and organizations have limited resources of time due to changing workloads of the incoming requests pipeline. This results in resorting to the available databases and past experience, as well as limited research of new suppliers.
The second stage is the submission of the bid documents and the configuration of the bid type, conditions, and timeline. This step is very important, however, it is often more technical and the e-Bidding platforms simplify the process.
The final stage we should take a closer look at is the bid results. It is important to understand that this stage often leads us to think that receiving an outcome of an award of a supplier is where the process ends. The best bidder receives the PO and the buyer can continue to the next assignment in the pipeline.
When talking about a digital transformation built on the use of an e-Bidding platform, we must start thinking about how the platform can serve us not just as a bidding tool, but rather an integrated part of the whole procurement process, which provides a built-in report back to the system and modifies our data processing, bringing value to future bidding processes. We must shift our state of operations to a learning experience, taking the outcomes of the specific bid result and understanding how it can help us to improve.
Exhibit B — Report-back flow of the e-Bidding process
*Usually, competitive bidding of multiple bidders helps us establish a good understanding of the market value of our product by having several bids in a reasonable range of price. For convenience reasons of this discussion we will assume that the market value of the product is around $100.
Let’s discuss how can we modify the process to create the necessary connectivity between the bid results and the suppliers database in order to allow the buyer to make more efficient decisions and help vendor management functions fulfill their function using insights from the bidding processes.
In Exhibit B, we can see that Supplier “A” proposed the lowest bid, and assuming our competitive requirement, in this case, was solely the lowest price, therefore, based on our assumptions we should feel confident in awarding the supplier. As to Supplier “B”, as the bid was significantly above the established market value of about $100, we would usually want to make sure our documentation and requirements were clear and well defined, not leaving room for wrong assumptions or interpretation by the suppliers. Sometimes, in cases of high variance between proposals, we should evaluate if there was a problem in the process. However, in this case, we will assume the process was good and the high bid is due to the suppliers conditions.
The final proposal of Supplier “C” is where we can find enormous value to move our transformation process forward. As shown in the example in Exhibit B, Supplier “C” shows up as a “NO BID”. Let’s further drill down into the meaning of “NO BID”. One scenario might be that the supplier reviewed the details and documentation and decided not to proceed, due to lack of interest, lack of ability to supply us the item or even the item might not be in the suppliers portfolio of products. If the supplier chose to share with us a remark, explaining his inability to participate, we should review it and decide whether the remark is of a continuous nature or a one-time occurrence. In case the remark is of a continuous nature, such as “the item is not in the portfolio of the supplier”, this should be flagged and incorporated back in the ERP system or the Vendors Management System. Reporting back to the system will allow the buyer to improve the selection process of potential suppliers for future requisitions.
Now, let’s take a look at the scenario when the supplier submitted a “NO BID”, without providing an explanation. In general, I believe most e-Bidding platforms, should require of recipients of the bid information to add a note if they viewed the information, however, chose not to place a bid. We must constantly remind ourselves that we want to get as many insights from the bidding process as possible. Keeping that in mind, we want to take the “NO BID” signal and report back, preferably automatically, to our ERP system or vendors management system in order to flag that next time a buyer selects a potential suppliers list for a bid, there is a flagged indicator needed to be considered.
The flagged indicator should prompt two main questions at the suppliers selection stage, or the vendors management function. The first would be, should we include the supplier who keeps placing “NO BID”, or fails to submit a proposal, in our future bidding processes? In some cases we include suppliers who are not a good fit for the bid, inflating our potential participating suppliers list and as a result underestimate the robust process or the efficiency of the competitive process. The flagged indicator can allow us to make a smarter decision on the suppliers list and seek new or additional and more compatible suppliers. The question we should ask ourselves about the supplier who has re-occurring “NO BID” instances is, did something change on the supplier’s end? We must always keep in mind that our operations are built over time and we are not always aware of things like a change of a POC, or contact information of the supplier, M&A and structural changes in the supplier’s operations and even lost login information on the supplier’s end. A non-responsive supplier, should be contacted as part of the vendors management operations, relying on the passive feedback received from the e-Bidding platform.
The above scenario is just an example of a simple bidding process. In reality, the bidding process is often much more complicated and involves multiple participating suppliers and various results. That being said, the core idea of the implementation of a report-back process is what can help your organization improve the change management of digital transformation from an e-Bidding tool to a learning process that drives smarter decisions making, better management of processes, and continuous improvement.
Disclaimer — This article reflects the author’s personal perspective of an idea and process, and does not reflect the state of the process, strategic or operative practice of any of his current or former employers. If you found an error or have remarks on the contents of this article, you are welcome to contact the author.