How a Pricing Analysis Provides Proposed Savings Faster Than a Lengthy RFP Process

By: CovestAdmin
April 10, 2024

Sourcing projects can be a colossal undertaking, especially when trying to establish where to begin. Many procurement departments automatically conduct an RFP whenever a sourcing event arises. While this is an intelligent path forward, it is often an inefficient use of resources. The primary resource that is neglected is time – employees’ time and the time it takes to obtain actionable results.

To better understand how to improve the process, let’s walk through a common scenario:

You are tasked with leading an RFP event for a broad range of MRO products. To start, you gather current company data for the MRO products, then you organize this into a usable format, clean out any outliers, and create a usable bidding sheet to share with suppliers. Gathering the appropriate contacts for each supplier takes time, and pricing capabilities can fluctuate within a company by working with a regional salesperson via a national account manager. You will then need to wait as the suppliers need time to gather pricing, ask clarifying questions, and respond to the RFP.

Once the responses are gathered, an analysis of the data must be conducted to accurately compare what each supplier program looks like. This often leads to many questions, such as:

      • Are the products ideal matches for form, fit, and function if the manufacturer is different?
      • Are the quantities (UOM) the same for each product? 
      • Are there shipping costs or other fees that may pop up? 
      • What are the best subcategories of programs to drive additional cost savings?

After spending 60 hours or more over several months to get to this point, you find two suppliers showing 8% savings on one million dollars of MRO spend. It seems a little low, especially considering a 4% cost of change, which has you thinking, “We are a ten billion dollar company, we have leverage, why aren’t the savings higher?!” 

If you find yourself in this scenario, it is now time to execute and implement FAST. You should consider a GPO that leverages the MRO spend of one hundred other global enterprise companies and can conduct a proper analysis in as little as six weeks.

Finding Quicker Results and Implementation 

A Pricing Analysis through a competitive GPO, such as CoVest with a robust analytical department, can deliver higher cost savings in less time. Leveraging the spend of multiple Fortune 1000 companies allows for higher cost savings AND a higher level of expertise when analyzing data. The multitude of analytical projects leads to a higher level of knowledge, historical benchmarking data and market intelligence CoVest has invested heavily in software development, including machine learning, which allows us to systematically organize, clean, and cross-reference large data sets that would take individual employees hours to accomplish. This expedited process allows for quicker results and implementation, which in turn, drives down the cost of changes and provides hard cost savings. 

Let’s say the pricing analysis shows 20% savings on one million dollars in MRO spending. That’s a savings of $200k annually or $16.6k monthly. So, every month it takes to RFP a category, you essentially lose $16.6k. It typically takes three months to conduct an RFP and implement the program, but a GPO can conduct a pricing analysis and implement a program in one month. That two-month difference is costing your organization $33k+.

 In summary, RFPs are standard practice in the procurement world. However, this can be an outdated, timely, and cumbersome process. CoVest specializes in delivering analysis that drives hard cost savings in a timely manner. So tell us, what strategy will you consider when the next sourcing event arises?

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