Unfathomable Situation

Published March 28, 2012

A multi-plant corporation realized that managing its MRO storeroom constituted a significant drain on its investment in Lean principles and, as such, a drain on profits.

Corporate Procurement was directed to select a provider as well as a test site. Procurement selected Plant Able. A 40-page RFP (Request For Proposal) was sent to six so-called integrators, all of whom visited the target plant, responded to the RFP and priced the omnipresent market basket quote.

Integrator #3’s market basket response was competitive but not the lowest of the responders. Integrator #3 was chosen because of experience, focus, and the fact that their response was better related to the needs of Plant Able than that of the other five. The market basket was flawed because of questionable descriptions, assumed substitutions, units of measure fluctuations and inconsistencies among respondents to individual SKU (Stock Keeping Units) line items; nevertheless, it was still a part of the selection process.

Plant Able is now in operation with supplier #3. All KPIs (Key Performance Indicators) are being met and exceeded. Letters of reference have come from Finance, Maintenance and local Purchasing.

Now the Corporation can see the benefit of on-site stores management and decides to add Plant Baker. Corporate Procurement is directed to create another RFP and market basket. Out it goes to the “usual suspects” and supplier #3 wins again with the same results.

The cost of creating the second RFP, the time lost and the loss of benefits during that time cannot be recovered.

Now Plants Charlie, Dog, Easy and Fox are targeted. Corporate Procurement is again directed to go with another RFP for each operation.

What is wrong with this picture?

Supplier #3 has proved its ability to perform and to achieve the specific goals of the company. With no history of success with the company and little understanding as to what is needed, the only avenue for other responders is to cut prices on the market basket which is no indication of price savings in total. What am I missing? Once again, these additional plants will lose potential savings because of the time it takes to process and then decide on the supplier. If other providers are selected for the wrong reasons, failure would result. If failure occurs, the plant will never try it again and will forever lose the cost-savings opportunities.

In addition, integrator #3 and Plants Able and Baker have experienced the learning curve necessary for success. What could be the reason to introduce another supplier into the mix and incur additional unnecessary learning curve expense? Ergo, why continue the costly process of the RFP?

What do multiple RFPs prove?

Where is the value?

Why does it continue?

Can anyone help me?