Selecting suppliers need not be a gamble. 8 risks you need to mitigate.

Contracting allows startups and smaller firms access to affordable mission-critical expertise your operation needs. But contracting new suppliers is inherently risky. Captian Kirk bet his crew's lives on his ability to beat 3 gladiators in hand-to-hand combat at the same time. But is this really a sustainable solution. We can do better Captain! Unmitigated, supplier selection fails could easily erase the benefits you are seeking, or worse, hinder your firm’s broader strategy? And depending on the scope and nature of the contract, your firm's brand and market position may also be at risk.

Let’s explore the most likely ways that selection projects can block business success and what you can do about it. We'll also offer some tips on how to select the right firm and contracting approach to avoid these pitfalls. So, if you're ready to learn more about how to protect your business, read on! First up, selecting a supplier.

When it comes to selecting a firm to provide critical services, it is important to choose one that has experience, capability, knowledge, and that is willing to offer you the service quality you need at an acceptable price.

You also need to avoid firms with great sales processes and personnel that are completely willing to underbid as a strategy and sign a contract that they could never deliver on.

Selecting a supplier is a project. Treat it as such.

The selection project’s scope should match the criticality and scale of the service. Good service providers don’t have to chase work as hard, so expect to go looking. SMBs need to execute a process that uncovers firms that are not on your radar but that are a good fit, while avoiding the dogs. The margins for error are smaller for SMBs given limited resources so the effectiveness of these projects needs to be hitting the sweet spot at a higher rate than larger firms with larger cash reserves.

To help you scope this project or vet advisory support to run this critical project for you, I’m going to give you some insight into the risks you should be mitigating and questions you should be answering.

Risks to Mitigate

Here are some rules of thumb to eliminate or at least manage the most common gotchas from this critical project:

1.?????What is this RFP a Solution For? – Create a formal problem statement and be sure to shop it around to trusted advisors, colleagues and detailed thinkers on your team who are not as invested. Be vulnerable to get value out of their feedback.

2.?????What is the business after? – Go deeper than the stated problem with each key stakeholder? Do different stakeholders want different things? How are these things measured? Are the impacts to the BU and company comparable across stakeholders?

3.?????Is the business ready? – Needing something done or having budget is not the same things as being ready to contract for their service. Is there a view of process maturity that tells the story of what the business can effectively manage? Can your business plan and forecast work accurately? If there are projects, who is leading them? Are the necessary controls in place for the answer you just gave yourself? Who are the folks receiving this work? Have they been in this position before? What do they expect?

4.?????Are you any good at managing contracts? – The skill sets are numerous. Contract language interpretation (working with legal), drafting and editing. Pricing and cost analysis. Industry and firm assessment. Business acumen. Natural problem solver. Excellent communicator. Assertive personality. Politically aware. Has a performance or lean background. Process oriented but pushes through ambiguity, and leaves from for people to work in effective relationships. This is often a team, not a person.

5.?????Do your measures matter? – Have the proposed service level measures been tested with the business against what they tend to experience? Are there any gaps that might create daylight between a customer satisfaction score and the quantitative measures? Is a measurement program in place? Is the continuous improvement cycle built in? Does it work? Who is accountable for it?

6.?????Does your value chain work? – Can ideas and budget allocation flow form high level planning through to conceptualization, design, and land as a contractable project within an acceptable amount of time? Are all key players working together from the start?

7.?????Are we challenging our templates? – Template save time but make us lazy. What terms ?or section in our template don’t apply and why? What tools did we use to ensure our that our project is creating alignment in all key areas of the service? What context are we bringing to the templates to align them with what is required here?

8.?????Do we know the suppliers? – Suppliers have different people and operating models which means they have different capabilities and risks. Do we understand these differences and how they affect costs and final pricing? Is capability adequately tested for all suppliers?

If you are confident your project is setup to address these known risks, you have a good approach. Manage the project well, with all key decision makers observing and weighing in on decisions as the project unfolds.

In our next post, we will ask questions to test whether our project is ready to deliver the outcome we need.??