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Selecting a Suitable Supplier/Vendor for a Debt Collections and Recoveries System
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- Thought leadership
It is important to recognise that there are many different vendors that claim to support sustainable collection and recoveries system practices, a number which has grown exponentially in the last few years. Where before there were one or two choices for vendors providing a specific service for a specific market, there are now more than five times that amount which makes the selection process more difficult to ensure that you pick the right vendor for your needs. Getting selection right is important as the consequences of a poor selection could be a millstone around the neck of collection and recoveries (CnR) function for 5-10 years.
All vendors provide a similar sale pitch up front but in a slightly nuanced way so that they all seem to blend together. This is why it is important to set up a well-defined selection process. This blog outlines some of the key areas that should be touched upon with a vendor selection, as well as some of the common pitfalls.
1. Business Requirements
Setting up a project team across different functions tends to work well in order to form well-rounded business requirements. The team should: define the requirements based on the current setup of the business area; take account of any in-flight initiatives; and be in line with the organisation’s collections and recoveries TOM (Target Operating Model).
It is fundamental that requirements include utopian outcomes where possible, as well as future proofing based on known changes/initiatives. The requirements should also be based on a desired target-state and ranked by order of importance. You cannot use a vendor to fix a broken problem or process! This helps the business case justification as most ROI (Return on Investment) are within a five-year timeframe, therefore businesses should look to where you want to be, not where they currently are. It makes sense to show the difference between functional and non-functional requirements as this will help your weighting process in the evaluation stage. Do not let requirements be created in silo by 1 or 2 individuals from the same area!
2. Searching and Filtering Vendors
Scan the market for vendors that could match your requirements and send a Request for Information (RFI). This can be easy where all of the players in the market are well-known, however it might be wise to look for external consultants who have wide knowledge of the market, relevant experience and can help throughout the whole process (such as Arum!).
- Look for recommendations and case study examples of vendors to aid the initial filtering and appropriateness of each vendor.
- Invite vendors to come on-site and demonstrate their various offerings and capabilities – this will help not only to understand what the vendor can provide you and your organisation, but also the way the vendor articulates themselves.
- Take reference from other comparable businesses or those involved in other implementations.
From this judgements can be made to start forming answers to questions including:
- Are they a vendor you could see yourself working with?
- Are they collaborative?
- Do they go the extra mile?
- Does the product fit your requirements and do they have relevant experience?
3. Request for Proposal (RFP)
A formal request for the vendors to respond to your requirements. In order to make sure that you can compare apples with apples later on, the RFP needs to have a clear formatting structure and be clear to the vendors to what and how to respond. An RFP should contain the following elements:
- Introduction and Summary
- Instructions to the vendor: Mandatory structure of the proposal that will be submitted to you, proposal language, contact for questions, deadlines
- Full list of requirements
- Overall Approach/Roadmap
- Implementation Plan
- Resourcing & Skill-sets
Build an evaluation sheet based on the RFP by weighting each of the criteria and evaluating each vendor response against these criteria. On top of the criteria derived from the Requirements and RFP, include additional criteria like ‘Cost’ and ‘Overall vendor impression’. The purpose of this step is to avoid political games and minimise human emotions, which often occurs through a selection process. You also want to be able to see where vendors have already gone the extra mile which will count in the ‘Overall Vendor Impression’ as these are the type of vendors that make it easy to work with.
Your evaluators should write reports in order for their conclusions to be well understood and the process should be designed so that the outcome of the evaluation can be summarised in a simple table, clearly identifying the winner.
5. Select a Vendor
The base for this should be the evaluation sheet. Look at the total scores and make a ranking of the vendors. In practice it happens often that they are close together and in this case the price and general vendor impression may be the determining factor. The outcome should not be communicated to the vendor community until it is approved by the relevant parties.
Remember throughout the whole of the selection process, some of the clear traits that need to remain at the forefront when reviewing a vendor are:
To summarise some of the key points discussed:
- Ensure you have robust, fit for purpose business requirements that fall in line with your current and future TOM.
- Do not try and use a vendor to fix a broken process!
- Ensure you scan the marketplace heavily taking into account all aspects each vendor has to offer.
- Be clear on your RFP requirements to vendors.
- Clearly articulate to vendors what you expect and how you want the process to run.
- Evaluate using fairly weighted criteria and put aside any potential slanted judgements by evaluating as fair and impartial as possible.
Finally if the process has run correctly hitting all of the necessary points, it should have been fairly pain-free and you will be left with a vendor who can deliver what you require and be a pleasure to work with.
Arum are a vendor-impartial consultancy who have subject matter experts with deep experience throughout all aspects of the vendor selection process.
If your organisation is looking to go through a new vendor or supplier selection process, contact us to find out how we can help you.