Competitive tendering: no longer a question of ‘if’ but ‘how’
SummaryTendering is moving centre stage in the European Life Sciences marketplace. A recent Model N poll confirmed how businesses are aware of the growing importance of tendering and want to improve their performance. Many senior managers (51%) recognise the need to excel in an increasingly competitive tendering environment. A similar number (54%) point to its importance in increasing competitive intelligence, gaining a better understanding of what the customer wants and how competitors are responding.
Yet most continue to see it as a lengthy and essentially administrative process, with fewer than one in five recognising tendering as an opportunity to differentiate the business on value rather than just price. As a result, almost three quarters of respondents maintain a manually-based and departmental rather than centralised approach, with the result that performance is inconsistent.
In consolidating the relevant business processes this presents the organisation with a number of challenges as, in the area of tender management, control is in the hands of the customer and national legislatures.
This is made worse by the fact that the business will almost certainly operate different tender processes between and within countries across the globe. This creates a minefield for any business looking to create a common approach throughout the enterprise.
Considering the complete process
One global pharmaceutical giant has accurately described tendering as: ‘Not a single event, but a never-ending cycle of account management’. As such, suppliers must pay rigorous attention to every stage of the process, in order to enhance the chances of bid success and maximise the profitability of the deal throughout the life of the tender:
At the first stage, that of shaping the tender, the sales organisation is the primary stakeholder, with the opportunity to help set the key parameters of the tender, by engaging with the contracting authority in accordance with the legal framework before the tender specification is issued. Here the business must also prioritise and allocate resources by segmenting customers and focusing on the most profitable bids.
Close relationships with customers, regular contact by account managers and a broader understanding of key business needs will make organisations much better-placed to succeed, particularly compared with more reactive competitors who may not be aware of this strategic intelligence, prior to bid publication.
At the second stage - making the tender - the tender department itself now takes centre stage, supported by the sales, finance and legal teams. Each tender should be treated as a cross-functional project, allocating resources, planning, defining deliverables and ensuring there is no risk of exclusion.
In preparing tender documents this can be regarded, quite rightly, as the most administrative part of the process. However, one of the most important elements at this stage is the win/loss results analysis. This is the first step on the road to success in the next tender, transforming the ability to convert tenders into wins through a more forensic and practical understanding of the key elements of bid success.
This is far from the end of the process. In fact it probably accounts for only the first six months of a three-to-five year commercial relationship.
At the next stage of valuing the tender, the goal is to maximise sales and profitability, by monitoring contract compliance by both parties.
If order volumes diverge significantly from the volumes contracted under the tender, this can impact on profitability. Equally, failure to supply on the part of the provider can have severe repercussions in terms of contractual penalties which can easily wipe out any profit on the deal.
Integration is key
In looking at a best practice tender management solution, the watchwords are standardisation and flexibility, in providing a consistent high quality response which satisfies the regulatory and legislative demands of each country.
This is best delivered by a single integrated tool managing the entire tender lifecycle and associated deadlines, tracking all internal activities prior to the publication of the tender header through to post award activities such as tender renewal.
Maintaining strict control and visibility of pricing is also critical. An effective tender management system will provide a complete history of the status of all prices tendered, including those offered, awaiting a response, awarded or lost, extended, improved or expired.
Providing transparency in this way will avoid the risk of overlapping prices, in which the same product is offered to the same organisation over the same time period but at a different price.
This is especially important given the commercial realities of how much can change over the period of the tender. For example, product specifications and ranges may evolve significantly over a five-year period and any proposed change or substitution must be implemented within the strict terms of the original tender.
A tender management system should also be fully integrated with other elements of the IT infrastructure. By interfacing with the company’s ERP, CRM or Master Data Management system, the business will be able automatically to access all types of customer-related data in developing and managing the best possible bid.
A holistic approach
Increasingly, tendering is the only way to secure business across the Life Sciences sector. The only winners will be those who achieve primary and, in some cases, secondary supplier status. And failure can mean there may be no opportunity to bid again for several years. As a result, businesses are turning to integrated, end-to-end tender management to give themselves the best chance of success in fiercely competitive markets.
A best practice tender management solution should embrace the full lifecycle of the tender, from upstream informing bid decision-making through to downstream tracking value optimisation. It should offer an enterprise scale, Europe-wide platform, which can extract and centralise all elements of price setting, execution and agreement monitoring at regional or local level. This thereby creates a common data platform on which analysis systems can be built. And finally, it should be designed and dedicated to meeting the specific challenges of the Life Sciences sector.
The benefits of such an approach are simple and powerful, including increased revenues and margins, lower operating costs and better control over all pricing decisions.
The time to act is now. Inertia is no longer an option, as to stand still is to go backwards in an ever-tougher tendering environment.