Finding the right SCF provider to support your supply chain finance programme can be tough, says Steven van der Hooft. Here’s a four-step process to aid successful selection.
After months of meetings, workshops and presentations, you and your team have finally decided on what kind of supply chain finance (SCF) programme you want and what your company aims to achieve with it.
Armed with clear objectives, the next step is to effectively communicate those to the market so you can find an SCF provider that aligns with your goals.
With the ever-widening range of different providers in the market from the well-established players to new dynamic fintechs and offerings from banks and other financial institutions, there is a risk of feeling overwhelmed by the choice.
Breaking down the process into more manageable steps and ensuring you ask the right questions to the right people at the right time will put you in the best position to select the SCF provider that truly fits your needs.
At the start of the process, your team will want to ensure it carries out feasibility studies and then use those to create an early design of your planned SCF programme.
This all happens way before the request-for-proposal (RFP) document even appears.
At this pre-RFP stage, it is essential to engage with all the various departments in your company that will be involved in the project, from finance and treasury to procurement. This will ensure you have an in-depth awareness of the specific goals and requirements of each department – and what particular questions to include in the RFP.
Step 1: the RFP Document
The aim of the RFP is to gather as much relevant information from potential providers as possible so you can make an informed decision.
However, it is not advisable to include an endless stream of questions. This will not generate the accurate and specific information you are looking for. Decide right at the start what are the key pieces of information you need from providers. You can draw on those earlier conversations with different internal departments.
Including early blueprints of how you envisage your SCF programme within the RFP is another useful move to allow the providers an opportunity to share ideas and insight on how they could support your plans.
It is key to remember that the more time, effort and money you invest in the formulation of the RFP, the more likely you will avoid delays, mistakes and last-minute changes when you come to making your final decision.
Once you are ready to put your RFP together, consider dividing it into three parts. The first will be an overview of your plans, including your project objectives, growth strategy for the company as a whole and the company’s current financial position. The second part is the questionnaire itself and the final part is the appendix with any additional notes.
Step 2: The Tender
Finally, once you’ve formulated your RFP you can move to the next stage – the tendering process. But before you press send – make sure you have already had some interaction with your long-listed SCF provider candidates.
If you’ve not communicated or established any relationship with potential SCF partners, you really don’t know whether they are even willing to work with you at all. Sending out the RFP to them could be a completely redundant process.
Engaging at the earliest stage possible also makes it easier to organise paperwork such as non-disclosure forms before the RFP is issued.
Once the RFP is out, it is time to wait for the responses to flood in – hopefully. Just make sure you have made the providers aware of the timeframe for sending in responses. Consultants generally suggest between three and four weeks.
You also need to ensure you have people on hand to answer any additional questions prospective providers might have.
Step 3: Evaluation
The third stage is the evaluation process. It is worth taking a three-step approach to this – and if applicants don’t make it through the first two levels of assessment they are knocked out before moving to the third step.
Step one is to assess the answers of each applicant against a scorecard, giving each response a score. This makes it easier to compare each provider with another. For instance, you could grade responses from excellent to inadequate or not eligible and then give that grade an appropriate score from 0 to 5.
Ideally, you will have given different groups of questions different weightings, depending on their importance, and made that clear that in your original RFP.
Step Two is to collect references from corporate clients that already have worked with the potential provider. Getting real client feedback can be invaluable in making your final choice.
Finally, if some of your potential applicants make it through both those stages without being knocked out – you can invite them in to show live demos of their product offerings.
Step 4: Selection
Now it’s time for decision-making, drawing on your scorecards, the demos and the feedback you received from other corporate clients.
Once selected, all that remains is to negotiate contracts and get the deal signed off.
If you got it right at the start of the selection process and put together an effective RFP, you will be able to reap the rewards as you start to implement your new programme with your chosen SCF partner.
For a full guide to selecting an SCF partner, visit Capital Chains
Steven van der Hooft is the founder and CEO of Capital Chains, a Dutch company specialising in consultancy and training on end-to-end working capital optimisation and financial supply chain management issues. Steven will be a speaker and session moderator at SCF Forum Asia in Singapore on 23rd May.