There’s no question that, when it comes to your bids and RFPs, the more vendor competition, the better the award value. That’s why sending vendor invitation letters—or a notification to suppliers through your eSourcing solution—is an important step to ensuring optimum vendor competition in your invitations to bid or request for proposals.
Writing vendor invitation letters and selecting the appropriate vendors to send them to is no small task, so we wanted to look at the data behind this question: do more vendor invitations lead to more submitted proposals? And is there an optimal number where you’re maximizing competition without sending out more invites than you need to? We discovered that the answer is yes, sending more invites leads to more submissions…but there is a point when quality is more important than quantity.
How many invitations is too many?
To answer these questions, we took a look at competitive events in the Euna Procurement database that had sent out at least one vendor invitation. As we started digging into the data, we noticed the range of the number of vendor invites per project varied widely; some projects had sent just a few vendor invitations and some had sent out hundreds.
If your guess is that sending out more vendor invitations will result in more results, you are correct—to an extent. Our study uncovered that there is a threshold of optimal invites sent, and it’s likely not worth your time or effort to send more than that.
To come to that conclusion, we first created a plot comparing the number of vendor invitations and the corresponding average number of complete submissions received for all projects in the dataset. For instance, if there were three projects that sent out 5 invitations, and one received 2 submissions, another 3, and another 4, the average number of complete submissions would be 3. When we removed outliers from the data, the plot looked like this:
Here, we can see a positive correlation; as the number of vendor invitation letters increases, so does the number of submissions received. What happens if we view the trend beyond 18 vendor submissions?
The average number of complete submissions received does become more random past 20 invitations, but the positive correlation we saw in the previous graph is somewhat maintained up to 35 invitations.
This suggests that continuously sending out invitations to more than 35 vendors does not necessarily increase the number of submissions you receive. As efficiency becomes more important than ever before for procurement teams, focusing on sending the right invitations rather than just a high volume of letters is critical for running strategic and streamlined competitive events.
How many proposals come from invitations?
Obviously, vendor invitation letters play a big role in increasing vendor competition, but how much so? In other words, how many received proposals come from invitations?
To answer this question, we calculated the percentage of proposals received from vendors that had been invited to a project by dividing the number of proposals from invites by the total number of proposals received. On average, approximately 66% of proposals were from vendors that had been invited. So, for instance, if you received a total of 8 submissions, around 5 proposals would potentially come from invited vendors.
The number of vendors you would need to invite to receive 5 proposals is another question—one that can be answered with benchmarking in Euna Procurement.
Conclusion
Whether you would prefer to say less is more, work smarter not harder, or quality over quantity, we found that sending out more vendor invitations leads to more proposals to a certain threshold of about 35 invites. As a procurement professional, your time is better spent sending fewer than 35 well-crafted and thoughtfully-selected invitations.
Since vendor invitation letters or notifications are so critical to ensuring strong competition, set-up your next bid or RFP up for success by accessing data like this in your project planning. Besides giving you vendor competition insight such as how many invites you need to send to reach your desired number of submissions, Euna Procurement gives you access to the largest buyer and supplier network in North America.