Bid Processes Can Deter Innovation

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During the height of the pandemic, we were presented the opportunity to bid on a conveyor for handling OSB strands. The prospective customer had formerly used a rake conveyor to handle the material, and we were excited they were willing to consider our SMART Conveyors™ as an alternative. Before we could issue a quote, however, our contacts informed us that they had already ordered chains and specialized wear materials for the new conveyors because they were concerned about the grueling lead times that were plaguing the earth. The chains and wear items they ordered wouldn’t work in our conveyors, though. They only fit the rake conveyors the company had specified in the official bid package. This immediately told us several things:

  1. Our competitors were essentially fabrication shops that built conveyors to order.
  2. The customer was not really interested in innovation.
  3. The customer was not going to buy our conveyors.

Without going into more details, we didn’t bother to finalize our bid. The customer had already invested capital, and it was unlikely we could convince them to backtrack.

This case highlights a problem with the bid process many companies employ to reduce capital expenses: it can stifle innovation. Because the company laid out so many specifics for the conveyors it sought to purchase, anyone whose solution did not comply with the minutiae of those specifications would face an uphill battle to get their equipment installed, even if their solutions were better than what the customer specified. Consider: the process is far easier for vendors who don’t cause a fuss—there are fewer meetings, fewer disagreements, and there’s less perceivable risk. The opposite is true for those who ask for special consideration. This means that the customer can miss out on solutions that will improve their processes and operational efficiency.

The bid process also invites lackluster performance. The fact that the customer expected the companies bidding on the project to use its chains and its wear materials meant the vendors didn’t compete by outperforming other companies. They competed by cutting costs. The customer had told them what they wanted, so there would be no R&D. No points for doing it better. The machines had to match the industry-normative designs and deliver industry-normative performance through the warranty period. That’s it.

Thus, when an innovative company competes in a bid process designed to find the lowest-cost resource to get the job done, they face at a significant disadvantage. Innovation costs capital, and capital increases the price tag. The disadvantage is often magnified in the customer’s purchasing department because companies reward employees when they save money on the equipment they procure, whether it performs well or not. They’re motivated to buy cheap, not quality.

All this being said, you should consider the end goal in selecting machinery, which is to increase profits. The goal isn’t to get the process running. There are many ways to do that, not all of which make sense. For example, you could power a factory using the stream next to the facility, but this is an unreliable and inefficient way of producing electricity. The same goes with other systems, including bulk handling.

With your goal in mind, ask whether your procurement processes actually help get you there. Do they contribute toward long-term improvements that result in higher gains? Or do they solidify the status quo?

If you’re looking to lower the operational costs of your bulk-handling system, turn to BE&E. We believe in manufacturing equipment that benefits our customers in the long run. We’re continually innovating to produce the best bulk-handling systems on the market: the most efficient, the most reliable, and the easiest to maintain. We make it our aim to produce machines bar-none in performance.

If it’s improvement you want, talk to us today.

 

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