Baseball and Procurement

January 16th, 2018

What you can learn in your business from the sport.

 

Today’s blog is by Margaret Stewart, Manager of HR and Administration at SafeSourcing Inc.

Baseball is widely considered America’s pastime with a colorful history and a nostalgic place in many people’s lives. Some of the lessons learned in baseball can also apply to everyday life, including your business. Here are quite a few common teachings that many of us learned from baseball and how they apply to your business.

  1. Hit a home run – to be very successful. This can mean successfully completing your project, gaining a new client, making your goals, or exceeding your goals. While just one person in baseball will hit a home run at a time, the whole team benefits. In business, the whole team can be responsible for hitting a home run.
  2. A ball park figure – an estimate. When this phrase is used, it can have a wide range of estimation. For example, a person may offer a ballpark figure for a new hire, which may cover a range of a few thousand dollars, whereas a ballpark figure of a company’s entire spend may range from several million dollars to tens of millions.
  3. Strike out – to fail. This phrase is often used in business, and especially sales. Often sales teams will try a pitch a few times, like in baseball, before they deem it a strike out and will not spend any more time or effort continuing, but rather try a new approach.
  4. Batting a thousand – maintaining a perfect record. This is when a person has been exceptionally successful in their ventures to a point where failure never seems to be an option. While such a high record in anything cannot be expected or maintained indefinitely, it is always a goal for everyone to strive for.
  5. Play hardball – use extreme measures to ensure success. This phase can be used to describe individuals or businesses that take more extreme stances when it comes to compromise. They may maintain a firm position on an offer, which may or may not work out in their favor.
  6. Go to bat for someone – to aid or support someone. This can describe when someone comes to your aid in some way, whether to reiterate strategies or points, defend positions, or just take some of the burden of a person or team for an amount of time.
  7. Throw a curve ball – to do something unexpected. This phase is very common in business and many businesses take great care to avoid curve balls, even hiring analysts and researchers to ensure no signs of an upcoming curveball were missed. However, like the definition states, curveballs refer to the unexpected, so being prepared for anything can help your organization combat any curve balls coming.
  8. On the ball – very aware, responsible, and intelligent. This phase in business is commonly used to describe a person or team who takes initiative, is proactive, or generally takes care of the things necessary without trouble, hassle, or complaint.

For more information on how SafeSourcing can help you cover your procurement bases, or on our Risk Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

 

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Where is the best place for retailers to spend their effort to improve profitability?

January 12th, 2018

This has always been a great question for retailers. Should we attack the bottom line by focusing on shrink, cost of goods or gross margin?

 

Todays post is a oldie but goody by Ronald D. Southard, CEO at SafeSourcing

Obviously all retail companies would like to focus on all three areas and there are even sub sections of these top line areas that we could spell out as needing attention. The challenge is where to deploy already taxed resources?

It does not require an accountant to figure this out. If we assume that COGS or cost of goods and services is about 75% of top line revenue that would result in a simple gross margin of 25%. Based on a number of industry reports we are also safe using a shrink number of 3% of top line revenue.

This author is aware that there area a few companies with shrink below 1% and cost of goods below 75% which means there are also companies with gross margin better than 25%. The obvious question is; are these companies that solution providers want to target for profit improvement sales? Probably not.

So let’s look at an example of shrink improvement with data analysis tools and process improvement tools versus cost compression with SaaS e-procurement tools. Let’s assume we have a company that does top line sales of $1B. Using a shrink number of 3% shrink would be $30M annually. If you were able to reduce shrink by a third in one year, profit improvement would be $10M. If this were a supermarket company with a 1% bottom line or $10M, improvement could be as much as 100%.

Now let’s take a look at reduction in cost. If we assume the same company has COGS of 75% or $750M and that we were only going to address 20% of that number or $150 and only reduce those costs by 20% which is slightly above industry averages the net profit improvement would be $30M or 300% improvement in year over year net profit. If we were only able to achieve 10% savings which is well below industry averages, net profit would improve by 150%.

I’ll leave the gross margin example for you to figure out. In the above case it is clear that attacking COGS has an impact on the bottom line of up to 3 to 1 versus addressing shrink with your already taxed resources.

If you are interested in an immediate impact to your bottom line, please contact a SafeSourcing Customer Services associate today.

We look forward to and appreciate your comments.

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Watch out that your Spend Cube does not overwhelm you!

January 11th, 2018

Spend cubes if built properly are great as long as they are managed regularly and reviewed often.

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing.

I’ve participated  in a lot of discussions lately about spend cubes, which can just as easily be called data cubes, because that is all they really are.

Just what is a spend cube?  In its most simple form it is a data set that includes information that when analyzed as a whole provides a better or more completed  picture of your spend universe such as the expense category.  Spend cubes help to identify opportunities within a broad category of products and services that may require more attention including going to market and ideally, when they should. Because  a spend cube includes vendor data, causal data,  and  other specifics such as commodity pressures relative to the related cost center being impacted, spend cubes by their nature are very complex.

Unfortunately good spend cubes as well as improperly built managed spend cubes can deteriorate over time based on a number of factors. Probably the primary reason is that the originating data was not complete to begin with or scrubbed properly in the first place. This is kind of a one bad apple can spoil the whole bunch issue or the wrong data bumping into the wrong data. Another reason may be that you don’t have all of the data that you need and therefore the result sets are compromised or left to conjecture that creates improperly built and executed sourcing strategies. Additionally there is the analyst’s interpretation of the data and to this author that is really the most important part once you get the data sources right (think ERP). This person or group of persons needs to know their stuff (industry and products) in order for the data to be interpreted properly. It’s pretty easy to read a GL and determine what suppliers you have been spending the most with. It’s an entirely different thing to understand what the market for a commodity that impacts that particular spend was doing during the last contract versus what it is doing now and how it is trending for the future. All of this has to be attached to specific sourcing unit activity. Think of it this way?  If your vendor does not invoice you at the unit level, where will you come up with corroborated unit spend from regardless as to whether it is a can of beans or a fork lift.

Ask your solutions provider where your data should come from, who will be interpreting your data and what data they will be interpreting. Also thinks start small.

If you’d like to learn more about how to optimize your spend data, contact SafeSouricng.

We look forward to and appreciate your comments.

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If you can improve profitability 73%, Why don’t more companies use reverse auctions and other e-procurement tools?

January 10th, 2018

Let’s review exactly what a reverse auction is, how simple they are to use and the potential financial benefits?

 

Todays post is from Ronald D. Southard, CEO at SafeSourcing Inc.

Todays reverse auctions are web/cloud based  Software as a Service (SaaS) offerings that are part of very sophisticated procure to pay applications that let retailers and other companies find the best suppliers for any resale or not for resale product or service they wish to source.  Using a web based reverse auction tool, retailers, other companies or groups of companies (Group Purchasing Organizations) can invite far more suppliers to take place in reverse auctions than they could possibly find or manage using traditional sourcing methodologies. During the reverse auction event they can review on one page all responses from suppliers, data about suppliers, notes from suppliers, product specifications and other necessary information at an instant. Upon auction conclusion which is typically less than 30 minutes retailers and other companies can review savings scenarios and award business from their desktop.

Now let’s get to the simple financial benefits. Let’s assume a $150M Retail Company with industry average earnings of one percent or $1.5M. Additionally cost of goods for this company is 70 percent or $105M. Let’s also assume this company were to only source ten percent of their for resale or above the gross margin line spend or roughly $11M. With below industry average savings of ten percent, total savings generated would be $1.1M which is a direct impact to net profitability. If all other segments of the P&L perform to plan and all savings are recovered during the same business calendar year net profitability would increase to $2.6M or a 73% improvement.

NO BS Here! If you don’t believe me, I will be glad to personally sit down with your CFO and Finance team and prove it to you!

Wen company’s  can begin almost immediately (SaaS/Cloud offering) with no risk (Cost Neutral Pilots)  and no IT involvement,why don’t more companies use reverse auctions and other e-procurement tools? That’s a great question!

If this author were you, I just could not ignore this type of opportunity. If you’d like to learn more, please contact a SafeSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

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If All Your Friends Jumped Off A Bridge

January 4th, 2018

Would you jump too?

 

Today’s post is by Dave Wenig, Vice President of Sales and Services at SafeSourcing.

“If all your friends jumped off a bridge, would you too?” Usually, when you hear a parent ask this question, then they are saying this because they don’t approve of the child’s decisions. While I understand the sentiment, I’d propose an alternative and that we think about this more in the sense of trying something new.

There are some who have still not jumped off the bridge into e-Procurement. Perhaps they look at their peers who have taken to using e-Procurement with the same dismissive view as the parent who is disappointed in their child. What they have probably not considered is that what they have deemed a questionable decision is actually very beneficial.

The difficult part is being open to alternatives. Many who do not use e-Procurement will point to their well-established procurement practices, their own experience, and their rolodex as the evidence that they should not even consider jumping off the bridge that their friends have jumped off.

But, by allowing for an open mind, you might come to realize that e-Procurement is also very well established, that the providers in the space such as SafeSourcing have incredible experience, and that your rolodex is important and will be included but will be augmented by vendors from a database with hundreds of thousands of global sources of supply.

I’m not suggesting that anyone blindly do as others do or succumb unnecessarily to peer pressure. I’m saying that anyone who has responsibility for purchasing has a fiduciary duty to examine all options. Sometimes, you’ll find that jumping off the bridge is the right thing to do.

For more information, please contact SafeSourcing.  We look forward to your comments.

 

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What is Shrink?

January 3rd, 2018

Inventory shrink is a loss of goods either due to theft, damages/spoilage or administrative errors

 

 

Today’s post is by Gayl Southard, Administrative Consultant at SafeSourcing.

“What is shrink? Inventory shrink is a loss of goods either due to theft, damages/spoilage or administrative errors on items moving from a manufacturing site to an end customer.  The shrinkage can be referred to as a hit to the margin or loss in profit.”1

  1. How do we Record Inventory Shrink? Between the last cycle count and the current period, your business may have Inventory loss. The physical Inventory is less than what is recorded in your books. “To account for this loss of Inventory via the perpetual accounting method, you would: increase the cost of goods sold and decrease the inventory but the difference for the recording period. Your balance sheet would show a credit to the inventory line then for the value that was lost. Showing that you have incurred higher expenses (cost of goods) and a lower gross profit will lower your taxable income.” You may prefer to record shrinkage separately. This would require IRS Form 4684 if your business is in the US.
  2. What Causes Shrink? Shrink is inevitable. It can be controlled through inventory management best practices. Shrink can occur by employ theft and fake sales. Retail theft may occur through petty theft, shoplifting, breaking and entering, and entering fake coupons. Shrink isn’t always caused by scams. It can be attributed to poorly designed operational procedures and standards. It causes a trickle down effect to the rest of the business including the warehouse and financial operations. Shrink can be managed by implementing internal controls. When hiring, conduct background and reference checks. Educate new employees on your policies and stance on employee theft. Some preventative steps may be surveillance cameras, valuable items secured in secured areas accessed by higher authoritative levels, separation of duties, anonymous reporting, checking on how trash is disposed, and audits.
  3. What Can be Done to Prevent Retail Theft? Using security cameras and mirrors through the space. Suspicious behavior may be spotted more easily. Bad promotion codes and fake coupons and online discount sites have increased the amount of manufacturing coupons on the net. Personnel will have to stay current with coupon scams.

For more information on SafeSourcing and how we can help you with your sourcing needs, or on our Risk Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

Resources:————————————————————-

1 Colleen Roderick’s, inFlow

 

 

 

 

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Happy New Year 2017. This year’s strategic sourcing plan should already be in place

January 2nd, 2018

Now you should be focused on tactics and execution.

 

What specific short term tactics will you deploy that support your plan and drive immediate and measureable results.

One example of the above might be to augment the manual processes that many  sourcing professionals use today in order to find new sources of supply interested in bidding for their business rather than continuing to live with the same small, known group of suppliers they have used for years. Historically this has been a very time consuming practice that results in few if any new sources of supply. This represents a great opportunity to deploy a tactic that can have an immediate impact for an organization without the need for the implementation of a complete new sourcing strategy.

There is a specific process to follow that will encourage new sources of supply to want to bid for a companies business beyond just being invited. Simply having your buyer assigned the task of picking up the phone and calling new sources of supply will not result in new suppliers agreeing to bid for your business. There are specific objections to overcome and questions to answer that require a specific skill set.  This is a perfect opportunity for Software as a Service providers that offer supplier research. Skilled providers in this area can provide companies with as many as a half dozen or more willing new sources of supply in as little as thirty minutes  that may in fact reside within a companies existing marketing  area.

Sourcing tactics can be isolated procurement related actions or events that take advantage of opportunities offered by the gaps within strategic plans such as lack of new sources of supply mentioned above.  So our tactic here would be to find additional sources of supply that we can invite to compete for a companies business in a variety of categories. The fact is that additional sources of supply competing for a companies business results in compressed pricing and often better quality products.

We appreciate and look forward to your comments.

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HAPPY NEW YEAR 2018 from Safesourcing; Your GLOBAL SOURCING PARTNER!

January 1st, 2018

No matter your location or language, the world is not really that big of a place anymore. Consider your global sourcing alternatives!

picture of world

If you’d like to learn more about alternative sources of supply around the world or locally, contact a SafeSourcing customer services account manager to learn more about SafeSourceIt™ our 427,000 global supplier database and let us translate it into increased profits for you.

We look forward to and appreciate your comments.

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The SafeSourcing Way

December 29th, 2017

The Value of a Warm Welcome.

 

Today’s post is from our SafeSourcing Archives.

In a rapidly evolving world, are we losing the art of welcoming someone into a new situation? Is our culture too casual in the way we conduct business or form meaningful relationships? Have we taken for granted the meaningful notes and thoughtful extras that gives life meaning?

As of today, I’ve officially been employed at SafeSourcing for two weeks. As I reflect on the things that I learned over the last two weeks, it is only befitting to reflect on the warm welcome I felt on my first day; week. I walked into the office suite to notice a sign that read, “Welcome to SafeSourcing Inc. Jericia Stevens” sitting on the front desk.

SafeSourcing knows the value of a Welcome. We want to ensure that our customers feel welcomed while we manage their procurement needs.

Our procurement team works diligently to provide our customers with quality training and customer service. Our flexible service offerings and suite of e- procurement tools deliver the savings that can be referenced that are greater than 10 times the cost of our services.

We work closely together and make sure that we all have a role in providing our customers with the best value for their product and services.

I am glad to be a part of a company that knows the value of a welcome. Partner with us and experience The SafeSourcing Way. Let SafeSourcing manage your sourcing projects. We enjoy bringing this blog to you every week and hope you find value in it. For more information on how we can help you with your procurement needs or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative.

 

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Is it time to Plan Your Procurement. You’re already late!

December 28th, 2017

Do you have your procurement planned for 2018?

 

Today’s blog is by Margaret Stewart, Manager of HR and Executive Assistant at SafeSourcing.

With the year coming to a close, many companies are focusing on the upcoming year and what changes they may have in store. Whether the change is increasing head count in the office, opening more locations, or even trying out a new product in your store, changes need to be planned out.

Typically, a business needs to plan for its year financially, budgeting money for labor and overhead and trying to plan for goods and services expenses, plus any changes they foresee in the upcoming year. Opening new locations, buying new products, and hiring more employees require financial planning.

With all the other planning at year end, what many companies overlook, though, is planning for procurement. If a company will need temporary labor in the next year, they should reach out to their procurement partner sooner rather than later to identify needs. A procurement partner can help get the right services for you at a competitive price. If, like many other businesses, a company needs to hire landscapers to maintain company property in the spring and snow removal companies in the winter, now is the time to begin the procurement process.

With proper planning and with help from your procurement team, your company can not only have the financial year planned, but also have vendors and suppliers in place ready to begin whatever work might need done. On top of that, many of those suppliers and vendors could be even less than you initially thought, all through the help of your procurement partner and tools like the ones offered by SafeSourcing. This could, in turn, lead to even more financial means to grow your company even more in the upcoming years.

For more information on how SafeSourcing can help with your procurement needs, or on our Risk Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

We appreciate and look forward to your comments!

 

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