The components of information

August 22nd, 2019

Avoid communication mistakes through negative entropy!

 

 

Today’s post is from our SafeSourcing Archives

Communication is a funny thing. We communicate day in and day out, most of the time successfully, but it’s easy to think of examples where our message has not be received as intended, or we just weren’t able to pick up what someone else was trying to communicate to us. Much of the time, we find that the fundamental issue in miscommunication is that the message giver and the message receiver have different understandings of the concepts being traded back and forth. For example, one person’s idea of “love” looks completely different from someone raised in a family that expressed love in a totally different way. Another simple example could be if you’re sent to the grocery store with instructions to get “apples”. In your mind, when you hear the word “apple” you have a picture of a Honey Crisp apple, but the person who sent the request has an image in their mind of green Granny Smith apples. All communication is based on templates stored in our minds, on hard drives, on documents, etc. And if we don’t understand what information IS, we’re bound to make mistakes in how we trade it with others in our professional lives.

Information, generally speaking, is a representation of other objects stored within a physical medium. All information is stored in physical objects, such as hard drives, CD’s, brain cells, etc. The higher fidelity of information is stored, the more accurately it represents the object of its focus. For instance, a picture of a widget in low definition, and vague description in a specifications sheet, won’t represent that widget as well as a high definition picture, with several pages of precise descriptors. Similarly, a cell phone recording of a symphony won’t represent the event as well as an IMAX recording would. But the IMAX data will be potentially thousands of times larger, because it takes larger physical space, to record information at higher fidelity. This is because the more possibilities your information CAN’T represent, the more detailed it has to be and the more likely it can only represent what you intend it to.

In the Information Theory context, entropy can be defined as the delta of change from order, to disorder/randomness. Information entropy is the average information of all possible outcomes. In other words, information is most precise, when it disqualifies EVERY possibility other than the very specific one it is trying to represent. If the information you are sending could mean any one of a dozen things, you are bound to have some unavoidable margin of error in communicating to your audience. The tricky thing though, is there’s a tradeoff.

The greater fidelity the information is, more precise your communication will be. However, this increases the size of the information content, making it more difficult to manage, decode, or asses. The tradeoff is that the more precise the information, the more difficult to use. How this translates into procurement specifically, is that there will always be some margin of ambiguity in any specifications document. However, that doesn’t mean an RFP can’t be flexible enough to meet a buyer’s needs. Here are a few ways procurement professionals can make sure their documentation avoids falling into some of the common communication pitfalls inherent to the transfer of information:

  • Identify the most important attributes, and focus your specifications on those. For instance, perhaps the business goal of the purchase doesn’t depend at all on color, or pack size, or the availability of support staff. Keep the more detailed information limited to the important attributes.
  • Add flexibility to your bid for consideration of equivalent products. Sometimes being too specific means that a vendor who may have a superior product to offer, isn’t able to propose his alternative if a specification calls for an exact match to a lesser product.
  • Ask yourself “would something I wouldn’t want qualify under the specifications I’m creating?” Remember, information should guide your audience to a specific concept, and disqualify all other possible concepts, as much as is possible without overburdening your audience.

For more information on how SafeSourcing can assist your team with this process or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.

Banning the Ban

August 21st, 2019

It’s been almost a year since my previous blog, “Zero Waste Initiative”

 

 

Today’s post is written by Ivy Ray, Senior Procurement Specialist at SafeSourcing Inc.

It’s been almost a year since my previous blog, “Zero Waste Initiative”, in which I discussed the move by several retailers to begin phasing out their plastic bag use. Now, in addition to the global concerns about the impact of plastic on the oceans and ecosystems, there is a new plastic crisis regarding plastic’s contribution to global greenhouse gas emissions and climate change.

According to the Center for International Environmental Law (CIEL), in 2019 alone, the production and incineration of plastic will add more than 850 million metric tons of greenhouse gases to the atmosphere which is equal to the pollution from 189 new 500-megawatt coal-fired power plants. The CIEL report Plastic & Climate: The Hidden Costs of a Plastic Planet, states that if plastic production and use grow as currently planned, by 2050, these emissions could reach 2.75 billion metric tons of CO2e from plastic production and incineration.

In the “Micro-bead Free Waters Act of 2015” the federal government banned the sale and use of rinse-off cosmetics that contain plastic microbeads. Washington, D.C., has enacted a bag fee to incentivize consumers to bring reusable bags when shopping. California was the first state to ban the use of plastic. New York and hundreds of municipalities across the U.S. ban or fine the use of plastic in some way. In seventeen other states there are those who argue that it is illegal to ban plastic items and are enacting old policy to place a ban on the ban of plastics.

Matt Seaholm, Executive Director of the American Plastic Bags Associations (APBA) says that the ban on plastics hurts the smaller businesses making it more costly for them to comply. The APBA proactively promotes and leads numerous public policy initiatives that serve as the frontline defense against plastic bag bans and taxes nationwide. Without universal laws across the country for plastic use, retailers with stores in multiple jurisdictions would find it difficult to adhere to different processes in multiple locations. According to Seaholm, more energy is used to produce replacement paper or cloth bags and that a ban will do little to impact overall litter and waste.

National Geographic hosts a multiyear effort to raise awareness about the global plastic trash crisis, “Plastic or Planet” which is very informative on the environmental impact of plastic, and challenges the community to find ways to reduce the amount of single-use plastic in their lives.

Plastic has become such an entrenched part of our lives, it is nearly impossible for us to live 100% free of plastic. It will be a long slow process that will involve a global effort in order to come to a resolution.

SafeSourcing has sourced plastic bags, paper bags, and reusable bags for our clients. Find the product that works for you, but remember to reduce, reuse, and recycle.

For more information on how SafeSourcing can assist you in exploring your procurement solutions for your business efforts, 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 look forward to your comments.

References ……………………………………………………………………

  1. https://www.ciel.org/news/plasticandclimate/
  2. https://www.nationalgeographic.com/environment/2019/08/map-shows-the-complicated-landscape-of-plastic-bans/
  3. https://www.nationalgeographic.com/environment/planetorplastic/

Baseball Season and eProcurement Part 5

August 19th, 2019

A doubleheader with Home Runs and Grand Slams

 

 

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

Welcome to today’s doubleheader. In this final post in the Baseball Season and eProcurement series, we’ll focus on the two most sought after outcomes of an online Request for Quote (RFQ) Event. In the previous posts in this series, we highlighted some examples of how SafeSourcing customers have achieved and enjoyed hitting singles, doubles, and triples in their RFQ Events. At SafeSourcing, a Home Run is achieved when a customer saves between 20% and 24.99% and a Grand Slam is when savings over 25% is achieved.

Home Runs are excellent. It’s a great achievement to save over 20% on a category. Very recently, one of our customers saved over 23% on their uniform purchases. They worked with SafeSourcing to identify the different types of garments that were required and invited several well qualified vendors to participate in the RFQ. This was good exercise for all parties. In the end, the incumbent vendor was able to retain their business through the process. The vendor participated actively and was the lowest company overall which makes the award of business decision very easy.

As great as a Home Run is, Grand Slams are even better. Any time you’re able to reduce costs for a category by over 25%, that’s very exciting. Grand Slams can also be an eye-opening experience for the customers. Certainly, nobody wants to find out that they have been overpaying by 25% or more for any length of time, but that is essentially what might come to mind when a customer achieves a Grand Slam. The reality is that there are a number of factors that go into why savings levels are often so high and this kind of savings shouldn’t be considered as a negative reflection of the capabilities of the buyer or business owner responsible for the spend. One of the strongest factors that leads to a Grand Slam is the use of the RFQ tool and process. Causing open competition leads to maximum savings. Further, when that competition includes a wider selection of potential vendors, the results are compounded. There are more factors too, but these two are very significant.

One clear example of a Grand Slam that supports these points is in the recent project that we completed for a customer covering their Employee Assistance Program. This project was run in two phases. The first phase was an RFP to validate that the potential vendors were able to provide services as required by the customer and to learn about how the services would be delivered. This was important because the customer already had a partner for these services, but they were not aware of alternative vendors or the capabilities they could offer. Once the RFP was completed, select participating vendors were then selected to be invited to participate in a live RFQ for the same project. This was a critical step. As a result of the process, the customer was able to identify several potential partners to choose from for their ultimate award of business. The lowest offering that was already qualified by the RFP offered a 56% savings. Other vendors also finished the RFQ with similar offers. For the customer, that represents a seven-figure cost reduction. That’s a Grand Slam, and they are very common.

At the end of this series, the hope is that we’ve reviewed enough opportunities and examples to illustrate the following point. Cost savings come in a wide variety of categories and amounts. The common thread between all of the examples is that they were valuable for the customer who benefits from the cost savings. Every organization can benefit from savings like what has been illustrated here. Take a moment and consider if you are achieving results like these yourself.

Contact SafeSourcing, Inc. if you’re interested in learning more about how RFQ Events can help your company advance the bases and achieve savings.

 

 

 

Procure and purchase Part II of II

August 16th, 2019

Procurement is the same thing as purchasing - right?

 

 

 

Today’s Post is by Eli Razov, Senior Account Manager at SafeSourcing Inc.

In part I of todays post we discussed our process. Today we discuss the purchasing process

The Purchasing Process

Purchasing is just part of the entire process. Think of it as the final piece to the puzzle. You have figured out what you want, who to get it from, what they will charge you, and now you just need to obtain that good or service. The simplified steps to that final piece can be seen below:

  • Purchase Order Acknowledgement
  • Advance Shipment Notice
  • Goods Receipt
  • Invoice Recording
  • 3-Way Match
  • Payment to Supplier

Often times companies will allow the General Manager or head of that location decide on where to go for what is needed. This can increase costs up to three times more than if the company combined its buying power. This can also be avoided by implementing the procurement methods explained above.

Because purchasing is part of the procurement process, both procurement and purchasing are often used interchangeably. In the business world, the practice of using similar terminology in either conversation or printed materials is routine, although it is often confusing and should be avoided.

Purchasing:

The activity of acquiring goods or services to accomplish the goals of an organization.

The major objectives of purchasing are to maintain the quality and value of a company’s products, minimize cash tied-up in inventory, maintain the flow of inputs to maintain the flow of outputs, and strengthen the organization’s competitive position.

Procurement:

The act of obtaining or buying goods and services. The process includes preparation and processing of a demand as well as the end receipt and approval of payment.

For more information on how SafeSourcing can assist you or on our “Risk Free” trial program, please contact SafeSourcing  we have an entire team waiting to assist you today.

Citation and References:

  • http://www.businessdictionary.com/definition/purchasing.html
  • http://www.businessdictionary.com/definition/procurement.html

 

 

Procure and purchase Part I of II

August 14th, 2019

Procurement is the same thing as purchasing - right?

 

 

Today’s Post is by Eli Razov, Senior Account Manager at SafeSourcing Inc.

Procurement is the same thing as purchasing – right? While similar in some ways, the two are different parts of an entire process. I would like to help draw that line that separates the two. This process begins with finding the need and ending with the solution to that need, be it a good or service. There are quite a few steps in the “procurement process”, including selecting and vetting vendors, establishing terms and conditions, vendor and client communication, and finally implementation. Below you can see our standard procurement process.

Our Procurement Process:

Investigation

  • Client identifies a category they would like to take to market
  • Data gathered on current spend, vendors, contracts and policies
  • Subject Matter – Expert is assigned and project team is formed

Notification

  • Internal notice sent on expenditures under review (if needed)
  • Request for current vendors and additional information is made

Information Gathering

  • All internal feedback reviewed
  • New event specifications established

RFx Strategy & Setup

  • Communication
    • Incumbents notified of policy for spend, suppliers invited to participate in the event
    • Answer supplier questions, train suppliers and collect samples as required

Vendor Selection

  • Event is executed – results are analyzed, possible testing, information to Client News
  • Send supplier thank you and surveys
  • Select vendor to enter into a new contract

Implementation

  • Proposed contract details sent to selected vendor
  • Effective date established.

While this is a very simplified list, your company’s needs may be the determining factor of the procurement process. If you work for a big corporation, there may be more steps including Non- Disclosure Agreements, stronger qualifier questions for the intended vendors, and prolonged contract discussions. If your company is smaller, the process can often times be a lot quicker.

Check Back Tomorrow for Part II or II The Purchasing Process.

For more information on how SafeSourcing can assist you or on our “Risk Free” trial program, please contact SafeSourcing  we have an entire team waiting to assist you today.

Citation and References……………………………………………………………………………………

  • http://www.businessdictionary.com/definition/purchasing.html
  • http://www.businessdictionary.com/definition/procurement.html

 

 

It’s a real crime that so many companies continue to stay on the sidelines!

August 13th, 2019

Particularly when they could have an ROI of 17X or greater and an immediate improvement to their bottom line?

 

 

Todays post is from Ron Southard CEO at SafeSourcing

Unfortunately some 70% of companies still do not use eprocurement tools. If they did, their results would be better. SafeSourcing can give you customer references that exceed the 17X ROI mentioned above. So what happens when you combine your spend with another company?

Generally speaking, the greater the spend amount, the more interest you will get from potential vendors. As a result, many of our customers have been turning to collaborative eProcurement events in order to benefit from the additional savings that higher volumes can generate. Let’s take a look at a few of the benefits of getting involved.

1. Higher savings due to aggregate volumes
2. Improved payment terms
3. Larger vendor pool
4. Greater ROI
5. Source smaller category spends

Based on the five benefits listed above, perhaps it’s time to try a collaborative event. You may ask; “how would we become involved?” The answer is simple. Contact your SafeSourcing customer services representative and ask if there are any open or upcoming opportunities in which you could participate. Similarly, if you have any upcoming projects either large or small, ask your partner to attempt collaboration within their customer base.

Here’s an example of savings generated from a recent collaboration. In this scenario, our customer was in need of a relatively small spot buy for replenishment purposes. Their spend in this category was actually quite low and was actually the lowest overall amongst the participating companies. In this example, the customer saved almost 37%. I find it difficult to imagine that they would have done so well without the eProcurement process. Further, this is evidence of the benefits of the collaborative process as their pricing was likely much better off as a result of the aggregated spend.

So, are you ready to get involved, or will you continue to stand on the sidelines?

We look forward to and appreciate your comments.

Retailers should have continuing success when re-running prior e-procurement events.

August 12th, 2019

One area of commonality that has historically made this a difficult task is the lack of new suppliers.

 

Today’s is a short post from Ron Southard, CEO at SafeSourcing in response to a customers question.

There is a proper way to insure the sustainability of your strategic sourcing or reverse auction events going forward.  Since you have already conducted or should have conducted your detailed discovery and analysis, a robust supplier database should permit you to do the following.

1. Conduct a detailed supplier discovery
a. Rank suppliers by
i. Size
ii. Experience
iii. References
iv. Environmental certifications
v. Safety Certifications
vi. Coverage area
2. Develop a three year supplier game plan
a. Develop a three year time line  for all categories
b. Identify suppliers for each event over the three years
c. Develop a three year supplier rotation schedule for those suppliers.
3. Role play internally  each year for a test category
a. Ask the following questions
i. Who will you invite and why
ii. Keep in mind the unique benefits of distributors and manufacturers
iii. Discuss award the business strategies
iv. Review alternative scenarios
v. Review impact on non awarded suppliers
vi. Determine which suppliers will be invited back and why
vii. Determine what new suppliers from your database search will be  invited next year.

If you’d like some help building this into a process that will work over and over again, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

We’ve all heard about the wild blue yonder. But what is Blue Ocean Strategy?

August 7th, 2019

Believe it or not, most companies can still not tell you exactly what a 2PL or a 3PL is and what they do, so how often do you hear about 4PL’s.

 

Todays repost is fro Ronald D. Southard, CEO at SafeSourcing Inc. in 2014 and still relevant today.

4PL’s or fourth generation logistics providers are the newest (although not that new) of logistics providers and typically they are a consulting firm that brings together the resources of other providers such as 2PL’s and 3PL’s to drive world class logistics performance. This might include global or local companies that are focused on air transportation; ground transportation as well as ocean bound freight. The goal of these organizations is to piece together solutions rather than to develop or own them. Without assets, 4PL’s can change quickly as performance and demand dictates.

With a good 4PL in place companies typically are not bound by their traditional marketing areas and can create new demand in areas they may have never conducted business in before. This is referred to as Blue Ocean Strategy.

According to Wikipedia, Blue Ocean Strategy is a business strategy book first published in 2005 and written by W. Chan Kim and Renée Mauborgne of The Blue Ocean Strategy Institute at INSEAD. The book illustrates what the authors believe is the high growth and profits an organization can generate by creating new demand in an uncontested market space, or a “Blue Ocean”.

How are you managing your logistics requirements? If you’d like some guidance before you just jump in and get overwhelmed, please contact a SafeSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

Enterprise Software RFPs

August 2nd, 2019

How are RFPs for enterprise software different than other RFPs?"

 

Todays post is from Ron Southard, CEO at SafeSourcing

We’ve discussed the differences between the RFPs, RFIs, RFQs, and Surveys many time and also touched on why they were different as well as when you would use one.  What we said then was that you typically want to run one of these events when you have an idea about the basic functionality of a product you need but are not sure who can provide it and what else it is they can bring that you didn’t think of.

In many cases, the road to procuring enterprise software will require one of these tools due, in part, to the fact that software can change so quickly, but also because typical decision factors like price play a much smaller role to the features and functionality of the software.

In preparing to make a major software purchase a Request for Information or Proposal can be a great first step.  Here are some things to keep in mind about the solution and the company when preparing for one.

Flexibility – One of the keys in the process of evaluating software solutions and the companies that create them is to gather information about the flexibility of the product.  A focus on how configurable the system is and how well a solution can be fitted with your company’s needs and appearance is an important part to building a good software RFP/RFI.

Reputation – A company’s reputation for delivery used to go a long way in the business world but in the wake of a tougher economy price has begun to gain ground.  In the arena of software, it is still one of the most important factors to evaluate when selecting a software partner.  Building a relationship with companies known for under promising and over delivering on a consistent and referenceable level can be a huge factor in protecting a million dollar investment.

Pricing model – The key here is not in the actual price but how the company prices that is important.  Your company’s needs will dictate the pricing model that benefits your company whether for the enterprise; per seat or per user.  How a software provider prices and what they charge you for are HUGE factors in determining if they are suited for you and your company. The more information you can gather at the RFP/RFI stage as possible is very important.

Support – There is no more important product to verify good support on than software.  As upgrades occur, employees get promoted or leave the company, new employees need training, or issues arise, the level of support a company will commit to is critical to the confidence you can place in them.  On top of this, the more mission critical the functionality the software is to support is for your company, the more important the level of support becomes.  Any software RFP/RFI you create should have a detailed section to determine what level of support you can expect from each vendor.

For more information on SafeSourcing and how we can provide RFIs/RFPs that help you focus on these important factors, please contact a SafeSourcing Customer Service Representative.

We look forward to your comments.

The Benefits of Contract Management

August 1st, 2019

Buyers rely on contracts with suppliers to keep their business going

 

 

Today’s post is our SafeSourcing Archives

Buyers rely on contracts with suppliers to keep their business going. Shippers, vendors, outsourced services and independent contractors all require a high level of contract management system to maintain efficient relationships for their organization. Understanding the impact of poor contract administration on their organization can justify the investment in comprehensive contract management services.  However, one of the biggest pitfalls of not having a contract management system in place is the risk of a contract expiring without the buyer realizing it and thus the buyer being in the control of the supplier to either keep goods and services coming or deliveries just stop since the contract came to the end of the term date.

A contract is drawn up to create the guidelines for a business relationship. When you abide by the terms of the contract, you reap the benefits that it has to offer. But poor contract administration can cause you to violate terms of your contract, which can lead to penalties, fines and a potential lawsuit. Each move made with a contracted entity should be dictated by good contract management to avoid the high cost of the contract penalty clause.

An efficient contracted relationship includes a reporting system that informs both parties of activity performed under the contract. Without this reporting, the two sides have no way of monitoring the benefits of the agreement and developing any changes to make when the agreement comes up for renewal. Effective reporting also keeps track of quantities that helps each side monitor their usage and determine when contract limits may have been met.  Poor contract administration can cause each side of an agreement to lose track of the contract term. Companies can get caught up in the daily routine of doing business and lose sight of contract renewal dates. With a relaxed or no contract management system in place, companies could be operating under expired contracts and not realize it.

Fortune 1000 companies generate an average of 40,000 to 80,000 contracts; less than 80% of retailers have a Contract Management system in place.

  • Today’s Retail Environment
    •  Fragmented Contract Management Procedures
    •  Labor Intensive
    •  Lack of common systems infrastructure
    •  Poor contract visibility/analysis/compliance
  • Regulatory compliance
    •  Contracts dictate supplier-customer relationship
    •  Pricing, Terms
    •  Service levels, Quality
  •  Forcing companies to strengthen contract policies
    •  Document procedures
    •  Track and control financial exposure
    •  Mitigate risk
  •  Sarbanes-Oxley
    •  Every Transaction
      •  Approved/Stored/Reported

How to avoid accidentally extending an expired contract is the key to ensuring that an expired contract isn’t kept on foot is to engage in good contract management. Know your contract and monitor contract performance. Be aware of deadlines and notice period and communicate and document any changes.L

If you are planning to explore the benefits of contract management, feel free to contact SafeSourcing.   If you would like more information on how SafeSourcing can help you with a contract management system, please contact a SafeSourcing Customer Service representative.  We have an entire team ready to assist you today.

We look forward to your comments.