Archive for July, 2008

How does using e-procurement tools help make a company to become greener?

Thursday, July 31st, 2008

Companies have always struggled to make changes. I don’t know how many times I’ve heard someone say; become an agent of change? What the heck does that mean? Relative to becoming a green focused company or change agent without just being pegged as a green wash company may be the most difficult change to make. Not enough work has been done at the corporate level in order to provide the financial justification that becoming green can have on the company.

There are several opportunities in the use of e-procurement tools to support and advance companies green footprint if well thought out. The first is to deploy your e-procurement tools using green technology, or asking your Software as a Service (SaaS) provider to run their service on energy efficient hardware that is certified with an energy star. Another opportunity is to move your internal procurement to a hosted tool which stores all inforamtion electronically and as such eliminates reams of paper. This helps to support our forests. Additionally, use your e-procurement provider’s document management system to store your manuals, and policies, in easy to access e-documents and eliminate the vast libraries of paper documents that sit on shelves largely unused today.

Make it easier to procure products or increase spend using e-procurement tools than traditional methodologies. Set up departmental competitions and reward teams for savings, improved quality, time savings etc. when using e-procurement tools.

Making the commitment to be green is difficult, it requires thought and support from executive management. Think through other ways to do your job that support reduction of our carbon footprint and share then with you manager. Everyone doing a little can add up to a lot.

I look forward to your comments.

Ron Southard

What Categories should not be considered for e-procurement?

Wednesday, July 30th, 2008

In the retail environment, this is a very common question. Compared with other industries, retail has always suffered low margins and low profitability. The grocery segment in particular has struggled to drive one percent net profitability for years. With cost of goods generally between sixty five and eighty percent, the answer to the opening question should be none. Another unfortunate reality is that retail places much less of it’s spend under the management of these types of tools than any other industry. In fact in the mid to lower tier markets these tools are almost non existent.

Reality would dictate that retailers should keep an open mind and let a detailed discovery process determine the right categories. It may help to use a third party to conduct the discovery in order to eliminate bias from the process. Bias is usually driven by an attitude of; we always do it this way. Depending on whether the category of choice is a reduction to gross margin or in the cost of goods, it will have an impact on the bottom line providing all other lines of the P&L perform to plan. This author favors attacking above the line costs, but understands that certain below the line costs such as health care costs can be very attractive targets based on unrealistic cost escalation.

The following categories should not be overlooked during the discovery process as they offer a rich history of savings and cost avoidance.Seasonal Items,Private Label, uel ,Equipment,General Mdse ,Produce,Dry Goods ,Transportation,Seafood, Meat, aintenance,Construction,Office Supply’s,Pharmacy,Security and Floral.

A good way to begin is by asking your provider how they would like to conduct the discovery process. Who would you need to make available to them, where would they like access to, what inforamtion would they like and finally how they plan for a sustainable process moving forward.

I look forward to your comments.

Here are twenty reasons why all retailers should use E-Procurement tools now.

Tuesday, July 29th, 2008

Sometimes the detail gets lost in translation, so for those of you that are following on a daily basis here is a simple list. These are certainly not all of the benefits that retail can drive from the use of e-procurement tools, but it is a good starting point.

Since this is not Late Night with David Letterman, our list is not ranked in order of importance although many might argue that not much is more important than improved earnings.

1. Guaranteed to improve net earnings
2. Guaranteed to improve safety
3. Guaranteed to improve Corporate Social Responsibility.
4. Guaranteed new sources of supply
5. Retail has less spend assigned than any other industry
6. Streamlines the procurement process
7. Holds suppliers accountable to your standards.
8. Improves quality
9. Coast avoidance in a volatile market
10. Creates a competitive environment
11. Drives reliable market pricing
12. Maintains a reliable history for future comparison
13. Educates suppliers as to how retailers wish to procure products
14. Supplier training eliminates questions
15. Improved and consistent product specifications
16. Improved negotiation.
17. Improve carbon footprint
18. Simple award of business process
19. Frees up time for other tasks
20. Works for procurement of all product categories

This author is not sure why a derivative of this list could not become the mission statement for any procurement department.

I look for ward to your comments.

Ron Southard

When you’re In Mexico, A question of more than just food safety.

Monday, July 28th, 2008

The old saying goes, “When in Rome, do as the Romans do.” This quote is used to guide people to adapt to the culture of places that they visit. So I guess according to the Food and Drug Administration (FDA), “When in America, only eat American grown jalapeño’s.”

Last week, the FDA cleared the U.S jalapeño crop which seems to have spared retailers and the produce industry from the fate of the Tomato crop. It is curious however that the amount of time it took the FDA to clear Tomato’s was so much longer than the time it took to clear jalapeño’s. That’s probably because of the size of the crop and the number of producers. Let’s hope that American producers don’t raise the price now because of increased demand.

Now the onus has been put on the consumer to determine where the peppers come from. When asked this question, Dr. David Acheson the FDA’s food safety chief said, you’re going to have to ask the person you are buying them from. Does that mean that since the FDA has said it is not safe to consume Mexican jalapeños’ that retailers are still allowed to buy them? Hopefully they are wearing sombreros.

This is one of the problems with product safety. Too many of the answers are not thought out and too much of the information occurs after the fact. In this author’s blog posting of July 11th, titled Holy Jalapeño I posited the following. It may take entrepreneurs to provide the answer. What is sorely needed is a database of manufacturers, suppliers, brokers, growers and products that can be searched in a variety of ways in order to trace goods to their original source of supply when situations like this occur. Safety is the key area of focus whether it is lead in toys or food-borne illnesses. It is incumbent on suppliers to provide this information freely and openly when it is asked of them. When a safety situation occurs the retailer-broker-supplier-distributor-grower chain can then be easily searched so that our limited government resources can be productive with their existing resources. Technology is the answer.

I have never intended for this blog to be a commercial for my company. However, SafeSourcing does have the beginnings of such a database with over 250,000 North American suppliers and another 9,000 from China. Today you can visit our website www.safesourcing.com and under the solutions tab select SafeSourceIt™ Query Tool. Once on the tool page, select major category grocery, sub category produce and country Mexico. In as little as 3 seconds you will know that there are 14 produce suppliers in this database from Mexico. The same query for the United States returns 672 suppliers. The database contains their address, phone number, email and other information. The next step we are working on is the traceability beyond two levels such as Retailer/Supplier. We would be happy to work with the FDA, USDA, Industry Groups or any other body to help provide an ultimate solution to the problem of safety and traceability. We are already part of the way there.

This is an industry problem that goes way beyond produce, to include problems such as lead in toys etc.

We look forward to you input, support and participation.

Ron Southard
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Have you ever looked at an audience and noticed that deer in the headlights look?

Friday, July 25th, 2008

It often bothers me when I am visiting with customers, prospects or at a speaking engagement that while explaining the benefits of a spending program like the benefits of Software as a Service (SaaS) offerings as it relates to the use of procurement tools, that I get that far away look and sometimes just disinterest by someone in the in the audience.

I have been around business long enough to know, and as one boss so blatantly told me; “it’s about the money”. I’m not quite so esoteric as to believe that there are not times when profitability can be challenged in favor of the general good. Wall Street however would not reward a company for it during earnings season. That said, this author certainly thinks that consumer safety and environmental protection are two areas where one could lean in that direction. If a company can pare these initiatives with an opportunity for increased earnings through a virtually guaranteed reduction in cost of goods, so much the better.

These three areas; CSR, Safety and earning improvement tied together should jump out at anyone in the procurement business or the executive suite. Imagine going to your CEO during the middle of a challenging quarter and saying we were just able to reduce costs this quarter by a million dollars or more and our products are now more environmentally friendly and meet more stringent safety standards. I know how I’d react.

I believe there are two many people that go to work each day with limited or no passion at all for what they do. After all it’s just work. Let’s just do it the same way we always have. They many times don’t completely understand the intricacy’s of their job, let alone the goals of their company. Every company on the planet has a mission statement. I’m pretty sure that all the top business schools have a course called mission statement 101.

The question is how many of your employees know it, believe it and practice it.

Keep an open mind, the next idea you hear may be a great one. It could even change the world we live in.

I look forward to your comments.

What is retail supply base management?

Thursday, July 24th, 2008

Let’s face it, for the almost 10 years the primary driver associated with reverse auctions or e-procurement events has been a reduction in cost of goods. In large part, if a retail company saved money it was deemed to be a good event for the retailer and vendor alike. But, what about the supplier?

Supply base management is creating a lot of buzz today as the next major addition to strategic sourcing suites. All vendors do not offer this functionality today; in fact some have trouble describing what it is. Although elements of this functionality exist within a variety of surround type service offerings, no one vendor offers complete functionality in this area today. A significant reason for this is the suppliers concern with the thought of being managed. Additionally, retailers, suppliers nor vendors have agreed as to what the correct Key Performance Indicators (KPI’s) should be. As these tools are developed, the most successful supply base management tools will be those that can manage the largest supplier database to the continual benefit of both retailers and suppliers that participate in their events. In a best case scenario, high quality suppliers will get invited to more events, earn incremental business and save retailers money on a continuous basis.

This author believes that the most probable result of this process will be a set of automated robust supplier scorecards that monitor and report on supplier performance versus a range of KPI’S that are applied against well known quality guidelines such as Total Quality Management (TQM), Six Sigma etc. resulting in continuous improvement in e-procurement events and growth in the amount of spend under management by retailers.

I look forward to your comments.

Retailers, are you thinking through e-procurement self service. If so, you should consider what constitutes event services. Are they really that important?

Wednesday, July 23rd, 2008

You bet they are. That is if you want to drive the greatest possible savings across the broadest range of categories; and have a sustainable process moving forward.

The question you need to be asking is what type of event services does my e-procurement provider offer? If you’re deciding to try self service, which is to be 100% self-sufficient. You need to know if your provider offers readily available classroom education that can be conducted on-site in order to train your team in all the nuances of event support. These skills are the foundation that allows e-procurement providers to support large volumes of events in a full service mode, which drive greater savings over the long term. Knowledge transfer in this area is one thing; the passion, skill and headcount to carry out these practices on a day by day basis are what drive results.

Typically event services falls into two broad categories:

1. Event management
2. Event monitoring and support.

Event management provides end to end e-sourcing support that begins with a companies overall strategy and ends with the actual execution of the e-procurement event. This is a true cross category effort that includes a rather lengthy list of services that may include buyer training, supplier selection, discovery, supplier communication and training and overall supplier expectation management.

Event monitoring and support is actually the tactical implementation of the over all e-procurement event management process. This may include all communications with suppliers on the day of an event including making sure they have access to the system, get logged in properly, don’t have problems placing quotes, monitoring supplier and buyer system communications techniques during an event such as notes and texting and being available post event for questions as needed.

These services are normally provided by people behind the scenes. If you plan to do self service it would be very wise to make sure you have them covered at the same quality level.

I look forward to your comments.

My thoughts on the use of e-procurement tools by retail collective buying organizations.

Tuesday, July 22nd, 2008

These business structures have been around for a long time. Many have evolved to use cutting edge e- procurement tools. Do their retailers also benefit from their use of these tools in order to reduce their net landed costs?

This author remembers being a young salesperson over 30 years ago (ouch!). I convinced a customer to buy some new point of sale equipment. I was really excited when I took the contract to the customer for signature. Once there, the retailer told me I had to get a purchase order from Cressy Dockham who was their wholesaler and they would tell me how much discount the retailer was to receive. Cressy Dockham is no longer in business today. They were located in Americus Georgia. I worked in Boston. Thus began a long relationship with collective buyers across all segments of the industry. Explanation of fees was always a part of the discussion.

These types of organization can go by a lot of different names such wholesaler, collective buyer, consortium, cooperative, share groups and more. They all have one thing in common. They consolidate purchasing volumes for a wide array of groups that may have very similar business structures, but can also be wildly different. Some retailers may actually belong to several different buying groups because their primary group does not offer expertise in a certain area.

Obviously, these organizations are not in business to lose money. There are some non profit membership organizations that do return earnings to their members on a pre-planned basis such as quarterly or annually.

As a result of volume consolidation or aggregation, these organizations often qualify for much larger discounts from manufacturers and suppliers than do their independent retailer partners. In many cases the full discount is not passed on to retailers in order to cover the cost of administering the programs. Additionally, other service fees may also be added to invoices.

Today’s advanced e-procurement tools make it much easier to accomplish collective buying. Large and small retailers alike now have the capability of viewing a much broader universe of suppliers while also coordinating and participating in collaborative events from hundreds if not thousands of miles away. Suppliers now have an opportunity to earn business they could never compete for in the past.

Retailers should ask their collective buyers how they plan to make the use of these tools available and how many suppliers they have to choose from by category.

I look forward to your comments.

Retailers and their consumers are all tired of high fuel prices? Most are not aware that we pay more during summer months for cleaner fuel?

Monday, July 21st, 2008

Most of us probably do not pay attention to the fact that gas prices rise each and every summer. The reasons are many, but primarily it is because summer fuel is more expensive to produce.

We all watch the price of oil on the open market, and its resulting impact on the economy as well as the price we pay at the pump. There are however a host of other reasons why the price of gas at the pump goes up during the summer for everyone. We all know that demand during the summer is higher do to more travel as a result of family vacations. Additionally, oil companies tend to conduct maintenance of their refineries in the spring which can also limit production and put pressure on supplies during a time of high demand. What many people are not aware of is that the fuel sold during the summer is actually different and more expensive to produce.

So, the fuel supply is different in the summer than it is in the winter. This began in 1995 as a result of the Reformulated Gasoline Program, which was established through the 1990 Clean Air Act Amendments. The (EPA) Environmental Protection Agency started the RFG program in order to reduce pollution and smog during the summer season which runs from June 1st to Sept. 15th.

There are a number of estimates as to the impact to consumers during summer months as a result of the increased production costs of summer fuel that range anywhere from 1 cent to as much as 15 cents per gallon. This author would bet on the later.

If you don’t like paying $4 per gallon, just wait a couple of months. Demand will fall, refineries will convert to winter fuel, the ozone will take a negative hit, but you’ll have a few more pennies or maybe even dollars to spend during the holiday season.

Oh, buy the way Retailers, August may be a good time to start thinking about contract buys for the next six months or longer. Lower demand plus a long term commitment equals potentially lower costs for your transportation needs.

I look forward to your comments.

Who gets hurt by a health scare? Actually more people than you might think.

Friday, July 18th, 2008

The simple answer is everyone. All interested or involved parties including growers, brokers, retailers, consumers, employees of each, emergency room workers and anyone else that has a vested interest due to a lack of food safety.

The most recent fall out from the salmonella out break that began in April is the Florida Growers asking the Federal Food and Drug Administration to declare there is no Salmonella in Florida tomato crops. The FDA has yet to prove that there is a link to the tomato, or the other crops they are now investigating, but they have also not ruled out tomatoes either. If they clear one state, I’m sure a flood of requests from other states as well a Mexico will follow right behind that announcement.

Consumers I’m sure are waiting for tomatoes to clear, but an all clear needs to take place when it is in fact an all clear. What does it say if Florida growers are cleared and a month later California is cleared but has lost much of their business to Florida? I’m sure the litigation attempts would be soon to follow.

At present there seems to be no potential wining solution for any of the groups involved.
Growers have lost revenue; retailers have lost revenue including sales of products affiliated with tomatoes. The FDA has lost man hours that could be focused on preventative tasks to outbreaks in the future, and the consumer to some extent has lost confidence in the safety of our food products.

There never seemed to be a better time to focus on a national or international supply chain database that would support traceability and safety standards that is accepted by everyone.

I look forward to your comments
Ron Southard…