What Categories should not be considered for e-procurement?

July 30th, 2008

In the retail environment

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.

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