COST SAVINGS, COST SAVINGS, COST SAVINGS!

November 20th, 2008

This author would like to know why this is not the most important initiative of all retail companies. Why do we fight it so?

I can meet with a retailer and roll out charts that reflect savings from recent reverse auctions of retailers in a similar format and geography that are as recent as twenty four hours ago. As real as those results are, it is still difficult for the retailer to pull the trigger to give a new process a try. This is even true for full service events offered in the form of Software as a Service. We just seem to get in our own way sometimes because we have important things to do. I sometimes wonder if there was ever a retailer or a prospective retailer that was directed by their CEO to bring in all companies that have a new way of doing things, and none of the companies that have been doing the same old thing for years, what the result of those meetings might be if implemented.

Sometimes we just make things to difficult. In this case let’s assume that the CEO directs that he or she would like the cost of goods reduced asap. The project is then assigned to the Senior Vice President of Supply Chain or Chief Logistics Officer or Chief Procurement Officer or other senior executive. This is further assigned to the Vice President of Purchasing who in turn assigns it to the director of supply purchases. The director convenes a meeting of the buyers or category managers responsible for a variety of supply categories. Now the excuses begin.

1. We can’t damage our relationship with our suppliers.
2. We get the best price in the industry right now.
3. These guys don’t know what they are talking about.
4. Don’t we have a tool that does this in our ERP system?
5. We’ll sacrifice quality.

I could go on an on with more excuses or objections, but I think most of you get my drift. Everyone has one. Have you ever heard the quote that “A camel is a horse created by committee”? Well, here we are in the stable and nothing has been done yet. But the dung is getting pretty strong.

If we go back to the CEO and explain what the situation is, one is likely to get a reply that says as the Nike commercial does; JUST DO IT! Unfortunately that needs to be followed by; DO IT KNOW!

From start to finish, a reverse auction should take no more than two weeks to run. This includes the entire process including and RFI if necessary from the day a retailer says go to the award of business. With that said, there are several requirements necessary to accomplish this. These eliminate the worry and mitigate the risk.

1. A robust supplier database with safety and environmental focus.
2. A robust event template library.
3. An intuitive or intelligent tool for building an event quickly.
4. An automated reporting tool to provide immediate event detail.

Stop the excuses. If you are really interested in improving your bottom line now while we are in the midst of an economic meltdown, you are less than two weeks away from immediate results. But you can not be a camel herder.

We appreciate and look forward to your comments.

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