Archive for December, 2008

SafeSourcing hopes the Holidays can be a source of peace on earth and good will toward all people.

Wednesday, December 24th, 2008

While this blogger is enjoying a long winter’s nap through the holidays, please continue to enjoy “On the twelve days of retail e-procurement Christmas” which is the 12 days from December 25th until January 5th. We will begin to explore the many more gifts e-procurement can provide after the first of the New Year. Happy Holidays to all of you.

We’re sure you all remember the holiday classic” The twelve days of Christmas”. With that tune playing over and over in your head, try substituting the lyrics below to reveal the many gifts of retail e-procurement.

On the first day of Christmas our e-procurement service provider gave to us, a streamlined procurement process. On the second day of Christmas our e-procurement service provider gave to us, more suppliers to source our goods from. On the third day of Christmas our e-procurement service provider gave to us, more reliable market pricing. On the fourth day of Christmas our e-procurement service provider gave to us, consistent product specifications. On the fifth day of Christmas our e-procurement service supplier gave to us, more time for other priorities. On the sixth day of Christmas our e-procurement service provider gave to us, improving quality in our products. On the seventh day of Christmas our e-procurement service supplier gave to us, better supplier education. On the eighth day of Christmas our e-procurement service provider gave to us, a simple award of business process. On the ninth day of Christmas our e-procurement service provider gave to us, support for a better carbon footprint. On the tenth day of Christmas our e-procurement service supplier gave to us, total category e-procurement. On the eleventh day of Christmas our e-procurement service provider gave to us, safer products for our customers. On the twelfth day of Christmas our e-procurement service provider gave to us, great category savings and improving net earnings.

Now, ask yourself if all of these goals are accomplished on your company’s behalf by your present e-procurement service provider.

We look forward to and appreciate your comments. Happy Holidays.

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On the twelve days of retail e-procurement Christmas.

Monday, December 22nd, 2008

This author knows we have all heard the song “The twelve days of Christmas” many times. With that tune playing over and over in your head now, try substituting the lyrics below.

On the first day of Christmas our e-procurement service provider gave to us, a streamlined procurement process. On the second day of Christmas our e-procurement service provider gave to us, more suppliers to source our goods from. On the third day of Christmas our e-procurement service provider gave to us, more reliable market pricing. On the fourth day of Christmas our e-procurement service provider gave to us, consistent product specifications. On the fifth day of Christmas our e-procurement service supplier gave to us, more time for other priorities. On the sixth day of Christmas our e-procurement service provider gave to us, improving quality in our products. On the seventh day of Christmas our e-procurement service supplier gave to us, better supplier education. On the eighth day of Christmas our e-procurement service provider gave to us, a simple award of business process. On the ninth day of Christmas our e-procurement service provider gave to us, support for a better carbon footprint. On the tenth day of Christmas our e-procurement service supplier gave to us, total category e-procurement. On the eleventh day of Christmas our e-procurement service provider gave to us, safer products for our customers. On the twelfth day of Christmas our e-procurement service provider gave to us, great category savings and improving net earnings.

Now, ask yourself if all of these goals are accomplished on your company’s behalf by your present e-procurement service provider.

We look forward to and appreciate your comments.

Happy Holidays.

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Green is a holiday color right? Well here is a GREEN re-post of interest.

Friday, December 19th, 2008

The Greening of the Supply Chain: Mind your Three P’s.

What does it mean to go Green? I was reading the Aberdeen white paper Building a Green Supply Chain from March of this year and believe they may in a concise format have the best glossary of definitions as to the meaning of and impact on what it means to be Green. Their short but effective green glossary defines the following terms.

1. Corporate Social Responsibility (CSR) posits that companies have a responsibility to be social and environmental stewards and that having a positive impact on society and the planet is as important as profit.
2. Green refers to practices, processes and products that have a minimal impact on the health of the ecosystem. The emphasis is on non hazardous recyclable, reusable, and energy efficient products and processes.
3. Sustainability ensures the ability to meet present needs and profits, today, without compromising the ability to meet them tomorrow.
4. Triple Bottom Line (TBL) determines that business has positive impacts on the three P’s: people, profit and planet and is a standard framework for CSR agendas.

It might be interesting to ask CEO’s around the country if they agree with these definitions. Many probably do. The answer would however be a good indicator of a company’s commitment to being Green and not just caught up in green wash.

Yesterday Wal-Mart and Costco announced better than expected results for their past quarter and the stock market was delighted. What if their results had not been as good and same store sales were flat? But concurrently the companies offered guidance of the significant and positive impact they are having on the evolution of a green supply chain. Would Wall Street have reacted in the same way? Personally I think it highly unlikely.

The great news is that every day more and more emphasis is being placed on this subject by companies of all sizes.

We look forward to and appreciate your comments.

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Who’s managing your suppliers?

Thursday, December 18th, 2008

For nearly 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. What about the supplier? What makes it a positive for them?

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.

As always, we look forward to and appreciate your comments.

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Tag. You are it. Product safety risk concerns more than just food born illnesses.

Wednesday, December 17th, 2008

Do retail companies have an extended risk window from the sale of tainted foods? Please read on.

This author posed the above question just two days ago. Perhaps I should have expanded the subject beyond retail companies to all companies and all products.

Beyond the obvious social costs associated with responsibility and culpability in the sale and consumption of tainted foods and other products such as toys, the potential for huge litigation costs can put any company at risk for years after an incident actually happens. How traceable is your data?

In the Tuesday December 16th edition of USA TODAY it was reported that Mattel will pay $12M to 39 states to settle an investigation over Chinese-made lead tainted toys shipped to the USA during 2007. Mattel and its Fisher-Price unit recalled more than 21 million Chinese made toys last year.

As part of the agreement Mattel also agreed to lower the acceptable level of lead in toys shipped to the U.S. to 90 parts per million, down from 600 parts per million which is the federal standard until next year when it too will drop to 90 parts per million. I’m not sure I want any lead in my products please.

I wonder how many jobs could have been created with $12M in extra profit. According to IRS data 50% of the US makes below $32,000. If we use $32,000 as a base, $12M would create 375 jobs. The federal minimum wage is $6.55. For a forty hour week an extra $12M could provide enough money to generate 880 jobs. It does not solve our current economic condition, but baby steps certainly help.

In these tough economic times, there are certainly 800 people that would like a job. Are you comfortable that all of your products are as safe as they can be? Ask your spend management solution provider what they can do to help mitigate your future risk.

We look forward to and appreciate your comments.

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What certifications are included your e-procurement company’s database?

Tuesday, December 16th, 2008

What is your answer if a consumer asks you to explain what Certified Humane Raised and Handled means? What if the follow up is; do your products meet these standards?

The Safesourcing North American Supplier database includes more than 30 safety and environmental standards that suppliers are vetted against. The Certified Humane Raised and Handled® program is one of them.

The Certified Humane Raised and Handled® program is a certification and labeling program that is the only animal welfare label requiring the humane treatment of farm animals from birth through slaughter. The goal of the program is to improve the lives of farm animals by driving consumer demand for kinder and more responsible farm animal practices. When you see the Certified Humane Raised and Handled® label on a product you can be assured that the food products have come from facilities that meet precise, objective standards for farm animal treatment.

The Certified Humane Raised and Handled® label assures consumers:
• That the producer meets our standards and applies them to animals from birth through slaughter.
• Animals have ample space, shelter and gentle handling to limit stress.
• Ample fresh water and a healthy diet of quality feed, without added antibiotics or hormones.
• Cages, crates and tie stalls are among the forbidden practices, and animals must be free to do what comes naturally. For example, chickens are ale to flap their wings and dust bathe, and pigs have the space to move around and root.

We look forward to an appreciate your comments

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Something to think about? Do you have time to monitor your supplier’s safety performance?

Monday, December 15th, 2008

When we think about safety and environmental standards in the supply chain, I honestly believe that retailers say quietly to themselves; how are we supposed to monitor all this stuff with everything else we have to deal with in procuring products?

This author has written on this subject before, and as a TQM ands Six Sigma advocate, believe in the statement that you can not manage something that you do not measure.

The issue becomes more complex when you consider that data is required from your organization relative to the historical performance of existing suppliers, data from the supplier as to their own assessment of their historical performance and finally external data that neither may have at their finger tips.

When we talk about safety, the question that retailers need to ask suppliers is pretty simple. What certifications do you carry relative to food safety such as Safe Quality Foods (SQF), Global Food Safety Initiative (GFSI), American Humane Certified and many more? Another area to question should be regarding USDA and FDA inspection history.

Although Green Initiatives fall into the social consciousness area of a company, there are a variety of questions that can be asked in this area as well such as Green Seal, Eco-logo and Green Star certifications and participations.

It may be easier for retailers to rely on their e-procurement providers for this data if the provider has it included in their supplier database. Pre-populated e-procurement templates can act as a form of scorecard for existing suppliers and potential news sources of supply. This is actually a type of automated RFI process which can save retailers a lot of work and time when trying to find additional sources of supply or when trying to drive cost down with existing suppliers. These data may also help to protect retailers from harmful litigation when products end up not being as safe as promised.

Can your e-procurement provider provide these types of data on demand as a normal byproduct of your standard e-procurement process at no additional cost?

We look forward to and appreciate your comments.

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Do retail companies have an extended risk window from the sale of tainted foods?

Friday, December 12th, 2008

Beyond the obvious social costs associated with responsibility and culpability in the sale and consumption of tainted foods, the potential for huge litigation costs can put any company at risk for years after an incident actually happens. How traceable is your data?

In a recent issue in the The Arizona Republic there was a short article included in the week in review section titled Girl’s tainted-food death brings $13M settlement. This unfortunate incident actually occurred eight years ago at a Sizzler restaurant. The settlement was with the company’s meat supplier and others according to court records. Evidently, Brianna Kriefall did not even eat meat. She actually ate watermelon that had touched the tainted meat and passed away a week later. Additionally, one hundred and forty (140) other people became ill from the outbreak in two sizzler locations.

Today there continues to be an ongoing lawsuit where the national Sizzler chain and an insurance company are suing Excel Corporation a meat producer that is a subsidiary of Cargill Inc.

Beyond the settlement listed, additional costs such as the actual legal and related expenses associated with this case may never be known, but with retail industry net profit averaging about 3.4% you can bet the impact on earnings to be significant for some company.

In 2008 there have been more food borne illness scares worldwide than most of us can remember. Occurrences of salmonella caused illness, listeriosis, e.coli caused illness and illness associated with additives that don’t belong in consumable products like melamine have all occurred. And for those not in the consumables businesses there are other issues such as lead in toys. Who to fault is a longer discussion, but we can be sure of one thing. The first place a consumer will look is to the retailer that sold them the tainted product.

It is important to know where your products come from with a clear trail to the original source of supply, and what your suppliers are doing in the way of certifications such as GFSI and SQF to insure the quality of the food chain for retailers and their consumers. SafeSourcing is working to provide that information. If we do not have inforamtion readily available, suppliers go through a specific vetting of more than thirty (30) specific safety and environmental certifications to insure a greater level of traceability while also indicating a level of diligence on the part of a retailer that may mitigate some legal exposure.

As always, we look forward to and appreciate your comments.

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Internal collaboration should be common sense.

Thursday, December 11th, 2008

Collaboration with other internal departments is very critical for successful procurement strategies as it puts more spend available to suppliers resulting in potentially greater savings. Additionally, continuous process improvement strategies or sustainment initiatives may add additional savings that are commonly neglected in procurement ROI’s. According to Aberdeen, companies that collaborate save an average of 42% more than companies that do not. It also creates great education as to where there may be opportunities to collaborate externally. More on that later.

Although this brief refers to the print category specifically, the process offered can easily be applied to all categories and for those companies that are creative, to the same categories at non competing companies. A huge opportunity in the retail space is for smaller companies to combine their purchase volumes in order to drive higher savings. This same process has been used for years buy wholesalers and collective buyers that buy in volume from manufacturers, store the products, and ship on demand to the retailers they support. The question this begs is; do these volume based savings always make it to the independent retailer?

An example might be in the area of supplies. The category might be plastic or paper bags or both. All companies use them, and often they are of different quality. A potential scenario might be that Company “A” a 10 store independent, and company “B” a 5 store independent whose market areas do not overlap combine their purchases. This offers a larger volume to suppliers that may not have considered the geographic area of one or the other of these companies. Additional work may be done by your e-procurement provider to find suppliers that can source both paper and plastic bags. This may not have been considered in the past, and may offer another opportunity for increased savings based on the combined higher volumes.

Under certain market conditions it may not be possible for both companies to save significantly. In fact the benefit may end up being a better product for the same price, which can increase customer satisfaction and retention.

Make sure your e-procurement provider offers tools that allow for aggregating purchase and collaborating internally and externally. Also make sure they have an adequate source of supply and can search it by category to enable these types of events. You may find a few dollars in savings that were not available to you in the past.

As always, we look forward to and appreciate your comments.

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The business model of reverse auctions has many benefits for retailers.

Tuesday, December 9th, 2008

According to Wikipedia, a business model is a framework for creating economic, social, and/or other forms of value. The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.

Often times during this author’s discussion with retailers the question comes up as to the benefits of the reverse auction business model or that of other e-procurement events such as Requests for Information or RFI’S.

This author will make the assumption that there is common agreement that price compression in today’s world is critical and that the reduction in cost of goods and services is the largest area of opportunity on a retail P&L. As such, there are a number of reasons that the reverse auction business model works well within organizations that should drive the strategic growth in utilization of this business model within retail.

A few and certainly not all are listed below in no particular order…

1. A larger number of buyers. Because of an increased number of suppliers bidding for a retailers business, getting a relatively low price is a given. The suppliers benefit because of the potential reduction is selling costs and easy access to new sources of business which encourages them to lower their pricing.
2. Location, Location, Location. In this case, location no longer matters. A supplier can participate from wherever they happen to be located. This opens up new potential markets for the supplier and new sources of supply for retailers.
3. It’s like a game: Participating suppliers wait to see if their price is the lowest much the same way a gambler would wait to see the turn of the next card when playing blackjack or poker. This is a social interaction and dynamic that builds on itself and can drive a larger number of bids and extensions while ultimately leading to lower pricing.
4. Early success drives a virtual circle for retailers and suppliers: The more a retailer uses the tool and the more success suppliers have with securing new business resulting from this process, the more the process will drive retailers to host new events and suppliers to participate in them again and again. Independent departmental successes can spread quickly within a retail company such that other departments not using the process do not want to be left out of potential savings opportunities and notoriety.

As always, we look forward to your comments.

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