Archive for January, 2009

Part Six a final look at five (5) specific procurement goals and resolutions for the New Year.

Monday, January 12th, 2009

Last week we discussed five specific procurement goals or resolutions for the New Year and followed up by taking a deeper look at goals two through four. Today we are going to discuss goal number one. Focus more on existing customers. Cater to existing clients as new business becomes scarcer.

As a recap from our original post the five procurement goals or resolutions for the New Year are as follows.

1. Focus more on existing customers
a. Cater to existing clients as new business becomes scarcer.
2. Look at ways to use new technology to save money
a. New open source software applications mean you don’t have to shell out a ton of money for license fees.
3. Make training a priority
a. Talented workers want to be challenged. Keep them happy by helping them develop new skills
4. Take a close look at your supplier chain
a. You can find ways to save money by reevaluating what suppliers are charging.
5. Create a small business network.
a. Collaborating with other businesses is one way to save money

Today we take a look at possibly the most important goal for any company as it heads into a new year. Focus more on existing customers. From a casual perspective many may not believe this has a whole lot to do with procurement. In fact, it has everything to do with procurement. Programs such as frequent shopper programs have been in place for many years that help retailers collect detailed data about their customers. If the information is complete enough, it allows retailers to analyze what deciles of their customers are buying what products and create unique merchandising or continuity programs that are intended to drive greater wallet share from the top deciles or those customers that do the majority of their shopping with that specific retailer.

If these programs are executed properly, products that have an affinity with another product family can also increase revenue and margin contribution at the same time. An example may be paring a product such as tortilla chips with a particular brand of beer and merchandising them in a unique way that uses end caps and signage to create brand loyalty for two separate products and increasing sales at the same time. These types of programs can also have a specific impact on customer satisfaction. Studies have indicated that a one percent increase in customer satisfaction can have a corresponding two percent impact on top line sales.

So, are your procurement plans in line with your marketing and merchandising plans? Are you using your procurement tools to drive the best margins possible for the products that your customers want and offering products with an affinity that makes so much sense to your top customers that they select the package without event thinking about it. If not, it may be time to realign your resolutions for the New Year.

We look forward to and appreciate your comments.

Share This Post

Part Five of continuing looks at specific procurement goals and resolutions for the New Year.

Friday, January 9th, 2009

In yesterday’s blog post, we looked at the procurement resolution or goal of taking a close look at your supplier chain, where you can find ways to save money by reevaluating what suppliers are charging. Today we are going to discuss goal number three. Make training a priority because talented workers want to be challenged. Keep them happy by helping them develop new skills.

This author began his career as a teacher. In fact, a history teacher. One of my favorite quotes comes from Aristotle who lived from 384 BC to 322 BC and nearly 2500 years later this quote it is still appropriate. “Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.”

The challenge with the above quote for all leaders of procurement knowledge workers is to provide an ongoing educational environment as part of the daily routine so that what was discussed during yesterdays post where we see coworkers every day that just like to come to work, do what they perceive to be their job and then head home. One reason this happens is because there is no challenge or fun it what they are doing. Repetitive tasks become boring. Training and education can provide the spark necessary to open a world of creativity that will benefit the entire company going forward.

The following are some creative ways to create a procurement departmental educational program without spending a lot of time or money.

1. Nominate a weekly rotating team educational leader
a. Responsible for a one hour weekly department training update
2. Assign the task of locating great education content on the web
a. Websites
i. Application Providers
ii. Trade Magazines
iii. Trade Organizations
iv. White Papers
b. Blogs
i. Spend Matters
ii. Sourcing Innovation
iii. SafeSourcing
c. Wiki’s
i. Wikipedia
ii. SafeSourcing Wiki
d. Collaborative Professional social communities
3. Select a different procurement subject for each weeks leader
a. The weekly team leader presents the weekly content gained from the above free locations in a one hour team meeting
4. Hold a monthly open web test for the entire department
a. The test can be taken at their own desk with use of their PC
b. Award prizes for a team test average of above 80%
i. Team Lunch
ii. Leave an hour early on Friday
iii. Be creative

If education is perceived to be fun and the entire team is involved in developing and participating in the program, the quality of the team will improve as will team communication and moral. It is however important not to rank individual team members or publish individual scores. This is not a competition. This exercise is about the team.

We look forward to and appreciate your comments

Share This Post

A Continuing look at specific procurement goals and resolutions for the New Year.

Thursday, January 8th, 2009

In yesterday’s blog post, we looked at the procurement resolution or goal of creating a small business network and collaborating creatively with them as one way to save money.
Today we are going to discuss goal number four. Take a close look at your supplier chain, where you can find ways to save money by reevaluating what suppliers are charging

Comfort is a wonderful thing. This author loves nothing more than being comfortable in a variety of situations. There is however a variety of places where to much comfort can also create complacency. We all see coworkers every day that just like to come to work, do what they perceive to be their job and then head home. Nothing extra is ever done, and few ideas come from these folks that are just comfortable with what they are doing. They do a good job at it, but that’s it.

Let’s apply this “I’m to busy” type of complacency to knowledge workers in the supply chain. If we are being honest with ourselves; we see this situation all the time.

Example: A buyer has a list of products or a category manager has a category that they are responsible for. There are only so many hours in the day and they have a job to do in order to get product to a distribution center, warehouse, store or some other location on time. They have done business with the same suppliers for a number of years. In fact the person in the job before them did business with these same suppliers and the person before that. So, let’s not rock the boat. It takes to much time to look for new sources of supply and after all one can only manage so many relationships. Finally the buyer is comfortable with product quality and pricing has not gone up to much over time. Let’s not even discuss that new product introductions are much easier with a supplier you already know.

With the help of your procurement provider, this situation is easily rectified. With that said, you have to be open to change. That is normally led from the top of the organization. The following is a partial list of what you can do to eliminate complacency and support the fact that you knowledge workers don’t have a lot of free time.

1. Provide your e-procurement company with a list of your suppliers by category.
2. Provide your e-procurement provider with a complete list of products carried by each supplier.
3. As your e-procurement provider to produce a list of new sources of supply located within a fifty mile radius of each distribution center or warehouse
4. Ask your e-procurement provider to provide data on each supplier’s including incumbent’s safety certifications such as GFSI and ISO.
5. Ask your e-procurement provider to provide supplier background information such as years in business and user references.
6. Select categories or products to source from your incumbents catalog and cross reference with new suppliers offerings.

The additional steps to this process can be provided by SafeSourcing as a part of our best practices deliverables which are included in our event pricing. The SafeSourceIt™ Supplier database includes over 300,000 global sources of supply that can be sorted by a variety of filters such as country, county, postal code or mileage from a particular location, plus many more.

We look forward to and appreciate your comments

Share This Post

Let’s take a more detailed look at our number five procurement goal or resolution for the New Year.

Wednesday, January 7th, 2009

In yesterday’s blog post, we looked at procurement resolution or goal of ways to use new technology to save money. Today we are going to discuss goal number five. “Creating a small business network and collaborating creatively with them is one way to save money”.

We often hear the term collaboration or collaborative partners or networks when we are discussing the supply chain. It rolls of everyone’s tongue like we all know what we are talking about. So this author took a look at Wikipedia hoping to gain some insight and clarity. According to Wikipedia, Collaboration is a recursive process where two or more people or organizations work together toward an intersection of common goals, and
An aggregate is a collection of items that are gathered together to form a total quantity.

Since collaboration only means different groups or organizations working together towards the same goal, that term can apply to just about any business function. However when we combine it with the word aggregate to form the collective e- procurement term Collaborative Aggregation which was coined by this author in 2006; we arrive at something potentially meaningful.

Collective buying organizations and sometimes share groups often combine purchasing volumes of like products to drive better discounts. Large companies often aggregate their purchases among departments and are more often today doing the same thing across different operating group’s or companies within a larger organizations to drive economy of scale in purchasing.

The unfortunate truth, is that not much out of the box thinking is going on in this process. We are so involved in the process that we can not see the forest for the trees.

Let’s take a look at a small regional supermarket chain as an example. They buy their products mostly from wholesalers who are able to aggregate the volumes of many in order to earn enough discounts to pass on reasonable pricing to the retailer that is slightly better than the retailer might earn on their own, and reserve a little for themselves in order to support their business. These products are normally for resale products. In the not for resale area or supplies, the regional retailer usually does business with local suppliers for a variety of supplies that can include everything from cleaning fluids to paper bags. The supplier normally does good job of managing these products against a number different cost structures to maintain a customer margin that is good for them. As an example if the price of oil is up and the resin market high, the supplier might be making less on plastic products such as plastic shopping bags or t-sacks, soup containers, trash can liners etc. The supplier may however also carry paper products and other supplies that can be mixed together to drive a total customer margin. Retailers can do the same thing. Here’s a partial list of how collaborative aggregation can work.

1. Take a good look at the total list of supplies offered from your primary supplier.
2. Compare that to what you are buying from them.
3. Ask your e-procurement provider for a list of suppliers within a 50 mile radius that can provide the same products or some of the same products.
4. Look at local businesses within a five mile radius of your area that are not in your industry but buy some of the same products such as trash can liners, cleaning fluids, paper products etc.
5. Call them and explain how collaborating might save you both money.
6. Ask for the name of their supplier as they might be different from yours.
7. Determine a test group of products to request bids on.

Safesourcing has a best practices program for this type of collaborative aggregation that is included in our event fees. For a complete list or more information please contact us at www.safesourcing.com.

We appreciate and look forward to your comments

Share This Post

Let’s take an individual look at our “5” procurement goals or resolutions for the New Year.

Tuesday, January 6th, 2009

In yesterdays blog post, we indicated that we would focus on each of the five goal areas or procurement resolutions for 2009 in more detail. Today we begin by looking at ways to use new technology to save money.

Every year companies spend millions of dollars on new business plans for the upcoming year. In fact most of the fourth quarter is focused on this endeavor. So, there is no excuse for not having your goals written down. The first step to an achievable goal or resolution is to write it down. As such our second resolution from yesterdays post for 2009 was to “Look at ways to use new technology to save money. New open source software applications mean you don’t have to shell out a ton of money for license fees.”

Your current e-procurement solution provider if using current technology should not have to charge you an arm and a leg for using their application. In fact, your prices should be going down. The need to pay increases in license fees or use fees today to have software installed behind your firewall or in a hosted environment is being reduced dramatically as a result of lower development costs for newer versions of applications based on the use of inexpensive or in some cases free open source tools that are being made available on the internet. The resulting applications are then being offered in the form of Software as a Service or even newer buzz words such as cloud computing as usage fee based solutions.

Companies can begin to seek lower fees by simply asking their present provider why their costs have not dropped and are they growing or reducing their IT staff based on newer technologies. The size of this organization alone adds to your providers overhead and as a result to the fees you are paying for using their tools. If a current application has its roots in the 1990’s or prior to the dot.com bust you may well be paying more to use it as a result of the embedded cost to develop it. More current applications that use a variety of freeware tools make it possible for today’s developers to do several multiples of the work a single developer could accomplish as little as five to ten years ago.

Next generation applications should also include a level of inelegance that was not available five to ten years ago. Whether that is simple language versus HTML or the use of intelligent agents, the result should be an easier to use application resulting in shorter cycle times.

What this all leads to for the procurement knowledge worker are lower embedded development costs, lower ongoing support costs and more flexibility relative to customization requests going forward. The net result is that you should be paying less for better tools.

Have this discussion with your solution provider; it may save you thousands or dollars.

We appreciate and look forward to your comments

Share This Post

Here are some of my thoughts on procurement goals and resolutions for the New Year.

Monday, January 5th, 2009

As this author begins a new year of Safesourcing blogs, it’s no surprise that we take a look at what our procurement goals and resolutions should be for 2009.

I was reading an article in the Arizona Republic today by Andrew Johnson focused on Entrepreneurs titled “Resolutions for small firms”. This made me think as to why our procurement resolutions need to be that much different regardless of the size of our company. SafeSourcing has sourced product for companies with as few as three stores and companies with thousands of stores. The process and the results are the same and require the same careful focus to drive the desired results. Which could at a minimum include some or all of the flowing…?

1. Lower cost
2. Consistent quality
3. Products that guarantee safety for our consumers
4. Smooth transition to new relationships
5. Quality product specifications
6. Unlimited new sources of supply
7. Well thought out collaboration and aggregation

In the article mentioned above, Mike McDerment CEO of Toronto based online invoicing firm FreshBooks, suggests small business owners do the flowing. This author believes these principles apply to businesses of all sizes.

  1. Focus more on existing customers. Cater to existing clients as new business becomes scarcer.
  2. Look at ways to use new technology to save money. New open source software applications mean you don’t have to shell out a ton of money for license fees.
  3. Make training a priority. Talented workers want to be challenged. Keep them happy by helping them develop new skills.
  4. Take a close look at your supplier chain. You can find ways to save money by reevaluating what suppliers are charging.
  5. Create a small business network. Collaborating with other businesses is one way to save money.

As your organization develops their procurement goals and or resolutions for 2009, use the above guidelines as a source. Simple goals written down are the most achievable. During the balance of this week, we will focus on each of the above five areas in more detail.

We appreciate and look forward to your comments

Share This Post