Archive for August, 2009

Now is a great time to drive lower generic drug costs. This is nothing new for most retailers.

Monday, August 31st, 2009

This author was watching a television commercial the other night that indicated that as many as 61 million Americans last year did not refill their prescriptions on time.

The company was touting a service capable of filling prescriptions on file for customers automatically and then calling the customers to come pick it up. This would be a great service for me, as I always wait until the last day when I am about to run out. However this does not answer the problem of consumers that can not afford to fill their prescriptions on time if at all.

In trying to research the above inforamtion, I came across a survey from the Kaiser Family Foundation called The Kaiser Family Foundation health tracking poll that indicated of their survey respondents who admitted that they have delayed or put off care due to cost, over one-quarter admitted to failing to fill a prescription. Worse, 18% said that they had cut their pills in half, a practice not

The United States pays the highest prices in the world for brand-name drugs. Retailers have been dealing with this issue for years and have come up with a variety of strategies and programs in order to save their consumers money.

During September of 2006, Wal-Mart announced that it would make nearly 300 generic drugs available for only $4 per prescription for up to a 30-day supply at commonly prescribed dosages. The Wal-Mart plan later drove other retailers to create programs of their own. Target, Meijer, Wegmans, Costco and K-Mart and others have since announced similar generic plans. The Wal-mart program since its inception has grown to over 1,000 over the counter medications and claims to have saved consumers over $1 billion.

One way retailers have been able to drive down their costs with generic drugs and other over the counter medications, is to hold the drug manufacturers and other distributers accountable by purchasing their generic drugs through the non biased use of e-negotiation tools such as reverse auctions. Many retailers are not aware of the very large number of suppliers capable of bidding on their business. With the down economy, these suppliers are very anxious for new business.

History indicates that generic drug events can drive savings in some cases that are greater than thirty percent. Events can be held for dozens of suppliers and hundreds of products at one time and left open for days if not weeks in order to collect pricing prior to the final price compression. The fact is that major pharmaceutical companies use these tools regularly in order to drive down their costs and so should retailers.

Ask your solutions provider how many suppliers they can provide for your sourcing needs?

We look forward to and appreciate your comments.

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For e-negotiation events, when is a specification not just a specification?

Friday, August 28th, 2009

A statement of work or SOW is another document that is typically added to e-negotiation events in order to bring clarity to what is included in a bid. In essence the document lists the work activities to be agreed upon, the deliverables and a timeframe in which a supplier will be expected to perform against. The SOW requires agreement as do other documents prior to a supplier being allowed to place bids.

Areas that are normally included in a Statement of work might include but are not limited to the following.

1. The actual scope of work to be completed
2. The time period in which the work is to be performed
3. The location of work.
4. A list of the detailed deliverables
5. A Schedule of all deliverables
6. A standards adherence document.
7. Acceptance criteria
8. Other requirements.

Make sure that when you are running e-negotiation events that you make sure that all of the above information is considered and captured before you approve of an event being passed on for suppliers to review.

We look forward to and appreciate your comments.

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There is one area more than any other that always delays the running of reverse auctions.

Thursday, August 27th, 2009

Has you ever heard a buyer say I can’t find or don’t have a specification for that product or service? If we are all being totally honest with ourselves, we know this is true and it happens every day of every week of every month. The interesting part is that we are asking for something that is already being used by the company or being sold by the company. How in the world can the specification be missing or not exist in the first place? How would we even know if what we were receiving is what we ordered? Back door receiving systems have tracked this for years. What happens if we order one type of copy paper like recycled 96 white, and receive a lower quality product?

This has always amazed me because an original order had to be placed at some point in time. In many cases the invoice (at least the original one) may even reference the product number or description if not both. Sometimes the invoice even calls attention to the terms and conditions. In fact, it may be a good bet that the current supplier has a copy of the original contract and specification on file that can be obtained with a simple phone call. On many occasions when hosting e-negotiation events new sources of supply may help to clarify specifications through their questioning. And then, and it is a big and then, there is of course the internet and sites like Ask, Google, and now Bing.

Of course you can also ask your e-procurement solutions provider if they have a product specification template library that is constantly updated. If they do, you can get a specification from them. At least it’s a place to start.

We look forward to and appreciate your comments.

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The sourcing of eco friendly products is not that difficult.

Wednesday, August 26th, 2009

If a Golf Tournament sponsored by a retailer can go green, then certainly retailers themselves can follow the same process.

I was reading our local newspaper The Arizona Republic today when I came across an interesting article titled Frys.com golf event goes green.

In the article it mentioned that the tournament has partnered with a third party called EcoAid to make the tournament more eco friendly. Together the companies will source the following products and services at a minimum.

1. Solar Generators
2. Soy based inks
3. Carbon neutral transportation services
4. Recycled paper for tickets
5. Products made from recycled materials
a. Cutlery
b. Plates
c. Napkins
6. Organic Dry Cleaning Services

The logical question is where would EcoAid find a list of suppliers for all of these products that are also held accountable to the same standards they support? The SafeSourceIt™ Global Supplier Database is the best source for that search.

We appreciate and look forward to your comments

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Here are some typical reasons or excuses why companies do not to use e-negotiation tools.

Tuesday, August 25th, 2009

Many times, new associates seem to be able to cut through the chaff and get to the heart of an issue. In this case a new account manager by the name of Dave Wenig joined us two weeks ago and recently took a stab at this blog post. His first thought was to title it “Why Not?” This author agrees totally. Thanks Dave.

All you ever hear about a business is that they need to increase profitability. After all, that’s the whole point. One of the most common ways that a company plans to reach this goal is to reduce costs. Why then, wouldn’t a company be willing to try new techniques to attain that very goal?

There are many possible answers to that question. One common “reason” not to try new ways of cost-cutting, such as a reverse auction, is that companies don’t want to upset their suppliers. But this is not reasonable concern. It is a very safe assumption that those same suppliers have similar business goals. They too are busy reducing their costs. If this is true, then each time they find success, their long-term customers become high margin customers. The fact is that the relationship with your incumbent will be more balanced if you choose to award them your continued business after e-negotiation.

Another typical “reason” not to use e-negotiation tools is the assumed cost. Sure, all providers will have some type of fee structure. The simple answer is to shop your business around. Compare apples to apples from the different providers in the marketplace. See who is offering the largest and safest source of new suppliers. Check what the cost of running reverse auctions will be. Ask how these providers will assist you with product specifications and other hosted services. Judge the total value, then weigh your findings against the estimated savings that you were shown based on historical data. Then, you will feel comfortable integrating e-negotiation, like the services provided by SafeSourcing, into your own process.

We look forward to and appreciate your comments

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For retailers that are trying to achieve LEED certification for their retail building projects. As Kermit the Frog so aptly put it, It’s Not Easy Being Green.

Monday, August 24th, 2009

If Retailers really want there buildings including offices, stores, warehouses and distribution centers to be green, it will not be easy. However the payoff in consumer confidence and long term energy savings may be well worth it

Te first step in driving green building practices is to commit to it as part of an overall corporate green strategy. This means more than initiating a plan to change the type of light bulbs one uses or monitoring refrigeration.

Once your company has embraced a green strategy as part of its CSR initiatives, it is then incumbent upon you to also hold your suppliers accountable to the same standards. It is much easier to achieve LEED (Leadership in Energy and Environmental Design) certification for your projects when the suppliers you use such as developers, landscapers and property management companies are LEED educated and certified and following the same type of initiatives that you do.

LEED certification which is managed by the U.S. Green Building Council or USGBC provides independent, third-party verification that a building project meets the highest green building and performance measures. Sustainable building strategies should be considered early in the development cycle. An integrated project team will include the major stakeholders of the project such as the developer/owner, architect, engineer, landscape architect, contractor, and asset and property management staff. Implementing an integrated, systems-oriented approach to green project design, development and operations can yield synergies and improve the overall performance of a building.

USGBC’s education programs are proactively changing in response to transformations to the LEED® Rating Systems, LEED-Online and LEED certification that comprise the new LEED v3 – as well as to changes in the Green Building Certification Institute’s (GBCI) LEED credentialing program.

It may not be easy being green, but this author thinks it’s the right thing for you to do.

We look forward to an appreciate your comments.

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For companies that have plans to add the e-negotiation and import of goods from off shore regions, here are some thoughts to consider.

Friday, August 21st, 2009

Many companies actually shy away from this process because they don’t believe they are large enough or have a staff knowledgeable enough to manage the process.

So, if you want some of the benefits (cost) associated with this process, there is a great opportunity for you to save on your logistics costs by using Third Party Logistics Providers or 3PL’s

The first step to accomplishing this process is to make sure you are working with a quality e-procurement solutions provider that should already have relationships in place with agents and other companies that can manage much of this process for you. This can allow you to compete with larger companies that have been sourcing lower cost products from these regions for years. Third party logistics professionals can prove very helpful in tracking down shipments when they did not arrive at the expected time or place, as well as tracking them en route.

The National Customs Brokers and Forwarders Association of America www.ncbfaa.org can put you in touch with customs brokers and freight forwarders who can help you import your goods. Many of them offer informational websites that contain what is required in order to find the right customs broker or freight forwarder for your shipments. Your e-procurement solutions provider can also manage this process with the 3PL’s for you.

Companies can also visit the following website www.aapa-ports.org (American Association of Port Authorities) for assistance with the technical aspects of the logistics industry including directories of custom brokers and freight forwarders.

We appreciate and look forward to your comments.

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Just what made that little old ant think he could climb a rubber tree plant?

Thursday, August 20th, 2009

Well in this case rubber tree plant is just a play on words for plastics and trees. We did get your attention though didn’t we?

According to Sustainablebusiness.com the residents of city of Seattle, Washington have voted down a 20-cent fee for paper and plastic bags, according to an Associated Press story that said about half of the mail-in votes had been counted late Tuesday night. The AP reported 58% against the fee and 42% for it. The city had previously approved the 20-cent fee for bags distributed by supermarkets, drug stores and convenience stores.

The question this raises is what consumers are saying about green initiatives sponsored by their government or business when they have a direct impact on their own pocketbook.

We are all well aware of the negative impact that deforestation has on our planet and that a paper bags do come from trees. We also understand the issues associated with the lack of biodegradability of plastic products and the landfill issue that creates. Retailers however have stepped up by providing good quality reusable bags at a reasonable cost. Suppliers have begun to step up by including bags with a higher percentage of recycled and biodegradable materials.

What the consumer in Seattle seems to be saying here is that this is the retailers problem rather than our collective problem. What the Seattle consumer also seems to understand is that the cost of doing business (buying bags) is already figured in the price they pay for products today.
It will be interesting to watch how this issue evolves city by city and state by state over the next couple of years.

What should procurement professionals tasked with purchasing these products do when regardless of their personal beliefs they are still required to buy these products?

Everyone knows an ant can’t climb a rubber tree plant.

High Hopes.

We look forward to and appreciate your comments.

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Careful selection and management of new sources of supply will sustain your e-negotiation process for the long term.

Wednesday, August 19th, 2009

A successful e-negotiation strategy over the long term is a growing high quality global supplier database.

This author believes that if you have a limited source of new suppliers, then including new blood every time you run a new event will be incredibly difficult. Resultantly your process by default ends up as just a new way to continue to award business to the same suppliers. This process may yield some productivity increases initially, but over time meaningful price compression will be difficult if not impossible.

Although the numbers quoted vary slightly by solution provider at somewhere between six and ten as to the number of suppliers required to drive optimum e-negotiation results, these data suggest that attaining sustainable results from the e-negotiation process has a direct correlation to the number of new suppliers available and willing to participate.

Let’s assume that your existing solutions provider has only a limited source of new suppliers. As an example, they can only find six suppliers to invite to an e-negotiation event. Your customer services team using their best sales skills can probably convince most if not all of these suppliers to participate. This may be fine the first time around. Although this author believes there are better sustainability strategy even given this scenario.

In the future, the suppliers that finished first or second or incumbents that were displaced may agree to participate again, but with a smaller number of suppliers and no new blood it will make the rerun of this auction less successful.

Lacking a robust source of new suppliers, and in the above case we only had a total of six available how can companies create a sustainable process.

The lack of a robust global supplier database limits future price compression at a minimum. It may also have a negative impact on quality, process and service. Particularly if history suggests a minimum of six to ten suppliers in order to drive optimum results…

Make sure to ask your e-negotiation solutions provider how many suppliers they have in their supplier database and if you can have regular access, it will determine your future success.

We appreciate and look forward to your comments

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What is GATT? The General Agreement on Tariffs and Trade.

Tuesday, August 18th, 2009

Make sure you understand all of the terms associated with off shore sourcing before you jump in. Sourcing products from off shore markets requires careful consideration of literally dozens of shipping terms and conditions.

As companies grow, the allure of sourcing lower cost products from off shore markets looks attractive. Mistakes in understanding the complex import/expert terms and conditions can cost you money, time or both.

Many safeguards are in place to insure that unnecessary damages do not occur to the local markets or workforces as a result of product imports.

The General Agreement on Tariffs and Trade (GATT) permits two forms of multilateral safeguards: (a) a country’s right to impose temporary import controls or other trade restrictions to prevent commercial injury to domestic industry, and (b) the corresponding right of exporters not to be deprived arbitrarily of access to markets. Article XIX of the GATT permits a country whose domestic industries or workers are adversely affected by increased imports to withdraw or modify concessions the country had earlier granted, to impose, for a limited period, new import restrictions if the country can establish that a product is “being imported in such increased quantities as to cause or threaten serious injury to domestic producers,” and to keep such restrictions in effect for a such time as may be necessary to prevent or remedy such injury.

We look forward to and appreciate your comments.

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