Most retail companies understand that lowering their cost of goods provides the greatest benefit to their bottom line, but they face significant challenges in trying to do so.
Why do some companies succeed while others continue to implement program after program with no measurable benefit. First among these is the recognition that effective e-negotiation initiatives like any successful program requires strong support from the executive suite. In Retail this is important because the industry lags well behind other industries in utilization rates of e-negotiation tools. At a minimum in order to get off on the right foot, this means the involvement and sponsorship of your CEO, CFO, CLO or CPO is critical. Once you have this involvement directives can be issued. This will help in the required next step which is to identify savings targets across all corporate spend categories. Once these targets are identified and ranked, a category specific attack plan can be developed that best maximizes savings opportunities. It is important to note, that savings alone do not create a successful e-negotiation plan. What can not be sacrificed in the name of cost reduction is quality, which can include safety as well as Corporate Social Responsibility (CSR) goals including environmental support programs.
A key challenge for any procurement team directed to implement e-negotiation tools across all of their unique spend categories, is to not over complicate the process into something that can’t be maintained. At a high level, the following 10 steps which are in no particular order offer some assurance that you are headed down the right path.
1. Identify and rank all opportunities by spend
2. Locate all contracts and identify termination language
3. Document your safety and environmental goals
4. Develop a total company strategy
5. Source qualified suppliers
6. Identified fragmented or maverick purchasing and aggregate
7. Negotiate final terms and conditions
8. Award of business
9. Contract completion including review of evergreen and termination language
10. Results Analysis
Most quality e-negotiation solution providers have well developed and well thought out plans that will aid you in developing and implementing your best practices while maintaining quality and supporting your CSR initiatives.
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