Archive for April, 2010

Why some buyers think e-Procurement will never work.

Tuesday, April 20th, 2010

Sometimes I wonder what it takes to get through to people that as a procurement professional or knowledge worker, that their job is the most important job in retail. Or at least it could be.

This author has discussed on many occasions the various benefits to retailers of using e-Procurement tools. Not the least of which is that if a retailer were seriously to assign twenty percent of their above the gross margin line spend to these types of tools, they could increase their net earnings by up to 100%. In addition, much of the following would also happen.

1. They would continue to source high quality products.
2. They would continue to have great supplier relationships.
3. They would free up time to do other tasks.
4. They would improve their company?s net earnings by up to 100%.
5. They would support our fragile environment.
6. They would support global food and product safety initiatives.
7. They would have a larger audience of piers to converse with daily.
8. They would have a single source of information about their profession.
9. They would be instantly alerted to product recalls.
10. They would support a traceable supply chain.
11. They would have an endless source of new suppliers to review easily.
12. They would have product specifications at their finger tips.

Now you might wonder why many companies are not enjoying these benefits already. The following are the objections I hear all of the time after we have presented to a prospect that has not been exposed to e-procurement tools in the past.

1. I already get the best cost.
2. We?ve done business with this supplier for years.
3. I don?t have product specifications.
4. I don?t have time for this.
5. Switching costs will be too high.
6. I can?t insure the same quality.
7. We need to adhere to certain standards.

If you have an objection that is not listed above, or they pretty much fit your thinking, please review the dozen benefits above and weigh it against them.

As always, we look forward to and appreciate your comments

How should companies decide what products and services can go through the e- negotiation process?

Monday, April 19th, 2010

There really is no reason to shy away from taking any product or service to reverse auction as part of your overall e-negotiation strategy to compress pricing.

There are however some simple questions companies can ask themselves when considering any product, service, or category for consideration in the e-negotiation process. Several but not all of those questions would certainly include the following three.

1. How many suppliers are available and willing to bid on your business?

It?s obvious your company is already aware of your incumbent suppliers. The more important question is what other suppliers are available and how can you find them.
Several will exist within you own geographical area that you are not even aware of. Many others may be located across the country that are also very interested in earning your business.

2. Does your company have the complete detailed product specifications for this product or service readily available or are you familiar with a source from which you can get them easily?

Are your products specifications kept in some form of central repository or are they in the mind of your buyer? This is the single largest obstacle to successful e-negotiation events.

3. How much of the product or service are you willing to commit to buy over what period of time?

What period of time are you buying for? Is there an opportunity to contract for a longer period of time in order to raise volumes? Is there an opportunity to aggregate dissimilar products in order to increase the e-auction size?

If you are well prepared, there are suppliers willing to bid for your business that offer quality equal to or better than what you are presently receiving for your products and services at a better price and with better service. That?s win-win-win.

We always look forward to and appreciate your comments

A timely repost on getting started with environmental procurement processes.

Friday, April 16th, 2010

This blog has discussed a variety of e-procurement issues from quality category discovery to safety certification adherence over the last several months. Recently I was asked by a medium sized retailer where they might begin or how to get started in becoming more eco-friendly in their e-procurement practices.

There are certainly a lot of potential answers to this question that might include beginning by defining what their company means by being more eco-friendly or what specifically they are hoping to accomplish with this initiative.

There are several environmental focus areas that can be easily integrated into a company?s buying decisions without to much difficulty. In fact much of the data can be provided by suppliers as part of a simple RFI process and supported in a detailed product specification. The following list is intended to offer some guidance or points of reference in developing a plan.

1. Evaluate the environmental performance of incumbent suppliers
2. Support eco-labeling on products,
3. Develop a list of corporate environmental requirements you support
4. Develop a list of environmental regulatory requirements you are required to support
5. Publish this inforamtion with all pre event supplier instructions
6. Require service and systems providers to provide an analysis of the environmental impact of their delivery model
7. Ask suppliers to provide pricing on an environmentally focused equivalent or alternative to the current product specification within pricing guidelines
8. Jointly raise the awareness of environmental issues that affect procurement by providing relevant information and training to internal staff and suppliers
9. Review your state, province and regional environmental policies as they apply to your business
10. Publish the goals of your environmental program in the reception area and in each buyer or category manager?s office space in clear view.

There are certainly other areas not included in this list, but these are a good starting point.

We look forward to and appreciate your comments

Today is a great time to take a look at your logistics planning and to try out e-procurement tools in order to reduce your freight costs.

Thursday, April 15th, 2010

According to Wikipedia Logistics is the management of the flow of goods, inforamtion and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers. So getting it there at the right price is an enormous challenge.

The constantly fluctuation cost of fuel is causing less stable freight rates and creating concern and worry? in the executive suite about transportation expenses. As such many senior executives are looking to e-procurement solution providers to automate and reduce costs in the execution of their shipping plans.

Reverse auction tools,? electronic RFI?s and other e-procurement tools are being used regularly in order? to? optimize bid collection by helping companies organize detailed information about their shipping patterns so they can? compare daily or weekly offers from vendors.

Believe it or not many companies continue to use time-consuming manual processes to schedule shipments and have not even consolidated their rate tables into spreadsheets let alone assembled data with easy to use e-procurement tools. Many companies also continue to use static rules based on full loads to LTFL to a destination to decide which carrier they should use. The problem with this is that rate, routes, and a particular haulers availability change daily if not more often.

Call your e-procurement solutions provider and ask how they can help.

We look forward to and appreciate your comments.

What are we discussing when we speak or write about sustainable procurement?

Wednesday, April 14th, 2010

I have quite often written about what is required to build a sustainable process in e.negotiation or e.procurement. I have also posted quite often on the subject of Sustainable Procurement. To that end I offer the following.

According to Wikipedia, Sustainable procurement which is also called green procurement is a spending and investment process typically associated with public policy, although it is equally applicable to the private sector. Companies that practice sustainable procurement look well beyond cost only benefits using more intrinsic measures that include society and a broader view of the world.

Often company?s focused on sustainability measure their results by Triple-bottom-line accounting or TPL which is a process by which companies can measure the economic, social and environmental performance of a project or a business. This method of assessment aims for synergy among these three aspects rather than compromise or trade-offs among them.

We look forward to and appreciate your comments.

Understanding the complexity of contracts and their lifecycles.

Tuesday, April 13th, 2010

Contract Management is the management of contracts with customers, vendors, partners, or employees. Contract management includes negotiating the terms and conditions in contracts and ensuring compliance with the terms and conditions, as well as documenting and agreeing upon any changes that may arise during its implementation or execution.

Contract Management or (CM) can be summarized as the process of systematically and efficiently managing contract creating, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk.

A recent study found that 42% of enterprises indicated that the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks. In addition, nearly 65% of enterprises report that contract lifecycle management (CLM) has improved exposure to financial and legal risk. Common commercial contracts include employment letters, sales invoices, purchase orders, and utility contracts. Complex contracts are often necessary for construction projects, goods or services that are highly regulated, goods or services with detailed technical specifications, intellectual property (IP) agreements.
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A significant problem with the life cycle of contracts today particularly in the retail space is a process called evergreening by which a contract is renewed automatically, often with less favorable terms. These evergreen contracts between two parties will automatically renew after the completion of the contract period. This will occur until the agreement is cancelled by either party.? Without a system in place to monitor or manage contracts, evergreening can add unnecessary costs to businesses, often for millions of dollars as well as damage ongoing relationships between suppliers and buying organizations.

Ask you solutions provider how they can help you in this area.

We look forward to and appreciate your comments.

If I save and you save shouldn’t we all save?

Monday, April 12th, 2010

Historically this author has heard the buzz phrase that this is a” win win situation” far too often because far to little thought is put in to what it should really mean. As such when I do hear it, it makes me want to puke. What we should be doing is focusing on win-win-win relationship in the supplier-buyer-consumer supply chain model.

E-negotiation tools offer benefits to both suppliers and hosting retail companies which should also provide a benefit to consumers if the retailer and supplier are savvy enough to figure it out. Some but not all to consider follow.

1. Suppliers have an opportunity to bid on business they might otherwise not know about.
2. Forces retailers to formalize their specifications for further use.
3. Retailers are exposed to far more sources of supply than they were previously aware of.
4. Focuses the buyer-seller relationship on a fair trade approach to conducting business
5. The best total solution based on more than just price generally rises to the top.
6. Focuses both suppliers and buyers on reducing their net landed costs for products and services.
7. Unbundles costs to reveal and eliminate hidden costs that provide little or no value
8. Creates a competitive and balanced marketplace.
9. Offers a lesson that in cost cutting those suppliers should use with their raw material suppliers.
10. Collectively provides an opportunity for improved margins and earnings
11. Provides a tool to offer products to consumers that are of better quality, safer and at a lower price.

If this is not win-win-win, someone is not paying attention. Even though I still don’t like the buzz word.

We look forward to and appreciate your comments.

If I save and you save shouldn?t we all save?

Monday, April 12th, 2010

Historically this author has heard the buzz phrase that this is a? win win situation? far too often because far to little thought is put in to what it should really mean. As such when I do hear it, it makes me want to puke. What we should be doing is focusing on win-win-win relationship in the supplier-buyer-consumer supply chain model.

E-negotiation tools offer benefits to both suppliers and hosting retail companies which should also provide a benefit to consumers if the retailer and supplier are savvy enough to figure it out. Some but not all to consider follow.

1.?Suppliers have an opportunity to bid on business they might otherwise not know about.
2.?Forces retailers to formalize their specifications for further use.
3.?Retailers are exposed to far more sources of supply than they were previously aware of.
4.?Focuses the buyer-seller relationship on a fair trade approach to conducting business
5.?The best total solution based on more than just price generally rises to the top.
6.?Focuses both suppliers and buyers on reducing their net landed costs for products and services.
7.?Unbundles costs to reveal and eliminate hidden costs that provide little or no value
8.?Creates a competitive and balanced marketplace.
9.?Offers a lesson that in cost cutting those suppliers should use with their raw material suppliers.
10.?Collectively provides an opportunity for improved margins and earnings
11.?Provides a tool to offer products to consumers that are of better quality, safer and at a lower price.

If this is not win-win-win, someone is not paying attention. Even though I still don?t like the buzz word.

We look forward to and appreciate your comments.

There are a number of places from which procurement professionals can collect or solicit your RFI data.

Thursday, April 8th, 2010

According to Wikipedia and others a Request for Information (RFI) is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes.

A Request for Information (RFI) is primarily used to gather information to help companies make a decision on what steps to take next. RFI?s are therefore most often the first stage in the procurement process particularly with new sources of supply. They are used in combination with: Requests for Quote (RFQ), Requests for Tender (RFT), and Requests for Proposal (RFP). In addition to gathering basic information, an RFI is often used as a solicitation sent to a broad base of potential suppliers for the purpose of preparing a supplier?s thought process in preparing for a Request for Proposal (RFP), Request for Tender (RFT) in the government sector, or a Request for Proposal (RFP).

Much of the data required for an RFI is generally available and can be found on company websites, U.S. Security and Exchange Commission (SEC) filings for publicly traded companies in their Edgar system, industry guides from companies like Trade Dimensions, or from sources like Dun and Bradstreet.

The challenge for most companies is that they do not have the necessary resources to complete this research. Therefore providers of supplier data should be able to make this data available in templates that companies can begin with. Simple data should always be available in any database as to Company Name, Annual Sales, Product category expertise, contact information, e-procurement experience and product specifications. This data should be easily exportable to a variety of formats such as MSFT Excel.

A simple request of your e-procurement supplier should get you well on your way to completed RFI?s that lead to quality RFP?s and RFQ?s without spending a lot of your valuable time on basic research. If they do not, we?d be glad to hear from you.

We ?look forward to and appreciate?your comments

Retailers need to think it through before trying a do it yourself program when it comes to e-negotiation or e-procurement

Wednesday, April 7th, 2010

This author has met with many large companies that are using e-sourcing suites or tools provided by some of the largest names in the industry. After we have reviewed what we do and how we do it and then compare what they are accomplishing the following question always comes up. Why are you generating significantly higher savings than we are?

The answer is pretty simple in most cases. You have bought a software suite or tools and rather than using them as designed you have just incorporated your old practices into new tools. In addition, further training or access to your supplier?s data in the form of sources of supply etc. was not included in your initial cost.

A full service solution provider should be able to create, execute and support all auction activity including but not limited to the following.

1.?Assistance in selecting Auction categories
2.?Market insight
3.?Determine the timing of category auction
4.?Identification of potential quality suppliers in addition to existing
5.?Building on-line auctions
6.?Supplier contacts and training
7.?Execution of live bids
8.?Trouble shooting during live bids
9.?Compiling and communicating reports within 24 hours
10.?Award and Non-Award notifications to Suppliers
11.?Providing ongoing customer support
12.?Monitoring Supplier performance
13.?Feedback from Retailers/Suppliers
14.?Analyze the quality of each auction

The above deliverables if not executed in a self service program will result in less than maximum results and potentially failure of your program.

We look forward to and appreciate your comments.