Archive for June, 2010

Under the retail the spend management umbrella, what exactly is spend analysis?

Tuesday, June 15th, 2010

Simply put, spend analysis is designed to provide companies detailed information about the entire companies purchasing data most.

At the surface this seems to be pretty simple. In fact it is anything but. If we just look at the retail space, spend analysis relies on data from a number of disparate systems. Most retail organizations to this day do not have a single source of information or an enterprise data warehouse where data is available in one location for use by many applications. In mid tier retailers this is almost universal.

In fact in many retail organizations the following systems if they even have them would require access in order to gain all spend data necessary for analysis by advanced real time analytics and workflow management systems. Again most mid tier retailers will not have any of these systems in place making the collection of accurate data even more difficult.

1. Contract Management Systems
2. Retail ERPS Systems
3. Retail Planning Systems
4. Merchandise Management Systems
5. Supply Chain Management and Execution Systems
6. Store Operation Systems
7. Corporate Administration systems
8. Accounts Payable Systems

Certainly, if access to this data is available benefits such as instant access to information and better decision making are certain benefits that can be derived from these types of solutions.

The question for most however is how much time is required to conduct this integration. Would retailers be required to create another data repository and is a data mart of this sort really required to drive savings to the bottom line in the shortest amount of time?

For many organizations, there are e-negotiation solution providers that offer these same analytics in the form of a professional service that is embedded in their e-procurement pay as you go pricing. This may result in a more expeditious time to market and savings that can impact the organizations bottom line in the present reporting period.

All solutions do not fit all industries and there are generally alternatives worth exploring that may fit your needs more closely at a more economical price point.

We appreciate and look forward to your comments

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What contract Meta data should retailers store in a contract repository? Can FASB help?

Monday, June 14th, 2010

This author’s guidance would be to look to standards settings bodies and laws that apply to guidance for reporting of financial data that might and associated risks that may surface during an audit or areas that may have material impact on forecast results. FASB is one of many organizations that can offer such guidance relative to accounting impact.

Just who is FASB or The Financial Accounting Standards Board?

The mission of the FASB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.

Our financial reporting system is essential to the efficient functioning of the economy. That is because it is the means by which investors, creditors, and others receive the credible, transparent, and comparable financial information they rely on to make sound investment and credit decisions. Accounting standards are an important element of the financial reporting system because they govern the minimum required content of financial statements of U.S. public companies.

One action that FASB takes to accomplish their mission is to improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability and on the qualities of comparability and consistency.

Now give some thought as to what areas of your contracts have an impact that influences financial reporting. Here’s a clue. It is not the contract definitions area of your agreements.

We look forward to and appreciate your comments.

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Retail buying organizations are you prepared to survive an audit?

Thursday, June 10th, 2010

The question here is really are you as a buying organization prepared for any kind of an audit because most of the time contracts work there way back to the procurement department whether they are for consumables, services or any area other business expense that requires negotiation resulting in specific terms and conditions or standards that require compliance.

Although the audit process can be a good thing because it holds companies and individuals accountable, to often they are a result of something that is already broken and we are looking for a reason as to why. Or, someone to blame.

Audits can generally be broken down into the three classes that follow.

1. Significant Risk – This is non compliance that generally results in a major financial loss to the company
2. Moderate Risk – This is non compliance that generally results in a negative impact to the company
3. Minor Risk – This is a non compliant act that generally  results in a negative impact to an existing process within a company

From a procurement perspective this can include all items required during the bid and award process. Such as .

1. Purchase Orders tied to contract quotes
1. Delivery T&C’s
2. Definition of contract terms
4. Bidding process used
5. Vendor notification of award
6. Corporate standards adherence
7. Signature authority
8. Termination Clauses
9. Training adherence

The above list is potentially endless. The point is if you are buying products or services for your company, you need to be able to withstand a vigorous internal audit so that your auditors can withstand a vigorous external audit.

Is your procurement team prepared?

We look forward to and appreciate your comments.

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There is a real conundrum in retail today. How do we stop CONTRACT leakage?

Wednesday, June 9th, 2010

A conundrum in it’s simples definition is a riddle or a question to an  intricate and difficult problem, so it’s know wonder with the above scenario that we have compliance and other related issues such as ever greening in  the retail industry that literally costs companies millions of dollars. The answer to the conundrum is that with little effort this problem can be avoided. And the way to avoid it is to use a contract management solution. Most retailers do not do so today.

We know that fortune one thousand companies many of which are retailers may have as many as 100,000 contracts. We also know that in the retail trade less than 15% of companies have contract management solutions. We also know that companies that do use contract management solutions have compliance ratings significantly higher than companies that do not. It is a well known fact that these solutions can reduce administrative overhead by up to 30%. Those savings although significant from an ROI perspective pale in comparison to the loses associated with evergreen or auto renewal contracts  that include price increase language when written notice is not received as called out in the contract. Just imagine a bulk fuel contract for millions of gallons with a single basis point escalator above a current Platts, OPIS or Gulf coast index if the contract evergreens. Ouch.

The good news is that a contract management solution like SafeContract™ can solve this problem and provide a near instantaneous ROI. SafeContract™ is offered in the form of Software as a Service or SaaS which makes it much more affordable than an in-house solution. The good news is that the data is yours and you only use what you need.

Don’t wait any longer to reduce your administrative costs, manage discounts and rebates, make your auditors happy with improved compliance and eliminate ever greening.

Contact SafeSourcing™ today.

We look forward to and appreciate your comments.

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Retail buyers are you checking your supplier’s standards to insure they support your Corporate Social Responsibility (CSR)?

Tuesday, June 8th, 2010

Contributions to the welfare of society can come in many forms such as supporting the arts, further education, giving to social welfare agencies, supporting community-building initiatives, reducing pollution, and the other charitable causes. Businesses that adopt socially responsible directives help to allow government agencies to minimize their involvement with the corporation

One way that retail companies can add to their social consciousness is to try and use Certified Reference Materials or (CRMs) which are the controls or standards used to check the quality and traceability of products. Requiring these standards prior to purchasing products indicates a lot about a company’s commitment to its stakeholders which includes their consumers. This will also mitigates risk should recalls occur as a result of harm.

By the way of an example, a reference standard for a unit of measurement is an artifact that embodies the quantity of interest in a way that ties its value to the reference base. At the highest level, a primary reference standard is assigned a value by direct comparison with the reference base.

A primary standard is usually under the jurisdiction of a national standards body such as ISO or The International Organization for Standardization which is an international standard -setting body composed of representatives from various national standards organizations. Relative to the example of a primary standard, you might refer to the Future ISO 26000 standard on social responsibility published as Draft International Standard which ties very nicely to this post.

We look forward to and appreciate your comments.

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Buyers; don’t use Cadmium in your marketing or branding promotional giveaway items.

Monday, June 7th, 2010

Last Friday June 4th   The U.S. Consumer Product Safety Commission announced a voluntary recall of Twelve Million Shrek drinking glasses that are tainted with Cadmium.

According to Wikipedia Cadmium is a chemical element with the symbol Cd and atomic number 48. The soft, bluish-white metal is chemically similar to the two other metals in group 12, zinc and mercury.

In extreme cases of exposure to cadmium fumes the result can be flu like symptoms including chills, fever, and muscle ache sometimes referred to as “the cadmium blues.”

The company that produced the glasses has been doing so for major companies for years. This reinforces the fact that procurement professionals can not get comfortable in their jobs and that consumer safety, product safety and environment safety are as much a part of the procurement knowledge workers job today as the relatively simple task of picking up the phone to place the next order. Additionally and maybe more importantly, manufacturers can not just assume that the raw materials they are using are safe either. Their buyers need to be as vigilant in terms of what has changed in the supply chain as their customers. If we trace products from the farm to the table so to speak these type of issues don’t need to occur.

Discipline, process and traceability are the pillars of a good procurement team.

We look forward to and appreciate your comments.

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Retail buyers; are your commodities FAIR TRADE certified?

Friday, June 4th, 2010

Buying commodities is a real challenge particularly with the environmental changes the globe is going though and the continuing expansion into global markets. Add to that the changing price of fuel and the impact of shipping on the environment and there is a lot that requires measuring beyond price in order to make the right decisions on behalf of your consumers

An organization that can help is TransFair USA who licenses companies to display the Fair Trade Certified label on products that meet strict international Fair Trade standards

The Fair Trade Certified™ label guarantees consumers that strict economic, social and environmental criteria were met in the production and trade of an agricultural product. Fair Trade Certification is currently available in the U.S. for coffee, tea and herbs, cocoa and chocolate, fresh fruit, flowers, sugar, rice, and vanilla.

What do your commodity specifications look like? Ask your e-procurement solutions provider how they can help.

We look forward to and appreciate your comments

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Retailers do you have a sustainable e-negotiation program?

Tuesday, June 1st, 2010

If you have a limited source of new suppliers, including new vendors every time you run a new e-negotiation 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 over and over again. This process may yield some productivity increases initially, but over time meaningful price compression will be difficult if not impossible.

Solution providers suggest that somewhere between six and ten suppliers are 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 compete for your business.

By example let’s suppose you 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.

Suppliers that finished first or second or incumbents that were displaced may agree to participate again in the future, but with a smaller number of suppliers and no new sources 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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