Archive for July, 2010

What?s new in retail e-procurement?

Friday, July 16th, 2010

A small retailer said to me last week that he did a form of reverse auction on his own. I asked how he accomplished this. The answer did not shock me, but I did chuckle a little. I?m glad he was a friend because he asked why I was smiling. The answer was that he sent out an email to three suppliers that he knew and asked for a price on a specific product. He told them in the email to make sure their price was there best offer and then called each once received and pressured them down with the threat of the other offers. We won?t get into the number of calls he had to make, the time it took to create the specification, the number of emails sent back and forth or lack of knowledge as to any new or additional sources of supply. We also won?t discuss the underlying psychology of a reverse auction and the tools that encourage quality bidding. The basic premise was solid and helped to reinforce why an automated system would out perform his results every time as well as provide a detailed audit trail.

At least in the example above, my friend was trying in his mind. What continues to concern this author is that many retail companies from lower tier I companies through all of tier II companies are not using any type of e-negotiation solution. Most of these solutions are relatively low cost hosted or SaaS oriented tools and available to them covering the entire P2P (procure to pay) process. In addition many of them belong to wholesalers that may use these tools themselves but don?t pass on all of the benefits to their customer.

I will continue to focus on this issue in the hope that if one company reads, watches, prints and uses any of this information and then executes because of it any or all of the following benefits may befall them.

1.?Profits can and should improve
2.?Quality can and should improve
3.?Product Safety can and should improve
4.?Environmental impact can and should improve
5.?Prices can be compressed
6.?New sources of supply can be found
7.?Risk can be mitigated
8.?Evergreening of contracts can be held in check
9.?Existing jobs can be protected
10.?New jobs can be created.

If these were the only reasons to try and get out the message as to the stunning effect that today?s e-procurement tools can have on an organization it would be enough. But we all know there are many more good reasons beyond the ten listed above.

We look forward to and appreciate your comments.

Retailers; the average price of a basket of groceries is trending up! Are your profits?

Thursday, July 15th, 2010

One thing that news print (I still love newspapers) offers that internet based news does not is the tactile fell of holding the paper open and scanning all items on those two pages quickly. Sometimes you actually find pearls that really bring in to question the logic or understanding of the relationships between seemingly unrelated articles. In data analysis we call these tangential or affinity relationships.

Now back to my original premise. I was reading my local ARIZONA REPUBLIC business section the other day and two articles jumped out at me. The first was titled ?Arizona Grocery prices continue to climb?. It was on the front of the first page in the business section. The second was titled ?Technology helps Valley logistics company to thrive?. It was on the bottom of the second page of the business section right near DILBERT. In this case, that is appropriate.

The first article discussed the fact that prices were rising because of an improving national economy (why?) and higher energy costs (this means fuel). The second article discussed the use of technology to optimize the flow and storage of merchandise within the ground freight industry by selecting the best transportation options.

As I work in this space, I was already thinking (duh) when I saw the title of the two articles. It occurred to me during reading them that the authors could have combined these two articles to come up with something great that might be titled Retailers are finding better ways to keep retail prices flat during an improving economy by using logistics technology. The byline might read something like this. Retailers can improve profit without raising prices and gain market share.

I never would have found these articles on line or had them jump out at me like they did if I did not still read newspapers. Jay Leno always uses news articles in his humor that causes one to think. This is my version. So think about this if you are a retailer. Why do your prices need to rise when the economy improves? The truth is they don?t.

We look forward to and appreciate your comments.

Retailers; what is your green or sustainable sourcing plan?

Wednesday, July 14th, 2010

Unfortunately, elsewhere is most likely your competition if they want a job in retail procurement.

In a recent USA TODAY article by Trevor Hughes titled More Colleges using green as a selling tool; the author discusses the impact that green programs have on college students deciding where they will attend College or University. It is a safe bet if these students are using this as criteria for selecting where they will spend the next 4 years of their life, that they will also use the same criteria to make their career decisions.

The article goes on to quote results form The Sustainable Endowments Institute survey in 2009 which found that 27% of colleges and universities included sustainability messaging in their admissions process and that in 2010 69% did. That is a 156% increase in one year.

The Sustainable Endowments Institute focuses on areas such as food sourcing, recycling, and energy efficiency.

Quite often when this author asks this question of mid level managers, associates and employees, I just draw a blank stare. If you have this discussion with investors, the eyes just roll and you can see the note caption saying blah, blah, blah.

If you don?t have a plan you can not blame anyone but yourself.

We look forward to and appreciate your comments.

We still need to question CHINA.

Tuesday, July 13th, 2010

There was a point in time that sourcing products from China insured a low cost for your product. Then the price of oil went through the roof and melting down containers returned more than trying ship product in them. Even with oil down somewhat from that time, costs are increasing in China as plant safety and quality and worker safety and quality improves. However, there are still probably bargains to be had, but caution should be your guiding word.

A great example of this is a recent find by Chinese officials of tons of milk products tainted with Melamine. If this sounds familiar, it should. This was an issue in 2008 on which this author posted. The scandal actually killed 6 babies and made hundreds of thousands sick at the time. China actually executed two individuals for producing or selling toxic milk. So here we are in 2010 and the problem has still not been totally corrected and we are talking about products that are only sold in China. It would seem that a country would be more concerned about the quality and safety of products made by the Chinese for the Chinese consumer.

As such, companies need to complete the due diligence necessary to insure that the products you are planning to source include detailed raw materials descriptions, formulas and certifications that are mandated globally to insure product quality, safety and environmental impact standards.

Ask your solutions provider what their vetting procedures are for including suppliers in their database?

We look forward to and appreciate your comments.

“I never saw a purple cow” and other fictitious animals that can ruin a bloggers day!

Monday, July 12th, 2010

The “Purple Cow” is the name of a well-known poem by Gelett Burgess that was written in 1895 about a fictitious cow.

The original “Purple Cow” poem went like this.

I never saw a purple cow;
I never hope to see one;
but I can tell you anyhow;
I’d rather see than be one!

Although this author had nothing to do with a Purple Cow last week I did in fact encounter another type of barn yard animal that you will all want to avoid at any cost. It was a horse. In this case the Trojan Horse. Although the poem listed above is about a mythical animal, the one I encountered is all too real and named after the Trojan Horse Story in Greek mythology that appeared as a gift that hides its ultimate purpose.

So what kind of Trojan Horse can affect a blogger? In this case we are referring to malware which is named Trojan Horse which appears to perform desirable functions for a user prior to running or installing applications, applets or other file based features but instead facilitates unauthorized access of the user’s computer system. “It is a harmful piece of software that looks legitimate. Users are typically tricked into loading and executing it on their systems. And then the real fun begins.

Once you have been tricked, one may begin notice a system slowdown, access slowdown or lockups that cause you reboot multiple times and ultimately and scan your system for viruses. Files are indentified by that process that are infected and flagged for cleaning, not deleting. If you unknowingly delete them you may compromise the operation of your operating system that may result in a reload and rebuild of your entire system that can be time consuming and provide a test of your backup processes including password storage.

Be careful what you click on. We’re Back.

We look forward to and appreciate your comments.

?I never saw a purple cow? and other fictitious animals that can ruin a bloggers day!

Monday, July 12th, 2010

The ?Purple Cow? is the name of a well-known poem by Gelett Burgess that was written in 1895 about a fictitious cow.

The original “Purple Cow” poem went like this.

I never saw a purple cow;
I never hope to see one;
but I can tell you anyhow;
I’d rather see than be one!

Although this author had nothing to do with a Purple Cow last week I did in fact encounter another type of barn yard animal that you will all want to avoid at any cost. It was a horse. In this case the Trojan Horse. Although the poem listed above is about a mythical animal, the one I encountered is all too real and named after the Trojan Horse Story in Greek mythology that appeared as a gift that hides its ultimate purpose.

So what kind of Trojan Horse can affect a blogger? In this case we are referring to malware which is named Trojan Horse which appears to perform desirable functions for a user prior to running or installing applications, applets or other file based features but instead facilitates unauthorized access of the user’s computer system. “It is a harmful piece of software that looks legitimate. Users are typically tricked into loading and executing it on their systems. And then the real fun begins.

Once you have been tricked, one may begin notice a system slowdown, access slowdown or lockups that cause you reboot multiple times and ultimately and scan your system for viruses. Files are indentified by that process that are infected and flagged for cleaning, not deleting. If you unknowingly delete them you may compromise the operation of your operating system that may result in a reload and rebuild of your entire system that can be time consuming and provide a test of your backup processes including password storage.

Be careful what you click on. We?re Back.

We look forward to and appreciate your comments.

Retailers should consider Lifecycle Costing when calculating savings on new business awards.

Wednesday, July 7th, 2010

It’s true that a reverse auction can create substantial low quote savings. However much needs to be considered when tracking realized savings once the event has concluded and the award of business is ready to be made.

Lifecycle Costing is a procurement technique which considers operating, maintenance, acquisition price, and other costs of ownership in the award of contracts to ensure that the items or services to be acquired will result in the lowest total cost of ownership during the time the item’s function is required.

If a category is truly returning event savings, it should be able to be tracked from original delivery to contract termination on a companies detailed P&L. The trick is that many of the associated costs go to different departments on the P&L. If you don’t know which ones, your pre event discovery was not complete and the odds of getting the actual savings reported are at significant risk.

We look forward to and appreciate your comments.

We need to avoid Bisphenol A or BPA and retailers need to avoid offering products that contain it.

Tuesday, July 6th, 2010

This author has posted on BPA many times and I continue to warn retailers to find suppliers that offer alternative solutions to products that use BPA.

As a reminder, Bisphenol A (BPA) is a chemical building block that is used primarily to make polycarbonate plastic and epoxy resins. Polycarbonate plastic is a lightweight, high-performance plastic that possesses a unique balance of toughness, optical clarity, high heat resistance, and excellent electrical resistance.

 The question posed by a reader in Men’s Health Magazine was I’m freaked out by BPA. How can I cut down? According to the Ask Men’s Health section edited by Ben Court, you can take the following steps.

1. Avoid canned foods.
2. Avoid Polycarbonate containers
3. Avoid Polycarbonate and aluminum reusable water bottles.
4. Avoid Soda and Beer cans.

Be careful out there.

We look forward to and appreciate your comments.

Happy 4th of July

Sunday, July 4th, 2010

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Retail COGS, Gross Margin and Net Operating Income. So what else is included in retail P&L

Thursday, July 1st, 2010

This is the final in a three part series.

At a very high level and retail summary P&L might look something like the example below. Each retail industry sub vertical will look a little different. The percentages in each category absolutely will… If you can understand the underlying pressure points then and only then will your e-procurement discovery drive the results that a CEO or CFO are interested in.

Gross Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Net Operating Income
Gross Operating Expenses
Officer Compensation (CEO, CFO Etc.)
All other Salaries and wages
Maintenance (Cost of Repairs)
Bad debt write off
Facility Expenses (Rents)
Taxes
Interest
Amortization
Depreciation
Advertising Expense
Benefits
Misc expenses
Retirement Plans
Total Operating Expenses

We look forward to and appreciate your comments.