Archive for September, 2010

Before you comment about strategic sourcing!

Wednesday, September 29th, 2010

Recently Sourcing Innovation has carried a series of posts, comments and rebuttals as to whether strategic sourcing is alive or dead. This author also posted on the subject in a two part series titled Join the argument. Strategic Sourcing alive or dead? Part I of II on September 17th. And Join the argument. Strategic Sourcing alive or dead? Part II of II on September 20th.

As I read through much of the content in these posts I came to the conclusion that most solution providers comment are not seeing the forest for the trees. Officially strategic sourcing has been around as a sourcing term for 25 years. Unofficially it has been around as a process as long has man has been able to hunt and gather. Almost all searches on strategy will at some point refer to some from of military definition. That may unfortunately be a commentary on mankind. We can certainly agree however that from a military perspective we don’t need to look any further than Germany’s failure in the Ukraine during WWII to understand that not following ones own strategy can have disastrous effects.

Strategy is about understanding your subject area and all of the influence points associated with it. The question is; can we have a strategy without tools? The answer is yes. The key for solution providers is to develop and refine their tools so that they are easily usable by practitioners in order to carry out their strategy, goals and tactics which by their nature follow larger and more complex plans.

Let’s take a simple look at how we might be complicating things. From this authors perspective a strategic plan is made up of the following high level elements.

1. Strategy: Strategy is science or art and sometimes more of the later of combining and employing the means by which procurement can plan and direct supply chain improvement measured by level of operational efficiency and improvement.
2. Goals or Objectives: Goals or objectives fall directly from the strategy to drive a desired state or desired outcome of  persons or of  systems as set by the strategy
3. Tactics: Tactics are the conceptual action that drive goal fulfillment and are used by the procurement organization to achieve  specific goals or objectives

So simply it is not up to us to determine if strategic sourcing is dead or alive, it is up to the subject company that builds a strategic plan to makes sure they have a strategic procurement element of their plan that uses the best tools available to analyze and measure their results. And who are we to say that is not strategic.

We look forward to and appreciate your comments.

The economists say the recession has been over for more than a year.

Tuesday, September 28th, 2010

Finding new sources of supply has always been an issue. It may even be more important if your current suppliers can not provide what you need because they were forced to down size during recent economic woes.

This author has posted on numerous occasions relative to the importance of a robust retail supply chain and how retail companies might manage their relationships with current and new sources of supply. A significant part of the process is to have alternative sources of supply that you can rely upon. During last years H1N1 flu outbreak, The SafeSourceIt™ supplier database was able to provide multiple sources of surgical mask suppliers to a customer that had not been able to find them elsewhere for resale in their stores. Although this particular issue was caused by panic buying, it is still a supply and demand problem. The question this begs is are your suppliers capable of supplying your needs as demand increases? Did they reduce staff during the downturn? Have they been able to ramp up since then? Have their suppliers? The message here is, don’t wait until a time of panic or increased prosperity to work and plan for spikes in the supply chain that may cause your customers pain.

The SafeSourceIt™ Retail Supplier Database contains over 380,000 vetted global suppliers that are certified in over 25 different areas.

We look forward to and appreciate your comments

Didn’t the last earnings season just end? Here are twenty reasons why all retailers should use e-negotiation tools beginning immediately.

Monday, September 27th, 2010

One way to hire is to stop worrying about others and focus on you. If your business model is tight survival is more up to you than it is external forces. To that end there is a lot that e-procurement tools in the form of the e-RFX process can do to help you in the upcoming fourth quarter.

Below is a list of twenty benefits retailers can gain by using these tools particularly those that are offered in the form of Software as a Service. If you don’t believe they will help you in this quarter, what better time to start than 90 days prior to the New Year.

This list is not in any particular order.
1. Guaranteed to improve net earnings immediately
2. Guaranteed to improve safety immediately
3. Guaranteed to improve Corporate Social Responsibility.
4. Guaranteed to produce new sources of supply
5. Retail has less spend assigned than any other industry
6. Streamlines the procurement process for the better
7. Will hold suppliers accountable to your standards.
8. Will improves quality
9. Will provide cost avoidance in a volatile market such as pulp.
10. Will create a competitive environment
11. Will drives reliable market pricing
12. Will maintain a reliable history for future comparison
13. Will educate your suppliers as to how retailers wish to procure products
14. Supplier training eliminates questions
15. Will improve your product specifications
16. Will improve negotiations.
17. Will improve your carbon footprint
18. Will provide a simple award of business process
19. Will free up your peoples time for other tasks
20. Works for procurement of all product categories

This author is not sure why a derivative of this list could not become the mission statement for any procurement department.

As always, we  look forward to  and appreciate your comments.

Retail buying organizations are you prepared to survive an audit?

Friday, September 24th, 2010

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.

If you want to improve your profitability maybe it’s time to look at a private label program.

Thursday, September 23rd, 2010

According to Wikipedia Private Label goods and services are available in a wide range of industries from food to cosmetics.

Historically these products or store brands were positioned as low cost alternatives to major national and international brands. Today if you read the labeling many of the products are virtually identical and in some cases companies are positioning their brands as better or premium to the large brands.

A great source if education is The Private Label Manufacturer’s Association or PLMA. Their website is www.plma.com. PLMA sponsors an annual show which this year is being held in Chicago the 14th-16th of November. This show is full of great workshops as well as manufacturers that would be glad to compete for you business.

According to GfK Roper, 57% of all shoppers now say that they purchase store brands which represents a 21% increase from ten years ago and an impressive 38% growth rate.

E-procurement tools typically assigned to the e-RFX suite are an ideal way to source these products and will help to drive your costs even lower. Start with an RFI to select the companies or manufacturers you are interested in partnering with and then invite the best few to bid for your business.

If you want to improve your profitability maybe it’s time to look at a private label program.

Thursday, September 23rd, 2010

According to Wikipedia Private Label goods and services are available in a wide range of industries from food to cosmetics.

Historically these products or store brands were positioned as low cost alternatives to major national and international brands. Today if you read the labeling many of the products are virtually identical and in some cases companies are positioning their brands as better or premium to the large brands.

A great source if education is The Private Label Manufacturer’s Association or PLMA. Their website is www.plma.com. PLMA sponsors an annual show which this year is being held in Chicago the 14th-16th of November. This show is full of great workshops as well as manufacturers that would be glad to compete for you business.

According to GfK Roper, 57% of all shoppers now say that they purchase store brands which represents a 21% increase from ten years ago and an impressive 38% growth rate.

E-procurement tools typically assigned to the e-RFX suite are an ideal way to source these products and will help to drive your costs even lower. Start with an RFI to select the companies or manufacturers you are interested in partnering with and then invite the best few to bid for your business.

We look forward to and appreciate your comments.

It’s a bird, it’s a plane, no it’s superman or super fish or?

Wednesday, September 22nd, 2010

Retail Buyers have always faced tough decisions. Today it is getting down right crazy. How much of a product should they buy, how much category share should a product get, what is the demand going to be for the product going forward, does the product support safety and sustainable  standards. And now even tougher questions is this product what I think it is or something else entirely and will it have any kind of long term impact on my customer.

In this specific case, a company from Massachusetts wants to market a genetically engineered version of Atlantic salmon. I’m from Massachusetts and have worried for sometime about the commercial fishery in the North Atlantic. Supposedly this new salmon grows twice as fast as natures own. According to the company it is just as safe to eat as the traditional salmon.

I’m not sure what the impact is on humans and the FDA seems to be struggling with the same issue. We have been consuming engineered farm crops for years now. My question is if we approve the fish what will happen to the fisherman and what fish will be next? I know when I order scrod, scallops or other fresh seafood what it is and where it came from. More importantly I know who caught it and that is our commercial fisherman.

Buyer’s   reengineered s may be coming to a store of yours soon and you need to think about how to answer your consumer’s questions.

We look forward to and appreciate your comments.

Join the argument. Strategic Sourcing alive or dead? Part II of II.

Monday, September 20th, 2010

In Part I of this blog we posited that in order for a strategic plan to be successful there are certain elements organizations need to know. I’ll just list a few as an example.

1. Your own company.
2. Your Industry. Example: Retail.
3. Your vertical within your industry.
4. Your competition. Be careful.
5. Your category.
6. Your product.

So let’s assume that you have an e-procurement supplier that indicates they have great strategic sourcing tools that can evaluate your data and help you strategically build your sourcing plan which as a result would support your company strategic plan.

Let’s assume a tier two supermarket chain wanted to evaluate their total grocery category. Let’s just look at bottled water which is a sub category of the total grocery category. The first requirement is that they provide access to their sales and cost data. This may be easier said than done in the lower tier one and tier two markets. What is also required here is access to industry data. Data may indicate that their bottled water sales are 2.5% of their total grocery category, but what is the industry standard for this category? Are they already above the average?  Has their category grown year over year? Have industry category sales?  If they have access to both sets of data they have a start but who is their competition?  Are they comparing themselves to other supermarkets and should they be?  What about C-Stores, Drug-Stores, Liquor Stores and Mass Merchants that are close to their stores and get a share of category sales. Are they aware of these competitors category mix such as number of brands offered or private label offerings? All of this information is required for every category in the total grocery category. If they don’t conduct this analysis how would they begin to know what category to address first? The obvious choice is the category that is most out of norm with the industry average. But will sourcing that category have the best impact on the P&L and earnings.

Once this analysis has been completed, their e-procurement solutions provider should also have data that can guide them as to what month is the best month to source specific categories and what commodity markets are doing currently that may also have an impact on finished products.

After all of this is completed and categories are evaluated, ranked and prioritized they should then look for other elements that are incorporated in their company’s strategic plans such as CSR initiatives that support safety and the environment.

So, is strategic sourcing dead? This author does not believe so. However it is a process involving a lot of work, a lot of data, a lot of analysis and more than just tools in order to result in a strategic sourcing plan that can be implemented, scored and adjusted properly over time.

We look forward to and appreciate your comments.

Join the argument. Strategic Sourcing alive or dead? Part I of II.

Friday, September 17th, 2010

This author believes that strategic sourcing requires the same elements that any strategic program does in order to be considered strategic. Once these elements are in place within a company it becomes much easier to determine if the program, practices, solutions and tools that support it are strategic in nature.

Most companies, at least most successful or destined to be successful companies have a vision that is supported by a strategic plan and then broken down into a tactical plan. The plan is adjusted and updated over time as it moves along a path of predetermined  goals or milestones that are typically measurements against a pre determined goal. In order for a strategic plan to be successful there are certain elements organizations need to know. I’ll just list a few as an example.

1. Your own company.
2. Your Industry. Example: Retail.
3. Your vertical within your industry.
4. Your competition. Be careful.
5. Your category.
6. Your product.

If you do not know the above like the back of your hand as well as their interaction points, then your strategic plan already has flaws in it and getting organizations within the company to have linkage with the total company strategic plan is also flawed. This model can be applied to the entire company as well as organizations within the company such as the supply chain or procurement.

This author also believes that determining if something is dead has a lot to do with determining if it still has a use. In the retail space in lower tier one and tier two there really have never been any strategic sourcing tools deployed and many of these companies operate on a business as usual format. They may make claims like we are an EDLP company or a Cost Plus company when in fact they are not. They may think that a specific company is their competition when their primary competition comes from a completely different vertical.

If you check back on Monday I’ll delve more deeply into this subject and answer the question in Part II of this post as to whether the subject matter is dead or alive. Then you can make up your own mind.

We look forward to and appreciate your comments.

Are you comfortable with your sources of supply? Are your suppliers comfortable with you?

Thursday, September 16th, 2010

Being comfortable is great. Sometimes however being to comfortable can also create complacency. We all know we have coworkers that come to work everyday and do what only what they perceive their job to be. Nothing extra is ever done, and few ideas come from these folks that are just comfortable with what they are doing and how they are doing it. They do a good job at it, but that’s it.

Let’s apply this type of complacency to knowledge workers in the supply chain. If we are being honest with ourselves; we see this situation all the time.

 A buyer you know has a list of products or a category manager has a category that they are responsible for. There are only so many hours in the day and they have a job to do in order to get product to a distribution center, warehouse, store or some other location on time. They have done business with the same suppliers for a number of years. In fact the person in the job before them did business with these same suppliers and the person before that. So its easy to not rock the boat. It takes to much time to look for new sources of supply and after all one can only manage so many relationships anyway. Finally the buyer is comfortable with product quality and pricing has not gone up to much over time.

With the help of your e-procurement solution provider, this situation is easily rectified, but you need to be open to change. This is normally led from the top of the organization. The following is a partial list of what you can do to eliminate complacency and support the fact that you knowledge workers don’t have a lot of free time.

1. Provide your e-procurement company with a list of your suppliers by category.
2. Provide your e-procurement provider with a complete list of products carried by each supplier.
3. As your e-procurement provider to produce a list of new sources of supply located within a fifty mile radius of each distribution center or warehouse
4. Ask your e-procurement provider to provide data on each supplier’s including incumbent’s safety certifications such as GFSI and ISO.
5. Ask your e-procurement provider to provide supplier background information such as years in business and user references.
6. Select categories or products to source from your incumbents catalog and cross reference with new suppliers offerings.

The additional steps to this process can be provided by SafeSourcing as a part of our best practices deliverables which are included in our event pricing. The SafeSourceIt™ Supplier database includes over 360,000 global sources of supply that can be sorted by a variety of filters such as country, county, postal code or mileage from a particular location, plus many more.

We look forward to and appreciate your comments