Archive for November, 2010

Retailers, how many of your e-procurement contracts contain evergreen language?

Friday, November 12th, 2010

In this case your supplier wins because your contract contains evergreen language. Some retailer’s think this is a good thing and it could be. Paired with other language that might identify escalator or de-escalator language that protects both the supplier and the buyer against abnormal commodity increases this could be win-win. The bigger issue is who is responsible for monitoring the dates and how will you be alerted if the adjustments don’t take place?

This begs the question; just what are are evergreen clauses within a contract and what do you need to do to be careful with them.

According to Black’s Law Dictionary an Evergreen contract is a contract that renews itself from one term to the next in the absence of contrary notice by one of the parties”

The potential problem with an “evergreen” clause in your contract is that this type of contract automatically renews at the end of the contract term, unless one of the parties notifies the other party that it does not want to renew the contract.  This notice normally must be given within a specified time period such as 60 to 90 days prior to the end of the current contract term. This takes us back to who is going to monitor this time frame and alert you to the fact that something is required?

A significant step in conducting quality e-negotiation events is to understand the contracts you are wishing to negotiate.

We look forward to and appreciate your comments.

Share This Post

When should Retailers use a Request for Information or RFI?

Thursday, November 11th, 2010

As we have discussed in a prior posts, a Request for Information or “RFI” is in its most simple form a document distributed to new sources of supply prior to inviting them to participate in a Request for Quote or RFQ. The process assists you in your decision as to whether or not you wish to invite new suppliers to participate.The document lets potential suppliers know the information you require in order for them to be considered for participation. This is also a great way to update the information for your incumbent suppliers. This is particularly important in light of our recent economic woes.
Some of the information contained in an RFI can include but certainly is not limited to the following.

1. General education relative to your procurement process.
2. Certification requirements such as safety or environmental.
3. Rules of engagement
4. Supplier general information.
5. Sourcing tree information.
6. Country of Origin Information.
7. Near Shore or Off Shore Practices
8. Financial Information 
 

A Request for Information is a great tool that when used properly enables retailers to evaluate potential new sources of supply while also holding their incumbent suppliers accountable to the same standards they would of new suppliers. Although most often used in complex sourcing events, RFI’s are very helpful in almost all e-negotiation events.

Share This Post

Sourcing prescription drugs gets a little simpler all of the time.

Wednesday, November 10th, 2010

This was the case years ago, but with the advent of many of the internet based prescription drug sites such as RXlist, Drugs.com and many retailers sites, it is easy to find lists, formulations, directions, dictionaries and generic equivalents. What more could a Pharma buyer ask for. Now all you need to do is use your e-procurement solutions provider to drive your costs down.

According to RXlist, the top twenty prescription drugs in the U.S. are as follows.

1. Lipitor
2. Hydrocodone / Acetaminophen  
3. Hydrocodone / Acetaminophen  
4. Levothyroxine sodium  
5. Amoxicillin  
6. Lisinopril  
7. Nexium  
8. Synthroid  
9. Lexapro
10. Singulair
11. Plavix
12. Simvastatin
13. Hydrochlorothiazide
14. Amlodipine besylate
15. Azithromycin
16. Warfarin sodium
17. Furosemide
18. Azithromycin
19. Levothyroxine sodium
20. Advair Diskus

Let’s hope this  information helps you to drive down your costs.

We look forward to and appreciate your comments

Share This Post

What’ll ya have? Oh, I dunno, give me some recalled eggs over easy and some of that BPA stuff.

Tuesday, November 9th, 2010

Maybe we all need to be nine feet tall and have three eyes and four ears in order for the government to get up to speed and take food safety more seriously, or execute more effectively.

I was reading a local news paper on Sunday and found an article titled Study: ‘Quantifiable levels of Bisphenol A found in food by Ervin Brown of the Los Angeles Times. The article went on to say that last week a study was announced that was conducted by a research team that measured 105 foods from grocery stores in the Dallas area. In this research they detected quantifiable levels of BPA in sixty three of them. The products named were those of major brands.

Today I was browsing the internet and came across an item titled Eggs in Texas recalled after salmonella found at Ohio farm by Associated Press and www.khou.com. Didn’t we just have this problem a couple of months ago?

As they say on ESPN, COME ON MAN!

We look forward to and appreciate your comments.

Share This Post

Scottsdale Arizona’s SafeSourcing Inc. releases outstanding Q3 2010 results.

Monday, November 8th, 2010

Despite the continuing economic condition SafeSourcing Inc. reported significant 3rd quarter 2010 revenue growth of 42.45% versus the same period of 2009.Safesourcing has also continued to significantly grow its customer base with wins across all retail verticals as well as other new industries. SafeSourcing also recorded significant net income for the same period.

According to Ron Southard SafeSourcing CEO, We continue to honor the commitment we made to the retail market when we launched this company of being able to address all spends regardless of size. During 2010 we have sourced products for companies with 1000’s of stores and for companies with only a single location. SafeSourcing has run hundreds of millions of dollars through our system this year for all RFX types and provided new sources of supply, a focus on companies CSR inititives and significant savings across all categories. Southard continued by saying that they could not be more pleased with the faith that their customers have placed in SafeSourcing during a very challenging economic climate.

To learn more about SafeSourcing please visit our website www.safesourcing.com.

We look forward to and appreciate your comments.

Share This Post

For retailers it’s really pretty simple; just look at your gross profit.

Friday, November 5th, 2010

How many times do we hear all of the reasons for a retail company’s performance being off? It’s the cost of doing business over seas, the economy, the cost of fuel, heath care costs etc. How often do we hear, that we are doing better than the same period a year ago or we are exceeding plan. All of that is nice stuff, but the bottom line is your bottom line. If you top line sales are up and your net profit is up it does not necessarily mean that you have all of your procurement issues under control.

Let’s start with some numbers you might wan to look at. Don’t just assume that profit is a good thing because profit could be caused by an imbalance in your category margins.

Here are a few good questions to ask yourself.
.
1. How do your cost of goods compare to the rest of the industry for a chain of your size?
2. How do your operating expenses compare to other chains of your size?
3. How do your gross margins compare to other chains your size?

All of the above can be good indicators of overall company health and certainly procurement health. If your cost of goods is higher than industry averages for a chain of your size, why is that? Is there a specific category that is causing the issue? Do you know how to isolate the problem and then eliminate it?

If you don’t have or know this information, you should ask your e-procurement provider if they have it.

As an example, here is a look at U.S. based convenience store chains targets for non fuel.
1. Cost of Goods Sold should run somewhere around 71% or 72%
2. Gross Profit should run around 28% to 30%
3. Operating Expenses should run around 26% to 29%
4. Net Operating Income around 2%

If you are way out of balance with these numbers and want to understand how to rebalance them, call SafeSourcing.

We look forward to and appreciate your comments

Share This Post

Are Reverse Auctions Strategic? YES THEY ARE!!!!!!!

Thursday, November 4th, 2010

What is strategic is entirely up to the person using the tool, whether or not they have used it before and if it returns the results they require as part of their strategic plan. So can a reverse auction be strategic. Of course it can. The overlying strategy might in fact be to simply get costs under control as quickly as possible. I shudder to think that this would be a company’s entire strategy, but in these times of economic survival it may well be. I can envision the following. The economy is kicking a companies ass and the CEO calls a  staff meeting and says we have a new strategy and for the time being everything else will take a back seat in order to get our costs down. Come back in a week and tell you how you are going to do this immediately.

Now for the English lesson.

The word strategy is a noun that has several definitions. According to Wiktionary, 2 of those are.

1. A plan of action intended to accomplish a specific goal
2. The art of using similar techniques in politics or business

The word strategic is an adjective which we know is a word that modifies a noun and can also me modified by an adverb. So think of strategic as meaning of and pertaining to strategy and can be used comparatively as in something that is more strategic or less strategic.

So can a reverse auction or auctions be strategic. Of course they can and one example would be if your strategy was to simply reduce costs immediately. They can also be more strategic as part of a going forward strategy as well as provide other strategic benefits such as cleaning up your specifications and reporting as well as providing new sources of supply.

We look forward to and appreciate your comments.

Share This Post

Air shipments are growing. How concerned should retailers be about Air Cargo safety?

Wednesday, November 3rd, 2010

There are many areas that effect air cargo prices that can effect demand for and the use of this service and there are literally hundreds of airlines that participate. Examples might be issues such as the ash plumes from Iceland to the cost of jet fuel. With the recent concerns relative to air cargo security driven by the events in Yemen it is critically important not only that governments be concerned about the safe shipment of cargo to the  U.S.; but that U.S. companies importing these good also be concerned once the products have crossed our borders and entered the ground stage of their delivery cycle. The more products that are shipped the larger the problem for governments and  retail companies.

Air cargo volumes are growing rapidly. According to an article in Reuters the International Air Transport Association or the IATA says that the United States, for instance, shipped around 30 percent of its exports by value using air transport from January to March, IATA estimated. According to another article in Business Insider by Vincent Fernando, CFA titled Hong Kong Air Cargo Volume Exploding towards Record Highs. The article goes on to say that someone forget to tell Hong Kong the global economy was in trouble. Air Cargo volume is surging for the trade hub, up 47% year over year, and at the highest level in two and a half years.

Employees, consumers want to know that they are safe. As such it is critical that companies work together to develop a process that insures check and balances are in place from the site of original shipment to final store or consumer delivery.

We look forward to and appreciate your comments

Share This Post

Here are nine steps to safer and more eco-friendly procurement.

Tuesday, November 2nd, 2010

Below are nine  great steps to  follow in order to drive safer and more eco-friendly procurement.

1. Be pro-active in driving not for resale and for resale product safety within your company, and also supporting eco-standards in the procurement process.
2. Pay it forward with all of your trading partners by sharing what you are doing, and asking what they do to support yours or similar initiatives.
3. Educate your employees and trading partners about common safety standards and guidelines such as the SQF Certificate www.sqfi.com  and the Global Food Safety Initiative www.ciesnet.com.
4. Educate your employees and trading partners about common eco-standards such as Green- Energy National Standard www.green-e.org or EcoLogo www.ecologo.org
5. Point associates and trading partners to free educational websites such as www.safesourcing.com to use their free SafeSourcing Wiki or the Sourcebook professional social network for procurement professionals.
6. Only use trading partners that follow your lead.
7. Train your team to understand and use all available tools that insure supply chain safety such the free daily safety in sourcing blog at www.safesourcing.com  or the low cost SafeSourceIt Supplier Database and Reverse Auction Tools.
8. Impose a system of measures and controls to monitor performance against clearly defined goals.
9. Start at the top and engage all levels of your company.

We appreciate and look forward to your comments.

Share This Post

How safe is your/our supply chain? Help keep us all safe please.

Monday, November 1st, 2010

The specific question is how safe is your supply chain. How safe is it when transporting r products to your stores from warehouses all over the country and in fact all over the globe. Are there enough checks and balances in place to insure that the only products on a boat, train, truck or jet are the products that should be there?

The recent threats from Yemen should make all supply chain logistics providers ask the same questions every time something ships relative to their own and 3rd party logistics providers they may provide these shipping and delivery services. Unfortunately most companies will not have an answer readily available on this subject. In fact most companies will tell you when they order something how soon they would like to receive it and where but will never ask how the product will get there and by whom.

It’s crazy to think that we don’t know what’s on a plane until four hours before it gets to the U.S. This according to an article in the Arizona Republic titled Yemeni arrested in mailing of powerful bombs by Eileen Sullivan and Ahmed Al-Haj of the Associated Press. We have to do better. The terrorist never rest and we must remain diligent. So think about where you products come from and how they get from their point of origin to your stores. This is part of having a traceable supply chain but in this case we need to know what is shipping, when it’s shipping and who has access to to it during the entire process.

We look forward to and appreciate your comments.

Share This Post