Archive for December, 2010

There are a few simple keys to understanding competitive bidding when using e-negotiation tools.

Wednesday, December 15th, 2010

There are several important elements that require clear understanding by both the host company as well as the invited suppliers to ensure that bidding is fair when using e-negotiation tools.

What constitutes the best overall bid is a bid that meets or exceeds the specifications in areas such as price, safety, environmental best practices quality and other areas as outlined in the product specification. The process contemplates giving potential bidders a reasonable opportunity to bid, and requires that all bidders be placed on an equal playing field. Ideally each supplier must bid on the same documented specifications, terms, and conditions for all the items.

However breaking out individual line items that a specialty supplier can provide bids for can help to reduce the opportunity for suppliers to manage the overall gross margin of their bids and drive higher savings. The purpose of competitive bidding is to stimulate competition, prevent favoritism, and secure the best goods and services at the lowest possible price, for the benefit of the host company while making the job easier for buyers and category managers. Competitive bidding cannot occur where specifications, terms, or conditions prevent or unduly restrict competition, favor a particular supplier, or increase the cost of goods or services without providing a corresponding tangible benefit for the host Retailer.

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

Make sure you conduct a detailed Category Discovery if you’re planning for a successful e-negotiation program?

Tuesday, December 14th, 2010

The following are some practical thoughts that companies should consider which will take their e-negotiation program well beyond tactics to create a sustainable process going forward.

Category discovery is the basis of any quality implementation of an e-negotiation strategy. It is essential that this process begin with a company’s executive management’s sponsorship. This process will include working with all category managers, buyers and other procurement knowledge workers to uncover opportunities suitable for e-negotiation tools such as Requests for Information (RFI), Proposals (RFP) and Quotations (RFQ).

A fundamental requirement for any successful category discovery process is an adequate source of suppliers interested in participating in e-negotiation events regardless as to whether they impact cost of goods or the expense line. Suppliers can then be vetted against product specifications and CSR goals the during the discovery process. The success of this process may and probably should also include store visits, distribution center visits, supplier visits, product evaluations, contract reviews, spend data collection and other related information necessary to completely understand specific category dynamics.

Any process is only as good as its original goals. These factors may go well beyond simple price reduction such as impact on quality, finding secondary sources of supply, cost avoidance, safety and environmental goals. Analysis of these success factors and areas of improvement which have been properly benchmarked to the original goals included during the discovery and resulting category to market strategy will drive a sustainable process and as such may well be the most important step after an e-negotiation event has concluded.

We look forward to and appreciate your comments

Senior executives; how can your company help to ensure our citizen’s safety?

Monday, December 13th, 2010

Every time a new program goes out the door, coming back to it and insuring that all companies are in compliance is tricky at best. Just ask any CFO you know if they are in full compliance with Sarbanes Oxley. But I digress.

As you may recall all import products from abroad now require Importer Security Filing (ISF) which is also known as 10+2 because 10  data elements are required from U.S. importers and 2  data set items are required from carriers. These 12 items were required beginning in January of 2009 requiring importers and vessel operating ocean carriers are required to provide U.S. Customs and Border Protection CBP with advance notification for all ocean vessel shipments inbound to the United States.

Behind The Importer Security Filing Program (ISF) or 10+2 is an attempt at helping to prevent terrorist weapons from being transported to the United States and to improve Customs and Border Protection (CBP) ability to identify high-risk shipments so as to prevent smuggling and ensure cargo safety and security.

The following are the 10 data elements are required from the Importer:

1. Manufacturer (or supplier) name and address
2. Seller (or owner) name and address
3. Buyer (or owner) name and address
4. Ship-to name and address
5. Container stuffing location
6. Consolidator (stuffer) name and address
7. Importer of record number/foreign trade zone applicant identification number
8. Consignee number(s)
9. Country of origin
10. Commodity Harmonized Tariff Schedule number

From the carrier, 2 data elements are required:

1. Vessel stow plan
2. Container status messages

Ask your solutions provider if they have this information available to assist you in you off shoring plans.

Get the lead out! Holy Holiday Lighting.

Friday, December 10th, 2010

So why the heck do retailers keep buying and manufacturers keep making products like holiday lighting that can make so many sick. According to ecology center HealthyStuff.org found that over 50% of holiday lighting tested in the U.S. has excessive levels of lead. An excuse me the answer to every issue we have in product safety is not to wash your hands once you have touched something.

According to Wikipedia, Lead poisoning (also known as plumbism, colica Pictonum, saturnism, Devon colic, or painter’s colic) is a medical condition caused by increased levels of the heavy metal lead in the body. Lead interferes with a variety of body processes and is toxic to many organs and tissues including the heart, bones, intestines, kidneys, and reproductive and nervous systems.

Buyers; this is a simple issue. One question determines whether or not you buy these products. Do the holiday lights you are selling us contain lead?  An answer of yes or I don’t know means that vendor does not get the business. An answer of absolutely not gets that vendor all of the business and also creates a great advertising opportunity for you.

According to HealthyStuff.org their tests showed that 4 out of 5 light sets contained detectable lead and that 28% contained lead at levels which make the product illegal to sell in Europe (greater than 1,000 parts per million.

Apparently the EU is ahead of the U.S. Maybe the new food safety bill needs to be expanded to include products beyond food. Check out the test results.

SafeSourcing would not let this happen if we were your e-procurement solutions provider.

We look forward to and appreciate your comments.

I guess flame retardant chemicals in our food makes sense.

Thursday, December 9th, 2010

I could not believe what I was reading this morning in the Arizona Republic the little side bar was titled Flame-retardant chemicals found in package of butter. The chemicals are polybrominated diphenyl ethers which are commonly found in electronic devices, fabrics and insulation. This all happened at a Dallas grocery store

I think I have it figure out though. The southwest is noted for its wonderful spicy dishes based on all sorts of peppers. So I guess the manufacturer thought that since butter is the basis of all great food that people in the southwest would appreciate having their stomachs insulated and all of us that love this food already know why we need the fire retardant.

It will be interesting to find out when the product is traced to its source how this happened. Thank goodness we have a new food safety bill. Although sometimes the legislation we get from our existing government gives this author heartburn.

Support product traceability from the farm to the plate.

We look forward to and appreciate your comments.

Safety and Environmental certifications are not just about food and food born illness protection.

Wednesday, December 8th, 2010

Many times the ideas for my blog posts come from conversations with customers. Often times those thoughts make it into our product development plans. In fact listening to our customers is one of our most important jobs.

During a visit with a customer several months ago, the head of procurement complimented me on our companies efforts related to food safety and in particular commented on the 27 safety certifications we hold our 380,000 global suppliers accountable to in our SafeSourceIt™ Supplier Database. He followed that with the statement that since they did not sell fresh foods, that area of our business did not apply to them.

This particular retail customer does sell food products, cosmetics, private label bottled water and also bags the products they sell to their customers in plastic bags. I think most of you can see where I’m going with this. Plastic bags are a growing area concern for many areas of the country and in fact outlawed in an ever increasing number of areas due to their negative environmental impact. Food packaging can contain BPA. Dog food has contained products such as melamine. Toys have been found to contain lead.

So, let’s see that’s clothing, packaged foods, pet food, toys and beverages. I guess we have to be careful with all of the products we buy. Suppliers need to be held accountable to a variety of standards and certifications while also providing traceability beyond the one forward and one back standard supported in the industry today.

E- procurement solutions  providers need to be prepared to discuss how they intend to accomplish this for their customers in order to limit end user consumer risk, but also limit risk associated with litigation and other recall related costs that have a direct impact on company profit.

At SafeSourcing, all of our associates support our R4 program of Recycle, Reuse, Replace and Reduce and will be glad to have a detailed discussion relative to product safety and environmental impact and how our tools proactively address these opportunities.

We look forward to and appreciate your comments

What is a Vickrey reverse auction?

Tuesday, December 7th, 2010

According to Wiktionary the Vickrey reverse auction is named after a Canadian professor of economics named William Vickrey (1914-1996) who was also a Nobel laureate.  Vickrey’s paper, Counterspeculation, auctions and competitive sealed tenders, was the first of its kind using the tools of game theory to explain the dynamics of auctions. Any one that truly understand the magic of a reverse auction understands that the same type of psychology that drives gaming in a Casino drives the dynamics of a reverse auction.

There are a number of types of reverse auctions which is why a strategy is important when you look at each category that you decide to take to market. Specifically to the opening question, a Vickrey auction allows for selling single items where the lowest bidder sells the item at the price offered by the second lowest bidder.

Now try and figure out how you would implement this strategy. Would you use ranking? If so, what impact might it have?

We look forward to and appreciate your comments.

The holidays are a great time to refocus your companies green sourcing efforts

Monday, December 6th, 2010

What does it mean to go Green? I was rereading an Aberdeen white paper Building a Green Supply Chain from last year and believe they may in a concise format have the best glossary of definitions as to the meaning of and impact on what it means to be Green. Their short but effective green glossary defines the following terms.

1. Corporate Social Responsibility (CSR) posits that companies have a responsibility to be social and environmental stewards and that having a positive impact on society and the planet is as important as profit.
2. Green refers to practices, processes and products that have a minimal impact on the health of the ecosystem. The emphasis is on non hazardous recyclable, reusable, and energy efficient products and processes.
3. Sustainability ensures the ability to meet present needs and profits, today, without compromising the ability to meet them tomorrow.
4. Triple Bottom Line (TBL) determines that business has positive impacts on the three P’s: people, profit and planet and is a standard framework for CSR agendas.

It might be interesting to ask your CEO if he or she agree with these definitions. Many probably do. The next question would be are you as a company measuring any of them and their impact on your companies performance. The answers would be a good indicator of  your company’s commitment to being Green and not just caught up in green wash and web slogans.

We look forward to and appreciate you comments.

What is spend analysis?

Friday, December 3rd, 2010

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

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 would require access in order to gain all spend data necessary for analysis by advanced real time analytics and workflow management systems.

1. Retail ERPS Systems
2. Retail Planning Systems
3. Merchandise Management Systems
4. Supply Chain Management and Execution Systems
5. Store Operation Systems
6. Corporate Administration 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 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 event 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

A Contract Management Primer.

Thursday, December 2nd, 2010

If you put a bunch of senior executives in a room and ask them what they would like in the way of contract control; the meeting could last weeks. At the end of that time you might not have anything that resembles what you started looking for. And that is why we have the saying that a camel is a horse created by committee.

Most contract management systems have relatively short ROI periods. In fact a company might even be lucky enough as they go through their data collection process to find a single contract that when analyzed might pay for the entire system.

There are all sorts of benefits associated with using contract management software. Probably the most important and least recognized of which is finally having all spend data in one location enabling more effective negotiations. If you have ever run an e-procurement event and tried to assemble a simple specification or incumbent supplier data you already understand the time involved. Administrative costs alone can be reduced by 25-30%.  That’s a huge number in today’s world of insufficient staff.

If you want to get started, here are some basics that a system should be able to provide.

1. Create contracts
2. Maintain contracts
3. Control contracts
4. Track user access to contracts
5. Track and monitor the status of contract Meta data
    a. Award date
    b. Contract begin date
    c. Contract end date
    d. Begin delivery date
    e. Escalator language
    f. Notification clauses
    g. Termination Clauses
6. Automatically alert buyers and management of required actions
7. Custom Reporting
8. Supplier Scorecards

If you want to get started tomorrow, contact SafeSourcing and ask about SafeContract™.

We look forward to and appreciate you comments