Archive for January, 2011

Do you want to stop CONTRACT leakage?

Thursday, January 13th, 2011

And it does not really matter who signed it or whether they had authority to do so in the first place.

Fortune one thousand companies can have as many as 100,000 contracts. Most of these companies do not have contract management software, maybe as few as 15%.. 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 a contracts in evergreen status or auto renewal that may include price increase language that required written notice to terminate or renegotiate a contract already in place. 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 as much of the system as 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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As in other areas, in procurement it’s not easy being lean.

Wednesday, January 12th, 2011

A lean supply chain implies that there are lean procurement practices because the act of buying products and services means you have to collaborate with your trading partners.

The term “lean” as it applies to our subject was coined to describe Toyota’s business during the late 1980s by a research team headed by Jim Womack, Ph.D., at MIT’s International Motor Vehicle Program. According to lean.org; the idea behind lean organizations is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources.

In Lean Thinking, by Jim Womack and Dan Jones, the authors suggest that companies or organizations think about three fundamental business issues.
1. Purpose: What customer problems will the enterprise solve to achieve its own purpose of prospering?
2. Process: How will the organization assess each major value stream to make sure each step is valuable, capable, available, adequate, flexible, and that all the steps are linked by flow, pull, and leveling?
3. People: How can the organization insure that every important process has someone responsible for continually evaluating that value stream in terms of business purpose and lean process? How can everyone touching the value stream be actively engaged in operating it correctly and continually improving it?

So, how does this apply to the procurement process?

A typical misconception is that lean is suited only for the manufacturing process.  This is not true. Lean applies in any and all businesses for any and all processes. Some areas you might consider relative to a lean procurement process would certainly include but not be limited to the following.

1. How many internal resources are dedicated and at what cost to procuring products and services for resale or internal use.
2. How much time do these resources spend to review and renew contracts?
3. How many new sources of supply are vetted regularly to insure you are receiving the best possible product at the best possible price?
4. How long have you been doing businesses with existing suppliers in every category?
5. What are your Procurement Key Performance Indicators and how often do you review them?
6. Do your Procurement KPI’s link directly with your corporate KPI’s

Ultimately a lean organization understands both internal and external customer value and focuses its key processes to continuously improve both. Your solutions provider should have tools to help you evaluate your current process and suggestions as to how to reduce cost and infrastructure to support a lean procurement organization.

We look forward to and appreciate your comments.

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Here is how to insure that your e-procurement bids as successful as possible

Tuesday, January 11th, 2011

Competitive bidding is the process of inviting and obtaining bids from competing suppliers in response to documented specifications, by which an award is made to the best overall bid that meets or exceeds the specifications in areas such as price and quality. Probably one of the most important elements and most overlooked is that of incumbent supplier communication once a bid has been authorized. That is not setting any false expectations with your incumbent suppliers. As you already have a relationship you will most likely receive calls, emails or texts as to what is going on. Your answer has to be that we value our relationship and encourage you to use this process as it is the only process by which we will review bids.. Do not indicate that everything will be ok or that things will work out just fine or any similar language. If you are using a 3rd party, instruct your supplier to provide any questions or communications through the third party only. 

The e-negotiation 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 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. 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 company.

The above message needs to be communicated to any and all associates that are involved in the process and may have a reason to communicate with suppliers.

We look forward to and appreciate your comments.

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What type of office supplies are you buying?

Monday, January 10th, 2011

It’s a safe bet that your company is using laser printers. You may even have a thoughtful blue paper recycling container near the copier or even near every printer. You may even use recycled paper. The next step is a logical one; use environmentally friendly soy based ink for your laser printers.

In our opinion, the two best environmental reasons to use soy based ink are as follows. One, soy ink does not emit VOCs or volatile organic compounds. Two, soy ink is not petroleum based.

If you still need more reasons to switch? Assuming that you are already recycling paper, you will be glad to learn that soy based ink is said to make recycling the paper quicker and easier. Also, this option opens you up to new sources of supply. The next time you run a reverse auction for toner, you will have more options, greater price compression and another notch in your environmentally friendly tool belt.

Now you need to brag about it so that others can take their lead from you including your suppliers and customers. If you have implemented the full array of green printing mentioned in this blog, you have earned the right. Your customers will be happy to hear that you have made the right choices.

If you would like to learn more about environmentally friendly practices for your business, please visit www.SafeSourcing.com and check out our blog archives and our sourcing wiki. You will find much more information there.

We look forward to and appreciate your comments.

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It’s just down right scary that 80% of fortune 500 companies do not have contract management software.

Friday, January 7th, 2011

If you happen to be a large company as all in the fortune 500 are, this number is enormous.

The reality is that most of the information in a contract is not language one needs to be concerned with unless there is some form of break down in the relationship, product or services deliverables. There are however some fields that we want to know about such as expiration dates, escalator language, written notice dates, milestone attainment and service levels to name a few. Most of this data can be referred to as Meta data or essentially data about data. These data represent the information companies should be aware of in order to reduce their exposure to leakage and evergreening.

After many pages of definitions and legalese, most contracts can be broken down into the following areas.

1. Mutual Consent
2. Offer and Acceptance
3. Mutual Consideration
4. Performance or Delivery
5. Good Faith
6. No Violation of Public Policy
 

Contract management does not have to be a difficult process. Contact SafeSourcing if you’d like to begin to bring your contracts under smart management with SafeContract™ which includes the development of your Meta data tables.

We look forward to and appreciate your comments.

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What is the Design for Environment Program?

Thursday, January 6th, 2011

This program is a United States Environmental Protection Agency (USEPA) program that works to prevent pollution, and the risk pollution presents to humans and the environment.

According to Wikipedia Design for Environment (DfE) is a general concept that refers to a variety of design approaches that attempt to reduce the overall environmental impact of a product, process or service, where environmental impacts are considered across its life cycle. Life cycle assessment (LCA) is employed to forecast the impacts of different (production) alternatives of the product in question, thus being able to choose the environmentally friendliest. Different software tools have been developed to assist designers in finding optimized products (or processes/services). Design for Environment includes several subsidiary approaches, such as Design for Disassembly (to facilitate recycling and source reduction.

Please continue to support triple bottom line and do your part to hold your suppliers accountable to how they design their products and programs for retail and consumer utilization. Ask your procurement solution providers how they work with suppliers on your behalf in this area.

We  look forward to and appreciate your comments.

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E-procurement solutions require officer level sponsorship and support!

Wednesday, January 5th, 2011

he role of e- procurement solutions continues to become more of a strategic each year. Driving cost of goods and services control is one of the most important above the line initiatives a company can undertake. But don’t forget the expense or indirect category

In order to successfully implement an enterprise wide e-procurement initiative, executive management must provide sponsorship and visibly promote these projects within their organizations. Executive sponsorship is required by the Chief Executive Officer, Chief Financial Officer, Chief Procurement Officer or Chief Logistics Officer. The potential impact to earnings regardless of Industry is so significant with a properly deployed e-procurement program that officer level executives require visibility based on the impact to stockholders and stakeholders alike. In fact Sarbanes-Oxley section 404 requires that companies 1. Demonstrate reasonable & consistent governance & compliance monitoring. 2. Assure proper use of tools that have been placed into practice. 3. Employ proper reporting & management oversight. Implementing e-procurement tools has the potential to offer significant earnings changes. 

Once executive management has sponsored these initiatives, some form of accountability must be implemented to ensure maximum participation in order fully realize organization wide savings opportunities. A company’s successful transition to e-procurement requires a transition from a cumbersome paper RFX processes to one that focuses on using the speed and efficiency of an electronic forum.  Successful change management professionals focused on sustainability realize that this shift must be a combination of the use of not only the latest software advances, but also reengineering of internal processes in order to drive sustainable results.

We look forward to and appreciate your comments

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What is Environmentally Preferable Purchasing (EPP)

Tuesday, January 4th, 2011

For guidance with your green purchasing practices, one place to begin is our federal governments Environmental Protection Agency or EPA.

The United States Environmental Protection Agency (EPA) has a number of programs that as a result of government use offer companies a great opportunity to educate themselves in support of their social responsibility initiatives.

One of those programs, the Environmentally Preferable Purchasing (EPP) helps the federal government “buy green,” and in doing so, uses the federal government’s enormous buying power to stimulate market demand for green products and services. Geared first to help federal purchasers, this site can help green vendors, businesses large and small — and consumers. Use the easy index to:
 
• Find and evaluate information about green products and services;
• Identify federal green buying requirements;
• Calculate the costs and benefits of purchasing choices;
• Manage green purchasing processes.

The U.S. EPA website www.epa.gov contains a wealth of information relative to finding and evaluating green products in any number of categories from construction to office supplies. If you truly review and evaluate the green portion of your company or individual social consciousness regularly the  U.S. EPA site is a great place to start.

We look forward to and appreciate your comments.

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Your strategic sourcing plan should already be completed.

Monday, January 3rd, 2011

One example of the above might be to augment the manual processes that many  sourcing professionals use today in order to find new sources of supply interested in bidding for their business rather than continuing to live with the same small, known group of suppliers they have used for years. Historically this has been a very time consuming practice that results in few if any new sources of supply. This represents a great opportunity to deploy a tactic that can have an immediate impact for an organization without the need for the implementation of a complete new sourcing strategy.

There is a specific process to follow that will encourage new sources of supply to want to bid for a companies business beyond just being invited. Simply having your buyer assigned the task of picking up the phone and calling new sources of supply will not result in new suppliers agreeing to bid for your business. There are specific objections to overcome and questions to answer that require a specific skill set.  This is a perfect opportunity for Software as a Service providers that offer supplier research. Skilled providers in this area can provide companies with as many as a half dozen or more willing new sources of supply in as little as thirty minutes  that may in fact reside within a companies existing marketing  area.

Sourcing tactics can be isolated procurement related actions or events that take advantage of opportunities offered by the gaps within strategic plans such as lack of new sources of supply mentioned above.  So our tactic here would be to find additional sources of supply that we can invite to compete for a companies business in a variety of categories. The fact is that additional sources of supply competing for a companies business results in compressed pricing and often better quality products.

We appreciate and look forward to your comments.

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