Archive for November, 2011

The Risks of Putting Off Spend Analysis

Tuesday, November 29th, 2011

Today’s post is by Lauren Gentry; Account Manager at SafeSourcing. 

A company that does not want to take the time, energy, or resources to evaluate their spend is ultimately wasting money.  Every company has opportunity to evaluate where, what, and when they are spending money and therefore where they could potentially be saving money.

Most companies that implement any type of spend management program within their company need to start with a good spend analysis.  This analysis should include information such as the quantity of products purchased, number of suppliers used, and the varying price points per unit. 

A company should implement a specific sourcing strategy as a result of analyzing their spend data.  As your strategic sourcing partner, SafeSourcing can help with your analysis.  Some of the steps that a company should take are to develop a sourcing pipeline, identify and prioritize specific sourcing projects, determine a strategy for each, collect project information, finalize supplier identification and management, and distribute and collect bid information.  These steps will all contribute to a more successful award of business.  By implementing a strategic sourcing plan a company is able to understand their full spend analysis and start taking advantage of savings opportunities.

What are you waiting for?  Remember, the longer you wait, the more money you waste!

For more information on SafeSourcing and how to implement your strategic sourcing plan, please contact a Customer Service Representative for more information.

We look forward to and appreciate your comments.

To Award or Not to Award…..

Monday, November 28th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

The process of negotiating deals with vendors has long been seen as one in which the customer “beats up” the vendor over price; sending the message that price/cost is the most important thing involved in making a decision about who you award business to.  Today’s economy would tend to back this mindset, however, in evaluating based on price alone you could be doing your company a great disservice.  Today’s blog is going to focus on a few areas to keep in the forefront as you make your purchasing decisions.

Apples to Apples – Whether by Request for Proposal, Reverse Auction, or just placing phone calls to gather pricing, the end result of your comparative research must ensure that you are looking at the same offering from each vendor (or the nearest comparison possible).  Even in the case when shopping a commodity-type product such as computer hardware there are many chances for the vendor to increase their value with other services they offer.  When comparing vendors make sure the products, services, extra offerings, etc. are being evaluated evenly. 

Reputation  – Although it would seem to go without saying, many companies will take the lowest bid of an apples to apples comparison without finding out much about who they are about to spend their money with.  This is seldom the type of practice people would do with their own personal purchases and yet there are many companies who are so focused on price that they fail to do the research to make sure the vendor they are about to select has a proven track record of performance.

Cost of Change – Assuming that you end up finding a new vendor to do business with, one of the things that must be considered early on in the discovery process is the cost of change.  Before you ever make a phone call, send out an RFI, talk to a vendor; the business needs to determine what the costs of switching vendors will be.  Knowing this in advance will allow you to set the stage with new vendors you are talking with as negotiation points and will possibly allow you  to possibly eliminate those costs should you ever have to change again.  There  are multiple levels of cost for switching vendors and you should know each before starting the process of looking for potential new suppliers.

Policy Changes –The final area that should be examined in the process of evaluating your vendors is the policies surrounding the goods or services being looked at.  Some companies have policies developed long ago and for good reasons that dictate the companies they can do business with.  Some of these policies (such as ones relating to specific geography) may need to be examined so that companies that can provide good value to your company can still be considered for your business.

For more information on gathering information and pricing from vendors and assistance with the evaluation of that information, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

The Most Expensive Turkey Day

Wednesday, November 23rd, 2011

Thanksgiving 2011 is one of the most expensive, if not the most expensive, ever.  How can this be? According to a report from ABC News, travel and food costs are at an all-time high.  Hotels are up 5% this year, turkey is up $3, and even pumpkin pie is up in price by $0.41!  The culprit for these increases: rising gas prices, which are up about $0.50 per gallon compared to last year?  If gas prices are affecting Turkey Day, what about Black Friday and Cyber Monday?

Black Friday is notoriously known as the busiest and most lucrative day for retailers.  On its heels is Cyber Monday which has become almost equally as profitable, both of which follow one of the most expensive holidays this year.    Prices for those must-have gifts inevitably are higher this year as well as gas prices have inflicted higher cost burdens for the retailer, who inevitably impose those cost increases to the consumer.  Although it may be a little late to prepare, this expensive turkey day provides a lesson in preparation for the year to come.

The consumer has numerous options to beat the rising costs.  Purchase non-perishable goods such as pumpkin and soups early in the year to avoid High Holiday costs.  Traveling on Thanksgiving?  Book flights ahead of time, and if possible travel on Thanksgiving, or postpone celebrations to the week after which will provide lower fares.

For the retailer, preparation and consultation with your strategic sourcing partner is key.  Following a similar plan as the consumer, purchase excess non-perishable goods earlier in the year.  Products and gifts that you know will be successful should also be bought in large quantities in advance.  This will not only help your wallet, but it will also allow you to have remaining inventory once Black Friday and Cyber Monday hit.  Beyond purchasing in advance, why not incorporate an escalator/de-escalator clause into your contracts to ensure you are not as heavily affected by the price inflation of oil.

Even though 2011 is one of the most expensive years to celebrate Thanksgiving, you can find alternatives to paying the higher prices.  Contact your strategic sourcing partner today so you can begin developing a plan for a Happy 2012.

For more information on SafeSourcing and how we can assist with this process, please contact a SafeSourcing  Customer Service Representative for more information.

We look forward to and appreciate your comments.

“Now is the time for construction savings”

Tuesday, November 22nd, 2011

Today’s post is by David Wenig; Senior Account Manager at SafeSourcing.

Balancing high priority procurement projects can be difficult due to some very complex factors including commodity indices, urgency, safety programs, corporate initiatives and more. In an effort to help ease the process a bit, I would like to share a bit of category advice.

Last night, over dinner, I had a conversation with a contractor that affirmed a concept that I already knew to be true. He said that he is going into a slow period of the year for contractors. Beginning around Thanksgiving, the work available for contractors becomes scarce.

This year, around the 3rd of January, my phone began ringing and ringing. On the other end were the contractors with whom I had worked throughout the year on procurement projects for our customers. The message was the same; they all wanted to know if there were any new projects that were ready to go out to bid.

What this means for retailers is that there is no time like the present to source your upcoming construction projects. From a strategic standpoint, the timing is at its best and savings will follow. Take a look at your project lists and contact your strategic sourcing partner to fast track these projects for completion as soon as possible.

If you are the type of person who prefers facts to conjecture, I will leave you with this example. In a long-running project in the construction category for a customer, we held bids for general contractors several times per month. The bids that were completed in January and February showed, on average, 75% more savings than the overall average savings for the project as a whole.

We look forward to and appreciate your comments.

The Future of the Paper Invoice?

Monday, November 21st, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

A few weeks ago, in a move to support the President’s “Campaign to Cut Waste” initiative, the U.S. Department of Treasury mandated that a new Internet Payment Platform will be up and running in 2012 all commercial vendors being required to submit their invoices electronically in 2013.  This trend is being mirrored by companies all over the world as the cost of generating and mailing paper invoices increases at an alarming rate. 

Today we will look at some of the factors to keep in mind when considering your own plans to migrate away from paper invoices and toward an electronic platform.

One solution or two – The first thing that the business needs to do is determine the scope of the transition they plan to make.  The obvious first step is to examine the invoices you send out because of the internal costs associated with generating and mailing them.  Other companies may also have new corporate initiatives to become more “green” and choose to incorporate the invoices they receive into the e-invoicing project right from the start.  Whether you keep these two pieces apart or together finding a solution provider that can handle them both is an important first step. 

Develop a transition plan – Once the scope of your project has been established, the transition plan the business can feel comfortable with must be developed.  Invoicing is such a sensitive process for businesses and the way the process is modified, for any reason, is one which has great importance at the executive levels.  The majority of successful transitions to electronic invoices include plans to gradually phase out the paper statements a portion at a time.  Whether that is 20% per quarter, 10% per month, or some other method, the transition plan will be as important as the tools you choose to implement.  An additional piece to this step will also be to determine a total compliance level that the business is willing to accept as some customers and vendors may not be able to handle an electronic invoicing process.

Communication with customers and vendors – As with any change that involves an embracing of technological processes and equipment, the transition to e-invoicing needs to be communicated to your customers and vendors clearly and with a well-defined timeline for what the transition means to them.  It will be important that all customers and vendors understand the reasoning behind your transition and that it will be a move they will eventually need to make.  The recommended first step would be communicate the plan and determine which of your customers and vendors that are willing to voluntarily make the move to electronic invoices immediately.  After these are moved it will be time to implement the transition plan for the remainder of the group that you have set as a result of the step above.    

For more information on finding the right solution partners to assist you with your transition to e-invoicing, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

Watch out that your spend cube does not become a spend rock!

Friday, November 18th, 2011

Just what is a spend cube?  In it’s most simple form it is a data set that includes information that when analyzed as a whole provides a better picture of your spend universe and helps to indentify categories or products and services that should go to market as well as when they should. Because it includes vendor data, commodity information and specifics relative to the related cost center being impacted, spend cubes are very complex.

Unfortunately just like the ices cubes you order in a drink (on the rocks please) a spend cube can deteriorate over time based on a number of factors. Probably the primary reason is that the originating data is not complete or scrubbed properly in the first place. This is kind of a one bad apple spoils the whole bunch issue or the wrong data bumping into the wrong data. Another reason may be that you don’t have all of the data that you need and therefore the result sets are compromised or left to conjecture. And then there is the analyst interpretation of the data and to this author that is really the most important part once you get the data sources right. This person or group of persons needs to know their stuff (industry and products) in order for the data to be interpreted properly. It’s pretty easy to read a GL and determine what suppliers you have been spending the most with. It’s an entirely different thing to understand what the market for a commodity that impacts that particular spend was during the last contract versus what it is now and how it is trending for the future.

Ask your solutions provider who will be interpreting your data and what data they will be interpreting so that your cubes stay afloat and don’t end up sinking you like a rock.

We look forward to and appreciate your comments. 

Ron Southard

What’s important to you in the development of your negotiation strategy Part II of II?

Thursday, November 17th, 2011

During yesterdays post we discussed that before you can negotiate effectively you will have to go back to the drawing board and develop a procurement strategy. Once that’s in place negotiation best practices can follow.

Here’s some of what you might consider. Remember this is not how we will negotiate (tactics) this is what do you want for a result set that supports your overall procurement strategy?

Result Thoughts:  What are you looking for from our negotiations?

1. Alternative or additional sources of supply?
2. Better quality products!
3. Lower costs!
4. Where possible products that support a reduction in your environmental foot print!
5. Products and Services that are safe for your associates and consumers!
6. Clear and concise contracts!
7. Elimination of quick deals!
8. A win-win result (define) for your company and your supply partner!
9. Open unbiased treatment of all suppliers during the process!
10. A collaborative process that eliminates stove pipes and supports logical aggregation without maverick buying!
11. Internal subject matter experts (SME) going forward!
12. Standardized specifications and Terms and conditions!

There is certainly any number of items that could be added to this list, but it should get you started. As a result you should have a procurement strategy and a negotiation strategy in place. The next step would be the tactics.

If you’d like more information please contact a SafeSourcing representative.

We look forward to and appreciate your comments.

Ron Southard

What’s important to you in the development of your negotiation strategy Part I of II?

Wednesday, November 16th, 2011

What is your procurement organizations overall procurement strategy? All to often, when this author asks this question, the response I  get is  that deer in the headlights look that says to me there either is not one in place or the person I’m asking the question of has know idea how to answer the question. If there is no procurement strategy, there certainly is no supportive negotiation strategy because how companies negotiate should support their overall procurement strategy or at least it should.

The cause for the above is quite often that there is no formal procurement organization in place to begin with or the function is lost within a supply chain organization, logistics organization or finance organization. And sometimes it is located in operations and spread all over the place.

It’s a good bet that  if there is no well defined organizational procurement  structure within a company that there are multiple maverick negotiation strategies going on and that many of the associates conducting these negotiations are not skilled at doing so and don’t  have any advanced tools other than spreadsheets, email and telephony to conduct the negotiations with.

The result of the above is a lack of collaboration and well thought out aggregation, maverick buying, expired and or ever greened contracts and much higher than needed cost structures.

So before you can negotiate effectively you will have to go back to the drawing board and develop a procurement strategy. Once that’s in place negotiation best practices can follow.

Check back tomorrow for part II where I’ll offer some suggestions on negotiation strategy. If you’d like to learn more before then, please contact a customer services representative at SafeSourcing.

We look forward to and appreciate your comments.

Rebranding: Sourcing Nightmare or Opportunity – Part II of II

Tuesday, November 15th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

Yesterday we discussed how a company can begin to include its procurement team into the process of preparing for a re-branding effort.  Meeting with the Marketing team to understand the scope of the rebranding and timeline it will occur within can help determine the categories affected and the priority determined based on need, contract expiration and importance to the re-branding project. 

Today we will focus on four of the major areas that can be affected by a re-branding effort and that historically have led to strong savings when sourced and leveraged with increased re-branding budgets.

External Marketing Items – This category is one that will typically  be involved with re-branding projects.  It includes items that are used by employees in a variety of ways and that carry the corporate message and image.  Business cards, letterhead, and promotional items  usually carry the company logo and will need to be ready at the milestone in the timeline for when the re-branding will become public.  Also included in this category are website changes and other marketing literature such as brochures that will need to be refreshed and have strong savings potential.

Uniforms – In some cases company uniforms will be included in the category above as logoed clothing will be handled by one of the companies that provide other external marketing items.  For some companies, employee uniforms are a much larger part of their business and are handled by a uniform company that keeps an inventory of their uniforms. Due to the fact that changing branding on these items generally comes at an additional expense, this category can become complicated and is a big reason for handling it separately. 

Construction – This category can include everything from new construction, to remodeling existing buildings.  When it is included in the scope of the re-branding effort it can encompass furniture changes, signage changes, and as in the case mentioned in yesterday’s blog with Haggen, it can include changing the entire layout of a building.  Many times companies will have existing relationships established with vendors for these types of projects but the increased spend from a re-branding effort offers a good point of discussion with these vendors to ensure you are getting the best pricing.

Transportation – For those companies with branded vehicles either owned or leased, this category generally comes in a secondary phase of rebranding once the categories above have been dealt with.  The depth and breadth of changing this category over make a complex category however because of that and the spend associated with making it happen, it is one that frequently comes with opportunities for increased savings.

For more information on preparing your sourcing projects related to a re-branding effort, please contact a SafeSourcing Customer Service Representative.  

Rebranding: Sourcing Nightmare or Opportunity – Part I of II

Monday, November 14th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

Last week there was an article in Progressive Grocer about how Haggen, a 28 store independent grocer in the state of Washington, was leading a rebranding effort in their stores to focus on the concepts of homemade products and community.  Decisions like these are always major changes for a company and ones that are not made lightly, and there are many things to consider in the planning of these moves.

Over the next two days we will be taking a look at the sourcing points to consider while rebranding is being planned and the types of categories that need immediate focus after the process is set in motion.

Marketing-Procurement Planning – With re-branding changes being driven primarily by marketing departments it is important that a collaborative meeting with procurement happen early so that the scope of the re-branding can be discussed and timelines shared for the different stages in the process.  Armed with the scope of what the re-branding will change and the timeline within which it is to happen, proactive steps can begin so that the procurement team is ready to source the products needed to handle the change.

Categories Affected – One major piece that the procurement team will determine early in the scope discussion will be to detail all of the categories that will be affected by the re-branding.  This will be a topic covered in more detail in tomorrow’s blog and at a high level will include major categories such as uniform related items, external marketing items, construction related items and transportation related to name just a few.

Matching Categories with Contracts – As mentioned above, the scope and timeline are critical pieces of information for the procurement team to know because with that information and the category research above contracts can begin to be examined to determine which categories have contracts that can be leveraged against the re-branding.  There is significant spend associated with re-branding efforts and it should be used when examining contracts for items that will be affected and that expire within the timeline milestones.

Communication – Understanding how the re-branding effort will be communicated within the timeline is a final piece of information that will be needed by the procurement team so that they know what and much of the re-branding can be communicated when doing their job.  Often the re-branding effort comes with other organizational changes that need to be kept confidential so understanding how the organization plans to communicate the re-branding is important.

In tomorrow’s blog we will discuss more about the categories affected by a re-branding effort.  For more information on preparing your sourcing projects related to a re-branding effort, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.