Archive for February, 2012

Part II of II. New Technology: Helping Businesses to Compete !

Tuesday, February 28th, 2012

In yesterday’s post, this author asked, “With so much new technology being introduced every day, how are you using it to help your business be more competitive?”  I now would  like to offer a little more detail relative to the following four areas you’re your consideration.

The Cloud  – There have literally been thousands of articles, an equal numbers of blogs, including ones on this site like this one about the benefits of cloud computing.  Cloud computing allows companies to have all of the advantages of an IT data infrastructure just like the Fortune 100 companies without the overhead of staff to support, equipment to run, software to manage it and worries of assuring it is always available.  These are all of the financial reasons why cloud computing makes sense for companies but the  feature advantages are equally important as companies with resources all over the world can more easily collaborate on projects through the virtual environment clouds create.

IP Phone Systems – On the heals of discussing what can be done with a “cloud” network structure it makes sense to bring up IP phone service companies.  Tens of thousands if not millions of dollars were typically required for a company to install a Private Branch eXchange (PBX) for their company.  The complexity of maintaining such a system either required a fulltime expert employee or high-priced consultants in the past.  Now companies can have all of the features of those PBXs at hugely reduced prices through companies like RingCentral and Windstream who tailor plans for businesses based on their needs and budgets to give them everything they want.

Dashboard Communication–  The days of HR departments running around answering phones and letters about benefits, providing forms, and printing expensive newsletters is quickly becoming a thing of the past as companies are beginning to understand how cost-effective internal portals and dashboards can be to handle all of this traffic.  Third party companies that offer HR portal solutions allow employees to service many of their own needs which frees up a typically overloaded HR staff to concentrate on the things that matter most to the business.

Virtual Staff–  All three of the above mentioned items are useful tools that aide in companies being able to employ more and more virtual employees.  The financial benefits of virtual employees have long been documented as have the added benefits of increased and quality work done by virtual employees who are allowed to better control the flow of their work day.  Advances in cloud technology and video and webinar offerings make employing virtual staff even more practical to do.  It is also important to note that when companies increase their virtual staff they instantly remove the geographical boundaries that sometimes prevent them from going after the best employees across the country. 

As small and medium companies increase their contribution toward our Nation’s economy, their ability to compete at cost-effective levels will become increasingly more important and technology will play a huge role in them getting there.  For more information on finding vendors in any of these four areas or in other areas that might help your business, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

Part I of II. New Technology: Helping Businesses to Compete !

Monday, February 27th, 2012

With so much new technology being introduced every day, how are you using it to help your business be more competitive?

Technology is not the only thing that makes businesses run: we all know that regardless of what our IT departments tell us.  Technology, however, does make it possible for businesses (especially small and medium-sized businesses) to do things for a few thousand dollars that would have cost millions just 10-15 years ago.

This two part post will focus on four specific areas where small businesses including startups can leverage newer technologies in ways that can help them be more competitive at a fraction of historical costs.

These areas are:

1. The Cloud
2. IP Phone Systems
3. Dashboard Communication
4. Virtual Staff

To learn more detail about these specific technologies and how SafeSourcing can help you find providers of these services for your company, check back with us tomorrow for Part II.

We look forward to and appreciate your comments.

“Reduce (All) Spend”

Thursday, February 23rd, 2012

Maximizing potential savings requires that all spend be considered as part of your strategic sourcing initiative. While you may think that some of your categories are too small to qualify for inclusion, I would like to point out that these categories can and SHOULD be included.

Combining individual items with lower spend totals is a great way to both maximize savings potential and streamline your purchasing. If you would like to be able to consider more of your spend for inclusion in your strategic sourcing initiatives, your first step should be to talk to your sourcing partner.

You might find that you are looking broadly at a category and that many of the items you purchase are in smaller quantities or otherwise represent a small amount of spend annually. While these opportunities are often overlooked or passed over in favor of higher spend opportunities, an effective purchasing leader understands that every opportunity must be considered to truly maximize savings. In these cases, historical RFx data can be used to recommend similar or overlapping purchase items that might not have initially been considered. It may be that this data forces you to look beyond the typical restraints of accounting categorization, department or even vendor.

Once you have taken the step to find these similar items, you will see your average savings increase as vendors are given an opportunity to compete for larger volumes of new business.

Additionally, combining these items may also have the effect of streamlining your purchasing. As you have now offered more items to vendors in one RFx event, you may find that it is more favorable to award the purchases to fewer vendors. The ripple effect of efficiency will continue throughout your organization.

We look forward to and appreciate your comments.

Is the economy finally bouncing back?

Wednesday, February 22nd, 2012

Today’s post is from Danielle Begley Account Manager at SafeSourcing Inc.

The past few years have proven to be quite a struggle as the US economy battles recession.  Nearly four years later, there appears to finally be a small glimmer of hope.  The Dow is continuing to rise and has almost edged past a high that hasn’t been reached since May of 2008.  In addition to the rising financial markets, the job market is beginning to become revitalized.  As a major culprit of fear and justified doubt over the past few years, the catastrophic economy of Greece and downturn economies of neighboring EU countries may see the light as a bailout deal appears to provide pseudo salvation to the global economy.

What could an upturn economy mean for your company; Increased purchases?  New Hires? Have you discussed new projects with your strategic sourcing partner in order to benefit most efficiently from a potential rising economy? If not, now is the right time to implement a plan to initiate new category expenditures, and evaluate if your service providers are providing the best value for the cost. 

A resolution in the EU coupled with continued evidence of an economy on the rise may be the jumpstart the US has awaited to bounce back from recession.  Planning in advance will greatly increase your ability to succeed in a thriving economy.

For more information on strategic planning please contact a SafeSourcing  Customer Service Representative for more information.

We look forward to and appreciate your comments.

Twenty steps to running high quality e-procurement events.

Tuesday, February 21st, 2012

E-Procurement events have been around since the late 1990’s and are commonly referred to as reverse auctions or events. These sessions can from time to time also run as forward auctions in order to reduce over stock conditions and reduce shrink. Regardless of the naming convention used there are certain rules which if followed will create higher quality events for the retailer and the supplier? This will result in creating better savings opportunities or cost avoidance in a tough market. The importance of focusing on a clear process will increase event participation. This focus on quality will be recognized by your existing trading partners and potential new sources of supply, and will keep them coming back in the future to compete fairly for your business.

1. Executive sponsorship is mandatory
     a. This is required at the CEO, CFO, CPO, CLO or head of the supply chain.
2. Get the entire buying organization together for a kickoff session.
3. Provide an over view of what you are going to do and the impact it can have on the company. Use company financial models.
4. Discuss and agree on success criteria.
5. Every event is not a homerun. Singles and doubles score runs.
6. Create a fun environment.
7. Consider prizes for the most creative use of an auction.
8. Use scorecards by department with percent of savings.
9. Discuss the meaning and importance of corporate aggregation.
10. Hand out E-RFX templates to gather existing product specifications.
11. Put a time requirement on data collection.
12. Gather an accurate list of your present suppliers.
13. Work with your sourcing company to identify a top 100 list of events.
14. Calendar the events.
15. Prioritize by dollar value, date and strategic value.
16. Conduct department level discovery meetings of 30 minutes to an hour.
17. Investigate existing contract language.
18. Look for auto renewal (evergreen) language roadblocks.
19. Determine alternate sources of supply with your sourcing company.
20. Develop an E-RFX rules and instruction template and post with each event.

Although these steps are not all encompassing, they provide a format for getting started that offers the best opportunity for reduction in cost of goods, expenses and improvement in corporate earnings. Be sure to combine this with a business partner that knows your business.
 
We look forward to and appreciate your comments.

How do you define full service reverse auction?

Friday, February 17th, 2012

I’m sure that every solution provider one would ask might have a slightly different definition.

From my perspective, a full service solution provider should be able to create, execute and support all auction activity including but not limited to the following.
1. Assistance in selecting Auction categories
2. Market insight
3. Determine the timing of category auction
4. Identification of potential quality suppliers in addition to existing
5. Building on-line auctions
6. Supplier contacts and training
7. Execution of live bids
8. Trouble shooting during live bids
9. Compiling and communicating reports within 24 hours
10. Award and Non-Award notifications to Suppliers
11. Providing ongoing customer support
12. Monitoring Supplier performance
13. Feedback from Retailers/Suppliers
14. Analyze the quality of each auction

The above deliverables if not executed in a full service program will result in less than maximum results and potentially failure of your program.

We look forward to and appreciate your comments.

Are reverse auctions a good tool to use with the retail distribution channel cost plus model?

Thursday, February 16th, 2012

According to Wikipedia Cost-plus pricing is a pricing method used by companies. It is used primarily because it is easy to calculate and requires little information. There are several varieties, but the common thread in all of them is that one first calculates the cost of the product, and then includes an additional amount to represent profit. It is a way for companies to calculate how much profit they will make. Cost-plus pricing is often used on government contracts, and has been criticized as promoting wasteful expenditures.

Once unit level cost has been established for the distribution of products it’s easy to turn that into a percentage and add it to the price of a product coming up with a distributed unit price or category price. The most important part of this pricing exercise for the distributor is to get the distribution costs correct. This can include price of storage, freight, length of travel, driver cost and any number of other costs. This is an area where a distributor can lose a lot of money if they are not very careful

So, are revere auctions a tool that can help distribution companies? The answer is a clear yes both above and below the gross margin line. If you like to know more please contact me at ronsouthard@safesourcing.com.

Who knows, if you partner correctly you might be able to improve your costs and your distributors margins as well.

We look forward to and appreciate your comments.

What drives competitive bidding when using e-procurement tools?

Tuesday, February 14th, 2012

If you have ever been fishing, you already understand that the better the bait the greater the opportunity to catch something. In this case, the bait is your promise to award business. Casting that bait amongst suppliers provides an opportunity to catch a better product or service. There area variety of psychological techniques employed with these tools that also cause a type of phishing in order to get to drive pricing in a direction that would be considered a good catch. A well run e-auction takes all of these elements into consideration when they discuss a companies sourcing strategy.

There are also other important elements  that require understanding in order to drive competitive bidding when using e-negotiation tools.

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, quality, safety and environmental impact.

The process contemplates giving potential bidders (vendors & suppliers) 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 within the event. 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. In this case however consideration as the whether or not you want ot split the award of business or just use this as a strategy. 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.

If you’d like to learn more, please contact a SafeSourcing representative.

We look forward to and appreciate your comments.

A Purchasing Managers’ Index (PMI)

Monday, February 13th, 2012

This author wonders how to measure the economy’s ups and downs as it relates to your specific industry.  There are business trends that can be somewhat of a prediction, but is there any way to keep a measure on the pulse of how the economy is affecting you on a more regular basis?

A Purchasing Managers’ Index (PMI) is a great way to keep track of market fluctuations.  The PMI measures activity such as production, new orders, inventories, and employment levels.  The PMI is compiled by the Markit Group and the Institute for Supply Management and is calculated on a monthly basis by polling businesses that represent the make-up of the private sector.  According to Wikipedia, “the manufacturing data is generally released on the 1st working day of the month, followed by construction on the 2nd working day and services on the 3rd working day.”

The data for the index are collected through a survey of over 400 purchasing managers in the manufacturing sector on five different fields.  Each respondent has the opportunity to report on levels of better, same, or worse than previous months.  Depending on the manufacturing region, there may be a specific survey of results for the region as well as the specific manufacturing sector.

The national PMI was issued in the first few days of February reporting that nine out of eighteen manufacturing industries were reporting growth in January.  So if you want to keep a better pulse on the economy of your industry, the PMI survey is a great place to start.

For more information on SafeSourcing and how your industry is doing, please contact a Customer Service Representative for more information.

We look forward to and appreciate your comments.

What is the retail procurement lifecycle?

Friday, February 10th, 2012

If your retail procurement team understands the procurement lifecycle of a product or service it will make its sourcing much more efficient. Ask one of your teammates to explain their understanding of the retail procurement lifecycle to you. You’ll be surprised as to how many different answers you get.

A good place to begin discussing this subject is in the discovery phase of a procurement engagement. It helps to get everyone on the same page. Surprisingly the process which is quite simple as a definition is not any different from when this author first learned it over 40 years ago in the U.S. Air Force.

Typically procurement consists of seven (7) steps. Where the confusion generally enters is that each step can have a process of its own or be interrelated with another step in the process. An example would be the contract lifecycle that easily fits within the negotiation cycle and the renewal cycle. Another might be that information gathering which is the generally accepted first step in the process can apply to multiple issues such as information gathering for the related product or services such as specifications as well as the information gathering of prospective supplier data.

As such, the simple steps to the procurement lifecycle that most individuals generally agree upon are as follows.

1. Information gathering
2. Supplier contact
3. Background review
4. Negotiation
5. Fulfillment
6. Consumption
7. Renewal

Most times keeping this simple model in mind will allow retail procurement professionals to answer the question; where are we in the process when a project gets stalled or off track?

Contact the Safesourcing team if you’d like to learn more.

We look forward to and appreciate your comments.

Ron Southard – CEO SafeSourcing