Archive for April, 2013

Looking at Health and Wellness in a New Light

Monday, April 29th, 2013

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing

A recent article in the Wall Street Journal headlined the methods by which Safeway expects to have a strong 2nd half of the year due to emphasis on new programs like their health and wellness initiative.  Safeway’s “Live Life, Live Long, Live Well™” program has helped its employees and their families manage of the pieces of a healthier life and now they are expanding a variance of that program to their customers with all new healthy food options.  The Simple Nutrition, which will soon be available online, will allow customers to create a dietary program on their own focusing on characteristics like lowering their sodium or cholesterol.

Increasing profits, however, is just one of many reasons to explore a health and wellness program and in today’s blog we will be looking at a few areas that companies can begin exploring to source for their companies in order to achieve a healthier balance for their customers and employees.

Retailer Customer Wellness – Retailers are choosing to focus on the types of offerings that will benefit their customers first, recognizing that by taking care of their customers, the rest of the business will fall in line.   With Health and Wellness programs being a strong way to demonstrate this commitment it is no wonder that more companies are embracing them.  The keys to making the program work are to establish buy-in at the executive level that will help you organize a team that learn what is important to your customers.  Surveying your customers to find this out is a good method to learn this information. 

Once you know what is important to your customers you can tailor a program to meet those, whether it is new products, discounts, marketing, in-store cooking demonstrations or finding a 3rd party to partner with to help you develop the program.  Communicating this program effectively to your customers is the key to the success with success being measured by previously established metrics in advance.  All of these things can be done internally or with the assistance of 3rd party consultants.

Corporate Programs – Focusing on your employees is just as important as focusing on your customers and is why many companies are looking at the long-term cost benefits of having a healthier team.  Whether you are partnering with your health insurance provider or a 3rd party medical consultant, there are many entities who are capable of working with your HR team to develop staged approaches to achieving a stronger and healthier group of employees. 

At the center of all of these programs is usually an internal website for employees to utilize resources developed to help them with weight loss, tobacco cessation, heart health, or even stress management, but the commitment to health and wellness goes beyond an intranet site.  By providing incentives for employees to get healthier, companies can drive down health care costs, increase productivity and morale and improve overall retention.  Companies like Lifeworks.com are available to help employers develop these types of programs.

At SafeSourcing we support many companies how are striving to develop health and wellness programs and vendors who can assist them in doing this and routinely help retailers and other industries in finding the right mix of services and vendors for their needs.  For more information on how we can help you, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today

We look forward to your comments.

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Hamburg could make us all sick! Dr. Hamburg that is.

Friday, April 26th, 2013

Today’s post is by Ron Southard, President  & CEO at SafeSourcing Inc.

In a recent post titled “The stalemate in Washington resulting in spending cuts could literally make you SICK”  I suggested that furloughs for food-safety inspectors were not a good idea. Well instead of just  furloughs the FDA has decided to reduce total food-safety inspections by about 18% or $209M. That will result in 2100 fewer inspections according to an article in the April 25, 2013 issue of USA TODAY by Liz Szabo titled FOOD SAFETY, DRUG REVIEWS ‘COMPROMISED’. The article goes on to indicate that these cuts will also delay the implementation of the 2011 FOOD SAFETY MDERNIZATION ACT according to FDA Commissioner Margaret Hamburg. What the heck, we’ve only been waiting since (let’s see) 2011. No big thing right? It’s just our nation’s health that’s at risk.

Of course in this case they don’t even tell us how many food inspectors this will impact or if the count is still the 8,400 it used to be.  I assume we could back into the number, but as the USA TODAY article points out, the FDA currently inspects less than 2% of all food imports anyway.

I’ll tell you as entrepreneurs, our new businesses cannot take this long to implement change when it presents itself or when legal requirements dictate. If they did, they would go out of business.  There certainly is no question that many of the politicians we have in Washington continue to be the wrong people.

Food Safety continues to be a huge issue in this country and around the globe. Businesses require nothing more than 100% support of their governments in order to reduce the impact of food borne illness. Do something.

If you’d like to understand how SafeSourcing addresses food safety in support of our customers sourcing process, please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments

 

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Is your company culture an Ideal, or a reality?

Thursday, April 25th, 2013

Today’s post is from Michael Figueroa an Account Manager at SafeSourcing

Most human beings are averse to ideas that go against conventional wisdom. Yet, usually the most successful innovations come from ideas that of course, go against conventional wisdom. Alexander Graham Bell was told nobody would want to use and idiotic device like the telephone by the companies he pitched his ideas to. Arnold Schwarzenegger was told he was too big and had too thick an accent to get anywhere in the movie business. Andreas Pavel’s ideas for a portable music player were rejected 5 years before the Walkman when he was told nobody wanted to walk around in public with headphones on. We have a natural tendency to reject those ideas that exist outside of the status quo.

A 2011 study entitled “The Bias Against Creativity: Why People Desire But Reject Creative Ideas” suggested that even those who have creative thinking as a goal are much more biased against creativity than they realize. The reason for this the study goes on to explain, is that all human beings have an innate bias toward ideas that represent uncertainty. At its core, a creative proposal is an idea that breaks the rules; social, procedural, or otherwise. So how else is your organization going to ever be able to fully capture productive creativity (innovation) without incorporating mechanisms that force innovations to go through a vetting process? Innovation might be your ideal, but without a plan, is it ever going to be your reality?

Many businesses claim to foster an “environment of innovation”. But this environment is only going to be as much of a fertile ground for new ideas as its leadership’s own blind spots. Don’t think you have any blind spots? Well, that’s why they’re called blind spots  😉  And without a mechanism or a process that forces leadership to engage uncomfortable ideas, the BUSINESSES innovations will forever be limited by the leadership’s PERSONAL patterns of thinking.

It’s been said that significant change within a business can only be accomplished by business guerilla tactics, by being willing to throw some informational grenades behind the enemy lines of workplace apathy before the culture will engage the forces of change it needs to face. These disruptions can be good for business if handled correctly, but expect some resistance. Without mechanisms in place to capture and squeeze the value out of new ideas, you can almost always expect them to go nowhere.

Some companies balk at the idea of using eNegotiation tools to meet their procurement needs. It’s different, it’s new, and it takes a little bit of study to understand. Forget that it’s also proven. But that’s why we love to engage new clients and suppliers, because we have the methods and track records in place to show why this unconventional idea also has above conventional results.

If you’d like help with your sourcing needs, please contact a Safesourcing customer services account manager.

We look forward to and appreciate your comments

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Taking the proper time to prepare for your sourcing projects. The story of Ray and John Part IV

Friday, April 19th, 2013

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

This week we are taking a look at how two procurement professionals approached the same containerboard project with their respective company.  Ray and John took different approaches to understanding the containerboard market, suppliers, and company atmosphere and were now prepared to start looking at the goals they wanted to achieve with their respective projects.

Ray would love to be able to source this containerboard project and consolidate his vendors, learn more about new vendors in the market and, of course, control his costs. Unfortunately he just doesn’t have the time to do it all. 

With the lack of time and the fact that his boss has been constantly talking with Ray about how the company can reduce their cost of goods, Ray has resigned himself to the fact that cost is the goal he is going to focus on during this event.  Ray knows that by focusing on cost alone that he will likely scare off new vendors who have no interest in investing time in a bidding war and that he will create some ill will with his current vendors, but he has limited  time  to invest on this project. As such, Ray spends the next few weeks on the phone and communicating through email with his incumbents trying to get them to reduce their costs, leaving the several divisions doing their own thing to continue with business as usual.

John, on the other hand, has chosen to invest some of his time with his company’s other departments and has made a name for himself within the company as someone who really is trying to understand the total picture relative to this and other categories.  This gives him the latitude to begin to investigate some potential goals that reach beyond cost of goods only and gives him the executive backing to pursue them. 

John knows that he needs to take a step I towards consolidating his vendors.  With so many divisions doing their own thing, he knows that  one goal of this project is to leverage the company’s overall spend and standardize on a process in order to help his company control total cost.  His plan to put part of the responsibility of this monitoring back with the vendor will create even greater potential savings and provide him with tools to show the results. 

John also knows that there are evolving programs within his company that will be affected positively by this project if he completes the due diligence in order to understand what each vendor can offer beyond just pricing.  The other departments probably never thought that containerboard spend would help them accomplish their new initiatives but John in understanding all of his companies initiatives understands the benefit that selecting the best overall vendor could provide his company.

John also realizes that at the end of the day reducing his cost of goods is still an important goal so he plans to invite several new vendors he has identified along his incumbents to participate in an online pricing gathering event.  This event that he will conduct through his eProcurement solutions provider will allow vendors to see and adjust their pricing based on their ranking in a way they see fit and feel comfortable with, but in a way that also benefits John’s company.  John is convinced that the investments and research he has done will pay big dividends in meeting new corporate initiatives, optimizing vendors and reducing his cost.

Stay tuned Monday as the final piece of the story of Ray and John unfolds.  You may be like Ray but desperately want to operate like John but without the staff or the time to dedicate at that level.

At SafeSourcing we understand Ray’s frustration and that is why our customer services team works with you to achieve great results while removing much of the work from your plate.  For more information on how we can help you with your sourcing projects, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today

We look forward to your comments.

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WE ARE ALL STRONGER THAN THE BOSTON MARATHON PRACTIONERS OF TERROR!

Wednesday, April 17th, 2013

Today’s post is by Ron Southard, CEO of Safesourcing.

Terrorists beware! WE runners and those that support us are more determined THAN YOU ARE

As a Bostonian borne and bred, the bombing that took place at the Boston Marathon troubles and concerns me as it does many of you. Patriot’s day is a holiday to me. I take it off every year and settle in to watch the race unfold on my PC as I now live several time zones away.

I have a unique perspective on the Boston Marathon having run it 5 times. I have also coached numbers of runners that have participated in numerous marathons including Boston. Running a marathon is not something that one takes likely, and that is why everyone does not run one. Marathons require careful planning and a commitment over a long period of time if one is to enjoy success. Most people have trouble completing the normal goals so marathoners are a unique subset of the runner population. In many cases preparation requires teamwork with a coach, club or individuals you may train with. The results are also highly personal whether it is placing in one’s age group; achieving a new personal record (PR) or just finishing. People have many personal reasons for running such as supporting charities, raising awareness of a particular cause  or just pursuing a healthier life style to name a few.

Bostonians are proud of their heritage, after all the earliest settlers came to our Massachusetts shores in order to seek a more tolerant freedom. To that end, the Boston Marathon is something to be proud off but has a deeper underlying meaning. This is an international event that drew participants from 85 countries in fact a fifth of the registered runners were from these countries. Although the runners did not share a common language, they did share a common voice. That voice if listened to was genuinely interested in how each and every other participant fared in their individual race. You can hear and see it in the finish chutes, the hotel lobbies, and the restaurants before and after the race. You can see the 2:10 runner as interested in the participant that was thrilled to run 4:09:44  which was the exact time of the first explosion. This voice is LOUD, it is united and it says; this is our life, we will not run away, we will not hide and you cannot dissuade us from our passions. We will continue to run,
our families will continue to cheer us on and we will be back. You will not win.

SafeSourcing wishes to offer its condolences to the families as well that the entire global running community that were affected by this heinous event!

RUN FREE! RUN FOREVER! RUN STRONG!

 

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HEY Procurement Senior Management; Are you thinking big enough?

Thursday, April 11th, 2013

Today’s post is by Ron Southard, CEO at SafeSourcing Inc.

I continue to think that most organizations and in fact most people don’t think big enough.  This includes CEO’s, CFO’s and many of the other C level professionals. However this is not limited to just executive leadership, it happens at every level of every organization. And the most troubling fact is that it happens with almost all people. So it is no surprise that it happens in procurement as well.

I have posted on a number of occasions the impact that I personally believe a procurement organization can have on the overall operating results of companies. For the most part this function within retail companies reports to a CFO, CPO or CLO, so the purview is at the highest level where it needs to be.

The following is an excerpt from a post on March 25th of 2011 titled Improving profitability 73% and why more companies don’t use reverse auctions and other e-procurement tools?

Assumptions:

1.  $150M Retail Company with industry average earnings of one percent or $1.5M.
2.  Cost of Goods (COGS) for this company is industry average of 70 percent or $105M.
3.  Company   agrees to source ten percent of their Cost of GOODS or roughly $11M.
4.  Company achieves below industry average savings of ten percent.
5.  Total savings generated  equals $1.1M
6.  Savings drops directly to the bottom or net profit.
7.  All other segments of the P&L perform to current fiscal plan
8.  All savings are recovered during the same fiscal year.
9.  Net profitability improves from $1.5M to $2.6M or a 73%.

Now let’s be realistic, all of the savings are not going to happen in the current fiscal year. With that said, we are only sourcing 10% of the total COGS. We achieved below industry average savings. No unforeseen costs that were not planned for eroded earnings. There will also be switching costs that may a erode some of the savings, but in today’s world they are not that significant.

If the above example is true, why are procurement departments not thinking big enough in order to chase this opportunity? If the company is publicly traded I would argue that there is not much else if anything that could drive similar operating results including acquisitions.

If you look back over many years, today’s bottom line of this industry is eerily similar. All the format changes, product mix changes, new technologies, specialization etc. have not materially improved the bottom line.

An argument from senior management might go like this! “We cannot maintain these savings year over year and our investors and other stakeholders are looking for sustainable results”. “As such, if we in fact deliver these results in the first year we will be penalized in subsequent years if we don’t deliver similar results”.

My rebuttal would be that in our example we only sourced 10% of the COGS. We did not touch expense. We did not put tools in place that would protect savings like a contract management solution. We did not strategize as to how to treat the categories being sourced so that we could take the category to market year after year in order to further compress or maintain cost.

This of course begs the question of how we might do just that. The first step is to think bigger, to believe that this is possible and then assign the resources to make it happen.

Maybe if JCPENNY had tried to execute this type of strategy their former CEO would still be there and all of his company stock would be worth a lot more than it is today.

Check back tomorrow and we’ll discuss how to think through a category strategically so that savings generated don’t erode over time regardless of the market conditions.

If you’d like to accomplish big results that stick, contact SafeSourcing.

We look forward to and appreciate your comments.

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What’s in your Spend Management data model?

Wednesday, April 10th, 2013

Today’s post if by Ron Southard, CEO at SafeSourcing.

Someone said to me at some point in time that until at least you think that you know what you know; It’s not possible to even considering knowing what you don’t know. I’m sure the phrase has been represented in a number of different ways over the years.

The above is a really important thought to keep in mind if you are in the process of trying to identify what your spend management data model needs to look like.  Resultantly  turning the development of your data model over to  a DBA or Architect  that has no understanding of the procurement space,  processes or enabling data sources could  result in reporting that will break your  strategy before you event  get started.

Let’s take a look at a fairly simple example.

Any DBA even a low level one can speak at some level as to the construction of tables, rows and columns. With that said, they  probably are not  able to discuss their relationship with each other if they do not understand the procurement business, the categories being addressed or the supply base that supports the categories. This is where naming conventions can come into play early in the process and you need someone that knows what they are talking about. It’s pretty simple that across all vendors that an invoice is an invoice is an invoice. The data contained on the invoice like product or category identifiers or the lack thereof (pretty common) probably differs from vendor to vendor and will ultimately require normalization within your data model. However, at the end of the day an invoice is an invoice and the table that identifies them should be named such.  It sounds pretty simple, but there are many database implementations that do not return their perceived benefits due to simple issues of this nature.

The simple moral here is not to build a data base without the necessary governance from the business.

If you’d like to learn more about building your data model to support a more detailed understanding of your spend, please contact SafeSourcing.

We look forward to and appreciate your comments

 

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Trains, Planes and Trucks oh my!

Tuesday, April 9th, 2013

Today’s post is by Ron Southard, CEO at SafeSourcing.

Oh well I tried, my title is almost like the title of the movie of a similar title, but in our case automobiles don’t provide much help. The question however is a good one and unfortunately many companies are not exploring what may be the least expensive alternative today. And that would be (Your guess was wrong) TRAINS. Surprised?

Companies that are looking to optimize their shipping lanes or even their entire logistics structure face significant hurdles.  Selecting the correct business partner  or partners is a huge challenge,   as vetting them includes so many different items that can include items like Track & Trace capability, shipment visibility, driver turnover, certifications, fuel surcharges and much much more. But don’t forget to take a hard look at Trains.

The price of shipping your freight by rail is relatively inexpensive and the volume of freight being shipped this way is projected to grow by half to $27.5B by 2040 according to an article in the March 27th issue of the Wall Street Journal titled Boom Times on the Tracks: Rail Capacity, Spending Soar.

This may be a surprise to many as most procurement professional tend to think of rail as old school. Well, while you may have been looking the other way, technology has been upgraded, infrastructure has been upgraded and total tonnage has increased across a broad number of categories.

Who are the major players in this space?  The names may be familiar. Union Pacific, BNSF, CSX, Norfolk Southern and Kansas City Southern to name a few.

If you like to learn more about how to optimize your shipping needs, please contact a Safesourcing customer services account manager.

We look forward to and appreciate your comments.

 

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Measuring Your Vendor Key Performance Indicators!

Monday, April 8th, 2013

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing Inc.

Very few of the suppliers you do business with are hired to perform a service that is nothing more than a convenience with no ROI or process improvement attached to them.  Unfortunately many of those suppliers do not provide their customers with an accurate way of measuring just how good of a job they are doing for them.  By not providing that picture they are actually setting themselves up to have to compete with other vendors for business they already have down the road.

In today’s blog we will be looking at some of the Key Performance Indicators (KPIs) you should be asking your vendors to supply with on at least a quarterly basis if not a monthly or weekly basis should the need demand it.

Issue resolution – Every company and their suppliers eventually run into issues in the course of doing business.   Delivery issues, quality issues, supply issues, service issues are all areas that come up how your suppliers support you during these times is a good indicator of how much they value your business.  Most procurement departments have their own supplier scorecards for this KPI but asking your suppliers to provide them for you as well is a nice way to see if their tracking of your issues matches your methods.

Delivery Performance – Delivery performance is one of the most important KPIs that can be tracked.   Having or not having the products you need is even more important than the cost of that item because if you don’t have the services and products you need to provide your customers what they need, you lose those customers and getting them back may never be an option.  Measuring the length of time from order to delivery all throughout the year will tell you a lot about the suppliers you do business with as does tracking instances were RUSH orders were required and how those suppliers were able to accommodate your special needs.

Process savings – Process savings can be tricky because often they are associated with “soft expenses,” that is expenses that you would have had pay but your suppliers, through some benefit of their service, were able to accomplish for you.  Process savings are important to many suppliers and you should hold them accountable for reporting how they are doing for you on a regular basis especially if their cost improvements are not quite as obvious.  Time saved for your employees due to activities they handle for you, software tools that make your employees more efficient, or consolidated efforts that create central points of communication are things that provide savings to your company and should be prepared by your suppliers and vendors.

Cost Improvements – Many suppliers do a great job of partnering with companies to make sure they are purchasing the products and services they need.  Reducing cost due to analysis of the business is part of of what many suppliers offer.  They will review your business today and make sure you aren’t purchasing items or services that are more than what you need, recommending alternatives that instantly create cost savings.  Improvements, in material, logistics, processes and product sources are all important pieces of this process and should be reported by your suppliers on a frequent basis so that you have a centrally visible point to monitor their effectiveness for your company.

For more information about how we can help you develop KPIs to request from your vendors, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today.

We look forward to your comments.

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SafeSourcing is great at eRFX execution, but what else do you do Part II

Friday, April 5th, 2013

A new program SafeSourcing has launched with our partner KPM Enterprises is called Strategic Cost Initiative (SCI).This is a very extensive program that addresses all functional areas within a company by assigning cost champions in every area that focus on collecting analyzing and improving processes that impact cost. This program is typically sponsored at the CEO and CFO level and delivered by individuals with extensive financial backgrounds including CFO’s.

Strategic Cost Initiative (SCI) tools and deliverables include but are not limited to the following

1. Cost Reductions
2. Expense Analysis
3. Budget Effectiveness Review
4. Supplier Billing Analysis
5. Zero-Based Budgeting
6. Cost/Benefit Analysis
7. Detailed Tracking/Monitoring Procedures

If you have any questions regarding SCI or other Safesourcing deliverables listed in “SafeSourcing is great at eRFX execution, but what else do you do Part I, please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

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