Archive for May, 2013

Contract Management 101 a Primer!

Thursday, May 30th, 2013

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

The shame is that the retail industry is at least that bad. And we wonder why retail profitability continues to be a challenge. Not having a contract management in place can erode 3-5% of hard earned savings from your e-negotiation best practices.

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 could 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 any 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

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There are always going to be new costs associated with improvement! In this case, MEAT SAFETY.

Wednesday, May 29th, 2013

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

According to an article in the denverpost.com titled New meat labeling rules take effect in US! by By M.L. Johnson, Associated Press which was first posted on 5/24/2113, Shoppers in the U.S. will soon have more information about where their meat comes from after new federal labeling rules went into effect Thursday 5/30/2013.

These labels will be required to indicate where the meat came from or  its country of origin as well as where it has been processed which could be different. Although many organizations are not in favor of this legislation, it is not going to go away any time soon. The cost of insuring that the foods we buy and consume are safe is enormous and the loses associated with sick or down time related to food borne illness has been out of control for a long time.

There are however ways to mitigate your expense when deploying new programs.

If you’d like to learn more about how SafeSourcing vetts the safety standards of members of our SafeSourceIt™ Supplier Database or how you can source these labels and labeling equipment more economically, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

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The Future of Television and What It Means for Procurement

Tuesday, May 28th, 2013

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

The current issue of Time magazine had an article on the future of television and what new companies are doing to offer alternatives to normal cable and satellite offerings.  The article goes into detail about how many companies are out there offering options for consumers to obtain TV programming without paying the cable and satellite companies big money to get it.  The reason many people are still going down the cable and satellite TV path is simple: they don’t know they have other options.   The reason why people who know about these options and still aren’t using them is also simple: they lack the know-how to do it.

The focus of today’s blog is to look into areas of procurement where the same process is happening and services or products are being purchased because no one has taken the extra time to look for alternatives.  Sometimes these alternatives are in their infancy and some require some expertise to implement them, but the potential return for your company can be staggering in the long-run.

Different methods, current applications – Some of the best ways to find new alternatives for your sourcing needs is to implement different methods to currently sourced items and services.   One hot area where this is happening is in leasing and renting.  Recently we performed a project for a customer who was looking to collect pricing on purchasing new and used equipment he had an upcoming need for.  We asked about looking into renting the equipment for his short term uses and he stated that he had never really explored the option.  The flipside to this is looking into purchase programs where you have historically rented/leased.  This is getting great traction in corporate uniform programs.  Companies are creating purchase programs for their employees to buy the uniforms and maintain them as well.  Where there is a corporate culture to support it, these programs are saving companies hundreds or thousands of dollars in uniforms expenses.

Understand New Options – If you stay in business long enough it won’t take long to see that where companies are making money, others will follow.  When companies get too big and lose great employees, those employees have a tendency to start competing businesses and create new alternatives to old problems.  In both of these cases it means a constant stream of new players coming into the business world with new products and new ideas.  As is the case with any business, no matter how great the idea, if the business is not managed well it will fail.  This is important to your company because as you look for alternatives to some of your sourcing needs that you will find exciting new companies with options that need to be researched and followed up on before they can be chosen for business.  The key is to take the step to understand what they have and where they are currently as well as to commit to following their growth.

Know When to Take a Chance –  On the heels of stating above about monitoring new solutions without committing your business to them before they proven, it is also important to know when you have an opportunity to partner with a company with a revolutionary new solution.  Often times the cost will be lower but it will require an investment in resources and patience to make it work.  These opportunities arise many times in IT as new companies with breaking technology are emerging every day that will work with your company to make the solution work.  Knowing when it is worth the time and resources to invest is important and the return can pay great dividends.  Investing in a young company with a great solution that can quickly adapt to fit your company’s need without having to pay huge custom development charges is one of the big benefits to taking this chance.

There are new solutions emerging every day in every department that can reshape how your company does business in a way that will better prepare them for the future.  Knowing what those solutions are is half of the battle and determining what to do with those solutions is the other half but the results of investing time in each half can lead to great new possibilities for your company.  For more information on how we can help you research these new solutions or on our “Risk Free” trial program, 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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What differentiates SafeSourcing from other Solution Providers?

Friday, May 24th, 2013

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

I was speaking with a prospect today that has a great deal of experience in the procurement space, in particular the e-procurement space.  I was discussing the process that we use in order to source a category at a high level which follows six well defined steps.  Although we believe adhering to this process allows us to run high quality eRFX events, our prospect offered that these are pretty standard steps adhered to by most solutions providers in this space.  So what else makes you different was the follow up question. I could have bragged about our SafeSourceIt™ Supplier Database or some of the unique features included in our SafeSourceIt™ tool set. I might have event mentioned the  other members of the SafeSourcing  Procure to Pay product family like SafeSurvey™,  SafeDashboard™, SafeDocuments™,SafeContract™, SafePO™ or SafeCatalog™. However that’s not the answer I gave. In fact I answered the question almost immediately. The answer was and is our People. Our people are simply the best.  Our team is made
up of project managers that come from a variety of industries, and they are supported by a Procurement Center of Expertise or CEO that have specific category expertise in Retail, Healthcare, Distribution, Logistics, Manufacturing, Energy, Agriculture and a variety of other areas necessary to insure that our strategies and execution are spot on.

At the end of the day, a lot of people can swim but not everyone is Michael Phelps. Lots of people can play basketball but not everyone is Michael Jordon. Millions of people play golf, but there is only one Tiger Woods. People make a difference. Or better yet people make the difference. I’ll put ours up against any solution provider. That’s why our customers and suppliers have had the following to say.

1. “No one else will do the things that you do to help us.”
2. “We would not be where we are with our Indirect Spend if it were not for SafeSourcing.”
3. “The entire experience was very well planned and the tool was easy to use.”
4. “SafeSourcing is a great business partner with terrific customer service and software.”

We’ll impress this customer as well.

If you’d like to learn more about us, please contact a Safesourcing customer services representative.

We look forward to and appreciate your comments

 

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Twenty-one steps to running high quality Retail e-procurement events and reverse auctions.

Thursday, May 23rd, 2013

Todays post is from Ron Southard, CEO at SafeSourcing!

At any rate and regardless of the specific naming convention used there are certain rules which when followed will create higher quality e-procurement events for the Retailer as well as the Supplier?

Following these steps will result in maximizing savings or cost avoidance regardless of market conditions!

The importance of focusing on a clear process will also increase event participation at the supplier level. As a result of paying attention to quality and detail your existing trading partners and potential new sources of supply will respect your process and it will keep them coming back in the future to compete for your business again.

1. Executive sponsorship is mandatory from the C- Suite.
2. Get the entire buying organization together for a kickoff and discovery session.
3. Provide an over view of what you are going to be doing and the impact it can have on the company. Use company financial models.
4. Discuss and agree on success criteria.
5. Every event will not be a homerun. Singles and doubles score runs.
6. Create a fun environment.
7. Consider prizes for the most creative use of the tolls by functional business area.
8. Use scorecards by department with percent of savings.
9. Discuss the meaning and importance of corporate aggregation.
10. Hand out event 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 solution provider to identify a top 100 list of opportunities.
14. Develop a Calendar the events.
15. Prioritize by dollar value, date and strategic value.
16. Conduct department level detailed 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 solutions provider company.
20. Develop an event rules and instruction template and post with each event.
21. Develop a category and event based strategy

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.

If you’d like help building your strategy, please contact SafeSourcing.
 
We look forward to and appreciate your comments.

 

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There has never a better time to Source. Part II of II!

Wednesday, May 22nd, 2013

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

Once you have looked at the commodity markets to determine historical movement since you last sourced your category and the future outlook, the opportunity to drive your prices lower is also based on other factors such as the financial performance of the companies you may want to invite to participate including your incumbent supplier.

Using an example from EDAGR as we discussed yesterday for an unnamed supplier we have determined the following data. The unnamed supplier’s sales have risen consistently from 2010 through 2012. In particular, sales rose 19% from 2011 to 2012. Gross profit during the same period rose 44.8% and net income rose 90%. All of this is supported by an increase in unit sales of 26.6%. I know your next question, what does this mean?
1.   We’ve learned that even in the face of a slightly rising market which also has lower futures that your potential supplier was able to produce enviable numbers. Their Sales and Margins are both up so they have increased sales and reduced the cost (net income is up) of sales at the same time. This is a key indicator.

2.   As a result of the aforementioned numbers, it would indicate that they have room to move on price for selected customers if the new business is important to them or a net gain. Remember they still have to grow to please their shareholders. There is often margin set aside for winning new business and they are not the incumbent.

3.   Finding suppliers with these metrics of which there were several also suggests that your incumbent supplier may have to discount to a certain extent in order to keep your business. As such, an award here may help to avoid switching costs and make a slightly higher bid a better total deal, so do the math.

If you’d like to learn more about SafeSourcing spend analysis process please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments

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There has never a better time to Source. Part I of II or Maybe III?

Tuesday, May 21st, 2013

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

Customers always ask me when the best time to source a particular category is. The answer always requires some thought and fact based research relative to what drives that particular category. For the most part this means staying on top of the commodity markets to begin with. However there are other indicators for those procurement knowledge workers that are willing to take the time to do some basic research.

I was reading the Wall Street Journal today and noticed an article in the MONEY & INVESTING section titled Oil Out Of Sync With the Market by Christian Berthelsen. The first sentence of the article says, “Prices of many commodities are down this year, but U.S. oil futures have rallied”. Here’s the key in that sentence. “Prices of many commodities are down this year”. Forget about oil for the moment. Yes it does impact many areas of procurement. And yes the futures for oil are up. This is mostly because hope springs eternal that demand will rise as the global economy continues to improve. Remember that other commodities are also influenced by oil. As a simple example, you can’t harvest Corn or Soy without fuel. So when you look at commodities you have to determine if the price is trending down more than the price of another commodity that impacts it is trending in the other direction. Let’s assume that without going through a math formula that you determine to source a category that is trending down by a decent
percentage like five or six percent. The initial decision here would be to take a run at this category. The next question however should be what else can we take a look at in order to reinforce our hypothesis that there is an opportunity to reduce our cost?

The answer to the above question is to take a detailed look at your supplier’s financial data! There are a number of ways to do this for both public and private companies. In the US, foreign and local companies file their 10K’s and 10Q’s and other data periodically. This data can be accessed on the US Security and Exchange Commission Website EDGAR.  All companies, foreign and domestic, are required to file registration statements, periodic reports, and other forms electronically through EDGAR. Your next question should be, what data should we look at and what can we determine from that data?

If you check back tomorrow for Part II, I’ll share that information with you.

If you’d like to learn more about SafeSourcing spend analysis process please Contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments

 

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Do you want onion with that?

Monday, May 20th, 2013

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

It wasn’t too long ago that restaurants and quick service restaurants included onions on things they served as part of the package.  If you didn’t want them included you needed to make a special request. Somewhere along the line onions must have gotten a bad name because more and more when you order something they tell you in advance and give you the opportunity to remove them from the deal right then and there.

It occurred to me that I have begun seeing this mindset frequently in the procurement world as well, as departments are now getting to choose when the procurement department gets brought in and at what level they are participating.  Like the onion, I don’t think procurement teams have deserved their new fate, but like it or not, it is the way many companies now operate.

Today we will be looking at some ways to deal with this change using methods not unlike a chef would in order to keep the onions in the dish and keep the customer happy.

Understand the onion – One of  the many  issues that many procurement departments are dealing with is that they do not truly understand the issues other departments have with involving them. Without knowing why someone is hesitant to include you it makes it difficult to counter on why you should be included.  Arguments like “you only care about the lowest price”, “This project is too complicated”, “we are too far along”, “this isn’t a commodity” are common and how they are responded too must be addressed in advance by your team so that you can acknowledge the other departments’ hesitancy.   Please review the SafeSourcing blog on handling objections to help with this.

Transform the onion – In my family I have people who would not touch a raw onion to save their life but have no problem eating onion rings (I know, I don’t get that either).  By transforming the onion it becomes an agreeable object.  There are times when procurement teams need to undergo a similar transformation by assisting departments in ways that help them while still achieving your goals of controlling costs.  Working on requests for proposals that offer vendors a best and final price adjustment can help everyone achieve their goals in a new way that does not threaten the integrity other departments are hoping to keep.

Don’t tell on the onion –  I have watched people cooking meals sneak unwanted ingredients into the recipe masterfully in ways that no one would know only to be undone by feeling the need to tell their secret afterwards.  Telling someone they just ate an onion they didn’t know about rarely leads to them to start liking onions.  For a procurement professional this means when you get an opportunity to help a department like IT run a project on enterprise software don’t ruin it by touting about how you reduced the cost, instead focus on how you helped that team find the best solution for the company while getting the vendor to include free training and a reducing the costs by 12%.   This lets the business owners hold onto the fact that the decision was truly made based on value and not just price which is really how every project should be.

If you are a procurement team struggling to get included in all of your company’s spend projects we at SafeSourcing are constantly helping our customers and can assist you by explaining our recommended strategy for helping departments that historically not wanted “help.”

 For more information on these strategies or on our “Risk Free” trial program, 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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Construction Sourcing with eProcurement Tools White Paper Offer!

Friday, May 10th, 2013

Today’s post is an offer of a free white paper on Construction Sourcing with eProcurement Tools by Ron Southard, CEO of Safesourcing.

We are regularly asked to comment on a variety of categories by our customers, prospects and suppliers from the 427,000 member SafeSourceIt™ Supplier Database and SafeSourcing’s daily blog readers. These questions normally occur during the course of the discovery or value assessment phase we conduct with companies with which we do business. The questions vary, but generally have to do with SafeSourcing’s experience with a particular category (in this case, construction) or our impression of successes or failures within that category; when using today’s modern eProcurement tools such as online RFIs, RFPs and RFQs. RFQs are typically called Reverse Auctions and many times are the end result or final step of a much longer and more detailed sourcing process. While the focus is on more than just price, quite often the first question we get is “What kind of savings might we expect?”

The goal of this Construction Sourcing with eProcurement Tools white paper is to share a historical perspective, both positive and otherwise, relative to the use of these tools in the construction space from a variety of sources, as well as SafeSourcing’s specific experience with our own customers.

If you’d like to learn more about the many categories discussed in Construction Sourcing with eProcurement Tools please call Ron a 480-773-7524 or contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

 

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It takes a team!

Thursday, May 9th, 2013

Today’s post is from Steve Schwerin an account manager at Safesourcing.

Other times, we also need someone in a position to help us act on that opinion.  Procurement professionals are in position to offer both.  What I am referencing to here, are situations like the recent drop in gold prices.  Whenever I see an article like the recent article, “Gold’s peak seen by BofA as end to China’s leadership in markets” on bloomburg.com, I think of indexes or how commodities affect prices of finished products. 

Were you someone who thought gold would never come back down from its charge past $1,900 per ounce back in 2011?  I had not given much thought to the price of gold for a while mainly because I was one of those people who figured gold was up around $1,800 to stay.  It wasn’t, though.  It recently dropped to $1,386.35 per ounce.  Does it signal something?   A broad drop in commodity prices?  A prolonged retracement in the price of gold itself?  Who knows? 

The point is, the price of gold could go in either direction depending on developments.  This is where indexes and contract management benefit your business.  Sometimes, you have a little more at stake than a curious thought about the price of gold.  There are two things going on here.  We in the procurement industry may have helped you achieve indexed pricing allowing for potential price adjustments if an underlying commodity experiences a large price swing.  Who is going to remind you to act on this, though?  This is where that outside opinion of someone who can help you act comes into play. 

Here at SafeSourcing, our eProcurement tools include contract management tools that can alert you of not only renewals, but the potential to realize savings due to index fluctuation.  Things like index pricing sound easy enough to manage.  One problem is that we have all been in situations where we “knew” something would happen only for the opposite to occur.  In the meantime, we are busy running your businesses, and are not in a position to take advantage of clauses like index clauses.  This can occur despite our foresight to include the index clause in the first place!

Let us here at SafeSourcing help you realize the benefits of good foresight.  Contact your SafeSourcing customer service representative at 1-888-261-9070 to find out how.

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