Archive for October, 2014

To Fix or To Prevent…. Part V of V

Friday, October 10th, 2014

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

Over the course of the past four days we have taken a look at a common process companies go through to evaluate their Repair & Maintenance spend for equipment their businesses use.  Depending on where the company is in deciding on a break-fix VS preventative maintenance focused plan determines which of three steps they are likely to run.  Controlling current expenses while information about the internal and external landscapes are gathered is the first step many companies take before finally ending up with a primarily preventative maintenance model.  Today we will take a look at some of the benefits our customers are seeing with this approach.

Extend the life – Companies that move toward a primarily preventative maintenance based program are seeing that they can extend the life of their equipment by 10-15%.  Because vendors are inspecting the equipment and performing regular preventative maintenance tasks, the equipment operates in a manner it was designed to and maintains a life expectancy at our beyond what was intended.  A side benefit to having the equipment run as it was designed, was an overall energy efficiency improvement of 8-15% by customers employing a PM program.  As motors, compressors, etc. operate free of debris and dirt they will use less energy leading to reduced energy related costs.

Reduce the severity – Although helpful, PM programs do not eliminate issues that arise with equipment, however when a PM program was in place, SafeSourcing customers saw a 15-20% reduction in the frequency of repairs that were needed and 20-30% reduction in downtime when that equipment did break due to a reduction in break severity.    Break fix costs and operation downtime are two of the biggest enemies to a business.  By having PM vendors perform routine inspections, issues that were just beginning were caught early and addressed quickly and less expensively which caused less downtime of the equipment.  These inspections also reduced the number of issues due to being caught early and by having the equipment properly calibrated to operate as intended.

Reduce the overall cost – The overall affect customers saw when improving on or switching to a primarily preventative maintenance focused model was exciting, averaging 15-20% from their current R&M costs for that equipment.   Factors such as the amount of attention which had previously been devoted to researching which program would fit and the existing internal expertise on R&M issues had the potential to raise these numbers significantly.  Customers found that they purchased replacement equipment less frequently and repairs happened less frequently and with less severity than they had before.  Reduced downtime and increased energy efficiency were KPIs seldom analyzed but have very real dollar savings attached to them.

At SafeSourcing our goal is to develop a program of sourcing that is going to have the best fit for a company.   We use our team, expertise, database and eSourcing tools to ensure a company has all of the information necessary to make the smartest decision for their business.  For more information on this process 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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To Fix or To Prevent…. Part IV of V

Thursday, October 9th, 2014

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

Over the past two days we have been exploring some steps our customers are taking to learn which model of repair & maintenance works best for them.  Many will begin with a quick RFP to try and lock in and improve hourly rates and costs for normal break-fix occurrences while they study their internal landscape to determine which model is the right fit.  Once completed, many will then look at the landscape of the industry to learn more about suppliers are doing and offering.  Generally the current break-fix companies will be invited to phase to participate as well. 

The third phase allows companies to standardize what they want in terms of service and gives all suppliers a chance to win the business with their best overall proposal and the incumbents a chance to add to their reputation and service with any last minute adjustments they want to make.

PHASE 3 – Lock down the overall offering

Well defined terms and conditions – Yesterday we discussed the importance of putting together a Best In Class statement of work for the suppliers to offer pricing against.   By defining that in advance it will be easier to compare where all of the vendors fall on the same set of details.  Just as important is define the Best In Class contract terms in advance of award of business.  This would include service conditions, background requirements of the employees coming on site or payment terms for example.   Having this stated up front will ensure there are no surprises for the suppliers when they are awarded the business.

Pricing by location – With the equipment defined at each location and the statement of work established, it will be much easier to collect preventative maintenance plan pricing for each location.  This will account for variances in the life and type of equipment by location as well as demographics that would increase or decrease costs such as the location being located in a densely populated metropolitan area or in a more difficult to service rural area.  If necessary, break up the locations into groups to allow suppliers to focus their attention.

Factor in loyalty and incumbent performance – Once pricing proposals have been collected and pencils have been sharpened as far as they will go it is important to factor in all of the value a supplier brings to the table but especially the history of loyalty and customer service on the part of the incumbents if they have been good partners to work with.  In virtually every instance we will show our customers an award scenario where nothing changes on the part of their supplier even if the incumbent was not the lowest bidder. 

We will conclude the series tomorrow by sharing a summary of the results our customers are seeing by taking this three-step approach and how successful those that have chosen to move towards a primarily preventative maintenance plan have been.  For more information 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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To Fix or To Prevent…. Part III of V

Wednesday, October 8th, 2014

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

This week we have been going through a five part series examining the steps companies are taking to determine their repair and maintenance needs based on which of the of three groups Monday’ blog defined.  We continued yesterday with looking at Phase I of three approaches many companies follow by controlling the current costs while they prepare for an overall evaluation of where their company stands.   Today we will look at the second phase virtually all of the companies we deal are taking.

PHASE 2 – Understand the current landscape

Whether a company has a current preventative maintenance plan in place or just exploring the possibility, taking the next step of a Request For Information is a solid next step many SafeSourcing customers take to learn and validate the details they need before proceeding to the third phase.  

Best In Class Details – During the Request For Information phase 2, one of the important pieces of information to collect will be the statement of work details that go with a supplier’s preventative maintenance program as well as a break-fix program.  These details will allow a customer to pick the best aspects of each program and develop a program that works best for them and for the way they do business.  These details can then be used to collect and compress pricing in the final stage 3.

Evaluate New Talent – Service industries are some of the most volatile in terms of new companies entering, companies consolidating and companies leaving the market.  As such learning what new companies have emerged is an important step every company should take periodically so that they can make sure they aren’t missing value.  This is especially important when new companies have been formed by employees of market leaders or 2-3 medium companies combine into one strong potential leader.

Coverage & Capabilities – Along with understanding who the new players in the industry are a Request For Information can uncover other details about new capabilities and geographical coverage suppliers are offering.  National companies who are looking to find suppliers that can provide total coverage for their organization will find this a very important piece of the RFI.  The RFI can also uncover new technologies and service plans that are Best In Class that the customer is unaware of.   All of this data can then be used to create the final RFP for those companies that continue pursuing a primarily preventative maintenance focused model.

Tomorrow’s blog will look at the third and final phase companies are using to establish a best in class solution for repair and maintenance programs.  For more information on these phases or 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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To Fix or To Prevent…. Part II of V

Tuesday, October 7th, 2014

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

Yesterday we began a series exploring Maintenance and Repairs and the types of companies that begin exploring their options as they try to control their expenses.  At SafeSourcing we have seen most of our customers fall into the exploring, changed company landscape or validating the decisions they have already made categories.   The next three days will look at the standard phases we see our customers, especially those which fall in the first two groups, go through when exploring their options for Repairs & Maintenance.   These phases provide data and pricing from which every single one of our customers has been able to make the best decision for them.

PHASE 1 – Reduce what you pay today

Many companies fall in the category of trying to explore whether maintaining a break fix model is better than implementing preventative maintenance programs for their R&M spend.  Whether they have implemented a full, partial or no preventative maintenance plan, break-fix issues still arise and a frequently ran first step is an RFQ to lock in and control hourly rates, part costs and other incidental costs such as travel.

Begin the legwork for Phases II and III – A good step to begin in conjunction with the Phase I RFQ is to collect the data needed for the next phases.  This means understanding the current R&M expenses for the equipment being maintained, preferably by location.  Also, collecting current contracts, agreements and statements of work will also be useful so that an understanding of where the company is coming from can be laid out.  A very important piece that sometimes gets overlooked is to also begin inventorying the equipment at each location.  Having this information for the suppliers up front will shorten this process greatly.

Collect detailed hourly rates – While running the RFQ it is important to collect the rates in as detailed as fashion as possible.  Ideally this means collecting the hourly rates for every location that needs service so that cost of living differences are not rolled in together.  At the very least collect hourly R&M rates by state or province as it applies and if possible break large areas into smaller chunks if it contains significant metropolitan areas.

Lock in part costs – Locking in part costs is the second critical piece of this phase.  If possible collect pricing for the most commonly needed individual parts but at the very least locking in discounts off of list prices should be conducted at this point.  Along with this rate information collect the list price for all parts needed from the vendor so that they can be locked in at the same time as the discount rate applied against them.

Getting early help for current expenses is key to developing longer term strategies for the business.  For more information 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.

Stay tuned for Part III of this series tomorrow.

We look forward to your comments.

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To Fix or To Prevent…. Part I of V

Monday, October 6th, 2014

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

One of the toughest questions that face companies is where to put their Repair & Maintenance budget dollars.  One train of thought is to try and reduce the costs for hourly repair rates and parts as much as possible and then deal with the issue when it arises, while the other train of thought is to invest heavily in a preventative maintenance program and try and extend the life of the equipment and head off major damages before they occur.  Over the next week we will be taking a look at a recent SafeSourcing study on Refrigeration repair and maintenance decisions our customers have made and apply it to repairs and maintenance of all equipment.

Repair and Maintenance spend is one of the largest non-payroll expenses that companies have.  Whether it is to service HVAC, refrigeration, computer, security, roof, or other equipment, companies are spending hundreds millions of dollars to keep their machines and businesses running.  SafeSourcing customers generally fall into one of three categories when we begin to discuss the repair and maintenance categories with them and out of that proper move forward strategies can be developed.

Exploring – These customers are unsure of which model will work best for their organization.  Historically they may have “tinkered” preventative maintenance plans but by and large they have been primarily break fix companies.  Most of these customers are seeing R&M costs rise and equipment life expectancy decline and are at the point where they need to determine which model will work best for them.  These customers typically will follow all three phases of exploration which will be covered over the next three days.

New management – As seems to be happening every day, companies are being acquired, companies are merging, old regimes are retiring and new ones are coming up to speed.   During these times companies tend to review every aspect of their business and where money is being spent regardless of whether it is an area that seems to be working well.  Repair and maintenance expenses are typically an early category that is reviewed because of its size.  While companies in this group tend to follow the three phases, they tend to use it validate they are doing the right thing just as much as to explore a different way of doing things. 

Established – Customers that fall into this category have already invested the time to determine the best fit for their company and have usually conducted extension studies and data reviews to land themselves where they are today.  Even with all of that, these companies will still look at running phase 2 and 3 so that they validate any new companies or programs that have been introduced since the last contract and then use those details to develop Statements of Work that are the most beneficial for their company.

Please continue to follow this series this week as we break down the most widely used approaches for determining R&M needs, concluding with some of the average results we are seeing with our customers from these three phases.  For more information on this tool 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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How to negotiate without hurting your supplier relationships

Friday, October 3rd, 2014

Today’s post is by Michael Figueroa, Account Manager at SafeSourcing

When negotiating a sale with a vendor, the wrong process can quickly change the tone of communication from a friendly sales meeting to that of a confrontation. With large accounts at stake and communication tools that can lose the intended meaning of the speaker, misunderstanding can easily breed offence. The process doesn’t have to devolve into a foray that sours business relationships however. The health of your business will require healthy, win-win, long-term relationships with your suppliers, so let’s consider a few rules for promoting a healthy negotiation outcome:

Clear away assumptions

The only assumption you should start with is that you will discover unknown variables during the procurement process. This is why it will be crucial to allow for questions, feedback, involvement from SME’s and stakeholders, as well as flexibility for the process to be iterative. Your team may publish a set of specifications, then find that there were options in the market they weren’t even aware of from the vendor community. Assuming you know all there is to know about a category could force you into a purchase that is sacrificing value without considering other opportunities identified in the process, as well as alienate suppliers who may be trying to help you help yourself.

Think win-win

You and your suppliers know each other’s business: How can you help each other do business better? Things like “If we changed shipping schedules we could save our vendor a ton of money. And if the vendor sent us PO’s through our EDI system we’d save a lot of time”. The give and take of negotiation doesn’t have to be win/lose. Find the variables that make sense for both parties and adds value to the full project, not just the invoice.

Have a clearly defined process

Leveraging competing quotes to drive savings can be exhausting when done linearly. The back and forth over remote location can be extremely time consuming, and the “negotiation room” tactic leaves suppliers feeling short-changed. This is why e-sourcing web-tools are designed to consolidate complexity through clearly defined mechanisms. Bids are collected with a simple and immediate indication of low quote status. Negotiation is technical, not personal, parameters such as top threshold of quote are identified from the outset, and the timeline and specifications are all in one place.

For more information on how SafeSourcing can assist your team this process 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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The 7 Deadly Sins of E-Procurement Part VIII of VIII

Thursday, October 2nd, 2014

Today’s post is written by Heather Powell, Manager of the COE Department & Project Manager at SafeSourcing Inc.

Pride – Being too self-satisfied; quality or state of being proud – inordinate self-esteem.

  • Pride is thinking you’re better than you are.  Better at what doesn’t matter.  It’s not just misguided overconfidence.  It’s thinking you’re better than God and thus that you’re invincible.  This isn’t bad in small things like your jump shot.  It is bad when you cannot accept your limitations and live within them.

In e-procurement pride can be defined as- thinking that loyalty means something.

Sadly, the opposite often applies with complacency setting in with suppliers where contracts have been in place for many years. If your contract with your supplier is really delivering good value, then they won’t have any concerns about you ‘testing the market’ as this will surely prove it. Benchmarking longstanding contracts is a ‘no lose’ strategy for customers as it will either prove value, result in your supplier ‘sharpening their pencil’ or enable you to change to a supplier that is offering better value.

How to avoid this:

  • Make it standard practice to regularly benchmark all of your suppliers, even those who you are happy with. It ensures that your suppliers are always ‘on their toes’ with respect to your pricing and service as they know that at any time you are likely to test the market.

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 Will you recognize any of these sins in your business practices today?

For more information on how SafeSourcing can assist you in exploring your procurement solutions for your business 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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The 7 Deadly Sins of E-Procurement VII of VIII

Wednesday, October 1st, 2014

Today’s post is written by Heather Powell, Manager of the COE Department & Project Manager at SafeSourcing Inc.

6. Wrath – Vindictive anger; angry revenge.

 a. Wrath is wanting to hurt someone.  It is not anger, which is normal and is really frustration and rebellion at being powerless.  Wrath is  wanting to cause pain, and being motivated by this to actually cause pain.  A little bit, especially when driving, is okay.  Carrying a weapon and firing at both the stupid and insane people driving near you isn’t okay.

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In e-procurement wrath can be defined as- not reading the small print.

In defense of the customer, this is most likely due to the enormous time constraints placed on them. However, that matters not if something goes wrong costing the customer money. What an expensive mistake it can be not reading the small print on contracts. Many customers have been left with debt for what they had believed to be ‘free’ services, shipping, and/or goods.

How to avoid this:

Never, ever, sign a contract without reading the small print. Ever. (Have we made the point)?! It really is that simple. If you’re not sure about some of the clauses, ask the supplier for a full explanation and keep asking until you are 100% comfortable you understand what you are signing. If you’re still not happy, engage a third party expert to review documentation for you. A small fee here might prevent bigger costs, and time consuming problems, later on down the line.
Do you recognize Wrath as a sign of sins in your business practices today? Stay tuned tomorrow for the 7th and final sin in e-procurement: Pride and how to realize and avoid it.

For more information on how SafeSourcing can assist you in exploring your procurement solutions for your business 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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