Part I of II. What type of savings should we see when we source Private Label items?

August 6th, 2015

Should it really be any different than expense related items?

 

Todays post is by Ron Southard, founder and CEO of SafeSourcing.

I was asked the other day if I would share some experience in sourcing private label items in the Grocery and OTC area, and if there were any differences in those areas that might make using e-negotiation tools less effective than traditional negotiation methodologies.

At first I chuckled because the answer is so obvious to me. Then I thought that it obviously is not to others. Further more, greater than 80% of companies still don’t use these advanced tools today even though they have been around for over a dozen years.

The more I continued to think about it, the more the answer did become somewhat complicated. That’s because the answer concerns raw materials, commodities, services (as an example printing) and all the other things that go into making and delivering a product to market that as a private label deliverable is supposed to deliver better margin contribution than a national brand. And unlike the evolution of private label, in today’s world also deliver the same or better quality than the national brand. Additionally the challenge exists to find enough suppliers to provide these products that understand the regulatory concerns for the market being considered. An example might be the U.S. versus the CANADA or MEXICO markets.

The above has to be formulated into a specification that defines the product or products to be delivered in the approved brand format that suppliers can understand. At the same time that specification needs to be unbundled from a bid perspective in order to take advantage of market fluctuations so as to mitigate too much movement in price over a reasonable period time such as quarterly.

With all of the above to consider then should buyers try to do this on their own and if they do, will they see the same type of savings as they did when they sourced there expense or indirect categories? Check back tomorrow for Part II in order to get the original answer before this one became a little more complicated.

If you’d like to learn more about sourcing your private label categories, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

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