How much legwork are you doing in order to prepare for your projects?
Today’s post is our SafeSourcing Archives.
In part one of this week’s post we began 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 and were now prepared to start looking at their supplier base.
Ray had been doing business with a few of his containerboard suppliers for a long time. They were great people that were friendly and assured him at all times that they were doing everything they could to make sure he got the best price. They were responsive to his needs and their track record for quality and delivery was pretty good as far as Ray had heard throughout the divisions. There were, however, about 25% of the divisions that, due to acquisition or an allowance to be independent by the corporate office, had chosen other regional suppliers for their containerboard needs. This 25% represented almost 40% of Rays overall spend.
Because Ray didn’t have the time to chase down all of the different suppliers being used by the acquired divisions and potentially disrupt his business with potential vendor changes, he chose to focus on his existing vendor relationships and let the outlying divisions continue with business as usual. Ray never had the time to really explore the mergers, partnerships and new companies that had developed since his last contracts were negotiated so, as many procurement professionals, he didn’t know what he didn’t know.
John too had been stuck in a place with a few primary suppliers and large number of regional vendors to supply his needs. Because his automated contract management system had alerted him 120 days before the contracts were set to expire, he was able to send out an internal survey to the divisions in order to ask them a few detailed questions about their pricing, quality and relationship with the vendors that supplied their containerboard.
What he was able to learn through this process was very interesting. Of the 24 divisions not being supplied by a major vendor, over half wanted to be supported by a national provider with better delivery performance. He also learned that 2 of his regional suppliers had been acquired by one of his national vendors but had left the existing, higher priced agreement in place for those divisions.
Also through the course of sending out this survey, John was able to learn about a very large regional mill in the Midwest who traditionally had been primarily a newsprint manufacturer, but because of the decrease in printed media and the increase in the need for containerboard, had converted over 45% of their manufacturing capabilities to producing containerboard thereby increasing the competition in that area of the country where coincidently several of his company’s divisions were located.
The final issue John was able to learn upon follow-up from a few surveys that contained negative comments, was that the quality of one of his major National suppliers was beginning to suffer. When he asked the division presidents why they had not mentioned this before, they all said that it was more of a nuisance than it was a real problem and that while it had been getting worse, it was not preventing them from hitting their numbers.
Armed with this information John had a complete picture of his current National and Regional supplier landscape as well as information relative to a few new suppliers that he had not known of with which to prepare for his sourcing project. He know had what he needed to begin reaching out internally for how far he could go to make the changes that would benefit his company the most.
Stay tuned this week as 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 for that level of performance.
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.