Understanding your results!
Today’s post is from our SafeSourcing archives.
What are you doing to understand the results you are receiving from your projects?
We have spent most of last week looking at Ray and John, two procurement professionals who were running sourcing projects for containerboard for their respective companies. Ray and John took different approaches to understanding the containerboard market, suppliers, company atmosphere and in determining the goals of the project. They had each executed their strategies and now needed to understand the results they received. Yesterday we looked at Ray’s results and today we finish our series by looking at the results John was able to achieve.
John works on a small team just like Ray does but long made the commitment to invest a little bit of his every week to try and stay up to date on the markets he deals, the vendors that are in it as well as to understand what is going on in his own company by scheduling periodic meetings with the department heads. Due to the fact that John had invested this time up front, it made it easier for John to understand initiatives of his company, and trends in the market and with suppliers to form goals that accomplished more in his projects than just reducing price.
The final known metrics that John’s project was able to achieve were as follows:
• Project Start Date – January 9, 2013
• Number of Suppliers Involved – 12
• Percent of spend being review – 100%
• Amount of time spent doing research to understand project
o 5 hours per week reading industry publications and blogs for the entire year
o 10 hours reviewing current contracts and invoices
o 15 hours spent researching other suppliers
o 4.5 hours preparing survey and analyzing results
o 2 hours per week meeting with other departments to understand what they are doing
o 18 hours negotiating final versions of updated contracts
• Additional Information Collected – Green Initiatives from Suppliers; Production levels for containerboard; Internal survey detailed division satisfaction levels, usage and the fact that two of his regional players had been acquired by National companies.
• Amount of time spent communicating with suppliers – 2 hours personally, however his 3rd party strategic sourcing company invested 33 total hours on his company’s behalf to help arrange a price gathering process.
• Number of Bids and Changes – Average of 47 bids each – 564 total bids/changes collected in 37 minutes.
• Savings Achieved – 9% savings plus the average of 8-12% predicted future increases
• Terms – Net 30 Plus 3% Discount on Net 20 collected from one vendor
• Contract Length – One year contract with reviews against Indexes every 6 months; Discount of 5% on a two year deal but with the consolidation of vendors John’s company is leaning toward a one year deal and taking it back out in 12 months.
• Number of additional suppliers supplying outlying divisions
• Plan is to consolidate the 18 regional and National vendor group down to a Better/Best National program with one Regional included to help handle on region that represents 45% of his overall spend.
• Project Complete Date – February 27, 2013 last contract was finalized
John had a goal to achieve “value” for his company and in doing this he had to understand everything about what was going on around him in the industry and in the company. This understanding allowed him to create a specification and scope that was extremely detailed and accurate for the vendor community. After reviewing everything the attention to detail was not lost on the vendor community or the seriousness of the opportunity. John had a plan with clear goals and was able to convey that successfully to the suppliers who showed up with additional discounts and pricing in order to win the business.
When it was all completed John’s year round efforts produced 3 great vendors, one of which was new, discounts for terms and larger orders that would be stored in his new warehouses and competitive pricing while avoiding a cost increase. His final decision was aligned with the corporate initiatives for “green” and woman-owned companies and reducing his supplier count would save his company hours of additional administrative effort.
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.