Archive for October, 2017

Dollars and Sense

Friday, October 20th, 2017

 

Today’s post is by Dave Wenig, Vice President of Sales and Services at SafeSourcing.

Many (most) of the topics featured on this blog focus on eProcurement and the savings generated by the use of it. Today’s blog certainly follows that theme, but with a bit of a twist. As you might have gathered from the title, I’ll dig more into when and why it makes sense to use eProcurement to achieve your savings objectives and other goals.

Timing 

When you have been doing business with a vendor for an extended period of time, typically at about three years, it is time to assess the market conditions. One of the best ways to do so is through eProcurement. Over time, vendors will very naturally work to improve their margins. eProcurement works by keeping those margins within reason based on competitive levels.

Cost Avoidance 

The day you receive that notification of an unwanted price increase is the day you should prepare to take that category to market. Often, our clients receive two benefits in this case. One, their pricing is reduced as compared to the new increase from their incumbent. Often, this pricing is even better than the old price. Two, often, new vendors will offer more favorable terms such as fixed pricing or other terms to help avoid costly increases in the future.

Quality or Supply Chain 

Another common reason for leveraging eProcurement is quality issues or issues or interruptions in your supply chain. These type of issues typically warrant a fresh look at alternate sources of supply. eProcurement will satisfy this need and take the additional step of providing compressed pricing from well vetted alternatives to your current source of supply.

There are many times when eProcurement makes good practical sense as well as financial sense. If you find that any of these examples ring true, reach out to us here at SafeSourcing and we’ll help you understand your options.

Sometimes, savings dollars just makes sense. We look forward to your comments.

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Nested if/then Statements for Everyday Use

Thursday, October 19th, 2017

 

Today’s post is by Mike Figueroa, Assistant Director of Customer Services at SafeSourcing

Most problems don’t have solutions as simple as yes or no, such as “if A, then ‘yes’. If B, then ‘no’”. Solutions are more often evaluated through multiple sets of dependencies, such as “if A+B is greater than C, then find the average of X-Z”. Of course these statements aren’t intuitive, so if we don’t understand how to use them formally in logic equations or computer code, we are much less likely to get them right in real life situations. So here’s a crash course in Excel “IF” statements:

The basic description of the “IF” function is “If something is True, then do something, otherwise do something else”. To see it in action, start with typing “=IF” in an Excel cell of your choice. You’ll see Excel suggest the full formula as “=IF(logical_test, [value_if_true], [value_if_false])”. Each of those statements within the parentheses is a variable that does something specific, and they have to be separated by a comma so that Excel knows when you are entering a new variable. Here is how each variable behaves within the function:

  • “logical_test”: This means there must be an active function. Let’s go with an example of “A1>B1”.
  • “value_if_true”: Whatever value you include in this variable, will populate the cell you’re programing the formula for, if the “logical_test” variable is true. Such as if A1 = 2, and B1 = 1.
  • “value_if_false”: Whatever value is in the false variable, will be populated if “logical_test” is untrue. Such as if A1 = 1 and B1 = 2.

So if we insert some example variables into the formula like so: “IF(2>1, “Yes”, “No”)

This function would insert a “Yes” into the cell being programmed, and is one of the more simple ways to use the function. However, you can swap any of the aforementioned variables for other formulas as well. This is called “nesting”.

For example, you could write a formula like this: “=IF(K5<K6,”YES”,IF((COUNT(H7:H10>2)),”HIGH”,”LOW”))

Let’s describe what this function is doing in sentence form, with a context of evaluating vendor proposals: If Vendor 1’s cost is lower than Vendor 2’s cost, enter “YES” into the cell, if Vendor 1 is not lower than Vendor 2, then if the number of DC’s the new vendor carries is greater than 2, enter “HIGH” into the cell, otherwise enter “LOW” into the cell. This tells me either to select Vendor 1, or to evaluate several other dependencies to make a final decision.

This level of specificity is not normal in everyday speech, but is absolutely critical in procurement. If you have a vendor proposing an agreement, a full evaluation of the value proposition can’t be based on just one variable. Practicing this and other logic functions in Excel and other tools is an excellent way to hone your ability to evaluate complex procurement problems.

For more information on how SafeSourcing can assist your team with 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.

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Overcoming Procurement Mistakes

Wednesday, October 18th, 2017

 

Today’s post is by Robert Rice, Account Manager at SafeSourcing.

Yes, mistakes happen and are part of any purchasing process; but with right tools from the right company, those mistakes can be diminished greatly. Here are 10 of the most common mistakes made in the world of purchasing.

Mistake 1: Not understanding the philosophy, needs and motivations of the procurement organization. Price is important, but other factors count too. For example, in this tough economy, procurement may be pushed hard to implement and obtain immediate cost discounts or cash-flow improvement. This may give you an opportunity to lock in business with better payment terms immediately, while a competitor may require lengthy qualifications.

Mistake 2: Not developing a written specification for vendors to bid on. The specification needs to state your goals, a detailed description of what you’re purchasing, the terms you require, a maximum quote, and when you need responses back.

Mistake 3: Assuming the procurement department knows your value plan. If the department is considering two widgets, and one is $400 and the other is $800, then the $400 tool wins, right? If the widgets are measured on cycles before replacement, the $800 tool is the clear winner. If the procurement staff doesn’t understand this, the $400 tool wins.

Mistake 4: Buying based on price alone can have a reverse effect on your net gain. The cheapest product or service isn’t always the best choice. You may end up having to replace a piece of cheaper equipment or have more maintenance costs if you would have spent a little bit more money and received better quality. Or the initial cost is very low, but after the purchase you find out additional fees that start to add up. Evaluating all costs is the best way to ensure you are getting the best deal.

Mistake 5: Thinking reverse-auction award decisions are based only on price. In most reverse auctions, price is not the only factor clients consider. If the client doesn’t publish that the “lowest bidder wins,” then, in most cases, factors other than price are used in the award decision. Vendors that only sell on price are bound to lose.

Mistake 6: Not acting quickly to pass on commodity-driven cost increases. If a vendor is selling a product that has a cost structure that is significantly impacted by the cost of commodities, then you need to act quickly on pursuing price in the rising market. Procurement professionals will be more receptive to your passing on the commodity increase while the markets are still high – especially if they can pass it onto their customers. Once the markets fall, price increases will be resisted.

Mistake 7: Not capturing price by using your ability to help manage your client’s risk through material hedging, managing inventory, etc. For example, say the vendor sells stretch wrap. The client is concerned about future price increases due to unstable stretch wrap prices. You can get a premium price if you can help alleviate the risk by providing a fixed price that relies on your ability to hedge your stretch wrap purchases.

Mistake 8: Taking a misguided view of strategic partnerships. Your partnership is not an entitlement to getting the best price. The greatest benefit to the vendor is a stronger position to keep the business by locking in clients over time. You have worked hard to be named as a strategic partner, but now is not the time to rest. That partnership provides you an opening to create strong relationships with the executive staff and their purchasing department. Creating those relationships will pay big benefits when your competition tries to unseat you.

Mistake 9: Not getting involved in the client’s new projects. By helping them understand a procurement approach that saves them time and money, you can create a win-win relationship.

Mistake 10: Don’t skimp on research. You should know the basics, price range, your requirements, and the names of vendors that can provide the product or service and how long the purchasing process usually takes. You can’t afford to waste time contacting vendors that cater to small businesses if you are a big company.

You need to ask yourself, “Do I have the time and or manpower to do this?” Everyone one of these mistakes can be avoided if you develop a partnership with SafeSourcing. We have the e-Procurement tools and knowledgeable staff at your disposal ready to save you time and money.

Robert, or any member of the experienced team at SafeSourcing would be happy to discuss how SafeSourcing can help you with your eProcurement planning. For more information, please contact SafeSourcing.

We look forward to your comments.

 

 

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Grease Traps

Tuesday, October 17th, 2017

 

Today’s post is by Gayl Southard, Administrative Consultant, at SafeSourcing.

I worked at a cooking school for seven years, several as the Assistant Director. The school was located in an outdoor mall with a busy restaurant located right beside it.   One night while a cooking class was in progress, the grease trap backed up and the floor was soon covered in water and muck.  What was interesting, the students continued to prep and cook acting like nothing was going on.  We ended up closing the kitchen and giving out rainy day vouchers.

What is a grease trap (also known as a grease interceptor, grease recovery device and grease converter)? It is a plumbing device designed to intercept most greases and solids before entering a waterwaste disposal system.  Wastewater contains small amounts of oils which enter into treatment facilities and septic tanks that form a floating scum layer.  A scum layer is slowly broken down and digested by microorganisms in the anaerobic digestion process.  Large amounts of oil from food preparation in restaurants can overwhelm a treatment facility or septic tank, causing the release of untreated sewage into the environment.  High-viscosity fats and cooking grease, such as lard, turn into solids when cooled.  When these solids combine with other disposed solids, the drain pipes block.

Grease traps have been in use since Victorian days. Nathaniel Whiting obtained the first grease trap patent in the late 1800’s.  “These reduce the amount of fats, oils and greases (FOGS) that enter sewers.  They are boxes within the drain that flow between the sinks in a kitchen into the sewer system.  They only have kitchen wastewater flowing through them, and do not serve any other drainage system, such as toilets.”1   They can be made in many different materials, such as plastic, stainless steel, concrete and cast iron.  They can be located above or below ground, inside a kitchen, or outside a building.

SafeSourcing regularly sources Grease Traps for a variety of businesses. For more information on SafeSourcing and how we can help you with your sourcing needs, or on our Risk Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

Sources

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1 https://en.m.wikipedia.org/wki/Grease.trap#Uses

 

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Believe Me, You could be improving your profitability by up to 73%.

Monday, October 16th, 2017

 

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

I would be glad to personally discuss this premise with any Retail CEO or CFO that wants to challenge it!

Let’s review exactly what a reverse auction is, how simple they are to use and the potential financial benefits?

Reverse auctions are web based  or Software as a Service (SaaS) tools that let retailers and other companies find the best suppliers for any resale or not for resale product or service they wish to source.  Using a web based reverse auction tool, retailers, other business or even large holding companies can locate and invite many more suppliers to take place in reverse auctions than they could possibly find or manage using traditional sourcing methodologies or even tools like BING or Google. During the reverse auction they can review on one screen all of the responses from suppliers, data about the suppliers, notes from the suppliers, product specifications and other necessary information in an instant. Upon auction conclusion which is typically less than 30 minutes including extensions host companies can review potential savings scenarios and award business right from their desktop. Sound simple? That’s because it is.

Now let’s get to the simple financial benefits. Let’s assume a $150M smaller Retail Company with industry average earnings of one percent or $1.5M. Additionally cost of goods for this company is 70 percent or $105M. Let’s also assume this company were to only source ten percent of their for resale goods spend or roughly $11M. With well below industry average savings of just ten percent, total savings generated would be $1.1M which is a direct impact to net profitability. If all other segments of the P&L perform to plan and all savings are recovered during the same business calendar year net profitability would increase to $2.6M or a 73% improvement.  Again this assume no tributes to Caesar or other funny accounting associated with new capital plans and the like

So, why don’t many companies use reverse auctions and other e-procurement tools? That’s a great question! Maybe someone out there has an answer.

If this author were you, I just could not ignore this type of opportunity.

If you’d like some examples of the types of savings SafeSourcing can generate for you by size of spend and category, please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

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The Central Procurement Function!

Thursday, October 12th, 2017

 

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

As you can imagine the answer to this question could actually be pages in length. However the following is directionally correct based on the question and minus the organizational structure and alignment.

The Central Procurement Function in responsible for the procurement of goods, services and capital projects by an authorized group within a company’s hierarchy. Central procurement in a best case scenario includes the financial decision making authority specific to that procurement on behalf of the entire company for reuse or resale from an approved list of vendors or suppliers. In some cases the budget for a specific spend may reside within another functional area  where central procurement collaborates and negotiates on behalf of that areas subject matter experts but the subject matter experts approve the final vendor selection.  In the case of manufacturing company’s  this function also includes the purchase of commodities used in the manufacture of finished goods.

The central procurement function is typically authorized within a company in order to insure consistency thought-out the organizations procurement process by eliminating the potential negative effects of non-collaborative, non-aggregated purchasing by multiple divisions, departments and other corporate entities that can support rogue or unstructured buying.

Measurements of a central procurement organizations success can differ widely from company to company depending upon where they fall relative to a procurement maturity model. Typically these organizations are measured by overall procurement Key Performance Indicators or KPI’s at the procurement department level that usually includes the following at a minimum.

1.  Percent of spend under management
2.  Price Improvement
3.  Quality Improvement
4.  Safety Improvement
5.  Reduction in Carbon Footprint
6.  Service Level Improvement
7.  Distribution Flexibility
8.  On  Time Delivery Improvement
9.  Supplier Management

Management of these KPI’s is intended to insure that  companies have a defined  processes in place so as to promote a fair and open competitive model for the supplier community that’s  interested in soliciting their business.  This also minimizes the opportunity for fraud and collusion while insuring the best possible product or service is purchased at the best possible price and overall value to the company.

If you’d like to learn more about the central procurement function, please contact SafeSourcing.

We look forward to and appreciate your comments.

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Source-to-Pay vs. Procure-to-Pay. What’s the difference?

Wednesday, October 11th, 2017

 

Today’s post is by Dave Wenig; Vice President of Sales and Services at SafeSourcing.

You may have heard of the terms Procure-to-Pay and Source-to-Pay. While both terms can be used to describe solutions that aim to improve the procurement process, they each have different meanings. The objective here is to provide some clarity around what we mean when we refer to Source-to-Pay.

Most will agree that a Procure-to-Pay solution is one that enables a cross-functional workflow to streamline and improve the process from the act of purchasing to accounts payable. Source-to-Pay takes this a step further, expanding the scope to include the process of actually sourcing the products or services to be purchased.

The objective of a Source-to-Pay strategy is to be inclusive of all activities related to procurement from sourcing using RFx capabilities through financial reconciliation with your organization’s systems of record. Implementing a Source-to-Pay solution that incorporates each step of your organization’s procurement process maximizes the value of your strategy.

The end result of a Source-to-Pay solution is a more tightly controlled procurement process that drives greater reductions in spend than you might achieve using Procure-to-Pay solutions alone. Plus, you will enjoy a more efficient supply chain.

At SafeSourcing, we advocate implementing a Source-to-Pay strategy and applaud organizations that have incorporated these solutions. For more information on how we can help you with your procurement needs or to discuss how you can improve your own strategic sourcing strategy, please contact a SafeSourcing representative. 

We look forward to your comments.

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When using e-procurement tools to source complex services make sure you have a well defined change of control process.

Friday, October 6th, 2017

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

Change happens. It can result from poorly designed specifications, terms and conditions, quoting instructions and other data related to a bid.

The normal process for managing these changes is a change of control process which governs how any changes to the services being provided as identified in the actual bid.

The change of control is normally managed as a request that communicates the requested changes to the services deliverables. Normally the change request will describe the following at a minimum.

1. The change
2. The reason for the change
3. The effect the change may have on the existing Statement of Work.
4. Impact on cost or savings

In most cases a project manager or the associate with responsibility for managing the program deliverables will be required to submit a written change request to the contracted or warded supplier.  The supplier will then develop and return the response to the contracting company.

The contracted supplier and the contracting company will then review the proposed change request and either approve it, modify it or reject it. When approved the contracting company as well as the contracted supplier must sign the change request in order to authorize the work as well as the implementation of the work and its potential impact on the existing project plan or project time line.

If you don’t want erosion inn your savings, make sure you spend the time to cover this process in your bid parameters.

Please contact a SafeSourcing Customer Services Account Manager in order to learn more

We look forward to and appreciate your comments.

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The Politics of Procurement

Wednesday, October 4th, 2017

 

 

Today’s post is from our  SafeSourcing Archives!

As a Project Manager within SafeSourcing, I am often tasked with beginning a sourcing project, as well as ending it. Mixed in with customer communication, there is also supplier communication.  We can learn vast amounts of information from the suppliers that we source products and services from.  We can find out current industry trends, as well as the forecast for the following year.  The possibilities are endless.

At SafeSourcing we are exposed to hundreds of suppliers on a weekly basis. Some suppliers shine brighter in some areas than others; however, we also run across suppliers who become unresponsive during the process of running an RFI, RFP, or an RFQ.  This is where the politics come into play.  When this happens, you “re-route” your approach.   Many times it becomes a simple solution by being redirected to another sales consultant, or perhaps a new department. Sometimes this approach is not conducive, and another strategy must be applied. At this point, the request becomes an escalated issue within the company. I normally ask whom the original contact’s boss is, “who makes decisions to participate?” More often than not, the company will want to know your credentials.  As a Project Manager who is intimately familiar with any project I take to market, I can accurately and confidently answer any questions or concerns.

At the end of the day, the politics in procurement is managing the supplier interactions from a sales individual all the way to the CEO.

For more information on how we can help you with your procurement needs 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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Say Yes To New Business! Participate in Request for Quotes!

Tuesday, October 3rd, 2017

 

Today’s post is written by Heather Powell, Director of Customer Services & Project Manager at SafeSourcing Inc.

Do you ignore the invitations to participate in Request for Quotes? Do you overlook the “Please click HERE too for your acceptance to participate in the Request for Quote (RFQ)”?

As a business owner, how do you make any money if you do not do business? Why would you turn down an opportunity to earn new business? If it costs you nothing monetarily but a total of an hour’s worth of time, why not participate?

  •  Through the SafeSourcing process, the RFQs are paid for by the client/host, which means you are not paying to participate or paying to earn new business.
  • Specifications and Terms and Conditions are provided to give you very clear details of the expectations of the items or services required within the RFQ.
  • Accepting to participate in a SafeSourcing RFQ is a very simple process that allows you time to ask specific questions about the items or services and a scheduled training of the system tool to enter pricing. The training itself is very detailed and is done in a very short period of time. We at SafeSourcing understand your time is money.
  • Our RFQs are blind. Just as in a traditional RFP or RFQ, the electronic view of our system is customized to show you your price and your price only, and if you have the lowest quote will be indicated by a specific color. Also different from traditional methods of price collection, is the opportunity to lower your pricing if you do not have the lowest quote. Traditionally, you submit your best and final, walk away and then never know if you had dropped your pricing just another dollar or two that you would have had the advantage of having the lowest quote.

Again, time is money, so 90% of the RFQ Events that SafeSourcing runs for our clients are 20 minutes with 2 minute extensions. Rarely are the RFQs longer. Many of the clients are on a tight timeline themselves and do not have hours to dedicate a person to watch the live event.

The author hopes with this blog that it will open the eyes to businesses wanting new business to participate in future RFQs. Should you have questions regarding our system tool and process or are interested in how SafeSourcing can run a RFQ or RFP 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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