Archive for the ‘B2b Supply Chain’ Category

Part II of II. Are reverse auctions a good tool to use in the retail distribution cost plus arena?

Friday, March 3rd, 2017

 

Todays post is by Ron Southard, CEO at SafeSourcing

Yesterdays post reviewed why and how this author felt that reverse auctions were potentially good for both the distributor and the retailer alike. So just what is cost plus?

According to Wikipedia  Cost-plus pricing is a pricing method used by companies. It is used primarily because it is easy to calculate and requires little information. There are several varieties, but the common thread in all of them is that one first calculates the cost of the product, and then includes an additional amount to represent profit. It is a way for companies to calculate how much profit they will make. Cost-plus pricing is often used on government contracts, and has been criticized as promoting wasteful expenditures.

Once unit level cost has been established for the distribution of products it’s easy to turn that into a percentage and add it to the price of a product coming up with a distributed unit price or category price. The most important part of this pricing exercise for the distributor is to get the distribution costs correct. This can include price of storage, freight, length of travel, driver cost and any number of other costs. This is an area where a distributor can lose a lot of money if they are not very careful.

So, are revere auctions a tool that can help distribution companies?  The answer is a clear yes both above and below the gross margin line. If you like to know more please contact me at ronsouthard@safesourcing.com.

We look forward to and appreciate your comments.

Part I of II. Are reverse auctions a good tool to use in the retail distribution cost plus arena?

Thursday, March 2nd, 2017

 

Todays post is by Ron Southard, CEO at SafeSourcing

A lot of distributors have told this author that reverse auctions don’t apply to them because they use the cost plus model and as such they just add their price or profit margin on top of the contract price with their source to drive their distributed price.

The fallacy in this thinking is that it may make buyers and category managers lazy in their approach to driving margin within the categories that they manage. This results in a higher price to the retailers they distribute to and ultimately to the consumer or their customers customer. A worst case scenario is that the consumer stops shopping at their customer’s store which reduces overall volume and further increases prices by not meeting volume incentives. It’s a slipper slope.

Off course this argument is relatively easy to overcome when we get around to discussing capital goods and expense related products and services area. These areas have an impact on the distributor’s net profit. And I’m sure that many of you will agree that just because one says they are a cost plus provider does not necessarily mean it’s true in the most pure sense of the definition.

Check back tomorrow and we’ll review what the real definition of cost plus is in part II.

We look forward to and appreciate your comments.

Thanksgiving is really a story of a supply chain found and developed!

Friday, November 25th, 2016

 

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

Happy Thanksgiving Weekend from SafeSourcing

One hundred and two pilgrims and crew arrived in Massachusetts after a 3,000 mile trip from England on the Mayflower. It is safe to say that as a result of that distance there was no existing supply chain to leverage, so one had to be developed and quickly. This began with basic hunting and gathering and later included trading with the areas indigenous peoples known as the Wampanoag’s for corn, seed and foraging and planting techniques.

The Thanksgiving holiday we celebrate today really stems from the feast held in the autumn of 1621. Since the pilgrims had only arrived on November 21st of 1620 they had really not been there long enough to develop a fully reliable and renewable supply source. They had however established collaborative relationships with the local Wampanoag people who became regular trading partners and who helped them celebrate the colony’s first successful harvest.

The most detailed description of the “First Thanksgiving” comes from Edward Winslow from A Journal of the Pilgrims at Plymouth, in 1621:”Our harvest  being gotten in, our governor sent four men on fowling, that so we might after a special manner rejoice together after we had gathered the fruit of our labors.

The fowl referred to above certainly could have included a wide range of fowl that was plentiful in the area such as wild turkey, pheasant, goose, duck, and partridge and unfortunately by today’s standards even eagles.

The pilgrims probably didn’t have pies or much of anything sweet at the harvest feast because they did not yet have ovens. They had brought some sugar with them on the Mayflower but by the time of the first Thanksgiving, the supply had probably run out.

Their meals also included many different types of meats. Vegetable dishes, one of the staples of today’s Thanksgiving, didn’t really play a large part in the feast. Other items that may have been on the menu certainly included sea food such as clams and lobster, Indian corn, wild fruits and nuts, meats such as venison and seal and certain dry herbs and spices.

The Thanksgiving meal that has today become a national holiday is a symbol of supply chain cooperation and interaction between English colonists and Native Americans.

We look forward to and appreciate your comments.

Happy Thanksgiving.

Your Suppliers Performance – Trick or Treat?

Thursday, October 13th, 2016

 

Today’s post is from our SafeSourcing Archives

Last week we took a look at the life of your purchased products once you have the contract signed and begin to place orders and how you can protect that inventory along the supply chain.  Today we take a look at the job your suppliers are doing while the contract is being executed.  What is the quality of their goods; timeliness of the shipments; pricing being billed versus the contract?   Are you getting “tricked” or “treated” by your suppliers?

Many retailers have looked at the process of developing supplier scorecards that measure how well their vendors are doing in the relationship with them.  If designed and executed well, these scorecards can be invaluable in later stages of negotiating new contracts or in evaluating new vendors against a standard you are used to receiving.  Let’s look at a few of the metrics to consider when creating a good supplier scorecard.

Invoice audits – Many companies work so hard to get a great deal, great prices; finish with a contract that works well for the company only to move forward without well-defined processes for auditing the new invoices to ensure the new pricing is being affected by the vendor.  One of the most important pieces of creating a good evaluation program for your vendors will be to determine how often and which invoices you are going to audit and then stick to that audit schedule.   The bigger your company the more important this will be.

Quality Control – Scoring the suppliers on quality comes in a few different forms.  The first thing to measure is the quality of the product itself: Are you getting the product you contracted and does it meet the specifications that were agreed upon?  Another area is in the packaging of the product when it arrives.  Many times it is how the product was packaged to ship that is the problem and frequently responsible for big losses.  How the items measure up to their warranty will also be another critical area to measure for quality.

Delivery–Even the best product at the best prices has value only if you can get the product in the timeframe that your company needs it.  Vendors should be measured on their ability to deliver within the window agreed upon in the contract but they should also be measured on how capable they are in delivering unscheduled product in emergency situations.  As in any business, circumstances occur that take you outside of the normal schedules and you need partners who can deliver when you need them most.

Service–This leads us to final scoring point for this blog; services.  Delivering unscheduled product within a window of time you need it is one thing but how your suppliers handle the relationship with you business in times of conflict or when issues arise is equally important.   Scoring this area can be slightly more subjective, however developing a strategy by which you can record these bumps in the road and how your suppliers react to them will be valuable in future negotiations.

For more information on scoring your suppliers or for assistance in reviewing or creating automated scorecards, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

The End of Antibacterial

Thursday, September 15th, 2016

 

Today’s blog is by Margaret Stewart, Executive Assistant at SafeSourcing.

In the past decade or so, the market has seemed to be flooded with antibacterial soaps, sanitizers, detergents, and other cleaning products, but recently the FDA has essentially banned those antibacterial products. Many of us are asking, why would they do such a thing?

In today’s world of keeping things extra clean and preventing the spread of bacteria and other causes of illness, many of us see antibacterial soaps as a step in the right direction to keep our surrounding areas clean and our families healthy. This ban on antibacterial comes as a shock to many people. The problem is, however, that the antibacterial soaps have not been found to be any better than classic soap, and the chemicals used in the “antibacterial” do not even kill bacterial, but rather expose the bacteria to low levels that help the bacteria breed into strong, highly antibacterial-resistant bacteria. To top it off, scientists have found that antibacterial soap chemicals actually do more harm to people, including, according to an article by NPR, a disruption in hormone cycles and muscle weakness.[i]

So is this the true end of “antibacterial”? Not quite. The ban of 19 different antibacterial chemicals in soaps haven’t been banned from hospitals and food service, but rather banned from household use. Many soap companies have already stopped use of the chemicals in question in their over the counter soaps and have begun using other chemicals thought to be antibacterial. In response, the FDA has set a limit of one year to show scientifically proven effectiveness before another ban takes place.

With the soap market changing dramatically, many businesses may find themselves needing new soap products. This opens up a whole new window of opportunity for new business and renegotiating for new products. SafeSourcing can help with both ends of this process through its procurement specialties.

For more information on how SafeSourcing can help you source soap products, or are interested in our Risk Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

[i] http://www.npr.org/sections/health-shots/2016/09/02/492394717/fda-bans-19-chemicals-used-in-antibacterial-soaps

 

HVAC System Efficiency.

Thursday, June 16th, 2016

 

You do not want trouble with your air conditioner in the summer

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

In today’s blog, Gayl discusses the economics of air conditioner filters.

Recently one of our air conditioners began making loud noises each time it cycled on and off. It was so loud in fact, that it would wake me up.  In addition to the loud noise, it wasn’t cooling the house.  Living in a hot climate such as Arizona, you do not want trouble with your air conditioner in the summer.  I made a call to my service company on Saturday and explained the problem.  Luckily, I was able to line up a repair person to be at my home on Monday morning.  After some investigation, the repairman said my unit was frozen.  In order to remedy the situation, he had to turn the heat on in the house to melt the ice in the system.  Initially the repair person said he thought I had dirty AC filters, but I knew that the filters were clean and are changed out regularly.  It turned out the air conditioner was working overtime with the heavy-duty, pleated filters I have been using and strained to pull the air to cool the house.  I was advised to use a fiberglass filter that needs to be changed out every 30 days.  Although I change my air conditioner filters on a regular basis, I learned about the damage a dirty filter can have on your system.

  • A dirty filter in your HVAC system will raise energy bills. A dirty filter restricts the air flow into your HVAC system air handler, causing it to work harder to cool or heat your home.
  • A dirty clogged filter can restrict HVAC airflow and potentially cause problems with the system. They also cease to filter allergens and other particulates out of your air.
  • Dirty filters can make your HVAC system fail completely. Repairing a HVAC system can end up costing you a pretty penny.

The air in your home is up to five times more polluted than the outside air and in businesses it can be even worse. Impurities in the air such as pet dander, mold, bacteria, dust and dirt, and pollen build up in your air conditioner and ventilation system which can cause allergies, asthma triggers, and other respiratory problems.  Thus, it is very important to keep up with changing air conditioner filters regularly.

An AC filter uses special, densely woven, electrostatically charged material to trap pollutants in the air before they pass into your air conditioner or HVAC unit. Over time as the AC air filter gathers more pollutants, it becomes clogged, making it more difficult for the air conditioner to pull air through it.  If you live in an environment where you are doing remodeling, if its allergy season, or if you have pets, you should consider changing the filter more often.

SafeSourcing has a wealth of knowledge on sourcing HVAC units, filters, and maintenance agreements. Please contact a SafeSourcing Customer Service representative or ask about our Risk Free trial program. We have an entire team ready to assist you today.

 

 

 

K-Cups – Convenient? Expensive? Environmentally Friendly?

Monday, March 28th, 2016

 

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

We asked for a Keurig for Christmas. Although we love the convenience of the coffee brewing machine, we have found out a lot along the way.

Green Mountain Coffee Roaster bought Keurig in 2006 for $160million. The National Coffee Association reported that Keurig Green Mountain is the biggest change in coffee-brewing since Mr. Coffee in the 1970’s.  The method of brewing coffee by injecting hot water into a plastic pod has quickly rivaled drip coffee.  It is a faster and more convenient way to brew coffee.  People in the workplace got used to a Keurig in the office and began buying them for their home.

Keurig’s patent on K-Cups expired in 2012. This has opened doors for many companies to make pods at cheaper prices.  Private-label cups went from 7 percent of the market to 14 percent in the second half of 2015. Credit Suisse reported the sales of private- label cups increased by 203 percent over last year, while Keurig’s Green Mountain cups grew by only 12 percent (keep in mind, they had the monopoly previously).

Keurig’s business model was built on selling the coffee units cheap, but with the intention of recouping their money on the K-Cups. “Keurig is trying to establish a technological one: its new brewer, which goes on sale this fall, has a mechanism that scans each pod for Keurig’s markings and locks out any unapproved capsules.  It’s essentially digital rights management (DRM) –a mainstay in music and video – adapted for coffee.”[1]  Currently, the Keurig literature tells the consumer to buy only Keurig-approved pods.  Many food companies have tried to get a piece of Keurig’s single-cup coffee market.  Starbucks, Nestle, Kraft Foods are a few examples.  Currently these companies are packaging K-Cups for Keurig.

A big reason why K-Cups are preferred is because you know you are drinking fresh coffee. Keurig grinds the beans in a factory, flushes them with nitrogen, and seals them in air-tight capsules.  Oxidation is what makes coffee go stale.  The second appeal to K-Cups is the convenience.  You can’t mess up!  Unlike brewing a whole pot of coffee in a traditional coffee maker, you can brew single cups of coffee, decaf coffee, as well as flavored coffees—pleasing everyone’s taste.   Although pods are convenient, they are much more expensive in the long run than brewing coffee.  The environmental concerns of disposing these plastic cups are significant.

For more information on how the team at SafeSourcing can help your company, or on our Risk Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

1  Josh Dzieza, The Verge, 6/30/14

What is Crystalized Polylactic Acid?

Tuesday, January 19th, 2016

 

 

Today’s post has been written by Ryan Melowic Vice President of Customer Services at SafeSourcing.

Crystalized Poly Acid sounds scary, however, according to Wikipedia “Polylactic acid or polylactide (PLA, Poly) is a biodegradable thermoplastic aliphatic polyester derived from renewable resources, such as corn starch (in the United States and Canada), tapioca roots, chips or starch (mostly in Asia), or sugarcane (in the rest of the world). In 2010, PLA had the second highest consumption volume of any bioplastic of the world.”

Uses

Crystalized Polylactic Acid is used to manufacture the following types of products.

  • T-shirts
  • Coffee cups
  • Packaging
  • Bottles
  • Other everyday items

Advantages

  • Compostable in commercial facilities, meaning that it will break down under certain conditions into harmless natural compounds.
  • Heat-Resistant to 185°F
  • Sturdy feel, stronger than starch plant based products
  • Product is 97% USDA certified bio based product

Unfortunately, the current PLA production process is costly and creates waste. In July of 2015, researchers in Belgium developed a new production technique that is less expensive, greener and makes PLA a more attractive alternative to petroleum-based plastics.

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.

 

Are you doing business with your suppliers “A” Players?

Tuesday, October 6th, 2015

 

Today’s post is our SafeSourcing. archives!

You can classify all employees in an organization into three categories: A, B, and C players. Should an organization strive for 90% of employees being ‘A’ players? No, a healthy distribution of A and B players is what an organization should strive for.

C Players– All employees generally start as C players due to their training and inability to bring a benefit to the company right off the bat. Genuine A and B players will not be C players long. They will eventually bring value to the company and move to an A or B player. The employees that remain C players will eventually be weeded out of the company.

B Players– B players can perform the tasks given to them well, but show no initiative to perform beyond average. B players show more loyalty to a company. In many cases B players are former A players, but do not want the responsibility anymore for whatever reason (age, personal, family, etc.). B players will complete the task given to them and with their loyalty will save companies money in hiring and training.

A Players– Everyone wants a company full of A players. A players are responsible and work to bring great benefit to the company. Sure they are experienced, motivated, and bring great benefits to your company, but how long will they stay satisfied? With the knowledge, motivation, and experience A players have it can be challenging for organizations to sustain their employment. A players find greater opportunities and their loyalty is far less than B players.

What players is your company searching for? You cannot run a company with only one type of player a successful organization will have a healthy balance of A and B players. Understanding who your A and B players are is an important key step.

We all work with the three different players from our suppliers and  we know it can be challenging to receive the results or information you have requested from a B or C player. If a company you are working with has not established  who their A, B, and C players are, then you could end up working with any of them for contract negotiations. At SafeSourcing we have an extensive SafeSourceIt™ Supplier database and  existing relationships with  the suppliers that will deliver the results you request. SafeSourcing finds the suppliers A players in order to bring value to your company from the outside.

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 and appreciate your comments.

Global Food Risks

Thursday, October 1st, 2015

 

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

This year alone California farmers are predicted to lose $3 billion due to persistent drought[1]. Avian Flu has cost nearly $3.3 billion nationwide in the US[2], while the resultant egg shortage continues to wreak havoc with the market by doubling egg prices[3]. Yields in North Korea are feared to come in as low as 50% below normal due to drought, which could pose huge humanitarian needs and market risks[4]. The average amount of arable land needed to support an American standard of living is approximately 10 acres per capita[5], though as of 2012 there were only between 0.49-0.6 acres of arable land on earth per capita[6]. The UN has stated that food production must double by 2050 in order to meet demand[7] due to rising population as well as rising global affluence. As the world population continues to increase the number of hungry mouths on the globe, it becomes ever more vital to have a strategy for dealing with disruption in food production markets.

Unfortunately, one of the greatest challenges to this problem is understanding what all of the potential risks are. As unpredictable weather patterns emerge, we are warned to expect the unexpected by the scientific community due to global warming, and political disruptions are equally unpredictable. Though there are recommended steps for discovering the unknown variables, and managing what is known.

Identify the risks: Does your organization have a risk mitigation department? One that focuses on proactive measures to ensure continued production in a crisis, not just financial hedging?


[1] “Drought May Cost California’s Farmers Almost $3 … – NPR.” 2015. 18 Aug. 2015 <http://www.npr.org/sections/thesalt/2015/06/03/411802252/drought-may-cost-californias-farmers-almost-3-billion-in-2015>

[2] “Bird Flu Cost the US $3.3 Billion and Worse Could Be Coming.” 2015. 18 Aug. 2015 <http://phenomena.nationalgeographic.com/2015/07/15/bird-flu-2/>

[3] “Egg prices in the US nearly double after outbreak of avian flu.” 2015. 18 Aug. 2015 <http://www.theguardian.com/us-news/2015/jul/16/egg-prices-in-the-us-nearly-double-after-outbreak-of-avian-flu>

[4] “North Korea fears famine as drought halves food production …” 2015. 18 Aug. 2015 <http://www.theguardian.com/world/2015/jun/19/north-korea-fears-famine-as-drought-halves-food-production-says-un>

[5] “The State of World Population 2011 – UNFPA.” 2011. 19 Aug. 2015 <http://foweb.unfpa.org/SWP2011/reports/EN-SWOP2011-FINAL.pdf>

[6] “Arable land (hectares) | Data | Table – The World Bank.” 2010. 19 Aug. 2015 <http://data.worldbank.org/indicator/AG.LND.ARBL.HA>

[7] “Food Production Must Double by 2050 to Meet Demand …” 2014. 18 Aug. 2015 <http://www.un.org/press/en/2009/gaef3242.doc.htm>

 

Coordinated risk management: Form alliances with national and international producers and brokers establishing protocols for responding to shortages that protect the most vulnerable populations from food shortages.

Identify the weaknesses in your supply chains: An example would be diversification of farm location can mitigate drought risk confined by geographical location.

Move to non-biofuel energy production: Using energy sources such as nuclear, solar, and wind allow farming capacity to be used for food instead of bio-fuels, which some studies have shown to be a net-energy loss product[8].

Early warning: Have mechanisms in place for capturing information regarding shortages and market disruptions.

Supplier resilience standards: If you are a purchaser, adopt requirements of your suppliers for managing risk that incentivizes food production resilience.

In the face of dealing with all of the food commodity disruptions in the market, and increasing pressure to shave already thin margins, it’s easy to lose sight of the fact that a major disruption doesn’t just mean loss of revenue, but can also mean loss of life within the markets of the most vulnerable consumers. For example, US food aid to foreign countries comes from US commodity surplus, but aid has decreased by 64% in the last decade due to reduced surplus[9]. This and many other examples are why it’s so extremely important for those of us working in the food procurement and production industries to build resilience into their long term strategies.

For additional insight on this topic I highly recommend the report by the UK-US Taskforce on Extreme Weather and Global Food System Resilience[10].

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.


[8] “Economic Cost of Biodiesel and Corn Ethanol per Net BTU …” 19 Aug. 2015 <http://www.ag.auburn.edu/biopolicy/documents/Economic%20Cost%20of%20Biodiesel%20and%20Corn%20Ethanol%20per%20Net%20BTU%20of%20Energy%20Produced.pdf>

[9] “Food Aid Reform: Food For Peace By the Numbers … – usaid.” 2013. 19 Aug. 2015 <https://www.usaid.gov/foodaidreform/ffp-by-the-numbers>

[10] “Extreme weather and resilience of the global food system.” 2015. 18 Aug. 2015 <http://www.foodsecurity.ac.uk/assets/pdfs/extreme-weather-resilience-of-global-food-system.pdf>