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The reason is because middle market retailers are still not using low cost e-procurement tools such as reverse auctions.

There are two primary sources of objections that continue to halt the use of these profit enhancing tools in the middle markets.

The first source is your own buyers or category managers. For some, it is the false belief that these tools will eliminate their jobs. For others, it is the thought that in rising markets, buyers tend to be conservative in the hopes that their suppliers will continue to honor old contracts and delay price increases. Neither assumption is true. E-procurement tools make a buyer’s job easier, as they can do more in less time such as working with dozens of suppliers versus only the same few they have always worked with.  Honoring old contracts almost never happens. Ever-greening of contracts is a huge problem in retail where the lack of sophisticated contract management systems that can provide automatic alerts results in literally thousands of contracts auto renewing annually at predetermined price increases. This results in huge cost increases to retailers that were not planned for. This is all the more reason to be thinking about your spend months before contracts expire even if it only results in cost avoidance.

The second area where you can expect pushback is from your incumbent suppliers or wholesale distributors. If you have never participated in the setup of an RFP or an RFQ (reverse auction) and most middle market retailers have not, that initial call to your suppliers to ask them to participate in a reverse auction event is always an interesting journey. Be prepared for all of the reasons in the world why you should not waste your time on this type of process. The more forceful the pushback the more likely you are to see savings that you should have seen earlier. As such, although suppliers may be well aware of or even using these technologies to reduce their own costs, middle tier retailers have not been able to share in these savings to the extent they deserve to.

If middle market senior executives were to lead the charge and  e-procurement costs as ell as the availability of new sources of supply were no longer an issue, there is absolutely no reason middle market retailers should not benefit greatly from running  e-procurement events such as reverse auctions.

Contact SafeSourcing if you’d like to impact this quarters earnings.

We look forward to and appreciate your comments.

Ron Southard – CEO SafeSourcing

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This generally is dependant on their own offerings which can cover the entire procure to pay process? However at it’s most basic, we are talking about e-RFX offerings such as RFI’s, RFP’s and RFQ’s  and other tools and  services that support them. So, the answer to the above is really yes and no.

My typical response to retailers is that spend management  is the management of your company’s spending across all of your operating expenses and SG&A through sophisticated tools that support RFI’s, RFP’s and RFQ’s at a minimum. Organizationally this process should report to a Chief Procurement Officer or the head of your supply chain with strong ties to the finance area. Success is typically measured by a reduction in cost of goods and services or COGS, improvement in quality or both. In retail, spend is represented in for resale products such as general merchandise, gift cards, frozen seafood, meat etc. Spend is also measured in the expense category or not for resale products and services such as supplies, services, technology, real estate etc.

According to Wikipedia, Spend management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business. These costs typically show up as “operating costs” or SG&A (Selling, General and Administrative) costs, but can also be found in other areas and in other members of the supply chain.

There are dozens of vendors that have a variety of tools and services that are available to assist companies in the analysis and management of their spend for the purpose of present and future decision making. These range from small boutique software houses to giant corporations. Spend management of which e-procurement tools are a part run the gamut from sophisticated contract management applications, reverse auction tools, purchase order management tools and supplier databases etc. In the most sophisticated implementations, these tools may be tightly integrated with retailers enterprise based support systems or data warehouses.

It is not a surprise that many retail companies are not really aware of what their total spend is, or how many suppliers they spend it with. In addition, many retail companies still do not use these tools today. Often times, product specifications are hard to find if documented at all and in some cases the same category might be purchased by different departments across the enterprise without aggregating the spend.

Today’s tools that supports spend management are largely available as internet based or hosted applications that re much lower cost than older in house legacy applications. As such they can be activated almost immediately. This means savings within your present accounting period is possible.

If you’d like to learn more about this process or these types of tools, please contact SafeSourcing. 

We look forward to and appreciate your comments.

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Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing. Mark asks

The RFI/RFP process has been the source of a few SafeSourcing blogs over the past few months and no piece is as important to the process as the plan you develop to move forward with the final stages of the RFx process, as you have companies that barely make the shortlist all of a sudden leap to the front of the pack if done right.

Today’s blog will take a look at some of the aspects that you should be thinking about when preparing for the final presentations.

Who makes the list?  – The main purpose to holding the final stage presentations is to get a final look at the vendor team that you may be getting ready to give your business too.  In almost every case, the RFx process will immediately drop a few vendors out of the mix based on their responses, their initial pricing or a combination of both.  Typically the final presentations will be given by 2 4, sometimes 5 vendors.  To have a larger list makes managing the list difficult, and generally is the stage where you have it narrowed down to companies who can truly handle your account.

What is the focus? – As you are developing the items in the next two points it will be important to develop the content for what you want to know more about.  In many cases RFIs and RFPs are unable to completely do justice for some of the details you need especially if those details revolve around a demonstration.  This is not to rehash the RFI/RFP itself but rather to dig deeper into answers that may have been confusing or not quite as complete as what you wanted.

What’s the Agenda? –  Once you know what you want to focus on and prior to holding your presentations it will be important to create the agenda you wish the vendors to follow.  Not doing so allows the vendors to present whatever they want and may leave you with more follow-up questions than you started with.  Vendors generally appreciate an agenda so that they can focus their energy on the things that are important to you.  This agenda will help be the foundation for the next two points so making it thorough without being so detailed there is no flexibility is the key to a good agenda.

How will you score it? – The final piece you will want to develop before the presentations will be a scorecard that can be distributed to the evaluation team covering every aspect that you want reviewed.  This is a critical step because not everyone will automatically evaluate the presentations in a similar way without guidance.  This can be as detailed as you want to make, however, it should at the very least follow the agenda the vendors have been given so that thoughts and comments on each point can be captured by every member of the team.

Getting ready for final RFI/RFP presentations is an important part of the evaluation process and one that should have as much thought and preparation put into it as the RFx itself.

For more information on helping your company prepare on RFI/RFP or in help preparing for final presentations, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

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