Archive for the ‘E-procurement Solutions’ Category

Do you know how a price index plays into e-procurement best practices?

Wednesday, March 3rd, 2021

 

Todays post is a repost by Ron Southard, CEO at SafeSourcing Inc.

Todays post is a little long in the tooth, but still relevant for sourcing professionals.

Being overly simplistic an index is a system used to make finding causal information easier! There are any numbers of indexes or indices available to help procurement knowledge workers insure they are sourcing products at the best possible pricing. The key word here is price as what we will be discussing are specifically price indices.

According to Wikipedia a price index (plural: “price indices” or “price indexes”) is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations.

Price indices have several potential uses. For particularly broad indices, the index can be said to measure the economy’s price level or a cost of living. More narrow price indices can help producers with business plans and pricing. Sometimes, they can be useful in helping to guide investment.

Normally an index reflects the current and historical price of a variety of commodities ranging from metals to grain. A common index used in sourcing petroleum products is OPIS or the Oil Price Information Service which you can learn more about by visiting www.opisnet.com.  However in order to drive the best possible fuel pricing there are other dependencies such as whether you are doing spot buys or bulk purchases and these strategies will determine what specific index you would want to review as well as it’s relation to other product information sources such as Platts or the Gulf Coast spot assessments.  This will put you in a better position to determine how to bid the product and also earn a discount relative to the lowest common denominator.

All other commodities have similar sourcing issues dependant on what the highest cost item is in their product makeup. An example here might be the cost of grain in the feeding of cattle or poultry.

Ask you solution provider to explain these tools to you and to recommend how you might use them toward the best outcome.

If you’d like more information, please contact a SafeSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

Retailers it’s really pretty simple; just look at your Gross Profit.

Wednesday, February 3rd, 2021

 

Todays post is by Ron Southard, CEO at SafeSourcing Inc.

How many times do we hear all of the reasons for a retail company’s performance being off? It’s the cost of doing business over seas, the economy, the cost of fuel, heath care costs etc. How often do we hear, that we are doing better than the same period a year ago or we are exceeding plan. All of that is nice stuff, but the bottom line is your bottom line. If you top line sales are up and your net profit is up it does not necessarily mean that you have all of your procurement issues under control.

Let’s start with some numbers you might want to look at. Don’t just assume that profit is a good thing because profit could be caused by an imbalance in your category margins.

Here are a few good questions to ask yourself.
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1. How do your cost of goods compare to the rest of the industry for a chain of your size?
2. How do your operating expenses compare to other chains of your size?
3. How do your gross margins compare to other chains your size?

All of the above can be good indicators of overall company health and certainly procurement health. If your cost of goods is higher than industry averages for a chain of your size, why is that? Is there a specific category that is causing the issue? Do you know how to isolate the problem and then eliminate it?

If you don’t have or know this information, you should ask your e-procurement provider if they have it, because they should if they want to model an improvement plan for you.

As an example, here is an example of a previous years U.S. based convenience store chains targets for non fuel.

1. Cost of Goods Sold should run somewhere around 71% or 72%
2. Gross Profit should run around 28% to 30%
3. Operating Expenses should run around 26% to 29%
4. Net Operating Income around 2%

While these numbers are certainly off based on Pandemic issues, product  or services mix, you can build a case model on them to compare before and after for you company. That is if you have a tool like SafeBIM™ from SafeSourcing. BIM stands for Business Impact Model.

If you are way out of balance with these numbers and want to understand how to rebalance them, contact a  SafeSourcing Customer Services Associate.

 

Part II of here is some Lasik for retail e-procurement professionals in order to create better focus.

Thursday, January 28th, 2021

 

During yesterdays post Here is some Lasik for retail e-procurement professionals in order to create better focus we discussed the following four retail P&L measures and how to use them to pin point a starting point for e-procurement evaluation and events. They were

  1. Gross Sales,
  2. Cost of Goods Sold,
  3. Gross Margin and
  4. EBITDA.

Also in yesterdays post, we promised to review what underperforming the above measures means and how careful evaluation will point you in the direction as to where to begin your e-procurement journey.

Here you go!

If your EBITDA is low, and your top line sales are in line with your plan, it is pretty clear that you have either an expense problem or a cost of goods problem. If the problem is expense related the first indicator is that your gross margin is most likely in line and your costs of goods are ok relative to your plan. In this case since the issue looks like it is below the gross margin line you have an expense problem. This does not always mean that the issue is your largest expense category like health benefits. Often times the problem can be caused by mid level expense related categories particularly categories that are hard to monitor and as such hard to control like hired services. A few examples are items like landscaping, snow removal, pest control, window washing and other similar types of expenses. These expenses have multiple invoices from multiple suppliers multiple times each month and are approved at store level. As a result, eProcurement results for these categories return impressive results while also streamlining suppliers as well as the process. With out going into to much detail the exact same process works if you turn this issue around and sales are near plan and gross margin is out of line, you most likely have a cost of goods issue.

A caution that procurement professionals should be aware of is that of measuring yourself solely against your own plan. You may be achieving your plan, but underperforming the industry you serve. This author believes that this is the 2nd level of analysis required once you have addressed the items indicated above and want to take the next step in creating a sustainable e-procurement process.

I hope this helps and allows you to use the lyrics from the 1972 song by Johnny Nash titled ?I can see clearly now? as your sourcing mantra.

If you’d like to discuss further how I can personally help your company, please use our contact page as I get the updates as soon as you submit it.

 

Here is some Lasik for retail e-procurement professionals in order to create better focus.

Wednesday, January 27th, 2021

 

I can see clearly now the rain has gone. I can see all obstacles in my way. The lyrics from the 1972 song by…. Johnny Nash titled I can see clearly now should be the mantra for enlightened e-procurement professionals.

Here’s and old post that continues to have merit with a link to another resource from FitSmallBusiness.com

Very often this author gets the question as to where to start in the e-procurement process. Too often I read that one needs to do a detailed discovery. The question is of what and how to get to the right place the quickest. So here is some Lasik for you that will help you see a little more clearly.

Using another idiom, and with renewed focus we hope to make it possible to see the forest for the trees by not focusing on excessive detail that is not needed yet.

There are four areas where you should begin your search for an e-procurement starting point and they are pretty simple.

1.Gross Sales
2.Cost of Goods Sold
3.Gross Margin
4.EBITDA.

This is really to say that if you take a look at your top line or Gross Sales and your bottom line or EBITDA and they are out of whack relative to your plan or industry averages you need to look at the above the gross margin line or Cost of Goods Sold or below the gross margin line which is expense related items for as an e-procurement focal point..

As such a couple of terms whose definitions you should be aware of are as follows.

According to two separate sources, Wikipedia and FitSmallBusiness.com Cost of Goods Sold or COGS is a financial accounting term which includes the direct costs attributable to the production or procurement of the goods sold by a company. This amount can include the materials cost used in creating the goods along with the direct labor costs used to produce them. It excludes indirect expenses such as distribution costs and sales force costs. COGS appear on the income statement and can be deducted from revenue to calculate a company’s gross margin.

Earnings Before Interest, Taxes, Depreciation and Amortization or EBITDA which is an approximate measure of a company’s operating cash flow based on data from the company’s income statement. EBITDA is calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization.

Based on the above a lot is determined by who built you annual plan and how realistic it was to begin with.

Tomorrow we will review what underperforming these measure means and how it should point you in the direction as to where to begin your e-procurement focus.

We look forward to and appreciate you comments.

On the Twelve Days of e-Procurement Christmas.

Tuesday, December 15th, 2020

 

Todays post is a holiday favorite by our CEO Ron Southard from our SafeSourcing Archives.

  1. On the first day of Christmas our e-procurement service provider gave to us, a streamlined procurement process.
  2. On the second day of Christmas our e-service provider gave to us, more suppliers to source our goods and services from.
  3. On the third day of Christmas our e-procurement service provider gave to us, pricing that works for smallest categories..
  4. On the fourth day of Christmas our e-procurement service provider gave to us, consistent and customized product specifications.
  5. On the fifth day of Christmas our e-procurement service supplier gave to us, more time for other priorities.
  6. On the sixth day of Christmas our e-procurement service provider gave to us, improved quality in our products and services.
  7. On the seventh day of Christmas our e-procurement service supplier gave to us, better supplier education.
  8. On the eighth day of Christmas our e-procurement service provider gave to us, a simple award of business process.
  9. On the ninth day of Christmas our e-procurement service provider gave to us, support for a better carbon footprint.
  10. On the tenth day of Christmas our e-procurement service supplier gave to us, total category e-procurement.
  11. On the eleventh day of Christmas our e-procurement service provider gave to us, safer products for our customers and planet.
  12. On the twelfth day of Christmas our e-procurement service provider gave to us, a sustainable e-procurement process and improved corporate net earnings.

Now, ask yourself if all of these goals are accomplished on your company’s behalf by your present e-procurement service provider. If n0t, please contact a SafeSourcing customer services account manager.

Continued best wishes for a very Merry Christmas  the rest of the 2020 Holiday Season.

Collaborative Buyer Organizations, Share Groups and Consortiums are evolving in order to compete with mega retailers.

Wednesday, October 28th, 2020

 

Todays post is from Ron Southard, CEO at SafeSourcing Inc.

These business structures have been around for a long time. Many have evolved to use cutting edge e-negotiation and eProcurement tools. Their retailer members are also benefiting from their use of these tools in order to reduce their net landed costs in many different ways.

These types of organization can go by many different names such as wholesaler, collective buyer, consortium, cooperative, share groups and more. They all have one thing in common. They consolidate purchasing volumes for a wide array of groups that may have very similar business structures, but for the savvy consortium can also be wildly different.

In the retail vertical, companies may actually belong to several different buying groups because their primary group does not offer expertise in a certain area.

Consortiums are also evolving and beginning to focus mixed markets where it makes sense. In general consortiums tend to be vertically focused such as a drug industry consortium with the members generally representing the drug industry only. However some consortiums are beginning to market them selves outside of their vertical to retailers or other companies who want to take advantage of learned expertise that the consortium possesses in the categories that are common across more than their own vertical and offer increased volumes. An example might be drug stores sourcing very similar products that health care organizations like hospitals source. Although this may seem like a stretch fro most, it is now very common within retail for non vertical specific players to work together.

Today’s advanced e-negotiation or e-procurement tools make it much easier to accomplish collective buying and aggregating outside of a consortiums initial area of expertise. Large and small retailers alike now have the capability of viewing a much broader universe of suppliers and other companies while also coordinating and participating in collaborative events from hundreds if not thousands of miles away. Suppliers now have an opportunity to earn business they could never compete for in the past.

Retailers should ask their collective buyers how they plan to make the use of these types of tools and what they have to offer in terms of introductions to other companies for increased volume.

If you’d like to learn more about our risk free trial or how SafeSourcing may be of service to you, please contact a SafeSourcing Customer Services Representative.

It really is a CRITICALLY GOOD time to look at your supplier contracts.

Thursday, August 20th, 2020

 

 

Todays post is from Ron Southard, CEO at SafeSourcing Inc.

It appears it would be counter intuitive for senior management to ask procurement professionals to explore all contracts in the current environment. There is so much uncertainty relative to the economy, COVID-19, and related internal and external adjustments as well as an upcoming election that may change how we look at everything.

With all of that said, public companies are going to have to continue to report earnings while they plan for an uncertain future. Small businesses while not having to report are equally as focused on keeping the doors open. While the numbers vary as they seem to with everything today, approximately 100,000 businesses have failed forever. Many more will over the next 6 -12 months. Depending on the source you use, nearly 17 million Americans are unemployed. So much to focus on, how to cope?

While the statistics are daunting, all these businesses were buying products and services from the supply chain. As such, it is not surprising that the supply chain companies have lost sales/revenue and are very eager to find new business. They are looking at their existing customers to lock in business, new verticals with similar characteristics to their existing customers to cannibalize from and their existing markets to offer unsolicited proposals at great initial pricing. I am sure there is not a senior leader that has not been told of unsolicited offers for current expense categories at drastic improvements in pricing. So, the market is ripe, but it will not stay that way forever. And here is a caution; Do not accept those initial offers. There is still better pricing available.

At SafeSourcing, we have not laid off anyone since the 1st of the year and have dramatically reduced our expenses on everything. One example is our phone service where we reduced costs by 45.3%. Another is our insurance policies where we reduced costs by 13%. There are many others with significant savings as well.

I have often used the following as a tongue in cheek response to the question I have heard thousands of times. Why should we focus on expense reduction with SafeSourcing? My response is, do you have a dollar bill? Even in todays world most folks do. I ask the questioner to take it out of their purse or wallet while I am taking a $10 bill out of mine. I offer to trade one for one. While many already see my point, no one has ever turned down the exchange. A 10X return? Why would you not do it. Both bills are the same size, color, and government backed. It is the same specification right? So, an easy decision. I then add that when you use SafeSourcing, our ROI is quite often much higher. Your time commitment is minimal, and you receive and equal or better specification or service or both at a lower price! So, Why Not?

The times are hard, headcount may be down, and you have so much to focus on! Let SafeSourcing help you reduce your costs on everything from capital, costs of sales/goods and expense. Your numbers will look better now and in the future and you will not have to use headcount as your best cost management tool. Our average customer savings over the last 18 months are in excess of 24%. Yours could be too!

For more information on how SafeSourcing can assist you in exploring your procurement solutions 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.

 

 

 

 

During a Pandemic like COVID-19, Is there benefit to a large retail supplier database?

Tuesday, August 4th, 2020

 

Todays simple post is from Ron Southard, CEO at SafeSourcing Inc

Maybe you’re looking for KN95 face masks, gloves or other medical safety equipment. Do you know all of the off shore suppliers and how to contact them? We do!

Maybe your current supplier can’t handle your volume any more because of the Pandemic! Where do you look.

Once you are armed with a robust Global Supplier Database such as  SafeSourcing’s  SafeSourceIt™ Global Supplier Database  and it’s easy to use query tool.

If you need assistance, just contact us at 1-888-261-9070 or  marketing@safesourcing.com.

We’re here to help!

Are You Still Printing And Filing Documents in Filing Cabinets?

Wednesday, July 22nd, 2020

 

Today’s post is from our archives at  SafeSourcing Inc

paperstacks

 

 

 

 

 

 

 

 

I suppose I am “old school” to have paper in hand and make my edits in red pen, then make my revisions to the electronic document, and save those edits in our document management system. Now I have a hard copy in a filing cabinet that, more than likely, no one will ever see and eventually be shredded.

We are a Green company, and I am becoming more cognizant of that by limiting what I print, and save more trees. By utilizing the document management system, the original drafts, as well as all of the edited copies are saved, anyone from our company, at any point and time, can visit those documents and follow the train of thought from beginning to end. It saves time and paper to have those documents accessible.

From our website: www.safesourcing.com

SafeDocument™

SafeDocument™ is a document repository that allows companies to collaborate on documents through an online tool that is a cloud-based SaaS offering available through simple internet access. This tool Provides document sharing and collaboration options where users can organize, edit, protect, and track their documents.

SafeDocument™ includes safety features and controls that enable users to safely share large files across their organization, including the ability to save and recall multiple versions of a document and a notification system that alerts users when changes to the document have occurred.

Implementing SafeDocument™ provides companies with a cost-effective alternative to enterprise content management solutions that is safe and easy to use.

To learn more about SafeDocument™ SafeSourcing can assist you in exploring your document management procedures 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.

 

Sourcing with RFIs, RFPs, RFQs and Surveys – Part 5 of 5

Friday, July 10th, 2020

 

 

Today’s post is from our archives at SafeSourcing Inc.

This past week we have covered a lot of ground in defining the different methods of gathering internal and external details needed to help make important procurement decisions.  Today we will wrap the discussion up by tying those processes into the final piece of the puzzle of gathering competitive pricing.

The Request For Quote, RFQ, process is usually one of, if not the last process, that occurs before a company begins contract negotiations with a vendor.  It can take many forms from online bid submission, to blind paper bids to more recent technology eRFQ process referred to as a “Reverse Auction”.  The goal of this phase no matter how the information is collected is the same; procure the most competitive prices on a specific spend so that a contract can be negotiated and finalized.

Many times the RFP process will double as an RFQ where the details about a company and their capability to deliver the items or services you need are combined with a collection of specific pricing information as it relates to the project.  When this occurs vendors are encouraged to submit their best pricing but that pricing alone will not determine the award of business and will not be their best price!

Even if the RFQ portion is included in the RFP, many companies will take a handful of vendors or a “short list” and allow them the opportunity to be more competitive in their pricing ( which is why, when you ask for best and final it never is), especially when vendors are so similar in what they are offering in every other way.  This gives vendors the opportunity to differentiate themselves in the process in a way they may not be able to do in the way of experience or in the goods they are bidding on alone.

RFQs can often be run with no additional information gathering at all.  For instance if you have purchased 100,000 plastic bags for the past 25 years, you know the breakdown goes to these 4 locations and you have all the specifications defined, it is appropriate and even beneficial for savings to go straight into an RFQ.  This event allows companies to stand out in an area they have control over in order to get your business.  In this case, going straight to an RFQ makes perfect sense and in order to begin realizing those prices as quickly as possible it should be the move every company proceeds with.

The other nice thing about RFQs is that they can provide a small channel to gather information from the vendors that would help clarify any other value they might be able to offer.  This is useful for situations where price is the most important criteria but you want to provide the possibility that vendors may be able to give you additional services or terms that would allow them to distinguish themselves in ways they may not be able to do in price alone.

At the end of an RFQ you will have details about the suppliers and their capabilities either from historical spends or through an RFI/RFP process and you will have all of their pricing needed to make a decision as to who the best supplier for your company will be, taking you to the “endpoint” of the process which is contract negotiation and finalization.

During this 5 part post, we have covered several different processes in procuring products or services, but it all boils down to this: you have a beginning point which is the need for something and you have the end point which is the signed contract defining how that need will be fulfilled.  In between is the place where the type of information you have and the type of information you need must be evaluated so that the journey from beginning to end is as smooth and organized for your company as possible.

For more information on SafeSourcing and how we can assist your company with sourcing these goods and services, please contact a Customer Service Representative for more information.

We hope you have enjoyed this week’s series and look forward to and appreciate your comments.