Archive for the ‘E-procurement Solutions’ Category

Shrinkflation?

Wednesday, June 15th, 2022

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc.

In a recent post titled “How are you dealing with your overstock issues” Where I discussed using eprocuremnt tools to help reduce retail shrink. Then today I opened the paper and there it was Shrinkflation. Which is the Reduction in the size or weight of retail products, especially items of packaged food, with no corresponding reduction in the retail price. This improves financial results for the company with the expense born by the consumer who end up getting less for more.

In economics, shrinkflation is the practice of reducing the size or quantity of a product while the price of the product remains the same or slightly increases. In some cases, the term may indicate lowering the quality of a product or its ingredients while the price remains the same.

When I was studying Psychology in college out professor brought up the term Just Noticeable Difference or (JND). He asked us if anyone though that candy bars were getting smaller year over year. We all know the answer to that question, particularly if you ever trick or treated or now take your kids trick or treating. Those darn candy bars keep shrinking. So just what is a Just Noticeable Difference

According to Helensinblog on WordPress, Just Noticeable Difference, also known as the difference threshold, is the minimum level of stimulation that a person can detect 50-percent of the time.

For our senses, there is a measure called an absolute threshold. The absolute threshold shows that we can hardly see the difference in stimulus and are able to perceive its ability, and the difference threshold is that we cannot notice the difference, better known as the” Just-noticeable difference” (JND). For example, if you hold a bag of 100 pounds of oranges, plus a pound will not be noticed. But if you hold 5 pounds, then you add a pound, you will notice.

SafeSourcing is an eprocurement company that operates across multiple industries. As such we have specific experience in helping our customers source their products through a variety of tools. One of those is our SafeSourceIt™ Templates Library. Here we house thousands of specifications that have evolved over the years as products have changed. Having the proper specification is key to sourcing the correct products at both the manufacturing and the retail level. Take care of your customers the way they deserve to be. Don’t sell them less for more, they are already hurting enough.

To learn more, please contact a SafeSourcing customer services associate.

References: shrinkflation meaning – Search (bing.com)

Just-noticeable difference (JND) – Consumer Behaviour (wordpress.com)

E-Procurement

Tuesday, May 24th, 2022

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc.

How does your procurement department define E-Procurement today?

The following is a generally good definition of E-Procurement. However, complete SaaS offered end to end solutions have continued to evolve over the years. Often solutions today are used across multiple solution providers as they can be turned on and turned off and integrated in a truly brief period.

eProcurement is a business to business exchange of goods or services facilitated by the internet. A complete set of e-procurement tools can include products for management of correspondence, bids, questions and answers, previous pricing, contracts and email. Although many Enterprise Resource Planning suites offere-procurementsolutions, the current generation of software is typically purchased on-demand or as software-as-a-service (SaaS). Elements of e-procurement can include request for information (RFI)request for proposal (RFP), and request for quotation (RFQ), which together are categorized as “RFX”.

If you’d like to learn more about SafeSourcing’s additional E-Procurement solutions that are part of our SaaS offered esourcing suite like SafeContract™, SafePO™, SafeContract™ and the SafeSourceIt™ Supplier Database please contact a SafeSourcing customer services associate.

What is a Request for Quote (RFQ)?

Tuesday, May 3rd, 2022

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc.

Although this process can be defined with relative simplicity, it is anything but!

What is A Request for Quote (RFQ) is a document that a business submits to one or more potential suppliers in order to receive quotes for a product or service. Generally, an RFQ seeks an itemized list of prices for products or services that is well-defined, such as hardware. Another type of document is called a Request for Proposals (RFP), which is customarily used when the requesting business’s requirements are more complex, or a Request for Information (RFI), which collects written information about supplies or services.

SafeSourcing offers a suite of eRFX tools under its SafeSourceIt™ Family of Products including RFI’s, RFP’s and RFQ’s. Often to achieve the best net landed cost, all three may be required to source certain categories. These tools are supported by our white glove proven seven step process that delivers on average savings of 24% below what you may be able to achieve on your own.

If you like to learn more about how we can reduce your costs, please contact a SafeSourcing customer services associate.

 

Procurement is based on Data Part II

Thursday, March 31st, 2022

 

Today’s post id by Ronald D. Southard, CEO at SafeSourcing Inc.

I asked you to Check back today to learn more about the types of data I discussed in the whitepaper.

The following is second excerpt from my White Paper Titled Re-Imagining Procurement where I will discuss my view of the types and availability of the data that you have to work with. In doing so, please remember the old saying of “Garbage in Garbage out”. Oh, that it was not still true today!

For our purposes I like to place this data as the following Three Pillars:

  1. Pillar One – Your Data: This is the data that your company has available that can be accessed and used in the procurement process. Where is it and who controls it?
  2. Pillar Two – Our Data: This is your e-Procurement provider’s data such as specifications, templates, and historical category data. I call this our data because SafeSourcing is a Cloud based SaaS provided Procure to Pay SafeSourceIt™ family of solutions. See a summary below.
  3. Pillar Three – Their Data: This is the Suppliers or Vendors Data. This will include all data associated with getting the best possible product or service at the best possible price, at the exact location, and at the exact time it is needed.

The first question that should come to mind is where this data comes from both internally and externally. The answer is that it depends. It depends on how sophisticated your internal business solutions and processes are and the level of drill down (meta data) that is available in your business systems and how well they interact or are linked for a corporate view.

  1. Here is an example: Company A has a purchase order system that has all the attributes required to provide a clear historical view of what has been purchased. The CPO asks a procurement professional to get a copy of the P.O. for a particular product or service that has been purchased. The requested P.O. arrives and has one line on the entire document that reads per the attached purchase and sales order (a vendor document). Come on, admit it. This has happened to you more than once and it will continue to. So now what? Get a copy of the order from the vendor? Cool idea. When it arrives, the pricing is different, so what now. Let us review the contract. Who has the original signed copy? Get my drift?

SafeSourcing is a data rich company built to support procurement professionals. Included on our website are several million words in the form of white papers, a sourcing wiki, a specifications library, a daily blog focused on procurement and a supplier database including a query tool that allows you to search global sources of supply. There are many more tools and data sets that are here to make your life easier.

If you’d like to discuss the use of our data or have us review yours, please contact a SafeSourcing customer services associate, please click here.

The importance of RFx in the Procurement Process – Part I of II

Wednesday, March 2nd, 2022

 

As businesses continue to use reverse auction tools more frequently to reduce their costs and introduce competitive pricing from existing and new suppliers, it is inevitable that the events will also begin to increase in complexity.  With complexity comes the need to understand the offerings of the invited companies before price is ever brought up.  You need to know that the companies you may be dealing with have experience and can handle your business.

To ensure that the right companies are involved in competing for your business many times it is necessary to run a Request for Proposal or Information (RFP or RFI) to gather information about the suppliers before a pricing event is run.  Some of the important things to keep in mind when doing this are:

• Be Specific! – Make sure the RFP/RFI is specific about the types of information requested.  Leaving the document open-ended will result in several completely different responses that will be difficult to compare to each other.

• It’s ok to run an RFx for something you have already purchased.  Many times, especially in technical product purchasing, the landscape can change so fast from contract to contract that running an RFx is not only a possibly but is probably the wisest thing to do especially if the spend is large and/or the contract is longer than a year.

There will be more tips in my next post but if you would like more information about the SafeSourcing Rfx tools and professional services, please contact a Customer Service Representative today.

We look forward to and appreciate your comments.

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

Wednesday, January 26th, 2022

 

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.

 

Where is the best place for retailers to spend their effort to improve profitability?

Tuesday, January 11th, 2022

 

Today’s post is an oldie but goody by Ronald D. Southard, CEO at SafeSourcing

The answer to this posts byline is of course all three!

Obviously, all retail companies would like to focus on all three areas and there are even sub sections of these top line areas that we could spell out as needing attention. The challenge is where to deploy already taxed resources?

It does not require an accountant to figure this out. If we assume that COGS or cost of goods and services is about 75% of top line revenue that would result in a simple gross margin of 25%. Based on a number of industries reports we are also safe using a shrink number of 3% of top line revenue.

This author is aware that there are a a few companies with shrink below 1% and cost of goods below 75% which means there are also companies with gross margin better than 25%. The obvious question is are these companies that solution providers want to target for profit improvement sales? Probably not.

So, let’s look at an example of shrink improvement with data analysis tools and process improvement tools versus cost compression with SaaS e-procurement tools. Let’s assume we have a company that does top line sales of $1B. Using a shrink number of 3% shrink would be $30M annually. If you were able to reduce shrink by a third in one year, profit improvement would be $10M. If this were a supermarket company with a 1% bottom line or $10M, improvement could be as much as 100%.

Now let’s take a look at reduction in cost. If we assume the same company has COGS of 75% or $750M and that we were only going to address 20% of that number or $150 and only reduce those costs by 20% which is slightly above industry averages the net profit improvement would be $30M or 300% improvement in year over year net profit. If we were only able to achieve 10% savings which is well below industry averages, net profit would improve by 150%.

I’ll leave the gross margin example for you to figure out. In the above case it is clear that attacking COGS has an impact on the bottom line of up to 3 to 1 versus addressing shrink with your already taxed resources.

If you are interested in an immediate impact to your bottom line, please contact a SafeSourcing Customer Services associate today.

We look forward to and appreciate your comments.

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

Wednesday, January 5th, 2022

 

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.

On the Twelve Days of e-Procurement Christmas.

Tuesday, December 14th, 2021

 

It is actually twelve days until Christmas and today’s 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 2021 Holiday Season.

As Services Expand So Do Sourcing Needs

Wednesday, October 27th, 2021

Todays post is from our SafeSourcing Archives!

In today’s increasingly competitive landscape, retailers are getting more and more creative with the types of services they are offering their clients to get them into the stores. Dine-in space that offers music, internet access or scheduled events such as wine-tasting are becoming more popular every year as retailers compete for the customer’s time, attention and money.

With so many of these services being implemented quickly and by the individual stores, at least initially, the opportunity to consolidate and organize the entire spend for the company presents a very big and potentially profitable opportunity.

One growing service retailers are offering is in-store internet access. Customer internet is a service that can easily be sourced for the entire company either through one national vendor, or a handful of regional vendors. Leveraging the purchasing power of all of the company’s locations for internet services can be a highly successful process as there are so many more providers today than there were even 5 years ago.

The music played in these new areas is also another service that can be sourced as there are many suppliers that can either supply music that can be played and sold at the point of purchase creating yet another new revenue stream or that provide internet streamed music complete with customized marketing messaging in between songs.

Another way for retailers to successfully reduce their spends by purchasing for the whole company is with the supplies being used for their coffee or dining services. In many cases these new areas are not treated as their own profit centers and the materials needed to run them are purchased on a store by store, as needed basis. Napkins, utensils, cups, condiments as well as all of the ingredients that go into the finished product are examples of items that could be taken to the vendor community for more competitive pricing.

So many of these new ideas for bringing customers are highly affective and are difference makers for someone shopping at one location over another and by bringing the services and products they offer under solid sourcing practices they can also be highly profitable new channels of revenue for the company.

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 look forward to and appreciate your comments.