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So how does one define a complex e-negotiation event? On the surface it may be an event with a large number of line items within a particular product set such as MRO or Fleet Maintenance in the distribution space or raw materials used to manufacture components that require special handling, shipping and standards adherence. The amounts of the total spend for an event really has nothing to do with the complexity of the event. The complexity is determined by the data points requiring management in order to drive the best possible value to the buyer and the supplier.

This author would suggest that any event including multiple market baskets, thousands  of  SKU’s all with different specifications, order quantities, delivery locations, multiple suppliers not bidding on each line item, a split award of business and the size of the spend qualifies as a complex event. Adding to the complexity may be the overall strategy required when sourcing the right mix of suppliers to compress pricing properly and drive early and consistent bid activity. This can be further complicated by trying to determine the correct decile based sourcing strategies for the event and including product affinities where they make sense.

The above example would qualify as organized complexity where there is a non-random, or correlated, interaction between most of the parts. In order to support  complex events, your e-procurement provider needs to have an understanding of the specific market place and practices and processes in place that allow them to drive these activities and bring complex events to market  in the shortest period of time. Generally this should occur within less than two or three weeks from event notification to event completion.

Last year, this author tried to define the relative complexity of the retail environment and its potential impact on the use of e-procurement tools. Specifically we identified the following areas of interlocking complexity.

1. Supply Chain complexity.
2. Rate of change in the global supply chain.
3. Long term inherited supplier relationships.
4. Lack of retail procurement staff.
5. Lack of time.
6. Multiple sources of supply.
7. Limited view of new sources of supply.
8. Confusion as to who’s the customer and who’s the supplier
9. Sales People
10. Third Party Providers
11. Collaboration complexity.

Being comfortable that your solution provider understands your market place and has a well defined process for hosting Complex e-negotiation events insures that they are not difficult to host.

We appreciate and look forward to your comments.

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If you’re a business owner, large or small, CEO, CFO, or President of a company you should be asking yourself if your company can benefit from procurement services.  Depending on the size of the organization you may or may not be familiar with all the goods and services that your company is purchasing.  This is where procurement services can come into play! 

According to Wikipedia procurement is “the acquisition of good and/or services.  It is favorable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchases in terms of quality and quantity, time and location.”

This sourcing professional believes that if a company were to review at least 10% of their annual spend, they would find many opportunities to improve the bottom line.  Below you will see a few of the times that would be most beneficial to take advantage of procurement services.

1. 1.Reviewing/Resigning a current contract with an incumbent supplier.  –   If you’ve been with the same supplier for the length of multiple   contracts, it’s time to re-evaluate.  You may not be interested in switching vendors, but by taking advantage of procurement tools you will be able to negotiate a better rate for the goods and services that you’re purchasing.
2. When you start a new task/department within your business. – Every time your business grows or expands is an opportunity to take advantage of procurement tools.  Even if the goods and services that you’ll need to operate this new department are things you’re currently using, the quantity of these items would be a great opportunity to evaluate how much you’re spending to have the goods and services you’re using on a regular basis.
3. When you are analyzing you upcoming budget – Each year when your company monitors your profit margin and areas within your budget that cause you concern is a great time to evaluate what procurement services would be beneficial for you.  For example, you may find areas of your business that are critical for your end product or service, but you feel that you are spending too large of a percent of your budget to produce such results. 

Just think of all the different areas you bottom line is affected by.  Each of these is an area for potential savings thru the use of procurement tools.  By partnering with a procurement professional, you’ll be able to evaluate more than a few areas of your business where you can start saving for your next purchase or contract for your goods and services.

For more information on SafeSourcing and how we can help you evaluate your savings opportunities, please contact a Customer Service representative.

We look forward to and appreciate your comments.

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All Retail industry leaders know for a fact that e-procurement improvements can directly improve their bottom line as well as positively impact shareholder and stakeholder equity. In many cases in upper tier companies significant strides have been made to this end.

In  mid tier markets, it’s an  unfortunate circumstance that  procurement departments or purchasing as it had traditionally been known has not evolved significantly beyond its traditional functionality in many cases. Many mid tier companies will introduce you to their category managers. However, it very quickly becomes clear that although many have strong backgrounds as product buyers; very few have been exposed to the most current e-procurement tools available today. This is in no way the fault of the purchasing department or of the retailer. Reduced staff counts and the aforementioned lack of attention from software and consulting providers as well as a lack of near by formal e-procurement training programs combine to make the transition to e-procurement tools difficult.

What can retailers in the mid tier markets do? The answer may be working with boutique software houses that have no where near the overhead of the largest companies in this space. The largest well known companies in the e-procurement space may dominate your web based searches because they can afford to pay for large numbers of key words used in web searches. It may actually pay to drill down a few pages beyond your original search to find companies that have unique e-procurement software offerings that are often developed by highly skilled entrepreneurs that know the retail procurement business and can offer e-procurement solutions for a fraction of the cost associated with the better known legacy providers. The risks associated with this approach are minimal as most offers in the e-procurement space are offered as a hosted service today. All that is required on the retailer’s part is internet access. You might even get treated more like a customer to boot.

We look forward to your comments.

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This 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 a popular new method which many people refer 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.

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.
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, 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 on who the best supplier for your company will be, taking you to the “endpoint” of the process which is contract negotiation.

In the past five days 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.

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For the past 3 days we have been focusing on the gathering of external information in order to make the proper procurement decisions.  Today we will be looking into when it is necessary to gather internal information before reaching out to the suppliers even happens.

Looking back at Monday’s blog there were some basic questions that need to be asked before every sourcing project. 

• Do you know who you vendors are for a specific item or service across your company and do you know how much you spend with each? 
• Do you have current contract or agreement details?
• Are your divisions, regions or offices pleased with the quality of product and service they get currently?
• Are there other companies out there that parts of your business would like to include but don’t currently today?

The answers to these questions will dictate whether or not you know enough about the sourcing project you are about to begin to proceed with a Request For Information/Proposal.  Before any communication goes to the external supplier community it is critical to have an understanding of what your company is doing today and where the potential holes are in the procurement processes for these goods or services.

Proceeding with an internal survey involves a number of factors to consider.

• What tool will I use to collect the information from the company and does that tool allow for submission of the survey without requiring login information?
• Who will handle the survey process including the initial communication, gathering and return of the collection of responses? (Many times your 3rd party sourcing partner will provide this service for you)
• Who do I want to collect information from?  (Many times this will be dependent on how your company is divided, ie Districts, States, Divisions, Territories)
• What information do I need to collect in order to move forward intelligently with an RFI/RFP?

The keys to internal surveys are to make them as succinct as possible and to make sure you include everyone you need input from.  The first way to derail a sourcing project is to find out 2 weeks into it that someone’s input was not collected and sends the project back to the beginning.

Another very important key for internal surveys is to attach a manageable but small window for answering.  More often than not, the more time you provide respondents to answer the worse your response rate is and the more delays you introduce.  Tight timeframes usually lead to respondents taking the time right then to answer as soon as they get the invitation to participate.

In the end the goal of the internal survey is to have the information needed to begin speaking with suppliers.  To refer back to a phrase used in Monday’s blog, internal surveys are conducted in order to “know what you don’t know.”

Tomorrow we will wrap up this series by discussing how all of this information ties into the formal detailed price gathering or Request For Quote.

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.

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