Archive for the ‘E-procurement Tools’ Category

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

Thursday, March 29th, 2018

 

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

From a simplistic perspective an index is a system used to make finding 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.

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You can’t just implement another companies SOP when you begin to use e-procurement tools.

Friday, March 2nd, 2018

 

This is an oldie but goodie from our Archives. It’s still pretty true today.

All companies like to throw around the term best practices. Who’s best practice is the question that companies should ask as well as who says these are the best practices. Successful learning organizations don’t just throw the baby out with the bath water when they begin to use new tools. There are procedures your company has followed for years, many of which are necessary and other that need to evolve. There are procedures that your new e-procurement solutions providers support and have used successfully with other companies that may make sense. An integration of these practices that work will become your new Standard Operating Procedures (SOP) as applies to your implementation of e-procurement within your organization.

A Standard Operating Procedure (SOP) is an established process or group of processes that an organization carry’s out in a given situation on a routine basis. These procedures tend to be very specific to the business functional area being impacted.

So, how would you go about implementing e-procurement tools SOP into your organization? Begin by asking your solutions provider and if you don’t get a simple straight forward answer call SafeSourcing.

Don’t throw the baby out with the bathwater.

We look forward to and appreciate your comments.

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

Friday, January 12th, 2018

 

Todays post is a oldie but goody by Ronald D. Southard, CEO at SafeSourcing

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 industry reports we are also safe using a shrink number of 3% of top line revenue.

This author is aware that there area 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.

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What exactly is spend analysis? And at what cost?

Monday, January 8th, 2018

 

For as many simple yes answers that I get, I can also give you a handful of tools that do a lot of analysis and at the end of the day that is what you have. Simply put, spend analysis is designed to provide companies detailed information about the entire companies purchasing data. The cost to get at that data is astronomical.

At the surface this seems to be pretty simple. In fact it is anything but. If we just look at the retail space, spend analysis relies on data from a number of disparate systems. Most retail organizations to this day do not have a single source of information or an enterprise data warehouse where data is available in one location for use by many applications. In mid tier retailers this is almost universal.

In fact in many retail organizations the following systems would require access in order to gain all spend data necessary for analysis by advanced real time analytics and workflow management systems.

  1. Retail ERPS Systems
  2. Retail Planning Systems
  3. Merchandise Management Systems
  4. Supply Chain Management and Execution Systems
  5. Store Operation Systems
  6. Corporate Administration systems
  7. Many New Advanced Analytic Tools and Systems
  8. Spend Cubes

Certainly, if access to this data is available benefits such as instant access to information and better decision making are certain benefits that can be derived from these types of solutions.

The question for most however is how much time is required to conduct this integration. Would retailers be required to create another data repository and is a data mart of this sort really required to drive savings to the bottom line the shortest amount of time?

For many organizations, there are e-negotiation solution providers that offer these same analytics in the form of a professional service that is embedded in their event pricing. This may result in a more expeditious time to market and savings that can impact the organizations bottom line in the present reporting period.

All solutions do not fit all industries and there are generally alternatives worth exploring that may fit your needs more closely at a more economical price point.

We appreciate and look forward to your comments

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On the Twelve Days of e-Procurement Christmas.

Wednesday, December 13th, 2017

 

Todays post is a holiday favorite by our CEO 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 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.
  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. Click CONTACT US!

We look forward to and appreciate your comments.

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

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So, you’re not using e-Procurement tools because of your team’s objections

Wednesday, November 8th, 2017

 

The following are the objections we hear all of the time after we have presented to a prospect that has not been exposed to e-procurement tools in the past.

1. I already get the best cost.
2. We’ve done business with this supplier for years.
3. I don’t have product specifications.
4. I don’t have time for this.
5. Switching costs will be too high.
6. I can’t insure the same quality.
7. We need to adhere to certain standards.

Now please review the dozen benefits below and realize that while you are trying to answer these objections that your competition is reducing their cost by as much as 20% across the board.

1. They would continue to source high quality products.
2. They would continue to have great supplier relationships.
3. They would free up time to do other tasks.
4. They would improve their company’s net earnings by up to 100%.
5. They would support our fragile environment.
6. They would support global food and product safety initiatives.
7. They would have a larger audience of piers to converse with daily.
8. They would have a single source of information about their profession.
9. They would be instantly alerted to product recalls.
10. They would support a traceable supply chain.
11. They would have an endless source of new suppliers to review easily.
12. They would have product specifications at their finger tips.

There are any number of additional benefits to retailers and other companies when using Strategic Sourcing tools such as reverse auctions, online RFI’s and RFP’s. Not the least of which is that if a retailer were seriously to assign just twenty percent of their above the gross margin line spend to these types of tools, they could increase their net earnings by up to 100%.

We look forward to and appreciate your comments.

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Enterprise Software RFPs

Friday, August 4th, 2017

 

Todays post is from Ron Southard, CEO at SafeSourcing

We’ve discussed the differences between the RFPs, RFIs, RFQs, and Surveys many time and also touched on why they were different as well as when you would use one.  What we said then was that you typically want to run one of these events when you have an idea about the basic functionality of a product you need but are not sure who can provide it and what else it is they can bring that you didn’t think of.

In many cases, the road to procuring enterprise software will require one of these tools due, in part, to the fact that software can change so quickly, but also because typical decision factors like price play a much smaller role to the features and functionality of the software.

In preparing to make a major software purchase a Request for Information or Proposal can be a great first step.  Here are some things to keep in mind about the solution and the company when preparing for one.

Flexibility – One of the keys in the process of evaluating software solutions and the companies that create them is to gather information about the flexibility of the product.  A focus on how configurable the system is and how well a solution can be fitted with your company’s needs and appearance is an important part to building a good software RFP/RFI.

Reputation – A company’s reputation for delivery used to go a long way in the business world but in the wake of a tougher economy price has begun to gain ground.  In the arena of software, it is still one of the most important factors to evaluate when selecting a software partner.  Building a relationship with companies known for under promising and over delivering on a consistent and referenceable level can be a huge factor in protecting a million dollar investment.

Pricing model – The key here is not in the actual price but how the company prices that is important.  Your company’s needs will dictate the pricing model that benefits your company whether for the enterprise; per seat or per user.  How a software provider prices and what they charge you for are HUGE factors in determining if they are suited for you and your company. The more information you can gather at the RFP/RFI stage as possible is very important.

Support – There is no more important product to verify good support on than software.  As upgrades occur, employees get promoted or leave the company, new employees need training, or issues arise, the level of support a company will commit to is critical to the confidence you can place in them.  On top of this, the more mission critical the functionality the software is to support is for your company, the more important the level of support becomes.  Any software RFP/RFI you create should have a detailed section to determine what level of support you can expect from each vendor.

For more information on SafeSourcing and how we can provide RFIs/RFPs that help you focus on these important factors, please contact a SafeSourcing Customer Service Representative.

We look forward to your comments.

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Could You Get More Procurement Savings?

Wednesday, May 17th, 2017

 

 Today’s post is by Dave Wenig, Director of Sales, North America at SafeSourcing.

Many of the organizations we speak with believe they handle their purchasing reasonably well, either with their existing internal processes or without any eProcurement tools at all. These companies may even realize savings as they negotiate with their vendors. That’s said; very few of these organizations are doing as well as they should, given the wide availability of eProcurement solutions and/or the ease of use available with full-service SaaS options.

Here are my top 5 signs that your organization is not maximizing the savings potential by using only a traditional procurement process.

  1. You only seek quotes from 2-3 vendors.Historically, our data suggests that having 6-8 suppliers quoting drives the highest possible savings.
  2. You haven’t competitively bid a category in the last 3 years.It is at this point that we find a category should be sourced, including non-incumbent vendors,to ensure you are still receiving the best market prices.
  3. You don’t have easy access to your existing contracts.If you don’t already, you should implement a contract management tool. Too often, we see organizations unsure of contract terms and key dates falling victim to unfavorable auto-renewals.
  4. You do not have a set of specifications for the category.This is both common and fixable and places the incumbent vendor in a place of perpetual power in negotiations.
  5. You’re not using eProcurement.As well as your organization does when negotiating, we see significant increases in savings, often 10-20% more, when our clients use their eProcurement tools effectively. One client recently admitted that they would never have asked for the prices or discounts that we deliver for them. Each of the four preceding signs is also an indicator that you’re not using eProcurement. In fact, by implementing a strategic eProcurement program, you’ll likely resolve one through four organically.

Do you see any of these signs in your organization? If so, take steps to correct and you’ll see immediate, measurable results.  For more information, please contact SafeSourcing.

We look forward to your comments.

 

 

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Retail Contract Leakage. Where does it come from and how can we stop it?

Thursday, February 9th, 2017

 

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

How does your organization  now ensure that the award of business is implemented or delivered as awarded so that you indeed receive all of your savings?

This is probably the most difficult part of the entire procurement lifecycle. The first part is to understand your data and where it is kept, that includes understanding what constitutes contract leakage so that you know what you are looking at. Once you have the data needs to be looked at on a regular basis in order to insure leakage is not occurring. This should be at least monthly depending on contract language. Most contract management systems have alerts that can be triggered as frequently as required.

The following list although not all inclusive speaks too many of areas in which contract leakage can occur. This happens in all companies large and small. If you are aware of them, capture them and report on them there is a good possibility of controlling them.

1. Buying without a contract.

2. Expensing something outside of a contract

3. Having multiple contracts in place:

4. Executing a new agreement when one is already in place

5. Paying a price different from the contract

6. Delivery variances

7. Quality specifications variances

8. Making payments at a prices different from the contract

9. Scope creep

10. Invoice discrepancies

11. Missed volume discounts

12. Insurance discrepancies

13. Shipping discrepancies

14. Expired contracts resulting in price uplift

15. Evergreening

16. Overtime Violations

17. Material discrepancies

18. Sub Contractor discrepancies

Don’t  have your team work hard to drive benefits with your procurement solutions and then lose much of what you have gained to contract leakage. Ask your e-procurement solutions provider how they can help or save yourself a lot of time or please contact a SafeSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

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Enjoying the Benefits of eProcurement

Wednesday, November 30th, 2016

 

Today’s post is by Dave Wenig, Regional Sales Manager at SafeSourcing.

First, the good news. You’ve successfully completed an eProcurement event and you have a very significant opportunity to realize the savings generated by that effort.

The question many ask at this point is; now what do I do?

  1.  Review the results in detail: Following a successful eProcurement Request for Quote (RFQ) event, you should take the time to fully review the results of the RFQ. Of course, you’ll want to take a close look at the pricing entered during the process, but there is much more involved. You will also review any notes that the participating suppliers entered to accompany their quotes. Perhaps you’re also interested in understanding how and when suppliers entered their quotes. What was the activity level and what can you learn from the bid activity? As a result of any SafeSourceIt™ RFQ, you’ll have all of this information and more at your fingertips.
  2. Lean on your partner: Often, even after reviewing the results, the best path might still be unclear. For example, perhaps you now have several potential suppliers who could meet your needs and are offering their products at roughly the same price. How do you choose between them? One way to make this decision easier is to confer with your eProcurement partner. While they may not be in the position to make the award decision for you, they might have insight as to what other factors you might take into consideration. Is this a category for which samples are commonly tested? What recommendations does your partner have relative to that sampling process? Did any vendor go above and beyond and offer up additional benefits such as more favorable payment terms or a rebate program? Your partner has experience reviewing the results of an RFQ. Ask their advice.
  3. Keep negotiating: The RFQ is not the end of the negotiations, it’s just another step. At the conclusion of an RFQ, you may deem a supplier to be the best overall value, even if that supplier is not the lowest cost provider. Internal pressures to reduce costs might make awarding to the supplier with the higher cost difficult. In this stage of your review, it may be appropriate to negotiate for further cost alignment with this supplier to achieve a final agreement that is beneficial to both buyer and seller.
  4. Make your decision: Stay with incumbent or try something new? Change is difficult. You may have had a long relationship with your incumbent supplier which had been perceived as a good working relationship. Over time, that supplier may have taken on duties that are outside of the scope of your agreements. Ultimately, as you review the results of your RFQ, this choice will be yours to make. You’ll consider the value of the long term relationship and the value of the known entity against the potential represented by an eager new supplier. Weighing heavily on that decision will be the potential savings. If the new supplier’s cost is 5, 10, or 15% lower than the cost of your incumbent, you’ll have to consider the monetary value you would associate with being able to maintain your current source of supply.

Dave Wenig is a North American Director of Sales at SafeSourcing. Dave or any member of the experienced team at SafeSourcing would be happy to discuss how SafeSourcing can help you attain and quickly realize savings. For more information, please contact SafeSourcing.

We look forward to your comments.

 

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