Archive for the ‘E-procurement Tools’ Category

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

Monday, February 22nd, 2021

 

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.

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.

 

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.

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.

Sourcing with RFIs, RFPs, RFQs and Surveys – Part 4 of 5

Thursday, July 9th, 2020

 

 

Today’s post is from our archives at  SafeSourcing.

During the last week 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 our previous posts in Part I, Part II  and Part III there were some basic questions that needed 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.

Sourcing with RFIs, RFPs, RFQs and Surveys – Part 3 of 5

Tuesday, July 7th, 2020

 

Today’s post is our archives at  SafeSourcing

Thursday July 2nd’s post began to uncover the search for information needed to make important sourcing decisions by highlighting the Request For Information (RFI) process.  Today we take a look at the Request For Proposal (RFP) process, how it compares to an RFI and when you need one.  Let’s begin by looking at how the two processes are different.

Project details – Typically you will not have all of the details necessary to provide the suppliers on what it is you are going to do in an RFI.  With an RFP it is necessary to have those details and be able to effectively communicate to the suppliers what the sourcing project is going to look like, complete with the quality and amount of product or service you need and if necessary to what regions of the country/world this project applies.  It takes much more time to prepare an effective RFP than it does for an RFI because you need to supply as much information about what you want as the suppliers do in answering.

Pricing – As touched on above, there is a much more focused request for pricing details in an RFP than in an RFI.  RFIs ask general questions about fees and how a supplier charges for their products or services while an RFP requires specific pricing as it relates to their project.  (i.e. An RFI would ask “What types of fees are associated with buying your product?” an RFP would ask “What are the fees associated with buying 25,000 of your product with these specifications and having it delivered in 3 groups to 5 regions throughout the U.S.?”)

Next steps – The other major way the two differ is in the expected next steps.  With an RFI a customer is looking to gather basic information about companies in order to determine the handful they wish to proceed with seriously considering.  Conversely, in an RFP the goal is to collect much more detailed information about the supplier and their capability to deliver as well as enough project specific pricing and product or service details to allow you to proceed immediately into negotiating a contract.  In some cases there will be a short list of vendors invited to compete further on pricing or present their offering to the customer before the final contract is completed.

Going back to July 1st’s post , in an RFI “we don’t know what we don’t know” and we gather accordingly.  In an RFP, “we KNOW what we don’t know” and that process is the time to collect it from your selected vendors.
Tomorrow we will focus on internal information gathering in the form of surveys, when to use them and what to expect from them.

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.

Sourcing with RFIs, RFPs, RFQs and Surveys – Part 2 of 5

Thursday, July 2nd, 2020

 

Today’s continuing 5 part repost is from our archives at  SafeSourcing.

According to www.businessdictionary.com, a Request For Information is a “request made typically during the project planning phase where a buyer cannot clearly identify product requirements, specifications, and purchase options. RFIs clearly indicate that award of a contract will not automatically follow.”

RFIs are generally externally facing and have a sole purpose of gathering enough information about a company, their experience and details about their products or services to create a list of suppliers you want to pursue, each of whom has a legitimate chance to be awarded the business.  As mentioned above, this is rarely a final step before the “award of business.”

During an RFI you want to understand who a company is, how long they have been in business, who their customers are, what industries they service and specialize in, how many employees they have dedicated to the business you are looking to award them, as well as details about what they are offering for a good or service.

This stage of the information gathering process would be equivalent to that first trip shopping for a new car; where you let the salesperson know up front “We are just starting to look and gather information.  This is not a decision making day as we have other dealerships to visit before we narrow it down.”  The reason for this is twofold.  First you are doing the suppliers the courtesy of not investing too much time in a process where 30-40% won’t make a short list for round two.  Secondly, it saves time in the initial evaluation of the responses as RFIs generally involve 15-20 (or more) companies.

Looking back at the basic questions from yesterday’s blog, let’s see how they fit within the definition of an RFI.   If the answer to “Is this something you have purchased before?” is “No” and you are looking for a service or the specification for the product is not well defined, an RFI should absolutely be standard practice.

Also, if the answer to “Are there additional features or services you are not currently purchasing that you would like to gather information on from suppliers? “ is “Yes” then investing in the RFI process will save you an incredible amount of time later when you get closer to deciding who you want to gather quotes from.   Going back to “you don’t know what you don’t know”, new services generally fall into the “don’t know” bucket and RFIs can help with that to a large extent.

The object of an RFI is to gather enough information about the project so that you can provide the vendor community enough data to give accurate details and pricing for their involvement in a more focused next step which is usually a Request For Proposal (RFP).

Tomorrow we will cover RFPs, how are they are different than RFIs and when you should use them.

For more information on SafeSourcing and how we can assist your company with this process, please contact a Customer Service Representative for more information.

We look forward to and appreciate your comments.

Sourcing with RFIs, RFPs, RFQs and Surveys – Part 1 of 5

Wednesday, July 1st, 2020

 

Today’s post is  the 1st in a 5 part series that is always good to re-share from our Archives at SafeSourcing.

Information rules the world and the sourcing world is no exception.  It is often said “you only know what you know and you don’t know what you don’t know.”  This may seem like a simple concept but it is amazing how often it gets ignored and decisions get made without people having all the facts they need to properly make those decisions.

In this week’s series, we will be exploring how simple information gathering techniques can help make better million dollar decisions and we will finally answer the reoccurring question “What really is the difference between an RFI and RFP and an RFQ and when should I use them?” Before we do that let’s focus on determining what, if any of these things, is needed to make the right purchasing decisions.

When faced with an upcoming purchasing decision there are several factors that need to be determined to know which direction to take should you need to gather additional internal or external information.

  1. Is this something you have purchased before?
  2. If this is not a new purchase, do you have current copies of contracts or agreements for these items or services?
  3. Is it clear who is providing this product or service across your entire company?  (In many cases, the larger the company the hazier the answer to this question becomes.)
  4. Are the current suppliers national companies or is there a mix of regional vendors included?
  5. Is it clear within your organization how much is being spent and is that information broken down by region, state, division or some other fashion?
  6. Are you pleased with the performance and quality of the item(s) or service(s) your incumbent supplies?
  7. Are there additional features or services you are not currently purchasing that you would like to gather information on from suppliers?

These are the basic questions that need to be asked before determining if more information needs to be collected.  In the end all of these questions lead to this, “Do I have what I need to supply information to potential vendors and then properly and fairly evaluate their responses in order to make a purchasing decision?”

Later this week we will dissect the different methods of information gathering as it relates to the questions above, explaining the purpose and expected result of each in order for you to determine, project by project, which will serve you best.

For more information on SafeSourcing and how we can assist your company with this process, please contact a Customer Service Representative for more information.

We look forward to and appreciate your comments.