Archive for the ‘E-procurement’ Category

Believe Me, You could be improving your profitability by up to 73%.

Monday, October 16th, 2017

 

Today’s post is by Ron Southard, CEO at SafeSourcing.

I would be glad to personally discuss this premise with any Retail CEO or CFO that wants to challenge it!

Let’s review exactly what a reverse auction is, how simple they are to use and the potential financial benefits?

Reverse auctions are web based  or Software as a Service (SaaS) tools that let retailers and other companies find the best suppliers for any resale or not for resale product or service they wish to source.  Using a web based reverse auction tool, retailers, other business or even large holding companies can locate and invite many more suppliers to take place in reverse auctions than they could possibly find or manage using traditional sourcing methodologies or even tools like BING or Google. During the reverse auction they can review on one screen all of the responses from suppliers, data about the suppliers, notes from the suppliers, product specifications and other necessary information in an instant. Upon auction conclusion which is typically less than 30 minutes including extensions host companies can review potential savings scenarios and award business right from their desktop. Sound simple? That’s because it is.

Now let’s get to the simple financial benefits. Let’s assume a $150M smaller Retail Company with industry average earnings of one percent or $1.5M. Additionally cost of goods for this company is 70 percent or $105M. Let’s also assume this company were to only source ten percent of their for resale goods spend or roughly $11M. With well below industry average savings of just ten percent, total savings generated would be $1.1M which is a direct impact to net profitability. If all other segments of the P&L perform to plan and all savings are recovered during the same business calendar year net profitability would increase to $2.6M or a 73% improvement.  Again this assume no tributes to Caesar or other funny accounting associated with new capital plans and the like

So, why don’t many companies use reverse auctions and other e-procurement tools? That’s a great question! Maybe someone out there has an answer.

If this author were you, I just could not ignore this type of opportunity.

If you’d like some examples of the types of savings SafeSourcing can generate for you by size of spend and category, please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

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The Central Procurement Function!

Thursday, October 12th, 2017

 

Today’s post is from Ron Southard, CEO at SafeSourcing Inc.

As you can imagine the answer to this question could actually be pages in length. However the following is directionally correct based on the question and minus the organizational structure and alignment.

The Central Procurement Function in responsible for the procurement of goods, services and capital projects by an authorized group within a company’s hierarchy. Central procurement in a best case scenario includes the financial decision making authority specific to that procurement on behalf of the entire company for reuse or resale from an approved list of vendors or suppliers. In some cases the budget for a specific spend may reside within another functional area  where central procurement collaborates and negotiates on behalf of that areas subject matter experts but the subject matter experts approve the final vendor selection.  In the case of manufacturing company’s  this function also includes the purchase of commodities used in the manufacture of finished goods.

The central procurement function is typically authorized within a company in order to insure consistency thought-out the organizations procurement process by eliminating the potential negative effects of non-collaborative, non-aggregated purchasing by multiple divisions, departments and other corporate entities that can support rogue or unstructured buying.

Measurements of a central procurement organizations success can differ widely from company to company depending upon where they fall relative to a procurement maturity model. Typically these organizations are measured by overall procurement Key Performance Indicators or KPI’s at the procurement department level that usually includes the following at a minimum.

1.  Percent of spend under management
2.  Price Improvement
3.  Quality Improvement
4.  Safety Improvement
5.  Reduction in Carbon Footprint
6.  Service Level Improvement
7.  Distribution Flexibility
8.  On  Time Delivery Improvement
9.  Supplier Management

Management of these KPI’s is intended to insure that  companies have a defined  processes in place so as to promote a fair and open competitive model for the supplier community that’s  interested in soliciting their business.  This also minimizes the opportunity for fraud and collusion while insuring the best possible product or service is purchased at the best possible price and overall value to the company.

If you’d like to learn more about the central procurement function, please contact SafeSourcing.

We look forward to and appreciate your comments.

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When using e-procurement tools to source complex services make sure you have a well defined change of control process.

Friday, October 6th, 2017

 

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

Change happens. It can result from poorly designed specifications, terms and conditions, quoting instructions and other data related to a bid.

The normal process for managing these changes is a change of control process which governs how any changes to the services being provided as identified in the actual bid.

The change of control is normally managed as a request that communicates the requested changes to the services deliverables. Normally the change request will describe the following at a minimum.

1. The change
2. The reason for the change
3. The effect the change may have on the existing Statement of Work.
4. Impact on cost or savings

In most cases a project manager or the associate with responsibility for managing the program deliverables will be required to submit a written change request to the contracted or warded supplier.  The supplier will then develop and return the response to the contracting company.

The contracted supplier and the contracting company will then review the proposed change request and either approve it, modify it or reject it. When approved the contracting company as well as the contracted supplier must sign the change request in order to authorize the work as well as the implementation of the work and its potential impact on the existing project plan or project time line.

If you don’t want erosion inn your savings, make sure you spend the time to cover this process in your bid parameters.

Please contact a SafeSourcing Customer Services Account Manager in order to learn more

We look forward to and appreciate your comments.

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Procurement after a Natural Disaster

Wednesday, September 27th, 2017

 

Today’s post is by Mike Figueroa, Assistant Director of Customer Services at SafeSourcing.

Both hurricane Harvey and hurricane Irma have wreaked havoc in Texas and Florida over the past several weeks, resulting in dozens of lives lost, and costs in damage to buildings alone are being estimated as between $100 and $400 billion dollars. But of course the cost isn’t limited to direct building damage as there will be costs in disruption to production activities, costs, and increased demand for goods. So what are some of the things procurement professionals should keep an eye out for post-natural disaster?

Crop losses: Orange crop losses are estimated at 10%, grapefruit at 20%, and could increase due to the greening disease Florida has been battling with that is exacerbated by moisture. Other crops of fruit, nuts, and melons are expected to be similarly affected.

Lumber: Even before the two hurricanes hit land, demand for plywood for boarding up windows increased. Now that the rebuilding efforts are underway, lumber is in greater demand than ever. Prices in Texas and Florida are expected to rise by 20%, partially due to a secondary cause of a recent 10% tax on Canadian soft wood imports.

Insurance: Currently the insurance industry is estimating they will be on the hook for about $300 billion in property and business loss claims, with losses in the $35-$70 billion dollar range. The re-insurance industry that further protects the financial health of the insurance agencies, is considering re-negotiating their rates to account for such monumental loses.

Energy: Total production of gasoline and natural gas is not expected to have been reduced by more than 1%. However, the disruption caused by the storms has had an interesting impact on demand as well, while hundreds of thousands of people are not driving back and forth or able to utilize the amount of energy they did on a normal basis. The outlook in the mid-term is a volatile and unpredictable market.

The bottom line is that for procurement professionals, a wide variety of industries have been thrown into turmoil, making it difficult to begin new initiatives or guarantee pricing for the short term. Furthermore, logistical concerns for moving product in and out of the affected areas will incur protracted lead times. This both presents challenges to sourcing new contracts, while also making it critical to lock down future agreements. Where commodities affected by natural disasters are concerned, everyone will be feeling the pinch. However, these challenges above make it more important than ever to lock-in favorable agreements more important than ever.

For more information on how SafeSourcing can assist your team with this process 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.

 

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Avoiding common RFP mistakes

Tuesday, August 8th, 2017

 

Today’s post is by Michael Figueroa, Project Manager at SafeSourcing

I sometimes hear stories from suppliers that are downright outrageous; I’ve literally been told “the dog ate my RFP”, and “I didn’t read any of the documentation” on multi-million dollar projects by executive level professionals. I’ve worked with a supplier on multiple year projects who has been late on each one, and always because his “mother just passed away”. If you’ve worked with me before you know I can sometimes be a little bit pushy to make sure you understand the structure of the RFP at hand, but I assure you it’s only to make sure the process goes smoothly for you. But what causes people to overlook the details of a project? I would suggest that the root of the problem is something every human being is susceptible to: Assuming we already know everything we need to know.

When going into a new RFP or other procurement project, the first assumption should be that we don’t know the needs of the customer until we’ve taken the time to learn them. I’ve seen suppliers come into a project trying to force their agenda, or assume the details of an RFP rather than observing, learning, and understanding first and asking questions second. It will always be difficult to come to a mutually beneficial business partnership if you don’t even understand the initial request that is being made. A successful RFP provides some basic information and asks questions, allowing the supplier to respond explaining their position, including product/service details, quotes, constraints, etc. Not actively listening and learning causes us to talk past each other, and can cause a misalignment of value propositions.

Listening well is a skill so commonly lacking that it is one of the first things taught in relationship counseling, and shouldn’t be overlooked in our professional lives. Active listening is taught formally in the classroom or counseling session by having one person take turns speaking to another, with the listener repeating in his/her words what was heard. This is effective because it prevents us from falling into the destructive habit of thinking about what we want to say while we should be listening to what is being said. Research suggests we only have the mental bandwidth to process a maximum of 1.6 conversations at a time, and if you’re fully listening to your own thoughts about what you want to say, you’re only hearing 60% of what you should be observing1.

[1] “Too Much Noise – Steelcase.” 2015. 15 Jul. 2015 <http://www.steelcase.com/insights/articles/much-noise/>

We make every effort at our company to make sure you are aware of the details of any procurement project, and also encourage feedback during the process to ensure each project is a positive opportunity, allowing you to put your best foot forward.

For more information on how SafeSourcing can assist your team with this process 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.

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“You Buy It, We Procure it”

Monday, July 31st, 2017

 

Today’s post is written by Heather Powell, Director of Customer Services & Project Manager at SafeSourcing Inc.

The above quote has recently become this author’s mantra. When working with current or new customers, I often ask what’s next in your pipeline or purchases. Too often I get a response similar to we don’t have anything coming up or we aren’t buying anything big today/this month/this year. A purchase doesn’t have to be considered big in the moment of ordering, but over time the expense adds up. For instance, copy paper is bought for almost every single office or location. While it might be a ream or case at time, added up might be in the thousands of dollars annually. Perhaps you own a fleet of vehicles and purchase tires multiple times a year. Without a pricing agreement in place to ensure the best possible pricing all year round, you are losing money.  Within each of these purchases, it might seem small or a onetime purchase, however, an annual spend or general ledger (GL) will show at the end of the year as a significant spend to the company.

SafeSourcing can work with your company to identify purchases and potential saving opportunities through our SafeSpend™ analysis. This presents your company with an overview of where not just the large purchases are, but where the small purchases are that add up to large purchases. This will give you the view into saving potential that SafeSourcing can offer with various sevices. Remember… “ If you buy it, we procure it”!

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.

We look forward to your comments.

 

 

 

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Overcoming Declines

Wednesday, July 26th, 2017

 

Today’s post is by Robert Rice, Account Manager at SafeSourcing.

Defeating the decline is something most of us have had to deal with. It typically starts early in life. The girl you have been waiting all year to ask to the dance, says no. The time you asked your dad to co-sign on your first car, nope! Or the college you had your heart set on, “sorry to inform you but you were not selected”, blah blah blah. It’s a part of life and you will have to deal with declines constantly. But the key is HOW you will deal with the declines.

At SafeSourcing we offer an e-procurement tool that allows our clients to get better value without the hassle of hiring additional staff or devoting countless hours doing what we do in a fraction of the time. See, we deal with declines every day. In fact, we are sort of experts at it.

Declines are basically the starting point. Declines start a dialogue or a fact finding venture, where as an Account Manager, I can become better informed on the product or service I am selling. Through the engagement of the vendor, I am able to find out the real reason for “the decline” through direct questions or just being a good listener. In many cases, after speaking with the vendor regarding the decline, we both find out that they could still participate and bring value.

Some keys things to remember are:

  1.  When you receive a decline, IMMEDIATELY follow up with a phone call and find out why? There are definitely legitimate reasons a supplier cannot participate – logistics, they no longer provide that item; but before you hang up, ask, “Whom do you recommend?” More times than not, they will give you a company and a contact person.
  2. Ask good questions why the decline, “I can only bid on some of the items.” Great, we still want their participation. This can generate better savings for the items they are able to bid on.
  3. “We don’t do this this.” Great. What do you do? We might have another event they would be perfect for.

Basically, it is our job to make a decline into an opportunity, be it new leads, becoming better educated, or engaging the supplier and then finding a better event for them to join. Robert or any member of the experienced team at SafeSourcing would be happy to discuss how SafeSourcing can help you with your eProcurement planning. For more information, please contact SafeSourcing.

We look forward to your comments.

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Make Time for eProcurement

Thursday, July 20th, 2017

 

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

Reducing spend is important. It’s actually among the most important and impactful methods to improve your company’s bottom line. In most industries, you’ll be hard pressed to generate the same effect through any other means. New stores, new accounts, improved processes, and more all have merit. The fact is, reducing spend while maintaining quality can create a one-to-one savings to bottom line improvement opportunity. Where else are you getting results like that?

So, reducing spend is a top priority. But, is it the most urgent priority? Right now? Chances are you have something going on that cannot wait. Maybe you have a fire that needs to be put out before you can tackle the job of reducing the cost of the floor tile for your upcoming new stores. Maybe that’s a literal fire that needs to be put out. It happens.

At the end of the day though, we have to make time to focus on reducing our spend. One way to handle this is to improve efficiency by working with a partner, such as SafeSourcing, to increase the number of eProcurement projects that you complete in a given time period. Let somebody work on your behalf by delegating responsibly. Then, instead of one project per month, you can easily achieve three. Your input will still be required, but your time commitment will be greatly reduced.

So put out that fire and let us focus on the details so you can realize the savings. For more information, please contact SafeSourcing.

We look forward to your comments.

 

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

Monday, July 17th, 2017

 

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 the m. 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.

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Sourcing Corrugated Boxes

Friday, July 7th, 2017

 

Today’s post is by Mike Figueroa, Assistant Director of Customer Services at SafeSourcing

When companies are looking to save money, they often look in places that have the largest spend, but also the greatest fixed costs. Sometimes the most commonly used items represent the best opportunity to compress spend. In today’s case, we are going to look at Corrugated Boxes. Don’t be fooled though by this deceptively simple item. If you aren’t intimately familiar with what your company buys today, especially if you have multiple Distribution Centers, developing a new RFP can get complicated quickly. Here are a few specification considerations to understand about this category that might save you some frustration before you get too far into the project:

Dimensions (Inside or outside?): Sometimes your invoices will give you measurements different than what you would measure yourself simply because the invoice gives interior measurements and you are measuring the outside. Make sure you indicate whether your specified sizes are interior or exterior. Also make sure you are consolidating box sizes where you can. If DC1 uses the exact box DC2 uses with a 1/16th inch difference, is there a good reason? You might be able to save a lot of expense by getting your DC’s all on the same program with a limited variety of box types.

Grade: The most commonly used measurement of corrugate strength is the Edge Crush Test (ETC). For example, an ETC of 32 would mean a box could withstand a maximum load of 40 lbs. Suppliers would need to know this requirement in order to gauge how to construct the box in terms of its flute size, number of walls, etc.

Coatings: Your intended use will determine the type of coating requirement you will have. For instance, food safe boxes may require non-stick surface coating, and boxes with marketing information may be colored white with logo printing. But for basic usage to fulfill your supply chain and distribution needs, the unaltered brown standard color is the cheapest, and the term for it is “Kraft”.

Printing: A print design can be both functional, or marketing related. Meaning, you may need certain marks for optical machine box loading, barcodes for tracking, or simply logos for easy retail identification. Either way, you will likely want to provide detailed drawings and artwork along with dimensions, and precise color in order to end up with what you intended.

The Usual Suspects: All of the typical concerns within any given sourcing project still apply, such as:

  • Shipping terms: If delivered to multiple DC’s, you’ll probably want separate quotes per location. However, if you don’t need delivered pricing, obtaining FOB quotes can save you a lot of headaches.
  •  Volume: Unit of measure, lead time, delivery schedule, must be indicated, and under the correct annual multiplier.
  •  Current cost: Is it inclusive of any promotional allowances, taxes, freight, etc and are you asking for quotes to include all of the same factors for accurate comparison?
  • Always run through a sample process before approving a large production run. A mountain of useless boxes would ruin anyone’s day.

For more information on how SafeSourcing can assist your team with this process 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.

 

 

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