Archive for the ‘E-procurement’ Category

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.

 

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

Wednesday, January 27th, 2021

 

I can see clearly now the rain has gone. I can see all obstacles in my way. The lyrics from the 1972 song by…. Johnny Nash titled I can see clearly now should be the mantra for enlightened e-procurement professionals.

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 them. 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.

All we Want for Christmas…

Wednesday, December 23rd, 2020

 

Today’s post is from our archives at SafeSourcing.

SafeSourcing continues to work with hundreds if not thousands of vendors and clients during the year, and here are some things we’d like to see Procurement professionals deliver to all of us this festive season.

Let’s get clients talking to us again. You can’t sit back and think clients are chomping at the bit to call us. So let’s have a chat. Things change quickly and you might be surprised about what we can do for you now. With a new year upon us, it is a perfect time to talk about your upcoming procurement challenges and areas where you see savings. And, while we’re on the subject…

Let’s bring back a new level of interest for vendors. Start the New Year by contacting those vendors (email survey) who have participated in more than two or three events. Access their level of interest in participating in future events and/or find out ways we can improve our process.

Say what you mean. Request for Quote documents are often hard to interpret, and the specifications can lack important detail. With better instructions and better details, any vendor with a bit of common sense will be able to bid more confidently. That’s good for everyone.

Provide a timetable that has a response period that’s fair and reasonable. We run a pretty tight ship these days; our staff is stretched and it can be difficult to keep up with complex requirements and decreasing deadlines. Pressing us for time because you’re late to respond, only means you get rushed and submit sub-par results. On the other hand…

Don’t issue a timetable only to issue a last-minute extension just before the deadline. This unfairly disadvantages (and discourages) the vendors that are prepared, and have made it a priority to respond to our request.

Please Client, answer our questions. We don’t ask many, but often, we don’t get meaningful answers (or any answers). Giving us better data will mean better proposals for you to evaluate. And finally…

If you give us a service or supply to run, mean it! We have a hard working dedicated team that loves working on your projects. We pride ourselves in getting back to you the necessary data for you to approve to run an event. But please, let’s not waste either of our time.

Wishing you all a Merry Christmas, and a successful and prosperous 2021.

SafeSourcing associates are focused on our customers and vendors in order to deliver the best possible white glove service that there is. We would be happy to discuss how SafeSourcing can help you with your eProcurement planning. For more information, please contact SafeSourcing.  

 

You can procure anything, including Christmas Candy Canes Part I!

Wednesday, December 16th, 2020

 

Today’s post is from our SafeSourcing Inc. Archives

What does it take to make a candy cane, package it, market it, and distribution? All of these involve procurement. Today, the candy cane makes up a significant amount of the $1.4 billion Christmas candy market. In fact, billions of candy canes are made and consumed each year.

First the history of the candy cane: from the HomeBoy Media Network!

The candy cane is a Christmas tradition that many hold dear but nobody really knows why. Let’s face it, the only things we really know about candy canes is that they taste good and that they are red and white.

Whether the story of the candy cane is a legend or if it is true is not certain, but this is how the story goes: About two hundred-thirty years ago at the Cologne Cathedral in Germany, the children that went to church there were really loud and noisy. They often moved around and would not pay attention to the choirmaster.

This was especially difficult for the choirmaster when they were supposed to be sitting still for the long living Nativity ceremony. So to keep the children quiet, he gave them a long, white, sugar candy stick. He couldn’t give them chocolate or anything like that because the people at that church would think it was sacrilegious. So he gave them the stick and he bent it on the end to look like a cane. It was meant to look like a shepherd’s cane, and so it reminded the children of the shepherds at Jesus’ birth.

In 1847, a German-Swedish immigrant in Wooster, Ohio put candy canes on his Christmas tree and soon others were doing the same. Sometime around 1900 candy canes came to look more like what we know them as today with the red stripes and peppermint flavoring.

Some people say the white color represents the purity of Jesus Christ and the red stripes are for the wounds he suffered. They also sometimes say that the peppermint flavoring represents the hyssop herb used for purifying and spoken of in the Bible. The shape also looks like the letter “J” for Jesus, not just a shepherd’s cane. It is possible that these things were added for religious symbols, but there is no evidence that is true.

Around 1920, a man in Georgia named Bob McCormack wanted to make candy canes for his family and friends. He later started mass-producing candy canes for his own business which he named Bob’s Candies. This is where many of our candy canes come from today.

Tomorrow we will discuss the raw materials needed to make candy canes.

For more information on how we can help you with your procurement needs 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.

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.

I know that your costs are going UP!

Wednesday, September 23rd, 2020

 

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

Its amazing to me that with all the increases in spending due to the COVID-19 Pandemic, which would certainly be classified as tail spend that companies continue to not use tools available to them that will help to keep these costs down. Please contact me personally if you’d like to discuss.

At SafeSourcing, we help buyers save considerably on costs by providing tools that enhance the ability to do business in a better, safer, smarter, more streamlined and cost-effective way. Our flexible service offerings and suite of e-procurement tools deliver savings that can be referenced that are greater than 10 times the cost of our services and often much higher. Our annualized savings across all customers and all categories over the last 24 months are greater than 24%

We can help Improve your profitability and increase your efficiency. Both areas that  should and can help during these stressful times.

Here’s what one of our customers had to say. “We would not be where we are with our Indirect Spend if it were not for SafeSourcing.” SR. VP FINANCE OF $20B DISTRIBUTION COMPANY.

If you’d like to discuss our risk free trial, please contact a SafeSourcing Customer Services professional.

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

Wednesday, September 9th, 2020

 

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

I wrote this post a number of years ago, and it is still true today. To many CEO’s believe they can have a huge impact in the sales area. Let’s rebrand and we can drive huge top line sales increases! BS. Yup BS. Many have tried and many have failed.

What they should be saying is let’s  MAKE MONEY. We are in business to MAKE MONEY. We can increase sales by focusing on sales. News flash, visit your stores  and  talk to your customers. Watch you associates. It will be come painfully clear what will improve sales.  You do not need to spend millions to rebrand. We can also keep more of those sales increases and reduce historical margins by focusing on reducing costs.

Read on if you want to learn something. Or go find an investor and delay the asset sale for a few more years.

I would  still be glad to personally discuss this premise with any Retail CEO or CFO that wants to challenge it! Let me do it for you. You’ll be surprised and be a hero and get a big bonus.

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.

eRFX Strategies for Success Part VI the  Request For Quote  

Thursday, September 3rd, 2020

 

 

 

Today is the final edition of this VI part post from Ron Southard, CEO at SafeSourcing Inc. You can download each link or just download my Whitepaper by the same title. If you follow these guidelines, you are on your way to controlling the cost of any category you take to market.

In  parts one, two, three items 1-4 and four items 5-8  and five RFQ Part I of II we have discussed  that the world of procurement is continually changing, and this includes the world of eProcurement when it comes to the request for information, a proposal, or a quote and why this process when used properly even with newer tools is still the most effective results delivering procurement process available.

The Request for Quote (RFQ) Part II of II Details, Missing Pieces and Communication

Details, Details, Details. In the RFQ, send an invitation to potential suppliers containing a detailed list or description of all relevant parameters of the intended purchase, such as:

  • Personnel skills, training level or competencies
  • Part descriptions/specifications or numbers
  • Quantities/Volumes
  • Description or drawings
  • Quality levels
  • Delivery requirements
  • Term of contract
  • Terms and conditions
  • Other value-added requirements or terms
  • Draft contract

An RFQ event can have many suppliers participating in your project. They will all be actively participating during the RFQ in a preset timeframe, which is usually 20 minutes, but can be adjusted when the line item count grows over 25 items.  Within the 20 minutes, suppliers can lower their bid pricing an unlimited amount of times. Like sealed bidding, suppliers cannot see one another’s pricing. Suppliers see whether or not their quote is the low quote through the use of a low quote indicator when they achieve that milestone by fishing for it. Suppliers may also see their ranking at a predetermined point in the RFQ process if the strategic decision to use that feature has been made.

Missing Pieces. An easy way to establish specifications and develop base pricing is from the RFP responses submitted earlier.  Many times, a list of suppliers is established that has already been educated on entering pricing through an online sourcing or bidding tool. The RFQ gives the supplier the opportunity within the live RFQ to view whether or not if they have any low quotes and to “sharpen their pencils” in order to lower their pricing if they wish to do so. From this RFQ, an award of business based on the results can be made.

Training and Communication. Suppliers should be trained as to how to use the eProcurement system, how to place their bids, how to look for the low quote indicator, and also be communicated with relative to questions, pricing, and products and services you are looking for. The overall goal is to drive the best overall value, so suppliers should have an opportunity to enter notes during the RFQ. This additional information often offers additional hidden savings opportunity, i.e. if 1,000 cases are purchased rather than 900 cases, additional discounts, or other value-added services such as freight waived for the first 6 months of a 1-year contract if awarded the business. These additional notes can provide and overall benefit, rather than just a low-price win.

Returning to our original RFI example of a company owning a building they intend to repurpose as a Distribution Center, the process began as an RFI in order to understand what was needed so it could be followed by an RFP in order to collect further detailed information and base pricing. These two steps were then followed by an RFQ to compress the pricing from suppliers who participated in the RFP and were invited to this final stage.  In this last stage running the line items as a complete list of materials rather than an item by item list, total cost of freight, total installation pricing- which could include teardown pricing which could also be listed as its own line item can have great value and provide the opportunity for the suppliers to keep their focus where it is needed rather than on 100’s of individual line items submitted during the RFP. The four items mentioned here represent the largest spend items of the proposal and have the opportunity to lower pricing by 20% or greater from the original RFP pricing.

Determining what stage of the eRFX process to begin with and how to assemble those pieces can be a difficult puzzle to put together especially if a procurement team is already engaged in a myriad of other daily activities. A good Strategic Sourcing solution provider can help put these pieces together in a way that requires less of your company’s time and resources.

If you’d like to learn more and can’t wait for the series conclusion, please contact a SafeSourcing Customer Services associate, they’d be thrilled to hear from you.

Thanks.

It really is a CRITICALLY GOOD time to look at your supplier contracts.

Thursday, August 20th, 2020

 

 

Todays post is from Ron Southard, CEO at SafeSourcing Inc.

It appears it would be counter intuitive for senior management to ask procurement professionals to explore all contracts in the current environment. There is so much uncertainty relative to the economy, COVID-19, and related internal and external adjustments as well as an upcoming election that may change how we look at everything.

With all of that said, public companies are going to have to continue to report earnings while they plan for an uncertain future. Small businesses while not having to report are equally as focused on keeping the doors open. While the numbers vary as they seem to with everything today, approximately 100,000 businesses have failed forever. Many more will over the next 6 -12 months. Depending on the source you use, nearly 17 million Americans are unemployed. So much to focus on, how to cope?

While the statistics are daunting, all these businesses were buying products and services from the supply chain. As such, it is not surprising that the supply chain companies have lost sales/revenue and are very eager to find new business. They are looking at their existing customers to lock in business, new verticals with similar characteristics to their existing customers to cannibalize from and their existing markets to offer unsolicited proposals at great initial pricing. I am sure there is not a senior leader that has not been told of unsolicited offers for current expense categories at drastic improvements in pricing. So, the market is ripe, but it will not stay that way forever. And here is a caution; Do not accept those initial offers. There is still better pricing available.

At SafeSourcing, we have not laid off anyone since the 1st of the year and have dramatically reduced our expenses on everything. One example is our phone service where we reduced costs by 45.3%. Another is our insurance policies where we reduced costs by 13%. There are many others with significant savings as well.

I have often used the following as a tongue in cheek response to the question I have heard thousands of times. Why should we focus on expense reduction with SafeSourcing? My response is, do you have a dollar bill? Even in todays world most folks do. I ask the questioner to take it out of their purse or wallet while I am taking a $10 bill out of mine. I offer to trade one for one. While many already see my point, no one has ever turned down the exchange. A 10X return? Why would you not do it. Both bills are the same size, color, and government backed. It is the same specification right? So, an easy decision. I then add that when you use SafeSourcing, our ROI is quite often much higher. Your time commitment is minimal, and you receive and equal or better specification or service or both at a lower price! So, Why Not?

The times are hard, headcount may be down, and you have so much to focus on! Let SafeSourcing help you reduce your costs on everything from capital, costs of sales/goods and expense. Your numbers will look better now and in the future and you will not have to use headcount as your best cost management tool. Our average customer savings over the last 18 months are in excess of 24%. Yours could be too!

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.