Archive for the ‘E-procurement’ Category

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 is Shrink?

Wednesday, January 3rd, 2018

 

 

Today’s post is by Gayl Southard, Administrative Consultant at SafeSourcing.

“What is shrink? Inventory shrink is a loss of goods either due to theft, damages/spoilage or administrative errors on items moving from a manufacturing site to an end customer.  The shrinkage can be referred to as a hit to the margin or loss in profit.”1

  1. How do we Record Inventory Shrink? Between the last cycle count and the current period, your business may have Inventory loss. The physical Inventory is less than what is recorded in your books. “To account for this loss of Inventory via the perpetual accounting method, you would: increase the cost of goods sold and decrease the inventory but the difference for the recording period. Your balance sheet would show a credit to the inventory line then for the value that was lost. Showing that you have incurred higher expenses (cost of goods) and a lower gross profit will lower your taxable income.” You may prefer to record shrinkage separately. This would require IRS Form 4684 if your business is in the US.
  2. What Causes Shrink? Shrink is inevitable. It can be controlled through inventory management best practices. Shrink can occur by employ theft and fake sales. Retail theft may occur through petty theft, shoplifting, breaking and entering, and entering fake coupons. Shrink isn’t always caused by scams. It can be attributed to poorly designed operational procedures and standards. It causes a trickle down effect to the rest of the business including the warehouse and financial operations. Shrink can be managed by implementing internal controls. When hiring, conduct background and reference checks. Educate new employees on your policies and stance on employee theft. Some preventative steps may be surveillance cameras, valuable items secured in secured areas accessed by higher authoritative levels, separation of duties, anonymous reporting, checking on how trash is disposed, and audits.
  3. What Can be Done to Prevent Retail Theft? Using security cameras and mirrors through the space. Suspicious behavior may be spotted more easily. Bad promotion codes and fake coupons and online discount sites have increased the amount of manufacturing coupons on the net. Personnel will have to stay current with coupon scams.

For more information on SafeSourcing and how we can help you with your sourcing needs, or on our Risk Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

Resources:————————————————————-

1 Colleen Roderick’s, inFlow

 

 

 

 

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All we Want for Christmas…

Thursday, December 21st, 2017

 

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

As thoughts turn to Christmas and what Santa might bring us, my Christmas letter asks for something a little bigger.

On behalf of SafeSourcing I have worked with vendors and clients during the year, and here are some things I’d like to see Procurement deliver to all of us this festive season.

“Dear Procurement, all we want for Christmas is…

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 2018.

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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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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You can procure anything, including Candy Canes Part I!

Wednesday, December 6th, 2017

 

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.

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Reduce Capital Expenditures

Wednesday, November 15th, 2017

 

Today’s post is by Dave Wenig, Vice President of Sales and Services at SafeSourcing.

Many of our clients find great success in significantly reducing their indirect spend. The typical expense categories that are sourced are always winners and are often the first categories that come to mind when selecting which categories will be sourced using eProcurement tools. As nearly all of our clients know from first-hand experience, these categories have earned this reputation for good reason. The average savings for Supply categories, for example is in excess of 21%. This is relatively well known and is only the start of what is truly possible with eProcurement.

What is less known, and too often overlooked, is that this same eProcurement methodology can very easily be applied to your capital expenditures. At a time when many of our clients are preparing for the coming year, I wanted to point out that you should not forget to leverage eProcurement for your capital expenditures.

At this point, you may well have a very clearly defined sourcing plan in the form of next year’s budget. My suggestion is simple – remember to review that identified spend with your eProcurement provider. You’ll be glad you did.

I would encourage you to also keep an open mind as you decide which of these capital expenses you would identify for eProcurement. You might be surprised to know that our clients have had success in areas where most clients don’t even consider. In one example, we were able to successfully take just one panel van out to market as an RFQ. Inside of days, the client saved many times more than could ever be saved negotiating with dealers using traditional methods. In another example, we achieved 30% savings on two towable generators.

Many of our clients, whether retailers or otherwise, will be working on construction such as opening new stores and remodeling old stores in the coming year. I propose all of that related spend should be sourced using eProcurement. If it is not competitively sourced, you will overpay. Before you build that new carwash, you should know that we do that too. Recently, we achieved over 10% savings on the building and over 34% savings on the installation portions alone for a client.

In this short post, I’ve listed only a few examples out of many, many more and I have not even mentioned your cost of goods or cost of sales. I hope, however, that my main premise was clear. If you have budgeted for capital expenses, you should consider eProcurement to reduce the cost of those expenses. You’ll likely find that you’re able to accomplish much more in the next year based on the savings generated by eProcurement.

For more information, please contact SafeSourcing.  

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Advantages of e-Procurement.

Tuesday, November 14th, 2017

 

Today’s post is from our SafeSourcing Archives

e-Procurement comes with distinct benefits over manual purchasing, ranging from increased cost efficiency to greater access to suppliers. Let’s delve deeper into some of these noticeable advantages.

Increased cost efficiency is considered the primary benefit of utilizing an e-procurement purchasing platform. E-procurement puts a single buyer online with many suppliers, thus lessening the leg work traditionally associated with the buyer narrowing his or her field of suppliers.

Using the e-procurement platform, buyers have access to essentially an unlimited list of suppliers, which equates into a wider selection of goods and services. These suppliers have normally undertaken rigorous vetting procedures to ensure that they are the correct supplier for the specific job or work the client is requesting.

e-Procurement applications can be tailored to fulfill the distinct needs of buyers and sellers and be scaled to grow as the organizations expand. For example, suppliers from new territories can be added to supplier databases as the organization grows into new market segments.

e-Procurement processes can greatly increase productivity. Customers can acquire the items they want to procure from a catalog of approved items through an on-line requisition and ordering system. Purchasing staff can be relieved from processing orders, filing paperwork and handling lower priority tasks to focus on strategic sourcing and improving supplier relationships.

In some organizations, purchasing duties are dispersed over several different departments within the company. E-procurement platforms will enable a company to merge orders for similar items with one supplier, resulting in greater volume discounts and cost savings. Additionally, e-procurement may allow a company to simplify purchasing by reducing the number of products involved. Instead of having to sort through large volumes of paper or electronic catalogs, buyers are able to build custom catalogs that include only the items the company is interested in. Additionally, this method increases volumes of smaller numbers of items, which is another process used to generate volume discounts.

For more information on how SafeSourcing can assist you in exploring your procurement solutions for your business, 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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What always causes delays in the running of any e-RFX?

Wednesday, November 1st, 2017

 

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

Have you ever heard a buyer say I can’t find or don’t have a specification for that product or service? Or, I’m not sure how much we spent on that last year. Or I’m not sure if we have a current contract in place or when it expires if we do. Don’t’ laugh, because this is all too common at the best of companies. We all know this is true and that it happens every day of every week. How in the world can the specification be missing or not exist in the for something you are currently buying? How would we even understand if what we are receiving is what we ordered? Back door receiving systems have tracked this for years. What happens if we order one type of copy paper like recycled 96 white, and receive a lower quality product?

The above examples have always amazed me because an original order had to be placed at some point in time. In many cases the invoice (at least the original one) may even reference the product number or description if not both. Sometimes the invoice even calls attention to the terms and conditions. In fact, it’s a pretty good bet that the incumbent supplier has a copy of the original contract and specification on file that can be obtained with a simple phone call. On many occasions when hosting e-negotiation events new sources of supply may help to clarify specifications through their questioning about the upcoming bid collection. And then, and it is a big and then, there is of course the internet and sites like Yahoo, Google, and Bing.

If your procurement department has this type of issue, please contact a SafeSourcing customers services account manager. I’m sure they can bail you out in about 5 minutes ninety nine percent of the time.

We look forward to and appreciate your comments.

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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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