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You practice, I practice, and we all practice. And practice does not necessarily make perfect.

Monday, December 12th, 2011

However, what this author does know is that perfect practice does make perfect.

According to Wikpedia a best practice asserts that there is a technique, method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method or process. So who determines that it is the best practice is open to conjecture. If my results are better than my competitor, it seems as though my practices would be the best. So maybe you should just begin by asking for examples of results and references.

I don’t believe that best practice is just following a standard way of doing things that can be carried out in the same way by multiple organizations. A best practice is a life long process that must evolve over time as the tools, business conditions, expertise and current processes require.

If one uses best practices, should not the result be an ideal state that a person or an organization set out to achieve in the first place. In fact if the process used is actually a best practice shouldn’t all of a companies customers use the same process. I’m not sure that this is ever a question one asks when looking for a referral about a companies service offerings. Please tell me about these companies’ best practices. Are they consistent and carried out each and every time at each an every customer to the desired result. You know the answer to that as well as I do, it’s NO.

One way to ensure good quality results is to provide templates that evolve with use and can then be used over and over again and are reevaluated at the completion of each practice and changed again when need dictates. This then requires passing the practice on to other customers in order to insure integrity and validity of the most current process. This elevates the actual process beyond just a buzzword and moves a particular process in the direction of becoming a best practice that drives similar results on a consistent basis.

I will continue to call our services offerings high quality process techniques focused on continuous improvement that deliver anticipated results. Our customers, supplier participants and business partners will determine if they are best practices for them.

We look forward to and appreciate your comments.

Posted in Business Sourcing, Contract Management, Strategic Sourcing

To Award or Not to Award…..

Monday, November 28th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

The process of negotiating deals with vendors has long been seen as one in which the customer “beats up” the vendor over price; sending the message that price/cost is the most important thing involved in making a decision about who you award business to.  Today’s economy would tend to back this mindset, however, in evaluating based on price alone you could be doing your company a great disservice.  Today’s blog is going to focus on a few areas to keep in the forefront as you make your purchasing decisions.

Apples to Apples – Whether by Request for Proposal, Reverse Auction, or just placing phone calls to gather pricing, the end result of your comparative research must ensure that you are looking at the same offering from each vendor (or the nearest comparison possible).  Even in the case when shopping a commodity-type product such as computer hardware there are many chances for the vendor to increase their value with other services they offer.  When comparing vendors make sure the products, services, extra offerings, etc. are being evaluated evenly. 

Reputation  – Although it would seem to go without saying, many companies will take the lowest bid of an apples to apples comparison without finding out much about who they are about to spend their money with.  This is seldom the type of practice people would do with their own personal purchases and yet there are many companies who are so focused on price that they fail to do the research to make sure the vendor they are about to select has a proven track record of performance.

Cost of Change – Assuming that you end up finding a new vendor to do business with, one of the things that must be considered early on in the discovery process is the cost of change.  Before you ever make a phone call, send out an RFI, talk to a vendor; the business needs to determine what the costs of switching vendors will be.  Knowing this in advance will allow you to set the stage with new vendors you are talking with as negotiation points and will possibly allow you  to possibly eliminate those costs should you ever have to change again.  There  are multiple levels of cost for switching vendors and you should know each before starting the process of looking for potential new suppliers.

Policy Changes –The final area that should be examined in the process of evaluating your vendors is the policies surrounding the goods or services being looked at.  Some companies have policies developed long ago and for good reasons that dictate the companies they can do business with.  Some of these policies (such as ones relating to specific geography) may need to be examined so that companies that can provide good value to your company can still be considered for your business.

For more information on gathering information and pricing from vendors and assistance with the evaluation of that information, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

Posted in Contract Management, Sourcing Strategy, Strategic Sourcing

When using e-procurement tools are you just driven by a reduction in price?

Friday, November 4th, 2011

The real question you should be asking is just what makes up total cost to begin with. A good friend of mine who has been a fortune 100 retail CFO helped to crystallize my thinking in this area. As such we look at cost differently today than we did a year ago. So, when we run an RFX event for our customers at SafeSourcing we think of cost in the form of three basic dimensions that cause a different type of thinking during discovery and strategy. They are as follows.

1. Price: This is the unit cost. It is expressed as an amount per unit. Price involves vendor comparison and negotiation.
2. Use: This is the consumption of a product or service. This is driven by the activities or needs. Authorization and control processes are key elements. Without these, you may not derive all of the savings from negotiating price alone
3. Mix: This is the inclusion of similar products or services to achieve a similar result. Company policies support this.

Certainly there are many more aspects to running a successful RFX like making sure the T&C’s are clear and that the process is managed through the award and contract stages. These steps or KPI’s along with the ones mentioned above collectively serve to insure that your strategic sourcing strategy uncovers all of the clues that have or may cause leakage to your sourcing events. They also proved the basis of a scorecard system that can track progress over time

We look forward to and appreciate your comments.

Posted in Business Sourcing, Contract Management, E-procurement, Sourcing Strategy, Strategic Sourcing

What is a price or commodity index and how is it used?

Wednesday, November 2nd, 2011

I was reading our local paper today “The Arizona Republic”. In their MARKET TIP on page 3 of the business section they had a nice synopsis of the Consumer Price Index or CPI relative to measuring inflation. It was brief and holds true in terms of how indices are used to measure the rise or drop in prices over time. In your annual contracts you may wish to review them quarterly and have escalator language that locks in price increases or decreases versus a specific index to protect you from volatile commodity markets like the oil market.

According to the Bureau of Labor Statistics website, the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI is used as an economic indicator, a deflator of other economic series and as a means of adjusting dollar values. The CPI affects nearly all Americans because of the many ways it is used.

To learn more about how the CPI index is used please visit the Bureau of Labor Statistics website.

If you’d like to learn more about the variety of indices and how they impact the many products that you buy for reuse as well as resale, please contact a SafeSourcing representative.

We look forward to and appreciate your comments.

Posted in Business Sourcing, Contract Management, Sourcing Strategy, Strategic Sourcing

Contract Management 101.

Tuesday, October 25th, 2011

Beyond storage, understanding  and alerts of the Meta data that will mitigate your risk relative to contract leakage, understanding the terminology in your contracts and how they are organized is a daunting task.

There are many law dictionaries available in hard cover and over the internet that can help, but remember just having one does not make understanding these documents any easier. Here is a list of many of the most popular.

1. Anderson’s Dictionary of Law (1893)
2. Bouvier’s Law Dictionary 1856 Edition
3. Criminal Justice Today Glossary
4. Criminology Today Glossary
5. Criminal Law Glossary
6. Canadian Bankruptcy Glossary
7. Divorce Law Dictionary
8. Duhaime’s Law Dictionary
9. Everybody’s Legal Glossary
10. Glossary of Commercial Fraud
11. International Law Glossary
12. INS Glossary of Immigration and Naturalization Law
13. Law Glossary
14. Merriam-Webster’s Law Dictionary
15. Legal Lexicon’s Lyceum
16. Merriam-Webster’s Law Dictionary
17. Oxford Law Dictionary Top of Form

Certainly one could argue that some of these might be eliminated for business use, and this author would agree. However others might argue that separating from an unfavorable contract or supplier relationship  can be as difficult as a divorce so maybe we should leave that one on the list.

If you’d like to eliminate your contract leakage, give SafeSourcing a call.

We look forward to and appreciate your comments.

Posted in Contract Management

What are you doing about your Contract Management Needs?.

Wednesday, October 19th, 2011

Most contract management systems have relatively short ROI periods. In fact a company might even be lucky enough as they go through their data collection process to find a single contract that when analyzed might pay for the entire system.

There are all sorts of benefits associated with using contract management software. Probably the most important and least recognized of which is finally having all spend data in one location enabling more effective negotiations. If you have ever run an e-procurement event and tried to assemble a simple specification or incumbent supplier data you already understand the time involved. Administrative costs alone can be reduced by 25-30%.  That’s a huge number in today’s world of insufficient staff.

If you want to get started, here are some basics that a system should be able to provide.

  1. Create contracts
  2. Maintain contracts
  3. Control contracts
  4. Track user access to contracts
  5. Track and monitor the status of contract Meta data
     a. Award date
     b. Contract begin date
     c. Contract end date
     d. Begin delivery date
     e. Escalator language
     f. Notification clauses
     g. Termination Clauses
  6. Automatically alert buyers and management of required actions
  7. Custom Reporting
  8. Supplier Scorecards

If you want to get started tomorrow, contact SafeSourcing and ask about SafeContract™.

We look forward to and appreciate you comments

Posted in Contract Management

When developing your terms and conditions don’t forget the potential for BARTERING!

Thursday, September 29th, 2011

According to Wikipedia: Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.[1] It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.

There are a number of companies that primary business model is to use bartering in part as their engagement model. Although the model is slightly different at each organization, the general theme is that a company can trade excess inventory for just about any category and receive credits that can be used in part to buy or acquire other products and services that they need for their business. An example might be to consolidate and eliminate backroom stock in retailer’s stores in exchange for credits and use those credits to buy supplies that are regularly used such as paper or plastic bags etc. This process can also have a positive impact on shrink as well as preserving cash.

A unique use of this process that I recently read about in the Arkansas Democrat Gazette discussed a company agreeing to pay for building renovations if they had their current contract extended. The article by Debra Hale-Shelton titled UCA trustees call off audit of vendor bid. The legality of this transaction is in question, but it is in fact a form of Barter.

If you are going to consider barter as a payment or terms option, make sure you understand its use and that it is an above board part of negotiation that is well defined in your terms and conditions.

We appreciate and look forward to your comments.

Posted in Contract Management, Sourcing Strategy, Strategic Sourcing

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

Wednesday, September 28th, 2011

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.

We look forward to and appreciate your comments.

Posted in Contract Management, E-procurement, E-procurement Solutions, E-procurement Tools

Who is reviewing your contracts? Are they missing anything?

Wednesday, July 6th, 2011

The answer is neither or maybe both. The first important question for each is who is actually evaluating the contracts, and just because they have a law degree does not mean that contract evaluation is a specific skill set the individual possess. This author recommends choosing who will provide this function within your company and then makes sure they have the skill set to do their job and stay up to date.

There are any number of contract management certificate programs available from prestigious and well know institutions. To name a few, there is Villanova University, The University of California Irvine and St. Louis University. In addition there are organizations that also offer this training. Probably the most well know is, the National Contract Management Association or NCMA that has been around for over 50 years.

Many of these organizations offer on line courses that can be completed within a reasonable period of time. Many of the University and College courses are actually accredited as well as affiliated with NCMA.

Once you have resources that are certified, provide them with the tools they need to do their job. All companies have 100’s to as many as 1000’s of contracts and most do not have a contract management solution. These solutions today are available via the cloud in Software as a Service models for very little investment. Most of these providers will also assist you in the creation of your Meta data and database population. 

Contact SafeSourcing for more information.

We look forward to and appreciate your comments.

Posted in Contract Management, Strategic Sourcing

Buyers; Soybeans are down and the Corn harvest will be up. So What?

Friday, July 1st, 2011

It appears as though the corn crops will be better than expected this year and as a result drive prices down on the supermarket shelves. The reason is because farmers planted more corn than usual based on what the futures market was telling them relative to other crops. Because they planted more and the yield will be higher futures actually went down. This should impact the price we pay for a variety of products impacted by corn.

If you don’t think that corn impacts many products, think again. Corn impacts beer, aspirin, livestock feed, carbonated beverages, Ethyl alcohol, textiles, soaps and hundreds of other products.

If you’re a buyer, you need to be aware of this as the impact in the market typically trails the crop by about 3 to 6 months. So while you are buying products you need to understand that costs should come down before year end and make sure the language in your contracts allows you to take advantage of this. Think de-escalator language on any contract between now and year end.

We look forward to and appreciate your comments.

Posted in B2b Supply Chain, Business Sourcing, Contract Management, Sourcing Strategy, Strategic Sourcing

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