Archive for the ‘Online Procurement’ Category
Wednesday, February 9th, 2011
If you are looking to break out all of the other costs associated in a product bid, just asking to have freight included or free freight within a certain radius or other similar language will not accomplish net landed cost or allow you to manage it going forward.
Quite often the terms net landed cost, haul back, FOB and others come up during the logistics portion of a sourcing event. Some times they are bid on separately and or delivered by a third party. When a company says they want a net landed cost what they are referring to is the cost of a product or products plus all of the relevant logistics costs, such as transportation, warehousing, handling etc. In other words, what’s my cost when it gets here or where we want it?
If you want to drive the best pricing and service possible you need to understand the terminology and make sure it is clear in your specifications and terms and conditions.
We look forward to and appreciate your comments.
Posted in B2b Reverse Auction, Online Procurement, Online Reverse Auction, Procurement Auctioning, Procurement Purchasing
Tuesday, January 11th, 2011
Competitive bidding is the process of inviting and obtaining bids from competing suppliers in response to documented specifications, by which an award is made to the best overall bid that meets or exceeds the specifications in areas such as price and quality. Probably one of the most important elements and most overlooked is that of incumbent supplier communication once a bid has been authorized. That is not setting any false expectations with your incumbent suppliers. As you already have a relationship you will most likely receive calls, emails or texts as to what is going on. Your answer has to be that we value our relationship and encourage you to use this process as it is the only process by which we will review bids.. Do not indicate that everything will be ok or that things will work out just fine or any similar language. If you are using a 3rd party, instruct your supplier to provide any questions or communications through the third party only.
The e-negotiation process contemplates giving potential bidders a reasonable opportunity to bid, and requires that all bidders be placed on an equal playing field. Ideally each supplier must bid on the same documented specifications, terms, and conditions for all items. However breaking out individual line items that a specialty supplier can provide bids for can help to reduce the opportunity for suppliers to manage the overall gross margin of their bids and drive higher savings. The purpose of competitive bidding is to stimulate competition, prevent favoritism, and secure the best goods and services at the lowest possible price, for the benefit of the host company. Competitive bidding cannot occur where specifications, terms, or conditions prevent or unduly restrict competition, favor a particular supplier, or increase the cost of goods or services without providing a corresponding tangible benefit for the host company.
The above message needs to be communicated to any and all associates that are involved in the process and may have a reason to communicate with suppliers.
We look forward to and appreciate your comments.
Posted in E-procurement, Eprocurement Auction, Global E-procurement, Online Procurement, Online Reverse Auction
Friday, September 10th, 2010
On demand software or SaaS (Software as a Service) by its nature is an internet based application and as such is accessible from wherever you happen to be as long as you have a network connection. With today’s broad band offerings that literally means anywhere. So the first rule of thumb is that it provides easy access. In addition, since most of the newest versions of SaaS applications are native web based applications, they integrate very nicely with most office infrastructures. With Microsoft being the most deployed environment, data is easily exported or imported to formats that comply with their standards. In many cases these tools can also be made 100% available to you within days of contract signature
Most of us have horror stories about when our PC, Network, Application etc. went down and we were not able to complete tasks at work. When we call our internal service department, the response is normally less than what we would like or hurry up and wait. With a hosted software application, it is the responsibility of the SaaS provider to maintain the application. They know up front that if they don’t do a superior job of support and availability, that you the customer can go somewhere else to find a provider that will. This is not the case with internally installed corporate applications.
Your data at a SaaS provider is also often more secured than the data at your corporate office. Since this is the core business of a SaaS provider, the architecture of the application normally has multiple levels of redundancy, failover recovery and is backed up regularly.
Typically, SaaS applications are easier to change than traditionally installed corporate applications. There are not as many feature upgrade charges with every point release in a SaaS environment because the provider needs to provide these features to continue to attract new customers and to keep up with the pace of the industry.
Finally, the total cost of ownership is much quicker in a SaaS environment than traditional application software installations. Often as much as 100% faster. In fact there are many stories of breakeven ROI’s with your first series of e-procurement events. The biggest question you have to ask of your future provider is are you a true SaaS environment with the newest technologies available or are you a reengineered ASP provider. I’ll comment more on that later.
We look forward to and appreciate your comments.
Ron
Posted in E-procurement, E-procurement Solutions, E-procurement Tools, Online Procurement, Online Reverse Auction
Thursday, September 2nd, 2010
I was reading a blog post from the Doctor over at Sourcing Innovation today titled “A Hitchhiker’s Guide to e-Procurement: Terminology” and I thought it was great as well as very timely.
Ultimately it is up to practitioners and solution providers of these tools to educate their customers as to what the proper terms are for the tools they are using. As an example E-RFI, E-RFP, E-RFQ. I have numbers of customers that have used other solution providers and not only are the definitions different by customer; they are actually different within a specific company. In some cases everything is referred to as a reverse auction and in other situations the companies have made up their own name for the service or tool.
This author uses Wikipedia and Wictionary quite often as a source and in this case, they have a very good definition that covers most of the terminology in the entire e-procurement space as well as related B2B and B2C internet based or private network based functions. As your company moves in the direction of a computerized supply chain management solution for your company understanding what you are asking for and what you are using will make both your job and that of your solution provider easier.
We look forward to and appreciate your comments.
Posted in B2b Reverse Auction, B2b Supply Chain, E-procurement, E-procurement Solutions, E-procurement Tools, E-supply Chain, Eprocurement Auction, Online Procurement, Online Reverse Auction, Procurement Auctioning, Procurement Outsourcing, Procurement Purchasing, Procurement Solutions, Procurement Tool, Product Procurement, Reverse Auction, Reverse Auction Procurement, Supply Chain Procurement
Thursday, August 19th, 2010
Quite honestly this is a fairly complex question so the answer is not simple. To begin with let’s take a look at just what a market (retail) exchange is.
One of the earliest exchanges in the retail space was called the Retail Exchange which was sponsored by some very large retailers and is still available today from a company that bought the system from its retailer sponsors. As simply as possible, a Market (Retail) Exchange is a business to business or B2B E-commerce platform that allows Suppliers, Resellers, and their customers or buyers to offer, purchase and manage their goods and services in a simple and effective way. Typically an organization must be a member of the exchange in order to participate. Once a member the organization can then conduct business with other organizations by establishing on line connections with each other. Typically exchanges are a shared hosting environment and in some cases for very large companies dedicated server implementations. In recent years exchanges have migrated to SaaS or software as a service models in order to address wider markets.
The success of an exchange is based on the number of suppliers or resellers that belong to it and their willingness to participate with a retailer for their business. The activity is more of hands off approach once your offer is posted that can include punch outs to a supplier’s website and catalog services for sourcing of products.
From my perspective I like the personal touch of the historical RFX process in the form of a SaaS full service offering that actively engages new sources of supply and sells them on wanting your business. There is a much smaller investment from both a financial and resource perspective. If you want to learn more about the RFX process please visit SafeSourcing Blog archive or the SafeSourcing Wiki.
We look forward to and appreciate your comments.
Posted in B2b Reverse Auction, B2b Supply Chain, E-procurement Solutions, Online Procurement, Procurement Outsourcing, Procurement Solutions, Retail Supply Chain
Tuesday, August 3rd, 2010
This is as true for e-negotiation events as it is for personal negotiations. The question is how the tools you are using allow you the flexibility to do so.
I was reading an article in the USA TODAY on Friday July 30th by Jillian Berman titled “Negotiate your way to savings”. The lead in was Cable TV, cell phone bills are ripe for cutting. This author would add the following; so is everything else.
So what is a negotiation? According to Wikipedia, negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution.
In terms of our discussion and the article we are talking about pricing and services. The article goes on to suggest what they call tenacious bargainers tips. Two of the tips are; don’t be afraid to complain and negotiate away extra fees up front.
Retail buyers need to do the same and the ability to think individually and act collectively when they develop the specifications and rules of their e-negotiation events. What would you ask for if you were buying this product or service for yourself and then be just as aggressive when it comes to your department and company?
We look forward to and appreciate your comments
Posted in Business Sourcing, Online Procurement, Strategic Sourcing
Tuesday, July 27th, 2010
In other words, there are too many companies that have been at this for a long time whose pricing is way too high in the retail marketplace for what they provide.
I was speaking to a large retailer recently that has an unlimited use tool in place from a very large player in the e-procurement space. I asked what type of savings they were able to achieve and how many people they had assigned to handle events, supplier communication, hosting support etc. These are all of the normal questions.
After we had discussed at least 20 different categories, it occurred to the both of us that the savings from our events were at least a third higher than the savings from the use of the unlimited tool. Even if you added in our fees, the savings were still substantially higher on event by event basis with SafeSourcing. There are a number of reasons for this. One is that to many times when retailers deploy a solution internally or as a SaaS offering they default back to their old way of doing business with a new tool once the solutions provider has left. Supplier research is limited, the number of participants is less, training is inadequate and the result is lower savings. There are also proprietary benefits to the SafeSourcing solution that I won’t share.
Another way that retailers over pay, is when an older company comes in and matches the lower cost of doing business with a newer and better provider in order to win the business. This model will not last because many of these older companies are not structured in such a way that will allow them to absorb these lower fees profitably on an ongoing basis. Over time your price will continue to rise. In fact next year, your price should go down if you are running the same event again. Hasn’t most of the work already been done in the past?
Some good questions to ask your prospective solutions provider would be the following.
1. How many events per month can one of associate host?
2. What are you doing to automate your solution to take out cost?
3. Will we pay the same in year two as we paid in year one for identical events?
4. Is your cost higher because of your investment in brick and mortar locations?
5. Is your cost higher because of your headcount required to run events?
6. What are your average savings for events over $100K?
7. What are your average savings for events under $100K?
There are certainly more questions but you get the idea. Be careful out there.
We look forward to and appreciate your comments.
Posted in Business Sourcing, E-procurement Solutions, E-procurement Tools, Eprocurement Auction, Online Procurement
Wednesday, June 30th, 2010
The following position was offered relative to the title. “This has always been a great question for retailers”. Should we attack the bottom line by focusing on shrink, cost of goods or gross margin?
During the post we answered the areas of shrink and cost of goods and services. The question now is how would we focus on gross margin and what would the bottom line impact be?
Let’s begin by restated our gross margin assumption. 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%. Now that we know our gross margin, it is pretty simple to measure the impact. The first step is to look at the categories which generally fall into gross margin reduction such as the expense category. Examples might include employee benefits, construction, insurance and not for resale purchases etc.
We already know that our gross margin dollars are equal to 25% of our fictional company’s sales of $1B or $250M. Therefore the impact to the bottom line at most could be a percentage of $250. The next logical step is to look for the largest category spends with in the gross margin area. Let’s assume that employee benefits are 15% of payroll costs and that payroll costs for our fictional company are 15% of revenue. For our $1B retailer payroll would be $150M and benefits would be 15% of that or $22.5M. If we attacked health benefits costs and were able to reduce them by 20% the improvement to the bottom line would be $4.5M or 45%. This would certainly be a worthy target, but would not impact net profit as much as our shrink or COGs models as discussed yesterday. To summarize the impact to net profit as discussed in both posts.
1. COGS up to 300%
2. Shrink up to 100%
3. Gross Margin up to 45%
Please remember these numbers are fictitious.
We look forward to and appreciate your comments.
Posted in Business Sourcing, E-procurement Solutions, E-procurement Tools, Online Procurement, Procurement Company, Procurement Outsourcing, Procurement Purchasing
Tuesday, June 29th, 2010
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.
We look forward to and appreciate your comments.
Posted in E-procurement, E-procurement Solutions, E-procurement Tools, Online Procurement, Online Reverse Auction, Procurement Outsourcing
Monday, June 21st, 2010
SafeSourcing has averaged over 30% savings for the entire time we have been in business across hundreds of millions in spend volume. This includes single event spends as small as $20K and as large event spends as large as hundreds of millions. You can rest assured that you can source all products and services with SafeSourcing regardless of how small or how large.
We believe there are very important reasons for these results. A few are as follows.
1. Our Event Template Library.
2. The SafeSourceIt™ Supplier Database with over 380,000 sources of supply.
3. Our customer services to assist buyers in building quality specifications quickly.
4. Event setup strategies that drive the best results.
5. Time to event.
6. Percentage of new suppliers per event.
So, here is the offer. Source any product or category regardless of the size of the spend and if you don’t save at least 15% THE EVENT IS FREE. Experience the difference for yourself in retail e-procurement leadership.
We look forward to and appreciate your comments
Posted in B2b Reverse Auction, Eprocurement Auction, Online Procurement, Online Reverse Auction, Procurement Company, Reverse Auction, Reverse Auction Procurement
