Archive for the ‘Online Reverse Auction’ Category

E-procurement.What?s in a definition?

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.

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Retailers; how much are you really saving with reverse auctions and other e-procurement tools.

Monday, August 16th, 2010

Further more; your buyers can not save you as much as you might save if you used these types of tools. So when and if you do, make sure you measure and understand the true savings.

There are all sorts of e-procurement companies. Not all focus only on retail. However, all of them have web sites and all of the web sites tout savings that are all over the map. The question is what type of savings are they talking about. Following are some of examples.

1.?Total low quote savings.
2.?Total low quote company savings.
3.?Total savings awarded companies.
4.?Total realized savings.
5.?Total savings versus budget period to date.
6.?Total category savings.
7.?Total savings year to date.
8.?Total annual realized savings.
9.?Total potential savings.

Companies really have to be specific as to what they ask each company relative to savings opportunities and make sure they have a formula in place for calculating savings over the course of the contract period for which the products are being sourced. There are all sorts of missed opportunities associated with actual event based low quote savings that can be created by lengthy review periods, delays in sample evaluation, extended award time periods, delays in contract dates, switching costs within the finance department, delays in shipping, specifications not being matched and specification creep that results in adding more expensive non specified items.

The bottom line is that you may have had low quote savings of 28% and that?s great. You may have had net realized savings of 18% and that?s great too. However if you don?t have a plan as to how you will measure savings you won?t know what caused the leakage and it can?t be fixed.

We look forward to and appreciate you comments.

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Retailers you don?t know what else you can get that is extra from a reverse auctions unless you ask!

Monday, August 2nd, 2010

My wife went to lunch at a restaurant she has never been to before with 7 of her friends the other day. One of her friends called in advance and asked to speak with the executive chef. She told him she was coming for lunch with 7 of her friends and wanted to have the chef prepare a sampling of their best appetizers for the group and would like the restaurant to comp the expense for the group. Are you kidding me that is incredibly ballsy? Here?s the kicker, the restaurant did it. In addition the chef came to the table and explained the selection and what would go well with it for lunch. He also bought each attendee a glass of wine. Most of you are smart enough to figure out the benefit to the restaurant. I can guarantee you we will go there for dinner.

Here?s the tie in.

I always suggest to retailers that there is more to be gained from reverse auctions and other e-procurement events than just price concessions. With that said, cost still tends to be the primary driver or motivation for most retailers. The question always comes back to me; like what? My answer is that you have to use your imagination. Take a look at your product. Ask yourself what more would you like?

1.?A better price?
2.?An extended warranty for free?
3.?Free shipping?
4.?An onsite account manager?
5.?Premium club membership?
6.?One free night for every three nights stayed in a hotel chain?
7.?One car grade upgrade from your standard contract for free?
8.?100 free meals for every $10K spent at a specific restaurant chain?
9.?Free installation services
10.?A donation to your frequent shopper program gifts catalog.

This really becomes a brainstorming or whiteboard event. Once you come up with an idea relative to a certain product, just ask for it in your specification. You?ll never know if you don?t ask.

We look forward to and appreciate your comments.

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Are retailers still using reserve price reverse auctions any more?

Friday, July 30th, 2010

A reserve is also sometimes called the desired price, or a ?qualification price?.? Careful thought is required on the part of the retailer in determining their reserve price. Quite often retailers just rely on their existing or current price from their last contract. If careful thought is not given, this may in fact create an unreasonable expectation that results in less participation from prospective suppliers, particularly if the market has changed dramatically in an upward direction since the last award of business. You have to be very careful that once a reserve is met that suppliers will stop bidding because you have already indicated your desire price point.

In a reserve revere auction if the bidding does not reach the ?reserve price?, the buyer is not obligated to award the business based on the results of the reverse auction. This can also add risk to the participation level of suppliers. However once the reserve price is met, the buyer is obligated to award the business to a participating supplier or group suppliers based on previously published auction rules. Most reverse auctions today include terms and conditions that protect the retailer from awarding the business whether the reserve is met or not. This author would caution that if you are just trying to collect prices to analyze market conditions, tell the suppliers up front. If you set a reserve plan to award the business.

Additional pricing considerations can be given to adding other price points or qualifiers in a reserve price reverse auction such as entering a market price. In the case of fuel, this may be from a price index such as OPIS, Platt or Gulf Coast. This information can be visible or blind to the supplier, but let?s the retailer compare a suppliers mark up strategies. This also offers a nice opportunity to calculate cost avoidance during an up market.

We don?t see reserve auctions to often anymore, but understanding the different types of formats and tools available to you and assessing them in your event setup for their potential impact can add to the quality of the data collected and the event itself.

We look forward to and appreciate your comments

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Retailers here are twenty additional reasons why you ought to be running reverse/forward auctions.

Monday, July 26th, 2010

This author has posted a number of times on twenty reasons why retailers should use e-procurement tools including everything in the procure to pay process. I post that subject a number of times a year. Quite frankly there are many more than twenty reasons. Here is a different type of look at the same subject.

1.?It?s about the money.
2.?It?s not about the money.
3.?You don?t have specifications even if you think you do.
4.?You will have specifications once the event is complete.
5.?You have great relationships with all of your suppliers.
6.?You don?t have great relationships with all of your suppliers.
7.?You don?t know where to find additional sources of supply?
8.?You will have at least 8-10 new sources of supply for every category you run.
9.?All of your management team collaborate and make sure they aggregate their purchases. No they don?t.
10.?You are getting the best prices in the market according to your buyers.
11.?Believe me; you are not getting the best prices in your market.
12.?All of your contracts are less than two years old! Ha, Ha Ha! They should be.
13.?All of your overstock and out of cycle inventory has been removed from the back rooms of your stores! If it had, your shrink would be lower.
14.?You are aware of all of your suppliers green and safety programs?
15.?You are taking advantage of all of your suppliers green and safety programs.
16.?You are measuring all of your commodity purchases against the appropriate indices.
17.?You are getting the best use of your team because they have all the tools they need in order to source products and services efficiently.
18.?Your people could be spending more time on more important projects if they used low cost SaaS e-procurement tools.
19.?You have never had a contract auto renew or evergreen that cost you money.
20.?All products and services you buy are top quality because you evaluate them regularly.

If you can only find three issues above that plague your operation, then you should be using e-procurement tools. Call us today. We?ll do the first one for free.

We look forward to and appreciate your comments.

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Retailers we Dare you to Compare. We?ll run one event for you FOR FREE and if you don?t save a minimum of 15%.

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

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Retail procurement needs to step up. Your Investors, Consumers and other Stakeholders demand it!

Wednesday, June 16th, 2010

What troubles this author most about this is that the industries included in the Aberdeen Group study such as education, manufacturing, energy, utilities, financial services and others are all using these tools to trim their costs and improve earnings. Retail has had at best terrible earnings numbers historically with the supermarket industry averaging net earnings of below one percent (1%).

I was just talking with our CFO today about the impact of these tools. I used a very realistic example of a $2B supermarket company with one percent net earnings of $20M.? I can see the board now. If the same retailer were to source as little as $10M of their budgeted spend and reduced costs by just 20% or $2M, net earnings would improve in the budgeted year by 10%. If you are a CFO and can?t get excited about that, I?m not sure what would excite you.

This is not just rhetoric. We have customers with savings that are almost double that with a huge resulting impact on earnings. I know that there are a lot of bloggers and others out there that doubt the impact of e-procurement tools or think that reverse auctions as an example have run their course. Quite frankly that thinking is misguided because in the? retail industry the large majority of companies have never used these tools and have been doing business with many of the same suppliers for more than two years. These are both indicators of the fact that you are overpaying for products and services.

You can be comfortable and be busy or you can grab the bull by the horns and improve costs, earnings, stock price and even the bonuses of your management team.

We look forward to and appreciate your comments.

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Safesourcing Inc. completes a successful year two.

Friday, May 7th, 2010

It hardly seems possible that we launched our company two years ago. At the time there were indicators for those paying attention of trouble in the global economy but know one had any idea just how bad it was going to get. In hindsight what a time to launch a company. When customers and business partners asked me why, my response was if you are doing what you believe in and the results you promise are true, then there really is no bad time to launch a business.

Our promise has been the same from day one, to reduce the cost of goods and services regardless of a company?s size or the size of the category being sourced. And, while doing so improve quality, safety and environmental focus. Today, two years later our customers will attest to the fact that we have held true to that promise.

Following is a short list of accomplishments that we are very proud of.

1.?Over 700 educational blog posts relative to e-procurement issues of importance.
2.?Over 1500 useful procurement related wiki terms and definitions.
3.?Added an average of more than one new customer for every month in business.
4.?Grew our supplier data base to greater than 380,000 retail suppliers
5.?Sourced 100?s of categories from commodities to finished goods and services.
6.?Sourced categories as small as $5K with savings > 30%.
7.?Sourced categories as high as $80M.
8.?Never held an e-negotiation event that did not result in savings.
9.?Conducted every process in e-procurement including RFI, RFP and RFQ.
10.?Installed our product in Asia in a multi lingual implementation.
11.?Averaged over 24% savings over two years.
12.?Developed a unique process for sourcing small spends for the retail mid market.
13.?Grew our database to over a terabyte of data.
14.?Helped companies source with environmental and social consciousness
15.?Today released SafeContract? a fully featured hosted Contract Management System.

To our customers thank you for your support. We endeavor to earn your business every day. To our business partners thank you for your guidance during a tough economic period. To the retail industry our goal is to be your best vehicle for reducing costs and improving earnings with an increased focus on corporate social responsibility.

Thank You.

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How should companies decide what products and services can go through the e- negotiation process?

Monday, April 19th, 2010

There really is no reason to shy away from taking any product or service to reverse auction as part of your overall e-negotiation strategy to compress pricing.

There are however some simple questions companies can ask themselves when considering any product, service, or category for consideration in the e-negotiation process. Several but not all of those questions would certainly include the following three.

1. How many suppliers are available and willing to bid on your business?

It?s obvious your company is already aware of your incumbent suppliers. The more important question is what other suppliers are available and how can you find them.
Several will exist within you own geographical area that you are not even aware of. Many others may be located across the country that are also very interested in earning your business.

2. Does your company have the complete detailed product specifications for this product or service readily available or are you familiar with a source from which you can get them easily?

Are your products specifications kept in some form of central repository or are they in the mind of your buyer? This is the single largest obstacle to successful e-negotiation events.

3. How much of the product or service are you willing to commit to buy over what period of time?

What period of time are you buying for? Is there an opportunity to contract for a longer period of time in order to raise volumes? Is there an opportunity to aggregate dissimilar products in order to increase the e-auction size?

If you are well prepared, there are suppliers willing to bid for your business that offer quality equal to or better than what you are presently receiving for your products and services at a better price and with better service. That?s win-win-win.

We always look forward to and appreciate your comments

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Retailers need to think it through before trying a do it yourself program when it comes to e-negotiation or e-procurement

Wednesday, April 7th, 2010

This author has met with many large companies that are using e-sourcing suites or tools provided by some of the largest names in the industry. After we have reviewed what we do and how we do it and then compare what they are accomplishing the following question always comes up. Why are you generating significantly higher savings than we are?

The answer is pretty simple in most cases. You have bought a software suite or tools and rather than using them as designed you have just incorporated your old practices into new tools. In addition, further training or access to your supplier?s data in the form of sources of supply etc. was not included in your initial cost.

A full service solution provider should be able to create, execute and support all auction activity including but not limited to the following.

1.?Assistance in selecting Auction categories
2.?Market insight
3.?Determine the timing of category auction
4.?Identification of potential quality suppliers in addition to existing
5.?Building on-line auctions
6.?Supplier contacts and training
7.?Execution of live bids
8.?Trouble shooting during live bids
9.?Compiling and communicating reports within 24 hours
10.?Award and Non-Award notifications to Suppliers
11.?Providing ongoing customer support
12.?Monitoring Supplier performance
13.?Feedback from Retailers/Suppliers
14.?Analyze the quality of each auction

The above deliverables if not executed in a self service program will result in less than maximum results and potentially failure of your program.

We look forward to and appreciate your comments.

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