Archive for the ‘Procurement Auctioning’ Category

Trusting You General Contractors!

Monday, February 24th, 2014

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

In spite of the past few rough economic years, many businesses have continued to grow building new locations, warehouses and divisions while be able to upgrade, remodel and rebrand their businesses to match pace with the 21st century.  As part of this growth, companies have contracted with General Contractors all over North America to help with these remodels and new builds without giving much thought to a big expense that results from these activities; fixtures and supplies. 

General contractors have established relationships and pricing for these materials which they then pass along to their customers with a markup.  In small projects this can be worth the extra money paid because the General Contractor has taken the time to leverage their spend for better pricing and they remain responsible for following up on warranty issues should they arise.  When the projects are much larger and especially if they are more frequent, this model begins to benefit the customer less and less.  Today’s blog will look at some of the reasons companies in this latter situation should look a sourcing the materials and fixtures on their own.

No visibility to price  – As is often the case with construction projects, visibility into every aspect of a job is uncommon.  In fact, receiving a $50,000 invoice with only a few line items is more normal than not.  The problem with this approach is that a customer has no idea how they are truly paying for the fixtures, material and equipment being used.  Without this detail the customer cannot base, historically, whether they are getting the best value for their dollar from their contractor.  Customers with a large amount of spend have the capability to make their own deals with the manufacturers and then pass that pricing back to the general contractor along with an agreed upon markup for handling the inventory as needed.  Another option is to work with your contractor on a combined sourcing project to get overall lower prices that the general contractor can pass to you and leverage in their own way with their other customers.

Changes in quality – Another issue when the general contractor is in charge of procuring the materials and fixtures for a project is that quality can be compromised at time in order to improve margins.  When the customer makes their own deals according to their own specifications, they can use online sourcing tools like catalogs for contractors to use that will ensure the correct items are being ordered at the price they have already negotiated.  This ensures that both price and quality will remain locked in place.

Central Management of Warranties – Many customers use multiple general contractors for their projects especially of those projects are spread out geographically.  Because the general contractors manage the warranty issues for the fixtures and materials they purchase, it can be difficult to know exactly who to contact when certain issues arise covered by warranty.  When customers bring the procurement and management of those manufacturer relationships in-house they can have a central point of management when issues arise that can be integrated into company Intranets for remote locations to use whenever issues arise.  Employing the services of Repair and Maintenance managed service companies can also help manage this process.

Exploring the procurement of construction materials may not be something everyone company wants to do, but if the spend is large it should be one that is at least investigated.  For more information on how SafeSourcing can assist your team with this process 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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I could not believe the question, but it was asked in a category manager meeting.

Wednesday, March 28th, 2012

Google or Bing certainly might help here, but in the old days we needed to know this stuff. So let me give you an old fashioned answer.

Typically this author thinks of this process in the six steps that follow

   1. When buying a product or a service a decision is required to do so.
   2. Once the decision has been made, analysis of what you are currently  buying in what volumes for use in what locations that will continue to satisfy your needs to be completed.
   3. Your purchase offer is submitted to a supplier or suppliers in order to collect pricing and other information such as the Terms and Conditions required in making your decision.
   4. A contract is signed for the product or service that outlines the responsibilities of the involved parties as well as remedies if contract terms and conditions or volumes are not met.
   5. A purchase order is issued with the appropriate approvals that match to the specifics as outlined in the contract in order to properly manage the contract.
   6. Payment is generated based on the purchase order submitted against the contract.

Sometimes there is a steep where an LOI or letter of intent is issued between step 3 and step 4 in order to take advantage of contract terms earlier in the cycle.

So now what happens if you don’t have a contract management system or a purchase order management system? Generally it’s referred to as leakage. In about 12 months you will be very familiar with it.

Contact SafeSourcing and let’s see if we can help you out with our procure to pay solutions.

We look forward to and appreciate your comments.

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Collaborative Procurement: No Need to Wait to Buy

Tuesday, March 1st, 2011

Collaborative purchasing and co-op enterprises are concepts that are not new to the business world. 

For decades manufacturers, retailers and consumers have organized associations that allow their members to take advantage of lower pricing than they could normally get on their own due to the increase in the overall purchase amounts made by the collective group.

While this is a great advantage for smaller businesses and retailers, many companies think this is the only way to take advantage of this type of spend. 
Many businesses think that the amount of inventory they want to purchase is just too small to think about purchasing like this and so they wait for a period of time until they think they can justify the amount, all the while losing out on money they could have saved on the product they are currently purchasing.

Luckily for these companies, neither of these situations has to be true for them.   We are conducting regularly scheduled collaborative events, weekly, and are just waiting for these companies to join.  As with any collaborative spend, the more participants involved the better the savings will be and the bigger the opportunity for the suppliers involved.

We are routinely saving customers 10-20% on spends they had previously thought were too small for any type of reverse auction due to the fact we were able to include them in one of these collaborative events.

Call a SafeSourcing Customer Service representative today to see if any of your upcoming spends have associated collaborative events scheduled for the month of March.

We look forward to and appreciate your comments.

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Is the inclusion of freight in an e- bid or reverse auction equal to the net landed cost?

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.

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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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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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This is Part III of an III part post series titled “Technology Drives E.Procurement Acceptance” focuses on Reasons to Use E-Procurement.

Monday, May 24th, 2010

 Part III Reasons to Use E-Procurement

Sometimes an explanation can be lost in translation so we have developed the following 20 reasons why utilizing the technology-based e-procurement process can provide significant benefits to you and your company. These are certainly not all of the benefits that can be derived from the use of the e-procurement process, but it is a good starting point.

While this list is not ranked in order of importance, many might argue that not much is more important than the #1 item which is improved earnings.

• Improve net earnings
• Enhance safety
• Reinforce corporate social responsibility
• Find new sources of supply
• Streamline the procurement process
• Elevate supplier accountability to meet your standards
• Improve quality
• Reduce costs in a volatile market
• Ensure a competitive environment
• Buy at market pricing
• Maintain a reliable history for comparison
• Educate suppliers as to how you wish to procure products
• Eliminates questions through effective supplier training
• Maintain consistent product specifications
• Improve negotiation
• Improve carbon footprint
• Simplify your “award of business” process
• Free up time for other tasks
• Process works for all product categories
• Provide a detailed audit trail

E-procurement offers many benefits for a broad range of companies in a variety of industries, assuming that the process selected is a high quality system with an extensive supplier database. We must also assume that the e-procurement process is implemented properly with the purchasing company and that the experienced e-procurement system provider works in concert with the buyer in order to realize optimal cost savings.

Numerous technology advancements have streamlined the e-procurement process and made it more user-friendly and less expensive. A company today can expect to reap significant benefits from e-procurement, including: saving money on purchases, reducing the time involved in the purchasing process, tracking current and archival activities and results, eliminating waste and improving the overall efficiency of the supply chain.

 Take advantage of the technology advancements and don’t overlook the benefits of implementing an e-procurement process to strengthen your company’s bottom line.

To download copies of this entire article please use the following link.

We look forward to and appreciate your comments.

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This is Part II of an III part post series titled “Technology Drives E.Procurement Acceptance” focuses on Getting Started!

Friday, May 21st, 2010

Getting Started

First and foremost in getting the e-procurement process right is to select a solution provider or partner that knows what they are doing and is willing to work closely with you during the early part of the process. The e-procurement plan for each company will be somewhat different in order to meet the specific needs of the company. There is however a general order to things that will provide the best opportunity for success.

To realize the most benefit from your e-procurement process, you will need to:
• Develop your strategy
• Complete a detailed discovery
• Learn to understand how to set up your procurement events, even if handled by your provider.
• Use a provider with a high quality process and an extensive database for sourcing suppliers
• Clearly communicate how events will be run or executed to all involved parties • Review the process for sustainability and adjust as necessary
 
As mentioned earlier, it is incumbent upon your e-procurement solutions provider to be able to assist you in completing these tasks in a reasonable period of time. You should be checking the background of the team and the leadership that will be assisting you to ensure their understanding of your industry such as operations, technology, procurement, warehouse management, logistics, transportation, loss prevention, store management and other functional areas of your business that will be sourcing products and services. It is all about detail because knowledgeable attention to detail will improve quality, reduce costs and ensure the success of your company’s new e-procurement process.

Please join us for part III of this post series on Monday titled Reasons to Use E-Procurement.

To download the entire article please use the following  link.

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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