Archive for the ‘Procurement Purchasing’ Category
Wednesday, January 25th, 2012
Today’s post is by David Wenig; Manager – Customer Services at SafeSourcing.
Data has a way of sneaking into every aspect of our life. In an article in the Wall Street Journal from 1/14/2012 titled “How Google & Co. Will Rule Your Rep” by Holly Finn, the uses of personal data as it relates to one’s reputation are described. Soon, it seems, data will be carefully analyzed at even the most personal or intangible aspects of life.
With that in mind, it is my belief that as you approach your procurement process, this rings true as ever. Too often in procurement, a purchase decision must be made when there is either no historical data to support the decision or the historical data available is insubstantial.
In these cases, it may seem as though there are no valid options that would help make a purchase decision beyond the data at hand.
In most cases, however, there are more options available. In an example where you do not have adequate historical data to make a sound purchasing decision based on pricing, you may find that it is possible to move forward in your decision with the confidence that you have received the best pricing possible. Ask your strategic sourcing partner to work with you to review your project. In most cases, an RFP can be created and managed in such a way that will provide you with the data that you might not have otherwise. Once completed, a live RFQ can be managed as needed to provide the compressed prices that you seek.
With your new data in hand, you can make your decision with confidence and with the metrics to back it up.
Just think, it used to be enough to want to share an opinion. But now, as I write this, I am hoping that it will be worthy of online comment and reaction so to boost my (quantifiable) reputation.
We look forward to and appreciate your comments.
Posted in Business Sourcing, E-supply Chain, Procurement Purchasing, Product Procurement
Friday, September 9th, 2011
The answer may be surprising. One may assume that the negotiation begins when the vendors begin quoting. This is a reasonable assumption, but I know that negotiation begins long before this point.
Often, in procurement, a negotiation can begin with the writing of the specification. I find that when the host organization is writing their specifications, they are forced to rely on their incumbent vendors for details about the products or services that they are providing. During this process a vendor may have the upper hand and, as a result, may influence the specification in a way that will benefit them throughout the process. Not so long ago, a specification was written for a fairly simple manufactured product. The specification for this product dictated the use of stainless steel. This would not have been an issue, except that only one of the vendors was able to meet the specifications. It turns out the use of stainless steel was patented in this case.
Even more often, this type of influence can be felt in the days leading up to an RFQ. Typical vendor negotiation tactics during this timeframe may include calling on the sourcing partner or host organization directly to try to get time extensions or to attempt to implement last minute specification changes as discussed above. Worse yet, they may also use this time to negotiate for higher prices. If a maximum has been set for price submission, it is not uncommon to hear feedback that these prices are too low. While these complaints may be valid, the timing seems suspect. In these last minute cases, it is important to react carefully and avoid being forced into a decision that you would not have made two weeks ago.
So, how do you sort through the feedback and specification input (solicited or not)?
You have to make a plan and see it through. Your strategic sourcing partner has experience navigating vendor communications. They are actively tracking the feedback and working with the vendor community make the journey from planning an RFQ to awarding business go as smoothly as possible. Place your trust in both your partner and the process and you will find favorable results.
We look forward to and appreciate your comments.
Posted in Procurement Purchasing, Procurement Solutions
Monday, August 15th, 2011
The process of procuring services for you organization has a few aspects to keep in mind that are different then processes involving typically procured products. How the company currently purchases these services tends to be varied and additional expenses that tend to be “bundled” into the price frequently provide very little visibility for you to understand what you are paying for.
The following are just a few tips to keep in mind when you are preparing the initial stages of finding new service providers.
Understand how and from whom you work with today – So many companies, especially those with more than one location, have an unclear view of the relationships, contracts, and pricing that they pay for the exact same services throughout the organization. Understanding how each part of the company works with the providers of the services you are looking for is a critical first step to successfully developing a strategy for the entire organization.
Develop the strategy of where you want to go – Once you know where things stand it won’t be uncommon to have a variety of different contracts, terms and companies that you are dealing with. Instead of trying to fit what you want into everyone’s model or contract, this is the time for you to determine how you want to be billed. Knowing this and providing it to the vendor community early will help you get the details you need to make the best decision for the company.
Define Additional Expenses – Almost every vendor has a price list of “additional services” that fall outside of the normal course of business. It is very important that you require every vendor you speak with to provide you the complete list of these fees and that they understand that any fee not listed will not be honored as part of the new contract with you.
Unbundle the “upcharge” – Upcharges are one of the great mysteries in dealing with service provider companies; many of whom would prefer to give you invoices with nothing more than one line item showing the weekly, monthly or annual charge. By requesting the vendors to break this charge into smaller more detailed components, it will be easier for you to determine what you are paying for and will also give you stronger footing from which to negotiate your relationship with them.
For more information on best practices in procuring services for your company, please contact a SafeSourcing Customer Service Representative.
We look forward to your comments.
Posted in Procurement Purchasing, Sourcing Strategy
Wednesday, April 6th, 2011
If you are not sourcing at least 30% of your cost of goods and services using e-procurement tools, you are lagging your industry leaders as well as being significantly behind other industries. As such; you are not getting the best costs and not driving the best margins for your company.
Reverse auctions since their inception more than a dozen years ago haven driven healthy competition amongst supplier companies. As such the results of a reverse auction can provide a great benchmark for both the buyer and the supplier. For the buyer the results can be used as a tool to evaluate how to best source other products and services. Additionally suppliers that are not the low quote or winning bid now have the opportunity to evaluate why that is and what they need to do in order to improve or to be more competitive in the market place. This of course is all happening without the need to collect, collate, compare or negotiate during the process. In other words it is happening transparently to the normal sourcing process. I watched a reverse auction today where 4 suppliers placed 180 quotes for a dozen line items in under 30 minutes. No buyer can do that. Additionally reverse auctions provide the opportunity for suppliers that are outside of your business area or knowledge base to bid for your business.
Possibly the single largest area of benefit to reverse auctions outside of price compression for procurement professionals is that it offers a significant opportunity for process improvement since most solution providers offer a standard process for hosting reverse auctions. Everything is done in one place using standard processes in building the event to the final analysis of the bids collected. Information availability is immediate for evaluation and is archived for easy access in the future. This reduces the overall procurement life cycle, eliminates or reduces the opportunity for human error, and provides a standard way to conduct and award business.
We look forward to and appreciate your comments.
Posted in Procurement Outsourcing, Procurement Purchasing, Procurement Solutions, Procurement Tool
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, February 8th, 2011
For every commodity that rises there are also commodities that fall. For every company that raises their prices to their end user be it consumer or company, there are others that want your business bad enough to keep prices stable if not lower them. The issue is that companies have to be willing to put the work in if they want to keep prices down. Too many companies continue to operate in a business as usual manner. It’s pretty easy to spot when individuals or companies operate from the “this is how I learned it and this is how I do it” point of view. Some clues are;
1. They buy from the same suppliers over and over again.
2. The do not have a view of their contracts.
3. They do not have a view of their performance against those contracts.
4. They do not have a view of additional sources of supply.
5. They do not put their products and services out to bid on a regular basis.
6. They do not have basic specifications.
I was reading an article in U.S. TODAY last Friday February 4th titled Prices starting to creep higher By Paul Davidson. The sub title was Businesses hit point where they can’t absorb higher costs. The article sited several manufacturers and retailers that were raising their prices as a result of increased costs.
Here’s a promise. If you can’t figure out how to keep your costs down, call us at SafeSourcing because we can. As a matter of fact call me personally 480-773-7524 or email me at ronsouthard@safesourcing.com.
We look forward to your comments.
Posted in B2b Supply Chain, E-procurement, E-supply Chain, Global E-procurement, Procurement Purchasing
Wednesday, October 20th, 2010
The problem today is that there is so much retail data available that buyers and category managers could easily suffer business paralysis by data analysis.
Below is just a partial list of systems and places where data resides that is meaningful if not critical to sourcing professionals. Most of you can probably add to this list pretty easily. The unfortunate issue that confronts retail procurement professionals daily is that most of this data is not integrated in any way and even at very large companies, to much critical data is sitting on local employee desktops or even worse in their heads. And that is not what we mean by a neural network.
1. ERP systems
2. Enterprise Data Warehouse systems
3. Replenishment systems
4. Financial reporting systems
5. Demand Planning systems
6. Purchase Order management systems
7. Distribution and Logistics systems
8. Merchandise management systems
9. Retail Planning systems
10. Local employee desktops
11. Contract management systems
Number two from above the enterprise data warehouse is probably the most logical place to bring all of these data sources or elements together within one logical data model that drives the master data source integrated with a s business reporting and busyness intelligence front end. Small companies may never make it to this level, but if they can find a business partner that offers these solutions in a SaaS format it will be much better than the current; Hey Joe, how many of these did we order last year?
We look forward to and appreciate your comments.
Posted in Business Sourcing, E-procurement Solutions, Global E-procurement, Procurement Company, Procurement Outsourcing, Procurement Purchasing, Procurement Solutions
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
Wednesday, July 28th, 2010
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 Business Sourcing, Procurement Purchasing, Strategic Sourcing
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
