Archive for the ‘Procurement Tool’ Category

Procurement can help your company beat the averages!

Friday, February 13th, 2015

 

Today’s post is from the SafeSourcing archives.

When you see a chart, often times the lines it contains represent some sort of average.   A chart in an article in the Daily Chart section of Economist.com titled, “Taxing for some” illustrates how procurement fits into where companies place in these averages.  The article is specifically about how corporate taxes have plummeted since the 1950s.  No, the author does not mention procurement, but what is great about charts like this is that they can mean so many things depending upon what the author wants to highlight.

Here, the author is trying to highlight that corporate tax rates have plummeted, insinuating that this is somehow a negative phenomenon.  The chart indeed does show that as a percent of GDP, corporate tax rates have dropped since the mid-50s.  What is really interesting to me in this situation is a second line above the corporate tax line.  It shows corporate profits as percentage of GDP.  Here profits hover above 10 percent in the mid-50s and are peeking over 12 percent today.  The years in the middle, however, show a bunch of zigzagging with a bottom of around 6 percent.

Being an average, the chart line represents both companies whose profits were above the line and those whose were below the line.  Why did some fall above that specific point and some fall below?  Certainly, there are innumerable factors.  I just have to ask myself what role procurement played.  Even back then, I have to believe that some companies were good at procurement and others were not so good.  This article does not tell us why some companies were above the line and why some were below it, but procurement was certainly a factor.  Profits being profits, they boil down to revenue minus expenses.  I have to wonder how many of the companies who were bringing the line up in the 50s were doing so partially because a savvy procurement department kept expenses in line with the current costs of goods and services at the time.  That being said, is your company above or below the line in today’s economy?  Regardless of if you find yourself in the 50s, the 70s or the 2010s, you can always strive to do things better? 

If you’d like to keep your expenses in check, please contact a SafeSourcing Customer Services Account Manager. 

We look forward to and appreciate 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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Many Mid Tier One and Tier Two retail companies can not afford advanced analytic software! The truth is they also can’t afford to not have it! So what to do?

Friday, August 12th, 2011

Let’s first try to understand what analytics actually is. According to Wikipedia’ a simple definition of analytics is “the science of analysis”. A practical definition, however, would be that analytics is the process of obtaining an optimal or realistic decision based on existing data. Business managers may choose to make decisions based on past experiences or rules of thumb, or there might be other qualitative aspects to decision making; but unless there are data involved in the process, it would not be considered analytics.

So why can’t many companies afford analytics? The answer is because they are complex. In my early days of selling data warehouses with one of the industry leaders, in fact the best in the space today the combination and analysis of data from disparate functional areas of a business were nearly impossible. As such if a company was advanced enough to have this type of information it most likely existed in islands that evolved into departmental data marts like category management systems. These data marts ultimately evolved to complex databases with relational data models that allowed access of data contained in these  disparate systems and then into on line analytical systems capable of managing massive amounts of data .

It’s probably no surprise that the early adopters of these technologies were the biggest of the big companies and governments. So when we get to analytics that support e-procurement systems or procurement systems in general, the systems that provide the analytics have to reside within a company’s corporately supported data model. If not, they initially at least have to have a procurement data model that supports data contained in ERP systems, Financial systems etc. Since the trend is not a backwards direction of recreating islands of information,  pilots of these systems that show significant benefits, will only end up as a corporate roll out through integration within the corporate framework and data model.

I could go on to explain the expense and time associated with these implementations, but there is a reason that these solutions are not readily implemented within lower tier one and tier two retailers. Number one is that many still do not have easily accessible corporate views of data. Number two is the cost; resources and time to implement them are difficult for these companies to justify.

As such there continues to be a need (niche) for providers that understand retail from an operational and financial perspective that know where to look, what to ask for and can assemble, analyze and report on data the old way to support the procurement data requirements of mid tier one and tier two retailers.

We look forward to and appreciate your comments.

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Hey buyers! The economy is still terrible. Maybe now is the time to finally try reverse auctions.

Wednesday, August 10th, 2011

However, we continue to see a reasonable uptick in the use of e-negotiation tools in retail and this author believes that some of the following quotes from a retail CEO and his team  that watched their first  reverse auction last week may be the reason why.
1. “This was pretty simple to do”
2. “If we hired someone we could do these ourselves with you guys”
3. “This is fun”
4. “You mean the reports are already available”
5. “I love the sports concept”
6. “It was easy to follow the marquis and what was going on from one screen”
7. “The multiple color schemes were great”
8. “I can’t believe how fast you guys set this up”
9. “We saved that much money and only have to pay what we discussed”
10. “Can we do another one today”
11. “I may get a promotion out of this”
12. “I love that calculator at the end of the bid process”
13. “I like all of the supplier data that was accessible during the auction”
14. “Now I know how the big guys get the pricing they do”

Why not join others that have come a little late to the party. You can still benefit because today’s tools are easier to use, more interactive, maintain your attention during an auction, integrate gaming technology to keep it fun and are lower cost than their predecessors. If you happen to have already been doing this for years, why not find an easier way or do it less expensively.

If you would like to have fun, save money and do it quickly, please visit us at www.safesoucing.com.

We look forward to and appreciate your comments.

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When should companies conduct RFI’s and how do you get started?

Friday, January 21st, 2011

E-procurement tools make it easier today to conduct requests for information or RFI’s in a hosted format than in the past, but the fact is this particular e-procurement tool is not used often enough.

RFI’s are kind of free flowing in their format, but generally the first data companies should want to capture is specific information about the company you are interested in. Any good supplier database should be able to provide the following data for you without even having to ask or develop a single question.

1. Company name
2. Company address
3. Parent company
4. Describe ownership and/or strategic partnerships of your company
5. Name and signature of the person responsible for the information contained in this RFI
6. Phone number
7. Fax number
8. E-mail address
9. Web site URL
10. Company location (corporate office; other offices)
11. Total number of employees (include breakdown per department, if possible)
12. Employee turnover rate
13. Employee satisfaction rating (if available)
14. Key employees names and employment contracts
15. Total revenue:
16. This year
17. Last year
18. Total profit/loss:
19. This year
20. Last year
21. When was your company’s initial year of operation?
22. Company Description:
23. Product categories offered:

Once you have collected this type of information the next step is to get product specific at a high level. And remember don’t turn your RFI’s into RFP’s, that’s the next step.

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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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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Retailers do you have a sustainable e-negotiation program?

Tuesday, June 1st, 2010

If you have a limited source of new suppliers, including new vendors every time you run a new e-negotiation event will be incredibly difficult. Resultantly your process by default ends up as just a new way to continue to award business to the same suppliers over and over again. This process may yield some productivity increases initially, but over time meaningful price compression will be difficult if not impossible.

Solution providers suggest that somewhere between six and ten suppliers are required to drive optimum e-negotiation results, these data suggest that attaining sustainable results from the e-negotiation process has a direct correlation to the number of new suppliers available and willing to compete for your business.

By example let’s suppose you can only find six suppliers to invite to an e-negotiation event. Your customer services team using their best sales skills can probably convince most if not all of these suppliers to participate. This may be fine the first time around. Although this author believes there are better sustainability strategy even given this scenario.

Suppliers that finished first or second or incumbents that were displaced may agree to participate again in the future, but with a smaller number of suppliers and no new sources it will make the rerun of this auction less successful.

Lacking a robust source of new suppliers, and in the above case we only had a total of six available how can companies create a sustainable process.

The lack of a robust global supplier database limits future price compression at a minimum. It may also have a negative impact on quality, process and service. Particularly if history suggests a minimum of six to ten suppliers in order to drive optimum results…

Make sure to ask your e-negotiation solutions provider how many suppliers they have in their supplier database and if you can have regular access, it will determine your future success.

We appreciate and look forward to 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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