Archive for the ‘Procurement Tool’ Category

What is the retail procurement lifecycle of a product or service?

Thursday, May 13th, 2010

This author generally begins discussing this subject with our customers and prospects during the discovery phase of our engagements. It helps to get us all on the same page and as such we get a lot of different definitions. Quite frankly we get almost as many as the number of people we discuss the subject with. Surprisingly the process which is quite simple as a definition is not any different from when I first learned it over 40 years ago in the U.S. Air Force other than its automation provided by modern procurement tools.

Typically procurement consists of seven (7) steps. Where the confusion generally enters is that each step can have a process of its own or be interrelated with another step in the process. An example would be the contract lifecycle that easily fits within the negotiation cycle and the renewal cycle. Another might be that information gathering which is the generally accepted first step in the process can apply to multiple issues such as information gathering for the related product or services such as specifications as well as the information gathering of prospective supplier data.

As such, the simple steps to the procurement lifecycle that most individuals generally agree upon are as follows.

1. Information gathering
2. Supplier contact
3. Background review
4. Negotiation
5. Fulfillment
6. Consumption
7. Renewal

Most times keeping this simple model in mind will allow  retail procurement professionals to answer the question where are we in the process when a project gets stalled or off track.

We look forward to and appreciate your comments.

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Very few retail companies have contract management software.

Tuesday, May 11th, 2010

So just what is Contract Management or Contract Lifecycle Management? Are they the same?

According to Wikipedia Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees.

Contract management can include negotiating terms and conditions and ensuring compliance with those terms and conditions. Beyond these base functions contract management can also include documenting and agreeing on any changes that may occur during the implementation or execution of a contract.

We can think of contract management as a summary of the process of with which companies use a systematic approach to manage contracts through the process of creating, executing and analyzing contracts for the purpose of maximizing the financial and operational performance of contracts so as to mitigate risk.

A frequent buzz word in the industry today is that of Contract Lifecycle Management Solutions. This really means the same thing from a systems perspective that should include automating much of the following.
1. Authoring
2. Negotiating
3. Tracking
4. Alerting
5. Awareness management
6. Baseline moderation
7. Commitment moderations
8. Communication moderation
9. Contract visibility
10. Document management
11. Change management
12. Issue alerts
13. Service level agreement moderation
14. Total Transaction compliance

Ask you solution provider how they can help you in this area and how to integrate CLM with your e-procurement suite.

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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Why should retailers be concerned with evergreen contracts?

Tuesday, May 4th, 2010

This author has been asked on numerous occasions why I am so concerned with evergreen contracts. First, let’s discuss what an evergreen contract is. A simple definition is that it is a contract or an agreement between two parties (you and your supplier) that is automatically renewed or rolled over after each completion period which is typically a year, until canceled by the either party.

This does not sound so bad at first glance, particularly if the current terms of the contract such as price, performance, quality, service or service level are all being met and are to your advantage when they automatically renew.  However this is not normally the case, particularly with contracts that are driven by commodity markets such as oil, chemicals, resins, pulp, steel and many others. In addition you can bet if the advantage is in your favor in the initial contract that your current supplier will notify you in writing within the specified period which is usually 60 days that they are going to let the contract expire or want to renegotiate.

In the retail trade where there is very few sophisticated contract management solutions deployed, the cost to the industry annually runs in the billions of dollars. This is because the original contract normally has language that includes price increases above the current contract when it auto renews and the auto renewal is normally for a year if the supplier is not notified in writing prior to the anniversary date. Once renewed you are stuck. This happens because most buyers or executives think they will remember in time to notify your supplier when in fact this almost never is the case. As most retail companies have thousands of contracts in the place the amount of data requiring review is unmanageable.

Contract management solutions that offer alert subsystems based on contracts Meta data are the best solution to this problem and typically provide near immediate ROI based solely on the cost avoidance associated with evergreen contracts.

SafeSourcing offers an easy to use solution called SafeContract™ to help our customers with this problem. Ask you solution provider how they can help you.

We look forward to and appreciate your comments.

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What’s on your e- procurement tool belt? Tool belts should make your job simpler.

Monday, April 26th, 2010

There are all sorts of shiny new belts in every store. Don’t get caught up with flashy features that you will never use or forget how to use because you will end up defaulting to doing things the same way you have been for years

The SafeSourcing e-procurement tool belt is simple and easy to use.

A procurement intern can build an e-negotiation event the very first time they look at our tools. If they don’t understand certain procurement terminologies they can enter the term into the SafeSourcing Wiki without ever leaving the website. If you would like to converse with other procurement professionals about a variety of subjects such as index pricing, just log in to Sourcebook it’s easier to use than traditional social network sites and has many of the same features. You can create a group or hold an open threaded conversation with hundreds of other procurement professionals. If you are looking for new sources of supply, you can request information sorted by dozens of criteria including proximity to a particular zip code, category, sic code etc. While all this is going on alerts from more than thirty sources like the FDA, USDA and OU provide you with up to the minute industry alerts on safety and environmental related issues. Are you looking for product specifications?  Just click on the SafeSourceIt template library. Want to start a contract after you have awarded business from an e-negotiation event, simply click on SafeContract to view templates and setup tracking.

You can also read this blog daily and pass the useful inforamtion on to a friend very easily.

We constantly hear from our customers how simple our tools are to use. What are you waiting for; get your pants of the ground with the Safesourcing e-procurement tool belt.

We look forward to and appreciate your comments.

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There are a number of places from which procurement professionals can collect or solicit your RFI data.

Thursday, April 8th, 2010

According to Wikipedia and others a Request for Information (RFI) is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes.

A Request for Information (RFI) is primarily used to gather information to help companies make a decision on what steps to take next. RFI’s are therefore most often the first stage in the procurement process particularly with new sources of supply. They are used in combination with: Requests for Quote (RFQ), Requests for Tender (RFT), and Requests for Proposal (RFP). In addition to gathering basic information, an RFI is often used as a solicitation sent to a broad base of potential suppliers for the purpose of preparing a supplier’s thought process in preparing for a Request for Proposal (RFP), Request for Tender (RFT) in the government sector, or a Request for Proposal (RFP).

Much of the data required for an RFI is generally available and can be found on company websites, U.S. Security and Exchange Commission (SEC) filings for publicly traded companies in their Edgar system, industry guides from companies like Trade Dimensions, or from sources like Dun and Bradstreet.

The challenge for most companies is that they do not have the necessary resources to complete this research. Therefore providers of supplier data should be able to make this data available in templates that companies can begin with. Simple data should always be available in any database as to Company Name, Annual Sales, Product category expertise, contact information, e-procurement experience and product specifications. This data should be easily exportable to a variety of formats such as MSFT Excel.

A simple request of your e-procurement supplier should get you well on your way to completed RFI’s that lead to quality RFP’s and RFQ’s without spending a lot of your valuable time on basic research. If they do not, we’d be glad to hear from you.

We  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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Part II of here is some Lasik for retail e-procurement professionals in order to create better focus.

Tuesday, March 23rd, 2010

In yesterdays post; here is some Lasik for retail e-procurement professionals in order to create better focus we promised review what underperforming the above measure means and how careful evaluation will point you in the direction as to where to begin your e-procurement focus.

Here you go.

If your EBITDA is low, and your top line sales are in line with your plan, it is pretty clear that you have either an expense problem or a cost of goods problem. If the problem is expense related the first indicator is that your gross margin is most likely in line and your costs of goods are ok relative to your plan. In this case since the issue looks like it is below the gross margin line you have an expense problem. This does not always mean that the issue is your largest expense category like health benefits. Often times the problem can be caused by mid level expense related categories particularly categories that are hard to monitor and as such hard to control like hired services. A few examples are items like landscaping, snow removal, pest control, window washing and other similar types of expenses. These expenses have multiple invoices from multiple suppliers multiple times each month and are approved at store level. As a result, e-procurement results for these categories return impressive results while also streamlining suppliers as well as the process. With out going into to much detail the exact same process works if you turn this issue around and sales are near plan and gross margin is out of line, you most likely have a cost of goods issue.

A caution that procurement professionals should be aware of is that of measuring yourself solely against your own plan. You may be achieving your plan, but underperforming the industry you serve. This author believes that this is the 2nd level of analysis required once you have addressed the items indicated above and want to take the next step in creating a sustainable e-procurement process.

I hope this helps and allows you to use the lyrics from the 1972 song by Johnny Nash titled “I can see clearly now” as your sourcing mantra.

We look forward to and appreciate you comments.

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Retailers, how many of your e-procurement contracts contain evergreen language?

Tuesday, March 16th, 2010

In this case your supplier wins because your contract contains evergreen language. Some retailer’s think this is a good thing and it could be. Paired with other language that might identify escalator or de-escalator language that protects both the supplier and the buyer against abnormal commodity increases this could be win-win. The bigger issue is who is responsible for monitoring the dates and how will you be alerted if the adjustments don’t take place?

This begs the question; just what are are evergreen clauses within a contract and what do you need to do to be careful with them.

According to Black’s Law Dictionary an Evergreen contract is a contract that renews itself from one term to the next in the absence of contrary notice by one of the parties.

The potential problem with an “evergreen” clause in your contract is that this type of contract automatically renews at the end of the contract term, unless one of the parties notifies the other party that it does not want to renew the contract.  This notice normally must be given within a specified time period such as 60 to 90 days prior to the end of the current contract term. This takes us back to who is going to monitor this time frame and alert you to the fact that something is required?

A significant step in conducting quality e-negotiation events is to understand the contracts you are wishing to negotiate.

We look forward to and appreciate your comments.

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Retail e-procurement savings. How many times have we heard we can do it better ourselves?

Tuesday, February 23rd, 2010

And for those very large retail companies that have very expensive internal tools that were sold to you by the largest players in the space. Ask yourself why your event savings are much less than those reported by companies who have outsourced this functionality? If you want to drive the greatest possible savings across the broadest range of categories in the shortest amount of time; and have a sustainable process moving forward keep reading..

The question one needs to ask is; what type of event services does my e-procurement provider offer? If your company is deciding to try self service, which is to be 100% self-sufficient, you need to know if your provider offers readily available classroom education that can be conducted on-site in order to train your team in all the nuances of event support. These skills are the foundation that allows e-procurement providers to support large volumes of events in a full service mode, which drive greater savings over the long term. Knowledge transfer in this area is one thing; the passion, skill and headcount to carry out these practices on a day by day basis are what drive results.

Typically event services falls into two broad categories:

1. Event management
2. Event monitoring and support.

Event management provides end to end e-sourcing support that begins with a companies overall strategy and ends with the actual execution of the e-procurement event. This is a true cross category effort that includes a rather lengthy list of services that may include buyer training, supplier selection, category discovery, supplier communication, the strategy for taking a category to market, training and overall supplier expectation management.

Event monitoring and support is actually the tactical implementation of the over all e-procurement event management process. This may include all communications with suppliers on the day of an event including making sure they have access to the system, get logged in properly, don’t have problems placing quotes, monitoring supplier and buyer system communications techniques during an event such as notes and texting and being available post event for questions as needed.

These services are normally provided by people behind the scenes with a very specific skill set. If you plan to do self service it would be very wise to make sure you have them covered at the same quality level.

As always, we look forward to and appreciate your comments.

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