Archive for the ‘Sourcing Strategy’ Category

Watching the RFQ – Part 3

Tuesday, November 17th, 2020

 

Today’s post is by Dave Wenig, Senior Vice President of Sales and Services at  SafeSourcing

If you’ve been reading this blog series in which we have been looking at the online Request for Quote (RFQ) as it progresses over time, you may be excited to read that this post is the conclusion of that series. In case you’re just joining us now, we normally focus on measuring RFQ value delivered as savings, but instead, we’re examining when the value is created and considering the vendor behaviors that go into that moment. If you need a primer on what an RFQ is, click here.

In part one and two of this series, we reviewed the first fifteen or so minutes of the RFQ. While the beginning and middle of the RFQ can be both interesting and valuable, the end of the RFQ will ultimately determine the success of the RFQ. This is the final opportunity for each of the vendors to participate and compete fully in the live RFQ.

 

 

 

 

 

 

 

 

 

 

 

In the example above, we’re able to see the final quote activity of each of the vendors. This particular RFQ was scheduled for 20 minutes plus extensions and this did not run as long as the average RFQ. You can see that some of the vendors represented by blue and green were caused to compete significantly to try to offer the most competitive quotes. Ultimately, they failed to do so, but the process was successful from the buyer’s perspective. This RFQ created a 47.57% savings opportunity. The green, blue, and orange vendors all happen to be some of the better vendors in this space and each would have been a great vendor partner.

As usual, this process delivered much more value than traditional procurement practices that don’t include an RFQ would have been able to deliver. Frankly, that statement was true in the first several minutes and it only got better as time went by.

If  you would like more information on how SafeSourcing can help you, please contact a SafeSourcing Customer Service representative.  We have an entire team ready to assist you today.

 

 

 

 

 

 

Where is the best place for retailers to spend their effort to improve profitability?

Thursday, November 5th, 2020

 

Todays post is by Ron Southard, CEO at SafeSourcing Inc.

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?

Obviously all retail companies would like to focus on all three areas and there are even sub sections of these top line areas that we could spell out as needing attention. The challenge is where to deploy already taxed resources?

It does not require an accountant to figure this out. 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%. Based on a number of industry reports we are also safe using a shrink number of 3% of top line revenue.

This author is aware that there area a few companies with shrink below 1% and cost of goods below 75% which means there are also companies with gross margin better than 25%. The obvious question is; are these companies that solution providers want to target for profit improvement sales? Probably not!

So let’s look at an example of shrink improvement with data analysis tools and process improvement tools versus cost compression with SaaS e-procurement tools. Let’s assume we have a company that does top line sales of $1B. Using a shrink number of 3% shrink would be $30M annually. If you were able to reduce shrink by a third in one year, profit improvement would be $10M. If this were a supermarket company with a 1% bottom line or $10M, improvement could be as much as 100%.

Now let’s take a look at reduction in cost. If we assume the same company has COGS of 75% or $750M and that we were only going to address 20% of that number or $150 and only reduce those costs by 20% which is slightly above industry averages the net profit improvement would be $30M or 300% improvement in year over year net profit. If we were only able to achieve 10% savings which is well below industry averages, net profit would improve by 150%.

I’ll leave the gross margin example for you to figure out. In the above case it is clear that attacking COGS has an impact on the bottom line of up to 3 to 1 versus addressing shrink with your already taxed resources.

In order to learn about SafeSourcings risk free trial, click here or please contact a SafeSourcing Customer Services Associate

Using Uniforms as a Marketing Tool

Tuesday, November 3rd, 2020

 

Today’s post is from our archives at SafeSourcing, Inc.

We have currently been working on a project for a client at SafeSourcing for Uniforms/Workwear. This category can range from just plain tees, to aprons, to work boots. Many places in the US require that employees wear certain attire to work. It keeps the workplace looking unified and also places a nice role in free marketing. You can actually use your employee’s uniforms as marketing for your company. If a customer is already in your store or office, they’ve probably already chosen your brand. However, decking out all your employees in uniforms will give a look or professionalism and cohesiveness that will impress visitors and clients. Additionally, putting all your employees in the same or similar work uniforms will make them easily identifiable in your store. As such, customers will have an easy time finding someone to answer questions, help with a sale, or generally improve their experience in your facility. Anything to improve the customer experience is a positive marketing tool.

However, if you don’t have an office or maybe not a place where customers come to you, having work uniforms with a logo or your company name can get people’s attention. Every person your employee interacts with while wearing a branded uniform is a person that you’re advertising to, essentially for free. In a method that’s approaching subliminal advertising, this is a subtle and easy way to increase your marketing capacity. When you’re out and about grabbing lunch or running errands and you wearing your uniform, people notice. Weather they ask you about it or not they see your logo and your company name and they think about it next time they may need that service.

According to Market Watch workwear/uniforms is expected to grow 4.3% over the next five years, will reach 72,900 million US$ in 2023, from 56,700 million US$ in 2017, according to a new study. That is a huge opportunity to come up with a logo or something that people will be drawn to. Even if your company does not have uniforms, buying t-shirts for your employees to wear outside of work, gets the name out there and gets people talking and asking. It takes no effort and no time. It’s an easy marketing tool and trust me employees love free T-Shirts.

For more information on how SafeSourcing can help in your procurement efforts, or on our Risk Free trial program, please contact a SafeSourcing Customer Service Representative. We have an entire team ready to assist you today.

 

References…………………………………….

https://www.marketwatch.com/press-release/workwearuniforms-uniforms-workwears-market-2019-industry-demand-share-size-future-trends-plans-growth-opportunities-key-players-application-demand-industry-research-report-by-regional-forecast-to-2024-2019-07-01

Government Procurement: Bids and Contracts

Monday, November 2nd, 2020

 

Today’s post is from our archives at SafeSourcing Inc.

If anyone has ever seen the movie War Dogs, it is a prime example of exactly how government procurement works, well at least how it worked back in the 90’s. In the movie, the government used procurement to buy weapons and ammunition on a large scale.

For anyone who doesn’t know what government procurement is, it is the procurement of goods, services and construction on behalf of a public authority, such as a government agency. With 10-20% of GDP (Gross Domestic Product), government procurement accounts for a substantial part of the global economy. Per Wikipedia, to prevent fraud, waste, corruption, or local protectionism, the laws of most countries regulate government procurement to some extent. Laws usually require the procuring authority to issue public tenders if the value of the procurement exceeds a certain threshold. Government procurement is also the subject of the Agreement on Government Procurement (GPA), a pluryilateral international treaty under the auspices of the WTO (World Trade Organization).

Working at SafeSourcing and learning about all the different markets there are to take out to bid outside of the government is a huge undertaking. However, it would be incredible to learn exactly what the government takes out to bid. The opportunity in Government Procurement is substantial. Government Procurement brings in about 7 trillion dollars annually.

The government buys many of the products and services it needs from suppliers who meet certain qualifications. The US federal, state and local governments apply standardized procedures by which to purchase goods and services.

For example, according to RFQ.com the federal government does not purchase items or services in the way an individual household might. Instead, government contracting officials use procedures that conform to the Federal Acquisition Regulation (FAR). The FAR is a standardized set of regulations used by all federal agencies in making purchases. It provides procedures for every step in the procurement process, from the time someone in the government discovers a need for a product or service to the time the purchase is complete. When the government wants to purchase a certain product or service, it can use a variety of contracting methods. Key contract methodologies used to purchase products and services include:

  • Simplified acquisition procedures
  • Sealed bidding
  • Contracting by negotiation
  • Consolidated purchasing vehicles

There are problems, however, with procurement within the government, such as the possibility of corruption. Like in movie War Dogs, you had 2 Americans that ended up corrupting the procurement process and stealing millions of dollars from the government and overseas officials by using the procurement process to hold fake bids and then collect the money on weapons and ammo and then buying them from the black market. The movie is based on a true story that happened in 2007. David Packouz and Efraim Diveroli ended up proving how corrupt Government Procurement could become. Worth the read? Maybe an upcoming blog.

For more information on SafeSourcing, or on our Risk Free trial program,  please contact a SafeSourcing Customer Service Representative. We have an entire team ready to assist you.

 

 

 

Loss Prevention

Tuesday, October 27th, 2020

 

 

Today’s post is from our archives at SafeSourcing, Inc.

What will 2020 results tell us after a very challenging year? These practices are still very important regardless of retails evolving model.

In 2018, it was reported that U.S. retailers posted an annual loss of $35 billion dollars due to theft and errors. This includes internal theft, shoplifting and also errors such as inventory not being accounted for correctly. According to hubsopt.net there are 6 principles you should follow to minimize theft in your company.

  1. Prevention: Taking the necessary steps to prevent theft from happening. Dedicating resources, whether internally resourced, co-sourced or outsourced, brings the skill, knowledge and attention to the concepts of loss prevention and the continued progression of a loss prevention function. The creation of policies, procedures and processes geared toward the holistic approach to loss prevention provides the greatest long-term opportunities to prevent loss and increase company profitability.
  2. Awareness: Make sure you and your team are aware of how to prevent theft and steps to take to be more diligent. The key to awareness is to make certain that it focuses on all levels of associates; field management, store management and all associates. It must also be viewed as part of the overall business and not seen as something separate or only utilized by store personnel.
  3. Compliance: Maintaining compliance within retail locations is always best served through auditing the various operating procedures and policies. You need to make sure you hold people accountable and everyone is doing exactly what they need to. Having random audits keep everyone in line and hopefully less mistakes.
  4. Detection: The use of technology, coupled with generating awareness about the    technology, a retailer can create a level of deterrence against future thefts. Technology alone, however, is not a complete solution. Make sure once something is detected you take very quick action to fix it. The longer you wait the chances of bouncing back from the loss is minimal.
  5. Investigation: Involving the collection of evidence, interviewing of associates, or the overall process to find someone involved in theft. Although the term investigation is often used in this sense, it is not entirely accurate. An auditor conducting an operational audit is in fact conducting an investigation to determine compliance or adherence to policies and procedures.
  6. Resolution: The reactive aspect of a loss prevention program starts to become proactive once again. Establishing a process for resolution will help to answer the questions of how to prevent future losses. After a solution has been determined it is very important to see it through and make sure things get fixed for future problems.

Per hubspot.com, reviewing the six principles of Loss Prevention, it has become evident how each of them plays great importance in building and maintaining a solid loss prevention program. As individual principles, they each provide elements toward reducing shrinkage, margin loss and costs. Collectively working in tandem, they provide the key principles of a loss prevention program and a solid foundation against loss.

For more information on how SafeSourcing can help in your procurement efforts, or on our Risk Free trial program, please contact a SafeSourcing Customer Service Representative. We have an entire team ready to assist you today.

References:

http://cdn2.hubspot.net/hub/31499/file-282948940-pdf/The_Six_Principles_of_Loss_Prevention.pdf

 

Watching the RFQ – Part 2

Wednesday, October 21st, 2020

 

Todays post is by Dave Wenig is the Senior Vice President of Sales and Services at SafeSourcing Inc.

In this post, which is the second of several, we’re continuing to take a close look at the online Request for Quote (RFQ) from a different perspective. Rather than focus on measuring the value delivered as savings, let’s examine when that value is created and consider the vendor behaviors that went into that moment. If you need a primer on what an RFQ is, click here.

In part one of this series Watching and RFQ Part 1, we reviewed the first five or so minutes of the RFQ. While the beginning of the RFQ can at times be interesting, it isn’t always a good indicator of what will come.

The same can’t usually be said about the middle of the RFQ. I would consider the middle of a typical RFQ to be from around 5 minutes in to around 15 minutes in. While it doesn’t always look like there is a great deal of activity in this portion, I would argue that looks can be misleading.

 

 

 

 

 

 

 

 

In the example above, there are several things that are happening in this 10 minute window. First, the SafeSourcing Customer Services team and some of the participating vendors are usually in communications off and on during this time. The second is that the vendors will start to become active and begin to test the waters. Again, there are different approaches and different tolerances for the emotional impact of participating in an auction. Here, we see that some of the vendors decided to try small reductions in their costs in an effort to “fish” for the Low Quote Indicator that would tell them they are doing well. We see that another takes a drastically different approach and enters significantly lower costs that most of the competition.

In this phase of the RFQ, what we see if the vendors jockeying for position as they head into the final lap. They know that this particular RFQ was scheduled for 20 minutes plus extensions so they will want to be ready to compete in the final phase. We’ll get into the last portion of the RFQ in the next installment.

For more information, please contact SafeSourcing.

 

 

 

Two Heads Are Better Than One

Friday, October 16th, 2020

 

Today’s blog is by Margaret Stewart, Director of HR and Administration at SafeSourcing Inc.

Have you ever heard that two heads are better than one? While two heads may make putting on a t-shirt more difficult, most often two heads will benefit whatever project you are working on. The idea behind this is that there are more people working on a project at the same time and can be beneficial in a few different ways.

First, having more than one person working on a project can lead to new insights. Recently, I saw a motivational poster of a runner at a cliff and the words were something along the lines of taking a leap in life. While the author may have meant the poster to inspire people to go for their dreams despite difficulties, it could also be interpreted as encouraging someone to jump off a cliff. Simply having an outside perspective on a project can lead to seeing things in a new way, and possibly prevent you from releasing something that could backfire.

Another way two heads are good is that there is simply twice the available brain power. This can be especially helpful if you are working on a project with a deadline. One person can only work so fast, but having another head on the team can potentially get the work done twice as fast, making the deadline much more reachable. Even more than that, if a project is daunting enough, several heads can help even more so long as expectations and instructions are clear and well defined.

Finally, another good way two heads are better is in procurement. If you have ever wanted to take out a certain product but just didn’t think your volume was big enough to interest major suppliers, then maybe you and others can put your figurative heads together, combine volumes and gain the interest you were seeking. One way to do this is through SafeSourcing’s own SafeCollaborative. The SafeCollaborative event can showcase multiple companies’ volumes of a particular product and allow suppliers to quote everyone at once. Not only does this bring the suppliers into the discussion, but also can save money on the sourcing costs. This outcome winds up being a win-win-win for everyone involved.

For more information on ways we can with your procurement goals or projects, or on our Risk Free trial program, please contact a SafeSourcing Customer Service RepresentativeWe have an entire team ready to assist you today.

 

Balancing Deliberate vs Emergent Strategy

Wednesday, October 14th, 2020

 

Today’s post is from our archives at SafeSourcing

People can be unpredictable. Its part of what keeps life interesting. But when a project gets thrown a curveball by someone who missed a deadline, overlooked a requirement, or is just plain uncooperative, the complexities that emerge are not typically the kind of “interesting” we want to experience. Michael Porter and Henry Mintzberg were the originators of the concepts of Deliberate vs Emergent strategy more than 25 years ago, and their views are still relevant today. We can account for most of the variables rational players bring to the table, but human beings aren’t always rational, and therefore not always predictable. This is why a balance between deliberate and emergent strategies must be achieved for any project.

The aspects of your project that should be deliberate are things like financial goals, timeframes, logistical requirements, etc. High level criteria for success often do not change and should be deliberate, pre-planned, and static. When our expectations regarding the execution of this strategy collide with reality in a way that will not resolve without adaptation, our ability to develop emergent strategy is essential.

No two procurement projects have to be run the same, and in fact usually should not be. Often times the optimal strategy for achieving pre-determined goals will not be known until some insight has been gained about the supplier base; how many suppliers are capable of providing the product/service? What is the geographical availability of capacity? Is pricing market regulated? What service level guarantees are available? Is the market experiencing price increases/supply shortages? These variables should influence our strategy for execution, by changing things like baseline pricing, terms and conditions, SOW’s, and freight considerations.

Some managers believe that any form of adaptation is a weakness of strategy. It isn’t. The old way of thinking about strategy is to assume all outcomes can be known and predicted. That’s why most of the Fortune 500 Companies that existed 50 years ago don’t exist anymore. They believed their position to be a product of previous strategy that should never be changed. The companies that have thrived over the years have continuously adapted, reinventing themselves over and over again to stay relevant, and capable of exceeding their customer’s expectations.

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.

Some key procurement trends re-visited!

Friday, October 9th, 2020

 

 

Today’s post is from our archives at SafeSourcing, Inc.

According to Zycus, there are 7 major trends that are happening in the procurement world. They started back in 2018 but are expected to grow quickly for 2019 and 2020. Here is a list of the new trends to look for in the procurement world:

  1. Having a Digital Strategy- 32% of procurement companies will start using a digital strategy. 85% of them believe that digital transformation will change the way they deliver procurement services over the next 3-5 years.
  2. Building a Talent Pool- 51% of the procurement owners believe their teams do not have sufficient capabilities to deliver on the digital procurement strategy. Companies are starting to use proper training programs to make sure their employees will be able to execute correct strategy.
  3. Thinking Suppliers Beyond the Price- Suppliers will have visibility of all the steps in the  procurement cycle to help in getting the best pricing and reducing the risk quotient. This plan stands for a focused, smart and effective method of measuring, analyzing and improving supplier performance and reducing costs, increasing efficiency, enhancing vendor customer relationship, enhancing performance, preventing product issues and driving improvements in the supply chain.
  4. Risk Management- 65% of the procurement companies has little or no visibility in their supply chain.
  5. Indirect Spending- Indirect spending or tail spending follows the 80/20 rule, i.e., it constitutes 20% of the organization spent and involves 80% of the suppliers.
  6. Artificial Intelligence- Procurement teams will design and deliver intelligent robots to complete most procurement tasks with minimal human intervention. This will speed up the procurement process and minimize human error.
  7. Effective Change Management- In 2019, more organizations will focus on a smooth change management plan through increased focus on regular communication with the employees; engage them through the process and by providing training and support. Having proper support by management is key to running a successful procurement company.

Per Zycus, as procurement is gaining more strategic importance within an organization, the expectations from this function are also increasing. This year, procurement function will continue to deliver on traditional cost savings while focusing heavily on digital technologies and supplier synergies. Overall 2019 seems like a promising year full of challenges and opportunities for procurement to undertake. This is a great time to try the procurement world if you haven’t already. It’s growing and becoming a huge part of how people do business. We save our customers thousands of dollars every month.

For more information on how SafeSourcing can help in your procurement efforts, or on our Risk Free trial program, please contact a SafeSourcing Customer Service Representative. We have an entire team ready to assist you today.

References……………………………………

https://www.zycus.com/blog/procurement-technology/7-procurement-trends-2019.html

 

 

 

 

How to tell when you need to simplify your processes

Friday, October 2nd, 2020

 

Today’s post is our archives at SafeSourcing

Finding the right balance of complexity in your processes is a tough thing to juggle for businesses large and small. I’ve worked in companies where you literally had to read through and comply with hundred page manuals for every email sent, phone call made, or lunch break taken. On the other end of the spectrum, were companies who had so little structure that no one had any idea what standard procedures were, roles were not identified, and whether or not you were performing well was determined more by the owner’s mood than any objective metric.

The problem is similar to the dilemma of Emergent vs. Deliberate strategy[1]. Each side of the argument carries its own merits; highly process oriented organizations are usually highly efficient, and low risk. The tradeoff however, is that adaptability and innovation suffers. The more flexible and open ended your process, and the more you give your team the authority to deviate from those processes, the more they are able to deal with crisis, unexpected changes, or to innovate in order to meet the needs of the business. So how do we determine if our organization is leaning too far in one direction?

A basic rule of thumb is:

If the cost of your process > the value of the process, you may need to re-balance.

This of course, requires that you have a correct understanding of the cost of all your processes.

Many businesses have a hard time wrapping their heads around the true process capacity of their workforce. Typically this results from not having an up to date or objective measurement of all processes rate of finite resource consumption. Do you have an accurate listing of every activity performed by each member of your team? Have you found averages for all costs of each of these activities, in time, money, and materials? Most likely each of your team positions specializes in a certain activity, and will be aware of activities associated with executing that position that no one else is. Performing this evaluation will identify your process capacity “budget” if you will. And of course, all things that consume finite resources must have a budget of that resource.

Once you have a clear and objective picture of your activity costs, you can evaluate the costs and value inherent in your processes. Do you have redundant processes that only add marginally increased value? Do you have processes so narrow in scope that a large number of activities get bypassed? Do you have activities whose execution is so sensitive that a miss-step would shut down your business? You may need to add processes or capabilities that eliminate these risks (For more on that topic, see my blog “Mistake-proofing your business”).

In summary:

  1. Objectively measure your organization’s process capacity
  2. Evaluate the cost to benefit balance of your processes
  3. Appropriately budget your process capacity to maximize overall value/decrease risk

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.

[1] “Balancing Deliberate vs. Emergent Strategy: SafeSourcing …” 2015. 15 Dec. 2015 <http://blog.safesourcing.com/2015/06/01/balancing-deliberate-vs-emergent-strategy/>