Archive for the ‘Sourcing Strategy’ Category

A Sourcing Diatribe you should read and share with your finance team!

Monday, March 8th, 2021

 

 

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

Here’s the diatribe from two years ago that still applies today and they still tell you why they don’t.

Example: Your finance department in reviewing current costs looks at your waste management costs and discovers that they have gone up significantly over the last two years. They call your Category Manager (if you have one) in order to ask why? The answer they get back is that in discussions with your current vendor, their costs have gone up significantly. Your finance department representative asks for examples. The answer he/she gets, is as follows, “I don’t know, but I’ll reach out and ask”.

Alternative Example: Your finance department in reviewing current costs looks at your waste management costs and discovers that they have gone up significantly over the past two years. They call your Sourcing provider SafeSourcing Inc. (if they are) in order to ask why? The answer they get back is that in discussions with your current vendor, their costs have gone up significantly. Your finance department representative asks SafeSourcing for examples. The answer he/she receives is as follows.

There are several reasons. The first is that 2 years ago the Chinese were the largest importers of recycled materials, specifically plastics and papers. At the time they were importing approximately 15M metric tons. Today they are importing approximately 7M metric tons. This has gone from a revenue producing opportunity for suppliers to a cost. Additionally, there is a shortfall of drivers in the US that has caused demand for their skills to increase accordingly. As a result, all freight hauling focused companies have experienced a shortfall of drivers and an increase in costs for the drivers that they do hire.

Additionally, diesel prices in 2017 were lower than they are today. While these prices have eroded somewhat (about 6%) between 2018 to 2019, they are still not at the low levels they were in 2017. There are additional areas to also consider like new equipment that are also higher based on demand. Now can I provide you with a strategy as to how we (SafeSourcing) can mitigate these costs going forward and maybe even rain them in some?

I know all executives have had these types of frustrating conversations internally as well as with your suppliers. I also know that SafeSourcing regularly provides these types of answers and reviews across hundreds of categories for our customers. It is the precise reason that our average savings across all categories during the last 2 years is greater than 24%.

While the above is a specific example, what can you tell me about your freight costs, supplies costs, commodity costs, construction costs, equipment costs, items for resale costs etc. Probably not as much as SafeSourcing can tell you. Give us a call and find out.

For more information regarding SafeSourcing and how we can help you with your sourcing, or regarding our Risk Free Trial Programplease contact a SafeSourcing Customer Service representative, you’ll be glad you did! We have an entire team ready to assist you today.

We look forward to and appreciate your comments.

SafeSourcing Inc. is hosting a Collaborative Technology RFQ

Friday, March 5th, 2021

 

Todays post is from Ronald D. Southard, Chief Executive Officer at SafeSourcing Inc.

Executives Leadership Teams:

SafeSourcing Inc. is hosting a Collaborative Technology RFQ event on behalf of our customers for PC, Tablets, Peripherals etc. in the VERY near future.

We held a similar event last week in the healthcare industry and our customers achieved 34% cost reduction on their exact configurations and other budgeted purchases.

Based on current market dynamics, the opportunity to save NOW is very significant.

Your technology team will tell you that they are already getting the best price and that we can’t possibly beat it. THEY ARE NOT, and YES WE CAN! Our opportunity is ZERO risk. If you do not reduce your costs, you will never be invoiced by SafeSourcing. You may keep the updated Terms and Conditions, Supplier Research and Final Report Package we provide all participants as our thanks for trying and future use.

Please respond to this email with your interest and who we should work with. I will keep you updated as to progress. This is my personal email address for this RFQ.

Please feel free to share with anyone you think might benefit.

Thank you,

 

 

What are you doing about your Contract Management Needs?

Friday, February 26th, 2021

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

If you want to insure against contract leakage that can be as much as 5% per year and also protect the savings from your hard fought eNegotiations, it may be time to take a look at your contract management needs.

Most contract management systems have relatively short ROI periods. In fact a company might even be lucky enough as they go through their data collection process to find a single contract that when analyzed might pay for the entire system.

There are all sorts of benefits associated with using contract management software. Probably the most important and least recognized of which is finally having all spend data in one location enabling more effective negotiations. If you have ever run an e-procurement event and tried to assemble a simple specification or incumbent supplier data you already understand the time involved. Administrative costs alone can be reduced by 25-30%.  That’s a huge number in today’s world of insufficient staff.

If you want to get started, here are some basics that a system should be able to provide.

1. Create contracts
2. Maintain contracts
3. Control contracts
4. Track user access to contracts
5. Track and monitor the status of contract Meta data
a. Award date
b. Contract begin date
c. Contract end date
d. Begin delivery date
e. Escalator language
f. Notification clauses
g. Termination Clauses
6. Automatically alert buyers and management of required actions
7. Custom Reporting
8. Supplier Scorecards

If you want to get started tomorrow, please contact a SafeSourcing customer services account manager and ask about SafeContract™.

We look forward to and appreciate you comments

The customer experience matters more today than ever.

Tuesday, February 16th, 2021

  

Today’s post is from our archives at SafeSourcing.

This is an oldie and still works today, maybe more than ever.

Within the span of one hour this weekend, I experienced both ends of the customer service experience at two retail establishments. The first was at my bank and the second at the Apple store. I went to the bank for standard cash withdraw. The line at the ATM was exceedingly long so I elected to go inside. I was greeted with a more manageable line and no greeting from anyone at the bank. After 10 minutes of waiting I heard, “next”. I was asked what I needed help with. I did not have my account number for my transaction and I would have thought it was inconvenient for my banker to retrieve this information. It was an overall unfriendly transaction.

Next I went to the Apple store to purchase a case for my iPad. It was equally as busy, likely more so. I was immediately greeted and asked what was bringing me in that day. I was taken to the accessory area and asked what I was specifically looking for. I was then asked if I needed help with anything else. All while smiling I must add. I left happier than when I went in.

I want to buy from people and organizations that treat me like I matter. When I select a supplier, their culture matters. The way I will be treated matters. The way my company and my clients are treated matters.

Let SafeSourcing better manage your sourcing projects. We enjoy bringing this blog to you every week and hope you find value in it. For more information on how we can help you with your procurement needs 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.

 

 

RETAILERS! Clean out those back rooms and move your overstock items using a forward auction.

Friday, January 29th, 2021

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

Why is it that we never hear of retailers running forward auctions? There are dozens of sources waiting to buy your overstock which all retailers know will reduce shrink and improve bottom line profitability.

If you go to any internet search engine and type in the term overstock, the data returned is in the millions of pages. Many of these links are locations  for Business to Business (B2B) and Business to Consumer (B2C) companies that will gladly agree to participate in e-negotiation events in the form of a forward auction to purchase your overstock or liquidated products for resale through their on line offerings.

Online forward auctions are an ideal way to get the best price for capital equipment, materials, overstock and services you may want to sell, such as when you need to liquidate excess inventory.

There are two basic types of forward auctions. The first is a liquidation auction where sellers are reducing inventory from overstock or liquidation and buyers are seeking to obtain the lowest price for items they have an interest in for resale and other purposes. The second type is more of a marketing auction where sellers are trying to sell unique items and buyers wish to obtain unique items. This is typical of an eBay type of offering.

Much of retail shrink happens in the back room or receiving area of retail stores. It just so happens that this is also the location of much of the overstock in the retail community. Much of this product sits there month after month resulting in significant margin hits to quarterly and annual earnings and as such to a company’s stock price.

Ask your e-negotiation solution provider how they can help reduce your overstock and shrink with forward auction tools, and who they would invite as buyers. You company stakeholders will applaud your efforts.

For immediate help, please contact a SafeSourcing Customer Services Account Manager.

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.

Thursday, January 28th, 2021

 

During yesterdays post Here is some Lasik for retail e-procurement professionals in order to create better focus we discussed the following four retail P&L measures and how to use them to pin point a starting point for e-procurement evaluation and events. They were

  1. Gross Sales,
  2. Cost of Goods Sold,
  3. Gross Margin and
  4. EBITDA.

Also in yesterdays post, we promised to review what underperforming the above measures means and how careful evaluation will point you in the direction as to where to begin your e-procurement journey.

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, eProcurement 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.

If you’d like to discuss further how I can personally help your company, please use our contact page as I get the updates as soon as you submit it.

 

Here is some Lasik for retail e-procurement professionals in order to create better focus.

Wednesday, January 27th, 2021

 

I can see clearly now the rain has gone. I can see all obstacles in my way. The lyrics from the 1972 song by…. Johnny Nash titled I can see clearly now should be the mantra for enlightened e-procurement professionals.

Here’s and old post that continues to have merit with a link to another resource from FitSmallBusiness.com

Very often this author gets the question as to where to start in the e-procurement process. Too often I read that one needs to do a detailed discovery. The question is of what and how to get to the right place the quickest. So here is some Lasik for you that will help you see a little more clearly.

Using another idiom, and with renewed focus we hope to make it possible to see the forest for the trees by not focusing on excessive detail that is not needed yet.

There are four areas where you should begin your search for an e-procurement starting point and they are pretty simple.

1.Gross Sales
2.Cost of Goods Sold
3.Gross Margin
4.EBITDA.

This is really to say that if you take a look at your top line or Gross Sales and your bottom line or EBITDA and they are out of whack relative to your plan or industry averages you need to look at the above the gross margin line or Cost of Goods Sold or below the gross margin line which is expense related items for as an e-procurement focal point..

As such a couple of terms whose definitions you should be aware of are as follows.

According to two separate sources, Wikipedia and FitSmallBusiness.com Cost of Goods Sold or COGS is a financial accounting term which includes the direct costs attributable to the production or procurement of the goods sold by a company. This amount can include the materials cost used in creating the goods along with the direct labor costs used to produce them. It excludes indirect expenses such as distribution costs and sales force costs. COGS appear on the income statement and can be deducted from revenue to calculate a company’s gross margin.

Earnings Before Interest, Taxes, Depreciation and Amortization or EBITDA which is an approximate measure of a company’s operating cash flow based on data from the company’s income statement. EBITDA is calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization.

Based on the above a lot is determined by who built you annual plan and how realistic it was to begin with.

Tomorrow we will review what underperforming these measure means and how it should point you in the direction as to where to begin your e-procurement focus.

We look forward to and appreciate you comments.

Procurement is a Science. Retail procurement needs to be an Exact Science.

Tuesday, January 26th, 2021

 

Todays post is from Ronald D. Southard, CEO at SafeSourcing Inc.

I was talking to a meat buyer recently and it sounded more like talking to a commodity trader. In fact, that is exactly what they are. Data is important, and the breadth of data they need to watch is amazing.

Without getting into detailed spend management, strategic sourcing or analytics, a very simple example of what a retail meat buyer goes through every day should shed some light on the need for talent in the sourcing area.

Consider the following nine questions that a meat buyer might have to consider every day.

1.What is my companies demand for beef products?
2.What is the price of corn?
3.What is the price of diesel?
4.What is the price of plastic?
5.What is the price of paper?
6.What is the price of ink?
7.How do all of these products or interact to impact the price of beef?
8.How do I keep track of all these moving parts and what if I don’t?
9.Is there an index for each of these I should be watching?

That sounds like a commodity trader to me.

One place a meat buyer might turn for help is to their e-procurement solution provider and if they already have a partner and these questions have never come up, maybe it’s time to change solution providers.

If you’d like to learn more about the resources we use at SafeSourcing when developing the strategy for our customers e-procurement events, please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

What are your Procurement related New Year Resolutions?

Monday, December 28th, 2020

 

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

Here are ten (10) procurement focused resolutions that may align with your plan. While they may seem straight forward, the fact is in many cases companies do not focus on these even within more broad based annual business plans.

Here is a typical Example: Your company has new  store construction planned for this year. You have suppliers for all your construction needs and materials including signage, lighting, checkouts, floor tile, ceiling tile, loss prevention equipment, technology, electrical engineering, plumbing, doors, environmental systems, freezer cases, shelving, kitchen equipment etc.. I could go on and on. As this is a new location there is a budget for this build and it is part of your capital plan. You have bids in place and are focused on getting the location open and delivering revenue.

Here is the question, have you checked to make sure that your pricing is as low as it should be, or are you just going with your internal teams RFP evaluations? If you are, you are not doing your capital plan justice.

Resolutions:

  1. Reduce the Capital Plan through improved pricing.
  2. Reduce Cost of Goods and Services through improved quality and pricing.
  3. Reduce you Expense Plan through improved service and pricing.
  4. Use external sources and tools to help your procurement team achieve maximum results.
  5. Do not hire any more people for your procurement team unless they are a replacement.
  6. Always ask all functional departments if current purchases have been taken through a price compression exercise with at least three (3) suppliers. Not Contract review, price compression.
  7. Make sure that all contracts contain statement of work procedure outlines with specific out-of-scope price submission language
  8. Make sure that your internal teams have a well-defined sourcing execution plan.
  9. Identify additional sources of supply to mitigate risk of out of service or out of stock situations.
  10. Eliminate all Rogue spending.

While these seem simple, all CPO’s, CFO’s and other executives will tell you they have this covered. Unfortunately, in most cases they do not.

If you would like to learn more about SafeSourcing’s white glove services, SafeSourceIt™ family of SaaS products, or our world class six (6) step process containing thirty-nine (39) specific you do or we do touch points, please contact a SafeSourcing Customer Services Representative, and ask about SafeSourcing’s Risk-Free Trial.

 

 

A Christmas related spend cube analogy. “Little Jack Horner sat in corner eating his Christmas Pie.”

Tuesday, December 22nd, 2020

 

Todays post is an oldie but goodie from Ron Southard CEO at SafeSourcing.

And it’s still true today.

The rest of the Little Jack Horner spend cube analogy might go like this. He stuck in his thumb and pulled out a peach and said what the heck is a peach doing in a plumb pie?

If you look to Wikipedia, there is no definition of a spend cube. You can find information relative to spend cubes in a discussion about spend analysis. However t the original discussion we are talking about data in this case multi-dimensional data about spend information. Consultants love to talk about it because it allows them to charge you a lot of money without necessarily delivering any results other than, well a spend cube.

Quite frankly you are going to hear terms like data model, data warehouse, data scrubbing, data cleansing, data access, data sources and incomplete data. All of which allow consultants to charge you more money in order to develop yours from what is likely incomplete data kept in many places like GL’s, ERP systems and the like.

Once you get your model or cube, I promise you additional discovery is going to be required in order to determine what categories or products should go to market. One category manager’s category is another category mangers product. So now what?

Don’t get confused by consultants touting their spend cube analysis software because if you do, you will be in for a dime in for a dollar and continue to get peaches when you are looking for plumbs.

If you’re totally confused, SafeSourcing can help with our SafeSpendAnalysis™, and we deliver results very quickly. Contact a SafeSourcing representative.