Archive for the ‘Sourcing Strategy’ Category

Never Too Late to Revaluate

Wednesday, September 13th, 2017

 

Today’s post is from our  SafeSourcing archives.

Several years ago lawmakers introduced a bill (HR 5255) the purpose of which is to reorganize how the federal government purchases IT product and services.   In the face of the highly questionable success of the newly launched federally operated health insurance exchange website, many believe that the government is stuck in a pattern of buying technology that is not current, solutions that are not the right fit, and running projects that take years to implement once they have begun.   While this bill focuses on federal government and IT categories the reason for its need could easily be applied to other companies and categories.

Complex procurement processes  – One of the main reasons this bill was introduced was the complexity of the procurement process adopted by the federal government.  Its voluminous RFPs and RFQs are so difficult and confusing to complete that only very large companies with staffs proficient in submitting federal RFP responses are competing for the business.  This leavesmany quality, capable suppliers out of the mix.  What is usually left to choose from is not necessarily the “best of the best” it is more like the “whose left that has the resources to respond?”  Like the federal government, the question companies should being asking themselves is “How easy are we to do business with?”

Rigid guidelines – Along the same lines of complexity is the problem of being too rigid in the procurement guidelines that have been developed.  Even companies with streamlined procurement processes can run into challenges if they are not willing to slightly adjust those processes from project to project as the need fits.  An example of this would be a company that has a strict rule not to take spends less than $100k through their normal procurement processes.  They become so entrenched in the letter of the rule that they fail to go further.  They never explore that $80k spend that could begrouped with either another category serviced by the same suppliers or grouped with another company to get a larger spend as an impromptu GPO.

Build Champions – HR 5255 would have a narrower focus of a roll-out starting with only 5 government agencies participating.  This approach is similar to one that any company should follow when making changes to how they procure goods and services.  Start with departments that need procurement help the most and that are open to having the procurement department and/or 3rd party sourcing partner assist them.  Focus on some projects that can build momentum in the way saving time, money or resources with the outcome.  Once the initial departments are running and satisfied with the process it will be much easier to take that process to the rest of the departments in the organization.

SafeSourcing helps our customers every day develop new sourcing strategies and examine the processes that have grown “long in the tooth.”  For more information on how we can help your team 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.

Monday, September 11th, 2017

 

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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Sourcing Temporary Labor, Day Labor and Contingent Work…

Tuesday, September 5th, 2017

 

Todays post is from our SafeSourcing Archives

Sourcing temporary labor is never easy. To begin with you require a clear definition of what type of labor you are planning to source as well as a good understanding of national and local labor laws. Quite often companies fall into the trap of using a temporary labor agencies job descriptions that are not clearly defined and way to broad. In fact many times these descriptions are not more than catchall categories. As an example, can someone please tell me what job descriptions fall into the industrial work category? For each of you that try, we will most likely end up with a collection of descriptions that are several multiples larger than the number of people responding. In fact, this is what agencies are looking for because “One mans meat is another mans poison”. Without a clear definition you are at the mercy of sourcing agencies. An example might be how an agency differentiates between a secretary, administrative assistant and an executive assistant and how they up charge for each.

If you were to visit Wikipedia one of the world’s greatest sources of data and search for the term Temporary Labor, you would receive the following The page “Temporary labor” does not exist.  They would however give you a link on that page to the subject Temporary Work where the following paragraph gets you started with what you are looking for.

Temporary work or temporary employment refers to a situation where the employee is expected to leave the employer within a certain period of time. Temporary employees are sometimes called “contractual”, “seasonal”, “interim”, “casual staff”, or “freelance”; or the word may be shortened to “temps.”

The key when trying to source temporary labor is that if you are looking to source temporary work and do not want to get taken advantage of, your specifications and terms and conditions need to be spot on as to what you are looking for. The more detail you provide the better because grey area is where you will end up paying for more than you are asking for.

If you need help with this category,  please contact SafeSourcing.

We look forward to and appreciate your comments.

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

Monday, July 17th, 2017

 

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 the m. 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.

Overcoming Cognitive Dissonance in Purchasing

Monday, June 12th, 2017

 

Today’s post is  from our Archives by Michael Figueroa then an Account Manager and now Assistant Director of Customer Services at SafeSourcing

Cognitive Dissonance is the state of having a set of beliefs, attitudes, and ideas, and being faced with information that conflicts with those concepts. Leon Festinger’s Cognitive Dissonance theory holds that all people attempt to keep all of their beliefs, attitudes, and information in harmony. The problem that often comes up, however, is that we sometimes unconsciously suppress or modify correct information in order to avoid having that information conflict with what we already believe.

An example of this in purchasing would be when a procurement decision is made, and the project turns out badly. Often times the decision will be defended and even REPEATED, rather than the decision maker admitting fault. Why? Because most people automatically feel they need to defend their decisions in order to preserve what they believe about themselves. If you believe you are a great decision maker, you will look for information that supports that belief, and avoid information that conflicts with that belief. Here are a couple of ways to help avoid pitfalls on both sides of the purchase:

The Enthymeme

An Enthymeme is a truncated form of syllogism, where a premise or conclusion is left out of the argument. It is always easier to let someone convince themselves of something than it ever will be for you to, even if your audience’ belief is fallacious. When we pose a logical argument, but don’t explicitly state the conclusion, we allow our audience to extrapolate on their own instead of risking putting them on the defensive because we are demanding they believe what we are advocating. Example; “XYZ Company isn’t certified and the manufacturing process requires certification”. This type of statement can be much more effective than shooting straight for the conclusion “Don’t go with XYZ Company.”

The Ben Franklin Effect

When we do a favor for someone, we tend to justify our actions to ourselves that we did the favor BECAUSE we liked them. We naturally tend to avoid Cognitive Dissonance by changing other beliefs, in favor of holding onto beliefs we have about ourselves. Be on the lookout for people who would use this concept against you; how often have you heard a sales pitch that starts off by asking you for a small favor? It’s a commonly used tactic to use your beliefs against you in order to obtain something the sales-person wants.

For more information on how SafeSourcing can assist your team 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.

Failure to Communicate

Wednesday, June 7th, 2017

 

Today’s post is written by Ivy Ray, Account Manager at SafeSourcing Inc.

The importance of clear and concise communication should never be underestimated. We live in a time where, more than ever, we are receiving multiple streams of communication on a continuous basis.

Failure to communicate in a concise manner can result in an outcome that ranges from minor delay, to missed opportunity, or even major destruction; as in the case of the 1981 skywalk collapse at the Kansas City, Missouri, Hyatt Regency Hotel.

In the collapse, the structural failure was due to a change in the initial design drawings, by the fabricator, which the design engineer reviewed and returned to the fabricator, stamped with the engineering review seal, authorizing construction. The fabricator built the walkways in compliance with the directions contained in the structural drawings, as interpreted by the shop drawings. The change was not clearly communicated through all channels of the construction team, and the load capacity was never tested.

There have been publications and lectures which have come from this unfortunate incident, such as, “Avoiding ‘Failures’ Caused by Lack of Management” and Gerald W. Farquhar’s “Lessons to be Learned in the Management of Change Orders in Shop Drawings.”

When working with or clients for national and international associations, from various time zones, communication tends to be done through email.  People are busy. According to a report prepared by The Radicati Group Inc., in 2015, the average business professional received/sent 125 email messages in one day. This is one reason why long, rambling emails have become such a scourge. Providing a clear concise message will help a person use their time wisely while managing their in-box. Simple, direct language keeps people tuned in to what’s important. These are things that need to be considered when sharing information via email with a group of people working together on the planning of an event.

The 7 Cs provide a checklist for making sure that your meetingsemailsconference calls, and reports, are well constructed and clear – so your audience gets your message.

Communication needs to be:

1) Clear

2) Concise

3) Concrete

4) Correct

5) Coherent

6) Complete

7) Courteous

“Simple messages travel faster, simpler designs reach the market faster and the elimination of clutter allows faster decision-making.” – Jack Welch

For more information on how SafeSourcing can assist you in exploring your procurement solutions for your business 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.

References:………………………………………………

http://www.engineering.com/Library/ArticlesPage/tabid/85/ArticleID/175/Hyatt-Regency-Walkway-Collapse.aspx

https://www.mindtools.com/pages/article/newCS_85.htm

http://www.radicati.com/wp/wp-content/uploads/2011/05/Email-Statistics-Report-2011-2015-Executive-Summary.pdf

 

 

Procurement is a science. Retail procurement needs to be an exact science.

Friday, June 2nd, 2017

 

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.

You just got a great price on an inventory of goods; now how do you protect it?

Friday, May 5th, 2017

 

Today’s post is from our SafeSourcing Inc. archives

One of the many ways that SafeSourcing helps its customers is to find ways to allow them to reduce their Cost-Of-Goods by sourcing smarter through the use of tools and services that give them total insight into what they are purchasing and from whom.  As is often the case, customers are able to find a vendor they feel comfortable with (many times the incumbent) at prices that help their bottom line.  The issues lie once the contract is signed, the new pricing is in place and the product begins to get scheduled for delivery.

Today we are going to take a look at some of the potential supply chain holes and what you can do to ensure that the great deals you have completed are not offset by process, theft and damage problems that can be monitored and controlled.

Vendor issues – One of the common misconceptions about Loss Prevention professionals is that they primarily deal with activity that is fraud or theft when in reality it is often honest mistakes, but mistakes nonetheless, that contribute much of the loss when product comes from a vendor.  One of the best ways to combat this is to engage a Loss Prevention software company to analyze the data of what is being delivered (which includes quality control) against the invoice in an automated system that allows for real-time analysis.  Ensuring that the product quantity, style, and quality is what you paid for is the first step to plugging your supply chain holes.

Transport issues – Transportation is becoming one of the most alarming areas of loss of your product, especially in bigger cities where organized crime is routinely stealing entire trailers full of merchandise.  RFID and GPS pallet monitoring are two of the ways that companies are using to monitor their shipments from the time they leave the vendor until they arrive at their warehouses.  Speak with your transportation company about new ways to monitor shipments and controls your loss in theft and damages and if you are approaching a contract, now may be the time to begin seeing what other companies are offering by running an Request For Information.

Internal Issues– If you can get your shipments to your offices or warehouses without much damage or loss then you have only won half the battle, especially if the product you received will need to go from a warehouse or distribution center to another location.  CCTV systems are regularly employed in warehouses to monitor the flow of goods coming and going but require an employee or service to assist in the effective monitoring.  Many times the practices you enforce for the workers in your facilities can be an effective tool as well such limiting the access an employee has to their purses or bags until they are in a secured area. Monitoring what happens to the product you purchase once you receive can be just as important as making sure it gets to you safely.

The supply chain can be a place full of pitfalls for your purchased goods if you are not monitoring it properly but you have many good options and tools to help you do that. When you build your T&C’s, list the policies and tool requirements that you want your vendors to adhere to in order to mitigate after the negotiation leakage.  For assistance in finding companies and products to help do this, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

Taking the proper time to prepare for your sourcing projects. The story of Ray and John!

Thursday, March 9th, 2017

 

Today’s post is from our SafeSourcing Archives

This blog series details the story or Ray and John.  Ray and John are both procurement professionals who work for multi-billion dollar food manufacturers.  Both Ray and John have corrugated containerboard contracts that are about to expire and with a predicted rise in the pulp market, both professionals are looking to renegotiate their contracts in order to lock in the hopefully current lower prices.  Ray and John, however, took different paths in order to get this category sourced and, as expected, their results reflected their differing preparation time.

Over the course of this week we will be looking at five areas that Ray and John approached differently and how those decisions and time investment affected their final results.  These areas are:

•  Understanding the market

•  Understanding the suppliers

•  Understanding their own company

•  Understanding their goals

•  Understanding and interpreting the results

When Ray and John began reviewing the containerboard project each began with a similar set of information.  They knew how much they were spending and the locations the containerboard was being shipped to.  They had each received some feedback from the field relative to the quality and customer service of the incumbent vendors (of which each had multiple) and they had some part number information from the past invoices.

Ray jumped right in and began to reach out to the suppliers to coordinate meetings on renegotiating the upcoming contract pricing structure.  Ray had seen in one of his trade journals that the pulp index was on the rise and knew enough to know that he wanted to lock in prices before those increases started taking effect.  Outside of that information Ray really did not take any additional time  in order to research the market in order to try and understand what experts were saying about the trend over the next few years and any changes that were happening with technology or safety that may affect his company.

John had already been keeping up with the market for the past year and had been speaking to professionals about their opinion of where the industry was headed.  He had attended two online webinars and at the last industry trade show he made sure to make appointments with two different containerboard companies he had spoken with who were also going to be at the show.  Through his efforts he had learned of a new technology that was coming that was going to drastically affect the costs of production of containerboard.  While the technology was new it was a key point he would be discussing with his incumbents relative to their understanding of it and their plans to potentially implement it within their facilities.

John also found out that there were three leading experts that felt that the increases that were coming in early 2013 would hold there for a while and be the last ones expected for a while.  This was great information because John now knew that when it came time to negotiate his new contracts that he would structure the language surrounding Index related price changes slightly differently because of that.

John’s process involved an intentional commitment to category education throughout the year and some additional time for research up front than Ray’s approach. As such John started his project fully prepared with an understanding of the status of the market before ever reaching out to a supplier.

Stay tuned the rest of the week as the story of Ray and John unfolds.  You may be like Ray but desperately want to operate like John but without the staff or the time to dedicate at that level.

At SafeSourcing we understand Ray’s frustration and that is why our customer services team works with you to achieve great results while removing much of the work from your plate.  For more information on how we can help you with your sourcing projects, 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.

Multi-tasking, or just task switching?

Wednesday, March 8th, 2017

 

Today’s blog is a repost is from Michael Figueroa, Assistant Director of Customer Services at SafeSourcing.

“Switching Costs” is a familiar term in the world of business economics, but now the term is being applied to personal tasking and efficiency. In almost any office environment, the ability to multi-task is seen as a standard requirement for any job, but the term itself is misleading. The way we perform activities is much more akin to task-switching than to performing multiple tasks simultaneously.

Most of us are incapable of talking on the phone while writing an email on a completely different topic at all, and those of us who can do both simultaneously will experience an extreme decrease in quality of performance in both tasks. What we really do when we “multi-task” is switch from one activity to another in rapid succession.  Just like we incur switching costs in efficiency when we switch our production parameters or a miscellaneous service provider, the brain will lose some of our processing capacity as it switches gears to deal with each new interruption.  A recent study done at Carnegie Mellon University tested the performance of participants completing manual computer related tasks when they were switching from one activity to another. In every case, the performance of the participants decreased with every unexpected change of task. The best performing participants however, were the ones that expected to be interrupted and were not, outperforming even the control group. But how can we use this idiosyncrasy of the brain to our advantage?

Anyone familiar with Parkinson’s Law understands the theory that “Work expands so as to fill the time available for its completion”. However, what if the inverse was true? What if the less time we thought we had to complete our work, the smaller an increment we would use to complete it?

Slice up your tasks into manageable segments instead of dealing with every interruption immediately. For instance, don’t stop what you are doing immediately for every new email that arrives. Instead, set up an alert so that you only immediately respond to emergency messages, and set aside a ½ hour twice a day or however often is needed for only responding to emails. Minimize the number of times you have to task-switch during the day so that you can give your undivided attention and best performance to one activity at a time. Schedule your activities with flexibility for emergencies and your workday surprises will fit into your expectations of the day, where your brain will already have the framework in mind to deal with it.

At SafeSourcing we understand how many inputs you receive in your daily procurement related activities. Let us simplify the process by segmenting the flood of information you receive every day and help you find the best strategic fit for your sourcing needs.

We look forward to and appreciate your comments.