Archive for the ‘Sourcing Strategy’ Category

Spend Analysis Part I of II

Thursday, November 29th, 2018

 

Today’s post is by Alex Borbely, Director of Sales at SafeSourcing

In yesterday’s post we explored what Spend Analysis is and some of the experiences I have had spending time with customers during the review process.

Today we’ll look at the steps involved in Spend Analysis.

Typical Steps of Spend Analysis: Identify all the sources available for your spend data, from all of your departments, plants and business units. This includes accounts payable, general ledger, pCard, eProcurement systems, etc. Gather and consolidate all of your spend data into one central database. This can be difficult if your data is in different formats, different languages and different currencies, however, there are programs available specifically designed to accomplish this however not necessary and a simple Excel workbook may be used.

Cleanse your data. This includes finding and correcting errors in descriptions and transactions, as well as standardizing the spend data for easy viewing. Group, or link, your suppliers for better supplier management. For instance, purchases made from IBM, IBM Corp., or Cognos should all be grouped together, since they’re the same supplier. Categorize your spend. Whether you use specific industry standard classifications or your own company-specific categories, you need to be able to determine where your money is being spent. Office supplies, marketing travel, legal, direct and indirect spend should all be categorized appropriately.

Analyze your spend data. Ensure that you have negotiated the best contract deals per supplier now that all of your spend is identified. Ensure that all of your buyers are purchasing from preferred suppliers. Reduce the number of suppliers per category. Repeat. Performing a spend

analysis once is a great start to identifying savings, however, you need to continually update your data to ensure that contract terms are being adhered to, that buyers are purchasing from preferred suppliers and that savings opportunities are being identified.

Once the Spend Analysis is completed, and reviewed with the client, there are several lessons learned as a result:

  1. Upon completion you now have a baseline for sourcing initiatives
  2. Spend Analysis now becomes an enabler for process improvement
  3. The known data is now a measurement device for cost reduction programs such as SafeSourcing’s Reverse Auction Events
  4. Significant cost-savings opportunities through supplier and commodity consolidation
  5. Enhanced compliance through effective spend and supplier monitoring, which by the way is part of the SafeSourcing full service program
  6. Comprehensive spend visibility across direct and indirect commodities and services

In closing I cannot help but to remember something that was drilled into my head as a young individual by my parents: “It’s not about how much money you make, it’s about how you save it.” This says it perfectly as to why spend analysis is such a vital part of procurement planning.

For more information on how we can help you with your procurement needs or on our Risk Free Pilot program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

 

 

 

 

 

 

Spend Analysis Part I of II

Wednesday, November 28th, 2018

 

 

Today’s post is by Alex Borbely, Director of Sales at SafeSourcing

While visiting with retailers and manufacturers during the pilot event stage, and watching live events unfolding in front of the client, it is exciting times at SafeSourcing when we show what competition in procurement spend can do.  What other solution can a prospect see instant dollar’s fall right to their bottom line in a matter of a 20-minute reverse auction event?  SafeSourcing, thus far in 2018, has saved on average 24.5% for our clients.  All this falling right to their bottom line.  As I said to a new client watching their first reverse auction event this past week, their 22.3% in savings in one reverse auction event goes right to their bottom line.  I asked my client, how many new customer cups of coffee would you have to sell in order to see a similar impact on your bottom line?  Reality is that selling more in today’s competitive world is difficult without losing margin.  Reducing expense on spend with SafeSourcing’s full service events will add to bottom line profitability at a rate of 10X ROI on average.  This meaning what you pay for an event in most instances will be multiplied in savings by 10 times or more!

After our typical 2-pilot events are executed and the client witnesses the power of SafeSourcing’s  ePROCUREMNT and the reverse auction Event they then ask what’s next? Our typical response is let’s discuss what you spend your money on for both direct and indirect spends.  We usually get that deer in the headlights look and hear “well that is handled by many individuals within our organization and we would have to get with them to see if they know how much is spent in each category”.  The result is 9 out of 10 responses are that “they don’t know”.  This is when SafeSourcing suggests that we engage with the client and together we orchestrate a spend analysis to highlight spend and where SafeSourcing can assist with historical sourcing events results that is the proof of the pudding.  Let’s begin by understanding spend analysis:

Definition: Provide top level picture of spend. Spend Analysis is the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of decreasing procurement costs, improving efficiency, and monitoring controls and compliance. It can also be leveraged in other areas of business such as inventory management, contract management, complex sourcing, supplier management, budgeting, planning, and product development.

At SafeSourcing we use our internal tool and  process called SafeSpendAnalysis™

Tomorrow we’ll review the typical steps in a spend analysis during Part II!

For more information on how we can help you with your procurement needs or on our Risk Free Pilot program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today

 

What Would You Do? ​

Wednesday, November 7th, 2018

 

 

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

We all have choices to make when it comes to managing our responsibilities. In procurement, we face choices with every purchase. When we enter into a new agreement, we have choices. When we renew an agreement, we have choices.

In this post, I’ll focus in on just one major choice that procurement professionals face when it comes time to renew an agreement with a vendor. Clearly, a renewal offers the purchaser an opportunity to review the current agreement and decide whether or not they intent to continue working with the vendor. This is also an opportunity for the vendor to make changes to the agreement, very commonly in the form of price increases.

However, the question of whether to renew with the incumbent vendor or not is a bit premature. The better question is around how we want to evaluate the agreement to make that decision. SafeSourcing clients know that they have access to a powerful set of eProcurement tools that will help them attain the best pricing possible with the best terms. If your vendor knows that you have these eProcurement tools, it’s natural that they might attempt to persuade you not to use them.

Do you want to negotiate the agreement fully, including using your eProcurement tools, or do you want to accept the offer that the vendor made for renewal? This question becomes a bit more complicated if the vendor offers a discount if you were to renew without eProcurement. What would you do?

Let’s assume that your vendor offered you a renewal and agreed to reduce your pricing by 10% and hold that pricing for a year and left all the other terms the same. That’s a pretty good offer, right? Maybe. If they offered that in a non-competitive environment, then I’d bet that they have additional margin beyond the 10%. The reason I believe this is because we see this scenario play out time and again with our clients. The client tells the vendor that they are going to host an RFQ and the vendor says there is no need and offers better pricing to avoid the process. Our average savings are well over 24%. Before making a decision to accept the vendor’s offer, it makes sense to talk through what savings levels SafeSourcing expects in a particular category.

It would be very easy to renew and stay with your incumbent vendor. However, knowing that you might be overpaying by 10% or more should give you pause. We always recommend that we discuss the category details and consider whether an RFQ is the right choice to help you make this decision. We usually recommend running the RFQ after that discussion. Either way, our services are always risk free, so there is very little to lose. So, what would you do? Would you use the available eProcurement tools and negotiate the agreement fully?

We’re here to help you make the choice that’s best for you and your company. Let’s talk before you agree to a renewal.

For more information, please contact SafeSourcing.

 

 

Sourcing Project Fingerprints

Wednesday, October 10th, 2018

 

Todays post is from our SafeSourcing Archives.

The day we are born we all get a set of identifying marks that make us unique; our fingerprints. Not one us have the same set of fingerprints and so they have become one of the things that identify who we are to the rest of the world.

In much the same way our physical fingerprints identify us, how we approach and handle tasks in our everyday lives have characteristics similar to our fingerprints that identify us as the ones involved with those tasks; how we write; how we speak; how we lead; how we organize; how we communicate. Each of us puts fingerprints on our work that identify us as being involved with a project. Let’s look at a few areas to help you determine what fingerprints you are leaving behind.

Research: Every sourcing project begins with the research. Research includes understanding what you are buying, how much you are buying, who you are currently buying that product from and who else sells that product that you could buy it from. The diligence you show in digging up the documents, emails, contracts, potential new vendors leaves your fingerprint on a project a major way.

Tool use: Tools range from pencil & paper to Excel spreadsheets to fullblown eSourcing solutions that intelligently help you organize the procurement process. Knowing what tools you have at your disposal and how to use them can mark a project with your involvement. Also, knowing when the tools you have aren’t sufficient is equally important.

Organization: Knowing all of the details does no good unless the organization of a project is done well. Great procurement professionals can assess a project; determine who needs to be involved; determine what each phase of the project should be and who should be brought in to assist with each step of the process. Knowing what to expect and organizing appropriately can be the difference between a successful project and one that fails to meet expectations.

Communication: Communication is tightly connected with organization. Without effective communication among all parties involved in the organized project, including what the expectations of each member are, many projects fail before they ever begin.

Desire: The wild card to the fingerprint you leave on a project is desire. Desire can originate from many different sources but the goal is always the same; completing a successful project in the time it was expected to happen. Among each of the five components mentioned here, desire will mark projects as yours and will many times be the difference-maker in a project being completed correctly and in a timely manner. When you strongly care about a project being successful, the majority of the time it will be.

For more information on SafeSourcing or how you can leave better fingerprints on your sourcing projects, please contact a SafeSourcing Customer Service Representative.

We look forward to your comments.

What is a Salesperson’s Role Part I of II

Tuesday, September 18th, 2018

 

Today’s post is by Alex Borbely, Director of Sales at SafeSourcing Inc.

As a 30 year sales veteran, I am happy to be back with SafeSourcing for the second time in my career.  A salesperson’s role in any organization is to sell the company’s products and support the clients.  Challenge number one in selling is always to find the ROI in the product you are representing and being able to demonstrate that ROI to the buyer in a timely manner where investment doesn’t exceed return.  I have represented many offerings both SW and HW during my career and that ROI is sometimes not an easy task to find or to explain to a buyer.  Many times the ROI is spread over a 12 to 18 month period or longer with dribs and drabs coming in monthly or even annually. I am pleased to have rejoined SafeSourcing and representing a robust procurement full service offering.  The ROI is a certainty apparent to the prospect and easily able to demonstrate to a prospect that is looking for a procurement solution with an end goal of reducing cost of goods and services.  Who wouldn’t be interested in a 10X ROI?  That is what the SafeSourcing offering will do.  The full service team will help product buyers save considerably on costs by providing tools that enhance the ability to do business in a better, safer, smarter, more streamlined and cost effective way.  SafeSourcing Services Team is one of the best in the industry at complimenting existing procurement teams to help structure and develop projects in less time for better results.  The flexible service offerings and suite of e-procurement tools deliver savings that can be referenced that are greater than 10 times the cost of the service.

In review until tomorrows Part II, it is great to be back at SafeSourcing and visiting retailers with such a feature rich offering that provides a low cost of usage and an instant return on investment.  I look forward to meeting many retailers representing this exciting full service offering and assisting procurement professionals with striving to bring additional dollars to their bottom line.

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 today.

 

 

Effective Problem Solving

Friday, August 31st, 2018

 

Today’s post is from our  SafeSourcing Archives

When first seeing a complex problem our intuition is to try to take it all in at once, but this often leads to feeling overwhelmed by the size and complexity of the information and not knowing where to begin. It’s easy to get so focused on the substance of a problem, that we pay inadequate attention to the analytical process. The instinctive reaction to problem solving is to start going in a direction, any direction because we just want to get started, and see what turns up.

Starting an analysis without an appropriate analytical structure in mind can lead to a critical failure in your conclusions by:

• Using processes where data is corrupted by incorrect manipulation
• Allowing bias into your analysis by looking for data that supports your assumed conclusion
• Answering questions that were the wrong questions to begin with
• Missing clues in the information that could have informed your process early on

Below we offer a basic outline to approaching a problem that involves a large data set. Keep in mind, this is just a starting point, but one that may help prevent you from going too far down a wrong path:

1.   Identify the goal: This helps us identify our angle of attack, our strategy for how to break down the data. Not to be confused with identifying the answer. The goal may be “to identify the spend in X category”, but cannot assume what the results will be until the data speaks for itself.
2.   Identify the constraints: Not all data sets will contain the information required to perform an analysis. Some problems require some back and forth from your source before you will have all of the variables needed to solve. Does the data contain relevant information to our goal?
3.   Identify the correct method for attacking the problem: The methodology chosen must be appropriate to the puzzle you are trying to solve. Do transactions need to be re-categorized? Do we need to prove the data is inclusive of all fees attached to each PO? Does it need consolidated and normalized?
4.   Break down the problem into its constituent parts: The more complex the problem, the smaller “chunks” you will want to break the problem into and solve individually before regrouping and piecing any broad conclusions.
5.   Tell the story: Once you have problem broken down into manageable chunks, establish patterns that tell the story behind the data with as specific of information and numbers as possible.

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.

Growing Sales Volume through Relationships

Monday, August 27th, 2018

 

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

To be successful, food product manufacturers need to know their market and understand how to sell its benefits to consumers. They must invest in market research, product testing and tasting well before they hit the stores. They also need to be sure they have a strong brand presence.  Chobani Greek Yogurt started less than ten years ago.  Since then it has grown from a one million SBA loan to one billion in revenue securing the number one spot in the U.S. for Greek yogurt brands. Retailers have choices as to how they receive goods from vendors, depending upon their size and specific needs.

  • Independent / Direct to Retail
  • Distributors
  • Brokers

These are a few of the pros and cons for each:

Direct to Retail

PRO: The majority of independent and specialty retailers prefer to deal directly with a small vendor as the service is more specialized and the small vendor can usually react more quickly to their needs.

CON: Servicing independent stores can be quite costly when consideration of the order size is compared against the “drop cost”.  If the cost of delivering the product, including the cost of time, transportation, administrative, and other costs are factored against the gross, the net margin may be lower than dealing with a distributor or a broker.

Distributor

Most food products pass through a distribution network to get from manufacturers to retailers. The largest food distributor in the nation is Sysco Foods.

PRO: Distributors are experts in the logistics of food distribution. The distributor, or “truck-to-door”, typically purchases directly from their vendors, stocks inventory, takes orders from retailers, manages the inventory on the shelf, services the retailer’s needs, introduces new products into retail and delivers the products to the stores via direct store delivery(DSD). A chain buyer may buy for 4-10 categories of products and deal with 6-10 distributors and dozens of major nationals, and also be responsible for category management of thousands of items.

CON: The distributor requires a margin of 20%-30% to purchase and stock inventory, sell, deliver and invoice the products, and may carry between 1,500 and 50,000 stock keeping units (SKUs).The principles of a small line can lose control of their products at retail and lose control of the relationship with the retailer.

Broker

U.S. Industrial Commerce defines a broker as “An independent contractor or legal entity who acts as an intermediary between a buyer and a seller. The most common and accessible way to tap into new markets and expand your sales territory is through food brokers.

PRO: Food brokers handle or represent a limited number of food companies in a specific geographic area. Brokers will normally work with retail store staff to promote the lines that they carry and provide the companies that they represent with a varying degree of information and services. Brokers are very selective in the lines that they represent as the cost of servicing these lines is high ($300-400 per sales call) and the sales of these lines must be sufficient to not only pay the bills, but generate a profit.

CON: Food brokers will normally charge a fee or commission of 5-10% of the net invoiced price of all products shipped into the customers that they service. Brokers will normally not be responsible for the shipping or invoicing of products that they represent.

Distributors may also work with brokers who act as a manufacturer’s agent in getting additional distribution for a specific product line. The relationships your brokers and distributors have with retailers play an integral role in growing your sales volume.

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://blog.procorrdisplay.com/the-role-of-brokers-and-distributors-in-moving-a-food-brand-forward

https://bakermarketingservices.com/2014/12/how-to-tell-an-export-distributor-from-an-importer-or-a-broker/

 

To Fix or To Prevent…. Part I of V

Wednesday, August 15th, 2018

 

Today’s post is from our SafeSourcing Archives

One of the toughest questions that face companies is where to put their Repair & Maintenance budget dollars.  One train of thought is to try and reduce the costs for hourly repair rates and parts as much as possible and then deal with the issue when it arises, while the other train of thought is to invest heavily in a preventative maintenance program and try and extend the life of the equipment and head off major damages before they occur.  Over the next week we will be taking a look at a recent SafeSourcing study on Refrigeration repair and maintenance decisions our customers have made and apply it to repairs and maintenance of all equipment.

Repair and Maintenance spend is one of the largest non-payroll expenses that companies have.  Whether it is to service HVAC, refrigeration, computer, security, roof, or other equipment, companies are spending hundreds millions of dollars to keep their machines and businesses running.  SafeSourcing customers generally fall into one of three categories when we begin to discuss the repair and maintenance categories with them and out of that proper move forward strategies can be developed.

Exploring – These customers are unsure of which model will work best for their organization.  Historically they may have “tinkered” preventative maintenance plans but by and large they have been primarily break fix companies.  Most of these customers are seeing R&M costs rise and equipment life expectancy decline and are at the point where they need to determine which model will work best for them.  These customers typically will follow all three phases of exploration which will be covered over the next three days.

New management – As seems to be happening every day, companies are being acquired, companies are merging, old regimes are retiring and new ones are coming up to speed.   During these times companies tend to review every aspect of their business and where money is being spent regardless of whether it is an area that seems to be working well.  Repair and maintenance expenses are typically an early category that is reviewed because of its size.  While companies in this group tend to follow the three phases, they tend to use it validate they are doing the right thing just as much as to explore a different way of doing things.

Established – Customers that fall into this category have already invested the time to determine the best fit for their company and have usually conducted extension studies and data reviews to land themselves where they are today.  Even with all of that, these companies will still look at running phase 2 and 3 so that they validate any new companies or programs that have been introduced since the last contract and then use those details to develop Statements of Work that are the most beneficial for their company.

Please continue to follow this series this week as we break down the most widely used approaches for determining R&M needs, concluding with some of the average results we are seeing with our customers from these three phases.  For more information on this tool 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.

Mistake-proofing your business!

Thursday, July 26th, 2018

 

Today’s post is our  SafeSourcing Archives

All human activities have a percentage of error. For example, out of all the email we send in a day some percentage will have a grammar error, for all the mouse clicks we make in a day some percentage will miss their targets. These “fat-finger” category mistakes are fairly benign, and would take quite a bit of corrective time and effort to reduce. Sure, we could spend an extra 10 hours a week slowing our clicks and typing down to a crawl to make sure they never miss their mark, but most businesses don’t have the spare time or patience to do so. However, when our processes have vulnerabilities built into them, where a stray click can create a lawsuit level problem, the “fat-finger” category of mistakes suddenly becomes a big deal.

Make no mistake, inadvertent minor errors WILL happen, and there’s nothing economically feasible you can do to eliminate them entirely. You CAN however, structure your processes and systems in a way that makes it difficult or impossible for small mistakes to have unforgivable consequences.

Identify your vulnerabilities: Evaluate your systems for what functions are business-critical. What processes, buttons or links have the highest risk associated with their execution? Which ones would buy something your business couldn’t afford, send messages you can’t take back, or delete records you can’t recover?

Create roadblocks: You know those pop-ups that annoy you so badly that say “are you sure?” after you’ve hit the “buy now” link? These intention-checking messages help you slow down your furious clicking, and can prevent execution of an erroneous command.

Improve bad layouts: Do your systems have dangerous buttons/links right next to innocuous links? Maybe your “print” button is next to your “fire everybody” button? Your “Decline award of business” button next to your “buy all” button? Your copy/paste command next to your “wipe database” command? There’s no good reason to build vulnerability into your system layout.

Sensitive Communications: Are you frequently sending sensitive information back and forth over email that you could be automating through a system with protections in place? One mistake and you could send proprietary information from steve@vendorA to steve@vendorB, and you have a breach of confidentiality on your hands. Take advantage of the data segmenting capabilities available in most modern systems.

Even your most talented team member will make a small mistake, and if it’s at the wrong place at the wrong time, or wrong link on the wrong system, it can have disastrous consequences. Don’t get rid of the talent, remove the unnecessary vulnerabilities in your systems, so that your people can focus on using their skills. Your company’s internal processes shouldn’t be its riskiest activity.

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.

 

 

 

 

 

The Art of the Pilot ​

Tuesday, July 17th, 2018

 

 

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

At SafeSourcing, we typically start our engagement with a simple Pilot Program. The pilot is our trial offering for new clients who are interested in what SafeSourcing can do for them and are ready to test us out. When we engage with the client, we start with two relatively simple categories to use for our client’s first eProcurement events.

We select simple categories so that the client can focus on understanding the process and evaluating the results. We also recommend categories which we host fairly commonly. Another benefit for hosting simple and common categories is so that we can provide quick results. For example, some common pilot categories for retailers are copy paper, stretch wrap, plastic bags, and paper bags. There are more, or course, and that list would vary from industry to industry.

The SafeSourcing Pilot Program is a 30-day trial of SafeSourcing’s services. Because we are able to drive very quick results, 30 days is a sufficient amount of time to fully experience and evaluate the benefits of the process.

Another very important benefit of the SafeSourcing Pilot Program is our Cost-Neutral Guarantee. SafeSourcing guarantees the pilot will be successful and will drive savings. If our client does not get savings from the pilot, then they will not be responsible for our fees. This means that our new clients are only risking the time they spend working with us to prepare for their events.

With no risk and guaranteed savings, the SafeSourcing Pilot Program is a great way to try eProcurement within your organization. SafeSourcing’s clients are attaining incredible savings averaging over 24% in 2017. Start with your SafeSourcing Pilot Program soon and get started on your own. 

We look forward to and appreciate your comments.