SafeSourcing Blog

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

What are you doing to understand the results you are receiving from your projects?

We have spent most of last week looking at Ray and John, two procurement professionals who were running sourcing projects for containerboard for their respective companies.   Ray and John took different approaches to understanding the containerboard market, suppliers, company atmosphere and in determining the goals of the project.  They had each executed their strategies and now needed to understand the results they received. Yesterday we looked at Ray’s results and today we finish our series by looking at the results John was able to achieve.

John works on a small team just like Ray does but long made the commitment to invest a little bit of his every week to try and stay up to date on the markets he deals, the vendors that are in it as well as to understand what is going on in his own company by scheduling periodic meetings with the department heads.  Due to the fact that John had invested this time up front, it made it easier for John to understand initiatives of his company, and trends in the market and with suppliers to form goals that accomplished more in his projects than just reducing price.

The final known metrics that John’s project was able to achieve were as follows:

•  Project Start Date – January 9, 2013
•  Number of Suppliers Involved – 12
•  Percent of spend being review – 100%
•  Amount of time spent doing research to understand project
    o  5 hours per week reading industry publications and blogs for the entire year
    o  10 hours reviewing current contracts and invoices
    o  15 hours spent researching other suppliers
    o  4.5 hours preparing survey and analyzing results
    o  2 hours per week meeting with other departments to understand what they are doing
    o  18 hours negotiating final versions of updated contracts
•  Additional Information Collected – Green Initiatives from Suppliers; Production levels for containerboard; Internal survey detailed division satisfaction levels, usage and the fact that two of his regional players had been acquired by National companies.
•  Amount of time spent communicating with suppliers – 2 hours personally, however his 3rd party strategic sourcing company invested 33 total hours on his company’s behalf to help arrange a price gathering process.
•  Number of Bids and Changes – Average of 47 bids each – 564 total bids/changes collected in 37 minutes.
•  Savings Achieved  – 9% savings plus the average of 8-12% predicted future increases
•  Terms – Net 30 Plus 3% Discount on Net 20 collected from one vendor
•  Contract Length – One year contract with reviews against Indexes every 6 months; Discount of 5% on a two year deal but with the consolidation of vendors John’s company is leaning toward a one year deal and taking it back out in 12 months.
•  Number of additional suppliers supplying outlying divisions
•  Plan is to consolidate the 18 regional and National vendor group down to a Better/Best National program with one Regional  included to help handle on region that represents 45% of his overall spend.
•  Project Complete Date – February 27, 2013 last contract was finalized

John had a goal to achieve “value” for his company and in doing this he had to understand everything about what was going on around him in the industry and in the company.  This understanding allowed him to create a specification and scope that was extremely detailed and accurate for the vendor community.  After reviewing everything the attention to detail was not lost on the vendor community or the seriousness of the opportunity.  John had a plan with clear goals and was able to convey that successfully to the suppliers who showed up with additional discounts and pricing in order to win the business.

When it was all completed John’s year round efforts produced 3 great vendors, one of which was new, discounts for terms and larger orders that would be stored in his new warehouses and competitive pricing while avoiding a cost increase.  His final decision was aligned with the corporate initiatives for “green” and woman-owned companies and reducing his supplier count would save his company hours of additional administrative effort. 

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.

Share This Post

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

We have spent the better part of the last week following the sourcing activities of Ray and John, two procurement professionals who were running containerboard sourcing projects for their respective companies.   Ray and John took different approaches to understanding the containerboard market, suppliers, company atmosphere and in determining the goals for their projects.  Each executed their strategies and now needed to clearly understand and evaluate their results.

Ray’s strategy was focused on his three big incumbents and in getting them to improve their pricing.  Ray was not prepared to ask or collect much additional information from his vendors nor was he able to properly research the market and his company landscape to learn what was going on that he was unaware of.   Ray was able to garner some limited information relative to his suppliers “green” initiatives and was pleased to learn that all three incumbents were at some level of implementing policies and offerings that were aligned with his company’s new plans as well. 

On average Ray was able to achieve locked in savings for 6 months and also avoided the 8-12% increases he had understood would be coming.  Ray was pleased with these results, however, because he had not talked to his finance department in a while he had no idea of their move to requesting Net 45 terms from all suppliers was only a few weeks away from being implemented and that he would have to have a conversation with his suppliers that would have had much more leverage prior to negotiating these new contracts.   Also, because Ray chose to focus on the three big incumbents, the divisions using local suppliers were moving forward with business as usual and much of what Ray was able to save was going to be lost in increases in the outlying divisions.

The final known metrics that Ray’s project was able to achieve were as follows:

1.     Project Start Date

     a.      January 7, 2013

2.     Number of Suppliers Involved

     a.      3

3.     Percent of spend being reviewed

     a.      60%

4.     Amount of time spent doing research to in order to understand  the project              

         hours per week reading industry publications and blogs

     a.      7.5 hours reviewing current contracts and invoices

     b.      15 hours spent researching other suppliers

     c.       2.5 hours hearing about new company “green” initiatives

     d.      24 hours negotiating final versions of updated contracts    

5.      Additional Information Collected

     a.      Green Initiatives from Suppliers

6.     Amount of time spent communicating with suppliers

     a.      18 hours

7.     Number of Bids and Changes

     a.      Average of 3 bids each – 10 total bids and changes

8.     Savings Achieved

     a.      3% plus average of 8-12% predicted future increases

9.     Terms

     a.      Net 30

10.  Contract Length

     a.      Two year contract with reviews against Indexes every 6 months

11.   Number of additional suppliers supplying outlying divisions

     a.      9 Suppliers representing 11 divisions – These agreements were not included in the project scope

12.   Project Complete Date         

     a.      March 6, 2013 last contract was finalized

Ray’s goals were focused solely on getting a reduction in pricing from his three major incumbents and as a side objective, understanding some of the “green” options and initiatives that they were either currently offered or would be offered in the near future.  While it could be argued that Ray achieved his goals, the case could also be made that the expectations he set and results of this project could have been much greater and could have resulted in additional value to his company.

Stay tuned tomorrow as the story of Ray and John concludes and we review the results John was able to achieve with his efforts. 

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.

Share This Post

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

This week we are taking a look at how two procurement professionals approached the same containerboard project with their respective company.  Ray and John took different approaches to understanding the containerboard market, suppliers, and company atmosphere and were now prepared to start looking at the goals they wanted to achieve with their respective projects.

Ray would love to be able to source this containerboard project and consolidate his vendors, learn more about new vendors in the market and, of course, control his costs. Unfortunately he just doesn’t have the time to do it all. 

With the lack of time and the fact that his boss has been constantly talking with Ray about how the company can reduce their cost of goods, Ray has resigned himself to the fact that cost is the goal he is going to focus on during this event.  Ray knows that by focusing on cost alone that he will likely scare off new vendors who have no interest in investing time in a bidding war and that he will create some ill will with his current vendors, but he has limited  time  to invest on this project. As such, Ray spends the next few weeks on the phone and communicating through email with his incumbents trying to get them to reduce their costs, leaving the several divisions doing their own thing to continue with business as usual.

John, on the other hand, has chosen to invest some of his time with his company’s other departments and has made a name for himself within the company as someone who really is trying to understand the total picture relative to this and other categories.  This gives him the latitude to begin to investigate some potential goals that reach beyond cost of goods only and gives him the executive backing to pursue them. 

John knows that he needs to take a step I towards consolidating his vendors.  With so many divisions doing their own thing, he knows that  one goal of this project is to leverage the company’s overall spend and standardize on a process in order to help his company control total cost.  His plan to put part of the responsibility of this monitoring back with the vendor will create even greater potential savings and provide him with tools to show the results. 

John also knows that there are evolving programs within his company that will be affected positively by this project if he completes the due diligence in order to understand what each vendor can offer beyond just pricing.  The other departments probably never thought that containerboard spend would help them accomplish their new initiatives but John in understanding all of his companies initiatives understands the benefit that selecting the best overall vendor could provide his company.

John also realizes that at the end of the day reducing his cost of goods is still an important goal so he plans to invite several new vendors he has identified along his incumbents to participate in an online pricing gathering event.  This event that he will conduct through his eProcurement solutions provider will allow vendors to see and adjust their pricing based on their ranking in a way they see fit and feel comfortable with, but in a way that also benefits John’s company.  John is convinced that the investments and research he has done will pay big dividends in meeting new corporate initiatives, optimizing vendors and reducing his cost.

Stay tuned Monday as the final piece of 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.

Share This Post

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

This week we are taking a look at how two procurement professionals approached the same containerboard project within their respective company.  Ray and John took different approaches to understanding the containerboard market and the sources of supply, and are now prepared to start looking at their changing company landscapes.

Ray is part of a very small procurement team and as a result he does not have nearly enough time to touch all of the areas within the sourcing process.  Ray also doesn’t have a lot of extra time in order to keep informed of the constant changes that are affecting his and other businesses all over the world.  Because Ray is not well-connected with other internal teams, there are new corporate initiatives being put into place in the form of new policies and programs that he is unaware of.  These programs could affect decisions he makes to source any number of products and services, especially in an area like containerboard. 

Ray plans to source his containerboard from the same sources he has always used, and as an added step he will ask the vendors about any recycling programs they may have or that they are part of that his company may be able to use because his company had just had a ½ day event on how they could become better recyclers in the industry.

John’s team is not much bigger than Ray’s but he made a commitment long ago to have a monthly meeting or luncheon with the 12 department heads that he interfaces with. Four (4) of these have never run a project with John’s group before for but do have some opportunities they wish to explore.

When John last met with the HR department head he learned that the company recently received some bad press for not awarding some business to a company that was female-owned.  While the award was completely legitimate and the best company was awarded the business, it did bring up his company’s track record of working with minority-owned businesses.  In speaking with the HR director a new process was developed to collect information about the characteristics of the suppliers being considered in John’s projects so that the decision makers could have additional insight when making final award decisions.

When John met with the Environmental Program Director he was able to learn the breadth of his company’s new green initiatives, their new specifications on recycled product use and the programs they were trying to implement.  John was able to use all of this information in order to refine his containerboard specifications as well as the Terms and Conditions for this.

John also had a regular monthly meeting with the construction department head.  Three months ago he learned that his company was building two new warehouses on the east and west coast in order to handle overflow and distribution within the divisions.  John was curious and asked about the already spoken for capacity of the warehouses and was pleased to find out that they had each reserved space for potential projects that involved purchasing higher volumes in order to get reduced prices on some materials and product.  By becoming their own distributor, John planned to structure his project for containerboard in a way that gave him leverage to try and drive better pricing and create a flow of containerboard from the warehouses to divisions that were already getting scheduled loads.  This process also meant that we would be able to better control freight costs as the number and frequency of his containerboard deliveries from the suppliers could be reduced.

John now had a good feel for the market, suppliers and what his company was doing in other areas that allowed him to begin taking the next step of designing the goals he wanted to achieve through this process.

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.

Share This Post

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

In part one of this week’s post we began taking a look at how two procurement professionals approached the same containerboard project with their respective company.  Ray and John took different approaches to understanding the containerboard market and were now prepared to start looking at their supplier base.

Ray had been doing business with a few of his containerboard suppliers for a long time.  They were great people that were friendly and assured him at all times that they were doing everything they could to make sure he got the best price.  They were responsive to his needs and their track record for quality and delivery was pretty good as far as Ray had heard throughout the divisions.  There were, however, about 25% of the divisions that, due to acquisition or an allowance to be independent by the corporate office, had chosen other regional suppliers for their containerboard needs.  This 25% represented almost 40% of Rays overall spend.

Because Ray didn’t have the time to chase down all of the different suppliers being used by the acquired divisions and potentially disrupt his business  with potential vendor changes, he chose to focus on his existing vendor relationships and let the outlying divisions continue with business as usual.  Ray never had the time to really explore the mergers, partnerships and new companies that had developed since his last contracts were negotiated so, as many procurement professionals, he didn’t know what he didn’t know.

John too had been stuck in a place with a few primary suppliers and large number of regional vendors to supply his needs.  Because his automated contract management system had alerted him 120 days before the contracts were set to expire, he was able to send out an internal survey to the divisions  in order to ask them a few  detailed questions about their pricing, quality and relationship with the vendors that supplied their containerboard. 

What he was able to learn through this process was very interesting.  Of the 24 divisions not being supplied by a major vendor, over half wanted to be supported by a national provider with better delivery performance.  He also learned that 2 of his regional suppliers had been acquired by one of his national vendors but had left the existing, higher priced agreement in place for those divisions.

Also through the course of sending out this survey, John was able to learn about a very large regional mill in the Midwest who traditionally had been primarily a newsprint manufacturer, but because of the decrease in printed media and the increase in the need for containerboard, had converted over 45% of their manufacturing capabilities to producing containerboard thereby increasing the competition in that area of the country where coincidently several of his company’s divisions were located.

The final issue John was able to learn upon  follow-up from a few surveys that  contained negative comments, was that the quality of one of his major National suppliers was beginning to suffer.  When he asked the division presidents why they had not mentioned this before, they all said that it was more of a nuisance than it was a real problem and that while it had been getting worse, it was not preventing them from hitting their numbers.

Armed with this information John had a complete picture of his current National and Regional supplier landscape as well as information relative to a few new suppliers that he had not known of with which to prepare for his sourcing project.  He know had what he needed to begin reaching out internally for how far he could go to make the changes that would benefit his company the most.

Stay tuned this 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 for that level of performance.

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.

Share This Post

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

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.

Share This Post