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“Be Prepared – Resolutions Part II of V”

Tuesday, December 27th, 2011

In yesterday’s post, we took a look at a fairly basic concept that will pay out enormous dividends. In a nutshell, every procurement activity, regardless of value, should be approached using the same techniques that would be used for the highest priority purchasing initiatives. This includes RFIs, RFPs and RFQs. Now, the question becomes, how do you prepare your team for the challenges that lay ahead?

The answer is to develop a thorough plan. Working with your strategic sourcing partner, develop a strategy based on a proper category discovery session. Your partner will lead the effort to determine your plan based on the spend information that you provide and conversations with key personnel in your departments. Once this plan is in place, understand that this will become a living document that will continue to grow and evolve throughout the year.

In addition to your plan, you also need to enable your team and your strategic sourcing partner. Your partner has already assisted with the discovery process, so it is a natural extension to continue to keep them informed of changes to your plan. Now that you will be considering more of your company’s spend in your day-to-day efforts, your solution provider will also have to follow suit and provide additional support. At this point, you must develop and maintain an open line of communication between key players on each team.

Finally, you will want to prepare to share the good news. In order to keep your team motivated through the year, you might consider how best to share the news of your successes. You may choose monthly or quarterly reporting that will highlight cumulative savings dollars that departments or team members have ushered in using your procurement plan. Creating excitement will only lead to more success.

Tomorrow, we will touch on another resolution that is becoming more and more common and from which we can all benefit.

We look forward to and appreciate your comments.

Posted in Sourcing Strategy, Strategic Sourcing

“Welcoming the New Year – Resolutions Part I of V”

Monday, December 26th, 2011

As we welcome in a new year, we often speak of our resolutions. Personally, the resolutions that we make are likely to include exercise more, become more environmentally conscious or lose weight. The same concept of resolutions should take hold in your procurement department. Take the New Year as a challenge to drive new initiatives that will reduce spend in a sustainable manner.

If our first resolution was to exercise more, we could also apply that to procurement. That is to say that we could take more steps toward efficient and effective procurement. You may focus your RFI, RFP and RFQ efforts on initiatives that have been deemed the most significant based on spend or some other factor, but what about all of the other initiatives that go unnoticed? How many of these smaller spends are allowed to continue year after year while your focus is on these larger spends? Make a plan to include more of your contracts and share that plan with your strategic sourcing partner.

If you were to say “I want to lose some weight this year”, couldn’t you also say “I want to reduce my spend this year?” Just like it is for a body, exercise will lead to weight loss. Stay on track with your procurement plan and you will see the spend dollars drop. Increasing your company’s strategic sourcing initiatives to involve all projects will have a significant impact on reducing your overall spend.

In the remaining segments of this series, we will continue to explore ways to take advantage of that New Year energy. Tomorrow, we will take a look at how to get your department prepared for the new (or renewed) procurement initiative.

We look forward to and appreciate your comments.

Posted in Sourcing Strategy, Strategic Sourcing

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

Wednesday, December 21st, 2011

The rest of the Little Jack Horner (learn more) spend cube analogy might be changed to read 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 subject definition of a spend cube. You can find information relative to spend cubes in a discussion about spend analysis. However  to the original discussion we are talking about data in this case multi-dimensional data (data cube) 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 and ultimately in for a dollar and continue to get peaches when you are looking for plumbs. Ultimately the rhyme we used above is about hiding something.

If you’re totally confused, SafeSourcing can help, and we deliver results quickly. Contact a SafeSourcing representative.

We look forward to and appreciate your comments.

Posted in E-procurement Solutions, Sourcing Strategy, Strategic Sourcing

Here’s a Light bulb Christmas Gift from congress. Or not.

Tuesday, December 20th, 2011

If you were to base your business decisions on what congress told you to do, you could make some big mistakes. Mistakes like carrying to much of one inventory item versus not enough of another. Mistakes like moving your CSR focused green initiatives up based on legislation even though they will cost you more money this year as opposed to spreading your transition out over a couple of years.

Well congress as usual is at it again with another hide and seek item within a huge spending bill.

According to a Washington Post article by Stephen Dinan titled Congress overturns incandescent light bulb ban, Congressional negotiators struck a deal Thursday that overturns the new rules that were to have banned sales of traditional incandescent light bulbs beginning next year.

That agreement is tucked inside the massive 1,200-page spending bill that funds the government through the rest of this fiscal year, and which both houses of Congress will vote on Friday. Mr. Obama is expected to sign the bill, which heads off a looming government shutdown.

Congressional Republicans dropped almost all of the policy restrictions they tried to attach to the bill, but won inclusion of the light bulb provision, which prevents the Obama administration from carrying through a 2007 law that would have set energy efficiency standards that effectively made the traditional light bulb obsolete.

Any thoughts as to what lobby caused this action to happen? Will it protect jobs? Will it slow growth? Do what you do because it’s good for you.

All of your opinions are welcome and appreciated

Posted in Green eProcurement Practices, Sourcing Safe Foods, Sourcing Safe Products, Sourcing Strategy

Social Media and a New Year

Monday, December 19th, 2011

Todays post is by Mark Davis Vice President of Operations and CTO at SafeSourcing.

With the influence of social media like Twitter, Facebook and LinkeIn  continuing to grow, how do you plan on using them for your business in 2012?

This past year has seen many new and sometimes alarming trends worldwide at every level and in every industry.  Few of those trends saw the impact and influence that social media channels had in 2011.

As with any new technology or tool, misuse can cause harm as we saw with some Twitter and Facebook mishaps, however those same tools, when used as designed, can create a benefit that can far outweigh the potential downside.  For many businesses the use of these tools would be embraced if they just understood more about them and the potential benefits. 

Today’s blog will take a look at a few of the aspects of social media and how they can be leveraged to help your business.

What’s Happening NOW? – It used to be that there were very traditional methods that worked for decades to communicate what is happening with your company.  Press releases were the strongest methods because they told the story in a way that made it news, and so the story respected.  With time the process for making this happen, making it “news” and getting it picked up by a newspaper or magazine began to transition into easier regular updates to a company website or possibly a blast email. 

With today’s social media tools such as Facebook or more fittingly Twitter, quick, snapshot, text-message updates can be sent at any time, about anything the company does in a way that can be instantly “followed” by thousands of people immediately.  The challenge is having a staff or partner that is current enough with the new channels to make the messages short enough to be digested but relevant enough to valuable.  The more frequently the messages are produced, the greater following you will develop. 

Who’s Talking About Us – Instant feedback is another valuable characteristic of the social media channels.  Whether by Blog, by Tweet or by Status Update the whole social network world has the capability to instantly let you know what it thinks of your message, product, service or company.  Having this feedback is terrific when it validates you are heading in the right direction, but even more importantly, it lets you know when you are NOT, quickly enough in most cases to change your course.  Knowing what people have to say about your company can be some of the most valuable information these channels can provide.

“Like” Us  – “Like” and “unlike” are words that in the past few years have hit the mainstream spotlight in ways they never have before.  These seemingly simple concepts made popular by Facebook for people to connect to businesses, people or concepts that they like is the one of the most important features of virtually all social media channels; FOCUS.  No longer are you blasting your messages out to groups of people you “think” will find your message valuable.  Now you have the peace of mind to know that your messages are going to people that are interested in what you have to say.  Those people are connected to other people who are also likely to have interest in your company, product or service and as a result will also hear what you have to say.  This connectivity; these links; this network is why the technology has become so powerful.

This just barely scratches the surface of what can be achieved with these new channels of communicating to your current and potential customers but hopefully is still a useful beginning of seeing where the value lies.

For more information finding companies that can help you with developing your strategy for social media, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

Posted in Business Sourcing, Sourcing Strategy, Strategic Sourcing

Part III of III. There are all types of reverse auctions.

Friday, December 16th, 2011

I like these types of words. Vickrey has a certain ring to it doesn’t it? In fact there are so many types of reverse auctions that we can’t deal with them all in a single blog. Some of the other types beyond the reserve price auction we have already discussed in this series and the Vickrey we will discuss today are English Auctions Yankee Auctions, Dutch Auctions and many more. Each type of auction evolved to be used for different type of purchasing.

I like the premise behind the Vickrey auction because of the gaming discipline that psychologically encourages bidders to keep fishing or playing. To this author what is important in today’s e-procurement platforms is that all features of all auction types ought to be available for use within a single event. By this, I mean we should be able to use all features of any auction type within a single event. An example might be using deciles, market baskets and units as a framework for a single event and have the flexibility to apply any feature such as reserves, ranking, indices, extensions and any other feature to each as well as each line item within an area. This flexibility drives the best possible savings for the host within one event.

Now back to the Vickrey.

According to Wiktionary the Vickrey reverse auction is named after a Canadian professor of economics named William Vickrey (1914-1996) who was also a Nobel laureate.  Vickrey’s paper, Counterspeculation, auctions and competitive sealed tenders, was the first of its kind using the tools of game theory to explain the dynamics of auctions. Any one that truly understand the magic of a reverse auction understands that the same type of psychology that drives gaming in a Casino drives the dynamics of a reverse auction.

Because there are so many types of reverse auctions it is important to develop an individual strategy for each category that you decide to take to market. Specifically to the opening question, a Vickrey auction allows for selling single items where the lowest bidder sells the item at the price offered by the second lowest bidder.

Now try and figure out how you would implement this strategy. Would you use ranking? If so, what impact might it have?

We look forward to and appreciate your comments.

Posted in B2b Reverse Auction, Reverse Auction, Sourcing Strategy, Strategic Sourcing

Unbundling the Bundle

Monday, December 5th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

As I was watching football this weekend I paid special attention to a commercial by a leading Voice-Over-IP company who showed a couple getting robbed of everything including the kitchen sink to symbolize the hidden charges they were getting hit with from their current phone company “bundle”. With a message asking why consumers don’t unbundle their services, the same question could be asked of companies across the globe on why they continue to receive invoices for thousands of dollars with only one line item to go with it and no detail into what that bundle consists of.

Today we will be taking a look at some of the disadvantages when taking the “bundled” approach with any of your services. 

Unknown charges – One of the biggest problems with bundles is that you don’t know exactly what you are paying for.  Vendors often state the benefit of the bundle is that you get discounts for buying more features or services together.  In reality, changes to any aspect of your bundle are at the mercy of your vendors because of the lack of detail you are seeing.  Anything about your bundle that could save you money due to vendor improvements or process changes are difficult to recognize due to the lack of your visibility into what you are paying.

Comparing vendors – As inevitably happens in the sourcing world, the time will come when vendor offerings need to be compared against the market to ensure competitive pricing.  Bundles make this difficult to do because of the lack vision into what is being paid for everything.  Without these details there is no vision into where the incumbent is hirer or lower than other vendors on the market making your negotiations on those pieces almost impossible. 

Multi-Award issues – Not every procurement project will lend itself to being awarded to more than one vendor (i.e. services vs. equipment), but without the breakdown of what is being paid for in a “bundle”, the potential to award pieces to more than one vendor, and in the process getting greater savings, becomes extremely difficult.  Whether or not multiple vendors are used, having the vision into what each piece of your bundle costs is an important decision-making tool for the procurement team to have. 

Most bundles are designed and presented in a way to save money for the customer, but the danger is when that bundle is actually being used to hide fees, charges and potential savings under a one line item payment.  For more information on the bundles you are paying for and ways to examine whether unbundling those services is right for your company, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments. 

Posted in Sourcing Strategy, Strategic Sourcing

We plan to launch a procurement department. Now What?

Thursday, December 1st, 2011

The following twenty bullet points are certainly not a complete list, but are areas that should be considered for any supply chain re-structuring including what is needed to drive success. These points should help frame your thought process and get you headed in the right direction.

1. Request CEO and CFO support.
2. Empower the Department.
3. Structure and staff the department for success. Not just one person.
4. Plan a detailed review of all contracts.
5. Plan a detailed review of all suppliers. 
6. Improve the performance of all suppliers or replace them.
7. Find a way to gain access to additional sources of supply.
8. Improve your view of all spend categories. Technology, Technology,  Technology.
9. Review any off shore and near shore sourcing.
10. Meet with all departments that controlled historical spend.
11. Review all sourcing methods being used by others today.
12. Review all Environmental strategies
13. Review all Product Safety strategies
14. Collect or create a product specification library
15. Conduct detailed category discovery session
16. Review lower cost SaaS oriented solutions that can ramp up quickly.
17. Develop and education plan.
18. Outline a plan of where you will be in 90 days, Six months and a Year.
19. Develop short and long terms goals that support your plan.
20. Build a department that delivers zero incremental cost to the organization.

As you use the above list and grow it, it is important to remember that the job of a procurement management leader is to think outside of the box and educate while looking for innovative ways to do things better, faster and at a lower cost. And to hopefully create an environment that will inspire co-workers while doing that.

We look forward to and appreciate your comments.

Posted in E-procurement, E-supply Chain, Sourcing Strategy, Strategic Sourcing

To Award or Not to Award…..

Monday, November 28th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

The process of negotiating deals with vendors has long been seen as one in which the customer “beats up” the vendor over price; sending the message that price/cost is the most important thing involved in making a decision about who you award business to.  Today’s economy would tend to back this mindset, however, in evaluating based on price alone you could be doing your company a great disservice.  Today’s blog is going to focus on a few areas to keep in the forefront as you make your purchasing decisions.

Apples to Apples – Whether by Request for Proposal, Reverse Auction, or just placing phone calls to gather pricing, the end result of your comparative research must ensure that you are looking at the same offering from each vendor (or the nearest comparison possible).  Even in the case when shopping a commodity-type product such as computer hardware there are many chances for the vendor to increase their value with other services they offer.  When comparing vendors make sure the products, services, extra offerings, etc. are being evaluated evenly. 

Reputation  – Although it would seem to go without saying, many companies will take the lowest bid of an apples to apples comparison without finding out much about who they are about to spend their money with.  This is seldom the type of practice people would do with their own personal purchases and yet there are many companies who are so focused on price that they fail to do the research to make sure the vendor they are about to select has a proven track record of performance.

Cost of Change – Assuming that you end up finding a new vendor to do business with, one of the things that must be considered early on in the discovery process is the cost of change.  Before you ever make a phone call, send out an RFI, talk to a vendor; the business needs to determine what the costs of switching vendors will be.  Knowing this in advance will allow you to set the stage with new vendors you are talking with as negotiation points and will possibly allow you  to possibly eliminate those costs should you ever have to change again.  There  are multiple levels of cost for switching vendors and you should know each before starting the process of looking for potential new suppliers.

Policy Changes –The final area that should be examined in the process of evaluating your vendors is the policies surrounding the goods or services being looked at.  Some companies have policies developed long ago and for good reasons that dictate the companies they can do business with.  Some of these policies (such as ones relating to specific geography) may need to be examined so that companies that can provide good value to your company can still be considered for your business.

For more information on gathering information and pricing from vendors and assistance with the evaluation of that information, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

Posted in Contract Management, Sourcing Strategy, Strategic Sourcing

The Most Expensive Turkey Day

Wednesday, November 23rd, 2011

Thanksgiving 2011 is one of the most expensive, if not the most expensive, ever.  How can this be? According to a report from ABC News, travel and food costs are at an all-time high.  Hotels are up 5% this year, turkey is up $3, and even pumpkin pie is up in price by $0.41!  The culprit for these increases: rising gas prices, which are up about $0.50 per gallon compared to last year?  If gas prices are affecting Turkey Day, what about Black Friday and Cyber Monday?

Black Friday is notoriously known as the busiest and most lucrative day for retailers.  On its heels is Cyber Monday which has become almost equally as profitable, both of which follow one of the most expensive holidays this year.    Prices for those must-have gifts inevitably are higher this year as well as gas prices have inflicted higher cost burdens for the retailer, who inevitably impose those cost increases to the consumer.  Although it may be a little late to prepare, this expensive turkey day provides a lesson in preparation for the year to come.

The consumer has numerous options to beat the rising costs.  Purchase non-perishable goods such as pumpkin and soups early in the year to avoid High Holiday costs.  Traveling on Thanksgiving?  Book flights ahead of time, and if possible travel on Thanksgiving, or postpone celebrations to the week after which will provide lower fares.

For the retailer, preparation and consultation with your strategic sourcing partner is key.  Following a similar plan as the consumer, purchase excess non-perishable goods earlier in the year.  Products and gifts that you know will be successful should also be bought in large quantities in advance.  This will not only help your wallet, but it will also allow you to have remaining inventory once Black Friday and Cyber Monday hit.  Beyond purchasing in advance, why not incorporate an escalator/de-escalator clause into your contracts to ensure you are not as heavily affected by the price inflation of oil.

Even though 2011 is one of the most expensive years to celebrate Thanksgiving, you can find alternatives to paying the higher prices.  Contact your strategic sourcing partner today so you can begin developing a plan for a Happy 2012.

For more information on SafeSourcing and how we can assist with this process, please contact a SafeSourcing  Customer Service Representative for more information.

We look forward to and appreciate your comments.

Posted in Sourcing Strategy, Strategic Sourcing

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