Archive for the ‘Strategic Sourcing’ Category

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

Friday, January 29th, 2021

 

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

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

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

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

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

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

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

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

We look forward to and appreciate your comments.
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Part II of here is some Lasik for retail e-procurement professionals in order to create better focus.

Thursday, January 28th, 2021

 

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

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

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

Here you go!

If your EBITDA is low, and your top line sales are in line with your plan, it is pretty clear that you have either an expense problem or a cost of goods problem. If the problem is expense related the first indicator is that your gross margin is most likely in line and your costs of goods are ok relative to your plan. In this case since the issue looks like it is below the gross margin line you have an expense problem. This does not always mean that the issue is your largest expense category like health benefits. Often times the problem can be caused by mid level expense related categories particularly categories that are hard to monitor and as such hard to control like hired services. A few examples are items like landscaping, snow removal, pest control, window washing and other similar types of expenses. These expenses have multiple invoices from multiple suppliers multiple times each month and are approved at store level. As a result, eProcurement results for these categories return impressive results while also streamlining suppliers as well as the process. With out going into to much detail the exact same process works if you turn this issue around and sales are near plan and gross margin is out of line, you most likely have a cost of goods issue.

A caution that procurement professionals should be aware of is that of measuring yourself solely against your own plan. You may be achieving your plan, but underperforming the industry you serve. This author believes that this is the 2nd level of analysis required once you have addressed the items indicated above and want to take the next step in creating a sustainable e-procurement process.

I hope this helps and allows you to use the lyrics from the 1972 song by Johnny Nash titled ?I can see clearly now? as your sourcing mantra.

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

 

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

Wednesday, January 27th, 2021

 

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

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

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

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

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

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

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

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

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

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

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

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

We look forward to and appreciate you comments.

The Buyer in All of Us VII Part Series Summary Regardless

Thursday, January 14th, 2021

 

Today’s post is assembled by Ron Southard, CEO at SafeSourcing based on data from our white papers and past blogs at SafeSourcing Inc.

Regardless of what type of personal buyer or corporate buyer you are, or even if you are a combination of any of the five, the goal should still be to prepare and create savings and value where you have the resources to do it. Some companies will have more time and resources to invest and others, due to circumstances, will make the time and resources to do it. There are ways to improve buying habits, not matter the type of buyer. Through better understanding of the types of buyers, the better equipped a company is when trying to make better decisions. By analyzing the kind of buyer, a company has now, the better the buying will be in the future, allowing for a more rounded and beneficial process. Paying close attention now to how and where money in a company is spent, the better prepared that company will be if it should ever need to make spending adjustments. The best way to prevent future problems is by being proactive and seeing where problems may lie in the future. Looking for potential problems now could potentially make the difference whether a company survives hard times or not. By noticing the kind of buyer your company has, the better a company can watch spend and know that the best possible process is in place. This is one big way a company can become more grounded, create better relationships, and know they are saving money in the best way they can.

If you are interested in the White Paper titled “The Buyer in All of Us” that was the basis of this series, please click the link and scroll down to download it with our compliments.

In order to learn more about SafeSourcing, please contact a SafeSourcing Customer Services Associate and ask about our risk free trial program.

The Buyer in All of Us Part V of VII. The Miser!

Monday, January 11th, 2021

 

Today’s post is assembled by Ron Southard, CEO at SafeSourcing based on data from our white papers and past blogs at SafeSourcing Inc.

Bob is the Miser. He and his family make a good living. They earn, they save, they spend, and generally have enough cash at any one time to weather the needs and emergencies life throws at them. Despite having a healthy bank account, Bob hates to overspend for anything. “I didn’t get rich by blowing my money on overpriced items,” is his favorite saying and his purchasing habits model that. Bob will find every deal even if it means driving twice the distance he normally would save even a little bit of money. At times he drives his family crazy with his “penny-pinching” ways, as even when on vacation Bob questions every cent and never believes that the first price he sees is the final price he can get.

Great savings – Companies that operate like Bob are known for achieving terrific savings and great contracts for their business. By reviewing and scrutinizing every penny the company spends, there are few times when these companies would feel that their suppliers are getting the better of them. If it means switching a supplier they have done business with for 20 years to save an extra 3%, they will do that. Businesses like this, however, generally expect to get the same quality of better from their new suppliers. They are the “want their cake and eat it to” buyers.

Strained Relationships –Most procurement professionals will tell you that a cost-only mentality will eventually lead to major problems down the road. Companies that take this approach develop two types of strained relationships: externally with the vendor and internally with operations. Suppliers who see that their customer only cares about low prices, no matter what, tend to deliver just that. They will not deliver value-added services and typically will not go above and beyond for their customers. This can cause strains with the operations of a company because they are trying to conduct business and need their suppliers to service them, deliver on time, and help when a crisis comes. This can cause resentment internally and lead to bigger issues.

Juice Worth the Squeeze – The Miser purchasing behavior looks to save money anyway possible. No project is too small, and every penny is worth pursuing. In theory, this is a good practice until it creates situations that cost the company more time and resources than the savings achieved. Each category and project should be examined from a spend, complexity, and potential savings perspective to understand its priority, whether the “juice” potential is worth the “squeeze” effort. Every spend should be reviewed, but priority should be put in place before executing projects.

Misers have the potential to get great savings for their companies but sometimes at the cost of valuable internal and external relationships. Understanding the priority of projects and working with the suppliers to achieve more than just price reduction can ensure all goals are met.

Please check back tomorrow for Part VI “The Traditionalist (aka The Contact Builder)” In order to learn more about SafeSourcing, please contact a SafeSourcing Customer Services Associate and ask about our risk free trial program.

The Buyer in All of Us Part IV of VII. The Casual Saver!

Friday, January 8th, 2021

 

Today’s post is assembled by Ron Southard, CEO at SafeSourcing based on data from our white papers and past blogs at SafeSourcing Inc.

The Casual Saver:

Dave is the casual saver. He and his family are living just past “paycheck to paycheck”, with a little bit of savings, but enough to pay all of the bills and still have some money left over. Dave’s income covers all of the expenses of his family’s lifestyle, while being able to improve its quality slowly over time. When Dave shops, he doesn’t turn away savings if a discount is offered, but he doesn’t actively seek savings out. He has enough to get by and is better than average about creating a cushion for his family if things got rough, but is not prepared for something major to happen. He is comfortable.

Quick decisions – Businesses that take Dave’s approach to sourcing frequently put contracts into effect quickly. These companies will never refuse a better deal from their incumbents and are not apt to change suppliers easily. Doing so would require “fixing something that ain’t broke” and may create a situation where the product or service is not as good and money is wasted. Like Dave, these companies may not actively pursue savings, but they don’t like wasting money. When the product or service is not mission critical, companies are likely to try new offerings if they are cheaper and come with a history of similar quality in the industry.

Missed Opportunities – When companies stay with the status quo and do not actively search for something better in the way of service, quality, or pricing, opportunities are missed for a company to get a better product or price. For Example, Dave needs landscaping services and has the current company he has used for years fit into his monthly budget. When he throws away the flyer for a new landscaping company in town, he does not know that this company is already doing better work for his neighbors at 2/3 the cost. Dave has a budget and the incumbent fits in that budget and does good work. How many companies everyday have incumbents that don’t even get considered for change because they fit the budget and do “good enough” work?

False Sense of Security – The Casual Saver company’s approach to sourcing is precariously balanced on one very fallible position; the revenue won’t decrease and the expenses won’t increase. Everything about the Casual Saver works as long as the revenue stays ahead of expenses, even if at a slightly higher rate. This creates a false sense of security because most businesses will eventually run into a decrease in revenue or outgrow a building that requires increased expenses or a capital investment. When a company misses opportunities to save extra cash they are creating a situation where they must become the Discount Shopper and possibly have to cut resources that no company ever wants to.

Casual Savers miss opportunities that are readily available because they are fooled into a false sense of security created by a situation that could change at any time. By investing just a bit more time pressing their incumbents or seeking new product/service alternatives they could get returns of that investment of more than 10X.

Please check back on Monday January 11th for Part IV “The Miser”

In order to learn more about SafeSourcing, please contact a SafeSourcing Customer Services Associate and ask about our risk free trial program.

The Buyer in All of Us Part IIl of VII. The Bargain Hunter!

Thursday, January 7th, 2021

 

Today’s post is assembled by Ron Southard, CEO at SafeSourcing based on data from our white papers and past blogs at SafeSourcing Inc.

The Bargain Hunter:

Sue is what we call a thrifty coupon cutter. She is on a fixed income since she lost her job and has had to take another, which makes less income. Since many of Sue’s expenses, especially those relating to her two children, are difficult to adjust, Sue must do everything she can to cut her expenses until she can grow her income back to a level she was accustomed to. Sue searches through the paper for coupons, pays attention to special discounts, and will even shop at multiple stores to get the items she needs at the best price available. These efforts take time and an investment from Sue, but it is worth it for her in a situation where the money is tight.

Many businesses are not unlike Sue. For one reason or another, their revenue stream may have taken a hit due to losing a major customer, having a major expense that has depleted capital, or from rising supplier costs. In these situations, companies must review their expenses and determine, as Sue did, where they can cut costs until they can return the company’s revenue to previous levels.

Cut the luxuries – The first step to take is to review those areas of expense that are not necessary. In Sue’s case, the cable TV package and restaurant meals were the first to go because they were luxuries and not necessary for her family to survive the reduced income situation. Many companies often follow this same strategy and will cut those “luxury” expenses that their company can live without.

Look for discounts – The second step is looking for discounts on the services and products that cannot be cut. In Sue’s case she found e-coupon sites, clipped coupons, and registered for discount programs from the places she shopped most. Many businesses will do the same thing, looking for suppliers who are offering deals on new business. However, changing suppliers or products introduces unknown variables in the equation that should be examined before deciding on full switches. Trying or testing a product or supplier first is a crucial part of this process.

Discover new sources – There may be times when it makes sense to split spend among more than one supplier so that the best deals on the items can be realized. This can require more effort managing multiple vendors, but like it did for Sue, the time investment may be worth the savings when multiple suppliers constantly compete for the business, with no one vendor guaranteed to keep the business by default.

Discount shoppers must invest more time, but circumstances often require this to get the needed savings to run a business. Keeping watch of the market and being familiar with multiple sources of supply is a big key to this model.

Please check back tomorrow for Part III “The Casual Saver”

In order to learn more about SafeSourcing, please contact a SafeSourcing Customer Services Associate and ask about our risk free trial program.

The Buyer in All of Us Part II of VII.

Wednesday, January 6th, 2021

 

Today’s post is assembled by Ron Southard, CEO at SafeSourcing based on data from our white papers and past blogs at SafeSourcing Inc.

The Five Buyer Types:

It is interesting to look at the business world in the perspective of how we function in our personal lives; seeing the differences and similarities with which activities are accomplished. Sometimes we behave in business as we do in our personal lives and sometimes we behave the opposite, especially when we are dealing with someone else’s money. These purchasing profiles and the defining characteristics can mirror each other or be very different depending on the person.

There are generally five different types of buyers: the bargain hunter, the casual saver, the miser, the traditionalist or contact builder, and the cash rich. Each of these types of buyers has pros and cons to it and many people share traits with more than one type. We will go into detail about each one of these types and analyze the positives and negatives of each. As with any situation, each positive trait can become a problem if taken too far, and with each negative there are ways to improve. No matter which category of buyer a person fits into, there are ways to improve buying habits.

With better understanding of the types of buyers out there, an organization can not only tailor their own buying habits for a better overall value, but also target a broader consumer base. The better the understanding of buying habits across the board, the better equipped a company is when dealing with the different types of buyers.

No matter what type of buyer a company employs, there are ways to improve the process for the betterment of the organization, whether through relationship building or awareness of the broader market. Knowing what buyer supports an organization can help that company’s targeted advertising and marketing, helping to make the process more efficient and less costly.

Please check back tomorrow for Part III “The Bargain Hunter”

In order to learn more about SafeSourcing, please contact a SafeSourcing Customer Services Associate and ask about our risk free trial program

The Buyer in All of Us Part I of VII.

Tuesday, January 5th, 2021

 

Today’s post is assembled by Ron Southard, CEO at SafeSourcing based on data from our white papers and past blogs at SafeSourcing Inc.

Does the type of buyer you are personally and professionally dictate the type of team you have surrounded yourself with?

Regardless of what type of personal buyer or corporate buyer you are, or even if you are a combination of any of the five, the goal should still be to prepare and create savings and value where you have the resources to do it. Some companies will have more time and resources to invest and others, due to circumstances, will make the time and resources to do it. There are ways to improve buying habits, not matter the type of buyer. Through better understanding of the types of buyers, the better equipped a company is when trying to make better decisions. By analyzing the kind of buyer, a company has now, the better the buying will be in the future, allowing for a more rounded and beneficial process. Paying close attention now to how and where money in a company is spent, the better prepared that company will be if it should ever need to make spending adjustments. The best way to prevent future problems is by being proactive and seeing where problems may lie in the future. Looking for potential problems now could potentially make the difference whether a company survives hard times or not. By noticing the kind of buyer your company has, the better a company can watch spend and know that the best possible process is in place. This is one big way a company can become more grounded, create better relationships, and know they are saving money in the best way they can.

Please check back tomorrow for Part II “The Buyer Types”.

In order to learn more about SafeSourcing, please contact a SafeSourcing Customer Services Associate and ask about our risk free trial program

What are your Procurement related New Year Resolutions?

Monday, December 28th, 2020

 

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

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

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

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

Resolutions:

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

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

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