Archive for the ‘Strategic Sourcing’ Category

Tactical and Strategic Sourcing

Wednesday, November 14th, 2018

 

Today’s post is from our SafeSourcing Inc Archives

Let’s define each one then note the differences. This will aid in better understanding how procurement professionals justify adopting one sourcing method or the other.

Strategic Sourcing

Strategic sourcing is a precise, long term approach to acquire supplies and or services for an organizations current need at the lowest total cost of ownership (TCO) and the lowest risk to the supply chain. This process creates a relationship between the customer and vendor that will ensure continuous improvement in quality, delivery, cost and service while providing the means to attain ideal proficiencies with both parties. There are three key components of strategic sourcing; spend analysis, market research and supplier evaluation and relationship management. These steps require a specifically trained staff using a specific software tool to achieve desired outcomes.

Tactical Sourcing

Tactical sourcing is a short term, transactional activity practiced in small to medium companies. This approach to purchasing goods and services uses quick quote and order processing to support the company’s production or needs. This approach does require management within the company to ensure the right material is purchased at the right price and at the right time. Unlike strategic sourcing, companies are not concerned with the vendor’s core capabilities or creating a long-term relationship.

So based on the two sourcing methods one might think that the strategic approach makes for best practices compared with the tactical method. So why do many companies choose the latter of the two.

Consider a small to medium sized company where purchasing has the ability to use just about any supplier that fits their need. Typically, buyers will use their own best judgement to find the right supply that meets both their pricing and best shipping dates. This is very common in companies that don’t have the luxury of time or technology to assist them from shifting form tactical to strategic purchasing. Their biggest concern is to keep things moving while keeping an eye on costs, hence why tactical sourcing makes the most sense.

Now compared this to a larger company where they could have a suite of ERP technology and a dedicated team of purchasers. They have the time and resources to properly vet suppliers, develop reports, perform a spend analysis, and conduct market research. With these capabilities, procurement can negotiate lowest total cost of ownership (TCO), taking into consideration, quality, price, delivery and lead times. These buyers will have a deeper understanding of the company’s overall needs and requirements. Taking a strategic sourcing approach makes the most sense in these cases.

Finding the best sourcing method for any size company should be a priority, yet time and time again, companies fail to implement any thoughtful process or policy costing them time and money. SafeSourcing, with its dedicated staff and E-procurement suite of tools could do just that. Lower your risk and increase savings without hiring additional staff or buying expensive software. It’s a win-win!

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.

 

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.

Selective Exposure

Thursday, September 6th, 2018

 

 

Today’s post is our SafeSourcing Archives

Mark Zuckerberg once famously said “A squirrel dying in front of your house may be more relevant to your interests right now than people dying in Africa”. Along those same lines, Eric Schmidt of Google fame proclaimed “The power of individual targeting—the technology will be so good it will be very hard for people to watch or consume something that has not in some sense been tailored for them”. Often times statements like these disquiet our fears of artificial intelligence, or of Google powered robots taking over the world. But I think there’s a much bigger, and more immediate cost to what is being described above.

Have you ever noticed how many of the news feeds, search results, and advertisements that you don’t have a choice in seeing are often customized to your interests? What kind of long term effects do you think this will have on a society, especially one that is only getting more and more embedded into online networks of all types? Some believe it will necessarily lead to us only seeing the information we agree with, and that can be a dangerous thing.

This is why Eli Pariser, executive director of moveon.org, believes that opinions are becoming both more polarized, and more narrow minded. One way this problem seems to be manifesting itself is through the increasing polarization of opinions in topics ranging from global warming, gun control, ISIS, and vaccines. The claims of both sides of any argument seem to get more extreme and certain of their views, and rarely ever less. This is because the algorithms that review our history and populate our search results, also tailor our information feeds to what we want to see. But how then will we learn things we need to know, without being limited to the things we want to know?

Right now, the options are limited. All of your Facebook and Google results go through algorithms that customize their outputs to your activity. Google gives some tips for how to prevent that in PC browser searches by deactivating your history[1], but that option is not available for mobile browsing. Don’t forget, these companies are advertising revenue based, so they’re incentivized right off the bat to give you output that will sell ad space, which is more effective with personalized marketing. In this case, although there doesn’t seem to be a black and white answer, age old advice seems to be the most useful: Never stop learning, listen to opinions different than yours, be humble, and never assume you are right without considering the alternatives.

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.

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[1] “Search and browse privately – the Google Help Center.” 2014. 14 Dec. 2015 <https://support.google.com/websearch/answer/4540094?hl=en>

The Procurement Integrity Act

Tuesday, August 7th, 2018

 

Today’s blog is from our SafeSourcing Archives

Depending on your political leanings, the government might not be your first choice of where to get guidance on integrity. I would suggest, however, that the government guidelines may not be the end-all source for all of your policy development, but it may be a great starting point. When experts speak about business ethics, they usually talk ethics as a spectrum of more ethical and less ethical, not as an on/off switch. The starting point of that threshold for most ethicists is the law. So even though you may want to go above and beyond the law for determining how you conduct your business, the law is where you would start for ensuring your policies are compliant, and you may want to begin with the government’s procurement integrity policies when developing your own.

The purpose of the Procurement Integrity Act is to prevent the award of contracts based on corporate espionage or bribery. The intention is for this act to encourage contracts that provide the best value to the government and, by proxy, its citizens. Below we will summarize a few key concepts from the Procurement Integrity Act for you to consider:

Communication must be much more regulated after a formal request for proposal has been released: It is expected that before the release of an RFP, a government procurement representative will be conducting industry research that may involve direct communication with the vendor community. However, after the release, communication must be well documented and must not include information that would give advantage to any one vendor over another.

Conflicts of interest: If you are advising the government in a procurement project and yourself, a family member, or company you are involved with have a financial interest in the project, criminal law may prevent you from working on the project. This policy applies to both giving AND receiving gifts between the purchaser and the vendor, applicable to gifts and other “perks” as well.

If you think it would be inappropriate for you to be involved on a project, speak with an agency ethics officer: Not many private companies have an ethics officer, but it should be within your policy to have the ability to notify a supervisor and self-identify any reasons why an employee shouldn’t be involved on a project when warranted.

Obligate participating vendors to minimize exposure to competitor information: It should be within your terms of participation that a company should never knowingly obtain confidential competitor information, and if ever erroneously receiving such information, they agree to minimize that exposure. In other words, the error should be immediately disclosed and information destroyed, not further disseminated. It does not benefit the purchasing party to have any one vendor have an informational advantage over another.
For more details, we recommend further study of the resources available at the website for the Office of Government Ethics at: http://www.oge.gov/

For more information on how SafeSourcing can assist your team in this process, 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.

When Good Companies Make Good Vendors

Tuesday, July 31st, 2018

 

Today’s post is from our SafeSourcing Archives.

In a previous issue Fortune Magazine published the top multinational companies to work for to compliment the top 100 US companies list they release every January.  Some of the highlights included donating money on behalf of their employees, offering extra money and vacation at long term anniversary, providing on-site childcare, and free breakfast buffet and game rooms.  You may be wondering what this has to do with your company.  The answer is everything.  When your suppliers are doing things right and creating a great place for their employees to work, it means they can service you better, provide better prices and products and have employees who are happier to work with your company.

In today’s blog we will be looking at a few other areas that suppliers are evaluated against that should be part of how you measure your potential and existing suppliers.

Non-Profit Organization Ratings – Along with industry reviews, there are also organizations like the Better Business Bureau who give its ratings to companies based on complaints that have been logged against those companies and any other information available.  Others sites like Angie’s List and customer driven feedback sites allow you to see consolidated views of the companies, services and products.  These sites go beyond surveys and get right to the customer feedback you are looking for.

Peer Opinion – One of the most valuable questions you can ask a supplier but one that is rarely asked is “Who are your top three competitors?”  By asking all of the vendors this question during an RFI or RFP process you will quickly understand the landscape of who the leaders in the field are and how they view each other.  This can be valuable information to get from the companies who know their industry the best.

Industry Reviews – There are so many organizations these days whose sole purpose is to research and rank other companies against one set of criteria or another.  This BLOG was sparked by one of these surveys performed by a financial periodical, but there are other major companies like Gartner and Hoover who regularly publish the findings of their research for both companies and products.  These types of surveys and research results are important because they include the same types of criteria found in an RFI and are performed by independent organizations saving your organization some valuable research time.

Certifications – Almost all organizations have been certified for one reason or another depending on the industry they belong to.   Many times their customers have no idea that they carry these certifications.  Capturing these during an RFI or RFP process will help you better evaluate the vendors you do business with.  Another way of getting this information is to go to the Certifying Organizations websites to find out which companies have been certified by their processes.

Understanding your potential and existing suppliers and how they compare in areas outside of the normal metrics, can help you develop good partnerships well in advance of any final contract with them.  For information on how SafeSourcing can help you gather these types of details, please contact a SafeSourcing Customer Service Representative.

We look forward to your comments.

Google search tools

Monday, July 23rd, 2018

 

Today’s post is from our  SafeSourcing Archives

Google’s search algorithms are notoriously complex and secretive. After all, if a savvy online company cracked the code to becoming the first result you see no matter what your search, they could stand to profit immensely. The ambiguity and complexity also makes it difficult to conduct research effectively and avoiding false-positives within your search results. What many users don’t know is that there are many shortcuts embedded into the search bar that allow you to get more specific with your results. We have passed through the many shortcuts available, and ranked the ones we think would be the most helpful to any procurement professional:

Search term format, followed by description:

    1. Word1 Word2: The default search parameter used by most users will search BOTH terms as separate terms. Therefore your search results won’t necessarily use the same word order, which may not return the correct results when using compound words or specific phrases.
    2. “Fourscore and seven years ago”: Using quotation marks will search the exact phrase entered in its exact order. This is best used for searching exact quotes, or product descriptions that must have an exact match.
    3. Star -Trek: Is your search result giving you too many false positives? If searching a word like Star is giving you too many results within a popular science fiction category that doesn’t belong in your scope, placing a “-” symbol before a second term will prevent the results from returning results containing that second term.
    4. Logistics site:www.safesourcing.com: Enter a search term, and then use “site:” to limit the search results to a specific domain. This can be helpful when looking for a specific product within a manufacturer’s website, but aren’t certain where to find it.
    5. Filetype:pdf: This shortcut allows you to search for files of a certain extension type. For instance, if looking for a sample specification, sometimes limiting your search to a pdf or word filetype will return the most relevant results.
    6. Fluid Milk Type VI 2008…2013: Placing three periods between two numerical terms will limit your results to between those numbers. For instance, if you are conducting historic market research for a commodity within a certain timeframe, this search will only return results containing numbers within the year range given. This can be useful if shopping for within a known price range as well.
    7. Related:www.cmegroup.com: When looking for similar suppliers or services, a “related:” search can be helpful for returning other sites of similar scope.

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.

 

 

How to insure the sustainability of e- RFX events for your customers.

Friday, July 13th, 2018

 

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

If you follow these simple guidelines it will also encourage senior management to consider placing more of the companies spend under the umbrella of e-procurement tools and specifically reverse auction tools.

Once you are armed with a robust detail focused supplier database and related e-procurement tools:

1. Conduct a detailed category discovery
a. Learn all there is to learn about the customers way of doing business.
b. Walk, observe and annotate all activity at distribution centers and warehouses.
c. Walk an array of stores and review all formats of the enterprise.
d. Compile a list of all corporate categories
2. Rank categories by
a. Total spend
b. Importance
c. Sourcing frequency
d. Quality objectives
e. Look for aggregation opportunities
i. Lighters, lighter fluid, flints, fire sticks.
3. Conduct supplier discovery
a. Rank suppliers
i.   Size
ii.  Experience
iii. References
iv. Environmental certifications
v.  Safety Certifications
4. With all of the above in hand; develop a three year game plan
a. Identify suppliers for each event over the three years
b. Develop savings targets by category
c. Develop a three year time line  for all categories
5. Role Play internally  the first year for a test category
a. Ask the following questions
i.   How will you award the business
ii.  Review alternate scenarios
iii. Review savings by scenario
iv. Determine which suppliers will be invited back
v. Determine what new suppliers from your database search will be invited during the next year or cycle.

I’m sure you can fill in a few more items prior to your launch, but the key is to have a plan and to write it down. Now you do.

If you’d like Safesourcing to conduct a cot neutral 2 day discovery session for your procurement team, please contact a SafeSourcing Customer Services Account Manager.

We  look forward to and appreciate your comments.

Cold calling is a necessary part of all businesses, not just sales.

Tuesday, July 10th, 2018

 

Today’s post is from our  SafeSourcing Archives

I come from a history of cold calling. When my mom was in junior high (circa 1955), my grandmother started her own catering business. A hard working Hungarian immigrant, she would sit at their kitchen table every Sunday afternoon after church and call the family of every single young woman listed in the engagement announcements to ask if they had decided on a caterer. My dad is a mechanical engineer, turned salesman, who spent the bulk of his career in the tool and dye industry selling everything from diamond grinding wheels to linear ball bearings.

I guess you could say that I was born into it. Although I resisted for the first several years of my career, once I finally gave in to the sales call, I never looked back. One of my favorite parts of the sales cycle is the cold call. It’s the first introduction of the product or service that you have to offer to a person or business that may have a need for it. I see cold calls as a challenge, each one a fresh opportunity. Apparently not everyone feels the same way. Here are a few suggestions that might help your cold calls be a little less frightening and a little more fun… like mine!

  • Be Confident. Go into each call with confidence and optimism. You are a business professional providing a viable product or service to someone whose company might very well have a need for it.
  • Listen. You’re prepared. You have a good understanding of your value proposition and basic understanding of the businesses that you’re calling on. Now have a conversation, paying close attention to what’s being communicated verbally and otherwise.
  • Be Yourself. Believe it or not, discomfort is easily perceived over the phone. You do not have to be unnaturally pushy or super aggressive to make sales calls. Using your own assets and unique personality to create a genuine rapport can be much more effective.
  • Speak at a Normal Speed. Or even slightly slower than normal, and enunciate. You want to do everything you can to help your potential customers hear what you’re saying. There is nothing worse than struggling to understand someone who is speaking too quickly or mumbling.
  • Be Succinct. Get to the point quickly, keeping in mind of course that if your potential customer feels like engaging in a little small talk to feel more comfortable, you’ll be happy to oblige.
  • Know Who To Ask For. When making sales calls, do your best to understand who the decision maker is for your particular product or service. For some clients, it might be VP of Marketing, for others it could be the head of Human Resources. Learn who makes the final decision before picking up the phone, so you’re not wasting their time or your own.

Would you like to learn how SafeSourcing could help your company run more efficiently? Interested in a risk free trial? Please don’t hesitate to contact SafeSourcing. Our team is ready and available to assist you!

We look forward to and appreciate your comments.

 

Freight Tendering 101

Monday, July 9th, 2018

 

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

This author has been in and around the freight business for years. Actually for 40 years. Just like the unrelated movie, I have seen it all. Planes, trains and automobiles (trucks really) to be sure but also ocean bound freight. The ships and planes get bigger, but at the end of the day the same issue exists. How do companies get their products to where they need to be efficiently and at a cost that is acceptable in order to satisfy customer demand?

This is not necessarily about your internal optimization models; it is more about the data that feeds your internal optimization models. That is of course if you even have one. The basis for collecting that information is not all of the math calculations and pivot tables; it really is the following types of data.

• Lane data in distance for your delivery model such as Plant to DC.
• Volume discount data from carriers
• Lane rate per mile
• Fuel Surcharge rate
• Human resources rates for loading and unloading (Lumpers in the US)
• 3PL storage rates
• Load balancing charges for LTL versus FL

There may be other data that is required for your individual model, but the above will cover most of what you need to come up with a well rounded format that freight companies can easily bid on.

Relative to who should be bidding; this authors recommendation conducting a three step process that includes a detailed RFI, followed by a detailed RFP and then ultimately the RFQ data compression piece or a reverse auction.

• RFI  – Incumbent and other participants selected from a quality sourcing  database
• RFP – Participants include a reduced number from the RFI process
• RFQ – Includes all RFP participants unless otherwise indicated by the host.

The terms and conditions of the reverse auction or RFQ can cover the balance of information needed by providers that relates to quality, certifications, payment terms, safety, insurance etc.

If you want to get control of your freight costs, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

Retail collective buyer organizations and consortiums are evolving in order to compete with mega retailers.

Friday, June 15th, 2018

 

These business structures have been around for a long time. Many have evolved to use cutting edge e-negotiation and eProcurement tools. Their retailer members are also benefiting from their use of these tools in order to reduce their net landed costs in many different ways

These types of organization can go by many different names such as wholesaler, collective buyer, consortium, cooperative, share groups and more. They all have one thing in common. They consolidate purchasing volumes for a wide array of groups that may have very similar business structures, but for the savvy consortium can also be wildly different.

In the retail vertical, companies may actually belong to several different buying groups because their primary group does not offer expertise in a certain area.

Consortiums are also evolving and beginning to focus mixed markets where it makes sense. In general consortiums tend to be vertically focused such as a drug industry consortium with the members generally representing the drug industry only. However some consortiums are beginning to market them selves outside of their vertical to retailers or other companies who want to take advantage of learned expertise that the consortium possesses in the categories that are common across more than their own vertical and offer increased volumes. An example might be drug stores sourcing very similar products that health care organizations like hospitals source. Although this may seem like a stretch fro most, it is now very common within retail for non vertical specific players to work together.

Today?s advanced e-negotiation or e-procurement tools make it much easier to accomplish collective buying and aggregating outside of a consortiums initial area of expertise. Large and small retailers alike now have the capability of viewing a much broader universe of suppliers and other companies while also coordinating and participating in collaborative events from hundreds if not thousands of miles away. Suppliers now have an opportunity to earn business they could never compete for in the past.

Retailers should ask their collective buyers how they plan to make the use of these types of tools and what they have to offer in terms of introductions to other companies for increased volume.

We look forward to and appreciate your comments.