Archive for December, 2011

“Staying the Course – Resolutions Part V of V”

Friday, December 30th, 2011

In the past four days, we have explored our New Year’s resolutions. We are now ready to reduce spend, prepare for new projects, engage in that green initiative and prevent contract evergreening. The most difficult step in any resolution is to see it through for the year to come. Today, I will provide additional tips that can keep your procurement strategies fresh and beneficial.

Event Selection:

The selection and timing of your procurement events is an important factor in overall procurement success. Take the time to categorize your events based on level of complexity as well as spend dollars and you will find that you are able to maintain a mix of simple and complex events that keep your organization balanced and prevent overload.

Index pricing and renegotiation:

You will likely find that your contracts contain index pricing language. This might include Min/Max clauses and might even include caps to prevent your pricing from varying too much in a given timeframe. Monitoring your price changes as they occur will protect you against unjustified price increases and increases that are above the maximum levels allowed. You might also find benefit from monitoring the indices involved to ensure that you receive any applicable price decreases that you deserve.

By working with your strategic sourcing partner to follow the resolution enhancing tips from this series, you will enjoy a 2012 filled with procurement advances and greatly reduced spend.

Have a Safe and Happy New Year!

We look forward to and appreciate your comments.

“Eliminate Evergreen Contracts – Resolutions Part IV of V”

Thursday, December 29th, 2011

One of the biggest causes of excessive cost we find is evergreen contracts. I find this to be a fitting topic for a New Year discussion as, just like the New Year, these contracts also follow on the tails of a year. Evergreening is the practice in which a contract automatically renews if no actions are taken. Often this renewal is at a premium. For more on evergreening, click here to go to the SafeSourcing Wiki.

Evergreening can be prevented using a two part approach. First, you may implement a contract management system that will monitor your existing contracts and notify you of upcoming dates, such as contract expirations. These notifications will allow you to take the appropriate actions to prevent evergreening.

Once you have received your notification, you can take the existing documentation from the contract management system and work with your strategic sourcing partner to develop this into an RFI, RFP or RFQ based on the specific needs of that project. This chain reaction caused by your contract management system will have allowed you to prevent your evergreen contract from automatically renewing, led to further procurement savings and did so with enough time to benefit from this process without interrupting your current source of supply.

In tomorrow’s post, we will consider tips that will help you stay the course with your resolutions.

We look forward to and appreciate your comments.

?Eliminate Evergreen Contracts ? Resolutions Part IV of V?

Thursday, December 29th, 2011

One of the biggest causes of excessive cost we find is evergreen contracts. I find this to be a fitting topic for a New Year discussion as, just like the New Year, these contracts also follow on the tails of a year. Evergreening is the practice in which a contract automatically renews if no actions are taken. Often this renewal is at a premium. For more on evergreening, click here to go to the SafeSourcing Wiki.

Evergreening can be prevented using a two part approach. First, you may implement a contract management system that will monitor your existing contracts and notify you of upcoming dates, such as contract expirations. These notifications will allow you to take the appropriate actions to prevent evergreening.

Once you have received your notification, you can take the existing documentation from the contract management system and work with your strategic sourcing partner to develop this into an RFI, RFP or RFQ based on the specific needs of that project. This chain reaction caused by your contract management system will have allowed you to prevent your evergreen contract from automatically renewing, led to further procurement savings and did so with enough time to benefit from this process without interrupting your current source of supply.

In tomorrow?s post, we will consider tips that will help you stay the course with your resolutions.

We look forward to and appreciate your comments.

“Green Practices – Resolutions Part III of V”

Wednesday, December 28th, 2011

By now this is a classic company resolution. But now is the time to act on your good intentions. This is a great resolution and this author sincerely hopes that you can make this work, even if only in a small way.

If we really consider going green, it is easy to see the benefits of and get caught up in the big areas. We might want to reduce our carbon footprint by limiting corporate travel or replacing our equipment and office supplies with the green versions of the same. These are certainly great aspirations. While you determine which of the major green projects you can implement, I would suggest you step back and make a smaller change as well.

One way to implement an environmentally friendly purchasing process is to enlist help from your strategic sourcing partner. Ask your provider to limit your vendor selections to only include vendors that hold at least one environmental certification. This would ensure that as you go about your business of purchasing the items and services that you already need, you will also be supporting a green initiative.

This may seem like a small step, but every small step we take is a step in the right direction.

In tomorrow’s New Year post, we will take a look at another annual procurement issue; evergreen contracts.

We look forward to and appreciate your comments.

?Green Practices ? Resolutions Part III of V?

Wednesday, December 28th, 2011

By now this is a classic company resolution. But now is the time to act on your good intentions. This is a great resolution and this author sincerely hopes that you can make this work, even if only in a small way.

If we really consider going green, it is easy to see the benefits of and get caught up in the big areas. We might want to reduce our carbon footprint by limiting corporate travel or replacing our equipment and office supplies with the green versions of the same. These are certainly great aspirations. While you determine which of the major green projects you can implement, I would suggest you step back and make a smaller change as well.

One way to implement an environmentally friendly purchasing process is to enlist help from your strategic sourcing partner. Ask your provider to limit your vendor selections to only include vendors that hold at least one environmental certification. This would ensure that as you go about your business of purchasing the items and services that you already need, you will also be supporting a green initiative.

This may seem like a small step, but every small step we take is a step in the right direction.

In tomorrow’s New Year post, we will take a look at another annual procurement issue; evergreen contracts.

We look forward to and appreciate your comments.

“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.

?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.

Reverse auctions will drive consistent results over time.

Thursday, December 22nd, 2011

To use a baseball analogy, you may not get the grand slams and homeruns typically seen during first year implementations of reverse auctions but with proper planning and execution you will at a minimum continue to beat market pricing. Think of it as singles, doubles and triples for the at bats after you have hit a home run.

In order for this to happen we have to understand how to conduct successful auctions in today?s business world and it is not the same old same old where the low bid always wins. The number one job of any business is to drive bottom line profitability. Because of this, companies that win your business during an E-RFX process need to make the business they have just won as profitable as possible. They may take your business during an auction as a loss leader in the hopes of selling you more volume at a lower margin or selling other products to you. They may take your business at a loss in a down economy to drive cash flow in order to just keep going. They also will take actions during the next year or two to drive their internal costs down. All of these circumstances and more mean that there is potentially more compression on the table the next time around. The why is actually pretty simple? Your new supplier wants to keep the business and the relationship, your old supplier wants their business back and other suppliers want new accounts.

There are many other benefits to running these auctions again and again. New products offerings with better features, new suppliers that you are not aware of, suppliers you strategically did not invite the 1st time, existing products with new technologies and quality improvements to name a few. To support this, don?t sign contracts for periods of longer than two years or you will be paying too much by contracts end.

If your e-procurement solutions provider knows what they are doing, reverse auctions can and should become a long term tool in your procurement tool box.

We all know that the consistent hitting of singles and doubles wins more games. In fact a grand slam can?t happen unless there are already runners on base.? If you want to hear more about how to succeed year in and year out with this process, please contact SafeSourcing.

We always appreciate your comments.

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.

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.