Are you paying to much for your Retail E-Procurement solution?

July 18th, 2012

Like a P&L, you will have to peel back the onion in order to find out.

When you review using retail e-procurement tools you may not always get what you pay for. In fact you are probably paying way too much.

There are too many companies that have been at this for a long time whose pricing formula is way too high in the retail marketplace based on what they provide.

I was speaking to a large retailer recently that had an unlimited use tool in place behind their fire wall from a very large player in the e-procurement space. The recently converted to this companies cloud based SaaS offering without a significant reduction in cost. I asked what type of savings they have been able to achieve and how many additional associates they had assigned to write RFI’s and RFP’s as well as handle events, supplier communication, hosting support, training, report generation, specification building, data collection etc. The answer was a lot.

After we had discussed at least 20 different categories, it occurred to the both of us that the savings from our cloud based SaaS events were at least a third higher than the savings from the use of the unlimited tool in either configuration.  Even if you added in our fees, the savings were still substantially higher on event by event basis with SafeSourcing. There are a number of reasons for this. One is that to many times when retailers deploy a solution internally or as a SaaS offering they default back to their old way of doing business with a new tool once the solutions provider has left. Obviously staff additions have to be calculated into the ongoing cost. Supplier research is limited, the number of participants is fewer, training is inadequate and the result is lower savings and sometimes overall quality. Older companies also do things in old ways. There are proprietary cost frameworks to the SafeSourcing solution that will also drive higher savings. I won’t share that information here.

Another way that retailers over pay, is when an older company comes in and matches the lower cost of doing business with a newer and better provider in order to win the business. An example of this is the cost of IT infrastructure in an open source world. As such the model will not last because many of these older companies are not structured in such a way that will allow them to absorb these lower fees profitably over time. Over time your price will continue to rise. In fact next year, your price should go down if you are running the same event again. Hasn’t most of the work already been done in the past?

Some good questions to ask your prospective solutions provider would be the following.

1. How many events per month can one associate host?
2. What are you doing to automate your solution in order to take out cost?
3. Will we pay the same in year two as we paid in year one for identical events?
4. What percentage of your associates work virtual?
5. Is your cost higher because of your investment in office space?
6. Is your cost higher because of your headcount required to run events?
7. What are your average savings for events over $100K?
8. What are your average savings for events under $100K?
9. Can you even run events under $100K?

There are certainly more questions but you get the idea. Be careful out there. If you want the lowest cost and the best service in the industry give SafeSourcing a call.

We look forward to and appreciate your comments.

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