Archive for the ‘B2b Reverse Auction’ Category

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Why do we hear that reverse auctions are not as successful the 2nd time around?

Friday, March 19th, 2010

As we discuss this further, one area of commonality they frequently discuss is a lack of new suppliers. Another is the price being too high for the same event that has already been built and will result in lower savings the 2nd and 3rd time around.

A simple focal point to begin a discussion of this issue is the lack of availability or the related benefit of a large retail specific supplier database. However unless we discuss how? retail companies should use this type of data when available is just as important if there is a true desire in growing their percent of spend with e-negotiation tools?

There is a proper way to insure the sustainability of your e-negotiation events going forward. Following these guidelines will also encourage senior management to consider placing more spend under the control of e-negotiation tools and specifically reverse auction tools. Armed with a robust retail supplier database and related tools:

1.?Conduct a detailed category discovery
???? a.?Learn all there is to learn about the way a company conducts their?? business.
???? b.?Walk distribution centers and warehouses
???? c.?Walk an array of stores and understand 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.
3.?Conduct supplier discovery
???? a.?Rank suppliers
??????? i.?Size
??????? ii.?Experience
??????? iii.?References
??????? iv.?Environmental certifications
??????? v.?Safety Certifications
4.?With? 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 to participate next year

Now ask your e-procurement solutions provider to demonstrate their capability in this area

We look forward to and appreciate your comments.

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Retailers, how many of your e-procurement contracts contain evergreen language?

Tuesday, March 16th, 2010

In this case your supplier wins because your contract contains evergreen language. Some retailer?s think this is a good thing and it could be. Paired with other language that might identify escalator or de-escalator language that protects both the supplier and the buyer against abnormal commodity increases this could be win-win. The bigger issue is who is responsible for monitoring the dates and how will you be alerted if the adjustments don?t take place?

This begs the question; just what are are evergreen clauses within a contract and what do you need to do to be careful with them.

According to Black?s Law Dictionary an Evergreen contract is a contract that renews itself from one term to the next in the absence of contrary notice by one of the parties.

The potential problem with an ?evergreen? clause in your contract is that this type of contract automatically renews at the end of the contract term, unless one of the parties notifies the other party that it does not want to renew the contract.? This notice normally must be given within a specified time period such as 60 to 90 days prior to the end of the current contract term. This takes us back to who is going to monitor this time frame and alert you to the fact that something is required?

A significant step in conducting quality e-negotiation events is to understand the contracts you are wishing to negotiate.

We look forward to and appreciate your comments.

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Just what is Strategic Sourcing?

Thursday, March 11th, 2010

Let?s?look first at strategy in general.

As a former military procurement guy if we think of strategy from a military perspective, how an actual battle is fought is a matter of tactics: the terms and conditions that it is fought under or whether it should be fought at all is a matter of strategy.

The next logical step would be to understand that a strategic plan is a way to define a company?s strategy. When this author goes about developing a strategic plan I tend to lean in the direction of aligning my thoughts so that they are in concert with my three basic necessities or tenants of running a business which obviously includes sound fiscal guidelines. The tenants are.
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1. A long-range strategic plan
2. A tactical plan
3. A talent management plan

The ultimate goal is not to do something just to do it, but to do it as a way of beating or avoiding competition and growing at the same time. Think of Dollar Stores in terms of how they avoid competing with Wal-Mart although they are in a very similar space.

If we believe the above, how do we relate that back to Strategic Sourcing?

Strategic Sourcing should be a discipline used to identify, examine, select and implement a variety of sourcing alternatives for? specific groups or categories by evaluating, selecting and collaborating with your sources of? supply in order to achieve improvements in quality, cost, operational efficiency and other benefits that support a companies overall strategic plan. To that end just lowering the purchase price is not necessarily strategic in and of itself.

Some say that based on that definition and an understanding of strategy that Reverse Auctions therefore are not strategic. This author says that depends. If Reverse auctions? are the result of significant discovery and analysis that focuses on identifying the best opportunities to support a strategic objective and it is the result of using the entire RFX sequence, it may in fact be strategic but it could also just be tactical. This author believes we are splitting hairs.

After all one mans pill is another mans poison.

We look forward to and appreciate you comments.
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Hey Retailers, what is your 2010 business strategy and how does e-procurement enter into it?

Wednesday, March 10th, 2010

The business of e-negotiation and in particular reverse auctions has many benefits for retailers that support their business strategies.

According to Wikipedia, a business model is a framework for creating economic, social, and/or other forms of value. The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.

Often times during this author?s discussion with retailers the question comes up as to the benefits of the reverse auction business model or that of other e-procurement events such as Requests for Information or RFI?S.

I have never spoken to a retail executive that does not have as a significant pillar of their business strategy to increase profitability even if it takes reducing losses in the early stages of a turn around. Reverse auctions if run properly can reduce the cost of goods category, the expense category and hired services that impact both areas. They can also continue to reduce the same year after year and the savings are predictable.

This author will make the assumption that there is common? agreement that price compression in today?s world is critical and that the reduction in cost of goods and services is the largest area of opportunity on a retail P&L. As such, there are a number of reasons that the reverse auction business model works well within organizations that should drive the strategic growth in utilization of this business model within retail.

A few and certainly not all are listed below in no particular order…

1.?A larger number of suppliers: Because of an increased number of suppliers bidding for a retailers business, getting a relatively low price is a given. The suppliers benefit because of the potential reduction is selling costs and easy access to new sources of business which encourages them to lower their pricing.
2.?Location, Location, Location: In this case, location no longer matters. A supplier can participate from wherever they happen to be located. This opens up new potential markets for the supplier and new sources of supply for retailers.
3.?It?s like a game: Participating suppliers wait to see if their price is the lowest much the same way a gambler would wait to see the turn of the next card when playing blackjack or poker. This is a social interaction and dynamic that builds on itself and can drive a larger number of bids and extensions while ultimately leading to lower pricing.
4.?Early success drives a virtual circle for retailers and suppliers: The more a retailer uses the tool and the more success suppliers have with securing new business resulting from this process, the more the process will drive retailers to host new events and suppliers to participate in them again and again. Independent departmental successes can spread quickly within a retail company such that other departments not using the process do not want to be left out of potential savings opportunities and notoriety.

As always, we look forward to and appreciate? your comments.

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Retail e-procurement savings. How many times have we heard we can do it better ourselves?

Tuesday, February 23rd, 2010

And for those very large retail companies that have very expensive internal tools that were sold to you by the largest players in the space. Ask yourself why your event savings are much less than those reported by companies who have outsourced this functionality? If you want to drive the greatest possible savings across the broadest range of categories in the shortest amount of time; and have a sustainable process moving forward keep reading..

The question one needs to ask is; what type of event services does my e-procurement provider offer? If your company is deciding to try self service, which is to be 100% self-sufficient, you need to know if your provider offers readily available classroom education that can be conducted on-site in order to train your team in all the nuances of event support. These skills are the foundation that allows e-procurement providers to support large volumes of events in a full service mode, which drive greater savings over the long term. Knowledge transfer in this area is one thing; the passion, skill and headcount to carry out these practices on a day by day basis are what drive results.

Typically event services falls into two broad categories:

1. Event management
2. Event monitoring and support.

Event management provides end to end e-sourcing support that begins with a companies overall strategy and ends with the actual execution of the e-procurement event. This is a true cross category effort that includes a rather lengthy list of services that may include buyer training, supplier selection, category discovery, supplier communication, the strategy for taking a category to market, training and overall supplier expectation management.

Event monitoring and support is actually the tactical implementation of the over all e-procurement event management process. This may include all communications with suppliers on the day of an event including making sure they have access to the system, get logged in properly, don?t have problems placing quotes, monitoring supplier and buyer system communications techniques during an event such as notes and texting and being available post event for questions as needed.

These services are normally provided by people behind the scenes with a very specific skill set. If you plan to do self service it would be very wise to make sure you have them covered at the same quality level.

As always, we look forward to and appreciate your comments.

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Why use E-Negotiation, e-Procurement or Strategic Sourcing tools?

Tuesday, February 16th, 2010

This author has discussed on many occasions the various benefits to retailers of using e-negotiation tools. Not the least of which is significant profit improvement. Simply put if a retailer were seriously to assign twenty percent of their above the gross margin line spend to these types of tools, they could increase their net earnings by up to 100%. In addition, much of the following would also happen.

1.?They would continue to source high quality products.
2.?They would continue to have great supplier relationships.
3.?They would free up time to do other tasks.
4.?They would improve their company?s net earnings by up to 100%.
5.?They would support our fragile environment.
6.?They would support global food and product safety initiatives.
7.?They would have a larger audience of piers to converse with daily.
8.?They would have a single source of information about their profession.
9.?They would be instantly alerted to product recalls.
10.?They would support a traceable supply chain.
11.?They would have an endless source of new suppliers to review easily.
12.?They would have product specifications at their finger tips.

If you are wondering why most companies are not enjoying these benefits, the following are the objections we to often hear during initial discovery meetings with managers that have not been exposed to e-negotiation tools in the past.

1.?I already get the best cost.
2.?We?ve done business with this supplier for years.
3.?I don?t have product specifications.
4.?I don?t have time for this.
5.?Switching costs will be too high.
6.?I can?t insure the same quality.
7.?We need to adhere to certain standards.
8.?What about my relationships.

One thing you may notice is that the companies almost always include me or I and almost never we. To much individual emphasis is not a good thing. Healthy skepticism is. If you have an objection that is not listed above, or they pretty much fit your thinking, please review the dozen benefits above and weigh your objections against them.

As always, we look forward to and appreciate your comments

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Quality retail e-negotiation in a time of heightened Corporate Social Responsibility (CSR)

Friday, February 12th, 2010

Why do some companies succeed while others continue to implement program after program with no measurable benefit. First among these is the recognition that effective e-negotiation initiatives like any successful program requires strong support from the executive suite. In Retail this is important because the industry lags well behind other industries in utilization rates of e-negotiation tools. At a minimum in order to get off on the right foot, this means the involvement and sponsorship of your CEO, CFO, CLO or CPO is critical. Once you have this involvement directives can be issued. This will help in the required next step which is to identify savings targets across all corporate spend categories. Once these targets are identified and ranked, a category specific attack plan can be developed that best maximizes savings opportunities. It is important to note, that savings alone do not create a successful e-negotiation plan. What can not be sacrificed in the name of cost reduction is quality, which can include safety as well as Corporate Social Responsibility (CSR) goals including environmental support programs.
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A key challenge for any procurement team directed to implement e-negotiation tools across all of their unique spend categories, is to not over complicate the process into something that can?t be maintained. At a high level, the following 10 steps which are in no particular order offer some assurance that you are headed down the right path.

1.?Identify and rank all opportunities by spend
2.?Locate all contracts and identify termination language
3.?Document your safety and environmental goals
4.?Develop a total company strategy
5.?Source qualified suppliers
6.?Identified fragmented or maverick purchasing and aggregate
7.?Negotiate final terms and conditions
8.?Award of business
9.?Contract completion including review of evergreen and termination language
10.?Results Analysis

Most quality e-negotiation? solution providers have well developed and well thought out plans that will aid you in developing and implementing your best practices while maintaining quality and supporting your CSR initiatives.

We look forward to and appreciate your comments.

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What is The Transportation Intermediaries Association or TIA?

Wednesday, February 3rd, 2010

The Transportation Intermediaries Association (TIA) is the premiere organization for third-party logistics professionals doing business in North America. TIA provides resources, education, information, advocacy and connections to establish, maintain and expand ethical, profitable and growing businesses in service to their customers.

There are a number of certifications offered through the TIA that signify the quality of transportation providers. Please read on to learn more about them.

TIA – Certified Transportation Brokers:
Since1986, the Certified Transportation Brokers designation has signified the highest level professionalism and integrity in logistic brokers. The CTB program tests the knowledge of participants on brokerage, legal and regulatory requirements, as well as the latest trends in transportation and business management.?

TIA – Performance Certified:
The TIA Performance Certification Program is the first business certification program for professional 3PL businesses with proven expertise in logistics. This certification takes the best features of TIA’s? P3 and GPP products, and combines them with the TIA name.

The Platinum Performance Program (P3):
A main feature of this program is that participants are identified by the P3 logo as service providers committed to a set of operating best practices designed to deliver the highest level of customer service. The name Platinum Performance Program and its logo are becoming a standard by which customer service is measured.

Ask your e-negotiation solutions provider how they evaluate the transportation companies they work with and what certifications they hold?

We look forward to and appreciate your comments.

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OPIS is the leading U.S. provider of retail fuel price information.

Tuesday, February 2nd, 2010

With prices at more than 100,000 stations, no other source offers more timely or accurate data than OPISretail.com.

Whether you are looking for a feed of actual site prices in real-time throughout the day, rolled up averages of a data subset, or historical data for trend analysis, OPIS puts all the information you need at your fingertips.
All major players are included, from traditional major brands to regional independents to aggressive convenience store chains, as well as the supermarkets and big box stores.

For the 6th consecutive year, OPIS has compiled, crunched and condensed its retail and wholesale data into one exclusive and highly valuable report.

The OPIS Retail Year in Review and 2010 Profit Outlook Report delivers a 360 degree look at last year?s retail landscape – revealing the brands and markets that dominated and the ones that were most challenged.

Inside this year?s report, you?ll find critical data needed to benchmark your company?s position in 2010 including historical price changes and in-depth analysis of the changing relationships of the entire supply chain, from the futures market to the individual outlet owner.

Please vist OPIS.net to learn more about their valuable services.

We look forward to and appreciate your comments.

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A customer asked me what a reserve price reverse auction was today.

Friday, January 29th, 2010

In a reserve price reverse auction, the buyer establishes a ?reserve price?, the maximum amount the buyer will pay for the goods or services being auctioned. This is also sometimes called the desired price, or a ?qualification price?. Careful thought is required on the part of the retailer in determining their reserve price. I personally have seen retailers try to just use their existing price from their last contract. This type of practice may set unreasonable expectations, particularly if the market has changed dramatically in an upward direction since the last award of business. In today?s market, fuel would be a great example of something that you would not set a reserve price based on a previous contract if you wanted incumbent or new suppliers to take you seriously.
Traditionally, if the bidding does not reach the ?reserve price?, the buyer is not obligated to award the business based on the results of the reverse auction. However once the reserve price is met, the buyer is obligated to award the business to a participating supplier or group suppliers based on previously published auction rules.
Additional pricing considerations can be given to adding other price points or qualifiers in a reserve price reverse auction such as entering a market price. In the case of fuel, this may be from a price index such as OPIS.net spot fuel or rack rate updates.. This information can be visible or blind to the supplier, but let?s the retailer compare a suppliers mark up strategies. This also offers a nice opportunity to calculate cost avoidance during an up market.
We? look forward to and appreciate your comments

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