Supply base management is the next major addition to strategic sourcing suites. All vendors do not offer this functionality today; in fact some have trouble describing what it is. Although elements of this functionality exist within a variety of surround type service offerings, no one vendor offers complete functionality in this area today. A significant reason for this is the suppliers concern with the thought of being managed in the first place. Additionally, retailers, suppliers nor e-procurement solution providers have agreed as to what the correct Key Performance Indicators (KPI’s) should be. As these tools are developed, the most successful supply base management tools will be those that can manage the largest supplier database to the continual benefit of both retailers and suppliers that participate in their events. In a best case scenario, high quality suppliers will get invited to more events, earn incremental business and save retailers both money and time on a continuous basis while also supporting other retail areas of interest such as safety and green initiatives.

This author believes that the most probable result of this process will be a set of automated robust supplier scorecards that monitor and report on supplier performance versus a range of KPI’S that are applied against well known quality guidelines such as Total Quality Management (TQM), Six Sigma etc. resulting in continuous improvement in e-procurement events and growth in the amount of spend under management by retailers.

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

Supply base management is the next major addition to strategic sourcing suites. All vendors do not offer this functionality today; in fact some have trouble describing what it is. Although elements of this functionality exist within a variety of surround type service offerings, no one vendor offers complete functionality in this area today. A significant reason for this is the suppliers concern with the thought of being managed in the first place. Additionally, retailers, suppliers nor e-procurement solution providers have agreed as to what the correct Key Performance Indicators (KPI?s) should be. As these tools are developed, the most successful supply base management tools will be those that can manage the largest supplier database to the continual benefit of both retailers and suppliers that participate in their events. In a best case scenario, high quality suppliers will get invited to more events, earn incremental business and save retailers both money and time on a continuous basis while also supporting other retail areas of interest such as safety and green initiatives.

This author believes that the most probable result of this process will be a set of automated robust supplier scorecards that monitor and report on supplier performance versus a range of KPI?S that are applied against well known quality guidelines such as Total Quality Management (TQM), Six Sigma etc. resulting in continuous improvement in e-procurement events and growth in the amount of spend under management by retailers.

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

A customer asked me the other day what indexes we followed in our sourcing practices. Although this is a very broad question that could be answered any number of ways such as what product are you speaking about, it is in fact a very good question. Let me give you an example.

Let?s suppose you are planning your strategy to buy egg products such as whole eggs or liquid eggs or egg mixes. The first question you need to resolve is what makes up the largest cost in the egg farming process? To provide a short answer, it is feed. The follow up question to this should be what type of grain makes up the feed? Again a short answer is corn. Resultantly these two questions should lead to the conclusion that keeping track of grain market futures is probably the best bet for locking in your pricing strategy depending on the length of your contract. As an example, with this information you might insert escalator / deescalator language in your contract based on the market price of grain at the time you negotiated your pricing.

The next step is determining where you can find this type of information. At SafeSourcing we use the CME Group which includes the Chicago Board of Trade. For the egg market there is also another tool available that can also be useful which looks at the average weekly price of egg products by region of the country. Using the two together is normally your best bet to build a solid strategy.

The previously mentioned CME Group serves the risk management needs of customers around the globe. They provide the widest range of benchmark futures and options products available on any exchange, covering all major asset classes, including interest rates, equities, FX, commodities, and alternative investments such as weather and real estate.

If you are not watching the markets that drive the pricing of the products you buy, you may make some significant mistakes that could negatively impact your financial plan down the road.

We look forward to and appreciate your comments.

Ron Southard