Archive for the ‘Business Sourcing’ Category

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Capitalism provides the opportunity to consider alternative solutions.

Tuesday, January 24th, 2012

Today?s post is by Danielle Begley, Account Manager at SafeSourcing.

Last week in protest of ?the SOPA and the PIPA bills against internet piracy from the House and the Senate, close to 10,000 websites blacked out either all or part of their content and allowed users to sign their petition against the Stop Online Piracy Act and the Protect Intellectual Property Acts.

The world?s largest Internet companies boasted their presence in support of the petition as Google blacked out their logo, Craigslist blacked out part of their website, and Wikipedia went so far as to black out all content on their site.? In addition to the blackout, thousands of companies, including social media titan Facebook, expressed their support of the petition through various media outlets.

Millions of users signed the petition, made calls and sent emails to lawmakers which inevitably resulted with the bills losing support within Congress, thus proving the strength and power these internet giants have over their users, the media and even Congress.?

The strength of these giants made me think of the power incumbent suppliers boast when faced with running auctions where their business is in question.? Incumbents use all tactics possible in order to bring strategic sourcing companies down and much like Congress, the customer can at times give in to the protest.?

While this author believes the benefits of the internet would be severely jeopardized if censorship was enacted, the same holds true for the customer.? While an incumbent supplier may have an existing relationship, capitalism provides the opportunity to consider alternative solutions, which are similarly jeopardized when incumbent suppliers protest the sourcing process.

If you are facing a similar situation with your incumbent supplier, or have any questions on how to handle this problem, please contact a Customer Service Representative for more information.

We look forward to and appreciate your comments.

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What should our category savings be?

Wednesday, January 4th, 2012

The answer is that it depends on the industry, company or vertical within an industry as well as who you are asking and what you will actually be measuring. There are dozens of procurement focused websites that speak to or quote category savings.

The reason the answer depends on who you ask is that to begin with every company defines their categories differently. Yes there is similarity across industries in areas like fleet maintenance or currier services. However when we look at the retail landscape and an example like bottled water, thinks get a little murky. Is bottled water really a category or is it a sub category of beverages which is a sub category of grocery. If it is a true category, your buyer or category manager should be able to provide you with pricing, margin and any related cost that shrinks the later.  So, the first question that needs to be answered is…are you looking for true category savings or are you looking for specific product savings. The products savings are good, but don’t get the product to your shelf.  The next question one might ask is, are you asking for actual realized savings or are you asking for savings that are hi-lited at the end of an e-procurement event? If you are asking for true realized savings, there are a multitude issues that need to be discussed.  If the successful supplier is your incumbent, then the savings may actually be closer to those viewed during the e-procurement event; however, reality indicates that a large number of incumbents do not end up as the low quote.  If the supplier is not the incumbent, there are actually quite a few elements that result in true savings that have to be considered.  By in large, they can be included in a bucket referred to switching costs. To begin with the supplier that you may have just awarded business to may not be an authorized vendor in your data base. As such, the IT department and or the finance department are needed to add them to your database. A new contract may also be required with a company that you have not done business with before. This requires the involvement of your legal department and may, in fact,  add delays to the process that require you to order additional product from your existing supplier at potentially higher prices than awarded during the e-procurement event.  If products are being delivered to a distribution center, slotting requirements are needed and pick lists require updating in order for the product to be available when ordered by individual store locations.

All of the above assumes that your buyers know where to find additional suppliers in order to make the event competitive in the first place. Should they go to other wholesalers, manufacturers, distributors, other vertical suppliers that don’t traditionally supply your vertical?

Now, let’s go back to the actual e-procurement event for a minute. At the end of the e-procurement event when business was awarded were the savings the same as displayed during the event? Did the e-procurement event just provide you with high level savings made up of all low quotes; or, if business was awarded to multiple suppliers ,were savings calculated in that manner?  Were funds, if included in the winning bid, included in the savings and treated the same way that your company treats them from an accounting perspective? Were distribution charges and other uplifted costs removed or bid on separately?  Are pre-event historical savings a result of how companies awarded business; or are you being quoted a historical average of all low quotes run through a system even though business was not actually awarded that way and savings may not have been realized?

In order to actually answer the questioned posed in this post, the real answer is that I need to ask you some questions and depending on your answers I can give you a range of savings based on the size of your total spend and dependant on other market influences such as fuel costs and other related commodity costs.

So, what can you expect for category savings in an e-procurement event? The answer is it depends.

We look forward to your comments.

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Social Media and a New Year

Monday, December 19th, 2011

Todays post is by Mark Davis Vice President of Operations and CTO at SafeSourcing.

With the influence of social media like Twitter, Facebook and LinkeIn? continuing to grow, how do you plan on using them for your business in 2012?

This past year has seen many new and sometimes alarming trends worldwide at every level and in every industry.? Few of those trends saw the impact and influence that social media channels had in 2011.

As with any new technology or tool, misuse can cause harm as we saw with some Twitter and Facebook mishaps, however those same tools, when used as designed, can create a benefit that can far outweigh the potential downside.? For many businesses the use of these tools would be embraced if they just understood more about them and the potential benefits.?

Today?s blog will take a look at a few of the aspects of social media and how they can be leveraged to help your business.

What?s Happening NOW? ? It used to be that there were very traditional methods that worked for decades to communicate what is happening with your company.? Press releases were the strongest methods because they told the story in a way that made it news, and so the story respected.? With time the process for making this happen, making it ?news? and getting it picked up by a newspaper or magazine began to transition into easier regular updates to a company website or possibly a blast email.?

With today?s social media tools such as Facebook or more fittingly Twitter, quick, snapshot, text-message updates can be sent at any time, about anything the company does in a way that can be instantly ?followed? by thousands of people immediately.? The challenge is having a staff or partner that is current enough with the new channels to make the messages short enough to be digested but relevant enough to valuable.? The more frequently the messages are produced, the greater following you will develop.?

Who?s Talking About Us ? Instant feedback is another valuable characteristic of the social media channels.? Whether by Blog, by Tweet or by Status Update the whole social network world has the capability to instantly let you know what it thinks of your message, product, service or company.? Having this feedback is terrific when it validates you are heading in the right direction, but even more importantly, it lets you know when you are NOT, quickly enough in most cases to change your course.? Knowing what people have to say about your company can be some of the most valuable information these channels can provide.

?Like? Us? ? ?Like? and ?unlike? are words that in the past few years have hit the mainstream spotlight in ways they never have before.? These seemingly simple concepts made popular by Facebook for people to connect to businesses, people or concepts that they like is the one of the most important features of virtually all social media channels; FOCUS.? No longer are you blasting your messages out to groups of people you ?think? will find your message valuable.? Now you have the peace of mind to know that your messages are going to people that are interested in what you have to say.? Those people are connected to other people who are also likely to have interest in your company, product or service and as a result will also hear what you have to say.? This connectivity; these links; this network is why the technology has become so powerful.

This just barely scratches the surface of what can be achieved with these new channels of communicating to your current and potential customers but hopefully is still a useful beginning of seeing where the value lies.

For more information finding companies that can help you with developing your strategy for social media, please contact a SafeSourcing Customer Service Representative.??

We look forward to your comments.

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You practice, I practice, and we all practice. And practice does not necessarily make perfect.

Monday, December 12th, 2011

However, what this author does know is that perfect practice does make perfect.

According to Wikpedia a best practice asserts that there is a technique, method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method or process. So who determines that it is the best practice is open to conjecture. If my results are better than my competitor, it seems as though my practices would be the best. So maybe you should just begin by asking for examples of results and references.

I don?t believe that best practice is just following a standard way of doing things that can be carried out in the same way by multiple organizations. A best practice is a life long process that must evolve over time as the tools, business conditions, expertise and current processes require.

If one uses best practices, should not the result be an ideal state that a person or an organization set out to achieve in the first place. In fact if the process used is actually a best practice shouldn?t all of a companies customers use the same process. I?m not sure that this is ever a question one asks when looking for a referral about a companies service offerings. Please tell me about these companies? best practices. Are they consistent and carried out each and every time at each an every customer to the desired result. You know the answer to that as well as I do, it?s NO.

One way to ensure good quality results is to provide templates that evolve with use and can then be used over and over again and are reevaluated at the completion of each practice and changed again when need dictates. This then requires passing the practice on to other customers in order to insure integrity and validity of the most current process. This elevates the actual process beyond just a buzzword and moves a particular process in the direction of becoming a best practice that drives similar results on a consistent basis.

I will continue to call our services offerings high quality process techniques focused on continuous improvement that deliver anticipated results. Our customers, supplier participants and business partners will determine if they are best practices for them.

We look forward to and appreciate your comments.

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Watch out that your spend cube does not become a spend rock!

Friday, November 18th, 2011

Just what is a spend cube?  In it’s most simple form it is a data set that includes information that when analyzed as a whole provides a better picture of your spend universe and helps to indentify categories or products and services that should go to market as well as when they should. Because it includes vendor data, commodity information and specifics relative to the related cost center being impacted, spend cubes are very complex.

Unfortunately just like the ices cubes you order in a drink (on the rocks please) a spend cube can deteriorate over time based on a number of factors. Probably the primary reason is that the originating data is not complete or scrubbed properly in the first place. This is kind of a one bad apple spoils the whole bunch issue or the wrong data bumping into the wrong data. Another reason may be that you don’t have all of the data that you need and therefore the result sets are compromised or left to conjecture. And then there is the analyst interpretation of the data and to this author that is really the most important part once you get the data sources right. This person or group of persons needs to know their stuff (industry and products) in order for the data to be interpreted properly. It’s pretty easy to read a GL and determine what suppliers you have been spending the most with. It’s an entirely different thing to understand what the market for a commodity that impacts that particular spend was during the last contract versus what it is now and how it is trending for the future.

Ask your solutions provider who will be interpreting your data and what data they will be interpreting so that your cubes stay afloat and don’t end up sinking you like a rock.

We look forward to and appreciate your comments. 

Ron Southard

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Specifications need to be specific! So, what is Recycled Material Content?

Wednesday, November 9th, 2011

When developing a specification for a product you are planning to source such as copy paper, asking for post consumer content is a great opportunity to support your company’s support of a more environmentally friendly workplace. However you need to be specific (that’s why they call it a specification) because post consumer content while being a recycled material is not necessarily the only type of  recycled material that could be used and as a result may confuse you suppliers. So be specific.
 
Recycled material content is the portion of a product made with recycled materials consisting of pre-consumer materials (waste), post-consumer materials (waste), or both. This figure is important because the term recycled does not mean that a product contains 100% recovered materials. Nor does it mean that a product contains solely post-consumer materials. Recycled means that a product contains some recovered materials. Recycled content can vary from small percentages of pre-consumer to 100% post-consumer materials.

The easiest route to take when trying to develop user friendly detailed specifications is to have your sourcing partner do it for you or at least review what you have put together. If you’d like to view a detailed product specification library, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

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Are you spending enough time looking at your Indirect Spend?

Monday, November 7th, 2011

Today’s post is by Ryan Melowic; Director of Customer Services at SafeSourcing.

In the past not a lot of attention or respect was given to the buyer which was responsible for purchasing indirect spend items such as supplies and hired services.  Their products do not always have the high visibility that the spend of other departments do such as For-Sale items.

Today, businesses are realizing the cost reductions that can be achieved by the indirect spend departments. 

The indirect spend category can be just as complex and in some cases even more complex than the other categories.  An example of the complexity of the category is measuring value of the supplier and the service they provide.  The best solution for that complex issue would be a detailed understanding of the category or the market.

When given a category like Temporary Labor, buyers must understand how  fees are broken down.  As an example, some pieces of the fees cannot be controlled  or bid down as they are mandated by the State or Federal government.  If you break those fees out from the ones that can be compressed, however,  the end result of your total project will be cleaner and ultimately more successful. 

If you would like to know more about procuring Temporary Labor Services or other complex service categories, please contact a Customer Service Representative at SafeSourcing.

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When using e-procurement tools are you just driven by a reduction in price?

Friday, November 4th, 2011

The real question you should be asking is just what makes up total cost to begin with. A good friend of mine who has been a fortune 100 retail CFO helped to crystallize my thinking in this area. As such we look at cost differently today than we did a year ago. So, when we run an RFX event for our customers at SafeSourcing we think of cost in the form of three basic dimensions that cause a different type of thinking during discovery and strategy. They are as follows.

1. Price: This is the unit cost. It is expressed as an amount per unit. Price involves vendor comparison and negotiation.
2. Use: This is the consumption of a product or service. This is driven by the activities or needs. Authorization and control processes are key elements. Without these, you may not derive all of the savings from negotiating price alone
3. Mix: This is the inclusion of similar products or services to achieve a similar result. Company policies support this.

Certainly there are many more aspects to running a successful RFX like making sure the T&C’s are clear and that the process is managed through the award and contract stages. These steps or KPI’s along with the ones mentioned above collectively serve to insure that your strategic sourcing strategy uncovers all of the clues that have or may cause leakage to your sourcing events. They also proved the basis of a scorecard system that can track progress over time

We look forward to and appreciate your comments.

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Retailers: Want to increase your sales and reduce liabilities? Implement a mystery shopping program. As with any process, it pays to get it right.

Thursday, October 27th, 2011

Mystery shopping is a service that retailers often use to determine if their locations are consistent with their compliance efforts, product displays, customer service, sales and more. Mystery shoppers will “shop” the stores and follow a set procedure or checklist and will then report on their findings. Among the findings will be areas for improvement at the locations that are very beneficial to retailers.

One example of the benefit of these services is in compliance. If a retailer is selling alcohol or tobacco products they are required to be compliant with age verification laws. Mystery shopping can identify locations that are not consistently checking ID. Another example is in sales. Retailer may find lost opportunities for revenues based on missed up sell attempts or lacking product displays.

Here are four steps to get the most out of your program.

1. Shop the shoppers. There are hundreds of companies that offer mystery  shopping services. You and your sourcing partner will need to evaluate the field. This is a critical first step and is best addressed with a thorough Request for Proposal (RFP).
2. Set your evaluation criteria. In order to evaluate the providers, you need to have a well thought out plan. What are the most valuable attributes of your ideal mystery shopping provider? Share these with your sourcing partner as a basis for your RFP. Likewise, what are the most important service offerings or capabilities?
3. Evaluate. Now that you have completed your RFP, you will need to evaluate the responses. Your sourcing partner will assist with this process as well. By setting your criteria in step two, you have already set the stage for a simple review process. Your reporting will be centered on what matters the most to you.
4. Finalize your selection. Of course, once you have chosen the vendors that will remain under consideration, you will have the option to host a reverse auction based on the pricing collected during the RFP. This will ensure that you are getting the best provider at the best possible price.

If you are new to mystery shopping programs or if you would like to give an existing program a new start, your strategic sourcing partner has the expertise to guide you through these four steps.

We look forward to and appreciate your comments.

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Back To The Future!

Thursday, October 13th, 2011

Companies and individuals enter into contracts based on the future price of a market or commodity. Manufacturers that use a variety of commodities in their manufacturing process constantly balance the swing of many commodities in order to drive blended costs that most benefit their future needs. Futures can be monitored on future markets like Bloomberg amongst others.

A very simple example of how this data might be useful to a buyer is that of a retail real estate – construction buyer that is looking at construction of new stores for the upcoming year. If we continue with the Bloomberg example, they report futures prices on energy, agriculture, industrial metals etc. If a buyer were to look at the future price for lumber within the agriculture category based on 1000 board feet, as of this report the cost for this commodity is down 3.46%. This reduction in price might be used as a negotiation point for upcoming stick builds versus prefab on concrete structures that are in your plan for the particular future month being sold. It does not take very long to look at these reporting tools in order to understand trending in commodities that affect your sourcing. Another example would be looking Diesel futures as they impact your distribution costs and those of supplier’s providing products to you.

A simple step you can take is to pick three market views such as Bloomberg, CME etc. Pick a half dozen commodities that impact the products you are sourcing. Now take 10 minutes per day to review them so that they become second nature to you.

If you’d like help in this process or are interested in track a commodities price versus your particular purchase points, please contact SafeSourcing.

We look forward to and appreciate your comments.

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