Archive for the ‘Business Sourcing’ Category

?I never saw a purple cow? and other fictitious animals that can ruin a bloggers day!

Monday, July 12th, 2010

The ?Purple Cow? is the name of a well-known poem by Gelett Burgess that was written in 1895 about a fictitious cow.

The original “Purple Cow” poem went like this.

I never saw a purple cow;
I never hope to see one;
but I can tell you anyhow;
I’d rather see than be one!

Although this author had nothing to do with a Purple Cow last week I did in fact encounter another type of barn yard animal that you will all want to avoid at any cost. It was a horse. In this case the Trojan Horse. Although the poem listed above is about a mythical animal, the one I encountered is all too real and named after the Trojan Horse Story in Greek mythology that appeared as a gift that hides its ultimate purpose.

So what kind of Trojan Horse can affect a blogger? In this case we are referring to malware which is named Trojan Horse which appears to perform desirable functions for a user prior to running or installing applications, applets or other file based features but instead facilitates unauthorized access of the user’s computer system. “It is a harmful piece of software that looks legitimate. Users are typically tricked into loading and executing it on their systems. And then the real fun begins.

Once you have been tricked, one may begin notice a system slowdown, access slowdown or lockups that cause you reboot multiple times and ultimately and scan your system for viruses. Files are indentified by that process that are infected and flagged for cleaning, not deleting. If you unknowingly delete them you may compromise the operation of your operating system that may result in a reload and rebuild of your entire system that can be time consuming and provide a test of your backup processes including password storage.

Be careful what you click on. We?re Back.

We look forward to and appreciate your comments.

Yesterday’s post created a lot of questions relative to attacking Gross Margin!

Wednesday, June 30th, 2010

The following position was offered relative to the title. “This has always been a great question for retailers”. Should we attack the bottom line by focusing on shrink, cost of goods or gross margin?

During the post we answered the areas of shrink and cost of goods and services. The question now is how would we focus on gross margin and what would the bottom line impact be?

Let’s begin by restated our gross margin assumption. If we assume that COGS or cost of goods and services is about 75% of top line revenue that would result in a simple gross margin of 25%. Now that we know our gross margin, it is pretty simple to measure the impact. The first step is to look at the categories which generally fall into gross margin reduction such as the expense category. Examples might include employee benefits, construction, insurance and not for resale purchases etc.

We already know that our gross margin dollars are equal to 25% of our fictional company’s sales of $1B or $250M. Therefore the impact to the bottom line at most could be a percentage of $250. The next logical step is to look for the largest category spends with in the gross margin area. Let’s assume that employee benefits are 15% of payroll costs and that payroll costs for our fictional company are 15% of revenue. For our $1B retailer payroll would be $150M and benefits would be 15% of that or $22.5M. If we attacked health benefits costs and were able to reduce them by 20% the improvement to the bottom line would be $4.5M or 45%. This would certainly be a worthy target, but would not impact net profit as much as our shrink or COGs models as discussed yesterday. To summarize the impact to net profit as discussed in both posts.

1. COGS  up to 300%
2. Shrink up to 100%
3. Gross Margin up to 45%

Please remember these numbers are fictitious.

We look forward to and appreciate your comments.

Retailers, how do you source and select your construction site partners?

Tuesday, June 22nd, 2010

A great place to start is an organization called the The Construction Safety Council which was founded in 1989. Ask you conduction partners if they are a member.

The CSC is a non-for-profit organization dedicated to the advancement of safety and health interests in the field of construction throughout the world. It was chartered by a board of directors composed mostly of large construction company owners and operators whose vision and leadership made the organization possible. Since its humble beginnings in 1989, the organization has quickly grown to become a world class professional construction consortium with associations that span the globe. With an emphasis on quality and customer service, all of the construction safety and health resources and loss reduction tools developed by the Construction Safety Council have been designed to maximize positive impact on your safety program.

The SafeSourceIt™ Global Supplier Database has hundreds of construction companies that are held accountable to these types of standards. Are you asking all the right questions or is your solution provider?

We look forward to and appreciate your comments

Retail procurement needs to step up. Your Investors, Consumers and other Stakeholders demand it!

Wednesday, June 16th, 2010

What troubles this author most about this is that the industries included in the Aberdeen Group study such as education, manufacturing, energy, utilities, financial services and others are all using these tools to trim their costs and improve earnings. Retail has had at best terrible earnings numbers historically with the supermarket industry averaging net earnings of below one percent (1%).

I was just talking with our CFO today about the impact of these tools. I used a very realistic example of a $2B supermarket company with one percent net earnings of $20M.  I can see the board now. If the same retailer were to source as little as $10M of their budgeted spend and reduced costs by just 20% or $2M, net earnings would improve in the budgeted year by 10%. If you are a CFO and can’t get excited about that, I’m not sure what would excite you.

This is not just rhetoric. We have customers with savings that are almost double that with a huge resulting impact on earnings. I know that there are a lot of bloggers and others out there that doubt the impact of e-procurement tools or think that reverse auctions as an example have run their course. Quite frankly that thinking is misguided because in the  retail industry the large majority of companies have never used these tools and have been doing business with many of the same suppliers for more than two years. These are both indicators of the fact that you are overpaying for products and services.

You can be comfortable and be busy or you can grab the bull by the horns and improve costs, earnings, stock price and even the bonuses of your management team.

We look forward to and appreciate your comments.

How do you keep your contracts and suppliers green?

Friday, May 28th, 2010

The primary way of doing this is to insure that all of your contracts support (GPP) or green product procurement. This practice should apply to all contracts regardless as to whether they are for a product or a service.

Green Product Procurement places its focus on the items below as a condition of the contract or a condition of doing business with the host company. This process applies to both products and services that a company provides to or for your company, and may also apply to their own companies endeavors to support the environment in their daily business practices as well.

1.?Products made from recycled content
2.?Biobased products and services
3.?Environmentally prefererable
4.?Energy efficiency
5.?Water efficiency
6.?Use of renewable energy sources
7.?Use of alternative fuels or vehicles
8.?Products do not include? Ozone- depleting substances (ODS)
9.?Lacking in priority chemicals
10.?Use of Electronic Products Environmental Assessment Tool (EPEAT) for electronics.

Make sure your contract templates include environmental language that supports your companies programs and provide the safest products for your customers.

We look forward to and appreciate your comments.

Hey Retailers if you don?t have a Contract Management solution you will be learning a new language.

Thursday, May 27th, 2010

Don?t assume that understanding legal language and its use is any easier than understanding a new foreign language. Much of the language is used to create ambiguity and may be as difficult to understand as your first foray into speaking Spanish or any other foreign language.

An example of a term used quite frequiently in legal contracts and documents is ?subject to’.? According the business directory.com this term used in a document generally prevents it from being an evidence of acceptance and, thus, of a concluded-transaction. A court, however, may decide that all the terms and conditions required in the underlying agreement have been included and agreed to and, therefore, the document evidences a concluded transaction. If that definition is clear to you congratulations. If it is not, please join the hundreds of law neophytes out there that require legal help to interpret our contracts for us.

Because we require this type of help and because most of it is done through email with hi-liteing, tracking and merging tools today, keeping track of these conversations and the most current versions of them is incumbent upon you unless you want to be subject to not understanding your own contracts.

Ask your procurement solutions provider their recommendation as to how to solve this problem for you.

At Safesourcing our product is called SafeContract?.

We look forward to and appreciate your comments.

Hey Retailers if you don’t have a Contract Management solution you will be learning a new language.

Thursday, May 27th, 2010

Don’t assume that understanding legal language and its use is any easier than understanding a new foreign language. Much of the language is used to create ambiguity and may be as difficult to understand as your first foray into speaking Spanish or any other foreign language.

An example of a term used quite frequiently in legal contracts and documents is ‘subject to’.  According the business directory.com this term used in a document generally prevents it from being an evidence of acceptance and, thus, of a concluded-transaction. A court, however, may decide that all the terms and conditions required in the underlying agreement have been included and agreed to and, therefore, the document evidences a concluded transaction. If that definition is clear to you congratulations. If it is not, please join the hundreds of law neophytes out there that require legal help to interpret our contracts for us.

Because we require this type of help and because most of it is done through email with hi-liteing, tracking and merging tools today, keeping track of these conversations and the most current versions of them is incumbent upon you unless you want to be subject to not understanding your own contracts.

Ask your procurement solutions provider their recommendation as to how to solve this problem for you.

At Safesourcing our product is called SafeContract™.

We look forward to and appreciate your comments.

What is the retail procurement lifecycle of a product or service?

Thursday, May 13th, 2010

This author generally begins discussing this subject with our customers and prospects during the discovery phase of our engagements. It helps to get us all on the same page and as such we get a lot of different definitions. Quite frankly we get almost as many as the number of people we discuss the subject with. Surprisingly the process which is quite simple as a definition is not any different from when I first learned it over 40 years ago in the U.S. Air Force other than its automation provided by modern procurement tools.

Typically procurement consists of seven (7) steps. Where the confusion generally enters is that each step can have a process of its own or be interrelated with another step in the process. An example would be the contract lifecycle that easily fits within the negotiation cycle and the renewal cycle. Another might be that information gathering which is the generally accepted first step in the process can apply to multiple issues such as information gathering for the related product or services such as specifications as well as the information gathering of prospective supplier data.

As such, the simple steps to the procurement lifecycle that most individuals generally agree upon are as follows.

1.?Information gathering
2.?Supplier contact
3.?Background review
4.?Negotiation
5.?Fulfillment
6.?Consumption
7.?Renewal

Most times keeping this simple model in mind will allow? retail procurement professionals to answer the question where are we in the process when a project gets stalled or off track.

We look forward to and appreciate your comments.

Very few retail companies have contract management software.

Tuesday, May 11th, 2010

So just what is Contract Management or Contract Lifecycle Management? Are they the same?

According to Wikipedia Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees.

Contract management can include negotiating terms and conditions and ensuring compliance with those terms and conditions. Beyond these base functions contract management can also include documenting and agreeing on any changes that may occur during the implementation or execution of a contract.

We can think of contract management as a summary of the process of with which companies use a systematic approach to manage contracts through the process of creating, executing and analyzing contracts for the purpose of maximizing the financial and operational performance of contracts so as to mitigate risk.

A frequent buzz word in the industry today is that of Contract Lifecycle Management Solutions. This really means the same thing from a systems perspective that should include automating much of the following.
1.?Authoring
2.?Negotiating
3.?Tracking
4.?Alerting
5.?Awareness management
6.?Baseline moderation
7.?Commitment moderations
8.?Communication moderation
9.?Contract visibility
10.?Document management
11.?Change management
12.?Issue alerts
13.?Service level agreement moderation
14.?Total Transaction compliance

Ask you solution provider how they can help you in this area and how to integrate CLM with your e-procurement suite.

We look forward to and appreciate your comments.

Safesourcing Inc. completes a successful year two.

Friday, May 7th, 2010

It hardly seems possible that we launched our company two years ago. At the time there were indicators for those paying attention of trouble in the global economy but know one had any idea just how bad it was going to get. In hindsight what a time to launch a company. When customers and business partners asked me why, my response was if you are doing what you believe in and the results you promise are true, then there really is no bad time to launch a business.

Our promise has been the same from day one, to reduce the cost of goods and services regardless of a company?s size or the size of the category being sourced. And, while doing so improve quality, safety and environmental focus. Today, two years later our customers will attest to the fact that we have held true to that promise.

Following is a short list of accomplishments that we are very proud of.

1.?Over 700 educational blog posts relative to e-procurement issues of importance.
2.?Over 1500 useful procurement related wiki terms and definitions.
3.?Added an average of more than one new customer for every month in business.
4.?Grew our supplier data base to greater than 380,000 retail suppliers
5.?Sourced 100?s of categories from commodities to finished goods and services.
6.?Sourced categories as small as $5K with savings > 30%.
7.?Sourced categories as high as $80M.
8.?Never held an e-negotiation event that did not result in savings.
9.?Conducted every process in e-procurement including RFI, RFP and RFQ.
10.?Installed our product in Asia in a multi lingual implementation.
11.?Averaged over 24% savings over two years.
12.?Developed a unique process for sourcing small spends for the retail mid market.
13.?Grew our database to over a terabyte of data.
14.?Helped companies source with environmental and social consciousness
15.?Today released SafeContract? a fully featured hosted Contract Management System.

To our customers thank you for your support. We endeavor to earn your business every day. To our business partners thank you for your guidance during a tough economic period. To the retail industry our goal is to be your best vehicle for reducing costs and improving earnings with an increased focus on corporate social responsibility.

Thank You.