Archive for the ‘Business Sourcing’ Category

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Here are twenty-one reasons why all retailers should use E-Procurement tools.

Tuesday, March 30th, 2010

Since this is not Late Night with David Letterman, our list is not ranked in order of importance although many might argue that not much is more important than improved earnings.

1.?Guaranteed to improve net earnings
2.?Guaranteed to improve safety
3.?Guaranteed to improve Corporate Social Responsibility.
4.?Guaranteed new sources of supply
5.?Retail has less spend assigned than any other industry
6.?Streamlines the? procurement process
7.?Holds suppliers accountable to your standards.
8.?Improves quality
9.?Cost avoidance in a volatile market
10.?Creates a competitive environment
11.?Drives reliable market pricing
12.?Maintains a reliable history for future comparison
13.?Educates suppliers as to how retailers wish to procure products
14.?Supplier training eliminates questions
15.?Improved and consistent product specifications
16.?Improved negotiation.
17.?Improve carbon footprint
18.?Simple award of business process
19.?Frees up time for other tasks
20.?Works for procurement of all product categories
21.?Provides a detailed audit trail.

This author is not sure why a derivative of this list could not become the mission statement for any procurement department.

We appreciate and look for ward to your comments.

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OK so YOU have finally decided to stick your toe in the e-procurement water! NOW WHAT?

Thursday, March 25th, 2010

First and foremost to getting this process right is to select a solution provider or partner that knows what they are doing and is willing to hold your hand during the early part of the process. The plan for each company will be somewhat different as we have discussed in a number of previous posts. There is however a general order to things that will offer the best opportunity for success.

1.?You need a strategy
2.?You must complete a detailed discovery
3.?You must understand how to set up events even if done by your provider.
4.?You must have a quality process and extensive database for sourcing suppliers
5.?You must clearly communicate how events will be run or executed to all involved parties
6.?You must review the process for sustainability and adjust as necessary

As mentioned above it is incumbent upon your e-procurement solutions provider to be able to assist you in completing these tasks in a reasonable period of time. You should be checking the background of the team and their leadership that will be assisting you to insure their understanding of the retail industry such as operations, technology, procurement, warehouse management, logistics, transportation, loss prevention, store management and other functional areas of your business that will be sourcing products and services.? Retail is about detail and detail will improve quality, reduce costs and insure success of your new e-procurement process.

We look forward to and appreciate your comments.

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How does a price index play into e-procurement practices?

Thursday, March 18th, 2010

From a simplistic perspective an index is a system used to make finding information easier. There are any numbers of indexes or indices available to help procurement knowledge workers insure they are sourcing products at the best possible pricing. The key word here is price as what we will be discussing are specifically price indices.

According to Wikipedia a price index (plural: ?price indices? or ?price indexes?) is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations.

Price indices have several potential uses. For particularly broad indices, the index can be said to measure the economy’s price level or a cost of living. More narrow price indices can help producers with business plans and pricing. Sometimes, they can be useful in helping to guide investment.

Normally an index reflects the current and historical price of a variety of commodities ranging from metals to grain. A common index used in sourcing petroleum products is OPIS or the Oil Price Information Service which you can learn more about by visiting www.opisnet.com.? However in order to drive the best possible fuel pricing there are other dependencies such as whether you are doing spot buys or bulk purchases and these strategies will determine what specific index you would want to review as well as it?s relation to other product information sources such as Platts or the Gulf Coast spot assessments.? This will put you in a better position to determine how to bid the product and also earn a discount relative to the lowest common denominator.

All other commodities have similar sourcing issues dependant on what the highest cost item is in their product makeup. An example here might be the cost of grain in the feeding of cattle or poultry.

Ask you solution provider to explain these tools to you and to recommend how you might use them toward the best outcome.

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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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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SafeSourcing trains hundreds of suppliers every week to use e-negotiation tools to their benefit.

Tuesday, February 9th, 2010

SafeSourcing Inc. places a great deal of value in our SafeSourceIt?? Retail Supplier Database of over 350,000 suppliers located in Mexico, Canada the United States, China, Korea, The United Kingdom and the European Union? Additionally we also place a great deal of value on each individual supplier regardless of size. We believe that well thought out next generation e-negotiation tools can provide significant benefits to buyers and suppliers whether they are hosting or participating in e-negotiation events such as reverse auctions of RFI?s.?

Some but certainly not all benefits that suppliers can anticipate from SafeSourcing are:
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1. An easy to use e-negotiation tool limited to a single page view where a supplier can be completely comfortable that their company?s best foot is being put forward to the soliciting company.

2. An increase in new business opportunities through engagements they would otherwise not be exposed to.

3. Clean data about the soliciting company and an accurate listing of their event guidelines, specifications, terms, conditions and other information necessary to build an accurate and successful pricing strategy.

4. Best practice training in event participation and strategy development.

5. A clear focus on what?s important beyond price in next generation e-negotiation tools such as supplier safety certifications and practices as well as their environmental programs that will differentiate them from other suppliers.

6. Closed loop reporting of results of the specific e-negotiation event a supplier participates in as well as a detailed supplier feedback questionnaire report.

7. Significant time savings associated with new business development that becomes more and more costly as fuel and other related prices continue to rise.

8. Industry pricing trends extrapolated from their view of low quote information during the event if allowed by the soliciting company.

9. Use of the same e-negotiation tools for their own procurement needs.

10. Introduction to an educational website that provides all sorts of free tools for procurement professionals use including a daily safety alerts from over 25 sources, a daily sourcing blog, a? sourcing wiki and SourceBook? the industries only social network for procurement professionals.

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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What type of category savings can you expect from the use of E-RFX tools?

Tuesday, January 26th, 2010

There are probably at least a dozen websites that speak to category savings. Each discusses different numbers. The reason the answer depends on who you ask is that to begin with every company defines categories differently. A simple example might be something like bottled water. Is bottled water really a category or is it a sub category of beverages which is a sub category of grocery. The first question that requires an answer is?Are you looking for true category savings or are you looking for specific product savings?? A follow on question might be; Are you asking for actual realized savings or are you asking for savings that are reflected at the end of an E-RFX 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-RFX event; however, reality indicates that a large number of incumbents do not end up with the low quote.? If the supplier is not the incumbent, there are actually quite a few elements that result in realized savings that have to be considered.? By in large, they can be included in a catchall phrase referred to as switching costs. To begin with the supplier that you plan to award your 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 which requires the involvement of your legal department and may, in fact, add delays to the process that requires you to order additional product from your existing supplier at potentially higher prices than awarded during the E-RFX 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.

Now, let?s go back to the actual E-RFX event for a minute. At the end of the E-RFX event when business was awarded were the savings the same as displayed during the event? Did the E-RFX 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? Is shipping included in the final price and was it included in the price from your previous contract?? 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?

So, what can you expect for category savings in an E-RFX event? The answer is it depends. It is however critical that you make sure you are working with a provider that knows what they are talking about.

We look forward to and appreciate your comments.

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This author loves all kinds of Salami. Is it traceable?

Monday, January 25th, 2010

Rose said, ?toughie (their nick name for me) get out of the Salami?. I had this bad habit of reaching in the refrigerator (possible contamination) and taking 5 or 6 slices that had been cut in half for pizza and stuffing them in my mouth all at once. The Salami was either Genoa or Volpi or some other top quality brand. I did not even know where it came from and I?m sure that neither Rose nor Margaret (both from Italy) the proprietors could trace it either.

Today I live in Arizona. We have a few good Italian eateries here but not a very large Italian community. I was reading the Arizona Republic today when an article jumped out at me titled R.I. Company recalls salami. This article was attributed to the Associated Press. Being as Rhode Island is very close to Boston and also has a great Italian section called Federal Hill and the subject was salami I read on. As you are aware, my most recent post was also on product safety and traceability, titled Procurement Professionals can aid in product safety adherence.

The article went on to say that a Rhode Island meat company had recalled 1.24 million pounds of pepper coated salami after month?s long investigation of a salmonella outbreak that sickened 184 people in 38 states by comparing shopping receipts of those who got sick. This certainly supports one forward and one back accountability from a retailer?s perspective but this author is not sure that the intention of the rule is to have to chase down receipts which is extremely time consuming, costly and a strategy that provides the possibility of an extremely limited sample.

The definition of traceability according to Wikipedia refers to the completeness of the information about every step in a process chain. Traceability is the ability to verify the history, location, or application of an item by means of documented recorded identification. Doing this systematically is where the retail industry needs to be.

This author has discussed this in numerous previous posts. One of my favorites is from September of 2008 titled Traceability-also-requires-sensibility-if-you-want-a-safe-supply-chain.? So what can you do as a retailer? Begin by asking your e-procurement solutions provider how they address traceability with their tools.

We look forward to and appreciate your comments.

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