Archive for the ‘E-procurement Tools’ Category

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Procurement and Tariff Increases

Friday, April 18th, 2025

 

Today’s blog is by Margaret Stewart, Director of HR and Administration at SafeSourcing.

In an ever-challenged economy, procurement professionals are no strangers to volatility. One of the most impactful—and unpredictable—variables in recent years has been the rise in tariffs. Whether due to trade disputes, geopolitical tensions, or efforts to protect domestic industries, tariff increases are reshaping how organizations approach procurement.

Tariffs, essentially taxes on imported goods, directly increase the cost of affected items. For procurement teams, this can quickly escalate total spend, especially if critical materials or components are sourced internationally. Tariff-related cost hikes can blow through carefully planned budgets, especially for long-term contracts negotiated before tariff changes. Suppliers in tariff-affected regions may raise their prices or pass on additional costs to buyers. Frequent changes in trade policy make it difficult to forecast and plan procurement strategies with confidence.

To mitigate the impact of tariff increases, procurement professionals can adopt more agile and strategic approaches. Relying too heavily on suppliers from a single country or region increases vulnerability. Diversification helps reduce exposure to tariffs and supply chain disruption. For instance, if tariffs rise on goods from China, sourcing alternatives in Vietnam, India, or Mexico could offer relief. Some organizations are reevaluating their global sourcing strategies altogether. Bringing production closer to home—or at least to regions with favorable trade agreements—can reduce tariff exposure and shorten lead times.

Changing markets reinforce the need for changing contracts as well. Many companies are renegotiating terms to include clauses that account for tariff changes, allowing for cost-sharing or pricing adjustments in response to policy shifts. Focusing on purchase price alone is no longer sufficient. Procurement leaders must also factor in tariffs, shipping costs, lead times, and risk factors—to evaluate the full cost of sourcing decisions.

Tariffs are just one of many forces reshaping global procurement, but their impact is profound. With the right strategies in place, procurement partners, like SafeSourcing, can help your organization not only weather the storm but also thrive.

For more information on how SafeSourcing can help your e-procurement needs, or on our Risk-Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

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On the Twelve Days of e-Procurement Christmas.

Tuesday, December 24th, 2024

 

It is actually twelve days until Christmas and today’s post is a holiday favorite by our CEO Ron Southard from our SafeSourcing Archives.

  1. On the first day of Christmas our e-procurement service provider gave to us, a streamlined procurement process.
  2. On the second day of Christmas our e-service provider gave to us, more suppliers to source our goods and services from.
  3. On the third day of Christmas our e-procurement service provider gave to us, pricing that works for smallest categories.
  4. On the fourth day of Christmas our e-procurement service provider gave to us, consistent and customized product specifications.
  5. On the fifth day of Christmas our e-procurement service supplier gave to us, more time for other priorities.
  6. On the sixth day of Christmas our e-procurement service provider gave to us, improved quality in our products and services.
  7. On the seventh day of Christmas our e-procurement service supplier gave to us, better supplier education.
  8. On the eighth day of Christmas our e-procurement service provider gave to us, a simple award of business process.
  9. On the ninth day of Christmas our e-procurement service provider gave to us, support for a better carbon footprint.
  10. On the tenth day of Christmas our e-procurement service supplier gave to us, total category e-procurement.
  11. On the eleventh day of Christmas our e-procurement service provider gave to us, safer products for our customers and planet.
  12. On the twelfth day of Christmas our e-procurement service provider gave to us, a sustainable e-procurement process and improved corporate net earnings.

Now, ask yourself if all of these goals are accomplished on your company’s behalf by your present e-procurement service provider. If n0t, please contact a SafeSourcing customer services account manager.

Continued best wishes for a very Merry Christmas the rest of the 2023 Holiday Season.

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Why increased profitability continues to evade the middle market retailers.

Friday, January 5th, 2024

 

Today’s post is from Ron Southard, CEO at SafeSourcing Inc.

I wrote this post 14 years ago and it’s still true today.

There are two primary sources of objections that continue to halt the use of these profit enhancing tools in the retail middle markets particularly c-stores and regional supermarket chains.

The first source is your own buyers or category managers. For some, it is the false belief that these tools will eliminate their jobs. For others, it is the thought that in rising markets, buyers tend to be conservative in the hopes that their suppliers will continue to honor old contracts and delay price increases. Neither assumption is true. E-procurement tools make a buyer’s job easier as they can do more in less time such as working with dozens of suppliers versus only the same few. Honoring old contracts almost never happens. Ever-greening of contracts is a huge problem in retail where the lack of sophisticated contract management systems that can provide automatic alerts results in hundreds of contracts auto renewing at predetermined price increases. This results in huge cost increases to retailers that were not planned for. This is all the more reason to be thinking about your spend months before contracts expire even if it only results in cost avoidance.

The second area where you can expect pushback is from your incumbent suppliers or wholesale distributors. If you have never participated in the setup of a reverse auction and most middle market retailers have not, that initial call to your suppliers to ask them to participate in a reverse auction event is always an interesting journey. Be prepared for all of the reasons in the world why you should not waste your time on this type of process. The more forceful the pushback the more likely you are to see savings that you should have seen earlier. As such, although suppliers may b well aware of or even using these technologies to reduce their costs, middle tier retailers have not able to share in these savings to the extent they should.

If middle market senior executives lead the charge and cost and the availability of new sources of supply is no longer an issue, there is no reason middle market retailers should not benefit greatly from running online bids or RFQ’s.

If you’d like a risk-free trial, please contact SafeSourcing.

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Retail Contract Leakage. Where does it come from and how can we stop it?

Thursday, December 7th, 2023

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

How does your organization  now ensure that the award of business is implemented or delivered as awarded so that you indeed receive all of your savings?

This is probably the most difficult part of the entire procurement lifecycle. The first part is to understand your data and where it is kept, that includes understanding what constitutes contract leakage so that you know what you are looking at. Once you have the data needs to be looked at on a regular basis in order to insure leakage is not occurring. This should be at least monthly depending on contract language. Most contract management systems have alerts that can be triggered as frequently as required.

The following list although not all inclusive speaks too many of areas in which contract leakage can occur. This happens in all companies large and small. If you are aware of them, capture them and report on them there is a good possibility of controlling them.

1. Buying without a contract.

2. Expensing something outside of a contract

3. Having multiple contracts in place:

4. Executing a new agreement when one is already in place

5. Paying a price different from the contract

6. Delivery variances

7. Quality specifications variances

8. Making payments at a prices different from the contract

9. Scope creep

10. Invoice discrepancies

11. Missed volume discounts

12. Insurance discrepancies

13. Shipping discrepancies

14. Expired contracts resulting in price uplift

15. Evergreening

16. Overtime Violations

17. Material discrepancies

18. Sub Contractor discrepancies

Don’t  have your team work hard to drive benefits with your procurement solutions and then lose much of what you have gained to contract leakage. Ask your e-procurement solutions provider how they can help or save yourself a lot of time or please contact a SafeSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

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Could You Get More Procurement Savings?

Tuesday, November 28th, 2023

 

 Today’s post is from our archives at  SafeSourcing.

Many of the organizations we speak with believe they handle their purchasing reasonably well, either with their existing internal processes or without any eProcurement tools at all. These companies may even realize savings as they negotiate with their vendors. That’s said; very few of these organizations are doing as well as they should, given the wide availability of eProcurement solutions and/or the ease of use available with full-service SaaS options.

Here are my top 5 signs that your organization is not maximizing the savings potential by using only a traditional procurement process.

  1. You only seek quotes from 2-3 vendors. Historically, our data suggests that having 6-8 suppliers quoting drives the highest possible savings.
  2. You haven’t competitively bid a category in the last 3 years. It is at this point that we find a category should be sourced, including non-incumbent vendors, to ensure you are still receiving the best market prices.
  3. You don’t have easy access to your existing contracts. If you don’t already, you should implement a contract management tool. Too often, we see organizations unsure of contract terms and key dates falling victim to unfavorable auto-renewals.
  4. You do not have a set of specifications for the category. This is both common and fixable and places the incumbent vendor in a place of perpetual power in negotiations.
  5. You’re not using eProcurement. As well as your organization does when negotiating, we see significant increases in savings, often 10-20% more, when our clients use their eProcurement tools effectively. One client recently admitted that they would never have asked for the prices or discounts that we deliver for them. Each of the four preceding signs is also an indicator that you’re not using eProcurement. In fact, by implementing a strategic eProcurement program, you’ll likely resolve one through four organically.

Do you see any of these signs in your organization? If so, take steps to correct and you’ll see immediate, measurable results.  For more information, please contact SafeSourcing.

We look forward to your comments.

 

 

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Where is the best place for retailers to spend their effort to improve profitability?

Friday, October 27th, 2023

 

Today’s post is an oldie but goody by Ronald D. Southard, CEO at SafeSourcing

The answer to this posts byline is of course all three!

Obviously, all retail companies would like to focus on all three areas and there are even sub sections of these top line areas that we could spell out as needing attention. The challenge is where to deploy already taxed resources?

It does not require an accountant to figure this out. 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%. Based on a number of industries reports we are also safe using a shrink number of 3% of top line revenue.

This author is aware that there are a a few companies with shrink below 1% and cost of goods below 75% which means there are also companies with gross margin better than 25%. The obvious question is are these companies that solution providers want to target for profit improvement sales? Probably not.

So, let’s look at an example of shrink improvement with data analysis tools and process improvement tools versus cost compression with SaaS e-procurement tools. Let’s assume we have a company that does top line sales of $1B. Using a shrink number of 3% shrink would be $30M annually. If you were able to reduce shrink by a third in one year, profit improvement would be $10M. If this were a supermarket company with a 1% bottom line or $10M, improvement could be as much as 100%.

Now let’s take a look at reduction in cost. If we assume the same company has COGS of 75% or $750M and that we were only going to address 20% of that number or $150 and only reduce those costs by 20% which is slightly above industry averages the net profit improvement would be $30M or 300% improvement in year over year net profit. If we were only able to achieve 10% savings which is well below industry averages, net profit would improve by 150%.

I’ll leave the gross margin example for you to figure out. In the above case it is clear that attacking COGS has an impact on the bottom line of up to 3 to 1 versus addressing shrink with your already taxed resources.

If you are interested in an immediate impact to your bottom line, please contact a SafeSourcing Customer Services associate today.

We look forward to and appreciate your comments.

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What is the benefit of a ranked reverse auction?

Thursday, June 29th, 2023

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc

A tool that can be effective when running a reverse auction is called ranking. While this feature is not used all the time, it can be of strategic importance when trying to get to the best net landed cost for products that have very slim margins at the supplier level. The feature can be set up to let all suppliers know where they rank or a select number of suppliers like the top five (5). The feature can also be turned on for a specific time during the auction like in the last 5 minutes. As an example, you might have tight bidding for a particular commodity-based product. Only the low bid vendor knows that they are indeed the low bid and resultingly is not entering any more price adjustments. If ranking is deployed, vendors can find out if they are 2nd or 3rd etc. and this may entice them to try one more or make multiple more entries if their desire to win the business is strong enough. This is particularly true if the bidding activity has been robust to a point with the low-price indicator switching back and forth between multiple vendors.

It is the deep understanding of markets along with the use of tools like ranking amongst others that are included in strategy reviews with our customers that allows SafeSourcing to regularly exceed customer expectations across all spend areas. Our average annual savings against all categories are more than 24% beyond what you can negotiate on your own.

SafeSourcing is a Procure to Pay SaaS based provider of a number of e-Procurement solutions and associated white glove services that are part of our SaaS offered SafeSourceIt™ eSourcing suite.

For more information, please contact a SafeSourcing Customer Services Associate.

 

 

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You can still improve gross margin and net earnings substantially in this market.

Monday, June 26th, 2023

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc

Example: Prove me wrong if you think you can!

Assume a $150M Retail Company with industry earnings of just one percent or $1.5M. Additionally cost of goods for this company is 70 percent or $105M. Let’s also assume this company were to only source ten percent of their for-resale COGS or above the gross margin line spend or roughly $11M. With below industry average savings of only ten percent, total savings generated would be $1.1M which is a direct impact to net profitability. If all other segments of the P&L perform to plan and all savings are recovered during the same business calendar year net profitability would increase to $2.6M or a 73% improvement.

NO BS Here! If you don’t believe me, I will be glad to personally sit down with your CEO or CFO and Finance team and prove it to you! Imagine what else you could do to earnings if you also attacked your Expense in the same way.

Companies can begin with SafeSourcing almost immediately (SaaS/Cloud offering) with no risk (Cost Neutral Pilots) and no IT involvement at all, why don’t more companies use eProcurement tools. That’s a great question! Probably because they are embarrassed to not already be getting these results.

If this author were you, I just could not ignore this type of opportunity. If you’d like to learn more, please contact a SafeSourcing Customer Services Account Manager. Or me.

We look forward to and appreciate your comments.

 

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Why don’t you use Reverse Auctions?

Friday, June 23rd, 2023

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc

 Understanding a Reverse Auction according to Investopedia

In a reverse auction, the buyer puts up a request for a required good or service. Sellers then place bids for the amount they are willing to be paid for the good or service, with the winner being the seller prepared to accept the lowest amount.

Reverse auctions gained popularity with the emergence of internet-based online auction tools that enabled multiple sellers to connect with a buyer on a real-time basis. Today, reverse auctions are used by large corporations and government entities as a competitive procurement method for raw materials, supplies, and services like accounting and customer service.

Here’s a real simple truth! If you are not using this tool, you are paying way more than you might think. And your team cannot get anywhere near the pricing that reverse auctions generate. I watched a large company yesterday reduce the cost of any office supply category by 31% beyond what they negotiated.

You can view my comments from an earlier post titled Just what do we mean by eProcurement White Glove Services that supports why our savings average over 24% better than what companies can do on their own most of the time.

SafeSourcing is a Procure to Pay SaaS based provider of a number of e-Procurement solutions and associated white glove services that are part of our SaaS offered SafeSourceIt™ eSourcing suite. That includes our SafeSourceIt™ Global Supplier Database  that includes over 557,000 vendor/suppliers.

To learn more, please contact a SafeSourcing customer services associate.

 

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Specifications?

Wednesday, June 21st, 2023

 

Today’s post is by Margaret Stewart, Director of HR and Administration at SafeSourcing

We all buy things, and we generally look for the best deal we can get, but how do you know you are getting the right thing? Recently a friend tried out a new shopping website and found a great deal on a car jack. This is something that we could all use if we do our own maintenance on cars or just want to be prepared if we need to change a tire. This particular site offered what seem like a reasonable price, much less than you usually see, but not low enough to trigger red flags. So, the car jack was purchased, and they awaited its arrival.

A few weeks later when it arrived, this car jack was approximately three inches high. This was some sort of tiny model of a car jack, and well above the price something like this would seemingly go for. After double checking the website and reviewing the details, this car jack was indeed just three inches high and through some creative photography, no one would be the wiser that it wasn’t full size unless you read the specifications.

There is an important lesson here. You must read specifications carefully to know that what you are purchasing is the right product. This will help you get what you need, but also help you to compare and understand any differences within that category of product. Sometimes by reading about what you think you need; do you discover you may in fact need something else.

This idea goes for sourcing as well. When looking for a product or service, your specifications should be clear and detailed, because otherwise you might get a miniature car jack that only works for small model cars. A procurement partner, like SafeSourcing, can help you come up with the right specifications for the product or service you need and also help to find those that would be a good fit in providing that service of product.

For more information on what the SafeSourcing team can offer you, or on our Risk-Free trial program, please contact a SafeSourcing Customer Service representative. We have an entire team ready to assist you today.

 

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