Archive for the ‘E-procurement Tools’ Category

“Reduce (All) Spend”

Thursday, February 23rd, 2012

Maximizing potential savings requires that all spend be considered as part of your strategic sourcing initiative. While you may think that some of your categories are too small to qualify for inclusion, I would like to point out that these categories can and SHOULD be included.

Combining individual items with lower spend totals is a great way to both maximize savings potential and streamline your purchasing. If you would like to be able to consider more of your spend for inclusion in your strategic sourcing initiatives, your first step should be to talk to your sourcing partner.

You might find that you are looking broadly at a category and that many of the items you purchase are in smaller quantities or otherwise represent a small amount of spend annually. While these opportunities are often overlooked or passed over in favor of higher spend opportunities, an effective purchasing leader understands that every opportunity must be considered to truly maximize savings. In these cases, historical RFx data can be used to recommend similar or overlapping purchase items that might not have initially been considered. It may be that this data forces you to look beyond the typical restraints of accounting categorization, department or even vendor.

Once you have taken the step to find these similar items, you will see your average savings increase as vendors are given an opportunity to compete for larger volumes of new business.

Additionally, combining these items may also have the effect of streamlining your purchasing. As you have now offered more items to vendors in one RFx event, you may find that it is more favorable to award the purchases to fewer vendors. The ripple effect of efficiency will continue throughout your organization.

We look forward to and appreciate your comments.

?Reduce (All) Spend?

Thursday, February 23rd, 2012

Maximizing potential savings requires that all spend be considered as part of your strategic sourcing initiative. While you may think that some of your categories are too small to qualify for inclusion, I would like to point out that these categories can and SHOULD be included.

Combining individual items with lower spend totals is a great way to both maximize savings potential and streamline your purchasing. If you would like to be able to consider more of your spend for inclusion in your strategic sourcing initiatives, your first step should be to talk to your sourcing partner.

You might find that you are looking broadly at a category and that many of the items you purchase are in smaller quantities or otherwise represent a small amount of spend annually. While these opportunities are often overlooked or passed over in favor of higher spend opportunities, an effective purchasing leader understands that every opportunity must be considered to truly maximize savings. In these cases, historical RFx data can be used to recommend similar or overlapping purchase items that might not have initially been considered. It may be that this data forces you to look beyond the typical restraints of accounting categorization, department or even vendor.

Once you have taken the step to find these similar items, you will see your average savings increase as vendors are given an opportunity to compete for larger volumes of new business.

Additionally, combining these items may also have the effect of streamlining your purchasing. As you have now offered more items to vendors in one RFx event, you may find that it is more favorable to award the purchases to fewer vendors. The ripple effect of efficiency will continue throughout your organization.

We look forward to and appreciate your comments.

Twenty steps to running high quality e-procurement events.

Tuesday, February 21st, 2012

E-Procurement events have been around since the late 1990?s and are commonly referred to as reverse auctions or events. These sessions can from time to time also run as forward auctions in order to reduce over stock conditions and reduce shrink. Regardless of the naming convention used there are certain rules which if followed will create higher quality events for the retailer and the supplier? This will result in creating better savings opportunities or cost avoidance in a tough market. The importance of focusing on a clear process will increase event participation. This focus on quality will be recognized by your existing trading partners and potential new sources of supply, and will keep them coming back in the future to compete fairly for your business.

1. Executive sponsorship is mandatory
???? a.?This is required at the CEO, CFO, CPO, CLO or head of the supply chain.
2.?Get the entire buying organization together for a kickoff session.
3.?Provide an over view of what you are going to do and the impact it can have on the company. Use company financial models.
4.?Discuss and agree on success criteria.
5.?Every event is not a homerun. Singles and doubles score runs.
6.?Create a fun environment.
7.?Consider prizes for the most creative use of an auction.
8.?Use scorecards by department with percent of savings.
9.?Discuss the meaning and importance of corporate aggregation.
10.?Hand out E-RFX templates to gather existing product specifications.
11.?Put a time requirement on data collection.
12.?Gather an accurate list of your present suppliers.
13.?Work with your sourcing company to identify a top 100 list of events.
14.?Calendar the events.
15.?Prioritize by dollar value, date and strategic value.
16.?Conduct department level discovery meetings of 30 minutes to an hour.
17.?Investigate existing contract language.
18.?Look for auto renewal (evergreen) language roadblocks.
19.?Determine alternate sources of supply with your sourcing company.
20.?Develop an E-RFX rules and instruction template and post with each event.

Although these steps are not all encompassing, they provide a format for getting started that offers the best opportunity for reduction in cost of goods, expenses and improvement in corporate earnings. Be sure to combine this with a business partner that knows your business.
?
We look forward to and appreciate your comments.

You know what they say about excuses.

Thursday, February 9th, 2012

The reason is because middle market retailers are still not using low cost e-procurement tools such as reverse auctions.

There are two primary sources of objections that continue to halt the use of these profit enhancing tools in the middle markets.

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 they have always worked with.  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 literally thousands of contracts auto renewing annually 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 an RFP or an RFQ (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 be well aware of or even using these technologies to reduce their own costs, middle tier retailers have not been able to share in these savings to the extent they deserve to.

If middle market senior executives were to lead the charge and  e-procurement costs as ell as the availability of new sources of supply were no longer an issue, there is absolutely no reason middle market retailers should not benefit greatly from running  e-procurement events such as reverse auctions.

Contact SafeSourcing if you’d like to impact this quarters earnings.

We look forward to and appreciate your comments.

Ron Southard – CEO SafeSourcing

What the heck is Retail Spend Management? Is it the same thing as Retail e-Procurement?

Wednesday, February 8th, 2012

This generally is dependant on their own offerings which can cover the entire procure to pay process? However at it’s most basic, we are talking about e-RFX offerings such as RFI’s, RFP’s and RFQ’s  and other tools and  services that support them. So, the answer to the above is really yes and no.

My typical response to retailers is that spend management  is the management of your company’s spending across all of your operating expenses and SG&A through sophisticated tools that support RFI’s, RFP’s and RFQ’s at a minimum. Organizationally this process should report to a Chief Procurement Officer or the head of your supply chain with strong ties to the finance area. Success is typically measured by a reduction in cost of goods and services or COGS, improvement in quality or both. In retail, spend is represented in for resale products such as general merchandise, gift cards, frozen seafood, meat etc. Spend is also measured in the expense category or not for resale products and services such as supplies, services, technology, real estate etc.

According to Wikipedia, Spend management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business. These costs typically show up as “operating costs” or SG&A (Selling, General and Administrative) costs, but can also be found in other areas and in other members of the supply chain.

There are dozens of vendors that have a variety of tools and services that are available to assist companies in the analysis and management of their spend for the purpose of present and future decision making. These range from small boutique software houses to giant corporations. Spend management of which e-procurement tools are a part run the gamut from sophisticated contract management applications, reverse auction tools, purchase order management tools and supplier databases etc. In the most sophisticated implementations, these tools may be tightly integrated with retailers enterprise based support systems or data warehouses.

It is not a surprise that many retail companies are not really aware of what their total spend is, or how many suppliers they spend it with. In addition, many retail companies still do not use these tools today. Often times, product specifications are hard to find if documented at all and in some cases the same category might be purchased by different departments across the enterprise without aggregating the spend.

Today’s tools that supports spend management are largely available as internet based or hosted applications that re much lower cost than older in house legacy applications. As such they can be activated almost immediately. This means savings within your present accounting period is possible.

If you’d like to learn more about this process or these types of tools, please contact SafeSourcing. 

We look forward to and appreciate your comments.

Visit our wiki when you have some time!

Wednesday, January 18th, 2012

According to the king of all wikis, Wikipedia; a wiki is a collection of web pages designed to enable anyone who accesses it to contribute or modify content, using a simplified markup language. Wikis are often used to create collaborative websites and to power community websites. For example, the collaborative encyclopedia Wikipedia is one of the best-known wikis. Wikis are used in businesses to provide affordable and effective intranets and for knowledge management. Ward Cunningham, developer of the first wiki, originally described it as “the simplest online database that could possibly work”.

Wiki? is a reduplication of “wiki”, a Hawaiian word for “fast”. It has been suggested that “wiki” means “What I Know Is”.

So, what is a SafeSourcing Wiki? Since SafeSourcing is a company dedicated to e-procurement as well as safety in the supply chain and environmental consciousness, it makes sense that the SafeSourcing Wiki would be a specialized wiki (in this case e-procurement) that concentrates at a minimum on any or all of the following.

1.?Procurement terms and links.
2.?Safety standards and definitions and links.
3.?Environmental certifications and definitions and links.
4.?Educational content for procurement and supply chain professionals.
5.?Procurement templates for commonly sourced products and services.
6.?Other procurement related material

The nice thing about wikis is that the definitions are not static. Authorized users can add to definitions or add definitions and terms as well as rate the site. In this way a body of work can grow from the contribution of all users and help to provide a reliable source of data for professionals in a specialized field.

Please feel free to visit the safesourcing wiki regularly and offer your comments, terms, definitions and suggestions. This section of the SafeSourcing website is free tool for anyone that cares to use it, and it is for your use as a procurement and supply chain professional, the most difficult job in all industries.

We look forward to and appreciate your comments.

Reverse auctions will drive consistent results over time.

Thursday, December 22nd, 2011

To use a baseball analogy, you may not get the grand slams and homeruns typically seen during first year implementations of reverse auctions but with proper planning and execution you will at a minimum continue to beat market pricing. Think of it as singles, doubles and triples for the at bats after you have hit a home run.

In order for this to happen we have to understand how to conduct successful auctions in today?s business world and it is not the same old same old where the low bid always wins. The number one job of any business is to drive bottom line profitability. Because of this, companies that win your business during an E-RFX process need to make the business they have just won as profitable as possible. They may take your business during an auction as a loss leader in the hopes of selling you more volume at a lower margin or selling other products to you. They may take your business at a loss in a down economy to drive cash flow in order to just keep going. They also will take actions during the next year or two to drive their internal costs down. All of these circumstances and more mean that there is potentially more compression on the table the next time around. The why is actually pretty simple? Your new supplier wants to keep the business and the relationship, your old supplier wants their business back and other suppliers want new accounts.

There are many other benefits to running these auctions again and again. New products offerings with better features, new suppliers that you are not aware of, suppliers you strategically did not invite the 1st time, existing products with new technologies and quality improvements to name a few. To support this, don?t sign contracts for periods of longer than two years or you will be paying too much by contracts end.

If your e-procurement solutions provider knows what they are doing, reverse auctions can and should become a long term tool in your procurement tool box.

We all know that the consistent hitting of singles and doubles wins more games. In fact a grand slam can?t happen unless there are already runners on base.? If you want to hear more about how to succeed year in and year out with this process, please contact SafeSourcing.

We always appreciate your comments.

Executive Teams, are you thinking through e-procurement self service? Think Again!

Thursday, November 3rd, 2011

Let’s also assume that you want to drive the greatest possible savings across the broadest range of categories in the shortest amount of time, like the next budget period; and have a sustainable process moving forward.

If all of the above is true, you should consider what constitutes developing full service events and whether you have the requisite headcount, specifications, strategy and research skills as well as new sources of supply to conduct the service yourself. Then there is always the question of what tool sets to use.

The question one needs to ask is; what type of event services can an e-procurement provider offer to help us get ready if we did want to do it ourselves? What we are talking about is to be 100% self-sufficient. A provider should offer readily available classroom education that can be conducted on-site in order to train your team in all the nuances of event creation and support. These skills are the foundation that allows e-procurement providers to support large volumes of events in a full service mode, which drive greater savings over the long term. They should be able to provide reference to where they have done it in the past and how much staff the reference needed to add. Ask the reference what their average savings were in year one versus what a full service provider can drive. Remember, knowledge transfer in this area is one thing; the passion, skill and headcount to carry out these practices on a day by day basis are what drive results.

This process is normally provided by people behind the scenes with a very specific skill set. If you plan to do self service it would be very wise to make sure you have them covered at the same quality level.

We look forward to and appreciate your comments.

Very complex e-negotiation events are not difficult to host.

Tuesday, September 20th, 2011

 

So how does one define a complex e-negotiation event? On the surface it may be an event with a large number of line items within a particular product set such as MRO or Fleet Maintenance in the distribution space or raw materials used to manufacture components that require special handling, shipping and standards adherence. The amounts of the total spend for an event really has nothing to do with the complexity of the event. The complexity is determined by the data points requiring management in order to drive the best possible value to the buyer and the supplier.

This author would suggest that any event including multiple market baskets, thousands  of  SKU’s all with different specifications, order quantities, delivery locations, multiple suppliers not bidding on each line item, a split award of business and the size of the spend qualifies as a complex event. Adding to the complexity may be the overall strategy required when sourcing the right mix of suppliers to compress pricing properly and drive early and consistent bid activity. This can be further complicated by trying to determine the correct decile based sourcing strategies for the event and including product affinities where they make sense.

The above example would qualify as organized complexity where there is a non-random, or correlated, interaction between most of the parts. In order to support  complex events, your e-procurement provider needs to have an understanding of the specific market place and practices and processes in place that allow them to drive these activities and bring complex events to market  in the shortest period of time. Generally this should occur within less than two or three weeks from event notification to event completion.

Last year, this author tried to define the relative complexity of the retail environment and its potential impact on the use of e-procurement tools. Specifically we identified the following areas of interlocking complexity.

1. Supply Chain complexity.
2. Rate of change in the global supply chain.
3. Long term inherited supplier relationships.
4. Lack of retail procurement staff.
5. Lack of time.
6. Multiple sources of supply.
7. Limited view of new sources of supply.
8. Confusion as to who’s the customer and who’s the supplier
9. Sales People
10. Third Party Providers
11. Collaboration complexity.

Being comfortable that your solution provider understands your market place and has a well defined process for hosting Complex e-negotiation events insures that they are not difficult to host.

We appreciate and look forward to your comments.

“What types of companies find procurement services beneficial?”

Monday, August 29th, 2011

If you’re a business owner, large or small, CEO, CFO, or President of a company you should be asking yourself if your company can benefit from procurement services.  Depending on the size of the organization you may or may not be familiar with all the goods and services that your company is purchasing.  This is where procurement services can come into play! 

According to Wikipedia procurement is “the acquisition of good and/or services.  It is favorable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchases in terms of quality and quantity, time and location.”

This sourcing professional believes that if a company were to review at least 10% of their annual spend, they would find many opportunities to improve the bottom line.  Below you will see a few of the times that would be most beneficial to take advantage of procurement services.

  1. 1.Reviewing/Resigning a current contract with an incumbent supplier.  –   If you’ve been with the same supplier for the length of multiple   contracts, it’s time to re-evaluate.  You may not be interested in switching vendors, but by taking advantage of procurement tools you will be able to negotiate a better rate for the goods and services that you’re purchasing.
  2. When you start a new task/department within your business. – Every time your business grows or expands is an opportunity to take advantage of procurement tools.  Even if the goods and services that you’ll need to operate this new department are things you’re currently using, the quantity of these items would be a great opportunity to evaluate how much you’re spending to have the goods and services you’re using on a regular basis.
  3. When you are analyzing you upcoming budget – Each year when your company monitors your profit margin and areas within your budget that cause you concern is a great time to evaluate what procurement services would be beneficial for you.  For example, you may find areas of your business that are critical for your end product or service, but you feel that you are spending too large of a percent of your budget to produce such results. 

Just think of all the different areas you bottom line is affected by.  Each of these is an area for potential savings thru the use of procurement tools.  By partnering with a procurement professional, you’ll be able to evaluate more than a few areas of your business where you can start saving for your next purchase or contract for your goods and services.

For more information on SafeSourcing and how we can help you evaluate your savings opportunities, please contact a Customer Service representative.

We look forward to and appreciate your comments.