Archive for the ‘E-procurement’ Category

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IT Sourcing and the Relationship Between Hardware and Software

Tuesday, February 22nd, 2011

We live in a world that is moving so technologically fast that it is difficult to be an expert on everything that is happening.? Because many of us have businesses and responsibilities that have nothing to do with all of this emerging technology, we rely on 3rd parties such as consultants and sometimes our own vendors to help make decisions that relate to these areas.

One of the places that I consistently see businesses make mistakes on when they take direction from an outside source is to buy the hardware they need to go with the software they purchased from the software vendor.? While it can be cost-effective in some cases, generally if a software company is selling hardware they don?t manufacture, you are either paying too much for it now, or you will down the road when it comes time to upgrade or repair that hardware.

Many times vendors will claim that a company must get the hardware from them because it was made specifically for them.? Frequently this is just not the case, and when it turns out to be the case, it is probably time to evaluate the vendor/company you are using for that software.

I ran across a blog the other day that actually dealt with this very topic.? In the blog the author was discussing how important it was for the customer that they select software that is completely independent of the hardware used in it.? It also went on to detail that the best software will integrate with several types of hardware giving the customer the choice to select the products that fit them the best when it comes to features, functionality and price. As the consumers you have the power to demand these types of options, make sure you select vendors that will give them to you. Blog

We look forward to and appreciate your comments.

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Do you want your first Reverse Auction to be a success?

Friday, February 18th, 2011

Competitive bidding is the process of inviting and obtaining bids from competing suppliers in response to documented specifications, by which an award is made to the best overall bid that meets or exceeds the specifications in areas such as price and quality. There are keys to understanding and making your bidding competitive and successful when using e-negotiation tools.

One of the most important elements and most overlooked is that of incumbent supplier communication once a bid has been authorized. This means that your entire company is on the same page. That page is agreeing to not setting any false expectations with your incumbent suppliers. Because you already have a relationship with these companies you will most likely receive calls, emails, IM?s and texts wanting to know what is going on. Your company line has to be that ?We value our relationship and encourage you to use this process as it is the only process by which we will review bids?. Do not indicate that everything will be ok or that things will work out just fine or any similar language. If you are using a 3rd party, instruct your incumbent supplier or suppliers to provide any questions or communications they have through the third party only.

To make it simpler, be honest, be thorough and don?t set any expectations. Keep this in mind and all suppliers will feel like they were treated fairly and want to bid to win your business again.

We look forward to and appreciate your comments.

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The U.S. Consumer Price Index rose 1.5% in December.

Tuesday, February 8th, 2011

For every commodity that rises there are also commodities that fall. For every company that raises their prices to their end user be it consumer or company, there are others that want your business bad enough to keep prices stable if not lower them. The issue is that companies have to be willing to put the work in if they want to keep prices down. Too many companies continue to operate in a business as usual manner. It?s pretty easy to spot when individuals or companies operate from the ?this is how I learned it and this is how I do it? point of view. Some clues are;

1.?They buy from the same suppliers over and over again.
2.?The do not have a? view of their contracts.
3.?They do not have a view of their performance against those contracts.
4.?They do not have a view of additional sources of supply.
5.?They do not put their products and services out to bid on a regular basis.
6.?They do not have basic specifications.

I was reading an article in U.S. TODAY last Friday February 4th titled Prices starting to creep higher By Paul Davidson. The sub title was Businesses hit point where they can?t absorb higher costs. The article sited several manufacturers and retailers that were raising their prices as a result of increased costs.

Here?s a promise. If you can?t figure out how to keep your costs down, call us at SafeSourcing because we can.? As a matter of fact call me personally 480-773-7524 or email me at ronsouthard@safesourcing.com.

We look forward to your comments.

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When is the right time to renegotiate products and services contracts?

Tuesday, February 1st, 2011

For most buyers and category managers, cycles are important. That is that the normal flow of business dictates how and why they buy their products and services. Some financial related examples of this are End of Year, End of Period, contract expiration and capital need. Other examples may be seasonal needs, change in demand either up or down or growth through acquisition.

However there are other clues that should also be analyzed on a regular basis that play an important role in predicting cost increases even if you are only mid contract that might make you want to reconsider a contract that is already in place. One of those is unusual spikes in the commodity markets.

An example of the above is the forecast for oil prices. We are hearing a lot lately about oil hitting $100 per barrel with some forecasts as high as $105 be year end. That?s a clue to take a look at contracts that are impacted by oil such as resin markets and fuel prices that affect transportation costs such as diesel prices. Judging how realistic these forecasts are can also be tricky but here are also clues for that such as instability in areas like Egypt because they control daily transit through the Suez Canal of oil.

As a buyer you have to be aware of more than just the need to renegotiate a contract because it is expiring. If you need help doing that your e-procurement provider should be able to offer the category expertise to help you.

We look forward to and appreciate your comments.

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How many times does someone ask you what does procurement mean?

Monday, January 31st, 2011

It really is a curious question; pretty much along the same line as what is spend management. Well my answer might create more questions, but all of the following job areas within your company are probably involved or impacted by procurement or e-procurement?

1.?Finance
2.?Purchasing
3.?Logistics
4.?Manufacturing
5.?Warehousing
6.?Materials Management
7.?Inventory Management
8.?Supply Chain
9.?Distribution
10.?Transportation

There are certainly many more areas of a company that have procurement or? e-procurement connections, but the above probably give you a pretty good idea of the breadth of involvement within any company. In fact, I can?t think of a job that is not impacted by procurement. Maybe I should just say we save every department in your company money every day.

We look forward to and appreciate your comments.

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Should prices really be rising based on the commodity markets?

Thursday, January 27th, 2011

Then yesterday as I was browsing another subject, I found the following on MSN. ?Commodities had a weak session, which culminated in a 1.5% loss for its worst single-session slide in three weeks. Weakness was widespread among commodities?. My response was huh?

So just what is a commodity and how can a company keep track of these trends for themselves. According to Wikipedia a commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are often substances that come out of the earth and maintain roughly a universal price.

Your product costs should fluctuate periodically based on the commodity markets, but being aware of them allows you to enter terminology in your contracts that should protect you against any significant spikes and your supplier against any significant drops in the market. Without this language you are really playing Russian roulette with your company?s money.

Commodities exchanges that you can easily follow include:

1.?Chicago Board of Trade (CBOT)
2.?Chicago Mercantile Exchange (CME)
3.?Dalian Commodity Exchange (DCE)
4.?Euronext.liffe (LIFFE)
5.?Kansas City Board of Trade (KCBT)
6.?Kuala Lumpur Futures Exchange (KLSE)
7.?London Metal Exchange (LME)
8.?New York Mercantile Exchange (NYMEX)
9.?National Commodity Exchange Limited (NCEL)
10.?Multi Commodity Exchange (MCX)
11.?International Indonesian Forex Change Market (IIFCM)

If you have a quality e-procurement partner they should be able to provide you with this type of data because it is still possible to compress pricing even in an up market. This author is not sure the preset trend is in that direction however.

We look forward to and appreciate your comments.

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Sustainable success with e-procurement programs is not based solely on financial models.

Monday, January 17th, 2011

Primary success with e-procurement programs is ultimately measured by cost reductions that should drop directly to a company?s bottom line. More than once I have heard; ?did we hit a home run?? Less emphasis is placed on cost avoidance and sustainability issues which can often lead to less of a companies total spend be assigned to these otherwise very effective tools then should be.

In order to ensure that results are sustainable; the strategies for all categories require consistent tool deployment across all departments throughout the company. This can be accomplished by utilizing a well planned repeatable process for category selection, discovery, supplier selection, and strategy communication that is well understood by all buyers and category managers through award of business.

Supplier selection and management is a critical stage that requires the understanding and participation of all sourcing professionals within an organization. One small mistake by anyone within the procurement organization could negatively impact the potential results of an e-procurement event. Historical long term relationships that drive behind the scene comments like; ?don?t worry we?ll be fine? to a long term supplier may drive inappropriate bid behavior and lack of ongoing credibility with your program. Not to mention the potential legal implications.

If you are not having the results you would like or have less than twenty percent your total corporate spend assigned to e-procurement tool?s that are offered in the form of? Software as a Service, ask your provider why?

We look forward to and appreciate your comments

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Here is how to insure that your e-procurement bids as successful as possible

Tuesday, January 11th, 2011

Competitive bidding is the process of inviting and obtaining bids from competing suppliers in response to documented specifications, by which an award is made to the best overall bid that meets or exceeds the specifications in areas such as price and quality. Probably one of the most important elements and most overlooked is that of incumbent supplier communication once a bid has been authorized. That is not setting any false expectations with your incumbent suppliers. As you already have a relationship you will most likely receive calls, emails or texts as to what is going on. Your answer has to be that we value our relationship and encourage you to use this process as it is the only process by which we will review bids.. Do not indicate that everything will be ok or that things will work out just fine or any similar language. If you are using a 3rd party, instruct your supplier to provide any questions or communications through the third party only.?

The e-negotiation process contemplates giving potential bidders a reasonable opportunity to bid, and requires that all bidders be placed on an equal playing field. Ideally each supplier must bid on the same documented specifications, terms, and conditions for all items. However breaking out individual line items that a specialty supplier can provide bids for can help to reduce the opportunity for suppliers to manage the overall gross margin of their bids and drive higher savings. The purpose of competitive bidding is to stimulate competition, prevent favoritism, and secure the best goods and services at the lowest possible price, for the benefit of the host company. Competitive bidding cannot occur where specifications, terms, or conditions prevent or unduly restrict competition, favor a particular supplier, or increase the cost of goods or services without providing a corresponding tangible benefit for the host company.

The above message needs to be communicated to any and all associates that are involved in the process and may have a reason to communicate with suppliers.

We look forward to and appreciate your comments.

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E-procurement solutions require officer level sponsorship and support!

Wednesday, January 5th, 2011

he role of e- procurement solutions continues to become more of a strategic each year. Driving cost of goods and services control is one of the most important above the line initiatives a company can undertake. But don?t forget the expense or indirect category

In order to successfully implement an enterprise wide e-procurement initiative, executive management must provide sponsorship and visibly promote these projects within their organizations. Executive sponsorship is required by the Chief Executive Officer, Chief Financial Officer, Chief Procurement Officer or Chief Logistics Officer. The potential impact to earnings regardless of Industry is so significant with a properly deployed e-procurement program that officer level executives require visibility based on the impact to stockholders and stakeholders alike. In fact Sarbanes-Oxley section 404 requires that companies 1. Demonstrate reasonable & consistent governance & compliance monitoring. 2. Assure proper use of tools that have been placed into practice. 3. Employ proper reporting & management oversight. Implementing e-procurement tools has the potential to offer significant earnings changes.?

Once executive management has sponsored these initiatives, some form of accountability must be implemented to ensure maximum participation in order fully realize organization wide savings opportunities. A company’s successful transition to e-procurement requires a transition from a cumbersome paper RFX processes to one that focuses on using the speed and efficiency of an electronic forum.? Successful change management professionals focused on sustainability realize that this shift must be a combination of the use of not only the latest software advances, but also reengineering of internal processes in order to drive sustainable results.

We look forward to and appreciate your comments

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What are your e-procurement goals for the 2011?

Monday, December 27th, 2010

1. Lower costs.
2. Drive improved quality.
3. Insure that products are guaranteed safe.
4. Build and maintain high quality product specifications.
5. Find a source of unlimited new sources of supply.
6. Aggregate your purchases.
7. Look at ways to use new technology.
8. Take advantage of software as a service applications to avoid large license fees.
9. Make procurement education and training a priority.
10. Review all of your existing suppliers.
11. Collaborate with other businesses to increase savings.

Remember that simple goals written down are the most achievable.

We look forward to and appreciate your comments.

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