How many times do we hear all of the reasons for a retail company’s performance being off? It’s the cost of doing business over seas, the economy, the cost of fuel, heath care costs etc. How often do we hear, that we are doing better than the same period a year ago or we are exceeding plan. All of that is nice stuff, but the bottom line is your bottom line. If you top line sales are up and your net profit is up it does not necessarily mean that you have all of your procurement issues under control.

Let’s start with some numbers you might wan to look at. Don’t just assume that profit is a good thing because profit could be caused by an imbalance in your category margins.

Here are a few good questions to ask yourself.
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1. How do your cost of goods compare to the rest of the industry for a chain of your size?
2. How do your operating expenses compare to other chains of your size?
3. How do your gross margins compare to other chains your size?

All of the above can be good indicators of overall company health and certainly procurement health. If your cost of goods is higher than industry averages for a chain of your size, why is that? Is there a specific category that is causing the issue? Do you know how to isolate the problem and then eliminate it?

If you don’t have or know this information, you should ask your e-procurement provider if they have it.

As an example, here is a look at U.S. based convenience store chains targets for non fuel.
1. Cost of Goods Sold should run somewhere around 71% or 72%
2. Gross Profit should run around 28% to 30%
3. Operating Expenses should run around 26% to 29%
4. Net Operating Income around 2%

If you are way out of balance with these numbers and want to understand how to rebalance them, call SafeSourcing.

We look forward to and appreciate your comments

Let’s not event talk about the economy which should automatically make companies look at their procurement practices. Let’s not talk about adjustments or explanations as to final industry numbers like the food at home inflation rates. If you are a new CEO or for that matter if you still have your job, you should be looking at 2 things aggressively. The first is cost of goods and services and the 2nd is expenses.

Here are eight good reasons why.

1. Fiscal Year 2000/2001        Net Profit Percentage    1.25
2. Fiscal Year 2001/2002        Net Profit Percentage    1.36
3. Fiscal Year 2002/2003       Net Profit Percentage       .95   
4. Fiscal Year 2003/2004       Net Profit Percentage       .88
5. Fiscal Year 2004/2005       Net Profit Percentage     1.16
6. Fiscal Year 2005/2006       Net Profit Percentage     1.46
7. Fiscal Year 2006/2007      Net Profit Percentage     1.91
8. Fiscal Year 2007/2008      Net Profit Percentage     1.84

SafeSourcing can help you fix this problem in the present quarter. Click here for the SafeSourcing Risk Free Trial.

We look forward to and appreciate your comments.

Let?s not event talk about the economy which should automatically make companies look at their procurement practices. Let?s not talk about adjustments or explanations as to final industry numbers like the food at home inflation rates. If you are a new CEO or for that matter if you still have your job, you should be looking at 2 things aggressively. The first is cost of goods and services and the 2nd is expenses.

Here are eight good reasons why.

1.?Fiscal Year 2000/2001? ????? Net Profit Percentage??? 1.25
2.?Fiscal Year 2001/2002 ?????? Net Profit Percentage ?? 1.36
3.?Fiscal Year 2002/2003 ????? Net Profit Percentage?????? .95???
4.?Fiscal Year 2003/2004 ????? Net Profit Percentage?????? .88
5.?Fiscal Year 2004/2005 ????? Net Profit Percentage???? 1.16
6.?Fiscal Year 2005/2006 ????? Net Profit Percentage ??? 1.46
7.?Fiscal Year 2006/2007 ???? Net Profit Percentage ??? 1.91
8.?Fiscal Year 2007/2008 ???? Net Profit Percentage ??? 1.84

SafeSourcing can help you fix this problem in the present quarter. Click here for the SafeSourcing Risk Free Trial.

We look forward to and appreciate your comments.

One way to hire is to stop worrying about others and focus on you. If your business model is tight survival is more up to you than it is external forces. To that end there is a lot that e-procurement tools in the form of the e-RFX process can do to help you in the upcoming fourth quarter.

Below is a list of twenty benefits retailers can gain by using these tools particularly those that are offered in the form of Software as a Service. If you don’t believe they will help you in this quarter, what better time to start than 90 days prior to the New Year.

This list is not in any particular order.
1. Guaranteed to improve net earnings immediately
2. Guaranteed to improve safety immediately
3. Guaranteed to improve Corporate Social Responsibility.
4. Guaranteed to produce new sources of supply
5. Retail has less spend assigned than any other industry
6. Streamlines the procurement process for the better
7. Will hold suppliers accountable to your standards.
8. Will improves quality
9. Will provide cost avoidance in a volatile market such as pulp.
10. Will create a competitive environment
11. Will drives reliable market pricing
12. Will maintain a reliable history for future comparison
13. Will educate your suppliers as to how retailers wish to procure products
14. Supplier training eliminates questions
15. Will improve your product specifications
16. Will improve negotiations.
17. Will improve your carbon footprint
18. Will provide a simple award of business process
19. Will free up your peoples time for other tasks
20. Works for procurement of all product categories

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

As always, we  look forward to  and appreciate your comments.

Compared to other industries, the retail industry has always suffered from low margins and resulting low profitability. With cost of goods generally between sixty five and eighty percent dependant on the sub vertical, the answer to what categories to source first should be all of them.

?Unfortunately retail places much less of their spend under the management of these types of tools than any other industry. In fact in the mid to lower tier retail markets these tools are almost non existent.

Reality would dictate that retailers should keep an open mind and let a detailed discovery process determine the right categories and the timing. It may help to use a third party such as SafeSourcing to conduct the discovery in order to eliminate bias from the process. Bias is usually driven by an attitude of; we have always done things this way. Depending on whether the category of choice is expense related or in the cost of goods, it will have an impact on the bottom line providing all other lines of the P&L perform to plan. This author favors attacking above the line costs, but understands that certain below the line costs such as health care costs and all types of third party services can be very attractive targets.

The following categories all have attractive returns that have averaged over 22% for SafeSourcing customers during 2010 and should not be overlooked during the discovery process.

1.?Seasonal Items?????
2.?Private Label????????
3.?Fuel?????????????????????
4.?Equipment
5.?General Mdse????????
6.?Services?????????????????
7.?Dry Goods????????
8.?Transportation
9.?Seafood????????????????????
10.?Meat?????????????????????????
11.?Maintenance???
12.?Construction
13.?Office Supplies
14.?Pharmacy?
15.?Security????????????
16.?Floral
17.?Packaging??????????????
18.?Commodities?????????
19.?Hardware?????????

A good way to begin is by asking your e-procurement solution provider how they would conduct the discovery process. They will let you know who? they would like you?to make available to them,? what information they would? like access to and finally how they would plan for a sustainable process moving forward.

We look forward to and appreciate your comments.

The reason for the train ride analogy is that one area we look at when trying to track the economy is the transportation sector and it associated costs. A few of the areas worth looking at are.

1.?The amount of product moved which is normally referred to as tonnage.
2.?The amount of air cargo shipped in and out of major airports.
3.?The amount of non travel volume increase rail shipments.
4.?The increase in trucking volume.

Most of these indicators are up according to an article in the Sunday September 12th issue of the Arizona Republic titled “Economy on the Move” by Betty Beard.

Maybe before you look at the products you are shipping you should look at shipping itself. Some questions to ask that might lead in the direction a decision.

1.?Are you doing all of your shipping using a 3PL?
2.?Are you leasing warehouse space?
3.?Do you have your own fleet of trucks?
4.?What are your current diesel costs?
5.?How old are the trucks in your fleet?
6.?Do you own or lease your warehouse equipment.

The good news is that once companies start to build their volumes again they also begin to look more aggressively for new business. All of the above areas are open for negotiation and have been sourced by SafeSourcing using low cost e-procurement tools during the last 12 months at great savings for our customers. Maybe you should get on the train. Maybe you should have already been on it.

We look forward to and appreciate your comments.