Archive for the ‘Sourcing Strategy’ Category

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Social Media and a New Year

Monday, December 19th, 2011

Todays post is by Mark Davis Vice President of Operations and CTO at SafeSourcing.

With the influence of social media like Twitter, Facebook and LinkeIn? continuing to grow, how do you plan on using them for your business in 2012?

This past year has seen many new and sometimes alarming trends worldwide at every level and in every industry.? Few of those trends saw the impact and influence that social media channels had in 2011.

As with any new technology or tool, misuse can cause harm as we saw with some Twitter and Facebook mishaps, however those same tools, when used as designed, can create a benefit that can far outweigh the potential downside.? For many businesses the use of these tools would be embraced if they just understood more about them and the potential benefits.?

Today?s blog will take a look at a few of the aspects of social media and how they can be leveraged to help your business.

What?s Happening NOW? ? It used to be that there were very traditional methods that worked for decades to communicate what is happening with your company.? Press releases were the strongest methods because they told the story in a way that made it news, and so the story respected.? With time the process for making this happen, making it ?news? and getting it picked up by a newspaper or magazine began to transition into easier regular updates to a company website or possibly a blast email.?

With today?s social media tools such as Facebook or more fittingly Twitter, quick, snapshot, text-message updates can be sent at any time, about anything the company does in a way that can be instantly ?followed? by thousands of people immediately.? The challenge is having a staff or partner that is current enough with the new channels to make the messages short enough to be digested but relevant enough to valuable.? The more frequently the messages are produced, the greater following you will develop.?

Who?s Talking About Us ? Instant feedback is another valuable characteristic of the social media channels.? Whether by Blog, by Tweet or by Status Update the whole social network world has the capability to instantly let you know what it thinks of your message, product, service or company.? Having this feedback is terrific when it validates you are heading in the right direction, but even more importantly, it lets you know when you are NOT, quickly enough in most cases to change your course.? Knowing what people have to say about your company can be some of the most valuable information these channels can provide.

?Like? Us? ? ?Like? and ?unlike? are words that in the past few years have hit the mainstream spotlight in ways they never have before.? These seemingly simple concepts made popular by Facebook for people to connect to businesses, people or concepts that they like is the one of the most important features of virtually all social media channels; FOCUS.? No longer are you blasting your messages out to groups of people you ?think? will find your message valuable.? Now you have the peace of mind to know that your messages are going to people that are interested in what you have to say.? Those people are connected to other people who are also likely to have interest in your company, product or service and as a result will also hear what you have to say.? This connectivity; these links; this network is why the technology has become so powerful.

This just barely scratches the surface of what can be achieved with these new channels of communicating to your current and potential customers but hopefully is still a useful beginning of seeing where the value lies.

For more information finding companies that can help you with developing your strategy for social media, please contact a SafeSourcing Customer Service Representative.??

We look forward to your comments.

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Part III of III. There are all types of reverse auctions.

Friday, December 16th, 2011

I like these types of words. Vickrey has a certain ring to it doesn?t it? In fact there are so many types of reverse auctions that we can?t deal with them all in a single blog. Some of the other types beyond the reserve price auction we have already discussed in this series and the Vickrey we will discuss today are English Auctions Yankee Auctions, Dutch Auctions and many more. Each type of auction evolved to be used for different type of purchasing.

I like the premise behind the Vickrey auction because of the gaming discipline that psychologically encourages bidders to keep fishing or playing. To this author what is important in today?s e-procurement platforms is that all features of all auction types ought to be available for use within a single event. By this, I mean we should be able to use all features of any auction type within a single event. An example might be using deciles, market baskets and units as a framework for a single event and have the flexibility to apply any feature such as reserves, ranking, indices, extensions and any other feature to each as well as each line item within an area. This flexibility drives the best possible savings for the host within one event.

Now back to the Vickrey.

According to Wiktionary the Vickrey reverse auction is named after a Canadian professor of economics named William Vickrey (1914-1996) who was also a Nobel laureate.? Vickrey’s paper, Counterspeculation, auctions and competitive sealed tenders, was the first of its kind using the tools of game theory to explain the dynamics of auctions. Any one that truly understand the magic of a reverse auction understands that the same type of psychology that drives gaming in a Casino drives the dynamics of a reverse auction.

Because there are so many types of reverse auctions it is important to develop an individual strategy for each category that you decide to take to market. Specifically to the opening question, a Vickrey auction allows for selling single items where the lowest bidder sells the item at the price offered by the second lowest bidder.

Now try and figure out how you would implement this strategy. Would you use ranking? If so, what impact might it have?

We look forward to and appreciate your comments.

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Unbundling the Bundle

Monday, December 5th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

As I was watching football this weekend I paid special attention to a commercial by a leading Voice-Over-IP company who showed a couple getting robbed of everything including the kitchen sink to symbolize the hidden charges they were getting hit with from their current phone company “bundle”. With a message asking why consumers don’t unbundle their services, the same question could be asked of companies across the globe on why they continue to receive invoices for thousands of dollars with only one line item to go with it and no detail into what that bundle consists of.

Today we will be taking a look at some of the disadvantages when taking the “bundled” approach with any of your services. 

Unknown charges – One of the biggest problems with bundles is that you don’t know exactly what you are paying for.  Vendors often state the benefit of the bundle is that you get discounts for buying more features or services together.  In reality, changes to any aspect of your bundle are at the mercy of your vendors because of the lack of detail you are seeing.  Anything about your bundle that could save you money due to vendor improvements or process changes are difficult to recognize due to the lack of your visibility into what you are paying.

Comparing vendors – As inevitably happens in the sourcing world, the time will come when vendor offerings need to be compared against the market to ensure competitive pricing.  Bundles make this difficult to do because of the lack vision into what is being paid for everything.  Without these details there is no vision into where the incumbent is hirer or lower than other vendors on the market making your negotiations on those pieces almost impossible. 

Multi-Award issues – Not every procurement project will lend itself to being awarded to more than one vendor (i.e. services vs. equipment), but without the breakdown of what is being paid for in a “bundle”, the potential to award pieces to more than one vendor, and in the process getting greater savings, becomes extremely difficult.  Whether or not multiple vendors are used, having the vision into what each piece of your bundle costs is an important decision-making tool for the procurement team to have. 

Most bundles are designed and presented in a way to save money for the customer, but the danger is when that bundle is actually being used to hide fees, charges and potential savings under a one line item payment.  For more information on the bundles you are paying for and ways to examine whether unbundling those services is right for your company, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments. 

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We plan to launch a procurement department. Now What?

Thursday, December 1st, 2011

The following twenty bullet points are certainly not a complete list, but are areas that should be considered for any supply chain re-structuring including what is needed to drive success. These points should help frame your thought process and get you headed in the right direction.

1. Request CEO and CFO support.
2. Empower the Department.
3. Structure and staff the department for success. Not just one person.
4. Plan a detailed review of all contracts.
5. Plan a detailed review of all suppliers.?
6. Improve the performance of all suppliers or replace them.
7. Find a way to gain access to additional sources of supply.
8. Improve your view of all spend categories. Technology, Technology,? Technology.
9. Review any off shore and near shore sourcing.
10. Meet with all departments that controlled historical spend.
11. Review all sourcing methods being used by others today.
12. Review all Environmental strategies
13. Review all Product Safety strategies
14. Collect or create a product specification library
15. Conduct detailed category discovery session
16. Review lower cost SaaS oriented solutions that can ramp up quickly.
17. Develop and education plan.
18. Outline a plan of where you will be in 90 days, Six months and a Year.
19. Develop short and long terms goals that support your plan.
20. Build a department that delivers zero incremental cost to the organization.

As you use the above list and grow it, it is important to remember that the job of a procurement management leader is to think outside of the box and educate while looking for innovative ways to do things better, faster and at a lower cost. And to hopefully create an environment that will inspire co-workers while doing that.

We look forward to and appreciate your comments.

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To Award or Not to Award…..

Monday, November 28th, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

The process of negotiating deals with vendors has long been seen as one in which the customer “beats up” the vendor over price; sending the message that price/cost is the most important thing involved in making a decision about who you award business to.  Today’s economy would tend to back this mindset, however, in evaluating based on price alone you could be doing your company a great disservice.  Today’s blog is going to focus on a few areas to keep in the forefront as you make your purchasing decisions.

Apples to Apples – Whether by Request for Proposal, Reverse Auction, or just placing phone calls to gather pricing, the end result of your comparative research must ensure that you are looking at the same offering from each vendor (or the nearest comparison possible).  Even in the case when shopping a commodity-type product such as computer hardware there are many chances for the vendor to increase their value with other services they offer.  When comparing vendors make sure the products, services, extra offerings, etc. are being evaluated evenly. 

Reputation  – Although it would seem to go without saying, many companies will take the lowest bid of an apples to apples comparison without finding out much about who they are about to spend their money with.  This is seldom the type of practice people would do with their own personal purchases and yet there are many companies who are so focused on price that they fail to do the research to make sure the vendor they are about to select has a proven track record of performance.

Cost of Change – Assuming that you end up finding a new vendor to do business with, one of the things that must be considered early on in the discovery process is the cost of change.  Before you ever make a phone call, send out an RFI, talk to a vendor; the business needs to determine what the costs of switching vendors will be.  Knowing this in advance will allow you to set the stage with new vendors you are talking with as negotiation points and will possibly allow you  to possibly eliminate those costs should you ever have to change again.  There  are multiple levels of cost for switching vendors and you should know each before starting the process of looking for potential new suppliers.

Policy Changes –The final area that should be examined in the process of evaluating your vendors is the policies surrounding the goods or services being looked at.  Some companies have policies developed long ago and for good reasons that dictate the companies they can do business with.  Some of these policies (such as ones relating to specific geography) may need to be examined so that companies that can provide good value to your company can still be considered for your business.

For more information on gathering information and pricing from vendors and assistance with the evaluation of that information, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

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To Award or Not to Award?..

Monday, November 28th, 2011

Today?s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

The process of negotiating deals with vendors has long been seen as one in which the customer ?beats up? the vendor over price; sending the message that price/cost is the most important thing involved in making a decision about who you award business to.? Today?s economy would tend to back this mindset, however, in evaluating based on price alone you could be doing your company a great disservice.? Today?s blog is going to focus on a few areas to keep in the forefront as you make your purchasing decisions.

Apples to Apples ? Whether by Request for Proposal, Reverse Auction, or just placing phone calls to gather pricing, the end result of your comparative research must ensure that you are looking at the same offering from each vendor (or the nearest comparison possible).? Even in the case when shopping a commodity-type product such as computer hardware there are many chances for the vendor to increase their value with other services they offer.? When comparing vendors make sure the products, services, extra offerings, etc. are being evaluated evenly.?

Reputation? ? Although it would seem to go without saying, many companies will take the lowest bid of an apples to apples comparison without finding out much about who they are about to spend their money with.? This is seldom the type of practice people would do with their own personal purchases and yet there are many companies who are so focused on price that they fail to do the research to make sure the vendor they are about to select has a proven track record of performance.

Cost of Change ? Assuming that you end up finding a new vendor to do business with, one of the things that must be considered early on in the discovery process is the cost of change.? Before you ever make a phone call, send out an RFI, talk to a vendor; the business needs to determine what the costs of switching vendors will be.? Knowing this in advance will allow you to set the stage with new vendors you are talking with as negotiation points and will possibly allow you? to possibly eliminate those costs should you ever have to change again.? There? are multiple levels of cost for switching vendors and you should know each before starting the process of looking for potential new suppliers.

Policy Changes ?The final area that should be examined in the process of evaluating your vendors is the policies surrounding the goods or services being looked at.? Some companies have policies developed long ago and for good reasons that dictate the companies they can do business with.? Some of these policies (such as ones relating to specific geography) may need to be examined so that companies that can provide good value to your company can still be considered for your business.

For more information on gathering information and pricing from vendors and assistance with the evaluation of that information, please contact a SafeSourcing Customer Service Representative.??

We look forward to your comments.

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The Most Expensive Turkey Day

Wednesday, November 23rd, 2011

Thanksgiving 2011 is one of the most expensive, if not the most expensive, ever.? How can this be? According to a report from ABC News, travel and food costs are at an all-time high.? Hotels are up 5% this year, turkey is up $3, and even pumpkin pie is up in price by $0.41!? The culprit for these increases: rising gas prices, which are up about $0.50 per gallon compared to last year?? If gas prices are affecting Turkey Day, what about Black Friday and Cyber Monday?

Black Friday is notoriously known as the busiest and most lucrative day for retailers.? On its heels is Cyber Monday which has become almost equally as profitable, both of which follow one of the most expensive holidays this year.??? Prices for those must-have gifts inevitably are higher this year as well as gas prices have inflicted higher cost burdens for the retailer, who inevitably impose those cost increases to the consumer.? Although it may be a little late to prepare, this expensive turkey day provides a lesson in preparation for the year to come.

The consumer has numerous options to beat the rising costs.? Purchase non-perishable goods such as pumpkin and soups early in the year to avoid High Holiday costs.? Traveling on Thanksgiving?? Book flights ahead of time, and if possible travel on Thanksgiving, or postpone celebrations to the week after which will provide lower fares.

For the retailer, preparation and consultation with your strategic sourcing partner is key.? Following a similar plan as the consumer, purchase excess non-perishable goods earlier in the year.? Products and gifts that you know will be successful should also be bought in large quantities in advance.? This will not only help your wallet, but it will also allow you to have remaining inventory once Black Friday and Cyber Monday hit.? Beyond purchasing in advance, why not incorporate an escalator/de-escalator clause into your contracts to ensure you are not as heavily affected by the price inflation of oil.

Even though 2011 is one of the most expensive years to celebrate Thanksgiving, you can find alternatives to paying the higher prices.? Contact your strategic sourcing partner today so you can begin developing a plan for a Happy 2012.

For more information on SafeSourcing and how we can assist with this process, please contact a SafeSourcing ?Customer Service Representative for more information.

We look forward to and appreciate your comments.

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“Now is the time for construction savings”

Tuesday, November 22nd, 2011

Today’s post is by David Wenig; Senior Account Manager at SafeSourcing.

Balancing high priority procurement projects can be difficult due to some very complex factors including commodity indices, urgency, safety programs, corporate initiatives and more. In an effort to help ease the process a bit, I would like to share a bit of category advice.

Last night, over dinner, I had a conversation with a contractor that affirmed a concept that I already knew to be true. He said that he is going into a slow period of the year for contractors. Beginning around Thanksgiving, the work available for contractors becomes scarce.

This year, around the 3rd of January, my phone began ringing and ringing. On the other end were the contractors with whom I had worked throughout the year on procurement projects for our customers. The message was the same; they all wanted to know if there were any new projects that were ready to go out to bid.

What this means for retailers is that there is no time like the present to source your upcoming construction projects. From a strategic standpoint, the timing is at its best and savings will follow. Take a look at your project lists and contact your strategic sourcing partner to fast track these projects for completion as soon as possible.

If you are the type of person who prefers facts to conjecture, I will leave you with this example. In a long-running project in the construction category for a customer, we held bids for general contractors several times per month. The bids that were completed in January and February showed, on average, 75% more savings than the overall average savings for the project as a whole.

We look forward to and appreciate your comments.

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The Future of the Paper Invoice?

Monday, November 21st, 2011

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

A few weeks ago, in a move to support the President’s “Campaign to Cut Waste” initiative, the U.S. Department of Treasury mandated that a new Internet Payment Platform will be up and running in 2012 all commercial vendors being required to submit their invoices electronically in 2013.  This trend is being mirrored by companies all over the world as the cost of generating and mailing paper invoices increases at an alarming rate. 

Today we will look at some of the factors to keep in mind when considering your own plans to migrate away from paper invoices and toward an electronic platform.

One solution or two – The first thing that the business needs to do is determine the scope of the transition they plan to make.  The obvious first step is to examine the invoices you send out because of the internal costs associated with generating and mailing them.  Other companies may also have new corporate initiatives to become more “green” and choose to incorporate the invoices they receive into the e-invoicing project right from the start.  Whether you keep these two pieces apart or together finding a solution provider that can handle them both is an important first step. 

Develop a transition plan – Once the scope of your project has been established, the transition plan the business can feel comfortable with must be developed.  Invoicing is such a sensitive process for businesses and the way the process is modified, for any reason, is one which has great importance at the executive levels.  The majority of successful transitions to electronic invoices include plans to gradually phase out the paper statements a portion at a time.  Whether that is 20% per quarter, 10% per month, or some other method, the transition plan will be as important as the tools you choose to implement.  An additional piece to this step will also be to determine a total compliance level that the business is willing to accept as some customers and vendors may not be able to handle an electronic invoicing process.

Communication with customers and vendors – As with any change that involves an embracing of technological processes and equipment, the transition to e-invoicing needs to be communicated to your customers and vendors clearly and with a well-defined timeline for what the transition means to them.  It will be important that all customers and vendors understand the reasoning behind your transition and that it will be a move they will eventually need to make.  The recommended first step would be communicate the plan and determine which of your customers and vendors that are willing to voluntarily make the move to electronic invoices immediately.  After these are moved it will be time to implement the transition plan for the remainder of the group that you have set as a result of the step above.    

For more information on finding the right solution partners to assist you with your transition to e-invoicing, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

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Watch out that your spend cube does not become a spend rock!

Friday, November 18th, 2011

Just what is a spend cube?  In it’s most simple form it is a data set that includes information that when analyzed as a whole provides a better picture of your spend universe and helps to indentify categories or products and services that should go to market as well as when they should. Because it includes vendor data, commodity information and specifics relative to the related cost center being impacted, spend cubes are very complex.

Unfortunately just like the ices cubes you order in a drink (on the rocks please) a spend cube can deteriorate over time based on a number of factors. Probably the primary reason is that the originating data is not complete or scrubbed properly in the first place. This is kind of a one bad apple spoils the whole bunch issue or the wrong data bumping into the wrong data. Another reason may be that you don’t have all of the data that you need and therefore the result sets are compromised or left to conjecture. And then there is the analyst interpretation of the data and to this author that is really the most important part once you get the data sources right. This person or group of persons needs to know their stuff (industry and products) in order for the data to be interpreted properly. It’s pretty easy to read a GL and determine what suppliers you have been spending the most with. It’s an entirely different thing to understand what the market for a commodity that impacts that particular spend was during the last contract versus what it is now and how it is trending for the future.

Ask your solutions provider who will be interpreting your data and what data they will be interpreting so that your cubes stay afloat and don’t end up sinking you like a rock.

We look forward to and appreciate your comments. 

Ron Southard

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