Archive for the ‘Sourcing Strategy’ Category

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Retail buying organizations are you prepared to survive an audit?

Friday, September 24th, 2010

Although the audit process can be a good thing because it holds companies and individuals accountable, to often they are a result of something that is already broken and we are looking for a reason as to why. Or, someone to blame.

Audits can generally be broken down into the three classes that follow.

1. Significant Risk – This is non compliance that generally results in a major financial loss to the company
2. Moderate Risk – This is non compliance that generally results in a negative impact to the company
3. Minor Risk – This is a non compliant act that generally  results in a negative impact to an existing process within a company

From a procurement perspective this can include all items required during the bid and award process. Such as .

1. Purchase Orders tied to contract quotes
1. Delivery T&C’s
2. Definition of contract terms
4. Bidding process used
5. Vendor notification of award
6. Corporate standards adherence
7. Signature authority
8. Termination Clauses
9. Training adherence

The above list is potentially endless. The point is if you are buying products or services for your company, you need to be able to withstand a vigorous internal audit so that your auditors can withstand a vigorous external audit.

Is your procurement team prepared?

We look forward to and appreciate your comments.

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Join the argument. Strategic Sourcing alive or dead? Part II of II.

Monday, September 20th, 2010

In Part I of this blog we posited that in order for a strategic plan to be successful there are certain elements organizations need to know. I?ll just list a few as an example.

1.?Your own company.
2.?Your Industry. Example: Retail.
3.?Your vertical within your industry.
4.?Your competition. Be careful.
5.?Your category.
6.?Your product.

So let?s assume that you have an e-procurement supplier that indicates they have great strategic sourcing tools that can evaluate your data and help you strategically build your sourcing plan which as a result would support your company strategic plan.

Let?s assume a tier two supermarket chain wanted to evaluate their total grocery category. Let?s just look at bottled water which is a sub category of the total grocery category. The first requirement is that they provide access to their sales and cost data. This may be easier said than done in the lower tier one and tier two markets. What is also required here is access to industry data. Data may indicate that their bottled water sales are 2.5% of their total grocery category, but what is the industry standard for this category? Are they already above the average?? Has their category grown year over year? Have industry category sales?? If they have access to both sets of data they have a start but who is their competition?? Are they comparing themselves to other supermarkets and should they be?? What about C-Stores, Drug-Stores, Liquor Stores and Mass Merchants that are close to their stores and get a share of category sales. Are they aware of these competitors category mix such as number of brands offered or private label offerings? All of this information is required for every category in the total grocery category. If they don?t conduct this analysis how would they begin to know what category to address first? The obvious choice is the category that is most out of norm with the industry average. But will sourcing that category have the best impact on the P&L and earnings.

Once this analysis has been completed, their e-procurement solutions provider should also have data that can guide them as to what month is the best month to source specific categories and what commodity markets are doing currently that may also have an impact on finished products.

After all of this is completed and categories are evaluated, ranked and prioritized they should then look for other elements that are incorporated in their company?s strategic plans such as CSR initiatives that support safety and the environment.

So, is strategic sourcing dead? This author does not believe so. However it is a process involving a lot of work, a lot of data, a lot of analysis and more than just tools in order to result in a strategic sourcing plan that can be implemented, scored and adjusted properly over time.

We look forward to and appreciate your comments.

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Join the argument. Strategic Sourcing alive or dead? Part I of II.

Friday, September 17th, 2010

This author believes that strategic sourcing requires the same elements that any strategic program does in order to be considered strategic. Once these elements are in place within a company it becomes much easier to determine if the program, practices, solutions and tools that support it are strategic in nature.

Most companies, at least most successful or destined to be successful companies have a vision that is supported by a strategic plan and then broken down into a tactical plan. The plan is adjusted and updated over time as it moves along a path of predetermined? goals or milestones that are typically measurements against a pre determined goal. In order for a strategic plan to be successful there are certain elements organizations need to know. I?ll just list a few as an example.

1.?Your own company.
2.?Your Industry. Example: Retail.
3.?Your vertical within your industry.
4.?Your competition. Be careful.
5.?Your category.
6.?Your product.

If you do not know the above like the back of your hand as well as their interaction points, then your strategic plan already has flaws in it and getting organizations within the company to have linkage with the total company strategic plan is also flawed. This model can be applied to the entire company as well as organizations within the company such as the supply chain or procurement.

This author also believes that determining if something is dead has a lot to do with determining if it still has a use. In the retail space in lower tier one and tier two there really have never been any strategic sourcing tools deployed and many of these companies operate on a business as usual format. They may make claims like we are an EDLP company or a Cost Plus company when in fact they are not. They may think that a specific company is their competition when their primary competition comes from a completely different vertical.

If you check back on Monday I?ll delve more deeply into this subject and answer the question in Part II of this post as to whether the subject matter is dead or alive. Then you can make up your own mind.

We look forward to and appreciate your comments.

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Sustainability needs to be a primary focus of all retail procurement leaders.

Wednesday, September 1st, 2010

A recent survey by UN Global Compact and? Accenture releases findings of largest CEO research study on corporate sustainability. According to this survey Chief Executives believe overwhelmingly that Sustainability has become critical to their success, and could be fully embedded into core business within ten years.

According to the survey CEO?s also believe that companies will need to meet the conditions listed below.

1.?Shaping consumer tastes in order to build a stronger market for sustainable products.
2.?Training management, employees and the next generation of leaders to deal with sustainability issues.
3.?Communicating with investors to create a better understanding of the impact of sustainability.
4.?Measuring performance on sustainability ? and explaining the value of business in society.
5.?Working with governments to shape clearer regulation and create a level playing field.

As a procurement leader what can you do in order to be prepared for those questions that may be coming to your desk tomorrow?

1.?Stay educated by seeking sources that offer readily available and fresh content on procurement related sustainability developments.
2.?Make sure that your procurement solution providers are also focused on sustainability.
3.?Ask your procurement solution providers what their environmental support plans are and how to include them in your procurement business plan.
4.?Ask your procurement solution providers what their product safety plans are and how to include them n your procurement business plan.
5.?Ask your procurement solution providers what training programs they can offer to your company in order to educate your associates.

We look forward to and appreciate your comments.

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Sourcing prescription drugs gets easier all of the time.

Wednesday, August 18th, 2010

This was the case years ago, but with the advent of many of the internet based prescription drug sites such as RXlist, Drugs.com and many retailers sites, it is easy to find lists, formulations, directions, dictionaries and generic equivalents. What more could a Pharma buyer ask for. Now all you need to do is use your e-procurement solutions provider to drive your costs down.

According to RXlist, the top twenty prescription drugs in the U.S. are as follows.

1. Lipitor
2. Hydrocodone / Acetaminophen  
3. Hydrocodone / Acetaminophen  
4. Levothyroxine sodium  
5. Amoxicillin  
6. Lisinopril  
7. Nexium  
8. Synthroid  
9. Lexapro
10. Singulair
11. Plavix
12. Simvastatin
13. Hydrochlorothiazide
14. Amlodipine besylate
15. Azithromycin
16. Warfarin sodium
17. Furosemide
18. Azithromycin
19. Levothyroxine sodium
20. Advair Diskus

It’s never been easier to drive down your costs.

We look forward to and appreciate your comments.

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Retailers; if it?s green or safe label it as such. You might find some new customers.

Wednesday, July 21st, 2010

I was reading a great article in yesterday?s USA TODAY titled Furniture to be greener, but pricier? by Jayne O?Donnell. What caught my attention was an insert in the article also by the same author titled Finding ?green? furniture can take some effort. The premise of the insert was that you need to go to company?s websites if you are going to find out what makes up the products they sell as items will not be labeled or the sales people won?t know the answers.

For this author, that is complete whooie or at least should be. If a company of any merit has a set of CSR or Corporate Social Responsibility initiative, they tend to roll them out throughout their company to all employees as a differentiating service. This would certainly include everyone from the buyers who ask their trading partners these tough questions every day to the sales person that ends up selling the product.

However in a less than perfect world research is always helpful. If you do not post this information on your website, you should. If you do not have CSR initiatives, you should. If your sales people don?t know them by heart they should. At the end of the day your customers will have questions and they should.

We look forward to and appreciate your comments

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Retailers; if it’s green or safe label it as such. You might find some new customers.

Wednesday, July 21st, 2010

I was reading a great article in yesterday’s USA TODAY titled Furniture to be greener, but pricier  by Jayne O’Donnell. What caught my attention was an insert in the article also by the same author titled Finding ‘green’ furniture can take some effort. The premise of the insert was that you need to go to company’s websites if you are going to find out what makes up the products they sell as items will not be labeled or the sales people won’t know the answers.

For this author, that is complete whooie or at least should be. If a company of any merit has a set of CSR or Corporate Social Responsibility initiative, they tend to roll them out throughout their company to all employees as a differentiating service. This would certainly include everyone from the buyers who ask their trading partners these tough questions every day to the sales person that ends up selling the product.

However in a less than perfect world research is always helpful. If you do not post this information on your website, you should. If you do not have CSR initiatives, you should. If your sales people don’t know them by heart they should. At the end of the day your customers will have questions and they should.

We look forward to and appreciate your comments

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Retailers; the average price of a basket of groceries is trending up! Are your profits?

Thursday, July 15th, 2010

One thing that news print (I still love newspapers) offers that internet based news does not is the tactile fell of holding the paper open and scanning all items on those two pages quickly. Sometimes you actually find pearls that really bring in to question the logic or understanding of the relationships between seemingly unrelated articles. In data analysis we call these tangential or affinity relationships.

Now back to my original premise. I was reading my local ARIZONA REPUBLIC business section the other day and two articles jumped out at me. The first was titled ?Arizona Grocery prices continue to climb?. It was on the front of the first page in the business section. The second was titled ?Technology helps Valley logistics company to thrive?. It was on the bottom of the second page of the business section right near DILBERT. In this case, that is appropriate.

The first article discussed the fact that prices were rising because of an improving national economy (why?) and higher energy costs (this means fuel). The second article discussed the use of technology to optimize the flow and storage of merchandise within the ground freight industry by selecting the best transportation options.

As I work in this space, I was already thinking (duh) when I saw the title of the two articles. It occurred to me during reading them that the authors could have combined these two articles to come up with something great that might be titled Retailers are finding better ways to keep retail prices flat during an improving economy by using logistics technology. The byline might read something like this. Retailers can improve profit without raising prices and gain market share.

I never would have found these articles on line or had them jump out at me like they did if I did not still read newspapers. Jay Leno always uses news articles in his humor that causes one to think. This is my version. So think about this if you are a retailer. Why do your prices need to rise when the economy improves? The truth is they don?t.

We look forward to and appreciate your comments.

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Retailers; what is your green or sustainable sourcing plan?

Wednesday, July 14th, 2010

Unfortunately, elsewhere is most likely your competition if they want a job in retail procurement.

In a recent USA TODAY article by Trevor Hughes titled More Colleges using green as a selling tool; the author discusses the impact that green programs have on college students deciding where they will attend College or University. It is a safe bet if these students are using this as criteria for selecting where they will spend the next 4 years of their life, that they will also use the same criteria to make their career decisions.

The article goes on to quote results form The Sustainable Endowments Institute survey in 2009 which found that 27% of colleges and universities included sustainability messaging in their admissions process and that in 2010 69% did. That is a 156% increase in one year.

The Sustainable Endowments Institute focuses on areas such as food sourcing, recycling, and energy efficiency.

Quite often when this author asks this question of mid level managers, associates and employees, I just draw a blank stare. If you have this discussion with investors, the eyes just roll and you can see the note caption saying blah, blah, blah.

If you don?t have a plan you can not blame anyone but yourself.

We look forward to and appreciate your comments.

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Retailers do you use or do you even have time to use punch-out software?

Wednesday, June 23rd, 2010

A Punch Out is a feature of e-procurement software applications that makes it possible for buyers to access suppliers Web sites from within the buyer’s solution provider’s procurement application. The buyer leaves their solution providers system and goes to an alternative supplier’s Web-based catalog to find and potentially order products. This is also a good way to conduct research and gather information. A vendor catalog that is enhanced for this process is known as a punch-out catalog.

This author has always felt that this is a good way to buy products that you currently buy from alternative sources, but it does not replace the possible price compression and other benefits of from taking these products through the normal e-RFX process.

Ask your solution provider their opinion on this process.

We look forward to and appreciate your comments.

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