Archive for the ‘Sourcing Strategy’ Category

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Why some retail companies are not successful with e-negotiation programs or actually most programs they implement.

Friday, April 30th, 2010

Most companies understand that lowering their cost of goods and services provides the greatest potential benefit or impact to their bottom line. However they face significant roadblocks in doing. At this point, one might ask why some retail companies succeed while others continue to implement program after program with no ongoing measurable benefit. As mentioned in the excerpt above, the first among these is the recognition that effective e-negotiation initiatives like any other successful program requires strong support from executive management. This is important because Retail as an industry lags well behind other industries in utilization rates of e-negotiation tools. So at a minimum in order to get off on the right foot, this means the CEO, CFO, CLO or CPO sponsorship is critical and mostly the first two. Once this directive has been issued, the next step is to identify savings targets across all corporate spend categories. Once these targets are identified and ranked, a category specific attack plan can be developed that best maximizes savings opportunities.

It is important to note, that savings alone does not create a successful e-negotiation plan. What can not be sacrificed in the name of cost reduction are quality, safety improvement and environmental support programs that enforce your Corporate Social Responsibility (CSR) goals.
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A key challenge for any procurement organization directed to implement e-negotiation tools across all of their unique spend categories, is to not over complicate the process into something that you can?t maintain. At a high level, the following steps will insure that you are headed down the right path.

1.?Indentify business owners
2.?Identify all spend opportunities by owner
3.?Consolidate spends into a total corporate view
4.?Aggregate like categories
5.?Rank spend by category and owner
6.?Develop a total company strategy
7.?Research and Source additional qualified suppliers
8.?Collect detailed specifications
9.?Prioritize events based on spend and Importance
10.?Let your solution provider do their job
11.?Hold e-negotiation events
12.?Negotiate final terms
13.?Award of business
14.?Contract completion
15.?Results Analysis

Most quality e-procurement solution providers have well developed e-negotiation strategy and plan templates that will aid you in implementing your best implementation while maintaining quality and supporting your CSR initiatives.

We look forward to and appreciate your comments.

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Do you pay attention to the commodity markets?

Wednesday, April 28th, 2010

Let?s suppose you are planning your strategy to buy egg products such as whole eggs or liquid eggs or egg mixes. The first question you need to resolve is what makes up the largest cost in the egg farming process? To provide a short answer, it is feed. The follow up question to this should be what type of grain makes up the feed? Again a short answer is corn. Resultantly these two questions should lead to the conclusion that keeping track of grain market futures is probably the best bet for locking in your pricing strategy depending on the length of your contract. As an example, with this inforamtion you might insert escalator / deescalator language in your contract based on the market price of grain at the time you negotiated your pricing.

The same story is true for all products based on the raw materials that make up the majority of the particular finished good. It may be a paper pulp based product, a plastics based product a steel based product a petroleum based product or many other raw goods. All of these commodities can be monitored.

Now you need to determine where to find this type of information. At SafeSourcing, one source we use is the CME Group which includes the Chicago Board of Trade. For our egg market example there is also another tool available that can also be useful which looks at the average weekly price of egg products by region of the country. Using the two together is normally your best bet to build a solid strategy.

The previously mentioned CME Group serves the risk management needs of customers around the globe.? They? provide the widest range of benchmark futures and options products available on any exchange, covering all major asset classes, including interest rates, equities, FX, commodities, and alternative investments such as weather and real estate.

If you are not watching the markets that drive the pricing of the products you buy, you may make some significant mistakes that could negatively impact your financial plan down the road.

We look forward to and appreciate your comments.

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Hey retailers; how green are your suppliers? You can not manage something that you do not measure.

Tuesday, April 27th, 2010

When we think about safety and eco standards relative to our supplier partners, I honestly believe that retailers say quietly to themselves; how are we supposed to monitor this with everything else we have to deal with in procuring products?

This issue becomes more complex when you consider that data may be required from your organization relative to your existing suppliers, data from your supplier as to their own interpretation of their adherence and practice and finally other external data that neither organization may have.

Reflecting on safety, the question that retailers should ask all suppliers old or new is pretty simple. What certifications do you carry relative to food safety such as Safe Quality Foods (SQF), Global Food Safety Initiative (GFSI), American Humane Certified and others? Another area to question should be regarding USDA and FDA inspection history.

Although Green Initiatives fall into the social consciousness area of a company, there are a variety of questions that can be asked in this area as well such as Green Seal, Eco-logo and Green Star certifications and participation in other partnerships that are environmentally focused.

A source that may make it easier for retailers would be to rely on their e-procurement solutions providers for this data if the provider has it included in their portfolio such as a supplier database. E-procurement specification templates can act as a form of scorecard for existing suppliers and potential news sources of supply if they are used as a repository for database queries relative to the above subject matter. This can become a type of automated RFI process which can save retailers a lot effort when trying to find additional sources of supply or when trying to drive cost down with existing suppliers. These data may also help to protect retailers from harmful litigation when products end up not being as safe as promised.

Can your e-procurement solutions provider provide these types of data on demand as a normal byproduct of your standard e-procurement process?

We look forward to and appreciate your comments.

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What’s on your e- procurement tool belt? Tool belts should make your job simpler.

Monday, April 26th, 2010

There are all sorts of shiny new belts in every store. Don’t get caught up with flashy features that you will never use or forget how to use because you will end up defaulting to doing things the same way you have been for years

The SafeSourcing e-procurement tool belt is simple and easy to use.

A procurement intern can build an e-negotiation event the very first time they look at our tools. If they don’t understand certain procurement terminologies they can enter the term into the SafeSourcing Wiki without ever leaving the website. If you would like to converse with other procurement professionals about a variety of subjects such as index pricing, just log in to Sourcebook it’s easier to use than traditional social network sites and has many of the same features. You can create a group or hold an open threaded conversation with hundreds of other procurement professionals. If you are looking for new sources of supply, you can request information sorted by dozens of criteria including proximity to a particular zip code, category, sic code etc. While all this is going on alerts from more than thirty sources like the FDA, USDA and OU provide you with up to the minute industry alerts on safety and environmental related issues. Are you looking for product specifications?  Just click on the SafeSourceIt template library. Want to start a contract after you have awarded business from an e-negotiation event, simply click on SafeContract to view templates and setup tracking.

You can also read this blog daily and pass the useful inforamtion on to a friend very easily.

We constantly hear from our customers how simple our tools are to use. What are you waiting for; get your pants of the ground with the Safesourcing e-procurement tool belt.

We look forward to and appreciate your comments.

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What?s on your e- procurement tool belt? Tool belts should make your job simpler.

Monday, April 26th, 2010

There are all sorts of shiny new belts in every store. Don?t get caught up with flashy features that you will never use or forget how to use because you will end up defaulting to doing things the same way you have been for years

The SafeSourcing e-procurement tool belt is simple and easy to use.

A procurement intern can build an e-negotiation event the very first time they look at our tools. If they don?t understand certain procurement terminologies they can enter the term into the SafeSourcing Wiki without ever leaving the website. If you would like to converse with other procurement professionals about a variety of subjects such as index pricing, just log in to Sourcebook it?s easier to use than traditional social network sites and has many of the same features. You can create a group or hold an open threaded conversation with hundreds of other procurement professionals. If you are looking for new sources of supply, you can request information sorted by dozens of criteria including proximity to a particular zip code, category, sic code etc. While all this is going on alerts from more than thirty sources like the FDA, USDA and OU provide you with up to the minute industry alerts on safety and environmental related issues. Are you looking for product specifications?? Just click on the SafeSourceIt template library. Want to start a contract after you have awarded business from an e-negotiation event, simply click on SafeContract to view templates and setup tracking.

You can also read this blog daily and pass the useful inforamtion on to a friend very easily.

We constantly hear from our customers how simple our tools are to use. What are you waiting for; get your pants of the ground with the Safesourcing e-procurement tool belt.

We look forward to and appreciate your comments.

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What are we discussing when we speak or write about sustainable procurement?

Wednesday, April 14th, 2010

I have quite often written about what is required to build a sustainable process in e.negotiation or e.procurement. I have also posted quite often on the subject of Sustainable Procurement. To that end I offer the following.

According to Wikipedia, Sustainable procurement which is also called green procurement is a spending and investment process typically associated with public policy, although it is equally applicable to the private sector. Companies that practice sustainable procurement look well beyond cost only benefits using more intrinsic measures that include society and a broader view of the world.

Often company?s focused on sustainability measure their results by Triple-bottom-line accounting or TPL which is a process by which companies can measure the economic, social and environmental performance of a project or a business. This method of assessment aims for synergy among these three aspects rather than compromise or trade-offs among them.

We look forward to and appreciate your comments.

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Understanding the complexity of contracts and their lifecycles.

Tuesday, April 13th, 2010

Contract Management is the management of contracts with customers, vendors, partners, or employees. Contract management includes negotiating the terms and conditions in contracts and ensuring compliance with the terms and conditions, as well as documenting and agreeing upon any changes that may arise during its implementation or execution.

Contract Management or (CM) can be summarized as the process of systematically and efficiently managing contract creating, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk.

A recent study found that 42% of enterprises indicated that the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks. In addition, nearly 65% of enterprises report that contract lifecycle management (CLM) has improved exposure to financial and legal risk. Common commercial contracts include employment letters, sales invoices, purchase orders, and utility contracts. Complex contracts are often necessary for construction projects, goods or services that are highly regulated, goods or services with detailed technical specifications, intellectual property (IP) agreements.
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A significant problem with the life cycle of contracts today particularly in the retail space is a process called evergreening by which a contract is renewed automatically, often with less favorable terms. These evergreen contracts between two parties will automatically renew after the completion of the contract period. This will occur until the agreement is cancelled by either party.? Without a system in place to monitor or manage contracts, evergreening can add unnecessary costs to businesses, often for millions of dollars as well as damage ongoing relationships between suppliers and buying organizations.

Ask you solutions provider how they can help you in this area.

We look forward to and appreciate your comments.

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If I save and you save shouldn’t we all save?

Monday, April 12th, 2010

Historically this author has heard the buzz phrase that this is a” win win situation” far too often because far to little thought is put in to what it should really mean. As such when I do hear it, it makes me want to puke. What we should be doing is focusing on win-win-win relationship in the supplier-buyer-consumer supply chain model.

E-negotiation tools offer benefits to both suppliers and hosting retail companies which should also provide a benefit to consumers if the retailer and supplier are savvy enough to figure it out. Some but not all to consider follow.

1. Suppliers have an opportunity to bid on business they might otherwise not know about.
2. Forces retailers to formalize their specifications for further use.
3. Retailers are exposed to far more sources of supply than they were previously aware of.
4. Focuses the buyer-seller relationship on a fair trade approach to conducting business
5. The best total solution based on more than just price generally rises to the top.
6. Focuses both suppliers and buyers on reducing their net landed costs for products and services.
7. Unbundles costs to reveal and eliminate hidden costs that provide little or no value
8. Creates a competitive and balanced marketplace.
9. Offers a lesson that in cost cutting those suppliers should use with their raw material suppliers.
10. Collectively provides an opportunity for improved margins and earnings
11. Provides a tool to offer products to consumers that are of better quality, safer and at a lower price.

If this is not win-win-win, someone is not paying attention. Even though I still don’t like the buzz word.

We look forward to and appreciate your comments.

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If I save and you save shouldn?t we all save?

Monday, April 12th, 2010

Historically this author has heard the buzz phrase that this is a? win win situation? far too often because far to little thought is put in to what it should really mean. As such when I do hear it, it makes me want to puke. What we should be doing is focusing on win-win-win relationship in the supplier-buyer-consumer supply chain model.

E-negotiation tools offer benefits to both suppliers and hosting retail companies which should also provide a benefit to consumers if the retailer and supplier are savvy enough to figure it out. Some but not all to consider follow.

1.?Suppliers have an opportunity to bid on business they might otherwise not know about.
2.?Forces retailers to formalize their specifications for further use.
3.?Retailers are exposed to far more sources of supply than they were previously aware of.
4.?Focuses the buyer-seller relationship on a fair trade approach to conducting business
5.?The best total solution based on more than just price generally rises to the top.
6.?Focuses both suppliers and buyers on reducing their net landed costs for products and services.
7.?Unbundles costs to reveal and eliminate hidden costs that provide little or no value
8.?Creates a competitive and balanced marketplace.
9.?Offers a lesson that in cost cutting those suppliers should use with their raw material suppliers.
10.?Collectively provides an opportunity for improved margins and earnings
11.?Provides a tool to offer products to consumers that are of better quality, safer and at a lower price.

If this is not win-win-win, someone is not paying attention. Even though I still don?t like the buzz word.

We look forward to and appreciate your comments.

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There are a number of places from which procurement professionals can collect or solicit your RFI data.

Thursday, April 8th, 2010

According to Wikipedia and others a Request for Information (RFI) is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes.

A Request for Information (RFI) is primarily used to gather information to help companies make a decision on what steps to take next. RFI?s are therefore most often the first stage in the procurement process particularly with new sources of supply. They are used in combination with: Requests for Quote (RFQ), Requests for Tender (RFT), and Requests for Proposal (RFP). In addition to gathering basic information, an RFI is often used as a solicitation sent to a broad base of potential suppliers for the purpose of preparing a supplier?s thought process in preparing for a Request for Proposal (RFP), Request for Tender (RFT) in the government sector, or a Request for Proposal (RFP).

Much of the data required for an RFI is generally available and can be found on company websites, U.S. Security and Exchange Commission (SEC) filings for publicly traded companies in their Edgar system, industry guides from companies like Trade Dimensions, or from sources like Dun and Bradstreet.

The challenge for most companies is that they do not have the necessary resources to complete this research. Therefore providers of supplier data should be able to make this data available in templates that companies can begin with. Simple data should always be available in any database as to Company Name, Annual Sales, Product category expertise, contact information, e-procurement experience and product specifications. This data should be easily exportable to a variety of formats such as MSFT Excel.

A simple request of your e-procurement supplier should get you well on your way to completed RFI?s that lead to quality RFP?s and RFQ?s without spending a lot of your valuable time on basic research. If they do not, we?d be glad to hear from you.

We ?look forward to and appreciate?your comments

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