Archive for the ‘Sourcing Strategy’ Category

« Older Entries
Newer Entries »

A procurement lesson! The CPSC issues Guidance on Repairing Homes with Problem Drywall from China.

Monday, April 5th, 2010

Last year I posted on offshore sourcing and the related problem of homes built with drywall from China. Now the CPSC has issued guidance as to what consumers should do. You can bet that this is not the end of this story. The first question I would be asking is who my contractor bought the drywall from in this country.

Inez Tenenbaum of the Consumer Product Safety Commission told the Associated Press, ?We want families to tear it all out and rebuild the interior of their homes, and they need to start this to get their lives started all over again.?

Below are some procurement recommendations:

1. Verify the name and address of the supplier or suppliers and their manufacturing addresses, phone numbers, email addresses and fax number. Conduct a cross-reference search of this information and the company name against other supply chain sites

2. Only deal with a company that has a specific company address and other professionally listed contact information.

3. Place multiple calls to the supplier at their provided contact numbers over a period of time and inquire about their company and the primary contacts. Ask for a management breakdown and to speak with at least two members of senior management.

4. Ask for references in the USA or another developed country that you will be doing business with.

5. Inform the supplier that you will be visiting their location for an office/factory tour. There are a number of third parties that can conduct a background checks on your behalf. These companies also have reference reports available. They are well worth the small associated cost.

6. Never agree to any up front payment without a sample or test of the products to be procured. These pre-shipment inspections are a must for any new supplier. You want to ensure that the goods are of adequate quality before placing or accepting any new products.

We look forward to and appreciate your comments.

Posted in , , , , , ,

Part II of II. Is critical thinking in supplier selection a key to quality and sustainable retail reverse auctions?

Friday, April 2nd, 2010

Continuing from Part I of II Is critical thinking in supplier selection a key to quality and sustainable retail reverse auctions?

The following scenario offers one example as to how the careful management of your suppliers and a little strategic thinking can drive the type of results you desire as well as a long term sustainable process.

Suppliers will almost always not be of the same size. This does not mean however that they are not of the same quality. Smaller vendors that have accepted your invitation will most likely bid early during your event and then drop out after the early rounds. These suppliers will most likely not agree to participate in the future as they consider their chances of winning the business unrealistic. This too is manageable however back to our first premise. Suppliers that finish first or second or your incumbent that may have been replaced will in most cases agree to participate again, but? a lack of new competition will make the auctions less successful.

Thinking more strategically, an apparently logical question might be… If we only have six suppliers available how many should we invite to participate the first time and is more always better over the long run? Should we invite them all? Every company will answer this question differently. When considering the future, do we want successful early events or would we like a continual process improvement that drives continuous savings?

There are several possible solutions to consider. One scenario might be to only invite four participants to your first event. This will create a competitive environment for your reverse auction. After all it only takes two suppliers both interested in your business to drive quality results. Now back to our story. Let?s make the assumption that in twelve months or in the next purchasing cycle when you wish to repeat this auction that the two largest suppliers from the previous event agree to return. You could now invite supplier?s number five and six that were not included in the original auction. You have now created a competitive auction for the second year or purchasing cycle. An additional thought might be to not invite all of the largest suppliers to your first reverse auction, in order to manage the quality of your suppliers for future auctions. This type of critical thinking supports continual process improvement in e-procurement implementations.

We look forward to and appreciate your comments.

Posted in , , , , , , , , ,

Retail spend management basics for e-procurement professionals and knowledge workers.

Wednesday, March 31st, 2010

I meet with buyers or other e-procurement knowledge workers on a regular basis that want to know what categories are the best to select in the short term to prove the benefit of e-procurement or e-negotiation tools. This quite honestly is not a bad approach for pilot selection as it creates an almost sure thing that results in a lot of excitement and the energy to move the process forward within a company.

Quite often before meeting with a new client, I will analyze their annual report and their summary P&L to get a good idea of where the opportunities are hiding that can have quick hit impact. However in order to have long term viability as a way to conduct the business of buying, a more detailed analysis is required. Quite frankly before you can even begin to discuss vendor or supplier selection, management or evaluation this process is critical to long term success.

Key data required to prepare you for this analysis can consist of but is certainly not limited to the following. All of this data is readily available from a variety of industry sources. Quite often the data is a year old but you can bet it is better than anything else your customer may be using today.

1.?Research and accumulate your specific Industry data
2.?Analyze last years P&L
3.?Compare your cost of goods with your Industries averages
4.?Compare your gross margins with you Industry averages
5.?Compare your net earnings with your industry averages
6.?Conduct the same comparisons with selected retailers with whom you compete
7.?Compare your departmental sales and contribution margin results to those of your specific industry.
8.?Look for department level anomalies
9.?Look for specific product anomalies within major and sub departments.
10.?Select top categories that are below plan and outside industry average for cost of goods and margin.
11.?Select top products that are underperforming to industry averages and plan

An example of the above might be to look at the major department of grocery and the major category of pet care then drill down to the sub category of cat and dog products and a list of all accessories. Now look at what products are underperforming to the industry and plan.? Continue your analysis with other underperforming categories.

Ask you e-procurement provider how they can assist you in accomplishing this with their tools.

We look forward to and appreciate your comments.

Posted in , , , ,

Here are twenty-one reasons why all retailers should use E-Procurement tools.

Tuesday, March 30th, 2010

Since this is not Late Night with David Letterman, our list is not ranked in order of importance although many might argue that not much is more important than improved earnings.

1.?Guaranteed to improve net earnings
2.?Guaranteed to improve safety
3.?Guaranteed to improve Corporate Social Responsibility.
4.?Guaranteed new sources of supply
5.?Retail has less spend assigned than any other industry
6.?Streamlines the? procurement process
7.?Holds suppliers accountable to your standards.
8.?Improves quality
9.?Cost avoidance in a volatile market
10.?Creates a competitive environment
11.?Drives reliable market pricing
12.?Maintains a reliable history for future comparison
13.?Educates suppliers as to how retailers wish to procure products
14.?Supplier training eliminates questions
15.?Improved and consistent product specifications
16.?Improved negotiation.
17.?Improve carbon footprint
18.?Simple award of business process
19.?Frees up time for other tasks
20.?Works for procurement of all product categories
21.?Provides a detailed audit trail.

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

We appreciate and look for ward to your comments.

Posted in , , , , , , ,

Here are Ten Steps that procurement professionals can use to insure safer and more eco-friendly procurement.

Monday, March 29th, 2010

1. Be pro-active in driving product safety within your company and also supporting eco-standards in the procurement process that support your companies CSR initiatives.
2.?Pay it forward with all of your trading partners by sharing what you are doing, how you are doing it and asking them what they are doing to support yours or similar initiatives.
3.?Educate your employees and trading partners about common safety standards and guidelines such as the SQF Certificate www.sqfi.com? or ISO 22000.
4.?Educate your employees and trading partners about common eco-standards such as Green- Energy National Standard www.green-e.org or EcoLogo www.ecologo.org.?
5.?Point associates and trading partners to free educational websites such as www.safesourcing.com to use their free SafeSourcing Wiki or the Sourcebook professional social network for procurement professionals.
6.?Only use trading partners that follow your lead.
7.?Train your team to understand and use all available tools that insure supply chain safety such the free daily safety in sourcing blog at www.safesourcing.com? or the low cost SafeSourceIt Supplier Database and Reverse Auction Tools.
8.?Impose a system of measures and controls to monitor performance against clearly defined goals.
9.?Start at the top and engage all levels of your company.
10.?Measure your company?s progress with Triple Bottom Line Accounting or TBL.

We look forward to and appreciate you comments.

Posted in , , , , ,

What does SafeSourcing do in the E-Procurement Space?

Friday, March 26th, 2010

Our SafeSourcing vision is to be the leader in knowledge driven retail e-procurement solutions that drive down costs and improve quality with an additional focus on safety.??? Beyond safety, we also focus on support of the environment which is a top of mind CSR issue within the retail executive suite.

By assigning as little as 10% of their cost of goods or expense related items to these tools a retailer can improve net earnings by up to 100% while also providing their consumers with safer products that support a reduction in the industries carbon footprint.

With SafeSourcing?s innovative e-procurement tools, a buyer can initiate reverse auctions or requests for information using the SafeSourceIt? e-procurement tools for new contract purchases, spot buys, replenishment, aggregation and collaboration with other buying organizations, saving as much as 30% to 40% in the process and then simply drop that data into our SafeContract? contract management solution to eliminate issues such as ever greening which costs the retail industry millions annually. Alerts can then be set that will remind procurement knowledge workers of required actions in the future as they arise.?

To support the above initiatives our SafeSourceIt?? global retail supplier database consisting of more than 380,000 suppliers contains thirty-five unique certification standards that are supported by our best practice initiatives such as GFSI, ISO 22000, Green Seal, ECO-LOGO, Fair Trade, SQF and Certified Humane Raised & Hand-Led to name a few. As our database continues to grow all SafeSourcing participating suppliers are regularly vetted for their support of ours and our retail partner?s socially responsible initiatives including their eco-friendly practices to insure continuity.

We look forward to and appreciate your comments.

Posted in , , , , , , , , , , , ,

OK so YOU have finally decided to stick your toe in the e-procurement water! NOW WHAT?

Thursday, March 25th, 2010

First and foremost to getting this process right is to select a solution provider or partner that knows what they are doing and is willing to hold your hand during the early part of the process. The plan for each company will be somewhat different as we have discussed in a number of previous posts. There is however a general order to things that will offer the best opportunity for success.

1.?You need a strategy
2.?You must complete a detailed discovery
3.?You must understand how to set up events even if done by your provider.
4.?You must have a quality process and extensive database for sourcing suppliers
5.?You must clearly communicate how events will be run or executed to all involved parties
6.?You must review the process for sustainability and adjust as necessary

As mentioned above it is incumbent upon your e-procurement solutions provider to be able to assist you in completing these tasks in a reasonable period of time. You should be checking the background of the team and their leadership that will be assisting you to insure their understanding of the retail industry such as operations, technology, procurement, warehouse management, logistics, transportation, loss prevention, store management and other functional areas of your business that will be sourcing products and services.? Retail is about detail and detail will improve quality, reduce costs and insure success of your new e-procurement process.

We look forward to and appreciate your comments.

Posted in , , , , , , , , ,

Why do we hear that reverse auctions are not as successful the 2nd time around?

Friday, March 19th, 2010

As we discuss this further, one area of commonality they frequently discuss is a lack of new suppliers. Another is the price being too high for the same event that has already been built and will result in lower savings the 2nd and 3rd time around.

A simple focal point to begin a discussion of this issue is the lack of availability or the related benefit of a large retail specific supplier database. However unless we discuss how? retail companies should use this type of data when available is just as important if there is a true desire in growing their percent of spend with e-negotiation tools?

There is a proper way to insure the sustainability of your e-negotiation events going forward. Following these guidelines will also encourage senior management to consider placing more spend under the control of e-negotiation tools and specifically reverse auction tools. Armed with a robust retail supplier database and related tools:

1.?Conduct a detailed category discovery
???? a.?Learn all there is to learn about the way a company conducts their?? business.
???? b.?Walk distribution centers and warehouses
???? c.?Walk an array of stores and understand all formats of the enterprise.
???? d.?Compile a list of all corporate categories
2.?Rank categories by
???? a.?Total spend
???? b.?Importance
???? c.?Sourcing frequency
???? d.?Quality objectives
???? e.?Look for aggregation opportunities.
3.?Conduct supplier discovery
???? a.?Rank suppliers
??????? i.?Size
??????? ii.?Experience
??????? iii.?References
??????? iv.?Environmental certifications
??????? v.?Safety Certifications
4.?With? the above in hand; develop a three year game plan
???? a.?Identify suppliers for each event over the three years
???? b.?Develop savings targets by category
???? c.?Develop a three year time line for all categories
5.?Role Play internally? the first year for a test category
???? a.?Ask the following questions
???????? i.?How will you award the business
???????? ii.?Review alternate scenarios
???????? iii.?Review savings by scenario
???????? iv.?Determine which suppliers will be invited back
???????? v.?Determine what new suppliers from your database search will be invited to participate next year

Now ask your e-procurement solutions provider to demonstrate their capability in this area

We look forward to and appreciate your comments.

Posted in , , , , , , , ,

Retailers sourcing strategic plans sometimes have too many guidelines and to little action

Friday, March 12th, 2010

From a retail perspective buyers and category managers have a lot to do. Try to get some of there time and watch their phone ring of the hook if you don?t believe me. So in the retail vertical let?s start implementing specific short term tactics that can drive some immediate results…

A great example of the above might be augmenting the manual process that many retail sourcing professionals use today to find new sources of supply interested in bidding for their your rather than continuing to live with the same small, known group of suppliers that you have used for years. Historically this has been a very time consuming practice that results in few if any new sources of supply. This represents a great opportunity to deploy a tactic that can have an immediate impact for an organization without the need to implement an entire new sourcing strategy.

There is a specific process to follow that will encourage new sources of supply to want to bid for your companies business beyond just calling or sending them an invitation. Simply having your buyer assigned the task of picking up the phone and calling new sources of supply will not result in new suppliers agreeing to bid for your business. There are specific objections to overcome and questions to answer that require a specific skill set.? This is a perfect opportunity for Software as a Service implementations of supplier research. Skilled providers in this area can provide companies with as many as a half dozen or more willing new sources of supply in as little as thirty minutes? that may in fact reside within a companies existing zip code or area code. In most cases you will never have heard of these companies and they will have solid reputations and good references.

Sourcing tactics can be isolated procurement related actions or events that take advantage of opportunities offered by the gaps within the strategic plan such as lack of new sources of supply mentioned above.? So our tactic here would be to find additional sources of supply that you can invite to compete for your company?s business across a variety of categories. The fact is that additional sources of supply competing for a companies business will result in compressed pricing and often better quality products and better terms. There are also an optimal number of suppliers that will encourage optimal results.

We appreciate and look forward to your comments.

Posted in , , ,

Just what is Strategic Sourcing?

Thursday, March 11th, 2010

Let?s?look first at strategy in general.

As a former military procurement guy if we think of strategy from a military perspective, how an actual battle is fought is a matter of tactics: the terms and conditions that it is fought under or whether it should be fought at all is a matter of strategy.

The next logical step would be to understand that a strategic plan is a way to define a company?s strategy. When this author goes about developing a strategic plan I tend to lean in the direction of aligning my thoughts so that they are in concert with my three basic necessities or tenants of running a business which obviously includes sound fiscal guidelines. The tenants are.
?
1. A long-range strategic plan
2. A tactical plan
3. A talent management plan

The ultimate goal is not to do something just to do it, but to do it as a way of beating or avoiding competition and growing at the same time. Think of Dollar Stores in terms of how they avoid competing with Wal-Mart although they are in a very similar space.

If we believe the above, how do we relate that back to Strategic Sourcing?

Strategic Sourcing should be a discipline used to identify, examine, select and implement a variety of sourcing alternatives for? specific groups or categories by evaluating, selecting and collaborating with your sources of? supply in order to achieve improvements in quality, cost, operational efficiency and other benefits that support a companies overall strategic plan. To that end just lowering the purchase price is not necessarily strategic in and of itself.

Some say that based on that definition and an understanding of strategy that Reverse Auctions therefore are not strategic. This author says that depends. If Reverse auctions? are the result of significant discovery and analysis that focuses on identifying the best opportunities to support a strategic objective and it is the result of using the entire RFX sequence, it may in fact be strategic but it could also just be tactical. This author believes we are splitting hairs.

After all one mans pill is another mans poison.

We look forward to and appreciate you comments.
.

Posted in , , , , , ,

« Older Entries
Newer Entries »
© 2026 SafeSourcing