Archive for the ‘Strategic Sourcing’ Category

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If you want negotiating success; try turning the game around.

Thursday, March 22nd, 2012

I was reading the Sourcing Innovation post today titled ?Procurement Game Plan: A Review Part II.3?. Part of the discussion was about negotiation preparation where the question asked was; So how does a skilled negotiator prepare? There were six responses, the 1st of which is as follows.

Try to find the win-win:
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If the only way for the buyer to get better terms is for the seller to sacrifice margin, it’s going to be a tough fight. But if the buyer can offer something to the seller that can look like a win in the rep’s pocket — such as more volume than expected, better production batch sizes, co-marketing — which may not cost the buyer much, the pie can be expanded and both sides can win. While the negotiation will still be tough, it is much easier to get a bigger slice of a bigger pie than to try and take the few scarps the sales person has left on margin.

Although much of what is listed above is accurate, the first question in preparation is or should be; does the supplier have any margin to share with me? Answering this question is pretty simple if you are negotiating with publicly traded companies because you can look up their results, press releases and other information on line. You also already know how long you have been doing business with your incumbents, which is worth something.

Let?s assume you have been doing business with an incumbent supplier for more than two years. This is plenty of time for them to use the same tools you plan to use in order to reduce their costs and improve their margins. If so, the question is have they shared those savings with their best repeat customers (you). The answer, probably not. Unfortunately for publicly traded companies, Wall Street holds them accountable to continual growth in terms of total revenue, margin and earnings. If they release numbers that are off in any one of these areas, their stock takes a hit.

As an example of the above, last year, major waste management companies unnamed here released significant growth and earnings numbers. Did your waste management costs go down? How much is a fair amount for a company to earn without sharing it with their customers. Several of these points are why more companies today would rather be private than public.

Let?s sum up. You have an existing contract in place with your incumbent for more than two years; your costs have not gone down, you incumbent supplier has just announced significant revenue and earnings increases as have their competitors who also want your business. Do you need to give anything else away? Probably not! Can you expect savings on your new contract as a result of having this information? Absolutely!? Why will you get the savings? Because you were prepared and asked for it! And most importantly because most of your competitors don?t prepare properly and as such did not ask for it.

Now in order to maximize your savings, make sure you use the most advanced e-procurement tools like reverse auctions to get the savings you deserve.

We look forward to and appreciate your comments.

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Lessons to be learned from March Madness Upsets

Monday, March 19th, 2012

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

For millions of people the past 4 days represent sports Nirvana as college basketball teams fight to become Champions.? As always happens, underdogs upset higher ranked teams and this weekend had many of those games.?

Today we are going to look into a few aspects of how these teams prepare; how they should deal with adversity; and how those things tie into your sourcing projects.

The Game Plan ? Every successful team has a game plan for how they win.? These factors and processes are a big part of why they are successful and how they leverage the resources and talent in the best possible way to win.? This is just as important in a sourcing project where the goal is to find the best source of product or service based on offering, value and cost.? To achieve this, a game plan must also be established in advance so the team knows the goal and how they are going to achieve it.? Teams with bad game plans run into issues they don?t know how to overcome and are usually not happy with their results.

Communication ? How a team executes their game plan and communicates with each other during the game/project is crucial.? When upsets occur many times the source begins with a breakdown in communication between team members.? Assumptions and misunderstandings lead to mistakes and missed details all because the team is not communicating well.? Creating pre-defined touch points of communication to re-establish how the project has progressed and where it is going is key.? When necessary, just like in games, call a time-out and regroup to get the game plan back on track.

Don?t Panic ? Every upset begins with a momentum shift and for the team about to be upset that is usually a bad thing.? The difference between teams that win and those that lose, is that the successful teams recognize that issues will occasionally arise in every project.? Knowing this, planning for this and dealing these issues right away without panicking will turn an upset around and produce the results you are looking for.? Stick to your well-prepared plan and the project will get back on track.? If you end up needing to slow things down to get control back then make the decision and notify everyone involved early so that the ?game plan? can be adjusted.

For more information on preparing your sourcing projects and planning for the things that can derail these projects, please contact a SafeSourcing Customer Service Representative.??

We look forward to your comments.

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Part II of II. New Technology: Helping Businesses to Compete !

Tuesday, February 28th, 2012

In yesterday?s post, this author asked, ?With so much new technology being introduced every day, how are you using it to help your business be more competitive??? I now would ?like to offer a little more detail relative to the following four areas you?re your consideration.

The Cloud? ? There have literally been thousands of articles, an equal numbers of blogs, including ones on this site like this one about the benefits of cloud computing.? Cloud computing allows companies to have all of the advantages of an IT data infrastructure just like the Fortune 100 companies without the overhead of staff to support, equipment to run, software to manage it and worries of assuring it is always available.? These are all of the financial reasons why cloud computing makes sense for companies but the? feature advantages are equally important as companies with resources all over the world can more easily collaborate on projects through the virtual environment clouds create.

IP Phone Systems ? On the heals of discussing what can be done with a ?cloud? network structure it makes sense to bring up IP phone service companies.? Tens of thousands if not millions of dollars were typically required for a company to install a Private Branch eXchange (PBX) for their company.? The complexity of maintaining such a system either required a fulltime expert employee or high-priced consultants in the past.? Now companies can have all of the features of those PBXs at hugely reduced prices through companies like RingCentral and Windstream who tailor plans for businesses based on their needs and budgets to give them everything they want.

Dashboard Communication?? The days of HR departments running around answering phones and letters about benefits, providing forms, and printing expensive newsletters is quickly becoming a thing of the past as companies are beginning to understand how cost-effective internal portals and dashboards can be to handle all of this traffic.? Third party companies that offer HR portal solutions allow employees to service many of their own needs which frees up a typically overloaded HR staff to concentrate on the things that matter most to the business.

Virtual Staff?? All three of the above mentioned items are useful tools that aide in companies being able to employ more and more virtual employees.? The financial benefits of virtual employees have long been documented as have the added benefits of increased and quality work done by virtual employees who are allowed to better control the flow of their work day.? Advances in cloud technology and video and webinar offerings make employing virtual staff even more practical to do.? It is also important to note that when companies increase their virtual staff they instantly remove the geographical boundaries that sometimes prevent them from going after the best employees across the country.?

As small and medium companies increase their contribution toward our Nation?s economy, their ability to compete at cost-effective levels will become increasingly more important and technology will play a huge role in them getting there.? For more information on finding vendors in any of these four areas or in other areas that might help your business, please contact a SafeSourcing Customer Service Representative.??

We look forward to your comments.

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“Reduce (All) Spend”

Thursday, February 23rd, 2012

Maximizing potential savings requires that all spend be considered as part of your strategic sourcing initiative. While you may think that some of your categories are too small to qualify for inclusion, I would like to point out that these categories can and SHOULD be included.

Combining individual items with lower spend totals is a great way to both maximize savings potential and streamline your purchasing. If you would like to be able to consider more of your spend for inclusion in your strategic sourcing initiatives, your first step should be to talk to your sourcing partner.

You might find that you are looking broadly at a category and that many of the items you purchase are in smaller quantities or otherwise represent a small amount of spend annually. While these opportunities are often overlooked or passed over in favor of higher spend opportunities, an effective purchasing leader understands that every opportunity must be considered to truly maximize savings. In these cases, historical RFx data can be used to recommend similar or overlapping purchase items that might not have initially been considered. It may be that this data forces you to look beyond the typical restraints of accounting categorization, department or even vendor.

Once you have taken the step to find these similar items, you will see your average savings increase as vendors are given an opportunity to compete for larger volumes of new business.

Additionally, combining these items may also have the effect of streamlining your purchasing. As you have now offered more items to vendors in one RFx event, you may find that it is more favorable to award the purchases to fewer vendors. The ripple effect of efficiency will continue throughout your organization.

We look forward to and appreciate your comments.

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?Reduce (All) Spend?

Thursday, February 23rd, 2012

Maximizing potential savings requires that all spend be considered as part of your strategic sourcing initiative. While you may think that some of your categories are too small to qualify for inclusion, I would like to point out that these categories can and SHOULD be included.

Combining individual items with lower spend totals is a great way to both maximize savings potential and streamline your purchasing. If you would like to be able to consider more of your spend for inclusion in your strategic sourcing initiatives, your first step should be to talk to your sourcing partner.

You might find that you are looking broadly at a category and that many of the items you purchase are in smaller quantities or otherwise represent a small amount of spend annually. While these opportunities are often overlooked or passed over in favor of higher spend opportunities, an effective purchasing leader understands that every opportunity must be considered to truly maximize savings. In these cases, historical RFx data can be used to recommend similar or overlapping purchase items that might not have initially been considered. It may be that this data forces you to look beyond the typical restraints of accounting categorization, department or even vendor.

Once you have taken the step to find these similar items, you will see your average savings increase as vendors are given an opportunity to compete for larger volumes of new business.

Additionally, combining these items may also have the effect of streamlining your purchasing. As you have now offered more items to vendors in one RFx event, you may find that it is more favorable to award the purchases to fewer vendors. The ripple effect of efficiency will continue throughout your organization.

We look forward to and appreciate your comments.

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Is the economy finally bouncing back?

Wednesday, February 22nd, 2012

Today?s post is from Danielle Begley Account Manager at SafeSourcing Inc.

The past few years have proven to be quite a struggle as the US economy battles recession.? Nearly four years later, there appears to finally be a small glimmer of hope.? The Dow is continuing to rise and has almost edged past a high that hasn?t been reached since May of 2008.? In addition to the rising financial markets, the job market is beginning to become revitalized.? As a major culprit of fear and justified doubt over the past few years, the catastrophic economy of Greece and downturn economies of neighboring EU countries may see the light as a bailout deal appears to provide pseudo salvation to the global economy.

What could an upturn economy mean for your company; Increased purchases?? New Hires? Have you discussed new projects with your strategic sourcing partner in order to benefit most efficiently from a potential rising economy? If not, now is the right time to implement a plan to initiate new category expenditures, and evaluate if your service providers are providing the best value for the cost.?

A resolution in the EU coupled with continued evidence of an economy on the rise may be the jumpstart the US has awaited to bounce back from recession.? Planning in advance will greatly increase your ability to succeed in a thriving economy.

For more information on strategic planning please contact a SafeSourcing ?Customer Service Representative for more information.

We look forward to and appreciate your comments.

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What drives competitive bidding when using e-procurement tools?

Tuesday, February 14th, 2012

If you have ever been fishing, you already understand that the better the bait the greater the opportunity to catch something. In this case, the bait is your promise to award business. Casting that bait amongst suppliers provides an opportunity to catch a better product or service. There area variety of psychological techniques employed with these tools that also cause a type of phishing in order to get to drive pricing in a direction that would be considered a good catch. A well run e-auction takes all of these elements into consideration when they discuss a companies sourcing strategy.

There are also other important elements  that require understanding in order to drive competitive bidding when using e-negotiation tools.

Competitive bidding is the process of inviting and obtaining bids from competing suppliers in response to documented specifications, by which an award is made to the best overall bid that meets or exceeds the specifications in areas such as price, quality, safety and environmental impact.

The process contemplates giving potential bidders (vendors & suppliers) a reasonable opportunity to bid, and requires that all bidders be placed on an equal playing field. Ideally each supplier must bid on the same documented specifications, terms, and conditions for all the items within the event. However breaking out individual line items that a specialty supplier can provide bids for can help to reduce the opportunity for suppliers to manage the overall gross margin of their bids and drive higher savings. In this case however consideration as the whether or not you want ot split the award of business or just use this as a strategy. The purpose of competitive bidding is to stimulate competition, prevent favoritism, and secure the best goods and services at the lowest possible price, for the benefit of the host company Competitive bidding cannot occur where specifications, terms, or conditions prevent or unduly restrict competition, favor a particular supplier, or increase the cost of goods or services without providing a corresponding tangible benefit for the host company.

If you’d like to learn more, please contact a SafeSourcing representative.

We look forward to and appreciate your comments.

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Who writes your Statements of Work or SOW’s? And what are they anyway?

Tuesday, February 7th, 2012

A statement of work or SOW is another document that is typically added to e-negotiation events in order to bring clarity to what is included in a bid. In essence the document lists the work activities to be agreed upon, the deliverables and a timeframe in which a supplier will be expected to perform against. The SOW requires agreement as do other documents prior to a supplier being allowed to place bids.  

Some of the areas that are normally included in a Statement of work might include but are certainly not limited to the following.

1. The actual scope of work to be completed
2. The time period in which it is to be performed
3. The location of work.
4. A list of the detailed deliverables
5. A Schedule of all deliverables
6. A standards adherence document.
7. Acceptance criteria
8. Other requirements.
9. Change of control documents
10. Price change requests

 
Make sure that when you are running e-negotiation events that you make sure that all of the above information is considered and captured before you approve of an event being passed on for suppliers to review. Make sure that you consult your internal subject matter expert and don’t just head off on your own. If you don’t have one, ask your e-procurement solutions provider if they can help.

We look forward to and appreciate your comments.

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FACT: If you won’t listen, no one can help you!

Friday, February 3rd, 2012

This is not a general complaint although the majority of folks believe they are overworked today. This complaint is in regards to using today’s e-procurement tools to reduce their costs across the board. How about, my team is to busy with other initiatives to take a look at this now.  Or our buyers and category managers work eighty hours a week and already get the best prices.

I work a lot. I always have. More than most if you were to ask my customers, employees and other individuals I am associated with. When someone tells me their people work 80 hour weeks, I flat don’t believe them.

Here’s a simple fact: IT”S ABOUT THE MONEY! From a corporate perspective if you are not profitable, you will die. This holds true for both public and private companies.

Let’s talk about retail for a bit. I don’t care what retail vertical you work in, for the most part your cost of goods are going to be between a low of 50% (you better hope not) and a high of 70%. Most of these companies have net profit of a couple percent at best.

Fact: E-procurement tools and specifically reverse auctions will reduce your costs.
Fact: You do not know where all the available sources of supply are.
Fact: Neither you nor your team has time to look for them or vet them.
Fact: Once vetted neither you nor your team have time to collect and analyze bids from all available be sources of supply.
Fact: Because of the facts listed above, you can not guarantee that you are receiving the best price.

Let’s do some simple math. If you are a $100M retail company. If your net profit is 2%. If your cost of goods are 70%. If you were to assign 10% of that to a full service company that offers e-procurement tools in the form of a service. If they were to achieve 20% in savings for you.
 
Fact: Your Company would more than double their net profit.

If you still do not believe me, please contact me and test me.

I look forward to and appreciate your comments

Ron Southard
CEO SafeSourcing
ronsouthard@safesourcing.com

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Where are the priorities for the American consumer?

Monday, January 23rd, 2012

The front page headline of the Dayton Daily News on Thursday January 19,2012 read, ?Americans spend more on tech bills than utilities.?? With people spending more money on? things like internet, mobile devices, and cable or satellite in their home than they do for basic utilities such as power, water, and natural gas it brings up the question of where the priorities are for the American public.? According to the Dayton Daily News article, ?63% of U.S. households spend 35% more on technology bills than they spent on utility bills.?

This author wonders if the American public is spending so much of their time and money on technology, how much time and money does your company spends on focusing that attention for your benefit?? The online presence of a company can help increase the client base which in return can help increase your bottom line. So what are the ways you can increase your online presence?

??Facebook ? a social networking service that has more than 800 million active users.? According to Wikipedia, ?a 2009 study ranked Facebook as the most used social networking service by worldwide monthly active users.?
??Twitter ? an online social networking and micro-blogging service and it currently has over 300 million users.
??LinkedIn- a business related social networking site and it currently reports more than 135 million users in more than 200 countries.

With the use of these popular networking sites, a company can quickly increase their client base.? Technology can be accessed from home, work, and a person?s mobile device.? Therefore, if you can get a person looking at your company on any one of these social networking sites, you and your company can reach a person at any time.? According to the Dayton Daily News article, ?That?s the way you measure yourself as a 21st-century society, is by making these (technologies) basic services (essential) for daily life.?? So make yourself and your company essential for daily life.? Technology makes it easier!

For more information on SafeSourcing and how to increase your company?s technology footprint, please contact a Customer Service Representative for more information.

We look forward to and appreciate your comments.

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