Archive for the ‘Strategic Sourcing’ Category

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Back To The Future!

Thursday, October 13th, 2011

Companies and individuals enter into contracts based on the future price of a market or commodity. Manufacturers that use a variety of commodities in their manufacturing process constantly balance the swing of many commodities in order to drive blended costs that most benefit their future needs. Futures can be monitored on future markets like Bloomberg amongst others.

A very simple example of how this data might be useful to a buyer is that of a retail real estate – construction buyer that is looking at construction of new stores for the upcoming year. If we continue with the Bloomberg example, they report futures prices on energy, agriculture, industrial metals etc. If a buyer were to look at the future price for lumber within the agriculture category based on 1000 board feet, as of this report the cost for this commodity is down 3.46%. This reduction in price might be used as a negotiation point for upcoming stick builds versus prefab on concrete structures that are in your plan for the particular future month being sold. It does not take very long to look at these reporting tools in order to understand trending in commodities that affect your sourcing. Another example would be looking Diesel futures as they impact your distribution costs and those of supplier’s providing products to you.

A simple step you can take is to pick three market views such as Bloomberg, CME etc. Pick a half dozen commodities that impact the products you are sourcing. Now take 10 minutes per day to review them so that they become second nature to you.

If you’d like help in this process or are interested in track a commodities price versus your particular purchase points, please contact SafeSourcing.

We look forward to and appreciate your comments.

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Comparative advantage suggests we should be looking to Brazil for our future sourcing needs?

Tuesday, October 11th, 2011

Comparative advantage is a theory that advances that in a free marketplace, each entity or country such as the EU or NAFTA or trading countries will ultimately specialize in activities where it has comparative advantage. Examples of such might be technology, natural resources,   local workers skill sets, agricultural advantages, transportation benefits etc. In an  article published this past March at Bloomberg Businessweek titled BG (BG Group Plc, (the UK’s third- largest natural-gas producer), to Export From Brazil as Nation Becomes Key Oil Source, it would sure seem as though Brazil has the natural resources piece down.

Many people are not aware that Brazil is the world’s seventh largest economy. When you think about the relatively untapped natural resources in this country, their impact as an economic power will only continue to grow.

Now let’s just hope that we don’t create and unnecessary trade agreements that eliminate the comparative advantages that we both have and could build upon.

We look forward to and appreciate your comments.

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The Holiday Season is right around the corner

Tuesday, October 4th, 2011

Christmas will be here before we know it.  While most of us as consumers wonder where the year has gone, retailers are feverishly planning in preparation for their busiest season.  In the retail industry, the short period from October to December can represent more than half of the year’s sales—which means that planning and implementation are crucial for success.

Retailers don’t panic; procurement services can assist you in your holiday preparations.  For novelty products that are traditionally sold such as gift cards, perfumes, and gift basket items, why not purchase products for the rest of the year?  This can help you have the inventory on hand and allow you to lock in a price—that can surely increase as the holidays ensue.  Planning to maintain appropriate inventory levels especially for Black Friday and beyond can help decrease your costs by not being subjected to inflated prices due to seasonality.

Don’t let the season sneak up on you, plan ahead to ensure you have the most successful Holiday.

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

We look forward to and appreciate your comments.

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When developing your terms and conditions don’t forget the potential for BARTERING!

Thursday, September 29th, 2011

According to Wikipedia: Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.[1] It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.

There are a number of companies that primary business model is to use bartering in part as their engagement model. Although the model is slightly different at each organization, the general theme is that a company can trade excess inventory for just about any category and receive credits that can be used in part to buy or acquire other products and services that they need for their business. An example might be to consolidate and eliminate backroom stock in retailer’s stores in exchange for credits and use those credits to buy supplies that are regularly used such as paper or plastic bags etc. This process can also have a positive impact on shrink as well as preserving cash.

A unique use of this process that I recently read about in the Arkansas Democrat Gazette discussed a company agreeing to pay for building renovations if they had their current contract extended. The article by Debra Hale-Shelton titled UCA trustees call off audit of vendor bid. The legality of this transaction is in question, but it is in fact a form of Barter.

If you are going to consider barter as a payment or terms option, make sure you understand its use and that it is an above board part of negotiation that is well defined in your terms and conditions.

We appreciate and look forward to your comments.

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What is Sustainable Procurement and Why You Should Care About It?

Wednesday, September 14th, 2011

In general, procurement refers to two different factors, price and quality.  For a company these factors are obviously important to the bottom line, but there are other factors that should apply for the bigger global picture.  Sustainable Procurement has a wider agenda by looking at a company’s “triple bottom line” which includes the impact the company has on the environment, the economy, and the social implications.  This indicates that a supplier will be evaluated on many more levels than just the product they are selling.

Environmental concerns are the dominant issue for sustainable procurement since humanity is currently putting such excessive demands on the available resources the environment offers.  A company that focuses on purchasing their goods and services from environmentally friendly companies is considered a “green procurement” company.

Economic concerns are another area that companies can focus on for a more sustainable procurement process.  In many situations a company that engages in sustainable procurement has the opportunity to offer assistance for smaller and/or ethnic minority-owned businesses.  By focusing on economic concerns a company may be more likely to purchase fair trade certified products which allows extra investments to be channeled towards developing countries.

Sustainable procurement can also be addressed through social policy and responsibilities.  In the United States, most companies are already conscious of the social responsibilities that influence the global supply chain.  The social implications include whether or not a company promotes equality and diversity among its work force. 

The overall goal for sustainable procurement is to ensure that goods and services purchased for a company are designed, manufactured, delivered, and used in an environmentally and socially responsible manner.  Why is this so important for you?  The answer is simple;  the more environmentally and socially responsible each of us is individually, and within our company or organization, the better off we will all be in the long haul.  In a global marketplace where people are becoming more and more concerned with the legacy their company can build and leave, it is becoming increasingly important that we leave positive footprints to be filled by future generations.

For more information on SafeSourcing and how your company can become more of a Sustainable Procurement partner, please contact a Customer Service representative.

We look forward to and appreciate your comments.

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When did sustainability become synonymous with the environment?

Thursday, August 18th, 2011

In this case sustainability has less to do with the environment and more to do with process, discipline and execution. Which can also impact green programs focused on  a company’s carbon footprint

According to Wikipedia a simple definition of sustainability, in general terms, is the ability to maintain balance of a certain process or state in any system. It is now most frequently used in connection with biological and human systems. In an ecological context, sustainability can be defined as the ability of an ecosystem to maintain ecological processes, functions, biodiversity and productivity into the future.

Sustainability has become a complex term that can be applied to almost every system on earth.

From a corporate perspective many investors look at sustainability as a framework for disciplined and responsible management, a key success factor in achieving economic gains.  Relative to e-negotiation this means being able to run the same process (events) over and over again quarter after quarter and year after year as the standard way in which  a company endeavors to improve quality, workflow and compress prices. To the extent that this process supports companies social initiatives relative to the environment and humanity new terminologies such as the term triple bottom line are emerging in discussions at the board level.

The Global Sourcing Council tells us that although sustainability has found its permanent place in corporate boardrooms, execution is still a challenging journey. Implementing sustainability in global sourcing operations becomes even more complex as it creates its own unique challenges.

Global service providers that subscribe to sustainable strategies will benefit by gaining competitive, green advantage with the global organizations.

Ask your e-negotiation service provider how they intend to implement a sustainable program for your company.

We look forward to and appreciate your comments.

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Great data discovery drives great results! So what’s required?

Thursday, August 11th, 2011

There are a number of valuable possible sources of information to consider. However don’t make the assumption that just because you have systems with a big sounding impressive name like an Enterprise Resource Planning system or ERP that the data they contain will be complete or clean. That depends entirely on the proper deployment and use of the system as well as its maintenance after the fact.

Here are some but not all areas of opportunity and pieces of information that you should look to. In fact the more of them you have access too the better prepared you will be for a great discovery session.

1) General Ledger
2) Detailed P&L
3) Purchase Orders
4) Contracts
5) Detailed Vendor Listing
6) Product List by Vendor
7) Invoices
8) Product cut sheets
9) Copies of orders
10) Brochures

There is also a strategy of how to use this information to your best advantage and no system will do it all for you.

We look forward to and appreciate your comments.

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Beyond price reduction, what other benefits should buyers be aware of when purchasing forklift batteries?

Thursday, August 4th, 2011

Not more than five years ago, warehouse managers were glad to have their scrap forklift batteries removed for free or a core charge refund.

Today warehouse managers have options due to regulatory changes and an increase in worldwide demand for lead.  This gives warehouse manager’s a couple of options for disposal.

One option is to sell it back to the manufacturer.  The customer sends scrap batteries back to the distributor for credits toward the purchase of new batteries.  This is recommended for a customer who will have loads under 44,000 lbs.   Unfortunately, the customer doesn’t get an additional revenue stream or directly profit from increasing lead charges.

A second option would be to sell it through a broker.  Brokers have bulk agreements with smelters and can pay a top price.  They will pay you based on a present Spot Market Pricing of Steel Cased Lead / Acid Battery Scrap and the Quantity of batteries that you want to get rid of.   Additionally, brokers educate the customer on packaging guidelines dictated by DOT.   This makes the implementation of a recycling program much easier. However, the option is only available for loads above a truckload (44,000 lbs.).  

Brokers are really only interested in Flooded Cell Batteries (these are the type of Batteries that have the removable tops where you add water).  They will however take Maintenance Free Batteries and even give you something for them. 

The markets are strong and should be for some time. So no matter which option you choose, now is a great time to start making money on those old batteries.  In fact, run a reverse auction for this and you will be sure that you get the best price for your scrap.

For more information on SafeSourcing and how we can assist your company with sourcing this category or any others, please contact a Customer Service Representative for more information.

We look forward to and appreciate your comments.

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Who is reviewing your contracts? Are they missing anything?

Wednesday, July 6th, 2011

The answer is neither or maybe both. The first important question for each is who is actually evaluating the contracts, and just because they have a law degree does not mean that contract evaluation is a specific skill set the individual possess. This author recommends choosing who will provide this function within your company and then makes sure they have the skill set to do their job and stay up to date.

There are any number of contract management certificate programs available from prestigious and well know institutions. To name a few, there is Villanova University, The University of California Irvine and St. Louis University. In addition there are organizations that also offer this training. Probably the most well know is, the National Contract Management Association or NCMA that has been around for over 50 years.

Many of these organizations offer on line courses that can be completed within a reasonable period of time. Many of the University and College courses are actually accredited as well as affiliated with NCMA.

Once you have resources that are certified, provide them with the tools they need to do their job. All companies have 100’s to as many as 1000’s of contracts and most do not have a contract management solution. These solutions today are available via the cloud in Software as a Service models for very little investment. Most of these providers will also assist you in the creation of your Meta data and database population. 

Contact SafeSourcing for more information.

We look forward to and appreciate your comments.

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Buyers; Soybeans are down and the Corn harvest will be up. So What?

Friday, July 1st, 2011

It appears as though the corn crops will be better than expected this year and as a result drive prices down on the supermarket shelves. The reason is because farmers planted more corn than usual based on what the futures market was telling them relative to other crops. Because they planted more and the yield will be higher futures actually went down. This should impact the price we pay for a variety of products impacted by corn.

If you don’t think that corn impacts many products, think again. Corn impacts beer, aspirin, livestock feed, carbonated beverages, Ethyl alcohol, textiles, soaps and hundreds of other products.

If you’re a buyer, you need to be aware of this as the impact in the market typically trails the crop by about 3 to 6 months. So while you are buying products you need to understand that costs should come down before year end and make sure the language in your contracts allows you to take advantage of this. Think de-escalator language on any contract between now and year end.

We look forward to and appreciate your comments.

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