Archive for the ‘Strategic Sourcing’ Category

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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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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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Retail buyers need to think individually and act collectively in their e-negotiations.

Tuesday, August 3rd, 2010

This is as true for e-negotiation events as it is for personal negotiations. The question is how the tools you are using allow you the flexibility to do so.

I was reading an article in the USA TODAY on Friday July 30th by Jillian Berman titled “Negotiate your way to savings”. ?The lead in was Cable TV, cell phone bills are ripe for cutting. This author would add the following; so is everything else.

So what is a negotiation? According to Wikipedia, negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution.

In terms of our discussion and the article we are talking about pricing and services. The article goes on to suggest what they call tenacious bargainers tips. Two of the tips are; don?t be afraid to complain and negotiate away extra fees up front.

Retail buyers need to do the same and the ability to think individually and act collectively when they develop the specifications and rules of their e-negotiation events. What would you ask for if you were buying this product or service for yourself and then be just as aggressive when it comes to your department and company?

We look forward to and appreciate your comments

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Retailers you don?t know what else you can get that is extra from a reverse auctions unless you ask!

Monday, August 2nd, 2010

My wife went to lunch at a restaurant she has never been to before with 7 of her friends the other day. One of her friends called in advance and asked to speak with the executive chef. She told him she was coming for lunch with 7 of her friends and wanted to have the chef prepare a sampling of their best appetizers for the group and would like the restaurant to comp the expense for the group. Are you kidding me that is incredibly ballsy? Here?s the kicker, the restaurant did it. In addition the chef came to the table and explained the selection and what would go well with it for lunch. He also bought each attendee a glass of wine. Most of you are smart enough to figure out the benefit to the restaurant. I can guarantee you we will go there for dinner.

Here?s the tie in.

I always suggest to retailers that there is more to be gained from reverse auctions and other e-procurement events than just price concessions. With that said, cost still tends to be the primary driver or motivation for most retailers. The question always comes back to me; like what? My answer is that you have to use your imagination. Take a look at your product. Ask yourself what more would you like?

1.?A better price?
2.?An extended warranty for free?
3.?Free shipping?
4.?An onsite account manager?
5.?Premium club membership?
6.?One free night for every three nights stayed in a hotel chain?
7.?One car grade upgrade from your standard contract for free?
8.?100 free meals for every $10K spent at a specific restaurant chain?
9.?Free installation services
10.?A donation to your frequent shopper program gifts catalog.

This really becomes a brainstorming or whiteboard event. Once you come up with an idea relative to a certain product, just ask for it in your specification. You?ll never know if you don?t ask.

We look forward to and appreciate your comments.

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Retailers you don’t know what else you can get that is extra from a reverse auctions unless you ask!

Monday, August 2nd, 2010

My wife went to lunch at a restaurant she has never been to before with 7 of her friends the other day. One of her friends called in advance and asked to speak with the executive chef. She told him she was coming for lunch with 7 of her friends and wanted to have the chef prepare a sampling of their best appetizers for the group and would like the restaurant to comp the expense for the group. Are you kidding me that is incredibly ballsy? Here’s the kicker, the restaurant did it. In addition the chef came to the table and explained the selection and what would go well with it for lunch. He also bought each attendee a glass of wine. Most of you are smart enough to figure out the benefit to the restaurant. I can guarantee you we will go there for dinner.

Here’s the tie in.

I always suggest to retailers that there is more to be gained from reverse auctions and other e-procurement events than just price concessions. With that said, cost still tends to be the primary driver or motivation for most retailers. The question always comes back to me; like what? My answer is that you have to use your imagination. Take a look at your product. Ask yourself what more would you like?

1. A better price?
2. An extended warranty for free?
3. Free shipping?
4. An onsite account manager?
5. Premium club membership?
6. One free night for every three nights stayed in a hotel chain?
7. One car grade upgrade from your standard contract for free?
8. 100 free meals for every $10K spent at a specific restaurant chain?
9. Free installation services
10. A donation to your frequent shopper program gifts catalog.

This really becomes a brainstorming or whiteboard event. Once you come up with an idea relative to a certain product, just ask for it in your specification. You’ll never know if you don’t ask.

We look forward to and appreciate your comments.

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Retailers here are twenty additional reasons why you ought to be running reverse/forward auctions.

Monday, July 26th, 2010

This author has posted a number of times on twenty reasons why retailers should use e-procurement tools including everything in the procure to pay process. I post that subject a number of times a year. Quite frankly there are many more than twenty reasons. Here is a different type of look at the same subject.

1.?It?s about the money.
2.?It?s not about the money.
3.?You don?t have specifications even if you think you do.
4.?You will have specifications once the event is complete.
5.?You have great relationships with all of your suppliers.
6.?You don?t have great relationships with all of your suppliers.
7.?You don?t know where to find additional sources of supply?
8.?You will have at least 8-10 new sources of supply for every category you run.
9.?All of your management team collaborate and make sure they aggregate their purchases. No they don?t.
10.?You are getting the best prices in the market according to your buyers.
11.?Believe me; you are not getting the best prices in your market.
12.?All of your contracts are less than two years old! Ha, Ha Ha! They should be.
13.?All of your overstock and out of cycle inventory has been removed from the back rooms of your stores! If it had, your shrink would be lower.
14.?You are aware of all of your suppliers green and safety programs?
15.?You are taking advantage of all of your suppliers green and safety programs.
16.?You are measuring all of your commodity purchases against the appropriate indices.
17.?You are getting the best use of your team because they have all the tools they need in order to source products and services efficiently.
18.?Your people could be spending more time on more important projects if they used low cost SaaS e-procurement tools.
19.?You have never had a contract auto renew or evergreen that cost you money.
20.?All products and services you buy are top quality because you evaluate them regularly.

If you can only find three issues above that plague your operation, then you should be using e-procurement tools. Call us today. We?ll do the first one for free.

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 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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Retail procurement needs to step up. Your Investors, Consumers and other Stakeholders demand it!

Wednesday, June 16th, 2010

What troubles this author most about this is that the industries included in the Aberdeen Group study such as education, manufacturing, energy, utilities, financial services and others are all using these tools to trim their costs and improve earnings. Retail has had at best terrible earnings numbers historically with the supermarket industry averaging net earnings of below one percent (1%).

I was just talking with our CFO today about the impact of these tools. I used a very realistic example of a $2B supermarket company with one percent net earnings of $20M.  I can see the board now. If the same retailer were to source as little as $10M of their budgeted spend and reduced costs by just 20% or $2M, net earnings would improve in the budgeted year by 10%. If you are a CFO and can’t get excited about that, I’m not sure what would excite you.

This is not just rhetoric. We have customers with savings that are almost double that with a huge resulting impact on earnings. I know that there are a lot of bloggers and others out there that doubt the impact of e-procurement tools or think that reverse auctions as an example have run their course. Quite frankly that thinking is misguided because in the  retail industry the large majority of companies have never used these tools and have been doing business with many of the same suppliers for more than two years. These are both indicators of the fact that you are overpaying for products and services.

You can be comfortable and be busy or you can grab the bull by the horns and improve costs, earnings, stock price and even the bonuses of your management team.

We look forward to and appreciate your comments.

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There is a real conundrum in retail today. How do we stop CONTRACT leakage?

Wednesday, June 9th, 2010

A conundrum in it’s simples definition is a riddle or a question to an  intricate and difficult problem, so it’s know wonder with the above scenario that we have compliance and other related issues such as ever greening in  the retail industry that literally costs companies millions of dollars. The answer to the conundrum is that with little effort this problem can be avoided. And the way to avoid it is to use a contract management solution. Most retailers do not do so today.

We know that fortune one thousand companies many of which are retailers may have as many as 100,000 contracts. We also know that in the retail trade less than 15% of companies have contract management solutions. We also know that companies that do use contract management solutions have compliance ratings significantly higher than companies that do not. It is a well known fact that these solutions can reduce administrative overhead by up to 30%. Those savings although significant from an ROI perspective pale in comparison to the loses associated with evergreen or auto renewal contracts  that include price increase language when written notice is not received as called out in the contract. Just imagine a bulk fuel contract for millions of gallons with a single basis point escalator above a current Platts, OPIS or Gulf coast index if the contract evergreens. Ouch.

The good news is that a contract management solution like SafeContract™ can solve this problem and provide a near instantaneous ROI. SafeContract™ is offered in the form of Software as a Service or SaaS which makes it much more affordable than an in-house solution. The good news is that the data is yours and you only use what you need.

Don’t wait any longer to reduce your administrative costs, manage discounts and rebates, make your auditors happy with improved compliance and eliminate ever greening.

Contact SafeSourcing™ today.

We look forward to and appreciate your comments.

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