Archive for the ‘Strategic Sourcing’ Category

Retail buyers are you checking your supplier’s standards to insure they support your Corporate Social Responsibility (CSR)?

Tuesday, June 8th, 2010

Contributions to the welfare of society can come in many forms such as supporting the arts, further education, giving to social welfare agencies, supporting community-building initiatives, reducing pollution, and the other charitable causes. Businesses that adopt socially responsible directives help to allow government agencies to minimize their involvement with the corporation

One way that retail companies can add to their social consciousness is to try and use Certified Reference Materials or (CRMs) which are the controls or standards used to check the quality and traceability of products. Requiring these standards prior to purchasing products indicates a lot about a company’s commitment to its stakeholders which includes their consumers. This will also mitigates risk should recalls occur as a result of harm.

By the way of an example, a reference standard for a unit of measurement is an artifact that embodies the quantity of interest in a way that ties its value to the reference base. At the highest level, a primary reference standard is assigned a value by direct comparison with the reference base.

A primary standard is usually under the jurisdiction of a national standards body such as ISO or The International Organization for Standardization which is an international standard -setting body composed of representatives from various national standards organizations. Relative to the example of a primary standard, you might refer to the Future ISO 26000 standard on social responsibility published as Draft International Standard which ties very nicely to this post.

We look forward to and appreciate your comments.

Retailers do you have a sustainable e-negotiation program?

Tuesday, June 1st, 2010

If you have a limited source of new suppliers, including new vendors every time you run a new e-negotiation event will be incredibly difficult. Resultantly your process by default ends up as just a new way to continue to award business to the same suppliers over and over again. This process may yield some productivity increases initially, but over time meaningful price compression will be difficult if not impossible.

Solution providers suggest that somewhere between six and ten suppliers are required to drive optimum e-negotiation results, these data suggest that attaining sustainable results from the e-negotiation process has a direct correlation to the number of new suppliers available and willing to compete for your business.

By example let?s suppose you can only find six suppliers to invite to an e-negotiation event. Your customer services team using their best sales skills can probably convince most if not all of these suppliers to participate. This may be fine the first time around. Although this author believes there are better sustainability strategy even given this scenario.

Suppliers that finished first or second or incumbents that were displaced may agree to participate again in the future, but with a smaller number of suppliers and no new sources it will make the rerun of this auction less successful.

Lacking a robust source of new suppliers, and in the above case we only had a total of six available how can companies create a sustainable process.

The lack of a robust global supplier database limits future price compression at a minimum. It may also have a negative impact on quality, process and service. Particularly if history suggests a minimum of six to ten suppliers in order to drive optimum results…

Make sure to ask your e-negotiation solutions provider how many suppliers they have in their supplier database and if you can have regular access, it will determine your future success.

We appreciate and look forward to your comments

What is the retail procurement lifecycle of a product or service?

Thursday, May 13th, 2010

This author generally begins discussing this subject with our customers and prospects during the discovery phase of our engagements. It helps to get us all on the same page and as such we get a lot of different definitions. Quite frankly we get almost as many as the number of people we discuss the subject with. Surprisingly the process which is quite simple as a definition is not any different from when I first learned it over 40 years ago in the U.S. Air Force other than its automation provided by modern procurement tools.

Typically procurement consists of seven (7) steps. Where the confusion generally enters is that each step can have a process of its own or be interrelated with another step in the process. An example would be the contract lifecycle that easily fits within the negotiation cycle and the renewal cycle. Another might be that information gathering which is the generally accepted first step in the process can apply to multiple issues such as information gathering for the related product or services such as specifications as well as the information gathering of prospective supplier data.

As such, the simple steps to the procurement lifecycle that most individuals generally agree upon are as follows.

1.?Information gathering
2.?Supplier contact
3.?Background review
4.?Negotiation
5.?Fulfillment
6.?Consumption
7.?Renewal

Most times keeping this simple model in mind will allow? retail procurement professionals to answer the question where are we in the process when a project gets stalled or off track.

We look forward to and appreciate your comments.

Very few retail companies have contract management software.

Tuesday, May 11th, 2010

So just what is Contract Management or Contract Lifecycle Management? Are they the same?

According to Wikipedia Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees.

Contract management can include negotiating terms and conditions and ensuring compliance with those terms and conditions. Beyond these base functions contract management can also include documenting and agreeing on any changes that may occur during the implementation or execution of a contract.

We can think of contract management as a summary of the process of with which companies use a systematic approach to manage contracts through the process of creating, executing and analyzing contracts for the purpose of maximizing the financial and operational performance of contracts so as to mitigate risk.

A frequent buzz word in the industry today is that of Contract Lifecycle Management Solutions. This really means the same thing from a systems perspective that should include automating much of the following.
1.?Authoring
2.?Negotiating
3.?Tracking
4.?Alerting
5.?Awareness management
6.?Baseline moderation
7.?Commitment moderations
8.?Communication moderation
9.?Contract visibility
10.?Document management
11.?Change management
12.?Issue alerts
13.?Service level agreement moderation
14.?Total Transaction compliance

Ask you solution provider how they can help you in this area and how to integrate CLM with your e-procurement suite.

We look forward to and appreciate your comments.

SafeSourcing Blog begins its third year!

Monday, May 10th, 2010

When we placed our first post on May 8th of 2008 our goal was to make the blog a piece of an educational website (www.safesourcing.com) for procurement professionals where they could meet, discuss and research and find information on topics of importance to procurement professionals and knowledge workers. We also wanted to call attention to the sourcing of safe products and environmentally sound procurement practices.

The traffic our blog enjoys supports the fact that procurement professionals find our post to be a useful part of their procurement tool belt. Since inception our post has been visited by professionals from eighty nine (89) countries. We are regularly visited by other procurement solution providers and from the best blogs in our space.

Our goal going forward is to continue to focus on the retail vertical and pass on useful information as our learning continues so that others may benefit.

Please tell others about us if you find our information useful. We certainly thank you for and appreciate your patronage.

Comments Welcome.

Safesourcing Inc. completes a successful year two.

Friday, May 7th, 2010

It hardly seems possible that we launched our company two years ago. At the time there were indicators for those paying attention of trouble in the global economy but know one had any idea just how bad it was going to get. In hindsight what a time to launch a company. When customers and business partners asked me why, my response was if you are doing what you believe in and the results you promise are true, then there really is no bad time to launch a business.

Our promise has been the same from day one, to reduce the cost of goods and services regardless of a company?s size or the size of the category being sourced. And, while doing so improve quality, safety and environmental focus. Today, two years later our customers will attest to the fact that we have held true to that promise.

Following is a short list of accomplishments that we are very proud of.

1.?Over 700 educational blog posts relative to e-procurement issues of importance.
2.?Over 1500 useful procurement related wiki terms and definitions.
3.?Added an average of more than one new customer for every month in business.
4.?Grew our supplier data base to greater than 380,000 retail suppliers
5.?Sourced 100?s of categories from commodities to finished goods and services.
6.?Sourced categories as small as $5K with savings > 30%.
7.?Sourced categories as high as $80M.
8.?Never held an e-negotiation event that did not result in savings.
9.?Conducted every process in e-procurement including RFI, RFP and RFQ.
10.?Installed our product in Asia in a multi lingual implementation.
11.?Averaged over 24% savings over two years.
12.?Developed a unique process for sourcing small spends for the retail mid market.
13.?Grew our database to over a terabyte of data.
14.?Helped companies source with environmental and social consciousness
15.?Today released SafeContract? a fully featured hosted Contract Management System.

To our customers thank you for your support. We endeavor to earn your business every day. To our business partners thank you for your guidance during a tough economic period. To the retail industry our goal is to be your best vehicle for reducing costs and improving earnings with an increased focus on corporate social responsibility.

Thank You.

As a follow up yesterdays post, the next question was; what is the benefit of a large retail supplier database?

Thursday, May 6th, 2010

Retailers should have continuing success when running prior e-procurement events over again, one area of commonality that has historically made this difficult is a lack of new suppliers.

There is a proper way to insure the sustainability of your reverse auctions going forward.? Since you have already conducted or should have conducted your detailed discovery and analysis a robust retail supplier database will allow you to do the following.

1.?Conduct a detailed supplier discovery
a.?Rank suppliers
i.?Size
ii.?Experience
iii.?References
iv.?Environmental certifications
v.?Safety Certifications
2.?Develop a three year supplier game plan
a.?Develop a three year time line? for all categories
b.?Identify suppliers for each event over the three years
c.?Develop a three year rotation schedule for the selected suppliers.
3.?Role Play internally? each year for a test category
a.?Ask the following questions
i.?Who will you invite and why
ii.?Keep in mind the unique benefits of distributors and manufacturers
iii.?Discuss award the business strategies
iv.?Review alternate scenarios
v.?Review impact on non awarded suppliers
vi.?Determine which suppliers will be invited back
vii.?Determine what new suppliers from your database search will be invited next year

If you only have the same list you originally used to conduct your historical events, don?t expect savings the 2nd and 3rd time around if market conditions are similar. Or, you could call Safesourcing.

We look forward to and appreciate your comments.

Why is e-negotiation not the most important initiative of all retail companies?

Monday, May 3rd, 2010

I have been in many meetings numbers of retail companies where charts that reflect savings from recent e-negotiation events of other retailers with similar formats are reviewed. As real as these results are, it is still difficult for most retailers to pull the trigger in order to give a new process a try. We just seem to get in our own way because we always have more important things to do.

We just have the ability to make things to difficult for ourselves.? Relative to e-negotiation, let?s assume that the CEO directs that he or she would like the cost of goods reduced. The project is then assigned to the Senior Vice President of Supply Chain or Chief Logistics Officer or Chief Procurement Officer or other senior executive. This is further assigned to the Vice President of Purchasing who in turn assigns it to the director of supply purchases. The director convenes a meeting of the buyers or category managers responsible for a variety of supply categories. In degrees of separation this is about 5 or 6 degrees from the person initiating the project. And now the excuses (delays) begin.

1.?We can?t damage our relationship with our incumbent suppliers.
2.?We get the best price in the industry right now.
3.?These guys don?t know what they are talking about.
4.?Don?t we have a tool that does this in our ERP system?
5.?We?ll sacrifice quality.
6.?We don?t have time for this.
7.?I?ll get back to you.
8.?Let?s create a cross functional team.
9.?I?m not going to be first.

If we go back to the CEO and explain what the situation is, one is likely to get a reply that says to the team JUST DO IT! Unfortunately that needs to be followed by; DO IT NOW!

From start to finish, an e-negotiation event such as a reverse auction should take no more than two weeks to run. This includes the entire process including an RFI if required from the day a retailer says go to the actual award of business. There are several requirements necessary to accomplish this that will eliminate the worry and mitigate the risk.

1.?A robust supplier database with safety and environmental focus.
2.?A robust event template library.
3.?An intuitive or intelligent tool for building an event quickly.
4.?An automated reporting tool to provide immediate event detail for review.

If you are really interested in improving your bottom line now, you are less than two weeks away from immediate measureable results.

We appreciate and look forward to your comments.

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.

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.