In yesterday’s blog post, we looked at procurement resolution or goal of ways to use new technology to save money. Today we are going to discuss goal number five. “Creating a small business network and collaborating creatively with them is one way to save money”.

We often hear the term collaboration or collaborative partners or networks when we are discussing the supply chain. It rolls of everyone’s tongue like we all know what we are talking about. So this author took a look at Wikipedia hoping to gain some insight and clarity. According to Wikipedia, Collaboration is a recursive process where two or more people or organizations work together toward an intersection of common goals, and
An aggregate is a collection of items that are gathered together to form a total quantity.

Since collaboration only means different groups or organizations working together towards the same goal, that term can apply to just about any business function. However when we combine it with the word aggregate to form the collective e- procurement term Collaborative Aggregation which was coined by this author in 2006; we arrive at something potentially meaningful.

Collective buying organizations and sometimes share groups often combine purchasing volumes of like products to drive better discounts. Large companies often aggregate their purchases among departments and are more often today doing the same thing across different operating group’s or companies within a larger organizations to drive economy of scale in purchasing.

The unfortunate truth, is that not much out of the box thinking is going on in this process. We are so involved in the process that we can not see the forest for the trees.

Let’s take a look at a small regional supermarket chain as an example. They buy their products mostly from wholesalers who are able to aggregate the volumes of many in order to earn enough discounts to pass on reasonable pricing to the retailer that is slightly better than the retailer might earn on their own, and reserve a little for themselves in order to support their business. These products are normally for resale products. In the not for resale area or supplies, the regional retailer usually does business with local suppliers for a variety of supplies that can include everything from cleaning fluids to paper bags. The supplier normally does good job of managing these products against a number different cost structures to maintain a customer margin that is good for them. As an example if the price of oil is up and the resin market high, the supplier might be making less on plastic products such as plastic shopping bags or t-sacks, soup containers, trash can liners etc. The supplier may however also carry paper products and other supplies that can be mixed together to drive a total customer margin. Retailers can do the same thing. Here’s a partial list of how collaborative aggregation can work.

1. Take a good look at the total list of supplies offered from your primary supplier.
2. Compare that to what you are buying from them.
3. Ask your e-procurement provider for a list of suppliers within a 50 mile radius that can provide the same products or some of the same products.
4. Look at local businesses within a five mile radius of your area that are not in your industry but buy some of the same products such as trash can liners, cleaning fluids, paper products etc.
5. Call them and explain how collaborating might save you both money.
6. Ask for the name of their supplier as they might be different from yours.
7. Determine a test group of products to request bids on.

Safesourcing has a best practices program for this type of collaborative aggregation that is included in our event fees. For a complete list or more information please contact us at www.safesourcing.com.

We appreciate and look forward to your comments

In yesterday?s blog post, we looked at procurement resolution or goal of ways to use new technology to save money. Today we are going to discuss goal number five. “Creating a small business network and collaborating creatively with them is one way to save money”.

We often hear the term collaboration or collaborative partners or networks when we are discussing the supply chain. It rolls of everyone?s tongue like we all know what we are talking about. So this author took a look at Wikipedia hoping to gain some insight and clarity. According to Wikipedia, Collaboration is a recursive process where two or more people or organizations work together toward an intersection of common goals, and
An aggregate is a collection of items that are gathered together to form a total quantity.

Since collaboration only means different groups or organizations working together towards the same goal, that term can apply to just about any business function. However when we combine it with the word aggregate to form the collective e- procurement term Collaborative Aggregation which was coined by this author in 2006; we arrive at something potentially meaningful.

Collective buying organizations and sometimes share groups often combine purchasing volumes of like products to drive better discounts. Large companies often aggregate their purchases among departments and are more often today doing the same thing across different operating group?s or companies within a larger organizations to drive economy of scale in purchasing.

The unfortunate truth, is that not much out of the box thinking is going on in this process. We are so involved in the process that we can not see the forest for the trees.

Let?s take a look at a small regional supermarket chain as an example. They buy their products mostly from wholesalers who are able to aggregate the volumes of many in order to earn enough discounts to pass on reasonable pricing to the retailer that is slightly better than the retailer might earn on their own, and reserve a little for themselves in order to support their business. These products are normally for resale products. In the not for resale area or supplies, the regional retailer usually does business with local suppliers for a variety of supplies that can include everything from cleaning fluids to paper bags. The supplier normally does good job of managing these products against a number different cost structures to maintain a customer margin that is good for them. As an example if the price of oil is up and the resin market high, the supplier might be making less on plastic products such as plastic shopping bags or t-sacks, soup containers, trash can liners etc. The supplier may however also carry paper products and other supplies that can be mixed together to drive a total customer margin. Retailers can do the same thing. Here?s a partial list of how collaborative aggregation can work.

1. Take a good look at the total list of supplies offered from your primary supplier.
2. Compare that to what you are buying from them.
3. Ask your e-procurement provider for a list of suppliers within a 50 mile radius that can provide the same products or some of the same products.
4. Look at local businesses within a five mile radius of your area that are not in your industry but buy some of the same products such as trash can liners, cleaning fluids, paper products etc.
5. Call them and explain how collaborating might save you both money.
6. Ask for the name of their supplier as they might be different from yours.
7. Determine a test group of products to request bids on.

Safesourcing has a best practices program for this type of collaborative aggregation that is included in our event fees. For a complete list or more information please contact us at www.safesourcing.com.

We appreciate and look forward to your comments

In yesterdays blog post, we indicated that we would focus on each of the five goal areas or procurement resolutions for 2009 in more detail. Today we begin by looking at ways to use new technology to save money.

Every year companies spend millions of dollars on new business plans for the upcoming year. In fact most of the fourth quarter is focused on this endeavor. So, there is no excuse for not having your goals written down. The first step to an achievable goal or resolution is to write it down. As such our second resolution from yesterdays post for 2009 was to “Look at ways to use new technology to save money. New open source software applications mean you don’t have to shell out a ton of money for license fees.”

Your current e-procurement solution provider if using current technology should not have to charge you an arm and a leg for using their application. In fact, your prices should be going down. The need to pay increases in license fees or use fees today to have software installed behind your firewall or in a hosted environment is being reduced dramatically as a result of lower development costs for newer versions of applications based on the use of inexpensive or in some cases free open source tools that are being made available on the internet. The resulting applications are then being offered in the form of Software as a Service or even newer buzz words such as cloud computing as usage fee based solutions.

Companies can begin to seek lower fees by simply asking their present provider why their costs have not dropped and are they growing or reducing their IT staff based on newer technologies. The size of this organization alone adds to your providers overhead and as a result to the fees you are paying for using their tools. If a current application has its roots in the 1990’s or prior to the dot.com bust you may well be paying more to use it as a result of the embedded cost to develop it. More current applications that use a variety of freeware tools make it possible for today’s developers to do several multiples of the work a single developer could accomplish as little as five to ten years ago.

Next generation applications should also include a level of inelegance that was not available five to ten years ago. Whether that is simple language versus HTML or the use of intelligent agents, the result should be an easier to use application resulting in shorter cycle times.

What this all leads to for the procurement knowledge worker are lower embedded development costs, lower ongoing support costs and more flexibility relative to customization requests going forward. The net result is that you should be paying less for better tools.

Have this discussion with your solution provider; it may save you thousands or dollars.

We appreciate and look forward to your comments

In yesterdays blog post, we indicated that we would focus on each of the five goal areas or procurement resolutions for 2009 in more detail. Today we begin by looking at ways to use new technology to save money.

Every year companies spend millions of dollars on new business plans for the upcoming year. In fact most of the fourth quarter is focused on this endeavor. So, there is no excuse for not having your goals written down. The first step to an achievable goal or resolution is to write it down. As such our second resolution from yesterdays post for 2009 was to ?Look at ways to use new technology to save money. New open source software applications mean you don?t have to shell out a ton of money for license fees.?

Your current e-procurement solution provider if using current technology should not have to charge you an arm and a leg for using their application. In fact, your prices should be going down. The need to pay increases in license fees or use fees today to have software installed behind your firewall or in a hosted environment is being reduced dramatically as a result of lower development costs for newer versions of applications based on the use of inexpensive or in some cases free open source tools that are being made available on the internet. The resulting applications are then being offered in the form of Software as a Service or even newer buzz words such as cloud computing as usage fee based solutions.

Companies can begin to seek lower fees by simply asking their present provider why their costs have not dropped and are they growing or reducing their IT staff based on newer technologies. The size of this organization alone adds to your providers overhead and as a result to the fees you are paying for using their tools. If a current application has its roots in the 1990?s or prior to the dot.com bust you may well be paying more to use it as a result of the embedded cost to develop it. More current applications that use a variety of freeware tools make it possible for today?s developers to do several multiples of the work a single developer could accomplish as little as five to ten years ago.

Next generation applications should also include a level of inelegance that was not available five to ten years ago. Whether that is simple language versus HTML or the use of intelligent agents, the result should be an easier to use application resulting in shorter cycle times.

What this all leads to for the procurement knowledge worker are lower embedded development costs, lower ongoing support costs and more flexibility relative to customization requests going forward. The net result is that you should be paying less for better tools.

Have this discussion with your solution provider; it may save you thousands or dollars.

We appreciate and look forward to your comments

As this author begins a new year of Safesourcing blogs, it?s no surprise that we take a look at what our procurement goals and resolutions should be for 2009.

I was reading an article in the Arizona Republic today by Andrew Johnson focused on Entrepreneurs titled ?Resolutions for small firms?. This made me think as to why our procurement resolutions need to be that much different regardless of the size of our company. SafeSourcing has sourced product for companies with as few as three stores and companies with thousands of stores. The process and the results are the same and require the same careful focus to drive the desired results. Which could at a minimum include some or all of the flowing…?

1. Lower cost
2. Consistent quality
3. Products that guarantee safety for our consumers
4. Smooth transition to new relationships
5. Quality product specifications
6. Unlimited new sources of supply
7. Well thought out collaboration and aggregation

In the article mentioned above, Mike McDerment CEO of Toronto based online invoicing firm FreshBooks, suggests small business owners do the flowing. This author believes these principles apply to businesses of all sizes.

1. Focus more on existing customers. Cater to existing clients as new business becomes scarcer.
2. Look at ways to use new technology to save money. New open source software applications mean you don?t have to shell out a ton of money for license fees.
3. Make training a priority. Talented workers want to be challenged. Keep them happy by helping them develop new skills.
4. Take a close look at your supplier chain. You can find ways to save money by reevaluating what suppliers are charging.
5. Create a small business network. Collaborating with other businesses is one way to save money.

As your organization develops their procurement goals and or resolutions for 2009, use the above guidelines as a source. Simple goals written down are the most achievable. During the balance of this week, we will focus on each of the above five areas in more detail.

We appreciate and look forward to your comments

While this blogger is enjoying a long winter?s nap through the holidays, please continue to enjoy ?On the twelve days of retail e-procurement Christmas? which is the 12 days from December 25th until January 5th. We will begin to explore the many more gifts e-procurement can provide after the first of the New Year. Happy Holidays to all of you.

We?re sure you all remember the holiday classic? The twelve days of Christmas?. With that tune playing over and over in your head, try substituting the lyrics below to reveal the many gifts of retail e-procurement.

On the first day of Christmas our e-procurement service provider gave to us, a streamlined procurement process. On the second day of Christmas our e-procurement service provider gave to us, more suppliers to source our goods from. On the third day of Christmas our e-procurement service provider gave to us, more reliable market pricing. On the fourth day of Christmas our e-procurement service provider gave to us, consistent product specifications. On the fifth day of Christmas our e-procurement service supplier gave to us, more time for other priorities. On the sixth day of Christmas our e-procurement service provider gave to us, improving quality in our products. On the seventh day of Christmas our e-procurement service supplier gave to us, better supplier education. On the eighth day of Christmas our e-procurement service provider gave to us, a simple award of business process. On the ninth day of Christmas our e-procurement service provider gave to us, support for a better carbon footprint. On the tenth day of Christmas our e-procurement service supplier gave to us, total category e-procurement. On the eleventh day of Christmas our e-procurement service provider gave to us, safer products for our customers. On the twelfth day of Christmas our e-procurement service provider gave to us, great category savings and improving net earnings.

Now, ask yourself if all of these goals are accomplished on your company?s behalf by your present e-procurement service provider.

We look forward to and appreciate your comments. Happy Holidays.

This author knows we have all heard the song ?The twelve days of Christmas? many times. With that tune playing over and over in your head now, try substituting the lyrics below.

On the first day of Christmas our e-procurement service provider gave to us, a streamlined procurement process. On the second day of Christmas our e-procurement service provider gave to us, more suppliers to source our goods from. On the third day of Christmas our e-procurement service provider gave to us, more reliable market pricing. On the fourth day of Christmas our e-procurement service provider gave to us, consistent product specifications. On the fifth day of Christmas our e-procurement service supplier gave to us, more time for other priorities. On the sixth day of Christmas our e-procurement service provider gave to us, improving quality in our products. On the seventh day of Christmas our e-procurement service supplier gave to us, better supplier education. On the eighth day of Christmas our e-procurement service provider gave to us, a simple award of business process. On the ninth day of Christmas our e-procurement service provider gave to us, support for a better carbon footprint. On the tenth day of Christmas our e-procurement service supplier gave to us, total category e-procurement. On the eleventh day of Christmas our e-procurement service provider gave to us, safer products for our customers. On the twelfth day of Christmas our e-procurement service provider gave to us, great category savings and improving net earnings.

Now, ask yourself if all of these goals are accomplished on your company?s behalf by your present e-procurement service provider.

We look forward to and appreciate your comments.

Happy Holidays.

The Greening of the Supply Chain: Mind your Three P?s.

What does it mean to go Green? I was reading the Aberdeen white paper Building a Green Supply Chain from March of this year and believe they may in a concise format have the best glossary of definitions as to the meaning of and impact on what it means to be Green. Their short but effective green glossary defines the following terms.

1. Corporate Social Responsibility (CSR) posits that companies have a responsibility to be social and environmental stewards and that having a positive impact on society and the planet is as important as profit.
2. Green refers to practices, processes and products that have a minimal impact on the health of the ecosystem. The emphasis is on non hazardous recyclable, reusable, and energy efficient products and processes.
3. Sustainability ensures the ability to meet present needs and profits, today, without compromising the ability to meet them tomorrow.
4. Triple Bottom Line (TBL) determines that business has positive impacts on the three P?s: people, profit and planet and is a standard framework for CSR agendas.

It might be interesting to ask CEO?s around the country if they agree with these definitions. Many probably do. The answer would however be a good indicator of a company?s commitment to being Green and not just caught up in green wash.

Yesterday Wal-Mart and Costco announced better than expected results for their past quarter and the stock market was delighted. What if their results had not been as good and same store sales were flat? But concurrently the companies offered guidance of the significant and positive impact they are having on the evolution of a green supply chain. Would Wall Street have reacted in the same way? Personally I think it highly unlikely.

The great news is that every day more and more emphasis is being placed on this subject by companies of all sizes.

We look forward to and appreciate your comments.

For nearly 10 years the primary driver associated with reverse auctions or e-procurement events has been a reduction in cost of goods. In large part, if a retail company saved money it was deemed to be a good event for the retailer and vendor alike. What about the supplier? What makes it a positive for them?

Supply base management is creating a lot of buzz today as the next major addition to strategic sourcing suites. All vendors do not offer this functionality today; in fact some have trouble describing what it is. Although elements of this functionality exist within a variety of surround type service offerings, no one vendor offers complete functionality in this area today. A significant reason for this is the suppliers concern with the thought of being managed. Additionally, retailers, suppliers nor vendors have agreed as to what the correct Key Performance Indicators (KPI’s) should be. As these tools are developed, the most successful supply base management tools will be those that can manage the largest supplier database to the continual benefit of both retailers and suppliers that participate in their events. In a best case scenario, high quality suppliers will get invited to more events, earn incremental business and save retailers money on a continuous basis.

This author believes that the most probable result of this process will be a set of automated robust supplier scorecards that monitor and report on supplier performance versus a range of KPI’S that are applied against well known quality guidelines such as Total Quality Management (TQM), Six Sigma etc. resulting in continuous improvement in e-procurement events and growth in the amount of spend under management by retailers.

As always, we look forward to and appreciate your comments.

For nearly 10 years the primary driver associated with reverse auctions or e-procurement events has been a reduction in cost of goods. In large part, if a retail company saved money it was deemed to be a good event for the retailer and vendor alike. What about the supplier? What makes it a positive for them?

Supply base management is creating a lot of buzz today as the next major addition to strategic sourcing suites. All vendors do not offer this functionality today; in fact some have trouble describing what it is. Although elements of this functionality exist within a variety of surround type service offerings, no one vendor offers complete functionality in this area today. A significant reason for this is the suppliers concern with the thought of being managed. Additionally, retailers, suppliers nor vendors have agreed as to what the correct Key Performance Indicators (KPI?s) should be. As these tools are developed, the most successful supply base management tools will be those that can manage the largest supplier database to the continual benefit of both retailers and suppliers that participate in their events. In a best case scenario, high quality suppliers will get invited to more events, earn incremental business and save retailers money on a continuous basis.

This author believes that the most probable result of this process will be a set of automated robust supplier scorecards that monitor and report on supplier performance versus a range of KPI?S that are applied against well known quality guidelines such as Total Quality Management (TQM), Six Sigma etc. resulting in continuous improvement in e-procurement events and growth in the amount of spend under management by retailers.

As always, we look forward to and appreciate your comments.