Managing Change While Managing Costs

July 10th, 2023

Striking a balance between change management and the desire for cost reduction.

 

 

Today’s post is our archives at SafeSourcing, Inc.

For our customers, we are primarily focused on delivering cost savings. Generally, in eProcurement, we aim to provide an apples-to-apples comparison so that our customers can make an award decision relatively easily based on the results of an online RFx Event. We do that very well and average over 24% savings. Sometimes, however, our customer is looking to reduce their category costs while also making changes to what it is that they are purchasing.

The good news is that the goals of reducing costs and making a change are not mutually exclusive. While every situation will be different, here is how one customer of ours recently accomplished both goals. The customer, a retailer, knew that they would be phasing out certain plastic products that use regularly. They have a significant annual spend in this category currently. Their goal was to discontinue the use of plastic and switch to alternative products that are more environmentally friendly including biodegradable and reusable options. Because they had carefully planned this change, we were able to develop a plan to work together to manage the change effectively while still taking full advantage of eProcurement tools to reduce costs along the way. Below is a quick summary of how we did this.

  1. Reduce the cost of the current plastic products using a live Request for Quote (RFQ)so they are not overpaying for the remainder of their orders. This generated a substantial savings.
  2. Develop a Request for Proposal (RFP)to attain a better understanding of the specifications, capabilities, and pricing for the alternative products.
  3. Review the RFP results and establish the specifications for the alternative products that would ultimately replace the plastic products.
  4. Host an RFQ to compress the pricing for the alternative products
  5. Test samples for the alternatives, make a decision, and coordinate the roll out of the new products to coincide with the timeline of phasing out the plastic products.

The most important part of this process was the planning. SafeSourcing and the customer coordinated the process and took the steps above in accordance with that plan. In contrast, when we see customers attempt to manage change through the eProcurement process without a plan, we tend to see results that are less impressive. They will likely have savings, and they will likely make a change, but they will not strike the ideal balance between the two.

If you’re interested in learning more about our contract management tool or any of our full suite of Procure to Pay tools,  please contact SafeSourcing

 

 

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A timely Repost of How do you control Maverick Buying?

July 7th, 2023

Who makes, better yet who does not make buying decisions at your company?

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc.

That is a two-sided question, isn’t it? When a product or service is under contract, and someone is then assigned the issuing of P.O.’s or ordering from a contract, they are not the buyer? And what if other parts of your company do not come to that person when they run out of something? Let us say it is as simple as copy paper. How do you are Work from Home associates restock when they run out? This is a pretty simple issue to address, however, most do not, and all of your negotiations buy an actual buyer, not user are wasted.

Maverick buying refers to any company or employee purchase that does not meet a company’s purchasing policy. This includes using off-contract methods of procurement and non-authorized purchases. Also called Rogue Purchasing, Maverick buying, for example, is when employees buy office articles at the local store around the corner instead of from the supplier with whom the company has negotiated a framework agreement and, therefore, specific discounts. Maverick buying makes the agreement with the supplier more expensive because the volume of the framework agreement is decreased or the goods are purchased at too high a price.

SafeSourcing is an eprocurement company that operates across multiple industries. We endeavor to act as an additional source of industry information on our website with our SafeSourcing white papers, daily blogs, SafeSourcing Wiki. We also monitor daily Industry Updates and Alerts as well as audit and offer vetted procedures to ensure contract compliance and utilization. To learn more, please contact a SafeSourcing customer services associate.

 

 

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Procurement or Cost Control     

July 6th, 2023

It pays to be specific about what your real goals are and then do the hard thing.

 

Today’s post is from our Archives at SafeSourcing Inc.

While everyone is still talking about inflation and what, if anything, needs to be done to fight it, the conversation will always go to costs. Do you feel like you’re forever fighting back against cost increases and never making any headway? The job can feel awfully Sisyphean.

 

 

 

 

 

 

 

 

 

That said, many in procurement and many of the larger providers and content creators in the space aren’t talking so much about cost control. Much of what we hear falls more into other areas of procurement like strategic sourcing, forecasting and planning, inventory management, and other topics.

Why then, if the whole world is talking about costs, are we spending so little time on cost control?

Cost control involves managing procurement costs throughout the process to minimize waste, reduce expenses, and prevent cost overruns. This includes identifying cost-saving opportunities, optimizing the use of resources, and monitoring costs in real-time.

My theory is that achieving cost control is hard, especially over the past couple of years. The hard things often take a backseat to the things that are easier to do. If you’re the one who’s job it is to truly control costs, you may feel like Sisyphus and you might imagine yourself a little like the poor person in the image above.

Attaining your cost control goals as part of your larger procurement objectives is not impossible, even if it may be hard and does seem like a stretch. All good goals require stretching and hard work.

SafeSourcing has been delivering for our customers against cost control goals. We know how to do it, including recently and have plenty of great examples, resources, and techniques to share to help you do it For more information, please contact SafeSourcing.

 

 

 

 

 

 

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Happy 4th of July Weekend 2023!

July 3rd, 2023

Independence is a wonderful thing to be celebrating with your family and friends. SafeSourcing wishes all of our friends a spectacular holiday weekend. Be Safe!

 

 

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What is the benefit of a ranked reverse auction?

June 29th, 2023

The benefit to the host is that it encourages an increase in vendor activity.

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc

A tool that can be effective when running a reverse auction is called ranking. While this feature is not used all the time, it can be of strategic importance when trying to get to the best net landed cost for products that have very slim margins at the supplier level. The feature can be set up to let all suppliers know where they rank or a select number of suppliers like the top five (5). The feature can also be turned on for a specific time during the auction like in the last 5 minutes. As an example, you might have tight bidding for a particular commodity-based product. Only the low bid vendor knows that they are indeed the low bid and resultingly is not entering any more price adjustments. If ranking is deployed, vendors can find out if they are 2nd or 3rd etc. and this may entice them to try one more or make multiple more entries if their desire to win the business is strong enough. This is particularly true if the bidding activity has been robust to a point with the low-price indicator switching back and forth between multiple vendors.

It is the deep understanding of markets along with the use of tools like ranking amongst others that are included in strategy reviews with our customers that allows SafeSourcing to regularly exceed customer expectations across all spend areas. Our average annual savings against all categories are more than 24% beyond what you can negotiate on your own.

SafeSourcing is a Procure to Pay SaaS based provider of a number of e-Procurement solutions and associated white glove services that are part of our SaaS offered SafeSourceIt™ eSourcing suite.

For more information, please contact a SafeSourcing Customer Services Associate.

 

 

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A REPOST, Maximize your savings with eProcurement

June 28th, 2023

Here are two ways you can make sure you are getting the most savings from your eProcurement investment.

 

Today’s post is by Dave Wenig Sr. Vice President Sales, and Services at SafeSourcing Inc.

Now that you are using eProcurement as part of your company’s procure-to-pay initiatives, you will likely want to get the most ROI from the investment and focus on projects that will be the most impactful to the company’s results.

There are two ways I always advise a client to make sure they are able to reach their goals.

First, source as much as you possibly can through RFQ. You are already buying the product or service, so take one last step of making sure the vendors also go through an RFQ process. SafeSourcing will do most of the work to prepare using whatever specifications or requirements you are already using and SafeSourcing will also work with all the vendors. There is not much more you need to do, but the upside for savings potential vs. traditional negotiation is dramatic. Bottom line: the more dollars you put through your RFQ solution, the more savings dollars you will generate.

Second, once you have concluded the RFQ, you will have an opportunity to make sure you are getting the most from that effort. Take that opportunity. In a typical SafeSourcing RFQ, we are going to report on many metrics. Let us just focus on two, All Low Quotes Savings and Low Company Savings. The All-Low Quotes Savings is a figure that if you were able to split the award and offer each item to the lowest vendor, that would be the savings. In RFQs with many items, it is often higher than Low Company Savings. Low Company Savings is a figure that represents the highest overall savings from one vendor. The piece of advice post-RFQ is to do whatever you can to close the gap between Low Company and All Low Quotes to get your award of business as low as is possible. SafeSourcing can help in that stage too.

That is just two tips to maximize your savings, but if you follow these, you will be setting yourself up for success and finishing strong.

For more information, please contact SafeSourcing.

 

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Same Question a Year later! Are you paying the same for less?  

June 27th, 2023

With all of the prices rising some companies are deciding to keep the prices the same.....

 

Today’s post is by Troy Lowe; Vice President of Development at SafeSourcing.

With all of the prices rising some companies are deciding to keep the prices the same but reduce the amount of product that goes into the packaging.  If you are not yet aware of this, it is called shrinkflation.  Shrinkflation is the practice of reducing the size of a product while maintaining its original sticker price.  This practice is usually used by companies in the food and beverage industries to increase profit margins or maintain them when there are rising input costs.  This practice is not new but it does escalate during times of inflation.  Companies are trying to find ways to deal with the rising costs for their ingredients, labor, packaging and high cost of transportation.  One of the main reasons for this practice is that manufacturers know that customers will notice if a product increases in price but they may not realize that a package may contain less product.  Most consumers do not pay attention to the weight, quantity or number of sheets contained on a roll of toilet paper.  But they would however notice if the price increased from their last time of purchase.  So when you are out shopping next time you may want to pay attention to the products you purchase and maybe search for an alternative one instead.  Below are some products that have been reduced.

  • Toilet Paper Rolls
  • Paper Towel Rolls
  • Tissues
  • Chips
  • Gatorade
  • Ice Cream Cartons
  • Yogurt
  • Family Size Boxes of Cereal
  • Candy Bars
  • Coffee
  • Cat Food
  • Dog Food
  • Trash Bags
  • Toothpaste

Interested in learning how SafeSourcing can help your company save money during these challenging times?  If you would like more information on how SafeSourcing can help you, please contact a SafeSourcing Customer Service representative.  We have an entire team ready to assist you today.

 

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You can still improve gross margin and net earnings substantially in this market.

June 26th, 2023

An oldie that is still true, and SafeSourcing knows how to do it! Do You? Now let’s get to the financial example.

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc

Example: Prove me wrong if you think you can!

Assume a $150M Retail Company with industry earnings of just one percent or $1.5M. Additionally cost of goods for this company is 70 percent or $105M. Let’s also assume this company were to only source ten percent of their for-resale COGS or above the gross margin line spend or roughly $11M. With below industry average savings of only ten percent, total savings generated would be $1.1M which is a direct impact to net profitability. If all other segments of the P&L perform to plan and all savings are recovered during the same business calendar year net profitability would increase to $2.6M or a 73% improvement.

NO BS Here! If you don’t believe me, I will be glad to personally sit down with your CEO or CFO and Finance team and prove it to you! Imagine what else you could do to earnings if you also attacked your Expense in the same way.

Companies can begin with SafeSourcing almost immediately (SaaS/Cloud offering) with no risk (Cost Neutral Pilots) and no IT involvement at all, why don’t more companies use eProcurement tools. That’s a great question! Probably because they are embarrassed to not already be getting these results.

If this author were you, I just could not ignore this type of opportunity. If you’d like to learn more, please contact a SafeSourcing Customer Services Account Manager. Or me.

We look forward to and appreciate your comments.

 

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Why don’t you use Reverse Auctions?

June 23rd, 2023

All the large companies you compete with are and have been for quite some time.

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc

 Understanding a Reverse Auction according to Investopedia

In a reverse auction, the buyer puts up a request for a required good or service. Sellers then place bids for the amount they are willing to be paid for the good or service, with the winner being the seller prepared to accept the lowest amount.

Reverse auctions gained popularity with the emergence of internet-based online auction tools that enabled multiple sellers to connect with a buyer on a real-time basis. Today, reverse auctions are used by large corporations and government entities as a competitive procurement method for raw materials, supplies, and services like accounting and customer service.

Here’s a real simple truth! If you are not using this tool, you are paying way more than you might think. And your team cannot get anywhere near the pricing that reverse auctions generate. I watched a large company yesterday reduce the cost of any office supply category by 31% beyond what they negotiated.

You can view my comments from an earlier post titled Just what do we mean by eProcurement White Glove Services that supports why our savings average over 24% better than what companies can do on their own most of the time.

SafeSourcing is a Procure to Pay SaaS based provider of a number of e-Procurement solutions and associated white glove services that are part of our SaaS offered SafeSourceIt™ eSourcing suite. That includes our SafeSourceIt™ Global Supplier Database  that includes over 557,000 vendor/suppliers.

To learn more, please contact a SafeSourcing customer services associate.

 

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What are you and your procurement team looking at? CPI, Inflation, Cost of Goods?

June 22nd, 2023

If you are, what on earth are you waiting for.

 

Today’s repost is still relevant from Ron Southard, CEO at SafeSourcing Inc.

So many companies in so many industries are struggling with their supply chain today. Most of the blame is on the Pandemic, supposed government assistance and other calamities such as weather and wildfires. All of these have had an impact that has resulted in poor labor pools and shrinking commodity availability. This has resulted in a historic increase in the Consumer Price Index that looks like it will not slow anytime soon.

The Consumer Price Index CPI in the United States is expected to be 273.16 points by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. In the long-term, the United States Consumer Price Index (CPI) is projected to trend around 281.24 points in 2022 and 286.59 points in 2023, according to our econometric models. That’s a further 5% increase from where we sit today. So, guess what, your prices for products and services are not going down any time soon. To believe that they are is folly. Waiting for them to or for the markets to stabilize is just not a sound procurement strategy.

However, that is just what many companies are doing. There is a hunker down philosophy until we get this figured out. To me, that is a cop out strategy that supports doing less with less. Less employees, so let’s source less stuff. Let’s stick with current vendors even though they are raising prices almost daily and based on the above numbers will continue to into the foreseeable future.

What’s the answer? It’s pretty simple actually. Augment your staff with companies that have the tools and the knowledge to mitigate your workload and improve your costs and service. Companies like SafeSourcing. Just today I watched a company use our resources to source sanitary wipes. Eleven (11) suppliers participated in the bid. The low supplier offered a cost reduction of 21% on all items. More surprisingly the total of all low quotes would reduce costs by a staggering 36% offering some additional negotiation prior to award. This is in an up market. We see these types of results regularly. Because of our SafeSourceIt™ Supplier Database, we know where the suppliers are that can offer you the  best pricing and best service levels that support your needs. Because we run categories dozens of times in a year, we may well understand current issues in the marketplace better than you do.

So, if you want to keep paying higher and higher prices and charging your customers more and maybe losing some, keep doing things the same way. If you really would like to lower your costs in a historically up market, contact SafeSourcing  because we can help.

Resources

Trading Economics

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