Twenty-one steps to running high quality Retail e-procurement events and reverse auctions.

May 23rd, 2013

E-Procurement events are incorrectly referred to by many as just reverse auctions or events when they can take on the complexity and function of the entire RFX process.

Todays post is from Ron Southard, CEO at SafeSourcing!

At any rate and regardless of the specific naming convention used there are certain rules which when followed will create higher quality e-procurement events for the Retailer as well as the Supplier?

Following these steps will result in maximizing savings or cost avoidance regardless of market conditions!

The importance of focusing on a clear process will also increase event participation at the supplier level. As a result of paying attention to quality and detail your existing trading partners and potential new sources of supply will respect your process and it will keep them coming back in the future to compete for your business again.

1. Executive sponsorship is mandatory from the C- Suite.
2. Get the entire buying organization together for a kickoff and discovery session.
3. Provide an over view of what you are going to be doing and the impact it can have on the company. Use company financial models.
4. Discuss and agree on success criteria.
5. Every event will not be a homerun. Singles and doubles score runs.
6. Create a fun environment.
7. Consider prizes for the most creative use of the tolls by functional business area.
8. Use scorecards by department with percent of savings.
9. Discuss the meaning and importance of corporate aggregation.
10. Hand out event templates to gather existing product specifications.
11. Put a time requirement on data collection.
12. Gather an accurate list of your present suppliers.
13. Work with your sourcing solution provider to identify a top 100 list of opportunities.
14. Develop a Calendar the events.
15. Prioritize by dollar value, date and strategic value.
16. Conduct department level detailed discovery meetings of 30 minutes to an hour.
17. Investigate existing contract language.
18. Look for auto renewal (evergreen) language roadblocks.
19. Determine alternate sources of supply with your sourcing solutions provider company.
20. Develop an event rules and instruction template and post with each event.
21. Develop a category and event based strategy

Although these steps are not all encompassing, they provide a format for getting started that offers the best opportunity for reduction in cost of goods, expenses and improvement in corporate earnings. Be sure to combine this with a business partner that knows your business.

If you’d like help building your strategy, please contact SafeSourcing.
 
We look forward to and appreciate your comments.

 

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There has never a better time to Source. Part II of II!

May 22nd, 2013

Once you have looked at the commodity markets, now take a detailed look at your supplier’s financial data!

Today’s post is by Ron Southard, CEO at Safesourcing.

Once you have looked at the commodity markets to determine historical movement since you last sourced your category and the future outlook, the opportunity to drive your prices lower is also based on other factors such as the financial performance of the companies you may want to invite to participate including your incumbent supplier.

Using an example from EDAGR as we discussed yesterday for an unnamed supplier we have determined the following data. The unnamed supplier’s sales have risen consistently from 2010 through 2012. In particular, sales rose 19% from 2011 to 2012. Gross profit during the same period rose 44.8% and net income rose 90%. All of this is supported by an increase in unit sales of 26.6%. I know your next question, what does this mean?
1.   We’ve learned that even in the face of a slightly rising market which also has lower futures that your potential supplier was able to produce enviable numbers. Their Sales and Margins are both up so they have increased sales and reduced the cost (net income is up) of sales at the same time. This is a key indicator.

2.   As a result of the aforementioned numbers, it would indicate that they have room to move on price for selected customers if the new business is important to them or a net gain. Remember they still have to grow to please their shareholders. There is often margin set aside for winning new business and they are not the incumbent.

3.   Finding suppliers with these metrics of which there were several also suggests that your incumbent supplier may have to discount to a certain extent in order to keep your business. As such, an award here may help to avoid switching costs and make a slightly higher bid a better total deal, so do the math.

If you’d like to learn more about SafeSourcing spend analysis process please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments

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There has never a better time to Source. Part I of II or Maybe III?

May 21st, 2013

The commodity markets are telling you to check your spends right now! So review those contracts A.S.A.P.

Today’s post is by Ron Southard, CEO at Safesourcing.

Customers always ask me when the best time to source a particular category is. The answer always requires some thought and fact based research relative to what drives that particular category. For the most part this means staying on top of the commodity markets to begin with. However there are other indicators for those procurement knowledge workers that are willing to take the time to do some basic research.

I was reading the Wall Street Journal today and noticed an article in the MONEY & INVESTING section titled Oil Out Of Sync With the Market by Christian Berthelsen. The first sentence of the article says, “Prices of many commodities are down this year, but U.S. oil futures have rallied”. Here’s the key in that sentence. “Prices of many commodities are down this year”. Forget about oil for the moment. Yes it does impact many areas of procurement. And yes the futures for oil are up. This is mostly because hope springs eternal that demand will rise as the global economy continues to improve. Remember that other commodities are also influenced by oil. As a simple example, you can’t harvest Corn or Soy without fuel. So when you look at commodities you have to determine if the price is trending down more than the price of another commodity that impacts it is trending in the other direction. Let’s assume that without going through a math formula that you determine to source a category that is trending down by a decent
percentage like five or six percent. The initial decision here would be to take a run at this category. The next question however should be what else can we take a look at in order to reinforce our hypothesis that there is an opportunity to reduce our cost?

The answer to the above question is to take a detailed look at your supplier’s financial data! There are a number of ways to do this for both public and private companies. In the US, foreign and local companies file their 10K’s and 10Q’s and other data periodically. This data can be accessed on the US Security and Exchange Commission Website EDGAR.  All companies, foreign and domestic, are required to file registration statements, periodic reports, and other forms electronically through EDGAR. Your next question should be, what data should we look at and what can we determine from that data?

If you check back tomorrow for Part II, I’ll share that information with you.

If you’d like to learn more about SafeSourcing spend analysis process please Contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments

 

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Do you want onion with that?

May 20th, 2013

Is your procurement department being treated like onions where it was once included as part of the condiment package but now is an option for other departments?

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing. Mark asks ”

It wasn’t too long ago that restaurants and quick service restaurants included onions on things they served as part of the package.  If you didn’t want them included you needed to make a special request. Somewhere along the line onions must have gotten a bad name because more and more when you order something they tell you in advance and give you the opportunity to remove them from the deal right then and there.

It occurred to me that I have begun seeing this mindset frequently in the procurement world as well, as departments are now getting to choose when the procurement department gets brought in and at what level they are participating.  Like the onion, I don’t think procurement teams have deserved their new fate, but like it or not, it is the way many companies now operate.

Today we will be looking at some ways to deal with this change using methods not unlike a chef would in order to keep the onions in the dish and keep the customer happy.

Understand the onion – One of  the many  issues that many procurement departments are dealing with is that they do not truly understand the issues other departments have with involving them. Without knowing why someone is hesitant to include you it makes it difficult to counter on why you should be included.  Arguments like “you only care about the lowest price”, “This project is too complicated”, “we are too far along”, “this isn’t a commodity” are common and how they are responded too must be addressed in advance by your team so that you can acknowledge the other departments’ hesitancy.   Please review the SafeSourcing blog on handling objections to help with this.

Transform the onion – In my family I have people who would not touch a raw onion to save their life but have no problem eating onion rings (I know, I don’t get that either).  By transforming the onion it becomes an agreeable object.  There are times when procurement teams need to undergo a similar transformation by assisting departments in ways that help them while still achieving your goals of controlling costs.  Working on requests for proposals that offer vendors a best and final price adjustment can help everyone achieve their goals in a new way that does not threaten the integrity other departments are hoping to keep.

Don’t tell on the onion –  I have watched people cooking meals sneak unwanted ingredients into the recipe masterfully in ways that no one would know only to be undone by feeling the need to tell their secret afterwards.  Telling someone they just ate an onion they didn’t know about rarely leads to them to start liking onions.  For a procurement professional this means when you get an opportunity to help a department like IT run a project on enterprise software don’t ruin it by touting about how you reduced the cost, instead focus on how you helped that team find the best solution for the company while getting the vendor to include free training and a reducing the costs by 12%.   This lets the business owners hold onto the fact that the decision was truly made based on value and not just price which is really how every project should be.

If you are a procurement team struggling to get included in all of your company’s spend projects we at SafeSourcing are constantly helping our customers and can assist you by explaining our recommended strategy for helping departments that historically not wanted “help.”

 For more information on these strategies or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today

We look forward to your comments.

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It takes a team!

May 9th, 2013

Sometimes we just need an outside opinion??.

Today?s post is from?Steve Schwerin an account manager at Safesourcing.

Other times, we also need someone in a position to help us act on that opinion.? Procurement professionals are in position to offer both.? What I am referencing to here, are situations like the recent drop in gold prices.? Whenever I see an article like the recent article, ?Gold?s peak seen by BofA as end to China?s leadership in markets? on bloomburg.com, I think of indexes or how commodities affect prices of finished products.?

Were you someone who thought gold would never come back down from its charge past $1,900 per ounce back in 2011?? I had not given much thought to the price of gold for a while mainly because I was one of those people who figured gold was up around $1,800 to stay.? It wasn?t, though.? It recently dropped to $1,386.35 per ounce.? Does it signal something??? A broad drop in commodity prices?? A prolonged retracement in the price of gold itself?? Who knows??

The point is, the price of gold could go in either direction depending on developments.? This is where indexes and contract management benefit your business.? Sometimes, you have a little more at stake than a curious thought about the price of gold.? There are two things going on here.? We in the procurement industry may have helped you achieve indexed pricing allowing for potential price adjustments if an underlying commodity experiences a large price swing.? Who is going to remind you to act on this, though?? This is where that outside opinion of someone who can help you act comes into play.?

Here at SafeSourcing, our eProcurement tools include contract management tools that can alert you of not only renewals, but the potential to realize savings due to index fluctuation.? Things like index pricing sound easy enough to manage.? One problem is that we have all been in situations where we ?knew? something would happen only for the opposite to occur.? In the meantime, we are busy running your businesses, and are not in a position to take advantage of clauses like index clauses.? This can occur despite our foresight to include the index clause in the first place!

Let us here at SafeSourcing help you realize the benefits of good foresight.? Contact your SafeSourcing customer service representative at 1-888-261-9070 to find out how.

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Sourcing Freight inbound or outbound can be very tricky! Make sure you know what you are asking for.

May 8th, 2013

Is the inclusion of freight in a reverse auction equal to the net landed cost?

The simple answer is no, and quite often this can be the most complicated part of any e-bid, reverse auction or traditional procurement process.

Sourcing freight lanes or shipping lanes is a project all its own. A shipping lane simply put is the general movement of products between two areas. The first is the departure area and the other is the arrival area. This gets more complicated when we start to discuss full loads versus less than full loads and haul back opportunities that accomplish the optimum in a transportation cost model.
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When you structure your reverse auction, simply asking for a net landed cost or assuming that means free freight or free freight within a certain radius of the origination point is just not that easily accomplished.

By example, I?ve seen companies include language in their Terms and Conditions that state all freight must be free for the first 500 to 1000 miles.? This can work to reduce freight charges, but the rest of the event needs to be set up very carefully or you just end up robbing Peter to pay Paul.

If you really want to understand your net landed cost, then you should have line items in your event that are specific, measureable and bid on separately. When a company says they want a net landed cost what they are referring to is the cost of a product or products plus all of the relevant logistics costs, such as transportation, warehousing, handling etc. In other words, what?s my cost when it gets here or where we want it?

If you want to drive the best pricing and service possible you need to understand what you are asking for and make sure it is clear in your specifications and terms and conditions.

If you?d like to learn more about reducing your total inbound and outbound shipping costs, please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

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Vendors: We Need More Toothpaste Squeezers!

May 6th, 2013

How can you find more ways to conserve the products that you purchase?

Today?s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing. Mark asks

In my house we try to conserve and be ?green? where we can but the other day I noticed a product in our house that I had seen a hundred times but never thought much about.? The Toothpaste Squeezer (see below) allows you to squeeze every last ounce of toothpaste out of the tube. Over the course of my life this device will probably only save enough toothpaste to result in a couple of free tubes but the process by which it conserves was fascinating to me and I wondered what other companies are developing products and services to help conserve.?

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Water ? The Energy Policy Act of 1992 set new guidelines for how much water and energy products should using.? Since that time companies continue to improve on these standards by developing new water conserving products for personal and commercial use.? Businesses now have the opportunity to become WaterSense partners (An EPA Partnership Program) helping them to join with other companies to implement water conserving products and programs.? Along with these new products, many companies are contacting 3rd parties to conduct water audits of their business and make recommendations for how they can conserve in even better ways.

Energy ? Energy conservation has been at the front of the ?green? movement since its beginning.? Opportunities for rebates from utility providers and the Federal government have given many companies increased incentives to be smarter about their conservation of energy and there are several consulting companies that can help find these opportunities.? One way businesses are making huge strides in conserving energy is by implementing energy management software (EMS) solutions.? These solutions can monitor your company?s energy use and then control the levels of energy in real-time savings millions of dollars a year.

Materials ? In a recent program performed by IBM for its shipping and distribution a complete analysis and redesign of their packaging led to an annual savings of $4.3 million dollars.? The combination of packaging redesign, new packaging equipment and product redesign allowed for massive material conservation for the organization.? Several consulting services provide assessments of a manufacturers business and engagements that will help them achieve similar results.? These new software and equipment products are helping companies save billions of dollars each year.

At SafeSourcing we are constantly helping companies who want to try and find ways to conserve resources in their organizations.? Through new products, new services and new processes these savings are helping businesses grow and in some cases, stay in operation.? For more information on how we can help you, please contact a SafeSourcing Customer Service Representative.? We have an entire customer services team waiting to assist you today

We look forward to your comments.

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Effective Supplier Data Management Improves Procurement Process

May 3rd, 2013

The title of this post is taken from an article published in Technology First by the same title!

The article?was written for the April 2011 edition of Technology First by Ron?Effective Supplier Data Management Improves Procurement Process CEO of SafeSourcing and Tim Hull President and CEO of? TDH Marketing in Dayton Ohio.

The following excerpt is from the above titled article.

There is more to an effective e-procurement program than cost reduction.

While buyers frequently record cost reductions in the range of 30% to 40% when utilizing an e-procurement or reverse auction process, the issues of quality and performance cannot be overlooked.

The foundation for successful e-procurement is the supplier database that has been developed and is maintained by the e-procurement service provider. Significant time and capital investment goes into the development of an effective supplier database. It provides the buyer with a recognizable advantage in terms of classification of supplier capabilities, historical performance and the quality of the products provided.

The scope, accuracy and functionality of the supplier database are critical components for buyers when using e-procurement. These elements allow buyers to identify the best sources of supply quickly and cost-effectively, oftentimes uncovering alternative sources that were previously not even considered. This is one of the major advantages of including the services of an online reverse auction service provider like SafeSourcing in the procurement process. Supplier data management is an excellent example of pairing
technology advancements with intellectual property to produce an effective, economical support tool that benefits both suppliers and buyers ? better pricing, better quality and better sources of supply.

To view the article in its entirety please follow the link, Effective Supplier Data Management Improves Procurement Process.

We look forward to and appreciate your comments.

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What is the Certified Professional in Supply Management® (CPSM®?)

May 1st, 2013

What is your company doing in order to educate your supply chain and procurement professionals?

Professionals that work in the supply chain should be encouraged to seek CPSM qualification.

The Certified Professional in Supply Management® is the qualification that supply management professionals strive to earn. The CPSM® will be relevant internationally and reflect the expanded knowledge, skills and abilities needed to be a successful supply management professional.
 
Certification for the CPSM is offered by the Institute for Supply Management or (ISM) which was founded in 1915 and is the largest supply management association in the world as well as one of the most respected. ISM’s mission is to lead the supply management profession through its standards of excellence, research, promotional activities, and education. ISM’s membership base includes more than 40,000 supply management professionals with a network of domestic and international affiliated associations. ISM is a not-for-profit association that provides opportunities for the promotion of the profession and the expansion of professional skills and knowledge.

Supply chain workers should be proud of their profession and earning your CPSM is one way to brag about it.

We look forward to and appreciate your comments.

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What is the Certified Professional in Supply Management? (CPSM??)

May 1st, 2013

What is your company doing in order to educate your supply chain and procurement professionals?

Professionals that work in the supply chain should be encouraged to seek CPSM qualification.

The Certified Professional in Supply Management? is the qualification that supply management professionals strive to earn. The CPSM? will be relevant internationally and reflect the expanded knowledge, skills and abilities needed to be a successful supply management professional.
?
Certification for the CPSM is offered by the Institute for Supply Management or (ISM) which was founded in 1915 and is the largest supply management association in the world as well as one of the most respected. ISM’s mission is to lead the supply management profession through its standards of excellence, research, promotional activities, and education. ISM’s membership base includes more than 40,000 supply management professionals with a network of domestic and international affiliated associations. ISM is a not-for-profit association that provides opportunities for the promotion of the profession and the expansion of professional skills and knowledge.

Supply chain workers should be proud of their profession and earning your CPSM is one way to brag about it.

We look forward to and appreciate your comments.

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