Are you wining your supply chain battles?

August 2nd, 2012

Throughout history, battles and wars have been won and lost based upon the strength of ones supply chain.

It could be said that much of today’s thought relative to supply chain management is rooted in the history of human expansion. In fact there are many examples of how expansion which many times happened or was planned in conjunction with the conquest of others was either successful or failed based on the ability to keep supplies flowing to the expansionists or armies associated with them. If you are a growing retailer with your own expansion plans some careful thought as to your supply chain and the necessary contingencies may be your most important activity

According to Wikipedia in military science, maintaining one’s supply lines while disrupting those of the enemy is a crucial—some would say the most crucial—element of military strategy, since an armed force without resources and transportation is defenseless.

Obviously this takes us back to our opening question; are you winning the supply chain battle? What would you do today if one or more of your current suppliers were to go out of business or enter bankruptcy (a real possibility)? Have you made plans as to how your company would replace the goods or services provided by these suppliers?

An example that might resonate happened during 2009 during an H1N1 (swine flu) outbreak in the United States. Drug store chains during that time  became the first stop for much of the population in search surgical masks or other anti bacterial supplies. Many retailers ran out of stock and many suppliers were unable to meet the increased demand. Most retailers were not sure where else to turn for additional supply based on the increased demand. The trickle down effect of this could have gone on an on well beyond the impact of surgical masks or anti bacterial product shortages.
Is winning the supply chain battle important? You bet it is! Do you have the right tools in place? Where would you look for additional sources of supply? Where would your customers look if you don’t solve that problem?

If you’d like help answering this question, please contact a SafeSourcing customer services representative.

We appreciate and look forward to your comments.

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I’m tired of hearing the same old thing out of many CEO’s aren’t you?

August 1st, 2012

This is an old post from several years ago, but I still like it and we are starting to see a lot of lay offs again. We can do better.

Does this sound like something you have heard before or in fact heard year after year? “XYZ Company announces the following personnel cuts due to the soft economy, increased competitive pressure or a decline in sales.”

This author has spoken to this subject a number of times. Earlier today I was speaking to a friend that sits one level away from his CEO. During the discussion he said, “I am so tired of hearing companies announce headcount reduction as their strategy for improving company results. What ever happened to creativity? A lot of times, the best ideas work their way up through an organization and result in a high level executive getting credit for a lower level individuals creative thinking. In fact, it happens all of the time. Headcount reduction creates a long term negative impact on companies as they lose these creative thinkers to a headcount reduction strategy. I sometimes think there must be an MBA course titled; “How to announce head count reduction as your strategy for tough economic times or poor results 101”.

The reality is if we want to put a creative procurement spin on this COGS or Cost of Goods Sold has not dropped dramatically if at all in any retail segment during the last ten years. It is the largest line item on any Retailers P&L including payroll and benefits which are expense items. There are also a number of expense items that are not included in COGS that could be addressed and have a resulting impact on results almost immediately beyond payroll reduction.

In three recent posts Bankruptcy Sucks Part I, Part II and Part III,  I discussed the financial impact of just assigning a reasonably small percentage of cost of goods to e-negotiation tools in order to compress pricing. And yes the fact is there may be switching related costs associated with this. What is more difficult, laying off 10% of your work force or switching suppliers?

Business is not same old same old. Successful enterprises require creative thinkers that evolve the business on an almost daily basis. If the first place you review during these economic times is your payroll or benefits costs as an opportunity to turn things around, there are better alternatives.

We look forward to and appreciate your comments.

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When do you buy lobsters?

July 31st, 2012

Due to environmental factors, there has been a huge change this year causing an increase in the supply of lobster.

You might have heard that the lobstermen in the northeast are experiencing tough times right now due to the extremely low prices they are able to get per pound recently. Due to environmental factors, there has been a huge change this year causing an increase in the supply of lobster.

This scenario is a real life example of how environmental and other external factors have the ability to dramatically affect the cost of the products that you are purchasing every day. From a procurement standpoint, there are steps that professionals can take that will help enable your company to protect itself from price increases and also to benefit from price decreases caused by these factors. So what can you do?

1. Ensure that your contracts contain a mechanism to tie your prices to the market. Indices are a great way to be certain that your pricing will remain consistent with current market conditions.
2. Do not include evergreen language. The terms are typically much worse than you would get through your existing eProcurement process.
3. Engage your eProcurement partner to monitor market conditions. They will help you determine when you should take your category to market.
4. Listen to and seek out seasonal recommendations. Reliable historical data is available that will provide great suggestions of the optimal timeframes to consider categories.

To learn more about your seafood sourcing needs, contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

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When the Internet Runs Out of Addresses!

July 30th, 2012

With the Internet Protocol version 6 just newly being launched and poised to succeed IPv4 do you know what it will mean to your organization?

Today’s post is by Mark Davis; Sr. Vice President of Operations and CTO at SafeSourcing.

Whether you realize it or not, every device in the world that connects directly to the internet must receive an address that identifies it to the rest of the internet community.  Many people may recognize numbers that look like “123.456.321.987” which are numbers that come from the current IPv4.  Based on 32-bit addresses there are about 4.2 billion available addresses which are about to be all assigned.  The new IPv6 will have about 3.4 x 1038 new addresses for internet capable devices.

So aside from the increased pool of new addresses, how will this change be different than what is being used today and how will it affect your business.  In today’s blog we will be looking at some of those differences.

Software  – The majority of what will change with IPv6 will be software or firmware related.  For most people the affect will be almost seamless as home use devices care only about the end result being returned and will not care how it gets there.  All major operating systems are currently designed to support the new protocol so if you are merely requesting data the affect will be meaningless, however if you have an online website that your customers access you will need to make sure that the both protocols are supported by your tools and applications.  The transition does not need to occur overnight but it should begin being planned now to ensure you do not lose any customer connectivity.

Hardware – As stated the majority of what will be affected is software or firmware (the software contained on a hardware device).  The only concern with hardware will be with equipment that is incapable of being upgraded with firmware in order to support the new protocol.  Routers will be the biggest area of concern here.  Generally if the equipment is less than 6-7 years old there will be no issue as virtually all of the equipment in that group will be IPv6 compatible.  If it can’t be upgraded then much of that equipment is likely about to become obsolete for other reasons and should probably be replaced. 

Current Use – Despite the fact that the IT industry has begun to make a huge push and launch announcement in June, the beginning of deployment has actually been in the works for a few years now with the first major use of the protocol in a world arena coming in the 2008 Summer Olympics.  It was the largest use of the technology since its inception.  All major operating systems, many business and commercial environments and almost all mobile technology manufacturers are now supporting the IPv6 as well.

For more information about how SafeSourcing can assist with connecting you with companies who can help validate your IPv6 strategy, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

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So you say you want to source Private Label products!

July 26th, 2012

Where should you source them from and how should you educate yourself?

Years ago we called these products store brands. During that time they were not considered premium products. Today you’d be amazed at how many companies there are that can provide you products under your own label. In many cases these products are just as good as the brand names, cost your customers less and more profitable as well.

Probably the best source of information relative to private label or store brand products is the PLMA or Private Label Manufacturers Association. This is actually a global organization.

According to their website, their show this year in Chicago from the 11th -13th of November will present more than 2,000 exhibit booths, featuring food, snacks and beverages, household and kitchen products, GM, and health and beauty. Exhibitors range from large, well-known store brand makers to small and medium-size companies. More than 35 countries will be represented on the show floor, including ten national pavilions.

If you’re not happy with your current private label offering or have never had one, this show is a must. There are also a number of educational workshops. In fact, PLMA sponsors workshops throughout the world annually. You can find a little more information on these at their website http://plma.com/.

If you’d like help with specifications or locating suppliers eager to bid on your business, please contact a SafeSourcing customer’s services representative.

We look forward to and appreciate your comments.

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Understanding Your Software License Options

July 23rd, 2012

Do you realize the different options you may have for licensing your company software agreements?

Today’s post is by Mark Davis; Sr. Vice President of Operations and CTO at SafeSourcing.

Many times when procurement teams are dealing with IT spends, specifically software solutions, they are unaware of the different options available to them; options that could save them money because they are more geared to the way their company will use the software than the default method the vendor is proposing.  Almost every vendor has a default method of licensing and yet almost every vendor when pressed for an alternative method that fits the customer better will agree in order to get the business.

In today’s blog we will be looking at some of the different models of licensing that are available to you.

Per-Seat Licensing – This type of software licensing is grounded in the number of users you will have accessing the application.  Per set licensing requires a license to be purchased for each user and is a good model for companies who will have a small and select group of employees using the system.  With this model it is easy to control who is accessing the software, however it can lack flexibility to add new users and temporarily share the use of the tool if the need arises. 

Concurrent User Licensing – This type of licensing is a variation of the per-seat model where a company purchases a block of user licenses that can be connected at any one point in time to the software.  For example if a company purchased 25 concurrent licenses the software would allow any 25 users to connect to the system and would block the 26th user attempting to connect.   In this example as soon as someone logs off new users can log on.   The benefit to this model is that it allows a greater group of users to leverage smaller number license packs for software that is not continually used all the time by each member. 

Per Server Licensing –Per server licensing is generally related to mission critical enterprise solutions and is a license purchased for every server the software is installed on.  The price of these licenses is generally much higher as they come with the permission for an unlimited number of users to connect to the solution.  Often web-based or database technology will be deployed using the model of licensing so that users can be added as frequently as necessary without having to worry about auditing the license count.  Accessibility to the system is only limited by what the administrator configures. 

Transaction Based Licensing – Transaction based licensing offers a company the complete flexibility of unlimited users while allowing the cost to grow as the business grows.    Other advantages of models like this involve all of the benefits of purchasing unlimited contract software and software without the upfront financial commitment to the hardware and software.

Annual Subscription Based Licensing – Many SaaS licenses are based upon a subscription license.  These types of licenses give a company unlimited access to the hosted system and tools for an agreed upon period of time.  This model is good for solutions that are already in use by a company and has a high level of use already throughout the company.  One advantage is that there are no further worries as it relates to licenses and tracking once the agreement is completed and it provides availability to any user in the company that needs access.  Like with all SaaS software license models there are no requirements of hardware to be purchased and the maintenance of the system is handled by the host company.

For more information about how SafeSourcing can assist with sourcing your software projects, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

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Better get that produce before December.

July 20th, 2012

We have to cut spending somewhere so the current administration chooses food safety!

Can any one tell me how many different types of produce there is in the world? How about how much of it is imported into North America daily. I’m not sure it matters, but it is a lot. And because we consume it, we would like to know it is safe to eat and not contaminated with E.Coli, listeria or other food born pathogens.

One of the tools that have been used for years is at risk of being eliminated that can screen these products. It is the Agricultural Departments Microbiological Data Program. According to and Article attributed to the Associated Press by Garance Burke, this program was due to be cut from the budget by the current administration but has been saved at least until December.

The good news is that this program scans high risk fruit and produce for bacteria that causes food born illnesses. I’m not sure it will make any difference, but during the same week the FDA finally backed into a decision on BPA while the USDA tried to cut a program that screens the produce we eat. Does the right hand even know what the left hand is doing?

Is anyone one paying attention to this lunacy. Is there an effective overriding food safety policy in the government? I don’t think so. Here’s my voters  smile to that issue and  two  disconnected organizations.

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A day late and a dollar short! The FDA announces no more BPA in Baby Bottles!

July 19th, 2012

Canada and other countries took action years ago.

the government always likes to take credit for issues or issue resolutions that they really did not have much impact on, failed to act or just moved way too slowly. Many times because of external pressures we hear more and more about every day. SafeSourcing has posted on BPA 10 times since May of 2008.

Here’s an old post  post titled “What can you do to lower your risk from BPA?”

The fact is that all the FDA is doing, is announcing a policy change that supports what manufacturers have already done. The manufacturers have responded to consumers and pressure from other countries to do the right thing.

So, there really is no big deal here. The FDA is a day late and a dollar short. And, the fact is that BPA is stilled contained in hundreds of other products.

 Let’s hope that upcoming budget cuts won’t eliminate effective programs that are already in place or delay others that are needed very badly to protect as all from the ever growing problem of food born illness.

If you’d like to find out more about food born illness and other safety standards that may impact your purchasing, please contact a SafeSourcing customers services representative.

We look forward to and appreciate your comments.

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Are you paying to much for your Retail E-Procurement solution?

July 18th, 2012

Like a P&L, you will have to peel back the onion in order to find out.

When you review using retail e-procurement tools you may not always get what you pay for. In fact you are probably paying way too much.

There are too many companies that have been at this for a long time whose pricing formula is way too high in the retail marketplace based on what they provide.

I was speaking to a large retailer recently that had an unlimited use tool in place behind their fire wall from a very large player in the e-procurement space. The recently converted to this companies cloud based SaaS offering without a significant reduction in cost. I asked what type of savings they have been able to achieve and how many additional associates they had assigned to write RFI’s and RFP’s as well as handle events, supplier communication, hosting support, training, report generation, specification building, data collection etc. The answer was a lot.

After we had discussed at least 20 different categories, it occurred to the both of us that the savings from our cloud based SaaS events were at least a third higher than the savings from the use of the unlimited tool in either configuration.  Even if you added in our fees, the savings were still substantially higher on event by event basis with SafeSourcing. There are a number of reasons for this. One is that to many times when retailers deploy a solution internally or as a SaaS offering they default back to their old way of doing business with a new tool once the solutions provider has left. Obviously staff additions have to be calculated into the ongoing cost. Supplier research is limited, the number of participants is fewer, training is inadequate and the result is lower savings and sometimes overall quality. Older companies also do things in old ways. There are proprietary cost frameworks to the SafeSourcing solution that will also drive higher savings. I won’t share that information here.

Another way that retailers over pay, is when an older company comes in and matches the lower cost of doing business with a newer and better provider in order to win the business. An example of this is the cost of IT infrastructure in an open source world. As such the model will not last because many of these older companies are not structured in such a way that will allow them to absorb these lower fees profitably over time. Over time your price will continue to rise. In fact next year, your price should go down if you are running the same event again. Hasn’t most of the work already been done in the past?

Some good questions to ask your prospective solutions provider would be the following.

1. How many events per month can one associate host?
2. What are you doing to automate your solution in order to take out cost?
3. Will we pay the same in year two as we paid in year one for identical events?
4. What percentage of your associates work virtual?
5. Is your cost higher because of your investment in office space?
6. Is your cost higher because of your headcount required to run events?
7. What are your average savings for events over $100K?
8. What are your average savings for events under $100K?
9. Can you even run events under $100K?

There are certainly more questions but you get the idea. Be careful out there. If you want the lowest cost and the best service in the industry give SafeSourcing a call.

We look forward to and appreciate your comments.

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Should you join a Group Purchasing Organization (GPO)?

July 17th, 2012

There are hundreds of group purchasing organizations that support specific specialties, industries and products. How should you choose one?

According to Wikipedia a group purchasing organization (or GPO) is an entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members.

When is a company a GPO and when are they something else? Many organizations take on procurement functionality based on the spend of their members. They can be industry wholesalers, share groups, consortiums, distributors and a variety of other types of organizations. They may take on all procurement opportunities or specific opportunities like energy. GPO’s can be vertically focused or horizontally focused. They can also be horizontally focused within an industry vertical. An example might be a wholesale grocer that is focused on a retail industry vertical like supermarkets.

The question is should you join one or many? Maybe you shouldn’t join any. The only way to answer the question is to understand your own organization in terms of its strengths and weaknesses relative to the products or services categories you hope to source. As an example; if you are just buying from a wholesalers price book, it’s a good bet you are not getting the best price. It’s also a good bet that other members of the same wholesaler are getting a better price and they may be smaller than you. However you may also have a huge energy spend and this is something that your product wholesaler can’t help you with. As such, there may be a specific GPO for energy that can offer some expertise.

This author believes that your best bet is to focus on a procurement company that is horizontally focused with specific expertise in a number of verticals such as health care, retail, distribution, financial services etc. I have often seen these companies significantly out perform GPO’s by a significant amount as the overall overlap of expertise across multiple industries suggests a level of creativity that GPO’s may not have.

Ultimately understanding what your company’s limitations are as well as the opportunities that are available to you is a first and important step. After that, it’s who can do the most for you with the least disruption across the broadest area of spend.

SafeSourcing is such a company. Please contact us if you would like further information on how to improve your bottom line in the present quarter risk free.

We look forward to and appreciate your comments.

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