There is a real conundrum in retail today. How do we stop CONTRACT leakage?

June 9th, 2010

Who signed this agreement is always something we hear when we review retailers contracts during the discovery process. The next question we hear is who approved this and did they have the authority to do so in the first place.

A conundrum in it’s simples definition is a riddle or a question to an  intricate and difficult problem, so it’s know wonder with the above scenario that we have compliance and other related issues such as ever greening in  the retail industry that literally costs companies millions of dollars. The answer to the conundrum is that with little effort this problem can be avoided. And the way to avoid it is to use a contract management solution. Most retailers do not do so today.

We know that fortune one thousand companies many of which are retailers may have as many as 100,000 contracts. We also know that in the retail trade less than 15% of companies have contract management solutions. We also know that companies that do use contract management solutions have compliance ratings significantly higher than companies that do not. It is a well known fact that these solutions can reduce administrative overhead by up to 30%. Those savings although significant from an ROI perspective pale in comparison to the loses associated with evergreen or auto renewal contracts  that include price increase language when written notice is not received as called out in the contract. Just imagine a bulk fuel contract for millions of gallons with a single basis point escalator above a current Platts, OPIS or Gulf coast index if the contract evergreens. Ouch.

The good news is that a contract management solution like SafeContract™ can solve this problem and provide a near instantaneous ROI. SafeContract™ is offered in the form of Software as a Service or SaaS which makes it much more affordable than an in-house solution. The good news is that the data is yours and you only use what you need.

Don’t wait any longer to reduce your administrative costs, manage discounts and rebates, make your auditors happy with improved compliance and eliminate ever greening.

Contact SafeSourcing™ today.

We look forward to and appreciate your comments.

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

June 8th, 2010

Retail companies that are socially responsible are the companies that actively contribute to the welfare of society in addition to their own profit driving activities.

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

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

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

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

We look forward to and appreciate your comments.

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Buyers; don’t use Cadmium in your marketing or branding promotional giveaway items.

June 7th, 2010

It would seem that something as simple as a toy or a drinking glass could not cause major safety concerns for consumers. Guess again!

Last Friday June 4th   The U.S. Consumer Product Safety Commission announced a voluntary recall of Twelve Million Shrek drinking glasses that are tainted with Cadmium.

According to Wikipedia Cadmium is a chemical element with the symbol Cd and atomic number 48. The soft, bluish-white metal is chemically similar to the two other metals in group 12, zinc and mercury.

In extreme cases of exposure to cadmium fumes the result can be flu like symptoms including chills, fever, and muscle ache sometimes referred to as “the cadmium blues.”

The company that produced the glasses has been doing so for major companies for years. This reinforces the fact that procurement professionals can not get comfortable in their jobs and that consumer safety, product safety and environment safety are as much a part of the procurement knowledge workers job today as the relatively simple task of picking up the phone to place the next order. Additionally and maybe more importantly, manufacturers can not just assume that the raw materials they are using are safe either. Their buyers need to be as vigilant in terms of what has changed in the supply chain as their customers. If we trace products from the farm to the table so to speak these type of issues don’t need to occur.

Discipline, process and traceability are the pillars of a good procurement team.

We look forward to and appreciate your comments.

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Retail buyers; are your commodities FAIR TRADE certified?

June 4th, 2010

If your consumers are looking for the best commodities such as coffee, tea, herbs etc. will FAIR TRADE certification help them select your products instead of your competitors?

Buying commodities is a real challenge particularly with the environmental changes the globe is going though and the continuing expansion into global markets. Add to that the changing price of fuel and the impact of shipping on the environment and there is a lot that requires measuring beyond price in order to make the right decisions on behalf of your consumers

An organization that can help is TransFair USA who licenses companies to display the Fair Trade Certified label on products that meet strict international Fair Trade standards

The Fair Trade Certified™ label guarantees consumers that strict economic, social and environmental criteria were met in the production and trade of an agricultural product. Fair Trade Certification is currently available in the U.S. for coffee, tea and herbs, cocoa and chocolate, fresh fruit, flowers, sugar, rice, and vanilla.

What do your commodity specifications look like? Ask your e-procurement solutions provider how they can help.

We look forward to and appreciate your comments

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Retailers do you have a sustainable e-negotiation program?

June 1st, 2010

Careful selection and management of new sources of supply is one way to sustain your e-negotiation program for the long term.

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

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

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

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

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

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

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

We appreciate and look forward to your comments

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How do you keep your contracts and suppliers green?

May 28th, 2010

Most companies when selecting a contract management solution fail to consider how their contract template library can help to support their Corporate Social Responsibility goals or CSR.

The primary way of doing this is to insure that all of your contracts support (GPP) or green product procurement. This practice should apply to all contracts regardless as to whether they are for a product or a service.

Green Product Procurement places its focus on the items below as a condition of the contract or a condition of doing business with the host company. This process applies to both products and services that a company provides to or for your company, and may also apply to their own companies endeavors to support the environment in their daily business practices as well.

1.?Products made from recycled content
2.?Biobased products and services
3.?Environmentally prefererable
4.?Energy efficiency
5.?Water efficiency
6.?Use of renewable energy sources
7.?Use of alternative fuels or vehicles
8.?Products do not include? Ozone- depleting substances (ODS)
9.?Lacking in priority chemicals
10.?Use of Electronic Products Environmental Assessment Tool (EPEAT) for electronics.

Make sure your contract templates include environmental language that supports your companies programs and provide the safest products for your customers.

We look forward to and appreciate your comments.

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Hey Retailers if you don’t have a Contract Management solution you will be learning a new language.

May 27th, 2010

Effective contract management means being able to understand the language used in the proper context and how it is used by legal professionals and knowledge workers trained to use it.

Don’t assume that understanding legal language and its use is any easier than understanding a new foreign language. Much of the language is used to create ambiguity and may be as difficult to understand as your first foray into speaking Spanish or any other foreign language.

An example of a term used quite frequiently in legal contracts and documents is ‘subject to’.  According the business directory.com this term used in a document generally prevents it from being an evidence of acceptance and, thus, of a concluded-transaction. A court, however, may decide that all the terms and conditions required in the underlying agreement have been included and agreed to and, therefore, the document evidences a concluded transaction. If that definition is clear to you congratulations. If it is not, please join the hundreds of law neophytes out there that require legal help to interpret our contracts for us.

Because we require this type of help and because most of it is done through email with hi-liteing, tracking and merging tools today, keeping track of these conversations and the most current versions of them is incumbent upon you unless you want to be subject to not understanding your own contracts.

Ask your procurement solutions provider their recommendation as to how to solve this problem for you.

At Safesourcing our product is called SafeContract™.

We look forward to and appreciate your comments.

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Hey Retailers if you don?t have a Contract Management solution you will be learning a new language.

May 27th, 2010

Effective contract management means being able to understand the language used in the proper context and how it is used by legal professionals and knowledge workers trained to use it.

Don?t assume that understanding legal language and its use is any easier than understanding a new foreign language. Much of the language is used to create ambiguity and may be as difficult to understand as your first foray into speaking Spanish or any other foreign language.

An example of a term used quite frequiently in legal contracts and documents is ?subject to’.? According the business directory.com this term used in a document generally prevents it from being an evidence of acceptance and, thus, of a concluded-transaction. A court, however, may decide that all the terms and conditions required in the underlying agreement have been included and agreed to and, therefore, the document evidences a concluded transaction. If that definition is clear to you congratulations. If it is not, please join the hundreds of law neophytes out there that require legal help to interpret our contracts for us.

Because we require this type of help and because most of it is done through email with hi-liteing, tracking and merging tools today, keeping track of these conversations and the most current versions of them is incumbent upon you unless you want to be subject to not understanding your own contracts.

Ask your procurement solutions provider their recommendation as to how to solve this problem for you.

At Safesourcing our product is called SafeContract?.

We look forward to and appreciate your comments.

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What are the high level benefits of contract management for retailers?

May 26th, 2010

Before making a decision to purchase software whether you plan to own it or use it as an on demand service have a plan in mind as to where you will generate your ROI.

Often times, companies go into projects like new contract management solutions?without any idea as to where they will derive there return on investment when launching a new solution. For the retail marketplace, contract management is a new endeavor for most of the market. The good news here is that the ultimate cost of ownership is probably much less today based on newer technologies and development tools if you want to own the software and install it behind your own firewall. The cost is even less if you plan to use a Software as a Service model where you pay for what you use.

The following are? a few of the? areas in which you may well save a significant amount of time and money? with your new contract management solutions when it comes to delivering a cost/benefit analysis to your management.

1.?Operational Improvement
2.?Improved collaboration with a trading partners
3.?Risk Mitigation from Evergreen contracts
4.?Improvement in Financial Management
5.?Quality improvement in contract performance

In? all companies large and small these benefits may in fact lead to cost reductions in the form of better utilization of human assets whether that means headcount reductions or reallocation of resources to more important tasks.

Ask your solutions provider to help you identify the best quick hit savings opportunities with their proposed solution

We look forward to and appreciate your comments.

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Retailers is understanding the language within your contracts confusing?

May 25th, 2010

When retailers don?t have their own law department or a contract management system in place, trying to understand the language of the legal world can cause delays, delays and more delays.

Quite often the longer the contract the more legalese there is to try and interpret and almost every one you ask will in fact interpret it differently.

Most contracts begin with a section called definitions which is where most companies and associates get lost to begin with. This section is just exactly what it says, all terms used within the following clauses of the contract refer back to this section for their specific explanations of a terms meaning within that clause.

Begin by focusing on the definitions as if it were a separate document and then set it aside and read the clauses. Most of the time this will clear up any confusion you are having.

Most contracts have a pretty good flow to them and will include a format that covers most if not all of the following.

1.?Definitions
2.?Merger and Integration
3.?Choice of Law
4.?Statute of Limitations
5.?Indemnification Language
6.?Time of Performance
7.?Arbitration?
8.?Severability
9.?Fee?s
10.?General Provisions
11.?Non-Waiver?
12.?Liquidated Damages

We look forward to and appreciate your comments

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