Just what can?t companies source using reverse auctions?

December 7th, 2009

The answer might surprise you. Absolutely nothing.

We were speaking with a consultant this morning that asked us a group of questions from a company he was in the process of introducing us to. Two of the questions were related and are as follows.

1.?Does it make sense to reverse auction any of our core items?
2.?Does it ever make sense not to reverse auction?

Obviously our first conversation centered on what were considered to be core items for this company. This can change from company to company based on the specific industry they serve and understanding frequently used buzz words for that particular industry.

In the retail industry, products are generally broken down into two major groups or classifications which are products for resale and products not for resale. Core items can exist in both categories. An example of a not for resale product/category that a large retailer may consider to be core might be fuel. This is a regular annual expense item that is driven overall by the price of a barrel of oil that can vary widely and be purchased as part of an annual contract that can be tied to a price index such as OPIS. Additionally, fuel can be purchased using spot buys that can be made periodically during the year and are also tied to the same index. Both types of buys lend themselves very nicely to the reverse auction process.

For a manufacturer, a core product might include the raw materials used to manufacture their end user products. This might include metals, plastics, resins etc. All of these core products are also tied closely to a variety of indexes.

The key to using reverse auctions to source any product/category is the quality and availability of the products specification, the availability of alternative or new sources of supply wanting to bid for the business and the quality of the new product compared to what is being used today.

With the above issues covered and understanding that all other data normally considered during the standard procurement process are generally features of most quality e- negotiation tools; companies can be comfortable that any product or service that they use can be sourced using a reverse auction.

Typically when using a reveres auction element of an RFX suite, companies can save time, review more bids and compress pricing or avoid costs in an up market.

We appreciate and look forward to your comments.

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Who’s managing your suppliers?

December 4th, 2009

For better than 10 years the primary driver associated with reverse auctions or e-procurement events in retail 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 solution provider alike. What about the supplier? What makes it a positive for them?

Supply base management is 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 in the first place. Additionally, retailers, suppliers nor e-procurement solution providers 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 both money and time on a continuous basis while also supporting other retail areas of interest such as safety and green initiatives.

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.

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Who?s managing your suppliers?

December 4th, 2009

For better than 10 years the primary driver associated with reverse auctions or e-procurement events in retail 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 solution provider alike. What about the supplier? What makes it a positive for them?

Supply base management is 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 in the first place. Additionally, retailers, suppliers nor e-procurement solution providers 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 both money and time on a continuous basis while also supporting other retail areas of interest such as safety and green initiatives.

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.

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Something may be rotten next year!

December 3rd, 2009

It could be because many of the perishable products sold at retail such as fruit, nuts, produce, meat, seafood and other consumables are being subjected to new security laws.

Product safety efforts can sometimes be confounding when related security issues have an overriding priority. In this case we are talking about product spoilage because of a 2007 freight screening law for bombs prior to the freight being allowed on aircraft. If enough spoilage takes place to perishable products shipped to the U.S. from around the world, not only could we have a shortage of products such as fruits and vegetables, but prices could also rise significantly based on a shortage of the products. For the products that do make it to market in sellable shape there is also an increased risk of food borne illness due to a lack of sanitary inspection techniques for raw consumables such as produce at air cargo facilities.

The cost issue may be something we have to bare regardless of the security issues because the only way around it for supply chain members is to impose more strict security processes on their own that meet the proper guidelines and there is a cost associated with that too. Suppliers, producers and wholesalers have all know about this for more than two years so there has been adequate time to prepare.

However if you find a shortage next year of what you are looking for on your perishable shopping list or you see a sudden rise the cost of airline tickets. The answer just might be that your government is just trying to keep us safe.

We look forward to and appreciate your comments.

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Are you guilty of Greenwashing?

December 1st, 2009

As regards e-procurement, just what is green washing?

Basically, to greenwash is to pay lip service to something to make it seem like you are involved without actually conducting any practice or process that supports said lip service.

On June 18th of 2008 post the Doctor at Sourcing Innovation described green washing as a practice used by a company to mislead consumers about the environmental benefits of a product or service. This can apply to any person or company in the sourcing cycle of life which includes retailers, suppliers, manufacturers, brokers, and vendors that provide the tools that bind this circle.

By way of example, at SafeSourcing we have a corporate social responsibility program we call R5. The first three of the five R?s refer to the Reduce, Reuse, and Recycle terms that all green focused organizations are familiar with. Additionally, we have added Reward and Renew. By reward we mean that we will contribute annually to the safety and environmentally focused organizations that our customers support through their initiatives?. This reward will be based in part on the vote of our customers. By renew we mean that we will continue this cycle annually and support it in all of our products, programs and practices.

Greenwashing can take a variety of forms such as linking to green websites or using green terminology without any practical application associated with it. If you are a retailer, ask your supplier?s, vendors and business partners what their green programs are. Compare their programs with yours and then learn from each other. Pay this support forward by rewarding suppliers, vendors and business partners that share and support your social consciousness.

We look forward to and appreciate your comments.

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TOY SAFETY

November 30th, 2009

Tis the season to be cautious!

During this season of giving it is important for Manufacturers that makes toys, Retailers that sell toys and the consumers that are buying these toys to refresh their memories as to child safety laws. These laws can be broken down into a number of areas that include but certainly are not limited to choking hazards, chemical content and noise restrictions.

There are several sources for this information and most companies that manufacture and sell toys have statements relating to the safety of those toys. A good source to begin your search is the Consumer Product Safety Commission. If you visit their website, they have a cool tool that allows you to Find CPSC Product Safety Standards or Guidance relative to a wealth of products. By selecting the drop down for toys/children products all, you can navigate to a number of documents that spell out required safety standards. You can also follow the CPSC on Twitter or receive and rss feeds of their product recalls.

This author is particularly concerned about choking hazards with the number of small give away products that come to the market during the holidays. The standards that these products should adhere to are also listed on this site.

A new tool I was just reading about for the tech savvy is a site called www.toysafety.mobi that is ideally suited to provide up to date inforamtion for consumers with mobile computing technology such as iphones and blackberry devices.

For retailers, your e-procurement solutions provider should also be able to provide you with a lot of this information.

We look forward to and appreciate your comments .

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Thanksgiving is really a story of a supply chain found and developed!

November 26th, 2009

Happy Thanksgiving from Safesourcing.

One hundred and two pilgrims and crew arrived in Massachusetts after a 3,000 mile trip from England on the Mayflower. It is safe to say that as a result of that distance there was no existing supply chain to leverage, so one had to be developed and quickly. This began with basic hunting and gathering and later included trading with the areas indigenous peoples known as the Wampanoag?s for corn, seed and foraging and planting techniques.

The Thanksgiving holiday we celebrate today really stems from the feast held in the autumn of 1621. Since the pilgrims had only arrived on November 21st of 1620 they had really not been there long enough to develop a fully reliable and renewable supply source. They had however established collaborative relationships with the local Wampanoag people who became regular trading partners and who helped them celebrate the colony’s first successful harvest.

The most detailed description of the “First Thanksgiving” comes from Edward Winslow from A Journal of the Pilgrims at Plymouth, in 1621:”Our harvest being gotten in, our governor sent four men on fowling, that so we might after a special manner rejoice together after we had gathered the fruit of our labors.

The fowl referred to above certainly could have included a wide range of fowl that was plentiful in the area such as wild turkey, pheasant, goose, duck, and partridge and unfortunately by today?s standards even eagles.

The pilgrims probably didn’t have pies or much of anything sweet at the harvest feast because they did not yet have ovens. They had brought some sugar with them on the Mayflower but by the time of the first Thanksgiving, the supply had probably run out.

Their meals also included many different types of meats. Vegetable dishes, one of the staples of today?s Thanksgiving, didn’t really play a large part in the feast. Other items that may have been on the menu certainly included sea food such as clams and lobster, Indian corn, wild fruits and nuts, meats such as venison and seal and certain dry herbs and spices.

The Thanksgiving meal that has today become a national holiday is a symbol of supply chain cooperation and interaction between English colonists and Native Americans.

We look forward to and appreciate your comments.

Happy Thanksgiving.

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Environmentally Preferable Purchasing (EPP)

November 25th, 2009

Retailers; For guidance with your green purchasing practices

The United States Environmental Protection Agency (EPA) has a number of programs that as a result of government use offer companies a great opportunity to educate themselves in support of their social responsibility initiatives.

One of those programs, the Environmentally Preferable Purchasing (EPP) helps the federal government “buy green,” and in doing so, uses the federal government’s enormous buying power to stimulate market demand for green products and services. Geared first to help federal purchasers, this site can help green vendors, businesses large and small — and consumers. Use the easy index to:

? Find and evaluate information about green products and services;
? Identify federal green buying requirements;
? Calculate the costs and benefits of purchasing choices;
? Manage green purchasing processes.

The U.S. EPA website www.epa.gov contains a wealth of information relative to finding and evaluating green products in any number of categories from construction to office supplies. If you truly review and evaluate the green portion of your company or individual social consciousness regularly the U.S. EPA site is a great place to start.

We look forward to and appreciate your comments.

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SafeSourcing Announces New Software Version 1.5

November 24th, 2009

Innovative e-Sourcing Firm Continues to Revolutionize Procurement with the Launch of Upgrade Releases 1.4 and 1.5

SafeSourcing is pleased to announce the simultaneous launch of our industry leading SafeSourceIt ? e-procurement software suite upgrades – Releases 1.4 and 1.5.

Releases 1.4 and 1.5, which are now in full production, offer many advanced tools that enhance support of the procurement practices of retail procurement professionals and their suppliers. The new releases allow for faster event setup for administrators in addition to a number of powerful new features that include:

? Flexible quote capability for suppliers
? Automated supplier management and tracking
? Improved supplier search capability
? Increase in the number of countries and suppliers that are included in the SafeSourceIt? retail supplier database

According to SafeSourcing CEO Ron Southard, ?These releases allow us to run more e-negotiation events over a shorter period of time by significantly reducing the amount of time required of a SafeSourcing customer service associate to build and host an event. Additionally, suppliers benefit because it takes less time to enter and react to bid data in optimizing their offers.?

SafeSourcing provides information and services to customers through e-procurement tools that drive reduced costs, higher quality and an immediate improvement in earnings while pro-actively supporting consumer safety and environmental standards in the global supply chain.
Releases 1.4 and 1.5 support the SafeSourcing mission to provide disruptive technology for retail procurement professionals, continually refreshing its solutions as requests for change are received and tool optimization is required by the retail industry.

We look forward to and appreacite your comments.

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Retailers; is your sourcing transparent enough?

November 23rd, 2009

This is really an important question? If you are not using online or reverse auctions

As such, if you are not sourcing at least 30% of your cost of goods and services with these tools, you are lagging the leaders in your industry and well behind other industries. Resultantly you are not getting the best costs and not driving the best margins for your company.

Reverse auctions since their inception more than a decade ago haven driven healthy competition amongst competing suppliers. As such the results of a reverse auction can provide a great benchmark for both the buyer and the supplier. For the buyer the results can be used as a tool to evaluate how to best source other products and services. Additionally suppliers that are not the low quote or winning bid now have the opportunity to evaluate why that is and what they need to do in order to improve or to be more competitive in the market place. This of course is all happening without the need to collect, collate, compare or negotiate during the process. In other words it is happening transparently to the normal sourcing process.

Additionally reverse auctions provide the opportunity for suppliers that are outside of your business area or knowledge base to bid for your business. That is if your solution provider has access to a large number of retail suppliers.

Possibly the single largest area of benefit to reverse auctions outside of price compression for procurement professionals is that it offers a significant opportunity for process improvement since most solution providers offer a standard process for hosting reverse auctions. Everything is done in one place using standard processes to build the event to the analysis of the bids collected. All information is then available for immediate evaluation and archived for easy access in the future. This reduces the overall procurement cycle time, eliminates or reduces the opportunity for human error, and provides a standard way to award business.

We look forward to and appreciate your comments.

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