For anyone that has ever run an eSourcing project, there is a typical flow that most processes follow. The project kicks off, and everyone’s focus is split between costs and known issues with the incumbent suppliers(s). Procurement uses historical spend to put together a list of line items with quantity and specification data. The company’s standard list of supplier questions is loaded into the eRFX system, along with any additional questions for suppliers that relate to the category of spend in question or new developments in the industry being sourced from. Everyone works frantically until the day the RFP opens and then – you wait. The project comes to a complete standstill for the two weeks (e.g.) that the RFP is open. Then the mad dash begins again as you wade through and evaluate supplier responses, pricing, and attachments.
You have been working on finalizing the award and determining who should get the opportunity to work with you. Have you considered that how you set the RFP up to begin with may have set the stage for that end game? Did you eliminate smaller suppliers due to the size of the bid? Should you have lotted things differently to allow more competition?
When you hear the word "evolution" does it bring you back to your high school days in Biology and discussions of Darwin? Survival of the Fittest? That is where our businesses are these days in the economic climate we find ourselves in. Otherwise, you may falter and get "acquired" by a bigger and faster species!!
So what does Spend Analysis have to do with that? And will it solve all the problems of your world? I don't think there is any magic potion for you. However, there is a great deal of value for utilizing Spend analysis.
This week’s eSourcing Wiki-Wednesday topic is Metrics for the Rest of Us – an article that breaks metrics down into Cost Avoidance and Reduction, Process Improvement, Operations, Customer Service, and Asset Utilization.
The last of the Cost reduction and avoidance metrics, “Spend Under Management” is defined as:
Total Spend Under Management / Total Spend.
As noted in the eSourcing Wiki, this is a straightforward calculation. The problem is not with our ability to divide one number by another, but in defining the inputs to the equation. Total spend should be easy, although your department may use either total annual spend or total addressable spend (which is likely to exclude taxes and salaries). The real question is to decide what spend is designated as being ‘under management’.
Whenever I see something that is titled "Back to Basics" I almost groan. That is like the latest secret to loosing 20 pounds. Here it is - Fewer calories in and more calories out. Really? Like diet and exercise are anything new?
We are so swept up in the immediate, we often can't step back and refresh to look at the whole picture. So that is why it is important from time to time to return to the basics.
This week’s eSourcing Wiki-Wednesday topic is Sourcing Success Enablers. Under the Organizational Best Practices heading is a brief paragraph that gets to the heart of what all procurement and supply management departments need to stay focused on:
“As part of a supply chain focus, successful companies do not overlook indirect categories. Chances are some categories (such as office equipment, professional services, etc.) consume a significant part of the total organizational spend and will also benefit from a review. Strategically source everything. (Often strategic sourcing means outsourcing procurement of non-critical, low value spend, or commodity categories to external organizations that also follow strategic sourcing principles.)”
Today's eSourcing wiki article, The Quest for Purchasing Fire, discusses the process and obstacles for getting buy-in from C-level executives as well as the stakeholders that will utilize an esourcing or eprocurement solution.
I have been the project lead on several software implementations and most of them have been difficult technically but the most challenging area was the change management for the end-user and the selling of the benefits. Pointing out the WIIFM (what's in it for me) definitely made a positive difference in moving the transition forward.
This week’s eSourcing Wiki-Wednesday topic is barriers to success – and those barriers are specific to strategic sourcing organizations. Broken down into the main categories of leadership, team and project issues, these nine barriers are a who’s-who list of worst case scenarios that should help you diagnose the root cause of the challenges you are facing in your organization.
I have hosted several trade shows and can tell you it is a TON of work and there are so many details to attend to. I have a true appreciation for professional event planners! I have also attended them as a customer and as a supplier with a booth.
Word of advice: WEAR COMFORTABLE SHOES!!
From a supplier's perspective, I found it extremely beneficial from an expense and time perspective . In one venue I was able to meet with multiple existing customers and several potential new customers. In the economy today, we all have to be aware of expenses and this was a efficient approach. There is also the ability to meet clients in person and develop stronger relationships. Conference calls are great but in person meetings are still an integral part of the equation.
Being Green is a large movement in households as well as businesses. We are switching our light bulbs, recycling, shopping with reusable bags and buying local to reduce on the use of fossil fuels. Of course people want the environment protected for future generations. However, it sometimes is not that simple. In these tough economic times, it is difficult to take on the green movement if it is more expensive.
One organization I know prides themselves on building LEEDS certified locations. They utilize that as a marketing tools and their customers feel good about working with them. Another organization worked very hard to categorize all their opportunities for their customers to work with them on green projects, and the effort fell flat. Why was one so successful and the other not at all?
Yes or No: Soliciting Pricing from Alternative Suppliers is the Best Way to Benchmark Your Incumbent?
This week’s Wiki-Wednesday topic is benchmarking, and we are covering it at the suggestion of BMP member Victor Halchin. A discussion has been going on in the Strategic Sourcing & Procurement group on LinkedIn in response to the following question: "If you are "locked " into a supplier , would you be prepared to try another for benchmarking even if it was just to "bash " down the supplier on price - would you change suppliers if you were offered the same service at reduced costs on your purchasing requirements?”
This post is a follow up to 'Innovation Through Procurement Contests' (Part 1), my thoughts on Procurement Insights’ 3 part (so far) series on contests in public procurement. I’ve had a chance to think about the idea a little more and as far as I’m concerned, if it allows the buying organization to put the right solutions in place, then it is a benefit. As I commented in my previous post, the concern becomes for the procurement professional whose role becomes one of administration rather than strategy and negotiation. Although I didn’t realize it at the time, I had started down the road towards what would become a sticking point for some of the collaboration-style projects often resulting from new solution development: intellectual property rights.
This week's Wiki-Wednesday topic is Innovation, and you can click here to read an excerpt or to link back to the Wikipedia article. We chose this topic because of a series of posts being done this week by BMP mentor Jon Hansen on his blog Procurement Insights. He is addressing a growing debate over the benefits of using procurement contests - particularly in public procurement - to innovate without absorbing the direct costs of a major R&D investment.
I'm hearing more and more about procurement outsourcing these days. I don't mean procurement people outsourcing other people's functions, I mean procurement BEING outsourced. There are different definitions for outsourcing, and the end impact on our careers is anything but known. There is always downside risk to every career choice, and ours is starting to come into focus. But don't worry - this is not a doomsday posting. You and me, we're going to be just fine. And here is why...
This week's Wiki-Wednesday topic is CAPEX (Capital Expenditures) v. OPEX (Operating Expenditures). Once you understand the difference between them, the next step is realizing the impact that distinction has on negotiated savings recognition.
This week's Wiki-Wednesday topic is the Pareto Principle - also known as the 80/20 rule. Many of us use it all of the time, but do we really understand the implications of the distribution principle? I'm sure I hadn't fully thought about it until reading up for this weeks' posting. Other things I did not know about the primciple are that it was incorrectly attributed to early 20th century economist Vilfredo Pareto because he observed that 20 percent of the landowners in Italy owned 80% of the land. (He also noted that 20% of the pea plants in his garden produced 80% of the peas...)
We’ve read as many of the news stories on this topic as possible to bring you the following synopsis. Most of the details are widely available across all sources, but in the case that an interesting detail or fact came from one particular article, we’ve cited the source (see our footnotes). Otherwise, there is a listing of articles for further reading at the bottom of the page, with date, source and a link (click on the article's title to access it at its source).