Ken Ballard on Thursday, June 30, 2016
Strategic Sourceror on
This ties into spend analysis in several ways. First, if your company has grown by acquisition, it is possible that different sites utilize different ERP systems. These systems may or may not roll into a single financial system.
Second, when the responsibility of ordering and paying for goods and services falls to multiple people (or groups of people), it usually results in a variety of procedures being used to actually pay for goods. For example, some locations might run all purchases through a purchase order system and pay via check, while others may pay via a purchasing (credit) card, and others may receive invoices and pay via electronic funds transfer. Depending on your situation, it may be a good idea to enlist the support of the finance department, the IT department, or both. If you are dealing with a situation in which multiple ERPs are used, finance can give you a good indication of how those systems interact with each other. Finance can also shed light on the types of payment options that are used within the organization and how those options are reflected in various ledgers and reports.
IT should also be able to help run the reports you need and provide assistance in standardizing and consolidating data sets coming from different sources. If some payments are going to vendors through a procurement card (p-card), the transactions you pull out of your ERP are only going to reflect payments to your p-card company, not the vendors you were actually paying. However, most providers of p-cards can give you reports that detail whom you have paid with their cards. These reports can be as simple as a list of suppliers and total amounts, or as detailed as a line-by-line account of particular items purchased and quantities.
If you do not already have access to this data, finance should be able to provide you with the appropriate reports. When working with IT or finance, remember that during this first pass of data collection you are simply trying to identify total spend by supplier over a period of time, normally a year. Two to three years might also make sense if one of your goals is to identify trends over time.
For further support in wrangling in decentralized data and performing a spend analysis, contact a Spend Consultant. These firms specialize in spend analysis and can provide a fast and comprehensive view of your organization’s spend profile.
Megan Connell on
Strategic Sourceror on Wednesday, June 29, 2016
As direct marketers, we’re always singing the praises of good old direct mail. And that’s because it works! (Editor's Note: The Strategic Sourceror agrees!) We understand that an integrated, multi-channel marketing approach is best, and direct mail deserves a nice slice of the overall budget. Check out these stats from the 2015 DMA Response Rate Report:
- Direct mail response rates outperform digital channels by a long shot. Direct mail achieves a 3.7% response rate with a house list, and a 1.0% response rate with a prospect list. All digital channels combined only achieve a 0.62% response rate (Mobile 0.2%; Email 0.1% for a Prospect list and 0.1% for House/Total list; Social Media 0.1%; Paid Search 0.1%; Display Advertising 0.02%). Telephone had the highest response rate at 9-10%.
- Cost-per-acquisition for direct mail is very competitive. Direct mail stands at $19, which fares favorably with Mobile and Social Media (both at $16-18), Paid Search ($21-30), Internet Display ($41-50) and even email ($11-15).
- 82% of respondents expect to use the same amount of direct mail, or more, in the coming year.
- Formats are playing a role. According to the study, oversized envelopes have the best response rate at 5.0%, followed by postcards at 4.25%, dimensional 4.0%, catalogs 3.9% and letter-sized envelopes 3.5%.
- Marketers continue to embrace multi-channel marketing, with 44% of the respondents using three or more channels for their marketing efforts. In these instances, the most popular channels tend to be email, direct mail and social media.
- Direct mail offers strong return on marketing investment. It returns the same ROI as social media (15-17%).
*1IPA Touchpoints 5, 2014 (Data based upon Monday to Saturday reading)
The Strategic Sourceror on
There is no shortage of challenges retailer supply chain managers today have to face. Among the various complexities that make navigating operations such as omnichannel distribution and fulfillment and e-procurement more difficult, reverse logistics is one of the lesser-talked-about obstacles.
However, IKEA recently set an unprecedented mark in this area by recalling of nearly 30 million pieces of furniture in the United States. The products the retailer is urging consumers to either anchor to a wall or return are dressers and chests due to a string of injuries and fatal accidents that have incurred because of the items not being secured properly, including the death of six toddlers.
"Consumers should immediately stop using any recalled chest and dresser that is not properly anchored to the wall and place it into an area that children cannot access," the company said in its press release. It added that shoppers who purchased one of the problematic chests or dressers between January 2002 and June 2016 will be offered a full refund, whereas those who own one that was manufactured before 2002 may receive store credit. The announcement explained that the recall, which is being issued by the U.S. Consumer Product Safety Commission, is happening because the furniture did not meet the industry's voluntary standard requirements.
Recall reverse logistics for retailers
According to The Wall Street Journal, this recall affects half of the chests the retail company sells in America, in addition to the more than 6 million pieces in Canada. And while IKEA declined to comment to the news source about how much this recall will cost the company, Reverse Logistics Association Executive Director Galen Vick said, to his knowledge, it is the largest recall of furniture that there's ever been.
The logistical challenge that IKEA faces is different than those that other organizations have had to deal with when recalling, for example, faulty vehicles, because retailers can't leverage the same kind of information base that dealerships have that could point them to customers who purchased the product.
The Wall Street Journal also reported that Aberdeen Group estimated that, on average, anywhere between 9 percent and 15 percent of manufacturers' total revenue is spent on returns.
However, this enormous recall is voluntary, meaning it is up to consumers to return the products themselves to receive the full or partial refund.
Michael Croasdale on
David Pastore on
Why bother to check it though, there’s nothing that can be done about those charges, right? I mean, taxes aren’t negotiable and the carriers couldn’t get away with mis-billing them, right? Surcharges and fees just come with the territory, everyone charges them so we are just stuck with paying them, right? Wrong and wrong. While it’s true the mechanics of these charges are a bit complex, they’re not indecipherable. In fact, once you take the time to unravel them once, auditing them routinely can be done with relative ease. The truth is that some taxes aren’t actually taxes as we know them, their name just sounds like a tax, e.g. “Property Tax Allotment.” Some surcharges are indeed mandated while others are simply passed through from the FCC to the carriers to the end customer. But some of them are functions of one another and some of them change from time to time and as anyone who’s ever reviewed a telecom invoice knows, when changes occur on an invoice, the carriers will generally find a way to mess it up. Most notably, we’ve seen a few instances where –for better or worse- tier 2 carriers have made significant mistakes in their surcharge policies that led to massive swings in unbilled or overbilled surcharges. So from an audit perspective, a huge amount of the invoice flies completely under the radar and significant errors and recoveries may be identified. Further, gaining and understanding of these costs now can pave the way to better decisions in the future to help control costs beyond services, below the bottom line.
Am I suggesting to negotiate surcharges and fees? No. However, being savvy about which services are state regulated vs. federally regulated and how the taxation and surcharging for those services actually works can have a significant influence on your next purchasing decision. In fact, we’ve seen many instances where everything looks good on paper and a client can save good money by switching carriers and/or technologies, until you factor in taxes, surcharges, and fees only to realize that if that deal were to be signed, the customer would end up paying more money. Of course, many organizations don’t have the time or resourcea to develop a program that allows them to audit their telecom usage and billing and make go-forward decisions with the inclusion of taxes, surcharges, and fees, so for help getting started, contact Source One Management Services, LLC at www.sourceoneinc.com
Martin Przeworski on
But, invariably, this approach will lead to delays in already time constrained initiatives, and lead to inconsistent responses with high pricing 9 out of 10 times.
This is due to each supplier usually following their own internal quotation process that is optimal for their team. You get the price point, but without critical qualifying information to show that the supplier can actually fabricate the product.
With a Request for Proposal (RFP) process you can collect pricing, validate capabilities, confirm certifications, make sure the supplier services clients in your industry, and begin to build the relationship with the knowledge that your IP is protected with an NDA.
Capabilities are a go/no-go when it comes to finding the right supplier. The first step is initial research to verify that the primary manufacturing process you're in search of such as CNC milling or turning is offered by the company along with secondary processes like anodizing, powder coating, or heat treating. The key step is to then start a conversation with a known contact in the company or begin building a relationship and determine the details of those capabilities.
For example, is swiss turning a primary capability, or do they have 1 machine in a back corner that gets used every other month for small jobs. Or, worst yet, do they outsource the operation to a neighboring company and mark-up the price when combined with other operations.
In addition, secondary operation, finishing, testing, packaging, and shipping certainly carry their own costs. A simple supplier-driven RFQ may not include them for all suppliers. When not specified up-front and managed through further conversations, this point always leads to inconsistent price comparisons and higher than expected final pricing.
Certifications are just as critical. If you're in the medical device industry and your products need to be ISO13485 certified, there's nothing quite like attaining a competitive price point, building a great relationship, and investing months in testing first articles to then find out that the supplier doesn't have the certification, or would take 6 months to a year to acquire it. We've seen that both quality assurance and quality control always play a big role when maintaining and tracking the relationship once a product is established. If not addressed to some degree up-front the difficulties may become unsurmountable and lead to further supplier transitions.
While a successful relationship can be established with a capable supplier, a further match in industry focus can serve to expedite the relationship building process and reduce the transition time-line considerably. If the client is in the construction industry, for example, and the supplier has 70% of their business focused on this industry, then all of the processes the client expects are already in place and simply need to be verified. On the other hand, if the supplier has a focus on the automotive industry, but has the capabilities to produce the product for the construction industry the expected processes will have to be clearly stated as expectations and established over time. This can be a significant problem for short lead time parts as the automotive clients will of course get first billing.
Perhaps the most significant consideration when quoting with multiple suppliers is protection of intellectual property rights such as your proprietary designs with a non-disclosure agreement. This point is often glossed over by suppliers, especially in outsourcing or low cost region initiatives, but serves as vital legal protection and should be signed before any drawings can be shared.
In the end, manufacturers have very intuitive and original ideas that can save an established product base 20-40% in some cases, but finding the right combination of savings and risk requires a uniform approach and ample communications well captured by the RFP process.
The Strategic Sourceror on Tuesday, June 28, 2016
This week, The Wall Street Journal reported that EZ Worldwide Express, a logistics and shipping provider, has dropped retailer Forever 21 Inc. as a client because it no longer offers it any value.
Earlier this year, EZ Worldwide filed for bankruptcy protection and was forced to let go of approximately 200 employees. Soon, it will be selling over 140 pieces of equipment, machinery and vehicles that it won't have any more use for after canceling Forever 21's contract. The shipping deal had previously said that EZ Worldwide would be the premier transporter for nearly 200 of the retailer's stores through 2019.
According to The Wall Street Journal, Forever 21's company generated about $25 million to $30 million a year for EZ Worldwide - almost half of its total revenue. However, because the clothing retailer's business has been suffering due to the rise of e-commerce and other shifts in the fast-fashion market, the logistics provider indicated the work has outweighed its worth.
The cancelation of this shipping contract is just one example of the broader trend taking place in the clothing industry, with many organizations struggling to properly optimize and manage retail supply chains in a way that allows them to meet the rising expectations and demands of consumers without losing profits.
Shoppers' tastes and preferences are rapidly changing and it is becoming increasingly difficult for merchants, especially those in the discount or fast-fashion sector, to enhance the efficiency of order fulfillment and distribution operations - especially as omnichannel purchasing evolves. Aeropostale Inc., Wet Seal Inc. and Delia's Inc. are all among the other chain retailers that have also recently been pushed to chapter 11 bankruptcy, the news source added.
In January, when EZ Worldwide first filed for bankruptcy protection, The Wall Street Journal reported that the business employed approximately 700 workers. In it's recent coverage, though, it revealed that its downsizing will include reducing its staff members to 225.
Jacquelyn Palantino on
Iyana Lester on
Identifying your primary, secondary, and key target audience is critical to the success of any initiative. Understanding the current relationship of individuals in relation to the project is a key place to start. By recognizing those who will be both directly and indirectly affected by the implemented changes will allow you to begin to tailor your approach to communicating. Consider what all needs to be accomplished and who will be accountable for each milestone along the way. Also look to previous projects to identify stakeholders likely to be involved for a particular project type or a particular client.
- What is this person perspective?
- What is their level of knowledge?
- What level of influence do they have over decisions and actions?
- What does this person need to know about this initiative in order to perform their role effectively?
- How will each stakeholder/group influence one another?
- What will it take to make this stakeholder a supporter of this initiative?
Leigh Merz on