Supplier Lip - The Worst Kind of Service

on Wednesday, November 25, 2009

When you purchase a product or service that is critical to your supply chain and customized due to unique business requirements, the most important thing you need from a supplier is for them to listen. Yet how many times have you brought a supplier in to discuss a critical aspect of your business, have them nod their head in complete understanding, only to leave and never think about it again?

I spend most of my day explaining business requirements and long term strategies to suppliers, and I would say less than 1 in 5 actually take what I say to heart. The problem is sales people make their living telling people what they want to hear, even if they can’t do what you are asking of them. They want to sell you an easy solution, even when your requirements are complex. Suppliers don’t want to think outside the box, they want business that comes prepackaged, preferably with a ribbon and a card attached.

To quote Peter Griffin, “That really grinds my gears”.

My intent here is not to bash sales people – everybody wants easy business, where the level of engagement required is lunch once a month. Business that operates without a lot of hand holding or up front investment is the best kind. The problem is when you have critical, unique requirements, and suppliers continue to look for the easy sale, simplest solution, or worse yet, promise the world with no idea how they will deliver.

Here are a few ways to make sure that supplier can meet your expectations before you sign on the dotted line:

Ask specific questions. Don’t just ask the supplier “Have you done this before?” Ask them to explain a situation where they have encountered similar issues, and how those issues were resolved. Their response will give you a good indication if the supplier understands the complexities of your requirements.

Prep before presentations. If a supplier is presenting their offering to you, give them a detailed outline of your requirements and ask them to customize their presentation based on your needs. If they still come in with their standard sales pitch, you can rest assured they have no intention of meeting your requirements.

Get specific references. Don’t just ask for references; ask for references with similar requirements. When you interview those references, see how similar they really are. If they don’t match, the likelihood is the supplier still doesn’t understand what you are looking for.

Go up the chain. Talk to the boss/supervisor of your main sales contact. Particularly if your requirements are customized, the boss should be relatively up to speed on your account. If they aren’t, chances are your main contact still isn’t clear what you are looking for, or is hoping they can sell a simpler solution.

Doing this homework won’t prevent you from getting the lip service treatment, but it will help you avoid building a relationship with that supplier.
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No Need to Ruffle Your Feathers

on Tuesday, November 24, 2009

Anyone who has cooked a turkey for Thanksgiving probably remembers their first time. If this week is your first year, then you’re in luck! Any questions you may have regarding thawing, prep, cooking, presentation and much more can be answered by the Turkey Talk-Line. Butterball has offered this hot line for almost three decades now and is well prepared for the most extreme questions. The hot line receives 100,000 calls including 12,000 calls on Thanksgiving Day alone!

As part of Butterball’s preparation, all newcomers to the hot line go through five days of training appropriately referred to as Butterball University. All that man the phones have degrees in nutrition, food science, or home economics and are armed with a 3” binder full of turkey knowledge.

Before the line goes live for November and December, all workers who have been on the hot line for three or less years also gather for intensive turkey training days including an assignment to make a turkey with a different method so they are familiar with all the ways people might prepare a turkey. According to this AP article, they make the basics: “roasters, ovens, and even grills and deep-fryers, which have grown in popularity.” They train with other brands of turkey as well as Butterball since the hot line is open for anyone to call.

So if you’re cooking a turkey for the first time this year or want to prepare it a different way, call the hot line experts at 800-288-8372. Fifty-five operators are on hand to help you!
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Spend Leverage

on Monday, November 16, 2009

An article recently posted in an issue of Supply & Demand Chain Executive briefly detailed the new trends in sourcing and procurement practices. The author discussed the traditional process of setting up the purchasing team within an organization and developing processes and procedures that would ultimately create the most savings for the organization. He continued by examining how new challenges and trends created the need for better practices, and a more strategic approach to spending. By focusing on specific spend categories that are considered strategic to a business, your company is on the right track to establishing better purchasing methods. Categories that are considered strategic are those which have a high risk of supply loss and high value as a product or service. For items that are considered strategic to a business, the main focus is on your relationships with suppliers. By targeting these particular areas, organizations can streamline their savings initiatives and push for much greater efficiency. What the author ends up driving at is that there is more to sourcing and procurement than what we traditionally know. He states that companies need to leverage their spending by collaborating with other businesses to maximize utilization of resources. Outsourcing procurement services provides another approach that can create better efficiency and provide for expertise that will eventually lead to even greater savings. Companies can also join a Group Purchasing Organization (GPO) to consolidate spend with other companies and leverage better pricing. The idea of the article is that organizations need to look beyond their basic means to expand their opportunities. We are in an age of vast knowledge that is at our fingertips, all we need to do is direct our focus. Even the smallest of companies can have multiple suppliers, which means multiple contracts and multiple spend categories. No matter what size company, they can take advantage of leveraging their spend and with the right management they can realize the most potential savings.
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Risky Business

on Tuesday, November 10, 2009

According to CNN certain banking companies will begin to raise their employees’ bonuses by an estimated 40 percent in the upcoming months, all in the wake of the financial turmoil in 2008. Many people are concerned that these increases may lead these companies back down the path led previously. The article states that the Fed will be ensuring that the banks are held accountable to the rules that ban excessive pay for bankers. But who or what decides what is excessive? Does the American public get to say, “Hey wait a minute, I think they are getting a little overpaid?” Or will it be the overpaid government determining what the definition of overpaid is?

Additional concerns surrounding the taxpayer bailout are being brought up since many of these companies planning increases were the ones that received bailouts earlier this year. But I think we can all rest assured since they still are not making quite what they were making in 2007, even with the 40 percent increase. As a taxpayer, I can definitely say this news does not make me sleep better at night, how about you? They are saying that the increases come due to the banking industry returning to a level of profitability. I say that we are not nearly out of the woods yet and this risky business needs to be looked at a little closer.
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Press Announcement: WhyAbe.com Adds New Features

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WhyAbe Free Sourcing Software
A small break from our regular blogging efforts for a Press Announcement from our parent Source One:


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New Features Added to Free e-Sourcing Site, WhyAbe.com!

Philadelphia, Pennsylvania – November 10, 2009 – Source One Management Services, LLC, who develops and maintains the web’s only completely free professional e-sourcing platform, announced new features to help assist procurement professionals in their e-sourcing events.

WhyAbe.com has built a communication system directly into individual RFP and Reverse Auction events. With this system, buyers are able to log in to any event they have created and email a message to their entire invited supplier base, or to individually selected suppliers. All records of email communications are stored indefinitely with the event in order to help maintain record keeping and accountability.

Editing active and saved events has become significantly easier. WhyAbe.com has incorporated a “WYSIWYG” (what you see is what you get) editor into the dashboard. Now, buyers do not need to know or understand HTML formatting in order to edit and customize their RFX events. The on-screen editor program supports formatting through familiar menu and navigation bars.

A new document uploader has also been added to the buyer’s toolset which allows users to create their RFX event with greater speed and improved system feedback. Now, when a buyer creates or edits an event, multiple attachments can be uploaded in one easy step. By simply holding Ctrl or Shift on the keyboard and clicking the mouse, multiple documents found in the same folder can be quickly attached to your event. WhyAbe has also added visual feedback for end users which indicates the progress of these document uploads.

Recently, the most frequently requested enhancement to WhyAbe was to enable buyers to revoke (remove) bid(s) submitted by suppliers. WhyAbe is pleased to announce that buyers now have the capability to remove bids from a supplier during a live event. Once a buyer removes a bid in a reverse auction, suppliers will see their bidding rank or current lowest bid screens refreshed with the proper information before the removed bid was placed. In order to maintain proper record keeping and regulatory compliance, buyers must enter a reason for removing the bid. All removed bids are stored within the event and event bidding history indefinitely.

In addition to the e-sourcing enhancements, WhyAbe.com has also improved the navigation and dashboard for its contract repository system. Users of the contract repository can now quickly sort their contracts based on pre-established criteria such as, contract amount, expiration date, and contract number. The process of adding new contracts, suppliers, and reviewers has also been streamlined through an improved navigation system.

Procurement Service Provider, Source One, is committed to continually improving and updating the WhyAbe.com platform and series of tools. New features and enhancements are developed based entirely on user requests. Stay tuned in early 2010 for another series of further developments.
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If you haven't yet heard of WhyAbe.com, or you still don't believe it is free, keep in mind that WhyAbe is now in its fourth year of operation as the web's only completely free on-demand e-sourcing website and collaborative marketplace. WhyAbe can be used by any organization in any industry, and has a user base ranging from single-person startups to Fortune 500 corporations. Source One also licenses out private label solutions at a low monthly cost if you are looking for a more customized solution for your business.
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States are the New "MOB"

on Monday, November 9, 2009

One of my favorite episodes of the Sopranos is the one where Paulie tries to hit up a Starbucks for some "protection" money. The Starbucks manager tells Paulie that ""Every last f***ing bean is in the computer".

Paulie's world was changing and soon your world will be changing too. California has a plan to shore up its deficit - an interest free loan from the taxpayer. The state is going to withhold an extra 10 percent out of residents' pay checks. Leaders say state residents will get any extra withholding back in April. Those who would have already gotten a refund will get a bigger one and those who owe taxes will owe less.

After years of mismanagement, California is going to shift more of the pain to taxpayers rather than reduce spending. The problem will only be worse in six months. Why not just make the cuts now? Taking additional tax money from already cash strapped consumers will only worsen the problem. Retailers will see less spending this holiday spending which will result in less tax revenue for Sacramento.

Given that almost every state is in financial turmoil, people that don't live in California should take note - the New "MOB" is coming to a state near you. How much of this are we going to take before we are totally fed up?
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$5 Goes a Long Way

on Friday, November 6, 2009

What do you think of nowadays when asking “what can I get for $5?” The jingle comes to mind “$5… $5… $5 foot longs!” The in depth Business Week article takes us through the birth of the $5 Subway footlong sandwich campaign. It all started when a franchise owner in Miami came up with the idea to offer every footlong sandwich on the weekends for only $5 (a dollar less than the usual price).

It’s great that Subway realized the potential and seized the good idea even though it wasn’t created at headquarters. To their reward, according to the NPD Group, Subway’s $3.8 billion in sales nationwide on the $5 footlong alone placed themselves within the top 10 fast-food brands in the U.S.

Sorry Jared but your reign is over. At least with this promotion you can continue your weight loss and realize savings. You will be saving time, gas and money by visiting Subway just once a day to buy a $5 footlong that will last you for lunch and dinner now!

If you get a few minutes I would suggest you read through this article. Be careful if you read it on an empty stomach though, now I want Subway!
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Accountability in Cost Reduction

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A year ago, with the economy on the verge of collapse, and our government basically maintaining a holding pattern, we heard a call that change was coming. Regardless if you bought into it or not, it seemed that the path we were on was unsustainable, and something would be different soon.

I for one was hopeful that we would see some accountability in the government as well as the corporate world. I felt that the bailout(s) would force our government’s hand to start cutting costs – their own as well as the companies they gave billions to. I also thought the trend would be contagious, from the federal government on down to state and local, and from large companies needing bailout funds down to small companies just trying to survive the current recession.

A year later, what do we have to show for it? Not much. Over the last few months we have seen that even during an economic crisis, most people will look to maintain the status quo, for better or worse. It’s ironic that a message of change sold our country, yet most people only want it if it’s not going to affect them.

In my job as a consultant that specializes in cost reduction, I don’t have the luxury of maintaining the status quo. Inherently, reducing costs means shifting away from traditional thinking, or having a damn good reason why you shouldn’t. That role requires accountability – recommendations have to come with solid facts behind them, alternatives need to be explored, and support needs to come from the highest levels – because change doesn’t come easy.

Our federal, state, and local government, along with many companies – from large corporations to small businesses, went into this new year with a noble cause of cutting out the fat, getting more efficient, and changing things that didn’t make sense. But along the way, many didn’t realize they had to be accountable for those actions and actually shift away from the status quo to be effective. Without that accountability, real change won’t take place.

A great example of lack of accountability and status quo protection is happening in the county I live in. Recently, Montgomery County (outside of Philadelphia) embarked on a budget balancing initiative, cutting programs and jobs across the board. One area that took some major hits was at the county building where most workers were stationed. This building included a county run cafeteria and day care center that employees could take advantage of at a discounted cost. County officials decided that the cafeteria and day care center were too costly to run, and outsourced both programs to companies that quickly raised prices for employees. Most of the employees of the county that work in this building do not have high paying jobs, and rely heavily on little benefits such as the low cost daycare center to keep them afloat. It’s recently been announced that these employees will now be required to pay a greater portion of their healthcare costs next year.

On the surface, it appears the county is making some tough choices, but are they really making cuts that will have a long term positive impact on the county? Not really. The likelihood is that many of these employees will find themselves in over their head financially, without the salary or ancillary benefits that allowed them to live and work in the most expensive county in Pennsylvania. Once they do, they will be required to utilize the same state and county services that they provide. The plans aren’t eliminating the cost burden, but simply shifting it be paid at a later date.

Government is not the only one with these problems. A similar lack of accountability in decision making can be seen in one of my customers. Their board of directors issued a mandate to shave $30 million out of the budget by the end of 2009. Even with this mandate, they haven’t allowed their cost reduction consulting firm (Source One) access to the areas where they spend the most – telecom and benefits, because in the past they have been considered “hands off” and politically sensitive, meaning the powers that be don’t want to challenge those who control the spend. Even in times of extreme emergency and dire straits, the first priority appears to be keeping the status quo, because change requires accountability.

From AIG fixing their problems by shifting good investments to a new company and leaving the bad to rot (ala GM), to state governments cutting back on police forces while huge process inefficiencies go unchecked, it is clear that the status quo is still being maintained, and accountability is avoided. On the surface, it may look like we are on the right track, but look under the covers and what you’ll find is a mess. We’re not going to have change anytime soon.
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Bypassing the RFP

on Tuesday, November 3, 2009

Recently this blog and many others have covered the trend of suppliers rebelling against the RFP process. Particularly in the services industry, suppliers are walking away from business rather than participating in a process that requires a great deal of upfront work (often with strict timelines) and little upfront customer engagement. The weak economy has only compounded this issue, with companies scaling back and requiring more get done with less resource. Sales teams have become selective in reviewing what business opportunities look real and which are long shots, and allocate resources appropriately. In the past, disqualifying suppliers due to a late bid (or no bid) was common practice, but these days you could be severely limiting your competitive landscape with that approach.

So what is a strategic sourcing professional to do when suppliers still need to be evaluated and qualified, but are unwilling to commit to a formal written response? Recently, I’ve started looking for opportunities to shift away from formal RFP’s and utilize supplier presentations as the initial qualifier during the sourcing process.

Supplier presentations have traditionally been reserved for the later stages of the sourcing process (with some exceptions), after the list of potential providers was narrowed from 10+ down to 2 or 3. This saved time and effort on the buyer side, and allowed the sourcing staff to bring in a cross functional team and any interested end users to see what the landscape looked like, but only from a select group of suppliers that could best meet the customer’s requirements.

Moving to supplier presentations on the front end can be a great deal more time consuming, because each supplier needs 1-2 hours of your time up front. You can limit the time investment though, by mapping out exactly what your requirements for the new supplier are in advance of any meetings. Once you do that, you may find that out of the 15 potential suppliers, only 3 or 4 are really a good fit based for your organization.

Allowing suppliers to present rather than provide a written response can make impartial qualitative comparisons a difficult process, but there are easy ways to “force format”. Start by giving suppliers a list of key concerns, and make sure they are going to cover each of them during presentation. Before the presentations, show them your scorecard system, and make sure they know the importance of each category of the scorecard.

I’ve been on both sides of the table during a “pre-qualifying” presentation process, and I have to say it’s been effective. On the sales side, during one of these presentations I spent five hours in a meeting room with a potential customer, including multiple end users and other decision makers. While it became clear early on that we weren’t the best fit for what this customer needed, it was still preferable to spending a few days (and nights) filling out a word document and expecting the same result. In addition, I had the chance to meet face to face with a large group of purchasing professionals, which was a great networking experience. The likelihood is if there is a better fit down the road, they are going to remember us more clearly from that meeting than from a written response.

On the sourcing side, I’ve found the process actually cuts timelines dramatically. Allowing suppliers to utilize their standard format (or sales pitch) and add to it based on my primary concerns means they don’t have to reinvent the wheel, just customize it a bit, and I can setup a presentation within a week rather than waiting 2-4 weeks for a written response to come back. Plus, suppliers are much less likely to ask for a time extension if they have already confirmed a face to face meeting.

Overall, I would recommend bypassing the initial proposal process for presentations whenever possible. Suppliers are often much more motivated and engaged when taking this approach and it becomes clear very early on if the suppliers actually listened to your concerns or just gave them lip service. In some cases a written response may still be required, and a formal quote will definitely be needed, but as a pre-qualifier, the process works well.
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