e-Sourcing Tools

This is a great article and basically what I have been saying for years...e-Sourcing Tools — Means to an End by Andy Sealock. The first three paragraphs sum it all up in my mind. e-sourcing tools can have all the functionality in the world but if your processes do not back it up, they might as well be shelfware. I believe this is where NowSource has distinguished itself, as we do not just provide you with a "sourcing application" we review your processes with you and assist in providing the functionality to fit YOUR process. Not too make the process fit the tool. I believe this to be the fundamental difference in our tool vs. other tools on the market.

Manufacturing Survival

Again these are random thoughts on the current economic situation. I, by no means, have any answers or magic pill to help anyone overcome the current situations. I am just offering up babble at this point and hoping something sticks to the wall!!

Suppliers are taking a hard look at production costs and looking to trim cost to widen margins and more importantly win new business. It is a hard time and the survivors will be those that can find cost trimming solutions in their manufacturing. So what is the answer? How do we cut costs? I have cut as deep as I can go! Sound familiar? This is what I am hearing, and the survivors are those that can compare their costs against competitors pricing and find that one last spot to trim. Based on current projections it is likely that suppliers will be in the 1% or less profit range for the next couple of years. Seems reasonable at this point that if you can live within that range and be competitive with the competition, then you can point out the differentiator's that make you stand out. You know...the "I produce a quality product", and the "we provide good customer service" kind of things.

Software as a Service a more viable option in a down economy

As companies look to reduce costs and spending, technology becomes a stronger and more viable option for companies. Specifically, Software as a Service (SaaS) becomes extremely attractive because it helps to maintain or reduce IT costs in a company. SaaS has been known by many for years, of the benefits, but it seems that companies are just now realizing the true benefit from an internal perspective. SaaS means having the same functions and functionalities that are currently enjoyed without the hassle of maintaining IT infrastructure or staff to maintain hardware and facilities. Actually causing dramatic decreases in cost. For companies that are looking for ways to increase effieciency without increasing costs SaaS systems are highly attractive, especially in today's current economic conditions.

Staples Makes Bid to Acquire Corporate Express

In an email to Staples associates dated 2/19/08, Ron Sargent Chairman and CEO of Staples, notified associates of the proposed offer made to Corporate Express. Below is the text of the email distributed yesterday.

"Fellow Associates:

Today we have taken a significant step in creating a bigger and better platform for all Staples associates to deliver great service and value to our customers around the world. We are pleased to announce that Staples has made a proposal this morning to acquire Corporate Express, one of the world's leading suppliers of office products.

This acquisition will not only significantly expand Staples' North American Delivery operations, the fastest growing and most profitable part of our business, but will also add successful Contract businesses in Europe, Canada, Australia and New Zealand to our portfolio. In addition to expanding our business into new geographies and customer segments, the acquisition will complement our organic growth, representing the addition of approximately $8 billion in annual sales to Staples' $20 billion business.

Corporate Express has a strong management team leading 18,000 associates in 20 countries, and we believe our combined business and people can be even more successful in building a strong, global delivery business. While Corporate Express has not been receptive to our approaches to discuss a possible business combination, we decided to pursue the proposed acquisition because of the tremendous benefits to both Corporate Express’ and Staples' stakeholders, given the complementary nature of our business and the significant opportunities the combination represents. We hope to meet with Corporate Express’ management and complete an acquisition agreement as soon as possible.

We look forward to officially welcoming Corporate Express to the Staples family in the coming weeks and working together to ensure a smooth transition for all associates, customers and suppliers."

The office products market seems to be heating up a bit. The proposed offer is for 7.25 euros per common share of stock. Staples is touting this as a 60% premium from current market value.

Will stock holders snub this offer like Yahoo investors snubbed the Microsoft offer a couple of weeks ago? Let's wait and see!

Read the official Press Release here: http://phx.corporate-ir.net/phoenix.zhtml?c=96244&p=irol-newsArticle&ID=1109564&highlight=

John

New Customer Implementation for Cross-Wind

I am sitting in the Newark airport after leaving a new customer implementation that I have been on all week. It is Raining and flights are delayed so I thought this the perfect time to update the blog.
I have spent Monday through today in the customers office setting up print product templates to meet the customers specific needs and to add their supplier base and the buyers into Cross-Wind I will try to give you a breakdown of my week and the customers response to all of this.
Day 1
was spent understanding the customers current purchasing processes and mapping out Cross-Wind to fit that process. In addition, I reviewed a demonstration site with the customer to show them how their process would look once their application was set-up. I also added all of the customers suppliers information into the system. One of the great things about Cross-Wind, is the ability for the customer to put their specific vendors in the system.
Day 2
Set-up of modules to fit the customers need, I added the customers buying team and assigned access permissions, from there we reviewed product templates and inserted attributes for the customers templates, we applied pricing structures for their templates and we built the templates to be used.
Day 3
We reviewed the templates and pricing applied to each and then created the product-to-supplier associations. When this was completed we did a final over view of the administration tools and then began a complete walk through with the customer of their application and made minor site adjustments on the fly.
Day 4 TRAINING DAY
8:00 AM we set-up for Buyer training which was split into two sessions to allow for supplier training in between. We trained the buyers in the process of creating a project, specifying the product, selection of suppliers, and submission of the RFQ. At this point the suppliers were receiving quotes within the system and allowing them to begin review so we immediately went into supplier training. The suppliers called in to a conference bridge and a LiveMeeting demo of how to respond to quotes. The supplier training session was completed in one hour and all suppliers were able to login and begin sending responses to our training quotes. After lunch the buyers were trained to review the quotes and how to submit proposals to their customers and how to submit purchase orders back to the suppliers. The buyer and customer training was complete by 3:00 PM and the buyers spent the rest of the day practicing.
Day 5 System Live Day
When the buyers reported to work this morning they began entering live quotes within the system and began receiving quote responses from their supplier base. I answered follow-up questions and helped the buyers with any problems they were having in navigating the system. I thanked everyone for their time and the opportunity to learn another customers processes.
Overall, What a great week! The customer is extremely pleased with how Cross-Wind works and how flexible it is for them. I will follow-up with them most of next week to ensure that it is functioning in the manner they expected and I will return to their location in about 6 weeks to do a follow-up and to show them how to use the custom and scheduled report features. In addition we have tentatively scheduled a 3-day session to implement another of their buying facilities into Cross-Wind in the next 6 weeks. I can't wait to reveal the customers name, but until approvals and finalized contracts are complete I cannot. But it will show how flexible and wide ranging our customer base is.
Well I hope all have a great weekend and It looks like my flight will only be 2 and a half hours delayed!!
John

Busy, Busy, Busy, Are you busy too?

Good Morning!
Or is it afternoon I am not sure! It has been a very busy start to 2008 for me. I hope your 2008 is starting out with a bang as well. I was at the Corporate Express National Sales Meeting last week. What a great show! The Keynote speaker was Astronaut Jim Lovell who talked about his experiences on Apollo 13. A very inspiring talk. I got the opportunity to visit with almost all of the Strategic Suppliers for Corporate Express and talk with them about their experiences with Cross-Wind and how it is working for them. Almost all of them were very pleased with how it works and expressed that it helps improve their processes when quoting to their customer. In addition, the Strategic Sourcing supplier manager did a supplier survey in early December asking for the suppliers input and the preliminary analysis is showing that an overwhelming majority of Suppliers are please with the tools. I hope to have the raw data soon and to share that analysis here as well. While the weather wasn't the greatest (Cloudy and rainy Wednesday through Saturday) it sure beat the Minnesota weather I came home too (-10 degrees) on Saturday.
Next week I am off to New Jersey for another customer implementation of Cross-Wind and hopefully I will be able to announce very soon the customers name. I am out of the office all next week but will have some time to start keeping up on this blog! As always if you have questions please feel free to send me a note.
John

Are Reverse Auctions good for the Print Industry?

So the question has come up again; "does Cross-Wind do Reverse Auctions?" My biggest concern is why are buyers so infatuated with reverse auctions? I find it hard to believe that anyone in the print industry would even consider these. Have the lessons not been learned? I really would like further feedback on this from the print supplier/printers perspective.

I can tell you that I have personally sat in on reverse auctions with a printer, as an observer and I can tell you it was quite painful for the print supplier. The auction was a long duration auction lasting 3 days. The supplier reviewed the specifications and had questions as did other suppliers apparently by the feedback response that was given to the questions. Of course no one really wants to ask a question about the specs on an open forum as that may give away something none of the other bidders had considered and if the customer is not accepting questions any other way then the questions often go unanswered. The specifications in the suppliers eyes were not complete so therefore they felt they were unable to provide the best pricing and without being able to consult directly with the customer the price would not be complete. Also pricing did not start coming in to the auction site until the last 3 or 4 hours and then got really heated in the last few minutes which by looking at the price differences that printers were providing there was margin the whole time. In addition, the customer was fairly savy in that they were using a ringer. They had a supplier that truly had no intention of doing the job but was there strictly to drive the price as low as possible. Every time pricing was submitted the ringer would respond within a minute or two and counter the price by a percentage point. So if a print supplier was truly interested in the job they were forced to drop the price even further if they wanted it. The print supplier I was working with had decided early on that they were not going to get the work and that this was a waste of their time. The supplier estimated the job with their standard markup, a discounted price, and with their cost. When the auction started he offered up his discount price immediately which was a 0.5% profit margin. Within an hour he countered with his cost price which meant no profit on the job. One minute later the ringer countered that price which would have put the print supplier at a 1% loss. The right thing to do for the printer would have been to walk away at that point. However the printer knew e needed to fill the press and chose to go .5% lower (now at a 1.5% loss.) With a half hour left in the auction another supplier countered his offer. The printer while frustrated chose at this point to walk away from the job. Now once the price went below cost the printer spent most of his time that afternoon trying to run different scenarios as to how they could cut cost on the project to win the bid. This was a very painful experience for the supplier as they met and engaged the production department and pre-press in devising ways that cost could be trimmed, but without the answers or the ability to ask questions of the customer their was no way to respond without taking a complete loss on the project. The supplier walked away frustrated and realized later how much time was truly wasted in trying to respond blindly to the auction. This supplier politely turned down the next invitation to a reverse auction for this customer, and when the customer called to ask why, they politely told them that if this was the way they intended to do business from now on that they were not interested in being a supplier for them.

The customer lost out on having a consultative resource available to them. The bottom line for the supplier was that if doing business meant doing it at a loss they were not willing to risk losing their company to satisfy a customers need to save money. There is a balance and companies are in business to make money.

What are your thoughts? I am interested in hearing what Printers and Print Buyers think regarding using and completing Reverse Auctions. Post your comments! All will be posted. Thanks!

Print Procurement Questions

I am not going to say that "I am the leading authority on print procurement and print buying." But I will say that If I am asked a question I will find an answer. It may not always be the answer your looking for but I will get an answer. I have had extensive experience in purchasing and as I stated in a previous post the process of purchasing is really not much different between print or an other commodity. Now I said that word, "Commodity". Believe what you will, and I plan to address this further in a later post, print is a commodity. My background in working with both printers and print buyers gives me a unique perspective of hearing both sides objectively as compared to other pundits in the business who have an "either...or" background. I encourage, you to ask me questions. I am not going to give fluffy answers. I will tell you the way I see it or as I have heard it said. If you have a question related to print or print procurement send me an email at: jgangerjt@gmail.com

Reverse Auctions the Gold Rush is Over!

Is anybody still using these things? If they are and you are reading this then I guess I am about to stir a hornets nest!

I read probably the best article ever on reverse auctions a couple of months ago By Mohanbir Sawhney at CIO.com called: Reverse Auctions Cutting Costs. In the article he points out the historical facts that the biggest reason these became popular is because GE claimed huge savings by doing them. Mohanbir also points out that Reverse Auctions can be damaging to supplier relationships. I believe most are finding out that this statement is quite true. I have talked with several suppliers who have out and out refused to do reverse auctions and have told even valued, long time customers that they would rather lose the business than participate in a reverse auction. Suppliers are revolting because of the consumption of time involved in responding to a reverse auction. Often times these auctions are open for hours and usually tie up an estimator and a production manager during the entire auction attempting to shave pennies off an already profitless project. Reverse auctions may serve a purpose in industries where there are bloated profit margins. But in the print industry where the profit leaders are netting between 2 and 3 per cent and the rest are lucky to net .5% profits, reverse auctions can be detrimental to a printers business. I know someone will claim they are saving 20% or better on jobs they have quoted using a reverse auction but I would counter that they were probably using the wrong supplier in the first place. The bottom line is you could probably research suppliers, submit and receive well priced quotes in less time than it takes to conduct a reverse auction. I would also venture to guess that you will get comparable pricing with less work on every one's part.

Reverse auctions are a fad in the print industry and fads usually last about 18 months. Is anyone even doing reverse auctions anymore? If you are maybe you should seriously take a look at the time involved in conducting a reverse auction and what suppliers you are quoting with. As a wise man said at Print Oasis in 2005 "Reverse Auctions, I wouldn't do'em"

Print Procurement Outsourcing is it all it is cracked up to be?

There are companies that will tell you that print is not your core competency so why are you spending money to procure print when you will save money outsourcing that function. Well with that mentality why just stop at print why not outsource ALL of your procurement? What these companies are telling you is that they know how to spend your money better than you do so let them spend it for you. I want you to know that these companies are feeding you a great line. Never the less, a line. You may even hear that outsourcing is the trend. But for every company that you can name that is moving to outsourcing I can name a company that is pulling sourcing back in house. I talked to another company today in the wireless industry that has just terminated an outsource contract and is pulling print procurement back in-house. Why? because the promises of saving big dollars are unfulfilled promises. The key to sourcing either out or in, is about process, efficiencies, and compliance. The reason these companies think they can do better is because they have focused on the process to improve the efficiencies. It is about working smarter not harder! In some cases it is about paying substandard wages to inexperienced buyers and giving them a tool to do the job of two experienced buyers. Their training consists of take the request, enter the data, and the machine will spit out three prices, give the customer the lowest price, don't worry about who is printing the job or the quality just send the job to them when you get the approval. Heck if all your looking for is bottom line price on every job Hire Me! I will even give you a guarantee that I WILL save you money don't ask about the quality and don't ask about delivery. Let's talk about a Pyramid commonly used in business and let's put a twist to it.
Let's call it the outsource triangle:

Now the game is you pick one and I get to pick two...Oh you want to pick two OK pick two...I pick one! Either way this is a losing proposition, You pick Price and Delivery, that means I get to choose Quality. Oh you want Quality and Delivery, That's fine...I get Price and you will pay for it. You want ALL THREE? Sorry it doesn't work that way in outsourcing! It doesn't work that way with in-sourcing either the difference is YOU KNOW what you are getting, how much it will cost to get, when you want it, and the way you want it. The difference is in-sourcing YOU make the decision, and it has to be a conscious one. Business owners and CEO's are entrepreneur's, they are constantly thinking about and making decisions that will impact their bottom line. And, if they make poor decisions their business will fail. I challenge you as a print buyer or print director to think like an entrepreneur, think about that buy decision as if YOU owned the company. Is the decision I am making the best decision I can make for my company? Will I get a paycheck at the end of the week if I go with company A over company B because I like the sales rep? Yeah, his price is higher but at lunch yesterday he told me how his kid needs braces and poor Junior may not be popular without straight teeth. Stop worrying about their business, worry about yours! They won't care when your CEO comes in and tells all of you that they are moving to an outsource company and that you will have to apply for a job with them or go do a job in the mail room that you left 15 years ago when you were an intern and oh yeah that comes with a pay cut! Is that Sales Rep going to be knocking on your door offering to share his commission check with you? You'll be lucky if you can get him to answer your voice mails. If you treat your job like your an owner of the company and make decisions like a responsible owner would I think you would find that your job will be just fine and your boss will even be able to give you a raise because they will see the value you can bring to the company.

OK, now some outsourcing company is going to tell you; YOU CAN HAVE ALL THREE! Well what they are doing is not rocket science and they are thinking like a business owner that needs to make good business decisions. They will balance the triangle on one of it's points and they will make trade offs where they can. Some jobs will come in with poor quality, but not enough that will make you complain. Some jobs will come in higher priced than you expected but not enough to make you complain. Other jobs will come in late delivery, but not enough that you complain. Seeing the pattern? Most outsourcing companies can be successful because they have put process efficiencies in place such as sourcing and vendor management systems that reduce the time to production, they also have vendor agreements that they fall back on that they guarantee certain volumes of print to certain suppliers in exchange for "Rebates" or some like to call these kickback's (but that's such a dirty word).

The best recommendation I can give any company is take a long hard look at your vendor base.
Who are you doing business with?
Are there companies that can do more of the jobs thereby eliminating a vendor or two?
If I offer them a guarantee of work can I get better pricing?
Can I get "Rebates"?

The right suppliers are willing to give rebates or even price reductions because they now know where their next job is going to come from and they know that you are guaranteeing work to them so that now they are going to be able to make payroll. See, they are in the same boat as you and they know you need to spend money and they need to spend money as well, it's just nicer knowing up front how much you are going to make in the next year before you need to budget.

The biggest thing to remember as a company is that either way you are paying money, so why do you want to pay an outsource provider to do exactly what you can do and probably cheaper than the outsource provider? If the outsource provider wasn't making money do you really think they would offer a service like this? You can do this yourself it is not that hard if you have the print buyers in place now you really need to pay attention to the process and how to make the print buyer more efficient. Give them the tools to do what an outsource provider does and you will make them more efficient.

Specification Gathering in Print Procurement

When purchasing print the key to getting what is desired is the specifications that are provided to the supplier. I will try to walk through the specification process. When specifying a print job two key elements can make the Quoting process go smoothly, Good Specifications, and Samples. (we will discuss samples in another post) Specifying the job is usually done through some sort of interview process. This process can be a formal or informal interview.

Formal Interview

The formal interview is conducted by asking a series of questions designed to get the job specs. This is usually performed as a meeting or phone interview in which the print buyer gleans the specification for the job from the requester (customer). A series of questions is usually on some sort of formal document or an experienced buyer may know the questions that need to be asked. I caution even the most veteran of buyers that "off the top of the head" is not the wisest way to gather specifications from a customer. Most of the time this can make a customer quite nervous about the overall outcome of the job being produced. If this is an external customer they may lose confidence and will walk away unsure if all of the information was gathered no matter how confident you may appear. I recommend using or at least have a form in front of you during the interview process. Whether you actually use it or not, having it out on the table will give the customer more confidence in your ability. It often times can be used as a prompt for your questions or to at least ensure that you have gathered all of the pertinent information. The drawback to a formal interview is that they can be time consuming and if you are like most buyers your days are pretty full already and it may be a couple of days to schedule and complete the interview. Often times the customer either perceives they do not have time or they REALLY don't have time before they need the job completed. A personal side note; I found blocking an hour per day off on my calendar will allow me time to do those urgent interviews and still get my work done for the day. The formal interview can also be conducted as a survey form that is submitted to the customer. I highly recommend this form either as a complete or as a preliminary to a meeting. This will give the customer an opportunity to answer at least the questions that they know and will expedite your meeting. In the formal meeting you simply need to review the answered questions and help the requester understand the unanswered ones.

Informal Interview

The informal interview is usually conducted by way of email, phone, fax, or sending a sample with chicken scratch all over it and your expected to interpret (my favorite). Any way you get these requests they can be time consuming and often key items can be missed. The buyer and customer usually go back and forth either by email or phone calls over and over. Usually, additional questions are prompted by suppliers after the buyer has submitted the RFQ and then you're putting undue delay on the project because you either have to guess at what the answers are or go back to the customer again and ask. This also does not give your customer a warm fuzzy feeling that they are going to get what they want.

I am a firm believer in the formal interview process and have found that it can be used in almost any industry. When I worked in the medical field I would use this strategy when working with a team of medical specialists wanting the latest and greatest medical device. Whether I knew how the piece of equipment worked or not was beside the point I could usually go to a potential suppliers web site and at least get the pertinent questions from the listed product specification information or from their marketing information. An hour of reading often times saved me three or four hours of back and forth questioning.

Building the interview form

When building an interview form I suggest creating one for each of the specific types of items you may purchase and to use them as templates. The reason for separate templates is because the questions you ask for an envelope job are going to be different than questions for a continuous form. No reason to know number of pages on an envelope! I challenge those buyers not using a template when interviewing to try it and see if the reaction you get from your customer changes. I think you will be pleasantly surprised at the reaction of your customers.

Was this helpful? I am always open for recommendations as to how to make this better and I invite those of you using a formal interview process to post your thoughts.