Sole Source Suppliers? Your Future Depends on Supplier Relationship Management

Here is a great article on how to effectively manage a sole sourced supplier. Too many organizations put themselves at a tremendous risk by poorly managing a sole source relationship. Suppliers that know this can use this to their advantage and take advantage of this situation if it is not managed properly.

Sourcing Guy

SRM maize blue

You’ve tied the knot; is it effective?

Today, procurement and supply chain managers focus more time and energy on managing sole source suppliers than I’ve ever seen in my 30+ years in the profession. Typically these suppliers provide a technological edge, are locked in by regulatory requirements or are the sole survivor of a massive industry consolidation. Many supply chain practitioners aren’t effectively managing these supplier relationships that are so critical to their business’ success. As a result of the mismanagement, the supplier exercises a strong influence on the business as a whole, has a tremendous amount of power in the business, maximizes revenue and profit and takes advantage of the fragmentation of procurement and supply chain managers across a global business. The key to survival is effective supplier relationship management; as Joe Payne, in his MyPurchasingCenter.com post last month says “the future of procurement is SRM.”

Many clients have…

View original post 433 more words

Advertisements

5 Parcel Challenges You Can Overcome to Transform Your Small Package Shipping and Crush the Competition

Cardboard boxes are delivered all over the world on the conveyor

Cardboard boxes are delivered all over the world on the conveyor

This article was written by Michael Rogers of 4 Way Logistics and appeared recently on his blog.

When you are running a small to medium-sized business and regularly ship small packages and parcels, you face certain challenges that your larger competitors do not have to overcome. Companies that ship thousands of small packages a week often get lower rates and better service than their counterparts who may only ship 25 or 50 parcels each week. A 3rd party logistics company (3PL) can help you overcome those challenges so you can stay competitive with your larger competitors and crush your smaller competitors. Take a look at five of the most common challenges and see how a 3PL  can provide the solution to each of those challenges.

  1. Complex rules are hard to understand and shipping costs are high

Big package delivery companies like UPS and FedEx have strict and complex rules that govern every aspect of the shipping and delivery process. As a small business owner, you may not have the time or inclination to read through all of the rules before shipping a package. Do you know the size and weight limitations on parcels? Do you know what is or is not allowed to be transported? What happens if your parcel is lost or arrives in damaged condition? In addition to understanding the terms of service, you also have to be concerned about price. What you pay for a shipment can depend on the level of service, when you want your parcel delivered, insurance, and a number of other factors. A 3rd party logistics company is familiar with all of the complexities and can find ways to lower your shipping costs.

  1. Carrier shipping information systems are basic and of limited value

Carriers have their own platform that is designed to track packages and provide a limited amount of information to customers. If you want better and more useful reports to analyze your shipping costs and budget for the future, your 3PL partner can custom design the type of reports that will better meet your needs.

  1. Complex pricing structures and numerous transactions leads to errors and overcharges. Costly audits need to be done in a more affordable way.

Carrier supplied software does not make it easy for you to retrieve the information you need to do a thorough audit of the charges you incurred. Rather than investing hundreds of manpower-hours and thousands of dollars in custom software to audit your freight bills, you can turn the job over to your 3PL provider. They have the technology and trained staff to do a thorough audit, saving you time and money.

  1. Choosing your best shipping option is difficult

While price may be the most important factor in deciding how to ship your parcels, there are other factors to consider. Does one carrier offer better customer service than another? Can you have your packages picked-up or delivered after business hours or on the weekend? Is it more affordable to ship your packages with an LTL carrier rather than a parcel delivery company? All of these questions, and more, can be answered objectively by your 3PL provider so you can make the smartest shipping choice.

  1. How can you avoid being penalized with higher rates when you are a low-volume shipper?

A 3PL can help you leverage other shipping and volume contracts to help you get lower rates. A postal consolidator is one type of arrangement that will lower your shipping costs and allow you to compete with your larger competitors and crush your smaller competition.

Question:  Does small package delivery seem too costly?

Is It Time to Change Vendors?

This is really great insight coming from a former CFO of UPS about how the logic of changing suppliers. Organizations often struggle on how to determine when to make changes with current suppliers. This article definitely provides tremendous insight how to make that determination.

Longitudes

As chief financial officers move beyond traditional roles, many are finding that vendor selection is becoming an important part of their expanded duties. When deciding which vendors are the right fit, CFOs should distinguish between those who simply supply a product or service and those who have the ability to challenge and collaborate in ways that make us and our companies stronger.

When is the right time to change vendors, and what is the best way to go about it? Those are extremely important questions that take on strategic significance and can have serious consequences.

[pullquote align=right]”Acceptable” is not good enough to meet the aggressive goals and objectives of most companies today.[/pullquote]It’s easy to become comfortable with vendor relationships, especially those that have existed for a number of years and where the service and results delivered are fully acceptable. But acceptable is not good enough to meet the aggressive goals…

View original post 584 more words

Small business suppliers can be like a house of cards

house-of-cards

Does it ever feel like your supplier network is held together like a house of cards? Would your business survive if one or more of your key suppliers went out of business overnight? If your small business is dependent on your suppliers then you need to take the time to understand the risks of doing business with them.

Small businesses are extremely susceptible to supplier risk due to their size and financial strength.  One failed risk of your suppliers can be the difference between success and failure.  Take for example a local restaurant, partnering with a local farm to supply the organic produce.  What happens if that local farm goes out of business?  How quickly can you get them replaced and at what costs? Your whole menu many need to change as well as the pricing.  A new supplier could add tremendous costs due to transportation, less negotiation power and less capacity. The financial impact could be devastating to a small restaurant.

Supplier risk is an area that is often talked about at large companies, but difficult to implement at small businesses due to the complexity and lack of expertise.  Most small businesses don’t have all the resources available to comprehend all the issues that can interrupt your supplier deliveries. Here are three areas small businesses should be address when considering partnering with suppliers:

  1. Financial strength – just how viable is your supplier financially? Partnering with suppliers that are financial unstable is equivalent of adding another bottleneck in your company. These suppliers are unable to fill your requests timely and can cause lost sales due to their inability to fill your demands.  This can be a huge constraint to growth if you allow it.  Due diligence is key here.
  2. Quality – small businesses are often at an extreme risk due to supplier performance. Lacking key resources likely results in completely being dependent on the quality performance from their suppliers. But how often are they able to investigate these suppliers? How confident are you that your suppliers can maintain a high level of performance over time? Watch closely for the warning signs such as quality failures or late deliveries.
  3. Location, location, location – just like real estate, the closer your suppliers are to your small business the better. Transportation costs and times are shortened when partnering with local suppliers. Political issues, weather delays and fluctuations in fuel help to minimize the risk impact due to local suppliers. Shorter delivery times also allow for decreased inventory further minimizing your risk. There are very few downsides to being able to work with local suppliers.

These are just a few of the areas small businesses can use to lower risk in their suppliers.  Of course, there are many other factors that can affect small businesses such as natural disasters, economics, labor strikes, political issues, currency values, technology and social media to name a few. While it is impossible for small business owners to investigate every factor that can create risks, it is best if you invest your efforts into the areas you can control.

If you know of any small business owners that could benefit from a risk assessment of their supply chain please email info@atssoutherncal.com for more information.

Question: have you ever had any suppliers negatively affect your sales?

How small business can challenge their indirect costs

Profit-risk

No risk no reward it is often said. Small business ownership is definitely not for the faint at heart.  Owning your own business has incredible rewards and can represent everything about yourself professionally.  The old saying of “you’ll never work a day in your life if you love what you do” certainly applies to many small business owners.

However, the same passion small business owners have for their core business does not necessarily translate well to other areas outside their core competency. Welcome to the world of indirect costs.  It does not matter if you are restaurant, medical office, manufacturer or a retail store, indirect costs can eat right through your profits in no time.  Indirect costs include many areas that are not a deliverable to your customer such as transportation, merchant services, electricity, gas, fuel, insurance and office equipment or supplies.

Small business owners struggle in these areas because of a lack of expertise, leverage and most importantly the lack of time. The indirect cost providers have no such lack of expertise or time compared to the small business owner.  This usually leaves the small business owner with the least amount of leverage.  Kind of like a nail to hammer relationship!  Not much leverage for the old nail.

However, small business owners do have options to increase their leverage if they choose.  Here are three ways they can increase their leverage with indirect costs:

  1. Open up negotiations – there a lot of indirect expenses in which there are no restrictions to competition so rebidding the service is a very viable option. This even includes using your current provider. There is nothing wrong with checking the marketplace for updated pricing and service plans. Service levels, service providers, technology and your own needs change over time. You just might be surprised to find key savings right in front of you.
  2. Buying groups – buying groups add value to their members through essentially group discounting. These groups are often associated by industry and can be a very effective way to increase leverage with providers to the industry.  There can be costs associated with joining these groups, but the cost of membership can easily payoff in the savings associated.
  3. Strategic partnerships – there are strategic partners that specialize in indirect costing solutions that give small business access to negotiation leverage they just can’t get on their own. These partners add leverage to the small business owner through their expertise and their relationships with these types of providers. They can provide preferential pricing to the small business owner because of their track record and relationship with these providers and pass these savings onto the small business owner. These partnerships not only pass along savings to their clients, but they also allow small business owners to leverage time because they act on the behalf of the small business owner allowing them to focus on their core business. Some of these partners specialize in one are while others can provide a one stop shop for all indirect costs.

Small business ownership requires maintaining cost to keep you competitive in the marketplace. While you can’t save your way to higher sales, you can price yourself out of the market.  Indirect costs are just part of doing business so make sure to review those costs for opportunities that just might give you an edge. If it has been a while since you reviewed those contracts the investment of time could payoff exponentially.

If you know of anyone that would like more information on how to reduce their indirect costing solutions in transportation, utilities, insurance, merchant services or many other areas please email info@atssoutherncal.com.

Question:  what’s the longest you have gone without reviewing a service contract with your indirect provider such as small package delivery, insurance or merchant services?

Leveling the playing field

This week’s supply chain article is presented by guest blogger Michael Rogers of 4 Way Logistics.  Michael and 4 Way Logistics provide industry leading transportation solutions for small companies to large businesses.

Arm wrestle

Businesses are competing against each other regardless of their size, potential and capacity. Often the small sized businesses are at a disadvantage when facing a larger competitor. This edge allows large scale companies to offer more services at a lesser cost while maintaining their desired profitability. So how can a level playing field be established as far as business competition is concerned?

Large logistics firms make news as they work with huge shippers. Meanwhile, other logistics firms are serving small and mid-size clients with results that can be even more profound. The reason this is possible is a 3rd Party provider can use their technology and leverage in the marketplace to level the playing field. It can give smaller companies the same transportation advantages as their large competitors.

These transportation advantages effectively include freight management, warehousing, carrier selection, pricing analysis and negotiation, technology, market expertise and risk management. These functions are vital to all manufacturing concerns in order to make their products readily available for their customers. If handled by a third party supply chain management company, the services are not only bundled intelligently and take advantage of the provider’s expertise in all areas of the transportation process (as it is their core competency and most likely not that of the company utilizing their services).

On top of this, the transportation advantages from third party supply chain management companies not only reduce costs, but streamline processes and optimize procedures. This cost effectiveness eventually translates into higher profitability for the company. In other words, the small business concerns get a chance to compete with the large scaled businesses on more equitable grounds with similar services provision involved.

By turning over their logistics details to someone who specializes in this field, business owners eliminate time-consuming responsibilities. They don’t have to worry about keeping track of the effectiveness of carriers. They need not invest in transport software, which now has an expected life cycle of about 18 months before something more robust is available. They don’t have to keep constantly on top of regulations and trends. They can keep their eye on what’s most important – their business.

There is a saying applicable to this type of strategic alliance – “Never doubt that a small group of thoughtful, committed people can change the world. Indeed, it is the only thing that ever has.” Small businesses have the power to alter the playing field in their favor. It is not size that puts them at a disadvantage but rather the resources available. By outsourcing the logistics concerns to supply chain management companies, they are able to devote more time and effort towards the core business functions and thereby focus on things that are central to their profitability.

Outsourcing logistics functions can also help in expanding business realms beyond the conventional borders. By partnering with the right logistics provider, a small/medium size business can work through an intricate distribution strategy. This allows the company to grow and compete against the large scaled enterprises effectively and efficiently. This gives all businesses the level playing field to showcase their true potential across all ventures.

Why small businesses need strategic partnerships

Me against the world

The business world can be an intimidating place for small business. But there is no reason to think it is you against the world.  Strategic partnership can be extremely powerful and effective for small businesses to level the playing field.  Strategic partners can be used in areas such as marketing and sales, distribution or even throughout the supplier network. These alliances can be the difference between surviving or thriving.

One of the great benefits of strategic partnerships is they create the ability to leverage your resources.  Every small business has limited resources internally from capital, manpower, knowledge and or even buying power.  Strategic partners allow you to leverage areas that you may need additional strength to get a competitive edge.

Not every business relationship is suitable for a strategic partnership, so determining the proper fit is very important.  There is a process to determine who is suitable and can pay big dividends.  Kate Vitasek is a world renowned supply chain author and she calls these 3 ideas the foundation of the relationship.  Follow these ideas and you will be on your way.

  1. Trust – this can be difficult to develop and may take some time but it is critical to any relationship. It will take effort, but everything worthwhile requires work.  Trust must be developed over time through a series of actions, words and follow through.  Trust is a two way street and each party plays a vital role in matching the choices of trust along the way.  Trust is a simple concept that helps to provide a foundation for the rest of the relationship. But lack of trust destroys.  Choose wisely.
  2. Transparency – once trust is established the best way to keep it is through the use of transparency in everything. Nothing erodes trust like a lack of transparency.  Transparency helps to keep trust and can be achieved through simple agreements.  Whether it is through reporting, discussions or shared resources being transparent in your business relationship fuels the trust.  Don’t you think the current FIFA World Cup Soccer scandal could have been avoided with a little transparency?
  3. Compatibility – while trust and transparency are vital to the foundation, compatibility is like the glue that keeps it all together. Two partners that are not in proper alignment just don’t seem to fit.  It is very important to find a balance for the partnership that is beneficial for both parties and is a good fit. Proper compatibility comes from the proper alignment of values, culture or size.  For example, would it make sense for a small local organic restaurant to partner with Monsanto?  Not a chance!

Strategic partnerships have proven to change the course of history from Ford and Firestone, to Steve Jobs and Steve Wozniak or even Ben and Jerry. Partnerships can have a dramatic effect on your business from sales development to cost reduction in your supplier base. If you are ready to dominate vs. participate let strategic partnerships help you get there.

If you know anyone that would like help understanding how to develop strategic partnerships for their business, please email info@atssoutherncal.com for more information.

Question: what are some of your favorite business partnerships?

5 reasons why procurement outsourcing works for small business

Hat trick

A hat trick for small business owners translates into wearing every hat in the company sooner or later.  Wearing all these hats creates strong emotions for owners from hope and accomplishment to frustration, fear and anxiety. There is nothing like having to wear every hat from CEO to janitor in the same day.

What you quickly realize is that time is the most precious commodity and you never seem to have enough of it.  The reality is that you only have so many resources no matter what your size.  You know in your gut that staying focused on your core competency is what will ultimately help you become successful.  Unfortunately, there are many other tasks outside of your core that requires your time too. Procurement is likely one of those tasks and in most cases, people do their best to ignore procurement challenges. I often hear from small business owners that they have a solution in place that has been working for years and causes no problems. Most of these same owners do not realize they can get the same service levels or higher at a reduced costs.

Procurement outsourcing for small business is designed to help the small business owner take advantage of many of the strategic benefits larger companies have been using for years.  According to KPMG, nearly 75% of all large companies plan to increase their use of outsourcing.  Entrepreneur.com recently stated “Entrepreneurs have long seen outsourcing as a strategy reserved for big business, but technology has made it a more accessible tool for small businesses.”  Times indeed are changing.

Here are 5 ways procurement outsourcing is helping small businesses succeed:

  1. Accesses to expert talent – most small businesses have very limited procurement support that is usually a shared resource to other departments. Procurement leaders know there is an expected large talent gap coming soon due to baby boomers retiring and small businesses will feel the pain as they have limited resources to attract talent. Procurement outsourcing solves this problem by allowing access to industry experts on demand.
  2. Risk management – adding additional head counts for small business is a major risk due to the fluctuations in business. More employees mean more risk.  Having procurement outsourcing reduces risk since you get the benefit of the service without the additional overhead expense.
  3. Access to strategic partnerships – any small business can use additional purchasing power, but how can you create negotiation leverage on your own? This is a huge benefit to using procurement outsourcing.  There are strategic alliances in place to provide immediate savings across many goods and services that most small businesses are already using.
  4. Competitive advantages – using procurement outsourcing allows small business to tap into competitive advantages most of your competitors are not using. Creative solutions come from collaboration with the supplier network which is exactly where the procurement outsourcing lives. Exclusive distribution, new product development, inventory solutions, packaging, and financing solutions are all areas that can help to separate small business from the competition.
  5. Cost savings –using best practices helps to drive cost savings and it can even come through existing solution providers without the additional overhead costs. Needs change, technology changes and services from providers are constantly changing but most contracts remain in place costing small business huge amounts of money simply because they don’t address these changes. In many cases, procurement outsourcing even pays for itself through cost saving splits creating no risk for the small business owner.

There has never been a better time for small business to take advantage of procurement outsourcing to develop best in class solutions that can that can help separate you from the competition and increase your cash flow.  These principles apply to virtually every industry. Procurement outsourcing allows small business owners to access many benefits larger companies use without the risk.

If you know any small business owners that can benefit from procurement outsourcing please email info@atssoutherncal.com for more information.

Question: have you seen procurement outsourcing projects make a positive impact for companies?

The disappearing world of Procurement

Invisible man

Here’s a great article by another procurement expert. Thanks Tim for the great insight.

Commitment Matters

Too many procurement groups are on a path to nowhere. They are missing the golden opportunities being created by today’s dynamic markets.

That is the conclusion I have to draw from the many conversations I have with practitioners, consultants, executive search firms and business executives. In a fast-changing world, the possibilities for growth are numerous. But in many cases, procurement professionals and their leaders are simply ignoring them because they do not fit existing paradigms, or they are too busy to pay attention to the warning signs.

For years, supply chain consultants and professional associations have been hammering on issues like compliance, category management, control – all based on the assumption that commoditization is the route to sustainable savings. This has led procurement into increasing isolation, making them masters of process, but disconnecting them from meaningful relationships with other business functions or suppliers. Indeed, many seem to glory in this isolation, feeling…

View original post 409 more words