Supplier collaboration

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?

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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?

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?

What can business learn from Moneyball?

Money ball

Brad Pitt once brought to life the importance and value of metrics when he portrayed Billy Beane in the movie Moneyball.  “Sabermetrics” as it is widely known today has really changed the way scouting in baseball was performed.  It elevated the process from tribal knowledge that had been in place for over 100 years to analytics that could measure performance creating a contender out of a small market team.  Just like Sabermetrics, almost all companies today use some sort of data analytics to measure performance.   But just how effective are those measurements and where did they come from?

When used properly, metrics work to support strategic initiatives and provide feedback to all stakeholders regarding the performance of the group quickly and effectively.  However, when they don’t they just become another number.  They quickly become irrelevant and people will just tune out.

Here are 5 ways to make sure your metrics are relevant and adding value to your organization:

  1. The metric fits into higher strategic goals

All metrics must align with your strategic focus.  Every metric created must support the higher goals of the organization.  No metric should be created without it fitting into the bigger picture.  Any metric not in proper alignment quickly losses value and can becomes irrelevant.

  1. Ownership

Metrics must have the proper ownership within the organization so that the individual/group responsible can have as much control over the process as possible.  It is unrealistic to hold anyone accountable for areas outside of their control.  Positive changes cannot be expected by individuals without the ability to change the dynamics of the input.

  1. Simple data

Making the metric as user friendly as possible is the best method.  The most useful data is when everyone can easily understand it and interpret the data instantly.  A great example of a simple metric is in the airline industry and on-time departures.   This is simple, to the point and everyone can easily relate to it.

  1. Publish regularly

However you designate the publication time, make it relevant. Whether it is weekly, monthly or quarterly, the measurement should be on time and relevant.  Data ceases to become relevant if it is outdated.  There is not much relevance to reading old news.

  1. Don’t be afraid to adjust

Keep in mind that not every metric is set in stone. I recently was asked the best way to measure fill rate for a distribution company.  The simple answer is that how you measure is irrelevant if your customer base disagrees with you.  Never forget to check with your customers. They will certainly have an opinion of your performance and how you should measure it.  Ultimately, keeping your customers happy is the goal. Don’t be afraid to get their input.  If your customers disagree with your metrics then you end up looking like you are out of touch.

While there is no denying that effective metrics help guide companies to higher performance, the development of the metric itself can be more about trial and error than pure science.   Constant improvement is the goal in any organization and metrics are no different.  Keeping your metrics, strategy and customer satisfactions in alignment takes constant adjustment.  Relevant metrics are often a work of art in the end.

If you or anyone you know would like more information regarding the use of metrics in their organization please email info@atssoutherncal.com.

Question:  What are some of the most useful metrics you have used?

The next level in the supply chain

Man in tunnel_light

It is time for supply chain professionals to shed some light on how things are made. Global economics can be a double edge sword.  It has the power to increase sales exponentially, but on the other side it has the power of to corrupt and abuse just as easily.  Business today demands companies continually look to make goods and services more cost effective or lose market share. It’s that simple in many cases.  We consumers love getting a great deal, but what’s the real cost in terms of the supply chain practices.  The fact is we know very little about those practices.

Companies that purchase goods and services have a responsibility to understand what practices are really going into their products they sell.  Due diligence in the supply chain can be daunting but worth the effort.  Languages, cultural differences, laws, business environments and many other factors play important roles in how business is awarded.  Labor practices, environmental impacts, working conditions and business practices are real concerns when awarding business to foreign companies.  Companies that profit from these arrangements have a responsibility to be aware of what they are buying.  Why is it that we consumers know more about free range cattle than free people in the supply chain?

The good news is that this awareness is beginning to ramp up.  Recent tragedies and social media are driving awareness that global supply chains won’t be able to ignore.  Unfortunately, for every abuse that has comes to light there are many more we never hear about.  The good news is there are several companies that have begun to leading the way such as Apple and Coke that have really made due diligence apart of their corporate responsibility.

Here are 5 ways to help your organization use your supply chains responsibly:

  1. It starts at the top

Executive teams must make a commitment to support fair and responsible trade throughout the entire supply chain. First level suppliers are not enough. They need to collaborate with their suppliers to go beyond just the first level and ensure all the way down to raw ingredients are made responsibly. Comprehensive policies addressing fair and responsible supplier practices need to be incorporated just like any other quality system.

  1. Transparency in the supply chain

The bottom line is that transparency creates trust.  Collaboration in the supply chain is dependent on trust.  Ensuring quality products has long been the focus for sourcing professionals but now it is time to take the supply chain to the next level and create transparent supply chains practices.

  1. Data systems

Today information is more accessible and relevant than ever before.  Organizations such Made in a Free World help put information into the hands of decision makers that award contracts to foreign suppliers.  This data is powerful and positively impacts lives across the planet.

  1. Third party inspection companies

These companies can provide on-site inspection services and can provide insight into what is taking place onsite.  They are an important part of the process as they can be your eyes when you cannot be at the supplier. It is very important to maintain they are independent from the supplier to provide objective information as to the performance of the supplier. They are beginning to provide oversight into working conditions and environmental issues.

  1. Responsible supply chain practice labels

Organic food supply has created a tremendous amount of awareness when it comes to what practices go into the food supply.  Why don’t we have that for people and the environment?  I think it is time we create labels on our packaging that let’s everyone know these products are made from a responsible supply chain practices.

Supply chains reach and impact people, countries and the environment across the world like few other disciplines.  It is our responsibility to use that influence correctly and reward those suppliers willing to offer transparency all throughout the supply chain.  We see it working with the organic food chain so it is about time we step up and make it work with people and the environment. People are worth the effort!

If you or anyone you know would like to learn more about responsible supply chain practices please email info@atssoutherncal.com for more information.

Question: Do you think adding “responsible supply chain” labels would make an impact to the end user?

4 keys why procurement’s like an ace up your sleeve

Ace up sleeve

It sure would be nice having an ace up your sleeve as part of your “go to market” strategy. Look no farther than you own procurement team.  Procurement has been working to establish itself as a worthy member of the executive team in every industry for years.  Procurement has long lived in the shadows behind sales, operations, finance and IT. Sales teams tend to get a lot of recognition for bringing in the business and it is well deserved.  Operations, finance and IT all seem to have their moments to shine too.  But procurement in general seems to get lost in the shuffle behind those other disciplines.

However, that in no way diminishes their ability to add value to the organization.  Maybe they just need a new marketing campaign.  Years ago procurement was viewed only as a necessary support function to fulfill internal requirements.  It’s continuing to evolve as more companies are seeing greater value being added than just filling a material requirement at the lowest cost.

Procurement’s strategic effect touches just about all areas of the organization.  Here are 4 key areas that procurement can effectively provide a competitive advantage for your organization:

  1. Product design

Developing products is a creative process that can consume lots of time and resources in order to maintain relevance in the marketplace.  Sales and operations typically drive the process, but don’t forget that procurement has direct communications to the supplier network.  That is an incredible resource that is easily tapped into for support to the latest technology and market solutions that extend well beyond your internal capabilities. Go ahead and invite your suppliers to be part of the process, you might be surprised what they bring to the table.

  1. Inventory strategies that increase cash flow

Investing into inventory is one of the biggest expenses for just about any company.  Unless you can turn around and sell the material without further touches, expenses quickly add up like space requirements, tracking inventory, audits, compliance, theft, packaging and support management.  Then there’s the risk of the inventory moving slowly or not at all.  Why not work with the suppliers to find solutions that minimize that risk and inventory investment?  Increasing cash flow, reducing lead time and logistics costs, what’s not to love about those benefits!

  1. Corporate social responsibility

Unfortunately as global commerce continues to expand into developing countries, corruption still exists but the good news is that information has never been more accessible.  There is so much injustice across the world, but organizations have never had as much information as they do today to make informed decisions on where they award their business.  There are major concerns when working internationally such as human rights, environmental issues or intellectual properties. How about turning those concerns around and sourcing responsible suppliers as an example of the right way to do business?  Now that’s an advantage that benefits everyone.

  1. Exclusivity

We all want to standout in the marketplace and having exclusivity in your supply chain is a very real possibility that allows you to be distinctive.  Procurement can drive this exclusivity advantage through strong relationships in the supply chain.  Keeping competitors out of your supply chain is a huge advantage that is best established right from the procurement team.

If you are tired of just being another supplier in the market place and distinction is what you want, look to your procurement solutions as a real advantage.   Advantages like this can be achieved through internal teams or through procurement outsourcing providers.  They have the experts on demand with proven concepts, experience and partnerships available to make ideas like this part of your competitive advantage.

If you know of any companies that are looking for a distinct competitive advantage through their procurement solutions, please email info@atssoutherncal.com for more information.

Question:  What creative procurement solutions have you used to develop a distinct competitive advantage in your marketplace?

Collaboration creates synergy in the supply chain

UM huddle

Supplier collaboration is like synergy-the whole is greater than the sum of its parts

In sports, working together for a common goal to win a championship is a given. Those teams that do it the best separate themselves from the competition creating lasting legacies that live forever. The winning spirit (a collaborative process) begins when the coaching staff lays the foundation for the season long before the season even begins.

Developing collaboration in the supplier base has a lot of similarities to winning championships.  Collaboration and winning teams share common characteristics such as a team vision, a foundation built on trust, structure and accountability to each other. All of these elements that create winning teams also help drive a shared collaborative team environment.  Creating collaboration in the supply chain, much like winning championships, will separate you from the competition by providing opportunities not afforded to those that work alone. Expanded market penetration, product innovation, cost reductions and shorter lead times are all possible when using a collaborative approach to engaging the marketplace.

So how do you translate winning on the field to collaborative winning in your supply chain?  Follow these four elements and you will be on your way:

1. Invite the supplier to participate.

Sounds simple, but if there has been a long standing relationship or the players have changed over time, it is time to reset. This is especially true if there has been friction in the past.  Besides who doesn’t like a warm invite?  It does not matter if it is about business, dinner or just a drink with friends.  No one wants to feel like they are crashing the party. A warm invite is usually well received and if done in the proper context can help to set the table for a collaborative relationship

2. Establish a foundation

Kate Vitasek (Founder of Vested Outsourcing and world renowned supply chain author) says it best, “trust, transparency and compatibility” help to define the basic foundation of any business relationship.  Once these three key elements are established, the creativity is allowed to flourish instead of being stifled.  It is in this freedom where ideas are developed to create unique solutions throughout the supply chain. The entire supply chain becomes open to discussion so opportunities may be found in planning models, product innovation, pricing, packaging, logistics, capacity, distribution or simply better information.  No one wants to feel boxed into a corner and the right foundation allows people the freedom to engage in new ideas.

3. Develop a structure

Just like a building, once the foundation is set, the structure building can begin.  A common vision helps to frame the structure, but a forum of communication needs to be developed that helps support an environment of ideas and provide feedback throughout the process for what is working and not working.  These communication tools are also key elements in establishing a method for accountability to keep all parties on track.

4. Create incentives

Setting the foundation, creating strong communications and accountability are great, but without the proper incentive, sustainability is difficult. Only through fair incentive policies will all parties feel justly compensated for their involvement. Incentives are not always restricted to just direct compensation.  Incentives such as exclusive rights, product innovations, inventory solutions, additional capacity or shorter lead times may be creative methods that can provide a winning edge over the competition.  What is it worth going to market knowing you can be first with product innovations or shorter lead times?

Champions in sports stand out above the rest of the crowd.  Winning in business involves creating a profitable and sustainable game plan. Collaboration in your supply chain can be a vital key to creating that game plan.  Isn’t it time to make your entire supply chain greater than just the sum of its parts?

Question: what are some of the most unique collaborative projects you have worked on?