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Winning strategies for better purchasing
By Lisa Wichmann
These days, purchasing managers must sometimes feel as though they’re standing in the middle of a messy house, wondering which room to tackle first. There are just so many competing pressures—e-tendering, green procurement, strategic sourcing, global supply chains.
But like the experts say, 50 per cent of the work is getting started. High-performing purchasers have clued into that idea, and are whizzing through their long-term improvement plans.
Take the York Public Buyers Co-operative, located just north of Toronto, for example. In June, it held a workshop with its members and vendors, to get the main issues out in the open. It drew 69 suppliers for information exchange, education and relationship building, according to Allan Jenkins, C.P.P., purchasing analyst with the Regional Municipality of York, and secretary of the Co-op.
“We wanted to enlighten vendors as to why government bid processes differ from the private sector. We also know, from experience, that requests for proposals (RFPs) are sometimes not very easy for suppliers to respond to,” Jenkins says.
“We wanted to educate them generally on what is a request for quotes, what is a tender, what is a request for information, and zero in on what is an RFP and how do you submit an RFP that’s acceptable and worthy of proceeding right through the various elements of scoring.”
Most purchasers have received their share of ambiguous proposals. But perhaps few have questioned why. That’s what the Co-operative wanted to find out, and remedy. Through presentations and roundtable discussions at the workshop, vendors and buyers tackled the issues together.
“In a lot of cases, what they’ve done is just regurgitate what’s in the RFP,” Jenkins says. “They really haven’t given us a solution. They haven’t detailed their plan, provided timelines or details on their team. They haven’t provided enough details on their experience.”
Many suppliers also had no idea how their proposals were being evaluated. “Definitely, there is a need from the supplier community for more information…A lot of the suppliers said ‘you know what? We could really use more time focusing on the dos and don’ts of RFPs.”
The workshop revealed suppliers had a lot of questions, and a lot of helpful input. In fact, the Co-operative plans to hold a morning session on RFPs in 2006, to help improve the quality of bids.
“From our perspective it increases competition and it educates suppliers,” Jenkins says. “We’re going to get more qualified bidders participating in the RFP process.”
Face time
Every purchaser knows the stress of dealing with persistent sales reps who constantly call, try to arrange meetings, or “drop in.” Not that the information they’re offering isn’t valid, but the Co-operative is trying to make the process less time-consuming for everyone involved. In the public sector—which must strive to be open and fair—it’s a touchy topic. Buyers can’t get too cozy with sales people, but no one benefits if the relationship is too distant.
“We want to make sure everything is fair and transparent so we manage supplier relationships [with that philosophy],” says Louise Blakelock, C.P.P.B., senior buyer with the Town of Newmarket and acting chair of the Co-op.
“In the private sector, from my understanding, you really embrace your suppliers, so you can make improvements to your supply chain, lower costs, bring technology solutions into your environment and benefit your customers. But in the public sector, there’s a totally different way of relating to suppliers.”
Many vendors pursue the same friendly relationship with municipal buyers as they have with their private customers. They constantly request face-to-face meetings, which may not be necessary, Blakelock adds.
Instead, the Town of Newmarket is focusing on e-mail alerts, in conjunction with BidNavigator.com, letting vendors know there’s an RFP out. The idea is to make them aware of new business faster, “instead of having them put all their time into an appointment with the buyer.”
When is a face-to face meeting acceptable? “We want to see them coming back to us with new, inventive [products and services] that maybe we’re not aware of,” she explains. “We want that information.”
The Co-operative has about 14 agency members who meet once a month. If a supplier has something new to offer, he can request some time to make a presentation to the members at the meeting.
“We’re planning to design a criteria,” Jenkins says. “We would go through a screening process really. What is the intent of your meeting? What is your product or solution. If the Co-op members feel there is value…we would give that supplier an opportunity to come in and speak to the membership.”
Such a system would allow the vendor to access more than a dozen potential clients at once, and it would free purchasers of the steady onslaught of calls, e-mails and meetings.
Many purchasers are also trying move away from the traditional methods of issuing bid documents—snail mail, fax, having vendors pick them up in person. BidNavigator, a web-based system, is quite popular among the ranks of the Co-operative.
Part of June’s workshop focused on BidNavigator, Jenkins says. A breakaway session brought non-using members and vendors up to speed, and served as a refresher course for the converted.
“We had a representative from BidNavigator and also the purchasing manager from NewMarket. They did a joint presentation and the first half of that hour was from BidNavigator’s perspective—what is [it] and what is electronic tendering,” he says.
“The purchasing manager from Newmarket talked about the benefits from a user standpoint. That was not only beneficial to suppliers, but also the agency representatives who were there. They heard the success stories of Newmarket so hopefully it encouraged them to go back to their own municipalities and say ‘hey, you know what? We can mirror that success.’”
E-community
BidNavigator is like a purchasing community for both public-sector buyers and suppliers. It allows buyers to advertise their bid documents online, and suppliers to search for applicable business. Purchasers use the directory of suppliers to find new sources and invite companies to join their bidders lists.
“We’re very closely aligned with BidNavigator,” Jenkins says. Even so, the Co-op watches the market for other useful solutions. Interestingly, BidNavigator now has a new sister site for private-sector buyers: OnlineCommerceConnect.com.
As the Co-operative pursues e-procurement, it’s working hard to keep members up to speed on other pressing issues, such as insurance. There seems to be [growing interest] among members lately, as to what kind (and how much) insurance is suitable, especially in an era of sky-rocketing rates.
“In the construction bids now we’re looking at wrap-up insurance, as opposed to your general liability insurance,” Blakelock says. “Wrap-up means all your insurance is together…it’s mainly used for huge construction jobs and facilities.”
The Co-op is planning a presentation on insurance with the Insurance Bureau of Canada for early next year. Earlier this year, it held a half-day learning session on surety bonds, presented by Aviva Insurance Company.
In addition to improving the knowledge and skills of its members, the Co-op continues its outreach to suppliers. At the workshop in June, York Region’s director of economic strategy, Don Eastwood, gave a presentation on economic growth in the area—useful information for vendors wondering how much business they can expect.
Overall, the workshop was rated 8.5 out of 10 by attendees. The lively roundtable discussions, set up to include members of different industries, could have continued for twice the allotted time. Much was learned by vendors and buyers alike—a success story worth repeating.
Lisa Wichmann, editor of Purchasing b2b may be reached at lisa.wichmann@pb2b.rogers.com
Pushing away the paper
Housing corporation saves with e-tendering
Electronic tendering. It’s faster, more efficient and definitely more environmental. It can also save an organization thousands of dollars. A case in point is the Windsor-Essex County Housing Corp. (WECHC), which saved $150,000 over a year and a half.
Based in Windsor, Ont., the WECHC manages more than 3,500 units of economic housing in approximately 460 buildings for the City of Windsor and the County of Essex. With so many buildings to maintain, it’s continually issuing tenders to contractors.
“I would say 98 per cent of our tenders are picked up electronically,” says George Robson, vice-president of capital and preventative maintenance. “Mind you, there are still a few people that are hard to convert, but they’re getting there.”
For the housing corporation, going electronic meant freeing itself from the reams of paper involved in printing tenders, which can range from 30 to 150 pages each. Much of the tender is “front end” information, which the contractor may not need to print out. These days, the contractor downloads the tender and prints only the pages he requires.
The other advantage is the tender gets more exposure. Before the electronic system, the WECHC relied on advertising its tenders in the local papers. Depending on the size of the job, the ad would run an average of two days.
If a contractor was away on vacation, or hadn’t read that section of the paper, he would miss out on the chance to bid. With the new system, the WECHC still advertises, but it also sends e-mail notifications to the 356 registered contractors, ensuring they’re aware of the business.
“This way, it appears on his desktop, whether it’s grass-cutting or roof replacement, and he chooses whether or not he wants to [download] it electronically. It’s a fair system,” Robson says. He recalls the days when contractors would have to come into the office and pay for a tender. “Now we just give it away.”
He estimates tender pick-ups have increased between 300 and 350 per cent with the electronic system. Bidding is up too. Robson used to receive about three bids per job, but that soared to 20 with the new system. Now, it’s tapered off to about 12 as contractors learn to be more selective in what they download.
Early adopter
Some purchasers find e-tendering intimidating, but Robson had the advantage of being an early user of the Internet.
“It started about 10 years ago when the Internet was a little bit in its infancy,” Robson recalls. “Not a lot of people had it. At that time, everything was 100 per cent paper-based. I said to one of my typists here, ‘as we’re giving out the tender, always ask the contractors for their e-mail address’. Her response was, ‘George, they don’t have [e-mail]’. I said ‘they will’.”
Sure enough, the contractors began to set up e-mail addresses. “Once I had enough of them accumulated, I started e-mailing my ads out…so they were being notified electronically of the tenders we had available here at the office.”
After the e-mail system was well established, Robson moved to stage two—assembling the tenders in electronic form. He looked at different programs, and settled on Adobe because most desktops come with the free Adobe Reader so the contractors wouldn’t have to buy new software to view the documents.
“In a contractor’s world, anything that’s free is great,” Robson quips. So the WECHC began to assemble its tenders in electronic form, using Adobe Professional to convert files including AutoCAD, Excel and Microsoft Word.
Tenders were then e-mailed out, but after a while, Robson noticed he was using a lot of bandwidth e-mailing out the lengthy documents, so he decided to post the tenders on a web page instead.
“We still assemble it in the Adobe software, making it secure, so they can print it, but they can’t alter any of the wording or any of the sheets.”
The WECHC posts the tender via FTP (file transfer protocol) to a secure web site. Registered contractors receive an e-mail notification from the site, allowing them to log on and view and/or print the document.
Robson also provided contractors with Adobe master invoices. They simply open up the document, punch in their numbers, and e-mail it. It’s faster, and more efficient because all the invoices look the same.
Bidding on proposals is still conducted by paper, meaning the contractors print out the tender and mail it back or deliver it in person to Robson’s office.
Will he eventually move to e-bidding too? “Everything is in place,” Robson says. “But I’d like to talk with the contractors first and let them know, get their feedback. It won’t be compulsory, but it will be an avenue to submit electronically.”
So far, the contractors have met Robson stride for stride in his e-tendering efforts. No doubt they’ll keep pace as he continues to evolve away from paper to faster, cheaper electronic methods that save time and money for buyer and bidder alike.
Lisa Wichmann, editor of Purchasing b2b may be reached at lisa.wichmann@pb2b.rogers.com.
Sustainable supply chains
Purchasers poised to lead the way
By Larry Berglund, C.P.P.
Purchasing professionals have always done a good job on the economics of the deal. And in the late 1970s, we started to include environmental criteria in our decision-making. In this century, we’ll also be applying social values to our bid evaluations.
For instance, consider the ethical purchasing policies (EPPs) being introduced in North America. EPPs address human rights, safe working conditions, and fair wages.
Most EPPs have adapted International Labour Organization (ILO) conventions as minimum standards for compliance. The City of Vancouver initiated an EPP along with a supplier code of conduct in early 2005. There are many other ethical purchasing policies in effect in other US municipal jurisdictions.
The City of Vancouver EPP is directed at uniforms and clothing as well as fair-trade certified agricultural products. Fair Trade Canada is the recognized third party which certifies agricultural products. If the Fair Trade Certified logo is on the packaging, it’s accepted as compliant with international standards.
Going green
Socially-responsible programs also include green roof programs. These were born in Germany through government incentives a few years ago and are now sprouting up everywhere. They appear in Europe, Chicago, New York City, Tokyo, Ottawa, and Vancouver, to name a few places.
They’re aesthetically-pleasing, but they also filter and reuse water, improve air quality, create a better workspace and contribute to the health of the populous. The cost of retro-fitting existing buildings can be cost prohibitive, but new construction can include the green roof concept without additional capital costs. The operating costs of green roof facilities can be somewhat lower than conventional designs.
Arguably, cynics may see green roofs as public relations exercises. This may be true where the companies that support the green concept have been targeted for indiscretions in a variety of social and environmental arenas.
When Ducks Unlimited chose an architectural design firm from Winnipeg to build its head office with a green roof, the idea was accepted as congruent with their values and mission. When the GAP built their facility in San Bruno, Calif., with a green roof, it was greeted with some criticism as having PR-based motives.
From green roofs we can look at green fuels. Biodiesel has been widely used in Europe for decades, though it’s a relatively new alternative fuel in North America. Biodiesel is viewed as one of the means of reducing green house gas emissions in the transportation industry, to help Canada meet the Kyoto Accord targets. The biomass used as the base can be derived from vegetable or animal biostock. Which would be a better feedstock is again, up for debate.
The subject of sustainability will continue to drive debate between advocates and detractors. Supply chain professionals should be doing their homework on sustainable practices and having dialogue with their suppliers.
The issues to address, quite frankly, are complex, ambiguous, and controversial. Long-term solutions to this global problem will require input from business schools, government, and entrepreneurs. First, it requires a consensus that there is a problem; secondly, identifying options to make a difference, and finally–doing something. b2b
Larry Berglund, C.P.P., is a purchasing practitioner and member of the Vancouver Regional District Writers Bloc, which allows BC Institute graduates of the C.P.P. program to develop their writing skills while sharing best practices with their peers. For more information see http://www.vrb-bci-pmac.ca
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