More About Lowering Purchasing & Procurement Costs

Thursday we shared suggestions to lower costs through efficient purchasing practices. Today we continue sharing additional ideas about how to control your materials and supplies overhead.

Procurement, or purchasing if you choose, expanded its scope and impact on businesses. Expertise and competence exploded in the last two decades. Tips and best practices can help small-business owners as well as large corporations. Luckily free information abounds on the Internet. Today’s post will share a few sources of rich information, white papers, manuals, and more about purchasing best practices.

Manuals, White Papers, and Guidelines

Puridiom provides procurement consulting, products, and services. They also share a wealth of information on their web site. Be sure to check them out.

• White Papers
• Case Studies
• Free Benchmark Reports
• Data Sheets
• Podcasts

Procurement and Supply Chain Benchmarking Association offers membership for free. The association includes representatives and collaboration with major corporations. They also offer some wonderful sources of information:

• A newsletter
• White papers
• Online surveys and a database
• Education through recommended books, online courses, and training
• Links to process or industry focused associations
• Industry specific roundtables

Source One Management Services seems to focus on outsourcing ideas for purchasing and procurement. They offer paid consulting, plus free resources on their web site:

• Articles & White Papers
• Book recommendations
• General news links and articles about procurement (fascinating about trends and specific companies)

Training Documents to Build Competence in Your Business

In addition to white papers, articles, podcasts, databases and other information; you can find training materials for your own use or your staff’s. Some of the sites I liked included:

• VMO-Blog
• Slideworld
• Freedownload

Of course, we cannot discuss training with including YouTube by Google “Procurement best practices YouTube” (don’t forget to click on the link “More videos for procurement best practices YouTube>>

I know I didn’t share much personal information, but I hope these resources give you good suggestions, ideas, and best practices.

Tuesday we will begin a series on human resource functions, liabilities, and changes

Smart Purchasing Lowers Your Costs

Two methods for increasing profits include increasing revenues or decreasing costs. You can lower costs by letting employees go, outsource or offshore, pay less for materials and supplies. Effective and efficient purchasing programs lower costs and thus increase profits. While some computer programs or online systems can streamline purchasing, a lot of low tech solutions also exist.

Suggestions from the Experts

Equip Advanced Supply Management posted an article on Procurement Best Practices. They recommended:

• Get control of your cost drivers: “Cost drivers are all those elements and ingredients that determine the total cost of a business process.”
• Maintain supplier relationships: “Focus on picking a number of suppliers who provide reasonable prices and quality materials, then forging a long-term relationship with them. In this way, businesses secure their line of goods and can forgo the extra costs and delays of finding new suppliers all the time.”
• Use technology wisely: “Before new technology is brought in to the purchasing picture, a sound supply strategy needs to laid out and that technology needs to be placed in the right part of the big picture.”
• Garner strong support from top management: top managers “need to provide adequate funding for the program. When there's not enough money, the program will never work. They need to hire individuals who are knowledgeable about the program being implemented and who will be able to implement a strategy. Additionally, they have to convince the lower level managers and employees that they are truly committed to the endeavor.”
• Create a procurement team approach: Purchasing “should involve individuals from throughout the company and from all different departments. In teams, company personnel can work together in order to achieve the larger goals of the business's designated procurement strategy.”

Helpful Web Sites

• Best Practices in E-Procurement by the Aberdeen Group at the University of Pennsylvania
• U.S. Counties Procurement-based Small Business Development Best Practices by Insight and DelACCESS Consortium
• Institute for Supply Management the professional association for procurement

Saturday will explore how payroll & staffing services can help you control costs

Questions to Ask About Your Business

This post shares some questions that you may want to ask yourself about your business.

I attended a seminar last week taught by a nationally known speaker, Steve Lishansky. Steve’s bio from his web site Optimize International states “Steve Lishansky is the founder and President of Optimize International, the successor company to Success Dynamics that he founded as one of the first executive coaching firms in the United States. He is recognized as a leader in the fields of building high-value relationship skills, executive coaching and development, and improving organizational alignment and performance.”

Establishing Value and Priorities for Your Business

I will not divulge Steve’s proprietary information. He encouraged clients to explore these questions:

• What is the most important thing you want to change about your organization?
• How would you measure the success of your changes?
• How much is it worth it to you to make the change?

How would you answer them?

The questions, and more that Lishansky provides, can guide you to exploring how to increase the value of your business. When you determine what is the most important change, you eliminate lesser priority changes and focus on the changes that will give you the best return on investment. Knowing how to measure the results of the change allows you to track improve and the effect of change.

Executive Decision Making

Optimize International describes “The 4 levels of executive decision making

1. Generate clarity about what is present, missing, or needed in the organization and its people.
2. Create focus on what is most important to the organization and, with these high-value outcomes in sight, place attention on what will best close the gap between where we are and where we want to be.
3. Have impact by accomplishing what is most important to the organization.
4. Produce leverage, which comes from creating the environment and opportunities for others to have impact in the organization.”

I constantly discover excellent ideas to improve businesses. You can access so much great information if you look. So, look!

Join me Thursday when we explore different ideas to enhance your purchasing processes

Market Analysis 9: Final Thoughts on Your Market Analysis

This concludes our series on preparing the market analysis section of your business analysis
Completing your market analysis remains a key element in establishing your business. Identifying and defining your current, past, and future clients allows you to focus your marketing messages, strategies, campaigns, and vehicles. Understanding your competitor’s practices, products, and prices prepares to adjust yours. Segmenting your market provides opportunities to customize your marketing efforts and product improvements.
Web Sites that Help You with Market Analysis
I’ve listed a few additional web sites that may guide and help you to conduct your market research:

• About.com Home Business How to Do Your Own Market Research
• B2B International: Market provides white papers on the following topics
• Market Segmentation in B2B Markets
• What is Marketing If If is NOT About Segmentation
• Segmentation Challenges in Business-to-Business Markets
• How to Segment
• CMS Wire offers articles, blogs, and a free newsletter. For example Social Media Marketing 101: Tips, Tricks, and Final Thoughts
• Inc. Magazine offers Conducting Online Market Research: Tips and Tools
• The Frugal Entrepreneur provides Are You Using These Free Online Tools to Conduct Market Research for Your Business?
• HubSpot Blog gives a lot of good articles including An Uncomplicated Approach to Conducting Solid Market Research
• Entrepreneur magazine also provides information as How to Do Market Research—The Basics
• Work at Home Mothers (WAHM) articles offers How to Conduct Target Market Analysis

Other Organizations That Can Help You with Market Analysis
I already discussed some of the resources available to help with an analysis of your market. Follow the link to review the ones that may help you.

Market Analysis 8: Segment Into Target Markets or Market Niches

This continues our series on preparing  the market analysis section of your business plan

The Small Business Administration writes “A market in its entirety is too broad in scope for any but the largest companies to tackle successfully. The best strategy for a smaller business is to divide demand into manageable market niches. Small operations can then offer specialized goods and services attractive to a specific group of prospective buyers.”

Ideas to Define Your Target or Market Niche

Ehow describes:

Target Markets: “Your target market represents the core group of consumers for whom your business works to create products and services. Your marketing and promotional efforts should be tailored to reach these individuals in media that they frequent, whether it's via television, the web, print, radio or mobile advertising.”

Market Niche: “A niche market goes beyond simply targeting someone by age or income; it breaks its market into smaller segments, identifying a group of people by very specific identifying characteristics. And as a business owner, you take this small segment and market to it.”

The Niche Marketing Blog teaches

• “Niche groups include hobbyists, political groups, gender groups, career groups, artists, writers, and others.
• Niche groups are usually attracted to similar web sites, blogs, and open forums.
• For example, soccer enthusiasts usually shop on similar sports web sites and sports news sites.
• When looking for niche groups, visit forums that cater to these groups and ask questions.
• You will be surprised by all the responses.
• People enjoy talking about their hobbies, careers, and lives.
• Visit web sites that are offer products that are similar to yours and see if other businesses have posted ads.
• Chances are, these businesses are frequented by the same niche groups.”

Where to Get the Information

Business Owner’s Toolkit helps you identify

• Where you can get customer and product data collection
• Factor and cluster analysis
• Cluster identification and importance ranking
• What smaller companies can do to segment their markets

Follow the link to find specific sources for each category.

Join me Saturday when we close our discussion about preparing your market analysis

Market Analysis 7: Forecast Growing or Shrinking Prices or Competition

This continues our series on preparing the market analysis section of your business plan

Your market analysis needs to forecast whether your targeted population, competition, and even market prices will grow or shrink. Growing populations provide greater opportunity for sales. Shrinking populations reduces sales possibilities. You order or manufacture inventory from  forecasted growth or shrinkage.

Factors Affecting Growing and Shrinking Market

Review this article from Dummies.com:

• Getting a handle on your market through customer descriptions, how customers divide into market segments, and the size of your market and growth trends you see
• Assessing your competition (direct, indirect, and stealth) involves assessing competitive threats, opportunities, and planning how to protect from threats and capitalize on opportunities
• Forecasting your business climate includes looking at how outside forces may affect your company’s success (includes good questions about labor supply, rules & regulations, social trends, regional industrial events, and more)

Research Portals’ article How Advertisers Ignore a Major Market at their Peril warns to watch:

• Demographic trends: “Looking at long-term trends of birth rates many forecasts warn of shrinking populations in Europe and parts of Asia”
• Attitudes vs. Life stages: judging your target by age definition no longer works. For example married 30 year olds purchase things much different than 30 year-old single, fast-paced professionals. So a new method for defining populations becomes necessary.
• Media consumption can also predict market population, price and competition.

How to Forecast Growing or Shrinking Markets

I cite the Dummies.com article Analyzing Your Market Situation again 

“Don't base your projections on a hunch. Cite experts, refer to census data, excerpt industry analyses, present findings compiled by media organizations that serve your customers, or show a recap of your sales history to prove market momentum. Offering proof for what you say about market size and growth is important because this proof is the claim on which you stake your marketing plan — and budget.”

Review my April 7, 2012 post Resources to Help You Conduct Your Market Analysis for links to research resources.

Join me Thursday when we analyze how to segment your market into market niches

Market Analysis 6: Calculating How Many People Live in Your Market

This continues our series on preparing the marketing analysis section of your business plan

Analyzing your market includes calculating how many current and potential clients live inside your market territory. Today’s global and virtual marketplace confuses the concept of market territory. Your business can now sell to clients from all over the United States and internationally. You can also list products on Amazon and other online sales sites which increases your market.

Defining Your Ideal Client

• Bonnie Jo Davis at SalesGravy outlines 23 questions to help clarify your ideal client.
• Madhavi Gare shares ideas and questions to help you define your ideal client.
• Inc. Magazine highlights some thoughts and questions to help you with the definition

Define Your Possible Markets

Net MBA defines a market into six categories (follow the link to a graphic to clarify):

• “Total population: every person living in the market area
• Potential market: those in the total population who have interest in acquiring the product
• Available market: those in the potential market who legally are permitted to buy the product
• Qualified available market: those in the available market who legally are permitted to buy the product
• Target market: the segment of the qualified available market who legally are permitted to serve (the served market)
• Penetrated market: those in the target market who have purchased the product”

Defining Your Geographic Market

Your geographic market may include:

• Concentric circles radiating specific miles from your store or business location
• Global locations with shipping costs and feasibility low enough to facilitate purchases
• Access to existing outlets such as Amazon, CDBaby, BookBaby, and other sites where you can list your product and sell to their clients

Sources of Population Information

• US Census Bureau calculates and arranges census data for business owners
• Arbitron of radio marketing fame
• Nielsen of TV ratings fame offers site reports
• EHow shares several links to population growth statistics
• Calculated Risk offers several reports on various target populations
• 10 Day Marketing Makeover provides some excellent advice on using lists

Return on Thursday to review how to predict growth or shrinkage in your market analysis

Market Analysis 5: Predicting Future Market Demands and Trends

This continues our series about preparing the marketing analysis section of a business plan

Your marketing analysis must consider market demands and trends. Understanding what people will buy, when they buy, and why they buy enhances your ability adapt your business to their whims. Luckily, other companies try to predict the same practices. As a result, the resources mentioned in my last post provide the information you desire because so many others do too.

Identify Market Demands

The 3 stages of the business cycle guide your ability to predict market trends for your business:

• Emerging stage represents new or improved products emerging into the market. You expect a higher demand for an emerging product.
• Plateauing stage reflects when supply and demand begin to equal one another. Demand usually levels off with less increase.
• Declining stage indicates that supply saturated demand. Consequently, demand decreases.

You also measure your market niche to determine market demands. The size of your niche, how many new people add to your niche, their buying capacity, and their interest in your product or service helps determine their demand for your business. Expanding the percent of the niche you penetrate also increases your market demand.

Predict Market Trends

Market trends calculate the direction of the market: growing, holding steady, shrinking, or disappearing entirely. It also determines expected cyclical or seasonal fluctuations in the market. Some excellent resources track market trends.

• Investopedia lists several sources
• David Amerland shares how to use Social Media to predict trends
• Opensource Association outlines tools, programs, and more

Product life span or obsolescence also influences market trends. Some businesses can predict when people will replace products. Some people replace their car every 1-3 years. Some people change houses every 5 or 10 years. You can predict when most people replace large and small appliances. While people used to replace telephones every 15 –20 years, now they replace them every 6-12 months today.

Once again, the resources identified in the previous post can help you find the information you need.

Join me Saturday when we review clarifying how many clients live in your market area

Market Analysis 4: Examine Your Competition Past, Present, & Future

This continues our series exploring how to prepare the market analysis section of your business plan

A key section of your market analysis examines your competitors. Competition both stimulates and jeopardizes your business. It spurs your business to greater excellence, productivity, and service. It also attacks your revenues, market share, and perceived reputation. Understanding and compensating for your competitors’ efforts require regular analysis.

Information You Examine about Your Competitors

You need to examine several things about your competition:

• How the quality, price, and availability of your product or service compares to theirs
• How their availability and convenience of purchasing & receiving compares to yours
• What would motivate clients to purchase their product or service over yours
• How does the competitor market to, communicate, entice, and influence clients
• What experiences and relationships does your competition provide their clients
• How do their prices, fees, and added costs compare to yours
• What products/services do they offer that you don’t? Will they introduce new ones?
• How will you compete? (This refers back to defining your competitive advantage)

Defining Your Competition

Many companies compete directly with yours. They sell the exact same products, services, or experiences you do. Indirect competitors sell similar products, services, or experiences. For example, a direct competitor to a restaurant would include other restaurants or dining establishments. Indirect competitors, however, would include theaters, movie houses, or entertainment opportunity.

In addition to direct and indirect competition, some companies compete for the dollar a client might spend with you, but chooses to spend elsewhere. For example, another competitor for the restaurant dollar could be a car or a vacation because the family chooses not to go out to dinner so they can save money for the car or vacation.

How to Examine the Competition

• Study their web site, advertisements, brochures, and other marketing materials
• Mystery shop the store and immediately make notes of your experience
• Read journals, articles, press releases, and publications describing your competitors
• Interview your clients and theirs to assess attitudes about you and the competition

Please come back on Thursday when we discuss how to predict market demand and trends

Market Analysis 3: Resources to Help You Conduct Your Market Analysis

This continues our series about the market analysis section of your business plan
The first step of your market analysis involves defining your competitive business advantage. We will list the resources available to help you conduct your market analysis before examining the second step. Fortunately, your taxes already pay for many of the resources you may use. Others cost very little. Of course, you can also pay for consultants and other help.
Primary and Secondary Sources
Before we talk about resources that can help you, I’d like to discuss primary and secondary sources of information.

• Primary sources provide first hand information. For example, a primary source occurs when you choose to interview clients personally or conduct focus groups.
• Secondary sources gather their information from primary sources and share it with you. Using information gathered by the census bureau or from an economic development council constitutes secondary sources. They gathered the information from primary sources, hence they become secondary sources.

Online Resources

• SBA.gov provides
• Consumer statistics
• Economic indicators
• Employment statistics
• Income and earnings
• KnowThis.com blogs and collection of web links
• Market Research provides reports on markets by industry for a small fee
• US Census Bureau reclassifies information about the population to help businesses
• A new and updated Fact Finder database
• The Statistical Abstract also gives access to market data
• The International Programs provides information on international markets
• Business.USA.gov, another government web site, offers statistics and reports

Additional Resources

• Local and national Chambers of Commerce profile community populations, socioeconomic status, traffic patterns, maps of busy locations, and more information
• City and state economic development representatives maintain information on import, export, sales, business growth, and demographics
• Professional and trade associations (local chapters) and national web sites monitor sales, production, client profiles and other useful information
• College and university libraries, sociology, business, and other departments; including business students willing to gather information from both primary and secondary sources for experience or even better a small fee.
• Reference desks at public libraries provide sources of economic and demographic information

Join me on Tuesday when we discuss how to analyze competitors past, present, & future

Market Analysis 2: Your Advantage or Why Do Business with You?

This continues our series describing how to conduct a market analysis section for your business plan.
One section of your market analysis describes your business advantage; or why clients do business with you. Defining your business advantage may become the most difficult part of your business plan.  If you do not understand why someone does business with you. You cannot explain it to potential clients. Without an advantage, your business may flounder or struggle.
Process of Identifying Your Business Advantage
You examine your business idea, your competition, and current and potential clients to define your competitive business advantage.
Your analysis may employ a variety of methods to gather the information:

• Internet Searches
• Small-business resources (SBDC, SBA, SCORE, Centers for Entrepreneurship, Chambers of Commerce, and others)
• On-site observation of competitors either from their parking lot, in store, or other
• Surveying, interviewing, or inviting current and potential clients to focus groups
• Hiring a professional analysis consultant to share existing, or discover new, data

Questions to Answer

• What does your business offer better than competitors?
• Price?
• Service?
• Relationship?
• Quality?
• Timeliness?
• Availability?
• Convenience?
• A completely unique product/service no one else offers?
• How can you offer this better than competitors?
• Lower manufacturing, labor, or shipping costs?
• Better trained staff oriented to providing exceptional service?
• Do you—or the competition—know something the other doesn’t?
• What do clients like about your product or service better than your competitors?
• What do they wish you would improve?
• What new products would they like?
• What do they like better about your business?
• Location?
• Staff? You?
• “The Experience you provide”?
• What would happen if you lost any of those advantages?
• Which loss would hurt your business most?
• Which loss would affect client loyalty or profits least?

Even More In-depth Considerations
Check out the following:

• Industrial Marketing Solutions: Defining a Competitive Advantage for Your Business
• About.com: “What’s Your Competitive Advantage?”
• Smart Advantages: “What business are you really in? Define Your Competitive Advantage
• GoEntreprenuers “Define your Market and Your Competitive Advantage
• Larry Lim “Unique Selling Proposition (USP)—Your Competitive Advantage”

Join me Saturday when we explore resources that can help your market analysis

Market Analysis 1: Overview to Market Analysis and Business Strategy

This begins a series about preparing or updating the market analysis section of your business plan.
A major element of business growth includes analyzing your competition, market idea, product or service. Market analysis builds a foundation for your business strategy. The market analysis fills a primary section of your business plan. The information identified during your market analysis allows you to set your business apart. You will find that a strong market analysis facilitates preparing your sales and marketing plan. You should conduct an extensive market analysis during the startup phase of your business. You should also update your market analysis annually.
Elements of Market Analysis
You evaluate several factors when you complete your market analysis:

• Description of your business advantage and why clients would do business with you
  
• Resources to help your business strategy
  
• Competitors past, current, and future to your business idea and dollar
  
• Demand and market trends for your product, service, or industry
  
• Number of current, potential, and future clients living in your market area
  
• Expected growth or shrinkage in total market populations, prices, and competition
  
• Segmentation of your market base into market niches
  
• Appendix containing the documentation supporting each of the previous sections
  
• Summary (the first section) outlining all the other elements together

We will review each of these elements in posts over the next three weeks. We hope the information will help you conduct or update your market analysis.
Sources for Market Analysis Information
Before we discuss the sources of information for your market analysis, I want to discuss what information you need to gather. Several sources exist that list typical questions that your market analysis should answer:

• Entrepreneur magazine
• Inc. magazine
• Home Business Section of About.com 
• Small-Business Administration
• M-Plans

Once you identify the questions you want answered, the source of information will become apparent:

• Entrepreneurship in a Box: 10 excellent sources
• Business USA: government and other databases
• Food and Agriculture Organization: primary and secondary sources
• Cambridge University: Google and other sources
• Vanguard Vista: survey and research instruments

Join us Thursday when we explore your business advantage and unique part of your business