Dispatch Two: InteSource Innovation '07

One of the presentations at InteSource's event that I got the most out of was given by an executive at Harris Teeter. For those who don't know Harris Teeter, they're an upscale grocery concept that reminds me quite a bit of Whole Foods, but with much less of an emphasis on organic products. The stories that the Spend Management leader shared -- while specific to the grocery business on a category basis -- still contain many lessons for sourcing professionals across industries. Consider, for example, their insights from sourcing bleach.

Bleach is a rather cheap and bulky product. It's a simple chemical concoction for which customers typically value low price points over some type of perceived product differentiation. Harris Teeter originally set out to source bleach through a reverse auction only to learn that no one could match the incumbent's price because transportation costs were such a large part of the total cost of the item (and their incumbent supplier's manufacturing facility was only an hour away from their own distribution facility).

Some of the other lessons that Harris Teeter shared included the importance of nailing the specification during the RFI/RFQ phase (something that many of us are all too familiar with, especially in global sourcing situations). Other war stories included the importance of spelling out all added requirements explicitly such as specific transportation and service level requirements from an inventory perspective. They also reiterated a common -- but critical -- sourcing strategy of requiring suppliers to separate out material costs as part of their bids and offers. This approach is critical to achieve savings or cost avoidance in highly volatile and/or rising commodity market environments.

Jason Busch

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