Tuesday, May 30, 2006

Purchasing & Management Expectations

I hope that you have enjoyed the article "What Management Wants From Purchasing."

The recent supply management vs. spend management debate in the blogosphere made me reflect on the fact that a lot of management teams probably don't know what to expect from purchasing. So, now, we have a legion of people trying to change the name of the purchasing profession to various different names in the hope of elevating the function in the eyes of management.

But changing the name is not where our emphasis should be.

Educating management about our value is. And that doesn't necessarily require a name change, though I do see some merit in the arguments of the bloggers out there.

So don't be afraid to share this article (or any of my other purchasing articles, for that matter) with your management. You may just be taking a significant step towards helping them better understand modern purchasing management.

Yes, it may be there responsibility to understand the value that purchasing can deliver. But they need help, too, and often appreciate when someone steps up.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Friday, May 26, 2006

Supply Chain Risk

Now I'm a fan of the blog medium. And I get excited about purchasing and supply chain blogs.

Unfortunately, as more purchasing and supply chain bloggers pop up like dandelions on my front lawn in May, the overall quality of the purchasing blogosphere is declining. And even the good purchasing blogs seem to strikeout in some of their posts as they go for quantity in lieu of quality (blog search engines list results in ascending order of age, so bloggers are encouraged to post often).

Spend Matters is one of the few purchasing and supply chain blogs that has both quantity and quality. There was a particularly good piece posted today on supply chain risk. It supports a lot of what I've been writing about with regard to contingency plans. Check the Spend Matters post out.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

A Sourcing Strategy's Effect On The Stock Market

I found this article that describes a stock market analyst's changing of his rating of a supplier's stock based on his perception of how Apple's sourcing strategy for the iPod may change.

It is pretty interesting that someone is looking into a crystal ball, trying to figure out what a sourcing strategy will be - and actually making news with it. Although it does feel kinda creepy in a way, too, like Big Brother is watching...

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Thursday, May 25, 2006

On-Demand Spend Management Solutions

It seems like the buzz about "on-demand" spend management solutions is heating up.

Essentially, on-demand enterprise spend management solutions are those purchasing-related systems that are hosted by the software provider, thus eliminating the hassle, delay, and expense of installing and maintaining the software internally.

What's odd about this is that in the late '90's and early 2000's, this approach was tried and called the Application Service Provider model. And this model seemed to crash and burn.

This model was pushed early on by Elcom, a spend management solutions provider who struggled mightily but has survived and still seems to be a player in the market. But now it seems that things are coming full circle in this particular approach to using spend management solutions.

Years ago, at a previous employer, we tried the hosted model for our eProcurement system. And then we ultimately brought it in-house for installation on our own servers.

The software providers just seemed to be good at software but horribly bad at hosting. Some spend management solutions providers partnered with third-party data centers for the hosting, but it seemed that all of those data centers were poorly funded and on the verge of financial collapse.

Today, years later, it appears that the spend management solutions providers are revisiting this model. Hopefully smarter, though!

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Wednesday, May 24, 2006

Good Negotiation Advice

With the online purchasing courses that I teach for Next Level Purchasing, I teach the fundamentals that every purchaser should know as well as advanced, progressive things that I've uncovered in my experience. Sometimes, I get a rewarding feeling when I see others teach principles that are similar to the ones that I teach (as long as they didn't rip me off!).

I got that feeling as I read the latest book I've added to my nightstand: "Outrageous Optimism: Wisdom for the Entrepreneurial Journey" by Jack Roseman and Steve Czetli.

You could say I've learned some negotiation techniques in my decade plus of vendor negotiations. I teach many standard, as well as many of the less obvious, techniques in our online course about procurement negotiation.

Here's an excerpt from Outrageous Optimism that really rings true to me with regard to negotiation advice...

"...In a negotiation, if the other person is sincere, you don't get your best deal by beating down the value of what he or she is selling. Most owners are invested in some way in the property you are trying to lease or the service or product you want to buy...But even when it's not so personal, you rarely do well in negotiations when you demean what the other person has to offer."

I totally agree.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Tuesday, May 23, 2006

Supply Management & Web 2.0

Anyone who knows me, knows that I love technology. I'm always looking for the hot, new tech buzz to incorporate into purchasing and supply management. After all, this was one of the first purchasing blogs - if not THE first purchasing blog.

The latest buzz is around what is called Web 2.0. Web 2.0 represents a series of simultaneous trends in Web use.

One of these new uses of the Web is the rise of "wikis" or pages where Web users can collaborate with little or no censorship or limitations. My first foray into the world of wikis was creating an entry into Wikipedia - an online encyclopedia dynamically created and continually edited by Web users - for the term "Supply Management."

I purposely made this entry very brief and open so that it may evolve over time which is, to me personally, one of the exciting things about wikis.

I'll be researching these new trends, devising applications to purchasing and supply management, and posting more here as well as in my more formal purchasing articles.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Monday, May 22, 2006

Supply Chain Certification, Degree, Diploma?

I often get asked: "What exactly is it that Next Level Purchasing offers - a supply chain certification, a supply chain degree, or a supply chain diploma? And what are the differences?"

We offer a supply chain certification, not a supply chain diploma or degree. There are several differences between a diploma/degree and a certification.

A supply chain/purchasing certification is generally 100% focused on a single professional topic. Supply chain degree and diploma programs typically require the completion of "non-core" curriculum. This often makes supply chain certifications more specialized and, therefore, valuable in the field.

Also, a supply chain certification generally requires maintenance and recertification through continuing education. This ensures that the certified person continues to keep his or her supply chain skills up-to-date. Thus, a supply chain certification retains its value for the entire time that the certified person maintains it. Supply chain diplomas and degrees are usually earned at one point in time and do not require maintenance. That theoretically results in the diminishing of the value of supply chain diplomas and degrees as time passes.

I hope that this helps.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Saturday, May 20, 2006

Fundamentals of Purchasing & The Apprentice

I just watched the Week 12 episode of The Apprentice last night.

I couldn't help but laugh in seeing Lee and Sean depend heavily on their suppliers for building their booth only to be embarrassed by a late delivery and poor quality workmanship. Ah, haven't we all had that same embarrassing feeling when we were still wet behind the ears as new buyers?

That episode should be a case study for all new buyers to see what happens:

1. When you put blind faith in your suppliers

2. When you choose convenient suppliers rather than taking just a little extra time to get the right suppliers

3. When you don't drill down into the tasks of a project to determine if the quoted lead time is realistic

Surprisingly, Lee and Sean won despite their inadequacy with the fundamentals of purchasing. But, then again, this season's group has to be the weakest of any Apprentice season to date, so anything's possible.

Perhaps the final tasks will be won by the team that utilizes the best purchasing practices. Now that would help demonstrate to the masses how important purchasing is to organizational success!

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Friday, May 19, 2006

Why Procurement & Supply Chain E-Learning?

Though it is 2006, some people still don't feel comfortable with the concept of e-learning. Especially in the procurement & supply chain management fields where we have not been on the "cutting edge" as much as other fields like marketing and IT.

So why should a procurement or supply chain management professional consider e-learning procurement courses over old-fashioned classroom training?

Simple. E-learning is more effective.

"C'mon, Charles! It's not really more effective, is it?"

Uh, yes it is. I'll give you a list of 10 reasons why. After reading them, it should be pretty darn clear that e-learning is definitely more effective. Especially for procurement and supply chain management professionals who are always called upon to put out the proverbial fires no matter where they are or what they are doing.

Ready? Here's the list...

10. There are no travel expenses. With online supply chain management courses, you don't have to incur expenses like airfare, hotel, ground transportation, food, etc. And we procurement and supply chain management professionals sure like to save money, don't we?

9. You don't have to wait for a start date. Our e-learning purchasing courses are offered on-demand. You don't have to wait for a scheduled start date. You get an introductory email within 24 hours of our receipt of your registration and you can start immediately upon receiving that email. In procurement & supply chain management, problems need to be solved now. Money must be saved now. Improvements must be implemented now. Not after waiting 6 months for a purchasing seminar to start.

8. You don't have to wait for a seminar in a convenient location. Not many places have purchasing seminars being held every month. In some areas of the world, seminars are rarely held while other areas never have a purchasing seminar come to town. That's not a problem with a supply chain online class.

7. You learn at your own pace. Look, everyone learns at a different pace. Some people learn best at a fast pace while others benefit more from a deliberate pace. Traditional classroom training tries to force everyone to learn at the same pace which is usually the ideal pace for just a small percentage of the class. With e-learning, you get to learn at the pace that is most effective for you.

6. Interruptions don't ruin the learning experience. Imagine being in a classroom and you get an urgent work-related call on your cell phone. You have to leave the class for 30 minutes to take the call. What happens to the material that was covered during your call? It is gone forever. You'll never have the opportunity to learn what was covered. With our e-learning, if you get interrupted, you can pick up right where you left off.

5. You get support when you need it most. Sure, you have the opportunity to ask questions during a traditional training session. But what happens when you return to the real world and implement what you've learned? You usually are stranded on your own. With our e-learning approach, you can ask questions and get responses in less than 24 hours for the entire time you have access to the classes (at least 60 days for an individual purchasing class and two years for the SPSM Certification Program). This helps you translate learning into real-world results.

4. You have a permanent record of everything you learn. We often offer as a bonus printer-friendly versions of our class materials when you enroll by a certain point in time. This is like having notes of every single word that an instructor spoke in a traditional classroom. Imagine taking that many notes! And you can reference these notes throughout your purchasing career, making it more likely that you will retain and apply what you've learned.

3. E-Learning fits everyone's schedule. Unlike traditional training where you have to leave the office for a day, or even several days, at a time, e-learning gives you the option to participate in class in small increments or all at once. We know what happens to procurement and supply management professionals when they leave the office for a day - they return to be bombarded with twice their already-heavy workload. That doesn't happen with e-learning.

2. Your satisfaction is guaranteed. If you have a bad live training experience, you usually are out of your money. That isn't the case with our e-learning approach. We offer a money back guarantee if you're not satisfied with one of our purchasing classes or your procurement certification experience. Please see our policy for more details.

1. You can get the same high-quality training as the top companies. Even if a purchasing seminar does come to your town at a convenient time, it may not be the highest quality. With our e-learning approach, time and place are no longer a reason for you not to get the same highest quality purchasing training that others get.

You didn't think of all of those advantages? That's OK, it is hard to get into this mindset. But when you do consider all of these factors, it's hard to argue that e-learning isn't more effective for the procurement & supply chain management professional, isn't it?

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Back To Contingency Planning

This past Tuesday, we released the latest edition of PurchTips entitled "The Next Purchasing Crisis & Contingency Plans." We watch the statistics of readership activity closely and, unfortunately, the readership on this article was not as high as we would have liked.

That concerns me.

Not because I feel that every one of my purchasing articles deserves to be read. Rather, because the threat of pandemic influenza on the supply chain is very real. My gut feel that purchasing professionals aren't concerned about this just might be right.

Did the "sky is falling" preparation for Y2K make us too skeptical about threats to our business?

Did all of the contingency planning we did for Y2K make us feel that the time spent on such planning was wasted?

Believe me, I hope that pandemic influenza never materializes to the point some are expecting. I hope that, in retrospect, we'll someday reflect that all contingency planning done in mid-2006 was a waste of time.

But what if the sky really is falling, so to speak, and some of us have no contingency plans at all?

Who would you rather be: the purchasing manager that had a contingency plan or the purchasing manager who didn't?

I almost feel that it is our duty to the health of the global economy to have a contingency plan for pandemic influenza. If no one does, the economy may take a hit that will take years, if not a decade or more to recover from. If we all do, the impact will be easier to recover from, at least economically.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Thursday, May 18, 2006

The Spend & Supply Management Debate

The growing community of purchasing bloggers has been blogging away about the debate between Supply Excellence's Tim Minahan and Spend Matters' Jason Busch about which is the better term between "Supply Management" and "Spend Management." I'm not going to cover that debate here, but I will share some stats that relate to it.

When we were doing our research for the 2006 Supply Chain Trends & Skills Report, we asked our survey participants (purchasing professionals from throughout the world) this question:

Which term do you prefer to describe the purchasing function?

Here's how the 601 responses were distributed:

1. Procurement 25.6%

2. Supply Chain Management 22.5%

3. Purchasing 21.5%

4. Materials Management 9.8%

5. Supply Management 9.2%

6. Sourcing 5.7%

7. Other 2.7%

8. Spend Management 1.7%

9. Acquisition Services 0.8%

10. Strategic Sourcing 0.7%


Now one may think, "Should we even bother debating which is the better term among these two that comprise less than 11% of the total?"

I'm not prepared to answer that yet.

I think that we'll ask that same question when we do our survey for the 2007 report and see which terms are gaining favor and which terms are losing favor.

But I do have a strong opinion on this whole "name of the profession" debate. Not just the Tim vs. Jason debate, but the various, disparate global efforts to come up with a perfect name for what has been called the purchasing profession. We, as a body of professionals, are tinkering with the name of the profession to increase its perceived value to top executives.

But you know what we are really doing?

We are making ourselves look like a bunch of confused, confused people who are confusing the very people we want to enlighten.

My feel is this: it is OK for a profession to evolve, to continuously improve, to expand. You don't have to rename it as a result!

You don't see professions like medicine, law, or accounting try to rename themselves. And medicine is certainly an example of a profession that undergoes rapid continuous improvement. Can't we use medicine as a model?

Sure "personnel" became "human resources" years ago. I wonder if there were 10 or more names that were so hotly debated during the transition.

But I am curious to see if procurement is still on top next year. My gut feel is that supply management will rise as large purchasing departments like the one at the United States Postal Service adopt the term. Stay tuned!

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Friday, May 12, 2006

Contingency Planning

I hope that you have enjoyed the article "The Next Purchasing Crisis & Contingency Plans."

To be blunt, this wasn't one of my favorite purchasing articles to write. To think of the potential impact of pandemic influenza is not pleasant.

I don't know how prepared they will be for the real deal, but state and local governments and health care providers are talking a good game. They seem to want to be ahead of the curve with their contingency planning.

I really hope that my procurement brethren are prepared as well. Contingency planning is not as fun as, say, developing a sourcing strategy. Contingency planning is easy to put aside for addressing more urgent matters. But contingency planning gotta be done - especially with this particular threat.

To this day, suppliers are still talking about being affected by Hurricane Katrina. And pandemic influenza seems to be much worse in its potential threat.

But we have more time to prepare. Will you use that time for contingency planning?

Or will you take your chances?

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Tuesday, May 09, 2006

Supply Chain Conferences

Is it just me, or are there an incredible number of supply chain conferences this year?

Corporate United, Ariba, ISM, etc., etc., etc. Unfortunately (actually, fortunately), Next Level Purchasing is so busy with a growing student base, new employees, and our growth initiatives, I am unable to attend most of these conferences.

But one organization that I'd like to hear more about at a supply chain conference is Alcoa. No doubt they get lots of good press in the supply chain world. But their recent supply chain talent acquisitions really have gotten my attention.

I personally know at least two top-notch people that they've lured from other organizations. And if these two guys are indicative of the type of talent they have in their supply chain organization, watch out! They are going to be blazing the trail for the supply chain profession and building on Alcoa's already impressive success for years to come.

If you get a chance to hear an Alcoa supply chain professional speak at one of these supply chain conferences, please comment on this blog and share your thoughts. I'm eager to hear what they're up to.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Monday, May 08, 2006

Gas Prices & Corporate Purchasing

In a early edition of PurchTips entitled "Autopsies of Dead Supplier Relationships," I discussed how opportunistic behavior can drive a buyer and supplier apart forever.

Today, we are seeing this happen on a macroeconomic level with gas prices.

The oil companies are indeed pushing the limits with their prices. And profiting, as I described in my earlier post "Gas Prices, Supply and Demand."

But I believe that they are killing their future opportunities. They have awoken a sleeping giant.

I believe that consumers will conserve. Maybe not today, or tomorrow, or next week. But wait 'til their next vehicle purchases. SUV's aren't flying off the lot anymore. And they and their low MPG brethren won't for a long time.

And corporate purchasing will respond as well. Alternative fuels, hybrid vehicles, and the like are finding their ways into the sourcing strategy of many a professional buyer.

Imagine huge fuel consumers with strong purchasing departments like the US Postal Service and Wal-Mart found a way not to be so dependent on gasoline. How much fuel do they purchase? What will happen to oil companies' profits a few years from now if these and other big players say "enough is enough?"

Sure, these big players play the forward buying/hedging game, but they are still seeing cost increases.

I believe that purchasers (both consumer and corporate) are going to respond with a massive adjustment to the demand part of the equation. And oil companies' profits will be a casualty of that response.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Sunday, May 07, 2006

Green Supply Chain & Dr. Seuss?

Green supply chain initiatives are becoming more and more common.

Some organizations pursue a green supply chain because it's an "emerging trend." Other organizations pursue a green supply chain because they are afraid of getting a negative public image if they don't.

But I think it is important to pursue a green supply chain primarily for the right reason: our environment is a precious gift and we must protect it.

I was reminded of this when reading, of all things, Dr. Seuss' "The Lorax" to my kids.

If you are a supply chain manager and have young kids, I recommend reading The Lorax. It will entertain your kids and give you a fresh perspective on the importance of a green supply chain.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Tuesday, May 02, 2006

Gas Prices, Supply and Demand

Yes, I dislike the current gas prices as much as everyone else.

But I also think that we, as consumers, are every bit as responsible for them as the "greedy" oil companies. And I don't really think that legislating extra taxes for these companies is fair.

Let me explain...

Though this is common knowledge to those of us who have business degrees, we often fail to realize that most of the people in the country don't have business degrees. And thank god for that!

Prices are determined by supply (the amount of something that is available) and demand (the amount of something that is needed). Companies will price their product to make the maximum amount possible.

So why don't companies charge massive prices?

Because higher prices will decrease demand for many things.

Sure, you'll pay $12 for meals for two adults and two small children to eat at McDonald's. And you may eat there once every 6 weeks. But what if those same meals cost $50? Would you eat there as frequently? No!

McDonald's knows how to price its products to make the most money.

Now, let's take a look at gas prices.

A gallon of gas used to cost about $2.19. Let's just say that at that price, an oil company sold (for the sake of simplicity) 1 million gallons of gas in a certain time increment. So they made $2.19 million in that increment.

Then gas prices crept to $2.49. Consumers bought the same volume of gas. The oil company made $2.49 million - a $300,000 increase.

Now gas prices are at $2.95 here in Pittsburgh. Consumers still haven't curtailed their consumption. So the oil company made $2.95 million - even more!

So what is an oil company to do?

They have a primary responsibility to their shareholders, so they are going to adjust the price until they find the "sweet spot" - the point at which they maximize their revenue (actually their profits, but let's keep it simple).

Sure, they hear complaining. But consumers' votes with their dollars (by continuing to buy the same amount of gas) measurably indicates to the oil companies that it is OK to continue to raise prices.

So, if you want lower prices, you have to curtail your use of gasoline, plain and simple.

If the oil companies found that raising prices from $2.49 to $2.95 would reduce consumption from 1,000,000 gallons per time increment to 500,000 gallons, here's what the difference would be...

$2.19 x 1,000,000 = $2,190,000

$2.49 x 500,000 = $1,245,000

The oil company would make more money by charging lower prices, so that's what they would do.

Now, again, this is simplified because to do a true economic analysis you have to factor in costs, consider volatility in supply, and base the price point on profits not revenues, but the concept is the same:

If you want lower gas prices, you have to commit to using less when prices are higher.

If you keep paying high prices, there is no incentive for the oil companies to lower their prices. If you don't want to change your habits, don't complain!

OK, back to CORPORATE procurement...

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

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