Friday, June 29, 2007

How Corporate Purchasers Do Their Research

The only surprise about this report is that a marketing firm researched the corporate purchaser rather than the typical consumer.

Have a good weekend.

To Your Career,
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, June 28, 2007

Purchasing's Importance In Bad Times

The US economy has been fairly solid lately. But with the Fed meeting this week, much press coverage is dedicated to speculating on what is ahead.

That got me thinking about what things are like when the economy is bad and how it affects the careers of purchasing professionals.

I have always said that the first budget line items to get cut when the economy turns sour are "The Three T's": travel, technology, and training. Unfortunately, cutting training - particularly purchasing training - in challenging economic times isn't always very smart.

In rough economic periods, sales decrease from levels achieved in good economic periods. So, providing that all else remains the same, profits will also decrease. So slashing the training line item is theoretically a way to sustain profit levels.

But, practically, that doesn't work so well.

In tough economic times, smart purchasing becomes MORE important. The market prevents you from improving profits through increased sales. But you can improve profits through reduced costs.

And while cutting training is one way of reducing costs, the fact that some training for bottom-line-impacting departments produces a return on investment (i.e., a positive contribution to profitability that exceeds the amount paid for the training), sustaining or increasing investment in results-oriented training can be a more effective way of maintaining profit levels. Because smart purchasing can reduce costs, purchasing's value can become much more evident in tough economic times.

I look to the example given in the success story of Carol Gissell, SPSM. In just one small negotiation, she used what she learned in the SPSM Certification Program to save her company 2x what they invested in her training. And she can reuse her new skills over and over to make the return on that investment simply massive!

Another silver lining to a bad economy is that purchasing professionals can use the "we simply cannot afford that price" argument in negotiations more effectively.

Who is gonna believe a buyer from ExxonMobil who would use that phrase in 2007? But when uttered from the mouth of a buyer from the new home construction industry in the same year, that phrase has a much higher probability of being persuasive.

Hopefully, the economy will continue to prosper. But if it stumbles at some point, hopefully intelligent decision-makers will see the bottom-line value of having a more skilled workforce - not just in purchasing, but in all disciplines that can achieve ROI.

To Your Career,
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, June 25, 2007

Supplier Diversity Goals

I hope that you have enjoyed the article, "7 Supplier Diversity Challenges, Part II."

While there are many reasons for starting a supplier diversity program, one that I feel is driving more big companies to implement supplier diversity programs is the marketing aspect. Companies want to appeal to a diverse customer base and having a diverse supplier base is just one more technique that can be used to build a we're-for-you brand.

If you look at the Web sites of massive companies, they have significant amounts of Web real estate dedicated to supplier diversity and, in that space, mention their customers:

Johnson & Johnson

FedEx

Grainger

Toyota

Avis Budget Group

AT&T

MPC

I see this trend as a very good one for raising the profile of purchasing within the organization. Branding is top-of-mind for many CEO's. If purchasing has one more tool that it can use for enhancing the organization's brand, it can only help.

To Your Career,
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, June 22, 2007

A Purchasing War Story About Email...

I just read Ron Morris' blog post about email being man's worst friend and it brought back a memory that I'd like to share with you...

I was in my fourth year as a purchasing professional and had earned my way to some serious responsibility. I was working on a sourcing project valued somewhere in the $50 million range.

Well, one of the top two suppliers we were considering after the RFP analysis was done really wanted this business (obviously). They wanted it so bad that they resorted to that timeless dirty sales trick - back door selling.

I was negotiating with their sales director and contract manager. But, when we got to what seemed to be becoming an impasse, their VP called the VP of the department who was our internal customer for this procurement and engaged him in a impromptu negotiation.

Of course, with our VP's ego, he wouldn't have said "I'm not interested in having this discussion. Talk to Purchasing." He thought he was a great negotiator (what VP doesn't?), so he participated in the conversation.

This was a dangerous situation from a procurement negotiation standpoint. The negotiation could have easily been derailed or we could have made commitments that would cost the company some serious money or hurt our ability to serve our customers.

So I put together a summary of the issues at hand for the VP that he may be confronted with if our supplier chose to contact him unexpectedly. This was totally informational.

Many years later, I can't remember what exactly the VP took exception to, but I got a nasty email back from the VP, beginning with the phrase "YOUNG MAN..." There is no way that it can be good news to receive an email from a VP that starts out that way.

And my boss was copied in. And her boss was copied in.

Fortunately, I was very well respected by those particular leaders and they agreed that they had no idea what he misinterpreted. But a very important lesson came out of that...

When dealing with important people, no matter how innocuous the topic may seem, never, Never, NEVER communicate anything of potential consequence by email. I've never heard of a phone call killing anyone and I'd bet that picking up the phone wouldn't kill you, either.

You've learned it from Ron Morris' war story. You've learned it from my war story. Hopefully that will prevent you from having your own war story to tell...

To Your Career,
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, June 21, 2007

Purchasing in Zimbabwe

One of the fascinating aspects of working here at Next Level Purchasing is that we have the pleasure of interacting with purchasing professionals from around the world - employers from over 50 countries around the world have enrolled their purchasers in the SPSM Certification Program. So I try to learn a little bit about many of the countries in which we do business.

A bizarre situation that I've become aware of is the runaway inflation in Zimbabwe. If you have a few minutes and an interest in global economics, give this interview on National Public Radio's Web site a listen. It talks about how people in Zimbabwe have to literally take millions of Zimbabwean dollars with them on a shopping trip and how crazy that is considering that the highest demonination of Zimbabwean dollars (ZWD) is 1,000.

I've recently exchanged some emails with a purchasing manager in Zimbabwe. He says that the inflation has a crazy effect on purchasing in many ways including getting quotes that say "Quote is valid for now only" because sometimes prices double or triple overnight!

Makes you glad you're buying goods and services in your own country, doesn't it?

On another note, the exchange rate seems to be remaining constant at 250 ZWD per 1 US Dollar. I'm not sure what Zimbabwe's import restrictions are, but this could result in the US being a low-cost-country to Zimbabwe.

I had to keep this week's apparent theme of LCCS going somehow, huh?

To Your Career,
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, June 20, 2007

Is China Making LCCS A Dying Trend?

Well, as mentioned in yesterday's blog post, China has been found to be notoriously lax at enforcing intellectual property rights, making it riskier to source there. Then, we all heard about toothpaste manufactured in China containing antifreeze.

Yesterday, my wife alerted me that it's been discovered that Thomas The Tank Engine toys manufactured in China have been found to contain lead paint, which could poison the children playing with them. The US government outlawed the use of lead-based paint years ago.

All of this news should be making purchasers very nervous about sourcing from China, or any other country for that matter. When countries have less rigorous environmental, health, or safety standards, you might be asking for trouble by sourcing there. There just may be a reason it is "cheaper" to buy there.

All of that incremental profit could easily be way more than offset by the cost of the recall of dangerous products. And what effect on your company's future would there be if your company's customers started dying as a result of LCCS decisions?

Now, I am not suggesting adopting a domestic-sourcing-only approach. Global sourcing is a necessary tool if you want to maximize your success in today's purchasing and supply management world.

But what I am saying is that you really need to realize how much additional due diligence needs to go into selecting a foreign supplier. From the outside, it seems like the sourcing professionals who have made some of these decisions weren't looking far beyond price.

To Your Career,
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, June 19, 2007

Still Waiting For That 3rd LCCS Leader...

In January, I predicted that by the end of 2007, there would be a third low-cost-country named alongside China and India when the topic of Low-Cost-Country-Sourcing was discussed. The battle still wages, but there has been chatter of Vietnam emerging from a variety of sources.

At Duquesne University's Entrepreneur's Growth Conference earlier this month (admittedly an forum where sourcing isn't usually a hot topic), a moderator mentioned that Vietnam was becoming a popular sourcing spot because its government tends to be more vigilant towards intellectual property protection issues than China is. Then eSourcing forum posted that the entire country briefly lost Internet connectivity.

I still believe that Mexico is gaining strength. But I'm also curious about the Philippines.

I called Dell on a support issue this week (which you'll probably be reading about soon here), and spoke to someone from the Philippines. Now, I understand that Dell pulled all of its B2B support back into the US from India a few years ago, so I find it interesting that they farmed it out again to a LCC and that they chose the Philippines over other options.

It will only get more interesting as time goes on...

To Your Career,
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, June 15, 2007

Expert Purchasing Management In The Press

Supply & Demand Chain Executive Magazine recently ran an article on their site about the launch of "Expert Purchasing Management." You can check out the article here.

Expect a lot of press coverage of Next Level Purchasing soon. We're working on a game-changing innovation.

Can't say much more right now...

To Your Career,
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, June 13, 2007

More About Negotiation Preparation...

After sending out yesterday's PurchTips article "How A Skilled Negotiator Prepares," I received a request from a subscriber asking for advice with regard to preparation tactic #4 - The Skilled Negotiator Knows What The Supplier Will Ask & How To Answer. Specifically, she wanted to know how to respond if the supplier asked the specific questions referenced in order to find out what they were seeking to learn.

Here's the gist of my response...

Because each situation will be different, it is impossible to provide the single best answer to each question that would be honest in every case. But I can tell you how certain responses affect your leverage...

* Are you the decision maker?

You will have more leverage if you are the decision-maker. Saying that there is a team or another decision-maker will make some suppliers want to speak directly to the team or manager (sometimes doing so without your knowledge or consent) and not treat you with the same level of respect. If you're not the decision-maker and you admit it, you should certainly indicate that your recommendations will have a great deal of influence in the decision.

* Do you have the budget to pay the current price?

This can be a two-edged sword. Saying you have the budget will make the supplier feel less compelled to change his price. Saying you don't have the budget will make the supplier feel that you are not serious about buying and therefore feel that negotiation is pointless. I like to use a standard response like "As a matter of policy, we simply do not discuss budget with suppliers regardless of the situation."

* How quickly do you need to make a decision?

The quicker you need to make a decision will make a supplier feel that you might be pressured to accept a higher price.

* Are there other suppliers that you're courting?

I always say "As a matter of policy, we do not discard any options until a deal is signed."

Please note that these questions may be asked directly or the information can be gleaned more subtly. A savvy salesperson will find less intrusive questions to ask to get at the same information!

If you want a more comprehensive education in negotiation, you may want to consider enrolling in our online class "Powerful Negotiation For Successful Buying."

To Your Career,
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, June 11, 2007

Skilled Negotiator

I hope you have enjoyed the article "How A Skilled Negotiator Prepares."

Point #1 in the article (A Skilled Negotiator Knows His Counterpart) is so critical, yet so overlooked. There are not many one-size-fits-all negotiating tactics.

You really have to know who your counterpart is to select the right tactics. If you're a buyer who is new to a category and you're negotiating against someone who has been selling products in that category every day for the past 20 years, you are at a disadvantage unless you prepare diligently and use the right tactics.

That's why people hate used car salesmen. They feel that the salesmen got a great deal and the customer got ripped off. In many cases, it is just that the used car salesman is more experienced - he might be involved in 5 used car negotiations a day and the customer may be involved in one used car negotiation every five years.

The more you know what to expect in a negotiation, the more successful of a negotiator you'll be.

To Your Career,
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, June 05, 2007

Interesting SPSM Statistics

I'm baaa-aaack!

A prospective SPSM student emailed me today asking if he could earn the SPSM Certification "even" if he is in Mexico.

Well, of course the SPSM Certification Program is available around the world and is being pursued by purchasing professionals from over 50 countries. But I dug up one statistic for him that I found interesting:

Mexico has the second most SPSM's of any country - 16% in fact. That's less than the USA, but slightly (and surprisingly) more than 4th place Canada. Another surprise is that 3rd place Qatar (where the SPSM is on fire!) is also slightly outpacing Canada!

Maybe after the Stanley Cup Finals (which is featuring an appearance by a Canadian team) are over, we'll see a deluge of SPSM's from Canada. There's no shortage of canucks enrolled in the SPSM Certification Program, but maybe they are spending more time rooting on the Ottawa Senators than learning purchasing best practices right now!

To Your Career,
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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