Friday, November 28, 2008

The Last Economic Stimulus: What Did We Learn?

Back in March, I pondered whether the economic stimulus rebate checks would have any effect on inflation. It appears that they did.

The inflationary correlation seemed particularly true with regard to gas prices. Stimulus checks were distributed during the period May 2 to July 11, 2008. Look what happened to gas prices per gallon during the period when checks were being distributed then look what happened immediately after the checks stopped being distributed (source: US Department of Energy)...

April - week 4 - $3.65

Economic stimulus starts

May - week 1 - $3.66
May - week 2 - $3.77
May - week 3 - $3.84
May - week 4 - $3.99
June - week 1 - $4.03
June - week 2 - $4.09
June - week 3 - $4.13
June - week 4 - $4.13
June - week 5 - $4.15
July - week 1 - $4.17

Economic stimulus stops

July - week 2 - $4.16
July - week 3 - $4.12
July - week 4 - $4.01

And we all know what happened to gas prices since then. This week, I saw a gas station sign advertising $1.97 gas. I have a feeling that may not even seem that low reading this post a week or two from now.

The oil companies seemed to be very predatory during this period, appearing to think "Consumers have extra money - let's try to get all of it!!!"

So did the stimulus checks truly stimulate the broader economy or just the bottom lines of the oil companies?

If you had read my March post and wondered if my parents went ahead and used their check to replace their kitchen flooring...they didn't!

Judging by the headlines, today's economy seems worse than it was this Spring when the economic stimulus was launched.

With Obama preparing to come into office, there's talk of more "economic stimulus." But that leaves a few questions...

What did we learn from the last economic stimulus?

And what will we do differently this time to ensure sustainable economic stimulus?

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

Wednesday, November 26, 2008

Whitepaper Wednesday - Recession-Proofing A Business

Welcome to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. In today's installment, I'll be reviewing a whitepaper entitled "10 Secret Strategies To Recession-Proof Your Business" from Coupa.

While this whitepaper is geared towards company executives, there are some good nuggets for procurement professionals, though not all strategies will be within your control. However, if you can suggest using those strategies that are within your control, your management may recognize your efforts and positive results can be delivered. I'll discuss those procurement-related strategies/secrets...

Secret #1. Really Monitor Non-Payroll Spending - If you haven't been asked already in this declining economy, senior management will likely soon be approaching the procurement department asking "Where are our opportunities to save money?" I hope that you have developed a good spend profile by now or at least done some type of spend analysis so that you can be confident in answering this question. You need to know where the spend is to know how you can best impact the bottom line.


Secret #4. Get Rid of the Supply Closet, or Start Managing Inventory - The whitepaper correctly points out that "As a business grows, 'pockets' of excess non-essential goods begin to build...Inventory costs money. There's overhead on the space that is needed to store it, and it uses up cash that could be used to pay salaries or buy other products and services." Even as a smaller organization, I see the tendency towards overbuying supplies when procurement doesn't manage inventory. Procurement needs to step up and introduce inventory management concepts like safety stock, reorder points, and optimal order quantities. I can guarantee you that end users will not do this on their own. And the organization's cash will be tied up in a 5-year supply of freakin' Post-It Notes and pallets of copy paper when it has trouble meeting payroll.


Secret #7. Look for Alternatives to Capital Spending - The whitepaper says "To state the obvious, a sharp downturn is a risky time to buy a piece of expensive capital equipment...it is often more prudent to delay future growth plans and defer these larger expenditures until you are more certain of your own financial forecasts...So instead of expensive CapEx items, look for affordable leases where you must." Again, your internal customers may not think of this option on their own, so it is a concept that procurement can bring to the table.

So those are just three of the 10 secrets. And I think that they are all valid. The whitepaper - unlike some I've downloaded for the Whitepaper Wednesday feature - is an easy and fun read. You can download your own copy from Purchasing Magazine's Resource Center.

Tomorrow is the Thanksgiving holiday here in the USA, so there will be no blog tomorrow and Next Level Purchasing's offices will be closed. So, for my fellow Americans, have a happy Thanksgiving. I'll "speak" to you again on Friday!

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

Tuesday, November 25, 2008

Supplier Partnerships Mean You Have To Contribute Too!

I hope that you have enjoyed the article "Supplier Partnerships: Your End of the Deal."

In the article, I shared four common supplier goals and how helping your supplier achieve them will result in more cooperation from your supplier towards achieving your goals. I wanted to elaborate further on those goals here.

Supplier Goal #1: Reduce Payment Cycle - In today's economy, this can be a challenge. If your own organization is struggling with liquidity, a strategy for coping is actually to stretch out payments to your suppliers. You are using suppliers as a defacto loan source. The problem is that suppliers may need your cash to make payroll. If they don't make payroll, you may be shooting yourself in the foot as they may not be able to continue their operations that are necessary to actually deliver the goods or services that you ordered. But if your organization does have good cash flow, it can be a bigger lever than ever towards negotiating with your suppliers. And it can help in a macroeconomic sense by lightening the burden of the credit crunch.

Supplier Goal #2: Increase Sales - This, too, can be a double-edged sword. You may fear that as your suppliers get more business, your organization will be less of a priority of theirs. This doesn't have to be the case. Not all customers will wave the supplier's flag the way you do. And by being such an evangelist, you can get preferred treatment without being the biggest spender while also being a respected thought leader in the field. Take Jim Polak, the Purchasing Director at PPG. Jim is a well-known and widely respected executive. And you'll often find his quotes in articles about Ariba, from the first "Ariba signs PPG as a customer" press release in 2003 to a recent webinar he did for them. Now, though I know some folks at Ariba and have met Mr. Polak, I'm not sure of the inner workings of their relationship. But I bet when PPG says "jump," Ariba says "how high?"

Supplier Goal #3: Reduce Cost & Complexity - One of the great things about cross-functional team procurement negotiation is that you can ensure that the needs of everyone in the organization are met because a representative from each functional area is involved. The problem arises when these team members confuse their "needs" with their "wants." So you may negotiate a benefit from your supplier that results in little necessary benefit to you but real cost to your supplier which is somehow passed on to you. If you can collaborate with your supplier and your internal team to determine what cost drivers are not really necessary, everyone can win.

Supplier Goal #4: Increase Reliability of Sales Forecasts - This is especially true in today's economic environment. Senior executives are closely watching the news for some indication of where the economy is going and how it will affect their business. Many are scaling back plans or laying off workers just because of what they think might happen. Signing a deal with a supplier can alleviate some degree of uncertainty and you can be rewarded with that. And if your spend is spread out among various non-contracted suppliers today, supply base rationalization will obviously help you achieve lower prices.

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

Monday, November 24, 2008

Educational Videos For Purchasing Professionals Hit The Web

If you're a regular reader of this blog, you know that I like to post a vlog (video blog) from time to time. Well, all of these educational vlogs plus SPSM® Certification Success Story Videos, the PurchSearch demo, and more are now collected on the newly-launched Purchasing Certification Channel on YouTube.

Here's our latest video in which we address some common questions about the SPSM® Certification...



More content is coming to the Purchasing Certification Channel is coming soon, so stay tuned!

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

Friday, November 21, 2008

The Great Debate About Commodity Price Strategies

I sat in on an interesting presentation on Tuesday when Christopher Stockwell, VP of Procurement at Heinz North America, spoke about Heinz's supply risk strategies. The portion of Stockwell's presentation that I found most thought-provoking was his philosophies on handling commodity pricing in a volatile market.

There are two primary approaches to handling pricing in such an environment: tying price changes to an index or negotiating fixed prices.

As Ariba's Mike Petro recommended in our podcast and article entitled "Commodities Prices: Managing The Insanity," many experts are advocating the increased use of index-based price adjustment clauses in contracts. Yes, they say, they can result in unplanned cost increases and a decreased ability to accurately budget, but they also prevent the common scenarios of suppliers refusing to honor contracts or putting you on allocation. Plus, they can result in price decreases, too.

But Heinz took the opposite approach. Heinz opted to pursue fixed prices.

And, based on Stockwell's presentation, it has worked out for them so far. He reported that while their prices rose about 7%, the market rose over 11%. And while the currently declining market has Heinz paying a little more today, overall the approach worked out.

But it wasn't so much the fixed price strategy that I found most educational. After all, I can guarantee you that blindly choosing a fixed price strategy would undoubtedly bite some procurement departments in the you-know-where.

What I found most helpful was how Stockwell communicated the implications of the strategy to the management team and his functional peers.

He said - and I'm paraphrasing here - look, we can either (a) have cost certainty for budgetary purposes or (b) we can tie ourselves to the market, making sure we don't overpay relative to the market, but it will result in potentially extreme variances from the budget. If we choose budget certainty over market price, you have to understand that sometimes we will have better-than-market pricing, but there will come a time when we will have worse-than-market pricing. We can't overreact when the inevitable worse-than-market pricing time comes.

Heinz chose to go the fixed price route. And despite the current commodity price drops resulting in Heinz paying a little more today, Stockwell says no one is beating him up over it because of his clear words of caution.

I think that his warning was brilliant. But I also was impressed at the detailed measurements his team keeps. This may come in handy the next time this great commodity price strategy debate comes up. The Heinz procurement team will be able to say "Here's the strategy we chose last time and here's how it worked out. Should we do the same thing - and take similar risks - this time, or choose the opposite strategy?"

Great "food" for thought, eh?

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

Thursday, November 20, 2008

How Purchasing Training Just Got More Fun!

This week, we announced one of several innovations and improvements that we are launching this quarter: the addition of multimedia mid-term games to our online purchasing training classes!

While you may not expect to find purchasing-related questions on popular game shows like "Who Wants To Be A Millionaire" and "Jeopardy," here at Next Level Purchasing we wanted to add some more fun to the purchasing training field by offering similar games with a purchasing twist in each of our 10 full-length purchasing classes.

To kick off these new additions, we have made a special game available to you - the reader of this blog! The "Million Dollar Savings Game", which includes questions based on content from previous editions of our PurchTips newsletter, mimics "Who Wants to Be a Millionaire" in its format. You will have two hints available to help you try to achieve as much "cost savings" as possible.

Want to prepare for the game? You can read previous editions of PurchTips at:
http://www.nextlevelpurchasing.com/free.html

Ready to try your luck and achieve one million dollars in cost savings? Play the "Million Dollar Savings Game" at:
http://nextlevelpurchasing.com/articles/purchtips_game

Feel free to share your comments right here on this blog and stay tuned for more announcements shortly!

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

Wednesday, November 19, 2008

Whitepaper Wednesday - CFO's View of Procurement

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing an Aberdeen whitepaper entitled "The CFO's View of Procurement: Same Page, Different Language," available from Zycus.

Contrary to many whitepapers I've reviewed, this is one that I found interesting right away. Early in the whitepaper, Aberdeen introduces three tiers of cost savings: Identified, Implemented, and Booked, defined as follows...

Identified: Beyond simple identification of a savings opportunity, this tier of savings is characterized by sourcing activity and negotiated pricing, where savings potential is attainable.

Implemented: After the contract has been executed, enterprises begin to realize the potential of previously identified savings opportunities. This tier is characterized by purchasing, receiving, invoicing, and settlement activity and ensured by contract compliance and strong end-user adoption.

Booked: Once savings have been realized, they can be recognized or booked in operating budgets and other enterprise-level financial statements. This tier is characterized by close involvement with finance, procurement, and the budget holder.

According to the whitepaper, booked savings is, on average, only about 27% of the identified savings. The Whitepaper goes on to say "The traditional view places blame for the gap between implemented and booked savings squarely on the shoulders of procurement. But this is a significant and fundamental issue that must be revisited and challenged. Procurement’s role should be to deliver savings to the enterprise. If a line of business chooses to deploy the savings to drive other goals that does not make implemented savings any less real."

That is a good point. And it underscores the need for procurement and senior management to have a common understanding of exactly why procurement is working towards "savings."

What is the organization's goal? Is it to reduce expenses? Or is it to reduce prices and costs? They are two different things.

If the goal is to reduce expenses, then you need senior management (who demands the expense reductions), procurement (who can reduce prices and costs), and the business unit (who can comply with supplier agreements and work within a reduced budget) to all be working collaboratively to get identified savings to equal implemented savings to equal booked savings.

However, if the goal is to get more out an existing budget amount, I agree that this excerpt from the whitepaper applies quite well: "Procurement should not be responsible for booked savings. Challenge the current view that it is procurement’s responsibility to negotiate budget reductions with the line of business. Once savings have been achieved, it should not fall to procurement to establish how this very real benefit should be allocated across the enterprise, but rather, to the line of business and / or finance."

Again, the key is that senior management (including the CFO) and procurement have a common understanding of the goal. If they don't, there's that classic risk that procurement will say "We've saved the company $500,000,000" and the CFO will say "But our expenses are 5% higher than they were last year!"

It all comes down to the goal of saving in the first place. Is it to enable growth on the same budget? Is it to reduce expenses to improve the corporate profit margin? Is it to match expenses with revenues (a common mantra in these economic times)?

Why are we saving?

Once that is known, saving money should be treated as a corporate goal and evaluated in light of that strategic goal. Was the goal accomplished through the savings and compliance efforts (which is different than futily figuring out whether implemented savings equals booked savings in cases where saved money is reinvested)?

My favorite parts of the whitepaper were the quotes from various executives.

All in all, this whitepaper is definitely worth a read. You can download your own copy from Zycus' Web site.

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

Tuesday, November 18, 2008

The Recession & Supplier Stratification

Earlier this year, I did a podcast with Michael Massetti, the VP of Procurement and Quality at Tekelec, as well as an article, both entitled "Skillfully Managing Supplier Relationships." During the podcast, we discussed the concept of supplier stratification.

Massetti revealed that he stratifies his supply base into three tiers: Partners, Suppliers, and Vendors - listed in the order from most important to least important. In today's recessionary times, I am seeing supplier stratification becoming more important.

You see, in the recent past, when suppliers would cold-call executives or procurement professionals saying they could save them money by switching their business to them, the executives or procurement professionals wouldn't pay much heed. After all, there were more strategic priorities.

But with today's revenues and forecasted revenues shrinking for many companies, a strategic priority has become matching expenses to revenues. In other words, "if we are selling less, we have to spend less."

So, now those cold calls are getting more attention. And procurement professionals are finding more of these "opportunities" handed down to them for review. Unplanned cost savings is becoming mandatory.

When this happens, you need to know whether or not to act upon the savings opportunity. And supplier stratification can help make the decision easier.

Using Massetti's labels, you probably won't consider replacing a Partner (i.e., a supplier with whom you have an excellent, mutually profitable relationship characterized by aligned goals and minimized risk). For Suppliers (i.e., a supplier with whom you have a good working relationship but isn't irreplaceable), you may want to learn the market pricing and consider giving your existing Supplier the opportunity to restructure their pricing or at least be a participant in a competitive bidding event. For Vendors (i.e., a supplier providing a common commodity where no real relationship exists or is necessary and there is not significant spend nor risk), you may be able to switch suppliers, avoiding the costs of bidding, and seamlessly transition to a new supplier.

So do you know which of your suppliers are irreplaceable, expendable, and somewhere in the middle?

If not, now might be the best time to start your supplier stratification program.

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

Monday, November 17, 2008

Source One Becomes Newest Sponsor of the Purchasing Certification Blog

Source One Management Services, LLC has become the newest sponsor of the Purchasing Certification Blog under our new sponsorship arrangement.

Source One is a company that has fascinated me for some time now. They have their hands in a lot of different activities and I'm hearing and seeing their name pop up more and more.

I first learned about them a few years ago when I became aware of their WhyAbe free reverse auction tool. Then, their Strategic Sourceror Blog became well known. And just a few weeks ago, I blogged about them teaming up with ThomasNet and launching a contract management solution.

I love to see the entrepreneurial spirit at work and was delighted when they contacted me about sponsoring this blog. Last week, I had the opportunity to catch up with a couple of their senior execs to learn more about Source One. I'll share with you what I learned...

First, with all of the activities they are involved in, what is Source One's primary line of business? I learned that their bread-and-butter is their strategic sourcing consulting practice. They have quietly gone about growing their consulting business quite successfully. Their consulting business operates on a 100% pay-for-performance model, so they are obviously delivering some pretty nice results for their clients.

Second, I learned of their newest offering - a Web site called MasterNegotiator.com. This site provides a somewhat GPO-style offering in which they offer leveraged contracts with discounted pricing.

Who is eligible to take advantage of these contracts?

Anyone.

Yep. There are no membership requirements and you don't have to be a Source One customer. And the buyer pays nothing other than the prices of the goods or services being purchased.

Are the prices good?

I haven't personally done a comparison but Source One indicates that they are below the prices that their vendors advertise to the "average Joe." Certainly, there are some larger companies whose volume would grant them better discounts than available through MasterNegotiator.com, so they say that companies that have annual revenues in the $250 million or lower range will benefit the most.

I have two pet peeves with some GPO-style offerings: one, the prices sometimes are not better than you can get on your own and, two, the vendors were not qualified by the GPO - they simply provided the best deal to the GPO.

In addressing the second point with the Source One execs, they have assured me that every single vendor offered through MasterNegotiator.com is a company that they have worked with in the past for several years and have performed well for Source One's clients. That is a breath of fresh air!

MasterNegotiator.com currently offers contracts for categories such as credit card merchant services, local and long distance services, and outsourced processing just to name a few. Plus, Source One plans on adding more categories in the near future.

So, Source One rattled the reverse auction marketplace beginning a few years ago, they are now rattling the GPO space, and it looks like they will have more tricks up their sleeve in the near future.

With all of these new services, Source One is definitely a company to watch in the procurement world. I'm delighted to have them on board as a sponsor.

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

Thursday, November 13, 2008

Procurement Discussions Pick Up On LinkedIn SPSM Group

For those of you who haven't checked in recently, the SPSM Group on LinkedIn has been gradually picking up in terms of activity. There have been many discussions started and some interesting opinions and advice shared.

Here are just some of the questions/topics that have started discussions:
  • What are the three most important tasks of any Sourcing or Procurement top professional managing a team of 30 FTE and spend of $ 200 Mn?
  • Recession Proof Purchasing Strategies – How to Monitor a Suppliers Financial Status?
  • Salary ranges in Souther California for Senior Procurement and Sourcing professionals targeted specifically to negotiate Indirect Spend
If you haven't joined the SPSM Group on LinkedIn yet, now is a great time. You will be welcomed with open arms. And you don't have to be an SPSM to join.

Here's the link to the group: http://www.linkedin.com/groups?gid=145761

"See" you there!

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

Wednesday, November 12, 2008

Whitepaper Wednesday - Optimizing Supply Chain Performance

Welcome back to another installment of Whitepaper Wednesday on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Optimizing Performance Across Your Supply Chain" from Information Builders.

This whitepaper addressed a variety of topics from competing supply chain objectives to managing risk to sharing information with suppliers to achieving cost savings. While it didn't necessarily go into an overwhelming amount of depth on any topic, there were a few noteworthy nuggets.

I liked a piece of McKinsey research cited in the whitepaper. According to the whitepaper, "A recent study of leading supply chain companies by McKinsey asked company executives what they do to minimize the increasing risk of supplying customers effectively." A graph was listed showing the responses and they were (sorted from most common to least common):

The whitepaper also cites a fascinating excerpt from the book "How" by Dov Seidman in which Seidman comments on research conducted by professors Jeffrey H. Dyer of the Marriott School at Brigham Young University and Wujin Chu of the College of Business Administration at Seoul National University: “Dyer and Chu surveyed almost 350 buyer/supplier relationships involving eight automakers in the United States, Japan, and South Korea and found a direct and dramatic relationship between trust and transaction costs. The least trusted buyer incurred procurement costs six times higher than the most trusted: same parts; same sorts of transactions. These additional costs came from added resources that went into the selection, negotiation, and compliance costs of executing deals. Dyer and Chu point to Nobel Prize-winning economist Douglas C. North’s findings that these sorts of transaction costs account for more than a third of all business activity and that the least-trusted companies were the least profitable.”

Now that makes me want to dive into Dyer and Chu's research deeper!

The rest of the whitepaper focuses a lot on information sharing as the author's perceived keys to a successful supply chain. It's worth a look but, from my perspective, information sharing is only one of the several important component of successful supply chain management, not the be-all-end-all.

To get the whitepaper, you can visit http://www.findwhitepapers.com/whitepaper2407/ (registration required).

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

Monday, November 10, 2008

Sustaining a Procurement Transformation

I hope that you have enjoyed the article "10-Step Procurement Transformation, Part II."

One of the steps that I feel particularly strongly about is #9 - Create Policies to Support Transformation.

It takes me back to the time I was working for a large university. The university, which had a very not-for-profit, government-related culture, brought me in to introduce private industry best practices and deliver measurable benefit.

Prior to my arrival, the university's purchasing approach was very decentralized. It had been thought that if end users can have access to a purchasing system and learn how to use it, then let them do the buying themselves. "Academic freedom" was a commonly-heard phrase.

Well, obviously the management who instituted that approach to buying had no clue as to the benefits of leveraging its spend, working collaboratively in the context of supplier relationships to improve performance, avoiding the consequences of uninformed buying decisions, etc. So that was a challenge facing me, my team, and my management.

At the core of our strategy was putting in place enterprise-wide contracts that leveraged the university's spend and afforded us deep discounts. But compliance was a concern. We believed that eProcurement would address compliance to some degree because it was so easy for the end users to not only place orders, but to identify what to buy and from whom.

But we knew eProcurement alone wasn't the total solution.

In a great (and rare) example of getting support for an initiative up through many levels of the bigger-than-necessary chain of command - there were 3 positions between myself and the chancellor, not inclusive, at the time - we were able to get two key policies incorporated into the Policies & Procedures Manual. They were:

1. If a university representative is going to purchase a product or service and that product or service is available from a contracted supplier, the university representative must purchase that product or service from a contracted supplier.

2. If a univerisity representative is going to purchase a product or service and that product or service is available through the university's eProcurement system, the university representative must purchase that product or service through the eProcurement system.

So maverick buying became not just a nuisance for the purchasing department. It was a violation of university policy.

That was a key facet in our procurement transformation.

Don't underestimate the importance of Step 9!

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

Thursday, November 06, 2008

New Sponsorship Model For The Purchasing Certification Blog

Well, we've run our three-month trial of sponsorships here on the Purchasing Certification Blog and have a better idea of where we want to take things moving forward.

Here at Next Level Purchasing, we often reference our list of our top 5 priorities in order beginning with the most important priority. Our top priority is "student satisfaction."

I am a big believer that an organization should do everything possible to give its customers a great experience. Based on feedback that we receive from our students, I think we have done that and we only are going to get better at it through our continual efforts.

But with sponsorships, we would have a new type of customer. A customer that wants (let me add, deserves) to get great exposure on the blog and lots of click-throughs to their Web site.

The problem is, that is not the purpose of this blog.

The purpose of this blog is to give our paying students something extra in terms of education as well as to deliver some educational value to those purchasing and supply management who cannot afford to enroll in our purchasing education classes and programs. True, the material covered here isn't as in-depth as what is covered in our purchasing classes, but it is something - something that doesn't cost the reader a dime.

So I find it difficult to serve the proverbial two masters.

Therefore, we will no longer be accepting paid sponsorships for the Purchasing Certification Blog. We will decline the opportunity to add to our revenue through blog sponsorships, which aren't really a significant source of revenue relative to our core offerings.

However, we will continue to offer sponsorships on a barter basis. That is, if we are given the opportunity to advertise on a relevant Web site or blog at no charge, we will allow that site owner/blogger the opportunity to sponsor the Purchasing Certification Blog at no charge.

If you're interested in such an arrangement, contact us and we can provide you with more information and work out the details.

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

Wednesday, November 05, 2008

Whitepaper Wednesday - Supply Chain Risk

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today's installment covers a whitepaper from SAP entitled "Understanding and Managing Supply Chain Risk."

The whitepaper begins by describing the benefits of "supply chain design." I agree that, too often, our supply chains are essentially a hodgepodge of disparate suppliers, each selected independently of one another. It is beneficial to take a step back and evaluate the supply chain as a whole to identify opportunities for improvement of the supply chain for the sake of the supply chain, rather than on a category-by-category basis.

The whitepaper lists a few general risks that supply chain managers face:
  • fluctuations of customer demand
  • financial factors such as exchange rates and market pressures
  • environmental and geopolitical factors such as weather, natural disasters,
    political instability, and union action

It was here that I felt the whitepaper fell a little short of my expectations. Certainly, these factors that are external to suppliers can impact continuity of supply but, in my experience and observations, it is the factors that are internal to suppliers (e.g., capacity, management, quality, production flexibility, etc.) that are culprits for many interruptions in supply. The whitepaper didn't really address these in sufficient detail. Not every production line shutdown at a buyer's plant was the result of a hurricane, government regime change, or terrorist attack.

However, the whitepaper did a good job of redeeming itself by sharing some valuable methods of addressing risk, such as:

  • Build a comprehensive model of the global supply chain, capturing business activities and key supply chain operations of primary partners, suppliers, and customers.
  • Implement IT solutions that connect business data and processes from end to end, providing visibility into planned events, warnings for unexpected events, proactive exception management, and so forth.
  • Use principles of continuous improvement with annual “supply chain drills” that test and scout for weaknesses, blind spots, and trouble areas in the extended supply chain.

All in all, this was a decent whitepaper, partly for its content and partly for its ability to get one thinking about the importance of supply chain risk management and what can be done today to maintain continuity of supply. You can download it here.

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

Tuesday, November 04, 2008

Purchasing & Supply Management Loses A Guru

I've been in disbelief since receiving the phone call last Wednesday afternoon. My cousin, friend, and fellow procurement enthusiast Justin Falgione suddenly and unexpectedly passed on while traveling on business. It wasn't until after attending his funeral today that I could bring myself to write a tribute to this brilliant individual.

Justin was a category manager for Ariba specializing in indirect spend. In recent years, he began getting more well-deserved public exposure in the field for authoring and co-authoring excellent articles in publications like Supply & Demand Chain Executive, Inside Supply Management, and Ariba's Supply Watch.

Justin had an amazing knowledge of procurement. In mere minutes of speaking with him, you had no choice but to be awed by his intelligence and his knowledge of all of the subtleties of various categories. Some of his co-workers referred to him as a "rock star."

In the spirit of the educational nature of this blog, I encourage you to seek out his work online. You'll learn tremendously.

But beyond his professional life, Justin was known as a wonderful father and as someone dedicated to serving others and improving everything he was involved with. To paraphrase the eulogy his father (my Uncle Joe) wrote for today's service, God is likely right now putting Justin to work to make Heaven a better place.

Justin, you were always an inspiration and your legacy will live on in the family and the profession that we shared.

Monday, November 03, 2008

The SPSM Certification Expands Further Into Europe, Middle East

As is customary for the first blog post of the month, I will now share insights onto the continued global expansion of the SPSM® Certification from the previous month.

In October, we certified our first SPSM's from The Netherlands and Kuwait. These two countries join dozens of others from their continents, Europe and Asia.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
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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