Friday, January 30, 2009

Is An Onshoring Trend About To Break?

With millions of jobs in the USA lost in 2008 and things looking bleak so far in 2009 - 71,400 jobs were lost on Monday alone - one wonders what the US workforce of the immediate future will look like. With tons of people out of work and available jobs scarce, some experts predict that people are going to have to work for less money and that the standard of living will decline.

While the US' high labor costs of the past prompted many organizations to outsource jobs to offshore providers, this potential "adjustment" to US labor costs may cause onshoring to be the new approach to cutting costs. Late last week, I received a letter from one of our vendors discussing how and why they were doing away with their offshoring approach in favor of an onshoring approach. I'll share that letter here, with the vendor's name omitted to protect their privacy:


Dear Valued Customers,


I wanted to write this letter to update you on a exciting change that is happening here at [vendor name]. For the past 8 years, [vendor name] has leveraged a mix of U.S and offshore staffing for many of its projects. This was done to stay competitive and provide the best value for our customers. [vendor name] is well aware of your concerns over the years that mainly deal around project timelines. After many attempts to resolve timeline concerns, [vendor name] has decided to move to a full onshore development model that will provide the speed and quality each and every customer deserves. This change has been in the works for months and we now encompass a full development staff in-house and also use of U.S contractors as needed. Our goal is to continue to hire additional in-house programmers in a ongoing basis within [vendor name] as we continue to grow.

Up until now, cost had been a prohibitive factor in our ability to do just this and stay competitive in our project pricing. However, after working with both onshore and offshore teams for years and assessing their turn-around times, skills, accuracy rates and overall understanding of projects, we have determined that it is more cost effective to have fewer senior level U.S. staff rather than many offshore employees. In making this change, we have been able to provide faster turn-around times, lower quoted hours and costs, higher quality work, shorter project timelines and more involvement for our clients with their assigned developers.

Unfortunately because of this move, it has been brought to our attention that a former offshore staff member is attempting to slander and undermine [vendor name] and its customers. Please be advised that these emails are coming from a disgruntled staff member that was terminated for just cause and is looking to make fraudulent claims for his own gain. His departure signals this change for the better and a new era here at [vendor name]. We are committed to providing our customers the best solutions at a competitive price point.

We are excited to be making this move and have no doubt our clients will soon notice the difference!

While this letter seems to tout the non-price advantages of onshoring, I have no doubt that the large amount of highly skilled and widely available US labor and the relatively lower wage rates were a factor in this vendor's decision.

So what do you think? Is onshoring about to go mainstream?

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, January 29, 2009

Super Bowl XLIII: The Purchasing & Supply Management Connection

This Sunday is the big day: Super Bowl XLIII!

And there's a purchasing and supply management connection.

The Super Bowl will pit the Steelers against the Cardinals.

The Steelers are from Pittsburgh. The Cardinals are from Arizona.

Next Level Purchasing is based in Pittsburgh. The Institute for Supply Management (ISM) is based in Arizona.

Doesn't this beg for the type of bet that mayors typically make on big sports games? Like how the Glendale, Arizona mayor challenged Pittsburgh's mayor to plant a cactus outside of Heinz Field if the Cardinals win or plant a Pennsylvania tree outside of University of Phoenix Stadium if the Cardinals win.

So what should we bet?

Maybe Mr. Novak would have to spend an hour outside in Pittsburgh's freezing February weather if the Steelers win while I would have to spend an hour outside in Arizona's sweltering February weather if the Cardinals win.

Yeah, I'd take that bet!

What funny bets would you suggest?

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, January 28, 2009

Whitepaper Wednesday - Procurement Process Centralization & Standardization

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Enterprise Source-to-Settle Transformation" from MarketSphere Consulting, LLC.

This whitepaper is more of a case study than a true whitepaper, as it describes MarketSphere's success in transforming the procurement process for one of its Fortune 500 clients. The case study begins by describing some of the problems that the client was experiencing:

"Processes were inconsistent across operating companies, primarily manual, paper-intensive, error-prone, and slow. All operating companies were on different, standalone instances and multiple versions of PeopleSoft® Financials. Contracts were not managed centrally and the few existing enterprise contracts had moderate off-contract ('maverick') spend. Enterprise spend visibility was limited and required significant effort to compile. Unfortunately, this spend data was often unreliable due to the poor quality of data in the source systems. Buyers used multiple supplier websites to procure goods and often sought approval after the paper invoices were received. Invoices were keyed into both PeopleSoft and a separate purchasing system, often requiring manual exception handling due to incorrect coding."

This client began the engagement with MarketSphere with five goals:
  • Improve and standardize processes
  • Improve financial transparency
  • Improve Sarbanes-Oxley compliance
  • Reduce enterprise spend
  • Reduce transactional costs

MarketSphere and its client identified five stages of the source-to-settle lifecycle to address:
Source, Procure, Settle, Account, and Analyze.

The Source stage focused on the process of centrally sourcing and contracting with strategic suppliers across all business units. The Procure stage involved having all business units use a single eProcurement system. In the Settle stage, the client used a largely automated payment process where manual intervention was required only for exceptions and for paying those suppliers not capable or willing to receive payments by Electronic Funds Transfer (EFT). Procurement cards were also used for low value purchases. The Account stage didn't seem that glamorous - integrating accounting and asset codes from the purchase order into the accounting system, which is basic eProcurement integration.

The Analyze stage was the one that I considered to be most fun, so I'll just provide the description word-for-word from that stage:

"Analyze focused on the process of spend monitoring and opportunity analysis. The company needed the ability to periodically stratify and analyze spend data for a host of reasons – current period liability (pending payables), maverick/off-contract buying, budget compliance, and contract compliance. As needed, users can run pre-established queries to monitor spend detail relevant to them for a certain period. On a semi-annual basis, spend data is 'enriched' (cleaned up) to better stratify spend by category, vendor, and/or item as a key input into further
cost reduction opportunity analysis and strategic sourcing which begins the [source-to-settle] cycle all over again."

The benefits of implementing this transformation include nearly $36 million in total P&L spend savings, nearly $4 million in total transactional P&L savings, and a host of other improvements. The whitepaper concludes with a handful of typical lessons learned plus five more subtle, yet important, ones such as: "based on past experience, we continue to find that having an actual user as the part-time deployment lead really helps break down barriers of trust, participation, buy-in, and accountability. Historically, either an IT person or external consultant was in this role, but was challenged with the aforementioned barriers since they could not relate to the user community and were there to just 'get the solution in.'"

While this whitepaper will not give you step-by-step instructions for transforming a procurement process, it does provide the framework and some good benchmarks if you will be embarking on a similar challenge. If you'd like to download your own copy, you can get one from cfo.com by clicking here (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, January 26, 2009

Purchasing & Accounts Payable: Unfulfilled Potential For Collaboration

I hope that you have enjoyed the article "How Purchasing Should Work With A/P."

If you are not convinced that improving Purchasing's synergy with Accounts Payable should be a priority, consider the following scenarios:
  • You've worked to negotiate an early payment discount from your supplier. As a result, you've included this early payment discount in your cost savings reports. At the end of the year, you are chastised for overstating your cost savings because the supplier's invoices were never paid on time and the discounts never taken.
  • You call a supplier on a Friday afternoon with an urgent order that, if not delivered when you need it, could cause a major operational disruption to your organization. The supplier refuses to ship and says that your organization has been placed on credit hold because it has not paid its invoices in 90 days.
  • You have the goal of reducing maverick buying and use an eProcurement system to guide users to contracted suppliers. Yet, maverick buying is still in full force because users have found that sending supplier invoices to Accounts Payable with check request forms enables them to pay suppliers for orders placed outside of the system.

Still think establishing that Purchasing-Accounts Payable relationship isn't important?

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, January 23, 2009

Can You Earn A Purchasing Certification Without A Bachelor's Degree?

We have been getting a number of inquiries of late where purchasing professionals will say something similar to this: "Someone told me that I can't get a purchasing certification without a bachelors degree."

That is simply not true. Purchasing professionals without bachelors degrees - who represent approximately 30% of all purchasing professionals - can indeed earn a purchasing certification. Specifically, the SPSM® Certification does not have a bachelors degree as a prerequisite.

This panic in the field has apparently been caused by a recent deadline imposed by the Institute for Supply Management (ISM) who is one of the bodies (but not the only body) awarding purchasing certifications. ISM had recently imposed a deadline of December 31, 2008 to register for their C.P.M. certification, which is "transitioning into a recertification-only status" (i.e., if you didn't register for the exam by that date, you won't have the opportunity to earn the C.P.M.).

Other than the C.P.M., ISM does not offer a certification available to purchasing professionals without bachelors degrees. That doesn't mean that you cannot be certified, simply that you need to earn your certification from a source other than ISM.

So if you are a purchasing professional without a bachelors degree and want to be certified - or if you are a purchasing leader interested in the many benefits of having a certified team which may be comprised of individuals both with and without bachelors degrees - it is advisable to evaluate the SPSM® Certification as a step towards workplace success.

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, January 22, 2009

Should Obama Encourage "Fuel-Conscious Sourcing?"

As President Obama gets through his first week in his new job, his focus is clearly on defibrillating the economy and addressing other national security issues. But during his campaign, as gas prices were more than double what they are now, energy independence was a major concern of his. I suspect that we haven't heard the end of his energy independence aspirations.

Looking over President Obama's energy independence plan, specifically the part about eliminating our current imports from the Middle East and Venezuela within 10 years, it seems that the focus is not geared towards reducing the way fuel is consumed, just mainly producing more fuel domestically and manufacturing vehicles that consume less fuel.

But what if President Obama wanted to encourage changes to the way that fuel is consumed - the behavior that drives fuel consumption? Could that break us from our "addiction to oil?"

I believe it could.

Just think of everything you source that gets transported. Some of it you buy locally. Some of it you buy from across the country. Some of it you buy from the other side of the world.

You obviously choose those sources because they are the best suppliers for those items. They may also likely have a cost advantage. You probably base most of your decisions on your evaluation of some combination of cost, delivery, service, and quality.

But if solving our addiction to oil is such a national priority, perhaps factoring in fuel consumed should be a part of the supplier selection process. In other words, a supplier that consumes less fuel to transport your product will get more consideration.

For those practicing green procurement, this is already a common practice. But the purpose of me suggesting that factoring fuel consumption into the decision is not so much about protecting the environment as it is about supporting the national priority of energy independence.

Should an organization be willing to pay a small premium in order to consume less fuel the way it pays a small premium to award business to diversity suppliers?

Should businesses that reduce fuel consumption through via changes to their sourcing practices be eligible for tax credits?

What can President Obama do to get US businesses to support his energy independence plan through "fuel-conscious sourcing?" (Ooh, I think I just invented a term 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, January 21, 2009

Whitepaper Wednesday - Purchasing Careers & Skills

Welcome to this week's installment of Whitepaper Wednesday on the Purchasing Certification Blog. In this installment, I'll be reviewing a whitepaper entitled "The 2009 Purchasing & Supply Management Career & Skills Report" from Next Level Purchasing.

This whitepaper shares statistics collected from a very recent survey of over 1,900 purchasing and supply management professionals. Topics covered include:

  • Most advanced accomplishments
  • Predictions for the future
  • Ranking of the importance of the various skills
  • The economic impact on purchasing and supply management careers and training
  • The impact of certification on cost savings and salaries

I'll cover a few of the more salient points here...

The whitepaper summarizes the top 10 predictions for the profession in 2009 and 2010. The top three were:

  1. Higher expectations for cost savings/cost reduction
  2. Increased use of eProcurement
  3. Purchasing job reductions

The whitepaper delivers a very timely snapshot of how the recent economic downturn has affected purchasing and supply management, saying "With employers cutting millions of jobs in North America alone in 2008, unfortunately, the purchasing and supply management profession was not spared. Over 20% of participants indicated that they held a purchasing position that was eliminated in the previous year."

Among the most interesting statistics involved the return on investment in certification. The whitepaper says "[P]articipants who have earned the SPSM® Certification saved their employers an average of $1,022,046 (US) per person annually compared to $802,020 for those who have not enrolled in the Senior Professional in Supply Management® Program – a difference of $220,026."

In addition, the whitepaper includes some fascinating purchasing salary statistics: "The survey revealed that those who have earned the SPSM® Certification have an average annual salary that is $14,188 higher than those who have not earned the SPSM® Certification." Also, the whitepaper compares salaries based on educational tracks, statistically illustrating that it may be more profitable for an individual without a bachelors degree to earn the SPSM® Certification instead of a bachelors degree and more profitable for someone with a bachelors degree to earn the SPSM® Certification instead of a masters degree.

You can get your own copy of the 2009 Purchasing & Supply Management Career & Skills Report by signing up for the FREE Purchasing Resources Program at http://www.NextLevelPurchasing.com/free.html. If you are already a member of the FREE Purchasing Resources Program and want to receive this new report, contact us and we'll email you a copy.

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, January 20, 2009

Will Obama's Inauguration Change Supplier Diversity?

I'm excited. Today, Barack Obama becomes the new president of the United States of America at a time when we need leadership out of many challenging situations.

One of the often discussed topics about today's long anticipated inauguration is the fact that Obama will be the first African-American president. In my opinion, this is a moment like no other that demonstrates that all Americans are equal - the way we should be.

So, let's transition the discussion to purchasing. Supplier diversity, in particular.

Supplier diversity programs are generally designed to encourage the use of suppliers meeting certain ownership criteria and, in some cases, to "set aside" a percentage of a procurement award for only suppliers meeting such criteria, sometimes called "disadvantaged businesses." Supplier diversity programs, in many cases, have the apparent mission of making up for inequities in cultural treatment that members of certain ethnic demographics have received, not received, or have been subjected to.

Consider this excerpt from techtarget.com: "A Small Disadvantaged Business (SDB) is a small business that is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged...The [United States Small Business Administration] defines socially disadvantaged groups as those who have been, historically, subjected to 'racial or ethnic prejudice or cultural bias' within the larger American culture. Identified groups include: African Americans, Asian Pacific Americans, Hispanic Americans, Native Americans and Subcontinent Asian Americans."

So, with a member of one of those "disadvantaged" groups now having risen to become the President of the United States of America - arguably, the most important job in the world - should that group still be considered "disadvantaged" for procurement purposes?

Does Obama's inauguration signal that equality has been reached for business purposes?

Could supplier diversity be on its way to obsolescence?

Is supplier diversity more of a throwback to the days of Ronald Reagan's presidency, when he signed Executive Order 12432, than it is applicable in the days of Barack Obama's presidency?

Times are clearly changing for the better. Will supplier diversity change also?

Time will tell. In the mean time, let's give our support to our new president with the faith that he'll make our world a better place and resolve some of the more important questions about the future of our planet.

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, January 19, 2009

Peanut Butter, Salmonella & Global Sourcing Implications

A few days ago, US Federal health officials issued a warning for people to avoid eating foods containing peanut butter in the wake of a salmonella outbreak that has sickened nearly 500 people and killed a half dozen. The source of the salmonella contamination? A "relatively small supplier" based in Georgia.

What would things have been like if the source had been a supplier based in China?

There would be cries to outlaw importing from China. Rants about how the Chinese government has such poor oversight over the safety of products produced in the country. Calls for withdrawing all plans to source from China.

Does this recent salmonella outbreak put things into perspective?

Should there be cries in other countries not to buy American goods? Should people criticize the US government's oversight? Should companies withdraw plans to source from the US?

I don't think so, although the following excerpt from the above-linked article makes it seem that perhaps US citizens shouldn't throw the proverbial stones at the Chinese government over their industry oversight...

"The outbreak has triggered a congressional inquiry and renewed calls for reform of food safety laws. For example, the FDA lacks authority to order a recall, and instead must ask companies to voluntarily withdraw products. 'Given the numerous food-borne illness outbreaks over the past several years, it is becoming painfully clear that the current regulatory structure is antiquated and ill-equipped to handle these extensive investigations,' said Rep. Rosa DeLauro, D-Conn., who chairs a panel that oversees the FDA budget. Seattle-area lawyer William Marler, who specializes in food safety cases, said the government shouldn't wait for the results of more tests to request recalls. 'At least 30 companies purchased peanut butter or paste from a facility with a documented link to a nationwide salmonella outbreak,' said Marler. 'The FDA has the authority actually, the mandate to request recalls if the public health is threatened. Instead, the FDA has asked the companies to test their products and consider voluntary recalls. It is just not enough.'"

In my mind, the bottom line is this: don't blame an entire country for the quality problems of one supplier - or even a small percentage of suppliers.

Do you agree?

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, January 16, 2009

Cost Savings vs. Keeping A Supplier In Business

For those of you who need one, a bad economy is a great excuse to beginning procurement negotiations with your suppliers. But a bad economy also means that some financially weaker suppliers may be on the brink of going out of business.

So do you negotiate with these suppliers to support your cost savings goal? Or do you let them keep a little juice in their pricing so they are around for you in the immediate and long-term future?

The answer is: "it depends."

Debbie Wilson of Gartner posted on her blog an excellent entry entitled "Is Chasing Deflation A Good Idea?" about this very topic. She makes some thought-provoking points and I added my two cents into the comments.

I recommend that you give it a read and, if you're brave, enter into the discussion as well.

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, January 15, 2009

Scholarship Honors Memory of Procurement Guru Justin Falgione

As I posted with a heavy heart several weeks back, my cousin and fellow procurement enthusiast Justin Falgione of Ariba passed away in October.

A couple of his friends are trying to establish a scholarship fund in his memory. I know that many readers of this blog had come to enjoy working with Justin, either as a coworker at FreeMarkets/Ariba or as a customer of FreeMarkets/Ariba. So, with Justin's friends' permission, I will use this blog post to share the letter that his friends have circulated in their effort to establish this scholarship fund.

Dear Friends and Family of Justin Falgione,

We are proud to announce efforts toward the creation of The Justin J. Falgione Memorial Scholarship at Westminster College. Westminster College was a place filled with wonderful memories for Justin and we are creating this scholarship to honor those memories and the memory of Justin's kind and generous heart and collegial spirit. The scholarship will be awarded to students who major in studies emphasizing public service as a tribute to Justin's commitment to volunteer work and helping others in need. We are hopeful that the scholarship will assist students in achieving their academic goals and socially responsible endeavors.


How can you help? Our objective is to raise $25,000, the minimum required by the College, to endow a scholarship. Tax deductible donations can be made to Westminster College and please note the funds should be applied to the Justin J. Falgione Scholarship Fund.

When making a donation please consider if your company matches your donation. Corporate matching gifts will also be credited towards the scholarship fund and will be a tremendous help in achieving our goal. Please note on your corporate matching gift form that the funds should be applied to the Justin J. Falgione Scholarship Fund.

Checks payable to: Westminster College

Important: Include in the memo line or an attached note that the funds should be directed to the Justin J. Falgione Scholarship. Feel free to attach a printed copy of this email with your check.

Mailing Address:
Westminster College
Development Office - Old Main #104
319 South Market Street
New Wilmington, PA 16172

Westminster will send you a receipt recognizing your gift to the Scholarship Fund and also provide the necessary IRS information.

Contingency Plan: If we are unable to reach the $25,000 goal after four (4) years, the funds will be applied to the Westminster Scholarship Fund in Justin's memory. Hopefully we will reach the goal and the scholarship will be endowed. We are committed to doing everything we can to reach this goal.

We have a limited number of email addresses so we are relying on your efforts to spread the word about the Scholarship. Please forward this email to anyone who knew Justin. If you would like to receive an update from us on the status of the fundraising efforts please send an email to falgionescholarship@gmail.com and we will make sure to include you in the email distribution list.

On behalf of Justin's family, thank you for your help.

Sincerely,
Bernie Taylor and Peter Goslin

Wednesday, January 14, 2009

Whitepaper Wednesday - What Influences Buyers?

Welcome back to another weekly installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I'm going to focus on a topic that is actually discussed in two separate, unrelated whitepapers - the factors that influence buyers. Those whitepapers are:
  • "Research Excerpt: How Clients Buy: 2009 Benchmark Report" from RainToday
  • "Marketing To A B2B Technical Buyer" from Enquiro Research

Unlike most whitepapers that I review, these whitepapers are targeted at marketers, not purchasing professionals. But I have always found it fascinating when marketers research corporate purchasing behavior. I think it is valuable to understand how marketing and sales views you as a purchaser and the techniques that they try to use to earn your favor.

The "How Clients Buy" whitepaper studies buyers of professional services such as accounting and financial consulting, architecture, engineering, and construction services, human resources consulting, IT consulting and services, legal services, management consulting, marketing, advertising, and PR, and training services. The whitepaper is based on a survey of over 200 buyers of these services who, collectively, are responsible for $1.7 billion in annual spend.

The whitepaper lists the top five methods that professional services buyers use to initially identify and learn more about professional service providers. Those methods were:

  1. Referrals from colleagues
  2. Referrals from other service providers
  3. Personal recognition or awareness
  4. In-person seminar
  5. Presentation at a conference or event

I found it personally interested that the Internet or search engines did not make it to the top 5!

The "Technical Buyer" whitepaper had similar statistics. First, it broke down the technical purchase cycle into four phases: Awareness, Research/Consideration, Negotiation/Vendor Finalization, and Purchase. Then, it specified what influences technical buyers in each phase. Unfortunately, it breaks it down into online and offline influences, but does not present combined influence statistics.

For the Awareness phase, which corresponds to the "initially identify" section of the "How Clients Buy" whitepaper, it lists search engines and the supplier's Web site as tied for the top two online influences and word of mouth from a colleague or peer and word of mouth from a friend or relative as the top offline influences.

With regard to all phases of the purchase cycle, the whitepaper states "When we asked technical buyers to rank influencers on a scale of 1-7, online influencers like vendor websites and search
engines outperformed offline influencers like trade shows and even paid consultant’s word of mouth...What was most interesting, was that technical buyers actually placed a higher value
on a vendor’s website than a colleague’s suggestion - clearly, there is a need for technical buyers to get the information directly from the 'horse’s mouth.'"

The whitepaper goes on to indicate that 95% of technical buyers would use online methods in the Awareness phase and that "86.5% of technical buyers first interaction with a vendor is online - this is where vendors are found."

So based on these two pieces of research, there are extreme differences in the way that professional services buyers and technical buyers find suppliers.

Or is there?

I'd like to use this blog post as a discussion of this topic. Is the research right? Or is one wrong? Or both wrong? What do you buy and where do you find your suppliers?

Click on the comment link below to share your experience.

If you're interested in getting your own copies of the whitepapers, you can download "Research Excerpt: How Clients Buy: 2009 Benchmark Report" here and "Marketing To A B2B Technical Buyer" here. Registration is required for both. And here's a couple of caveats: the "How Clients Buy" whitepaper is a free excerpt from the full benchmark report for which RainToday charges $345 and the "Technical Buyer" whitepaper is a whopping 63 pages long!

Once again, please use the comment link below to share your experience.

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, January 12, 2009

The Wrong Cost Savings Goal Can Set Purchasing Back 20 Years!

I hope that you have enjoyed the article "The Wrong Cost Savings Goal."

As purchasing departments announce their annual goals at this time of year, I often watch with concern. Often purchasing departments are measured (or measure themselves) only on one factor: cost savings (more specifically, price reduction). In the current economy, cost savings/price reduction initiatives seem to be more aggressive than they have been for some time.

While reducing prices is generally a noble achievement, ignoring supplier performance for the sake of a lower price can be destructive. Imagine jettisoning a reliable supplier for a supplier that fails to deliver on-time on 50% of orders. Or having to constantly deal with returns to a new supplier that just can't meet quality standards. Or getting beat up daily by end users who claim that a new supplier's service is terrible.

Many purchasing departments who get the prices necessary to substantiate their cost savings reports will appear to have met their goals while the company falls apart to some degree. There is something wrong with that picture. It's very 1989-ish.

Requiring maintained or improved supplier performance alongside price reductions is one solution. Measuring cost savings on a total cost of ownership basis is another. This implies that the purchasing department knows how to manage supplier performance and calculate total cost of ownership (both of which are taught in our online course "14 Purchasing Best Practices").

In closing, I'll reiterate the advice that I shared at the end of the article: "So be sure to mention supplier performance in your cost savings goals! And if you're not in a position to rewrite your 'wrong' cost savings goal, share metrics showing maintained or improved supplier performance when reporting your actual cost savings throughout the year. It will show management and internal customers that you know the importance and impact of modern purchasing."

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, January 09, 2009

Avoiding The Procurement Pink Slip

If you're lucky enough to still have your procurement job in this economic environment, any decent advice for maintaining the status quo is worth considering. If you agree, check out my guest post entitled "Avoiding The Procurement Pink Slip" on eSourcing Forum.

Have a great weekend!

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, January 08, 2009

Spend Matters vs. Sourcing Innovation: The Procurement Blog Cage Match

Over the past 20 hours, two of the top procurement bloggers have had a written battle online on the Sourcing Innovation blog.

In a post yesterday seemingly designed to promote blogger relations among the provider community, Michael Lamoureux (a.k.a. the doctor) wrote the following excerpt explaining why he feels contacting Sourcing Innovation should be a marketer's highest priority: "That's because unlike other technically-naive bloggers and analysts who believe that they can offer an informed decision based on a press release or a PowerPoint deck, the doctor always examines the patient thoroughly, and always prepares a deeply credible report."

Jason Busch, the blog-master extraordinaire of Spend Matters, posted a comment in response to the post: "Michael, to be candid, I found this post offensive. You need to get off your high horse and stop criticizing others -- analysts and other bloggers -- unless you have specific examples to cite...If you have a specific anecdote you'd like to share about technically-naiveté pray-tell."

Michael punched back with "If you want to throw down, I found your post 'How the Heck do You Get This Information?' particularly lame and the implication that anything you want to know about a company is available for the right price to be quite offensive...A post that says 'new year, new opportunity to reach out to me at ...' is boring. One filled with figurative speech and allegory playing on my nom-de-plum is not, so I decided to spice it off...So if you can't see the humor and the faux-conceit in the post, then maybe it is you that needs to get down off of your high-horse. Especially considering that if you follow the links, I end up promoting your blog as much as I promote mine. If I was that high and mighty, why would I do that?"

Jason doesn't buy it and retorts "Over the years, you have taken many shots at Spend Matters, not by name, but by implication. Part of this is an attempt to define SI by what it is not vs. what it is (e.g. 'gossip free', in the header). I think anyone reading this post in particular could imply some of the potshots in it...Michael, I want to see you succeed and build a successful business because there is room for multiple bloggers -- especially those with different strengths. We are in this together. You can take this criticism and respond by launching back at me or you can take it to heart...If you come off as an unpleasant, resentful provocateur you might as well fold your cards because it’s a waste of time if you want to make this a commercial success."

Michael then claims that it was not Spend Matters he was referring to "Now I'm starting to think you're paranoid. Although you might be the only other independent blog in the space with a regular publication schedule, and the easiest target if I want one, you're certainly not the only blog out there...So, while initial references to 'gossip-free' in early posts may have been a bit of a generic pot-shot once upon a time, the tag-line emerged as a response to the ignorance I have encountered and the fact that I want to distinguish my blog from tabloid blogs that are more concerned with 'breaking stories' than 'getting the facts'. I can't stop you or anyone else from reading in implications that aren't there, but I don't know if I want to worry too much about it either."

So, has Michael taken potshots at Spend Matters over the years and was this post the one that finally compelled Jason to explode? (For example, in Blogger Relations , Michael wrote "This goes double for the doctor - if you familiarize yourself with the space, you'll realize that he is the only independent blogger with a significant following that has an extensive background as technologist. (Most bloggers are ex-marketing, public relations, and business consulting.) "

Is Jason indeed being paranoid as Michael suggests?

Was Michael really talking about Spend Matters and taking the easy way out by saying he wasn't because he didn't reference Spend Matters by name?

Is it hypocritical for Jason to denounce Michael's criticism of anonymous bloggers and analysts when Jason has been known to criticize unnamed analyst firms (see Friday Rant: Does Objectivity Exist? , Bias in the Old Media and New: The Never Ending Debate, and many others)?

Why does Jason have such an interest in seeing Michael succeed if he thinks Michael has taken potshots at him? Sure, a business has a better chance of succeeding if there is a "market" rather than a lone ranger but, let's face it, there are plenty of other procurement blogs out there.

Is this debate over or will it continue? Could this be the end of the publicly warm-and-fuzzy, let's-link-to-each-other relationship between these two heavyweights?

When Michael makes reference to a gossip-free blog, I don't take offense because I don't feel that this blog is a gossip blog. Jason took offense. Does that mean Jason thinks that Spend Matters may be close to the invisible gossip line? Do you think Spend Matters is a gossip blog?

By posting this, can I no longer claim that the Purchasing Certification Blog is gossip-free? (BTW, that is meant to be a humorous question. By the exchange on Sourcing Innovation it seems safe to assume that you can never assume that someone else will get your joke.)

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, January 07, 2009

Whitepaper Wednesday - How The Economic Downturn Helps Procurement

Welcome to the first Whitepaper Wednesday of 2009! We're going to start off the year with a review of a whitepaper entitled "Called to the front: Driving procurement success by leveraging the economic downturn" from Efficio and Procurement Leaders magazine.

This whitepaper is based on the results of a survey of over 200 procurement leaders. Despite the title, the statistics in this whitepaper not only cover topics related to the economic downturn but also predictions of the future of procurement, making for quite an interesting read. In this post, I'll cover the economic downturn piece. However, I may just dedicate a future Whitepaper Wednesday to the future of procurement piece, as I think that the authors' findings are rather interesting.

As one would expect, reliance on procurement for cost savings has increased in today's economic climate. The whitepaper states "The negative macroeconomic factors are already having an impact on procurement. The most direct influence of the economic trend can be seen in increased savings targets, which two thirds of our respondents report."

The survey responses were collected up to August 2008, which I believe precedes when the economy went from bad to worse. This makes one wish that some findings could be updated with more current data. One example is this excerpt: "Because organisations require procurement contribution more than ever, they are willing to spend more time and resources on this and ensure that procurement efforts can be directly linked to – and accounted for – in the company’s results...The wider organisation is giving more focus and attention to the procurement contribution, relatively sparing procurement departments from the downturn."

Obviously, there have been hundreds of thousands of layoffs since the survey was concluded and my personal observation is that procurement departments aren't necessarily being spared to the degree implied in recent months.

In several sections, the whitepaper reports that respondents see the economic downturn increasing their need to go "back to basics" in their strategies: "Although procurement’s strategic role has become increasingly prominent, cost-cutting still appears to be a standard reflex to an economic downturn. Despite the developments outlined above, cost cutting programmes are considered the main area where procurement delivery is expected to support the wider business targets. This perception is not just confined to the boardroom: a surprising 90% of our respondents agree that cost-cutting programmes are the pre-eminent area where procurement can expand its current scope."

In a hierarchy of focus areas, "innovation" is fifth, which I'm sure would send the doctor from Sourcing Innovation into a tizzy.

The whitepaper includes a graph showing how performance measures are expected to be different three years from now (after the recession) vs. today (during the recession). This reinforces the premise that cost savings is king in bad economic times while good economic times allow more creativity and flexibility to expand the strategic positioning of procurement within the organization.

Another fantastic piece of the whitepaper is the key sourcing levers for use in an economic downturn. There are several areas of overlap with the recent Next Level Purchasing podcast and PurchTips article "Cost Reduction Ideas (Beyond Sourcing)."

The whitepaper concludes with "5 key areas that procurement functions need to have right to ensure they are delivering the best value for their organisation in the current climate." I'll list them here, but downloading the whitepaper will give you full explanations:
  1. Get the basics right
  2. Prioritize SRM
  3. Greater focus on value creation and risk management
  4. Measure with the right KPI's
  5. Become an integral part of ongoing business discussions

If you'd like to download your own copy of the whitepaper, go to http://www.procurementleaders.com/network-research/efficio-survey-nov-08/. Registration is required and I believe that the whitepaper is emailed manually.

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, January 06, 2009

Post-Recessionary Times: When Procurement Ethics Get Questioned

Procurement ethics is a concern regardless of the economic climate. However, ethical issues do seem to come up more often when the pendulum swings from good economic times to bad and back.

From when I was a newbie in the airline industry, I have countless war stories of suppliers coming to me and saying "But we did this for you when you guys were on the verge of bankruptcy. I can't believe you are bidding out our business." Of course, I wasn't there at the time of near-bankruptcy and no one up my procurement chain of command was either.

There was no documented agreement that we owed these suppliers anything. Were their claims true? Were they actually negotiating schemes?

It was impossible to tell. When there is no clear obligation, a procurement team has to put its company's stockholders first.

The bottom line is this...if you (either as a buyer or seller) feel that you are doing your counterpart a favor in bad economic times and should get "future considerations" for your efforts, put it in writing. It may not feel gentlemanly or ladylike. But without documentation, the new procurement or sales VP in five years won't know, won't be able to trace, and probably won't care what you, as their trading partner, did for them in different economic times.

If you're willing to invest without a written commitment of consideration, you need to realize that you are risking never seeing a return. It's not because your counterpart is unethical. You need to expect the players to change. And when they do, you'll be left to ask yourself whether you did your part to guarantee that you'll be treated better than the average supplier/customer.

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, January 05, 2009

C.P.M. Certification "Dead"-line Passes

While the SPSM® Certification continues to grow rapidly on a global basis, a competing certification has begun its march to the grave.

December 31, 2008 was the final day for individuals to register for the C.P.M. certification exams. This means that if you were hoping to earn the C.P.M. certification but didn't register for the exam by now, you will never have the opportunity to earn that certification.

But while ISM (the creators of the C.P.M. certification) appears content to turn aspiring certification-holders away and to devalue the work done by the many fine people who earned the C.P.M. during the time it was most relevant, don't fret. Next Level Purchasing will welcome you with open arms into the Senior Professional in Supply Management® Program, the path towards earning the more modern SPSM® Certification.

The SPSM® Certification has helped many purchasing professionals deliver more profitable results for their employers and have more rewarding careers. And whether you want to earn your first purchasing certification or you're a C.P.M. who wants to have a certification that will continue to be relevant going forward, the SPSM® Certification can help you, too.

Visit http://www.NextLevelPurchasing.com/spsm.html for more information or contact us if you have any questions. The SPSM® Certification is here to help your career for the long haul.

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, January 02, 2009

SPSM Certification Earned In 3 New Countries Last Month

Happy New Year! 2009 will be an exciting year in the purchasing certification field and procurement in general!

As I do on the first blogging day of each month, I will now share the countries who have seen their first SPSM's certified in the previous month. Despite the holiday season, in December, three countries joined the scores of other nations that have SPSM-certified professionals: Cameroon, the Czech Republic, and Norway.

The end of 2008 corresponded with an important industry deadline that will likely serve to accelerate the global spread of the SPSM® Certification. Come back on Monday (Jan. 5, 2009) for more coverage of this important shift.

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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