Tuesday, June 30, 2009

Big Purchasing Certification Announcement Tomorrow (7/1/09)!

Tomorrow, which is the fifth anniversary of the SPSM® Certification, we will be making an announcement that will rock the purchasing certification world.

Yes, this is a positive development. A very positive one for those purchasing and supply management professionals and procurement departments who want to demonstrate exactly how capable they are.

We will be dropping hints throughout the day today on our Twitter page (@nextlevelpurch) - http://www.twitter.com/nextlevelpurch.

And tomorrow morning (about 9AM Eastern US time on July 1, 2009), we will make the announcement here on this blog.

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

Monday, June 29, 2009

Financial vs. Operational Procurement KPI's

I hope that you have enjoyed the article "10 Procurement KPI's, Part II."

While Part I featured financial KPI's used by senior management to assess and benchmark the relative contribution of their procurement teams, Part II is more focused on measuring the success of the day-to-day operations of the procurement group. Both types of measurements are necessary, but they are applied differently.

The financial KPI's are measured less frequently. They are more concerned with a high-level view of Procurement's contribution. They are used for leadership of the procurement function.

The operational KPI's are measured constantly. They deal more with managing the day-to-day procurement process.

While "management" tends to have almost a negative connotation when juxtaposed with "leadership," as discussed in the "Are You CPO Material?" podcast, both management and leadership are necessary for success. In the case of these procurement KPI's, it is unlikely that the financial KPI's will show top-notch performance unless solid management is in place to deliver good operational KPI's.

Let me close with a reminder that the big announcement that will rock the purchasing certification world will be issued on Wednesday July 1, 2009 right here on this blog. By the way, July 1, 2009 is the fifth anniversary of the SPSM® Certification.

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, June 26, 2009

Are You Prepared To Negotiate The Forthcoming Price Increases?

In many categories of goods or services, the old adage can apply: "what goes up, must come down." But that adage alone is actually incomplete.

It should be followed by "what goes down, must come up."

With the economy taking a nosedive last fall and continuing to stumble through the first half of this year, many purchasing professionals - whose companies needed cost savings to survive - did the logical thing: the renegotiated their contract pricing. Hurray!

However, doing so sent a message to the supply base.

What is that message?

Check out my guest post on eSourcicng Forum for the answer.

And don't forget: there will be a BIG announcement that will rock the purchasing certification world on Wednesday July 1, 2009.

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, June 25, 2009

Procurement Training Quality Now More Transparent

Purchasing some services can be frightening. You are buying something that is intangible so, unlike buying products, you don't have complete certainty over what you are going to get in return for your money.

Procurement training, as a service, is no exception. However, Next Level Purchasing has added a new feature to our Web site to make the quality of our training more transparent.

We have just instituted a five-star rating system for each of our full-length, English-language online classes. When completing a class, students have the option to submit a rating of one to five stars and add a comment.

What's best is that you get to see every rating and comment submitted! If you go to our "Sign Up" page - http://www.NextLevelPurchasing.com/registration.php - and scroll down to the list of courses, you will see the star ratings for each applicable course. Clicking on the stars will allow you to see each rating and comment submitted.

Transparency is important. Smart buyers need to understand the quality of a service before they buy it. And now, you can leverage the experiences of other purchasing professionals when deciding whether or not to sign up for Next Level Purchasing's training or which class to enroll in.

This rating system will be expanded to other areas of our site in the near future.

While we're excited about this announcement, it pales in significance to the announcement we are going to make on July 1, 2009. The July 1, 2009 announcement will rock the purchasing certification world!

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

Wednesday, June 24, 2009

Whitepaper Wednesday - How CFO's Evaluate Big Purchases

Welcome back to this week's installment of Whitepaper Wednesday on the Purchasing Certification Blog.

As I did with last week's installment on the laws of leadership, I will focus this week's installment more on executive-level thinking. Specifically, I'll be reviewing a whitepaper entitled "CFO insights: Capital budgeting in the downturn: Four disciplines" from cfo.com and Deloitte.

This whitepaper is written in the context of an economic downturn. And, in such downturns, CFO's will closely scrutinize capital projects (i.e., purchases of expensive, long-term assets, such as equipment, facilities, vehicles, etc.).

Procurement may be involved either because it is seeking approval for a project of its own or because it is assisting an internal customer department with the total project. So, it is important to know what is going on in the mind of the CFO to know whether you stand a chance at getting approval for the project. The whitepaper does a good job of getting into the mind of the CFO.

The whitepaper starts off powerfully by stating: "The credit crisis and the rapid deterioration in the global economy have left many CFOs scrambling to cut costs and reprioritize budgets. Cash is king for now and finance organizations are scrambling to better forecast cash flows in and out of the company, reprioritize projects to rejuvenate cash inflows in the near term, [and] reprioritize projects to balance long-term capital plans and strategic goals with near-term cash flow and cost reduction objectives."

The whitepaper introduces four "disciplines" that CFO's can apply to their evaluation of capital projects as an alternative to across-the-board budget cuts. Here's a summary of each of these four disciplines...

1. Clean-Sheet Budgeting. This approach evaluates capital projects strictly on return on investment of each future dollar being spent, irrespective of what has already been spent. The whitepaper says that, under this discipline, "All projects should be quickly reassessed with a clean sheet." This approach can be scary to think that a company can have invested millions of dollars in a project only to cancel it and essentially waste all the money spent to date. But it is important to know how some CFO's think. And it's not uncommon to hear of such projects meeting this type of fate.

2. The Shortest Time To A Positive Benefit Discipline. This approach deals with how CFO's can prioritize several projects under consideration and invest in them in a phased - as opposed to an all-at-one time - sequence. It involves estimating the timeframe in which the organization can recoup its investment and then investing in those projects with the shortest time-to-ROI first.

3. The Less Than 100% Budget. This approach encourages the CFO to prod requestors for alternate scenarios rather than just one "full wish list." The CFO is encouraged to ask "[W]hat can be accomplished and in what timeframe with 70%, 80% or 90% of the proposed budget?"

4. The Discipline of Deferral. This approach encourages the CFO to explore whether or not a proposed project can be done later without major repercussions. The whitepaper also suggests using this approach to prioritize competing projects, saying "If two projects are of equal value in all other aspects, and if they are deferred by a year, one project might be significantly hurt (e.g., the opportunity to beat competition to the market with a new offering will be lost), while another project might simply achieve nearly the same level of benefits but these benefits occur one year later (e.g., a data warehousing initiative). Then the project likely to suffer the most from a deferral should be giving funding priority."

So, as you can see, this whitepaper has value for those trying to understand how senior management thinks. Hopefully, you are not only trying to understand senior management, but also aspiring to become senior management some day!

With this in mind, I recommend downloading (and keeping) a copy of this whitepaper for yourself. You can find it at CFO.com.

I know that about 75% of the readers of this blog are buyers and purchasing/supply managers. So I often do try to keep the content of the blog relevant to solving the problems you face on a day-to-day basis. However, I am also committed to helping you develop and advance in the profession. And I also want to appeal more to the directors, vice presidents, and CPO's who frequent this blog as well. So, in the coming weeks, you can expect to see more posts about leadership and executive-level thinking. Do you agree with this approach? Post a comment by clicking the comment link below. This blog is for you - I want to deliver exactly what you want. And the only way I can know what you want is for you to share your thoughts. Thank you in advance!

P.S. Whitepaper Wednesday will not appear next Wednesday (July 1, 2009) as this blog will feature a big announcement that will rock the purchasing certification world.

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, June 23, 2009

Procurement Training - How Do You Measure The Impact?

I always preach: procurement training is an investment, not an expense.

Expenses represent payments for goods and services where the organization does not realize a profit improvement as a result. Investments represent payments for goods and services that result in a financial benefit to the organization through increased sales and/or decreased costs.

Procurement training is one of those rare investments that will pay for itself many, many times over.

However, there is a common question among procurement leaders: "How do you measure the impact of training?"

They spent the money. How do they know what they are getting back?

There are three common measurement methods.

  1. Before & After: As a leader, you should be tracking metrics for each employee as well as the overall procurement department. Compare each trained employees metrics in the period (e.g., year) before training was attended and the period after training was attended. You should see an improvement and can determine how much of that improvement was due to training. Ideally, your metrics can be translated into monetary terms. For example, let's say that an employee saved $250,000 in the year prior to training and $600,000 in the year after training. Demand and prices were stable and neither responsibilities nor management changed. Then, you can attribute a performance improvement valued at $350,000 to training.
  2. Cost Savings Reporting Integration: Each procurement team member should record his/her cost savings into a shared database (or at least a spreadsheet). Of course, there will be a field for cost savings. There can also be a field for "Cost Savings Attributable To Training." In this field, the procurement team member can enter the amount of the cost savings that would not have been achieved were it not for something learned in training. For example, perhaps they used a new procurement negotiation technique that resulted in the supplier reducing its price. Then, the procurement leader can see, on an instance by instance basis, how training has impacted performance.
  3. Performance Appraisal Integration: It is common for the performance appraisal process to begin with a self-assessment. In this self-assessment, the procurement team member can be asked to identify what training s/he had attended during the year and how it has improved his/her performance, preferably in measurable terms, ideally in monetary terms. The manager can also be required to comment on the impact training has made on the employee's performance.

So, you can see, the impact of procurement training doesn't have to be a mystery.

Unfortunately, unlike a financial securities investment, you don't get automated quarterly statements showing how much money your training investment gained or lost. It takes a little effort but, when you think about it, the effort described above is very little indeed. When you think about procurement training producing returns tens or hundreds of times that of your investment, the time spent documenting it is well worth it.

If you're interested in learning more about the concept of return on investment in procurement training, download the free whitepaper "Procurement Skills & Profit: The Correlation."

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Improve Your Procurement Team's Performance?
Call Us About Our FREE Procurement Benchmarking Program At
(412) 294-1991

Monday, June 22, 2009

What Procurement Professionalism Means To Me

Procurement professionalism means many things to me. But one of the most important components of procurement professionalism to me is confident, fast and good decision-making.

Today's procurement professional is faced with having to make many decisions. Some of them, like selecting a supplier for a long-term contract, allow for deliberate decision-making over weeks. Others, like dealing with a supply disruption in a JIT situation, require the right decision to be made immediately.

And, let's face it, the higher one goes up the corporate ladder, the more decisions there are to be made and, therefore, the quicker they need to be made. So I believe that making high quality decisions in a short amount of time is a requisite competency for success in procurement and in business.

When we established the SPSM® Certification in 2004, that premise was built into how the SPSM® Exam works. We don't allow the test taker to skip around questions and bookmark them for later. You are presented with a situation and you have to decide the best course of action, right there, right then.

I envision the SPSM® Certification to communicate that those who have earned it are good decision-makers - the type of decision-makers that can rise to the top of their companies, either inside procurement or in a senior management role. And, I am proud to say that the hundreds of procurement professionals that have become SPSM's embody that spirit.

The "no chance to return to a question" feature has not been popular with everyone. In fact, we once gave a guy a refund for his enrollment in the Senior Professional in Supply Management® Program because he didn't like the fact that he couldn't return to an exam question.

That's OK. Those who fear decision-making are not the type of people we want to see with the SPSM credential after their name.

Think about it. Can you imagine a surgeon transplanting an organ thinking "Hey, I can always go back and check my text book and do it again if I need to?" No. They are expected to get it right the first time. They are expected to know what they are doing when they go in to the operating room. That's why they bear the moniker of "professional."

Heck, even think about a cage fighter. Do you think they throw a punch, say "Wait a minute," then safely return to their corner to check their text book to see if they could do it better? No. They go to the ring prepared. They know their stuff. That's professional. Gruesome, but professional.

So if we in the procurement field want that title of "professional," we need to know our stuff. We need to be confident and fast decision-makers. We need to be masters of our craft. We need to make procurement look easy to outsiders.

Professionalism is so much about good decision-making. Do we want to make cage fighters look more professional than us?

Let me leave you with a decision-making related quote from Donald Trump's book “Think Big & Kick *ss: In Business & In Life”:

“Practice listening to your instincts. Play with this skill, and test it out on small decisions. Learn to trust it.

“Many things are hidden from us that we cannot articulate logically, but somehow we know they are there…If you have a good feeling about something, go ahead with it. If the feeling is bad, proceed with caution. Your instincts are there to guide you. Use them.”


P.S. On July 1, 2009, there will be an announcement that will rock the purchasing certification world. 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, June 19, 2009

Iasta's Series of Procurement Conferences Starts Next Week

Iasta's reSource conference is expanding this year, with a "road show" hitting five cities between now and the end of October. The first event is June 24 in Philadelphia.

As in prior years, reSource will focus intensively on auction setup, eSourcing best practices, optimization strategies, and case studies of Iasta customers. I attended last year and the presentations were good and the breakout sessions even better.

reSource is one of the few procurement conferences authorized to award Continuing Education Hours towards SPSM® recertification. You can always verify which conferences are authorized by visiting our Web page for third party conferences at http://www.NextLevelPurchasing.com/procurement-conference.html.

To learn more about reSource or to register, you can visit http://www.iasta.com/company_reSource09.phtm

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, June 18, 2009

Pittsburgh Is The City of Champions...For Healthcare Purchasing, Too!

Though the local media has been all over the story, I'm not sure how well it is known outside of here that Pittsburgh is once again the City of Champions with the Penguins winning the Stanley Cup last week and the Steelers winning the Super Bowl in February.

Well, it turns out that we also can lay claim to having a hometown team at the top of another heap. That heap is the healthcare purchasing field.

Pittsburgh-based UPMC (University of Pittsburgh Medical Center) was this week named as one of just nine academic medical centers to receive an "A" grade on the American Medical Student Association's (AMSA) 2009 PharmFree Scorecard. The PharmFree Scorecard evaluates academic medical centers' purchasing policies related to conflicts of interest. One hundred and forty-nine academic medical centers had their conflict of interest and purchasing policies rated on the PharmFree Scorecard.

Conflict of interest in healthcare purchasing is a bigger issue than most of us realize. Consider this excerpt from a report entitled "Time for Change" published by The Prescription Project:


The pharmaceutical industry spends more than $25 billion each year in direct marketing to physicians, including more than $7 billion for detailing and journal advertising and $18 billion for samples. Ninety thousand sales representatives are deployed. Many promote new and expensive products that lack clear therapeutic advantage and may have unknown adverse effects. Industry representatives often gain access to doctors by offering meals, drug samples and other gifts. This intense marketing is widely believed to undermine quality of care and increase costs to patients, public programs, health care institutions, health insurers and employers.

Gifts generate conflicts of interest. Physicians who accept company gifts may feel a need, subconscious or otherwise, to reciprocate. Even small gifts change behavior; public records show that many clinicians receive tens of thousands of dollars per year from the industry.

Industry sales representatives frequently provide inaccurate information...Yet contact with sales representatives or acceptance of industry support leads to increased prescribing of the funders’ products, increased requests for formulary inclusion and decreased use of generic medications. Nearly all physicians (more than 90 percent) have some relationship with industry, but many often fail to realize the extent to which these relationships influence their own prescribing decisions.


Scary stuff if you think about being sick and how the doctor arrives at your treatment. The AMSA is seeking to change things and their scorecard highlights those academic medical centers who share the vision and adjust their purchasing policies accordingly.

The PharmFree Scorecard evaluates 11 areas, including:
  • gifts and meals from industry (i.e., suppliers) to doctors
  • paid promotional speaking for industry
  • acceptance of free drug samples
  • interaction with sales representatives
  • industry-funded education

The scorecard has "model policies" for each of the 11 areas. Some of the highlights include:

  • All gifts and on-site meals funded by industry (i.e., suppliers) are prohibited, regardless of nature or value
  • Speaking relationships are prevented from functioning as de facto gifts or marketing. An effective policy must not implicitly permit (a) long-term speaking agreements or (b) industry to have a role in determining presentation content.
  • Personnel are required to disclose past and present financial ties with industry (e.g., consulting and speaking agreements, research grants) on a publicly-available website and/or disclose such relationships to patients when such a relationship might represent an apparent conflict of interest.
  • Industry samples are prohibited, except under certain narrow circumstances approved by the institution that protect the interests of patients and prevent the use of samples as a marketing tool. Where there is a specific program in place, the policy must prevent samples from being given directly to physicians by pharmaceutical sales representatives.
  • Formulary committees and committees overseeing purchases of medical devices should exclude those who have financial relationships with drug or device manufacturers.
  • Pharmaceutical and device representatives are not allowed to meet with faculty regardless of location, or are not permitted to market their products anywhere inside the medical center and associated clinics and offices.
  • Industry (i.e., suppliers) is not permitted to provide direct financial support for educational activities.

Putting in place such policies is certainly a challenge, especially because there is long-term behavior that the organization is trying to change and doing so can ruffle the feathers of doctors who are usually the most revered constituency in such an organization.

So success in this effort surely can't be easy to come by. But it appears UPMC has captured the spirit of Pittsburgh sports in achieving their success. Here's what the PharmFree Scorecard had to say specifically about UPMC: "Exemplary. University of Pittsburgh Medical Center has implemented a set of some of the most ambitious conflicts of interest policies in the country. The policies are written clearly and unambiguously, and in many cases include a short preamble that outlines the reasoning for, and spirit of, each policy."

The Prescription Project has many "Tool Kits" available for healthcare purchasing organizations to refer to when developing their policies. I'm planning on covering some of them here on this blog in the future.

So I close with a hearty congratulations to the team at UPMC. Whether you are in healthcare or another industry, I think that there is a lot to be learned and applied from watching how the healthcare industry is revamping its approach to supplier relations.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Get Better Performance From Your Purchasing Team?
Getting Them SPSM®-Certified Can Make A Measurable Difference
For More Information, Call 1-412-294-1991

Wednesday, June 17, 2009

Whitepaper Wednesday - Laws of Leadership

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog.

This week, I'm going to do something a little different. I'm going to review a whitepaper that is not supply chain-specific, but still relevant to supply chain professionals, particularly leaders or those who wish to become leaders. This whitepaper is entitled "Laws of Leadership" and is from IdeaBridge.

This whitepaper is essentially a list of dozens of bulletpoints providing leadership advice and inspiration. Though I was a little disappointed that it was difficult to find leadership laws with specific names - don't all laws have names? - there were many bullet points that I thoroughly agreed with.

Here are a few highlights from the whitepaper (bolded) with my own thoughts:
  • Leadership is influence - nothing more, nothing less.
  • Leadership is about influencing people to follow, while management focuses on maintaining systems and processes. This is similar to the leadership vs. management distinction that Robert Rudzki made in our podcast about what it takes to become a CPO.
  • The best way to test whether a person can lead rather than just manage is to ask him to create positive change. Managers can maintain direction, but they can't change it. To move people in a new direction, you need influence.
  • If you can't influence others, they won't follow you. And if they won't follow, you're not a leader. This reminds me of a saying that a former coworker used to repeat: "If you're leading and no one's following, you're just taking a walk."
  • Each time you enter a new leadership position, you should immediately start building relationships. Build enough of the right kinds of relationships with the right people, and you can dramatically enhance your leadership effectiveness. This is so true in procurement, where you work with so many different departments. When someone takes over a new procurement leadership position, they are probably walking into a situation where their new department isn't exactly everyone's favorite. One of the keys to driving positive change is getting these skeptics and adversaries on your side. Don't wait to meet with the leadership of your key internal customers and other stakeholder groups.
  • Trust is the foundation of leadership
  • You don't build trust by talking about it. You build it by achieving results, always with integrity and in a manner that shows real personal regard for the people with whom you work. For procurement leaders, this means that you better not screw things up when you take over buying responsibility from an internal customer. Achieve the results you promise and get good supplier performance for your internal customer and that is a first step towards gaining trust and, later, influence.
  • A leader has to quickly read the situation and know instinctively what play to call.
  • When a leader has done the work to connect with his people, you can see it in the way the organization functions. Among employees there is incredible loyalty and a strong work ethic. The vision of the leader becomes the aspiration of the people.
  • Hire the best staff you can find, develop them as much as you can, and hand off everything you can to them. As a leader, one of your core competencies - if not THE core competency - has to be having the intuition to select the right people who will do a great job for a long time. The value of doing so cannot be understated.
  • Your list of priorities must always begin with what is required of you. Anything required that's not necessary for you to do personally should be delegated or eliminated. When one makes the transition from manager to leader or from employee to leader, one of the hardest things to learn to do is delegate effectively. But, if you don't, you'll be crushed. I've covered this topic in a previous post, "Doers, Managers, and Leaders."
  • Are you spread out all over the place? Or are you focused on the few things that bring the highest reward? Successful leaders live according to the Law of Priorities. This actually enables them to increase focus while reducing their number of actions. This is true, but also hard to do. Especially when you have the fire in your belly to accomplish much. I think that one needs to find the perfect balance between stretching him or herself to accomplish unbelievable things while also having a focus on the appropriate priorities.

If you've found these excerpts helpful or inspiring, there are plenty more in the whitepaper. You can download your own copy (no registration required!) from IdeaBridge's Web site.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Improve Your Purchasing Team's Performance?
You May Qualify For Our PASS Program Described At
http://www.NextLevelPurchasing.com/benchmark

Monday, June 15, 2009

Procurement KPI's: Do The Standard Metrics Tell The Whole Story?

I hope that you have enjoyed the article "10 Procurement KPI's, Part I."

In this article, I share some of the more standard KPI's used for benchmarking. These are often used by senior management to get a general understanding of how their procurement departments stack up against others.

So, in that regard, they are important. As a procurement leader, you should have these KPI's at your fingertips if/when your management comes looking for them.

But these particular KPI's don't tell the whole story of how a procurement department should be evaluated by management or even outside constituencies. Stay tuned for Part II in two weeks to get the rest of the picture.

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, June 12, 2009

Do You/Should You Commoditize Suppliers?

I must have heard it dozens of times from suppliers.

"We don't participate in eSourcing because we don't want to commoditize ourselves."

While some of these suppliers simply meant that they didn't want to provide a competitive price, others meant something else. They meant that that eSourcing doesn't give them the opportunity to communicate their differences or advantages.

I've had some interesting discussions with these suppliers. I explained that eSourcing provides transparency and a level playing field. All suppliers are evaluated on the exact same criteria.

And suppliers have argued back that this "buyer-knows-best" approach isn't always best. That ideas were being left on the table.

Of course, purchasing professionals today are smarter than ever. They really know their commodities and their markets inside out, moreso than ever before.

But, in some cases, I do feel that the buyers can learn from those suppliers. That ideas are indeed being veritably rejected by requiring only certain information and nothing more on RFP forms and eSourcing screens.

So, there is a balance to be struck. A balance between making a pragmatic decision based on the measurable, the financial, the easily comparable, the objective and making a slightly more subjective decision based on the intangible yet important. In purchasing, we tend to lean very strongly towards being totally pragmatic.

In many cases, this is definitely the way to go. However, in some cases, it isn't.

What really reminded me of the need to help other purchasing professionals solve this dilemma was a little home improvement project.

For this project, my wife and I wanted to replace the 10+ year old carpet in our room known as the "play room." It's where our kids - aged 5 and 7 - spend the bulk of their indoor time.

This isn't the nicest room in our house (after all, why try to have nice things in an area inhabited by young kids and their friends, right?). It has old burgundy paneling and a drop ceiling.

We had grey carpet in the room and thought we'd go with a slightly darker shade of grey. For just a playroom, we wanted to keep the cost of the project on the low end.

So we had Empire Today come in and also paid a trip to Home Depot. Both showed us their various variations of grey carpet. This wasn't a very inspiring project, so we were leaning towards having price be the main consideration.

We decided to check out one more place, just for the sake of comparison. It was Rusmur Floors, a family owned chain with a regional presence here in Pittsburgh. What we found at Rusmur was quite different than Empire Today or Home Depot.

The salesperson - Susan, I think - didn't just show us her various shades of grey carpet. She asked questions about the room: the size, the colors of the walls, whether or not their was a fireplace, etc.

She then walks away and returns with a carpet sample. It was a beige with hints of burgundy. It was far from the grey carpet we were seeking. But it looked really nice. She let us take it home for a day so we could see what it would look like in our room.

Quite frankly, it looked magical.

We actually got excited about a project that we decided to do just because we felt it had to be done. The carpet has since been installed by Rusmur and makes the whole room look fantastic!

(Of course, given a few months, I'm sure our kids will impact that a bit.)

Susan brought expertise to the table. Empire Today, on the other hand, was more like the very definition of a commodity.

While we may have paid a slight premium on a cost-per-square-foot basis (even after negotiation) for this carpet, the fact of the matter is that we got a much better value from our purchase because we opened ourselves to a supplier's idea.

Would it have been unethical to take Rusmur's idea and share it with the less creative folks from Empire Today and Home Depot for a competing bid on a uniform specification?

I say that it would be unethical.

So heading back to the corporate purchasing profession, I believe that a lot of value is left behind by not allowing suppliers to bring ideas to the table. By "commoditizing" them.

That's not to say that "commoditizing" shouldn't be done ever. It absolutely should be done in many, many situations.

But some more tricky procurements require more of an open mind. Fortunately, I have had a lot of experience in my roles in getting suppliers to communicate their value. I will share some of these experiences in the months ahead.

In the mean time, I encourage you to evaluate each procurment situation you face. Are you limiting your ability to extract value from the supply base? What can you do to identify value-building opportunities without overly sacrificing what's best for your organization's stockholders?

Things to think about...

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, June 11, 2009

Who Reads This Purchasing Blog?

As traffic continues to grow here on the Purchasing Certification Blog, we feel the obligation to make the content better and better. Doing so begins with knowing who you are.

So, I'd like to humbly ask you to take a one-question survey that asks what your job title is. It will literally take you about six seconds to complete. Knowing who our readers are will enable us to develop a laser-like focus on the topics that are important to your role.

Click Here to take the one-question survey

You will be directed to NextLevelPurchasing.com upon completion.

Thank you!

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, June 10, 2009

Whitepaper Wednesday - Inventory Strategies

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I'll be reviewing a whitepaper entitled "Inventory Rationalization and Right Sizing Strategies" from Kinaxis.

As soon as I saw the title of this whitepaper, I was immediately interested in reading it.

Why?

Because there's so much talk about inventory reduction that few people realize that sometimes the right strategy is to increase inventory of a particular item.

This whitepaper gets right to this point in the first paragraph, saying "The impact of inventory on cash flow can be devastating, resulting in everything from payable extensions to missed payrolls and loan defaults. Still, despite the lean six sigma purists who preach that inventory represents waste, inventory does play an important strategic role in buffering against demand variations and potentially harmful supply disruptions."

Amen.

The whitepaper goes on cite research that quantifies "the potential profit loss due to supply disruptions lasting 10 days and the potential mitigation that safety stock can yield."

A rare concept in inventory management is how inventory strategies link to the strategic positioning of the company in the marketplace. One point that is made in this regard is that in markets that are highly competitive and where availability is a top consumer consideration in selecting a supplier, maintaining inventory is more important than in markets where the company has a stronger competitive position and consumers don't expect instant gratification. The whitepaper also explains how an inventory strategy should vary based on the stage of the lifecycle that the product is in.

The whitepaper closes by indicating that:
  • Lead time reduction will naturally result in inventory reduction, so focusing on lead time reduction should be a first step
  • Company's shouldn't blindly aspire to cutting inventory as much as possible just in the quest to be "lean"
  • Technology tools related to planning, monitoring, and responding to supply chain dynamics can be very helpful

All in all, this was a well-written whitepaper that is consistent with some of my less-mainstream philosophies about establishing inventory strategies. I recommend downloading your own copy at Kinaxis' Web site (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

Tuesday, June 09, 2009

Big Announcement: Spanish-Language Purchasing Training Now Available!

SPANISH-SPEAKING PURCHASERS HAVE NEW TRAINING OPTION

Pittsburgh, PA – June 9, 2009 – Spanish-speaking purchasing professionals now have the option of participating in purchasing training in their native language as SPSM® Certification-provider Next Level Purchasing releases “Dominando los Fundamentos de Compras,” a Spanish version of its popular course “Mastering Purchasing Fundamentals.” “Dominando los Fundamentos de Compras” is Next Level Purchasing's first online purchasing course to be offered in Spanish.

Covering the same material as the English version of the course, “Dominando los Fundamentos de Compras” includes content, interactive exercises and audio/video elements which have been translated and reviewed by native Spanish-speaking purchasing professionals to ensure accuracy. Next Level Purchasing released the Spanish version in hopes of bridging a language barrier that may prevent purchasing professionals from pursuing procurement training.

“Purchasing leaders of multinational organizations often struggle with unifying their globally-dispersed teams, and this limits their ability to deliver world-class performance,” said Charles Dominick, SPSM, President and founder of Next Level Purchasing. “Introducing our courses in multiple languages is one more way to help these leaders overcome their challenges and deliver results that were previously unattainable."

Next Level Purchasing is a leading provider of online training for purchasing professionals. Its training includes the globally-recognized SPSM® Certification for world-class supply management success. Its services enable organizations to lower costs, support operations, and reduce risk by improving purchasing processes and expanding the capabilities of supply management organizations. Visit Next Level Purchasing at: http://www.nextlevelpurchasing.com/.

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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, June 08, 2009

Scholarship In Memory of Late Procurement Guru Has Been Funded

I posted in January that friends of Justin Falgione were trying to fund a scholarship in his memory at his alma mater, Westminster College. Justin was a widely respected category manager at Ariba, an individual committed to public service, and my cousin who passed away suddenly in October at the age of 43. The goal of the proposed scholarship was to provide financial resources to students who major in studies emphasizing public service and to assist them in achieving their academic goals and socially responsible endeavors.

Westminster has a high threshold for the amount of money necessary to fund a memorial scholarship. Though Justin's friends certainly had the ambition to pursue this endeavor, actually being able to succeed at funding this scholarship was far from certain.

I spoke to my Aunt Donna (Justin's mother) last week and she informed me that the scholarship in memory of Justin has successfully been funded!

While the various contributors had many different types of connections with Justin during his time here, she gave particular credit to his co-workers at Ariba for raising funds for this worthy scholarship. So I would like to extend my thanks to the crew at Ariba as well as everyone else who generously contributed. Your donations will help prepare some special individuals for their journey to make the world a better place for all of us and our children.

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, June 05, 2009

Sourcing Professionals: Sick & Tired of Having To Prove Yourself?

I recently penned a guest post on eSourcing Forum about a common complaint among sourcing professionals: having to prove themselves over and over. That post is entitled "Proving Yourself Should Be A Welcome Challenge."

Check it out and 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, June 04, 2009

SPSM Certification Continues European Expansion

May saw a continued expansion for the SPSM® Certification in Europe with Luxembourg being the latest country to have its first SPSM crowned last month.

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, June 03, 2009

Whitepaper Wednesday - Next Generation Spend Analysis

Welcome to this week's edition of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Next Generation Spend Analysis: Beyond Commodity Classifications" from Ariba.

The underlying point of this whitepaper seems to be to assail "traditional" spend analysis in order for Ariba to impress readers with its new spend analysis capabilities, as recently reviewed on Spend Matters. That being said, it isn't all sales pitch and is very thought-provoking for procurement leaders who want to know how they can use information to develop a better strategy.

The whitepaper says that traditional spend analysis is focus on an internal view of purchasing activity and typically "does not take external factors such as market dynamics, recently sourced commodities or best-in-class benchmarks into account." It includes an example of how using historical spend, as opposed to a market index, as a benchmark for savings may be misleading in terms of determining how successful the purchasing department is vs. how successful it could be.
The whitepaper identifies six "supplier enrichment components" that characterize next generation spend analysis. These components would appear to bounce internal data off of external data that the spend analysis provider integrates into its spend analysis system. Some of these more interesting data points include:
  • Supplier financial information;
  • Supplier risk assessments;
  • Supplier diversity status; and
  • Supplier green status

It seems to me that most organizations with a healthy spend analysis program already evaluate these aspects of their suppliers, but do so separately from their spend analysis. Having these components integrated into a spend analysis platform is something that excites me!

Beyond these components, the whitepaper also introduces the concept of integrating market visibility into spend analysis. This section of the whitepaper is where it gets more Ariba-specific. The aspects of market visibility present in next generation spend analysis include price indices, sourcing market dynamics (i.e., access to Ariba's knowledge of certain categories in a presumably very up-to-date format), and peer spend profiles (i.e., ability to compare certain ratios with other Ariba customers in your industry).

Even though the whitepaper veers into (or at least close to) sales pitch territory, I actually think it is a very worthwhile read. Because all of the aspects presented should be a part of the intelligence gathering phases of your sourcing strategy development. You may just learn some things that you should be doing, but aren't. The premise (or the fact) that you can get many tasks accomplished using a single portal will surely entice those who do all of those tasks, but have to go to multiple sources for the same information.

You can get your own copy of this whitepaper for free from Ariba's Web site (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, June 01, 2009

The Most Embarrassing Moment of Your Procurement Career

Imagine this scenario...

Today is the day that supplier responses to your RFP are due. Your internal customers, who haven't exactly been the biggest fans of the procurement department over the years, are antsy. This RFP is related to a high profile project of theirs. They wanted to use their "favorite" supplier, but your management was able to convince senior management to have the procurement department do an RFP. The leadership of your internal customer department reluctantly agreed, saying "I've been told you guys can do magic with this, I can't wait to see how good you guys are."

You haven't heard much from the bidders since issuing the RFP three weeks ago. But that's not unusual. When your internal customers follow up daily to learn whether you've received any proposals, you tell them that bidders rarely submit their proposals before the due date. Seller's never want their pricing or proposals to leak to their competitors, who would have the opportunity to revise their bids and steal the business out from under them.

You check your email as soon as you get in. No proposals.

The interoffice mail arrives in the morning. No proposals. But the deadline is noon and you sometimes get FedEx packages delivered right to you. If the bidders sent their responses for next morning delivery, you'd have them by noon, no problem.

But noon passes. Still no proposals.

The phone rings. Your caller ID tells you that it's your internal customer. Time for a rest room break. That's a good excuse for not picking up your phone.

You listen to the voicemail fifteen minutes later (you really extended that rest room break). You knew what they were going to ask.

You'll call them back in a little while. Your palms sweat. Maybe you should call the suppliers. You can get tracking numbers for their packages.

You can't reach the first three suppliers, so you leave voice mails. You do reach the fourth. He says that they chose not to bid. You also reach the fifth and last supplier. Same story. No bid.

Oh, no. There is no room for delay in this project. And if you had to find new bidders, we're talking another three weeks for them to respond if they are even interested.

Your internal customer - once regarded as being stuck in the old ways of doing things with a handshake - may have been right. The procurement department failed. Just like they expected. And this is the most embarrassing moment of your career.

Could this fate have been avoided?

You bet.

The new PurchTips article "NIP Poor RFP Response In The Bud" tells you how. It's simple. So simple, many buyers probably forget it or ignore it.

But if the advice can save you from a similar embarrassing moment, wouldn't it be worth reading?

I think so.

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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