Friday, October 30, 2009

Salespeople Joining Purchasing Associations: More Evidence That Traditional Associations Are Dying?

In his two-part audio series earlier this year, blogger extraordinairre Jon Hansen of Procurement Insights, explored the question "Is the traditional association model dead?" His panel of experts seemed to agree that traditional purchasing associations as we knew them are on their way out the door.

On a related note, Purchasing Magazine's Dave Hannon recently penned an article about a purchasing and supply management association that is considering allowing salespeople to become members. According to the article, that association is holding a vote among its members in December to get approval to change its bylaws so that salespeople are no longer prevented from joining. If a majority of voting members agree with the change, salespeople and purchasing professionals will have equal access to membership.

While the association itself defends this proposed change as a means "to better reflect the changing nature of the supply management profession," Hannon smartly gets to the heart of the matter - it's all about money and survival: "The broader membership would mean more revenue for the organization at a time when many industry organizations are struggling. [The organization's] officials confirmed the organization's membership numbers are down from past years."

Indeed, in an editorial in its own publication this summer, that association's CEO wrote that the association "is being challenged in the current economic environment. Revenue is declining. Last fiscal year, we posted a huge loss...This will likely occur again this fiscal year....we are blessed with substantial reserves for a 'rainy day.' Well, it's raining."

The likelihood of this change passing seems uncertain based on Hannon's research. The article includes this type of feedback:
  • Members and affiliate presidents and board members contacted by Purchasing.com expressed a variety of concerns about the proposal.
  • "One [affiliate] member said opening membership to salespeople, 'would hinder and negatively affect membership and/or attendance at meetings. I have found over the years that when we have a company involved in sales do presentations that they cannot stop themselves from doing a sales pitch as part of that presentation.'"
  • "Another [affiliate] member pointed out that his company would 'do more than frown if they knew that I was in a meeting with a vendor who could gain an advantage over other vendors regarding strategies or methodologies we are using.' In fact, this [affiliate] member said he would not be able to attend meetings that included salespeople 'as the appearance of meeting with a vendor or salesperson where we are discussing the aforementioned would violate our firm's purchasing guidelines and principles.'"
So, what does this mean? Does this mean that traditional associations are no longer sustainable doing business-as-usual? Does this mean that if the traditional association model survives, it will no longer have the benefit of being buy-side only? And will this lack of insulation from salespeople cause an exodus of purchasing and supply management members and effectively turn purchasing and supply management associations into veritable sales associations that welcome purchasers?

Time will tell.

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, October 29, 2009

Gah! ISM's Data Says Recession Wasn't So Bad (Tell That To The Unemployed)

Today, the US Commerce Department released a report indicating that Gross Domestic Product rose by 3.5% in the third quarter of 2009. This represents the first quarter of growth in over a year. These facts, combined with the widely accepted principle that two consecutive quarters of negative GDP growth constitutes a recession and that this recession featured one of the sharpest quarterly GDP drops in over a quarter of century, indicates that the recession appears to be over and that it was a relatively long and painful one.

However, ISM's Report on Business seems to say that it wasn't so bad and it ended a while ago. Let me share a chart to illustrate a few points I'm going to make...





This chart shows GDP and ISM's half-baked PMI-to-GDP correlation. If you look at the first circled quarter of datapoints, the GDP indicates that the economy was shrinking.

What did ISM say? That it was growing!

The second circled quarter of datapoints indicates that while the GDP was still shrinking, ISM said that it resumed growth.

Look between the circles. GDP shows a pretty severe decline, while ISM's decline is much more shallow.

All in all, the GDP data indicates that the US was in a recession for at least a year. ISM said that the recession was a mere seven months long.

Only seven months long? A little ridiculous, isn't it?

Now, it is OK for ISM to report its findings. I don't have a problem with that.

What I do have a problem with is that false little statement that they include in every manufacturing Report on Business that says "the PMI...corresponds to a x percent increase/decreasse in real GDP annually."

Let's face it...ISM's PMI does not correspond to change in GDP! The two circled segments indicate that ISM wasn't even directionally accurate in two of four consecutive quarters! The numbers don't lie!

The point? I urge ISM to discontinue using this phrase in their Reports on Business.

It's not only unethical. When you consider the influence that the Report on Business has on the stock market and the net worth of stockholders - all major stock indexes fell between 2 and 3 percent on October 1, the day ISM released its last manufacturing Report on Business - it's almost criminal!

For more reading on the weakness of the ISM Report on Business, see these links:

Caveat Emptor: Economic Indices Could Be Misleading You (November 30, 2006)

ISM's PMI is BS (February 6, 2008)

The ISM Index Gets More Amusing By The Second (March 4, 2008)

Another ISM Index Contradiction (March 5, 2008)

Today's GDP Release Leaves ISM With Egg On Its Face (October 30, 2008)

Is The ISM Report on Business Out of Sync With The Economy? (August 7, 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

Wednesday, October 28, 2009

Whitepaper Wednesday - Sustainable Cost Savings

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I'll be reviewing a whitepaper entitled "Cost Savings That Stick" from the Corporate Executive Board and Toolbox For Finance.

This whitepaper essentially dichotomizes "Elite cost cutters" and "other companies." "Elite cost cutters" are those companies that have sustained cost savings for at least three years.

So how do the Elite cost cutters save more? According to the whitepaper, sustainable cost reduction comes from a focus on Cost of Goods Sold (CoGS) instead of Selling, General, and Administrative Expenses (SG&A).

That's a nice correlation but, at only two pages in length, the whitepaper doesn't dive deep enough into this topic. Do CoGS suppliers have more of a propensity to hold their pricing for a longer time period than SG&A suppliers? Why would some of the companies choose not to focus on CoGS? Did industry make a difference in the results?

Unfortunately, these are all questions that go unanswered in the whitepaper. Despite that, if you want to download your own copy of the whitepaper, you can do so from the Toolbox for Finance Web site (registration required).

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Find More Good Resources For Procurement Leaders?
Check Out Our Web Site's New Whitepaper Section At
http://www.NextLevelPurchasing.com/WPcharles

Tuesday, October 27, 2009

Is Ariba Exchange The Next Hot Web Destination For Sourcing Professionals?

Ariba has recently posted a few nicely done vidoes on its Supply Excellence blog and these new videos end with an oblique reference to exchange.ariba.com. I'm naturally curious, so I went to the URL.

There, I discovered Ariba Exchange. Though I couldn't find anything describing what I had just found, a little random pointing-and-clicking revealed what appears to be a very targeted social network of sorts. Think of LinkedIn customized specifically for spend management professionals, only with a more pleasing user interface.

Ariba Exchange - which I could not find an announcement for - features discussion boards, polls, videos, and more. Despite the initial low profile - any new technology release should be given time for working the bugs out before declaring it the best thing since sliced bread - Ariba Exchange seems to have gotten some early participation and features interesting discussions on topics like reverse auction formats and spend classification.

Because I haven't received any press release information from Ariba, I'm not sure how much they are going to plug it. But it made a favorable first impression on me and, assuming that Ariba continues to dedicate sufficient resources to it, I expect that Ariba Exchange will become a useful destination on the Web for gaining and exchanging knowledge. Check it out for yourself at http://exchange.ariba.com/.

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, October 26, 2009

Should "Plan The Work, Work The Plan" Be Your Procurement Team's Mantra?

It's that time of year here at Next Level Purchasing where we are thinking ahead to what we want to accomplish in the year ahead. And though we set and accomplish goals of innovation each year, many times our innovations come from spur-of-the-moment ideas.

We already have some game-changing initiatives in our plans for 2010. But all of this planning has me reflecting on goal setting from a leadership perspective and how goal setting and innovation relate to one another. I remembered one of the old timers I used to work with at an airline saying "Plan the work, work the plan."

Generally, putting together a plan, following that plan, and accomplishing a plan is a noble approach. And we certainly do that here.

But, in my mind, the key to success and corporate growth is also having the flexibility to innovate. Sometimes, a business situation comes up that prompts an idea from the team to solve a problem or create an improvement.

What are you supposed to do? Say "We'll put that in our goals for next year" every time?

Sometimes, you have to prioritize and defer some good ideas so that the current ideas can be accomplished. But some ideas are so good and so timely that you should act on them right away. Yes, even if that means having documented goals being delayed.

I think it is important to have a culture that encourages room for innovation and doesn't strictly adhere to the "plan the work, work the plan" mantra. One famous example of a company that leaves room for innovation is Google.

Google allows its engineers to dedicate 20% of their work time to working on their ideas. In fact, some of Google's most popular features came from this "innovation time."

I believe in this and, here at Next Level Purchasing, we have been doing many different things to support continual innovation. In 2010, we are making a change to our goal setting process to support innovation.

You see, all of our goals have a start date and a target date. In 2010, we are not going to have any goals with a start date in the fourth quarter as we have had in prior years.

Why not? Because we always come up with innovations throughout the year. It's not like the goals that we set forth in January are the only things we will accomplish in a year. New tasks will get added as they do every year. Goals will get deferred as they do every year. Plans will be shuffled as they do every year.

And this will allow us to continue to grow as an organization and capture more market share. However, I know that there are companies in every industry - maybe even your company - that sets a plan at the beginning of the year and sticks to it for the entire year. They "plan the work and work the plan" and that's it. However, if their competitors are more agile, who is going to win more market share?

So procurement leaders: how do you feel about goal-setting in this regard? What are you going to do to ensure an agile culture in your department? What can you do to help your company stay ahead of competition that doesn't sit still?

It's time to plan for 2010. I suggest planning on accommodating the unplanned. Doing nothing other than "working the plan" is an indication of corporate decline.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Get Better Results From Your Procurement Team?
Learn About Our Group Discounts On Procurement Training At
http://www.NextLevelPurchasing.com/purchasing-training.html

Friday, October 23, 2009

What An Economic Recovery Means For Procurement Department Stability

With all the talk of imminent economic growth after what some have called the worst financial crisis since the Great Depression, procurement leaders are left wondering what that means for them. I recently penned a guest post for Sourcing Innovation that talks about three of the most significant challenges that procurement departments will be facing as we emerge from this recession.

You can check out that guest post by clicking here.

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

Thursday, October 22, 2009

Purchasing vs. Procurement: There Is No Official Distinction...Get Over It Already!

We all have pet peeves, right?

Well, one of mine is the fact that our profession uses different terms to describe the same thing. And a bigger one is when people try to "educate" their peers about the differences between these terms when there really isn't a difference.

One of those examples is the use of "purchasing" and "procurement." Look, these two terms refer to the same thing. Don't kid yourself into thinking otherwise.

I got drawn into a debate on the topic on Ariba's "Strategic Sourcing & Procurement" LinkedIn Group. Whether or not you agree with me, I think that there are some really frank comments in the thread.

But don't spend too much time there...it's such a silly debate when there are so many other value-added things that procurement/purchasing professionals like you could be thinking 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

Wednesday, October 21, 2009

Whitepaper Wednesday - Managing Your Procurement Talent Pool

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Managing Talent in a Recession: Attracting & Developing the Right Staff" from Denali Recruiting & Staffing.

This whitepaper starts out with a description of certain employment and economic conditions. It is a little bit dated (from June 2009), but the basic message is this: "There is high unemployment, so this is a great time to find talent if hiring new employees is in your near-term plans."

Skipping ahead, the whitepaper profiles the four different generations in the workforce and their characteristics as well as their stereotypes. All of the information up through this point of the whitepaper is very generalized and not procurement specific. However, that changes about half-way through. The whitepaper says that "the landscape in procurement and sourcing has changed over the last 10-15 years" and gives several examples of new processes, new tools and technologies, changing markets, and higher expectations.

It the goes on to address a topic that I've always found interesting: hiring someone with procurement-specific knowledge and skills vs. hiring someone with collaborative and consultative skills and the ability to learn procurement skills. The authors say that they recommend seeking individuals with "a blend of talent – those with consultative skills and those who know the business of procurement."

Though a procurement leader can easily be led to believe that it is an employer's market, the whitepaper wisely advises that while "the current market offers unprecedented opportunities to find great talent, it is imperative to keep the good people you have." The whitepaper includes a nice five-point plan for retention:
  • Align individual and organizational goals and effectively track progress
  • Emphasize employee performance management
  • Invest in performance-based development (i.e., "mentoring, training, and other targeted learning activities")
  • Identify and reward high-performing employees
  • Have succession plans

The whitepaper elaborates on each of these points and addresses a few other topics, such as assessing skills, before wrapping up.

What I like most about this whitepaper is that it really emphasizes the need to be strategic in thinking about how to staff a procurement department for the long-term. Too often, it is easy to get caught up in the priority-of-the-moment and not think about what you want your procurement organization to look like in the immediate and distant future. This whitepaper can help you focus in that regard.

If you're contemplating how to staff your procurement department as the economic landscape changes, I recommend giving this whitepaper a scan. You can download your own copy from Denali's Web site (no registration required).

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Find More Good Resources For Procurement Leaders?
Check Out Our Web Site's New Whitepaper Section At
http://www.NextLevelPurchasing.com/WPcharles

Monday, October 19, 2009

Becoming A Better Purchasing Professional

I hope that you enjoyed the article "How To Be A Better Purchasing Professional."

I thought that I'd supplement the article here with a complete example of how you might work through this process. I'm going to keep it simple. And I encourage you to do the same.

When it comes down to certain things, some people like to make things unnecessarily complicated. And that often stands in the way of making any improvement at all. So here is that simple example (keep in mind that this is for a fictional purchasing professional in a specific situation, not a general guideline for anyone).

1. Define the criteria for being a good purchasing professional. Cost savings and continuity of supply.

2. Determine metrics that support the criteria. Cost savings = (a) Actual cost savings realized in current fiscal year and (b) Percentage of orders delivered on-time.

3. For each metric, determine the value that would separate "good" performance from "average" or "mediocre" performance in your particular situation. Actual cost savings realized in current fiscal year = $12,000,000. Percentage of orders delivered on-time = 95%.

4. Establish a baseline of your current performance. Actual cost savings realized in previous fiscal year = $10,000,000. Percentage of orders delivered on-time = 89%.

5. Analyze what you do for improvement opportunities. Realize that recent negotiations have not been successful, so identify negotiation training options. Realize that materials orders are placed with dozens of different suppliers for similar goods, so plan to conduct a sourcing process for non-consolidated materials. Realize that performance is not being communicated to largest supplier, so conceive a supplier performance review process.

6. Improve your performance. Engage in negotiation training. Complete the sourcing process for non-consolidated materials. Conduct your first supplier performance review.

7. Hold yourself accountable. Commit to management to apprise them of your progress in monthly reports.

See, wasn't that easy?

What's stopping you from becoming a better purchasing professional?

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, October 16, 2009

Modern Marketing Can't Even Recover From Morningstar Farms' Apparent Procurement Problem

Regular readers of this blog know that I've been covering Morningstar Farms' discontinuation of their beloved veggie dogs over the past several weeks. Interestingly enough, I came across a post on their Facebook page where Morningstar Farms' customers rant about the decision and even give procurement-related advice! Here are a few excerpts...

  • "[T]he 'supplier issues' they were having made it such that the VDogs were no longer profitable enough."
  • "THAT [previous commenter] MUST WORK FOR THE 'SUPPLIER', SINCE HE SEEMS TO WANT TO DEFEND THIS INJUSTICE. WHAT AN IDIOT."
  • "Maybe you should have put some more research into your suppliers before creating, recalling, and ultimately discontinuing products. Who knows what I've ingested without knowing. As much as I'd like to know the truth behind what caused this, I sort of don't."

The intent of companies using social media like Facebook is to establish a more positive connection with your customers. But it appears that Morningstar Farms dropped the ball in this aspect as well.

What ignited this rant of customer feedback was a post of theirs in which they apologize for discontinuing the veggie dogs and offer a $1 coupon. A coupon that, apparently, requires the user to download software and print a full page of promotional material in addition to the coupon. That ticked people off! One commenter wrote "Who was the marketing genius that thought a $1.00 coupon would do anything but rekindle the irritation over losing our favorite product? We'd use about $1.00 worth of ink to print the coupon. *shaking my head*"

Some of these customer responses reminded me of the old Jerky Boys skit where a guy calls a pizza shop and says that his family is vomiting themselves to death due to bad pizza, the pizza shop employee offers a coupon for compensation, and the caller yells something like "My family is dying here and you want to give me a coupon?!?!?!" That skit is out there on YouTube, but I won't link you - it's way too vulgar for this blog!

OK, getting back to the moral of the story...this is an example of an apparent procurement problem that significantly - and possibly irreversibly - damaged a company's reputation in the eyes of its customers. So always see your work as more than getting products and services into your organization. Always look downstream in the supply chain and envision how your work impacts (and hopefully pleases) the ultimate customer. Then do everything you can to contribute to customer satisfaction.

That's strategic.

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, October 15, 2009

Outsourcing: Companies Push The Envelope Until The Envelope Pushes Back

It is fascinating to watch outsourcing continue to evolve.

Initially, companies outsourced low-risk, non-strategic tasks. Today, some companies outsource nearly everything, including customer-facing tasks.

Of course, when a company trusts a supplier to interface directly with its customers, there is a lot at stake for the company. Sometimes, this delegation is successful and invisible or irrelevant to the customer. Other times, it is disastrous.

I recent read on Spend Matters Sherry Gordon's tale of a bad international biking experience with a company that left Sherry's satisfaction in the hands of a less-than-capable supplier. Because Sherry is a well-respected consultant and advisor on supplier performance matters, I posted some macro-level-type questions for her. I was delighted when she dedicated a post to responding to my questions.

I think that the virtual discussion we had - I've never met, spoken with, or even exchanged emails with Sherry - provides some good food for thought for those pondering the question "How much outsourcing is too much?" It appears that both Sherry and I agree that different tasks deserve different degrees of caution and coordination based on the importance of those tasks.

You can read the original post, with my questions, on Spend Matters here and Sherry's response to my questions here.

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

Wednesday, October 14, 2009

Whitepaper Wednesday - Contingent Workforce Management

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Managing A Contingent Workforce" from Corporate United.

There has been a lot of buzz in the field over the past few years about contingent workforce management falling under the umbrella of the procurement function as another "non-traditional category." But what the heck is meant by "contingent workforce?"

The whitepaper answers that question right out of the chute by saying that a "A contingent workforce is a provisional group of workers employed by an organization on a non-permanent basis and can also be referred to as independent professionals, temporary contract workers, independent workers, freelancers or consultants." If that is too verbose for you, let's just say that a contingent workforce is the temps and other non-employees who work within your organization.

The crux of this whitepaper is that the contingent workforce needs to be managed well. Though management has traditionally been assigned to employees of the organization, the whitepaper makes the case for outsourcing that work to a special type of supplier that provides a "managed staffing program" or MSP.

Now, you may assume that an MSP is a temp firm - I originally did - but it is actually a company that coordinates with all temp firms that your company uses. Sounds like a middleman, right?

Well, it is. But the whitepaper does a good job of explaining why it is beneficial to have a middleman and how it may not be as costly as you think.

One of the benefits cited is the MSP provider's unique ability to monitor rates charged by temp agencies. The whitepaper says that "MSP providers conduct on-going rate analysis using current and historical data from all of its engagements." I agree that the MSP provider's broader visibility of the marketplace - compared with using employees, who are likely only familiar with their own company's rate experience - has value and can help keep costs in check because of the access to objective standards.

Because MSP providers are in a specific line of business and serve multiple customers, they are also likely to have access to the best technology for the job - an investment many companies would not have made on their own. The whitepaper goes on to contend that supplier/contractor performance management best practices could be brought to bear by working with an MSP provider.

In terms of the cost of engaging with an MSP provider, the whitepaper says that most "MSPs utilize a vendor-funded program − its fee (a percentage of spend) is borne by the [temp agencies and other vendors] − which is widely accepted in the industry...[temp agencies and other vendors] are motivated to offer their best price, especially when they consider the opportunity to supply more of the contractors and the reduced marketing and administrative costs." So the procurement organization would not directly pay the MSP provider for its services.

There are definitely additional things to learn about implementing the MSP concept at your organization. The whitepaper does a good job of covering the basics and getting the reader familiar with how things generally work. If your procurement department is attacking more and more non-traditional categories, it would likely be worth your time to get your own copy of this whitepaper from Corporate United's Web site (registration required).

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Find More Good Resources For Procurement Leaders?
Check Out Our Web Site's New Whitepaper Section At
http://www.NextLevelPurchasing.com/WPcharles

Tuesday, October 13, 2009

When Is Crappy Supplier Performance YOUR Fault?

I recently penned an eight-part series entitled "Poor Communication = Poor Supplier Performance" over on eSourcing Forum. In this series, I show you how bad supplier performance often stems from inadequate communication from the buyer and how you can avoid such an outcome.

Here are links to each of the eight parts:

Part I

Part II

Part III

Part IV

Part V

Part VI

Part VII

Part VIII

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, October 12, 2009

A Tip For Taking Purchasing Certification Exams

One of the pieces of advice we share with our SPSM® Certification students is to make sure that they schedule their SPSM® Exam shortly after passing the six purchasing courses of the Senior Professional in Supply Management® Program. The logic behind our advice is simple: the more time that a student allows to pass, the greater the likelihood that the student will forget what s/he has learned.

We were crunching some numbers and found some interesting statistical support for our advice. Students who take their exams 31 - 60 days after completing the courses are 13% less likely to pass the exam on their first attempt than those who take their exams within 30 days. Students who take their exams 61 - 90 days after completing the courses are 25% less likely to pass on their first attempt. And students that take their exams between 91 and 120 days after completing the courses are less than half as likely to pass the exam on their first attempt.

So, we'll formalize our advice here: Plan to take the SPSM® Exam within 30 days of completing the courses! Give yourself the best shot of passing!

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, October 09, 2009

The Purchasing Certification Blog Welcomes Iasta As A New Sponsor

I am pleased to announce that Iasta has become the newest sponsor of the Purchasing Certification Blog. Unless you haven't been paying attention, there has been a lot of buzz around this eSourcing software and services company of late, both within and outside of the procurement field.

Here are a few examples of the splash that Iasta has made in recent months:
  • For the sixth year in a row, Iasta was named to the Supply & Demand Chain Executive 100 - a list of the top service providers in the supply chain space
  • Iasta once again made the Inc. 5000 - a prestigious list of the fastest growing privately-held companies in the USA
  • Iasta was named to Software Magazine's Software 500 - "a revenue-based ranking of the world’s largest software and services suppliers targeting medium to large enterprises, their IT professionals, software developers and business managers involved in software and services purchasing."

In addition to the above accolades, Iasta has also recently earned kudos in Spend Matters' recent four-part series on the company. In that series, Jason Busch focused on how Iasta has strategically adapted its business model over the years, calling it "a company that is on the move" and "a company people like to do business with."

You can learn more about Iasta at their Web site: http://www.iasta.com/.

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, October 08, 2009

Do Your Suppliers Bully You Into Compromising Safety?

I'm sure the title of this post sounds outlandish to many of you. But, in the food industry, it appears to be commonplace. Or, maybe suppliers are being made the convenient scapegoat for greedy corporations that want to maximize profits at any cost. Let me tell you the story and you can decide.

I was recently tipped off to a New York Times article (hat-tip to Dick Locke) that shares the story of a woman, Stephanie Smith, who has become paralyzed as a result of eating a hamburger tainted with E. coli. The tainted hamburger was traced back to food giant Cargill. And that's when the supplier issues boiled to the surface.

According to the article, hamburgers commonly are made from meat provided by multiple suppliers. The hamburger eaten by Ms. Smith was comprised of meat ingredients from four different suppliers of Cargill.

So was the meat contaminated while at Cargill (a meat grinder) or at one of the suppliers' (slaugherhouse) facilities? That's where it becomes tough.

Apparently, the companies that grind the meat are not required to inspect the incoming meat for bacteria and instead require all inspection to be done by the suppliers prior to shipment. While the grinders certainly have the ability perform their own inspections, the article says that "many big slaughterhouses will sell only to grinders who agree not to test their shipments for E. coli" because they "fear that one grinder’s discovery of E. coli will set off a recall of ingredients they sold to others."

So, it appears that most beef buyers are bullied into agreements to not test the supplied ingredients for fear of having their suppliers refuse to supply them. The article quotes large grinder American Foodservice's Food Safety Officer, Timothy P. Biela, as saying that slaughterhouses "would not sell to us" until American Foodservice stopped testing trimmings.

So, do suppliers bully all buyers that way? No. The article cites one company, Costco, that insists on doing their own testing.

Costco does this testing despite pressure from the supply base. Craig Wilson, Costco’s food safety director, told the Times that a large supplier, Tyson, "will not supply us...They don't want us to test." Still Wilson says "It’s incumbent upon us [to inspect the ingredients].”

Now, despite the fact that the supply base seems to be behaving suspiciously here, I can't help but wonder if this is another case of blame the supplier. After all, if all grinders took Costco's stance, one would think that suppliers would relent.

But, would grinders be hurt by adopting such a policy? Naturally. To start inspecting ingredients that are currently not being inspected would require more resources. Thus, more cost. Thus, less profit.

Though opponents of testing by grinders prior to grinding contend that "the cost of testing could unfairly burden small processors" (read: prevent them from making as much money as they currently do), the article clearly indicates that it isn't just the small grinders that are refusing to test. The article reports that Cargill's annual revenue is $116.6 billion. Costco, which does test, is smaller with $72.5 billion.

That leaves us lots to ponder here:
  • Is it the greed of the suppliers/slaughterhouses that are leading to outbreaks such as the one that paralyzed Ms. Smith?
  • Is it the greed and spinelessness of the grinders?
  • Do the grinders know that they are at fault and simply blame the suppliers because that's the easiest and most distracting thing to do?
  • Should the government mandate stricter testing (and send the price of ground beef up)?
  • Is this type of incident such a rare occurrence that no changes are really warranted?

The article concludes with a familiar refrain. An investigation by the United States Department of Agriculture found that Cargill was not adhering to its own supplier management practices but that, going forward, the company "agreed to increase its scrutiny of suppliers and their testing, including audits and periodic checks to determine the accuracy of their laboratories" but still won't test supplier ingredients.

Gee...not being diligent enough in supplier oversight, witnessing your customers getting sick, and then committing to tighter supplier management practices. Sounds similar to the whole lead-paint-on-toys fiasco from a couple years back, eh?

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

Wednesday, October 07, 2009

Whitepaper Wednesday - Expanding Procurement Influence

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I'll be reviewing a whitepaper entitled "Too Much Savings?
9 Ways to Expand Influence, Drive Savings, and Secure Your Procurement Position" from K2 Sourcing.

As the title suggests, this whitepaper consists of nine tactics for delivering better procurement results. I won't give them all away here, but I will comment on a few of the more significant ones. Here we go...

#1. Understand That the Purchase of Goods and Services has the Number One Impact on Profitability. The segment describing this tactic runs you through a sample calculation demonstrating how a small cost savings through good procurement can have a dramatic impact on profitability. It's a good introduction if you're new to procurement and never saw the correlation between savings and corporate profits.

#3. Speak with Numbers. This section encourages the procurement professional to conduct an analysis on spend currently outside of Procurement's control and to present to the CFO an assessment of the opportunity for savings if the procurement department could get involved.

#5. Centralize Procurement - Especially Strategic Sourcing. This section discusses solving the oh-so-common problem of suppliers charging different departments and different divisions of the same company different prices.

For complete details on these three tactics as well as the other six, you can download the whitepaper from K2 Sourcing'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, October 05, 2009

Cost Savings Estimates: Be Precise Or Be Prepared For Unemployment

I hope that you have enjoyed the PurchTips article "Savings Estimates: Your Reputation At Risk."

With the title of that article and the title of this blog post, you may be thinking that any discrepancy between your cost savings estimates and actual cost savings will be the kiss of death in your purchasing career. Maybe that is a little bit of an exaggeration. But, still, you can't be sloppy when presenting your savings estimates.

I've seen purchasing departments where the only savings reported was the savings estimated on the day that a contract was signed. In these departments, there was no follow up to confirm that the estimated amount of savings - or any savings, for that matter - has been achieved. Not coincidentally, these purchasing departments also happen to not get very much respect from the C-suite.

There is usually some variation between savings estimates and actual savings. Whether that be because a different quantity of goods or services was purchased, maverick buying occurred, or some other reason, it is important to track actual savings and know why there was variation. Having this intelligence can help you capture more and more savings with the more sourcing initiatives you conduct. It is key to continuous improvement.

Plus, you just may impress finance types who respect your attention to detail and understanding of the numbers. And that can't hurt in terms of job security.

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, October 02, 2009

What Does The High Unemployment Rate Mean For Service Industry Purchasing?

Earlier this morning, the US Bureau of Labor Statistics announced that the unemployment rate has risen to 9.8% - the highest rate since 1983.

I believe that there are implications in the purchasing profession. Specifically in the service sector.

Here's what I'm thinking (keep in mind I'm making generalizations here, so don't be offended if you don't fit the stereotype)...

Traditionally, purchasing leaders in the manufacturing industry have preferred to stay in the manufacturing industry. This is generally because purchased goods and services are more directly related to the core competency of the organization when compared to service industries, so purchasing feels more strategic.

Also, many service industry purchasing professionals have the bad habit of shutting out purchasing concepts that they feel are specific to manufacturing. I've witnessed many occasions where a service industry purchaser would be presented with an idea and would say "Well, that's a manufacturing principle, so it doesn't apply to us" rather than putting just a little thought into how the principle could be adapted for success in a service industry.

But I think that this is about to change.

While, in a healthy economy, manufacturing purchasing leaders would remain in manufacturing, with 10% unemployment, they can't be so choosy. So we will probably see the service industry infused with manufacturing purchasing talent as the economy slowly recovers.

When these manufacturing purchasing leaders go to a service industry, they will be bringing their toolbox full of manufacturing purchasing practices with them. And the "that doesn't apply to us" excuse won't be so well-received by the leader.

This is a good thing. The service industry has needed a shot in the arm with some more advanced purchasing practices. I believe that high unemployment and a soon-to-be-recovering economy creates the conditions that will facilitate just that.

So, if you're a service-industry purchasing professional, my advice would be to start having an open mind right now. You are about to be exposed to some different approaches and you should embrace them.

Your organization and your career stand to benefit.

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, October 01, 2009

SPSM Certification Continues To Expand Throughout Asia

In September, two procurement professionals became the first to earn the SPSM® Certification in their countries. You can now add Uzbekistan and Yemen to the list of countries with SPSM®-Certified residents.

As of this writing, the SPSM® Certification has been earned in 53 countries and counting, making it what is believed to be the most globally-recognized procurement certification by far.

To learn more about the SPSM® Certification and how it can help you be more successful in your procurement career, click here.

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

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