Wednesday, December 30, 2009

Whitepaper Wednesday - Target Costing Best Practices

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Best Practices in Target Costing" from the Institute of Management Accountants and BNET.

This whitepaper focuses on the authors' lessons learned from studying the target costing practices of companies that they perceived as leaders in target costing: Boeing, Caterpillar, DaimlerChrysler, and Continental Teves. The first page of the whitepaper introduces the reader to "the six key principles of target costing":
  1. Price-led costing
  2. Focus on customers
  3. Focus on design
  4. Cross-functional involvement
  5. Value-chain involvement
  6. A life cycle orientation

The description of the first principle succinctly defines and explain target cost: "Market prices are used to determine allowable—or target—costs. Target costs are calculated using a formula similar to the following: market price – required profit margin = target cost." Also noteworthy is the authors' explanation of what they mean by value-chain involvement: "All members of the value chain—e.g., suppliers, distributors, service providers, and customers—are included in the target costing process."

A point that is emphasized several times throughout the whitepaper is that if the cost of an innovation or component is greater than the value to the customer of that innovation or component, then that innovation or component should be abandoned. In one of the several good examples used to illustrate the principles taught by the whitepaper, the authors write "One of Boeing’s customers requested heated floors. Before target costing, The Boeing Company was
inclined to provide almost whatever the customer wanted without regard to cost. The company now prices airplane options separately. When this particular customer learned that the price for heated floors was more than $1 million, it reconsidered its request."

While the whitepaper is not written from a procurement perspective, there are plenty of nuggets that address the procurement role in successful target costing, such as:

  • "[Successful companies] view their supply chains as part of an 'extended enterprise' where they share design information, cost information, and establish inter-company teams to meet cost reduction goals"
  • "If a supplier is unable to meet its target costs, Continental might ask to send a team there to view its operations. Continental will then analyze the supplier’s manufacturing processes, tolerances, and material content and generally verify the assumptions in its cost-modeling tool. After negotiations, however, if Continental still believes the
    supplier’s costs are too high, it might consider bids from other suppliers."

The whitepaper also devotes sufficient ink (or is it pixels?) to sharing an example of how one of the profiled companies broke down their costs into categories and decided how much cost reduction to seek in each category. This is well worth considering as a process to emulate if you need some guidance in getting your own target costing initiative started.

So, as you've read, this whitepaper contains a great deal of valuable information and I haven't even covered it all. So, I suggest that you download your own copy of this whitepaper from BNET's Web site.

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, December 29, 2009

Negotiating on Behalf of Your Suppliers

I hope that you have enjoyed the article "Negotiating on Behalf of Your Suppliers."

While this article focuses on the what-to-do's, I want to dedicate this blog post to focusing on the when-to-do-it's. You see, the strategy of negotiating on behalf of your suppliers isn't one that you undertake in any situation.

You should only apply this practice when you feel that you have the right supplier for the long-term and you've already squeezed as much savings as you are going to get by attacking other aspects of the suppliers cost (e.g., negotiating their margin and using VA/VE - value analysis and value engineering). So, in this regard, negotiating on behalf of your suppliers can be advanced because, from what I observe, most purchasing departments still can benefit from traditional approaches to cost savings.

These traditional approaches usually follow this pattern:
  • Sourcing, first, to identify the right long-term supplier
  • Negotiation, second, to get the best price from the long-term supplier
  • VA/VE or Kaizen, third, to continually focus on reducing cost

Once those approaches have been exhausted, negotiating on behalf of your suppliers is the next logical step.

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, December 23, 2009

Whitepaper Wednesday - Getting More Out Of eProcurement

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I'll be reviewing a whitepaper entitled "Five Steps to Improve ROI from Procurement" from Ketera.

First off, I see this whitepaper being more of a "how to get more out of your eProcurement investment" guide than a true procurement ROI whitepaper. This whitepaper is focused on eProcurement technology, not procurement as an entire function, and is written for what appears to be an IT audience. Those facts are fine, I just thought I'd point them out.

On a side note, I think it is interesting to see how procurement technology providers carve out a niche through the audiences they target. Ariba always struck me as a company that sells to the CFO (using the term "spend management"), Procuri (which was acquired by Ariba a couple of years ago) used the term "supply management" to appeal to procurement or operations executives, and now Ketera appears to be targeting IT executives. There's nothing wrong with any approach, I'm just fascinated by these types of things.

Anyway, back to the whitepaper. I like to read whitepapers that are short and sweet. At six pages, this definitely qualifies. There is a little more "chest thumping" than I typically see in whitepapers (e.g., "By working closely with Ketera on supplier enablement and supply base management, procurement organizations at all stages of the adoption curve are improving their eProcurement returns"). But despite the small size and these types of interspersed marketing blurbs, there are some discussions of common procurement problems that ring true, such as:
  • "Struggles remain with user adoption and supplier participation because of challenges around supplier on-boarding and content management. As a result, the overall percentage of suppliers that [procurement departments] are able to onboard and proactively manage within their procurement technology infrastructure is a fraction of what it should be, and it is often measured in single or low double digits."
  • "Procurement organizations often find that maintaining accurate, updated and relevant
    catalog content on dozens – or ideally even hundreds – of suppliers is a significant
    challenge."
  • "Top performing procurement organizations spend approximately twice as much as average performing ones on technology on a per resource basis."

You can get your own copy of this whitepaper from Ketera's Web site (registration required).

This will be my last blog post for the week, so I would like to wish all of you a Merry Christmas and/or a Happy Holiday season. I'll meet you back here next week!

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, December 22, 2009

When Job Hunting, It’s The Little Things That Kill You, Part III

OK, we're back for the third part of this series detailing how simple mistakes that applicants don't consider a "big deal" can make employers write you off immediately when they review your application, cover letter, or resume or meet you in person. Part I identified common writing mistakes. Part II identified common reading mistakes.

Today, Part III will discuss a mistake that you probably never thought about. You may have the perfect answer to questions like "Where do you see yourself in five years?" and "Tell me about a time when you overcame resistance of co-workers." But, if you mess this up, you're screwed (excuse the harsh term).

What is this mistake?

Messing up the interviewer's name.

Some people have real pet peeves about having their names messed up. I am one of them.

Yes, I have a last name that is a first name for some people. But, unless you are from a country where the "family name" (called a "last name" in the USA) is written before the "given name" (called a "first name" in the USA), I really don't think that there is an excuse for not knowing to call me "Charles" or "Mr. Dominick."

When people call me "Dominick," I find it really annoying. And when interviewees call me "Dominick," I worry whether or not they have the intelligence necessary for whatever position they are interviewing for if they can't even figure out which name is my first name and which is my last.

But I'm not the only one that feels this way, believe me. There's a great post on collegiateperformancemagazine.com that talks about "The Value of a Name."

So, when preparing for your next interview, do be prepared for all of the challenging questions. But also take a minute to learn the name of the person you'll be speaking with. Failing to do so is just another little thing that can stand in your way of getting that next job.

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, December 21, 2009

Is Fear of Failure Causing Purchasing Professionals To Limit Their Income?

In research conducted by both certification providers and independent entities (e.g., Purchasing Magazine's annual salary survey), it is clear: on average, purchasing professionals with certifications earn more. Plain and simple.

Yet, the percentage of purchasing professionals who have earned a certification is nowhere near 100%. I've seen posts on sites like LinkedIn where the non-certified criticize something about a certification provider or rant about something ideological how experience is more valuable or state some other reason why it isn't worth it to be certified. I know I'm not the only one who recognizes these as nothing more than thinly veiled excuses for not having the drive to achieve a goal.

I've pondered this in light of my work interacting with certification candidates and I've come up with a hypothesis. My hypothesis is that it is actually the fear of failure that keeps these individuals from achievement.

I speak to a lot of people before taking their SPSM Exams and they tell me how nervous they are. Why? It's an exam. It has never killed anyone.

The worst that can happen? You fail and have to try it again. It will cost you a mere $75 to do so.

Let me share some more information that has led me to believe that fear of failure is a culprit. Here at Next Level Purchasing, one of our key performance indicators is the number of SPSM's to be certified in a given year.

Like all good goal-setting, we then break down our strategic goal into more tactical goals, like the percentage of students that take the SPSM Exam within three months of passing the six courses of the Senior Professional in Supply Management® Program, the percentage of students that submit their applications within three months of passing the SPSM Exam, etc.

What we've found is that only about 80% of students that pass the six courses take the SPSM Exam within three months of doing so. This is despite the fact that the pass rate drops dramatically when students wait more than a month (the longer you wait, the more you forget). They've expended all the effort required to pass six courses (about 44 hours of study) and won't take the step to take a 90-minute exam. I attribute this 80% rate to fear of failure.

The shame is that it is costing these students earning opportunities. Purchasing Magazine's research indicates that SPSM's earn over $10,000 more than purchasing professionals without a certifiation. Our own research suggests that number is over $14,000.

All because of fear of failure. It's a shame, isn't it?

When it comes to scheduling a certification exam, just do it. You just may pass on the first attempt and have a credential that will increase your earnings potential.

An extra $10,000 per year seems worth it, don't you think?

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, December 18, 2009

Purchasing Magazine: SPSM's Earn $10,000 More

Purchasing Magazine has just released its 2009 salary survey issue. One of the most anticipated purchasing articles of the year, this survey reveals earnings differentials between purchasing professionals in various categories: corporate vs. divisional vs. plant buyers, male vs. female, big company buyers vs. small company buyers, etc.

Obviously, one of the comparisons that I look most forward to is the certified vs. non-certified dichotomy. And I was not surprised by what Purchasing Magazine found in 2009.

Purchasing Magazine reports that the average annual salary of purchasing professionals possessing the SPSM® Certification was $101,625. That is $10,992 more than those without a certification ($90,633).

$10,992 more in salary per year. A cost of $1,149.

What conclusions do you draw?

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, December 17, 2009

Get A Negotiation eBook - FREE!

Next Level Purchasing is giving away a FREE, 18-page eBook entitled "Negotiation X's & O's: A Game Plan For Procurement Bargaining Success." All you have to do to get your copy is take our annual survey, consisting of a mere 36 questions.

To take the survey and get this valuable eBook, go to http://tinyurl.com/yefpqvz.

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, December 16, 2009

Whitepaper Wednesday - What Are Asymmetric Procurement Mechanisms?

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I will be reviewing a whitepaper entitled "Asymmetric Procurement Mechanisms" from BNET.

Wow! Asymmetric Procurement Mechanisms? Could I possibly learn something groundbreaking by reading a whitepaper with a title like that?

Unfortunately, no. Though, in conversations with prospective clients, I often contrast Next Level Purchasing's real-world-based training with our competitors' academic training, this paper may be the most academically written document that I've ever read on procurement.

And not only is it academic in style - it contains lots of passages like "Our results hold for classes of distributions of types restricted by increasing hazard rate and technical assumptions on the curvature of the density function" - it is just plain bad!

The point of this three-page whitepaper was to discuss differences in two approaches to procurement of repetitively ordered goods:

  • The "Competitive Mechanism" where a buyer makes a price offer to the incumbent supplier after "learning his option through an auction amongst the entrants," and
  • The "Protective Mechanism" where a buyer makes an offer to the incumbent supplier and "a posted price offer to the incumbent and refrains from an auction, if the incumbent accepts the offer."

Obviously, the authors have never spent a day in a real procurement department because they left out the option where all suppliers, including the incumbent, compete at the same time on a level playing field. Plus, they also do not offer any guidance as to which of these two suboptimal approaches is better because they write that the "goal of the paper is to compare two types of mechanisms rather than to determine the optimal procurement mechanism." Well, they certainly don't come close to determining the optimal procurement mechanism!

If you want a good laugh - or to get lulled to sleep by academic writing that makes no real, actionable point - you can download this whitepaper from BNET's Web site. At least registration is not 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, December 14, 2009

Tactical Procurement Is A Minefield (But You Can Avoid Landmines If You're Smart)

I hope that you have enjoyed the article "Rule #1 of Tactical Procurement."

While most of my articles are written around corporate procurement situations that I've experienced or observed, sometimes I am inspired by a personal purchase that reminds me of corporate procurement principles. This article is one that was inspired by a personal purchase.

Here's the situation...

My family recently purchased a new home. This meant that I had to hire a moving crew to haul our big stuff - furniture, appliances, bikes, etc. - from the old place to the new one.

There are many moving companies. So many that one may call moving services a commodity.

But anyone who has been in the procurement profession for a while knows that services that appear to be commodities can have suppliers that are quite different when it comes to performance. I believe that moving services fit into this category.

We took a close look at three moving companies in particular. Mover #1 claimed to be the official or preferred mover of all our hometown sports teams. I had an acquaintance with one of the owners of Mover #2 and my sister had a great experience with them. Mover #3 was a company that really didn't have much fancy going on in the way of marketing or branding.

Naturally, we got pricing from these companies. Mover #1 was the least expensive. Mover #2 was the most expensive. Mover #3 was right in the middle.

Which company would the average new tactical buyer choose?

Probably the low bidder - Mover #1 - right?

The easiest - and, often most disastrous - decision to make is to select the lowest-priced supplier.

Of course, I consider myself a little beyond being the average new tactical buyer. But I also don't consider myself part of the "I prefer the devil I know to the devil I don't know" camp. Those people would have chosen Mover #2, despite its high price, because there was some personal familiarity with the company.

Not me.

I chose to do a (slightly) more in-depth analysis of the capabilities of these movers. Drawing from the above-referenced article, I was trying to determine the "supplier with an acceptable probability of being satisfactory in all aspects of the transaction."

For some tactical procurements, this is pretty easy. So for my moving supplier selection, I started by doing the easiest thing that a buyer can do - I googled the names of each of these movers.

I found that Mover #1 had lots of bad reviews posted online from disgruntled customers. Mover #2 had lots of positive reviews. For Mover #3, I could only find two reviews and they were for their retail delivery business, not their residential moving business.

Then, I searched the Better Business Bureau's Web site for each of these companies. What I found was rather revealing.

Mover #1 had a BBB rating of F! Within the past three years, they had a whopping 41 complaints against them, including one that they did not respond to! And this was the official/preferred mover of sports teams? I can't believe that sports teams would risk their brand by associating with an apparently bad performing company, but those types of alignments are usually "all about the deal" and not about performance.

So, needless to say, we ruled Mover #1 out. This little bit of research helped us remember that tactical procurement can be a minefield of potential mistakes and "commodity services" aren't always what they appear to be.

Mover #2 was a BBB Accredited Business and had an A- rating. They had four complaints in the past three years, all of which were resolved.

Mover #3 was also a BBB Accredited Business and had an A+ rating. They only had three complaints in the past three years, all of which were resolved.

Based on the googling and the BBB ratings, we felt that Movers #2 and #3 each had an acceptable probability of being satisfactory in all aspects of the transaction. So then - and only then - did it come down to price.

Mover #2's price was more than 10% higher than Mover #3. I could find no convincing evidence that Mover #2's premium would result in better performance. I consider BBB Accreditation a commitment to customer satisfaction and, because Mover #3 was BBB Accredited, I felt strongly that they would perform, so I selected them.

Who was Mover #3? Starck Van Lines.

And how did they perform?

Fantastic.

I can't tell you how impressed I was with the crew: Denny, Ron, and Kevin. These guys were careful, caring, personable, fast, and strong! Speaking of strong, Ron - a guy who told me that he has been doing his job since 1979, so he's no spring chicken - lifted my washing machine about 14" off the ground by himself and held it there for about 20 seconds while Kevin slid the tray underneath it. Crazy!

These guys obviously had developed good synergy by working together for some time. They navigated the tricky corners with ballerina-like grace and coordination between them. I'm not sure they would be flattered by a ballerina comparison, but they just awesome at their jobs!

Though time-and-materials contracts can make any buyer nervous, these guys finished the job in less time than was quoted, making my expenditure less than expected. Plus, not only were the personnel doing the heavy lifting a pleasure to work with, but their relocation coordinator Ann Marie was in regular contact before, during, and after the move to ensure that everything went according to plan.

All in all, I couldn't imagine being happier with the moving experience! And I didn't have to pay that 10+% premium to go with Mover #2, who has more awareness in the marketplace.

So, I have nothing but kudos to Starck Van Lines in general and Denny, Ron, Kevin, and Ann Marie in particular.

It was a nice reminder that, by doing just a little due diligence, you can find a great supplier, keep costs down, and avoid the landmines of a one-time buy.

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, December 11, 2009

The Costco/Coca-Cola Negotiation Appears To Have Had A Happy Ending

On a conference call with analysts yesterday, Costco CFO Richard Gallanti pronounced an end to the pricing standoff between his company and the Coca-Cola Co. that I covered last month. In that controversial standoff, Costco halted shipments of Coca-Cola products and publicly chastised Coca-Cola for its inflexibility in pricing. Coca-Cola products will return to Costco shelves on Monday December 14.

Who blinked? Neither party will say, although the quote from a Coke spokesperson in the above-linked Reuters article seems to suggest that the Coca-Cola Co. may have bent a little bit.

Now, one can't help but wonder if other large retailers (Walmart, Kmart, etc.) will think that beating up on the Coca-Cola Co. may help them reduce cost. Or if they believe that Costco hurt itself by straining the relationship in the way that it did.

Whatever the result, my earlier prediction that "this situation will be resolved soon and the relationship will continue as if this squabble never happened" appears to be spot on. Going forward, this negotiation will be a great case study to determine if negotiation brinkmanship does leave a lasting scar on supplier relationships or if it can be relegated to "distant memory status" when a contract is signed and the parties settle into business as usual.

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, December 10, 2009

As Hiring Resumes, How Important Is A Purchasing Certification?

I am penning an article for a major trade publication about purchasing certification in the context of today's economy. I've done some research and found a very interesting statistic.

In a random search of over 100 purchasing manager jobs on monster.com, I found that 20% of jobs either require or prefer that candidates have a purchasing certification. I must admit, I'm not sure what the percentage was 5, 10, or 20 years ago though I suspect that the percentage was lower. But the context that makes this statistic most interesting is that, according to research referenced in a Spend Matters Perspective from last year, "fewer than 10% of the procurement workforce in North America has a procurement certification or has gone through a formal degree program in supply management or a related field."

What does this mean?

It means that the demand for professionals with a purchasing certification exceed the supply. Therefore, as the unemployment rate peaks and hiring resumes, those with a certification are likely to have a much easier time securing new employment compared to those without one.

With the cost of earning a purchasing certification being just a fraction of even the lowest annual purchasing salary, I can't think of any good reason why anyone in the field would shy away from earning a certification. Can 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, December 09, 2009

Whitepaper Wednesday - Are European CPO Priorities Different?

Welcome to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I'll be reviewing a whitepaper entitled "European CPOs: Capitalizing on the Best Opportunities" from Aberdeen and Ariba.

Now, one thing I want to get out of the way right away is that, in my opinion, the principles discussed in this whitepaper don't just apply to European CPO's - they are just as applicable to CPO's in North America or other continents. Why Aberdeen labeled the whitepaper as European is not clear.

Anyway, this whitepaper essentially answers three main questions:
  • What are the top pressures faced by CPO's?
  • What are the top actions of CPO's who face those pressures?
  • What are the top priorities of CPO's?

These questions are graphically answered by Figures 1, 2, and 3 in the whitepaper:

  • Figure 1: Top Three Pressures for EMEA-Based CPO's
  • Figure 2: Top Strategic Actions For European CPO's
  • Figure 3: Top Three CPO Priorities

The information presented in these three sections is insightful. For example, 92% of surveyed CPO's said that identifying cost reductions was a top-three priority while mitigating supply risk came in a distant second with only 52% of respondents indicating that it was a top-three priority.

The next section goes on to provide insight into how those CPO's plan to address their top priority of identifying cost reductions. Increasing sourcing activity was the top strategic action identified.

The top CPO priority listed in the next section clearly illustrates that CPO's recognize that just because you start sourcing activity that it is going to be successful - you need the right people running the sourcing initiative. The top CPO priority was "Enhance department staff skills and capabilities."

Of course, what would an Aberdeen report be without benchmarks. So it naturally winds down with some standard benchmarks (e.g., spend under management) as well as some good recommendations, my favorite of which being "The current 'soft' labor market presents a unique opportunity for CPO's to reach out into specific industries and hire seasoned professionals with deep category expertise for their departments. If hiring is not feasible, CPO's should strongly consider leveraging third-party expertise to identify (and potentially manage) the sourcing of new categories."

A nice way of saying that talent matters in procurement.

If you would like to get your own copy of this whitepaper, you can download it 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 Find More Good Resources For Procurement Leaders?
Check Out Our Web Site's New Whitepaper Section At
http://www.NextLevelPurchasing.com/WPcharles

Tuesday, December 08, 2009

ISM Allowing Salespeople To Join: What's Your Vote?

The worst recession in decades. Professionals networking on sites like LinkedIn rather than in person. New, strong competition in the education market.

These are tough times for traditional professional associations. Desperate times are calling for desperate measures. This sentiment has never been more evident than it was when the remaining members of the Institute for Supply Management (ISM) received a ballot in the mail this week.

This ballot proposes that ISM do away with its long-standing restriction that prevents "persons who are primarily engaged in sales activity" from becoming ISM members. Apparently, if a majority of voters accept this proposal, ISM will transition from an organization dedicated to serving individuals in the supply management profession to one that, much like any chamber of commerce in any town in the USA, is open to anyone.

While, online and offline, the consensus seems to be opposition to this change, it is not the emotions that count - it is the number of votes. While previous proxies sent to members - such as those for electing the board of directors - didn't seem to really make a difference in the outcome of the decision, this particular proxy seems to have a potentially dramatic impact on the future of ISM.

So, if you are an ISM member: Are you voting? If no, why wouldn't you? If yes, are you voting for or against and why?

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, December 07, 2009

One Difference Between A Procurement Manager & A Procurement Leader

Last week, I was asked to be a guest of the local chamber of commerce at their board of directors retreat. While there, I experienced something that reminded me of a common situation faced by procurement managers (or, really, any middle manager).

This chamber's board of directors has several different committees, each involving different directors. After lunch, there were to be breakout sessions for the committees to each work on their committee goals. Being a guest and not a director, I offered to sit in with the committee with the smallest number of members.

The assignment was simple. Take the four strategic goals of the chamber, develop a committee goal that would support each strategic goal, and document milestones for each committee goal for each of the four quarters of 2010.

Pretty straightforward, right?

Well, not to the "leader" of this committee. First, he talked about what the committee was currently working on. He didn't take a breath. The first 20 minutes of the meeting were comprised of this guy doing all the talking and none of the listening. And, quite frankly, neither I nor two of the three other people on the committee who were new, had any idea what the heck he was talking about!

Then, when one of us tried to restore focus on the task at hand, all this leader did was rant and rave about the format that was imposed upon him and how it didn't jive with the work the committee had in progress! After a while, many of the committee members saw the futility of making suggestions and just shut down.

When the facilitator came over, she asked to see what the committee had documented and was shocked to see that it was...nothing! The leader of this committee passionately complained to her that the format of this exercise was irrelevant and useless. She was unsuccessful at convincing him to get with the program before she went to check on another committee.

The rest of this breakout discussion was tense, but some of us on the committee were able to get the leader to "play the game" and document a few things. We didn't finish, but we got a few things done before we ran out of time - two hours of time, to be exact. All of the other committees finished early enough to enjoy the fresh cookies that were being served. And they had quality results.

After the session, the facilitator and the chamber president privately sought my feedback about how the committee worked and I was brutally honest, using one of my favorite axioms: "In all of the parks and cities, there are no statues of committees." Needless to say, I will not be volunteering for that committee!

So what does this mean from a procurement perspective?

Well, in procurement, you're usually not aligned at the top of the organization. Usually, procurement is somewhere in the middle.

This means that you have certain objectives imposed upon you by top management. Some of them you'll agree with, some of them you won't.

Your job as a true leader is to motivate your team. If you:
  • Talk way more than you listen;
  • Complain about what has been imposed on you; and/or
  • Shoot down the contributions of your team members

you will not motivate your team. Your results will suffer. You may even fail to attract talent that could help you succeed. You will be a manager, not a leader.

Leaders do not complain about unchangeable circumstances. They accept, if not embrace, them. Great leaders succeed within constraints placed upon them.

I always think back to a quote that was attributed to Christopher Reeves when he first suffered his terminal injuries (and before he went on to surprisingly live several more years). This probably isn't word-for-word - I can't find it online - but the point is what matters:

"This appears to be very challenging, but let's see what can be done."

Do you think this to yourself? Or do you complain like the so-called "leader" in this story?

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, December 04, 2009

My Votes For The Best Procurement Blogs

I recently learned about an awards program called the "Edublog Awards," which recognizes the most popular blogs in several education-related categories. To nominate blogs for this award requires the nominator to actually blog their nominations.

So, here are my (100% procurement-related) nominations in the various categories...

Best individual blog: Leadership by Lara Nichols/Purchasing.com

Best individual tweeter: Steve Bagshaw / Supply Management Magazine

Best group blog: The Strategic Sourceror

Best new blog: CPO Confidential

Best resource sharing blog: Sourcing Innovation

Most influential blog post: "Another Indication of an Effective Leader" by Robert Rudzki/Supply Chain Management Review

Best educational use of audio: Procurement Insights and its PI Window on Business site

Best educational use of video / visual: Supply Excellence

Best educational wiki: eSourcing Wiki

Best teacher blog: The Vendor Management Office

Lifetime achievement: Spend Matters

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, December 02, 2009

Whitepaper Wednesday: Lean Supply Chain

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I'll be reviewing a whitepaper entitled "Driving Lean through Your Supply Chain: The cultivation of a more efficient supplier network" from Intek Plastics.

First off, I have to say that I really appreciate the fact that this is a whitepaper focused on working with suppliers on Lean initiatives. Many Lean resources talk almost exclusively about internal applications of Lean.

As the basis for the whitepaper, the author concentrates on evaluating suppliers' adoption of Lean by centering the content around these five questions:
  • Why do I need a Lean supply chain?
  • Why are so many suppliers lagging in Lean?
  • What will I gain by choosing Lean suppliers?
  • What does a real Lean supplier look like?
  • How can I tell if a supplier is really Lean?

It is the last section that is packed with the most actionable information. A few of the many indicators of "true Lean-ness" that the author shares include:

  • Lean that Moves Beyond Manufacturing. The whitepaper says that "You should see evidence of Lean in accounting, new product development, sales, materials management, logistics, and even human resources."
  • Evidence of a Visual Factory. The whitepaper claims that "Within minutes of setting foot on a Lean supplier’s production floor, you should see cues that it’s a visual factory... [including] metrics boards, Kanban signals, standardized work and maintenance visuals."
  • Employee Engagement. Citing the fact that a well-done Lean program "empowers and energizes employees," the whitepaper indicates that a "brief conversation about Lean with a production floor employee will speak volumes about the supplier you’re assessing."

The whitepaper closes with a handy 15-Point Lean Supplier Checklist. My only complaint about this whitepaper is that it does not reach its potential for a comprehensive reference guide to implementing Lean in the supply chain. For example, while it references the importance of suppliers having value chain maps, it doesn't really explain the finer points of such maps or provide samples. That being said, at nine pages, it is a quick and easy read for someone who has already gotten an introduction to Lean.

You can download your own copy of this whitepaper from Intek Plastics' 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

Tuesday, December 01, 2009

Sole Source Situations: Prevention Is Just As Important As Negotiation

I hope that you've enjoyed the article "Sole Source Situations: Eradicate Them!" One of the things that seems to attract purchasing professionals to our online class, "Powerful Negotiation For Successful Buying," is the fact that we teach techniques for negotiating in sole source situations.

And knowing how to negotiate in sole source situations is vitally important. But anyone who has negotiated in a sole source situation before knows that it isn't something they exactly want to make a habit of.

So, prevention of these situations is of equal importance compared to negotiating in them. I think that the article gives some actionable tips and so does the podcast on which the article is based.

Actually, the podcast - entitled "The Finer Points of Strategic Procurement" - was so packed with great tips that there will be multiple articles based on it. So be sure to download it - the guest expert, Jim Nelles from Roland Berger Strategy Consultants, was that good!

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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