Friday, July 30, 2010

Boeing worried over Supply Chain

Wednesday, I reviewed a white paper on the topic of supplier risk management. Well, I ran across an article this week that demonstrates the timeliness of this issue.

Boeing, the second-biggest aircraft manufacturer, made a statement on Wednesday that it would not be able to increase production rates because they felt their suppliers would not be able to fulfill the increased demand. As it stands now, Boeing produces about 31-32 of its 737-model aircraft each month and plans to increase production to 34 or more a month. They are also planning to increase the production of larger models, such as the 777 and 747, over the next two years.

Now, Boeing is not the only aircraft manufacturer looking to increase production; their main rival, Airbus, and several other competitors will be ramping up as well. Boeing fears that this collective increased demand will stretch suppliers too thin.

Recognizing the risk that this poses to their operations, Boeing is “working very methodically through different scenarios,” noting which suppliers may need to invest more in plant and/or equipment, those that may need to renegotiate standing contracts, and those that may need additional training.

I would have to imagine that Boeing is establishing a risk management plan to deal with anticipated supplier failures. Hopefully, they are not being too short-sighted and only monitoring their suppliers, but their supplier’s suppliers as well. It will be interesting to continue to follow this Boeing story over the next couple of years and see if they successfully managed their supplier risk.

To your career,

Megan Tyrseck, SPSM
Senior Marketing & External Relations Coordinator
Next Level Purchasing, Inc.

Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online
At Next Level Purchasing . com

Thursday, July 29, 2010

What can Procurement learn from Marketing?

Well, if you haven’t noticed yet, Charles has not been at the reigns for the blog this week. I have taken over the reigns, well the keyboard at least, and have been doing some guest blogging. (Don’t worry, Charles will return he’s currently working on a super-secret project that will be revealed shortly.) My primary role here at Next Level Purchasing is in Marketing and External Relations, and I know what you may be thinking- what does a marketer know about procurement? Well I think there’s a lot that different departments can learn from one another and I wanted to share with you a lesson that procurement can learn from marketing.

Over the past few years, I’ve talked with many procurement professionals who have shared with that they feel a lack of respect for procurement while other departments get all of the glory. So, why is it that other departments are more respected? Well, because they tell the rest of the company why they should be respected!

Marketing departments are quick to share their success, after all, marketing is a function based on communication. Procurement, on the other hand, often lets their successes go unsung. If your company doesn’t know how you supported corporate objectives, why would you expect them to praise you?

But, take this into consideration: Procurement has a definite and measurable impact on the bottom-line of a company, specifically the “Cost of Goods Sold.” If Procurement can decrease the cost required to produce a product or provide a service that allows for larger profit margins, which in turn allow a Marketing and Sales department greater flexibility in their pricing and offers, and better pricing or offers usually lead to more sales. As a result, procurement has helped to support the success of the Marketing department and the company as a whole.

So, how do you market procurement’s success in a way that improves the respect you receive from other departments? Well, marketing is all about selling the benefits. Companies want to know what they are getting back for what they are spending, so for the Marketing Department, reports focuses on metrics, especially return on investment. By the way, leading procurement departments are emulating this and are starting to implement similar measurements and you can as well.

The next time you achieve significant results, share the metrics and benefits in terms that each specific department will understand. For example, the marketing department will appreciate how your results will help to make your product or service more appealing to potential customers (i.e. better quality, lower price, faster delivery, etc) and Finance and Accounting will appreciate how the better terms that you negotiated will improve cash flow.

In the end, if you help make another department’s job easier, they will respect you more for the job that you do. You just need to “market” your procurement efforts better.

To your career,

Megan Tyrseck, SPSM
Senior Marketing & External Relations Coordinator
Next Level Purchasing, Inc.

Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online
At Next Level Purchasing . com

Wednesday, July 28, 2010

Whitepaper Wednesday - Supplier Risk Management

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Best Practices for Supplier Risk Management: Measure, Monitor and Mitigate" from Aravo and SDCExec.com.With the recent economic crisis and natural disasters, supplier risk management should be a topic of concern for all procurement professionals and the Executive Summary of this whitepaper emphasizes the same. A frightening statistic quoted in the whitepaper “…the American Bankruptcy Institute is estimating a total of 1 to 1.2 million bankruptcy filings in 2008, a 30% increase from 2007. Although bankruptcy is a lagging indicator, with the continuing global economic crisis, this trend is likely to accelerate in the near future,” drives the point home that if your company has not yet developed a supplier risk management program, you should consider doing so immediately.

So, how does a company do a better job with supplier risk management? Well, the whitepaper encourages the reader to return to the basics- Measure, Monitor and Mitigate. In the measurement phase, the whitepaper encourages buyers to collect important data for each supplier, ensuring that it is “accurate, validated and accessible across the company.” Key points of data to collect include supplier financials, percent of on-time delivery, quality metrics, etc.

The whitepaper suggests that in the monitoring phase, buyers work cross-functionally to decide which categories of risk are most important. (While a list of 10 common risk categories is included in the whitepaper, don’t be limited by these suggestions.) Once the most important risk categories have been established, buyers will continually monitor and update the metrics for each supplier.

With mitigation, a company is encouraged to have a contingency plan established for when an incumbent supplier’s risk becomes too high, which may require indentifying alternate suppliers. If a supplier is identified to be at high risk, the company should initiate the contingency plan to “ensure restoration of core business processes and services in a timely manner.”

I found the topic of this whitepaper to be very timely and its suggestions practical. Think of supplier risk management like the instrument panel in a car. The car is programmed to monitor the key requirements for operation: fuel levels, oil temperature, etc. If something fails in these areas, a notification will occur on the dashboard prior to the car breaking down entirely. If you ignored the warning signs, you may find yourself needing a new car. In your company, the failure of even one supplier could have disastrous consequences.

Now, each company will approach a supplier risk management program differently, but this whitepaper will provide some key points that you’ll want to consider. If you'd like to check it out for yourself, you can download your own copy from SDCExec.com.


To your career,

Megan Tyrseck, SPSM
Senior Marketing & External Relations Coordinator
Next Level Purchasing, Inc.

Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
Next Level Purchasing . com

Monday, July 26, 2010

Supplier Selection Criteria and Sourcing Teams

I hope that you have enjoyed the article "8 Supplier Selection Criteria & The SHoCC."As you can see there are a lot of questions that should be asked and decisions to be made when determining the optimal mix of constraints and sourcing selection criteria for each sourcing project. Too few criteria may result in a poor sourcing decision, while too many criteria may make finding a supplier more difficult.

To ensure that you are getting the right answers to the questions that you’re asking, make sure that you’ve assembled a suitable sourcing team. A post by Charles on eSourcing Forum entitled "Don't Be The Sourcing Lone Ranger" addresses how to build such a sourcing team.

So remember, a few extra steps when it comes to building a sourcing team and establishing your Sourcing Hierarchy of Constraints & Criteria will go a long way in increasing the likelihood that your sourcing process will be successful.

Best of luck on your next sourcing project!



To Your Career,

Megan Tyrseck, SPSM
Sr. Marketing & External Relations Coordinator
Next Level Purchasing, Inc.

Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online
At http://www.nextlevelpurchasing.com/

Friday, July 23, 2010

What Salespeople Think of Procurement (And Vice-Versa), Part II

So yesterday, I posted a blurb about how salespeople perceive procurement professionals as liars. I bet that many procurement people will contend that many salespeople are liars, too. In my procurement career, I can't count how many times I was told that a product will ship the next day, but didn't; that the price was all-inclusive when it wasn't; and that a problem was corrected when it persisted.

That being said, I'd rather dedicate this post to something positive. That positive thing being my perception of how, in general, salespeople are superior to procurement professionals in one particular area and how procurement professionals can regard salespeople as models for their own self-improvement.

What is that area?

Communication.

In my line of work, I get a lot of calls from both salespeople who want to sell their product or service to us and procurement professionals who want to purchase our training. It takes me less than two seconds of answering a call to know whether I am talking to a salesperson or a procurement professional.

What are the differences?

In general, the salesperson will have a very professional sounding vocal delivery. They will articulate their first two sentences without a pause, an "um," or any apparent uncertainty about what they want to say.

In general, the procurement professionals will sound quite informal. Their first two sentences will be littered with pauses, "ums," and a seemingly unclear focus on what they want to ask.

Now, I know I'm running the risk here of offending someone. But I make this observation because I've spent my career on the procurement side and I feel that my own communication is something that could be improved.

When I am conducting a webinar, I often feel like kicking myself when I don't articulate something crisply. And I feel jealous of those salespeople that sound like professional voiceover artists or radio DJ's that call me.

So, when you consider how you feel about salespeople, don't just focus on the negative. Focus on the skills that they have that you could emulate for your own self-improvement.

Then, maybe...um...you could...well, if you can focus on speaking professionally...you might easily be able to adjust your style to be a more professionator, I mean, professional communicator.

Have a good 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
Next Level Purchasing . com

Thursday, July 22, 2010

What Salespeople Think of Procurement (And Vice-Versa), Part I

Having spent my entire career in practicing and teaching procurement, one of my guilty pleasures is reading sales literature and attending sales training. I attended a sales workshop last month and came across a related sales article today.

There were a couple of interesting quotes in this article that I thought that I'd blog about. They capture an interesting perception of procurement people that salespeople have. Here are a couple of those quotes:

"You can lie to a salesperson and still go to heaven."

and

"Sandler has come up with a concept he calls the ‘buyer seller dance,' which is basically that the sales person follows a path like this: SEE IF THEY WANT TO BUY – TELL THEM THE SOLUTION – TRY AND CLOSE THE DEAL – CHASE THEM. Whereas the buyer follows the same process but does this: LIE – STEAL – LIE - HIDE. They lie to get you interested, steal all your information as the sales person has verbal diarrhoea, they then lie about wanting to buy and then hide as the sales person chases."

What are your thoughts on this perception that salespeople have of 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
Next Level Purchasing . com

Tuesday, July 20, 2010

Supply Base Overconsolidation: Is It For The Laziest Procurement Professionals?

Whether you’re the average consumer or a procurement executive for a Fortune 500 company, there is a probability that you might be lured in by the attractiveness of the “one-stop-shop” – a store or supplier where you can buy multiple categories of goods. The question is: how much supplier consolidation is too much?

It is not uncommon to hear of procurement professionals asking for one supplier to provide “it all.” Some even go so far as to suggest that if the prospective supplier doesn’t supply a product or service that they outsource it and serve as the point of contact.

It certainly is true that supplier consolidation has its advantages. Fewer people to deal with and the leverage to drive down prices are two of the biggies.

But there are disadvantages that too few procurement professionals consider.

Let’s consider an outsourcing relationship. Just because one outsourced service provider has an adequate call center to handle customer service calls does not mean that their IT outsourcing services will be adequate. In fact, because of the vast difference in skill sets required, their IT outsourcing services may be quite horrendous.

But they may still get selected based on the desire to consolidate the supply base. The goal of supplier reduction trumps quality. But should it? Is the company really becoming more profitable by having one fewer supplier?

Jump to the consumer side. Walmart sells a large number of goods categories. Furniture is one of them. But you can’t tell me that a formal dining room set from Walmart can match the quality of a formal dining room set from a fine furniture store.

So is it worth the sacrifice for the convenience of buying your dining room set from the same place as you buy your milk and socks?

A consumer who is quality conscious would say “no.” Yet, procurement professionals make parallel choices every single day.

And what about requiring a supplier to outsource the portion of the offering that they don’t provide in house? Why is it worth sacrificing control over one’s organization’s own destiny for the sake of dealing with one fewer supplier? Just because a supplier will manage that other relationship doesn’t mean that they will manage it well.

Yet, in many cases, convenience matters more. The cost reduction of using that one fewer supplier is hard to prove. If a cost reduction is hard to prove, guess what…it may not be real!

Lazy procurement?

Not always.

But, in some cases, absolutely.

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
Next Level Purchasing . com

Monday, July 19, 2010

Sourcing From China Today Is No Child's Play

Well, it is "earnings season" where publicly-held companies report their financial performance for the recently concluded quarter. I love checking out news coverage of the releases to see where credit goes for successful performance and where blame goes for performance that fell short of expectations. Often, there is a supply chain reference in these articles.

Such was the case with recent earnings reports from giant toy makers, Mattel and Hasbro.

Last week, Mattel announced that its second quarter earnings doubled from the year-ago period on an increase in sales. Today, Hasbro announced a more modest earnings increase of around 10% despite a drop in revenue.

Both mentioned supply concerns, which could impact earnings in the near future.

An article on Market Watch indicated that Mattel's executives feel that tight supply is an even bigger concern than weak demand from retailers who are keeping inventories lean. In China, Mattel's big source of production, "shipping containers are in short supply, labor is tight, and freight is moving slower." In addition, "input costs are expected to go up for the remainder of the year."

Are Hasbro's procurement strategies more effective?

While an article on Comcast Finance indicates that "toy makers are facing rising costs for commodities like oil and rising wages in China," it goes on to note that "Hasbro said that it agreed with its vendors on costs for the next year, so higher costs for labor will show up mainly in 2011."

What a great example of the fact that procurement is extremely strategic and a source of competitive advantage!

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
Next Level Purchasing . com

Friday, July 16, 2010

Is Bid Rigging Alive & Well?

Earlier this week, Paul Salisbury - an SPSM and former Dedicated Purchasing Student of the Month - passed along to me an article about bid rigging that has affected government procurement in the Isle of Man. Honestly, bid rigging is something that I haven't thought about for a little while, which led me to the question: is there any good information out there about bid rigging?

I found a few sites to have interesting content on the matter including Wikipedia, which has a concise post covering the types of bid rigging, and the District of Columbia's Office of the Attorney General, which shares several signs that bid rigging may be occurring.

However, probably the most thorough information I found was on the US Department of Justice's site, which featured an article entitled "Price Fixing, Bid Rigging, and Market Allocation Schemes:What They Are and What to Look For."

Thinking about it, I really think that this material is something that every purchasing professional should read, especially those new to the discipline. We will probably reference this material in the next regular revision of our online class "Mastering Purchasing Fundamentals."

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
Next Level Purchasing . com

Thursday, July 15, 2010

In Procurement, Integrity Should Be The Price Of Admission

It happens with striking regularity: I come across a news article that reports that someone responsible for procurement at an organization has been caught receiving personal financial benefits from suppliers in exchange for those suppliers being awarded business with the organization. Such was the case today when I read an article in the Pittsburgh Post-Gazette that reports that a former fleet manager for Mylan has been accused of "illegally netting $800,000 through various schemes while managing Mylan's fleet of vehicles from 2000 to 2005."

Why does this type of thing happen?

While it may be due to poor education of what is proper behavior and what is not, I tend to feel that it is due to something else. What is unethical procurement behavior due to?

I feel it is due to bad hiring practices.

If a position has the significant responsibility of dealing with suppliers and making procurement decisions, the candidates should be thoroughly evaluated for the degree of integrity possessed. Yet, in the interviews that I've sat through as a candidate for procurement jobs, I cannot recall being asked questions designed to reveal my degree of integrity.

Failing to sufficiently probe for and discover the direction of a procurement candidate's "moral compass" is an oversight of potentially disastrous proportions. In procurement, integrity should be the price of admission into the profession.

What's the solution? I think that it can start with the hiring manager saying something like this in the interview...

"Tell me about a time when you had to decide between doing something that led to personal financial gain and doing the right thing."

Not everyone will have had an experience. And that's OK. But the candidate's response may reveal a lot about their character.

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
Next Level Purchasing . com

Wednesday, July 14, 2010

Whitepaper Wednesday - End-of-Contract Strategies

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Be Prepared: Five Steps to Optimizing an End-of-Contract Negotiation Strategy" from Compass and CFO.com.

The first paragraphs of this whitepaper set the stage for why it is important to have an end-of-contract strategy when preparing to either extend or replace a relationship with an outsourcing service provider. Specifically, it says that sourcing teams are commonly "under-prepared and overly confident" in thinking that negotiation will be easy because "conventional wisdom states that...[incumbent] service providers...are eager to retain customers." In reality, the whitepaper contends that service providers know that switching providers is "is a costly, risky, and time-consuming proposition...and use this knowledge to their advantage in the negotiation process."

The whitepaper offers "five key steps" for a sourcing team to maximize its leverage as contract expiration approaches. While I found all five of these key steps to be valuable, I thought that the following two were the most important and would probably resonate most with readers of this blog:

3. Get Senior Level Support - This point discusses the very real possibility of the incumbent service provider obtaining a contract renewal - at less favorable terms to the client organization - by backdoor selling to the executive level if the sourcing team lacks senior level support.

4. Be Serious - This point essentially states that incumbents seek evidence that the client is willing to pursue an alternative. Without such evidence in the form of things like an information-packed Request For Proposal and active lobbying of potential bidders, the incumbent may be inclined to call the sourcing team's bluff.

Sometimes, Whitepaper Wednesdays can be a bit onerous for me. Not this time.

I found the topic of this whitepaper to be very thought-provoking and its solutions very practical. If you'd like to check it out for yourself, you can download your own copy from CFO.com (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, July 12, 2010

Procurement Myth #5

I hope that you have enjoyed the article "The 4 Worst Procurement Myths."

I've actually saved one more myth for this blog. That Myth #5 is "Partnering with a single supplier is always the best approach."

While using a single source can lead to benefits such as higher discounts due to fully-leveraged volume and streamlined communication, single sourcing can be very risky. What happens if supply from that single source is disrupted? Dual sourcing can offer highly leveraged volume while giving you a backup plan if one supplier fails to perform.

As mentioned in the article, the deadline for getting a 10% discount on Next Level Purchasing’s brand new online training offering: “The Finance For Strategic Procurement Series!” is coming up fast - July 14, 2010. The Finance For Strategic Procurement Series consists of two online classes that will help you comprehensively understand how to apply financial principles in your daily procurement work for better workplace results.

The Finance For Strategic Procurement Series is divided into two parts. Part I focuses on understanding financial statements and measuring and communicating a procurement department’s contribution to the organization. Part II focuses on how financial decisions are made and evaluating supplier health. You must complete Part I to be eligible to enroll in Part II.

To claim your discount and sign up for Part I or the entire series, use Coupon Code FINANCE622 at: www.NextLevelPurchasing.com/registration.php

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
Next Level Purchasing . com

Thursday, July 08, 2010

Next Level Purchasing Launches Series To Close The Procurement-Finance Gap

While CEO’s and CFO’s expect procurement professionals to understand their impact on corporate finances, many procurement professionals are unaware of how their work supports corporate goals and are more likely to make catastrophic mistakes that put their company at substantial risk. A new two-course online training series, "Finance For Strategic Procurement," from Next Level Purchasing will help procurement professionals better understand and apply leading financial principles for improved procurement performance.

Whether procurement professionals are selecting a supplier, negotiating payment terms, comparing lease and buy options, or making other typical procurement decisions, there are finance-based approaches that top management expects procurement professionals to follow. A failure to communicate in the language of finance has created a gap between procurement and top management, resulting in a lack of credibility and respect for the procurement function. By integrating the financial principles covered in the "Finance For Strategic Procurement" series into procurement operations, more optimal procurement decisions will be made leading to reduced risk and better support for corporate financial health.

"The way that many procurement departments operate today can be likened to a sports team that doesn’t understand the numbers on the scoreboard," said Charles Dominick, SPSM, President and founder of Next Level Purchasing. "The Finance For Strategic Procurement Series is designed to help procurement professionals not only understand how organizational performance is measured, but also to give them the skills to improve the procurement department’s contribution to organizational success."

The "Finance For Strategic Procurement "courses are the newest full-length online courses available from www.NextLevelPurchasing.com. Part I of the series focuses on understanding financial statements and measuring and communicating a procurement department’s contribution to the organization. Part II focuses on making sound financial decisions and evaluating supplier health. To be eligible to enroll in Part II, a student must first complete Part I.

To learn more about the Finance For Strategic Procurement Series, please visit http://www.nextlevelpurchasing.com/financial-purchasing.php

Wednesday, July 07, 2010

Whitepaper Wednesday - Supplier Collaboration

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I'll be reviewing a whitepaper entitled "Supplier Collaboration: Why It's Vital To Treat Key Suppliers As An Extension Of Your Organization" from Kinaxis.

At seven pages - slightly larger than the whitepapers I tend to like to review - I thought that this whitepaper would have a number of "how-to's" for supplier collaboration. Would it?

Well, let's get to the review to find out...

The whitepaper starts out with a couple of pages on outsourced manufacturing and it's expected continued growth. We all know that more and more manufacturing work is being sent to low cost countries, so let's move ahead.

The whitepaper then says that results from outsourcing haven't been as great as expected, with manufacturers "only" realizing 17% savings from outsourcing. The whitepaper also cited a report that indicated that there are other problems with heavily outsourced supply chains, including:
  • lack of supply chain flexibility
  • lack of internal competencies to manage external partners
  • partners unable to meet flexibility requirements.

So what is the solution to these problems? Yep, you guessed it - better collaboration!

And not just tactical collaboration. Collaboration that goes beyond simply using the "initial collaborative tools of the tactical nature."

So, then, what type of collaboration?

The whitepaper says that the desired type of collaboration involves "sharing business strategies, mutually investigating risks and threats, jointly looking at opportunities, developing and linking plans and targets … and treating key supplier as an extension of the business." The whitepaper also includes a maturity model and tips on identifying the suppliers with whom you should have a collaborative relationship.

While this whitepaper doesn't provide the holy grail of supplier collaboration techniques, the advice is solid, if not too high-level. If you'd like to check out the whitepaper for yourself, you can download a copy from Kinaxis' website (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, July 06, 2010

Is A Vendor Selection Process Fair? The Timing Of One Step Says A Lot

I seemed to set off a barrage of comments on the Strategic Sourcing & Procurement LinkedIn Group when I posed a simple question without a one-size-fits-all answer: "Should You Share Your Selection Criteria & Weightings With Suppliers?"

I was glad to see such a spirited discussion ensue, not so much because I wanted an answer, but moreso because it is good to see that many procurement teams at least have identified their selection criteria and weightings prior to issuing their RFP's. Unfortunately, there are still many procurement teams that only decide on those things after receiving proposals. That type of procurement amateurism is even written as part of a published process on a questionable article on vendor selection written by a community college's Director of Computing Technology (not Procurement, Computing Technology) on About.com.

When the criteria and weightings for supplier selection are developed after proposals are received, that is perhaps the biggest red flag that the vendor selection process is not being conducted fairly. After all, once you have proposals, you can create whatever criteria and weightings you need to in order to guarantee that your favorite vendor wins, regardless of whether or not they truly have the proposal that benefits your organization the most.

So one of the big litmus tests for determining whether or not a vendor selection process is fair is assessing whether criteria and weightings are developed prior to the RFP issuance or after proposal receipt.

That being said, many times an RFP process will educate a procurement team about things they didn't know and should consider in their vendor selection. In those cases in the private sector, it would be foolish to insist on ignoring new and better information and sticking with the initial criteria and weightings just in the name of being more fair to bidding vendors than to one's own employer.

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
Next Level Purchasing . com

Monday, July 05, 2010

When It Rains, It Pours On Some Suppliers

I read an article entitled "Pentagon honoring contracts with BP" in today's Pittsburgh Post-Gazette and it got me thinking.

BP, of course, has become a target of anger of many US citizens due to the massive oil spill that continues to plague the Gulf Coast. Politicians are taking note of citizen sentiment and, apparently, looking to maximize the number of ways to punish BP for the oil spill accident.

One of the US' options for punishing BP is to stop the government procurement of fuel and services from the company. Of course, that is a delicate balance: the government negotiated a settlement with BP where BP would make massive reimbursements to those impacted by the oil spill. If BP's sales get hurt by being barred from US government contracts, will they lose the ability to make restitution to the American people victimized by the accident?

There is a similar backlash going on in the private sector as well. Some Americans are refusing to purchase their fuel from BP stations.

Now imagine this situation: you are doing business with a supplier. And that supplier is a good supplier for you. But one isolated incident does tremendous harm to the reputation of that supplier. And many of its customers start canceling their orders and contracts with that supplier, making it financially feeble.

What do you do? Do you stick with that supplier? Or do you need to protect yourself from the risk of that supplier becoming insolvent?

One bad event can sometimes bring a supplier down. Would you be willing and prepared to drop a good supplier if it "poured" on that supplier?

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
Next Level Purchasing . com

Friday, July 02, 2010

Who Will Decide On Procurement Technology Investments In 2011?

Every procurement technology acquisition project I've been involved with has, to some degree or other, relied on a cross-functional supplier selection team. While everyone would like to think that everyone on the team has an equal voice, let's face it...there is usually someone who has more influence than others.

Sometimes, this influential person is the head of procurement. Sometimes, it's the head of finance. Sometimes, it's the head of IT.

And technology providers are usually pretty keen on figuring out who that influential person is. I believe that the smarter ones develop their sales and marketing strategy around that influential role.

Rewind back to a few years ago. Ariba used the term "Spend Management" while Procuri used the term "Supply Management."

I don't believe this was a casual decision made on preference between two synonyms. I believe that Ariba was seeking to appeal to CFO's - who are intensely interested in managing spend - as decision-makers. I believe that Procuri was targeting procurement VP's - who are intensely interested in managing supply.

Of course, Ariba bought out Procuri and retired the Procuri brand in the process. And new buzzwords came along.

Today, a lot of tech companies are putting a lot of marketing effort behind the "cloud computing" theme. Case in point, on their non-text-intensive home page, Ariba mentions the word "cloud" at least a half-dozen times, features clouds as the dominant imagery, and calls their solution the "Ariba Commerce Cloud." On Coupa's home page, they mention "cloud" almost as much, titled their newsletter "Cloud Cents," and call their solution "Coupa Cloud Spend Management."

Let's see...whose nerve does cloud computing strike? It's probably not the CFO or Procurement VP, many of whom struggle to understand how cloud computing is any different from SaaS and don't really give a crap because they are more interested in results than the buzzword du jour.

No, cloud computing gets the IT folks all hot 'n bothered. So, does this shift in marketing mean that these providers are seeing the CIO becoming that "most influential team member" when procurement technology is selected? Will the CIO be the driver of procurement technology investments in 2011? Does Ariba and Coupa's shift to the cloud marketing theme give Emptoris any kind of advantage with its more straightforward marketing pitch? Is Coupa simply trying to woo Ariba into an M&A situation rather than trying to target a specific decision-making role on the client side?

Time will tell. That is unless you beat time to the punch and use the comment link below to share your observations!

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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