Thursday, December 30, 2010

Year In Review For Next Level Purchasing, 2010

On this last working day of the year - Next Level Purchasing's offices will be closed December 31 through January 3 - it is a good time to reflect on a very productive year here at Next Level Purchasing. As I look back at 2010, here are the ways that we helped bring more professionalism to the procurement space:

In January, we launched our Lifetime Purchasing Skills Retention Package. This Package entitles all of our students who have enrolled in our full-length online purchasing classes to download Quick Reference Guides, receive monthly email refreshers, and attend quarterly webinars for the classes they've completed. For a lifetime. For no additional charge. When we say that we're committed to the successful careers of our students, we mean it and we put our proverbial money where our mouth is.

In the middle of the year, we were for the fourth consecutive year named to the Supply & Demand Chain Executive 100 - a list of the top service providers in the supply chain space. In addition, I was recognized among Supply & Demand Chain Executive Magazine's Pros To Know for the fourth consecutive year.

In July, we launched our two-course series, Finance For Strategic Procurement. These two courses focus on helping procurement professionals better understand finance so that they can speak the same language and be on the same page as their CFO's.

In October, we beefed up our course "Microsoft Project For Purchasing Professionals" and relaunched it as "Professional Purchasing Project Management." In recognition that, in previous years, purchasing professionals who were responsible for leading-edge projects went elsewhere for project management training, we created this class to give purchasing professionals everything they need to know about project management in this course. With this relaunched course being more advanced in nature, we modified our certification curriculum so that Professional Purchasing Project Management would be moved to the SPSM2® Program and its place in the SPSM® Program was taken by Powerful Negotiation For Successful Buying.

In November, we launched our third of three new podcasts this year: How To Use Cost Savings Ratios & When, Sourcing Problems In A Slow Economy, and T & E Management: Procurement's Domain?

And just this month, we launched the SPSM® Certification & Enhanced Results Program With iPad. True to our style, we continue to deliver purchasing education in the most amazing, cutting-edge ways possible. Enabling students to earn a purchasing certification almost exclusively using an iPad - and giving them the iPad on top of it - is certainly an unprecedented way of moving the purchasing profession into the future.

Beyond those milestones, Next Level Purchasing had another record year, growing over 15% from 2009 and increasing our subscribers to the FREE Purchasing Resources Program to approximately 170,000. But these accomplishments don't even scratch the surface of what we're planning for 2011.

Expect another big year!

All of us here at Next Level Purchasing want to wish you and your family a Happy New Year and as much success as you can handle in 2011. We'll be there to help you have a rewarding career.

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 29, 2010

Does Your Procurement Culture Need An Attitude Adjustment?

Imagine a company leader saying the following:

"We're not interested in learning about the features of the new version of Outlook because we don't use email at our company."

or

"We don't pay attention to interest rates because our company doesn't use banks. We keep all of our money in a safe in the basement."

or

"We don't need any employee training on avoiding sexual harrassment because our company doesn't have a no-sexual-harrassment policy."

You're probably thinking that anyone uttering these words is stupid, right?

Of course. Instead of saying "We don't need to worry about new Outlook features," the company leader should be thinking "Should we be using email?" Instead of saying "We don't need to worry about interest rates," the company leader should be thinking "Should we be using a bank?" Instead of saying "We don't need sexual harrassment training," the company leader should be thinking "Should we have a sexual harrassment policy?"

That probably sounds logical, almost silly. Yet, there are tons of procurement departments who keep themselves in the Dark Ages by having a similar attitude. Here are examples of things that procurement leaders say every day...

"We don't need to think about evaluating eSourcing software, we don't do reverse auctions here."

"We don't need to keep up with changes in customs laws and practices, we don't do international sourcing here."

"We don't need any training on project management, we don't use project management principles here."

"We don't need a contract template, we only use purchase orders here."

I could go on and on.

If these were true procurement leaders with an insatiable desire to continually improve performance, they would be asking these questions:
  • We currently don't do reverse auctions, but should we?
  • We currently don't buy from international suppliers, but should we?
  • We don't employ project management principles here, but should we?
  • We don't have a contract template, but should we?

If you find yourself not employing best practices that leading organizations use, you should be asking yourself "Should we?" It's an attitude adjustment that is long overdue in some procurement organizations.

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 27, 2010

The Best of PurchTips 2010

For the final installment of PurchTips this year, I've put together a "Best of PurchTips 2010" article. Whether you are a new subscriber and missed earlier editions or you're a long-time subscriber interested in refreshing your memory on the valuable things you've already learned, I think that there are several articles on ethics, negotiation, supplier selection, and more that are worth another look.

Check them out here. In the mean time, I'll be working to make 2011's articles even more valuable for you.

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 23, 2010

Annual Reposting: Purchasing Is NOT The Island Of Misfit Toys

Continuing an annual tradition that I started on this blog in 2007, allow me to share a video excerpt from Rudolph The Red Nosed Reindeer and then explain how it relates to the purchasing profession.



So what does a video clip from Rudolph The Red-Nosed Reindeer have to do with purchasing?

You knew I'd tell you, didn't you?

You see, many purchasing departments have been staffed in the same manner as the Island of Misfit Toys - when an employee didn't cut it elsewhere in the organization and the management didn't have the heart to fire him or her, that employee was sent to work in the purchasing department.

So purchasing departments became a home for the organization's "misfits." This practice was bred from the thinking that the role of purchasing is unimportant and that not much can be messed up in Purchasing.

Well, thankfully, times have changed and purchasing has become recognized as a true profession. Now, Purchasing is a place for people who want careers, not just jobs.

But, unfortunately, some misfits do remain in purchasing departments. These are the people who don't approach their work as strategic, don't produce measurable results, and often have bad attitudes.

So leaders of purchasing departments who want to transform purchasing in their organziations need a strategy to deal with the misfits. In my mind, there are two options for the existing misfits.

The first option is to give the misfits the benefit of the doubt and give them the opportunity to come on board with the strategic direction of the purchasing department. This can be done through external purchasing training accompanied by mentoring by the leader or one of the more talented members of the team.

This first option is the best one. If you can make leaps forward in Purchasing without having to change people, that's great. You look like a great leader, employees are happy that they get to keep their jobs and perform well, and there's no risk of legal action.

If you find misfit resistance or they still don't meet the goals expected of the non-misfits, then I believe that you have to resort to the second option - cutting them from the team. Headcount is so precious and limited. For the sake of the profitability of the organization and Purchasing's reputation within it, you cannot afford to have one seat in a purchasing department filled by a misfit.

You also need a strategy for dealing with management trying to dump misfits into Purchasing (yes, it still happens to this day in some places). Quite simply, just say "No." Purchasing is NOT the Island of Misfit Toys.

For those of you that celebrate it, let me close this post by wishing you a Merry Christmas from all of us here at Next Level Purchasing!

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 22, 2010

Whitepaper Wednesday - Cloud-Based Contract Management

Today's installment of Whitepaper Wednesday is written by Erick Opdenbosch, SPSM. Please help me welcome back Erick for his second contribution to the Purchasing Certification Blog!

Welcome to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I will be reviewing a whitepaper entitled “Contract Management in the Cloud: The Contract Management Impact of Moving into the Cloud” from Ariba.

On November 3rd, I talked about contract management and how it helps companies comply with the Sarbanes Oxley Act of 2002. This time, I found a whitepaper that focuses on the latest technological model that provides a solution to it. The model is known as Software-as-a-Service or Cloud computing (SaaS/Cloud model). Although the whitepaper does not provide actual proof on why Cloud computing is the best option, it sure points out the right questions to ask in order to determine its success.

The Whitepaper starts by recalling one of the basics in procurement – Internal Communication. It is important to remember that, even though it is a task that is performed by purchasing professionals like us, sourcing gathers information from many areas in the company. Finding if the SaaS/Cloud model is appropriate should not be an exception. The whitepaper states that “... the contract management group (i.e., Cross functional team) should consider creating a check list that will enable the business functions to acquire the tools and benefits they seek.” It would guarantee that all stakeholders are comfortable with the final decision.

But, what should the checklist contain? Well, here is where the whitepaper comes in handy. The whitepaper argues that the Saas/Cloud model has an impact on three major areas. For each one of them, it provides important questions to consider.

1. Data Considerations

All organizations are cautious about sharing their information. The SaaS/Cloud model as stated in the whitepaper, “by its very nature often includes open platform sharing.” Thus, it raises the following issues:

• Where is the data stored?
• With whom is data shared?
• Who technically 'owns' the data?
• When and how is data archived?
• How quickly can data be accessed or retrieved?

2. Negotiating terms and service levels

Since the SaaS/Cloud model is quite new, some may think that it has the same conditions as a software solution. Actually, the new model goes far beyond. The terms and conditions have huge differences and the whitepaper includes a table that shows them (see below).

However, there is one thing that is common to both solutions – Stability. The purchasing agent, as the whitepaper says, should take in consideration: “…[if] a provider goes out of business or is acquired, what recourse do you as a customer have? What assurances do you have that you will be able to access and retrieve your data?”

3. Risk Allocation

It is important to understand that “no system is foolproof.” As a result, the whitepaper advises to ask, “how is the provider expected to respond in the event that a failure or breach takes place?”

Also, the whitepaper asks, “How can areas of risk be identified and mitigated prior to an event?” The SaaS/Cloud Model offers a central repository for search and reporting as well as workflows for approvals and electronic signatures. It has the potential to become a great tool. But that sounds a lot like a sales speech. As purchasing professionals it is imperative to evaluate if, in fact, the model provides a solution or an improvement to our operations. Here is the link to the whitepaper (no registration required): http://www.ariba.com/resourcelibrary/views/resource_library_asset_brief.cfm?asset_id=687





























Software SolutionSaaS/Cloud Model
License feesSubscription and pricing terms
Maintenance feeData availability/uptime
Upgrade feesData storage, retention, and retrieval
Software installation supportData encryption and security
Third party outsourcingProvider stability





Tuesday, December 21, 2010

December 2010's Dedicated Purchasing Student of the Month Is...

Every month, Next Level Purchasing recognizes a purchasing professional who has made impressive progress in learning more about his/her field. We are excited to announce that the Dedicated Purchasing Student of the Month for December 2010 is...



Divya Menon, a Global Sourcing Procurement Officer for Standard Chartered Bank in Dubai, United Arab Emirates. Divya completed all six Senior Professional in Supply Management® Program classes during the month of November! Divya also passed her SPSM® Certification Exam!

Next Level Purchasing and the procurement community around the world congratulate Divya and her dedication to having a more successful purchasing career!

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 20, 2010

What Categories Will Increase In Price In 2011?

My attention was drawn to an article on dealnews.com entitled "20 Things That Will Be More Expensive in 2011." Now, I fully expected the article to be written for consumers, but I thought I may also find some tidbits that would be revealing for the corporate purchaser as well. And I believe I did.

Here are three categories mentioned in the article that a corporate purchaser should keep an eye on in 2011:

Insurances: The article mentions both car insurance and health insurance as two items that are expected to go up in price. Now, many purchasing departments do not handle insurance purchases. But the question is: should they? With prices on the rise, companies may need more spend management firepower to protect themselves from expense increases in "non-traditional categories." In other words, it may be time to execute Stage 3 of the Strategic Sourcing Plan of Attack.

Utilities: VOIP services and water rates were among the categories cited by the article. Again, these are categories outside of the traditional procurement domain but as pointed out in an earlier post on this blog entitled "Whitepaper Wednesday - Energy Buying," utilities may be ripe for a purchasing department's involvement.

Commodities: The article mentions consumer commodities such as chocolate, coffee, and gold as those likely to go up in price, but you better believe that commodities more commonly purchased by business will be facing upward price pressure as well. The article does touch on the cost-driver effect a bit when discussing ammunition, saying "Ammo prices...will rise again in 2011, all because the metals they're made of are going up in price."

So what categories are you expecting to go up in price in 2011?

And what do you plan to do about it?

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 16, 2010

Has Procurement Dropped Off Of CFOs' Radar?

Today, I received the most recent edition of CFO magazine in the mail. I was disappointed at the headline on the cover:

LET'S TURN THIS THING AROUND - How to kick-start 2011 with new strategies for:
  • Capital raising
  • Top-line growth
  • Career development
  • Technology
  • And more

No mention of procurement. =(

The article represented by this headline also didn't mention procurement. In fact, it demonstrated that CFO's are not as concerned this year with what has traditionally been viewed as the specialities of the procurement disclipline: cost cutting. The following excerpts highlight this sentiment:

  • "'Cost cutting for us is over,' says Taiyo Yuden (U.S.A.) CFO [Joseph] Wilkinson. 'Obviously, we're always going to be looking for ways to be more efficient, but overall cost-cutting is essentially complete.'"
  • "While American Woodmark expects to find additional cost-cutting opportunities in 2011, [their CFO Jonathan] Wolk says, they are likely to be minor by comparison [to cost cutting efforts in prior years]."

So, if cost cutting is a lower priority, does that mean that the procurement function will face a decline?

Not necessarily.

But it shows that it is time that we all start thinking about procurement more broadly and not just as a producer of cost savings. Here are ways that the procurement function can contribute to organizational success - and remain important to CFO's - in a growing economy that is more focused on revenue growth than revenue reduction:

  • As demand picks up, work more closely with suppliers to ensure that supply keeps up.
  • Bring in innovative ideas from the supply base that may help your organization's goods and services be more marketable and superior to the competition's.
  • Know your spend so well that you would be able to quickly identify synergies in the event that your organization acquires another company. CFO's interviewed for the magazine article expressed a desire to grow, a challenge of growing organically, and an easier time getting credit - an environment that is ripe for mergers and acquisitions.
  • Be able to identify cost savings even when overall expenses rise due to increased volume. This is tricky, but is thoroughly covered in our online class "Finance For Strategic Procurement, Part I."

This is a critical time for procurement. We've made a lot of headway in getting CFOs' respect. As the focus shifts away from cost cutting, you need to modify your strategy to retain and increase the recognition that your work gets from senior executives in your organization.

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 14, 2010

Collaboration In Negotiation

I hope that you have enjoyed the article "Using Collaboration In Negotiation: 3 Steps."

Collaboration in negotiation can work wonders. But there is an important prerequisite to unlocking this highly effective approach to negotiating a mutually satisfactory - or win-win - deal.

What is that prerequisite?

It's the willingness to collaborate from both parties.

It's usually the buyer that gets stuck in old-school negotiation mode, but you will occasionally run into a seller that refuses to follow the three steps outlined in the article. When you do, here is a plea you can use...

"Look, we can handle this negotiation the old-fashioned way and lie, keep secrets, and be tough on each other. If we do, the likelihood of one of us being unhappy with the deal is high. And the one that ends up feeling like he lost just may be you. This is a three-year deal. That's a long time to be reminded that one of us got beaten. So, before we relegate ourselves to negotiating like it's the '70's, are you sure you don't want to try to follow these three steps and see what we come up with?"

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 10, 2010

Seeking Procurement Experts To Be Guests On Our Podcast

One of the more popular free educational resources that we offer on our website is our Purchasing & Supply Management Podcast Series. Currently, we have over two dozen podcasts available for your listening pleasure on topics ranging from supply chain technology to office supplies sourcing to writing a purchasing resume and more. I believe that it would take nearly an entire day - not a workday, but a full day - to listen to all of the material without stopping!

We want to continue to beef up our collection of podcasts and are looking for some guest experts who are willing to share their knowledge with the procurement community. If you are interested, see if you meet these simple criteria:
  • You have a good story to tell. You've achieved results either as a procurement professional or you're a vendor (e.g., consultant, technology provider, etc.) who has helped a procurement department achieve results. These results should not be something that any procurement department can achieve, such as saving $1,000 on an office supplies contract. We're looking for stories that can impress Fortune 500 procurement leaders and that involved creative approaches that you won't find in textbooks.
  • You are willing and able to participate. A podcast only takes about 30 minutes to record. Add onto that any practice you want to do on your own to the scripted questions. If that's too much time to invest - or if you are not sure that your company would want you to be featured as a guest expert - then it may not be for you. However, if you are willing to be featured in the media as a top performer in the field and able to participate, we'd love to have you.
  • You are - or are willing to become - familiar with Next Level Purchasing. Next Level Purchasing is on the cutting edge when it comes to teaching the latest purchasing best practices. So, we don't want guests who may recommend outdated approaches or approaches that conflict with what we do.
If you fit these criteria, drop me a line at cdominick [at] nextlevelpurchasing [dot] com and tell me what you have done that is worthy of being featured.

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 09, 2010

3 Lessons From The Justin Bieber Doll Supply Chain

If you're like me and have a tween daughter, you know the name "Justin Bieber" all too well. He is the cute little 16-year old pop singer that has young girls going gaga. Not gaga in a Lady Gaga way, just gaga.

While thoughts of the mop-haired one evoke images of screaming girls and bubblegummy thoughts, there's actually a lot of stress in the supply chains for Justin Bieber merchandise such as his dolls. Demand is high and that calls for some creative supply chain management.

Using excerpts from a November Washington Post article, here are three lessons we can learn from the Justin Bieber doll

#1. It's Not Always About Total Cost, It's About Profit. The article indicates that retailer Toys 'R' Us opted against traditional ocean shipping for the dolls in favor of more expensive, but faster, air freight. Citing the cultural excitement about Bieber, a VP for the company was quoted as saying "With this type of opportunity, we knew we wanted to capitalize on it." Prices for the doll begin at $16.99. Let's say that the manufacturing cost for each doll was $8, the cost to ship each doll by air was $1, and the cost for ocean shipping was $0.15 each. If the doll arrives by ocean three weeks before Christmas, it will sell 3,000,000 units. But if the doll arrives five weeks before Christmas, it will sell 5,000,000 units. The result is that the retailer would make $10 million more in profit by getting the dolls earlier, despite paying more for freight. As I've said before, good procurement isn't just about lowest total cost of ownership.

#2. Standardization Has Benefits. The rapid rise to fame of Bieber combined with the upcoming Christmas shopping season left those in Foreman, the Bieber doll manufacturer, struggling to figure out how to meet demand. The article reveals their solution: "A factory that Foreman works with in China had a mold for a male body on hand, speeding up the process."

#3. Speed, Cost, and Specification Compliance Need To Be Balanced. Engineers will always insist that their specifications are not negotiable. But sometimes they should be. Consider that the reports that "there wasn't enough time to give Bieber brushable hair instead of molded plastic," so the manufacturer had to change the specification to ensure timely manufacture and save the brushable hair for next year. If anyone still cares about Bieber then, that is.

You never expected to learn anything about supply chain management from Justin Bieber did you?

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 08, 2010

5 Steps To Cost Savings Webcast

Are you frustrated with your inability to get procurement information that you can actually use to support your cost savings strategy? Then be sure to attend the FREE webcast "Navigate Your Way From Information To Savings In 5 Steps" offered by Next Level Purchasing and Zycus. This FREE webcast is scheduled for December 9, 2010 at 11:30AM!

To register for the FREE webcast "Navigate Your Way From Information To Savings In 5 Steps," follow the instructions at http://tinyurl.com/29nxh64.

To Your Career,
Charles Dominick, SPSM, SPSM2
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, December 07, 2010

Earn Your SPSM Certification Using An iPad!

By reading this, you are one of the first to hear about the new, groundbreaking way that career-minded purchasing professionals like you will be earning their certifications, starting today!

Today, Next Level Purchasing has announced its introduction of the "SPSM® Certification & Enhanced Results Program With iPad." This web-based certification program gives purchasing professionals like you the opportunity to work towards your certification in the most exciting way possible – by using an Apple iPad! Your very own iPad is included when you enroll in this version of the certification program!

Almost everything you need to do to become SPSM-Certified can be done right from the iPad*. And the iPad you receive when you sign up for the SPSM® Certification & Enhanced Results Program With iPad will come pre-loaded with the SPSM® Multimedia Study & Implementation Guide – a collection of over 50 audio and video clips designed to help you complete your SPSM® Certification sooner, score higher on the SPSM® Exam, and apply more of what you learn in the workplace!

To learn more about the SPSM® Certification & Enhanced Results Program With iPad and how it can help you in your purchasing career, please visit http://www.NextLevelPurchasing.com/ipad or watch this video...



NOTE: In addition to the SPSM® Certification & Enhanced Results Program With iPad, the SPSM Certification can also be earned by completing the Senior Professional in Supply Management Program® or the standard SPSM® Certification & Enhanced Results Program (which includes an iPod Touch, but not an iPad). Choose the program and the cost that is right for you.

Description of the SPSM® Certification & Enhanced Results Program With iPad: http://www.NextLevelPurchasing.com/ipad

Video: http://tinyurl.com/spsmipad

Description of All Versions of the SPSM® Certification Program:
http://www.NextLevelPurchasing.com/spsm.html

* You will need access to a computer with Microsoft Excel installed on it in order to complete the “Microsoft Excel For Purchasing Professionals” course.


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, December 03, 2010

U.S. Tax Policy & Your Supplier Relationships: A Connection?

One of the most annoying things that I've been reading is the in-the-press debate over whether the Obama administration should extend Bush-era tax cuts. Specifically, it rubs me the wrong way that the group least likely to have their tax cuts extended is referred to in the media as "the richest 2 percent of American households," "the wealthy," "the highest earners," and "the wealthiest" as was done in this story in today's Pittsburgh Post-Gazette.

The use of these words makes it seem like the Donald Trumps and the Bill Gates of the world aren't paying their fair share. But the fact of the matter is that this "2 percent" isn't comprised mainly of these celebrity types. It is comprised heavily by business owners, including the owners of many of your suppliers.

You see, this "top income bracket" begins with individuals who make more than $200,000 per year or families that make more than $250,000 per year. Sure, that sounds like a lot of money for a person or couple to make, but consider this: in the US tax code, any business that is organized as a "Subchapter S Corporation" has its profits taxed as individual taxes on the owner's tax return. So, if some of your suppliers are Subchapter S Corporations and their profits exceed $200,000 - not too hard for a mid-sized company, right? - then the owners (i.e., the businesses) will see their taxes go up if the Bush-era tax cuts aren't extended.

Another thing to keep in mind is this: the profits are taxed irrespective of whether the business plans to reinvest those profits in the business in the coming year. So, let's say that a business' income statement shows a profit of $300,000 on December 31, 2010. Even if that business wants to use that money to hire a few employees on January 1, 2011, too bad. The government will tax that profit and leave the business with close to half of what it started with after the federal government, the state government, and the local government get their fingers into the pie.

The talk of government not only maintaining but raising taxes on business owners isn't real conducive to driving down the unemployment rate - which incidentally was reported today to have risen to 9.8% - is it?

What does this mean to a procurement professional?

It means that, if taxes are raised for "the wealthy," your suppliers are going to get to keep a smaller percentage of the revenue they bring in. For you, that might mean that suppliers will attempt to raise your prices because they are going to need higher revenue to maintain the same after-tax profit or it might mean that they will try to cut corners so that same revenue - lower costs + higher taxes = same profit.

And what does this mean to the competitiveness of American businesses in the global economy? It means that other countries' suppliers will be more attractive.

Any way you slice it, increasing taxes on this "2 percent" doesn't seem very smart economically. Unfortunately, the US has spent itself into a corner. But I don't see continuing to spend - at the expense of the business owners who can make the decision to "hire or hoard" - as the solution.

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, December 02, 2010

Attention Procurement Vendors: Connect With Next Level Purchasing's Audience

Next Level Purchasing and the Purchasing Certification Blog will be rolling out various sponsorship opportunities over the next few months. If you are a vendor serving the procurement community and would like to get your brand in front of our vast audience of procurement professionals throughout the world, I encourage you to obtain a copy of our sponsorship media kit.

To request a sponsorship media kit, email Next Level Purchasing's Business Development Manager, Michael McCollum, at mmccollum [at] nextlevelpurchasing.com or call 1-412-294-1991.

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, December 01, 2010

Negotiating & The Impact of Urgency

I'd like to dedicate this post to further dissecting yesterday's article "Tips For Negotiating With A Sole Source."

In the first tip, I emphasized how time can motivate suppliers - even sole source suppliers - to concede a little bit in order to close a deal quickly. In procurement, it is easy to feel that time is always your enemy and the supplier's friend. After all, your internal customers are always pushing you to get things done quickly and can't understand why their part is done and you are "holding things up" by negotiating and getting the contract written.

But the fact of the matter is that suppliers feel the pinch of time as well. They have sales goals, usually by month, by quarter, or by year, and sometimes all three. That fact makes this time of year a particularly good time for procurement professionals who are negotiating!

Sales goals prepared early in this year may have been based on overly optimistic predictions about the economy. And, let's face it, it hasn't exactly been a stellar economic year.

That means that a lot of sales teams are probably coming up short on their goals. That probably means less commissions for everyone from the sales rep to the VP of sales. Bonuses are probably a long shot as well.

Closing a deal before the end of the year would certainly help their cause. But, in this economy, closing a deal in 30 days seems like a nostalgic concept.

Unless, of course, smart procurement professionals use that to their advantage. By committing to give an order by the end of the year if you can get concessions on a few terms, you hold a powerful lever.

When it comes to negotiation, procurement professionals don't always have time on their side. But this time of year, you do. Will you use it to your advantage?

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
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