Monday, January 31, 2011

The Lethal Injection Supply Chain Has Flatlined!


Earlier this month, Hospira, the sole FDA-approved U.S. manufacturer of sodium thiopental, decided to pull the proverbial plug on production of that key lethal injection drug according to the Huffington Post. There were already many complications with the supply of the drug, including:


  • An existing shortage of the drug due to "problems with [Hospira's] raw-material suppliers";

  • A corporate decision to shift production of the drug from the USA to Hospira's Italy factory regarded as the "only plant capable of manufacturing sodium thiopental"; and

  • The Italian government's condition that the drug cannot be produced in Italy if it would be used to put inmates to death.

This third factor apparently convinced Hospira to close the coffin on sodium thiopental production.

This decision by Hospira, a supplier to many states who purchase sodium thiopental to kill criminals, is having a ripple effect in those states. Texas only has enough supply to complete two of the four scheduled executions between now and July. In addition, the current supply problems have "delayed or disrupted executions in Arizona, California, Kentucky, Ohio and Oklahoma." Some of these states had already switched to a British supplier only to have that source deep-sixed by a November export ban by the British government.

It's a good case study that demonstrates the tragedy of overdependence on a single specification and a sole source supplier: one little decision can stop the pulse of a supply chain.

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, January 28, 2011

The 8 Buyer Personas (and How to Fix What's Wrong With Yours)

Longtime readers of my blog know that I love to dissect educational sales material to determine appropriate procurement reactions. I recently came across a fascinating article entitled "The 8 Buyer Personas (and How to Sell to Them)" on the RAIN Selling Blog.

I think that it is worth a procurement professional's time to read this article and evaluate which persona is closest to yours and how your sales counterparts see you. And I also think that it's worth it to identify the weakness of your persona and work on improvements to those. Let me list the weaknesses of each persona and what you might want to focus on:

1. Decisive Danielle - Having this persona may be a very good thing. However, in a corporate procurement situation where satisfying the internal customer is often a very high priority, you may want to focus a little more on involving internal customers in the decision-making process. Decisions affect more people than just you, so forcing your decisions on others without their input can be a recipe for bad relationships.

2. Collaborative Claire - While facilitating team decisions is an important skill in procurement, I've seen the frequent need to do so result in buyers having no faith in their own decision-making ability. While there will always be decisions that require consensus, there are also decisions that you can make on your own. Recognize these. And act on them independently. If you don't start making decisions independently, you'll never become a good decision-maker.

3. Relationship Renee - Developing relationships in negotiation is important. It is common for these relationships to pay dividends later when your organization needs its suppliers to go above and beyond the call of duty to meet a particular challenge. However, if you are too easily swayed by relationships, you may be making decent decisions but not optimal decisions. You should always strive to find the best alternative for your organization.

4. Skeptical Steve - Maybe I'm like Skeptical Steve so much that I find little wrong with this persona. It's good to question things to ensure you are making good decisions. I guess the only thing I have to say is don't be too cold to your suppliers. In negotiations, a warm relationship can lead your supplier to reveal information that you can use to your organization's benefit.

5. Gradual Greg - This one is easy: move faster. Not every decision has to take years. Some people leave emails in their inboxes for weeks because they need time to decide whether to act on it or delete it (I've done this myself). When it's possible, figure out what to do, make the decision, and move on to something else instead of letting a decision fester indefinitely. Staying on the cutting edge doesn't happen by delaying decisions.

6. Warp 9 Walt - This persona is one that I see in many procurement leaders that I know. "Let's get it done...my people will take care of the details." Decisiveness and appropriate time management are good, but this persona does cause problems when there are deal breakers in those details. Consult the people who will implement your decisions before finalizing those decisions. By doing so, you may avoid saying to your people six months later "I told you six months ago to make this happen. Why the hell is it floundering?"

7. Analytical Al - Many decisions involve data. Your analysis skills are valuable here. But some decisions don't have a precedent. These probably scare you. But good decision-makers are able to choose the right paths simply by "following their gut." It's a very important skill to have, so you need to learn how to survive without your spreadsheets.

8. Innovator Irene - To innovate, you have to break from tradition. It's good to do so, but sometimes it's helpful to understand why something didn't work before instead of being attracted to the idea of proving the naysayers wrong.

I'd like to thank the RAIN Selling Blog for posting such an inspiring article. They have some great material over there for anyone interested in selling (or decoding what your sales counterparts are thinking and doing!).

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, January 27, 2011

The Effect of the Recovering Stock Market on the Procurement Profession

Over the last couple of days, the Dow Jones Industrial Average has been flirting with the 12,000 mark. The Dow last hit this mark around 18 months ago. This mark is near the all-time high close of 14,164.53 on October 9, 2007.

Since that high point over three years ago, the Dow closed as low as 6,547.05 (March 9, 2009). As a result of the stock market decline that these figures represent, many people lost over half of the value of their investments. Many of the losers were individuals who had socked away money in retirement accounts and suddenly had to recalibrate when they were going to retire.

Now that the stock market has recovered and once imminent retirees have recovered a significant percentage of their losses, what do you think is going to happen? And what does all of this stuff have to do with the procurement profession?

Well, I am estimating that those who deferred their retirement are now ready to jump ship...fast! It's no secret that the procurement profession has a lot of mature people in its ranks. So, I believe that the procurement profession will be particularly hard hit by the attrition of these baby boomers who stayed put perhaps longer than they originally intended.

I believe that individuals who have demonstrated their skill through quality experience and/or education (e.g., the SPSM® Certification) will be in a great position to advance their careers. Sadly, I also think that those who weren't serious about adding to their credentials will see more employers crying about "not being able to find quality people" than employers hiring mediocre people just to have warm bodies filling seats.

What do you think? Are we going to see a rapid shift in procurement personnel in the near term?
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, January 26, 2011

Rising Commodity Prices in 2011: Procurement's Golden Opportunity To Shine?


These last few weeks, there has been ample media coverage of rising prices for a variety of commodities, from gold to food and many more. Yesterday's article, "Rising costs threaten corporate profits," on Comcast.net is just one example.


That article noted that "[c]oncern about the effect of rising [commodity] costs on profit margins" has impacted stock prices of publicly-held companies. Now, you probably are aware that the compensation and net worth of senior management of publicly-held companies is tied to stock price, so these people are going to care about prices paid for commodities - something that you, as a procurement professional, can affect.

Quite simply, if you can control what your organization pays for commodities better than expectations, your organization's stock price will likely rise. That means your management's compensation and net worth will likely rise. And you will deserve some credit for a job well done.

But that's assuming that you do a good job. What does a good job of commodity management entail? Well, I'm going to simplify it a bit, but here are a few components:

Know the market well enough to predict its future direction. You should have enough experience with what you buy that you know that price increases are on the way long before the media starts reporting them. What drives the cost of what you buy? What early indicators will you be looking for that usually precede cost increases? Know the cycle if there is one. Watch for trends. Try to understand how changes in circumstances - the economy, supply, demand, weather, etc. - will impact the commodities that you're responsible for.

Communicate your forecast. Executives don't want to be blindsided by things that threaten profitability, much less constrain their compensation or net worth. If you see prices rising, don't hide and hope for the best. Share with management what you see coming so that your organization can make necessary adjustments such as planning to pass on the cost increases to its customers, finding other areas for cost savings, looking at substitute materials, and/or maybe even giving the procurement team more training. This will also enable management of publicly-held companies to give guidance to investors who may like unpleasant surprises even less.

Use every tool at your disposal to control costs. From hedging to sourcing and everything in-between, you need to pull out all the stops to keep a lid on costs. You know the challenges that you will face, so do something about it. Your performance will be watched.

Communicate your success. I believe that if you know your market and use the cost containment tools available, you have a good chance of mitigating the worst of cost increases. Don't be shy about showing how you outperformed the forecast or expectations. And don't be surprised if your management does the same on its next earnings call and the stock price rises accordingly.

While the cost-cutting attitude brought about by the recent recession gave procurement departments the opportunity to help their organizations survive, I believe that today's environment of escalating commodity prices presents another golden opportunity for procurement departments to shine.

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, January 24, 2011

Will Supplier Consolidation Be A By-Product of US Healthcare Legislation?

I hope that you have enjoyed the article "Can Supplier Consolidation Truly Save Cash?"

In the article, I referred to "pending legislation in the USA that will require businesses to file a 1099 form for every supplier with whom they spend $600 or more per year." You can read more about that brilliant idea here if you're not familiar with the legislation or the 1099 form process.

As I tried to convey in the article, it is hard to assign verifiable costs to the number of suppliers. One exception would be having to hire a contractor to create and distribute 1099's to those suppliers with whom you've done business under the law that goes into effect in 2012. I would guess that these contractors that will pop up unless our congressmen and women get this looming debacle will probably charge on a per-1099 or per-supplier basis.

Because there will be now some verifiable, reduceable cost associated with the number of suppliers a company has - even if it only represents a small cost of doing business with a supplier - there will be some degree of push from executives for supplier consolidation. "Hey, if we don't have to pay for a 1099, let's not."

Obviously, this is a disadvantage to the niche suppliers - primarily small businesses - who focus on doing one thing well instead of 50 things poorly. If a business can buy 50 things from the same place and only have the burden of issuing one 1099, that business may sacrifice quality, cost, delivery, and/or service to do so in order to avoid having to issue fifty 1099's.

That sounds akin to a government-sanctioned plea to buy from Wal-Mart so that the local bike shop, pet store, pharmacy, etc. go out of business. And, if that wasn't enough, this legislation discourages small transactions that are the lifeblood of small business. Some businesses will think "It will cost more to generate a 1099 for this item than to buy it, so I will not buy it at all."

If no one noticed, "not buying" has been kind of bad for the economy in the past couple of years. It's scary to think that our government - in addition to encouraging doing business only with the big guys - is also encouraging a situation where businesses will think twice about making small purchases.

It makes me wonder how much of the total business spend in the US is low value (e.g., less than $50). I think that is an area that is very important to the economy and very vulnerable to this legislation.

Circling back around to the article, the point is that whether demanded by management or influenced by dumb legislation, supplier consolidation is likely to be a goal of yours. So, when you engage in it, be sure to aim for the three results listed in the article.

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, January 21, 2011

US Congressman Murphy Visits Next Level Purchasing Headquarters




Today, US Congressman Tim Murphy visited Next Level Purchasing's headquarters. He and I talked for an hour about a variety of legislation-related topics, one of which that has procurement implications I'll discuss here.

Congressman Murphy and other congressmen/women are seeking to revise the healthcare legislation signed into law last year. The congressman believes what I fear: that the individuals and businesses in our country will be fighting healthcare costs that will escalate more aggressively than ever before.

A couple of the legislative changes that Congressman Murphy is supporting include allowing individuals and businesses to purchase healthcare coverage across state lines and to allow businesses and individuals to pool their buying power, both of which can reduce rates and increase the quality of healthcare available. With the forthcoming upward pressure on healthcare costs and new markets potentially opening up, this is no time for spend management novices (like HR departments) to be driving the procurement bus.

If there ever was a time for procurement departments to be responsible for the healthcare category, it is now.

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, January 20, 2011

Mashed Peas For The Traveling Procurement Professional's Soul

I spent the first several days of this week on this road, getting on and off more airplanes that I care to count. And, if you're like most procurement professionals, you probably do your fair share of traveling, too.

Of course, there's one thing that is like nails on a chalkboard to most business travelers: sitting next to a crying baby. And, on the last flight of my trip, there was a baby who deserved a gold medal in the art of crying!

I overheard comments from many of my fellow passengers as they lamented their plight of being stuck in an aluminum-tube-with-seats with a tantruming infant. Me? Babies crying doesn't bother me.

I just thought, I could have been that crying baby on a plane a few decades ago. Any one of my fellow passengers could have been.

And I also thought about what babies represent. A baby represents opportunity and the future. That baby may someday grow up to change the world and make it a better place. That baby on the plane might become the next Bill Gates, Mother Teresa, or Martin Luther King, Jr.

If it did, would you complain about listening to it cry for an hour? Or would you thank the poor mother who has to deal with the sound and the embarrassment for bringing a future hero into the world?

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, January 18, 2011

Purchasing Professionals: Would You Let Yourself Be Ignorant For 30 Years?

Today, I had a great conversation with an attorney I shared an employer with in my early days in the purchasing profession. We recorded a podcast on a topic that the purchasing profession just doesn't have enough available educational material on. You'll hear more about that in the weeks ahead.

Anyway, my colleague recalled a legal training session that he did for the company's purchasing department years ago. And he clearly recalled a director approaching him afterward and saying "I've been in purchasing for 30 years, and I never knew what those terms meant until now."

My colleague was both pleased - that he could teach a seasoned purchasing director something new - and horrified that, after 30 years, a highly-paid professional didn't bother to seek to learn about some technical yet common things.

Is there something in contracts, specifications, or other aspects of your job that you've encountered often but never bothered to learn? If so, will you be like the purchasing director in this story and wait your whole career until someone explains it to you or will you be proactive and seek clarity on your own?

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, January 14, 2011

How To Filter Supplier Selection Advice

In a recent post, Spend Matters addressed a significant issue: handling supplier selection advice from a third party. In that post, editor Jason Busch cautions those in buying roles to be wary of such advice because it may be covertly driven by some type of revenue-sharing arrangement between the advisor and the recommended supplier.

Jason writes that "the onus should be on procurement organizations to ensure that they are representing their organization's best spending interests by [investigating] any potential conflicts of interest among those influencing -- or facilitating -- a decision on their behalf." I agree.

When advised to select a supplier, Jason suggests asking the advisor questions such as:
  1. Do you (or does your organization) receive any direct or indirect compensation from the supplier for referring business based on product, solution or service recommendations and/or referrals?
  2. Is this information disclosed (or not) through any public means?
  3. If "yes," is the compensation tied directly to volume and revenue generated for the vendor or is there an incentive based on another mechanism?
  4. Do you currently have any other type of commercial relationship with the supplier that you are recommending, or do you hold any type of equity or other financial upside in this vendor? If so, what is the extent of the relationship and do you work with other competitors to the vendor in question?
  5. Are there any suppliers that you do not work with commercially that you have referred business to in the past in this supply market? If so, who?

In other words, find out how the advisor and his/her organization would benefit if you selected a supplier based on the advisor's recommendation.

I feel that this post is one of the most useful ever on Spend Matters and should be bookmarked by every procurement professional. Stay in procurement long enough and you will confront this situation.

However, I also believe that questioning advisors who recommend doing business with certain suppliers is only half of the vigilance that you should employ. The other half is questioning suppliers who recommend against doing business with a supplier.

In those situations, you can ask:

  1. Why are you recommending against going with that supplier?
  2. What specific research in this particular market have you done to familiarize yourself with the available suppliers?
  3. Have you had or observed first-hand a bad experience with that supplier?
  4. Does this supplier have competitors with whom you have some type of revenue-sharing or referral fee relationship?

In my time, I've seen crazy situations such as one in which a buyer who knew his market quite well was recommending doing business with a well-known supplier in that market and presented that recommendation to management. Management - who knew nothing about that market, which is why they have buyers with such expertise - asked an advisor about the supplier. The advisor, who really didn't know the market yet didn't want to admit his abject ignorance to a client seeking advice, told management not to do business with that supplier because the advisor had never heard of the supplier. Management listened. And ended up spending more on an inferior service. All because it listened to an advisor that knew nothing instead of a buyer who knew a lot.

My additional advice about supplier selection advice:

  • Advisors' advice should be but one of several inputs that you use to make a decision.
  • Don't rely solely on your advisor - you may be more educated than your advisor.
  • Keep the old "trust but verify" adage in mind.
  • Do your own homework to see if you reach the same conclusion.

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, January 13, 2011

January 2011'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 January 2011 is...



Timothy Showalter, SPSM, a Buyer for Pechanga Resort & Casino in Temecula, California, USA. Timothy completed all six Senior Professional in Supply Management® Program classes and passed the SPSM® Certification Exam during the month of December!

Next Level Purchasing and the procurement community around the world congratulate Timothy and commend his 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

Wednesday, January 12, 2011

New Construction Purchasing Book Hits Market

I have been advised that a book entitled "The Construction Purchasing Agent Handbook: The Critical Sourcing Method" has just hit the market. I've read a couple of chapters of the book and scanned the rest so far.

What I like about this book is that it is very, very targeted. It is aimed to deliver maximum benefit to new purchasing agents in the construction industry. As such, it shares a lot of practical, useable ideas instead of the pie-in-the-sky ideas that sound great from 30,000 feet but are virtually unimplementable like those ideas featured in books targeted at CPO's.

Though the book does address many specifics of construction purchasing - and, therefore, should be required reading for everyone in construction purchasing - there are parts that can apply to any purchasing professional. One example is the ethics chapter. There is nothing new in this chapter but, when it comes to ethics, there are some things that can't be said/heard too many times.

The book is well-written, contains solid advice, and is easy and pleasurable to read. If you're interested, you can get this book from Amazon.com.

Disclosure: I do not receive any compensation from the sales or promotion of this book. However, I do admit to being flattered by the author - who I have never met - writing that this blog gave him the idea to write the book and that my "efforts at advancing Purchasing as a strategic function have benefited everyone in our profession."


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, January 10, 2011

The Should Cost Model - An End or a Means To An End?

I hope that you have enjoyed the article "Using A Should Cost Model In Negotiation."

This article was based on a podcast interview I did with Tim Reis, a Sourcing Manager who holds the SPSM® Certification. What I love about this article and Tim's approach is that it makes it clear that creating a should cost model isn't necessarily the end of a process. Instead, it is often a means to an end - using the should cost model to persuade a supplier to offer a lower price.

Much of the information on should cost models that is out there totally misses this point. So, if you haven't already, I recommend that you check out the podcast with Mr. Reis in addition to keeping the article handy to remind you what to do when you're faced with the challenges of buying a custom item.

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, January 07, 2011

Does Consignment/VMI/Bailment Reduce Costs Or Merely Shift Them?

An article in today's Pittsburgh Post-Gazette revealed that the Pennsylvania Liquor Control Board has altered its system such that their vendors will own the inventory in the PLCB's warehouses until such inventory is shipped to its retail stores. The PLCB is making this move to save money, the amount of which is calculated to be "up to $80 million in the short term...and millions more annually." Part of this savings is coming from the deferring of payment to suppliers, who are accustomed to getting paid within 30 days of delivery to the warehouse (not the stores).

Yes, inventory has carrying costs. And, yes, reducing inventory reduces carrying costs.

But by shifting the inventory to the suppliers' books, is the PLCB shrinking supplier margins in the near term? And, if so, won't suppliers, who factor their own cost of capital into pricing, increase their prices?

I say that is a distinct risk.

If the PLCB eliminates its inventory but gets 10% price increases across the board, will it still say that the initiative was a success?

It shouldn't. Especially since the PLCB - forecasting success with the program - only plans on closing one of its three warehouses. It will still incur the overhead costs of the other two warehouses. And facility costs are a major component of inventory carrying costs that are tied to the amount of inventory.

Do you think that the PLCB should be confident enough to write a check to buy $80 million worth of something else since it will be saving that much through this "bailment" initiative?

I'm not saying that consignment is not worth pursuing. But when you impose it on your suppliers and expect them to charge you the same prices, you may not be doing yourself any supplier relationship favors. Plus, there are other alternatives, such as integrating the PLCB's retail inventory system with its suppliers' systems and having shipments made direct to the stores. Maybe even on a quasi-JIT basis.

A direct-to-store strategy would truly streamline the supply chain, making it easy to see how cost can be taken out of the supply chain.

With that in mind, do you think that consignment/VMI/bailment reduces costs or merely shifts them? And, because whether you negotiate for lower prices or consignment/delayed payment you're still attacking supplier margins, what would you rather negotiate for: lower prices or consignment?

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, January 06, 2011

How Visible Is Your Procurement Impact?

I smiled today when I walked by the desk of Next Level Purchasing's Senior Marketing Coordinator, Megan. Here is a photo of what I saw:







Hanging this whiteboard was her idea, not management's. As you may have interpreted, the numbers on the whiteboard reflect the major metrics by which her performance is measured.


And I thought: "Jeez...why don't I see this type of performance communication on every buyer's outside cubicle wall when I walk through a procurement department?" You see, as the head of the organization, seeing this whiteboard assures me of at least two things: (a) what is important to management is important to Megan and (b) Megan has taken a simple, but effective, step to ensure that her focus stays on what is important.


So, what does your CEO see when he or she walks by your desk? Can they immediately tell how well you're doing or what you are focused on?


If not, don't you think that it would be worth spending $30 to make your procurement impact visible?



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, January 05, 2011

Paying A Supplier When There Is No Purchase Order

Back in October, I penned a post entitled "Should You Pay An Invoice That Doesn't Correspond With A Purchase Order?" Interestingly, that question took on a life of its own when I posted an excerpt of the post on the SPSM LinkedIn Group. There are still comments coming in as recently as today.

Topics brought up include:
  • What about emergencies?
  • Are PO's only important in certain cultures where there is a low level of trust?
  • Do you generally pay these invoices but try to find repeat offenders among suppliers?
  • And more!

Because this discussion has gotten so interesting, I invite you to join in the conversation. Click here to go to the discussion on the SPSM LinkedIn Group.

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, January 04, 2011

Borders Stops Paying Suppliers, Watches Stock Price Plummet

According to an article on Publisher's Weekly's website, the once-powerful Borders bookselling chain has suspended payments to suppliers due to cash flow problems. Of course, its major suppliers have cut off shipments until they are paid.

The result? A nearly 20% one day drop in Border's stock price.

Ouch.

Now, Borders might be in dire financial straits. But many organizations are less than diligent with supplier payments even when they are healthy.

Because this matter with Borders makes it clear that ability - or even perceived ability - to pay suppliers can be a powerful indicator of financial health, you should be able to understand how a procurement department can positively or negatively impact stock price by its supplier payment policies and practices. Pay those suppliers in accordance with your agreements and support a high stock price for your organization!

Why is stock price important?

Well, a significant percentage of most publicly-held company's senior management's net worth is dependent on stock price. You wouldn't want your CEO upset with you because late supplier payments wiped out 20% of her net worth would 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

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