Thursday, November 29, 2012

112 Die In Tier 2 Supplier Fire - What Will It Take For Companies To Employ Effective Global Supplier Management?

An article on comcast.net today reported that a weekend fire in a Bangladesh clothing factory of Tazreen Fashions Ltd. resulted in the deaths of 112 workers.  Found in the factory were garments bearing the branding of Walmart, Sears, and Disney.

The scope of the tragedy was much greater because of basic safety measures that were absent, specifically that there wasn't even one emergency exit for the eight story factory where 1,400 people were working.  The owner of the factory was quoted as saying "nobody told me that there was no emergency exit, which could be made accessible from outside...Nobody even advised me to install one like that."

A real Einstein running that factory, huh?

Of course, Walmart, Sears, and Disney tried to downplay their role and responsibility in having their merchandise made in unsafe conditions.

The article reported that "Wal-Mart said it received a safety audit that showed the factory was 'high-risk' and had decided well before the blaze to stop doing business with Tazreen. But it said a supplier had continued to use Tazreen without authorization. The retailer said it stopped doing business with the supplier Monday."

Similarly, the article reported that "Sears said it learned after the blaze that its merchandise was being produced there without its approval through a vendor that has since been fired" and that "Walt Disney Co., which licenses its characters to clothing makers, said its records indicate that none of its licensees have been permitted to make Disney-brand products at the factory for at least a year."

So, the bottom line is that the suppliers and licensees with whom these US corporate giants have contracts violated their contractual obligations and subcontracted work to forbidden factories.

Sorry, but I don't absolve Walmart, Sears, or Disney of blame.

As I always stress, it is important to have "boots on the ground" in the countries where links in your supply chain are located.  It is absolutely critical to have personal visibility of materials as they move throughout the supply chain.  An annual visit isn't enough.  You should be able to see where your items are in each stage of processing at any time.  The numbers need to add up...and not just on a computer screen, in person!

The reason companies source in countries like Bangladesh is for the low labor cost structure.  Obviously, they are trying to minimize cost.  Then, things like this happen.  I consider it a consequence of the effect of so aggressively chasing the last few pennies of cost savings.

I'm not saying that low cost country procurement shouldn't be done.  I am saying that it should be done right.

Companies need to allow some of their cost savings be justifiably offset by effective global supplier management practices.  They need to put their procurement, quality, and other staff on airplanes more often to verify that contractual obligations are being adhered to, that environmental standards are being maintained, and that work is being done in safe and sanitary conditions.

I have been criticized for advocating surprise supplier audits in countries where relationships and trust are important.  Perhaps Walmart, Sears, and Disney wanted their supply base to feel trusted and didn't provide the oversight that, in hindsight, was so dearly needed in this case.

Well, did their suppliers justify that trust at the end of the day?  No, they spit in the faces of the corporate giants and did what they wanted when they weren't being watched.  Don't misinterpret this as a statement against any country or culture.  Most people and organizations in these "trust is #1" cultures are indeed trustworthy.  But there are some that aren't and there is the very real risk that you could be lured into overly trusting a supplier that violates not only your trust, but also laws and basic human rights.

If you're not willing to have in-person oversight with "boots on the ground" in low cost countries, please, source domestically where it is less costly and more convenient to oversee your supply chain.  How many more child labor violations, unauthorized uses of lead paint and other dangerous materials, and deaths from inadequate safety systems is it going to take before companies decide to do international procurement and supplier management the right way? 

To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
www.NextLevelPurchasing.com


Wednesday, November 28, 2012

Value Creation & Cost Minimization Are Not Mutually Exclusive: Beware of Treating Them As If They Are!

It has been decades since top-notch procurement has been recognized as a means of ensuring an uninterrupted supply of high quality goods and services, from responsive and responsible suppliers, at the minimum total cost of ownership.  Cost minimization, if you will.

As procurement departments approached excellence in their cost minimization activities, the procurement function itself expanded to encompass more things:  collaborating with suppliers on joint process and product improvements, soliciting and implementing innovative ideas from the supply base, establishing the inbound supply chain as a source of competitive advantage and growth of market share, etc.  Value creation, if you will.

In many evolutions - music, fashion, romantic relationships, business, and more - people embrace "the new" and sneer at "the old."  Perhaps it is an innate human tendency.

But I'm telling you right here, right now:  beware of allowing that tendency to force you to treat value creation and cost minimization as mutually exclusive, because they are not.  It has concerned me that I have heard some sketchy procurement consultants and wet-behind-the-ears procurement leaders say the equivalent of "We're focused strictly on value creation...cost minimization is old school!"

I've heard similar statements often enough lately to consider it a trend.  A disturbing one.

Now, don't get me wrong, value creation is definitely something that needs to be among today's chief procurement officers' top priorities.  But cost minimization needs to be up there as well.

Incurring the minimum total cost of ownership for products and services from an optimized supply base that meets quality, delivery, support, and social responsibility standards is a timeless procurement goal.  It's just good, basic business.  To maximize profit improvements, revenue must increase and cost must decrease.  It's an accounting fact and it isn't going to go away.  Any good CEO will demand that costs be kept under control.

So do both:  create value and minimize cost.

I may pat you on the back if you tell me you've long ago donated your leisure suits and haven't used the phrase "gag me with a spoon" since the '80's.  But if you tell me that you are no longer are concerned with cost minimization only value creation, I may have to hand you a copy of my book, The Procurement Game Plan.  And by "hand you a copy," I mean "smack you in the head with it."

:)

To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
www.NextLevelPurchasing.com

Tuesday, November 27, 2012

Does The Fiscal Cliff Threaten Procurement More Than Any Other Function?

Seems that the top headline on every newspaper and news website this month has been related to "The Fiscal Cliff" in the USA - a December 31, 2012 deadline upon which, absent a budget agreement by the party-divided US Congress - automatic spending cuts and tax increases will go into effect, sending the US economy into yet another recession.  Once again, this afternoon's headlines report "little progress" on resolving this matter.

If you're familiar with my teachings, you know that the members of Congress in opposing parties are using the deadline to see if the other side will "blink" and give in to their negotiating demands.  Usually, that is a good negotiating tactic.

However, the uncertainty of an outcome of these negotiations has effects beyond just the parties negotiating.  It has US businesses preparing for a worst-case scenario and "tightening their belts," really restricting expenditures to preserve cash.

In addition to restricting spending, informal evidence suggests that companies are beginning to lay off workers - perhaps just temporarily.  When deciding on whom to lay off, companies often look to departments that are operating under their capacity.

With non-essential expenditures being deferred or canceled, guess which department isn't quite as overwhelmingly busy as it was a month or so ago.

That's right...the procurement department!

Now, you and I know that procurement professionals do more with their workday than just place order after order.  But we can probably also agree that many C-level executives do not understand all of the intricacies of procurement beyond simply "buying stuff."

One may speculate that these factors may conspire to result in procurement headcount being threatened - albeit temporarily - by the fiscal cliff.  I won't claim to be an expert and say that it is for sure, so let me simply ask your opinion...

Do you think that procurement is threatened more by the fiscal cliff than any other function?

To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
www.NextLevelPurchasing.com


Monday, November 26, 2012

Free Supply Chain Relationships Webinar This Thursday!

Proper supply chain approaches have been actively pursued by companies looking for lower costs and improved service levels. However, obtaining this ultimate prize is not easy and can never be fully gained by those companies who choose to remain with the power based “winner takes all” supply chain approaches that use an adversarial pursuit of “value for me alone.”

Thinking differently and looking for more creative and innovative ways to manage the supply chain may therefore be a future only a few companies are able to undertake quickly enough. Those that do will gain a tremendous advantage over their competitors.

The webinar “The Relationship Driven Supply Chain, from Service to Success” will describe how you must create a culture of collaboration throughout the chain in order for your organization to succeed. In this webinar, supplier collaboration will be explored fully, with practical examples and evidence that will give encouragement for moving beyond contractual based service levels, towards cognitive connected decision making that brings mutual success.

The presenter for this webinar will be Stuart Emmett, author of dozens of procurement and supply chain books, including “A Quick Guide to Supplier Relationship Management in the Supply Chain.” 

This webinar will be held on Thursday November 29 at 11:30AM Eastern US time.  This webinar is free to all members of the NLPA and membership in the NLPA itself is free and instant.

Here's how to register for the webinar:

If you're already an NLPA member: Go to http://www.NextLevelPurchasing.com/login.html, log into the members' area, and navigate to the "Webinars" tab. There you'll find a registration link, be sure to enter a valid email address as attendance details will be sent to you by email.

If you're not yet an NLPA member: Sign up for your free membership in the Next Level Purchasing Association at http://www.nextlevelpurchasing.com/procurement-association.php?pcb. After doing so, you'll receive an email with information about how to log in. After logging in, navigate to the "Webinars" tab. There you'll find a registration link, be sure to enter a valid email address as attendance details will be sent to you by email.

Registration is free but may be limited, so sign up soon to ensure access to this event. I hope that you will join me for this exciting webinar!

To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
www.NextLevelPurchasing.com


Friday, November 23, 2012

Preventing & Managing Backdoor Selling - A New Online Express Course!


Are supplier salespeople circumventing your procurement processes in order to maximize their profits? If so, they are doing so at the expense of your organization.  As a procurement professional, it is your job to put a stop to that supplier behavior, called "backdoor selling."

Supplier salespeople are often so skilled at backdoor selling that their customers do not even realize how much money they are losing as a result.  And it has traditionally been very difficult for procurement professionals like you to figure out effective approaches for eliminating backdoor selling from their organizations.

But there is good news! Several best practices have emerged in recent years that can reverse the disturbing growth of backdoor selling.  Learning these best practices can help you match the skills of the most highly successful backdoor selling suppliers and, as a result, save your organization quite a lot of money.  How can you learn these best practices?  By taking the Next Level Purchasing Association's new online Express Course "Preventing and Managing Backdoor Selling" - released just this month!

You will learn how to identify all of the various forms of backdoor selling, plus:
  • How suppliers disguise backdoor selling techniques in the form of innocent sounding questions
  • What to do when you catch backdoor selling already in progress
  • How to negotiate with a supplier who has already gotten an internal customer to commit to a purchase
  • How to apply the four components of backdoor selling prevention
  • And much more!
Sign up for "Preventing And Managing Backdoor Selling" today for immediate access to the best practices for denying suppliers the opportunity to take advantage of your organization.  You can take this single-lesson Express Courses in about 30 to 60 minutes, whenever you want and as many times as you want to over a 60-day period.

There are two different ways that you can gain access to "Preventing And Managing Backdoor Selling:"
Thank you for your interest in letting Next Level Purchasing help you have a rewarding career.

To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
www.NextLevelPurchasing.com

Wednesday, November 21, 2012

Procurement Transformation or Procurement Tweaking?

I hope that you have enjoyed the article "True Procurement Transformations, Part I."

As I wrote in the article, procurement transformation "means different things to different people" and I proceeded to list things that will change in a "true" procurement transformation.  What I didn't do was contrast what a procurement transformation is versus what it isn't.

So, I will use this blog post to list some of the things that are sometimes referred to as "procurement transformations" but are merely "tweaks" to the procurement function if done alone.  Here are those examples of procurement tweaks:
If you are only engaging in one of these bullet points, I mean no disrespect.  Certainly making improvements in one facet of procurement is better than continuing to do "business as usual."  I am only saying that it may not be proper to label that activity as a procurement transformation.

Part II of the article coming soon!

To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
www.NextLevelPurchasing.com

Thursday, November 01, 2012

More Surprise Supplier Audit Ideas

I hope that you have enjoyed the article "Surprise Supplier Audits:  Pros, Cons, Ideas."

In the article, I've provided some ideas about how to best implement surprise supplier audits.  I am using this additional space to share even more ideas on the topic.  So here you go:


  • The concept of surprise audits should be presented to your supplier as a standard business process that is performed with randomly selected suppliers.  This can help ensure compliance while not making your suppliers feel that you are suspicious of them.  This premise is why companies do random drug testing of their employees – so those employees called upon for a test don’t feel that they are the target of suspicion.
  • Ensure that you work with your suppliers to ensure some type of security pre-clearance so that your surprise visits aren’t met with uncomfortable and insurmountable refusals for your team to enter the suppliers’ facilities.
Be sure to subscribe to this blog, or check back soon, for a "Procurement Parable" about surprise supplier audits.

If you linked to this post from the Pros, Cons, Ideas article, click here to return to that article.



To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer - Next Level Purchasing Association
Author - The Procurement Game Plan
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
www.NextLevelPurchasing.com

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