Archive for June, 2008

What’s your risk associated with the sale of tainted food? Who’s Culpable?

Monday, June 16th, 2008

Beyond the obvious social costs associated with responsibility and culpability in the sale and consumption of tainted foods, the potential for huge litigation costs can put your company at risk for years after an incident actually happened.

I was reading the Sunday June 15th 2008 issue of The Arizona Republic and found a short article in the week in review section titled Girl’s tainted-food death brings $13 mil settlement. This unfortunate incident actually occurred eight years ago at a Sizzler restaurant. The settlement was with the company’s meat supplier and others according to court records. Evidently, Brianna Kriefall did not even eat meat. She actually ate watermelon that had touched the tainted meat and passed away a week later. Additionally, one hundred and forty other people became ill from the outbreak in two sizzlers.

Today there is still a lawsuit ongoing where the national Sizzler chain and an insurance company are suing Excel Corporation a meat producer that is a subsidiary of Cargill Inc.

Beyond the settlement listed the actual legal and other expenses associated with this case may never be known, but with retail industry net profit averaging about 3.4% you can bet the impact on earnings to be significant for some CEO.

It is important to know where your products come from with a clear trail to the original source of supply, and what your suppliers are doing in the way of certifications such as GFSI and SQF to insure the quality of the food chain for retailers and their consumers.

I look forward to your comments.

Ron

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When the people Speak. Koreans seek safety.

Friday, June 13th, 2008

Sometimes when I speak about safety in the supply chain, or environmental controls that suppliers and retailers adhere to, that far away look enters peoples eyes as if to say I don’t have time for this. We’ve had scares in the United States this year with beef, chicken, lead in toys, mercury in frog legs, heparin, baby seats, Honduran melons, tomatoes, frozen pot pies, play seats, mini NASCAR helmets, and more.

What concerns me most is there seems to be no outrage. At least no where near the outrage there seems to be relative to the increase in fuel costs?

This does not seem to be the same when other countries look at our export programs. As an example, over eighty thousand South Koreans held a vigil on the street leading to the U.S. Embassy protesting their governments program with the U.S. relative to the safety of U.S. beef imports and U.S. standards for combating mad cow disease.

In a world where so much is beyond our control, one thing we can control is what we eat. Is it to much to ask that it be safe? I’m not sure either one of our presidential candidates would even have a platform issue related to food safety. I’m sure they have an opinion. If a similar percentage of Americans were to assemble in Washington to protest the same issue, we would be viewing a half million people on the nightly news.

Relative to food safety, we need more tools that make it easy for retailers and suppliers to view safety standards for the products they buy and less process and politics to complicate the issue of food safety.

I look forward to your comments.

Ron

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It was the best of times, it was the worst of times.

Thursday, June 12th, 2008

This is the opening sentence of A Tale of Two Cities by Charles Dickens. As regards our subject matter, it is the best of times for retailers to run Reverse Auction e-procurement events.

Prices continue to rise across the board. Groceries climb each week, if not each day. Gas prices are ridiculous and causing companies to take unique approaches to retaining their employees. One employer recently measured the cost of hiring and training replacements versus reimbursing existing employees for their gas purchases above $2.57 per gallon, and decided on the later. But, that’s off the subject.

All companies in good times and in bad do what they can to contain or lower their costs. This happens on the expense line and on the cost of sales or cost of goods line. Which can have the most impact is a constant debate. I personally have always supported attacking the cost of goods line as it represents pre gross margin spending against the largest expense category. During challenging economic times like today, it may even be a better time to use reverse auction tools to procure your goods and supplies. Smaller companies that may not have willingly competed for your business in the past based solely on their size may in fact be very aggressive and willing to accept lower margins, zero margins, or negative margins just to help their cash flow. This is generally not the case in a good economy. Obviously your incumbent supplier’s don’t want to lose your business and will be aggressive in order to keep it. This is the formula for a successful reverse auction.

Supporting this philosophy has to be the fact that you have a robust source of suppliers in order to drive participant count. Tools that provide this data are available on a short term subscription basis and easy to use.

Unfortunately many retailers do not use these tools or are unaware of them, or only use them for a limited portion of their total spend. This is not the case outside of retail where up to 80% of spend is targeted using these type of tools.

It’s a great time for retailers to use reverse auctions.

I look forward to your comments.

Ron

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What are best practices? And, why should we care?

Wednesday, June 11th, 2008

According to Wikpedia a best practice asserts that there is a technique, method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method, process, etc.
So when a company indicates to you that they use best practices, does this mean they are supporting what is the best practice for the entire industry they serve such as e- procurement. Or does it mean they are the best practices for just their product family?
I don’t believe that best practice is just following a standard way of doing things that can be carried out by multiple organizations. A best practice is a life long process that must evolve over time as tools, businesses, and existing processes change.
If one uses best practices, should not the result be an ideal state that a person or an organization set out to achieve in the first place. In fact if the process used is actually a best practice shouldn’t all of a companies customers use the same process. I’m not sure that this is ever a question one asks when looking for a referral about a companies service offerings. Please tell me about these companies’ best practices. Are they consistent and carried out each and every time to the desired result.
One way to ensure good quality results is to provide templates that can be used over and over again and are evaluated at the completion of each practice and changed when need be. This then requires passage to other customers in order to insure the integrity of the process. This elevates the actual process beyond just a buzzword and moves a particular process in the direction of becoming a best practice that drives similar results on a consistent basis.
I will continue to call our services offerings high quality process techniques focused on continuous improvement that deliver anticipated results. Our customers, supplier participants and business partners will determine if they are best practices for them.
I look forward to your comments.
Ron

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I say Tomato, you say Tomahto. I ate some last night!

Tuesday, June 10th, 2008

I guess I just have to sit and wait and hope nothing happens. I did not keep up with the spread of the tomato outbreak. The list I read was for the states that you could eat tomatoes from. I thought it was for the sates you could not eat them from and not seeing Arizona I went ahead and had a nice garden fresh salad with tomatoes.

I’m sure this problem won’t hurt the economy the way that rising oil prices do. It probably won’t have a huge blip on a retailer’s bottom line although whatever sales there were are gone for good and normal sales will probably take a while to recover.

The FDA has said it is safe to eat cherry tomatoes, grape tomatoes, and tomatoes sold with a vine still attached. I bet you’ll think twice though before you buy any tomatoes.

Albertsons, McDonald’s, Wal-Mart, Burger King, Outback Steakhouse, and Taco Bell among others have halted sales of raw tomatoes

As of this morning there were up to 145 reported cases and 23 hospitalizations associated with this recall. The culprit is Salmonellosis which in healthy people can cause fever, diarrhea, nausea, vomiting and stomach pain.

According to and FDA spokesman you’ll have 2-3 days of discomfort if you are a healthy individual. Children, elderly and people with weakened immune systems may suffer more.

Taking the precaution of boiling your tomatoes for 15 seconds prior to eating them may make them safe. That’s if you can find any for sale and like stewed tomatoes in your salad.

Most retailers believe that they are buying safe products for their consumers. The question is when the FDA determines where the problem products came from and what caused it in the first place will the inforamtion be made available to retailers and what will the accountability be. After all 145 people sick only represents 3,480 work hours lost for now.

Tonight I think I’ll have some fresh fruit.

I look forward to your comments.

Ron

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Category Savings. What’s the question?

Monday, June 9th, 2008

I have had many retailers ask me the question, what are some examples of category savings we might expect when running e-procurement events? The answer is that it depends on who you are asking and what you actually are measuring. There are probably at least a dozen websites that speak to category savings. Each discusses different numbers. The reason the answer depends on who you ask is that to begin with every company defines categories differently. An example might be bottled water. Is bottled water really a category or is it a sub category of beverages which is a sub category of grocery. So, the first question that needs to be answered is…are you looking for true category savings or are you looking for specific product savings The next question one might ask is, are you asking for actual realized savings or are you asking for savings that are hi-lited at the end of an e-procurement even?. If you are asking for true realized savings, there are a multitude issues that need to be discussed. If the successful supplier is your incumbent, then the savings may actually be closer to those viewed during the e-procurement event; however, reality indicates that a large number of incumbents do not end up as the low quote. If the supplier is not the incumbent, there are actually quite a few elements that result in true savings that have to be considered. By in large, they can be included in a category called switching costs. To begin with the supplier that you may have just awarded business to may not be an authorized vendor in your data base. As such, the IT department and or the finance department are needed to add them to your database. A new contract may also be required with a company that you have not done business with before. This requires the involvement of your legal department and may, in fact, add delays to the process that require you to order additional product from your existing supplier at potentially higher prices than awarded during the e-procurement event. If products are being delivered to a distribution center, slotting requirements are needed and pick lists require updating in order for the product to be available when ordered by individual store locations.

Now, let’s go back to the actual e-procurement event for a minute. At the end of the e-procurement event when business was awarded were the savings the same as displayed during the event? Did the e-procurement event just provide you with high level savings made up of all low quotes; or, if business was awarded to multiple suppliers ,were savings calculated in that manner? Were funds, if included in the winning bid, included in the savings and treated the same way that your company treats them from an accounting perspective? Are pre-event historical savings a result of how companies awarded business; or are you being quoted a historical average of all low quotes run through a system even though business was not actually awarded that way and savings may not have been realized?

So, what can you expect for category savings in an e-procurement event? The answer is it depends.

I look forward to your comments.

Ron

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The Greening of the Supply Chain: Mind your Three P’s.

Friday, June 6th, 2008

The Greening of the Supply Chain: Mind your Three P’s.

What does it mean to go Green? I was reading the Aberdeen white paper Building a Green Supply Chain from March of this year and believe they may in a concise format have the best glossary of definitions as to the meaning of and impact on what it means to be Green. Their short but effective green glossary defines the following terms.

1. Corporate Social Responsibility (CSR) posits that companies have a responsibility to be social and environmental stewards and that having a positive impact on society and the planet is as important as profit.
2. Green refers to practices, processes and products that have a minimal impact on the health of the ecosystem. The emphasis is on non hazardous recyclable, reusable, and energy efficient products and processes.
3. Sustainability ensures the ability to meet present needs and profits, today, without compromising the ability to meet them tomorrow.
4. Triple Bottom Line (TBL) determines that business has positive impacts on the three P’s: people, profit and planet and is a standard framework for CSR agendas.

It might be interesting to ask CEO’s around the country if they agree with these definitions. Many probably do. The answer would however be a good indicator of a company’s commitment to being Green and not just caught up in green wash.

Yesterday Wal-Mart and Costco announced better than expected results for their past quarter and the stock market was delighted. What if their results had not been as good and same store sales were flat? But concurrently the companies offered guidance of the significant and positive impact they are having on the evolution of a green supply chain. Would Wall Street have reacted in the same way? Personally I think it highly unlikely.

The great news is that every day more and more emphasis is being placed on this subject by companies of all sizes.

I look forward to your comments.

Ron

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Is critical thinking in supplier selection a key to quality reverse auctions? You bet!

Thursday, June 5th, 2008

If you wish to host a successful reverse auction a robust supplier database is key to encouraging competitive bidding. A logical focal point for hosting a competitive auction is to assemble all of your present vendors for a particular category that you hold in good standing. These are suppliers from whom you have sourced products using traditional means in the past. In general the principal is the more vendors or suppliers that participate, the better your potential results. This however also requires strategic thought because you are beginning a process that you want to use on a recurring basis. As such inviting the same suppliers again and again may seem to make sense, but may not encourage the results you are looking for. This is a critical reason why it is important to have the most robust supplier data possible available for your review. If you can only find six local suppliers for a particular auction, they will all most likely agree to participate the first time. However a key issue to consider is what will encourage them to participate the next time and after that? Suppliers will almost always not be the same size. As such the smaller vendors will most likely bid early and drop out after the early rounds. These suppliers will most likely not agree to compete in the future as they consider their chance of winning the business unrealistic. Suppliers that finish first or second or incumbents that are displaced will agree to participate again, but lack of competition will make the auctions less successful.

A logical question would then be. If we only have six suppliers available how many should we invite to participate? Should we invite them all? Every company will answer this question differently. When considering the future, do we want events or do we want continual process improvement that drives continuous savings. There are several possible solutions to consider. First, only invite four participants to begin with. This will create a competitive environment for your auction. Let’s assume that in twelve months when you repeat this auction that the two largest suppliers agree to return. You could now invite supplier’s number five and six that were not included in the original auction. You have now created a competitive auction for the second year or cycle. A second thought might be to not invite all of the largest suppliers to your first auction, in order to manage the quality of your suppliers for future auctions. This type of critical thinking supports continual process improvement in e-procurement implementations.

I look forward to your comments.

Ron

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The Environment. Who’s on first?

Wednesday, June 4th, 2008

In a recent survey of eight thousand (8,000) adults conducted by Disney Family.com between the 22nd of February and the 17th of March 2008. When asked who should enforce environmentally sound practices? Forty percent of respondents indicated that it should be the government; thirty nine percent indicated that it should be individuals; thirteen percent indicated that it should be businesses and nine percent indicated that it should be the schools. That equals more than one hundred percent based on rounding. The great news is that 100% of the individuals surveyed had an opinion. That’s a step in the right direction for the environment. In question is the fact that forty percent of individuals surveyed defaulted to this being a government responsibility. Did not our sixteenth President of the United States Abraham Lincoln say during his Gettysburg address during November of 1863 that “government of the people, by the people, for the people, shall not perish from the earth”?

I believe that it really is about the people. All of the people. I don’t believe that government can do it alone without guidance from the people. I don’t believe that businesses can do it alone without guidance from the government in the form of standards. I don’t believe that people can do it alone without taking it to the work place. And, unless we focus on it in the home and the workplace there is not much schools can do to enforce their environmental educational content. I really believe that their should have been a selection option in this survey stating that it takes all of us working together towards a common good. And, since I have always told my children and co-workers to give more than 100% if they want to be successful, rounding to greater than one hundred percent in this case would have been a win for the environment.

At SafeSourcing we pay it forward every day where the environment is concerned by focusing on the environmental standards of the suppliers in our SafeSourceIt™ supplier database such as Greenstar Certified, LEEDS, Green Seal, and EcoLogo to name a few.

I look forward to your comments.

Ron

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The Pet Food Scare. It made me focus. What’s your Story?

Tuesday, June 3rd, 2008

The Pet Food Scare. It made me focus. What’s your Story?

It’s been almost 18 months, and my best friend is now over 14 years old. If you just used the common dog year formula of 7 years for every dog year he recently turned one hundred (100). How many of us today would sign up for that age if it was guaranteed to us? I hope I’m this healthy when I reach one hundred (100). Imagine waking up early every morning with the same eager air of anticipation. It’s another great day to look forward to. Have some breakfast, go to the park at the end of the street and then on a mile and a half walk. Have a light snack and something cold to drink when you get home and then take a nap in the warm sun spot coming through the window. This sounds like paradise to me, especially at 100.
Many of you probably have a friend just like this. They may not be as old, but the life you share is just as special to you.
How would you feel if this friend suddenly became violently ill and during the next two weeks lost nearly 20% of their body weight? Pets provide many benefits to humans. They comfort us and they give us companionship. In fact to many of us they are simply our family.
The situation described above is true, and fortunately my friend survived the pet food scare of eighteen months ago that for those of us affected we remember all too clearly. Some of our friends were not as fortunate. This is sad.
It sometimes takes personal incidents to initiate one’s focus on a particular subject. In this case it is safety in the supply chain. As a side note, to date retail sales of pet food have still not totally recovered from this incident. This is also sad.
I look forward to your comments
Ron

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