Archive for August, 2008

What’s in a LOGO? What makes a company more than simply me too? How does one measure differance?

Friday, August 29th, 2008

Attacking the competition is not something I do. I have always been an advocate of deserving business from my customers by providing the best products and services at the most competitive prices. Whether you are a new company or company evolving from a prior way of doing things should not matter. Where was Microsoft 30 years ago? Had anyone ever heard of Whole Foods? What was Intel? There have always been next generation companies, thinkers and visionaries that do the same things we’ve done every day in very different ways. The goal of these companies is to drive increases in productivity, create new jobs and better work environments. There have always been early adopters, and there have always been followers. Which are you?

There is an epidemic in our world today of unsafe products being sourced for our consumers. Not enough is being done about it. The global supply chain is growing larger every day and traceability which does not exist is critically important. As consumers we have become far too familiar with terms like listeria, salmonella, ecoli, botulism, noroviros and staphylococcus aureos etc. There are additional issues with non consumable products such as lead in toys, flammable liquid issues and hazardous materials to name a few.

Our environment is also suffering. We can do something about it. By us, I mean our collective sourcing community of retailers, suppliers, brokers, growers, manufactures and others. Every day speech includes terms such as global warming, recycling, biodegradable, alternative fuels, pollution, conservation, green living and many others. What are you doing about it?

So, when you look at a LOGO, please look at what statement it makes. Is it clear? Look at the company’s website and see if its message is clear and supports their brand image. When you meet with the company make sure their message supports at a detailed level what their brand indicates. The LOGO of our company is SAFESOURCING. We absolutely do things other companies do such as reverse auctions. However we do it in a far different way. We have streamlined the process with new technology, and added intelligent functionality. We have added a critical focus on safety and the environment with the largest retail supplier database in North America which also supports a traceable history beyond one forward one back. And, we do it less expensively because our technology allows us to.

We are SafeSourcing, and we are proud of it. I look forward to your comments.

Ron Southard

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What the heck is Retail Spend Management? One might think there is a simple answer.

Thursday, August 28th, 2008

Depending on the vendor you ask, you will get a variety of different answers. This generally is dependant on their own offerings. With that said, I must admit that there are days when my answer evolves based on current development and learning.

My typical response to retailers is that spend management is the management of your company’s spending across all product categories. Organizationally this normally reports to a Chief Procurement Officer or the head of your supply chain. Success is typically measured by a reduction in cost of goods and services or COGS, improvement in quality or both. In retail, spend is represented in for resale products such as general merchandise, gift cards, frozen seafood, meat etc. Spend is also measured in the expense category or not for resale products and services such as supplies, plastic sacks computer equipment, fuel etc.

According to Wikipedia, Spend management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business. These costs typically show up as “operating costs” or SG&A (Selling, General and Administrative) costs, but can also be found in other areas and in other members of the supply chain.

There are dozens of vendors that have a variety of tools and services that are available to assist companies in the analysis and management of their spend for the purpose of present and future decision making. These range from small boutique software houses to giant corporations. Spend management tools run the gamut from sophisticated contract management applications, e-procurement tools such as reverse auctions, purchase order management tools and supplier databases etc. In the most sophisticated implementations, these tools may be tightly integrated with retailers ERP systems.

It is not a surprise that many companies are not really aware of what their total spend is, or how many suppliers they spend it with. Often times, product specifications are hard to find if documented at all and the same category is being purchased by different departments across the enterprise without aggregating the spend. This results in lost savings which could mean the difference between success and failure in the retail segment.

So, there you have a simple or maybe not so simple answer to a complex question.

I look forward to your comments

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Why the sourcing of safe products is so important.

Wednesday, August 27th, 2008

During the last four months this blog has discussed a variety of safety related issues. We’ve discussed the impact of the recent St. Paul salmonella out break, recalled beef, tainted pet food, Heparin recalls, lead in toys and a variety of related issues such as traceability, certifications, and environmental impact. But what is the resulting trickle down effect.

We all remember the pet food recall from 2007. Although accurate numbers were never released as to the number of pets affected, an article in USA TODAY on August 26th 2008 by Julie Schmit indicated that the FDA received more than 17,000 complaints. WOW!!! Let’s spell that out SEVENTEEN THOUSAND. What if those were people? What if several of these outbreaks all happened at the same time? The same article titled Pet-food recall leads to 6,000 claims and counting. SIX THOUSAND. At present the article indicates that pet food makers and retailers have set up a $24,000,000.00 fund to compensate pet owners. This begins to beg a couple of questions.

1. What impact is this having on the bottom line of retailers, pet food suppliers and other affiliated companies?
2. How much work time was and will be lost by those filing claims that did or will have impact on the company’s productivity for whom they work.

We already know that retail in particular the supermarket segment is a low net earnings business. Based on estimated average net profitability over the last 10 years, it would take twenty four billion dollars ($24,000,000,000) to create $24M in net profitability. That’s a big ouch to retailers. So what other areas can be impacted by these types of events?

Some potential impact areas to consider from these types of events follow:

1. Lost sales of affiliated products
2. Lost customers that end up blaming retailers
3. Lost jobs at manufacturers and suppliers of tainted products
4. Productivity declines due to sick time
5. Increased legal fees
6. Decrease in stock performance of all connected companies
7. Increased government spending which drives taxes higher
8. Less job growth

Obviously one could go on and on. Retailers have always proved to be resilient and shown the capacity to bounce back. But, and it’s a big but suppliers and manufacturers can make it easier on their retail partners by supporting the proper level of traceability in the supply chain and adhering to emerging standards in more than name only. Great companies make the focus on these types of issues executive suite sensitive. Generally these are the same companies that bounce back.

I look forward to your comments.

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I radiate, you radiate, we all radiate. FDA approves irradiation of spinach and lettuce.

Tuesday, August 26th, 2008

How many times have you been to the dentist’s office or another medical practitioner’s office and been asked when the last time you had an x-ray was? Health professionals do this for a reason. The reason is that when it comes to exposure to radiation, to much is not a good thing.

The FDA just approved irradiation for lettuce and spinach. Maybe if they had done it sooner, tomatos would have been safer when paired with these greens in a salad. Sorry if you don’t get the humor, but where is it going to stop? We have a problem. Food born illness is on the increase around the world. If we want to keep the conversation local, we can look to Tomato’s, Jalapeño’s, Beef, Peanut Butter, dog food etc. in the USA during the last two years. The list however goes on and on. So, the supposition is that since we can’t trace it, control it or stop it let’s just give it some radiation.

For those that don’t understand what irradiation is, the Wikipedia definition is as follows;
Irradiation is the process by which an item is exposed to radiation. The exposure can be intentional, sometimes to serve a specific purpose, or it can be accidental. In common usage the term refers specifically to ionizing radiation, and to a level of radiation that will serve that specific purpose, rather than radiation exposure to normal levels of background radiation abnormal levels of radiation due to accidental exposure.

I know for this author, that when statements like all the evidence suggest there is not a risk does not make me personally comfortable. Meat was approved for irradiation in 2000, but as a follow on the FDA later approved the use of carbon monoxide gas to preserve coloring. If you go to your local store, you have a difficult time finding any of this meat. Let’s hope the same happens with produce. Your retailers have your best interests at heart, and generally won’t carry what you won’t eat. Please make sure you check your labels, and Bon appetite.

This author believes that the best opportunity for the elimination of food borne illness over time is a safe supply chain. This requires a database of suppliers with traceable inforamtion that goes beyond todays accepted standard of one forward one back.

I look forward to your comments.

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Congratulations to the Food and Drug Administration (FDA).

Monday, August 25th, 2008

If you are a regular reader of our daily blog, and according to Spend Matters you should be. You are aware of how important food safety is to SafeSourcing as a company and to our employee’s in general. Our SafeSourceIt™ North American Supplier Database supports thirty (30) safety and eco focused certifications that our suppliers are held accountable too when offering their products to retailers. We applaud all organizations that work towards that end.

The following is taken directly form the FDA website and appears an rss feed in our daily safety alerts.

The U.S. Food and Drug Administration (FDA) has scheduled a public hearing on allergen advisory labeling on September 16, 2008, at the FDA Center for Food Safety and Applied Nutrition’s Harvey W. Wiley Building in College Park, Maryland. Formal notice of the Hearing published in the Federal Register on August 8, 2008 (FR 73 46302).

FDA is developing a long-term strategy to assist manufacturers in using allergen advisory labeling that is truthful and not misleading, conveys a clear and uniform message, and adequately informs food allergic consumers and their caregivers. To that end, FDA is soliciting comments and information to assist the agency in determining how manufacturers currently use advisory labeling, how consumers interpret different advisory labeling statements, and what wording is likely to be most effective in communicating to consumers the likelihood that an allergen may be present in a food. The agency is also interested in receiving comments about whether consumers find advisory labeling helpful for making food purchasing decisions. This public hearing is the first step in closing existing knowledge gaps in developing our long-term strategy.

The hearing will include presentations by agency officials, invited speakers and members of the public. The Federal Register Notice and information regarding Registration are available on the FDA Web site.

Please support this important initiative, and as always we look forward to your comments.

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Part III. Why don’t middle market retailers use reverse auctions and other e-procurement tools?

Friday, August 22nd, 2008

Now that we understand why the middle market is not participating in reverse auctions, let’s review exactly what a reverse auction is how simple they are to use and the potential financial benefits?

In parts one and two of this three part blog we discussed why middle market retailers are not using reverse auctions to reduce costs of goods and services and provide some insulation for earnings during the current trying economic times.

Let’s summarize. Reverse auctions are web based applications that let retailers find the best suppliers for any resale or not for resale product or service they want to source. Using a web based reverse auction tool, middle market retailers or groups of middle market retailers (collaborative groups) can invite far more suppliers to take place in reverse auctions than they could possibly find or manage using traditional methodologies. During the reverse auction event they can review on one page all responses from suppliers, data about suppliers, notes from suppliers, product specifications and other necessary information. Additionally at auction conclusion which is typically less than 30 minutes long retailers can review savings scenarios and award business on line from their desktop.

Now let’s get to the simple financial benefits. Let’s assume a $150M Retail Supermarket Company with industry average earnings of one percent or $1.5M. Additionally cost of goods for this company is 70 percent or $105M. Let’s also assume this company were to only source ten percent of their for resale or above the gross margin line spend or roughly $11M. With below industry average savings of ten percent, total savings generated would be $1.1M which is a direct impact to net profitability. If all other segments of the P&L perform to plan and all savings are recovered during the same business calendar year net profitability would increase to $2.6M or a 73% improvement. One can just not ignore this type of opportunity.

I look forward to your comments.

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How do suppliers benefit from participation in e-procurement events such as reverse auctions?

Tuesday, August 19th, 2008

A customer asked me last week why suppliers would want to participate in an e-procurement event. A discussion followed relative to incumbent suppliers vs. new sources of supply. In general most vendors in the space would come up with many of the same points listed below. Please read on.

SafeSourcing Inc. places a great deal of value in our SafeSourceIt™ North American Retail Supplier Database of over 250,000 suppliers located in Mexico, Canada the United States and China. Additionally we also place a great deal of value on each individual supplier regardless of size. We believe that well thought out next generation e-procurement tools can provide significant benefits to buyers and suppliers whether they are hosting or participating in e-procurement events.

Some but certainly not all benefits that suppliers can anticipate from SafeSourcing are:

1. An easy to use e-procurement tool limited to a single page view where a supplier can be completely comfortable that their company’s best foot is being put forward to the soliciting company.

2. An increase in new business opportunities through engagements they would otherwise not be exposed to.

3. Clean data about the soliciting company and an accurate listing of their event guidelines, specifications, terms, conditions and other information necessary to build an accurate and successful pricing strategy.

4. Best practice training in event participation and strategy development.

5. A clear focus on what’s important beyond price in next generation e-procurement tools such as supplier safety certifications and practices as well as their environmental programs that will differentiate them from other suppliers.

6. Closed loop reporting of results of the specific e-procurement event a supplier participates in as well as a detailed supplier feedback questionnaire report.

7. Significant time savings associated with new business development that becomes more and more costly as fuel and other prices continue to rise.

8. Industry pricing trends extrapolated from their view of low quote information during the event if allowed by the soliciting company.

9. Use of these tools for their own procurement needs.

I look forward to your comments.

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What learning’s resulted from the St. Paul Salmonella Outbreak?

Monday, August 18th, 2008

As the salmonella scare winds down, with no new cases reported since the 27th of July and the count of infected individuals at 1,423. The leading causal candidate seems to be water used on Jalapeños from Mexico. Two questions come to mind. What did procurement professionals learn from the St. Paul Salmonella out break? And, what can be done in the future to shorten the amount of time it takes to come to an end game that does not result in millions of dollars in lost revenue for farmers, distributors, brokers, suppliers, retailers and any other organization in the supply chain.

Below are fifteen (15) thought provoking take aways:

1. Present certifications and laws are not enough to police safety properly.
2. The FDA is not staffed properly to handle an out break of this nature.
3. The FDA is understaffed to handle an issue larger than this outbreak
4. Policies in place to create traceability since 2002 are not being followed in their entirety.
5. One forward one back is not sufficient to support source level traceability.
6. New legislation Safe And Fair Enforcement and Recall for (SAFER) Meat, Poultry, and Food Act of 2008 has been introduced to give the government control over these issues in the future.
7. The CDC does not have the detailed information it requires in a timely manner.
8. Headlines in Major Newspapers are not always accurate. This headline from a June 18th article. How modern science and old fashioned detective work cracked the Salmonella case. Page two’s continuation title is Fast Action, great teamwork nabbed culprit.
9. What is sorely needed is a database of manufacturers, suppliers, brokers, growers and products that can be searched in a variety of ways in order to trace goods to their original source of supply when situations like this occur.
10. Growers have lost revenue unnecessarily.
11. Retailers have lost revenue including sales of products affiliated with tomatoes.
12. The FDA has lost man hours that could be focused on preventative tasks to outbreaks in the future.
13. Consumers to some extent have lost confidence in the safety of our food products.
14. Retail sales take a long time to recover even after products are declared safe.
15. It may be easier for retailers to rely on their e-procurement providers to provide safety data in a form greater than one forward one back.

The above list is certainly not complete and in no way is meant to be negative. It is however a call to action to all players in the supply chain to work together to create a traceability standard that will help to eliminate this type of issue or god forbid worse outbreaks in the future.

I look forward to your comments

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More and more and more on Food Safety

Friday, August 15th, 2008

Many of you are probably tired of my posts regarding the Salmonella outbreak that sickened over 1400 US citizens from one of my June first posts “I say Tomato, you say Tomahto” to a July post on the same subject “Holy Jalapeño” I have discussed the lack of traceability and adherence to food safety standrdards in our supply chain. Below are some other activities also related to this subject. As a former Ohio resident, I applaud Senator Browns work.

I read two interesting articles today. Once came from US Senator from Ohio Sherrod Browns monthly newsletter http://brown.senate.gov/ . The other came from a related news article in the Thursday August 14, 2008 edition of USA TODAY Money section cover story titled “Tracing tainted produce isn’t easy.” written by Julie Schmit The following are excerpts from Senator Brown’s news letter.

Recent salmonella and E. coli outbreaks in Ohio and across the nation have highlighted the serious shortcomings of our current food safety system. It’s bad enough that many Ohioans are struggling to afford groceries; they should not also have to worry about the safety of the food on their dinner tables. The safety of our food supply is too important to be left to voluntary self-policing by private industry. The Safe And Fair Enforcement and Recall for (SAFER) Meat, Poultry, and Food Act of 2008 would give federal regulators the authority they need to achieve our government’s most important duty: to keep Americans safe.

The aforementioned USA today story discusses issues causing the slowness in traceability within the produce supply chain being caused by a lack of inadequate record keeping. Record keeping required by bio-terrorism laws enacted after the events of 9/11. The following quote “A faster system would allow (us) to exclude products faster and give you a source faster” is from David Acheson the FDA’s food safety chief to law makers”

The SafeSourceIt™ Supplier Database with over 250,000 North American suppliers is focused on safe and environmentally focused sources of supply and traceability for retailers.

I continue to appreciate your shared concerns and look forward to your comments

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An e-Procurement auction is just an auction right? The answer is maybe, depending on your strategy.

Thursday, August 14th, 2008

The vast majority of e-procurement events are in the form of a reverse auction. That does not necessarily mean that reverse auctions are the only auction format that retail e-procurement strategists should consider. There are additional auction formats available when trying to drive to the best event strategy. In fact at times, using different auction types may have a positive impact on price compression when used strategically.

The traditional reverse and forward auction format used by most companies today is called an English auction. This type of auction allows the buyers and sellers to specify a reserve price below which the item will not be sold. In a forward English auction buyers bid the highest price they are willing to pay for an item and bidding activity stops when the auction duration is complete. In retail, this type of auction may be used for overstock items to help reduce shrink and may be attended by a variety of buyers such as dollar stores or companies like overstock.com. Generally the item or lot is sold to the highest bidder at their bid price. On the opposite end of the spectrum, but using the same tool set is a reverse English auction. In this case suppliers bid the lowest price they are willing to sell an item or lot for and bidding activity stops when the auction duration is complete. The item is bought from the lowest bidder at their bid price unless auction rules dictate that award of business will go to multiple suppliers or not be awarded at all based on other criteria such as quality.

Other types of auctions include the following. Understanding their functionality may help drive additional savings. Ask your provider if they can run these types of events and how to use them to your benefit.

1. Fixed Price Auction
2. Japanese Auction
3. Brazilian Auction
4. Vickrey Auction
5. Dutch Auction
6. Yankee Auction

I look forward to your comments

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