Archive for September, 2008

The Food and Drug Administration fills 1300 positions. Are consumers safer?

Monday, September 15th, 2008

On April 30th the FDA announced they would be hiring 1300 new associates. On the same day they announced the completion of this initiative, they also warned that baby formula could be contaminated.

The following was from the FDA April 30th press release which also corresponded with the Salmonella Saintpaul outbreak which ended up sickening over 1400 people. In fiscal year 2008 alone, the FDA is looking to fill more than 600 new positions and to backfill over 700 others to implement the FDA Amendments Act of 2007, the Food Protection Plan and the Import Safety Action Plan. That’s nearly triple the number of people hired from 2005-2007.

The question begging to be asked, is with the hiring of thirteen hundred individuals completed which includes biologists, chemists, medical officers, mathematical statisticians and investigators, are we safer? Additionally, is our supply chain any more traceable? It appears we are making progress.

It appears as though we are reacting more quickly also. The bay formula problem is not with products manufactured in the United States. The problem is with formula made in China not for sale in the U.S. which contains melamine the same contaminant that was responsible for poisoning and killing thousands of dogs in the United States during 2007. The fear is that the products could make their way into Asian neighborhood markets illegally. The FDA has already contacted all U.S. manufacturers and is working with state and local health agencies to notify local Chinese communities. This is a good job by an over worked agency.

We continue to believe that the best possible protection for consumers and risk mitigation for retailers is a traceable supplier database that supports more than one forward one back tracking.

We look forward to your comments.

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What are the ramifications of supply chain safety violations?

Friday, September 12th, 2008

I speak on a regular basis about safety in the supply chain. Some think it is just a hook. It is in fact a passion. Today I was discussing the ramifications of EN 13869 with a retailer. This safety standard applies to those small cigarette lighters sold at the point of purchase at many supermarkets, drug stores and convenience stores. This standard which is also related to ISO 9000 quality standards is known as BS EN 13869 and covers Lighters, Child-resistance for lighters, and Safety requirements and test methods.

Our discussion went on to cover where in fact the lighters ultimately come from, whether they are impacted by the resin market, the use of logo’s and branding restrictions related to those logo’s such as those of sport teams and the risk of the retailers logo also being placed on these lighters. Too often, these concerns are not considered when purchasing such a small resale product. Later in the day I went for my daily run, during which I passed a blue lighter lying on the side of the road. I wondered if this lighter still worked, or if it had a retailer’s logo on it? What if it has been damaged? What if a child picks it up and is injured by it? Who is liable? The only traceable element is the retailer’s logo. This certainly provides some food for thought when procuring these products. This author would make sure retailers request and retain all safety certifications of your supplier on file and additionally provide several levels of traceability as well.

If that does not inspire you the keep better records as regards safety, just check today’s release from the FDA. West Virginia Livestock Owner Sentenced in Criminal and Civil Contempt Case. The U.S. Food and Drug Administration announced today that a West Virginia cattle dealer has been sentenced to six months probation for refusing to obey court orders in 2006 and 2008 that prohibited her from introducing animals into the food supply until the FDA had approved her record-keeping system. The FDA initiated the case after illegal levels of drug residue were found repeatedly in calves that Shirley A. Rhodes of Sandyville sold for use as human food.

The fact is that safety is important. It needs to be included in all sourcing decisions and traceable information kept on file. Consumers deserve no less and quality suppliers owe it to their retailer partners.

Safety is our passion. We look forward to your comments.

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Star Market gets it right. Remodel to be Eco-friendly!

Thursday, September 11th, 2008

I am in Boston this week. I always enjoy my trips here because I grew up here and still think of it as home. Never mind that I’m also an avid Boston sports fan.

The other thing I like to do when I’m in town in addition to reading the local news papers, is to visit local retail locations. One of the first accounts assigned to me when I was a young salesperson at NCR was Star Market. They were a division of Jewel Companies at that time and Peter Lynch now the CEO of Winn Dixie was responsible for operations. Star had a very interesting store that actually sat on top of the highway spanning both east and west bound lanes. I often wondered what health effects that might have on the workers exposed to the fumes of the very heavy traffic below.

Today when reading the Boston Globe the business section had an article by Erin Ailworth titled Eco-friendly energy to power revamped Star Market. Based on my post from yesterday titled How can the procurement department lead the way in company green initiatives, this article caught my attention.

The article goes on to indicate that the store located on Route 9 in Newton Massachusetts will be powered with an energy-saving fuel cell that runs on natural gas, use an innovative refrigeration system that reduces carbon emissions, and be illuminated with light-emitting diodes that last up to 10 years. The best part of the entire article was the third paragraph. “What it allows us to do is save energy and save money, and it allows us to show our commitment to environmental stewardship,’ said Holly Angell, director of engineering for parent company Supervalu. This is an example of corporate social responsibility at its best. And, all of these products had to be acquired through the procurement department. I’ll bet if I were to ask that the construction company is also LEEDS certified.

Congratulations to Supervalu, Star Market and the Boston Globe for reporting on this subject on the front page of their business section. This is an example of paying it forward. Keep up the great work.

We look forward to your comments.

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How can the procurement department lead the way in company green initiatives?

Wednesday, September 10th, 2008

The role of procurement is pretty clear. At least it is to this author. It is also why procurement is the most important job in retail.

Others may argue with the last sentence, so let’s be more specific as to the other departments that are vital, yet no where near as important or in the position to lead as procurement. Not store operations, not finance, not information technology, not loss prevention, not human resources. They all use the products and services you negotiate the terms, conditions and pricing for. The impact these organizations can have on the net profitability of a company pale by comparison to what can be accomplished by procurement professionals armed with the most current e-procurement tools. Every good and service for resale and not for resale that comes in to a retail establishment has to go through the procurement process. That means it goes through buyers, category managers and other spend authorized team members. So, with the role of being the most important department, it is also incumbent upon procurement thought leaders to seize the opportunity to lead by example. One area that deserves your attention is driving and supporting green initiatives and corporate sustainability initiatives beyond simply making sure the products you procure support eco friendly standards.

So where might procurement thought leaders aid their companies approach to sustainability efforts. The following are are ten simple suggestions to stimulate your thinking. How many more can your team come up with?

1. Provide your team with the tools to work from home.
2. Ask your vendors to not come to the office weekly anymore. Have them communicate via the internet.
3. Host more reverse auctions and RFI’s as a standard way of procuring your products.
4. Use recycled office supplies such as pens, pencils and paper.
5. Make all corporate non shipping fleet vehicles hybrids.
6. Reduce the use of paper contracts.
7. Make sure all contractors for remodels and new construction are LEEDS certified
8. Use eco friendly lighting at home and in the office.
9. Car pool to lunch.
10. Have a team whiteboard session on ways to use clean technologies such as wind, bio-fuel, solar etc.

We look forward to your comments.

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Do we get quality products from China? When will we and how much will it cost?

Tuesday, September 9th, 2008

I read a really cute blog today at Spend Matters by Jason Busch. The last four or five sentences from the first paragraph were as follows. My wife was wearing a rather trendy looking sun hat that she had purchased at a boutique store in Shanghai (at close to Western prices). Our older son turned to her and asked her where she got it. Lisa blurted out: “in China”. Our five-year old responded with a one-liner that had us rolling: “well, it must not be a good brand.” You should read this blog. It posits that the quality for Chinese products is bound to improve.

I agree with Jason completely but we should also take other issues into consideration such as the total cost of sourcing those products and alternative North American sources of supply which may develop based on the high cost of fuel. I discussed this in two previous posts in more detail.

In the first blog (NAFTA and the High Price of Oil) I discussed an article in which the author discusses the fact that the North American countries could see an increase in production related jobs as a result of rising oil costs that make it to costly to source products from the Asia Pacific region. In the 2nd blog (Does your company source products from China?) Should they?) I discussed important questions that should be asked of your provider that will help to minimize the risks that are commonly associated with the use of long distance global supply chains.
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Please visit Spend Matters regularly as it is one of the best blogs in the space. Plus we can keep up with Jason’s family.

I look forward to your comments.

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Prescription drug law that retailers should be aware of. The U.S. Food and Drug Administration Amendments Act .

Monday, September 8th, 2008

In an effort to aid retailers in keeping abreast of product safety inforamtion beyond just providing rss feeds, the following is information taken from a U.S. FDA post to their website http://www.fda.gov/bbs/topics/NEWS/2008/NEW01881.html on September 5th. This information is important for all companies that distribute prescription drugs when counseling their customers regarding their continued use, or customers seeking inforamtion for new prescriptions.

The U.S. Food and Drug Administration Amendments Act, signed into law Sept. 27, 2007 requires that the FDA inform the public each quarter of new safety information or potential signals of serious risk, based on the agency’s review of adverse event reports contained in AERS.

The U.S. Food and Drug Administration announced on September 5th that it has posted on its Web site its first quarterly report that lists certain drugs that are being evaluated for potential safety issues. The drugs have been identified based on a review of reports in FDA’s Adverse Event Reporting System (AERS).

The appearance of a drug on this list does not mean that FDA has concluded that the drug has the listed risk, or that FDA has identified a causal relationship between the drug and the listed risk. It is on the list only because FDA has identified a potential safety issue.

“My message to patients is this: Don’t stop taking your medicine. If your doctor has prescribed a drug that appears on this list, you should continue taking it unless your doctor advises you differently,” said Janet Woodcock, M.D., director of FDA’s Center for Drug Evaluation and Research.

Please visit http://www.fda.gov/ to review in more detail the list of medications included in this report.

We look forward to your comments.

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What is the single most important factor in sustaining success in reverse auctions?

Friday, September 5th, 2008

The most important factor in sustaining success over the long term in reverse auctions is a high quality source of new suppliers.

Although the numbers vary by provider, it is common knowledge that attaining the best on going results from a reverse auction has a direct correlation to the number of suppliers agreeing to participate. If your source of supply data is limited, then including new blood every time you run an event is incredibly difficult. As a result the process by default ends up as just a new way to continue to award business to the same suppliers. As such there may be productivity increases with limited additional reduction in cost of goods.

Let’s consider the following scenario.

Suppose your provider only has a limited source of new suppliers and in this example can only find six local suppliers to invite to a particular auction. Using great sales skills most will likely agree the first time to participate for the opportunity to win your business. It is at this critical planning stage that thought be given as to what will encourage these suppliers to participate the next time and the next…

Suppliers like retailers are not always the same size. History indicates that smaller suppliers will most likely bid early and fish in order to determine a larger competitors’ pricing relative to their own. Smaller suppliers will also drop out or stop bidding after the early rounds. Lacking creative approaches (more on this later) to working with small suppliers, most will 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 generally may agree to participate the next time around, but fewer suppliers and the lack of perceived competition will make the rerun of this auction less successful.

Lacking a robust source of new suppliers, and in this case we only have a total of six available how many should be invited to participate? Should all be invited? Most providers will have different views on this question.

This author offers the following. This is the creative part. When considering the future, do retailers want events or do they want continuous process improvement that drives continuous savings. There are several possible solutions to consider. In this example only invite four participants to the first event. This will create a reasonably competitive environment for your auction. Let’s make the assumption that this is an annual contract that will be repeated in twelve months. When this event is repeated the two largest suppliers will most likely agree to return. You could now invite the two suppliers that were not included in the original auction. This will create a competitive auction for the second year or cycle. An additional thought may be to not invite all of the largest suppliers to your first auction, in order to manage the quality of your suppliers for future events.

Although this type of creative thinking supports continual process improvement in the use of reverse auctions, the lack of a more robust supplier database will limit the potential savings much beyond the second event, particularly if a best practice suggests a minimum of six to ten suppliers in order to drive the best possible results…

Make sure to ask your provider how many suppliers they have in their supplier database, it will determine your future success.

I look forward to your comments.

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How might retailers begin to support environmentally focused e-procurement.

Thursday, September 4th, 2008

This blog has discussed a variety of e-procurement issues from quality category discovery to safety certification adherence over the last several months. Recently I was asked by a medium sized retailer where they might begin or how to get started in becoming more eco-friendly in their e-procurement practices.

There are certainly a lot of potential answers to this question that might include beginning by defining what their company means by being more eco-friendly or what specifically they are hoping to accomplish with this initiative.

There are several environmental focus areas that can be easily integrated into a company’s buying decisions without to much difficulty. In fact much of the data can be provided by suppliers as part of a simple RFI process and supported in a detailed product specification. The following list is intended to offer some guidance or points of reference in developing a plan.

1. Evaluate the environmental performance of incumbent suppliers
2. Support eco-labeling on products,
3. Develop a list of corporate environmental requirements you support
4. Develop a list of environmental regulatory requirements you are required to support
5. Publish this inforamtion with all pre event supplier instructions
6. Require service and systems providers to provide an analysis of the environmental impact of their delivery model
7. Ask suppliers to provide pricing on an environmentally focused equivalent or alternative to the current product specification within pricing guidelines
8. Jointly raise the awareness of environmental issues that affect procurement by providing relevant information and training to internal staff and suppliers
9. Review your state, province and regional environmental policies as they apply to your business
10. Publish the goals of your environmental program in the reception area and in each buyer or category manager’s office space in clear view.

There are certainly other areas not included in this list, but these are a good starting point.

We look forward to your comments.

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E- Auctions success road blocks. What are your true savings opportunities?

Wednesday, September 3rd, 2008

As we meet with retailers across North America, the most frequently asked questions are, “what can we expect for savings” and what is the time to event from contract signature?

Our answer is that it depends on a variety of areas that need to be uncovered during the category discovery process. Many vendors quote historical savings in person and on their websites that at best are simple savings and do not include other hidden but real costs. Retailers beware. Net savings reflected on your auction results are not what you will save once you have awarded business and or finalized your contract with new or existing suppliers. Many tools available in the industry today simply calculate net savings based on a summary of low quotes across all supplier participants. This has no correlation to final savings.

Hidden costs can result from switching costs for new suppliers, product quality or lack there of uncovered when reviewing samples, poor contract negotiation for awards that cross business years and miscalculate future costs and renewal language in new contracts are but a few items that must be well understood before an item or category is approved for auction.

When trying to uncover these costs a key to moving beyond these issues is senior management involvement including the executive office to help eliminate barriers from cross functional departments. A clear directive as to the use of e-procurement tools as a way to improve earnings, quality, stock performance and a way of doing business is an absolute requirement. Also required are new and interactive tools that make it easier to share specifications, volumes and prices and the capability to review results and measure savings by applying alternative award scenarios.

If practices are followed properly, and these types of issues are addressed during discovery and adequate executive sponsorship is in place, time to market can be a matter of weeks and savings adequately forecast.

I look forward to your comments.

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When does the 2nd amendment to The Constitution of the United States (Right to Bare Arms) apply to food safety?

Tuesday, September 2nd, 2008

I’m not sure that it really does directly. However, I will take any opportunity to report and comment on ways being used to drive safety in our food system even when I don’t agree with them. Who would have thought that over two hundred years ago when our founding fathers drafted the 2nd amendment to The Constitution of the United States, that it would play out as a way to protect our food supply from a variety of nefarious predators..

First of all, let’s briefly review the 2nd Amendment. There are numbers of groups that interpret the the 2nd Amendment to the Constitution of the United States ratified on December 15th 1791 to their own benefit. These interpretations tend to lean in one of two ways. The first is that the amendment was meant to ensure that individuals have the absolute right to own firearms; the second is that the amendment was meant to ensure that States could form, arm, and maintain their own militias.

I was stunned to read the following article. “Farmers use guns, poison to guard crops”. As Reported in the Arizona Republic on Sunday August 31st in an area titled The Green Zone. The first paragraph read Farmers in “America’s Salad Bowl” are turning into hunters – stalking wild pigs, rabbits, and deer – to keep E.coli and other harmful bacteria out of their fields.

We also know that this is an area of the country that does not need another reason for people to carry guns. The best possible opportunity for a safe food supply is continued research and factual reporting as to the actual cause of an outbreak. These data then need to be captured in a central repository to support faster tracking of future outbreaks with better than one forward and one back source of supply reporting.

The st.paul outbreak is over. This author is not sure that the continued research to discover the cause ought to be. Statements that scientists are not sure of the exact source but suspect that cattle, feral pigs, or other wild life may have spread E. coli by defecating near crops requires careful control. Farmers don’t need guns; they need better research and quicker results. Is not manure a key source of fertilizer all over the world?

I look forward to your comments.

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