Archive for October, 2008

Here’s some more to think about regarding the complexity of e-procurement events.

Friday, October 17th, 2008

Pick a date any date. We’ll run that reverse auction for you. Be careful what you ask for.

A primary reason for unsuccessful reverse auctions is poor planning after the category discovery process during the event setup phase.

There are a variety of areas that require careful consideration as part of the date selection process prior to running a reverse auction or e-procurement event. A significant area of consideration is whether or not sample products will be required and if they are, will delivery of the samples be required prior to the event date or after the event date. The event bid date can also be dependant upon the complexity of the event and whether or not significant detailed information will be required prior to the event in the form of a request for information or RFI. This process may also be used to limit the field of suppliers prior to the actual event bid date which may then be used for further compression in the pricing. Consideration is also required regarding a seasonal items impact on the date you may select to run a reverse auction. As an example the best month to run holiday turkeys even though they are not needed until November may actually be February. Ultimately to keep the supplier community happy and willing to participate again in the future, a date needs to be selected for the award of business and adhered to. Remember that if you are requesting samples after the event, it will have an impact on the award date. The award date may also require review as to existing contract dates, planned product marketing programs, logistics decisions and store replenishment needs as well.

We look forward to and welcome all comments.

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You heard it here first; the foods we source and consume are safer than they have ever been.

Thursday, October 16th, 2008

That’s my attempt and tongue in cheek humor. They Are Not, and we collectively need to work together to do something about it.

This author reads a lot every day including trade publications, newspapers, retail industry website content and blogs. One unmistakable truth is that we do not have a good handle on safe quality foods yet. Nor do we have a good handle on safe sourcing. Significant industry organizations such as the U.S.A based Food Marketing Institute or FMI with their Safe Quality Foods or SQF initiative and European based CIES The Food Business Forum with their GFSI initiative are doing much to support food safety, while standards organizations such as ISO are driving quality standards such as ISO 9000’s family of standards for quality management systems and ISO 22000 which builds on HACCP’s role in food safety management systems.

With all of the above effort this author would like to call your attention to four articles in the LIFE section of the Wednesday October 15th issue of USA TODAY. They are.

1. Owners of pet food victims to get $24M.
2. Bottled water not necessarily pure.
3. Possible conflict in bisphenol A review.
4. New warning over microwaving raw frozen chicken entrees.,By Elizabeth Weise

I am personally proud that the news media keeps us informed of these issues, but in too many cases the information takes place after the consumption of the tainted products. Why can’t we prevent these problems during the growing, processing and production stages?

It is incumbent upon solution providers to retail companies to focus on product safety. In this case we are talking about food products. It is important during the supplier discovery stage to insure that proper certifications are in place throughout the food chain. If a distributor does not have a certification, it is incumbent upon them to make sure the company they distribute for does. If they do not know where to look it is incumbent upon the solution provider to point them in the right direction and to library the conversation in product specifications for future retrieval. It is important for solution providers to educate or have plans to educate their associates on the important certifications required by the industry and others in order to serve the industry better. Ask your solution provider to provide you with this information about their company.

It is important that as an industry we eliminate the discovery cost associated with source identification post food born illness and the resulting litigation expense that can follow sometimes years later.

I look forward to your comments.

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How can retailers creatively use e-procurement tools to limit upcoming losses from below normal holiday spending?

Wednesday, October 15th, 2008

Retailers all know the economy is the worst that most of us have ever seen. Panic is the emotion of the day. What is a good e- procurement strategy to limit retail losses?

For those of us who have been around the race track more than a few times, the time tested saying “this to shall pass” may provide some level of comfort during these trying times. This author believes that to often the knee jerk reaction of most executives is to immediately cut spending, reduce headcount and batten down the hatches until the present down cycle plays itself out. A former boss reminded me on more than one occasion that” it’s about the money” which is a common mantra taught in most business schools. The secure executive however looks at these times and try’s to make business decisions that will move the company forward by quantum leaps as the market recovers.

What might we expect from retailers? According to a USA TODAY article by Jayne O’Donnell titled Fearing a holiday letdown; retailers shifting strategies, consumers will see fewer selections, fewer sales people to help them and more promotions.

Let’s not be fooled, most of the product destined for stores during the holidays has already been ordered and is in the queue to be delivered to stores. What’s at risk for retailers beyond just reduced consumer spending during the holidays, are next quarter’s sales? If consumers are honest, they don’t see much in the way of personalized service during the holidays even with the ramp up in hiring. The real opportunity here is in the area of promotion. How a retailer moves product that is already committed to, is the real issue. The reason for getting the product out earlier is to extend the season including the markdown period generally planned as part of the sell through process.

One real opportunity for retailers in a down market for which inventory has already been committed is an aggressive plan to reduce overstock as soon as seasonal spending hits a planned bottom. First to market companies with this type of strategy will get a better bang for the buck than laggards. Forward auction tools are an excellent way to accomplish this. There are a variety of typical audiences for this type of inventory including internet sites such as overstock.com and all of the dollar store formats. What retailers may not be aware of are the dozens of other organizations that would be willing to participate events of this nature. The SafeSourceIt North American Supplier Database includes this category of resellers to support forward auctions.

An additional note, this plan will also help to reduce fourth quarter shrink which is the largest shrink quarter in both dollars and as a percentage of sales.

We look forward to your comments.

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Can understanding complexity theory shed light on the lack of use of e-procurement tools in retail? Part II.

Tuesday, October 14th, 2008

Does the complexity of the retail environment deter retailers from utilizing e-procurement tools?

In yesterday’s blog post, this author tried to define the relative complexity of the retail environment and its potential impact on the use of e-procurement tools. Specifically we identified the following areas of interlocking complexity.

1. Supply Chain complexity.
2. Rate of change in the global supply chain.
3. Long term inherited supplier relationships.
4. Lack of retail procurement staff.
5. Lack of time.
6. Multiple sources of supply.
7. Limited view of new sources of supply.
8. Confusion as to who’s the customer and who’s the supplier.

An element necessary to this conversation which was not considered in yesterdays post and offers significant pressure to each individual complexity element is the state of the global economy. Applying the present economic condition to any of the complexity elements listed above can have a negative impact on another complexity element. As an example, an existing source of supply may go out of business or may make a business decision to retract their reach as a result of transportation costs. Either of these conditions may have a huge complex impact on complexity element (# 7) limited view of new sources of supply while also introducing strain to complexity element (#3) long term inherited relationships. As jobs retract, complexity element (#5) is always impacted as existing procurement knowledge workers have to pick up the slack of departed associates where they may not know the suppliers or even have an existing relationship.

Where do solution providers focus their attention in order to begin to address these conditions and drive an increase in e-procurement utilization? The first complexity element that requires attention is (#5) lack of time. Although quite often offered as an objection by retailers (we don’t have time for this right now) this complexity element must be taken into consideration during the design phase of application development. Functional specifications must include significant provisions for doing the same job in significantly more efficient ways. This is not about best practices implementation or application surround services. These are not application attributes; they are ways to drive additional revenues from a retailer once contracts have been signed. These services need to be engineered into the application through the use of intelligent agents and intuitive design that result in significant time savings with the same headcount for day to day activities that can be proved easily.

We look forward to your comments.

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Can understanding Complexity Theory shed light on the lack of use of e-procurement tools in retail?

Monday, October 13th, 2008

Can scientific measurement systems not designed for retail be used to understand why e-procurement has not gained the level of utilization it should within the retail industry?

First we need to define complexity theory. In part, Wikipedia defines complexity theory broadly speaking as a system that tries to understand how organizations adapt to their environments. Now let’s try to understand the retail environment because it is critical to understanding how and why merchandise is purchased and sold today in order to define the habits developed over time within this complex system.

The word retail was originally taken from the French term retaillier which meant to sell at retail or in small quantities directly to customers. Not the typical definition of retail one might get today. So, it’s precisely at this point that we begin to discover the chaotic makeup of complexity theory. Small is a relative term and customer can be a complex term in its own right. As such, we can assume that customer can be a single consumer, a single store, a multiple store regional chain or internationally focused mega retailers such as Wal-Mart, and Tesco.

Additionally, we can also assume that the distribution channel can in fact be the retailer, a collective buyer organization such as IGA the Independent Grocers Alliance, collaborative groups, distributors, wholesalers such as SUPERVALU as well as manufacturers. Introducing the purchasing relationships between these disparate organizations where one can buy from all or any and understanding the interactions at the individual procurement professional level we begin to define the potential chaotic environment that retail procurement professionals face today. When we understand the lack of staff, the consistent change in the global supply chain and the importance placed on long term inherited relationships, it’s hardly any wonder that new tools designed to save time and add money to the bottom line ever make it to market.

Tomorrow in part two we will discuss how solutions providers can help retailers evaluate and implement these tools without significant human investment and as a by product address larger amounts of their spend resulting in significant time and cost savings.

We look forward to your comments.

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This has been a week of safety oriented blog posts. Today’s subject is Phenylpropanolamine (PPA).

Friday, October 10th, 2008

Most authors receive emails daily with requests to include information in their blog posts. Most offer a level of education. Some are more useful than others. This one scared this author more than a little.

The following posts this week all relate to safety issues.

1. Food Safety in North America requires a ZERO TOLERANCE policy by all safety and health related organizations

2. Let’s review a good idea from China and build on the traceability discussion

3. Understanding E.coli and limiting its spread.

Now we need to add the following and it is important that you pay close attention. During 2005 which in this case is almost three years ago the FDA announced the following.

Update – On December 22, 2005 the FDA issued a notice of proposed rulemaking (notice) for over-the-counter (OTC) nasal decongestant and weight control products containing phenylpropanoloamine preparations. This proposed rule reclassifies phenylpropanolamine as nonmonograph (Category II) not generally recognized as safe and effective. Written and electronic comments and new data can be submitted by March, 22, 2006.

The email I received today contained the following sad story and guidance. The authors name is being withheld.

I would like to thank those of you who expressed condolences on the recent passing of my mother. She suffered a hemorrhagic stroke while she was driving home from my house on 7/30 and passed away on 8/3. My mother’s stroke and passing was an enormous shock to my family because she did not have any symptoms or risk factors for a stroke. Just the week before she had gone to her doctor for a check up and received a clean bill of health. She did, however, develop a cold while she was visiting me and had taken Alka Seltzer Cold Plus for 3 days. Since her passing, we have learned that Alka Seltzer is one of the many cold medicines that contains Phenylpropanolamine (PPA) which can cause hemorrhagic stokes or cerebral bleeding even with the first use. I am forwarding a list of other medications that currently use PPA. These medicines are supposedly being recalled but my mother just purchased this medication less than two weeks ago. Pharmaceutical companies have known about this danger for years, we unfortunately, did not.

For those not aware of PPA, there are literally dozens of products that contain it. This author is not sure why products containing PPA have not been recalled but offers the following guidance. Procurement professionals should be aware of PPA and carefully look at the ingredients contained in all over the counter products prior to buying them for resale. Obviously consumers should also review the ingredients and if you have questions ask your retail pharmacist for guidance before you buy.

Please feel free to offer your comments

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Friday, October 10th, 2008

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Understanding E.coli and limiting its spread.

Thursday, October 9th, 2008

Although we tend to think of E.coli as coming specifically from meat products, only 45% of documented outbreaks during the last eighteen years were attributed to food.

A USA TODAY article in Money section by Julie Schmit titled “Little-Known E.coli strain starts gaining notoriety “discusses just how little the general public knows about E. coli.

The above referenced article goes on to discuss the most common type of E.coli, which is E. coli 0157:H7. Most of us are aware of this strain which was responsible for the recall of thirty million pounds of meat in 2007. This strain was also believed to be responsible for the spinach outbreak during 2006. Another strain E.coli 0111 is beginning to gain notoriety which the USDA may begin to testing within months. Although the reactions to this and other non 0157 strains may be milder, they may in fact be responsible for a variety of illnesses that were not thought to be E.coli originally.

What procurement professionals can do to make sure they have the necessary safeguards in place when buying meat products is to check the certifications their incumbent or future suppliers have on file? These may differ depending on the country of origin. Certainly SQF and GFSI certifications should be in place. Other potential certifications might include ISO 22000 as well as American Humane Certified, Certified Humane Raised & Handled and others. SafeSourcing includes these data in our supplier database as well as the most recent certification dates and other practices that suppliers and processors may have in place that will mitigate risk that could lead to the cause of future outbreaks.

While meat products were a major contributor, other areas causing outbreaks were person to person contact, lake water and animal contact.

We look forward to your comments.

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Let’s review a good idea from China and build on the traceability discussion.

Wednesday, October 8th, 2008

China plans to trace every link from the farm to the dinner table. This should be applauded and become the rallying point for a global effort.

I was reading the Arizona Republic this morning and came across a small update titled “China vows overhaul of Dairy Industry”. In the update China’s cabinet vowed to a complete overhaul of their scandal-ridden dairy industry, pledging to inspect every link from the farm to the dinner table. China went on to comment that the industry was “chaotic” and acknowledge there was a lack of over site.

The good news is that China has acknowledged there is a problem. This author might find “chaotic” slightly inappropriate phraseology in light of the fact that infants ended up dying and thousands upon thousands became ill. I do however agree with the farm to dinner table concept of traceability and might even go as far as suggesting a two step process of “seed to crop” and then “farm to dinner table” may be even more appropriate. As I have discussed in other posts, I do not feel that one forward one back traceability as is presently being pursued is enough to insure rapid detection and resolution of food born illnesses such as ecoli, salmonella and listeria among many others.

This is an important subject area that requires efforts beyond industry groups and trade organizations.

I look forward to your comments

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Food Safety in North America requires a ZERO TOLERANCE policy by all safety and health related organizations.

Tuesday, October 7th, 2008

As a follow up to this blog title, here’s a food safety question for our readers. Just what is considered safe?

Food additives have always been an issue for food safety officials. This author applauds the Food and Drug Administration (FDA) for their stance on melamine in baby formula. But enough is enough already.

According to the FDA, no level of the chemical melamine is acceptable in baby formula. We could not agree more! However, in other foods tiny amounts such as 2.5 parts per million (ppm) is considered acceptable. Are you kidding me? How many parents would knowingly let there babies drink formula that contains any melamine. My guess is none if they knew it contained this industrial (not food) product. Let’s review; melamine is an industrial product that can mimic protein content when it is added to food products. In large quantities it can be fatal. In fact the cause of this particular FDA announcement is a result of the Chinese milk scandal that has sickened fifty three thousand infants and KILLED four because of this additive.

If small amounts are ok, who is going to monitor the amounts? If 2.5 parts per million is ok, what happens if there are 5 parts per million or 10 parts per million. Is there a cumulative affect as there is with lead. Will signage be displayed that indicates that a product contains small amounts of melamine? If so, how many consumers would buy the product? I’m pretty sure the answer is ZERO.

This author believes that zero tolerance is the right policy relative to fillers, additives and other products that are not intended nor were developed for inclusion in food. I also believe it is incumbent upon retail suppliers to disclose this information as well as at least 3 to 4 levels of traceability for the products they supply.

We look forward to your comments.

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