Archive for November, 2008

The sourcing of quality safe retail products at the best market price is the most difficult job in retail. Part III of III

Friday, November 14th, 2008

In yesterdays post we concluded our discussion as to whether consumers have anything to worry about relative to safe products? Today in Part III let’s finish up with the retailers view.

A Retailers Perspective

Many retailers have rallied around support for safety in the supply chain. Many also have clear corporate guidelines and are socially conscious as regards to eco- standards that affect us all. However, common sense would dictate that we recognize that just “checking-off the box” doesn’t move us in the direction of the next level of safety or global renewal. We can monitor the “check-off” every day, but a check mark in a box does not mean that the practice was actually completed at the appropriate level of proficiency, if at all. Unfortunately, during 2007 retail companies had to spend nearly $30B to support various compliance measures not to mention moneys focused on eco-standards.

Even as retail companies try harder and harder to support more regulations, we continue to see safety alerts and product recalls from the FDA, the USDA, as well as other agencies that put retailers and their customers at unnecessary risk. New product introductions and new unchecked sources of supply from both companies and countries for which we may or may not have clean accurate data continue to make this a daunting task in an era of fewer employees required do more and more work.

Imagine the impact on retailer’s bottom line if that $30B was not needed to support these initiatives, or if it was easier to find good clean sources of supply that had the same level of concern for safety standards and focus on corporate social responsibility regarding eco- standards as our retailers do. The impact on U.S. retail alone would be staggering, an improvement in retail profit of 21.7% based on U.S. retail sales of $4T during 2007. The same results would require an unheard of sales increase of nearly $900M. Imagine the impact on jobs and the economy in general.

What Retailers Can Do

So, what can retailers do? How can they elevate their focus and make the job easier resulting in greater safety, more focus on their green initiatives and still reduce their cost of goods and improve profitability?

First, they need to understand that it is the effective execution of actual best practices through the use of best in class tools and proven processes that will yield them the integrity and “measurable” results that are demanded by their consumers, corporate boards’ and governance bodies.

Secondarily, there needs to be true collaboration without the incremental costs normally associated with implementing new processes. Collaboration really extends beyond traditional work relationships to incorporate a broader scope or objective. Collaboration demands a focus on success beyond “self”. The implantation of a collaborative culture is difficult because it calls for an apolitical, non-self-serving, but still driven business model. Most often we see this in very small work groups, or between one or two people who truly want success for the other as much as they want success for themselves.

Retailers Summary

Retailers want there customers not to have to worry about safety. They encourage their suppliers to be proactive in becoming aware of what they are doing to support safety and environmental standards and to hold their raw material providers accountable to the same standards. Retailers are also committed to using the most current tools and processes to allay their customers concerns.

We look forward to your comments

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The sourcing of quality safe retail products at the best market price is the most difficult job in retail. Part II of III

Thursday, November 13th, 2008

In yesterdays post we closed with the question. Should consumers have anything to worry about and if so what risk does this pose for retailers? Let’s finish up with the consumers view. We’ll discuss the retailer’s risks and concerrns in Part III tomorrow.

Over a previously monitored six-month period during 2007 – 2008, hardly a day went by that some notification or safety alert did not appear in the local or national news. Unfortunately as in most news reporting, these reports are often after the fact. Some examples are:

• Outbreaks prompt scrutiny of food labeling
• FDA fees eyed to boost safety
• Meat plant concerns raised for years
• One million baby seats recalled
• China making progress on safety
• Some pet foods Still not on shelves
• Altered Heparin linked to deaths
• Honduran melons linked to salmonella
• Families of U.S. victims sue Chiquita
• Lawsuit follows lead recalls. toymakers, sellers sued in California
• Report: FDA so under funded consumers are put at risk
• Mattel recalls more toys for lead

Okay, let’s sum it up: animal cruelty, illness, increased costs, death and litigation. This is scary stuff. Who has the time to monitor this on a daily basis? We have far more important things to do in our day to day lives such as working, raising our families and enjoying our growing lack off free time. What we don’t have time for, is to worry about the products we buy and the impact they may have on our loved ones, friends, pets or in larger sense the impact of how they are manufactured on our planet. Even worse, is the fact that as our world grows figuratively smaller based on modern technological advances, our global supply chain continues to grow larger, making it even more difficult for the largest of companies to hold their suppliers accountable as to the original source of products or the components and ingredients that make up their finished goods.

The answer is obviously to add more compliance demands on the retail community. In the food sector, an amendment to the Federal Food, Drug and Cosmetic Act became effective in 2006 called the Food Allergen Labeling and Consumer Protection Act. This act requires food manufacturers to identify in plain, common language the presence of any of the eight major food allergens (soy, shellfish, milk, eggs, peanut, tree nut, wheat, and fish).

Consumer Summary

Consumers do not want to worry about how safe the products they purchase are. Consumers do not wan to pay higher prices or increased taxes to support increases in regulatory compliance. Consumers do not want to invest their precious time in unnecessary litigation. Consumers want retailers and suppliers to collaborate with the most current tools available to insure their safety and that of the environment.

Tomorrow a retailer’s view.

As always we look forward to your input.

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The sourcing of quality safe retail products at the best market price is the most difficult job in retail. Part I of III

Wednesday, November 12th, 2008

Do consumers have the right to expect products, services and other finished goods they purchase from their retailers to be safe and eco friendly?

If so, what level of safety should they expect? Does safety extend beyond the personal safety of their families, pets and loved ones to the ecological impact the manufacturing of these products has on our planet? Who should bear the expense of this increased safety; suppliers, retailers, or consumers? Are there more effective ways in the form of better processes and more modern easy to use tools to reduce costs and increase safety and eco awareness?

A Consumer’s Perspective:

Many baby boomers remember listening to the nightly news as children and young adults and hearing the local anchor person ask the following question. “It’s 10 P.M. do you know where your children are?”

In those days, it was fair question. Prior to the development of pagers, cell phones, personal digital assistants and now smart phones, the question challenged parents to be accountable for their children and insure that they were safe. Today, a simple text message or phone call provides some level of security to parents, albeit not the level of safety one might like. But, do we know how the safe the products are we consume? Toy recalls, pet food recalls, tainted drugs, food born illness outbreaks, melamine and BPA issues. The list goes on and on.

The question consumers are asking retailers more often these days is how safe is our supply chain? Consumers are interested as to what level their retailer understands where their products come from? The Public Health Security and Bioterrorism Preparedness Act of 2002 was fully enacted in 2004. It requires processors, distributors, importers and other reseller groups in the United States to maintain records that identify the immediate sources that they receive food from and the recipients they send it to.

Should consumers have anything to worry about and if so what risk does this pose for retailers?

Visit us tomorrow for some answers.

We appreciate and look forward to your comments.

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What procurement professionals need to know about purchasing products that contain Bisphenol A or BPA

Tuesday, November 11th, 2008

A key design goal of the SafeSourcing website was to provide an educational format for procurement professionals. A source of reliable information and links to quality source data. To that end today’s blog post is intended to discuss the risks associated with the human consumption of BPA.

“Bisphenol A” is a toxic plastics chemical that has inherent risks associated with the human consumption of the product. The following is taken from an excellent organization the Environmental Working Group or EWG’s website.

The mission of the Environmental Working Group (EWG) is to use the power of public information
To protect public health and the environment. EWG is a 501(c) (3) non-profit organization, founded in 1993 by Ken Cook and Richard Wiles.

Our testing of canned foods found that BPA leaches from the liner into the food itself. Sensitive groups such as kids and pregnant women should limit canned food consumption. Beverages appear to contain less BPA residues, while canned pasta and soups contain the highest levels. Rinsing canned fruit or vegetables with water prior to heating and serving could lessen BPA ingestion.

BPA is found in polycarbonate plastic food containers often marked on the bottom with the letters “PC” recycling label #7. Not all #7 labeled products are polycarbonate but this is a reasonable guideline for a category of plastics to avoid. Polycarbonate plastics are rigid and transparent and used for sippy cups, baby bottles, food storage, and water bottles. Some polycarbonate water bottles are marketed as ‘non-leaching’ for minimizing plastic taste or odor, however there is still a possibility that trace amounts of BPA will migrate from these containers, particularly if used to heat liquids.

Risk levels associated with the consumption of BPA can be viewed at the EWG website.

This author recommends that when buying any of the products listed above that procurement professionals ask their suppliers the specific question; do the containers for these products contain BPA? If so, do you have the same product for the same price in container that does not contain BPA?

We look forward to your comments.

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Part I of II. Reexamining BPA bispenol A in North America.

Monday, November 10th, 2008

Today’s post is a repost of a blog from October 20th as background information as we begin a 2 day discussion of BPA in North America.

What is the status of bisphenol A in the United States? Should procurement professionals be cautious?

Canada declares this chemical toxic, bans bottles with it.

According to Canada Gazette, Canada declared a chemical widely used in food packaging a toxic substance this past Saturday and will now move to ban plastic baby bottles containing bisphenol A. According to Canadian Environmental Minister John Baird many Canadians have expressed their concerns to me about the risks of bisphenol A in baby bottles.

According to Wikipedia Bisphenol A, commonly abbreviated as BPA, is an organic compound with two phenol functional groups. It is a difunctional building block of several important polymers and polymer additives. With an annual production of 2–3 million tonnes, it is an important monomer in the production of polycarbonate.

Suspected of being hazardous to humans since the 1930s, concerns about the use of bisphenol A in consumer products grabbed headlines in 2008 when several governments issued reports questioning its safety, and some retailers pulled products made from it off their shelves.
So what you might ask is the United States doing about this compound?

During the week of April 14, 2008, upon the request of the Commissioner of Food and Drugs, FDA formed an agency-wide BPA (Bisphenol A) task force to facilitate cross-agency review of current research and new information on BPA for all FDA regulated products. As a result of this review, the task force will make recommendations to the Commissioner regarding next steps.

This author believes that the Canadian government has it right on this product, and that the United States government should follow with the same action. It is also my recommendation that procurement professionals include detailed questioning of their suppliers to determine whether or not products they supply contain this compound and do not purchase them or stock them.
Products that can contain bisphenol include but are not be limited to the following.

1. Common metal coatings liners of food cans.
2. Baby bottles the hard plastic ones.
3. Water coolers and bottles
4. Tableware and food storage containers
5. Medical devices
6. Consumer items such as sunglasses CDs and DVDs
7. Automobile parts
8. Sports equipment

We look forward to and welcome your comments.

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Simple supplier scoring may provide Key Performance Indicators to the future.

Friday, November 7th, 2008

Quality supplier selection is one of the most important areas of focus in order to insure quality and sustainability in e-procurement events.

Having a large database of available suppliers to drive sustainable results in e-procurement events such as reverse auctions is a critical success factor. Maybe even more critical is making sure that the suppliers once selected for participation in an event are of the highest quality, professional, responsive and have your best interests at heart. There are several areas in the early strategy stages of a reverse auction which if properly monitored can be leading key performance indicators as to future performance. These KPI’s are, the initial supplier response and supplier training schedule adherence. If suppliers are not interested enough during these early stages, that may be an indicator of future performance in other more critical areas such as on time delivery, back order management and documentation.

A simple process for measuring these KPI’s would be to measure the number of days between the project start date or initial supplier contact and the event start date, where the supplier has been sent an invitation but has not responded either positively or negatively. Maintaining an active status of response dates could be scored based on the number of days it takes invited suppliers to respond. Obviously the longer it takes to respond the lower KPI score the supplier would receive. Another possible KPI measurement or filter once the invitation has been accepted would be the number of days between the date accepted and the event start date, where the supplier has accepted an invitation but has not completed their training.

These are not intended to be punitive measures. In most cases suppliers will perform beyond your expectations. Sustainability and quality require measurements regardless of how simple.

We appreciate and look forward to your comments.

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Here’s some advice from William Shakespeare for today’s procurement professionals. “To thine own self be true.”

Thursday, November 6th, 2008

When product and food safety for your customers is at stake, can procurement professionals rely on a myriad of disparate organizations? Or should they follow Shakespeare’s Polonius and “to thine own self be true.”

These celebrated words were spoken in William Shakespeare’s Hamlet by Polonius to his son Laertes as he prepared him for travel abroad. “This above all: to thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man.”

This was great advice during the sixteenth century, and is equally good advice today when it comes to anyone involved in product safety. This author discussed the issue of BPA in a recent post. The post was on October 20th and titled “What is the status of bisphenol A in the United States?” In the post we mentioned and applauded the fact that Canada had recently declared this chemical toxic, and banned bottles containing it. In the U.S. the FDA had declared products with certain levels of BPA safe.

Recently in a USA TODAY article by Liz Szabo it was reported that the FDA ignored information about the danger posed by this chemical in plastic baby bottles. In fact, the excluded studies showed that BPA could pose harm to children at levels at least ten times lower than that the FDA says is safe. The article went on to site that the National Toxicology Program concluded that there is some concern that BPA alters development of the brain, prostrate, and behavior in children and fetuses.

Are you kidding me? This is where “To thine own self be true.” comes in to play for procurement professionals. Are you doing enough to insure the safety of your customers, associates and stakeholders? Is it enough that trade organizations focus on safety? Or, is there more that as individuals we can all do.

This author believes there is. The first thing we can do is to make sure that the proper questions are being asked of our suppliers. This is more than asking manufacturers, suppliers, brokers and other for their certifications and affiliations. Begin by coming up with the list of questions you personally would like answers for from a supplier. By example, do the bottles you sell us contain BPA? That is a pretty straight forward question. You can follow on from there. A next step would be to review with your e-procurement provider what they have in place to hold suppliers accountable. How do they check for certifications? What certifications do they check for? What safety questions do they ask? How does their list compare with yours? Does a merged list from the both of you look better and allow you to sleep better at night?

Sometimes “To thine own self be true.” Is the best protection of all?

We appreciate and look forward to your comments.

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Wal-Mart issues supplier mandates. What can other retailers do to keep up?

Wednesday, November 5th, 2008

When we launched SafeSourcing Inc, beyond quality e-procurement tools, product safety and a social consciousness relative to the environment were and continue to be two important key stones to building this company.

In this case, we may be specifically discussing Chinese suppliers as it relates to Wal-Mart, but this is not new information for the world’s largest retailer by revenue. Last year they held suppliers accountable to level one certification of the Global Food Safety Initiative or GFSI by July of 2009.

According to the Wall Street Journal on October 22nd, during its global supply chain summit held in Beijing, Wal-Mart would indicate that it is also focusing on environmental and labor laws in its Chinese locations in addition to their safety focus.

It is well known that Wal-Mart is one of the most technologically advanced companies in retail if not the world. So when Wal-Mart makes claims as to what it will do, suppliers generally line up to comply. The issue this creates for other retailers is that without the tracking technology a Wal-Mart has they can not keep up with what suppliers have done or plan to do to support the many emerging standards. And more importantly, retailers do not have a readily available view of alternative sources of supply where they might take their business if these important conditions are not met by their present suppliers.

Wal-Mart is also expected to require it’s suppliers to provide the name and location of every factory they use to make their products. As a by product, this is a great step to support 10 + 2 and one forward one back traceability for products that leave China particularly for North America.

An alternative for North American based retailers is the supplier databases that are offered for their use by supply chain; spend management and other e-procurement companies with whom they already do business. At SafeSourcing, our North American Supplier Database includes over 240,000 retail suppliers that are held accountable to twenty eight safety and environmental certifications such as Keep America Beautiful, SQF, Eco-Logo and GFSI. These tools should be made available via cloud computing or in the form of software as a service (saas) on a subscription basis for both individual searches and periodic use. If your provider can not demonstrate these tools, it might be time to look elsewhere.

We look forward to an appreciate your comments

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Part II of II. The Word “CHANGE” Is Not Only Applicable to Politics’ These Day’s!

Tuesday, November 4th, 2008

The impact of the results discussed during Part I of this blog post on Monday November 1st suggests the following.

What the results discussed during yesterdays blog post indicate is that World Class Companies are adapting their procurement practices in accordance to lowering their cost of goods while simultaneously adjusting other costs resulting in savings directly to the bottom line. We are not advocating a lesser workforce to aid in the bottom line savings, however we are suggesting that more and more responsible professionals within procurement organizations need to acknowledge that change is a coming and they need to adapt to e-procurement tools such as Requests for Information or RFI’s, reverse auctions and user friendly reporting tools.

One of the most frustrating daily activities for most e-procurement professionals is winning a new opportunity via the direction of a compaies CEO or CFO and then getting nothing but push back from buyers within the organization when tools such as reverse auctions are mandated. Now we realize that the pushback can mean many different things….does the responsible buyer not have product specifications, does he or she not know more than one or two vendors that can provide the product or service to his or her company… or is he or she simply resistant to change and unwilling to change the way he or she has procured the goods or services for the last 25 years?

The benefits to running reverse auctions are many and far outweigh continuing to do the same things the same way and expect different results. These benefits include but are not limited to the following:

– Maximize your visibility to additional suppliers

– Make better informed decisions

– Reduce sourcing time

– Lower cost of goods

– Streamline internal processes

– Excellent medium for aggregating

– Increased pricing visibility in the marketplace

– The retail industry is actively using this tool and improving
Competitive position

Make no mistake, this blog post is not a way of pointing a finger at any particular organization, however there is a common trend that when an e-procurement program is adapted within an organization it is very predictable that resistance to change will emerge and remain until someone is strong armed by senior management and the results prove that support for this process is best for the company. E-procurement tools such as reverse auctions are a different way to gather pricing in a quicker fashion, from more vendors, with your specifications and timelines with results typically 18 to 20 percent less in cost of goods which drops directly to your bottom line.

Change is uncomfortable but inevitable and requires acceptance in order for companies to stay competitive and retain the market share that one so diligently worked for in the past!

We appreciate and look forward to your comments.

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Part I of II. The Word “CHANGE” Is Not Only Applicable to Politics’ These Day’s!

Monday, November 3rd, 2008

As most everyone is well aware, the days ahead are filled with lots of rhetoric regarding “change” politically in both Washington as well as in our local elections.

I asked Alex Borbely SafeSourcing Inc. Vice President of Sales and Services to collaborate with me on a blog post as to his thoughts on the use of e-procurement tools in retail and what may be impacting their use in the retail market. Alex chose to speak about change; which became a great collaborative subject for this blog post.

Regardless of the elections outcome, I would bet that “Change” is something that we’ll all become more accustomed as the economic times require all of us to realign ourselves with reality. Reality can mean a variety of things to all of us, smaller homes, less traveling around town in our cars, and even less extravagant dinners on Saturday nights!

The concept of “change” also applies to what we all do in our daily work lives as we realign ourselves as to how to procure goods and services whether for resale or not for resale. Procurement today can mean many different things depending on who we are speaking with at the time.

One of my favorite Blog posts for e-procurement is Spend Matters where Jason Busch recently wrote “According to a recent press release on the subject of a Hackett Research Alert , Hackett’s research shows that world-class organizations, “now spend 22% less than typical companies on procurement operations (.64% of spend for world-class companies versus .82% for typical companies), and operate with 37% fewer staff (48.4 per billion US$ of spend for world-class companies versus 76.4 for typical companies). World class companies also generate 129% higher spend cost savings, including reduction and avoidance while also delivering greater stakeholder satisfaction and support for initiatives in sustainability, innovation, working capital improvement, and other areas. At a typical Global 1,000 company (with annual revenue of $22 billion and annual sourceable procurement spending of $8.9 billion) would have more than $16 million in incremental annual savings on procurement operations, and over $263 million in additional annual spend cost savings.” What does this mean to the retail market? Please visit Part II of this blog post tomorrow .

As always we appreciate and look forward to your comments.

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