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

In a recent issue in the The Arizona Republic there was a short article included in the week in review section titled Girl?s tainted-food death brings $13M settlement. This unfortunate incident actually occurred eight years ago at a Sizzler restaurant. The settlement was with the company?s meat supplier and others according to court records. Evidently, Brianna Kriefall did not even eat meat. She actually ate watermelon that had touched the tainted meat and passed away a week later. Additionally, one hundred and forty (140) other people became ill from the outbreak in two sizzler locations.

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

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

In 2008 there have been more food borne illness scares worldwide than most of us can remember. Occurrences of salmonella caused illness, listeriosis, e.coli caused illness and illness associated with additives that don?t belong in consumable products like melamine have all occurred. And for those not in the consumables businesses there are other issues such as lead in toys. Who to fault is a longer discussion, but we can be sure of one thing. The first place a consumer will look is to the retailer that sold them the tainted product.

It is important to know where your products come from with a clear trail to the original source of supply, and what your suppliers are doing in the way of certifications such as GFSI and SQF to insure the quality of the food chain for retailers and their consumers. SafeSourcing is working to provide that information. If we do not have inforamtion readily available, suppliers go through a specific vetting of more than thirty (30) specific safety and environmental certifications to insure a greater level of traceability while also indicating a level of diligence on the part of a retailer that may mitigate some legal exposure.

As always, we look forward to and appreciate your comments.

Collaboration with other internal departments is very critical for successful procurement strategies as it puts more spend available to suppliers resulting in potentially greater savings. Additionally, continuous process improvement strategies or sustainment initiatives may add additional savings that are commonly neglected in procurement ROI?s. According to Aberdeen, companies that collaborate save an average of 42% more than companies that do not. It also creates great education as to where there may be opportunities to collaborate externally. More on that later.

Although this brief refers to the print category specifically, the process offered can easily be applied to all categories and for those companies that are creative, to the same categories at non competing companies. A huge opportunity in the retail space is for smaller companies to combine their purchase volumes in order to drive higher savings. This same process has been used for years buy wholesalers and collective buyers that buy in volume from manufacturers, store the products, and ship on demand to the retailers they support. The question this begs is; do these volume based savings always make it to the independent retailer?

An example might be in the area of supplies. The category might be plastic or paper bags or both. All companies use them, and often they are of different quality. A potential scenario might be that Company “A” a 10 store independent, and company ?B? a 5 store independent whose market areas do not overlap combine their purchases. This offers a larger volume to suppliers that may not have considered the geographic area of one or the other of these companies. Additional work may be done by your e-procurement provider to find suppliers that can source both paper and plastic bags. This may not have been considered in the past, and may offer another opportunity for increased savings based on the combined higher volumes.

Under certain market conditions it may not be possible for both companies to save significantly. In fact the benefit may end up being a better product for the same price, which can increase customer satisfaction and retention.

Make sure your e-procurement provider offers tools that allow for aggregating purchase and collaborating internally and externally. Also make sure they have an adequate source of supply and can search it by category to enable these types of events. You may find a few dollars in savings that were not available to you in the past.

As always, we look forward to and appreciate your comments.

According to Wikipedia, a business model is a framework for creating economic, social, and/or other forms of value. The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.

Often times during this author?s discussion with retailers the question comes up as to the benefits of the reverse auction business model or that of other e-procurement events such as Requests for Information or RFI?S.

This author will make the assumption that there is common agreement that price compression in today?s world is critical and that the reduction in cost of goods and services is the largest area of opportunity on a retail P&L. As such, there are a number of reasons that the reverse auction business model works well within organizations that should drive the strategic growth in utilization of this business model within retail.

A few and certainly not all are listed below in no particular order…

1. A larger number of buyers. Because of an increased number of suppliers bidding for a retailers business, getting a relatively low price is a given. The suppliers benefit because of the potential reduction is selling costs and easy access to new sources of business which encourages them to lower their pricing.
2. Location, Location, Location. In this case, location no longer matters. A supplier can participate from wherever they happen to be located. This opens up new potential markets for the supplier and new sources of supply for retailers.
3. It?s like a game: Participating suppliers wait to see if their price is the lowest much the same way a gambler would wait to see the turn of the next card when playing blackjack or poker. This is a social interaction and dynamic that builds on itself and can drive a larger number of bids and extensions while ultimately leading to lower pricing.
4. Early success drives a virtual circle for retailers and suppliers: The more a retailer uses the tool and the more success suppliers have with securing new business resulting from this process, the more the process will drive retailers to host new events and suppliers to participate in them again and again. Independent departmental successes can spread quickly within a retail company such that other departments not using the process do not want to be left out of potential savings opportunities and notoriety.

As always, we look forward to your comments.

As the price of oil and related fossil fuel costs continue to erode, companies will go right back to sourcing more and more products from off shore instead of looking locally for similar goods. Is this necessary or good for the carbon footprint we leave?

Greenhouse gases increased by 1.4% during 2007 in the United States according to the Energy Department. This is a direct result of people using more coal, oil and natural gas during the year because of a colder winter and more electricity during a warmer summer. During 2007 the United States created eight billion tons of greenhouse gases. Carbon dioxide accounted for eighty three percent (83%) of the total according to the Energy Information Administration or EIA.

The question this begs is how much greenhouse gas were we responsible for globally that might be reduced by local sourcing. If a container ship is registered in another country we obviously do not count the emissions from the burning of fossil fuels associated with the ocean freight headed for our shores. I?m also not sure we count all of the overland freight emissions from fleets in other parts of the world delivering goods to stores owned an operated by retailers with headquarters located in the North America.

Many companies claim that greenhouse gases caused by ocean freight are one of their top contributing categories to their overall carbon footprint. It only makes sense that if retailers sourced fewer products from offshore, which in turn would decrease the amount of ocean freight required to move these products that our overall contribution of greenhouse gases would come down.

In order to support local sourcing, North American retail companies need to have a source that can tell them where suppliers within the trade zone are located by category and product. It is also important that the supplier community be able to register at such a site in order to be easily accessible to regional retailers.

A tool of this nature already which can tell retailers where there are 928 general merchandise suppliers located in Mexico, 1,585 Grocery Suppliers located in Canada, and 1,940 Pharmaceutical suppliers located in the United States. Please visit the SafeSourcing Query Tool to learn more.

We appreciate and look forward to your comments.

According to a variety of sources, the role of e- procurement continues to become more and more strategic each year. Driving cost of goods and services control is one of the most important above the line initiatives a company can undertake. Given the dramatic financial impact driven by these types of tools and the potential positive impact on earnings these initiatives should have the visisibility and oversight of senior executives.

Experience indicates that in order to successfully implement an enterprise wide e-procurement initiative, executive management must provide sponsorship and visibly promote these projects within their organizations. Executive sponsorship is required by the Chief Executive Officer, Chief Financial Officer, Chief Procurement Officer or Chief Logistics Officer. The potential impact to earnings regardless of Industry vertical are so significant with a properly deployed e-procurement program that officer level executives require visibility based on the impact to stockholders and stakeholders alike.

In fact Sarbanes-Oxley section 404 requires the following of all companies.

1. Demonstrate reasonable & consistent governance & compliance monitoring.

2. Assure proper use of tools that have been placed into practice.

3. Employ proper reporting & management oversight. Implementing e-procurement tools has the potential to offer significant earnings changes.

Once executive management has sponsored these initiatives, some form of accountability must be implemented to ensure maximum participation in order fully realize organization wide savings opportunities. A company’s successful transition to e-procurement requires a transition from a cumbersome paper RFX processes to one that focuses on using the speed and efficiency of an electronic forum. Successful change management professionals focused on sustainability realize that this shift must be a combination of the use of not only the latest software advances, but also reengineering of internal processes in order to drive sustainable results.

We appreciate and look forward to your comments

According to Wikpedia a best practice asserts that there is a technique, method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method, process, etc.

So when a company indicates to you that they use best practices, does this mean they are supporting what is the best practice for the entire industry they serve such as e- procurement. Or does it mean they are the best practices for just their product family?

This author does not believe that best practice is just following a standard way of doing things that can be carried out by multiple organizations. A best practice is a life long process that must evolve over time as tools, businesses, and existing processes change.

If one uses best practices, should not the result be an ideal state that a person or an organization set out to achieve in the first place. In fact if the process used is actually a best practice shouldn?t all of a companies customers use the same process. I?m not sure that this is ever a question one asks when looking for a referral about a companies service offerings. Please tell me about these companies? best practices. Are they consistent and carried out each and every time to the desired result.

One way to ensure good quality results is to provide templates that can be used over and over again and are evaluated at the completion of each practice and changed when need be. This then requires passage to other customers in order to insure the integrity of the process. This elevates the actual process beyond just a buzzword and moves a particular process in the direction of becoming a best practice that drives similar results on a consistent basis.

We will continue to call our services offerings high quality process techniques focused on continuous improvement that deliver anticipated results. Our goal will continue to be to save tour customers as much money as possible in the shortest period of time possible while also improving quality and mitigating risk associted with lapses in safety . We continue to believe that is the best practice of all.

We look forward to and appreaciate your comments.

What is melamine? Melamine is a small, nitrogen-containing molecule that has a number of industrial uses and is not approved for direct addition to human or animal foods marketed in the United States.

According to the FDA, in food products other than infant formula, the FDA concludes levels of melamine and melamine-related compounds below 2.5 parts per million (ppm) do not raise health concerns. This conclusion assumes a worst case exposure scenario in which 50% of a person?s diet is contaminated at this level, and applies a 10-fold safety factor to the Tolerable Daily Intake (TDI) to account for any uncertainties. The TDI is an estimate of the maximum amount of an agent to which an individual could be exposed on a daily basis over the course of a lifetime without an appreciable health risk.

As the melamine in milk products from China problem continues to grow apace, Sciencebase presents a succinct list of melamine contaminated food list culled from the most recent news results on the subject. This is by no means an exhaustive list nor is it a condemnation of any particular products; it?s here merely to raise awareness of what is happening with regard to the melamine in milk scandal.

? Powdered baby milk.
? HK finds melamine in Chinese-made cheesecake.
? Cookies With Melamine Found in Netherlands.
? Mr Brown coffee products.
? Manufacturing giant Unilever recalls melamine tainted tea. CNN is also reporting that the Hong Kong authorities Sunday (October 5) announced that two recalled candy products made by British confectioner Cadbury had high levels of melamine.
? Melamine Detected in Two More Ritz Snacks.
? More Chinese-made sweets recalled in Japan.
? White Rabbit brand Chinese candy contaminated: Asian health officials.
? Lipton, Glico and Ritz the latest businesses to be affected by milk powder scandal.
? Hong Kong finds traces of melamine in Cadbury products.
? Recalled Melamine Milk Products include Asian versions of Bairong grape cream crackers, Dove chocolate, Dreyers cake mix, Dutch Lady candy, First Choice crackers, Kraft Oreo wafer sticks, M&Ms, Magnum ice cream, Mentos bottle yoghurt, Snickers funsize, Yili hi-cal milk, Youcan sesame snacks and others. Testing of some of those has already proven negative.
? Melamine Found in More China-Made Products, including Heinz DHA+AA baby cereal.
? 305 Chinese dairy-based products temporarily banned in Korea.
? US bloggers have gone so far as to uncover dozens of products recalled in China that were still on the shelves of their local supermarkets.
? 31 new milk powder brands found tainted.

With the above knowledge, procurement professionals should also make it part of their normal information gathering of RFI process to ask where the products they are buying come from, particularly if you buy from a distributor or broker. In addition, have this document signed by the supplier. Further, you should specifically ask the following question. Do any of your products to your knowledge contain Melamine or any other additives that are not approved by the FDA and other governing bodies.. Although not a scientific solution, it does protect one more level of protection for you and your customers.

We appreciate and look forward to your comments.

The FDA opens and office in China and Melamine shows up in U.S. baby formula. Should we be concerned?

The FDA has taken a positive step in trying to control the introduction of products that should not be included in food from reaching U.S. markets by opening an office in China. At the same time we hear that Melamine has been found in U.S. baby formula. This is a time that procurement professionals in the food distribution business need to be vigilant.

The following is for your education.

Just what is Melamine? According to Wikipedia, Melamine is an organic base and a trimer of cyanamide, with a 1, 3,5-triazine skeleton. Like cyanamide, it contains 66% nitrogen by mass and, if mixed with resins, has fire retardant properties due to its release of nitrogen gas when burned or charred, and has several other industrial uses. Sounds like something we should be including in our food products right? Further from Wikipedia, Melamine is sometimes illegally added to food products in order to increase the apparent protein content. Standard tests such as the Kjeldahl and Dumas tests estimate protein levels by measuring the nitrogen content, so they can be misled by adding nitrogen-rich compounds such as melamine.

Here?s what?s possible when Melamine is ingested.

The following information is taken from a Monday October 20th Yahoo news article By Gillian Wong a writer for the associated press.

Beijing ? Some 1,500 dogs bred for their raccoon-like fur have died after eating feed tainted with melamine, a veterinarian said Monday, raising questions about how widespread the industrial chemical is in China’s food chain.

The revelation comes amid a crisis over dairy products tainted with melamine that has caused kidney stones in tens of thousands of Chinese children and has been linked to the deaths of four infants.

Melamine was also the product that caused the massive United States pet food recall during 2007. When discussing toxicity, Wikipedia tells us that Melamine is described as being “Harmful if swallowed, inhaled or absorbed through the skin. Chronic exposure may cause cancer or reproductive damage.

Tomorrow we?ll take a look at the products that are purported to contain Melamine and the questions procurement professionals should ask in order to best mitigate your risk.

We appreciate and look forward to your comments.