Archive for January, 2009

The 2nd largest food borne illness outbreak in decades and it’s only been six months since the previous record.

Thursday, January 29th, 2009

During today’s travels while waiting and waiting in Airports to travel east from Ohio, I had the opportunity to read several interesting articles related to the supply chain that retailers and suppliers need to pay close attention to.

SafeSourcing focuses on procurement optimization with an emphasis on people, processes and tools. While we ultimately drive cost compression that result in significant bottom line improvement through the use of world class business to business negotiation tools. With that in mind it is important to mention that we are also dedicated through this process to providing these results to companies while also insuring a laser like focus on product safety.

The first article referenced above appeared on the front page of the of the USA TODAY Money section by Elizabeth White and Julie Schmitt and was titled FDA: Salmonella detected before. To summarize the article, the most recent Salmonella out break may be a result of a company that sells products not complying with regulations that are in place to protect consumers. In the article, the FDA reports that there were records of 12 instances in which the company found Salmonella in finished products and shipped them anyway. Over five hundred people have already been taken ill during this outbreak and unfortunately as many as eight people have died.

This poses a consumer related question. As a consumer would you like the companies where you shop to buy their finished goods from suppliers or wholesalers that use these companies’ raw materials? You might need to bet your life on it. How would your retailer know not to buy finished products that contain tainted ingredients? How would their wholesaler know not to buy products from a manufacturer that used products from the producer whose products were tainted? How would the manufacturer know? The harsh reality is that takes to much process to trace the outbreak to its source of origin and ensure safety to the rest of the population.

This author has long been an advocate of safety in the supply chain and a traceable database with safety certifications in place by all supply chain members back to the source of origin and supported by a process that vetts suppliers for adherence to those certifications. In a July post I offered the following, “According to the CDC as of July 10th 2008 the number of those taken ill as a result of the St. Paul Salmonella outbreak had raised to more than 1000 people in forty two states and Canada. According to federal officials at the time, this was now the largest food-borne illness outbreak in decades”. Well here we are just 6 months later with over 500 people in 43 states affected and eight dead. So will this be the 2nd largest outbreak in decades or are we not done counting yet? This time we only had to wait six months for another large outbreak versus decades. This is scary stuff. It taxes our medical community, strains our federal agencies, and negatively impacts productivity in the work place.

At the end of the day, who is culpable when some one dies from one of these outbreaks? It certainly seems to me that consumers would hold every organization in the supply chain that did not have proof of direct efforts to ensure safety in their procurement process responsible.

This author has offered a number of practical solutions to this problem during the last year that are proactive and make common sense. I’d appreciate your comments as to any new ideas that we might collaborate on. Our supply chain and consumers deserve our best effort.

What are e-procurement best practices? Should we care?

Tuesday, January 27th, 2009

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?
I don’t 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 customers, supplier participants and business partners will determine if they are best practices for them.

As always we appreciate and look forward to your comments.

Quality e-procurement practices in a time of heightened Corporate Social Responsibility (CSR)

Monday, January 26th, 2009

Most companies understand that lowering their cost of goods provides the greatest benefit to their bottom line, but they face significant challenges in trying to do so. So, why do some companies succeed while others continue to implement program after program with no measurable benefit.

A primary reason is the recognition that effective e-procurement initiatives like any successful program requires strong support from executive management. This is more important in Retail, because as an industry Retail lags well behind other industries in utilization rates of e-procurement tools. So at a minimum in order to get off on the right foot, this typically means the CEO, COO, CFO, CLO or CPO sponsorship is critical. Once an official directive has been issued, the next step is to identify savings targets across all corporate spend categories. This sounds like a simple task. Ask someone in procurement what their top five spend categories are, what contracts are expiring and what auto renewal clauses are in place. You might be surprised at the lack of answers. Working with solution providers can help to rapidly identify these targets and rank them. Your solution provider can also offer a category specific attack plan that best maximizes savings opportunities. Having historical data is critical to these steps being successful. It is important to note, that savings alone do not create a successful e-procurement plan. What can not be sacrificed in the name of cost reduction is quality, which can include safety as well as Corporate Social Responsibility (CSR) goals including environmental support programs.

A key challenge for any procurement organization directed to implement e-procurement tools across all of their unique spend categories, is to not over complicate the process into something that can’t be maintained. At a high level, the following steps will insure that you are headed down a successful path.

Identify all spend opportunities in the next 180 days
Review all contracts due to expire in that timeframe
Assemble a list of primary and secondary suppliers for each category
Develop a total company strategy
Source at least 5 new qualified suppliers
Evaluate suppliers versus your companies CSR initiatives
Document product specifications
Provide clear terms
Award business within 30 days of event completion
Complete Contract with 60 days
Analyze Results

Most quality e-procurement organizations have well developed plans that will aid you in implementing your best practices while maintaining quality and supporting your CSR initiatives.

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

What does it mean to be Green?

Thursday, January 22nd, 2009

As retailers and other companies struggle with the current tough economic conditions, do green initiatives suffer? If they do, is there a long term cost?

This author believes that it is in the toughest of times that those committed to their Corporate Social Responsibility initiatives should get tougher about making sure that their trading partners are adhering to the same strategies.

Unfortunately, not many companies have adopted Triple Bottom Line accountability or (TBL) which is a measurement that determines if businesses have a positive impact on the three important areas of people, profit and planet or the three P’s, even though it has become the standard framework for CSR agendas.

I have not heard one single analyst when speaking of the present economic condition give credit to any company relative to CSR initiatives if their earnings are below expectations. After all it is about the money, and if the earnings are not in line with expectations, jobs are lost, stock prices suffer and excuses galore flow freely.

We all know that green initiatives are expensive and the benefits may or may not be realized for years. So, this might be the ideal time to put projects on the back burner for companies that are struggling. Or it might be the time to make sure that all suppliers you have been doing business with for two or more years are continuing to adhere to the same types of initiatives that you are. A simple review of their strategies when you place your next order can be as simples as asking some of the following questions.

1. I know things are tight right now, but can you tell me what your company is doing relative to green initiatives.
2. Are you doing anything to reduce your use of water?
3. What are you doing to insure that toxic ingredients are not in your products
4. What are you doing to reduce packaging?
5. What are you doing to eliminate hazardous materials?
6. Are you doing anything with organic ingredients?
7. Are you using any form of renewable energy?
8. How are these initiatives going to impact your cost structure today?
9. How are these ititntitves going to impact your pricing tomorrow?

The answers to these and other questions you may come up with can help you understand the smart companies to source your products from. The companies that support your CSR initiatives with theirs. Armed with this information the next step is to make sure your consumers and employees are also aware of what you and your trading partners are doing to support the environment they work and live in. More on that later…..

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

Congress renews calls for reform of food safety laws.

Tuesday, January 20th, 2009

As a result of the most recent Salmonella outbreak, there has been renewed activity from congress to reform food safety laws. The FDA’s lack of authority to order a recall of products versus asking companies to do so is just one example of the type of issues driving this activity.

This author does not necessarily agree that the government needs to be involved in regulating these issues because they generally tend to overreact, which can have a negative impact on the many individuals and companies associated with the traceability chain affected by this type of oversight.

Problematic to coming to a rapid determination of cause in these types of outbreaks is the lack of a traceable supplier and product database that all parties in the supply chain adhere to.

Traceability matrices can be easily established using a variety of tools including requirements management software, databases, spreadsheets etc.

A traceability matrix is created by associating requirements with the work products that satisfy them. Tests are associated with the requirements on which they are based and the product tested to meet the requirement.

Present food traceability standards call for one forward one back reporting. As such, let’s take a look at the first step in forming a traceability matrix as it applies to the most recent Salmonella outbreak. And, why one forward one back is a problem.

The following is a very simple example of ten possible traceable elements that could be associated with the most recent salmonella outbreak. Each individual element could contain a tree of it’s own that delays the FDA and other organizations from quick resolution.

1. Seed crop
2. Farm
3. Peanut Corporation of America
4. The Kellogg Company
5. Multiple Products
6. Multiple Wholesalers
7. Multiple Retailers
8. Multiple Consumers
9. Spread
10. Family & Friends

Let’s assume that the first person taken ill came from category ten, friends and family. This individual consumed a tainted product made with the peanut paste that contained Salmonella. Where was the product consumed? In fact, what product was it? Was it consumed at home, at school, at work or maybe at a friend’s house?

We can get to one back once we’ve determined the source of the actual illness. Then we can proceed to the next element of the matrix which could be multiple retailers who may have sourced the product from multiple distribution channels such as distributors, wholesalers, collective buyers etc.

This becomes a vicious cycle pretty quickly. It might be at this point that the government would call for a product recall. We’ve seen the negative impact that can have on the entire retail supply chain. A better action for congress would be to mandate that a data repository be developed that follows a product from seed crop in this example to the consumer.

There must be a grant out there somewhere for this type of effort.

As always we look forward to and appreciate your comments.

Food Safety, Salmonella and Traceability.

Monday, January 19th, 2009

In light of the new Peanut Butter Salmonella outbreak, this repost focuses on Traceability which also requires sensibility if you want a safe supply chain.

We will continue to focus on this current case as an example of what collaboration amongst supply and trading partners can accomplish.

When the FDA talks about traceability and refers to one back one forward, what are they referring to? Does it make our supply chain safer?
The definition of traceability according to Wikipedia refers to the completeness of the information about every step in a process chain. Traceability is the ability to verify the history, location, or application of an item by means of documented recorded identification.
When the FDA uses this term what they are referring to is the capability of bidirectional traceability or tracing products one step back one step forward. This means identifying the immediate supplier of the product and identifying the immediate recipient of the product, which is not the final retailer.

However the process also requires some level of common sense. I’m a man of faith, but blind faith really gets us no where when we are talking about food product traceability. GS1 has created a certification for traceability in cooperation with a number of organizations such as FMI, CIES and BASF.

So from a common sense perspective one would believe that all products we consume are safe, that all produce and grain products are traced back to the seed level. Unfortunately this is not the case.

Let’s just examine milk products or byproducts. In a recent blog this author discussed the fact that what is happening in China where 13,000 babies are still hospitalized and over 53,000 babies affected could happen here. Just today we hear that in fact Chinese candy in the United States contains melamine. What other products contain this or other carcinogens that should not be consumed and how can retailers control the introduction of such ingredients in the products they buy for resale.

As always we appreciate ad look forward to your comments.

Consulting Conundrums that often Create Considerable Consternation.

Friday, January 16th, 2009

The letter “C” can be so important. This author has always believed and in fact has written that C- level management needs to be more involved in the procurement process. That is the conundrum.

According to Merriam-Webster a conundrum is a riddle whose answer is or involves a pun or 2 a: a question or problem having only a conjectural answer b: an intricate and difficult problem.

So what is the conundrum in retail procurement that creates so much consternation, with consternation according to wiktionary simply being amazement or horror that confounds the faculties?

Now to the detail. When a solutions company in the procurement space calls on a retailer and opens the meeting with “we can increase your earnings by as much as 100% and do it in the current fiscal year”, why in the world would the answer from any associate and certainly the executive suite not be? “Show me how.”

My company would accept this challenge with the following logic. The single-largest opportunity to improve net income is by addressing the largest line on the P&L which is the cost of goods and services. The good news is that every dollar reduction in COGS falls directly to the bottom line. The finance department may argue that there are supplier related switching and timing costs incurred in order to get to the true savings, but the majority of these savings end up on the bottom line.

Let’s do some simple math: a five billion dollar ($5B) supermarket company has an approximate cost of goods of $3.6B. Assuming a net income of one percent (1%) this retailer would have earnings of $50M. Let’s assume that they assigned fifteen percent (15%) of their total above the gross margin line spend to next generation e-procurement tools. This would be approximately $540M. Assuming a savings of 10% which is well below documented savings within the industry, savings would equal $54M which would equate to a net earnings improvement of $54M or greater than 100%.

Certainly there are timing issues involved in the above scenario that will determine when savings reach the P&L such as when the contract is signed, delivery begins and sell through of the contract occurs. That would certainly happen within twelve months of contract signature. This author does not believe this is an intricate or difficult problem and as such suffers great consternation that in this economy C- level executives do not accept the challenge to drive these types of improvements.

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

Don’t melt those containers down just yet. Off shore sourcing is a bargain again.

Thursday, January 15th, 2009

Oil prices on July 11th 2008, reached a new record of $147.27 a barrel, some companies were even considering melting down there containers rather than re-shipping them because of the fuel price involved.

This author discussed the thought of sourcing more products locally in my NAFTA and the High Price of Oil on by August 13th 2008 blog post due to the price of fuel making it impractical to source off shore at the time even when companies considered the low cost of international labor. I continue to believe that there are opportunities that many procurement professionals are not aware of within the North American Free Trade zone that can be explored. With that said, there are some common sense practices to sourcing off shore that your procurement knowledge workers should consider and e-procurement solution providers offer if you are using Software as a Service.

1. Verify the name and address of the supplier, the manufacturing address, phone number, fax number, website and email contact address.
2. Refuse to deal with any generic e-mail addresses. Only deal with specific company addresses.
3. Call the supplier at the provided phone number several times from different numbers such as your home and mobile phone numbers and inquire about the company and the contact person.
4. Ask for specific company and personal references in North America.
5. Inform the supplier that your team will be visiting their location for company tour. Pay close attention to their response to this request.
6. When procuring items from new off shore suppliers request a written electronic payment process.
7. After sample evaluation, also request a pre-shipment inspection for new suppliers. This ensures that the products meet minimum quality expectations before the order is accepted.

These steps may sound like basic blocking and tackling, but sometimes skipping the most simple steps in a new engagement process can cost the most down the road.

As always, we look forward to and appreciate your comments

Vindication of one’s point of view is always a good thing.

Wednesday, January 14th, 2009

ASU Team wins grant to ensure food safety.

The above bi-line is credited to William Hermann of the Arizona Republic
January 13th edition. What’s interesting is that the grant comes from the U.S. Department of Homeland Security. The ASU team is headed by William Nganje. According to the article he and his colleagues are looking for ways to strengthen the security of the supply chain. According to Nganje, “It’s critical that we are able to trace exactly where a threat has come from.” I think I’ve heard that argument before.

This author has written extensively as many of you know regarding food safety and the role that procurement solution providers can play in ensuring that our retail partners have a traceable resource beyond one forward one back.

Please take another look at the following posts for more inforamtion.

1. We agree with the consumers union: Mandate traceability of their fruits and vegetables to their source.
2. Do retailers have time to monitor their supplier’s safety performance?
3. Food Safety; Do Hippo’s eat tomatoes?

An excerpt from Do Hippo’s eat tomatoes? is below for your enjoyment

I know I’m still not eating any tomatoes, and I love tomatoes. Is it the farmers fault, the CDC’s fault, the FDA’s fault? That’s a hard question to answer. What is true is that we have to do a better job of providing safe quality foods to retailers to sell to their consumers. There needs to be some type of central repository of safe data that allows tracking of products to their source more quickly. Our families, friends, pets and even the hippos will thank us.

The SafesourceIt™ Supplier database includes many of the traceability standards required to eliminate this problem.

As always we look forward to and appreciate you comments

What is Salmonella or Salmonellosis?

Tuesday, January 13th, 2009

It’s not the first time we’ve seen a Salmonella outbreak in North America and it won’t be the last. So just what is Salmonella and what if anything should consumers do to protect themselves?

There are about 2000 types of salmonella and about 40,000 cases are reported each year. Salmonella Typhimurium is the most common strain. The resulting illness may begin as little as six to as many as forty eight hours after ingestion of contaminated water or food with symptoms such as nausea and vomiting which is commonly followed by diarrhea. There are examples of the illness resulting in death, but these cases are normally restricted to the very young or old or people with other underlying medical conditions.

This author discussed the 2008 United States salmonellosis outbreak extensively which began during the spring of 2008 when hundreds of people throughout the U.S. became ill after consuming contaminated food which was believed to have come from fresh Jalapeno or Serrano peppers from Mexico and raw tomatoes.

There is no vaccine to prevent salmonellosis, but you can minimize your chances of contracting it by following these steps.

1. Thoroughly cook foods to destroy the bacteria.
2. Thoroughly wash fruits and vegetables before eating them.
3. Wash your hands before handling any food.
4. If you are diagnosed with salmonellosis, be sure that you or your doctor informs. the local public health officials.
5. Separate your meats produce and dry groceries while shopping and when storing.
6. Do not keep groceries in your car while you run other errands. Take them home and refrigerate them.
7. When defrosting frozen foods, follow directions completely.
8. Avoid raw or unpasteurized milk and other dairy products.

As I have discussed previously, more work is needed in developing databases of manufacturers, suppliers, brokers, growers and products that can be searched against a variety of entities or against a variety of attributes in order to trace goods to their original source of supply quickly when outbreaks of salmonella and other food borne illnesses occur.

The SafeSourcing supplier database with over 300,000 suppliers provides many of these attributes.

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