Archive for May, 2009

What can retail procurement professionals do to ensure their suppliers are helping to reduce carbon pollution in support of their CSR initiatives?

Friday, May 29th, 2009

Even with substantial increases in the use of renewable energy, world energy consumption will rise by 44% over the next twenty years according to The Energy Information Administration.

Because of the continued need for fossil fuels such as oil, this will increase the carbon dioxide entering the atmosphere by 40%.

There are a couple of things that buyers can do to insure that their trading partners are doing everything possible to insure they are trying to reduce their carbon footprint. One program that retailers can require that their suppliers qualify for is Green-e certification.

The Green-e programs mission is to:

• Bolster customer confidence in the reliability of retail electricity products reflecting renewable energy generation.
• Expand the retail market for electricity products incorporating renewable energy, including expanding the demand for new renewable energy generation.
• Provide customers clear information about retail “green” electricity products to enable them to make informed purchasing decisions.
• Encourage the deployment of electricity products that minimize air pollution and reduce greenhouse gas emissions.

Insuring that your procurement process questions and holds suppliers accountable to standards that support both safety and environmental initiatives is just the right thing to do.

We look forward to and appreciate your comments.

Ron Southar

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When you sit down to have a roast for dinner, does it ever eat at you what you might be eating and how it got to your table?

Thursday, May 28th, 2009

The easiest thing in the world to do is to walk up to a meat counter and ask for a cut of meat. There are ways that buyers can insure that the procurement of meat products is humane and supports their companies CSR initiatives.

The Certified Humane Raised and Handled program is the only farm animal welfare and food labeling program in the U.S. dedicated to improving the welfare of farm animals from birth through slaughter for the 10 billion farm animals raised for food each year.

Here are six simple steps that meat buyers can take in order to support humane treatment of farm animals while also support more socially responsible procurement practices.

1. Ask your meat suppliers for and only buy products labeled Certified Humane Raised and Handled® when available.
2. If your suppliers do not carry these products ask your suppliers sales representative fort their plan in writing to stock foods that are Certified Humane Raised and Handled®.
3. Contact the Humane Farm Animal Care and ask them to send you some brochures that you can distribute internally in order to educate other meat buyers and management about this program.
4. Encourage all of your meat brands and brands that contain meat products to become certified and to use Certified Humane Raised and Handled® ingredients in their products.
5. Continue to educate yourself by signing up for email and news updates on this subject.
6. Support the Humane Raised and Handled® program with your own CSR initiatives by donating to this program which tries to make a difference to the more than 10 billion farm animals raised for food in the US each year.

We look forward to and appreciate your comments.

Ron Southard

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There’s more data required now when offshoring from new sources of supply.

Wednesday, May 27th, 2009

How you import products from abroad now requires Importer Security Filing (ISF) which is also known as 10+2 because 10 additional data elements will be required from U.S. importers and 2 additional data set items will be required from carriers.

Launched in January of 2009, importers and vessel operating ocean carriers are required to provide U.S. Customs and Border Protection CBP with advance notification for all ocean vessel shipments inbound to the United States.

Behind The Importer Security Filing Program (ISF) or 10+2 is an attempt at helping to prevent terrorist weapons from being transported to the United States and to improve Customs and Border Protection (CBP) ability to identify high-risk shipments so as to prevent smuggling and ensure cargo safety and security.

The following 10 data elements are required from the Importer:

1. Manufacturer (or supplier) name and address
2. Seller (or owner) name and address
3. Buyer (or owner) name and address
4. Ship-to name and address
5. Container stuffing location
6. Consolidator (stuffer) name and address
7. Importer of record number/foreign trade zone applicant identification number
8. Consignee number(s)
9. Country of origin
10. Commodity Harmonized Tariff Schedule number

From the carrier, 2 data elements are required:

1. Vessel stow plan
2. Container status messages

Ask your solutions provider if they have this information available to assist you in you off shoring plans.

We look forward to and appreciate your comments.

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Thank you to all of our armed forces troops past and present for the sacrifices you have made on behalf of our country

Monday, May 25th, 2009

This author owes his early supply chain training to the United States Air Force where I attained the AFSC level of 64570 Inventory Management Supervisor while working in the Base Supply system.

Thank you again to the Air Force for helping to shape my future.

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What lessons can be learned from yesterday’s post where we posited that “Something may be rotten in drywall from China”?

Friday, May 22nd, 2009

There may be better ways to source safer products from China. It all begins with the quality of your supplier data.

Many industry pundits agree that data relative to North American suppliers tends to be pretty reliable. On the other hand, these same individuals also feel as though data for Chinese based suppliers is less reliable and as a result buyers and consumers end up with issues like the wall board contamination we discussed in yesterdays post. Some go as far as to say that for the Chinese market there is not a good database of suppliers. If you do have data these same individuals suggest that it is probably corrupted, inaccurate or dated.

Although there is an element of truth to the above hypothesis, this author would argue that data for these markets does exist and if supported by the proper procedures for insuring that the quality of the supply is what you would expect it to be can be very good. The process which we have discussed before has to include holding these suppliers accountable to the same environmental and safety certifications and practices as you would suppliers from North America. This may include SQF certification for food products, a variety of ISO standards or in the case of China the GB evaluation system for green building program adherence as a starting point.

If the data is not accurate, then enough time and money is not being invested to make it so.

A good database should be able to provide you with a list of suppliers for a particular country that can be sorted geographically within the country while also providing the appropriate contact data, company information and certification adherence. That balanced with the processes listed above (remember I don’t believe in best practices) should result in making Sourcing from China a less risky proposition.

We look forward to and appreciate your comments.

Ron Southard

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In Hamlet, Marcellus said “Something’s rotten in Denmark”

Thursday, May 21st, 2009

Many people misquote this by saying “Something is rotten in the state of Denmark”. In this case, “Something may be rotten in drywall from China”.

Although in the popular Shakespearian play the above quote refers to the local political climate, there is a governmental element to our China quote as well.

Recently the Environmental Protection Agency (EPA) has found suspicious materials in drywall imported from China. The question this author continues to ask is how to we import these products without understanding and testing that they are made with the proper materials. In this case, drywall has been a staple of home building for decades.

It seems to me that there should be a pretty standard formula for producing drywall. One ought to be able to ask a simple set of questions (RFI) as to what raw materials went in to the production of the end product. There should then be a fairly reliable Quality Assurance (QA) process in place to test whether or not the product in fact is manufactured to the proper standards..

In this case, the EPA found two organic compounds in Chinese made drywall that are associated with acrylic paint. The EPA also found higher levels of strontium in the Chinese product. According to Wikipedia strontium is a soft silver-white or yellowish metallic element that is highly reactive chemically.

According to the EPA the boards apparently cause a chemical reaction that gives off a rotten egg stench that gets worse with exposure to heat and humidity and also has a corrosive effect on metal, ( read more about strontium).

This author is pretty sure that many new homes are constructed using metal studs today and most of the wiring in homes is also metal based product.

Four samples of American made products were also tested that did not contain the aforementioned organic compounds.

In this case the total cost of products for as many as 100,000 homes might end up being lower had the products been purchased on shore originally.

We look forward to and appreciate your comments.

Ron Southard

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What steps can companies take to include green strategies into their procurement process?

Wednesday, May 20th, 2009

Although many e-negotiation solution providers claim to have processes in place to support green sourcing, how much of that is just green wash?

This author could have used the term best practices in the above paragraph instead of processes, but as you are already aware I do not believe there is such a thing. For companies that think outside of the box in order to offer solutions that improve and streamline processes, best practices cease to be just that as soon as they are established to begin with.

A first step for companies is to develop a process which evolves daily with which to evaluate your existing and potential new sources supply. A good way to begin this process is to author a GREEN RFI prior to all e-negotiation events. Eliminate the suppliers that don’t seem to have any process in place based on their RFI responses. Upon event completion hold low bid suppliers accountable by visiting those suppliers’ facilities prior to the actual award of business and base your final decision RFI result confirmation. During the RFI process make insure that the following types of questions are included with which to evaluate your existing and new sources supply.

1. Please list all of your companies CSR initiatives.
2. Does your company support TBL reporting?
3. What environmental permits and certifications are in place?
4. Do you have readily available audit results?
5. Please list all of your pollution prevention controls.
6. What are your hazardous materials handling process.
7. What is your waste management plan?
8. What do you do to insure clean air emissions?
9. Does your company maintain product formulas and content traceability?
10. Please list your product safety plans and certifications.

Once suppliers have been retained or selected, offer to train them on how to include this process with their own sources of supply and other business partners. This may include offering how your trace the overall benefits of being a green company to your bottom line (TBL) as well as other initiatives you have taken internally with associates and other stake holders to support your internal CSR initiatives.

We look forward to and appreciate your comments.

Ron Southard

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Just what can’t company’s source using reverse auctions?

Tuesday, May 19th, 2009

The answer might surprise you. Absolutely nothing.

We were speaking with a consultant this morning that asked us a group of questions from a company he was in the process of introducing us to. Two of the questions were related and are as follows.

1. Does it make sense to reverse auction any of our core items?
2. Does it ever make sense not to reverse auction?

Obviously our first conversation centered on what were considered to be core items for this company. This can change from company to company based on the specific industry they serve and understanding frequently used buzz words for that particular industry.

In the retail industry, products are generally broken down into two major groups or classifications which are products for resale and products not for resale. Core items can exist in both categories. An example of a not for resale product/category that a large retailer may consider to be core might be fuel. This is a regular annual expense item that is driven overall by the price of a barrel of oil that can vary widely and be purchased as part of an annual contract that can be tied to a price index such as OPIS. Additionally, fuel can be purchased using spot buys that can be made periodically during the year and are also tied to the same index. Both types of buys lend themselves very nicely to the reverse auction process.

For a manufacturer, a core product might include the raw materials used to manufacture their end user products. This might include metals, plastics, resins etc. All of these core products are also tied closely to a variety of indexes.

The key to using reverse auctions to source any product/category is the quality and availability of the products specification, the availability of alternative or new sources of supply wanting to bid for the business and the quality of the new product compared to what is being used today.

With the above issues covered and understanding that all other data normally considered during the standard procurement process are generally features of most quality e- negotiation tools; companies can be comfortable that any product or service that they use can be sourced using a reverse auction.

Typically when using a reveres auction element of an RFX suite, companies can save time, review more bids and compress pricing or avoid costs in an up market.

We appreciate and look forward to your comments.

Ron Southard

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Do retail industry procurement professionals really know which products they buy contain BPA?

Monday, May 18th, 2009

While we applaud the city of Chicago and the State of Minnesota for recently voting to ban the sale of sippy cups and baby bottles that contain BPA. This is an action that the federal government should be undertaking relative to a wider range of products now much the same as Canada has already done.

According to the Environmental Working Group (EWG) “Bisphenol A” is a toxic plastics chemical that has inherent risks associated with the human consumption of the product.

Products categories that may 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

The first question this author would ask himself is; if this compound is not good to consume, is it safe to rest against you face for extended periods such as in the use sun glasses? If it is included in sunglasses is it included in eye glasses? It appears as though we do not know what we do not know.

After reading the following, ask yourself if you would like this compound included in any of the products you consume or wear. 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. Duh!

This compound has been 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 their shelves

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

We look forward to and appreciate your comments.

Ron Southard

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Would your company like to make the procurement profession more sought after by college graduates?

Friday, May 15th, 2009

In order for companies to hire and retain professionals, candidates have to first be desirous of the profession. In order to accomplish this companies need to seek ways to make jobs fun and to tie them more directly to social responsibility.

According to a nationwide survey of college students by the Panetta Institute for Public Policy, when surveyed students were asked to choose from a list of career opportunities, 49% of students surveyed listed their greatest interest in working for a socially responsible company.

Another survey by William M. Mercer finds that, only 29 percent of employers nationwide encourage humor as part of their company culture, and only eight percent have a policy of using fun to reduce employee stress. California State University Long Beach found that people who have fun at work are more creative, more productive, work better with others and call in sick less often.

It seems simple to this author that if companies want to make the procurement profession a job that students seek out rather than one that they end up transferred in to, they can endeavor to combine elements of fun and social responsibly while also advertising that message to our best and brightest.

There is a very clear opportunity to accomplish the above in the e-negotiation space of procurement where the droll use of board room pilots and demos continue to put executives to sleep while they watch screens that do absolutely nothing for at least the first half of an event.

A good place where companies might start is with their current or prospective solution providers. Asking some of the following questions may provide some clarity to your search.

1. What have you done to make the use of e-negotiation tools more fun and engaging?
2. Have you done anything with score card systems that would engage disparate departments in a gaming mentality versus each other?
3. Can you suggest a reward system that supports these tools in order to encourage utilization and competition?
4. What specifically do your tools do to proactively support social responsibility?
5. Can you please demo all of this to me right now?

These questions should be able to be answered immediately, and an instant meeting or WebEx session set up within minutes in order to demonstrate the functionality.

We appreciate and look forward to your comments.

Ron Southard

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