Archive for May, 2009

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

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

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

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

We are pleased to announce to our industry friends the one year anniversary of SafeSourcing Inc. A company for procurement professionals.

Thursday, May 14th, 2009

Our website www.safesourcing.com. has been visited more than 40,000 times during our first year resulting in over 7.1 page views per visit with the average visit lasting greater than 6 minutes. All metrics are well above industry averages for site visits. These visits were generated from over 60 countries with a relatively low bounce rate of 30%.

This indicates that there is a wide level of interest in our approach to supporting companies Corporate Social Responsibility programs (CSR) with our safety and environmentally focused best practices that support e-negotiation in today?s world.

SafeSourcing is now conducting business in both North America and Asia. We have delivered significant savings to our customers and business partners in excess of 20% during an extremely tough economic period.

Our professional services business which supports our SafeSourceIt? product family is thriving with delivery of over 20 e-negotiation training sessions in Asia where our multi lingual application is running in both English and Kanji.

In support of our safety and environmental focus areas and corporate commitment to give back, Safesourcing is also very proud based on our early success that we were able to donate 1000 immunizations for the children of Haiti where almost a third of Haitians have no access to safe drinking water which can result in disease and a high death rate for children.

We have appreciated all of your comments over the last year and will continue to endeavor to provide timely and valuable guidance and tools to the procurement community.

Thank you!

Ron Southard

One of my favorite daily readings is a twice a day every day blog post from Sourcing Innovation where Michael Lamoureux is known as “the doctor”.

Wednesday, May 13th, 2009

In his most recent post, the doctor discusses near-shoring from an AMR research project that indicates that this process can be used as a form or risk management with which this author agrees.

Many people when referring to offshoring and near-shoring think they are only discussing jobs that have been replaced by remote resources from India and China. This was a major topic in the most recent political campaign for President of the U.S.A. This author believes this subject should be taken more broadly to include sources of supply for resale and not for resale products in the retail market.

Many retail executives may not even be familiar with this term. It has been around for a number of years now and in contrast to offshoring, nearshoring offers companies an opportunity to collaborate with suppliers located in the same or similar time zones. If you have ever tried to source products or services from Asia, compare the time difference with that of building a relationship with sources of supply in a local time zone such as in Argentina, Brazil Canada or Mexico. There are significant headaches associated with doing business with a supplier that is on the opposite end of the clock. By example: A company located in New York at 8 p.m. EST. trying to do business with a supplier in Tokyo at 9 a.m. the next morning. The New York based company is well past the end of their day and the Tokyo based company is at the very beginning of their next day.

From today’s Sourcing Innovation blog “the doctor” posts: Hear, hear! I’ve always been for nearshore sourcing and home country sourcing not only because it decreases risks, but because it increases competitive advantage manufacturing flexibility while decreasing transportation costs and pollution.

In order to support near shore or home country sourcing, a significant database of new sources of supply is required where suppliers are adequately vetted against a number of safety and environmental certifications and a level of traceability is maintained. We all know that a key to sustainability in the e-negotiation process is a list of suppliers ready and willing to compete for your business. Running events with the same supplier’s quarter after quarter and year after year is not sustainable.

We look forward to and appreciate your comments.

One of my favorite daily readings is a twice a day every day blog post from Sourcing Innovation where Michael Lamoureux is known as ?the doctor?.

Wednesday, May 13th, 2009

In his most recent post, the doctor discusses near-shoring from an AMR research project that indicates that this process can be used as a form or risk management with which this author agrees.

Many people when referring to offshoring and near-shoring think they are only discussing jobs that have been replaced by remote resources from India and China. This was a major topic in the most recent political campaign for President of the U.S.A. This author believes this subject should be taken more broadly to include sources of supply for resale and not for resale products in the retail market.

Many retail executives may not even be familiar with this term. It has been around for a number of years now and in contrast to offshoring, nearshoring offers companies an opportunity to collaborate with suppliers located in the same or similar time zones. If you have ever tried to source products or services from Asia, compare the time difference with that of building a relationship with sources of supply in a local time zone such as in Argentina, Brazil Canada or Mexico. There are significant headaches associated with doing business with a supplier that is on the opposite end of the clock. By example: A company located in New York at 8 p.m. EST. trying to do business with a supplier in Tokyo at 9 a.m. the next morning. The New York based company is well past the end of their day and the Tokyo based company is at the very beginning of their next day.

From today?s Sourcing Innovation blog ?the doctor? posts: Hear, hear! I’ve always been for nearshore sourcing and home country sourcing not only because it decreases risks, but because it increases competitive advantage manufacturing flexibility while decreasing transportation costs and pollution.

In order to support near shore or home country sourcing, a significant database of new sources of supply is required where suppliers are adequately vetted against a number of safety and environmental certifications and a level of traceability is maintained. We all know that a key to sustainability in the e-negotiation process is a list of suppliers ready and willing to compete for your business. Running events with the same supplier?s quarter after quarter and year after year is not sustainable.

We look forward to and appreciate your comments.

Data from the FDA should be of concern to food industry sourcing professionals and the Obama Administration.

Tuesday, May 12th, 2009

With the number of food scares we have endured during the last several years and the dollars that the FDA has spent on additional resources; shouldn?t the FDA be doing better than this?

According to an article in USA TODAY last week by Julie Schmit the FDA fell short of its goals in at least seventeen of thirty-nine states that they paid to do inspections during the 2007 -2008 contract year.

An FDA resource indicated that they do not meet their targets every year, but they are looking at continuous improvement. This author does not believe that a 43.5% failure rate indicates continuous improvement even if recent data was much worse. This of course does not speak to the fact that some states actually received no audits. In fact in the prior reporting periods, the State of Texas received no audits and is one of the largest FDA contract states.

Maybe the Obama administration should be using some stimulus dollars to insure the safety of our food supply. I have posted before on the new administrations concerns relative to food safety. The administration actually claims that their economic stimulus initiatives will in fact add or save as many as 3.5 million jobs. New Flash. Put a few of the stimulus dollars into ensuring an acceptable rate of success in FDA audits and inspections.

In the USA TODAY article, the FDA indicated that other priorities such as food borne illness outbreaks absorb so many FDA and state resources that audits are skipped. This is a chicken or the egg excuse as far as this author is concerned. If all audits and inspections were conducted on time and companies held accountable to audit standards, we might not have had some of the food borne illness outbreaks in the first place.

While it remains imperative that next generation supplier databases offer traceability to the original source of supply and adherence to a number of food safety certifications, proper inspection and audits completed on schedule at an acceptable rate of over 90% is imperative to insuring consumer satisfaction with our food supply chain.

We appreciate and look forward to your comments.

Ron Southard

Locating, managing and updating supplier information that companies choose to do business with has never been more difficult.

Monday, May 11th, 2009

Regulatory requirements change almost daily as the supply chain continues to broaden globally. Emerging industries, new sources of supply, safety factors, environmental factors, detailed supplier information and traceability are but a few of the issues that require regular maintenance in order to mitigate a company?s risk.

Solution Providers to procurement professionals that provide supplier databases that are part of automating the procurement process, need to step up and make sure that their data support these changes on a regular basis to the greatest extent possible by providing knowledge ware that interacts with both regulatory agencies and suppliers to insure consumer safety and environmental impact as more new sources of supply and new products enter the supply chain on a daily basis.

Actions that solution providers can take may include but are not limited to:

1. Monitor daily alert data as to product recalls and safety warnings.
2. Trace warnings back to the original source of supply automatically and maintain history.
3. Require that suppliers meet certain safety certifications in order to participate in their database.
4. Require that suppliers meet required environmental certifications or programs in order to participate in their database
5. Provide a regular purge of suppliers that do not comply with necessary standards.
6. Adhere to a strict RFI process for new suppliers requesting participation in their database.
7. Provide a rating system for suppliers that are offered to companies as new sources of supply.
8. Monitor regulatory agencies such as ISO for new standards and include them as further requirements in supplier databases.

Ask your solution provider what their process is to grow manage and maintain their supplier database for your benefit.

We look forward to and appreciate your comments.

Ron Southard

Truly understanding what traceability means from your suppliers is a key to your CSR initiatives.

Friday, May 8th, 2009

I had the TODAY SHOW on in the background this morning and heard something about tracing products from trees to napkins that caught my attention.

We certainly are all aware that paper and paper products come from trees. We are also aware if we care of the impact deforestation has on our planet. It just makes sense to source products from recycled materials in order to limit this process.

It occurred to me as I listened to the show that a question that we in the procurement profession might all ask since we are aware that napkins come from trees is; Can we trace the napkins that we purchase all the way back to the forest that that napkin came from? This would be an excellent test for our suppliers, distributors and wholesalers that claim to support traceability beyond one forward one back.

The TODAY SHOW segment I was watching was a review of the eight-part original series, ?Eco Trip: The Real Cost of Living?, hosted by eco-adventurer David de Rothschild, which premiered on Sundance Channel on April 21st at 9:00pm e/p. The series traces the origins and environmental impact of common everyday products such as a cotton t-shirt or a gold ring. ?Eco Trip: The Real Cost of Living? is airing as part of THE GREEN, Sundance Channel?s weekly ecological programming block. This is a great opportunity for a team meeting and educational opportunity relative to traceability and eco focused sourcing.

This author believes that tt is incumbent on all procurement professionals to understand where the products they procure for company use as well as for resale come from and how through a well thought out procurement process they can have a positive impact on the environment. In this case choosing suppliers that offer recycled product alternatives and doing something as simple as posting signage that indicates that taking just one napkin instead of a handful at all locations in a store that offer branded (another area for consideration) napkins from salad bars to bakeries to break rooms can have a positive impact on the environment while also providing backbone to your companies CSR initiatives.

A good question to ask oneself is where we can find suppliers that carry these types of products, what certifications do these suppliers carry and does our e-procurement solution provider offer best practices in this area as part of our existing fee structure.

We look forward to and appreciate your comments.

Ron Southard