Archive for June, 2009

Where can companies find new sources of supply? What’s the risk?

Tuesday, June 30th, 2009

The economy still sucks. Unemployment continues to trend higher and small businesses are closing all over the world as a result of large companies like Chrysler, General Motors and others closing plants, delaying store openings and reducing or canceling orders.

Chrysler indicated last week that they would begin to ramp up production. This is potentially great news for all of the small and medium suppliers with which Chrysler has done business in the past. The same holds true for other small suppliers as retailers begin to open new stores requiring construction sourcing and larger product volumes. This also creates a huge catch twenty two.

According to Wikipedia, catch twenty two refers to more than the book title. In our case, it refers to the no win situation or double bind of potentially good news.

In our Chrysler example, the news is good that Chrysler will be opening up closed production lines requiring more supplies. The catch in this case is that the companies from which they have traditionally sourced may no longer be in business or may have cut staffing in such a way as to require money for ramping up their own labor or for purchasing raw materials. I’m sure you can apply this model to other industries or organizations that you may be familiar with. Many of these small suppliers may be facing liquidation or bankruptcies of their own. So, we have good news; but is it too late and how might companies and suppliers react?

This certainly creates an opportunity for collaboration beyond traditional trading partners. The question this begs; is where do you find them? One source may be your present procurement provider. The tough question is if they had suppliers in the past that might have been willing to bid on your business, why you were not exposed to them. A tougher question is why didn’t you ask?

The logical approach is to come up with a list of questions for your solutions provider. Here is a couple for you to consider?

1. Do you have a large non industry specific supplier database?
2. Does it include suppliers of all sizes?
3. Are suppliers interested in collaborating with other suppliers for smaller shares of a larger opportunity?
4. Do you have an RFI on file for all suppliers?
5. How quickly can you provide us with category specific lists of suppliers?
6. What other information can you provide relative to these suppliers?

We look forward to and appreciate your comments

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How should companies structure for procurement success?

Friday, June 26th, 2009

During a lunch meeting last week a retailer asked us what they should consider in terms of structuring their procurement professionals to fully embrace e-negotiation tools.

Our answer is certainly not a complete one, but the following points are areas that should be considered for any supply chain re-structuring including what is needed to drive success while trying to fully embrace SaaS e-negotiation technology. These steps will get you headed in the right direction towards achieving the greatest possible return on investment.

1. Gaining executive (CEO) level and other stakeholder (Board) support
2. Get your supply chain organization structured for success
3. Plan a detailed review of all contracts.
4. Plan a detailed review of all suppliers
5. Develop better relationships with existing suppliers
6. Improve the performance of suppliers.
7. Gain access to additional sources of supply
8. Improve your view of all spend categories.
9. Develop a detailed off shore and near shore strategies.
10. Review all sourcing methods used today.
11. Review all Environmental strategies
12. Review all Product Safety strategies
13. Create a product specification library
14. conduct detailed category discovery
15. Align all of the above with your SaaS providers recommended strategy
16. Streamline, streamline, streamline.

As you use the above list and grow it, it is important to remember that the job of a procurement management leader is to think outside of the box and educate while looking for innovative ways to do things better, faster and at a lower cost. And to hopefully create an environment that will inspire co-workers while doing that.

We look forward to and appreciate your comments.

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What came first the chicken or the egg?

Thursday, June 25th, 2009

According to Wikipedia the chicken or the egg causality dilemma is commonly stated as “which came first, the chicken or the egg?” To ancient philosophers, the question about the first chicken or egg also evoked the questions of how life and the universe in general began. One might add today that it evokes how we might protect and preserve it .

I received a call from a retailer today with a question relative to today’s post, “Do you have humane procurement procedures in place for your meat and poultry purchases?”

The question really did not speak to the title of this post, but asked if I could give them a few suggestions or areas where they might look in order to begin to understand and develop humane sourcing procedures.

We discussed the subject in some length. Actually in more detail than I will cover in this post, but I suggested for starters that they visit www.americanhumane.org. American Humane Certified protects farm animals by working with producers through the groundbreaking American Humane Certified™ farm animal program (formerly known as the Free Farmed program). American Humane Certified guarantees consumers that the products they select are from animals that were raised and treated humanely.

This site goes well beyond the humane treatment of just farm animals and is a great educational resource for procurement professionals and other associates as well that are interested in humane treatment in general.

We look forward to and appreciate your comments.

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Do you have humane procurement procedures in place for your meat and poultry purchases?

Wednesday, June 24th, 2009

At the turn of the 20th century, chickens were primarily consumed for holiday meals. Today they are a staple food product around the world with a variety of procurement oriented names such as fryers, layers, broilers, WOGS etc.

Consumers are becoming increasingly concerned with the treatment of all farm animals during their life cycle from birth to the dinner table.

In the case of chickens, there has even been legislature passed recently by the State of California for the humane treatment of laying hens. One might say who cares. For one, this author does and so should all of you that are reading this and procuring poultry products.

Chickens have actually been kept as pets for years, and many say they have a relatively high degree of intelligence. According to the Guinness Book of World Records, the oldest living chicken lived to be sixteen years old. I’m not sure how long laying hens continue to produce eggs, but I am aware that the average cage size for a laying hen is only 81/2” by 11”. Yes, I said inches. That’s the size of a standard piece of copy paper. Can you even imagine having a level of intelligence and being confined to a space where you can not even extend your wings, stand up or turn around? If one was to compare the same amount of space for the average 5’10” adult male, the resulting space it would be 3 feet 4 inches by 4 feet 4 inches. That is smaller than the cells in which we confine inmates in our over crowded prison system.

The question one might ask is how might procurement professionals help during the procurement process? It is really quite simple. Ask the right questions or have your procurement solution provider ask them for you. Here are four examples of the type questions we ask suppliers at SafeSourcing.

1. What certifications do you support relative to the humane treatment of farm animals? An example might be “Humane Raised Hand Led”
2. From where do you source your poultry? What specific farms?
3. Are chickens confined to wire cages? If so, what’s the cage capacity?
4. Are the chickens you buy cage free during any of their life cycle.

This type of procurement practice is a great thing to brag about in advertising campaigns as consumers become more and more aware of how our farm animals are treated and react to that treatment by shopping with humanely oriented companies.

We look forward to and appreciate your comments.

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Green Guides. Manufacturers, suppliers and retail companies need to be aware of the ramifications of violating these guidelines.

Tuesday, June 23rd, 2009

This author has posted before on Greenwashing and what retail companies can do to make sure that the products they are buying meet their marketing claims.

Many companies that claim they are eco-friendly are actually practicing eco- fraud. At Safesourcing we have a 7 step process to assist companies in the procurement of products they buy for resale or reuse in meeting the eco guidelines that they should.

The organization with the primary responsibility for monitoring that companies are not just greenwashing with their eco friendly marketing claims is the Federal Trade Commission (FTC). The FTC published the GUIDES FOR THE USE OF ENVIRONMENTAL MARKETING CLAIMS in 1992.

Recently the FTC took legal action against three companies for violating these guidelines. Two of these claims have been settled and the other is proceeding to litigation.

Another company that offers to assist companies with their Green Marketing in order to help avoid these false claims and also has a website called greenwashing index www.greenwashingindex.com that assists consumers and companies in evaluating and rating companies eco friendly claims is Enviromedia www.enviromedia.com.

Consumers should not have to worry about greenwash investigation. The simple truth is that companies should be responsible enough to ensure that their claims are honorable, honest, accurate and meet the appropriate guidelines. Ask your solutions provider how they can assist you in this process.

We look forward to and appreciate your comments.

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Peanut products, canned chili and now cookie dough! This would normally sound like a good Saturday night to me.

Monday, June 22nd, 2009

I grew up a few miles from the original toll house where the recipe for Toll House cookies was invented. My grandmother made the best toll house cookies I ever had. When I married my wife, I never suspected that she would go to work for Nestle Foods or make what has today become my favorite toll house cookie. Sorry Grandma!

I have to admit that I have not eaten anywhere near the amount of peanut butter as I normally do since the food recall of last year. I know that’s a little silly, but it is how consumers feel and why when there is a recall that the impact on sales results of the specific product in question as well as affiliated products suffer for lengthy periods of time after the illnesses have disappeared. As such, not just cookie dough will suffer from this most recent outbreak.

We use Nestle products all of the time. One of the best inventions ever made was Toll House cookie dough that allows you to make just a couple of cookies in the evening when you have a sweet tooth. If you are like me, it is not easy to stop yourself from eating eight or ten cookies when they are home made. With the refrigerated dough, seventeen minutes later you have two cookies and a satisfied sweet tooth.

The curious thing about this outbreak is that it is an E. coli 0157 outbreak which is a bacterium that lives in cow’s intestines. So, how in the world did it get into cookie dough? The outbreak has affected a reasonably small number of people (65) in twenty nine states. Unfortunately, like peanut butter, cookie dough is a favorite food of children. As we all know, the young and the elderly are more likely to suffer from the effects of the bacterium.

On Friday, Nestle recalled 300,000 cases of the cookie dough after being notified by the FDA. Because of the curiosity of this case, this is a perfect example of the need for a traceable supply chain to more than one forward one back reporting. Ask you solutions provider how they would be able to produce this type of reporting.

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

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Kermit the frog sang it best and sang it loud. “It’s not easy bein’ green.”

Thursday, June 18th, 2009

As you follow the words of a popular verse of this song, think about how difficult it is to be a truly green company. Think about what it takes to walk the walk and not just talk the talk. Please read or sing on at your pleasure.

It’s not easy bein’ green.
It seems you blend in with so many other ordinary things.
And people tend to pass you over ’cause you’re not standing out like flashy sparkles in the water- or stars in the sky.

I was traveling the other day and speaking to a company representative from Humana. We discussed prescription drug purchasing and their mail order program. We then got around to what we each of us did. I explained reasoning behind the naming of our company. To this, and I was not surprised when he said. “Oh so you’re doing the green thing.” And there in lies the problem if you are truly dedicated to what you do. The problem is proof and believability.

Greenwashing is a term that describes the practice of companies who intentionally use spin control to market their products and policies as environmentally friendly or attempt to show that they are adopting practices beneficial to the environment. There may be a similar term for companies that focus on safety, but I have yet to find it yet.

For this author being and as Kermit so aptly put, green is not easy because it means that your company has to act in a certain way that is measureable. This means that you actually provide value in supporting the environment, providing for safe products and are able to provide a traceable history that companies can use to support their CSR initiatives. This also means that a company must promote that same view to all of their internal and external stakeholders in the hope of guiding them to behave in the same way.

In very simple terms, how one conducts themselves personally has a lot to do with the believability of how they might conduct themselves corporately.

A few simple steps that one can focus on in the home may also transfer easily to business practices. There are certainly many more, but a good walk begins with baby steps.

1. Use CFL’s in the home
2. Recycle all home products
3. Use products made from recycled material
4. If possible, Car Pool
5. Shut of lights when you leave the room
6. Purchase and use a reusable water bottle
7. Filter your own water
8. Turn off your computer when not in use.

Ask your solution provider to demonstrate how they can support your green initiatives. According to Cervantes Don Quixote “The proof of the pudding is the eating.”

We look forward to an appreciate your comments.

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Here’s another great idea. How GREEN is your toner procurement?

Wednesday, June 17th, 2009

A commonly sourced product using e-negotiation tools in the office supplies space is that of toner cartridges for laser printers. The majority of toner sold is made from petroleum based products. Another common practice when sourcing toner is to source recycled toner cartridges. We are all aware that recycling is a good thing.

There is a less expensive and greener alternative today that not many companies are considering yet. That is the use of toner derived from soybean oil. In fact, soy based toner can be as much as 20% less expensive than traditional toner that is based on petroleum products. Recycled petroleum based toners are still less expensive than new soy cartridges. Another benefit to soy based toner is that paper printed with soy based toner is also easier and less costly to recycle.

A very simple four step process for adding soy based toner to your next e-negotiation is as follows.

1. Add a question to your RFI as to whether or not your prospective or incumbent suppliers carry soy based toner products.
2. Include a line item in game planner for an identical specification of soy based toner for each petroleum based line item.
3. Ask for pre game samples of soy based toner.
4. Test the toner sample for volume and print quality.

The above process may also allow you to evaluate companies you wish to do business with in the future that are more flexible and support your environmental social responsibility initiatives by offering these types of green alternatives.

This simple process supports the reduction of petroleum based products, supports the environment and may in fact save you some money. Best of luck.

We look forward to and appreciate your comments.

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The Endocrine Society publishes a negative report on the use of BPA.

Tuesday, June 16th, 2009

Last year Canada declared this product toxic. It is time we do the same in the United Sates.

Last week during their meetings in Washington DC, the Endocrine Society indicated that there is strong evidence that chemicals that interfere with the hormone system can cause serious health issues.

Bisphenol A or BPA is a hormone disrupting chemical. On May 16th this author posted again on this subject because it concerns me greatly. The post is titled “Do retail industry procurement professionals really know which products they buy contain BPA”

According to Robert Carey, President t of the Endocrine Society they decided to release their statement because these chemicals affect everyone. The report also indicated that 93% of Americans tested have been exposed to BPA.

This author continues to recommend 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.

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Part II of “I’d like to share a winning idea for energy efficiency and a resulting reduction in green house gases.”

Monday, June 15th, 2009

Friday’s post shared a SafeSourcing employees novel idea on how to increase a retailers category sales, promote energy efficiency and increase reverse auction revenue for SafeSourcing all at the same time. I like these kinds of ideas. I think they’re called win-win-win. Please read on to view a great extension to this idea.

Friday’s category focus was on light bulbs. The specific product we discussed was compact fluorescent light bulbs or CFL’s. Today’s extension to that product is motion sensors.

As discussed during Fridays post, compact fluorescent light bulbs or (CFL’s) will save about $30 over its lifetime according to energy star and will pay for it in about 6 months. It uses 75 percent less energy and lasts about 10 times longer than an incandescent bulb.

Today’s product motion sensors can also be provided to a retailers employee in the same way that CFL’s were, as part of a program focused on energy consumption reduction. As an extension to the CFL program, energy sensors can be placed in an associates low traffic areas of their home such as spare rooms, basements and garages. When someone enters that area, the motion detector will turn on the lights which are already CFL’s, thus adding to the savings opportunity. When leaving the area, the light will also turn off after a certain period of time. Motion sensors could also be used outside of the home in security areas to eliminate having to remember to turn them on and off each day increasing safety in the home

The same program used to promote associates use of CFL’s can be used for motion sensors.

1. Retailer promotes a program that offers all associates an opportunity to buy motion sensors for their home. The employee can also receive their employee discount.
2. The motion sensors have to be purchased at the retailers store within a specified period.
3. The retailer offers to reimburse associates for the entire purchase.
4. The retailer holds a reverse auction for the sensors in order to reduce costs and make up for margin loss.
5. The sensors and the CFL’s can be sourced during the same reverse auction.

A creative retailer might also figure out a way to package these products for a marketing campaign to consumers that supports their CSR initiatives and would provide for great PR.

Please see Fridays post for additional benefits.

We look forward to and appreciate you comments.

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