Archive for June, 2009

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

Thursday, June 11th, 2009

During a company white board session last week, one of our associates came up with a novel idea how to increase a retailers category sales, promote energy efficiency and increase reverse auction revenue for us at the same time. I like these kinds of ideas. I think they’re called win-win-win.

The category in question is light bulbs. The specific product is compact fluorescent light bulbs or CFL’s.

A compact fluorescent light bulb (CFL) will save about $30 over its lifetime according to Energy Star and will pay for itself in about 6 months. It uses 75 percent less energy and lasts about 10 times longer than an incandescent bulb. If every home in America replaced just one incandescent light bulb with an ENERGY STAR qualified CFL, we would save enough energy to light more than 3 million homes and prevent greenhouse gas emissions equivalent to that of 800,000 cars.

Like any other product containing potentially hazardous materials that you use in your home, CFLs come with some special instructions for handling, disposal and recycling.

Without going into all of the detail or long term savings calculations of our white board or idea sharing session, here are the specifics of the recommendation…

1. Retailer promotes a program that offers all associates an opportunity to buy CFL’s for their home if they are willing to replace all light bulbs in their home. The employee can receive their employee discount.
2. The CFL’s 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 CFL’s in order to reduce costs and make up for margin loss.

The Benefits:

1. The retailer promotes a program that is good for and has a direct measurable impact on the environment.
2. The retailer’s category sales go through the roof.
3. Associates household expenses are reduced with no out of pocket expense.
4. Retailer experiences a rise in associate satisfaction
5. Minimal margin impact is experienced on the category based on reverse auction savings.
6. This is a perfect example of supporting TBL or triple bottom line

In this environment, the retailer wins, the associate wins, and the reverse auction solutions provider wins.

Just imagine the impact if some of the largest retailers with thousands of employee’s were to adopt this program.

We look forward to and appreciate your comments.

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What makes a successful reverse auction regardless of industry focus?

Wednesday, June 10th, 2009

The answer to this question is simpler than most would offer as an answer. Some might answer that it is savings, some might answer that it is cost avoidance. Both are a nice end result.

This author’s answer however is that without what I believe to be the primary answer the first two answers won’t happen. At least they won’t consistently.

A lot of work goes in to building and hosting a reverse auction. The people conducting that work are known as knowledge workers. At least that is my point of view. What they are building is content that supports the entire procurement process. Without the adequate content and easy access to it, suppliers can not properly bid without putting themselves at risk and buyers can not buy without putting themselves at risk. A primary risk to the above mentioned benefits of savings and cost avoidance is that the low quote you received might not be honored for a variety of loopholes created by a lack of adequate content.

The process begins with properly assessing a companies needs and documenting them properly and then targeting suppliers that have offers that match those needs plus some. Surprisingly, many buying organizations do not even have this content for their existing suppliers let alone access to new sources of supply. In many cases contact information is not up to date which can include simple data such as names, phone numbers, email addresses, payment processing addresses and the like.

Ask your solution provider to detail the content they collect for a reverse auction and to show you how both buyers and suppliers can access that information before, during and after an auction in order to insure that what you are offering for bid is what they are bidding for.

We look forward to and appreciate your comments.

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The following movie is a good primer on understanding traceability in the food chain.

Tuesday, June 9th, 2009

With the growing concern over food safety, this author has posted often on the importance of traceability in the food chain. The movie Food Inc. is a great place to begin to learn what traceability and social consciousness really means.

The about the movie website titled Hungry For Change shares that In Food, Inc., filmmaker Robert Kenner lifts the veil on our nation’s food industry, exposing the highly mechanized underbelly that has been hidden from the American consumer with the consent of our government’s regulatory agencies, USDA and FDA.This movie Features interviews with such experts as Eric Schlosser (Fast Food Nation), Michael Pollan (The Omnivore’s Dilemma, In Defense of Food: An Eater’s Manifesto) along with forward thinking social entrepreneurs like Stonyfield’s Gary Hirshberg and Polyface Farms’ Joel Salatin.

This movie provides a great opportunity to raise your company, individual and procurement teams education level relative traceability, safety and social consciousness in the procurement process.

Please share this post with a friend and visit http://www.foodincmovie.com to learn more.

We look forward to and appreciate your comments

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Here is another product safety legal settlement from 2007. Here, Mattel agrees to pay a $2.3 million fine.

Monday, June 8th, 2009

Fridays post relative to food safety in the pet food arena discussed the potential risks and associated costs of not adhering to product safety standards. The Mattel settlement and fine is from that same time period.

Ultimately not adhering to standards can result in significant fines or if the violation is severe enough can cause a supplier to go out of business. For a business such as Mattel with annual sales of approximately $6B USD based on their 2008 annual report a fine of $2.3M is relatively small. The total cost is probably double based on the length of the litigation and associated legal fees. For other companies violations can cause them to entirely go out of business in a much shorter period of time; as was the case for the Peanut Corporation of America from the peanut butter recall associated with the Salmonella outbreak earlier this year.

Even though two of the examples sighted above are relative to food products, product safety is not just about food borne illnesses. That was actually the title of a recent post that discussed the lack of accountability at the top of organizations relative to Triple Bottom Line (TBL) which measures organizational success based on economic, ecological and social results or more simply put based on people, planet and profit impact.

The question this begs is do any of the companies above meet that level of success based on these legal findings and results. If these things happen once in accompany can they or will they happen again? Will consumers let it? As we enter a heightened time of social consciousness only time will tell.

In recent history we have peanut products, medical devices, toys, produce and ballpark turf etc. all causing serious illnesses or death. It is time for all companies to require active diligence in order to ensure that safety and other standards are adhered to without exception in the sourcing process. Ask your solutions provider how they can help you accomplish this?

We look forward to and appreciate your comments.

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Hopefully this can be a learning experience for retail procurement professionals. Company agrees to plead guilty in connection with the 2007 Pet Food Scare.

Friday, June 5th, 2009

This author is not sure that the total financial or emotional impact of the 2007 Pet Food Scare will ever be totally calculated. As a concerned pet owner whose best friend was affected by this scare and survived, I do know our dog no longer eats pet food.

According to Consumer Reports, an attorney for Stephen S. Miller, co-owner of ChemNutra Inc., said his client, Miller’s wife, Sally, and the company plan to enter guilty pleas at a hearing June 16, according to court papers. The Millers and ChemNutra, along with two Chinese companies, were indicted in February 2008 on charges that ChemNutra imported wheat gluten tainted with the chemical melamine, which was then sold to pet food makers.

According to Wikipedia ChemNutra imported ingredients for food, animal feed and pharmaceuticals, so the impact of the products they imported had the potential to have a more far reaching impact than just pet food.

As this author has continued to stress, managing and keeping supplier information fresh and accurate is a constant challenge for all retailers. Food recalls such as the 2007 Pet Food Recall can be mitigated by following the correct processes and keeping up with and holding suppliers accountable to food industry safety standards as we discussed during yesterdays post.

As we are not aware of the plea arrangement in this case, we may never know the financial impact to retailers, wholesalers, suppliers, employees and shareholders that were negatively impacted by companies using ChemNutra as a source of ingredients.

What we do know is that thousands of dogs and cats gave their lives when all they do day in and day out is trust us to keep them safe. What a shame.

We look forward to and appreciate your comments.

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What information should we know about our sources of supply?

Thursday, June 4th, 2009

Managing and keeping supplier information fresh is a constant challenge for retailers. With the number of food born illness issues during the last couple of years, one area that is difficult to keep up with is food industry safety certifications and standards.

The SafeSourceIt™ Supplier Database has grown to over 300,000 global suppliers. During the same timeframe the number of certifications we monitor for these suppliers has also grown. In the food space three standards that are regularly adhered to are ISO 22000, SQF and GFSI? So, what’s the difference?

In essence, SQF and GFSI are programs administered by two separate organizations CIES and FMI that are supportive of each other and use ISO 9000 and its derivative ISO 22000 as standards guideline towards driving food safety in the global supply chain.

According to Wikipedia, ISO 22000 is a standard developed by the International Organization for Standardization dealing with food safety and is a general derivative of ISO 9000 which sets standards for quality management. As such, ISO 22000 guides food safety management systems – requirements for any organization in the food chain. Since food safety hazards can occur at any stage in the food chain from production to consumption it is essential that adequate control be in place that by the ISO are referred to as Critical Control Points or potential points of failure in the supply chain that when managed properly can mitigate the risk associated with the hazard ever taking place.

The ISO 22000 international standard specifies the requirements for a food safety management system which SQF and GFSI are that involves interactive communication, systems management and prerequisite programs and the principles of Hazard Analysis and Critical Control Points (HACCP).This is a systematic preventive approach to food safety which addresses physical, chemical and biological hazards as a means of prevention rather than finished product inspection which could be much more costly.

Think of the ISO as a standards creating body, and SQF and GFSI as programs that at a minimum focus on holding the entire food supply chain accountable to those and other standards.

We look forward and appreciate your comments.

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What information should we know about our sources of supply?

Thursday, June 4th, 2009

Managing and keeping supplier information fresh is a constant challenge for retailers. With the number of food born illness issues during the last couple of years, one area that is difficult to keep up with is food industry safety.

The SafeSourceIt™ Supplier Database has grown to over 300,000 global suppliers. During the same timeframe the number of certifications we monitor for these suppliers has also grown. In the food space three standards that are regularly adhered to are ISO 22000, SQF and GFSI? So, what’s the difference?

In essence, SQF and GFSI are programs administered by two separate organizations CIES and FMI that are supportive of each other and use ISO 9000 and its derivative ISO 22000 as standards guideline towards driving food safety in the global supply chain.

According to Wikipedia, ISO 22000 is a standard developed by the International Organization for Standardization dealing with food safety and is a general derivative of ISO 9000 which sets standards for quality management. As such, ISO 22000 guides food safety management systems – requirements for any organization in the food chain. Since food safety hazards can occur at any stage in the food chain from production to consumption it is essential that adequate control be in place that by the ISO are referred to as Critical Control Points or potential points of failure in the supply chain that when managed properly can mitigate the risk associated with the hazard ever taking place.

The ISO 22000 international standard specifies the requirements for a food safety management system which SQF and GFSI are that involves interactive communication, systems management and prerequisite programs and the principles of Hazard Analysis and Critical Control Points (HACCP).This is a systematic preventive approach to food safety which addresses physical, chemical and biological hazards as a means of prevention rather than finished product inspection which could be much more costly.

Think of the ISO as a standards creating body, and SQF and GFSI as programs that at a minimum focus on holding the entire food supply chain accountable to those and other standards.

We look forward and appreciate your comments.

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This is part II of yesterday’s post neither a leader nor a follower be.

Wednesday, June 3rd, 2009

Here are some more thoughts on the lack of industry thought leadership relative to not replacing BPA by industry leaders.

As a refresher, this author used the following example of less than stellar industry leadership during yesterdays post. I was reading an article recently Titled “Firms aim to fight BPA ban” by Lyndsey Layton of the Washington Post. A quote from the article that follows speaks volumes to the lack of leadership in solving this problem. “Frustrated industry executives huddled for hours Thursday trying to figure out how to tamp down public concerns over the chemical bisphenol A, or BPA”. You have to be kidding me.

So, let’s dig a little deeper into this article and suggest how industry leaders should be looking at this as an opportunity and how they can help buyers from all companies source products that are safer and have a better impact on the environment instead of continuing to follow the same practices they have been since the 1950’s.

The firms we are talking about are manufacturers of canned beverages and foods. This includes well known industry giants. A sampling of the creative strategy they came up with was based on the believe that they needed to have a legislative approach (lobbying) and a grass roots outreach to mothers and students between the age of 21 and 35 from someone in the age group. They also considered using fear tactics or telling consumers you will have to pay a higher price for these products. I won’t go on. Simply stated this is poor leadership based on a traditional business model with very little thought as to anything other than business as usual. At the end of the day, the product is not safe and needs to be replaced or outlawed.

Last year, scientists from the US National Toxicology Programme said that effects on reproductive development from BPA in packaging cannot be ruled out and a study released last year by UK scientists linked the chemical to diabetes and heart disease.
This is in addition to the 100 other studies that have found the chemical to be an endocrine disrupter or damaging to behavioural and neural development.

Michael Brown, president of chemical consulting firm StrategyMark said, alternatives such as acrylic, polyester, and polypropylene are worthwhile exploring in a number of applications such as non-packaging water sports bottles, baby bottles, water dispensing bottles, appliance containers (e.g. food processors), etc.

Of course it makes sense, but even a consulting firm that supports this industry won’t come right out and say this is a required and mandatory action.

Let’s take a look at what took place in Japan relative to the same issue

Due to consumer concern about the toxic effects of BPA, Japanese manufacturers voluntarily reduced the use of BPA in packaging between 1998 and 2003.
They replaced EXR coating with PET film lamination on the inner surface of cans or used an EXR paint that had much less BPA migration into food instead.
And following these reduction and replacement moves, a team of assessors claim that virtually no BPA is found in canned foods and drinks in Japan now.

I hope everyone caught the fact that this was done voluntarily between 1998 and 2003 and we are still discussing this problem six years later. The fact is that some of the same companies we are speaking of also sell products in Japan.

So what might enlightened leaders do? Following is a very high level less than all inclusive examples.

1. Accept the fact that there is a problem.
2. Conduct research from other sources such as Japan that have eliminated BPA leakage.
3. Author a plan to replace existing products with new ones that are safer.
4. Willingly incur the added expense to retool processes and manufacturing products that are required to support the change.
5. Author a marketing campaign to tell consumers what you have done on their behalf relative to product safety.
6. Let consumers know what your competition is not doing.

A leader behind this plan might in fact increase market share and also sleep better at night.

We look forward to and appreciate your comments.

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Neither a leader nor a follower be. This is a play on another famous quote, does it sound like any companies that you may know or work with?

Tuesday, June 2nd, 2009

Middle of the road does not work. The same old same old does not work. The pace with which change occurs today requires companies to be able to turn on a dime. For that leadership is required. Not leadership that only looks at the bottom line. We require leadership that creates and innovates to both your benefit and that of the global community.

The leadership this author is speaking about is visionary actionable leadership. Not reactionary leadership. We need leadership that looks at the sate of their company and its products as well as the needs of the community at large and in offering their solution to the collective problems faced by these entities, does it better, faster, cheaper and for the general good. This is more about walking the walk before any one else does because it is the right thing to do. If these represent the guiding principles of a company, the money part will follow. This is not something that can be learned or taught in business school.

According to Wikipedia, leadership has been described as the “process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task”.

A second definition which I like better and is more inclusive of followers comes from Alan Keith of Genentech who said “Leadership is ultimately about creating a way for people to contribute to making something extraordinary happen.

As an example of less than stellar industry leadership, let’s look at a recent news article on a subject this author has posted about on a number of occasions “BPA”. I was reading an article recently Titled “Firms aim to fight BPA ban” by Lyndsey Layton of the Washington Post. A quote from the article that follows speaks volumes to the lack of leadership in solving this problem. “Frustrated industry executives huddled for hours Thursday trying to figure out how to tamp down public concerns over the chemical bisphenol A, or BPA”. You have to be kidding me.

In tomorrows post let’s dig a little deeper into this article and suggest how industry leaders should be looking at this as an opportunity and how they can help buyers from all companies source products that are safer and have a better impact on the environment instead of continuing to follow the same practices they have been since the 1950’s.

We look forward to and appreciate your comments.

Ron Southard

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Why does this author post? Please enjoy this short lighthearted poem as to why.

Monday, June 1st, 2009

I choose to post simply because I can
My wife seems to think it’s because I’m a concerned and caring man

So why or when to post just what is my deal
It could simply be that I just had a bad meal
A meal from a food source that was not really safe
That sickened me some
And just could not be traced
It’s origin cloudy I really get ticked
That many more people could possibly get sick
So I post a few comments on product safety and more
In hopes that my comments are part of the cure
Whether near shoring or off shoring or from local suppliers too
I offer opinions hoping they’re helpful to you
It’s time ours sources of supply start to get the game right
And that will only happen if buyers make the process tight
With adherence to certifications and timely inspections
That are clearly executed against consistent directions
While we’re at it’s important to do and say what we mean
And while we tighten up our processes
Let’s try to keep them focused on green.
With a supply chain that’s safer
A greener to boot
My next posts can discuss how to do both while still saving you some loot.

As always, we look forward to and appreciate your comments. There is no need for them to be poetic in nature.

Ron Southard

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