Archive for January, 2011

How many times does someone ask you what does procurement mean?

Monday, January 31st, 2011

It really is a curious question; pretty much along the same line as what is spend management. Well my answer might create more questions, but all of the following job areas within your company are probably involved or impacted by procurement or e-procurement?

1. Finance
2. Purchasing
3. Logistics
4. Manufacturing
5. Warehousing
6. Materials Management
7. Inventory Management
8. Supply Chain
9. Distribution
10. Transportation

There are certainly many more areas of a company that have procurement or  e-procurement connections, but the above probably give you a pretty good idea of the breadth of involvement within any company. In fact, I can’t think of a job that is not impacted by procurement. Maybe I should just say we save every department in your company money every day.

We look forward to and appreciate your comments.

How does your company support food safety in your e-procurement process?

Friday, January 28th, 2011

The SafeSourceIt™ global  supplier database includes more than 35 safety and environmental standards and certifications that suppliers are vetted against. The Certified Humane Raised and Handled® program is one of them.

The Certified Humane Raised and Handled® program is a certification and labeling program that is the only animal welfare label requiring the humane treatment of farm animals from birth through slaughter.  The goal of the program is to improve the lives of farm animals by driving consumer demand for kinder and more responsible farm animal practices.  When you see the Certified Humane Raised and Handled® label on a product you can be assured that the food products have come from facilities that meet precise, objective standards for farm animal treatment.
 
The Certified Humane Raised and Handled® label assures consumers:
• That the producer meets our standards and applies them to animals from birth through slaughter.
• Animals have ample space, shelter and gentle handling to limit stress.
• Ample fresh water and a healthy diet of quality feed, without added antibiotics or hormones.
• Cages, crates and tie stalls are among the forbidden practices, and animals must be free to do what comes naturally.  For example, chickens are ale to flap their wings and dust bathe, and pigs have the space to move around and root.

We look forward to an appreciate your comments

Should prices really be rising based on the commodity markets?

Thursday, January 27th, 2011

Then yesterday as I was browsing another subject, I found the following on MSN. “Commodities had a weak session, which culminated in a 1.5% loss for its worst single-session slide in three weeks. Weakness was widespread among commodities”. My response was huh?

So just what is a commodity and how can a company keep track of these trends for themselves. According to Wikipedia a commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are often substances that come out of the earth and maintain roughly a universal price.

Your product costs should fluctuate periodically based on the commodity markets, but being aware of them allows you to enter terminology in your contracts that should protect you against any significant spikes and your supplier against any significant drops in the market. Without this language you are really playing Russian roulette with your company’s money.

Commodities exchanges that you can easily follow include:

1. Chicago Board of Trade (CBOT)
2. Chicago Mercantile Exchange (CME)
3. Dalian Commodity Exchange (DCE)
4. Euronext.liffe (LIFFE)
5. Kansas City Board of Trade (KCBT)
6. Kuala Lumpur Futures Exchange (KLSE)
7. London Metal Exchange (LME)
8. New York Mercantile Exchange (NYMEX)
9. National Commodity Exchange Limited (NCEL)
10. Multi Commodity Exchange (MCX)
11. International Indonesian Forex Change Market (IIFCM)

If you have a quality e-procurement partner they should be able to provide you with this type of data because it is still possible to compress pricing even in an up market. This author is not sure the preset trend is in that direction however.

We look forward to and appreciate your comments.

Maybe a good way to address rising costs is a more robust private label program.

Wednesday, January 26th, 2011

According to Wikipedia Private Label goods and services are available in a wide range of industries from food to cosmetics.

Historically these products or store brands were positioned as low cost alternatives to major national and international brands. Today if you read the labeling many of the products are virtually identical and in some cases companies are positioning their brands as better or premium to the large brands.

A great source if education is The Private Label Manufacturer’s Association or PLMA. Their website is www.plma.com. PLMA sponsors an annual show toward the end of each year. This show is full of great workshops as well as manufacturers that would be glad to compete for you business.

According to GfK Roper, 57% of all shoppers now say that they purchase store brands which represents a 21% increase from ten years ago and an impressive 38% growth rate.

E-procurement tools typically assigned to the e-RFX suite are an ideal way to source these products and will help to drive your costs even lower. Start with an RFI to select the companies or manufacturers you are interested in partnering with and then invite the best few to bid for your business.

We look forward to and appreciate your comments.

What information should we know about our supply chain partners?

Tuesday, January 25th, 2011

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 380,000 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.

When should companies conduct RFI’s and how do you get started?

Friday, January 21st, 2011

E-procurement tools make it easier today to conduct requests for information or RFI’s in a hosted format than in the past, but the fact is this particular e-procurement tool is not used often enough.

RFI’s are kind of free flowing in their format, but generally the first data companies should want to capture is specific information about the company you are interested in. Any good supplier database should be able to provide the following data for you without even having to ask or develop a single question.

1. Company name
2. Company address
3. Parent company
4. Describe ownership and/or strategic partnerships of your company
5. Name and signature of the person responsible for the information contained in this RFI
6. Phone number
7. Fax number
8. E-mail address
9. Web site URL
10. Company location (corporate office; other offices)
11. Total number of employees (include breakdown per department, if possible)
12. Employee turnover rate
13. Employee satisfaction rating (if available)
14. Key employees names and employment contracts
15. Total revenue:
16. This year
17. Last year
18. Total profit/loss:
19. This year
20. Last year
21. When was your company’s initial year of operation?
22. Company Description:
23. Product categories offered:

Once you have collected this type of information the next step is to get product specific at a high level. And remember don’t turn your RFI’s into RFP’s, that’s the next step.

We look forward to and appreciate your comments.

Is it time to look at your paper purchases?

Thursday, January 20th, 2011

So what does drive the price of paper? Well it depends on the type of paper you’re talking about. In this case let’s talk about copy paper, receipt paper and the like. What drives the pricing here is the pulp market and specifically the hardwood pulp market. You probably buy a variety of paper products from the same distributor. Your supplier may buy it from a larger distributor who may in fact buy it from a mill.

What the mills buy to make copy paper is hard wood pulp. That market at present is becoming saturated which is a good thing for paper prices. We took an early hit last year due to Mother Natures impact in countries like Chile but global inventories and shipments are headed up which means your prices should be headed down.

Your contract probably has some sort of escalator or deescalator language in that that offers some protection, but excess inventory is always a reason for companies to be aggressive in their pricing.

We look forward to and appreciate your comments.

Clean up in aisle three! What’s your CFL cleanup program?

Tuesday, January 18th, 2011

Well if you hear it now, you might want to think twice before your curiosity kicks in and makes you walk on over to take a look. If you’re at home you should also exercise some caution.

The answer to the opening question is probably more times than you can count. However, this is where it is not quite as easy to be green as one might think. Although CFL’s are the green alternative to traditional lighting alternatives, last longer and offer a lower cost of ownership, they are not quite so easy to dispose of. That’s because the tubes are a hazardous waste item that contain a small amount of with mercury which can be released into the air when they break. This also makes it illegal to dump them in the regular trash when they’re replaced or broken.

Yesterdays edition of USA TODAY actually had an article titled EPA makes cleanup tips for broken CFL bulbs much more realistic by Wendy Koch. Although this article was focused on the home, many of the same issue need to be addressed in retail establishments that sell and use CFL’s. If you want to read the article please click here.

Some times it’s not as easy as just saying you’re green. Plan ahead!

We look forward to and appreciate your comments.

Sustainable success with e-procurement programs is not based solely on financial models.

Monday, January 17th, 2011

Primary success with e-procurement programs is ultimately measured by cost reductions that should drop directly to a company’s bottom line. More than once I have heard; “did we hit a home run?” Less emphasis is placed on cost avoidance and sustainability issues which can often lead to less of a companies total spend be assigned to these otherwise very effective tools then should be.

In order to ensure that results are sustainable; the strategies for all categories require consistent tool deployment across all departments throughout the company. This can be accomplished by utilizing a well planned repeatable process for category selection, discovery, supplier selection, and strategy communication that is well understood by all buyers and category managers through award of business.

Supplier selection and management is a critical stage that requires the understanding and participation of all sourcing professionals within an organization. One small mistake by anyone within the procurement organization could negatively impact the potential results of an e-procurement event. Historical long term relationships that drive behind the scene comments like; “don’t worry we’ll be fine” to a long term supplier may drive inappropriate bid behavior and lack of ongoing credibility with your program. Not to mention the potential legal implications.

If you are not having the results you would like or have less than twenty percent your total corporate spend assigned to e-procurement tool’s that are offered in the form of  Software as a Service, ask your provider why?

We look forward to and appreciate your comments

Is the economy really sick?

Friday, January 14th, 2011

According to Wikipedia in economics, the debt-to-GDP ratio is one of the indicators of the health of an economy. It is the amount of federal debt of a country as a percentage of its Gross Domestic Product (GDP). A low debt-to-GDP ratio indicates an economy that produces a large number of goods and services and probably profits that are high enough to pay back debts.

So what does that say about the economy when our debt to GDP. The forecast GDP for June of 2011 is $15.1T and our dept is about $13.9T which means our forecast ratio is
about 91.4% which is an improvement from the same time period in 2010 when the ratio was about 98.4%. Although this represents an improvement, a healthy economy with limited risk should have a ratio in the mid 60’s at the most. IT was not to long ago that we were there.

A cool site where you can play around with the numbers if you can handle it is the government spending site.

We look forward to and appreciate you comments.