Archive for February, 2011

Trying to make sense of product traceability!

Monday, February 28th, 2011

The definition of traceability according to Wikipedia refers to the completeness of the information about every step in a process chain. Traceability is the ability to verify the history, location, or application of an item by means of documented recorded identification.

When we hear organizations like the FDA use the above term what they are referring to is the capability of bidirectional traceability or tracing products one step back one step forward. This means identifying the immediate supplier of the product and identifying the immediate recipient of the product, which is not the answer we need.
 
However the process also requires some level of common sense. I’m a man of faith, but blind faith really gets us no where when we are talking about food product traceability. GS1 has created a certification for traceability in cooperation with a number of organizations such as FMI, CIES and BASF.

So from a common sense perspective one would believe that all products we consume are safe, that all produce and grain products are traced back to the seed level. Unfortunately this is not the case.

Let’s just examine milk products or byproducts. In a post from two years ago, this author discussed what is happening in China where 13,000 babies were hospitalized and over 53,000 babies affected and that it could happen in North America. As recently as last week we heard that this was happening again in China with another protein look alike other than melamine. We are talking over two year’s folks.

So what best practices does your company deploy to protect your customers and theirs?

We look forward to and appreciate your comments.

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Great retail companies use standards to support their Corporate Social Responsibility (CSR) initiatives and drive towards Triple Bottom Line (TBL) accounting.

Friday, February 25th, 2011

Contributions to the welfare of society can come in many forms such as supporting the arts, further education, give to social welfare agencies, supporting community-building initiatives, reducing pollution, and the other charitable causes. Businesses that adopt socially responsible directives help to allow government agencies to minimize their involvement with the corporation. Reporting on these advances as well as their financial progress is TBL in its most pure form.

One way that retail companies can add  to their  social consciousness is to try and use Certified Reference Materials or (CRM’s) which are ‘controls’ or standards used to check the quality and traceability of products. Requiring these standards prior to purchasing products indicates a lot about companies commitment to its stakeholders which includes its consumers and those associated with them. It also mitigates risk should recalls occur as a result of harm.

As an example, a reference standard for a unit of measurement is an artifact that embodies the quantity of interest in a way that ties its value to the reference base. At the highest level, a primary reference standard is assigned a value by direct comparison with the reference base.

A primary standard is usually under jurisdiction of a national standards body such as the ISO or The International Organization for Standardization which is an international standard -setting body composed of representatives from various national standards organizations. Relative to an example of a primary standard, you might refer to the Future ISO 26000 standard on social responsibility published as Draft International Standard which ties very nicely to this post.

We look forward to and appreciate your comments.

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Here are twenty steps to running high quality retail e-procurement events.

Wednesday, February 23rd, 2011

There are well established processes which when followed will create higher quality sessions for the retailer and their supplier partners, resulting in better savings or cost avoidance dependant upon the category and market condition.

Although brief, the list below provides a good framework by which to build your program and should get you headed in the right direction.

1. Executive sponsorship is mandatory by the CEO,CFO and or the COO
2. Get the entire buying organization together for a kickoff session.
3. Provide an over view of what you are going to do and the impact it can have on the company. Use company financial models.
4. Discuss and agree on success criteria.
5. Every event is not a homerun. Singles and doubles score runs.
6. Create a fun environment.
7. Consider prizes for the most creative use of an auction.
8. Use scorecards by department with percent of savings.
9. Discuss the meaning and importance of corporate aggregation.
10. Hand out event templates to gather existing product specifications.
11. Put a time requirement on data collection.
12. Gather an accurate list of your present suppliers.
13. Work with your sourcing company to identify a top 100 list of events.
14. Calendar the events.
15. Prioritize by dollar value, date and strategic value.
16. Conduct department level discovery meetings of 30 minutes to an hour.
17. Investigate existing contract language.
18. Look for auto renewal (evergreen) language roadblocks.
19. Determine alternate sources of supply with your sourcing company.
20. Develop an event rules and instruction template and post with each event.

Although these steps are not all encompassing, they provide a format for getting started that offers the best opportunity for reduction in capital expense, cost of goods, expenses and improvement in corporate earnings.

We look forward to and appreciate your comments.

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IT Sourcing and the Relationship Between Hardware and Software

Tuesday, February 22nd, 2011

We live in a world that is moving so technologically fast that it is difficult to be an expert on everything that is happening.  Because many of us have businesses and responsibilities that have nothing to do with all of this emerging technology, we rely on 3rd parties such as consultants and sometimes our own vendors to help make decisions that relate to these areas.

One of the places that I consistently see businesses make mistakes on when they take direction from an outside source is to buy the hardware they need to go with the software they purchased from the software vendor.  While it can be cost-effective in some cases, generally if a software company is selling hardware they don’t manufacture, you are either paying too much for it now, or you will down the road when it comes time to upgrade or repair that hardware.

Many times vendors will claim that a company must get the hardware from them because it was made specifically for them.  Frequently this is just not the case, and when it turns out to be the case, it is probably time to evaluate the vendor/company you are using for that software.

I ran across a blog the other day that actually dealt with this very topic.  In the blog the author was discussing how important it was for the customer that they select software that is completely independent of the hardware used in it.  It also went on to detail that the best software will integrate with several types of hardware giving the customer the choice to select the products that fit them the best when it comes to features, functionality and price. As the consumers you have the power to demand these types of options, make sure you select vendors that will give them to you. Blog

We look forward to and appreciate your comments.

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Do you want your first Reverse Auction to be a success?

Friday, February 18th, 2011

Competitive bidding is the process of inviting and obtaining bids from competing suppliers in response to documented specifications, by which an award is made to the best overall bid that meets or exceeds the specifications in areas such as price and quality. There are keys to understanding and making your bidding competitive and successful when using e-negotiation tools.

One of the most important elements and most overlooked is that of incumbent supplier communication once a bid has been authorized. This means that your entire company is on the same page. That page is agreeing to not setting any false expectations with your incumbent suppliers. Because you already have a relationship with these companies you will most likely receive calls, emails, IM’s and texts wanting to know what is going on. Your company line has to be that “We value our relationship and encourage you to use this process as it is the only process by which we will review bids”. Do not indicate that everything will be ok or that things will work out just fine or any similar language. If you are using a 3rd party, instruct your incumbent supplier or suppliers to provide any questions or communications they have through the third party only.

To make it simpler, be honest, be thorough and don’t set any expectations. Keep this in mind and all suppliers will feel like they were treated fairly and want to bid to win your business again.

We look forward to and appreciate your comments.

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The experts say that the price of everything is going up! Can NAFTA offer a clue as to how to control this?

Wednesday, February 16th, 2011

As oil heads north of $100 per barrel again, the resulting higher fuel costs will again force global trade to focus on such as USA, Mexico and Canada versus the Asia Pacific region which is more than 7500 miles away.

Hopefully we learned our lesson less than three years ago? If so, we should all be aware of suppliers that will not require us to buy goods from so far away that transportation and logistics costs will kill our P&L.

Let’s remember that the North American Free Trade Agreement or NAFTA allows us to not just near shore many of our purchases but to localize them. This reduces transportation expenses. North America is made up of the United States, Canada and Mexico. Although NAFTA is primarily focused on agricultural products traded between North American Country’s it also represents one of one of the most successful trade agreements in history and has contributed  significantly to increases in agricultural trade and investment between the United States, Canada and Mexico. There are plenty of opportunities in the regional low cost manufacturing bases could have a related regional impact on keeping  costs lower on many types of retail products.

Finding tools that can aide our search in finding new sources of supply is imperative as demand rises and causes strain on commodities. Are you aware that a tool like this already exists which can provide data at a glance on 928 general merchandise suppliers located in Mexico, 1,585 Grocery Suppliers located in Canada, and 1,940 Pharmaceutical suppliers located in the United States. If not, please visit the SafeSourceIt Query Tool to learn more. Your P&L will thank you and so will your customers when you don’t raise their prices.

We look forward to and appreciate your comments.

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Ready for Valentine’s Day? What about the other 364 days of the year?

Monday, February 14th, 2011

Today hundreds of thousands of people will be out in force going to malls, grocery stores, jewelry stores and flower stores looking for that item in the 11th hour that they will likely pay too much for in order to show someone how much they value them.

It sounds crazy but this same craziness is exhibited all over the world in the purchasing departments of companies who pay a premium for inventory after a contract expiration date has passed, keep incumbent vendors even though they are getting overcharged because it is easier and waste perfectly good excess inventory just because they have no plan for how to control it.
Like spreading the effort of St. Valentine’s Day over 365 days instead of just one, what if companies began to put the plans in place to help them source smarter and safer?

What if companies began leveraging reverse auction tools and services that allowed for the review of the BEST vendor instead of settling for an incumbent because they think it will take too long to find another vendor?
What if companies employed contract management tools that would allow them to be alerted by email so that they never miss important contract dates?

What if companies used a 3rd party to help them move their excess inventory instead of wasting it?

They may find that they end up asking themselves why they weren’t doing it all along!

We look forward to and appreciate your comments.

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Is the inclusion of freight in an e- bid or reverse auction equal to the net landed cost?

Wednesday, February 9th, 2011

If you are looking to break out all of the other costs associated in a product bid, just asking to have freight included or free freight within a certain radius or other similar language will not accomplish net landed cost or allow you to manage it going forward.

Quite often the terms net landed cost, haul back, FOB and others come up during the logistics portion of a sourcing event. Some times they are bid on separately and or delivered by a third party. When a company says they want a net landed cost what they are referring to is the cost of a product or products plus all of the relevant logistics costs, such as transportation, warehousing, handling etc. In other words, what’s my cost when it gets here or where we want it?

If you want to drive the best pricing and service possible you need to understand the terminology and make sure it is clear in your specifications and terms and conditions.

We look forward to and appreciate your comments.

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The U.S. Consumer Price Index rose 1.5% in December.

Tuesday, February 8th, 2011

For every commodity that rises there are also commodities that fall. For every company that raises their prices to their end user be it consumer or company, there are others that want your business bad enough to keep prices stable if not lower them. The issue is that companies have to be willing to put the work in if they want to keep prices down. Too many companies continue to operate in a business as usual manner. It’s pretty easy to spot when individuals or companies operate from the “this is how I learned it and this is how I do it” point of view. Some clues are;

1. They buy from the same suppliers over and over again.
2. The do not have a  view of their contracts.
3. They do not have a view of their performance against those contracts.
4. They do not have a view of additional sources of supply.
5. They do not put their products and services out to bid on a regular basis.
6. They do not have basic specifications.

I was reading an article in U.S. TODAY last Friday February 4th titled Prices starting to creep higher By Paul Davidson. The sub title was Businesses hit point where they can’t absorb higher costs. The article sited several manufacturers and retailers that were raising their prices as a result of increased costs.

Here’s a promise. If you can’t figure out how to keep your costs down, call us at SafeSourcing because we can.  As a matter of fact call me personally 480-773-7524 or email me at ronsouthard@safesourcing.com.

We look forward to your comments.

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Winter Storms Wreak Havoc in the Land of Sourcing!

Monday, February 7th, 2011

Last week more than one third of the United States was hammered by a winter storm that left hundreds of people stranded in airports, without power and without the means to conduct their normal lives.  This storm comes on the heels of what has already been an extremely bad winter for much of the northern and eastern part of the country.

The question lies, what type of impact do storms like this really have on the business world and the activity surrounding the sourcing of goods and services.

Any time retailers have to go more than 2 or 3 days with no or very limited sales the impact is enormous.  That is lost revenue that cannot be retrieved; not to mention the waste involved for perishable products that were not sold.  Loss of this nature must be recouped somehow and often that is in the form of an increase in prices.

The service industry is also affected as poor travel conditions and canceled flights lead to lost revenue in many sectors while some sectors such as snow removal, roof repairs and maintenance companies can barely handle the increases they see.  Companies without a good procurement process and or have negotiated strong contracts are left waiting or paying extreme premiums to get attention.

Lost man hours due to driving conditions and increased illness are also a major impact of a storm like last week that certainly affects the areas being hit, but it also affects companies in other parts of the country as they suffer the pains of canceled meetings and delayed activity in the aftermath of the storm.  All of this ends up meaning one thing, lost revenue and time that usually leads to increased prices and shorter supply levels.

Whether this storm dramatically affects the slight economic upturn being displayed before it hit remains to be seen but one thing is sure; the ripple effect of the storm will be felt for weeks to come.

We look forward to and appreciate your comments.

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