Archive for May, 2014

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Are you watching the commodity markets? Should you be?

Wednesday, May 7th, 2014

Todays post is by Ron Southard, CEO of SafeSourcing Inc.

A customer asked me the other day what indexes we followed in our sourcing practices. Although this is a very broad question that could be answered any number of ways such as what product are you speaking about, it is in fact a very good question. Let me give you an example.

Let’s suppose you are planning your strategy to buy egg products such as whole eggs or liquid eggs or egg mixes. The first question you need to resolve is what makes up the largest cost in the egg farming process? To provide a short answer, it is feed. The follow on question to this should be; what type of grain makes up the feed? Again a short answer is corn. Resultantly these two questions should lead to the conclusion that keeping track of grain market futures is probably the best bet for locking in your pricing strategy depending on the length of your contract. As an example, with this information you might insert escalator and or  de-escalator language in your  terms and conditions request and resultantly in your contract based on the market price of  a specific crop at the time you negotiated your pricing.

The next step is determining where you can find this type of information. At SafeSourcing we use the CME Group  CME is the world’s leading and most diverse derivatives marketplace.  Relative to the egg market there is also another tool available that can be useful which looks at the average weekly price of egg products by region of the country. Using the two together is normally your best bet to build a solid sourcing strategy.

If you are not watching the markets that drive the pricing of the products you buy, you may make some significant mistakes that could negatively impact your financial plan down the road.

If you’d like to learn more about how SafeSourcing can assist you to determine how to best uncover the hidden costs that make up your products, please contact a Safesourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

Ron Southard

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Lean business practices create a weighty issue.

Tuesday, May 6th, 2014

Todays post is from Ronald D. Southard, CEO of SafeSourcing Inc.

This author tires of the desire of businesses that are trying to reinvent themselves and in so doing constantly coming up with new buzz words, industry terms and business jargon in order to try and prove that they are thinking differently and as such should be trusted to be on the right path. Maybe their original business plan was just flawed and they are not deserving of our trust.

Lean in any functional area of a business simply means producing more or getting more done with fewer resources. I’m not sure this is a great message for companies that are just launching, trying to grow or improve. If you’ve been around for while, and your customer reads between the lines properly, this may just mean that you did not plan your launch properly or react properly to market indicators in the past.

We all know that lean practices were originally a move to reduce costs in the manufacturing process and since it worked for manufacturing where we are typically talking about thousands if not millions of pieces and parts, other companies began to think why not for our business. As such let’s apply the term lean to the supply chain or the procurement space. Any one that knows the procurement space already understands the lack of resources.

The goal of every business should be to provide the end user or customer with what they want or what you have promised them at a fair price. If you do so, that customer and others that hear about that customers experience should buy more. When this happens, if the business plans appropriately they should grow and grow profitably. And this should create new and sustainable jobs. So, how is this any different than the way businesses were run 50 years go or even 100 years ago? The truth is that it’s not.

The decision to not hire, to try and do more with less and to reposition resources rather than firing someone is a better way to run a business. Unfortunately they do not teach this in business school. This author has been through many mergers, acquisitions, downsizings and the like over a lengthy career. One thing you can always count on in these scenarios is let’s cut expenses. You can call it lean, but it’s not.

So, let’s not hide behind the term lean or other business jargon or buzz words.

If you’d like to learn more about how SafeSourcing can help you reduce costs without reducing headcount, please contact a SafsSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

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So you want to source your products from China?

Monday, May 5th, 2014

Today’s post is by Ron Southard, CEO at SafeSourcing Inc.

In a recent article in USA TODAY titled Report: Drywall sickness real by Elizabeth Weise, the subtitle was Chinese Product confirmed culprit.

This author posted on this subject five years ago with the following two posts.

  1.   On May 21st of 2009 I posted.  In Hamlet, Marcellus said “Something’s rotten in Denmark”
  2.   On May 22nd of 2009 I posted. What lessons can be learned from yesterday’s post where we posited that “Something may be rotten in drywall from China”?

In the article by Elizabeth Weise mentioned above she goes on to report  that  Chinese made drywall was installed in more than 20,000 homes mostly in the south since 2005 causing a variety of health related complaints. In fact there have been 5 settlements totaling more than $1B. It is not clear how much of the drywall has been replaced.

So, do you really want to source your products from China? Much larger companies that we will leave unnamed have done so in the past and ended up with the type of results listed above.  At the end of the day, if you have not sourced products off shore, you had better know what you are doing!  Do your research or reach out to a company like SafeSourcing for help!

If you’d like to learn more about how SafeSourcing can help you with your off shore sourcing, please contact a SafeSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

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As procurement professionals, each and every one of us should accept personal responsibility for protecting the environment.

Friday, May 2nd, 2014

Todays post is by Ron Southard, CEO at SafeSourcing Inc.

I was rereading a survey conducted in 2008 by the Disney Family of eight thousand (8,000) adults. When asked who should enforce environmentally sound practices?  Forty percent of respondents indicated that it should be the government; thirty nine percent indicated that it should be individuals; thirteen percent indicated that it should be businesses and nine percent indicated that it should be the schools. That forty percent of individuals surveyed defaulted to this being a government responsibility is an issue or a cop out dependent on your own beliefs.

This author doesn’t believe that government can do it alone without guidance from the people. I don’t believe that businesses can do it alone without guidance from the government in the form of standards. I don’t believe that people can do it alone without taking it to the work place. And, unless we focus on it in the home and the workplace there is not much schools can do to enforce their environmental educational content. If parents don’t support it, children will not participate. In fact without all of us working together towards a common goal success is questionable.

At SafeSourcing there are many things that we are passionate about. However, three drive our daily thinking and actions.

1. Reducing the costs of goods and services for our customers.
2. Supporting the global community through the sourcing of safe goods and services.
3. Supporting the environment through eco friendly sourcing practices that we hold suppliers accountable to that provide those goods and services.

Through these beliefs, we try to pay it forward every day where the environment is concerned. Can you or your company boil your environmentally focused CSR initiatives down to three distinct points that can be measured? If you can, your customers will notice. Ours do.

If you’d like to learn more about how SafeSourcing  can help you reduce your operating costs and give back at the same time, please contact a SafeSourcing Customer Services Account Manager.

We look forward to and appreciate your comments.

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