China plans to trace every link from the farm to the dinner table. This should be applauded and become the rallying point for a global effort.

I was reading the Arizona Republic this morning and came across a small update titled “China vows overhaul of Dairy Industry”. In the update China’s cabinet vowed to a complete overhaul of their scandal-ridden dairy industry, pledging to inspect every link from the farm to the dinner table. China went on to comment that the industry was “chaotic” and acknowledge there was a lack of over site.

The good news is that China has acknowledged there is a problem. This author might find “chaotic” slightly inappropriate phraseology in light of the fact that infants ended up dying and thousands upon thousands became ill. I do however agree with the farm to dinner table concept of traceability and might even go as far as suggesting a two step process of “seed to crop” and then “farm to dinner table” may be even more appropriate. As I have discussed in other posts, I do not feel that one forward one back traceability as is presently being pursued is enough to insure rapid detection and resolution of food born illnesses such as ecoli, salmonella and listeria among many others.

This is an important subject area that requires efforts beyond industry groups and trade organizations.

I look forward to your comments

As a follow up to this blog title, here?s a food safety question for our readers. Just what is considered safe?

Food additives have always been an issue for food safety officials. This author applauds the Food and Drug Administration (FDA) for their stance on melamine in baby formula. But enough is enough already.

According to the FDA, no level of the chemical melamine is acceptable in baby formula. We could not agree more! However, in other foods tiny amounts such as 2.5 parts per million (ppm) is considered acceptable. Are you kidding me? How many parents would knowingly let there babies drink formula that contains any melamine. My guess is none if they knew it contained this industrial (not food) product. Let?s review; melamine is an industrial product that can mimic protein content when it is added to food products. In large quantities it can be fatal. In fact the cause of this particular FDA announcement is a result of the Chinese milk scandal that has sickened fifty three thousand infants and KILLED four because of this additive.

If small amounts are ok, who is going to monitor the amounts? If 2.5 parts per million is ok, what happens if there are 5 parts per million or 10 parts per million. Is there a cumulative affect as there is with lead. Will signage be displayed that indicates that a product contains small amounts of melamine? If so, how many consumers would buy the product? I?m pretty sure the answer is ZERO.

This author believes that zero tolerance is the right policy relative to fillers, additives and other products that are not intended nor were developed for inclusion in food. I also believe it is incumbent upon retail suppliers to disclose this information as well as at least 3 to 4 levels of traceability for the products they supply.

We look forward to your comments.

Both presidential campaigns are touting their plan for reduction in prescription drug costs as a significant benefit of their platform for change. Retailers have been doing this for years. Come on guys let?s come up with something new.

Both presidential campaigns promise to make low cost prescription drug availability a priority of their improvement strategy for health care plans. Neither McCain nor Obama has detailed how they would accomplish this against the largest and most powerful of lobby?s in the capital.

It is no surprise to anyone that prescription drugs are one of the fastest growing health care costs in the United States. We pay the highest prices in the world for brand-name drugs. Retailers have been dealing with this issue for years and unlike our presidential candidates have come up with a variety of strategies and programs in order to save consumers money.

It?s about time that the government caught on to what retailers have already been doing for over two years. In September of 2006, Wal-Mart announced that it would make nearly 300 generic drugs available for only $4 per prescription for up to a 30-day supply at commonly prescribed dosages. The Wal-Mart plan later drove other retailers to create programs of their own. Target, Meijer, Wegmans, Costco and K-Mart and others have announced similar generic plans. The Wal-mart program since its inception has grown to over 1,000 over the counter medications and claims to have saved consumers over $1 billion.

One way retailers have been able to drive down their costs with generic drugs and other over the counter medications, is to hold the drug manufacturers and other distributers accountable by purchasing their generic drugs through the non biased use of reverse auction tools. History indicates that generic drug events can drive savings greater than thirty percent. Events can be held for dozens of suppliers and hundreds of products at one time and left open for days if not weeks in order to collect pricing prior to the final live auction. The fact is that major pharmaceutical companies use these tools regularly in order to drive down their costs.

Let?s see something unique from our presidential candidates. It makes sense to drive down health care costs, but this seems more like the first president Bush thinking UPC scanners installed in most super markets at the time were cool many years after they were invented.

We look forward to your comments.

How can retailers use the leverage of next generation e-procurement tools to change their financial outlook now?

The key to the above question is the term leverage which suggests that with the same amount of effort more work can be done by using more leverage. Next generation tools use leverage throughout their design to improve on or do more work than original or legacy applications with the same or less effort or resources. One of the most famous quotes relative to leverage is attributed to Archimedes (c. 287 BC ?c. 212BC) who was considered to be one of the greatest mathematicians of all times. The modern version of the quote ?Give me a lever long enough, and a prop strong enough; I can single-handed move the world.?

Let?s look at one early generation tool for retailers, the supplier database. The theory was that as an e-sourcing company conducted reverse auctions on behalf of a retailer that the incumbent and other suppliers provided by the retailer would be added to the vendor?s database. If the vendor were successful with multiple retailers, the database would grow over time. There really was no data to support how many suppliers, distributors or manufacturers were required to drive the best reverse auction results for a particular product or service. Other data gathering practices such as phone book searches were used to buffer what was generally accepted as a small source of supply by most retailers. Reverse auction events were run and savings generated, but sustainable results over the long term were limited beyond minor compression due to the lack of new sources of supply. In fact in many cases, retailers were not allowed access to the vendor?s database as it would reveal the actual shortage of suppliers within certain regions and other geographies.

Now let?s apply some leverage to the supplier identification practices with a next generation database that uses modern search techniques and intelligent agents to conduct supplier research. In order to support best practices it is generally accepted that reverse auction events require at least 5 to 8 suppliers to drive the best results. In order to accomplish this, multiple search criteria are required such as country, state, and region; SIC code, zip code and a variety of other related data. The database also needs to have a large number of suppliers so that any category for any region can return at least the number of suppliers to support best practices for auction participation. With today?s tools such as Google, ask.com, search me and boogami and suppliers that are familiar with the reverse auction process it is much easier to build a relational database that can provide supplier data instantly. This saves time, insures success and creates a basis for sustainable process improvement.

So, to paraphrase Archimedes, give us a database large enough and a search tool flexible enough and single-handed a procurement professional can source from the entire world and a lower acquisition prices beginning today.

We look forward to your comments.

It?s taken more than six years for this legislation originally enacted in 2002 as part of the farm bill to take affect. Are we safer than we were six years ago from food born illness?

As we watch the politics of this year?s presidential election, it is easy to understand why this legislation has taken so long to enact. A combination of what has become a process of supporting private interests, lobbying, and the continuation of the frustrating partisan politics that our democratic system has digressed to have conspired to create this six year delay.

Now we can start to discuss the questions of who this affects, who must participate, who pays, why compliance is necessary, where labeling is required and when we can start to look for it.

How will a consumer be able to determine where a product originates? That quite frankly depends on how the retailer chooses to implement the program. If they are required to implement this at all, which some small specialty retailers will not be required to do. At some companies the source may be displayed on a sign. At others it may be displayed by a label on the actual product or both.

In fact the United States and most other North American countries import hundreds of food products from dozens of countries. Some are close neighbors and others are thousands of miles away. Some products are included, others are not. Some products which are required to display labeling when combined with other products that require labeling result in a product that does not require labeling.

This program although a positive step, is just that a step. This author is not sure it will make it any easier to trace food born illness at this point. In this country we often ship products to other countries for processing and return the same product back to the United States the same day. Who is responsible for this labeling?

This author continues to support traceability beyond one forward one back and this process is another step in that process albeit an expensive one with a few to many loopholes.

We look forward to your comments.

Often times, discussions with customers, investors, salespeople and others provide the best source of future blog posts.

This author believes that too many CEO’s and other senior level managers turn down meetings with just about anyone that are not their direct reports, not in their immediate network or a company peer or board member. This is unfortunate as it is one of the best ways to keep up with industry changes and new ideas at the grass root level. I was in a meeting last week when a senior person in the room asked me what Eco meant. I was totally surprised. I was even more surprised when someone else in the room provided the guidance that it meant green.

Quite frankly this encouraged rather than discouraged me because it indicated the level of education that is still required in order to drive ecological focus on our natural or green environment. This also supports that our company is barking up the right tree as it refers to environmentally and safety focused sourcing.

The following paragraphs content is taken from a variety of terms located in Wikipedia and their wiktionary tool.

The prefix eco is used for words relating to the ecology or to the environment. Since it is commonly used in relation to environmental issues ecology often becomes an inaccurate synonym for the environment. Ecosystems, of which there are numerous types and are a defined part of the biosphere, collectively make up the whole of the biosphere. Within an ecosystem there are habitats in which an organism (including humans) exists. At its most natural, an environment would lack any effects of human activity, although the scale of this activity is such that all areas of the Earth have had at least some influence by humans. Green as a term has come to relate to an ideology that places importance on ecological and environmentalist goals.

So, when a company indicates they are Eco focused, they are referring to the highest level of the biosphere in which there are many habitats or environments. In this case they are talking about a particular habitat within the eco system. That which is inhabited and impacted by humans. Introduction of the term green over the years has resulted in indicating that the focus on the environment within the eco system is in the area of the natural environment and humans’ impact on it.

We look forward to your comments.

Often times, discussions with customers, investors, salespeople and others provide the best source of future blog posts.

This author believes that too many CEO?s and other senior level managers turn down meetings with just about anyone that are not their direct reports, not in their immediate network or a company peer or board member. This is unfortunate as it is one of the best ways to keep up with industry changes and new ideas at the grass root level. I was in a meeting last week when a senior person in the room asked me what Eco meant. I was totally surprised. I was even more surprised when someone else in the room provided the guidance that it meant green.

Quite frankly this encouraged rather than discouraged me because it indicated the level of education that is still required in order to drive ecological focus on our natural or green environment. This also supports that our company is barking up the right tree as it refers to environmentally and safety focused sourcing.

The following paragraphs content is taken from a variety of terms located in Wikipedia and their wiktionary tool.

The prefix eco is used for words relating to the ecology or to the environment. Since it is commonly used in relation to environmental issues ecology often becomes an inaccurate synonym for the environment. Ecosystems, of which there are numerous types and are a defined part of the biosphere, collectively make up the whole of the biosphere. Within an ecosystem there are habitats in which an organism (including humans) exists. At its most natural, an environment would lack any effects of human activity, although the scale of this activity is such that all areas of the Earth have had at least some influence by humans. Green as a term has come to relate to an ideology that places importance on ecological and environmentalist goals.

So, when a company indicates they are Eco focused, they are referring to the highest level of the biosphere in which there are many habitats or environments. In this case they are talking about a particular habitat within the eco system. That which is inhabited and impacted by humans. Introduction of the term green over the years has resulted in indicating that the focus on the environment within the eco system is in the area of the natural environment and humans? impact on it.

We look forward to your comments.

Can the use of reverse auctions help the economic bailout package?

My daughter Meridith emailed me the other day. She is in sales and like her dad does a lot of reading to keep up with issues and trends. This of course makes me proud. Her email was related to how reverse auctions might help the economic bailout package and in fact the economy. Partial content from her email is below.

Hi Dad, I was reading an article in the New York Times and part of it caught my attention because it related to your business. The portion of the article is listed below:

The government would buy the troubled investments with the intention of eventually selling them back to the market when prices recover. The Treasury has suggested it might conduct reverse auctions to determine the price for securities that are not trading in the market. Unlike in a traditional auction in which would-be buyers submit bids to the seller, in a reverse auction the buyer solicits bids from would-be sellers. Often, the buyer agrees to pay the second-highest bid submitted to encourage sellers to compete by lowering their bids for all the assets submitted. The buyer often also sets a reserve price and refuses to pay any more than that price. This author believes this may actually be more of a forward auction, but the point is still good.

In fact reverse auctions have even become a diplomatic tool. The U.S. State Department found a tactful solution to purchasing commercial products and technology without alienating vendors or paying top dollar. ?Reverse auctions in general have saved us millions of dollars,? a State Department spokesman said. ?That doesn?t even touch the fact that we haven?t had to increase procurement staffing in a long time.?

As part of my regular reading, I enjoy Jason Busch?s Spend Matters blog. Shortly after receiving my daughters email Jason posted the following related blog. Treasurys-700-Billion-Sourcing-Challenge–Is-it-Reverse-Auction-Time? Jason?s lead sentence in this post is as follows. ?Quick, what’s the best potential marketing plug for reverse auctions and related strategic sourcing approaches in the relatively young history of the strategic sourcing process??

Let?s assume that the $700 billion were for retail products and historical savings using reverse auctions were greater than fifteen percent, which they are. Let?s assume that the government was only able to earn half of that amount or seven and a half percent. The earnings would equal $52.5B. That?s a pretty good ROIC or return on invested capital. It would certainly go a long way toward turning the bitter lemons of this situation into more palatable lemonade down the road.

Thanks for the email Meri.

We look forward to your comments.

In Fridays SafeSourcing blog post ?Traceability also requires sensibility if you want a safe supply chain? I promised to discuss today what solution providers in the procurement space can do and the best practices that can be implemented to protect retailers during the procurement process and their consumers as a byproduct .

Building a traceable supply chain takes time as we discussed on Friday. In the meantime there are things that retailers can do to hold suppliers accountable to safety standards that are already in place. This would be even simpler if it were part and parcel of customer support service packages offered tangent to e-procurement programs. As this author has often indicated the first clear step is to have a robust base of suppliers available to create a sustainable e-procurement process in the first place. Once retailers have ascertained that this data is available from their vendor, the next logical step would be to discuss the Request For Information process that suppliers are held accountable to as part of this service and the supporting documentation they should be required to provide in order to insure compliance with the Request For Information. It would be nice if this were elemental to the data already included in the supplier database discussed previously.

Basic questions to the potential supplier candidates will differ based on the type of product or service being purchased. By example, construction questioning may include LEED certification discovery. Food products depending on source of origin questioning may include discovery relative to SQF compliance, GFSI compliance or ISO 22000 compliance. Questions obviously would seek detail as to the level of compliance and the number of individuals who may hold certification within the company as well as how many additional associates will be certified on a go forward basis. This type of questioning eliminates green washing relative to environmental or green certifications and safe washing relative to safety certifications. Follow on questioning should discuss the practical application of standards within an organization and the process followed to maintain compliance once certified. A final step in the RFI process would be to collect and store electronically copies of the certifications and standards suppliers profess to comply with as backup to the questioning process. A final step prior to providing a list of candidates for buyer review and signoff would be to provide scorecards of the supplier candidates ranking them relative to your safety and environmental procurement goals. This is not to suggest that you might not use a supplier without all certifications in place, but it will allow you to make an educated selection and mitigate risk going forward.

Ask your vendor if this type of data is stored in their database and what design plans they have for adding detailed source of origin information such as seed source for produce products in the near term that support even deeper levels of traceability. This author believes this to be a common sense approach.

We look forward to your comments.

When the FDA talks about traceability and refers to one back one forward, what are they referring to? Does it make our supply chain safer?

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 the FDA uses this 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 final retailer.

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 recent blog tiled It Could Happen Here, this author discussed the fact that what is happening in China where 13,000 babies are still hospitalized and over 53,000 babies affected could happen here. Just today we hear that in fact Chinese candy in the United States contains melamine. What other products contain this or other carcinogens that should not be consumed and how can retailers control the introduction of such ingredients in the products they buy for resale.

On Monday I will discuss what solution providers in the procurement space can do and the best practices that can be implemented to protect retailers during the procurement process and their consumers as a byproduct.

We look forward to your comments.