Retailers; what is your green or sustainable sourcing plan?

July 14th, 2010

If you plan on hiring college graduates for your management training program you best have a well defined green or sustainable practices plan or these graduates will go elsewhere.

Unfortunately, elsewhere is most likely your competition if they want a job in retail procurement.

In a recent USA TODAY article by Trevor Hughes titled More Colleges using green as a selling tool; the author discusses the impact that green programs have on college students deciding where they will attend College or University. It is a safe bet if these students are using this as criteria for selecting where they will spend the next 4 years of their life, that they will also use the same criteria to make their career decisions.

The article goes on to quote results form The Sustainable Endowments Institute survey in 2009 which found that 27% of colleges and universities included sustainability messaging in their admissions process and that in 2010 69% did. That is a 156% increase in one year.

The Sustainable Endowments Institute focuses on areas such as food sourcing, recycling, and energy efficiency.

Quite often when this author asks this question of mid level managers, associates and employees, I just draw a blank stare. If you have this discussion with investors, the eyes just roll and you can see the note caption saying blah, blah, blah.

If you don?t have a plan you can not blame anyone but yourself.

We look forward to and appreciate your comments.

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We still need to question CHINA.

July 13th, 2010

It?s true there are hundreds if not thousands of suppliers in China that you can invite to bid for your business. That does not mean there are still not significant concerns.

There was a point in time that sourcing products from China insured a low cost for your product. Then the price of oil went through the roof and melting down containers returned more than trying ship product in them. Even with oil down somewhat from that time, costs are increasing in China as plant safety and quality and worker safety and quality improves. However, there are still probably bargains to be had, but caution should be your guiding word.

A great example of this is a recent find by Chinese officials of tons of milk products tainted with Melamine. If this sounds familiar, it should. This was an issue in 2008 on which this author posted. The scandal actually killed 6 babies and made hundreds of thousands sick at the time. China actually executed two individuals for producing or selling toxic milk. So here we are in 2010 and the problem has still not been totally corrected and we are talking about products that are only sold in China. It would seem that a country would be more concerned about the quality and safety of products made by the Chinese for the Chinese consumer.

As such, companies need to complete the due diligence necessary to insure that the products you are planning to source include detailed raw materials descriptions, formulas and certifications that are mandated globally to insure product quality, safety and environmental impact standards.

Ask your solutions provider what their vetting procedures are for including suppliers in their database?

We look forward to and appreciate your comments.

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“I never saw a purple cow” and other fictitious animals that can ruin a bloggers day!

July 12th, 2010

Many customers asked me where I was last week. I hope you can learn form the following barnyard analogy.

The “Purple Cow” is the name of a well-known poem by Gelett Burgess that was written in 1895 about a fictitious cow.

The original “Purple Cow” poem went like this.

I never saw a purple cow;
I never hope to see one;
but I can tell you anyhow;
I’d rather see than be one!

Although this author had nothing to do with a Purple Cow last week I did in fact encounter another type of barn yard animal that you will all want to avoid at any cost. It was a horse. In this case the Trojan Horse. Although the poem listed above is about a mythical animal, the one I encountered is all too real and named after the Trojan Horse Story in Greek mythology that appeared as a gift that hides its ultimate purpose.

So what kind of Trojan Horse can affect a blogger? In this case we are referring to malware which is named Trojan Horse which appears to perform desirable functions for a user prior to running or installing applications, applets or other file based features but instead facilitates unauthorized access of the user’s computer system. “It is a harmful piece of software that looks legitimate. Users are typically tricked into loading and executing it on their systems. And then the real fun begins.

Once you have been tricked, one may begin notice a system slowdown, access slowdown or lockups that cause you reboot multiple times and ultimately and scan your system for viruses. Files are indentified by that process that are infected and flagged for cleaning, not deleting. If you unknowingly delete them you may compromise the operation of your operating system that may result in a reload and rebuild of your entire system that can be time consuming and provide a test of your backup processes including password storage.

Be careful what you click on. We’re Back.

We look forward to and appreciate your comments.

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?I never saw a purple cow? and other fictitious animals that can ruin a bloggers day!

July 12th, 2010

Many customers asked me where I was last week. I hope you can learn form the following barnyard analogy.

The ?Purple Cow? is the name of a well-known poem by Gelett Burgess that was written in 1895 about a fictitious cow.

The original “Purple Cow” poem went like this.

I never saw a purple cow;
I never hope to see one;
but I can tell you anyhow;
I’d rather see than be one!

Although this author had nothing to do with a Purple Cow last week I did in fact encounter another type of barn yard animal that you will all want to avoid at any cost. It was a horse. In this case the Trojan Horse. Although the poem listed above is about a mythical animal, the one I encountered is all too real and named after the Trojan Horse Story in Greek mythology that appeared as a gift that hides its ultimate purpose.

So what kind of Trojan Horse can affect a blogger? In this case we are referring to malware which is named Trojan Horse which appears to perform desirable functions for a user prior to running or installing applications, applets or other file based features but instead facilitates unauthorized access of the user’s computer system. “It is a harmful piece of software that looks legitimate. Users are typically tricked into loading and executing it on their systems. And then the real fun begins.

Once you have been tricked, one may begin notice a system slowdown, access slowdown or lockups that cause you reboot multiple times and ultimately and scan your system for viruses. Files are indentified by that process that are infected and flagged for cleaning, not deleting. If you unknowingly delete them you may compromise the operation of your operating system that may result in a reload and rebuild of your entire system that can be time consuming and provide a test of your backup processes including password storage.

Be careful what you click on. We?re Back.

We look forward to and appreciate your comments.

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We need to avoid Bisphenol A or BPA and retailers need to avoid offering products that contain it.

July 6th, 2010

I was reading my July/August issue of Men’s Health and came across some more useful information that shows how concerned consumers are about BPA.

This author has posted on BPA many times and I continue to warn retailers to find suppliers that offer alternative solutions to products that use BPA.

As a reminder, Bisphenol A (BPA) is a chemical building block that is used primarily to make polycarbonate plastic and epoxy resins. Polycarbonate plastic is a lightweight, high-performance plastic that possesses a unique balance of toughness, optical clarity, high heat resistance, and excellent electrical resistance.

 The question posed by a reader in Men’s Health Magazine was I’m freaked out by BPA. How can I cut down? According to the Ask Men’s Health section edited by Ben Court, you can take the following steps.

1. Avoid canned foods.
2. Avoid Polycarbonate containers
3. Avoid Polycarbonate and aluminum reusable water bottles.
4. Avoid Soda and Beer cans.

Be careful out there.

We look forward to and appreciate your comments.

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Retail COGS, Gross Margin and Net Operating Income. So what else is included in retail P&L

July 1st, 2010

If you want to use e-procurement tools to drive cost reductions you have to understand the financial end of the business.

This is the final in a three part series.

At a very high level and retail summary P&L might look something like the example below. Each retail industry sub vertical will look a little different. The percentages in each category absolutely will… If you can understand the underlying pressure points then and only then will your e-procurement discovery drive the results that a CEO or CFO are interested in.

Gross Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Net Operating Income
Gross Operating Expenses
Officer Compensation (CEO, CFO Etc.)
All other Salaries and wages
Maintenance (Cost of Repairs)
Bad debt write off
Facility Expenses (Rents)
Taxes
Interest
Amortization
Depreciation
Advertising Expense
Benefits
Misc expenses
Retirement Plans
Total Operating Expenses

We look forward to and appreciate your comments.

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Yesterday’s post created a lot of questions relative to attacking Gross Margin!

June 30th, 2010

During yesterdays post we posed the question. Where is the best place for retailers to spend their effort to improve profitability?

The following position was offered relative to the title. “This has always been a great question for retailers”. Should we attack the bottom line by focusing on shrink, cost of goods or gross margin?

During the post we answered the areas of shrink and cost of goods and services. The question now is how would we focus on gross margin and what would the bottom line impact be?

Let’s begin by restated our gross margin assumption. If we assume that COGS or cost of goods and services is about 75% of top line revenue that would result in a simple gross margin of 25%. Now that we know our gross margin, it is pretty simple to measure the impact. The first step is to look at the categories which generally fall into gross margin reduction such as the expense category. Examples might include employee benefits, construction, insurance and not for resale purchases etc.

We already know that our gross margin dollars are equal to 25% of our fictional company’s sales of $1B or $250M. Therefore the impact to the bottom line at most could be a percentage of $250. The next logical step is to look for the largest category spends with in the gross margin area. Let’s assume that employee benefits are 15% of payroll costs and that payroll costs for our fictional company are 15% of revenue. For our $1B retailer payroll would be $150M and benefits would be 15% of that or $22.5M. If we attacked health benefits costs and were able to reduce them by 20% the improvement to the bottom line would be $4.5M or 45%. This would certainly be a worthy target, but would not impact net profit as much as our shrink or COGs models as discussed yesterday. To summarize the impact to net profit as discussed in both posts.

1. COGS  up to 300%
2. Shrink up to 100%
3. Gross Margin up to 45%

Please remember these numbers are fictitious.

We look forward to and appreciate your comments.

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Keeping track of product recalls is a horrible task for retailers.

June 28th, 2010

Retailers, how do you keep track of all product recalls? You could just visit the SafeSourcing® website www.safesourcing.com.

SafeSourcing® takes daily rss feeds from dozens of agencies and other sites and scrolls that inforamtion daily for retailers use. By clicking on the links it will take you to the actual recall source. One of those sites is www.recalls.gov .

The products listed below represent just the month of June recalls to date from the United Sates Consumer Product Safety Commission

1. Scope® Original Mint Mouthwash Recalled by Procter & Gamble Due to Failure to Meet Child-Resistant Closure Requirement
2. Youth Tiara Recalled by Wilton Industries Due to Lead Exposure Hazard
3. Simmons Recalls to Repair Drop-Side Cribs Due to Entrapment, Suffocation and Fall Hazards
4. Million Dollar Baby Recalls to Repair Drop-Side Cribs Due to Entrapment, Suffocation and Fall Hazards
5. LaJobi Recalls to Repair Bonavita, Babi Italia and ISSI Drop-Side Cribs Due to Entrapment, Suffocation and Fall Hazards
6. Jardine Recalls to Repair Drop-Side Cribs Due to Entrapment, Suffocation and Fall Hazards
7. Evenflo Recalls to Repair Drop-Side Cribs Due to Entrapment, Suffocation and Fall Hazards
8. Delta Recalls to Repair Drop-Side Cribs Due to Entrapment, Suffocation and Fall Hazards
9. Child Craft Drop-Side Cribs Recalled Due to Entrapment, Suffocation and Fall Hazards
10. CPSC Announces Recall to Repair Child Craft Brand Stationary-Side Cribs with Dowel Due to Entrapment and Strangulation Hazards
11. Seven Manufacturers Announce Recalls to Repair Cribs to Address Entrapment, Suffocation and Fall Hazards.
12. Baby Walkers Recalled by Suntech Enterprises Due to Fall Hazard
13. Target Recalls Children’s Belts Due to Violation of Lead Paint Standard
14. Regal Lager Recalls Infant Carriers Due to Fall Hazard
15. Infant Apparel Recalled by Kiwi Industries Due to Choking Hazard
16. Comverge Recalls Communication Module Inside TXU Energy Thermostats Due to Risk of Fire Hazard
17. CPSC Announces International Initiative for Strong Safety Standards on Window Coverings
18. Entertainment Centers Recalled by American Signature Due to Fall Hazard
19. Crate and Barrel Recalls Succulent Plant-Shaped Candles in a Pot Due to Fire Hazard
20. Risk of Strangulation Prompts Recall to Repair Roll-Up Blinds by Chicology
21. Dritz™ Electric Scissors Recalled by Prym Due to Fire and Burn Hazards
22. IKEA Recalls Roller Blinds, all Roman Blinds and all Roll-Up Blinds Due to Risk of Strangulation
23. Rhino Toys Inc. Recalls Bead Toy Due to Choking Hazard
24. GE Recalls Front Load Washers Due to Fire and Shock Hazards
25. Bayside Furnishings Recalls to Repair Youth Beds Sold at Costco Due to Entrapment Hazard
26. McDonald’s Recalls Movie Themed Drinking Glasses Due to Potential Cadmium Risk
27. Violation of Federal Mattress Flammability Standard Prompts Recall of Mattresses by IKEA
28. Maytag Recalls Dishwashers Due to Fire Hazard

29. One Step Ahead Recalls Children’s Stacking Toys Due to Choking and Aspiration Hazard
30. Infant Death Prompts Recall of Ring Slings Made by Sprout Stuff Due to Suffocation Risk
31. VOX Amplification Recalls Amplifier Carrying Cases Due to Risk of Injury
32. BRP Recalls Snowmobiles Due to Fire Hazard.

Best of luck to you.

We look forward to and appreciate your comments.

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In order to manage your retail supply chain, you first need to know what it is or isn’t.

June 25th, 2010

Automating a retail supply chain is a huge challenge. If you ask your management team and employees to define yours or one in general, odds are you will get as many answers as people that you ask.

Managing a retail supply chain depending on how involved you want to become in the process includes your products and how they get to you, your consumer and the service you provide for the product post sale. This also includes all data about the product in a procure to pay process such as purchase order information, contract information and delivery coordination and status along the way. All of the above requires management of the related financial data such as payment terms and schedules and other financial data. A good place to start is to break this information down into manageable pieces and see how many people are involved in the process internally and externally and how they collaborate with each other if at all. To the extent that you can not connect the lines may include.

As a retailer, you are an obvious part of the consumers supply chain and in some cases also a supplier to other retailers. The network depends on the product but can include yourself,  raw material providers, manufacturers, wholesalers, distributors, third party logistic companies or 3PL’s, and other types of transportation companies. Managing the collaboration of your supply chain is what will ultimately differentiate you from your competition. It’s up to you.

As your procurement solution provider how they might tie all of these disparate organizations together for you.

We look forward to and appreciate your comments.

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What is retail e-procurement?

June 24th, 2010

It no longer surprises this author how many retailers I meet with that ask me; what is e-procurement. So I digress.

In many cases the question might be better phrased as to; what is procurement?

It’s amazing as to the number of companies both large and small that have no internal procurement organization. It is even more amazing how small the groups when companies do have them. In either case due to a of lack of resources, disconnect from information resources, lack of authority and little collaboration an energy sucking power struggle exists that limits the effectiveness of the entire procure to pay process.

I like to think of this process as the procurement lifecycle. In general the lifecycle follows a pretty typical buying pattern, each step of which has its own set of difficulties. The first step which when generalized could be called information gathering. Inforamtion gathering can include collecting and producing product specifications as well as research and locating suppliers that can meet those speciations. While the last item in the list called renewal can include the entire order and fulfillment process as well as contract compliance.

The procurement lifecycle pretty closely follows this process

1. Information gathering
2. Supplier contact
3. Background review
4. Negotiation:
5. Fulfillment
6. Consumption, maintenance, and disposal
7. Renewal

If we cycle back to our original question of what is e-procurement? The answer is pretty simple, it is the electronic or internet based version of the same process much of which has its own unique terminology.

We look forward to and appreciate your comments

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