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Buyer Analytics Purchasing Blogs - News About Procurement
Tuesday
02Dec

Transforming Adversarial Supplier Relationships

The eight keys to transforming adversarial supplier relationships.

http://www.strategy-business.com/li/leadingideas/li00103?pg=all

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UPS: ‘We can handle all DHL’s business’ No ground or air-freight capacity upgrades will be needed to handle new business. DHL’s exit, declining volumes push prices up

http://www.purchasing.com/article/CA6617962.html?rssid=268

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If you don’t know about Filtrbox already, you should. In simple terms its like Google alerts on steroids, but really its more than that. Integrated monitoring of mainstream news, blogs, twitter and friend feed. Ability to search within your results and show/hide articles. Daily Briefing emails with noise control - using their FiltrRank scoring you can decide to only have articles sent to you from the most popular sites or that are very relevant

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Purchasing raises beat the averages. Companies are paying top dollar to purchasing professionals who can impact the business—even in a challenging economy.

http://www.purchasing.com/article/CA6616761.html?rssid=268

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Monday
17Nov

Margin Management Could be Procurement’s New Frontier

Toyota appeared to begin a new chapter on Thursday when it said it had established an "Emergency Profit Improvement Committee", to be chaired by Katsuaki Watanabe, its president. Margin management is the next frontier for procurement professionals to add value.

Vendor Management: If you want your suppliers to produce more innovation, create an environment where that can happen: Provide certainty of tenure, share the benefits, award additional categories or commodities to your most innovative suppliers, and spend enough time with them to allow you to understand their business and your suppliers to understand yours.

Tight credit markets are causing some companies to look more closely at how the use of purchasing cards (p-cards) can enforce spending limits. Great way to improve cash flow and track spend compliance.

Four automotive glass companies have been fined by the European Commission for allegedly conspiring to fix prices for their products sold to the automotive industry. Will they ever learn?

Supply chain risk has rarely been higher on the agenda and, as the crunch continues to bite, concern appears to be spreading. Check you supplier’s date when key financing comes due.

The efforts of the Chinese government could push China's demand for commodities up in 2009 more than expected, says an economist at mining giant Rio Tinto. Long term commodity pressure may come back.


Wednesday
05Nov

My Stakeholder Relationship is Killing Procurement

A seagull manager comes swooping in at the last minute, squawk orders at everybody and offers a significant amount of advice before abruptly taking off.  You may have experienced a “seagull like” stakeholder if you are buying services for IT, parts for manufacturing or temporary services for HR.

Travis Bradberry, president of consulting firm TalentSmart, and author of the book is called Squawk! How to Stop Making Noise and Start Getting Results offers advice on how to deal with seagull managers. This same advice can easily apply to managing change resistant stakeholders through Bradberry’s three surefire strategies:

1. Problem: Your seagull stakeholder swoops in at the last minute and bosses your procurement team around. Strategy: Communicate with your stakeholder early and often. If you keep your stakeholder in the loop, he or she won’t have a chance to swoop in later. This includes daily communication on routine matters, and at minimum a weekly check in on the status of projects.
2. Problem: Your seagull stakeholder thinks there is one way of doing things: his or her way. Strategy: Build support for your ideas by explaining the rationale and benefits up front. Then explain the process. Even the worst stakeholder will be more apt to listen when he or she can see the benefits of a new way of doing things.
3. Problem: Your stakeholder lets procurement have it when they make a mistake and he or she says little or nothing when you’re doing well. Strategy: Let your stakeholder know you need both positive and constructive feedback. After completing projects, approach your stakeholder and ask him or her both what went well and what you can improve upon in the future.

This is good advice, so give it a try.


Monday
27Oct

Procurement Industry Adage

It’s a procurement industry adage: for every pound brought in by sales, between 10 and 40 pence goes straight to the bottom line; for every pound saved, the entire pound goes to the bottom line.

Successful people say inspiration isn’t all luck. Equally important is having an open mind, especially in tumultuous times.

Thanks to a rising dollar, might global sourcing strategies once again dominate the efforts of US companies trying to save money on direct material purchases in the coming year?

Alan Greenspan told Congress today the economic meltdown is a “once in a century credit tsunami” that policymakers didn’t anticipate. hmmm.

Half of U.S. employees have been bullied at work. Could suppliers say the same thing?

During a time of economic crisis, it would be nice to have a gadget that procurement could use to sniff out money. Such a device may literally be coming in a few years, thanks to a breakthrough announced a few days ago by researchers at the Massachusetts Institute of Technology. They are developing an artificial nose.

So what, then, is a perfect order? A perfect order index is "a compilation score which measures the result of each of the four major components of a perfect order":

    • delivered on-time (the percentage of orders that arrive at their final destination at the agreed upon time between the customer and the shipper);
    • shipped complete (the percentage of orders shipped with all lines and units);
    • shipped damage free (the percentage of customer orders shipped in good and usable condition);
    • correct documentation (the percentage of total orders for which the customer received an accurate invoice and other required documents).

The perfect order index is calculated by multiplying each component to one another. If a company has a 95% score for each of the four components, for example, then the perfect order index would be 81.4%.


Thursday
23Oct

Volatility is Now the Norm

Currencies are fluctuating widely. The euro hit a fresh two-year intra-day low against the dollar Thursday near $1.27, while the U.K. pound declined to a five-year low near $1.60. Against the yen, the dollar fell to as low as ¥95.94 Thursday, its lowest since March.

Hotel prices heading down. After years of dictating the terms to corporate travelers, hotels now find the roles reversed. Time for a hotel bid event is now.

Energy chief urges OPEC not to cut oil production. Oil producers also largest equity holders. Low oil prices good for them.

Detroit fears the worst as GM merger talks roll on. This will be bad for suppliers.

Easing energy prices and the weakening economy have turned around this year's run up. With commodities down, should you lock in prices now?

Advice from Spend Matters on dealing with supplier bankruptcy: "Put in place a rapid switchover process that you can execute more quickly than a regular supplier changeover and ramp-up period. Know what corners you can cut and those you can't before you need to use this process."

Economists say weaker global economic growth in European economies, Japan and Canada will reduce demand growth for U.S.-made goods in the coming year by around 6%.


Tuesday
21Oct

Procurement Transplants Make Great Category Leaders

According to a recent survey of CPO's conducted by the Procurement Strategy Council (PSC), 82% of procurement executives polled said they have prior experience outside procurement or supply chain. This is great... but how about procurement executives that have industry experience in their purchasing category?

For example, how about a Procurement Travel Manager who comes from the hotel industry? Maybe a print buyer who was an operations manager at a graphics plant?

Procurement transplants with industry experience are less focused on functional expertise and more focused on category management, quality and anticipating industry dynamics. They know how to speak the language of their industry and are viewed as procurement experts by the organization. IMHO industry experts make better procurement executives than functional experts.

Other updates to share:

  • Bernanke says U.S. economy facing big threat. (All he has to do is read the ISM index.)
  • In a survey earlier this year, supply chain execs said they would like new college grads in SCM that are better able to "connect the dots," "acquire the leadership skills" and "balance specific IT skills with business acumen.
  • Emerging markets suffer as foreigners withdraw. They always take the worst hit. Procurement likes to keep their supplier's close when scared.
  • September (CPI) was unchanged, up 4.9% versus a year ago. Commodity price pressure is definitely going the other way.
  • The price per mbps of Gigabit Ethernet transit has dropped 38 percent in the past 12 months. Costs for high speed data transfer are declining.
  • $3 gas back if anyone cares. Make sure carriers have removed surcharges and adjust prices due to lower fuel costs.

Saturday
11Oct

Buyers Dealing with the World Economy in Crisis

No doubt buyers and sellers are concerned about the economic crisis. Buyers need to be concerned about their supplier's ability to maintain access to capital. It is highly possible that you may receive a bid response that is subject to the supplier obtaining adequate financing.

Some good articles to get up to speed, hot off the press from the Economist:

This week governments made three spectacular moves to save the system: a coordinated rate cut by the world's main central banks, a decision by America's Fed to lend directly to companies, and a comprehensive rescue package for British banks. We assess those moves, we look at the consequences of the continuing panic, and we publish a 19-page report on the world economy in crisis.

Need some strategies to optimize cash flow? Be sure to check out an Ariba white paper titled: Strategies for High-Yield Working Capital in Today’s Economic Environment.

Some of the strategies and measures they have taken to remove supply chain liquidity risk while raising their return on cash and reducing their net working capital are:

1. Discount Management – Gives the ability to use cash to finance supplier early payment—preserving the suppliers’ health—while at the same time generating excellent short-term returns for the company.
2. Third Party Financing – Introduces a third party to fund accelerated payment to suppliers at very low rates—again removing supply chain risk—thus enabling the extension of Days Payable Outstanding (DPO) and lowering net working capital needs.


Thursday
02Oct

Procurement and Suppliers Dealing with Economic Uncertainty


Wednesday
17Sep

Pull Based Procurement Services

As a way to improve the relationship between business units and the procurement function, a recent Strategy-Business article recommends moving to a "pull-based" procurement services SLA.

The way to increase the value of support services is through pull-based functional relationships. The business units pull services from the infrastructure, specifying their requirements and sometimes co-designing them, instead of having the services pushed on them in a company-wide package.

A well-designed pull-based functional relationship becomes like the relationship between a loyal customer and a regular supplier. The supplier (the functional infrastructure team) cares about the customer’s opinion; the customer (the business unit leader) treats the functional staff as he or she would treat any favored external supplier, not like an internal team forced to jump through hoops.

Here is the link:  http://www.strategy-business.com/resilience/rr00062?pg=all


Sunday
14Sep

How Suppliers Manage Profit Margins During a Downturn

In a recent McKinsey Quarterly article the authors reviewed tactics aimed at maintaining the best balance possible between sales volume and profit margins in the current challenging environment. Here are a couple of examples that your suppliers may using to manage pricing.

Watch Sudden Shifts in Price Structure

Declining demand means that some customers may be collecting volume discounts they no longer deserve. Best-practice companies are reviewing much more frequently their pocket margin waterfalls, which show how much revenue companies really keep from each of their transactions, and adjusting their pricing policies accordingly—for example, by adding delivery fuel surcharges to every order.

Monitor Customer Level Profitability

Many customer groups are becoming simultaneously smaller and more costly to serve. One industrial company found that more than 20 percent of its customers had fallen below break even profitability, forcing it to raise prices selectively and, where possible, lower cost-to-serve by decreasing delivery frequency, reducing sales support, or fulfilling orders through alternate channels.

Adjust to Changing Customer Needs

The best companies are constantly assessing—through market research and direct contact—how economics are changing for their customers. Even more important, they are reacting quickly by retooling their price and benefit offerings accordingly.

Monitor Your Industry's Microeconomics

Radical shifts in costs and demand have thrown previously predictable market pricing mechanisms into chaos. Responding correctly requires a keen understanding of the microeconomic forces at play at the industry level.

Tactics for Procurement Professionals

To counter these sales tactics buyers should work with their supplier's to reduce costs and eliminate waste. Suppliers that provide some transparency and a willingness to cooperate will be favored by their customers.

  • If purchase volume is declining due to soft sales, buyers should consolidate or reallocate volume among suppliers to maintain price discounts. If this isn't possible, consider changing the sourcing strategy to increase competition through the qualification of new suppliers.
  • Work with your supplier to revalidate EOQ's, payment terms and volume discounts.
  • Fuel surcharges are acceptable as long as terms are spelled out to remove them when prices decline.
  • Work with suppliers to reduce the cost to serve. Optimizing systems while making collaboration more efficient will help offset higher costs to serve.
  • Evaluate cost savings approaches that were considered unacceptable in the past. Lower cost materials that slightly increase internal production labor costs may now be an opportunity.

Wednesday
27Aug

Supplier Quality Challenges

Sparta Systems, asked its customers the question...

What are the most serious supplier quality challenges facing the manufacturing industry?  Here are the top five concerns.

  1. Reluctance to implement performance-based scorecards.
  2. Inefficient, decentralized reporting.
  3. Lack of senior-level involvement in supply quality management.
  4. Constant battle between supply quality management and supply chain management.
  5. Lack of risk-based analysis for supplier quality.

My point of view would also include the following:

  1. Inconsistent quality. The ability to fix problems but unable to consistently deliver quality.
  2. Lack of formalized quality programs for training, testing and continuous improvement.
  3. Changing specifications without requesting customer approval.
  4. Failure to pass third party quality audits or meet criteria for certification schemes.
  5. Inability to conduct root cause analysis and develop effective corrective action plans.

Thursday
21Aug

Enjoy the Commodity Retreat

Seeing the dramatic rise in commodity prices has made for a tough environment for procurement professionals. With the slowing economy commodity prices in a number of sectors have retreated dramatically.

If you enjoy watching prices decline (most buyers live for this) here is a small collection of Dow Jones indexes for your viewing pleasure.

 

Precious Metal Index

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Natural Gas

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Corn

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Unleaded Gas

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Copper

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Thursday
14Aug

Surcharges and Seller Reputation

New research conducted by Amar Cheema, Ph.D., assistant professor of marketing at Washington University in St. Louis, provides some interesting insights about consumers' perceptions of surcharges.

  • Consumers pay more attention to surcharges than what was previously thought
  • How consumers think about and respond to surcharges depends, in large part, on the seller's reputation
  • When buyers don't trust the seller — they are vigilant of such tactics. In many such cases, his research concludes, buyers will decide against making a purchase
  • Participants took longer to make a decision when buying from low-reputation sellers than when buying from high-reputation sellers
  • Sellers who divide the total price of a product or service into a base price and a surcharge could prosper when buyers ignore the surcharge
  • Surcharges levied by low-reputation companies lower purchase likelihood. Thus, low-reputation companies may benefit more by offering a consolidated price
  • High-reputation sellers can post higher surcharges to increase the total price paid by the buyer, but low-reputation sellers cannot do so effectively
  • Low-reputation sellers can benefit by absorbing the surcharge into the base price and offering a consolidated price for a product or service

The research, holds interesting implications for businesses and their pricing practices, and looked at pricing data of online sellers, catalogs and service providers.

The paper is available at http://www.olin.wustl.edu/faculty/Cheema/CircSurchargeReputation.pdf


Friday
01Aug

Nifty NAFTA or Asian Dragon

With U.S. unemployment now reaching 5.7% one would hope that purchasing professionals would consider the impact of domestic versus global sourcing. A number of factors come into play, but all things being equal, it appears that trading with Latin America may be a better alternative.

Here are some interesting facts to ponder...

In a recent editorial in the WSJ, Michael Boskin, professor of economics at Stanford University made the following statement:

Since Nafta was passed (relative to the comparable period before passage), U.S. manufacturing output grew more rapidly and reached an all-time high last year; the average unemployment rate declined as employment grew 24%; real hourly compensation in the business sector grew twice as fast as before; agricultural exports destined for Canada and Mexico have grown substantially and trade among the three nations has tripled; Mexican wages have risen each year since the peso crisis of 1994; and the two binational Nafta environmental institutions have provided nearly $1 billion for 135 environmental infrastructure projects along the U.S.-Mexico border.

In short, it would be hard, on balance, for any objective person to argue that Nafta has injured the U.S. economy, reduced U.S. wages, destroyed American manufacturing, harmed our agriculture, damaged Mexican labor, failed to expand trade, or worsened the border environment.

According to a Bloomberg news release:

The increasing U.S. trade deficit with China resulted in the loss of 2.3 million American jobs between 2001 and 2007, including 366,000 last year, according to a study released Wednesday by the Economic Policy Institute.

Those displaced workers lost an average $8,146 last year as they ended up in lower-paying jobs, the institute said.

Meanwhile, workers in export-linked jobs are paid 4.4 percent less than were workers who lost their jobs to exports, the study found. That's because U.S. exports to China are heavily commodities, including agricultural goods, while 98 percent of Chinese imports were manufactured products, the report said.

Making a decision to source globally when the domestic economy is suffering could be considered part of the ethical procurement equation. Certainly worth some thought as part of the strategic sourcing evaluation.


Friday
01Aug

Latest from Purchasing Blogs Shared Items

Plastic Pallets Let Shippers Calculate Fuel Savings, Greenhouse Gas Reductions
Monday, July 28, 2008
The calculator uses data issued by the U.S. Environmental Protection Agency that quantifies relationships between cargo weight, fuel usage and greenhouse gas emissions. .. read more..

Is China Ready to Flood the Market with Low-Cost Pole Dancers?
Friday, July 25, 2008
After reading this New York Times story -- and watching the video -- I can't help but wonder if this is what the Chinese government means when it says it wants to encourage higher margin, less polluting industries by changing the VAT rebate structure... .. read more..

Supplier Relationship Management -- Supplier Relationships Can ... - MarketWatch
Thursday, July 24, 2008
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Building Category Credibility
Thursday, July 24, 2008
Being confronted with an unknown category can easily make buyers feel uncomfortable, particularly in indirect goods and services, where buyers are likely to influence a higher proportion of the organization’s spend. While supply chain professionals may feel capable of applying procurement techniqu.. .. read more..

Hold your Clydesdales: InBev & Anheuser-Busch “synergies” aren’t just layo..
Thursday, July 24, 2008
The global economy can do a lot of things to a man…but if you threaten to mess with his job AND his beer, that may just be the last straw. By many of the reactions - from TV and barstool talking heads to the 31,000 member Facebook Group protesting the deal - the InBev purchase [more] .. read more..

Entrepreneurial Edge: Bartering Expands in the Internet Age
Wednesday, July 23, 2008
Thomas Daley, who runs an online barter site, is helping to lead a trend that has grown broadly over the past 25 years. .. read more..

Aluminum Hits Record High
Wednesday, July 23, 2008
China's top 20 aluminum smelters announced they would cut production 5%-10%. .. read more..

Rethinking Supplier Relationships with Tool Providers
Wednesday, July 23, 2008
Collaborating in advance with cutting tool providers can pay off in improved productivity and quality. .. read more..