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.

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

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.

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.

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

Natural Gas

Corn

Unleaded Gas

Copper

• 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

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. ]]>http://www.buyeranalytics.com/purchasingblogs/2008/8/1/latest-from-purchasing-blogs-shared-items.htmlDaveM2008-08-01T12:28:50Z2008-08-01T12:28:50ZPlastic 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
Supplier Relationship Management -- Supplier Relationships Can ... MarketWatch - 21 hours ago In addition, the Vectren Corporation, in the utilities industry, demonstrates how a highly successful strategic sourcing strategy powered by a supplier ... .. read more..

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..

1. A custom Google search engine. This searches over 50 procurement blogs.
2. An RSS feed from my Google Shared items list.
3. A custom Yahoo pipe that searches and delivers a custom procurement news feed.

Please let me know if you have any comments or questions.