eProcurement Is Still Newsworthy?

Yesterday, the Pittsburgh Post-Gazette ran a large article on the front page of its business section that described how UPMC just implemented eProcurement.

If you're like me, your first thought was "Uh, and that's news in THIS MILLENIUM?"

I mean, after all, implementing an eProcurement system in 2006 is not exactly groundbreaking. UPMC's sister organization, University of Pittsburgh, successfully implemented eProcurement in 2000 to much less public fanfare despite its rapid implementation, enthusiastic end-user adoption, and leadership of one very talented individual (hmmm...who could that be? ;) ).

But even then, implementing eProcurement wasn't the most cutting edge thing.

But wait. I'm not going to be too cynical. The Post-Gazette very infrequently mentions anything about the purchasing field, so I am going to turn from sarcastic to ecstatic. It is truly great that our profession can get this type of high-visibility coverage.

Hopefully, there's more coverage to come from the P-G.

Another interesting thing I'd like to point out about the article is the photo they included of UPMC's chief supply chain officer. It shows an executive in a business suit standing among boxes stacked in a warehouse.

How supply chain management is depicted in photos is so intriguing to me.

Sometimes, you'll see blue collar laborers packing boxes. Other times, you'll see men in suits in executive offices. Those images kind of fuel the confusion described in my article "What Is Supply Chain Management, Anyway?"

I thought that the P-G's picture was pretty good. I think that it can help an aspiring CSCO understand that supply chain is not just purchasing. It involves the lifecycle of materials, from purchase to inventory to logistics and more. CSCO's are indeed in charge of warehouse operations as much as they are in charge of purchasing.

The P-G's photo can help aspiring CSCO's become aware of that fact.

Well, the P-G hasn't often enough been a source of supply chain news. Let's hope this is the first of many big purchasing articles from them.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Purchasing and Inventory Management

I hope that you have enjoyed the article "Purchasing & Inventory Management Hook Up!" As promised in that article, here's the EOQ formula:
Where:

EOQ = Economic Order Quantity

ACPO = Acquisition Costs Per Order

AUU = Annual Usage in Units

UC = Unit Cost

CCP = Carrying Cost Percentage


So, if you know that it costs you $150 in overhead per order, you use 5,000 widgets a year, you pay $200 per widget, and your Finance Department tells you that annual carrying costs are equal to 20% of the value of the goods in stock, you should order...


Drumroll please...


194 widgets at a time.

I don't often place a link to this blog in my purchasing articles, so if you are reading this blog for the first time, please browse the posts below - I think you'll like them. I post educational and purchasing-related blurbs here about three times per week, so you may want to plan regular visits to this blog. Just remember to go to http://www.NextLevelPurchasing.com/blog, bookmark this page, or, if you're a techie, add this blog to your RSS feed reader using the Site Feed link to the right.

Hope to "see" you back here soon!

UPDATE MARCH 2012: The response to this blog post has been amazing. There is so much to learn about purchasing and inventory management and many people want - or need - to learn more. Therefore, we've created an online course to help everyone who is interested. The online course is entitled "Profitable Inventory Management and Control" and you can learn more about it at http://nextlevelpurchasing.com/inventory-management-and-control.php.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

What Does Diddy Have To Do With Purchasing?

The increasing visibility of social responsibility in purchasing is becoming more and more evident in the eyes of the public. This article demonstrates department stores' insufficient purchasing research when deciding to stock a line of dog-fur coats marketed by Sean "Diddy" Combs' company.

The ethical treatment of animals is definitely one of the key components of a social responsibility program and should be a part of every purchasing department's supplier code of conduct.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

To Whom Should Purchasing Report?

Like the question that led up to the article "What Is Supply Chain Management, Anyway?", I have commonly gotten questions like "To whom should Purchasing report?"

My answer: it depends.

To whom the purchasing function reports to can be different from company to company, and that's OK.

To simplify it, if the company sees Purchasing's primary role as delivering cost savings, the company generally positions Purchasing under Finance, reporting up to the Chief Financial Officer. If the company sees Purchasing's primary role as supporting operations (through assuring continuity of supply, reducing risk, etc.), then the company generally positions Purchasing under Operations/Supply Chain Management, reporting up to the Chief Operations Officer or VP of Supply Chain.

As another generalization, in manufacturing I see Purchasing more commonly reporting to Operations/Supply Chain Management and in service industries Purchasing more commonly reporting to Finance.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Articles For Re-Publishing

Occasionally, I get asked if my articles can be reprint or republished. As a general rule, I review each request on a case-by-case basis.

However, I do have several articles available for re-publishing for free through The Phantom Writers. Republishing is subject to their terms, but they're pretty easy to follow.

So if you're interested, here are links to articles that may be republished and the terms for doing so:

Six Service Principles For Delighting Internal Customers

How To Improve Your Time Management

Tie-Breakers For Job Hunters

If you use one of these articles, I'd love to know where it ends up.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Is The Procurement Blogosphere Shrinking?

A recent report by Gartner predicts that blogging has just about reached its peak, suggesting that there is a point in time where the non-serious will get bored and move on.

Are we seeing this in the procurement blogosphere?

Well, as Spend Matters, Sourcing Innovation, and Supply Excellence continue to consistently blog away with good content in 15, 7, and 5 posts per week, respectively, other blogs in the procurement blogosphere may be proving out Gartner's theory.

For example, it has been over two months since Purchase Realm has featured a new post. The output at Procurement Central has slowed to six posts in November and just three so far in December, with barely any posts about procurement. Vendor Management has had one post since September.

So does that mean that the days of the procurement blog are over?

I don't think those days are over completely, but I think that there will be very few procurement blogs standing at this time next year.

Spend Matters, with its sponsorship program, seems to have successfully monetized its blog. However, if indications are that blogging is peaking, there's always the chance that the owner of that blog may see it is a good time to sell and cash out. The ROI would be maximized at this point, like when FreeMarkets went public at the peak of the dot-com bubble and had its stock go up to, what, like $300/share, making the founders much richer than they would have been if they took FMKT public just months later.

This thought is just an outsider's viewpoint. Though I've met Jason, I have no idea whether or not cashing out is in his plans. But if he's in it for the long haul, I do think that Spend Matters will survive due to its growth and the fact that there is real cash being taken in.

Supply Excellence consistently has great content. But, with Tim being the VP of Marketing, surely one has to question whether there is a higher-impact use of his time. Without sponsorships, using a blog purely for branding makes the payback hard to measure. One has to speculate that there may be pressure for Tim to use what is probably highly-compensated time towards activities that have a more direct financial benefit.

And it seems that someone with the pure intellectual horsepower of Michael over at Sourcing Innovation will be in massive demand for consulting once more and more people discover his capabilities. So is his blog just a means to capture consulting business and, once he gets it, will he abandon blogging? Again, though I know the author, I'm not sure what his long-term plans for the blog are.

As for this blog, it never was a big part of Next Level Purchasing's outreach, so I don't see much change. NextLevelPurchasing.com has so much content on it, I am always reluctant to add more content that may be less formal. So this blog will continue to ramble along, with about 2-3 posts per week for the foreseeable future. A cool new feature or two may be in the works, too!

So, let's all plan on meeting here in about six months to see where the aforementioned procurement blogs are. It should be interesting!

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Savings Strategy Development Reviewed

Michael Lamoureux over at the Sourcing Innovation Blog recently reviewed Savings Strategy Development. You can check out his reviews here and here.

One thing that Michael does is evaluate whether the class is "worth it." In addition to his objective insights, I'll add one other way that our online purchasing classes are worth it.

Each of our full-length classes has the "Ask Charles!" feature. This allows our students to send a message to me that I will answer (a) by standard email within 24 hours or (b) by emailing a video clip of me personally answering the question within 72 hours (their choice).

Consider the cost of consultants. They're pretty pricey.

But our students have me available as their personal on-demand resource for an unlimited number of questions during the entire time they have access to the class and that service is included in the price they pay for enrollment. I think that's a pretty good deal!

Hey, while we're on the topic of Sourcing Innovation, Michael had another interesting post today to which I've added a comment. Check it out...it is about handling suppliers' requests for price increases.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

CPO's & The Talent Search

A hot topic of late is the fact that CPO's (Chief Procurement Officers) are vigorously competing for top talent to staff their procurement operations. A couple of resources worth checking out include this post over at Supply Excellence and Purchasing Magazine's "Top CPO's" feature.

Personally, I think that there is a high-impact trend that should be on every CPO's radar. Here's what it is...

CPO's in search of talent are courting managers and directors presently occupying purchasing jobs at other firms in town. They hire those individuals who have a talented staff who are loyal to the manager/director (not their present employer). Once employed, the manager/director, who has become a director or VP, is tasked with building his/her own team. The new director/VP will then recruit the most talented people from his/her former employer.

So it isn't even necessarily recruiting the best new executive. It is recruiting the executive who can bring the best team with him or her!

CPO's need to address this from both an offensive and defensive point of view. Let's talk about the defense.

I've seen this trend do massive damage to purchasing departments. In one case, there was a group of six individuals in a specialized group within the purchasing department: a director and five subordinates. When the director accepted a new, higher level position at another employer across town, he took four of the five remaining members with him!

Other cases aren't so severe in terms of the percentage of a group that is wiped out, but they aren't less significant because the most talented people are scooped up, leaving only the mediocre performers behind!

So I think that CPO's need to keep their managers and directors happy so they don't exercise the power they have to dismantle the entire purchasing department in one fell swoop! The Supply Excellence post shares some of the basic ways to increase the probability of retention.

One additional retention tool is investing in the professional development of the purchasing team. You may say: Charles, you're just saying that because you sell purchasing training. I do but, because I do, I get to see first hand the impact that such investments have on morale and employee loyalty.

When purchasing professionals are trained by an employer, they tend to feel that the employer cares about them. They feel that their increasing professionalism is partly due to their employer's interest in their continual development and they'd hate to lose that. These people know that skills are something that they can take with them throughout their entire purchasing career, but when they are getting a personal benefit from their employer's investment, they tend not to want to take those skills elsewhere.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

What Is Supply Chain Management?

I hope that you have enjoyed the article "What Is Supply Chain Management, Anyway?"

With all of the names that are given to the purchasing function, it is no surprise that people are confused. While most of these names (e.g., purchasing, procurement, supply management, etc.), in my opinion, refer to the same thing, I thought that making a distinction between purchasing and supply chain management was important.

Supply chain management is much more encompassing. It's really the end-to-end operation for an organization's core competency.

Speaking of names for our profession, be sure to watch for the 2007 Purchasing & Supply Management Skills & Career Report (tentative title) coming later this month. This report will share some statistics that may affect what our profession will be called in the years ahead!

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Our Annual Purchasing Survey

Here's the invitation from an email we sent to our subscribers today...

The next edition of PurchTips won't arrive in your inbox until next Tuesday. But that doesn't mean that you can't learn something valuable before then!

Here's an opportunity for you to get a FREE copy of a powerful educational document called 'Strategic Sourcing Questions & Answers.' This document answers questions about the most common issues related to implementing a strategic sourcing initiative, from how to build a cross-functional sourcing team to what some of the pitfalls of strategic sourcing are. You can have answers to all of these key questions today!

To get your FREE copy of 'Strategic Sourcing Questions & Answers,' simply complete our survey at:

http://www.surveymonkey.com/s.asp?u=601322984075

When you complete this survey, you will also get:

• A $5 (US) discount voucher towards enrollment in the online mini-course 'Negotiation No-No's'

PLUS

• A chance to be the one randomly selected winner of a $30 gift certificate to Amazon.com!

Your chance to participate in the survey expires on December 12, so visit this Web site today!

http://www.surveymonkey.com/s.asp?u=601322984075

And don't forget to watch for PurchTips in your inbox next Tuesday.

Thank you for your interest in letting Next Level Purchasing help you have a more rewarding purchasing career.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Here's the link one more time:
http://www.surveymonkey.com/s.asp?u=601322984075

Supply Market Assessment

Tim Minahan over at Supply Excellence posted the second part of our interview this morning in a piece entitled Supply Market Assessment 101.

I thought that I'd save a few tidbits on the subject for this blog. Here is a laundry list of just a few of the many things to consider when assessing a supply market:

• Role of government (potential sanctions, tariffs)
• Logistical risks (port closures, customs delays)
• Dependence on favorable weather
• Likelihood of being a terrorist target
• Availability of skilled labor if demand increases
• History of manufacturer recalls
• Changes in dependent demand from unrelated industries (e.g., more titanium needed to build more airplanes)
• Probability of natural disasters (e.g., hurricanes in Florida, earthquakes in California, blizzards in the Northeast US)

One of the classic models that generalizes all of the factors involved in assessing a supply market is called Porter's Five Forces. Porter's Five Forces, and how purchasing professionals should use the model, is taught in detail in our online course "Savings Strategy Development."

Kudos go to Tim for allowing me to address this issue for his readers.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Purchasing Education & Being Open-Minded

A recent blog post and subsequent comment exchange over at Sourcing Innovation made me recall a now-amusing conversation from a few years ago.

I was attending a local purchasing association meeting when a colleague said to me, "Hey, you should talk to Brian. He was just telling me that his organization is looking for some procurement negotiation training."

So, I approached Brian and asked him if Next Level Purchasing could be of service.

Brian then responded with a sneer usually reserved for people's worst enemies, saying "Yeah, we're looking for negotiation training, but we want real-world stuff, not CONSULTANT THEORY" and then walked away.

Wow.

Even though I have over 10 years of results producing experience and have negotiated eight-digit sums off of some contracts' values during my purchasing career, because I no longer held a role in a purchasing department, this guy had lumped me into that subhuman species known as CONSULTANTS (gasp!).

As I got further into my career leading Next Level Purchasing, I have found that purchasing professionals are indeed very skeptical about who they can learn from. (Professors, in particular, seem to inspire the most under-the-breath criticism at purchasing association meetings).

I agree that purchasing professionals should always filter what they hear or read through their experience-based common sense - there is a lot of garbage information out there - but it also concerns me that we are sometimes not open-minded enough when it comes to learning. Consultants (who are often purchasing professionals who have moved on to a new career), professors, and even people from different professions can provide a valuable purchasing education experience.

With regard to the Sourcing Innovation post, it was about a lack of purchasing professionals who regularly visit and participate on a few of the more popular purchasing blogs. Personally, I feel that a few of the purchasing blogs out there are definitely worth a daily visit.

In particular, Sourcing Innovation, Supply Excellence, and Spend Matters are excellent resources for getting a purchasing professional to think about the environment in which they operate. I don't always agree with everything those guys write but, again, it is healthy to see what others have to say and then filter it to form and/or strengthen your own opinions.

Another sub-topic of Michael's blog was the frustration that vendors/service providers/software providers comprise a higher percentage of blog visitors than do the authors' target - sourcing professionals. I suggested to Michael that they embrace that.

These bloggers have proven that there is a hunger for purchasing insights among the vendor community. If they continue to try to go for the market of purchasing professionals, they may be missing an opportunity to monetize an obviously interested market - the vendors.

Hmmmm....if they don't realize the opportunity that has made itself obvious, maybe Next Level Purchasing will have to seize it!

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com

Purchasing & Economic Indicators

I was recently interviewed by Tim Minahan, editor of the Supply Excellence blog on the topic of economic indicators.

I love the topic of economics and I have some very strong opinions about what the media
(mis)uses as indicators. This interview captured several of these opinions and allowed me to teach readers some fundamental things about economic indices.

Tim is going to publish this interview in two parts. You can check out the first part here.

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM Certification Online At
http://www.NextLevelPurchasing.com