Dual Source: A Panacea?

I hope that you have enjoyed the article "Dual Source vs. Single Source."

Being in the profession so many years, I've seen preferences for dual sourcing vs. single sourcing go back and forth like a pendulum. In my college purchasing class, dual sourcing was introduced as a "Japanese purchasing technique" that was made to seem so cutting edge at the time. The constant post-award competition would keep the primary supplier on its toes and the "carrot" of becoming the primary supplier (and doubling its business) would keep the secondary supplier working hard.

Then, in the late '90's, all the talk was about doing business with a single source to leverage volume for lower cost and "partnering" with your suppliers.

After Hurricane Katrina, everyone got on the dual source bandwagon again.

Jeez!

The dual source vs. single source argument reminds me of another "war story" from years ago. I'll use "ABC Company" as the supplier name to keep it anonymous.

I was working on a procurement project that represented perhaps the biggest service procurement in the history of a particular industry. We had an intense meeting at the headquarters boardroom with the VP of Purchasing, my manager, and me - my title was "Purchasing Representative" at the time (kind of a senior buyer).

My VP and I felt strongly that, due to the amount of supplier capacity we were going to chew up, we should dual source. My manager disagreed. My VP and I said that with two suppliers there would be less risk. My manager became quite impassioned and said "If something went wrong, I'm sure ABC Company would be there for us in a heartbeat!"

That shut us up.

She was right.

So we single sourced.

And we never had to get ABC Company to bail us out of a jam.

So what does Charles recommend as far as dual sourcing vs. single sourcing?

I recommend evaluating each major procurement on a case-by-case basis and deciding what is best for that particular situation.

I think it is absolutely foolish when I see dual sourcing or single sourcing being adopted as the trend du jour.

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 Survey

My fellow purchasing blogger, Tim Minahan from the Supply Excellence blog, tipped me off to a survey that Supply & Demand Chain Executive Magazine is doing.

Some surveys I like, some I detest, but it sounds like this one has a guaranteed report for all participants as well as a chance to win a prize from Procuri, so it just may be worth taking. Go to this post on Tim's blog for more info. There is an August 30 deadline, so if you're interested, check it out sooner rather than later.

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

How To Beat The Price Increase

Since we've begun offering online purchasing classes in 2001, we've kept our prices the same. But over those same years, we have improved the quality of our purchasing education tremendously. And even though we feel that a price increase after 6-1/2 years is warranted, we want to do three things for you:

1. Keep the price increase small;
2. Give you tips on how to beat the price increase; and
3. Alert you in multiple ways several times so that you have the time to enroll with us at today's prices and so you're not unpleasantly surprised when the changes go into effect

We added this new page to our site to explain the price increases, which go into effect on October 1, 2007. I recommend checking it out, particularly if you're currently pursuing (or thinking of pursuing) your SPSM Certification through the Pay-As-You-Go Certification Plan.

Feel free to contact us with any questions you have about the price increase.

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

A Spend Management Development...

Jason Busch over at the Spend Matters blog has today announced the launch of Spend Matters Navigator - what appears to be an aggregation of purchasing and supply management Web content searchable in a single portal. I've played around with it a bit already and it is pretty cool!

There's a lot to like about this new purchasing research tool. I particularly like how you can drill down by various criteria, such as by process, technology, etc.

Personally, I have one BIG hope for this tool. I hope that it makes it easier for purchasing professionals to distinguish the good purchasing advice from the bad - there's a lot of both out there in cyberspace.

Spend Matters Navigator appears to enable you to search for topics among blogs and other resources and view these resources practically side-by-side. I believe that this will speed up purchasing professionals' work in separating the authorative literature from the "sounds good on paper (or pixels)" stuff that's out there. You'll find both the good and the bad and will be able to quickly find other resources that will help you figure out which material is widely accepted and which is not.

I give my kudos to Jason and his team. And I encourage you to check Spend Matters Navigator out for yourself!

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

How Bad Is Golfing With Suppliers?

A huge photo of Pittsburgh Mayor Luke Ravenstahl consumed about 80% of the above-the-fold space on the front page of today's Pittsburgh Post-Gazette. It accompanied an article describing the mini-scandal in which Ravenstahl is embroiled.

His transgression?

Golfing with city suppliers.

Yes, Ravenstahl accepted two days of golf in the Mario Lemieux Celebrity Invitational from UPMC and the Pittsburgh Penguins valued at $9,000 (the article wasn't clear if that was $9k per day or $9k total). Because the city does business with each and each depends on the city for various approvals, Ravenstahl's acceptance is viewed as a potentially big ethical violation.

Ravenstahl's defense? The city's ethics code which, according to the article, states that "[charitable] outings are exempted from a code limit stating city officials may only accept admission to cultural or athletic events valued at $250 or less per year, or worth $100 from a single person or organization." The Lemieux Invitational does indeed benefit a charity.

But Ravenstahl's "but-mommy-said-it-was-OK" defense isn't exactly making him look real sharp right now.

When I teach conflict of interest in purchasing, I always caution my students to avoid any real or perceived conflicts of interest. Even if certain activities with suppliers may not bias your decision-making, others may have the perception that they do. And that can be just as harmful to your internal influence as a real conflict of interest.

That perception certainly has made Ravenstahl sweat in the past few days as he has gone before the city's ethics committee.

Certainly getting invited to play golf, go to a sporting event, or have lunch is not uncommon for you as a buyer. So, whether you run the risk of going before your company's equivalent of the ethics committee or whether you'll just have your internal customers grumbling behind your back, it is always best to scrutinize your interactions with suppliers. Be aware that how much time you spend, who pays, and how much fun you have all can have an effect on how you are perceived in your organization.

And, perception in purchasing, is more important than ever. Think about the consequences before your accept an invitation from a supplier.

Even if the "rules" say it's OK.

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

Reverse Supplier Scorecarding

Purchasing Magazine's new cover story "Pop Quiz: How would your suppliers grade you? Ask them." features some quotes from yours truly.

Dave Hannon really did a good job compiling a lot of information on the topic. It's probably the most comprehensive resource I know of on the topic.

I am a big fan of collecting supplier feedback. Hopefully, this article will be a good launching point for purchasing departments to really adopt the concept and develop new best practices for it. Suppliers have a lot of information that can help their customers really deliver some big business improvements.

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

Negotiating A Contract

I hope that you have enjoyed the article "Negotiating The Ultimate Contract." Writing this article reminded me of a "war story" from my early purchasing days - not necessarily on negotiating the Ultimate Contract, but more in terms of making sure that the supplier is most competitive on all variables.

The company I worked for was buying signage like crazy. And our internal customer's approach to determining demand was soooo non-strategic (if I knew then what I know now, things would have been different).

Anyway, there were some specialty-type sign items that we were buying. Not every sign manufacturer had the capability to produce the type of precision-cut lettering we were looking for. When our internal customer determined the sign needs for one location, he wanted them ordered NOW! That meant no waiting to determine what else we could package into a deal to have more leverage and get a better price.

And this was a high-profile project with Chairman of the Board involvement so, as a new buyer, I wasn't going to push back.

So we'd go out to bid, select a supplier, and a couple weeks later go out to bid again. We found ourselves primarily using two suppliers who met our quality requirements, were competitively priced, etc.

In this one solicitation for signage, one of the suppliers (Supplier A) offered a slightly better price, but the lead time was two weeks longer than the other supplier (Supplier B). So, we decided to pay a small premium to get the better lead time. Knowing the jobs we had in Supplier A's shop didn't give us any reason to question their lead time.

In the debriefing, we told Supplier A that they didn't win the award because their lead time was 8 weeks instead of 6 weeks (what Supplier B proposed). The supplier ranted and raved that they could have done the job in 6 weeks.

In my mind, I said: "Well, uh, if you could have done it in six weeks, why didn't you say that! Doesn't it make sense to put your best foot forward? Duh!"

But the supplier wasn't the only dumb one. I was too.

With a quick phone call to each supplier to see how flexible their important variables were, I could have saved my company a few dollars - much more than they would have spent paying me for the few minutes I spent "negotiating."

So, the moral of the story - and how it ties in to the article - is that a buyer should never assume that any variable is inflexible. Ask for improvement on them all. That's one of the keys to negotiating the Ultimate Contract.

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

The Purchasing Agent's Nightmare...

Most ambitious purchasing departments would love to have their CEO's passionately telling the public about their work in managing supplier relationships. But not when your CEO has to make a video like this.

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

Buyers: Blow Off Some Steam

Tim Minahan over at the Supply Excellence blog borrowed/adapted a fun idea of documenting the top cliches in purchasing and supply management. If you're a buyer, you are probably currently in a frustrated mood because a supplier didn't deliver as promised, your most difficult internal customer just read you the riot act, and your boss just denied your vacation request because your department is woefully understaffed due to the talent crunch.

So blow off some steam and go over to Tim's post and share your own most despised cliches. It won't get your parts to the dock any quicker, but it just may help you feel better.

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

The Bad News From China Doesn't Stop...

As soon as I logged onto the Internet this morning, two China-sourcing-related stories caught my eye:

China Toy Boss Kills Self After Recall

Slaves Found In Chinese Brick Factories

One interesting quote from the former article was "Chinese companies often have long supply chains, making it difficult to trace the exact origin of components, chemicals and food additives."

I've seen sourcing teams not exercise enough due diligence in evaluating their prime suppliers in China let alone going downstream to Tier II and Tier III suppliers. Hopefully, all of this bad news is a wakeup call to ensure a satisfactory supplier qualification process, not just in sourcing from China but sourcing period.

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

Sarbanes-Oxley (SOX) and Purchasing

Tuesday's Purchtips alluded to the Sarbanes-Oxley Act (SOX). For those unfamiliar with this law, SOX applies to publicly-held companies who are now required to have “financial controls” in place, some of which involve procurement. A somewhat dated, but still relevant, article on this can be found at http://www.purchasing.com/article/CA502332.html

If you’re a subscriber to Inside Supply Management magazine, you can also find an article at http://www.ism.ws/pubs/ISMMag/ismarticle.cfm?ItemNumber=12532&token=52578&userID=

Because this law is still relatively new, new processes and procedures are continuing to be developed to ensure compliance.

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 Buzzwords

I hope that you have enjoyed the article "2007's Purchasing Buzzwords."

I know that some people associate buzzwords with short-lived trends. And in many cases, this association is applicable. But I feel the need to say that this association is not always appropriate and is especially inappropriate for this article.

While the words describing the concepts mentioned in this article will likely be replaced, I believe that the practices are truly long-term practices and not trends.

For example, environmentally responsible purchasing will always be important. It may not be called sustainable purchasing forever (or even in a few years from now) but, trust me, the emphasis on environmental responsibility will only increase.

Business improvement initiatives, like Lean Six Sigma, and their principles will always have a place in the corporate world. But, just like TQM sounds so "old school" today, I'm afraid that "Lean Six Sigma" as a name (not as a set of principles) will have a short shelf life.

So while it is important to learn the words used to describe these practices, it is more important to learn the benefits of these practices and how to use them to deliver value to your organization.

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

More Kudos For Kimball

Mary Walker recently included an entry on her blog further expanding on Purchasing Magazine's article about Kimball International's procurement transformation. You can check it out 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

Invest In Your People - There Is ROI!

I just saw an interesting article in Supply & Demand Chain Executive's newsletter where the Hackett Group determined the measurable benefit of having a good "talent management" program in place. The article says that these are the four are of talent management:

• strategic workforce planning, which involves identifying the skills critical to a company's operation and how those needs match up against those of the existing workforce
• staffing services, including recruitment, staffing and exit management
• workforce development services, such as training and career planning
• overall organizational effectiveness, including labor and employee relations, performance management and organizational design and measurement

The article then shares some awesome statistics: "Companies with top-quartile talent management outperformed typical companies across four standard financial metrics. They generated EBITDA of 16.2 percent, versus 14.1 percent for typical companies. This gap netted a typical Fortune 500 company (based on $19 billion revenue) an additional $399 million annually in improved EBITDA."

So good talent management doesn't just "sound good" in theory. It actually pays off where it matters the most in business.

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

Assorted News Involving Purchasing

The low-cost country sourcing backlash is sure to continue on this news that Fisher-Price is recalling 1 million toys due to lead paint used by a Chinese supplier.

Services supplier selection by small businesses isn't necessarily a mainstream news topic, but yesterday's Pittsburgh Post-Gazette included a thoughtful piece on how a small business can source services such as legal and accounting services. Interestingly, sourcing professional services is a a topic that even large companies with sophisticated commodity sourcing processes struggle with due to the somewhat intangibility of quality measures of those services.

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

Quantifying Purchasing Job Growth

Wow. In the past week, there has been a flurry of blogging activity between the Purchasing Certification Blog, Sourcing Innovation, Supply Excellence, and Spend Matters on the topic of the BLS report about the growth rate of purchasing jobs.

Other than yours truly, all of the editors of the aforementioned blogs felt that the BLS' estimate of purchasing job growth likely being up to 8% was incredibly wrong. Sourcing Innovation even featured a quite passionate post disagreeing with some of the points I've made here.

So, my questions to my fellow bloggers are: if the estimated growth is not 8%, what is it? Why? And is the likelihood of another economic recession factored into that estimate?

I've read a lot about 8% being the wrong number, but no offering of what the right number is.

And, oh yeah, not only are software and procurement outsourcing factors limiting job growth, but so are the trend of center-led procurement and the heating up of merger and acquisition activity. There's been lots of buzz about huge companies (Alcoa, for example) perhaps being gobbled up and, when that happens, the purchasing department of the combined company usually has less staff than the sum of the two independent companies.

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