Should You Be Using Material Adverse Changes Clauses In Your Purchase Contracts?

I hope that you have enjoyed the article "Negotiating After Backdoor Selling."

In the article, I mentioned "Most Favored Nations" and "Material Adverse Changes" clauses. Some of you may not know what these are.

Our online course "Supply Management Contract Writing" covers Most Favored Nations clauses, so I won't go into detail on those here. But I will address Material Adverse Changes clauses.

Material Adverse Changes clauses are more common to merger and acquisition agreements than they are to purchase contracts, however, they definitely have their place and should be increasingly used in long term agreements. Essentially, they say that if the market experiences dramatic and unanticipated changes during the agreement that affect the way in which business is done, one or both of the parties may have the right to terminate the agreement.

Think of a case like the Transportation Security Administration taking over security at airports. That is a service that used to be purchased by airlines. But due to new regulations - unforeseen before 9/11 - the market dramatically changed and those contracts had to be adjusted accordingly. That would be a situation where a Material Adverse Changes clause could come in handy.

Also consider imaging or data industries where formerly paper output has been replaced by digitized output. Fifteen years ago, few people may have imagined that the film camera would be virtually extinct in 2009. So that is another example of a material adverse change that an educated buyer would be prepared for.

Material Adverse Changes clauses are an important tool to have in your toolbox. Like any tool, you won't need to use it in every situation. But it's good to know that it is available.

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

the Purchasing Certification Blog Goes On Holiday Hiatus

After a very successful 2008, a few of us here at Next Level Purchasing will be taking some time off over the holidays.

Don't worry...if you're a student or someone who wants to inquire about our online purchasing classes, the SPSM^® Certification, or our procurement skills assessment/benchmarking program, we will have employees working each business day through the next two weeks. But, as far as this blog goes, we will have only one more post after this one before 2009 arrives.

To tide you over, here are a couple of holiday related posts from the past:

Purchasing Is NOT The Island of Misfit Toys

Holiday Gifts From Suppliers

So happy holidays to all! And, to those that celebrate it, have a Merry Christmas!

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

Next Level Purchasing Year In Review

This has been another tremendous year of growth here at Next Level Purchasing. We did a "year in review" meeting internally and I thought I would share some of the more salient highlights with you!

January

• We broke open the champagne at 9:00AM one morning as Next Level Purchasing reached a huge inception-to-date revenue milestone

February

• We launched the new online course "Basics of Smart International Procurement"
  

March

• We moved into our new headquarters
• I was named to Supply & Demand Chain Executive Magazine’s 2008 Pros To Know for the second consecutive year

June

• We implemented a new integrity standard with the SPSM^® Exam

July

• We launched the SPSM^® logo
• We posted a video success story from Erick Opdenbosch, SPSM who saved his company $2 million by applying what he learned from us
• We launched the online course "Executing A Global Sourcing Strategy
• We launched SPSM Groups on LinkedIn and Facebook. We are now up to nearly 400 members on LinkedIn and over 100 on Facebook.
• We reskinned our older classes and added photos to give them a more appealing, consistent look
• Next Level Purchasing was named to the Supply & Demand Chain Executive 100 for the second year in a row

August

• We held the Purch-lympics right here on this blog with G.P Thushara Sampath Gunasekara from Sri Lanka getting the most votes for his essay on increasing supplier competition

September

• We upgraded our “Manager Check” module which allows our customers’ managers to better monitor the progress of their teams through our online purchasing training
• We started “Whitepaper Wednesday” on here on this blog

October

• We launched PurchSearch - a search engine designed specifically to help purchasing professionals conduct their research more quickly while accessing only high-quality content
• We completed our annual course review and implemented improvements to classes – many of which were suggested by students - which saw over 12% growth in the amount of content in the online classes "Mastering Purchasing Fundamentals" and "Microsoft Excel For Purchasing Professionals"

November

• We launched the Purchasing Certification Channel on YouTube
• We launched our superfun mid-term games in each of our online classes

December

• We launched our testimonial map, sharing the thoughts of our students from around the world

Other notable 2008 accomplishments:

• We've increased the number of certified SPSM’s by over 90% from the number at the beginning of the year. That's almost double!
• Today we have certified SPSM’s in 40 countries, students enrolled in the Senior Professional in Supply Management^® Program in over 80 countries, and customers in over 100 countries

So, despite the economic conditions, Next Level Purchasing has grown tremendously and brought a lot of innovation to the purchasing and supply management profession. And wait til you see what we have "up our sleeve" for 2009!

None of our success would be possible without the trust of our students and their employers. To them, I would like to extend a special "thank you" for believing that Next Level Purchasing could help them deliver better results.

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

Whitepaper Wednesday - Procurement Career Planning

Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. In today's installment, I'll be reviewing the whitepaper entitled "Procurement Career Planning In A Bad Economy" from Next Level Purchasing.

Despite the fact that the work of good procurement professionals has one of the most apparent positive impacts on the bottom line of organizations, many procurement professionals are seeing their jobs being eliminated. This whitepaper shares tips to help procurement professionals increase their chances of keeping their jobs as well as tips for getting back into the workforce in case their jobs are eliminated.

The whitepaper is divided into two sections: a section for what to do while you still have a job and a section for what to do if you're looking for a job. Some of the key topics include justifying your position to your current management, developing a strong network of contacts (including through use of online social networking tools like LinkedIn), writing a better resume/CV, determining the salary you should target, subtle (but effective) tips for finding more available procurement positions, and interviewing.

You can get your own free copy of "Procurement Career Planning In A Bad Economy" by completing Next Level Purchasing's survey, found by clicking here.

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

What The H*ck Do Suppliers Want, Anyway?

Having led and witnessed so many sourcing processes over the past decade-and-a-half, I think I've heard every possible bidding supplier complaint. The funny part is that there are complaints at both ends of the spectrum.

I've seen suppliers complain about more casual bidding processes, suspecting that another bidder was given preferential treatment because there were separate discussions held with each bidder. I've also seen suppliers complain about strict bid processes that prohibited one-on-one, personal meetings with bidders because they consider themselves more of a "collaborative" supplier as opposed to a "transactional" supplier.

The bottom line is this: any time a supplier loses (which will be any time that you have two or more suppliers bidding), someone is going to be unhappy. Your job is to make your stakeholders and your organization happy within ethical boundaries, not every bidding supplier.

So as long as you conduct your sourcing process ethically, stick to what you said you would do, and disclose what you said you would disclose, you can feel satisfied that you've done your duty to satisfy your customer. Unless you're in government procurement where suppliers are taxpayers and, therefore, your customers in some perverted way and are "entitled" to be treated like fine china.

That doesn't mean that you shouldn't care about relations with losing suppliers. A healthy and honest debriefing can help all parites walk away if not happy, at least at peace.

That being said, a poor debriefing can pour salt in the suppliers' wounds and make you look bad. I would define a poor debriefing as one where you are very secretive and refuse to share who the successful supplier was and what advantage they had.

You don't have to be specific like "Supplier A offered a price that was $13,002.87 lower than yours." But simply saying "We selected Supplier A based on a lower price" sufficiently protects Supplier A's confidential pricing while providing fair insight to the losing bidder.

NOTE: It's better to discuss these things in terms of the advantages of the winning supplier rather than the disadvantages of the losing supplier. Criticism invites arguments.

Unfortunately, I've seen too many purchasing professionals make themselves look bad by failing to follow these simple guidelines. I hope this short little rant helps you prevent yourself from being one of them.

So what do suppliers want?

They want what they expect. And you can shape what they expect with a well-written RFP that explains what the process is, why it is that way (ideally mentioning the benefit to suppliers), and what the losing bidder will learn (and not learn) at the conclusion of the process.

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

More SPSM's Share Their Thoughts

We recently added two testimonials to our classes pages. Gary Grainger, SPSM - a Company Buyer from the Isle of Man - shared his thoughts on our Web page for our course "Supply Management Contract Writing." And John Habonimana, SPSM - a Procurement Specialist from Rwanda - shared his on the Web page for "Savings Strategy Development."

We have gotten many testimonials throughout the years and we've rotated them on and off our site. However, from this point forward, even though we're rotating them off individual pages, we are going to keep them in a new section of our Web site called the "Testimonial Map."

The Testimonial Map shows a map of the world and allows you to click on your continent to see testimonials from other purchasing professionals from your part of the world. You can check it out at http://www.nextlevelpurchasing.com/purchasing-around-the-world.html.

It's still a work in progress, so look for more additions and enhancements in the future.

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

Purchasing Interview Preparation

With unemployment rising and the economy taking its toll on businesses, undoubtedly and unfortunately more and more purchasing professionals are or will be looking for work. So right now, many purchasing resumes are being updated and interview preparations begun.

When preparing for a purchasing interview, there are some things that a purchasing manager/executive wants to know. And you won't find these things in some "common interview questions" type of book.

So I've written a three-part series called "What Your Future Sourcing Boss Wants To Know" that was published on Iasta's eSourcing Forum. Here are links to the posts...

Part I

Part II

Part III

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

Where's The Beef? It's In Next Level Purchasing's Training!

Though we tweak our purchasing class material here and there throughout the year, we do a comprehensive review and update annually. And this year was our biggest update ever!

Our attitude is this: the purchasing profession evolves continuously, therefore, so should the education. In our minds, the days of the same old text books and same old study guide being used for years are over.

We added a ton of material. In fact, the content for Microsoft Excel For Purchasing Professionals grew by over 12% and the content for Mastering Purchasing Fundamentals grew by 16%.

And did our price go up?

Not at all!

More value, same price.

Here are some highlights from our update...

Mastering Purchasing Fundamentals

• Expanded on the distinction between purchasing and supply chain management
• Enhanced the explanations of inventory management principles
• Expanded the description of functional specifications
• Added more information to assist in requisition routing decisions
• Updated our descriptions of online marketplaces to reflect recent changes in the market
• Expanded the material designed to help purchasers decide whether to use competitive bidding, negotiation, or both
• Expanded our explanation of how to factor the time value of money into total cost of ownership equations
• Provided some new rules of thumb for deciding which type of analysis method to use
• Added new material instructing how to optimize purchase order descriptions
• Added a ton of new material on shipping terms, including expanded explanations of INCOTERMS
• Added tips for eliminating errors common to the placement of phone orders
• Added best practices for changing open orders

Microsoft Excel For Purchasing Professionals

• Added an entire new lesson on "Drilling Down Into Complex Spreadsheets"
• Covered importing data from text files or comma-separated-values files (such as those exported from ERP systems)
• Covered filtering
• Covered Conditional Formatting
• Covered VLOOKUP
• Covered data validation

14 Purchasing Best Practices

• Added references to price indexes in other countries
• Expanded our section on risk management, including step-by-step instructions on conducting and documenting a risk assessment
• Improved our ethics policy references
• Expanded our coverage of SaaS software

We are committed to bringing you the most up-to-date purchasing education possible.

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

Whitepaper Wednesday - New SCM Dimensions

Welcome to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. In today's installment, I'll be reviewing a whitepaper entitled "New dimensions in supply chain management: Eight strategies for improving performance from concept to customer" from Infor.

Despite the fact that the concept of supply chain management (SCM) has been popular in the mainstream for over a decade, what I see in the real world is continual struggle to figure out the way to best organize a true SCM strategy. The struggle usually occurs when the procurement team is given new responsibilities related to SCM such as optimizing the movement of goods through the supply chain and distribution networks and having influence over product design, known as "design for supply chain" to go along with other "design for" interests.

The whitepaper addresses these topics at an elementary (but very valuable if you are just migrating to SCM from procurement) level with the following excerpts:

• "Forward-thinking companies recognize that the internal dimension [of SCM] also encompasses the design of their products and the network they use to get them to customers. Network design includes such considerations as where to place manufacturing and warehousing facilities, how to design a distribution network, where to place retail outlets, and how to format stores. Given the complexity and global nature of many supply chains, network design is of rising importance with significant impact on bottom-line results, as recognized by the many companies who have already made decisions to 'offshore' production. However, there is mounting evidence that these decisions need to factor in multiple considerations, including traditional cost offsets such as production costs, distribution, and inventory as well as non-traditional considerations like the greater risk of product damage and delay resulting from offshoring."

• "Product design, another component of the internal dimension [of SCM], encompasses all the considerations that go into the design process, including market requirements analysis, manufacturability, and the ease with which the product can be distributed throughout the supply chain."

The whitepaper goes on to list eight strategies for leveraging concept-to-customer SCM. If this entices you, there is a caveat: just about all of them revolve around Infor's technology. However, one thing I was glad to see among the strategies was Infor's mention of the importance of Supply Chain Event Management (SCEM).

SCEM was a hot topic in the early part of this decade. And I feel it should be a hot topic today. But, unfortunately, it doesn't seem like there is much emphasis on it from the technology community nor overwhelmingly strong demand from the prospective users of SCEM technology. Infor does a good job of making the case for increased usage of SCEM.

While this whitepaper may be a bit general or basic for SCM executives who are in the throes of transforming their teams from procurement teams to SCM teams, I think it is a good read for procurement execs who are just about to migrate to the SCM concept or who expect to at some point in the future. You can download this whitepaper from http://go.infor.com/SCM8strategies/

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

Cost Reduction Ideas

I hope that you have enjoyed the article "Cost Reduction Ideas (Beyond Sourcing) " with its four cost reduction ideas and it's accompanying podcast that includes an additional three cost reduction ideas. All of these cost reduction ideas were geared towards situations where switching suppliers is not practical or a suboptimal alternative.

Because of the potentially knee-jerk "let's switch suppliers" approach to cost reduction, I wanted to highlight the alternatives to sourcing. And like so much of what I teach, it's not so much knowing the tactics, it's moreso applying the right tactic in the right situation.

To help you understand which situation to apply which tactic, I've prepared the following 2x2 matrix. The tactics covered in "Cost Reduction Ideas (Beyond Sourcing)" fall into the "Collaborate" quadrant.



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

Introducing...The SPSM Index!

One of the hardest questions to answer is "What topics does the Senior Professional in Supply Management^® Program cover?"

Well...a lot!

So rather than spout off the topics that most individuals are interested in - spend analysis, stratetic sourcing, managing supply risk, eProcurement and eSourcing, cost savings reporting, yada, yada, yada - we've developed a tool that can help purchasing professionals and procurement executives identify whether or not the topics they are most interested in are included. This tool is called the Senior Professional in Supply Management^® Program Index.

This index lists the topics that are covered in the six purchasing classes that comprise the program. Now, this is new, so it's not perfect nor all inclusive. But it is a decent starting point for determining which classes cover which topics. And it demonstrates the breadth of topics that are covered.

You can download it for free, with no registration required, at http://www.NextLevelPurchasing.com/resources/spsm-index.pdf

We welcome any and all suggestions to help make this most useful for you!

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

SPSM Certifications Now Awarded In 40+ Countries & Growing!

Though I usually use the first blogging day of the month to announce new countries where the SPSM^® Certification was awarded in the prior month, some other topics were more timely. But now...I'm ready!

November saw us award the first SPSM^® Certifications in Rwanda and the Isle of Man/British Isles.

Having cracked the 40 country plateau for SPSM's awarded (and the 80 country plateau where purchasers are enrolled in the Senior Professional in Supply Management^® Program), there really isn't another purchasing and supply management certification that can come close in terms of global recognition.

But it isn't just global recognition that distinguishes the SPSM^®. In the next day or so, I'll be posting a resource that will help you assess the comprehensive nature of the content.

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

The Automaker Bailout: Do Common Suppliers Pose Systemic Risk?

Whitepaper Wednesday will return next week. I wanted to jump on the automotive industry bailout news in a timely fashion.

Many eyes across the business world are on Capitol Hill where the leaders of GM, Ford, and Chrysler will be pleading for taxpayer dollars to save their companies and - as a result, they claim - the entire economy of the free world.

Personally, I've pondered whether letting the weakest of the automakers fail would be the right decision. Theoretically, it would allow the stronger two to have an opportunity to snatch up some market share and return to profitability, however thin those profits may be.

And, philosophically, it would help bring supply in line with demand. After all, if auto demand is down 37%, I'm not sure that we should be investing taxpayer dollars to sustain historical supply levels.

So one would think that the stronger two automakers would love to see the weakest one fail. Companies generally love to see their competitors die.

But there's one reason - one big reason - for counterintuitive thinking to prevail here.

What's that reason?

Supply chain risk.

Consider that, in today's Pittsburgh Post-Gazette, GM said that it needs government financial support because "Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain."

The article later stated that "GM said its collapse would cause 'catastrophic damage to the U.S. economy, with failures rippling through suppliers to other automakers, dealers and financial firms.'"

So in other words, if GM goes out of business, so will many of its suppliers. Many of these suppliers are also used - nay, depended upon - by Ford and Chrysler. The collapse of these suppliers would so inhibit Ford and Chrysler from producing vehicles that they, too, would collapse.

I'm sure (well, hopeful) that each of these automakers understand who their common suppliers are, the prospective solvency of those suppliers given a failure by one or more of their competitors, and contingency plans in the event of a competitor's collapse.

If one or more of the automakers does fail, there will be game-changing procurement lessons to be had. Make or buy procurement decisions - which, in recent years have always favored the "buy" outcome - may face a pendulum-like swing towards the preference of making in order to reduce such systemic supply risk.

We'll just have to wait and see what happens.

Hold onto your hats...it's gonna be a wild "ride."

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

The Sourcing Maniacs Visit To Next Level Purchasing

If you haven't been checking the Sourcing Innovation blog lately, you've missed the doctor's fun series where his "Sourcing Maniacs" characters "visit" various vendors in the sourcing space and extract some behind-the-scenes information that is both educational and entertaining.

Well, Next Level Purchasing headquarters was one of the stops on the Maniacs' tour. Be sure to check it out here. And while you're there, check out some of the other posts in the series. If you're like me, you'll first be very annoyed at Yakko, Wakko, and Dot, but you'll learn to love them...and you'll actually learn a lot about sourcing technology providers in the process!

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

The 4th Quarter Is Procurement Planning Time!

I recently penned a piece entitled "The 4th Quarter: A Procurement Leader’s Time To Plan" for the eSourcing Forum. In it, I discuss some questions that procurement leaders will ponder in this fourth quarter, such as:

• What goals should I set for Procurement to help the corporation achieve its goals?
• What contracts are expiring next year?
• What new categories can we source next year?

Plus many more.

If you're interested in reading more, be sure to click the link above to check out the entire piece.

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