GAO Keen on Strategic Sourcing for Services

According to the U.S. General Accountability Office, the federal government  spent $307 billion to acquire services in its last fiscal year. Did they get good deals on all that work?  The GAO wasn’t so sure, so it turned to ISM, asking for examples of organizations that might have best practices that the federal government could put in place. Obviously, they came to the right place. ISM staff offered a list of supply management organizations that the GAO might interview, and in its report the GAO mentioned four tactics that it found important.
(1) Standardize requirements
(2) Understand cost drivers
(3) Leverage scale
(4) Prequalify suppliers
The GAO remarked that effective organizations did not treat all service purchases the same, and they had to be able to adapt tactics to changing conditions.
None of this should be a big surprise. It did come from “good sources” as it were.
The GAO might not be able to persuade the whole U.S. Government to follow those good practices, but that should not stop you from paying attention to them in your own work.
Here’s the link to the report summary and PDF.
Strategic Sourcing: Leading Commercial Practices Can Help Federal Agencies Increase Savings When Acquiring Services

A moment of near consensus

In its latest Manufacturing Report on Business this morning, ISM reported the PMI at 50.7%.  That is down from last month, and just barely on the “growth”
side of 50%.  According to the release…
Economic activity in the manufacturing sector expanded in April for the fifth consecutive month, and the overall economy grew for the 47th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business^®.
It is interesting that the PMI very closely aligns with the results of a non-scientific “flash poll” of ISM members at the organization’s 2013 International Supply Management Conference wrapping up today in Dallas, Texas.  They were asked “Which way is the economy headed for the remainder of 2013?” and 64% responded “holding steady,” while 29% responded “turning up.” Only 7% responded “going down.” The conference attendees used a system called ThumbTalk that let them respond by sending a text message or making a choice at a mobile web site.
Shortly after the attendees answered the question live, they heard a semiannual economic forecast from ISM’s Bradley Holcomb and Anthony Nieves, who gave positive outlooks for both manufacturing and non-manufacturing sectors of the economy. (Read them here.) A third economist, Bernard Baumohl, Chief Global Economist, The Economic Outlook Group also forecast growth ahead for the U.S. economy.
Make of this what you will, but I would dare to call it “consensus.” For the moment.

 

Harvesting Cash from Suppliers is Reaping With a Sharp Sword

The Wall Street Journal today reports that Procter & Gamble is planning to extend its payment terms to suppliers by as much as 30 days — from an average of 45 days to a new target of 75 days.
The Journal reports that P&G was following the lead of many other large companies that were keeping their cash longer to help them fund expansions, investor dividends or other needs.
Of course, payment terms have been and always will be an important part of the total cost of ownership of anything in the supply chain. They are tools like many others. But as one of the sharpest of those tools, payment terms can cut two ways.
You may be comfortable that your tier one supplier can find funds at low interest rates to manage the situation without affecting deliveries to you or the overall health of the supplier. But the fact is, the more likely scenario is that tier ones will extend their own terms to tier two, and so on. Eventually, the shock of the change has to be absorbed.
How well do you know the financial health of every company at every level in your supply chain? Can you be sure there isn’t a service provider in your chain that has to meet a biweekly payroll, or some other upstream company that supplies a critical part on a razor-thin operating margin because it’s a startup or has put everything into an R&D effort? If so, you might be sowing the seeds of disaster at the same time you are harvesting what appears to be an easy source of cash.

ISM Non-Manufacturing ROB still positive

Respondents to the ISM Report on Business in non-manufacturing industries had some alignment to their counterparts in manufacturing last month — as the index dipped 1.6 percentage points, but still remained positive. Here’s the headline. Find the full report on the ISM website.

March Non-Manufacturing ISM Report On Business^â

NMI^™ at 54.4%
Business Activity Index at 56.5%
New Orders Index at 54.6%
Employment Index at 53.3%

(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in March for the 39th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business^®.

ISM ROB Manufacturing. Still growing

For the record, right from the ISM release. PMI^™ at 51.3%, so expectations of growth are continuing, although not as strong as last month, when the index was 54.2.

• New Orders, Production and Employment Growing
• Inventories Contracting
• Supplier Deliveries Faster

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in March for the fourth consecutive month, and the overall economy grew for the 46th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business^®.  (More on the ISM website.)

 

Scrutiny in the Food Chain

It’s easy to let ourselves think that every transaction is an ethical one, but the fact is that there is constant pressure to bend the rules.

Here are two examples from the food industry that show what can happen when suppliers engage in “any means necessary” to get a contract. The double whammy of these ethical lapses is that buying organizations were not only paying more than they should, but they were also receiving food that had not passed quality tests.

From the FBI, news of sentencing in a racketeering and price fixing case involving tomatoes.

FBI Release — Sentencing in SK Foods case.

In the second case, a former president and CEO of Peanut Corporation of America and others have been indicted for selling peanuts contaminated with salmonella.

Food Safety Monitor — Peanut Executives Indicted

 

 

ISM’s Annual Conference – Best Ever

I have been an exhibitor and speaker at ISM’s Annual International Conferences and have had the pleasure of attending every one since 1992 in Orlando. Each conference offers a slew of current and useful information, great networking events, and numerous avenues for growth for all levels of expertise. However, i think this year’s conference in Grapevine (Dallas area), TX  will be the best one ever.

Check out ISM’s impressive lineup of keynote speakers, starting with the 66th U.S. Secretary of State, Condoleezza Rice. In addition, Hau Lee of Stanford University Graduate School of Business will speak about agile supply chains and Bernard Baumohl, award-winning economics reporter for TIME magazine, will lead ISM’s annual Business Survey/Economic Outlook.

Another reason I’m looking forward to this year’s conference is ISM’s increased presence in the exhibit hall. ISM’s booth is expanded and placed in the center of the exhibit hall. The booth’s Solutions Bar gives attendees easy access to ISM Board members, speakers, ISM staff members, and conference volunteers. There will be separate kiosks for ISM Professional Credentials, Membership, Education as well as CAPS Research. ADR North America will also have its own kiosk, so please stop by.

The real meat of the ISM conference, however, lies in its numerous hour-long learning sessions, two-hour mega-sessions, and pre- and post-conference seminars. ISM conference sessions have always been topical, but this year there’s even more of an emphasis on information you need now, like the new ’Breaking News’ sessions on supply chain security. Here are some other great sessions I jotted down while browsing the brochure…

• Session BI — Offshore or Reshore? How to Objectively Decide
• Session HH — Create Adaptive Sourcing Strategy Under China’s New Tax Code
• Session GC — Critical Skills 101: What CPOs Want
• Session IH — Volatility: Managing Price Fluctuations in Volatile Markets
• Session BG — Beyond BRIC: Supply Chain Strategy in Emerging Economies
• Session ID — Avoiding Risky Afterthoughts: Integrating the Management of Supply Risk and Business Continuity

ISM also has two new professional development tracks: ‘Supply Management for Emerging Professionals and Their Managers’ and ‘Game Changers’. These new tracks have learning sessions like, “Things My Professor Never Taught Me”, “Sourcing and Category Management 101”, and “Understand Uncertainty Before Building Strategy”.

Among the nine mega-sessions offered, I’m leading one on Wednesday morning called, “Accelerate Your Career: Do You Have What It Takes?”.

ISM is also introducing its first ‘On-Point’ seminar, to be offered on Wednesday afternoon (the last day of conference). The topic this year is Cost Containment and I’m fortunate to be the instructor for this class as well.

ISM Board members will have a stronger presence at this year’s conference. In addition to the Solutions Bar inside the ISM exhibit booth, you’ll see the following Board members presenting a session, sitting on a panel, or leading one of our ten learning tracks: Jason Kwan, Lisa Martin, C.P.M., Ann Oka, Joseph Black, Steven Miller, Tim Fiore, CPSM, C.P.M., MCIPS, Kimberly Brown, and new Chair, Thomas K. Linton. You’ll also see former Board Chairs Dave Nelson, C.P.M., A.P.P, and Shelley Stewart, Jr., CPSM on an all-star panel called, “How We Did It”.

Another nice addition this year is a Team Discount of $300 per registrant (if four or more register at the same time). ISM has always had a team discount, but the increase to $300 is a great deal. And be sure to take advantage of the additional discount when you register before April 15.

ISM is making concerted efforts this year by attracting emerging professionals, offering more timely and relevant information, by brining in great keynotes, and making its Board of Directors and staff more accessible. I invite you to take part in the excitement.

Drop by The ISM Exhibit and say Hello.