Capital Stimulus Just Isn’t Cutting it...Yet

on Wednesday, May 27, 2009

In a recent entry about 2009 Tax Incentives I relayed some interesting tax stimulus information and urged managers to examine the opportunity and decide if the incentive was enough to persuade them to make a capital investment. In this week’s issue of BusinessWeek, the “Numbers” section certainly suggests one of two things. Either companies are taking a “wait and see” approach, or the stimulus just isn’t enough.

According to the “Numbers”, capital spending in the private sector dropped at an annual rate of 38% over the course of the first quarter. While it could be argued that the extended 2009 capital tax allowances may not have had a chance to take effect, this annualized figure still paints a dire picture. Month over month expenditures in every capital sector have continually slumped. With technology lagging the most at a one year negative delta of 28%, and energy leading the snail race with a negative 2% change, it’s clear that companies are still holding on tightly to their cash. While the “numbers” don’t say much about the effects the sluggish credit market and a general consensus of fear have had on capital spending, they do suggest that inflation has played a considerable role. A one-year increase of nearly 3% in prices of capital equipment has put a good deal of downward pressure on mangers’ ability and desire to make capital purchases.

The good news is that first-quarter government spending has increased…right? Wrong. Although Obama-nomics have laid big plans for government investment in infrastructure repair and environment-friendly overhauls, these policies have yet to gain traction. The first quarter real change in government investment was actually -.7%, and spending for road construction has only crawled slightly upward since this time last year.

So, is it all doom and gloom for capital markets? I don’t think so. I believe that over the course of the next quarter or two, the free-fall in private capital spending will be stemmed by a combination of tax incentives, subsiding fears, and opportunistic companies. As for the government, it’s almost a matter of fact that they will begin spending-On what and how efficiently will determine the success or failure of the policies. If you’re not feeling as optimistic, you may want to check out BusinessWeek.com’s internal blog The Case for Optimism. I found it funny that the editor’s memo that plugs the site was conveniently placed on the opposite side of the less-than-peachy “Numbers” page.
Share/Bookmark

Keep your Friends Far, Far, Away (Unless They Have Good Credit)

on

An article in the June 1st edition of Business Week titled “What’s a Friend Worth?” provides insight into behind-the-scenes research going on within the largest social networking sites on the web. The goal of the research is to get as many people as possible to click on ads that show up on a webpage. The basic premise of this particular set of studies is that people with similar interests or bonds, (Friends on Facebook, Colleagues on LinkedIn, Followers on Tumbler/Twitter/Blogger) will click on similar ads. So if I click that ad for laser hair removal, my friends and colleagues are (more) likely to click on that ad as well. Seems like a solid premise.

A research firm called Rapleaf took the concept a step further, and found that “borrowers are a better bet if their friends have higher credit ratings. This might mean that a home buyer with a middling credit risk score of 550 should be treated as closer to 600 if most of his or her friends are in that range”.

An implication of these findings is that a home buyer with a credit score of 550 should be treated as closer to 500 if most of their friends are in that range. This is a scary thought. What if most of your friends are 550, just like you, but one happens to have declared bankruptcy? What if you happen to be friends with that person and their spouse? Depending on how the algorithms work, those two people could mean the difference between you getting the loan or not. Just as bad, you could get the loan, but end up paying a higher interest rate than you should.

If this concept were even remotely true, wouldn’t banks already be asking for credit information from friends and family when someone applied for a loan? What makes a friend on Facebook so much different than a friend in real life, in that their credit score could decide the fate of your loan? The only difference is the potential for lenders to have access to the information without disclosing it to the person applying for the loan.

It reminds me of stories about people who ended up on the no-fly list. No one in the government could tell them why they were on it, and no one could tell them how to get off it.

At any rate, if you plan on looking for a loan in the near future, make sure you get a credit score before accepting any new friend requests, and don’t follow the postings of any financially unstable bloggers. In addition, if your credit score is north of 700, please invite me to be a connection on LinkedIn.
Share/Bookmark

Get Your Organization’s Green On

on

In keeping theme with my last few green posts, I enjoyed reading wiki-paper, Green Procurement, by Michael Lamoureux, Ph.D., Sourcing Innovation. Michael breaks out the contents nicely into an introduction, benefits, how to make an impact and ten steps to green procurement.

After an easy to follow introduction the paper goes on to explain some of the benefits why an organization should want to be green. Without detailing the entire contents, the list of benefits are: brand image, customer satisfaction, reduced risk, cost reduction and increased shareholder value.

Michael’s How to Make an Impact section provides advice on how to go green by category and follows up with some general tips. “The reason that green procurement is so complex is that there's no single rule-of-thumb that you can apply in every situation” Michael states. A good range of categories (IT, office supplies, buildings and maintenance, transportation, food, energy, manufacturing) are listed to help demonstrate that the 3Rs (reduce, reuse and recycle) can be applied in every situation.

In conclusion Michael outlines ten steps to green procurement as follows:
1. Commit to Being Green
2. Identify and Categorize Your Needs
3. Develop Green Specifications and Standards
4. Establish Green Selection Criteria and Their Impact on Award Decisions
5. Focus on Identifying Products and Services which are Green
6. Always Use a Life-Cycle Costing Approach
7. Include Green Performance Clauses in Every Contract
8. Communicate and Inform
9. Use Green Technology
10. Make it Easy

Check out the ten step details and references included in this wiki-paper and start thinking about how your company can get in on green procurement.
Share/Bookmark

Consulting: The Customer is Rarely Right

on Tuesday, May 26, 2009

If you’ve been in cost reduction consulting for any period of time, you’ve stood on the fine dividing customer satisfaction and customer service.

When project selection arises, it’s typical to see clients select less significant, less sensational spends for cost reduction because they simply don’t want to tackle the perceived “risk” or worse yet, the political hassles.

It creates the ultimate conundrum; if a client hires you to put significant dollars back on their bottom line, how can you do so tackling modest spends? Of course the client will feel better (in the instant) if their hired gun shoots only at the targets they select, but they’ll never see the substantive impact they truly need.

At that moment, every cost reduction consultant is faced with a choice. You can be the nice the guy, or the effective guy. The nice guy takes what he’s handed, accepts modest results and usually a terminal engagement. The effective guy explains to clients that they have to take the John Dillinger approach (rob banks because that’s where the money is) and weather the slings and arrows of righteous procurement staff indignation.

But a clearer perspective reveals that the effective guy and the nice guy actually are the same guy.

Consider how well served you would feel if your doctor diagnosed only the minor ailments you wished to address, and left the major problems out of the exam results? Is that a true service, or is it malpractice?

If we view businesses in the same holistic fashion as a living organism, and in many ways they are, telling clients where to focus their “treatment plan” is the kindest, most compassionate approach for their long term well being.

So the next time a client shrinks from substantive work and you’re tempted to be the nice guy, remember who the nice guy really is. Real Customer Service is about treating the client so that they thrive in the far term, not just soothing them in the moment.

Share/Bookmark

2009 Extended Tax Incentives Make Capital Investment More Attractive

on Thursday, May 21, 2009

If you are looking to get the most tax “bang” out of your capital investment “buck”, now may be the time to buy. According to an article prepared by Pro-Mach in this month’s edition of Packaging Digest, 2008 tax incentives have been extended to cover capital investments made in 2009 as well. Under the American Recovery and Reinvestment Act, the allowable amount companies can deduct from annual income has been increased from $128,000 to $250,000, and a bonus depreciation factor of 50% will be applied to capital expenses.

This means that companies have an opportunity to lower their taxable income and decrease the amount of time it will take them to recover their initial investment. The article is careful to warn that in order to take advantage of these incentives, companies must have capital investments “in service by 2009”. So, if you’re mulling the idea over, it would be a good idea to give the project priority.

Times may be tough, and cash may be sparse, but if your company has a need to expand or make plant investments, this tax stimulus may represent a great opportunity to make a strategic move. Of course there are many factors to consider before determining whether or not your company’s financial situation can tolerate a capital outlay, but this incentive makes it worth while to at least investigate the possibility. As I pointed out in an earlier post, indecision is not an acceptable decision in these situations. A “wait and see” attitude will certainly cause this opportunity to disappear. If managers perform a proper assessment of their organization’s current level of risk exposure and consult their tax planner for some additional information, they should be able to understand whether or not this tax stimulus is enough to incentivize them to buy in the short-term
Share/Bookmark

The Most Stupidest Contract Clauses, Part II

on Wednesday, May 20, 2009

A few weeks ago, I wrote about one of the “Most Stupidest Contract Clauses” I have come across, the Most Favored Nations Clause. Today I am going to add to the list of clauses that probably don’t belong in a contract, with the “total cost of ownership” or “Continuous Improvement Clause”.

The Continuous Improvement Clause (CI Clause for short) comes in many forms, but the basic idea is that a supplier will agree to assist in providing cost reduction and/or enhanced services to the customer over the life of the agreement. Examples of this include reducing inventories, reducing energy costs, cost avoidance, and administrative cost savings such as speeding up the ordering/payment process.

In many cases, the supplier will commit to both soft and hard dollar savings targets in these areas, and include the mechanisms to calculate cost savings in the contract. Cost savings percentages are based on estimated annual transactions and spend, and in every case, include a term to the effective of “results are predicated on customer’s participation in cost reduction proposals. If customer does not implement the cost reduction proposals suggested by supplier, the targets offered here shall be considered null and void.”

Essentially, the customer has to implement for the cost savings to work, but the supplier gets credit regardless. Here in lies the problem.

One time as I started a project with a new customer, the buyer insisted on the importance of these clauses. In their contract, the clause included details about how the supplier and customer would have quarterly meetings to discuss and implement cost savings opportunities. “We need a commitment to CI in every one of our contracts!”

I asked the buyer what specifically happens during the quarterly meetings, are they effective, etc. The buyer informed me that so far, they haven’t had any quarterly meetings.

“Our schedules have been too full.”

“Oh”, I said. “How long have you been under contract with the supplier?”

“Three Years”, the buyer replied.

The buyer, in his commitment to helping the company reduce costs, was adamant that contract language had to be put into every contract regarding Continuous Improvement. After that, the buyer saw no responsibility to follow up, and since the supplier had an out, they didn’t feel the need to push the issue.

Lets call the CI clause by what it really is, a CYA (cover your ass) clause. CYA does belong in contracts to some extent, in most agreements you want to include terms that make sure you are covered when things go wrong. But to spend the time and resources negotiating CI terms into an agreement, when a supplier partner will typically agree to these programs informally, is a waste of time and money. Weeks or months of hard dollar savings are lost while the contract sits in legal or meetings are held to develop cost savings estimates or clarify what was being agreed to.

In the end, the supplier always has a way out, and the buyer always has an excuse why they were too busy to move ahead with the arrangement. But at least it’s in writing.
Share/Bookmark

Why Ed Liddy Should Buy a Cheeseburger

on Tuesday, May 19, 2009

As I watched a segment about AIG on 60 minutes last Sunday, I couldn’t help but think of things Ed Liddy could buy with the one dollar salary he’s accepting as compensation for taking on one of the hairiest messes in modern financial history. Below are some ideas, and my eventual choice. Feel free to comment if you have any good ones.

A Newspaper
If Liddy wanted, he could go out and buy himself a newspaper. On the plus side, he’d be able to check his horoscope, try the crosswords (What’s a three-letter acronym for “financial debacle”), and get up to date on any news that could affect AIG. On the down side, he’d be beaten over the head with criticisms, pressure, and negativity. Besides, I’d speculate that, even in such crisis, the taxpayer..err I mean AIG…still picks up the tab for executive newspaper subscriptions.

A Lottery Ticket
Perhaps, with some luck, he could win a million bucks (Odds are around 1 in 195,249,054 on a Powerball drawing). Then AIG would only owe Uncle Sam…well…they’d still owe a lot. Considering AIG’s 180 billion dollar debt, a lottery win for Liddy wouldn’t even be a brick in the wall.

A Pack of Gum
Okay, a cheap pack of gum. I’d suggest the old-school pack of juicy fruit, but that’s just me. Does Ed Liddy smoke? Has Ed Liddy ever smoked? I don’t know (I googled my face off trying to figure it out), but I can guarantee you he’s going to need something to cope with the stress of having much of the hope for the country, and possibly the world’s, economic recovery placed squarely on his shoulders. This may not help the company’s financial situation or PR position, but it would at least give Liddy an alternative to the all-too-inevitable chain-smoking that, I would imagine, comes with the job.

A Wendy’s Value Menu Double-Stack Cheeseburger
Oh yea, I said it. It’s 3-conomics baby. In all seriousness though, Ed Liddy should buy this cheeseburger. I know the suggestions in this article have gotten progressively sillier, but I’m being serious with this one. If I’m Ed Liddy, I’m thinking, “Hmm..what’s a way that I could spend this dollar to make a little scratch for AIG while improving our public image?” If I’m a Wendy’s ad exec I’m thinking, “Hmm..how could I take this home-run '3-conomics' ad campaign and make it a grad-slam?” Eureka! Liddy should engage Wendy’s to feature him in an extension of the 3-conomics ad campaign that show’s Liddy buying a Double Stack with his one-dollar salary. The ad could, with humor, explain who Ed Liddy is, why he only has a dollar, and how much he loves “3-conomics”.

Wendy’s Gets: A relevant theme to cap off it’s “3-conomics” campaign and a gimmick that could very well generate enough buzz to propel the campaign into viral exposure status.

Liddy Gets: A couple million for the endorsement deal to throw at AIG’s mountain of debt, the public good will from subtlety highlighting the fact that he is “the good guy” who is making a sacrifice to get AIG back on track, and, last but certainly not least, a tasty, juicy, cheesy, delicious Double-Stack.
Share/Bookmark

Gaps and Attitudes, Part Deux

on

I mentioned in my last blog that Elin Raymond, president of branding/marketing firm The Sage Group wrote a second article in Packaging Digest on their survey results. This article focuses on sustainable branding strategies and tactics for each generational group based on the survey and research findings. The general idea is to not put all your eggs in one basket if you want to be successful at sustainable branding to all generational groups (Millennials 17 to 25 years, GenXers 26 to 40 years, Boomers 41 to 55 years and Matures 56-plus years). However, Elin notes that there are a few similarities between the groups: “(1) They all benefit from sustainability information related to your product; (2) they all rely on friends' product recommendations; (3) and they all want to try a new product before they buy it. And based on the current economic freefall, price is likely a greater consideration than before.”

The Millennials and GenXers were dubbed “the well connected” as the article continues. A bulleted list is provided with tactics when creating an online life and friends to reach these two internet connected generations. The list includes stats on companies using social media in their branding and marketing (85%!) as well as good strategies and tactics using Facebook, Twitter and YouTube. They also mention getting sustainable products in on GoodGuide, Inc’s app for iPhone that includes more than 65,000 green products.

Elin names the Boomers and Matures “the sustainable savviest” being the most committed to environmentalism. The key is to raise their awareness as they are hungry for information and have the most time (in comparison to the Millennials and GenXers I imagine) to commit to learning. The list of targeting tactics for these two generations suggests ads, articles and TV news spots but mainly being a sustainable resource for information. Keeping these generations involved with direction to your company’s website for product discounts, special offers and environmental information. This help’s you collect email addresses in order to send out special offers and to test products and product line extensions. Collecting Boomers and Matures’ feedback and rewarding their input will help develop new products and marketing strategies.

Among many great findings and suggestions, Elin states “Today, nothing communicates a company's brand and values more than its Website. It's a venue for creating brand connections and providing eco-educational opportunities. Include customer testimonials throughout the site; videotape the best and upload to both the site and YouTube. According to a Nielsen 2007 poll, nearly 80 percent of consumers trust the advice of other consumers.” Blogs and forums are also a great way for consumers to share eco-tips and personal experiences. This article lists Dell and Starbucks as companies that use a blog or forum to listen and learn from customers as well as Proctor & Gamble encouraging customers to be involved in product development.

Take a read through Elin’s article and see if it sparks any clever sustainable marketing ideas for your company. The Sage Group’s survey certainly shows that times have changed and to be creative in your strategies to expand and involve your consumer base.
Share/Bookmark

This just in: Chrysler doesn’t get it

on Monday, May 18, 2009

Okay, that’s not exactly a scorching head line, Chrysler didn’t "get it" up until their first bailout, and hasn’t gotten it since Lee Iacocca departed in the early 90’s.

Thursday’s announcement that Chrysler would close 1/3 of its dealerships may have sounded like a sweeping development to some, but to me it sounded like bad business as usual.

The inefficiency (pronounced-insanity) of the American auto industry is writ-large on the landscape of the American economy. Yet Chrysler actually dovetailed the announced closings with a justifying statement that 50% of its dealerships generate over % 90 of its sales. I’ll write that again; 50% of its dealerships generate over % 90 of its sales.

I’m not exactly John Nash, but I’m a guessin’ that means the other 50% of dealers generate 10% of its sales.

So it’s completely logical then, to close 33% of its dealers? I know that the remaining 50% of those dealers generate sales, but I’d bet (based on the law of averages and Pareto principle) Chrysler could salvage 99% of its sales and close 45-48% of its dealerships.

Hey Chrysler, I have an idea. It’s based on a question my former boss used to remind me to ask when evaluating any executive. Do they want a big ego or a big bank balance? It still looks to me as though there’s a degree of "size matters" running through the veins of the dinosaurs at Chrysler.

Here’s my idea. Close all the dealerships that are not profitable. Stop making the cars that are not profitable. Stop paying wages that are not profitable, owning real estate for plants that are not profitable, etc, etc. . . .

Here’s why: every American home has a purchasing manager, and those purchasing managers are running under the budget necessary to finance your folly.

We simply can’t afford to hitch ourselves up to nags anymore. We don’t care about your corporate emblem, your history, your legacy or the once untouchable status of the American auto workers. We’re just trying to get by.

So don’t tell us that your answer to this mess is closing 1/3 of your dealerships when 90% of the sales are done by 50% of the dealers. That math just doesn’t add up.

So it's clear, Chrysler still doesn't get it. I suppose that's okay, because we're going to stop giving them excuses (pronounced-bail outs) real soon.

Share/Bookmark

Media Buying? No…Media Procurement.

on Friday, May 15, 2009

I read in a recent Advertising Age article, that Omnicom, one of the world’s largest media communications groups, plans to bolster its negotiating team’s media buying efforts by adding "professional procurement resources”. At first, the title, “Omnicom Adds Procurement to Its Media Buying Arm,” struck me as redundant. Are Omnicom’s media purchasers not “professional”? Do they not “procure” for a living? Of course the answers to these questions would be “they are” and “they do”. The distinction exists because of what and how they purchase.

As any outsourced procurement outfit will tell you, companies are very protective of their marketing spend categories. The main reason for this has to do with the intangibly qualitative aspects of the marketing process. This intangibility applies particularly to the advertising aspect of marketing. For years, agencies have complained that client’s procurement departments have been hurting the ad business. They argue (correctly) that the procurement of the elements used to build brand recognition and equity is fundamentally different than the procurement of elements used to build a product. When sourcing almost any other category, purchasing professionals have the current price, the new price, and a variety of specification and service level requirements that make the return on a sourcing investment fairly calculable. In the marketing world, ROI can’t be determined with a straightforward formula. While intensive research, market feedback, and sales figures all help to guide marketers’ decisions, there is no x+y=z to marketing ROI. While this is all true, it hasn’t stopped the procurement departments of many ad agency clients’ from trying to apply sourcing theory where appropriate in order to make better media purchases.

Now it would seem that the very same ad agencies that once pointed fingers at “procurement” are turning to sourcing professionals to improve media purchasing and client service. The article cites Page Thompson, CEO-North America of OMG, as saying:

“Procurement will play a role in helping our negotiators figure out ways to save money on media spends. The rules are no longer the same, and procurement is becoming a bigger part of the process. Managing the investment costs that we oversee for all of our clients is the most important things we do and clearly this is an opportunity to change the rules of the game and bring a new dimension and perspective to our negotiating teams."

Daryl Simm, CEO Omnicom Media Group Worldwide, also explains:

"In today's environment, procurement is increasingly at the top of our clients' agenda. By adding procurement professionals to Opera (the media negotiation unit), we'll not only do a better job of meeting client expectations, we'll be investing in our buying teams by providing them with the negotiating resources and training to keep them at the top of their game."

It would seem that Omnicom is making a smart move by creating a situation in which the hard-line procurement executives, Craig Glaser (OMG’s director of procurement) and D.J. Martin (Ex-Colgate-Palmolive director of indirect procurement), can collaborate with, not replace, Opera’s media negotiators. According to the article, “The execs will help formulate negotiating strategies, including pricing and contractual terms, with vendors; measure the performance of the media buys; and assist in the management of vendor relationships.” I’m eager to see how this plays out and whether, like heads, two schools of purchasing are better than one.
Share/Bookmark

A "Creative" Solution to Unemployment

on

According to the U.S. Bureau of Labor Statistics, the unemployment rate in the U.S. is 8.6% as of April 2009 – up from 5% at the same time last year. It is projected that the unemployment rate in the U.S. could be up to 10.5% by the end of the year. Finding solutions to the unemployment problem have typically centered on developing faster economic growth in terms of the generation of more jobs. The government has spent billions on attempting to stimulate the economy in trying to do just that. Well, according to a recent article in the New York Times entitled Japan Pays Foreign Workers to Go Home, Japan is trying a very different approach to battle their unemployment rate. With the world’s second largest economy, Japan has an unemployment rate of 4.8%, up from 3.8% from the same time last year. This is the biggest jump since 1967, according to the Government Statistics Bureau in Tokyo. Job prospects are getting worse and wage declines are accelerating with damping consumption, their reports showed. So the government officials in Japan put their heads together and decided a good way to decrease the unemployment rate would be to get immigrant workers to leave the country – specifically Latin Americans.

Thousands of Latin Americans immigrated to Japan in the early 90’s during their growing industrial labor shortage. According to the article, an estimated 366,000 Brazilians and Peruvians now live in Japan. They quickly became the largest group of foreign blue-collar workers in Japan. Under this program, the government is offering any Latin American resident $3,000 toward airfare plus $2,000 for each dependent. The workers can then keep any of the money left over. For most of the unemployed workers that have filled in the so-called three K jobs (kitsui, kitanai, kiken – hard, dirty, dangerous) this is quite a substantial amount of money.

The catch to this of course is that if they accept this offer, their residency is revoked and they – including their children - can never return to the Land of the Rising Sun. Most would only be able to return on three-month travel visas.

“There won’t be good employment opportunities for a while, so that’s why we’re suggesting the Brazilians go home,” said Jiro Kawasaki, a senior lawmaker of the ruling Liberal Democratic Party. Mr. Kawasaki continued, “We should make sure that even the three-K jobs…are filled by the Japanese. I do not think that Japan should ever become a multi-ethnical society.” He also added that he thinks the U.S. had been “a failure on the immigration front.”

As many ridiculous politicians as we may have in this country, can you imagine the repercussions of a high government official saying something like that in the U.S.? How ridiculous would it sound if the U.S. government proposed something like this as a solution to unemployment? I could not believe that Japan, or any country could institute a program like this. Many of these immigrants have lived there15-20 years and have built a life and a home there. Because of the current economic conditions however, it wasn’t much of a decision for many families. So far, at least 100 families have accepted the offer and plan to leave.


Despite some of the U.S.’ racial tensions, our multi-ethnical society has defined the strength in our country and continues to do so. There are better ways to improve the unemployment rate and stimulate the economy than by simply saying, “Get Out.” The solution lies in the individuals and companies that make up the economy finding ways to decrease frivolous, unnecessary spending and making better decisions. Of course the execution of those changes is where it can get complicated. One thing is clear, however - having one ethnic group or another leave your country is not the answer to the country’s economic woes. I think one of the immigrant workers from Japan quoted in the article who took the money got it right in saying, “We worked hard; we tried to fit in. Yet they’re so quick to kick us out. I’m happy to leave a country like this.”
Share/Bookmark

“Best in Class” or Best in Show

on

We’ve seen it time and time again. “best in class” firms publish top level stats of “best in class” performers, which firms immediately pipe into “best in class” presentations, to make the case for “best in class” engagements, to implement those “best in class” practices.


I have a question or five.


Is anyone measuring the results, not the practices, of those “best in class” performers? If so, how are those results measured.


How many “best in class” companies have hired “best in class” talent, and implemented “best in class” tools and processes only to see those “best in class” steps produce little, if any, actual hard dollar benefits? I know some of those companies, I’ve come in to clean up the messes and to produce the results those “best in class” tools and performers never produced.


So if “best in class” performance doesn’t have black ink attached to it, what’s the use?

No, we’re not talking about projections here. The paper mill consultancies of the 90’s made a fortune in “pay-by-the-ream” reports and projected cost savings that vanished into the ether before their fees so much as cleared the bank.


Let’s see some actuals. Here’s my vote to tie ““best in class”” to some hard dollars. I’m not saying that “best in class” isn’t about real performance, but since business is done for money. I’d like to know that “best in class” performance has a dollar sign attached to it. There are a legion of businesses swimming in red ink that can trumpet their implementation of best practices and “best in class” methods.


I’d like some numbers. I’m afraid that the absence of post-implementation metrics suggests an absence of benefits. Until I see some data, “best in class” remains “best in show”.

Share/Bookmark

Gaps and Attitudes

on

The Sage Group ran a web-based research study called, “My Views on Environmentally Friendly Packaging,” and president Elin Raymond of The Sage Group branding/marketing firm wrote an April article on it in Packaging Digest. The study was sent to approximately 800 multiple-generation “friends” through an email or a Facebook link. Groups were asked to check all that apply on a list of environmental practices that included, for example, assessing packages for the 3Rs (reduce, recycle, reuse). The age ranges were broken down into the following categories:

Millennials 17-25 years
GenXers 26-40 years
Boomers 41-55 years
Matures 56+ years

All ages held recycling as the main ingredient of good environmental practices. The next step is to have as many companies stand behind these practices and produce recyclable yet functional packaging. Although, the study results deduced that consumers need more education regarding the subtleties of sustainability and the 3Rs. The article mentions one example that when asked what kinds of packaging consumers view as eco-friendly and what they don’t, most don’t know if a bottle or container is made of PET or HDPE. To the consumers defense they can tell if a plastic bottle is lighter weight and which products seem over-packaged.

Each generation have different views and varying degrees of participation with purchasing and sustainability in the environment. The article gives more details and is worth a read-through in my opinion, but I’ll make it easier for you the reader by presenting the “key takeaways” as quoted from the end of the article:

“These findings cover all four generations:

~They believe they can have a significant impact on the environment.

~ They seek data on the environmental impact of a product and its packaging on which to base purchasing decisions.
~ They view “hard-packaging” and over-packaging as environmentally destructive.
~ They're unaware of the sustainability nuances of the various types of packaging materials (plastic is bad, glass is good, reused materials are good, etc.).
~ To them, sustainable packaging is recyclable packaging. Period.
~ They avoid buying from companies they perceive as having a bad reputation—ethically or environmentally.
~ They recognize greenwashing when they see it. Authenticity and transparency are essential to them."

"Most importantly, the entire group sees a company, its brands, products and packaging as one and the same. This validates the sustainability approach adopted by the green front-runners: Sustainability is not a trend. It's a cultural keystone and a key attribute that must permeate the organization.”

Elin Raymond goes on to write a second article in the May issue of Packaging Digest so stayed tuned for another one of my blogs. In the meantime start educating yourself and look up what PET and HDPE stand for and see where else it takes you!
Share/Bookmark

Indecision: Not an Acceptable Decision

on Thursday, May 14, 2009

In every business decision situation, whether organizational, tactical, or strategic, there are two acceptable answers; Yes and No. Indecision is the cornerstone of faulty, short-sighted, C.Y.A. management philosophy. It’s the prized virtue of the mediocre and a tattered safety blanket for the incompetent. While I call the following two examples “reasons” for indecision, they are actually the two most common fallacies that cause leaders to accept indecision as a satisfactory solution.

There’s Not Enough Information
Of all the lines of reasoning that lead managers to indecision, I loathe this one the least. I can at least understand the root of this “logic”. The manager may feel that he isn’t properly informed or that he doesn’t fully understand the implications of the decision at hand. When I’m pitching my company’s services, or dealing with potential partners, I’ll gladly accept the “I don’t have enough information to decide” as a preliminary response. That is, of course, as long as it’s followed by “I will get it and have a decision” or “I will get in touch with the person who does have that information”. If you are the person who is authorized to make a decision, it is your duty (Yes, Joe, I said duty) to know enough to make that decision in an educated fashion. If you don’t know, find out. If you don’t understand, find someone in your organization who does. If you need feedback or data, go out and get it. If a manager comes to a “no-decision” on the basis of a lack of information, it could mean one of two things. The first, and most likely, would be that they are lazy. They just aren’t motivated to put in the extra time to educate themselves for the purpose of the particular decision at hand. The second possibility is that they lack the competence necessary to gain a level of understanding of the situation that would allow them to justify a simple “yes” or “no”. In this case, the individual most likely isn’t the right person to have managing the function in the first place.

Happy Enough with the Status Quo
“Let’s wait and see.” “I don’t want to rock the boat.” “If it ain’t broke don’t fix it.” “It is what it is.” When it comes to maintaining the (all-too-often dysfunctional) status quo, clich├ęs abound. When many managers are faced with a truly difficult decision, they freeze. Whether it’s a potential acquisition, a change in supplier, a layoff, or some other major decision, it’s understandable for the decision maker to feel a considerable amount of angst. After all, the decision they make will significantly impact the health of the organization, the lives of its stakeholders, and the security of the manager’s own job. But isn’t this the reason they’re in a leadership role to begin with? Like Uncle Ben (Parker not the rice guy) says, “With great power comes great responsibility.” Along with the prestige, respect, and pay grade that come with an executive position, also comes the obligation to make difficult decisions. In order to circumvent this obligation, some decision makers will “wait and see” until the opportunity disappears. This is the worst possible approach! It’s like going to the plate every at-bat and blindly hoping for a walk. Any baseball fan will tell you that there’s nothing more frustrating than watching your team go down on strikes looking. That’s exactly what indecisive leaders are doing. If a leader puts the time in, does his homework, and makes the most competent decision he can, then he has done his job. If someone disagrees, he can argue logically to support his point. If it turns out he was wrong, he can back his decision’s original validity with research and reasoning.

The current business climate is not hospitable to the lazy, incompetent, or the faint of heart. When the recessional dust settles, and the air clears, it will become apparent that decisiveness in the face of crisis will have been the factor that divided the companies that crumbled from those that capitalized. If you are the decision maker, the coach is giving you the green light. Use discretion, but, when a hanging slider floats right into your wheel-house, please-SWING AWAY!
Share/Bookmark

Louis Vuitton STRATEGIC Sale!!

on

I’m sure that everyone knows that you can buy items overseas for less. But after shipping and time are you really saving money?

I decided to do a brief shopping experiment. I went to louisvuitton.com and selected USA as my country. I opened another browser window and selected the UK as my country. I searched on both sites for the ‘Epi Leather Speedy 30’ in black, and here’s what I found:

UK PRICE ₤620 + ₤15 (shipping) = ₤635 ≈ $959.26
USA PRICE $1050 + $63 (tax) = $1113
[The current exchange rates (as of 5/14/09 8:55am ET): ₤1 = $1.51054. www.xe.com/ucc/]

Now we need to figure out how much shipping will cost from the UK to Pennsylvania.

₤29.19 (28 days economy shipping) ≈ $44.09 ( http://www.parcelforce.com/)

Since the item is less than $2,000 and is a gift, there will be no import duty.

So how much did we save?

USA net price = $1113
UK net price converted = $1003.35
Net savings = $109.65
Net savings percent = 9.85%

That’s pretty impressive considering that Louis Vuitton almost NEVER puts their classic handbags on sale. It will take some patience and a nice friend in the UK to ship it to you but worth it if you like to save every penny like me!!! I don’t think I’ve ever paid full retail USA-price for anything except for my Louis Vuitton monogram canvas Speedy 30. But that was 4 years ago when I didn’t know the tricks of retail.
Share/Bookmark

US Government Cracks Down On Weapons Procurement

on

Taking a step in the right direction, news was just released recently that the U.S. Government is passing legislation to crack down on weapon spending, overruns and delays. The report that prompted this legislation found that the Pentagon's 96 largest acquisition projects had overrun costs approaching $300 billion and were on average 22 months behind schedule.

President Obama is expected to pass the legislation by Memorial Day (which Senate and the House have already put through). Nancy Pelosi released this statement after the House unanimously passed the proposed legislation: "By substantially beefing up oversight of the Pentagon's system of acquiring weapons, promoting greater use of competition in weapons acquisition and requiring the Defense Department to take steps to prevent conflicts of interests in the acquisition process, we can save taxpayers tens of billions of dollars and ensure that our tax dollars are focused on ensuring that our troops in the field are the best equipped fighting force in the world, rather than wasted on cost overruns."

The main focus of the bill requires major defense acquisition programs that experience critical cost growth beyond original estimates, 25% from the current baseline or 50% from the original baseline, be terminated unless the Secretary certifies that the program is essential to national security and can the program can be modified to become more cost effective.

While I applaud the Government for finally taking some more small steps to crack down on spending, the heart of this legislation does more to make taxpayers feel good than it does to actually curb the spending.

To put this legislation in perspective, assume you were asked to head the implementation of SAP for your organization. Your budget is $6 million. If your business played by these rules, you would not even have to answer to your CFO until you spent $9 million, and then at that point, all you would need is a signature from him/her to continue spending because it is important to your business. Or, possibly worse, your CFO cans the project and you just lost a full $9 million.

To compound the problem, it does not appear that there is anything in the legislation discussing how a project budget is formed to begin with, it only deals with the budget of the project after the project starts. So, suppliers of the government can simply be expected to inflate their bids at the start of the engagement so that they never go over the 50% excess limit.

Again, I am happy to see our government taking any steps in the right direction to curb spending, however this particular legislation, which is being heralded as a huge bipartisan success, is still completely off the mark compared to even the worst "best-practices" in the private sector.
Share/Bookmark

ISM 2009: Purchasers, Pitchers, Partners, and Posers

on Wednesday, May 6, 2009

I recently had the privilege of attending ISM’s 94th annual International Supply Management Conference and Educational Exhibit in Charlotte, NC. Over the course of the early set-up hours of Sunday morning, I was amazed as the baron concrete convention center transformed into a virtual wonderland of signs, booths, promos, and freebies. From posters, banners, and flat-screens to racecars, rubber-band-balls, and fire-sharks (what the heck is a fire-shark?), the conference was a regular cornucopia of direct marketing. As a fist-time attendee, staring down aisle after aisle of promotions, I couldn’t help but wonder what everyone-exhibitors and visitors-were hoping to get from this event. By the end of the final day, I had a pretty good idea.

The Purchasers
I decided to classify the first group of ISM patrons as the “purchasers”. The purchasers came to learn. Whether they were purchasing managers, VP’s, or CEO’s, this group of people were on a serious mission to broaden their understanding of the latest developments in the sourcing industry. Some took advantage of the educational sessions ISM offered, others were there to scope out the vast array of industry solutions, and many came to do both. This group of individuals put their time in on the floor, asked plenty of good questions, and most likely got more than their time and money’s worth from the exhibit. Whether it was knowledge learned in a session or an intro to the perfect solution for their company’s unique supply chain challenges, everyone in this group took something of value away from the conference.

The Pitchers
The pitchers came to town for business. They recognized the conference as a great opportunity to get face-to-face with their target market, and they jumped on it. With dollar and resource investments that ranged from “eh” to over-the-top, each of the pitchers came to play ball. These ISM patrons passed the hours with pitch after pitch to potential clients and customers. Every question asked was an opportunity to differentiate themselves from the competition, and every contact made represented a new lead into potential business. As a member of this particular ISM “group” I can say, especially after the 12 hour Tuesday session, that the conference was quite an undertaking. As a secondary benefit, the pitchers also got a chance to see the ways in which the competitive landscape of their market is shifting and evolving.

The Partners
For every two exhibitors that were competing for the same market, there were most likely two companies that offered complimentary services and/or products. This situation created a fertile environment for partnership development. Over the course of hours of exhibiting, hob-knobbing, dinners, and drinks, many of the pitchers and purchasers discovered opportunities to partner with other pitchers and purchasers (say that five times fast. If you’re actually trying, we’d probably get along). As a result, many companies walked away from the show with the promise of expanding their current business base, breaking into new markets, and improving their overall business models via partnerships.

The Posers
While this group of attendees was the minority, there were enough of them to warrant mention. Some attendees, would-be purchasers and pitchers alike, were not spending their time in Charlotte all that wisely. Included in this group are the executives who made record time through the exhibit Sunday night, the trick-or-treaters just looking for enough chatch-skies to prove to the boss they were there, and the salesmen who thought the convention was a three-day frat party. This group should be particularly ashamed of themselves in the face of the current economic climate. While half of accounts payable is being laid-off, these particular individuals were blowing through company cash under the pretence of industry education. With that being said, there were also some purchasing professionals that were so dedicated to their craft that they picked up the bill to attend the conference on their own time even after their company had to cut the convention from the yearly budget. Kudos to them. For what it’s worth, you’ve certainly earned our respect.

Overall, the conference was a great experience. I, even as an exhibitor, learned more than I could have ever expected, our company was able to develop some solid leads, and quite a few doors were opened for partnering opportunities. If you were able to attend, I hope you took as much away from it as I did, and, if not, I hope you have the opportunity to go next year.
Share/Bookmark

WhyAbe.com launches WhyAbe 2.0, New e-Sourcing features and improved usability.

on

Source One debuted a new version of its free procurement tools suite, WhyAbe.com at the ISM conference this year in Charlotte, NC.

After spending recent months focused on developing customized solutions for private branded customers, Source One has launched a new and improved site, complete with improved navigation, an improved, more modern look and feel, new features, and an easier to use e-sourcing on-demand system.

Along with an entirely new look, WhyAbe has implemented a new left-hand drive navigation system. Users no longer have to click around to multiple pages to see all of their important event information. Both buyers and suppliers can quickly access any of their open, closed or saved events and bid histories without ever leaving the dashboard. Users can now quickly review summary event details, obtain contact information and edit preferences in an easy to use menu system that does not require excessive page loading.

Due to user request, a popular new feature has now been added. Suppliers are now able to access an event before its launch date and can indicate their intent to participate in that event. Buyers will no longer need to wonder whether or not the suppliers will show up for the Reverse Auction or RFx event.

No HTML experience needed. With the new WhyAbe site, buyers no longer need to know simple html commands in order to format their RFx events. Buyers now have an easy to use formatting bar that allows them to add bullets, indents, change font styles, colors and even post inline images without knowing a single HTML command.

Customize WhyAbe for your business. With the new user preferences feature, buyers can now select desired options for when they intend to run future events. Save time and bandwidth by uploading your company logo one time and have it appear as the main image for every event you run in the future. Worried that you might accidentally run a public event? Easy, simply set your preferences so that your default RFx is always a private listing.

Start using WhyAbe.com today for all of your e-sourcing needs. There is no software to install, no fees to pay, and no complex licensing agreements. Buyers have immediate access to time-saving tools and suppliers gain instant access to potential new customers.
Share/Bookmark

ISM Conference 2009 - Reminder

on Friday, May 1, 2009

Just a reminder for anyone attending the ISM conference next week.

Source One will be in booth 200 and can discuss or answer any questions you may have about:


We hope to see you there.

Also, Come See What This is About:
Strategic Sourcing with Firesharks
Share/Bookmark