Sugar … Rubber … Onions? As per this recent piece over on BBC News, food price rises put onions out of reach in India where food inflation has risen for the fifth straight week to 18.32% — the highest in more than a year!
This just goes to show that we are in a time where no price should be considered predictable over the long term.
When the word comes down to “cut costs”, the first thing that an average fire-fighting Procurement department tends to do is focus on the “big spend” categories. These will either be the categories identified by the spend analysis/reporting system (if one is possessed), an external cost reduction consulting firm (who will do a “spend analysis” if retained), or, if neither is available / approved, the high-spend categories identified by Finance or the long-term Procurement professionals that know which events in the past typically came with the biggest price tags.
If the identified categories haven’t been sourced recently, chances are there are some savings to be had. But how much depends on current market pricing, how much inventory and production capability is in the supply base, current transportation costs, and a whole lot of other factors. If the cost has risen 20% since the last contract due to raw material surges, if demand can barely keep up with supply, or if fuel prices are soaring and the products are heavy, there may not be much savings to be had, even on a 100M category.
That’s why the real trick to cost reduction success is to focus not on the highest value categories, but the categories with the most cost reduction potential. In order to identify these categories, an organization will have to do should cost modelling on all of its high-value and mid-value categories, but first, it will need to get as much of its spend under management as possible. Until its Spend Under Management (SUM) is at least in the 80% to 90% range, it will be impossible to identify all of the relevant high-value and mid-value categories that need to be modelled in order to identify the most likely opportunities in the immediate future.
So ask yourself, is your organizational SUM adding up? Because if it’s 50% or less, half of your organization’s greatest cost reduction opportunities are passing you by.
If I understand correctly, the whole point of S. 510, which was way over the top as it was so broad as to be simultaneously unenforceable and the end of the farmers’ market, was to increase food safety. While a bill that will allow for the inspection of any purveyor of food, ranging from a farm corp beast like Perdue to your Aunt Maye who sells blackberry jam at the town fair (“The Most Dangerous Bill in the History of America”) might increase food safety, it’s not the only way.
What if a consumer could tell if food was safe just by looking at the packaging? Far fetched? Not at all. When food spoils (which is often the result of oxygen mixing with bacteria which creates mold), it gives off particular gasses. If these gasses are trapped, they can be tested. And if the test is in the packaging, then, just like a battery energy level indicator, the packaging could be used to determine whether or not the food is still good.
And such technology is currently being developed at Strathclyde University where researchers are working on indicators made from intelligent plastics that change colour when food starts to spoil. As per this recent article on Smart Wrapping over on BBC News, the researchers expect that their intelligent plastics, that can be used in modified atmospheric packaging, will be commercially viable in the near future. Wouldn’t this be a better option?
I usually don’t make a point of promoting vendor blogs, or posts therefrom, as those posts are usually designed to promote the vendor that owns the blog (and, to be honest, the post I’m about to reference does promote the vendor’s solution to a limited extent), but this post over on Coupa Cabana (the Coupa blog) on how “Ariba Redefines What?” is totally awesome.
If you follow the press-releases (which, I must admit, I try not to as most of them are just steaming piles of marketing and PR BS, regardless of which vendor they come from), you’ll see that Ariba has recently announced that it has redefined enterprise software. (And if your first thought upon reading that isn’t Get Real! How stupid do you think I am?, then you need to read more of Sourcing Innovation’s rants, particularly my recent rant on the cloud. Or, if you don’t have time, just listen to Larry .) Puh-leaze!
If I knew where the Sourcing Maniacs were right now (as they have been missing in action for a year … they said they were going to visit their European Neighbors, and I haven’t heard from them since), I would have asked them to have their way with this announcement as Ariba is just asking for it with this one.
But, fortunately, Noah found it and he did a dissection that would make even Wacko proud. Ariba Redfines What? is a piece that truly put[s] it up to eleven.
we may not be able to afford it!
Last year, when we asked if we [can] sustain the global food supply chain, we noted that global food reserves reached fifty, if not one hundred, year lows and that global shipping is currently responsible for 4.0% of all global climate change emissions due to an utter lack of regulatory requirements compared to the automative and trucking industries. This was pretty scary since it doesn’t take many natural disasters to wipe out a state’s (or country’s) crops.
According to this recent article in The Telegraph, global food prices have surpassed 2008 highs when shortages led to riots in a number of countries. Up for the sixth month in a row, primarily due to soaring sugar prices (which reached 398.4 points in December) and rises in cereals (which reached 237.6 points) and oil (which reached 263.0 points), the FAO Food Price Index was the highest since records began in 1990, reaching 214.7 points, topping the previous high of 213.5 in June 2008.
This does not bode well for the burgeoning poor, who have been out of work since the recession began in 2008.