Regulatory Sustentation 36: Labelling

As per our damnation post, while the the subject of labelling sounds harmless enough, it can still pose a nightmare for your supply chain. Products that are not properly labelled can be held up or seized at the border, seized for violation of state or federal labelling regulations from your warehouses or shelves, or result in massive fines and trade embargoes until the problem is corrected.

And it’s not as easy to adhere to labelling requirements as one might think. For example, in food and beverage, many jurisdictions require not only that all products contain nutritional information but also indicate whether or not the products are derived from GMO (Genetically Modified Organisms). In the tobacco industry, despite continuous threats of lawsuits from the tobacco companies, countries are starting to impose plain packaging laws and third parties dictate what packaging can and can not contain. In electronics, some countries are considering imposing laws that force a company to indicate the expected lifespan of the product being produced and how long it will be supported (as this is very important to a consumer spending hundreds, or thousands, on a new electronic device with the belief that the manufacturer is going to support the hardware and software for at least a few years). And different countries require different units, warnings, languages, etc.

This is not necessarily a bad thing, because consumers deserve to know what they are buying, but if multiple jurisdictions require different labelling requirements, it can be difficult to produce a label that satisfies all of the jurisdictions that operate under the same language. And if the company needs to produce a multi-lingual label that satisfies multiple jurisdictions in multiple countries, it can be a nightmare.

As per our damnation post, there are steps a company can take, namely:

  • the implementation of a Global Trade Management (GTM) solution,
  • careful review of each proposed label for full compliance before it is seen to the packaging supplier, and
  • monitoring for changes in labelling requirements so that the company does not get caught off-guard

but if a company is really ahead of the game, it will also:

    • monitor for proposed changes in labelling requirements and make sure it is in compliance before they happen if approval is likely and
    • monitor for key issues and complaints by buyers and find ways to proactively address issues before lawmakers tackle them and take a leadership position, which will improve the brand.

And, of course, make your labels as easy to understand as possible. If the product is packaged in 1L, don’t put nutrition counts for 278 ml against suggested daily values that aren’t even indicated on the package. NO one can quickly do that math in their head!

Organizational Sustentation 53: Engineering

Engineering designs the products that represent a product-based company’s life-blood, as they generate the cash necessary for operations. No company exists without revenue (NO Sale, NO Store), and revenue only comes from the sale of products or services. And those have to be designed by someone, and that someone is typically an engineer. And while Engineers are the top talent in the company, as well as the best educated talent, they can also be stubborn rigid perfectionists.

As per our damnation post, each engineer has a process, a design, a set of approved raw materials, and that is the process, the design, and the set of approved raw materials. Trying to convince them that there is another process, alternate design, or other raw material that could be useable is like trying to force molasses to flow up a glacier, as this would mean that they would have to accept that there are better processes, designs, and raw materials, and that they exist today (despite the engineer’s expensive research and experience).

And even if they are willing to accept there are better processes, design, and approved raw materials — they are perfectionists. The cost model might say that 98% reliability is good enough because, in practice, only 1% of units will break down before the warranty period expires and the cost of flat out replacement will have little impact on profit margin, but Engineering will say otherwise. They will insist on the supplier with 99% reliability even with a 30% cost increase because a good engineer makes the best product they can make, cost be damned.

So how do you deal with this damnation so Procurement can achieve some sustentation? Education.

The first thing you need to educate is that reliability is not the number one concern, safety is. If a laptop, music player, TV, etc. stops working, it doesn’t harm anyone. The buyer might be annoyed, but if you immediately rush out a brand new replacement, the buyer won’t be annoyed for long. As long as the product doesn’t short out and electrocute the user, there’s no issue with a little less reliability.

The second thing you need to educate them is that sustainability trumps supplier longevity. A company has to plan for the future, not rest on past laurels, especially if those past laurels are suppliers that have never been questioned. While every supplier was likely a great choice for one reason or another at the time the supplier was selected, the supplier might not be such a great choice today. All suppliers have to be reviewed at one point in time, and if there are more sustainable suppliers, they have to be investigated.

The third thing you need to do is educate them that you can help them identify suppliers that could have better processes, designs, or raw material formulations and save them a lot of time searching for new alternatives, as you will be scouring the market on their behalf and only bringing them suppliers that might truly have a better, or different, option. As the gate-keeper, you will save them a lot of time.

Engineers are your best allies – they are educated, rational, and want to do the right thing for the organization, like you. So show them how you can help, and be willing to listen (and learn) from them, and you will be able to overcome this organizational damnation.

Failure to Monitor a Supply Chain for Risk Can Tarnish Your Brand

In our last post on Playing With Fire: Hidden Risks in Your Supply Chain, we discussed how your supply chain is filled with hidden risks which can bleed your bank account dry and bring your supply chain to a screeching halt if they rise up and rear their ugly head.

But they can do more than bleed the bank account and stop your supply chain in its tracks, they can tarnish your brand and cause permanent damage to your company. A recent study by CIRANO found that while there is an 80% chance of a company losing at least 20% of its value at least once during a five year period as a result of a negative, but well publicized, incident, a major incident that negatively impacts the brand in a significant way can be much worse. Just ask Airbus that had its stock plummet by over 26% in a single day, equivalent to a market capitalization loss of approximately €5.4 Billion, after it announced on the close of trading on June 13, 2006 that issues with the supply and installation of electrical harnesses would lead to a further six-month delay in the delivery of the A380 (and that the impact of the disruption on earnings before interest and tax would be €500M per year for four years).

Or ask BP, which, as a result of the Gulf of Mexico oil spill when the Deepwater Horizon drilling rig exploded on April 20, 2010, saw its stock price fall by 52% in 50 days. Ouch!

But it’s not just supply delays or disasters that cause loss of brand value. It’s reported violations of clean air, water, energy and other environmental acts that get environmentally conscious consumers to boycott your products after environmental activists get up in arms. It’s poor treatment, or even discrimination of, a class of people that can also get a company in trouble. If your supplier is known to regularly subject its employees to unfit working conditions and violate wage acts, that’s a problem. If a CXO regularly goes on record speaking out against minority groups’s rights (include the LGBTQ community or immigrants), that’s a problem. And if there are investigations of corruption, that’s a big problem.

It’s more than just environmental non-compliance risks that you have to watch out for. To find out more, check out Sourcing Innovation’s latest paper on Playing With Fire – 4 Hidden Risks Lurking in Your Supply Chain, sponsored by Ecovadis to find out the major categories of risk you need to watch out for, some major impacts of each type of risk, and just how many zeros they could take off the end of your bank account.

If You Are Going to Create RFPs – Avoid RFP Hell

And Write Better RFPs!

On Sunday, in Why Create RFP Hell? we referenced a post by Larry Bodine that he posted over ten (10) years ago over on the Law Marketing Blog on Why Go to RFP Hell where we noted that, as a vendor, the last thing you want to do is answer an RFP. Especially a poorly designed RFP, because it is the only thing worse than the Spreadsheet Hell you have to endure to manage your Sourcing Project Pipeline (unless, of course, you have a Sourcing CRM solution, like Per Angusta described in yesterday’s post).

Since the last thing you want to do is be on the receiving end of a bad RFP, the very last thing you want to do is issue a bad one. If you don’t drive away the best suppliers, you will at least put them off and they will not be all that excited about giving you a great solution or putting their best effort into the project. So, as we indicated in Sunday’s post, you really need to Write Better RFPs (membership required). And the new Plus series co-authored by the doctor and the maverick is designed to help you do all that. All five (5) parts of the series are now up, and can be found here:

  1. Intro & Issues
  2. Requirements
  3. Provider Secrets
  4. Buyer Best Practices
  5. Tech Benefits

So how will this series help you write better RFPs? Instead of telling you what an RFP is, specifying the section, and giving you a template with hundreds of useless questions that will have respondents pulling out their hair (and searching for the closest voodoo shop with your linked in profile picture in hand), it addresses a number of key requirements of RFPs that most guides will fail to tell you.

For example, what is more important to keep in mind when writing an RFP — the supplier limits, or your limits? Most people would say “supplier limits” because the supplier will be providing a product or service and you need to know the extent of their capability. And while this is true, it’s more important to know your limits. If you don’t know your limits, you end up asking questions that are too detailed and that effectively only allow suppliers that fit in a neat little box to respond — a neat little box that might represent last year, or last decade’s solution. An initial RFP needs very open, broad, questions that allow a top-notch, engaged, interested supplier to show their capabilities, not just the subset you think you are interested in. Success is describing the desired end, not the acceptable means. If the supplier can host their software on a quantum computer, all the better for you.

And while you might need to Cover Your @ss, Asking CYA questions is pointless. No supplier who takes the time to fill out a 20 page RFP is going to say “NO” knowing that it could be an immediate disqualification. And while you will want to disqualify any supplier unable or unwilling to meet necessary conditions by the first delivery date, you do not want to disqualify a supplier who does not have sufficient insurance now, because, for the right contract, many suppliers will increase their insurance, change their operational practices, and participate in optional sustainability improvement programs. Simply create an attachment that lists, in detail, necessary insurance requirements, and mandatory certifications and audits, minimally acceptable codes of conduct, and any other inflexible requirements and explicitly state that any supplier unable to meet these requirements by a certain date will be disqualified in the next round and that any suppliers selected for the next round (which could be in-person negotiations) will have to verify the ability to meet all of the attached terms and conditions before they will be allowed to continue in the sourcing process. If you take the time to specify all this in detail, the supplier will know your organization is serious, but that it is willing to give a good supplier until the product or services delivery date to meet the requirements. The better suppliers will self-select.

The reality is, as per our in-depth Provider Secrets article, suppliers, and the best suppliers in particular, have a lot of reasons to ignore your RFP. If you want the best suppliers to respond, it has to be a good RFP (for a decent size project which clearly conveys that the best supplier, whether or not it already does business with the organization, has a solid chance of winning some business).

If you follow the tips and tricks in Buyer Best Practices, your chances will improve considerably, especially if you use a good RFP creation tool that makes it easy to engage organizational stakeholders, gather supplier responses, and compare them side-by-side in a meaningful manner (that goes beyond just a weighted scorecard). So check out the series (membership required) and learn to Write Better RFPs today.

Per Angusta: Purchasing CRM

Per Angusta is an interesting SaaS company in the Procurement space. While most Procurement companies focus on the Sourcing or Procurement process, or supplier management, Per Angusta focuses on the workflow that ties it all together — a workflow that is typically managed in Microsoft Excel Spreadsheet Hell.

In particular, Per Angusta is a SaaS platform built to manage sourcing pipelines, track savings for organizational validation, and make Procurement’s impact visible to the organization — which, as per Sigi Osagie (the master of Procurement Mojo), is the key to building your Procurement Brand.

One of the unique things about the Solution is that the Sourcing Project Management Tool is not only designed to manage the sourcing workflow, but to integrate with your best-of-breed sourcing and procurement tool either out of the box (and, out of the box, integrates with Rosslyn Analytics, HICX, Market Dojo, and other Per Angusta partners) or through the API that is being released shortly.

The solution contains all of the basic project management capabilities you would expect, as well as a few unexpected ones including, but not limited to, deep configuration capability, a supplier data repository, and even Slack integration. Moreover, the strengths of the solution are exactly what you need — flexible project definition and the ability to track deep negotiation details. The platform can track projects of different expense types, document proposed negotiation strategies, and document the requirements of each stage: need definition, sourcing, negotiation, and signature. This is a very powerful capability as it allows the Procurement team to demonstrate that over 80% of the costs are locked in during the design and sourcing phases, and that very little savings can be obtained if the stakeholder waits until the (end) of negotiations and the contract phase to engage Procurement.

The Per Angusta platform is one that is worth exploring in detail, and for a very in-depth review, you can check out the recent piece over on Spend Matters Pro co-authored by the doctor and the prophet.