Category Archives: Event

Green Purchasing Reports

In advance of the upcoming Green Purchasing Summit in November in Miami, Florida, EyeForProcurement has released their Green Purchasing Report that summarizes the results of the Green Purchasing Survey they conducted in June – July 2007.

The survey, which polled 188 procurement professionals primarily across North America, Europe, and Asia across the automative, electronics, chemicals, apparel, and transportation sectors among others, found that while eco-friendly purchasing is a growing trend, few companies are realizing any spin-off benefits in terms of reduced costs. Furthermore, the cost of implementing environmentally friendly purchasing is seen as one of the primary barriers to adoption.

The report found that only 31% of respondents have policies and are actively practicing. An additional 21% have written policies on green purchasing but are not actively practicing green purchasing but an astounding 48% still do not even have green purchasing policies in place. For those that are actively practicing, or at least have established policies, 46% noted that the key driver was a larger corporate responsibility program. Other drivers were customer satisfaction and following the industry trend, at 13% each.

The key benefits that were cited were support of corporate environmental sustainability, strategy, and vision at 67%, responding to customer interest in eco-friendly products and practices at 49%, and reduced accident risk, liability, and health and safety costs at 19%. In contrast the major obstacles to implementation are costs for 43% of respondents, suppliers’ lack of environmental awareness for 42% of respondents, and insufficient green purchasing knowledge for 37% of respondents. The good news is that 98% of respondents believe that the practice of green purchasing will continue to expand. This indicates that the obstacles will eventually be overcome.

For those of you thinking of attending the EyeForProcurement Green Purchasing Summit in November in Miami, Florida, please note that EyeForProcurement is offering a 20% discount for all delegates who register and quote “Sourcing Innovation“.

In addition, in advance of the upcoming Green Transportation and Logistics Summit in San Francisco, California, EyeForTransport has released their Green Transportation and Logistics Report that summarizes the results of the Green Transportation and Logistics Survey they conducted in June-July 2007.

The survey, which polled 271 transportation and logistics professionals found that while some still view supply chain greening as a necessary evil, the most innovative and successful companies have discovered the business case for going green. It also found that 79% of companies believe supply chain greening is at least fairly important and that 69% believe that green issues will become more important over the next three years. Unfortunately, for the majority of respondents (66%), green initiatives are not yet seeing improved supply chain efficiency, but since a reasonable minority (27%) are experiencing more efficiency, this should improve as time goes on. Furthermore, 36% of respondents expect to see a financial ROI within the next three years while 74% expect to see a public relations payback.

The survey also reviewed some of the general transport and logistics initiatives being undertaken by respondents to green their supply chain. These initiatives include emissions measuring and/or reductions, energy efficiency improvements, switching to alternative fuels, reducing air transport, strategic warehouse and DC placement, vendor re-routing to reduce miles travelled, and the use of more environmentally friendly logistics provider. Some of the more specific initiatives being reported by respondents include product design and packing improvements, recycling programs, sustainable buildings, waste reduction & asset recovery, and reductions in toxins and hazardous chemicals.

The Green Purchasing Summit

Green Purchasing or Environmentally Preferable Purchasing (EPP) refers to the procurement of products and services that have a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose.

Global warming is an (essentially) indisputable fact*. Although one can dispute how bad it really is, how fast it really is occurring, and how much of it is our fault (since science has demonstrated that carbon content in the atmosphere has risen and fallen over the earth’s history and that solar cycles do contribute to the earth’s temperature), it cannot be disputed that we pump carbon into the atmosphere (which serves to raise the global temperature) and, especially in countries where strict pollution control is not (yet) the norm, we still pump other dangerous compounds into the atmosphere that lead to (further) ozone depletion and acid rain. Furthermore, with the recent Live Earth campaign, it, along with corporate social responsibility, is on the tongue of just about every consumer these days. Thus, it’s important to consider the impact of your purchases on the environment when sourcing, or it might come back to haunt you when you become the subject of the next media circus, which could quickly be followed by the next boycott of your goods and / or services.

So how do you learn more about Green Purchasing? The way I see it, you have two options. Hire an expensive consultant or go to a conference since there are not a lot of options from an educational perspective (yet). Although you probably should pursue the first option and bring in an expert in your sourcing project the first time you tackle a green initiative, you probably don’t want to pay one to educate you on the basics since this will put your consulting budget through the roof. To this end, I recommend going to conferences and learning the basics from your peers. Then you will be able to identify what projects can benefit the most from green purchasing initiatives.

Unfortunately, these conferences are still few and far between. Over the next six months, I’m only aware of two “green” conferences targeted at Procurement EyeForTransport’s “Supply Chain Directions: Green Transportation & Logistics Summit” in San Francisco (California) on the 25th and 26th of September and EyeForProcurement’s “Green Purchasing Summit” in Miami (Florida) on the 29th and 30th of November.

Even though it’s the first time EyeForProcurement is putting the event on, I believe the “Green Purchasing Summit” should be one event that you should consider. Since EyeForProcurement’s events focus on industry speakers, you’ll have the chance to learn from your peers. Furthermore, the round-tables represent a great chance to talk with your peers on issues relevant to you. So what will you learn?

According to the site, they are focussed on bringing in speakers with the knowledge and experience to help you:

  • find out what benefits Green Purchasing has to offer
  • learn how to apply environmentally preferable criteria early in your procurement process
  • identify which ‘green’ products work well, or better, than traditional products

Unfortunately the agenda has not been finalized yet, but considering how overwhelming the conference season can get these days, I thought it was important to point out this event before it gets lost in the shuffle.

For those of you thinking of attending the EyeForProcurement Green Purchasing Summit in November in Miami, Florida, please note that EyeForProcurement is offering a 20% discount for all delegates who register and quote “Sourcing Innovation“.

 

* There are those that will dispute it, and those that will aggressively point out the flaws in those arguments, and those that will aggressively point out the flaws in the counter arguments, and so on, but since this is a blog about Sourcing Innovation and not about Global Warming, I have disabled comments for this post since I do not want a global warming debate. If you disagree with me, that’s fine. Everyone is entitled to their opinions. If you do disagree, I hope you can at least respect the fact that I pointed out there are two sides to the argument, and that if you delve into the scientific facts, because of the complex interrelationships between all of the factors that influence climate, it is hard to precisely quantify.

Global Trade Metrics Benchmarking

Have you ever wondered …?

  • How effective are your global trade operations?
  • Is there a way to effectively measure its performance?
  • How much does it contribute to the company’s bottom line?
  • What are your competitors doing?
  • Are others using global trade to a competitive advantage?

If so, then Global Data Mining (acquired by CUSTOMS Info which was acquired by Descartes) would like you to join them for a webinar on Thursday, July 26, 2007 11:00 AM – 12:00 PM EDT to discuss one of the last frontiers where upgrading and optimizing business systems can create very significant financial and operational gains, giving corporations an additional strategy to create competitive advantage.

Surviving China’s Rapidly Changing Sourcing Tides: Part I

About an hour ago, the webinar by the same name, hosted by MFG.com and Aptium Global, and moderated by none other than Spend Matters own Jason Busch, wrapped up. This webinar had some fascinating insights into the current state of China sourcing, which has many people in a frenzy due to the massive VAT rebate changes that went into affect on July 1.

The current hullabaloo is due to the fact that on July 1, China cancelled VAT rebates on approximately 553 products, reduce the VAT rebates on approximately 2,268 products, and only exempted VAT charges on about 10 products. In other words, about 37% of the total classifications have had the VAT rebates slashed or eliminated. The VAT rebates were created in the 90’s at a time when exports were low to support growth in the export economy. However, now that there is a huge trade surplus with many trading nations, especially with the US ( to the order of 14 B ) China apparently wants to rectify the situation. Typically, Chinese companies are supposed to pay 17% VAT when they sell a product. Until recently, the VAT rebates drastically reduced (or eliminated) this tax on exports – but now that they are being eliminated, some products could end up costing you 17% more.

According to James Jin, the head of the MFG.com Shanghai office, the purpose of the VAT Refund Change is to reduce the trade surplus, eliminate high energy consuming & resource intensive exports, avoid products triggering trade functions, and give China more spending power. As a result, there are will be increased export prices on lower value add products such as fasteners, extrusions, etc; serious financial pressures on Small and Medium enterprises in China with low margins, especially going through trading agents, and some of them will likely go out of business; and increased opportunities for imports into a growing, and opening, Chinese markets. In the short term, the rebates cause quite a panic among those suppliers being negatively impacted who caused major traffic jams during the last through days of June trying to get their products out of the country before the VAT changes came into affect.

However, according to a recent survey conducted by the MFG.com China team, it looks like things aren’t all that bad. The Shanghai office conducted a poll of IPO (International Purchasing Organization) buyers on July 6 and received the following answers to the six questions presented:

  • What is the impact of the VAT reduction on your purchasing?
    Significant: 16%; Some 37%; Insignificant: 21%;
  • How much is the overall estimated purchase price increase?
    >5%: 26%; 3-5%: 11%; 0-3%: 21%;
  • How does material cost increase impact your China sourcing?
    Significant: 26%; Some: 26%; Insignificant: 32%;
  • What is the estimated price increase due to China material cost increases?
    > 5%: 22%; 2-5%: 33%; 0-2%: 17%;
  • What is your solution to the risk of increasing cost?
    Share Risks with Suppliers: 33%; Re-source in China: 22%;
    Switch to other Low Cost Countries: 19%; Maintain Pricing: 15%;
    Other: 11%;
  • What is your predicted sourcing trend for China in the long run?
    Increase: 79%; Decrease 11%; Unchanged: 5%;

In other-words, despite the fact that 53% of IPO respondents expect the VAT reductions to have some (negative) pricing impacts, with 37% expecting those price increases to be at least 3%, and despite the fact that 52% of IPO respondents expect material cost increases to also have (negative) pricing impacts, with 55% expecting those pricing increases to be at least 3%, 79% of respondents still expect to increase their China sourcing, with 55% planning to do so either by sharing risks with suppliers or re-sourcing to other in-country supply sources.

The MFG.com Shanghai office also polled the Chinese suppliers and found the following:

  • How does the VAT refund reduction impact your exports?
    Significant: 6%; Some: 29%; Insignificant: 29%; Not at all: 36%
  • How much of a price increase is likely to result from the VAT refund reductions?
    >5%: 18%; 2-5%: 12%; 0-2%: 0%; Not Sure: 18%; 0% – 52%
  • How are China material costs impacting exports?
    Significant: 32%; Some: 18%; Insignificant: 28%; Not at all: 18%; Unsure: 4%
  • What price increases could result from material costs??
    >5%: 14%; 2-5%: 30%; 0-2%: 5% 0%: 41%; Not Sure: 10%
  • How do the export cost increases impact competitiveness for the North American / European markets?
    Significant: 26%; Some: 11%; Insignificant: 32%; Not at all: 26%; Unsure: 5%;
  • If impacted, what is the solution? ?
    Increase Price: 43%; New Customers: 19%; Reduce Costs: 15%;
    Change Products: 4%; Other: 19%

In summary, 35% of responding suppliers believe that the VAT will impact their exports, with 30% expecting at least a 2% increase, but I’d suspect they are still more worried about material costs with 50% expecting material costs to have a (negative) impact on exports and 44% expecting the associated price increase to be at least 2%. Fortunately, only 37% believe their competitiveness will be affected and 57% are going to look for solutions that do not involve increasing price.

But, as pointed out by James, what is really important to note is that, despite the recent smear campaign (and despite the fact that since 2005, 431 Chinese-made goods have been recalled in Canada alone), many China suppliers consistently perform well and to high quality standards. For instance, MFG.com tracks ratings of all its suppliers, and 92% of China suppliers receive high or perfect ratings on quality, 96% of China suppliers receive good or excellent ratings on responsiveness, and 90% consistently deliver early or on time, giving them a rating of very good or excellent 72% of the time, and good or better 92% of the time. In other words, the vast majority care about the products they make and will work with you to correct any issues – but you have to manage them as you would your own plant and make sure quality materials, processes, and systems are being used.

Furthermore, as Mitch Free, founder of MFG.com, pointed out, the recent changes, despite the fact that they are a big deal and will continue to be a big deal, are not all bad news. First of all, they present an interesting opportunity for American Suppliers to bet aggressive and start to bring business back home. They will need to employ advanced technologies and a great strategy to do this, but that’s not a bad thing. Furthermore, he also points out that this will force Chinese suppliers to elevate to a higher level of technology to compete, especially on lower value-add products, and this is good for everyone! Mitch, in responding to a listener question, also pointed out that a higher-value finished goods economy, like the one that matured in Japan and Korea is undeniably coming, but that the question is, as always, when. Due to China’s sheer size, it’s likely to take a long time. It’s also up to the government, who appears to be in total control of their market with their power to control exports, give and take VAT rebates, alter the value of their currency, etc.

This was a great webinar, and Lisa Reisman also had some great insights on how to properly assess and manage your China sourcing and low-cost country sourcing in general, but that’s the subject of my next post.

In the mean time, I’d like to point out, as re-iterated many times by moderator Jason Busch, that MFG.com is launching a learning center next week to address all of the issues with China sourcing at http://www.mfg.com/chinasourcing and that this will include an archived version of the webinar, additional information on the recent MFG.com poll, questions and answers to all webinar questions (including the many that they didn’t get to), and a slew of executive briefs on the relative issues with more to come as time goes on.

Until the MFG.com learning center goes on-line, you can read and re-read the Spend Matter’s* series on the subject in these posts:

  • Full Spend Matters Coverage: The China Sourcing Controversy by Jason Busch on July 5
  • Paris Hilton’s Dog Dead Due to Pet Food From China!!!! by Tony Poshek on July 5
  • China Sourcing: The Future Ain’t What it Used to Be (Post 1) by Lisa Reisman on July 6
  • China Sourcing: You Got ‘VAT? by Jason Busch on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 2) by Stuart Burns on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 3) by AJ Sweatt on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 4) by James Jin on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 5) by Jason Busch, Pat Furey, and David Morgenstern on July 9
  • China Sourcing: The Future Ain’t What it Used to Be (Post 6) by Paul Martyn on July 17
  • Anti-China Propaganda Canada Style by Jason Busch on July 10
  • A Last Minute Webinar: What’s Really Going on in China by Jason Busch on July 11
  • MFGx — The China Debate by Jason Busch on July 12

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Eye-For-Procurement Technology For Procurement Highlights II: John LaPorta’s Presentation

John LaPorta’s (Procurement, IBM) presentation on “It’s not just about the technology: How to accelerate procurement skills and gain a real competitive advantage” was one of the best presentations at the Technology for Procurement Forum in San Francisco, put on by EyeForProcurement last month, and my favorite.

In this presentation, John tackled a favorite topic of mine, the talent crunch and how the most severe shortage of skilled labor in history is nearly upon us. ( Now might be a good time to start getting on your leading’s blogger priority customer list, before it’s too late. ) In this presentation, he reminded us of the following frightening statistics:

  • 25% of the world’s population will reach retirement age in the next three (3) years
  • employers estimate that 39% of their current workforce and 26% of new hires will have basic skill deficiencies

In other words, you could lose a quarter of your workforce in the next few years, but with the increasing skill requirements of knowledge requirement jobs, even if you can find a replacement (which is not guaranteed in an economy where the unemployment rate has dropped below the lowest rate during the recent IT bubble), he or she is not likely to have all the skills you need.

To this end, John is recommending that you, like IBM (and you can never go wrong with IBM, right? – well, okay, you can argue that sometimes you can, but they’re right on the money this time), develop or adopt a Procurement Capability Accelerator program to teach new hires the skills they need to have in months, and not years, using tailored development and coaching programs that compress two-to-three years of experiential learning into six months through heavy use of mentoring. I know you might not think you can spare your senior employees for these large buckets of time, but just think about how much worse this problem will be when they retire and take their knowledge with them.

John notes, rightly so, that one of the keys to this approach is finding the right tools and technologies that your employees can learn and adapt to quickly as well as identifying any tools and technologies that you can use to make the learning, and specifically the e-learning, process more efficient. It’s all about the right people, processes, and technology and the key is not to overlook any one of these focal points and attack all three with the appropriate level of attention and rigor.

I know you’d rather be an ostrich and stick your head in the sand then truly contemplate the magnitude of the talent problem sneaking up on you, but the sooner you realize that the only way to tackle the problem is to act now and turn your procurement officers into performance officers, the better off you’ll be in the long run. Moreover, if you’re prepared for the coming workforce turnover, you’ll have a significant competitive advantage. While your competitors are unsuccessfully scrambling to find talent that just isn’t available, you’ll have it in place.

And remember, as Deming said, if there’s a problem on the floor, it’s management, not the people. So act now.