Posts Tagged ‘Purchasing’

The Great Debate: Centralized or Distributed Purchasing

Monday, February 28th, 2011

For as long as I can remember this debate and internal struggle has taken place in companies with multiple production sites, or those with a headquarters operation and remote production.  Who should own the purchasing function?  The pros and cons of both scenarios are substantial.  The following are a few of the most common points of the argument.

Centralized procurement offers the opportunity to maximize buying power and leverage.  Especially with transactional print work where volumes can vary greatly from location to location, centralized management can monitor and match inventory across locations, balancing usage and reducing waste. It assures that a consistently lower price exists across locations.  The biggest negative is that centralized procurement is often not keyed in to the different needs and requirements of production facilities and their processes.  (I have never yet seen two locations that have the same operating process or equipment across the board.)  Centralized efforts are also removed from the dynamics of rapidly changing project schedules and the quantities of the work in each operation (longer support cycles).  Finally there is the risk of getting too much dependent on too few.

Decentralized procurement is close to the action and should be on top of the local production demands and therefore more responsive.  They know what materials and supplies have worked best in their equipment, which should give the best overall cost and quality results.  Information on inventory receipts, usages and quantities should be real time for the site.  Buyers develop real relationships with the suppliers. One of the negatives is that different sites or divisions may be buying the same thing but paying different prices for it.  There are multiple supplier contacts and more orders and payables overall for the organization to handle. There is probably no good information about total spend across the enterprise.

Companies have adopted many different approaches to resolving this debate.  In some cases certain products which are in the highest spend category or capital goods are controlled centrally, while the normal operating supplies are managed locally.  Some organizations have used central staff to qualify suppliers and local organizations are free to buy from approved suppliers.  Others have set up the procurement organization so that there are local buyers but they report to a centralized head of purchasing who establishes the policies and strategy for the purchasing organization in support of the operating company.  These can all be good choices, and each organization needs to develop the compromise that maximizes the benefits of each approach for them.  Some organizations have even chosen to turn over major purchasing efforts to a third party who promises to use their technology and buying power to save the enterprise money.

At the core of the centralized vs. distributed debate is one common element: Communication.

Communication is the key to being able to optimize any companies’ procurement program.  A rigorous approach to documenting and communicating requirements and specifications for each production location’s purchasing spend is the first step.  Where is the spend data coming from, and where is it maintained?  Once this is firmly understood, then developing reports and sharing them in a timely and consistent manner will provide significant opportunities even if the process is not automated.  Automation merely provides the opportunity to handle more data faster.  This is all easier said than done because many times the core of communication issues reside in the culture of the organization.  Divisions or facilities are often competing with each other by design, and therefore not willing to share information they feel gives them an advantage. 

Ending the debate and optimizing the purchasing function in an organization must begin with a strong mandate from the top of the organization, but then be implemented with a cross functional effort from the bottom up to assure the cultural issues do not present an insurmountable barrier.  Focusing on communication and process improvement can yield rapid results without increasing spending or turning over the control to a third party.

Key elements of sustainable paper procurement: Part 2

Friday, February 25th, 2011

Last week’s blog focused on four key elements of sustainable paper procurement.  Below are the remaining tips.  For an excellent resource document see the WBCSD / WRI Guide on Sustainable Procurement of Wood and Paper-based Products.

 

Good pulp and paper mill performance reduces the footprint of paper (clean production)

Paper manufacturing is a key part of the environmental life-cycle of papermaking because it uses raw materials and resources including fiber, energy, and water, and also generates emissions to air, water and landfills.  The operational “eco-efficiency” of pulp and paper mills varies from one site to the next, based on local regulations and how mills have used best-available-techniques.  The age of the mill and the amount of investments made to upgrade technology and equipment will often drive environmental performance.  For example, final mill effluent quality and chemical use can be influenced by bleaching method used (e.g. elemental chlorine free (ECF), enhanced ECF with pre-bleaching steps, total chlorine free or TCF, hydrogen peroxide, etc.).  Greenhouse gas emissions are influenced by switching to renewable energy sources instead of using fossil fuels.  Achievable levels are well defined in the EU BREF Document for companies using best-available-techniques.

Environmental management systems, such as described in the ISO 14001 standard and the EU Eco-Management Scheme (EMAS), allow more efficient management of activities and processes to reduce environmental impacts.  Companies can become certified to ISO 14001 and EMAS to demonstrate continuous improvement in environmental management and performance.

A low carbon footprint is a good sign

Given that climate change is a critical global environmental issue, more and more companies are developing energy and climate strategies, and calculating the carbon inventories of their products and supply chains.  The carbon footprint of paper can be defined as greenhouse gas emissions emitted to the atmosphere during the entire life-cycle of paper production and distribution.   The major contributor to the carbon footprint of paper is carbon dioxide (CO2) generated from combustion of fossil fuels (i.e. coal, oil, gasoline, diesel, natural gas).  However, disposing of paper in landfill sites, and subsequent breakdown and production of methane (a potent greenhouse gas) can also add to the carbon footprint.  This is another reason why paper recycling is beneficial for the environment.  A review of the literature and personal experience shows that pulp and paper mill sites that use a high percentage of renewable energy such as biomass and “green” power from the grid can significantly reduce the carbon footprint of their paper products.  Time Inc. commissioned a carbon study of some of their magazines that can be accessed here.

Other ways to reduce the carbon footprint of paper include:

  • Promoting sustainable forestry as a way of deterring deforestation, and ensuring that forests continue taking up carbon and mitigating climate change.
  • Efficient use of wood raw material.
  • Energy efficiency of operations and logistics.
  • Waste reduction and recycling.

Social responsibility is a key part of sustainability

Voluntary reporting initiatives like the Dow Jones Sustainability Index rank companies based on their social, environmental and financial performance.  A good standing on the DJSI can help companies demonstrate sustainability leadership.  Given that health and safety issues are a top priority in the industry, many companies have certified their occupational health & safety management system under the OHSAS 18001 standard.   More detail on social responsibility indicators can be obtained by consulting the web sites of the ILO, the UN, AA1000, and SA8000.

Look for eco-labels that cover the product life cycle

Eco-labels are a sign of environmental commitment and performance.  The most well know of these labels is the Mobius Loop indicating recycled fiber content or recyclability of products.  However, besides the sustainable forest management labels (FSC, SFI, PEFC) discussed in part 1 of this topic there are labels that cover more elements of the paper life cycle.  These include the EU Eco-label, the Ecologo, and the Green Seal.  Of these three, the EU Eco-label and Ecologo appear to be the most thorough in their coverage of environmental elements.

Environmental claims can also be made as long as they are factual and verifiable.  For example:  “This paper was manufactured at a mill facility that has an ISO 14001 certified environmental management system”.  Claiming that single elements (like recycled fiber use) lower the footprint of the product can be seen as a form of “greenwashing” and can be avoided by following recommendations for environmental marketing such outlined in the Seven Sins of Greenwashing.

Check for open and transparent reporting

Open and transparent environmental reporting is a sign of sustainability leadership.  Annual environmental or sustainability reports should be available on web sites.  A growing number of companies report according to the standard guidelines published by the Global Reporting Initiative and undertake third-party independent verification of reports to ad credibility.  Finally, sustainability information can be reported on a voluntary basis to outside organizations (e.g. DJSI, Carbon Disclosure Project that will rank companies based on their performance and reporting.

The bottom line is that sustainable paper procurement is not as simple as most people would like and it goes much beyond buying recycled paper.  Your choices and your environmental footprint will depend on how engaged and educated you become about the topic.

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Phil Riebel is a senior sustainability advisor to the forest, paper and print sector.  He has 23 years of international experience in the sector including senior management positions in industry and consulting. Phil also owns and manages 200 acres of sustainable forest.  He can be reached at philriebel@bellaliant.net

Do your suppliers make the grade? Do you?

Wednesday, February 2nd, 2011

In this economy and with all the pressures, are your key suppliers delivering the performance you expect?  Have you run into any of these issues:

  • Inconsistent quality throughout a production run or from shipment to shipment?
  • Product not packaged or labeled as specified?
  • Quantities are short or there are excessive overruns?
  • Late deliveries?

 The impacts to your company are bad enough, affecting your costs due to rework, inspection, or slowdown in production, but the real and lasting impact is failure to meet your customer’s delivery or quality expectations. You may also be paying too much for materials, which of course comprise a very large percentage of the total cost of print or mailings. Do you know if your costs are competitive?  If not, it contributes to loss of sales opportunities for you.

These are just a few of the purchasing and supplier challenges facing organizations today.  What can you do about it? Do you change suppliers?  Add extra inspection to your process?  Changing suppliers frequently or taking other actions internally are costly solutions.  A more effective solution is to implement a rigorous supplier scorecard process.  This provides a mechanism for objective two-way communication that can strengthen mutually beneficial relationships, and make both companies better.   

Implementing a Supplier Scorecard

The basics of setting up a scorecard are relatively simple – decide what you want to measure, and the relative importance of each factor.  Review any current issues and performance problems, as well as customer-identified quality expectations, and these become your measurement factors. Take the time to think about what happens to your organization if the standard is not met.  Then establish a simple ranking of 1 to 5 on worst to best. 

Once the scorecard development is complete, communication and training come next.  Communicate the goals for the supplier scorecard both internally and to your suppliers well in advance of the first evaluation.  The communication with suppliers may clarify or establish clearer expectations than existed before.  It should also open the door to regular feedback from the supplier on what you and your company may do differently to enable them to more effectively meet your requirements. Scorecards should be reviewed quarterly or at minimum twice per year or you won’t get a balanced picture or have opportunities to make course corrections.

Top-level reinforcement of the importance of fair, accurate, detailed, and timely input to the scorecard is critical.  It must be clear that the scorecard does not, of course, replace the need for timely resolution of any specific issue with a supplier, but it provides visibility into overall performance and trends that need to be reinforced, or corrective action initiated.

In addition, if you are penalized for failing to meet standards with your clients, any suppliers who contributed to that failure should also be held financially accountable. However, penalties are not the goal, they are just more enforceable with clear communication and measurement. The benefits to this best practice will be trusted suppliers you can count on to make your business run optimally, providing you with pricing and quality that make your end product better which in turn gives you an advantage over the competition.  Just firing poor suppliers who don’t “make the grade” makes it more difficult and costly for you to make the grade with your clients. Knowing who you can count on every day, as well as when you have a critical need can be a major advantage.

How Responsible Sourcing Will Impact Printers in 2011

Friday, January 21st, 2011

If you were in the storefront printing industry in the early-to-mid Eighties, the sign “We Accept Disks” means something to you. It was the beginning of the digital and “desktop” printing revolution. “We Accept Disks”. It meant you had a PC and/or maybe a MAC, and would accept customer floppys in order to print out copies to paste up and shoot to a neg or output an analog poly plate, or maybe run copies (not files) on your copier. But it didn’t mean there was any compatibility with what your clients were bringing in. All you knew was that you had to do it because everybody else was.

Let’s get one thing out of the way right now. This is not going to be a crystal ball article. The rhetoric surrounding “green”, “sustainability” and “corporate social responsibility” has cooled a bit. This means we are now in the normalization phase. Between 2005 and 2008, literally everything gained a greenish tinge. It’s the same with every standard business practice bubble. First there were the early adopters, and then market acceptance comes along. This is typically followed by market saturation, and finally normalization. Many shops claimed to be a “Green Printer”. Maybe you got FSC certified, increased your recycling efforts, switched to low VOC chemistry or replaced or upgraded offset equipment, or implemented higher efficiency digital.

2009 capped the trend by becoming the year of the “green printing trade show”. Again, everything had a greenish tinge to it. It didn’t matter what the product or service was. It was either “green” or “sustainable”. Then the inevitable happened. The Six (or Seven) Sins of Greenwashing hit the print industry airwaves and uncertainty about the message and its credibility crept in. Trade shows in 2010 had a diminished green presence. Not that it completely disappeared; Green now has earned a secured place in Print’s message. Now the FTC is releasing new green claim guidelines.

So here we are in 2011. Responsible sourcing/procurement is fast becoming the driving realization that encompasses everything green and sustainable. Business Green offers 11 (as in 2011) things to look for in the next 12 months. Number 7 is “Ethical consumer spending will keep rising”. To quote a portion of the Business Green statement: “Every indication suggests this market will grow substantially this year even as other areas of the economy falter. It is time to stop treating green industries as a niche and appreciate them for the robust and fast-growing success stories they are”.

Let’s take a closer look at what this means to the printing industry.

Paper is most likely to be thought of first. Chain of Custody certification, whether it’s FSC, SFI or PEFC puts third-part verification of at the very least legal and ethical sourcing. The credibility of the certifying bodies, who themselves are validated by independent accreditation organizations provides transparency as well as credibility. Supplies, whether for offset, digital, or for infrastructure (janitorial, facilities) also have their certification and third-party certifying body counterparts.

Green computing is going to have a large presence this year as the IT industry takes sustainable computing mainstream. The Climate Savers Computing Initiative is a nonprofit group of consumers, businesses and conservation organizations dedicated to promoting smart technologies that can improve the power efficiency and reduce the energy consumption of computers.

Formalized waste-stream reduction strategies have become profit centers for many organizations. Harmon Recycling, a division of Georgia Pacific is one of many organizations offering full-service programs to both manufacturing and office environments. Everything that can be recycled should, including strapping, containers of all types and other shipping material. In short, a zero manufacturing and office waste program is more of a reality now than ever as the reclamation industry matures.

A life cycle assessment (LCA, also known as life cycle analysis, ecobalance, and cradle-to-grave analysis) is a technique used by organizations to assess each and every impact associated with all the stages of a particular process from raw material sourcing through materials processing, manufacture, distribution, use, repair and maintenance, and disposal or recycling). LCA’s can help avoid a narrow outlook on environmental, social and economic concerns which can validate both responsible sourcing and responsible disposal methodology.

Then there are all the other infrastructure improvements that also have their ethical, responsible and or sustainable components. This includes everything from buildings, HVAC, lighting, logistics and production equipment, to transportation and facilities management operations.

The end-game is that professional purchasers are embracing responsible sourcing. Organizations like The National Association of State Procurement Officials, the Responsible Purchasing Network, and The International Society of Sustainability Professionals are serious about responsible sourcing and many options are considered in choosing suppliers, based at least in part on their ethical sourcing policies. Don’t be caught out in the cold because you cannot quantify and provide objective evidence pertaining to where your raw materials, products and services came from, and where your waste and by-products are going.

Responsible sourcing is the new green.

Vic Barkin

Can Social Media Sources replace the RFI?

Monday, January 10th, 2011

Elizabeth Gooding CartoonPreviously I hit a few high points on what issuers and responders face when dealing with Requests for Proposals (RFPs). One factor that can send the whole RFP process downhill is the issuer’s desire to get the best results with the least amount of work.

In theory, if you really want to find the best solution at the best price, you need to talk to a lot of different suppliers and be willing to review a lot of bids. But who wants to source 100 vendors – or even 20 for that matter? In the past, I have always encouraged my clients to issue a short “Request for Information” or RFI in advance of the RFP process. Some possible goals of the RFI may be to:

  • Learn about new services available in the area you are searching for bids on – for example, the latest trends in direct marketing, fulfillment or variable full-color printing.
  • Vet the requirements for your upcoming RFP. Are you asking for the right services or are you looking for the best price on the leading edge solution from the 1990s? (You’d be surprised how many RFP’s read like the latter!)
  • Cull the list of suppliers who will receive the full RFP by asking just a few key Yes/No questions that are critical capabilities or contracting points that you will require from suppliers.

Now that you’ve read this far, let me confess that I don’t think that social media can actually replace the RFI – but, I do think it can help to make the RFI and the RFP process a lot more effective and efficient. There is a wealth of information out there that can be accessed without 16 advance meetings and a full legal and compliance review!

Let’s look at LinkedIn for example. In the Question and Answers area there are over 500 topics on Request for Proposal (from both the issuer and the responder perspectives.) It’s helpful to look at the questions that other people have asked – but it’s also a straight-out opportunity to ask questions of your own. Naturally a lot of the questions will get jumped on by suppliers trying to present their solution – but often they have some good insights on what makes a good RFP. And – you’d be surprised at how many times peers of yours at other companies log on to share their experiences, recommend suppliers, or share what they’ve learned about new technologies. Many times members will also recommend experts on a particular topic which may lead you to articles, blog posts, or even sample RFPs.

There are also discussion groups on particular topics. For example there is the Print and Procurement (International) Group which has 6,936 members from around the world. I would say that there is more Printing (3,478) than Procurement but it still posts some pretty lively topics. If you post a thread saying that you are looking for companies that can provide a specific service your likely to get a quick response. For example, the post:

“I have a 400 Pg + Cover perfect bound book live project. Quantity = 1,500 and involves spot colors. I am looking for a book manufacturer with digital and offset capabilities.”

. . . received 38 responses within a matter of days. The neat thing is, social media sites allow you to drill down on the responses you get. If someone responds to a post you can click over to their profile and see who has given them recommendations or look at the anwers they have supplied to other questions. Click again to look at the company page on LinkedIn – or go directly to the company website.  You can see who else works there and if they have any interesting presentations or recommendations as well. All of this is available before you have sent any formal communication out from your company.

Potentially, you can quickly identify many new suppliers that you might not have considered, identify experts who can help you define all of the things you should ask for in your RFP and identify ways of making the RFP process much more efficient. I still think that you will want to issue an RFI to narrow the field before you issue an RFP – but maybe in some cases you can get what you need from a bit of online research and networking. Let me know what you think.

And, stay tuned (or stay RSSed or something.) Next time I’m going to talk about why you might want to skip the RFP all together!

The 2011 RFP Season has Begun!

Monday, January 3rd, 2011

Elizabeth Gooding Boston Color picFor those businesses on a calendar-based fiscal year, Requests for Proposals (RFPs) are already hitting the street. Whether you are on the issuing side or the responding side of bids for print and other business communications services here are some tips to keep in mind based on my many years sitting on both sides of the RFP table.

Issuers of RFPs

These days, most businesses rely on some sort of strategic procurement group for all or part of their RFP processes. In addition, the business group(s) requiring the services, their respective IT organizations and potentially a separate legal and compliance group may also be involved. Everyone is busy so the goal is typically to avoid “bothering the business units.” That’s mistake number 1 – bother the heck out of the business units and anyone else who can ensure a better result. If they don’t participate in the definition and weighting of requirements you might as well not bother issuing an RFP. You won’t get what you need and you will waste a lot of time and money not getting it. There is always a tradeoff between designing an RFP that takes the least effort for your business to evaluate and one that gets you the best and most creative bids. The latter will be more work in the short-term but can pay off for years.

Speaking of not getting what you need – that leads to mistake number 2: simply asking for bids on what you have now. What you have is not necessarily what you need and may not be the lowest cost, highest quality or most effective solution available. Tell the suppliers what you have now, what your goals are and get bids on their recommended solutions – you may want to get bids on what you have now also for an apples-to-apples comparison – but don’t limit yourself to what you think you know. I guarantee that the people who deliver the services for a living know a few things that you don’t about the best way to do it.

Top Tips for Issuers:

  1. Get all stakeholders to participate in both defining and weighting requirements up front
  2. Get all stakeholders to rate existing vendors on those requirements in advance of issuing the RFP (you really should be rating suppliers at least 2X per year anyway)
  3. Get an expert consultant (internal or external) to review requirements to ensure that they are complete, up-to-date and stated in a manner that will make sense to suppliers
  4. Don’t rely solely on “check the box” and “fill in the blanks” RFP formats. This may make it easier to score the RFP but will limit the quality and quantity of information you get to score.
  5. Don’t rely solely on “catalog pricing” for price comparisons. Have specific jobs estimated where possible. Catalog pricing, particularly for variable full-color printing jobs will likely cost you more in the long run.

Responding to RFPs

Let’s face it – responding to RFPs is not fun. They are typically poorly constructed; a lot of work and often you have no idea if they will ever really be awarded or if they are just a fishing expedition or post decision justification exercise. It’s easy to start off the process with a bad attitude. Well… don’t. That would be your first mistake.

If you don’t think an RFP is a good fit or a “real bid” then don’t respond. Quite frankly, many RFPs are not worth the time and effort. But once you make the decision to participate – go after it with your best people and your best effort. Participate in every possible aspect of the RFP process – ask questions on calls, ask questions in writing, make suggestions for improving the RFP and – at all times – play by the rules of the RFP. Also – if you decide not to respond – write a really kickin’ “No Bid letter” explaining exactly why you have chosen not to respond and under what circumstances, or for what types of services, you would like to respond to a future RFP. I’ve written no bid letters that ended up getting the whole RFP process changed for the better. I’ve also seen vendors barred from future RFP opportunities for failing to respond to the invitation to bid.

Top Tips for Responders:

  1. Follow the rules. If you are not supposed to call anyone but procurement – Don’t! If you are supposed to respond in a certain format – Do! By all means – meet the deadlines.
  2. If the RFP is poorly constructed – try to get the rules changed. During Q&A sessions make the case for changing the format to allow suppliers to provide more effective responses or suggest expanding requirements. Explain why this will benefit the Issuer. If the Issuer won’t budge – see Tip #1.
  3. Put the boilerplate at the end (and eliminate anything that is not pertinent to the Issuer.) Keep answers in the body of the RFP succinct and to the point. It takes more work to write fresh answers for RFPs – but the shorter you can make your answer the more likely it is to be read and understood.
  4. Make sure that the person responsible for writing your response can actually write. Some of the responses I’ve seen would embarrass a 3rd grader. Even if you have multiple people responsible for responding – there should be one voice and one responsible editor. And SPELLCHECK!
  5. The right references are important. If possible, give more than they ask for and make sure that the references will be pertinent to the Issuer (same or similar industry, company size, services provided, level of complexity.) Just providing a reference to say you’re a great company is not enough – it needs to relate to the particular RFP you are responding to.

RFPs are a lot of work for both Issuers and Suppliers. They work out best for everyone when it is a respectful process. Issuers don’t get the best bids when they treat suppliers like second-class citizens of the business realm. Likewise, suppliers don’t get the respect they deserve when they don’t play by the rules or fail to state their case in an effective manner. I wish everyone a prosperous and efficient RFP season and a Happy New Year.

If you want to get connected with some experts – comment on this post or find me on LinkedIn.