Post on 24-Feb-2023
PROFESSIONAL
PURCHASING
PROFESSIONAL PURCHASING (ISSN 1070-0455), published monthly free to members. Copyright ©, 2016, American Purchasing Society, Inc., P.O. Box 256, Aurora, IL 60507, U.S.A.,Phone (630)
859-0250,FAX (630) 859-0270, E-Mail propurch@propurch.com. All rights reserved. Material may not be reproduced or quoted in whole or in part in any form whatsoever without permission.
VOLUME 44, REPORT NUMBER 7/8 www.american-purchasing.com JULY/AUGUST 2016
There are a number of very good reasons to forecast
your costs for the balance of the year. First you should
know how your purchase prices are going to affect your
performance compared with your budget. You also want to know
if you should be interviewing potential buyers or other staff to
accomplish your projected goals for the year. If you expect the
economy to turn down, you need to plan how you will reduce
staff or take other measures to minimize the downturn.
Forecasting the cost of individual products will help determine
where your cost control efforts should be directed.
Most cost control effort should be placed on those products
that account for most of your expenditures. Many purchasing
managers set up meetings with their major suppliers to get their
input on ways of reducing cost. Suppliers usually are willing to
offer suggestions to please the customer rather than having the
competition gain credit for cost reductions. However, not all the
suggestions will be helpful or meaningful. Nevertheless,
occasionally gems will be offered. Don’t miss the opportunity
to get new ideas.
There are many factors that influence purchase costs. Not
the least is the general state of the economy, but the performance
of particular industries also affects product cost. For example,
personal computer sales have been declining whereas mobile
smart phone sales have been increasing.
Analysis of particular products can indicate normal times
of the year when sales of those products increase or decrease.
In other words, sales records may indicate cyclical sales volume
behavior and associated price increases or bargain pricing.
Historic company sales figures are available on the income
statements for publicly traded stocks. Some sales figures are
available for privately held corporation through trade magazine
and trade associations.
Inside this Issue Page
The Economy:How Will Brexit Affect The U.S.? 3
Job Opportunities 4-5
Online Course Schedule 6-7
History:Negotiation Lessons FromThe Battle At Appomattox 8
Member Profile:Pipeline to Professionalism 9
Overcoming The Salesman’sAdvantage 10
New! Certified Professional InDistribution And Warehousing 11
Recently Certified 12-13
New Members 14-15
Books Offered 16-17
Member Question:When Should We Obtain Bids? 18
Lesson Fundamentals:How Suppliers Try ToInfluence Buyers 18
Membership Application 19
Today’s Tip:Understand The Salesman’sPoint Of View 20
When Are Bids Obtained FromLongtime Suppliers? 20
Published Since 1972
Forecasting Your Costs
For Balance Of The Year
Continued page 2
PROFESSIONAL PURCHASING 2 JULY/AUGUST 2016
PUBLISHERAmerican Purchasing Society, Inc.630 859-0250Fax 630 859-0270E-Mail propurch@propurch.com
EDITOR IN CHIEFHarry E. Hough, Ph.D., CPP, CPPM
SENIOR EDITORLynne Marlor
EDITORSRichard H. Hough, CPP, CPPCCaroline S. Sieben
CONTRIBUTING EDITORSRobert Menard, CPP, CGPP, CPPCJeff Steele
ASSISTANT EDITORSMimi SteinwartEllen SiebenThomas Sieben
PROFESSIONAL
PURCHASINGwww.american-purchasing.com
Information for business buyersand purchasing managers
September
Differences When Buying For
Various Types Of Businesses
October
Maximize Benefits From
Available Time
November/December
How To Solve Purchased
Services Problems
COMING IN NEXT ISSUES
Forecasting Your Costs
For Balance Of The Year
Look at your own usage pattern to determine when you will be
needing more stock or when you will be cutting back on your ordering.
Relate your expected purchase volume to the expected price movements
to determine the effect on your organization.
Look for trends in the economy and in your purchase activities.
Plot those trends on a graph to forecast the future. If you haven’t had
a price increase in many years while all other costs have been
increasing, you should expect an increase sooner rather than later.
Be cautious about forecasting those price increases that may be
requested on products where prices have remained the same for a
long period. Inflation would have caused price increases for all other
products and should have done the same for those where prices were
not increased. Eventual requests are often exorbitant to make up for
the lost time. The companies suddenly realize that they are losing money
on every sale of those products. A counter argument when negotiating
to their large increase request is to point out that their previous price
must have been excessive if they can maintain it for so long while all
costs were increasing. Negotiating the large increase may substantially
reduce the amount. Therefore, be careful about forecasting large
amounts.
The expected volume of your own purchases is probably the most
significant factor affecting your costs. An increase in volume should
reduce your product cost per unit if you shop for the lowest cost and if
your negotiate with either your present suppliers or with new suppliers.
Unit cost is reduced through economies of scale. In most cases, the
more you buy, the lower the price. Conversely, if your company expects
a downturn in sales or usage of particular items, your cost per unit is
eventually likely to rise. We say eventually because suppliers will not
immediately recognize the slowing of orders or they will not realize
that quantity reductions indicate a permanent decline in sales.
The purchasing manager should get forecasting input from each
buyer. The buyer usually has more insight into the pricing stability or
vulnerability of the products that he or she purchases than the manager
who is not as closely involved with the suppliers of those products.
However, the manager must assess each buyer’s ability to predict price
movements. Over time with repeated requests, the manager will gain
confidence in which buyers make accurate forecasts and which buyers’
forecasts are wrong.
General management, sales management, and the financial people
may ask for purchase price forecasts for their own purposes, in addition
to the usefulness of a forecast for purchasing management, . In any
case, a careful well-prepared written report should be made and
distributed to interested parties. Good reporting of useful information is
appreciated and engenders respect for purchasing management.vvvvv
Continued from front
PROFESSIONAL PURCHASING 3 JULY/AUGUST 2016
The Economy
How Will Brexit Affect the U.S.?
* Preliminary. All indexes are subject to revision four months after original publication. Source: U.S. Department of Labor, Bureau of Labor Statistics
The U.K. voted to leave the European Union. Stock
markets initially reacted negatively because many
investors did not believe that the final vote numbers
would be enough to leave the Union.
Now, many Americans are wondering how (the) Brexit
will impact their lives and the U.S. economy.
It appears that the U.K. does not have as much direct
effect on the U.S. as one might think. Wells Fargo cited
data that only 4% of U.S. exports are bound for the U.K.,
about 0.4% of U.S. GDP. British assets in U.S. banks are
$500 billion, which is only 3% of the total. British securities
owned by Americans is $1.3 trillion, but this is a very small
figure compared to the $70 trillion of American household
financial assets.
However, it is generally believed that the Brexit could
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have an effect on the U.S. economy through tighter financial
conditions, which means that it becomes more difficult and
more expensive to borrow money. Less borrowing will mean
less investing, which will decrease economic activity.
The main threat is not direct exposure to the U.K., but
whether businesses or consumers will borrow money or
need investment capital.
Marketplace and Edison conducted a national survey
with 1,022 participants about their financial lives. The results
were not very positive. 32% say they lose sleep over their
financial situation. 48% believe that the economy will be
worse for the next generation of Americans. Even more
alarming, 71% believe that the U.S. economic system is
rigged in favor of certain groups. 61% of Hispanics, 71%
of White/Other, and 80% of African Americans agree.vvvvv
PROFESSIONAL PURCHASING 4 JULY/AUGUST 2016
Employment Opportunities
How to Plan Your Career
and Prepare a Resume Online Course
A self-running Web based course developed by the APS
and only available from the Society. In Part 1 learn how
to plan your career to achieve your goals. Then in Part 2
learn how to prepare a great resume that will get you
more and better job interviews. Part 3 will tell how to
take a successful job interview and avoid serious
mistakes. Go to www.american-purchasing.com and
click on Courses and Seminars to register. All students
who complete this course will earn a certificate of
completion and 2 CPP Points.
SENIOR BUYER
Apio, Inc., Guadalupe, California. The Senior Buyer will be responsible
for replenishment activities, supporting various reporting activities,
vendor management, and continuous profit enhancement initiatives. This
role will play an integral position in activities such as coordinating &
soliciting cross functional support, managing various information streams
and being accountable for identifying solutions in support of supply
chain related activities. Daily activities will involve procuring goods that
meet companys specific level of quality, delivery and optimum cost for
operation support. The Senior Buyer works closely with multiple levels
within production plants, internal customers and suppliers. The Senior
Buyer is well-versed in food ingredients and packaging. Responsibilities:
Maintain accurate inventory positions for all facilities with min/max
levels, avoiding stock out and overstock inventories. Reviews, interprets,
implements and communicates material supply forecast to suppliers and
co-manufactures. Ensure all suppliers have consistent forecast visibility
and adequate capacity. Create and manage purchase orders and subsequent
deliveries. To include shipment reconciliations, back orders, damaged
goods and invoice discrepancies. Actively participates in the RFP,
negotiation, and management of supplier agreements covering cost, quality,
and delivery terms. Researches and procures special ingredients for new
projects while keeping up with market trends. Understanding of
commodity futures and options trading in the Chicago Board of Trading
(CBOT), Chicago Mercantile Exchange (CME) and Chem Data Index
(CDI). Administers supplier performance management and improvement
efforts, including leading regular supplier business reviews. Act as
primary liaison between cross-functional partners, plants, and suppliers
to ensure supply plan requirements are being met and resolve supply,
quality and cost issues. Ensure material specifications are correct and
clear for suppliers and the Quality Department. Supervises the daily
activities of 3 buyers and support staff. Qualifications: 5+ years of
experience in procurement and supply chain in a manufacturing setting
preferred. Minimum four year degree in related field or equivalent on the
job experience. Microsoft Office with advanced Excel and PowerPoint
knowledge. Solid mathematical and analytical skills. Solid communication
and presentation skills. Strong working knowledge of JDE preferred.
Strong negotiating skills, Time management & Organization skills. Excels
both within a team environment & works with minimal supervision.
Must be self-motivated, enthusiastic, positive and self-confident.
Demonstrates attention to detail. High level of integrity and outstanding
work ethic. Bilingual preferred. Benefits: 401(k) with Company Match.
Dental Insurance. Disability. Medical Insurance. Paid Holidays. Paid
Time Off (PTO). Vision Insurance. Salary: $80,000 - $90,000 per year.
Please email to jvandam@apioinc.com for more information.
PROCUREMENT SERVICES DIRECTOR
Collier County is located on Florida’s southwest coast approximately
150 miles south of Tampa. It is a diverse mix of urban and rural areas,
and coastlines and inlands. One of the largest geographical counties east
of the Mississippi River, the County encompasses over 2,000 square
miles and has something for everyone. Collier County, Florida is seeking
a collaborative, proven leader to head its Procurement Services Division.
The individual will be someone who is dynamic, energetic, of highest integrity
and with a passion for excellence. He/she will be enthusiastic, personable
and likeable with outstanding people skills. Living the County’s guiding
principles of honesty and integrity; service; accountability; quality; respect;
knowledge; stewardship; collaboration; and self-initiating, self-correcting
will be essential to success. This is a great job where the individual has a
high degree of independence. Consequently, he/she will be a self-starter
with a sense of urgency. For more details, go to www.cb-asso.com
under Executive Search / Active Recruitments. The minimum
requirements are a Bachelor’s degree in public administration or closely
related field; supplemented by five years of progressively responsible
managerial experience in public procurement; or any equivalent
combination of education, training, and experience which provides the
requisite knowledge, skills, and abilities for this job. Fingerprinting is
required. Certification by NIGP or other equally recognized organization
and a strong background in procurement and contract law is highly desirable.
The salary will be between $92,597 and $136,427 annually. The County
offers a broad benefits package and participates in the Florida State
Retirement System. To apply, e-mail your resume to Recruit35@cb-
asso.com by July 8th. Faxed and mailed resumes will not be considered.
Questions should be directed to David Collier, Senior Vice President at
(772) 220-4320, or Colin Baenziger at (561) 707-3537.
PROFESSIONAL PURCHASING 5 JULY/AUGUST 2016
Employment Opportunities
Recruiters and HR Managers
Remember, when you are ready to find purchasing,materials management, or supply chain managementhelp, Professional Purchasing and the Society’s Webat www.american-purchasing.com is the place toadvertise to reach the best candidates. Many membersand guests visit our website each day looking for jobopenings and career enhancements. They also post theirresumes to the site, so recruiters and HR managers cansearch for and contact the best qualified person for theiremployment opportunity.
DIRECTOR OF PROCUREMENT
Saint Peter’s University, Jersey City, New Jersey. Under the direction of
the Vice President for Finance & Treasurer, the Director of Procurement
is responsible for all phases of the University’s procurement process for
goods and services for a public university with annual outlays totaling
more than $350 million. The Director develops University-wide
procurement policies and procedures; ensures compliance with public
bidding laws and regulations; manages the acquisition process in
collaboration with school and departmental sponsors (including RFP/
RFQ development, evaluation, selection, and contract negotiation); and
assists in the ongoing administration of contracts with suppliers. The
Director leads or participates in the final negotiation of University
contracts for goods and services, resolves bid and contract disputes in
consultation with other University departments and with government
entities as appropriate, and maintains all information required under
applicable laws, regulations, and University policy. The Director leads
efforts to introduce new strategies, techniques, technologies, and
workflows to the procurement process in order to minimize costs and
improve services to the University community. Formulates all purchasing
office policies, procedures, and related forms; revises them as needed or
required, publishes them for the benefit of internal users and vendors,
and educates/trains staff who are involved in the procurement process.
Plans, coordinates, and administers each procurement process, beginning
with the identification of need and continuing through the bidding,
evaluation, selection, award, and contracting process. Qualifications:
Bachelor’s degree in business or a related field, master’s degree preferred.
Comprehensive knowledge of public bidding laws, regulations, and
requirements; preferably through experience in a New Jersey public
entity. At least 5 years of experience directly supervising a procurement
staff team, including hiring, training, mentoring, and evaluating staff,
preferably in a comparably large, complex, and fast-paced procurement
operation. Strong technology skills, which include deep knowledge of
enterprise systems including a sophisticated procurement module, with
strong preference for experience with PeopleSofts procurement module
and experience introducing upgrades and new features. In addition, strong
spreadsheet and database skills. A commitment to the principles and
practices of continuous improvement. An analytical approach identifying
opportunities and barriers, but also a creative and pragmatic approach to
develop solutions. Excellent written, oral, interpersonal communications
and management skills. *When creating a profile, you will need to combine
your resume and cover letter into one Word or PDF document.** https:/
/jobs-montclairedu.icims.com/jobs/1503/director-of-procurement%2c-
goods-and-services/job.
Buyers, Purchasing Managers, Materials
Managers, and Supply Chain Managers
When applying for any of these positions, please tellthe employer that you saw the advertisement inProfessional Purchasing, a publication of theAmerican Purchasing Society. Go to www.american-purchasing.com for more help wanted ads and morejob information.
SITE PROCUREMENT LEAD WITH WAREHOUSE
PotashCorp, Augusta, Georgia. The Site Procurement Lead will be a
critical member of the PotashCorp Augusta’s on-site management team,
directing the procurement of all supplies, equipment and services to
ensure an optimum balance of quality, price and service. Education and
Experience Required: Bachelor’s degree and 6-8 years experience in
procurement of highly technical materials and equipment. Certified
Professional Purchasing Manager and/or Certified Professional in Supply
Management preferred. Strong analytical and negotiation skills and solid
understanding of contracting principles. Mechanical aptitude with a
working knowledge of machinery specifications and drawings. Must
demonstrate effective negotiating techniques and have a thorough working
knowledge of legal principles specified in the UCC and Contract Law as
they relate to the Procurement function. Benefits: Competitive
compensation package which includes an annual bonus plan. Our
comprehensive benefits plan includes health insurance that starts on
your first day of employment, a matching 401k plan and a pension plan.
Interested candidates will need to submit a detailed resume describing
work experience and education and a cover letter or brief explanation of
why you are a good fit for the position. Strongest applicants will be
contacted to interview with company representatives and may be asked
to give a PowerPoint presentation. Email resume
to:Augusta.Staff@PotashCorp.com. Extensive employment and criminal
background investigation and a comprehensive pre-employment medical
exam including a drug screen will be required for selected candidate. EOE.
PROFESSIONAL PURCHASING 6 JULY/AUGUST 2016
Online Course ScheduleFor more information, a complete schedule and to register today go to www.american-purchasing.com
New! Purchasing For Manufacturing - Available at all times and repeatedcontinually. Fee $154, APS members $129. Qualifies for 2 CPP points.This course is for those who work for manufacturing companies or who
want to prepare themselves for the possibility of obtaining a position in
a manufacturing company. It is a course for buyers and managers who
buy products and services for manufacturing organizations, for those
new to their jobs, or for those who want to refresh their knowledge. The
course gives information about the differences in buying for various
types of industries. You will learn about the objectives of purchasing for
manufacturing. The course covers the buying process for manufacturing,
the important issues of buying tooling, the importance of proper
specifications, and the essentials of inventory management. JIT, MRP,
and Supply Chain Management systems are described, as well as Six
Sigma and Lean Six Sigma.
New! Distribution and Warehouse Management - Available at all timesand repeated continually. Fee $129, APS members $99. Qualifies for 2CPP points. This course will teach students what is meant by
warehousing, definitions, its importance, related functions, types of
facilities, and more. Also covered in this course are warehouse design and
space required, equipment, operating activities, and locator systems and
product identification.
New! Inventory for Distribution and Warehouse Management -Available at all times and repeated continually. Fee $129, APS members
$99. Qualifies for 2 CPP points. This course covers many aspects of
inventory and how they relate to distribution and warehousing
functions. Covered are types of inventory, types of controls, record
keeping, item identification, locator systems, RFID, counting
methods, and much more.
New! Management Operartions and Logistics - Available at all timesand repeated continually. Fee $129, APS members $99. Qualifies for 2
CPP points. This course will teach students about management operations
and include information on its purpose, duties, decision making,
organizing, staffing, planning, controlling, and more. Other areas covered
are management psychologies, human resources and the law, transportation
and logistics, domestic and international transactions, and ERP.
Forecasting for Buyers, Managers, and Business Executives -Available at all times and repeated continually. Fee $129, APSmembers $99. Qualifies for 2 CPP points. This course providesessential knowledge about forecasting methods. Using these methodshelps you predict how prices will change, what inventory you willneed, and the size of your staff required to run your operationefficiently. Buyers and purchasing managers should use forecastingto time their purchases for lower prices. Forecasts should be used todetermine how much they should buy at any point in time. Predictingsales and usage volume helps the manager know when to increase ordecrease the workforce. Buyers and management should useforecasting to predict market changes that may affect their operation.Participants will learn the strengths of short-term forecasts and thelimitations of long-term forecasts. The course was developed byMark Miller, Associate Professor of Business at Carthage Collegewith many years of business experience in purchasing and supplychain management. Prior knowledge of some mathematics is helpfulfor those taking this course.
Preparation for CPP Exam - 3 week online course including exam.Qualifies for 13 CPP points. August 15 to September 4, 2016. Fee$700, APS members $540. This course is required for the CPP and isthe best training for buyers and purchasing managers to prepare for theCertified Purchasing Professional (CPP) examination. When completed,you will be encouraged, if you have not already done so, to apply forprofessional certification recognition. The course includes an instructor,the study guide, five different online courses, and the exam. Registrationand payment are required in advance. Register online at www.american-purchasing.com or phone (630) 859-0250. Please visit our website formore details.
Preparation for CPPM Exam - 3 week online course including exam.Qualifies for 10 CPP points. July 18 to August 7, 2016. Fee $600, APSmembers $440. This is the only online course available and approvedby the APS to prepare for Certified Professional Purchasing Managerrecognition. The exam is given at the end of the course without extracharge and is accepted by the Society as fulfillment of the CPPMrequirements providing the student has achieved CPP and has madeseparate application for the CPPM recognition.
Preparation for CGPP Exam - Up to 45 days online course includingexam. Continuous enrollment. Fee $300, APS members $215. Qualifiesfor 3 CPP points. Included are the workbook “Green Purchasing andSustainability”, the two-part self-running course titled “Green
Purchasing and Sustainability”, and the CGPP examination. As more
and more executive decisions include sustainability, buyers and
purchasing managers need to learn how they can be part of the process
before the policies and procedures are set in place. Sustainability is
quickly developing and changing, and the sooner purchasing
professionals begin to learn about the subject and current things that
they can do to encourage and embrace it, the better position they will be
in for the long-term future. Students will be taught what purchasing’s
role is in sustainability, how to develop a green purchasing plan, how it
can be included in facilities practices, how to utilize the 3Rs, energy
savings ideas, and more.
Applied Cost and Price Analysis - Available at all times and repeatedcontinually. Fee $154, APS members $129. Qualifies for 2 CPPpoints. This new online course will identify, define, describe, anddifferentiate the constituent elements of both Cost and PriceAnalysis. It will also provide step by step processes, lists, andactions that must be taken and/or avoided in selecting and managingsuppliers and their performance, and furnish specific tools andtemplates that make the Cost and Price Analysis decisions based onhard “Dollars and Numbers” criteria. Cost and Price Analysis skillsare among the most effective purchasing management tools. Theyreduce prices by eliminating unnecessary costs which leads tomutually beneficial results for supplier and customer. Some of theimportant skills you will learn are: The eight most common PricingStrategies revealed and explained. How prices are established. Dozensof tools, techniques, and modifiable, reusable templates. How toidentify and apply Cost Drivers. How to apply Cost and Priceanalysis to basic Spend Analytics. In addition, the course willdemonstrate with tables and templates how to use Cost and PriceAnalysis for better results in supplier negotiation, bid analysis, andsupplier performance evaluation. Website sources investigated and foundto be useful for purposes are included as supplementary resources.
PROFESSIONAL PURCHASING 7 JULY/AUGUST 2016
Online Course ScheduleFor more information, a complete schedule and to register today go to www.american-purchasing.com
Business Ethics for Buyers and Sellers - Available at all times and
repeated continually. Fee $154, APS members $129. Qualifies for 2 CPP
points. The Certified Purchasing Professional (CPP) program has always
stressed the importance of proper business conduct. Now, recent surveys
have discovered that there is renewed interest in courses related to
business ethics. College students are beginning to request that their
attending school offer classes in ethics. This self-running course fills
this need. Learn the meaning and sources of ethics. Learn how ethics
affects the way in which we do business. Know how to make ethical
decisions. Understand the relationship between the law and ethics. Feel
more comfortable making ethical decisions. Become familiar with the
ethical issues that buyers and sellers confront. Know the APS Code of
Ethics. Qualifies as one of the free courses for new joining and renewing
members.Course runs approximately two hours long.
How to Save $Thousands Buying a Car - Available at all times and
repeated continually. Introductory Price $29.99. Qualifies for 1 CPP
point. Many of us overpay when we buy a new or used car. Take this
course to learn how to save hundreds, maybe even thousands of dollars
when you buy a new or used car. You will learn the best places to find
information about the car you want. The course will tell you how to
negotiate with the dealer. It will let you know how pricing methods may
mislead you and how you can avoid being deceived. It will tell you about
different ways to finance the car. It will give you information about
leasing compared with buying. It will give you what you need to know
about trading in your old vehicle. The course covers certified cars and
service agreements. What you learn will help you now and for many
years in the future.
About F.A.R. - Available at all times and repeated continually. Fee $59,
$39 APS members. Qualifies for 1 CPP point. If you buy for the
government or your organization sells to the government you should
know about the government’s rules and regulations concerning purchasing.
Even if you work in private industry you should take this course to learn
about the policies and procedures used for government purchases. If you
only buy for private businesses, this course will help you understand the
differences between private and public purchasing. You will learn about
the federal government positions who are authorized to buy and what
their authority is. You will learn what the applicable laws are that are
related to federal government transactions. The course includes various
terms and conditions useful for purchasers. It covers the differences
between government contracts and those used by private industry.
Influencing Suppliers, Colleagues, and Management - Availableat all times and repeated continually. Fee $129, APS members $99.Qualifies for 2 CPP points. This course teaches you how to negotiatebetter deals by influencing or persuading those individuals you dealwith at work or anywhere else. The course tells you how to persuadeothers by the proper way you talk, the appropriate way you look,and how you behave. You will learn the importance of dressingproperly, having proper body language, and expressing your interestin what others are also interested in. Using the information in thiscourse is proven effective by a wide range of experiments and researchstudies, as well as the experience of professional buyers, managers,and executives. The course was developed by Harry Hough, anexperienced negotiator, consultant, and business executive.
Managing Quality - How to Get the Quality and Service You Want -
Available at all times and repeated continually. Fee $154, APS members
$129. Qualifies for 2 CPP points. A course designed to help you obtain
the best quality for your purposes. Good quality starts with defining
what you expect. The course covers quality issues both inside the
organization as well as the quality produced by suppliers. Different
quality theories, measurement techniques, and the cost of quality are
discussed. Testing tools are also described. Quality standards and awards
are listed. This course should be a must for every quality control
employee as well as for all buyers and purchasing managers regardless
of their industry.
How To Be A Smart MRO Buyer - Available at all times and repeated
continually. Fee $154, APS members $129. Qualifies for 2 CPP points.
The course explains the differences between MRO buying and other
types of purchases and gives you the information that will permit you
to take advantage of the unique features of MRO buying. Take this
course to learn the best ways to reduce MRO costs. Learn the best
places to obtain supplies. Find out how you can reduce your workload
and satisfy requisitioners’ needs.
Accounting, Finance, and Cost Management for Buyers and
Managers - Available at all times and repeated continually. Fee $154,
APS members $129. Qualifies for 2 CPP points. This course is an
introduction to accounting and finance and suitable for those who have
never had a course in accounting as well as those who wish to review
the subject. Topics include the accounting process, financial reports,
methods of evaluating inventory, budgeting, methods of evaluating
financial performance, and many other related subjects.
Fundamentals of Business Buying and Purchasing Management
- Available at all times and repeated continually. Fee $154, APS members
$129. Qualifies for 2 CPP points. A self-running Web-based course
developed by the APS. Don’t know much about business or buying for
business? Then this is the course for you. A three part online course
that introduces you to accepted business practices and gives you the
understanding to accept a position as a buyer or purchasing manager.
76 Ways to Improve Purchasing Performance - Available at all times
and repeated continually. Fee $154, APS members $129. Qualifies for
2 CPP points. Invaluable information and tips to help you negotiate
transactions, show you ways to reduce costs, and provide help to make
your purchasing operation more efficient. The course provides well
over 76 ways to improve your operation.
5 Convenient Ways to Register
Call 1-630-859-0250, or Fax to 1-630-859-0270,
or fill out the online form at www.american-purchasing.com,
or send an E-mail to propurch@propurch.com, or mail to:
American Purchasing Society
8 E. Galena Blvd., Suite 203, Aurora, IL 60506
PROFESSIONAL PURCHASING 8 JULY/AUGUST 2016
Negotiation Lessons From
The Battle At Appomattoxby Robert Menard, CPP, CPPM, CGPP, CPPC
The battle at Appomattox, VA ended the American
Civil War and provided six enduring negotiation
lessons:
One - The power of Higher Authority. In April 1865,
the Confederate troops were sealed off in three directions;
their only escape route was to the north, into the volleys of
the advancing Union infantry. Union troops had captured
the replenishments of Confederate food and armaments at
a rail station east of Appomattox.
On April 09, Grant responded to Lee that he was not
authorized to negotiate on the matter of peace between the
two warring sides. Grant’s skillful application of the “Higher
Authority” tactic may well have prodded Lee to offer his
best deal to end the misery of the Civil War.
Two - Respect for the other side. Generals Lee and
Grant were honorable men and acutely aware of the toll
the war had taken in blood, treasure, and sorrow. In his
memoirs, Grant wrote of the negotiations with Lee “…it
was impossible to say whether he felt inwardly glad
that the end had finally come, or felt sad over the
result…I do not question, however, the sincerity [of Lee
or] of the great mass of those who were opposed to us.
Note the utmost level of respect Grant reserves for
Lee. He does not think of Lee as an enemy but also a man
of feelings, commitments, and honor. Grant recognized the
personality factors that play into negotiation and was
scrupulously careful to try to understand Lee’s while
controlling his own.
Three - Expect the unexpected. At the meeting, Grant
was underdressed with respect to Lee. Without a doubt,
the appearance of the two generals created an obvious
imbalance. Was power shifted by having the surrendering
general out dress the winning general? Was this sartorial
reversal an intended negotiation tactic by Grant? The
answer lies buried in history.
Four - Never drive your counterpart beyond a
reasonable position. Grant wrote, “The arms, artillery and
public property is to be parked and stacked, and turned
over to the officer appointed by me to receive them.
This will not embrace the side-arms of the officers, nor
their private horses or baggage. This done, each officer
and man will be allowed to return to their homes, not to
be disturbed by United States authority so long as they
observe their paroles and the laws in force where they
may reside.”
A condition of the surrender, insisted upon by Grant, was
that no Union soldier would abuse, taunt, or otherwise
demean any Confederate soldier. The Confederate soldiers
were allowed to carry their government issued arms and
pile them in rows along the roadway with the dignity of
erstwhile warriors intent on resuming their pre–war roles as
farmers and ranchers.
By this concession, Grant drove the negotiation to what
we could call today the “Win-Win” strategy. The Confederate
soldiers were fellow countrymen and honorable men who fought
for their beliefs but lost. Now was the time for healing. By this
strategy, Grant removed the motivation for retaliation.
Five - Allow your counterpart to thrive. Grant continued
in his memoir to relay the exchanges between him and Lee
about “…the [Confederate] officers’… private horses and
effects, which were important to them, but of no value to
us; also that it would be an unnecessary humiliation to
call upon them to deliver their side arms”.
Grant had the foresight to realize that it was necessary
for the Confederate soldiers to retain their steeds for basic
transportation and agricultural services. Otherwise, they
might starve and rejoin an insurrection.
In a gesture of good will and brotherhood, Grant acceded
to Lee’s request for “rations and forage” for his men. Grant
asked how many men to which Lee replied “about twenty-five
thousand”. Grant authorized Lee to “send his own commissary
and quartermaster to Appomattox Station, two or three miles
away, where he could have, out of the trains we had
stopped, all the provisions wanted.”
Six - Always close with honor, dignity, clarity, and amity.
After Lee’s departure for the evening, he commanded a
cessation to celebration by the Union forces that were firing
volleys into the air so that no exultation would be shown to
the Confederacy over their downfall.
As to amity, Grant recorded this observation. “I was
accompanied by my staff and other officers, some of whom
seemed to have a great desire to go inside the Confederate
lines. They finally asked permission of Lee to do so for the
purpose of seeing some of their old army friends, and the
permission was granted. They went over, had a very
pleasant time with their old friends, and brought some of
them back with them when they returned.”
Would this end to the Civil War have been anywhere
near as good if both generals, particularly Grant, had not
been so gifted in negotiation?
History
PROFESSIONAL PURCHASING 9 JULY/AUGUST 2016
Member Profile: Eric Strinden
Pipeline To Professionalismby Jeff Steele
Eric Strinden has been avid about giving back to
society and his community his entire adult life. He
served in the Army National Guard and at a volunteer
fire department, spent 10 years each as a baseball coach
and Cub Scout leader when his kids were young, and now
has joined the local search-and-rescue ATV team in his
heavily rural area of Washington State.
Should it come as any surprise he’s equally dedicated
to his work? We didn’t think so, which is why Eric has been
tabbed this month’s featured member in the APS Member
Profile Series.
Eric is Purchasing Manager for Snelson, a Sedro
Woolley, Washington-based full-service pipeline and utility
contractor headquartered about 60 miles north of Seattle,
and 60 miles south of the Canadian border. The company
handles mainline distribution installation of pipeline, most of
it natural gas, as well as installation of compressor stations
that move product.
Last year, the company’s sales came to approximately
$280 million, and its purchases to $10 million. Eric’s primary
purchases include tools and consumables, piping, fittings and
valves, as well as MRO purchases. “In the piping products
area, I deal with about 10 vendors all the time,” Eric says.
“I get calls all the time from vendors wanting to get in with
us. The offers are for services from hauling freight to
providing tools and consumables.”
The size of the purchasing department varies from four
to five employees, depending on the number of projects in
which the company is currently involved. “I support several
projects on the station and distribution side of things, as well
as fab shop,” says Eric, who reports to the company
president. Purchasing is “somewhat decentralized,” he adds,
noting satellite offices in Colorado and California handle
some duties.
Among primary challenges Eric faces is getting the
specifications from external customers. “It’s sometimes
difficult to get all that information passed down,” he says.
“Gathering that information and making sure the materials
meet specifications can be a problem. We’re allowed to
use import, but it’s getting to know the AML [authorized
manufacturers’ list]. We work hard at making sure we
identify the right specifications, and when we don’t know
we’ll buy domestic instead of import, because domestic is
more accepted.”
Snelson does buy imported products, but typically
purchases from U.S.-based companies that themselves
purchase overseas product, Eric says.
The department has labored diligently to develop a
process of tracking and obtaining material test reports. The
MTRs, as they’re called, spell out the specifications on the
type of pipe delivered. “Now just about every customer
requires an MTR packet from us,” Eric says. “We
developed a means of getting them and putting them in
packages for our customers.”
Eric was born in Seattle but moved with his family to
Sedro Woolley when he was seven. His father taught at
local high schools and colleges, and the Strindens lived on a
55-acre farm where family members took care of cows,
harvested hay, mended fences and cut wood.
Having attended Skadgiit Valley Community College,
Eric joined Snelson in 1988, working as a small tool
mechanic, warehouseman and delivery worker, as well as
in the fabrication shop. He eventually was asked to handle
purchasing as well as small tool mechanic work and
dispatching. In the late 1990s, he was handed Snelson’s
purchasing manager reins.
Eric earned the Certified Purchasing Professional (CPP)
designation about five years ago.
“I just went for my five-year re-certification
[certification update] and now have my lifetime
certification,” he reports. “I wanted to further my education
in the purchasing area, strengthen my background and be a
better asset to my company. My company wants managers
to further their education by getting certified in whatever
area they’re in. The company financially assisted in my
getting the CPP. The owners were very excited for me to
get certified in the purchasing realm, so that is one of the
reasons I pursued certification.”
Asked to prognosticate on his future, Eric notes that he
has been with Snelson Co., Inc. for 28 years, some 18 of
those in the purchasing department. “I hope to spend another
10 to 15 years with them before I retire,” he says. “And I
hope to continue my education, including getting the CPPM
certification. That’s on my radar for the near future.
Developing the purchasing culture is important to our
company.”vvvvv
PROFESSIONAL PURCHASING 10 JULY/AUGUST 2016
Overcoming The Salesman’s Advantageby Joseph L. Vasoli
It is commonly accepted that, all other things being equal,
a purchasing agent/buyer is at a disadvantage in
negotiation with a salesman. This is for three main
reasons:
Solicitation. Typically, it is the buyer who solicits the
exchange. Particularly in the case of things you need to
buy for your core value production. Meaning that the
salesman already knows that the buyer wants what he is
selling. He may not be the only person the buyer can get it
from, but the buyer does still need it.
Training disparity. Salesmen drive the revenue
generation of the company, so it is very much worthwhile
for the company to invest in their training, often with an
emphasis on negotiation or hard selling. Pace
Productivity claims that salesmen receive, on average, one
to two hours of sales training per week. The World
Economic Outlook of 2014 estimated that salesmen receive
somewhere between 27 and 36 hours of training annually. In
fact, there are plenty of folks who expound upon the
disparity in training between buyers and sellers. They are
taught all kinds of tricks. One of the most common is the
“built in discount” or, more pejoratively, the “idiot tax”. It is
a small markup on the “actual” price of a small percentage
that, as soon as the buyer tries to negotiate, the salesperson
will “cave” on. It allows the buyer to flash both of the quotes
to his manager, claim a 3% savings, and happily call it a
day. The salesperson has lost nothing and, even better, some
buyers will say nothing at all and pay the extra markup!
Knowledge disparity. Companies are more
specialized in what they sell than in what they are
buying. Therefore it makes sense for buyers at a given
company to buy a wide range of things while salesmen sell
a small range of things. This combined with the fact that
they are able to talk to production means that salesmen
know a lot more about what they’re selling than buyers
know about what they’re buying.
The knowledge disparity leads to an interesting question
in game theory. Since a lot of the companies purchasing
things in large amounts will also have a sales force, who
really benefits from the knowledge disparity? Well, the
disparity only exists if the buyer is buying one of many things
that they use to make their core value and thus cannot
master any one thing. So the best way to take advantage
of knowledge disparity would be to buy one raw
material and manufacture diverse products from it. The
more diverse the better. The people who do this best?
Machine shops and sheet metallurgists, of course.
The problem with having a diverse offering (machine
shops and sheet metallurgists make a lot of sales from small
volume, unique contracts) is that it does not allow you to
capture economies of scale. This is why machine shops
are frequently quite small.
Thought experiments aside, how can Procurement
Professionals overcome these disadvantages? Well, the first
step is to see what you can control. You can’t really control
the solicitation; if you need something you need it. The crafty
buyer might have a friend of his “refer” a salesman to him
to “talk him into” buying what he already needs. But other
than clever little gambits, there’s not much you can do. And
I advise against clever gambits as deception and parlor tricks
aren’t things you want attached to you.
And there’s really not much you can do about training
in the short term. In the long term, you can obviously pay
for/convince your company to provide training. But let’s
focus on the short term.
What you can control, and alleviate, is
the knowledge disparity. And here are some good ways
how:
1: Never go into a negotiation without a BATNA. Your
BATNA is your Best Alternative to Negotiated Agreement.
Essentially, if the person you’re negotiating with is inflexible
and hangs up the phone, what is your back up option? If
The Society is looking for members who would like to
contribute to Professional Purchasing by writing an
article. The Society will provide remuneration for any
article that is published. To submit an article for
consideration please send a copy to
propurch@propurch.com with the subject line
Purchasing Article. Articles should be between 500
and 700 words.
Continued on next page
PROFESSIONAL PURCHASING 11 JULY/AUGUST 2016
you do not have a backup, you have zero leverage. So for
Purchasers this means always, always, always have multiple
quotes. One quote is not enough. Two quotes is not
enough. I’m not even satisfied until I have at least five,
depending on how common the item is. These not only give
you backups, but they let you get a sense of where the
market is.
2: Understand your two most important percentages. I
strongly believe in checking Producer Price Indexes. They
aren’t so great when it comes to initial negotiations, but
they are fantastic when you’re resisting price increases.
Inflation is just how much more money things on average
should cost whereas the Producer Price Index is what
producers in various industries have been doing to their
prices compared to 1985. It allows you to see how prices,
on average, have adjusted year to year. Unless your
suppliers are operating in a resource scarce industry, the
PPI will typically grow at a slower rate than inflation because
as the industry exists, it gets better and more efficient and
technology helps it to reduce costs. Obviously there are
exceptions.
Let’s say January rolls around and your supplier tells
you they need to jack up their prices by 5%. You find out
that inflation was only 1% (as of writing this) and the PPI
for their industry has actually gone down due to
technological advances! All you need to do is politely inform
them of this. They will do the math themselves: While their
prices are going up, their competitors’ prices are falling!
The death sentence of any supplier.
3: Know as much about the supplier as you can. If you
know about their supply chain, whether they’ve lost
business, what their sales tactics are, all of that knowledge
is useful to you.
Don’t be intimidated. And if you find out that a price is
high, do not be afraid to renegotiate! Stay thrifty, my
friends.vvvvv
Overcoming The
Salesman’s AdvantageContinued from page 10
Joseph L. Vasoli is a buyer who lives in Hatboro,
Pennsylvania. He joined and became a member of the
Society in February of this year.
The American Purchasing Society was the first
organization to offer national purchasing
certification. The Certified Purchasing Professional
(CPP) program was developed in 1970 by a group of
businessmen who recognized the need for improved integrity
in business and improved competence in the purchasing
and supply chain function.
The Certified Professional Purchasing Manager
(CPPM) program began in 2002 and was designed to certify
those who manage purchasing departments and supervise
buyers and purchasing agents.
The Certified Green Purchasing Professional (CGPP)
verifies training in green procurement and sustainability.
The area of sustainability is growing quickly and many
companies already have plans and policies/procedures in
place. This trend will only continue to grow.
Now, in 2016, the Society has announced a new
certification program, The Certified Professional in
Distribution and Warehouse Management (CPDW).
The area of distribution, logistics and warehousing is a
quickly blossoming type of business in the U.S. and other
places. Warehouses and distribution centers are popping up
everywhere as competition for immediate delivery increases.
As this quickly growing business advances, the need for
professionals in this field increases. The Certified
Professional in Distribution and Warehousing (CPDW)
program is designed to educate and train people in
distribution, logistics, and warehousing management.
Students who take this course will be prepared for
professional jobs in distribution centers and warehouses.
Anyone may apply for the CPDW. The CPP is not a
requirement for this certification, and there is a separate
application for the CPDW. The requirements for the CPDW
are three online courses and an examination. The courses
may be taken separately or through the CPDW prep course.
The three courses are Distribution and Warehousing,
Inventory for Distribution and Warehousing , and
Management Operations and Logistics. Once the courses
are completed an examination must be taken and passed.
The passing grade for the CPDW examination is 75%.
The CPDW application can be obtained from the
Society’s website.
New! Certified Professional In
Distribution and Warehousing
PROFESSIONAL PURCHASING 12 JULY/AUGUST 2016
Recently Certified
Certified Purchasing
Professional (CPP) Awards
CPPM
C ERTIF
IEDPROFES
SIONAL
PURC
HAS IN G M
AN
AGER
Eileen Brown is an employee of the City of Flagstaff inArizona. Certification number - 121697P.
Leann Bush works for the Cherokee Regional MedicalCenter in Cherokee, Iowa. Certification number - 121747P.
Rahima Chowdhury is an employee of Hi-Tech Pharmacalin Amityville, New York. Certification number - 120410P.
Jesse Clark is employed at the Power & Telephone SupplyCompany located in Memphis, Tennessee. Certificationnumber - 121239P.
Carly Dalton is an employee of MEMIC located in Portland,Maine. Certification number - 120652P.
Lisa J. Demeule works for Eastern Bank in Lynn,Massachusetts. Certification number - 115409P.
Steven L. Fawver is an employee of PCC Structurals locatedin Portland, Oregon. Certification number - 121035P.
Tangela A. Gallagher works for Extended Stay America inCharlotte, North Carolina. Certification number - 121773P.
Ryan Holland works for Medifast, Inc. located in OwingsMills, Maryland. Certification number - 121842P.
Jeffrey Hussien is employed at Excelitas Technologies inSalem, Massachusetts. Certification number - 121736P.
Hussein Said Jaber is employed at Weill Cornell Medicien -Qatar in Doha, Qatar. Certification number - 121767P.
Tyanne Jacobs-EL works for Castella Imports locatedin Hauppauge, New York. Certification number -121408P.
James Langton works for KRB Machinery Company locatedin Wrightsville, Pennsylvania. Certification number - 121471P.
Diane Limouzineau is employed at Club Med located inSingapore. Certification number - 1121800P.
Jesslyn R. McCutcheon works for PrimeSourceOPClocated in Winston Salem, North Carolina. Certificationnumber - 121648P.
Jayson Mills works for MVH Pharmacies in Augusta,Maine. Certification number - 121003P.
Paul Norris is employed at the State of Tennessee inNashville, Tennessee. Certification number - 121739P.
James David Nowell, Jr. is an employee of CampbellUniversity located in Buies Creek, North Carolina.Certification number - 121698P.
Cheryl R. Perez is employed at Mednax Services, Inc. locatedin Sunrise, Florida. Certification number - 121121P.
Ryan Petrilli is an employee of Filters Fast located in Monroe,North Carolina. Certification number - 121647P.
Jussara Philippet works for Extended Stay, America inCharlotte, North Carolina. Certification number - 121770P.
JoAnne Robichaud works for the Rutherford County Boardof Education located in Murfreesboro, Tennessee. Certificationnumber - 121711P.
Laraine Santiago-Martinez works for Transamerican AutoParts in Compton, Georgia. Certification number - 121784P.
Irene Scott is employed at Ithaca College in Ithaca, NewYork. Certification number - 121284P.
Libby M. Simmons works for the Dover School Districtlocated in Dover, New Hampshire. Certification number -121465P.
Anthony Simonetti works for Plex Systems located in Troy,Michigan. Certification number - 121258P.
Marvin Smith is employed at Hudson County CommunityCollege in Jersey City, New Jersey. Certification number - 120721P.
Scott Townsend works for Omron Oilfield & Marine inHouston, Texas. Certification number - 120304P.
Ionela Daniela Verzescu is employed at Standard GolfCo. in Cedar Falls, Iowa. Certification number - 121529P.
Linda Webster works for ControlAir, Inc. located inAmherst, New Hampshire. Certification number - 121738P.
Scott T. Weyandt works for Hart Precision Productslocated in Redford, Michigan. Certification number - 121494P.
Leone Zion is employed at Imperial Toy, LLC in NorthHills, California. Certification number - 119682P.
PROFESSIONAL PURCHASING 13 JULY/AUGUST 2016
Recently Certified
Certified Professional Purchasing
Manager (CPPM) Awards
Nicholas W. Anderson is an employee of the PacificResearch Laboratories in Vashon, Washington. Nicholas earnedthe CPP in March of 2012. Certification number - 113319M.
Scott Bater is employed at Lupin Pharmaceuticals, Inc.located in Baltimore, Maryland. Scott was awarded the CPPin December of 2015. Certification number - 121378M.
Lee Branch works for Hargray Communications inBluffton, South Carolina. Lee received the CPP in Marchof 2014. Certification number - 117264M.
Ben Bridwell is an employee of Sumitomo Metal Mining Pogoin Fairbanks, Alaska. Ben earned the CPP in May of 2015.Certification number - 114679M.
Fredrick B. Brown is employed at the Gulf Coast StateCollege located in Panama City, Florida. Fredrick was awardedthe CPP in January of 2016. Certification number - 117062M.
Julie Cameron is employed at iAutomation located in NorthAttleboro, Massachusetts. Julie was awarded the CPP inNovember of 2010. Certification number - 106148M.
Debra Diaz is employed at UnitedDC located in Houston,Texas. Debra was awarded the CPP in July of 2015.Certification number - 121144M.
Jennifer Dziedzic works for Bell Flavors & Fragranceslocated in Middletown, NY. Jennifer received the CPP inNovember of 2015. Certification number - 116683M.
Keith Fitzwater is an employee of Kor-Chem, Inc. inAtlanta, Georgia. Keith earned the CPP in November of2014. Certification number - 120488M.
Guillermo T. Fong works for Senninger Irrigation, Inc. inClermont, Florida. Guillermo received the CPP in Novemberof 2012. Certification number - 115903M.
Rebecca Glimsdal is employed at Gopher Sport inOwatonna, Minnesota. Rebecca earned the CPP inSeptember of 2015. Certification number - 95238M.
Terry Govostes works for Gerber Technology located inTolland, Connecticut. Terry received the CPP in January of2016. Certification number - 120938M.
Erika G. Jerez is an employee of Gonzaba Medical Groupin San Antonio, Texas. Erika earned the CPP in January of2013. Certification number - 115441M.
Bruce C. Lemon works for Alt-Tech, LLC in China Lake,California. Bruce received the CPP in September of 2015.Certification number - 121247M.
Denise A. Roy is employed at Gerber Technology inTolland, Connecticut. Denise earned the CPP in April of2015. Certification number - 117248M.
Charlene Fales Rubacha works for Gerber Technologylocated in Tolland, Connecticut. Charlene received the CPPin March of 2015. Certification number - 117247M.
Ryan Schmitt is an employee of The Shepherd ChemicalCompany in Norwood, Ohio. Ryan earned the CPP inJanuary of 2016. Certification number - 121486M.
Carlene N. Seaton works for Simpson Thacher & BartlettLLP in New York, New York. Carlene received the CPP inNovember of 2015. Certification number - 108036M.
Robert W. Seekford is employed at Wolseley IndustrialGroup in Point Comfort, Texas. Robert earned the CPP inMarch of 2014. Certification number - 119778M.
Joginder Singh works for Lupin Pharmaceuticals, Inc.located in Baltimore, Maryland. Joginder received the CPPin December of 2015. Certification number - 121379M.
Jodi Weier is an employee of Dufeck Manufacturing Co.in Denmark, Wisconsin. Jodi earned the CPP in August of2015. Certification number - 116981M.
Mimie L. Woods works for the City of Atlanta in Georgia.Mimie received the CPP in January of 2016. Certificationnumber - 121558M.
PROFESSIONAL PURCHASING 14 JULY/AUGUST 2016
Welcome New Company Members
Congratulations to the following new company members of the American Purchasing Society. Each organization appoints one or more
representatives to the Society and each company representative receives all the benefits of membership.
Andrew Adams, CPP, J.T. Wimsatt Contracting Co., Inc., Valencia, CA
Bobbi J. Allen, MD Building Products, Brooklet, GA
Patricia Arias-Brown, Hormel Foods, Vernon, CA
Susan Asato, MiraCosta Community College District, Oceanside, CA
Jeanette R. Bagcus, San Diego, CA
William J. Baker, F.L.Smidth Inc. - AFT, Evans, GA
Christi Balfour, CPP, CPPM, Tierney Brothers Inc., Burnsville, MN
Melissa A. Balzer, Accudyn Products, Inc., Erie, PA
Andrea Barkholz, Par Pharmaceuticals, Rochester, MI
Esmeralda Batista, Simpson Thacher & Bartlett LLP, New York, NY
Michael A. Bellflower, Vitamix Corporation, Middleburg Heights, OH
Beth M. Benke, Tech-Energy Co., Schertz, TX
Daniel Benton, Priefert Manufacturing Inc., Mount Pleasant, TX
Werner Berger, WB Management Consulting, Escondido, CA
Kajori Bhowmik, Apple, Sunnyvale, CA
Kelley Blow, Fiber Materials Inc., Biddeford, ME
Pamela Bowen, UIC Government Services, Lexington Park, MD
Joel G. Braddock, Krone NA, Inc., Germantown, TN
Thomas Brannick, Techmer PM, Clinton, TN
Tracy A. Brigner, Keller Logistics Group, Payne, OH
Eileen Brown, CPP, City of Flagstaff, Flagstaff, AZ
Elsie M. Burgess, Seminole State College of Florida, Lake Mary, FL
Leann Bush, CPP, Cherokee Regional Medical Center, Cherokee, IA
Di Ann Butkay, CPP, City of Flagstaff, Flagstaff, AZ
April Carlquist, UIC Government Services, Plano, TX
Brandon Carty, Blue Cross Blue Shield of Alabama, Birmingham, AL
Sarah Daly Caylor, CPP, 3north, Richmond, VA
Jenny Y. Chung, CPP, CPPM, Pier 1 Imports, Dallas, TX
Alex Cooper, Blue Cross Blue Shield of Alabama, Birmingham, AL
Michelle L. Czarnecki, Titan International, Inc., Urbandale, IA
Cynthia L. Daies, City of Winter Park, Winter Park, FL
Teresa Dayman, Cambridge International, Cambridge, MD
Krisha V. De La Fuente, Apple, Sunnyvale, CA
Martha A. DeLoge, Par Pharmaceuticals, Rochester, MI
Alysson DeTroy, SCS Direct, Inc., Stratford, CT
Luciana Dias, Apple, Sunnyvale, CA
Eric Dibble, CPP, Extended Stay America, Charlotte, NC
Michael DiBenedetto, Volunteers of America-Greater NY, New York, NY
Scott Dillingham, Apple, Sunnyvale, CA
Peter R. Duane, Avnet Inc., Chalfont, PA
Noel Emanuel, Simpson Thacher & Bartlett LLP, New York, NY
Andrew Engelson, CPP, CPPM, OTG Management, Brooklyn, NY
Janet P. England, Mondelez International, Portland, OR
Urban Peter Faria, CPP, Atlas Southeast Papers, Inc., Sanford, FL
Ciaran Farrell, Edge Adhesives, Fort Worth, TX
Steve Fawver, CPP, CGPP, Precision Castparts Corp., Boring, OR
Kristin A. Francavilla, City of Renton, Renton, WA
Erich J. Frye, Howard Industries, Ellisville, MS
Sharon Gage, Natoli Engineering, St. Charles, MO
Tangela Gallagher, CPP, Extended Stay America, Charlotte, NC
Ana M. Garcia, Chula Vista, CA
Karen M. Gerber, Middletown, RI
Maria Petra Goldstein, Caterpillar, Naperville, IL
John Gonsalves, Butler Automatic Inc, Middleborough, MA
Apio, Guadalupe, CA
Apple, Sunnyvale, CA
Blue Cross and Blue Shield of Kansas, Inc., Topeka, KS
Blue Cross Blue Shield of Alabama, Birmingham, AL
Cambridge International, Cambridge, MD
Cincinnati Public Schools, Cincinnati, OH
Coeur Rochester, Lovelock, NV
Edge Adhesives, Fort Worth, TX
Education Management Solutions LLC, Exton, PA
Extended Stay America, Charlotte, NC
Fitbit, San Francisco, CA
Formel D USA Inc., Greenville, SC
Great Lakes Environmental & Infrastructure, Rocklin, CA
Greenway Health, Apollo Beach, FL
Howard Industries, Ellisville, MS
HP Hood LLC, Lynnfield, MA
Kamco Industries, Inc., West Unity, OH
MaltHandling.com, LLC, Chicago, IL
MiraCosta Community College District, Oceanside, CA
Natoli Engineering, St. Charles, MO
Par Pharmaceuticals, Rochester, MI
Pedernales Electric Cooperative, Inc., Johnson City, TX
PL Developments LLC, Lynwood, CA
Red Hawk Casino, Placerville, CA
Rehabilitation Institute of Chicago, Chicago, IL
Rumpke Waste & Recycling, Cincinnati, OH
Spancrete, Valders, WI
St. Louis Public Schools, St. Louis, MO
Sterling Global Operations, Lenoir City, TN
Switch SUPERNAP, Las Vegas, NV
The Lighthouse for the Blind, Inc., Lakewood, WA
West Valley-Mission Comm. College Dist., Saratoga, CA
New Individual Members and New Company Representatives
Welcome to the following individuals and company representatives. Please take advantage of all the benefits of membership. Please visit the
Members Only area of the Society’s website at www.american-purchasing.com.
PROFESSIONAL PURCHASING 15 JULY/AUGUST 2016
New Individual Members and New Company Representatives
Continued
Welcome to the following individuals and company representatives. Please take advantage of all the benefits of membership. Please visit the
Members Only area of the Society’s website at www.american-purchasing.com.
Evelyn D. Goodger, Osburn Hessey Logistics, Hernando, MS
Donald Gotsos, Elim Christian School, Palos Heights, IL
Kim Gould, Education Management Solutions LLC, Exton, PA
Carol Hagerich, Martin-Baker America, Inc., Johnstown, PA
Kevin R. Hale, National Academy of Sciences, Washington, DC
Hayley K. Hammond, DepotStar, Inc., Saint Francis, MN
Jason W. Harper, Sallyport Global Holdings, Minonk, IL
William E Harris, CPP, Aldersgate Retirement Community, Charlotte, NC
Moustafa O. Hassan, Al-Inma Medical Services, Riyadh, KSA
Anna Hassay, UIC Government Services, Lexington Park, MD
Catherine W. Hawley, General Dynamics, Savannah, GA
Daniel E. Hearne, CPP, Marble Falls, TX
James G. Hernandez, CPP, Planned Parenthood of Illinois, Chicago,IL
Sheri L. Hinton, CPP, Flowery Branch, GA
Ryan Holland, CPP, Medifast, Owings Mills, MD
Jeffrey L. Ice, Sandia National Laboratories, Albuquerque, NM
Stephanie Imthurn, Blue Cross & Blue Shield of Kansas, Inc, Topeka, KS
Mohamed Ismail, CPP, CPPM, CPPC, Dubai UAE
Hussein Said Jaber, CPP, CGPP, Weill Cornell Medicien-Qatar, Doha
Terrance Jones, Fashion Glass & Mirrors, Grand Prairie, TX
Nicole Kennedy, Magnetic Inspection Lab., Inc., Elk Grove Village, IL
James M. Kerbey, West Valley-Mission Com. College Dist., Saratoga, CA
Breanna L. Kirtley, MD Building Products, Woodburn, OR
Timothy Krukoski, Kaman Precision Products, Middletown, CT
Bradley S. Kuriger, Noshok, Inc., North Ridgeville, OH
Vanessa Lauchaire, Broward County Pub. Schools, North Bay Village, FL
Shannon Letts, Walmart, Bentonville, AR
Marc D. Lloyd, Natoli Engineering, St. Charles, MO
Mark Ludes, Filters Fast LLC, Monroe, NC
Kevin P. Mackall, Entrematic, Kernersville, NC
Sharon K. Mahan, Sterling Global Operations, Lenoir City, TN
Danielle Mamede, Coconut Creek, FL
Diane Manganaro, HP Hood LLC, Lynnfield, MA
Natalia Martinez Lugo, PREPA, San Juan, PR
W. Tony Masters, CPP, O’Neal, Inc., Taylors, SC
Lauren Mayock, COCC, Southington, CT
Jesslyn R. McCutcheon, CPP, PrimeSource OPC, Winston-Salem, NC
Eric McGaw, Par Pharmaceuticals, Rochester, MI
Barry McInturff, Cambridge International, Cambridge, MD
Kelly McRae, United States Olympic Committee, Colorado Springs, CO
Carlos Mendez, Kaman Precision Products, Middletown, CT
Jessica Menke, Rumpke Waste & Recycling, Cincinnati, OH
Harold K. Midgett, Jr., CPP, Adams Group, North Port, FL
Mark Miller, CPP, CGPP, Extended Stay America, Charlotte, NC
Jayson Mills, CPP, MVH Pharmacies, Augusta, ME
Ken Miracle, Monti Inc, Cincinnati, OH
Heather Moss, Par Pharmaceuticals, Rochester, MI
Megan Munoz, CPP, Greenway Health, Apollo Beach, FL
Vincent Natoli, Natoli Engineering, St. Charles, MO
Robbin Nauman, CPP, CHS, Laurel, MT
Vance Nieweg, Natoli Engineering, St. Charles, MO
Michelle K. Noorman, The Tech Group, Walker, MI
Michael J. Norris, Omniticket Network, Orlando, FL
Paula Norris, CPP, State of Tennessee, Nashville, TN
James David Nowell, Jr., CPP, Campbell University, Buies Creek, NC
Linda Olone, Global Convergence Inc., Clearwater, FL
Tracy Orner, New Pig Corporation, Tipton, PA
Donna Orzano-Walker, Formel D USA Inc., Greenville, SC
Melisa Peck, PSU-Applied Research Laboratory, State College, PA
Byron B. Peltier, Samson, Lafayette, LA
Thomas A. Peters, Par Pharmaceuticals, Rochester, MI
Ryan,Petrilli, CPP, CPPM, Filters Fast LLC, Monroe, NC
Jussara Philippet, CPP, Extended Stay America, Charlotte, NC
Chanda Price, CPP, Southern Methodist University, Dallas, TX
Rekha-Leigh Punch, Stamford, CT
Jennifer E. Quinones, CPP, CPPM, Martinsburg, WV
Austin W. Rash, HF Mixing Group, Topeka, KS
Atmar K. Robert, First Source Supplt, LLC, Houston, TX
JoAnne Robichaud, CPP, Rutherford Cnty Sch. Board, Murfreesboro, TN
Lisa Rodenberry, Atrion Medical Products, Inc., Arab, AL
Andrew Rodriguez, ClarkDietrich, Dallas, TX
Melissa A. Rogers, Tyonek Manufacturing Group, Inc., Athens, AL
Terry Rosenfeld, Filters Fast LLC, Monroe, NC
Marcus Rucker, Franklin University, Columbus, OH
Laraine Santiago-Martinez, CPP, Transamer. Auto Parts, Long Beach, CA
Joshua J. Schulz, CPP, A&B Packing Equipment, Hartford, MI
John Schwartz, CPP, CPPM, ADP, Roseland, NJ
Debbie Self, Blue Cross and Blue Shield of Kansas, Inc., Topeka, KS
Kim Simonds, MiraCosta Community College District, Oceanside, CA
Audrey Sinopoli, Gensler, Denver, CO
Richard Sipmeier, Cambridge International, Cambridge, MD
Tyler Smith, Gensler, Denver, CO
Jonica J. Smith, University of Utah Health Care, West Jordan, UT
Yvette Stevens, Stemilt Growers, Inc., Wenatchee, WA
Elizabeth A. Stewart, American Cancer Society, Marietta, GA
Michelle Stone, CPP, Rumpke Waste & Recycling, Cincinnati, OH
Peggy Stroika, MiraCosta Community College District, Oceanside, CA
Darrin O. Swait, Central Plains Cement Co., Tulsa, OK
Nicole A. Sweitzer, CPP, Oven Industries Inc., Dover, PA
Kay K. Syed, CPP, School Board of Orange County, Florida, Orlando, FL
Olga Symoshyn, Keysight Technologies, Roseville, CA
Brandon L. Taylor, Sonnax Industries Inc., Bellows Falls, VT
Orethia Terry, City of Houston/P.W.E., Houston, TX
Megan Thorne, CPP, Glacier Fish Company, Seattle, WA
Angela Thurston, Caesars Entertainment, Henderson, NV
Jennifer Turgeon, HP Hood LLC, Lynnfield, MA
Joseph Vasoli, Hatboro, PA
Samuel Velez, CPP, Institute for Family Health, Woodhaven, NY
Cary Vincent, CPP, Kaiser Permanente, Pleasanton, CA
Catherine A. Weis, Kettering Health Network, Dayton, OH
Christine Wholley, Town of Salem, NH, Salem, NH
Shanna R. Williams, Switch SUPERNAP, Las Vegas, NV
Debbie L. Wilson, Cadman, Inc., Redmond, WA
Glenda J. Wiltz, Samson, Lafayette, LA
Jean M. Winkelman, Derichebourg Recycling USA, Inc., Humble, TX
Diane Wylie, Kaman Precision Products, Middletown, CT
PROFESSIONAL PURCHASING 16 JULY/AUGUST 2016
Over the past decade organizations have
faced relentless customer demand for
better value at less cost, individual
customization, greater choice, faster
delivery, higher quality, exceptional
service, and more recently – increased
environmental and social consciousness.
The organization’s weapon of choice to
address this increasing demand has been
the supply chain. However, as the supply
chain footprint changed (e.g. outsourcing,
off-shoring, and customer/vendor
empowerment) so did the organization’s exposure to uncertainty.
Organizations were taken by surprise since this exposure was
unanticipated, complex and beyond their ability to manage.
Organizations and societies are at much greater risk of systemic
failure because of the massive interdependency throughout global
supply chains. Single Point of Failure: The Ten Essential Laws
of Supply Chain Risk Management uses analogies and dozens
of case histories to describe the “risk parasite” that infects all
supply chains while revealing methods to neutralize that parasite.
Retail price is $39.95, however it is available to American Purchasing
Society members for only $35 plus shipping and handling.
Single Point of Failure
By Gary S. Lynch
Purchasing Books Offered
By The Society
Operating supplies account for important
and significant expenses of running any
organization. A new book, Managing
Indirect Spend, by Joe Payne, William R.
Dorn, Jr. and other contributors thoroughly
addresses this subject. A few of the many
covered topics are data collection and
analysis, conducting research,
negotiations, strategic sourcing, and
supplier collaboration. Chapters are
devoted to the purchase of office supplies,
telephone services, and the use of carriers
for small packages. This book is highly
recommended for both purchasing managers and MRO buyers
for all types of organizations. Anyone interested in hearing
today’s business jargon will be rewarded by the use of such words
or phrases as indirect spend, strategic sourcing, scorecarding
suppliers, continuous improvement, and leveraging supplier
feedback. Retail price is $95, however it is available to American
Purchasing Society members for only $85.50 plus shipping and
handling.
Managing Indirect Spend
By Joe Payne, William R. Dorn, Jr.
The American Purchasing Society offers more than twenty
books on purchasing, supply chain, and procurement-related
subjects. All of these books can be purchased through our
website at www.american-purchasing.com.
As a member make sure to log in to your member account
before shopping so you receive the discounted member prices.
Special offer! Use the promotion code BDJA16 when you
checkout with your book order and receive an extra 15% off
your order. Offer good through September 15, 2016.
New fourth edition. This how-to book is
truly the most practical Purchasing
Handbook available to the professional-
minded Purchasing Agent/Buyer. It is
intended to be used by the Buying Agent
of a Small Business (or Municipality) as a
working guide, not a textbook. It contains
every aspect of buying and purchasing
management in 50 chapters, each purposely
short and to the point. Written by Robert J.
Nahabit, CPP, CPPC, who has been
teaching purchasing seminars for over 30 years. It is a well-indexed
true handbook of real-life, everyday solutions for the Buying
Agent. It is the only “Handbook” on the market that compares
and details more than 15 certifications available to the buyer. The
Handbook includes sample letters which can be used as templates
to cover most types of communications needed with your
suppliers, sample forms to simplify your job and an illustrated
purchasing glossary, and best of all, it contains the most useful
information-packed Appendix available to the purchasing
community. This Appendix contains everything from World
Voltages to Incoterms, Conversion Factors to Weights of Water,
Steel Plate, and Common Building Materials. It even has a list of
Electoral Votes by State. It is published in a handy 8 1/2 x 11 spiral-
bound format, packed with 284 pages of vital purchasing
information. No other published purchasing handbook is as useful
and user friendly to the buyer. Published by Nahabit & Associates,
Inc., a small business located in Austin, TX. 100% written,
published and printed within the USA. ISBN number: 978-0-
9845049-2-3. Members $75 and nonmembers $84 plus shipping
and handling.
The Purchasing Handbook for Small Business Fourth
Edition
By Robert J. Nahabit, CPP, CPPC
PROFESSIONAL PURCHASING 17 JULY/AUGUST 2016
Timeless stock-keeping fundamentals meet up-
to-the minute technologies to optimize
efficiency and drive profits! Inventory
management is about more than counting what
you’ve got. It’s about understanding business
realities and making decisions that balance
current demand with future needs—while
keeping overhead and operating costs to a
minimum. Now in its Second Edition, Essentials
of Inventory Management gives inventory
professionals the information they need to
maximize productivity in key areas, from
physical stock issues to problem identification
and resolution to technologies like RFID and other automated inventory
mechanisms. Perfect for novice and veteran managers alike, this ultra-
practical book covers topics such as: Forecasting and replenishment
strategies • Differences between retail and manufacturing inventories •
Materials requirements planning and just-in-time inventory systems •
Simple formulas for calculating quantities and schedules • Management
of inventory as a physical reality and a monetary value • Supply chain
risk management. Complete with detailed examples, handy tools, and a
revised and expanded chapter analyzing “Why Inventory Systems Fail
and How to Fix Them, this nontechnical yet thorough guide is perfect for
both instructional and on-the-job use. Nonmember price $39, Member
price $31.99 plus shipping and handling.
Essentials of Inventory Management
By Max Muller
Books Recommended
By The Society
This book assists the reader and provides value
in three ways: First, model contract language
in the form of commercial terms and conditions
are provided. Second, the contract language is
annotated with explanations and suggestions
for each of the key articles. Third, summaries
of actual litigated cases are provided in
synopsis form. This triple combination of
language, annotations and key case synopses
all work together to instruct and enlighten the
reader. This book also facilitates the creation
of a project or transaction specific Contract
Management Plan (CMP). A CMP is essentially
an internal document prepared by either the Company or the Contractor
for use by their respective employees in managing the transaction that is
the subject of the Contract. The CMP is not shared with the other party
since it deals exclusively with the internal considerations and mechanics
associated with one party’s administration and management of its rights
and responsibilities under the Contract. The CMP supplements the
Contract and also permits a documented methodology for applying lessons
learned from past transactions. Nonmember price $80, Member price
$70 plus shipping and handling.
Model Contract Terms And Conditions With
Annotations and Case Summaries
By X. Paul Humbert, ESQ. and Robert C. Mastice, MSME
This book provides a survival manual for
anyone invo lved in the c ra f t ing ,
structuring, negotiating, supporting or
managing contracts involving commercial
transactions of goods, services or both. It
blends the practical with general legal
principles and highlights best practices for
supply chain professionals and anyone
else involved, directly or indirectly, with
the generation or management of contracts
from cradle-to-grave. Even commercially
wise and sophisticated organizations can
be untrained and unaware of certain gaps and traps in the
management of their contracts. This book addresses those pitfalls
and provides lessons learned and guidance that are not typically
taught at the college or even graduate school level. Experience
can be hard and expensive to come by and this book provides a
concentrated dose of experience that immediately raises the
reader’s level of sophistication and awareness for gaps and traps
while providing practical solutions to pitfalls that can haunt
any organization. Left unchecked, these pitfalls can lead to
dysfunction and confusion; both of which can be an expensive
proposition in today’s competitive and uncertain economic
environment . Who should use th is book? Supply Chain
Management Professionals, Risk Managers, Insurance Experts,
Project Managers, Purchasing Agents, Contract Administrators,
Executives and any business or technical professionals who are
involved with developing, managing or implementing projects,
purchases or any complex transaction or procurement where
cost, schedule and scope certainty are important. What does
this book cover? This book covers how the relationship of the
parties affects commercial transactions and addresses the
importance of upholding the integrity of the process and the
contract by understanding key supply chain best practices. The
book focuses on contracting strategies and approaches including
how to structure requests for proposals and instructions to
bidders as well as key considerations in pricing and pricing
adjustments , r isk management tools and techniques, the
importance of defining the deliverables and outcomes, negotiation
strategies and techniques, negotiating warranties and remedies,
applying leadership and influencing skills to the process, how
to implement sound change management as well as capturing and
applying past lessons learned. In addition, special attention is
given to the importance of sound “kick off” and “close out”,
including termination for cause or convenience techniques and
other best practices. Nonmember price $115, Member price $105
plus shipping and handling.
Contract and Risk Management For Supply Chain
Management Professionals
By X. Paul Humbert, ESQ. and Robert C. Mastice, MSME
PROFESSIONAL PURCHASING 18 JULY/AUGUST 2016
Lesson 178 Fundamentals
All part of the job
Questions From Members
When Should We
Obtain Bids?
QUESTION:What is the suggested minimum dollar amount before com-petitive bidding should be recommended or required? In otherwords, what is the rough spend level where savings achievedfrom competitive bidding is greater than the value of thetime and effort spent to obtain bids?ANSWER:
It seldom pays to go out for bids on every purchase
regardless of the amount or type. The time to issue requests
for bids and then collect and analyze them may exceed any
savings obtained. The ideal time to request bids differs from
organization to organization depending on the salaries or
labor rates assigned to the purchasing staff and the
availability of buyers that are not otherwise occupied.
Well-managed purchasing operations usually obtain new
bids annually for items used in production where the purchase
amount exceeds at least $1,000. Many companies only obtain
bids for annual purchases that are much greater than that.
Most companies have a policy of obtaining at least three
bids for new items never purchased before. It pays to obtain
bids for high cost capital equipment items which are seldom
purchased on a regular basis.
Savings obtained through the bid process alone depend
on the commodity, the amount being purchased, the
frequency of purchasing the same product, and the
frequency of obtaining bids. On average, at least a ten
percent saving can be obtained when bids for similar items
have not been obtained for a year or more. However, some
buyers have reported savings of over 50% for some
items.vvvvvSend your purchasing or job related questions to the Editor, Profes-
sional Purchasing, American Purchasing Society, P.O. Box 256, Au-
rora, IL 60507 or Email to propurch@propurch.com.
Understand The
Salesperson’s Point Of View
Don’t resent salespeople who seem to be
uncooperative or who seem to be only interested
in what they can get. The only difference between
such salespeople and all other salespeople is they can’t hide
their feelings very well.
Of course good salespeople will try to help the buyer and
the buyer’s organization if they can do so without unduly
reducing their own benefits or the benefit of their own
organization. But the buyer must keep in mind that the
salesperson’s objective is to make a profit, either short-term
or long-term. The more profitable the salesperson’s results
for the supplier, the better they will be regarded in terms of
salary and/or commissions.
Many, if not most salespeople have no authority to reduce
prices without approval of their management. Prices may
be set by policy. Prices may be established in whole or in
part by the supplier’s cost account personnel.
Some salespeople have a certain latitude to adjust prices
or certain terms by a small amount without further
authorization, but they usually require further approval when
the reduction in price or improvement in terms for the buyer
exceed those established guidelines.
The lesson here is to make sure you understand the
authority of the person you are dealing with. Understand
his or her point of view. A reduction in a price may affect
the salesperson’s bonus. Naturally, he or she is not likely to
give ground when it reduces income, unless they will lose
even more by not getting the sale altogether.
All of this being said, many products have inflated prices
that allow for negotiation. The supplier is only too glad to
take orders at those inflated prices accepted by a naive
buyer. Both salesperson and supplier will say to themselves,
why not take an exorbitant profit if you can get it? Don’t
blame the salesperson or the supplier, blame yourself if you
fail to shop the marketplace and compare costs with the
competition. Caveat emptor - let the buyer beware.
The buyer can get a cost reduction even when prices
are firmly established by the supplier’s accounting or
management. To do so, extraordinary measures may be
required. One way is to offer bigger quantities or a long-
term contract. Another method is to make sure you are
dealing with the person authorized to make the change. That
person may be a sales manager, a vice president, or even
the president of the company.v“Stop feeling guilty. Our spells work. Our potions are
effective. Why shouldn’t we live well?”
PROFESSIONAL PURCHASING 19 JULY/AUGUST 2016
Please print or type clearly.
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• Consulting on specific purchasing issues • Much, much more
Please enroll me as a member of the American Purchasing Society and provide all of the benefits described above.
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If not a member and you would like to receive all issues of Professional Purchasing
and all of the Society’s benefits, join at our website at
www.american-purchasing.com, or send this form via fax or mail to:
APPLICATION FOR MEMBERSHIP
AMERICAN PURCHASING SOCIETY, INC.North Island Center, 8 E. Galena Blvd., Suite 203, Aurora, IL 60506
P.O. Box 256, Aurora, IL 60507
Telephone (630) 859-0250 FAX (630) 859-0270
PROFESSIONAL PURCHASING 20 JULY/AUGUST 2016
“Google alone has nearly a million serversdistributed all over the world. Each server sucksup a lot of energy - the big data centers use thesame electrical supply as a town of 80,000people...”
“Chilled” (2015) byTom Jackson
Buyers Can Initiate
Make/Buy Studies
Today's Tip
It is more usual for cost accountants or operating
managers to initiate make/buy studies than for buyers
to do the same. Managers of manufacturing operations
may not be eager to raise the make or buy question because
the out-sourcing results may reduce the size of their
operation and weaken their responsibilities. Purchasing
managers may also be reluctant to raise the question since
changing purchases to inside production may reduce their
responsibilities. But it is general management and cost
accounting people who are directly concerned about
reducing cost and maximizing profits. Thus they are the
ones that usually bring up make or buy studies.
However, dedicated buyers and purchasing managers
are also concerned about cost, and they are in an excellent
position of evaluating the pros and cons of outside sourcing
and comparing it to in-house production. The buyer must
gather information internally and from suppliers to do the
analysis properly. More than just apparent cost is involved.
Recently, the Society was asked for information to
conduct such an analysis. It included a request for a
template to make the job easier. It is not likely that a
template would fit all companies or all products.
The best way to analyze make versus buy is to list all
the costs for manufacturing the product side by side with
all the cost for the purchase of the product. Those costs
include the cost for space, the price for raw materials, and
components, the cost of any tooling involved, the cost of
setup, and the cost for all labor involved. The number of
hours for each operation and the rate for each type of
work must be considered. Using Excel or any other type
of spreadsheet program is very helpful.
The quantity to produce is an important input. The
economic amount needed for one company may be too
large to justify production. The tooling required for small
production amounts may not justify the investment
An important make or buy consideration is the
availability of technical employees for the work involved.vvvvv
The American Purchasing Society’s recent online
survey asked business buyers and purchasing
managers how often other suppliers’ prices are
checked for items that have been purchased from one very
good supplier for many years. Here are the results.
Frequency Of Checks Percent of
For Competitive Prices Respondents
Longer than annually 13.74
or only when necessary
Annually 22.3
More frequently than annually 63.9
Note that the question pertained to getting bids in cases
where good suppliers were providing the same product
for years. Many purchasers believe it is a costly waste of
time to get new bids if the supplier is doing a good job and
has been competitiive in the past. They also believe that
asking suppliers for new bids too frequently makes the
suppliers reluctant to give out their proper prices when
they feel there is little real chance for the business.vvvvv
When Are Bids Obtained
From Longtime Suppliers?
Easily Convert One
Measurement to Another
It is commonly necessary to convert one type of
measurement to another. You can do this easily using
the Conversion Calculator on the American Purchasing
Spciety’s web. Simply go to the Society’s web at
www.american-purchasing.com, click on Resources near
the top of the screen, then click on the Conversion
Calculator in the drop-down window. Look near the bottom
of the screen and click on the type of conversion you want,
such as Area, Bits & Bytes, Density, Energy, Length,
Volume, etc. Then enter the quantity and the units of
measure that you wish to covert. Finally, enter the units of
measure you want and instantly it will show the actual
quantity that you will have with the new units of measure.vvvvv