IN RESIDENCE WEEK 2009

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Permalink Reply by Patrick Fisher on June 1, 2009 at 9:53am

David,

I echo your feelings. I had a chance to talk with Linda Craig and my main comment was "why an IRW?". If these topics are to be mandatory, then why not make them as such but be part of the seminar credits. As well having a six day away seminar like this so close to the exam really just took away from my study time.

Also, I was hoping for more from the study sessions. Our correspondence for attending the IRW stated that the study sessions would be open forum and students should bring their questions. Over the course of the 4 sessions I can't remember one question being taken at random from the audience. By 10pm I don't feel like standing in a line-up to get 60 seconds of an instructors time when I may need 5 - 10 minutes. At lot of it was the instructors telling you how to prepare. Folks, if you haven't already been studying, these tips aren't going to help much at this point.

All in all, feel that are comments will fall on deaf ears since the format is being revised anyway.

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Permalink Reply by David on June 1, 2009 at 11:39am

Patrick -

Thanks for your response. I agree at least its over. PMAC has a chance to make it better.

How's your studying program going? Where are you with it? Confident?

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Permalink Reply by Jon Hansen on June 1, 2009 at 10:07am

Regarding risk, I would like to direct you to last week's segments on PI Window on Business (http://www.blogtalkradio.com/Jon-Hansen).

On May the 26th 90-minute Special titled (For Want of a Nail: The Pandemic Effect), we welcomed guest Nick Kelley, who is the lead researcher from the University of Minnesota's Center for Infectious Disease and Policy (CIDRAP) to discuss the risks to critical supply chains as a result of a pandemic - WHO indicated that a pandemic is imminent, and Kelley's research has cited several gaps in organizational supply chains both domestically as well as internationally.

On the May 28th regular broadcast titled (Securing Your Supply Chain) the "everyday" risks to organizational supply chains was discussed. This 45-minute segment also referenced a number of studies including a 2006 McKinsey Report that indicated amongst the main risks organization's face is in the area of labor, commodity availability and pricing and supplier stability.

The show also covered practical steps to address these areas. What was interesting is that while two-thirds of all executives surveyed indicated that there are imminent risks to their companies' supply chains, only 16 percent believed that their organizations had taken appropriate action to address the referenced "weak links."

In terms of your overall question,in the May 21st second of a two-part series titled "Is The Traditional Association Model Dead?" (http://www.blogtalkradio.com/Jon-Hansen/2009/05/21/Is-The-Tradition...), we are joined by a guest panel of experts to discuss the ongoing viability and relevancy of current curriculum's of many of the "traditional" associations like ISM and PMAC. It was a very interesting segment. (Note: the first segment aired on April 9th - http://www.blogtalkradio.com/Jon-Hansen/2009/04/09/Is-The-Tradition...).

All-in-all, the questions you are posing reflect a general concern on the part of procurement professionals throughout North America as well as overseas.

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Permalink Reply by Jorge Alvarado on June 2, 2009 at 3:52pm

All depends on what were the conditions under which you went to Toronto.
In my case, I had to pay for the In residence Week and take one week vacation to go there, so I was more interested in what I could learn and how much I could network

The 4 hour seminars were too little to say I learnt something, I have learn more by reading articles about SM that are in the internet or in magazines. By the way, the subscription to the Journal of SM (from the ISM) costs only USD 129 per year and one year has way more information (and better explained) than what we got in one week in Mississauga (for CAD 3,400). From the learning point of view, this experience was very poor.

As networking, you can meet people but again, I meet more people in each monthly dinner at the Calgary PMAC meeting than I did each day in Mississauga. Cost per dinner in Calgary is CAD 30, multiplied by 5 equals CAD150.00 (way less than CAD3,400). From this point of view, it would have been a better idea three days of activities (Th, Fr, Sat) for members to socialize but that requires some imagination to plan the activities.

At least, having exercises to work together would help but We only did one, the first Sunday, (only integration exercise in the whole week).

The objectives of the In-Residence week is:
Integration and application of knowledge gained throughout the accreditation program.

Did they miss the objective when they developed the program for the In-residence week?

Was not this In-Residence program developed when there was not Internet (Not LinkedIn, etc) in the world? The world has changed but the In-R is a reminder on how the relationships were built 20 years ago.

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Permalink Reply by David on June 2, 2009 at 7:45pm

I agree that one is more engaged if one is paying the piper. But, as you said if was rather a traditional application of an event, rather than a fully engaging creative, professional approach to a learning week.

PMAC really in my opinion wasted a great opportunity to become respected and enhanced by doing little outside the box than what was offered. ACE (above customer expectations) - is what the teach/preach as a profession - but fail to bother to offer to their OWN paying members.

Most paying or sponsored attendees were disappointed of this PMAC "event". Both in the level and delivery of learnings, accommodations, food and a complete lack of creative & practical practices of hosting such an event.

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Permalink Reply by Kelvin Lui on June 2, 2009 at 11:47pm

In my opinion, this IRW is a gong show. Most seminars are basically the condensed version of some of the 2-day seminars, or it's consultant trying to advertised. The food was worse than McDonalds (especially the 2 BBQ dinner we had, and the catering staff refused to give me a second piece of burger), the accomendation was OK. Walking out from that IRW, I did not learn anything purchasing wise, but I did learn a lesson to avoid this type of event in the future.

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Permalink Reply by Jon Hansen on June 3, 2009 at 12:32pm

These are all very relevant comments, that as I had indicated previously reflect the growing consensus across the profession in general.

The following is an excerpt from an article I just posted titled "Upcoming Special “21st Century Leadership: An Evolutionary Profile”...."

Based on the above, the purchasing department’s “territory” or domain is being infringed upon by external (and internal) forces of change that threaten to leave many indigenous professionals out in the cold. And while traditional purchasing associations scramble to update their current education methodologies in an effort to deliver relevant content that is reflective of a dynamically changing and increasingly globalized market, in many instances purchasing professionals feel detached and even abandoned by a profession they did not necessarily choose to be in so much as “fell into.”

We are indeed going through a period of dynamic change.

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Permalink Reply by David on June 3, 2009 at 10:15pm

Jon - your rather in my opinion a little over the top in terms of "procurements" or a purchasing agents (Buyers) role in the 21st century.

I have been in the profession for over 25 years, in various industries, including small and large firms and the general theme - has always remained, and will into the next century - COST SAVINGS!

50-60% of what we do (should) be commodity team cost savings, the balance is administrative, technical overseeing, interpersonal skills strength and organizational in nature.

I see no big changes coming. Other than maybe a little more respect and engagement at the top.

The basics in my mind, only (begins) having a CPP. (The rest are just clerks in my experience.)

It remains to be seen (even with a CPP) if one truly engages with the profession and industry. I have met many so called - CPP's - that no very little about running business, let along having the interpersonal skills that cannot be easily taught!

Not much has changed but maybe a new generation of new players.

I suggest they need some time to "get with the program", but unfortunately they will take much longer jumping from one job/firm to another!

Interesting thoughts though - try a few more on me.

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Permalink Reply by Jon Hansen on June 3, 2009 at 10:38pm

But what are cost savings . . . Especially since 73% of all savings claimed by the purchasing department are routinely discounted as being invalid by finance.

The following is an excerpt from an article I wrote on January 31, 2008 titled "Bridging the Communication Gap Between Finance and Purchasing," that should serve has a cautionary beacon to any purchasing professional who continues to reference outdated metrics such as cost avoidance.

A May 4th, 2006 article titled How to Speak Like a CFO stressed that "Too often, finance executives in Corporate America simply don't believe that purchasing departments are really bringing in the savings they claim. That may be because finance and purchasing don't speak the same language."

Here are some additional findings from the Aberdeen study that may surprise you:

- Less than 20% of CFOs consider the work of CPOs and their staffs as having a very positive impact on competitiveness.

- On average only 46% of CFOs feel that the procurement team has contributed to enterprise growth.

- Only 57% of CFOs feel that procurement contributes to enterprise profitability.

Against this backdrop of miscommunication and misunderstanding, it is therefore imperative for the purchasing professional to both recognize and understand the financial objectives of the finance department as these will almost always reflect the primary interests of senior management.

The article went on to highlight areas upon which a purchasing professional should focus, which are as follows:

Along theses lines, and according to Robert Rudzki, president of Greybeard Advisors and co-author of Straight to the bottom line, here are the five critical finance terms:

1. ROIC (Return on Invested Capital): earnings divided by the total capital invested in the business (long term debt plus stockholder equity)

2. Cost of Capital: the weighted average “cost” of debt and equity. It represents what you must earn to, minimally, cover the expectations of your debt holders and stock holders

3. EVA (Economic Value Add): if ROIC is greater than Cost of Capital, then EVA is positive (you are adding value to the organization). If ROIC is less than Cost of Capital, then value is being destroyed and - absent substantial corrective action - the demise of the enterprise is just a matter of time

4. EPS (Earnings per Share): the net income divided by the # of common shares outstanding. Typically calculated on a quarterly and annual basis.

5. P/E Ratio: The ratio of the common stock price to the annual earnings per share. Companies/industries typically “enjoy” certain P/E ratios, therefore, increasing the E (earnings) often directly equates to a higher stock price.

The two “biggees,” says Rudzki, are ROIC and EPS. Those two concepts drive C-level because they are what Wall Street and bankers are interested in. ROIC and EPS are the ultimate “report card” of senior management.

If your course material is not taking these as well as other factors into account, you will be stuck in a functional versus strategic role with the former being viewed as being more readily expendable, especially in a tough economy.

Or as one senior executive who participated in a 2007 CPO Agenda round table put it, “one strategic business thinker with the right skills and capabilities is worth 10 or 12 of your normal, run-of-the-mill purchasing people.”

While I appreciate your comments, all indications in an increasingly globalized market tend to disagree with your point of view.

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Permalink Reply by David on June 4, 2009 at 9:59am

Jon - While I do not disagree that "Upper Management" have "traditionally" not engaged "the purchasing department", in upper level strategic (aggregate) planning. And that purchasing was relegated to so called "clerical" role.

That has been changing over the past 15 years or so. In North America (NA)

Your American Studies, typically does not take account the European experience.

In Europe they have been "strategically engaged" in procurement as a vital, and strategic and necessary resource for bottom line savings, commodity team buying and supplier partnerships for many years, North America is frankly behind.

This is not news to me.

e.g In Germany they are 20 years ahead in terms of recycle, reuse, energy and public transportation.

SUDDENLY now - N.A is experiencing increase costs in fuel, commodities & environmental legislation, Government legislation, neglected mass transit infastructure, global competition & the general higher costs of doing business, has become incubent to "change our ways" of doing business (across the firm) - not just in procurement.

"The "firm" is now seeing that transportation costs, commodity prices, hte cost of inventory = ROA, and getting the "best value" from procured goods & services - helps the botton line.

Profit Leverage Effect- is now suddenly "critical", because there are NO Sales! Or much lower margins!

I would suggest - The days of the "greety 90's are over". When profit margins were high, and costs were not managed as closely.

Additionally; I would suggest the new cult of "MBA's" and accountants installed in most companies as financial "stewards" of accounts payable (many installed as CEO's). They are there not only for an "image" for Wall Street bond holders for ethical, political reasons. But they will be "naturally" overly concerned with the balance sheet and driving shareholder value.

But, frankly are very poor leaders of companies in the long term. i.e in communication, what the company actually does (i.e what they make) "market trends", employee engagement, loyality and long term strategic development.

All they concern themselves with is credit and debts, and they only make decisions based on that. Forget getting any more decisions than that. So, naturally they NOW need purchasings assistance. Since we are also the "stewards" of A/P.

Spin in as you see fit, but the bottom line is still for purchasing to deliver "cost savings", but this time its TCO (from commodity to landfill) This is what the "accountants" in upper management must now have a plan for. But, they are lack the knowledge, experience and decision making interpersonnal skills to do so.

Purchasing has now the mandate, the task(s) of bringing not only commodity type savings but a fully integrated supply chain strategy to meet operational needs at the lowest bottom line -"total cost".

Purchasing is now, has been thrown into the limelight, because suddenly we cannot just niavely depend on our own domestic markets, industry and production - to sustain our profit margins, or North American - way of life.

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Permalink Reply by Jon Hansen on June 4, 2009 at 10:19am

Insightful observations to be certain David. And your comment regarding MBAs (as well as Six Sigma Black Belts, Master Black Belts and other designations) is not far off the mark as many of these individuals were amongst the first to be laid off when the economy began its recent decline. This of course is more of a testimony to outdated curriculum and an unwillingness on the part of many executives to look beyond the "we have always done it this way mindset."

And to be certain other regions of the world, most notably the United Kingdom, Australia and even South Africa (driven largely by the need to escape the destructive effects of a corrupt system) are indeed more advanced - although the number of years ahead of North America is difficult to actually calculate.

The key is quite simply this, the same limitations associated with outdated curriculums combined with an unwillingness to expand one's focus to include the broader enterprise vision still exists within the purchasing profession. While I have had the privilege to address professionals for PMAC, NIGP APICs etc. across North America through my various seminars, many of whom recognize this reality and want to take appropriate action, the absence of a holistic enterprise view as it relates to the changing role of purchasing in an increasingly globalized market will continue to undermine the efforts to catch-up with the rest of the world.

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Permalink Reply by David on June 4, 2009 at 10:37am

I agree. "Catch- up" - not only with procurement stratagies, but in a new way of staying competitive.

Frankly; as I see it the root cause with many "purchasing" professionals, have simply no experience in either running a company, "entrepenuership", or business in general.

They typically are N.A focused in terms of media, (or the lack of) regional buying & lack frankly travel.

Many North Americans in general have only been living on a "North American island". But, suddenly to maintain our NA way of life (or American Dream) - we are being forced to think outside "our NA box".

This may take some time!

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