When times get tough, it's much easier to see the true character of individuals and even companies. Over on Spend Matters affiliate blog Metal Miner, Lisa recently posted an entry titled "Do the Right Thing". In it, she provides three recent anecdotes that call into question the ethics of buyers and suppliers alike. I'll quote the first one verbatim (you can read the other two on your own if you're curious). According to Lisa, "somebody recently told us that they have awarded a new program, an aluminum product, to a new supplier. The supplier has invested significant cost and product development time toward that new product. The client awards the business to that supplier but now wishes to benchmark the product. If there is a savings, the company intends to re-negotiate with the supplier who has developed the product."

What is the right thing in this case? It's not cut and dry based on the information Lisa has shared with us. But if a buying organization proceeded down the path of developing joint IP with a supplier without paying them for it, it's pretty clear that they should honor what appears to be a spoken agreement to source the product from them. However, going out and gathering benchmarks to make sure the price is at the market rate is not unreasonable in my book. Still, this type of behavior was part of the major problem with the US automotive OEM market for so many years. Tier one and tier two suppliers that developed IP could never be sure that their customers would not take the idea and bid it out to other suppliers who could offer the lowest price.

What do you think? In this climate, is it harder to do the right thing? Or are ethics always the same regardless of the economy? I know where I stand. And I'm also lucky enough to have had the experience of working with unethical people in the past and knowing how to spot them as early as possible based on behavior patterns -- and to extricate myself and anyone I'm party to from dealing with them.

- Jason Busch

Is China getting ready to dump cheap metals products (semi-finished and finished) on the North American market? Perhaps, if you read and believe this story over on Metal Miner. Written by my blogging-partner-in-crime Lisa Reisman, the post notes that, "Several weeks ago my colleague Amy reported that the provincial government in Yunnan province would begin buying up metals to help save the local economy. This week, Reuters reported that the local government would purchase these metals using bank loans secured against smelters' metals stocks … the provincial government expects local metal smelters to get loans from banks to fund the purchases, and it will subsidize interest paid by smelters. The stocking up of reserves will be done between December 2008 and the end of 2009." Translation: with inventories high (and no way to pay the debt service) producers will sell these items at whatever price they can fetch.

As Lisa opines, "What is more disconcerting (and very likely to happen) is for China to re-evaluate its export tax and VAT rebate schemes. Only this time, the schemes will work in the opposite direction making Chinese goods even cheaper, in the hopes of improved export sales and economic stimulus at the expense of curbing pollution." I look at this whole relationship between the government, banks, workers and companies and it looks like the legitimization of a government-sponsored scheme to keep workers from rioting. So much for capitalist China! But given what's happening over here, perhaps I should not be so critical. And we could all use China to force producers and distributors here to drop their prices even further. After all, nothing cures low prices like low prices -- provided there's at least some demand in the equation.

- Jason Busch

When I was in college, I often price shopped a good pint of beer (Yuengling, in my case) between various bars. Now, don't get me wrong. I was not just after the buzz. I was also after the extra calories that caused me to gain the freshman ten, the sophomore fifteen, and so on at the cheapest possible price. But today, I really do just need a buzz. In the morning, that is. At night, I denude myself into thinking that I'm being healthy by drinking highly tannic red wine. And I'm relatively price insensitive, within reason. Yet in the morning, just give me coffee. Any type. Ideally at a good price.

So I'm probably the target for McDonalds latest advertising tirade against Starbucks which suggests, among other claims, that "four bucks is dumb" and "large is the new grande." Translation for the addicted masses: you can still get your yuppie espresso buzz, but you can save a lot in the process by changing to us. The question is how much. When it comes to regular filter coffee, the price is "$1.40 at Starbucks" which represents roughly "a penny more than the average McDonald's brew price." But the real price differences start to brew with espresso drinks. In this arena, "a small McDonald's latte costs $1.99 compared with $2.45 to $3.15 at Starbucks".

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Earlier this week, I hinted in a post that there was some major news about to come out of Emptoris. After doing some more homework, I've been able to piece together a number of elements on what's transpired. Though I've not gotten anything confirmed as yet from the company in question, I hope to speak with them early next week in significant detail about the news. But here's what I do know, pieced together by a number of those close to -- but not employed by -- Emptoris as well as company investors. First, Emptoris had Deutsche Bank Alex. Brown investigate various sales and capital raising options during the Q4 period when it became clear that Emptoris would have some liability from the Ariba patent litigation. Second, the retained bank succeeded in creating significant interest among more than one party interested in buying Emptoris. Third, the leading bidder turned out to be a financial investor (e.g., an investment firm), not another software company.

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So far, if Obama's picks for Treasury and Commerce are any indication of the administration's view of what is to come for global sourcing, we should all grab our pandering protectionist handbook. For it looks like special interests are going to win at the expense of the invisible hand. Now, you could argue that Bush was just as bad when it came to trade, but I believe Obama is shaping up to be even worse, despite the rosy-colored lens that the mainstream media is putting on so far. Consider how many of his picks -- and Obama himself -- would sooner trade with communists in Cuba than capitalists in Colombia (the Cubans don't threaten union jobs as much, I suppose).

Or consider Obama's apparent protectionist shortlist pick for the top trade job. According to the above-linked New York Times article -- and we all know the political slant of its writers -- "If President-elect Barack Obama appoints Representative Xavier Becerra, Democrat of California, as his chief trade negotiator, it would punch several political tickets at once for Mr. Obama ... Mr. Becerra, who has emerged as the leading candidate to become United States trade representative in the Obama administration, is known as a defender of workers' rights and as a skeptic of trade agreements."

I applaud Obama's early effort to help interject some common sense into the economic stimulus discussion. I think he is right to focus on infrastructure first over tax incentives or tax cuts (for anyone, for that matter). But I think on the trade front, he's looking to be the same left-wing protectionist that I warned of on Spend Matters throughout the campaign season. If you're engaged in global sourcing, get ready for a new round of policies designed to increase the cost of imported goods, all in the spirit of "fair trade" and worker's rights (which will in turn raise the cost of US goods in other countries as we get retaliative tariffs slapped on our exports).

- Jason Busch

I hope all Spend Matters readers are enjoying a relaxing New Year's day with their family and friends. My wishes go out to all Spend Matters readers for a prosperous 2009. But when you think of prosperous, don't just think of increasing the top line. After all, with the world economy in a shambles, things aren't going to get any easier from a growth perspective anytime soon. Focus on increasing your -- and your company's -- prosperity by making every penny of your spend count in 2009. In the Chinese Zodiac, 2009 is the year of the Ox, which represents "fortitude and hard work" according to one source. Another suggests that the "Ox year is a conservative year, one of traditions and values. This is not a year to be outrageous. A slow but steady year. This ox year will bring stability and growth where patience and diligence pays off." Now, I'm not into astrology any more than Nancy Reagan's biggest detractors. But I do know one thing. And that's when times are as tough as they are for much of the world, frugality, hard work, patience and diligence count for alot.

As all good personal gym trainers are fond of saying, "Breath". As 2009 unfolds we'll all be confronted with surprises and risks that will be difficult to anticipate. Should you find family, friends or co-workers gasping or gulping for air, jump in and give them the benefit of your hard earned wisdom. Caring,creative and thoughful advice can make a huge difference when the going gets tough.

So here's to hoping that everyone will maintain both a good work and Spend Management ethic in the New Year. We'll all be the better for it.

Jason Busch

This time last year we were wondering if the economy would get much worse. I trust that the following posts were helpful in 2008 and believe that they're well worth considering for 2009:

China: Think Localization, Not Just Global Sourcing

Do We Really Need Sourcing "Planning" Tools?

Spend Management Software -- Now is the Time to Buy

Don’t Forget About Benchmarking – A Simple Sourcing Strategy

What to Do When Your Volumes Decline

Hackett’s Book of Numbers Shows the Path to Savings

Surviving the Downturn: Steal Best Practices

Global Sourcing -- The Incoterm Basics

Global Sourcing: Map the Future, Don’t Follow the Herd

Spend Challenges -- Today and Tomorrow (Part 1)

How Can CPOs Best Weather the Down Economy?

Managing Change: A Supply Risk Imperative

Rising to the Supplier Information Challenge @ D&B and Beyond

A Supplier Bankruptcy Checklist

Just the Numbers: D&B's Supply Risk Outlook is Not Looking Good (Part 2)

In the Downturn, Are Dual Sourcing Strategies Best?



- Jason Busch

In the spirit of economy -- economy of words that is -- I'll keep my Spend Matters New Year's Resolutions brief. So here goes. My first Spend Matters resolution for the New Year is to cover technology providers more closely and in greater depth -- but from a business perspective, not an IT one. You've probably seen more of this starting in the fall of 2008. I strongly feel that besides Michael Lamoureux's (AKA, the Doctor) excellent work over on Sourcing Innovation, that there is simply not enough good, objective analysis of different providers, both large and small. Ironically, I think customer knowledge actually drops the larger you go (e.g., the market is more confused about SAP's Spend Management offerings than it is about a small start-ups).

My second resolution is to take Spend Matters in some new directions without skimping on the business focus that got us to this point. I should have done this sooner. Look for some really exciting news on this front in the coming months. As I've hinted at before, I believe that spend matters as much in the home as it does in the workplace. And I'm tired of hearing Suze Orman rant about tearing up high interest credit cards. There's a whole lot more to saving your personal mullah than that.

My third Spend Matters resolution is to stop making resolutions and to judge the merits of this venture on the results, not the ideas. In this regard, Spend Matters Navigator -- in its first iteration -- was a great idea but a colossal cock-up in execution. It cost me a small fortune and we ended up having to scrap it in the end because the company that provided us the software did not make it on its own. So don't look for rhetoric around big ideas here. Seeing will be believing going forward. As Benjamin Franklin said, "Talkers are no great doers." And Navigator will return, mind you, albeit in a new format -- one that's hopefully an improvement.

My fourth New Year's Spend Matters resolution is to continue to consult more with practitioners on a short-term basis (one and two day assignments). I got a lot out of the ones I did last year, and the feedback from procurement executives I worked with is that they did as well. These short-term "expert days" often take the form of relative deep technology, strategy and process discussions and workshop. They're often quite fractal in nature, scaling up and down at the level a customer needs. Some tend to focus on a high level (e.g., procurement technology). Some end up being very specific (e.g., supplier enablement, ERP vs. Best of Breed in P2P).

My fifth New Year's resolution is a personal one. And that's that I want to slowly extricate myself from writing for others in their name. In December, I went back to estimate the number of private -- or white-label -- whitepapers, columns, PPT decks and newsletters I've written since starting Azul Partners and the number is staggering. Just around one thousand. They've been for consultants, vendors and providers of all shapes and sizes. I've written approximately one every other day since starting the firm. I'm sure this extrication will take some time, but if you're looking for ideas and thought provoking copy that sing and you want yours truly to do it, your time is limited. I'll be finished with it by this time next year if I can adhere to this resolution -- except for my close friends and long-term clients.

Jason Busch

As Spend Matters’ readers know well, SAP and Oracle related subject matter has gotten a lot of ink (or pixels as the case may be) in 2008. The following list includes some of the most popular postings:

Sapphire Dispatch 4 -- The SAP E-Sourcing Roadmap

The SAP "Source to Pay" Roadmap

What's in Store for SAP SRM 7.0?

So You're an SAP Shop -- What Are Your Options? (Part 1)

So You're an SAP Shop -- What Are Your Options? (Part 2)

SAP Acquires Analytics, Inc. -- It's Finally Official

SAP's Procurement Road Show -- An Initial Take

Waiting for SAP SRM -- To Host or Not to Host

Attempting to Be the Oracle of Oracle Spend Management (Part 1)

Attempting to Be the Oracle of Oracle Spend Management (Part 2)

Attempting to Be the Oracle of Oracle Spend Management (Part 3)

Attempting to Be the Oracle of Oracle Spend Management (Part 4)

Attempting to Be the Oracle of Oracle Spend Management (Part 5)



- Jason Busch

Earlier in the month, I posted an initial blog entry on Panjiva, a new global sourcing tool that aggregates shipping manifest information to provide insight into global suppliers. As Josh Green, Panjiva's CEO, pointed out to me when we spoke, their core competence is one of data aggregation and analysis. All the data they're pulling already exists in some format around the world. It's just a question of pulling it together in a way that makes it easy to understand.

So how does it work in theory? Consider a search I did looking for a "wool suit" supplier. After looking at the many options that Panjiva presented in a completely non Alibaba-esque way, I clicked on Gracemate, Ltd. I liked Gracemate because of their 234 shipments, 7.7% contained wool suits (a high percentage of Asian-based suit makers). I also liked their "Excellent" rating by Panjiva. But where it gets interesting is double-clicking on the insights that the Panjiva tool provides such as product expertise. For example, I learned in the case of products, that Gracemate has shipped 205 containers of suits since 2005. They've also shipped 14 containers of outerware, 8 of pants or shorts and 6 of skirts. Panjiva also provided me with materials expertise, showing that of the containers, 149 contained primarily synthetics, 19 wool,15 cotton and 8 linen (nothing like a linen suit, I say).

But wait, there's more. I was also able to determine that they're more experienced making suits for the fairer sex. Of all of their shipments, 233 contained products for women and 59 contained products for men. Still, Gracemate is not the crème de la crème in terms of product. 66.7% of their products are going to "mass-market" retailers (e.g., The Gap) and the rest are going to niche. At least 0% are going to discounters, but 0% are going to "premium" buyers such as Neiman Marcus.

Fascinating, you say, but how well are they doing right now? Container volume has declined in recent months from a recent high in June. In fact, in August and September, they shipped 0 containers to the US. Not a good sign. Still Panjiva ranks them "Excellent" in customer loyalty because the average lifespan of a customer is 568 days. And they also have "exceptional" levels of experience when it comes to the products I'm interested in.

So how useful is this information and what else can Panjiva provide? Stay tuned for my next and final post in this mini-series.

- Jason Busch