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"The Point" is written by BMP Editor Kelly Barner as well as a diverse group of guest contributors.

Which came first – the chicken or the data?

I recently covered a fascinating story of present-day industry intrigue… centering around allegations by food distributors Sysco and USFoods that chicken producers (including Tyson and Perdue) have been colluding to raise the prices of chicken for a decade. This story has everything that makes supply chain an exciting place to work: razor thin margins, collusion, and federal intervention.

But an easily overlooked component of this case is that industry data sources were (allegedly) manipulated by the producers.

The Sysco and USFoods lawsuits accuse chicken producers of justifying increased prices by constraining supply (i.e. ensuring less available chickens) and inflating market rates through the manipulation of industry benchmarks. The Georgia Bench pricing system had to be shut down and replaced in 2017 because of questions about the reliability of their data.

Agri Stats (a subsidiary of Eli Lilly & Co.) is actually mentioned in the lawsuits because the subscription-based data they make available to chicken producers allows the producers to determine the breeding potential (i.e. production potential) of their competitors and change their own volume in response.

Since many of procurement’s efforts – and contracts for that matter – are heavily tied to industry data sources and benchmarks, Jeanette Jones (my Supply Market Intelligence for Procurement Professionals co-author) and I decided to offer our independent advice (written in parallel and without discussion) about how to apply a critical eye to industry data.

Keep in mind that you can always get our insight on industry data at ProcureSearch - a free, online resource based on our book.

Jeanette Jones’ Perspective: Finding a Trusted Source

Two chicken pricing benchmark providers have been mired in recent events that have highlighted, in a profound way, the critical need for using trusted, credible resources. It should be noted our focus here is on one aspect and that these stories are complex as there are many factors involved with determining truthful pricing benchmarks for not only poultry, but for all agriculture commodities.

Agri Stats (a subsidiary of Eli Lilly & Co) is connected with the Sysco and US Foods lawsuits because its data made available information about chicken production that provided competitive advantage to a select few. The Georgia Premium Poultry Price Index (GPPPI), which replaced Georgia Department of Agriculture’s (GDA) Georgia Dock chicken price index in January 2017, is in the news once again as it ceased to operate this past week due to a lack of available data. The GPPPI, in response to inflated price reporting concerns, considered evolving production techniques and buying practices in the poultry industry, and included changes that measure the aggregate change in the price of poultry sold on contract over three periods of time, in addition to reporting that indicates the weekly change in demand (GDA website).

In the past year, a number of valuable articles on how to detect misleading and false data have been published. One of the emerging strategies in detecting false information is to track the leading data claim directly to the primary source. In these two stories, the primary source appears to be about as credible as you can get: self-reported data by chicken producers. The challenge presented is how do you know if the primary data is being reported and presented correctly? The damage caused by the use of misleading information is felt by the businesses that rely on the data the most. This is hard to grasp if the provider of the primary data is considered a trusted source. This is especially so if you believe, like some, that the most valuable business commodity is trust.

The answer to the trust dilemma can be solved by the implementation of transparency measures by both the provider of the resource and the primary data provider (in this case self-reported chicken producers). The provider of the resource becomes 100% transparent about where the primary data originates and how it is being used. Getting back to GPPPI, an interesting aspect of the new index is its statement on verification: All data provided will be subject to verification through a random review, done through a prescribed process that will confirm submitted prices and quantities with the buyers. All formulas and forms utilized in the calculation of the price indexes will be open source and available to all parties to allow for the opportunity for any individual or company to track their own price indexes in relation to the industry aggregate index. Company specific proprietary information will not be available to the public. Regardless of what happens with GPPPI, the GDA is on the right track in regards to transparency of methodology and data origination, which is the direct path to regaining trust of past users.

Kelly Barner’s Perspective: Putting the Fox in Charge of the Hen House

In an age where real-time data is the difference between leading an industry and lagging it, procurement would be wise to understand the connections between the sources of data and the companies that profit or not based upon what it indicates. In this case, chicken producers provided data on the price per pound they earned during the current period. That data would then govern the prices paid to producers by distributors. 10 chicken producers constitute 80% of the market – so it doesn’t take a genius to figure out that they had an incentive to provide either good news or no news. And while not all of those 10 producers are based in Georgia (where the Georgia Dock pulls its data from), Georgia is the #1 producer of chicken in the U.S. The temptation was just too great to put a finger on the scale for their own benefit. Unfortunately, they grew too bold or too greedy and the Georgia Dock was ‘indefinitely suspended’ in 2016. The final death of the Georgia Dock was when, in response to concerns, the Georgia Department of Agriculture required producers to sign affidavits that their data was accurate. That quickly led to such a drop in data that the index had to be discontinued… draw your own conclusion.

The lesson for procurement in this is to consider which contracts you will use the data to govern, where the data comes from, and how much control or leverage  those parties have over their costs, profit margins, and the data they provide.

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Jaggaer and Pool4Tool: A Merger that Highlights the Fracturing of Procurement

I had the opportunity to speak with representatives from both Jaggaer and Pool4Tool last week in anticipation of this week’s ‘official’ merger announcement. We talked about geography, market share, and functionality and customer overlap.

By far, the most interesting part of our conversation was about the plans for their new combined go-to-market strategy. And while it demonstrates how thoughtfully this new entity is approaching the market as a whole, it also provides an excellent opportunity for procurement to reflect upon the increasing granularity of spend management.

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Transcript: Human Business: Discussing Tech, Social, and Relationships with Simona Pop

The following is the transcript of my recent Blog Talk Radio interview with Simona Pop. You can listen to it here. For anyone interested in reading the blog that the conversation is based upon, you can access it on Spend Matters.

Kelly: Hello and thank you for joining us today. This is Kelly Barner, owner of Buyers Meeting Point. Today I would like to welcome Simona Pop as my guest. She's the head of Partnerships and Global Communication at InstaSupply. Simona has held roles in sales, marketing, and event planning, and she's an author and speaker for WeRSM, one of the largest independent websites dedicated to social media. 

 
If that isn't enough, she was also selected as the winner of the Virgin Disruptor Challenge in 2016 for her desire to disrupt P2P. Last but not least, if you're thinking after hearing all these accomplishments that Simona is actually some kind of high performance AI, she reportedly loves a good omelette, something that, to me, is fair proof of her wisdom. Simona, thank you so much for joining us today.

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Business Performance Benchmarking for Sales and Procurement

This is the transcript from a recent interview with Donal Daly, CEO of Altify. To listen to the podcast on BMP Radio, click here.

Kelly: Hello, and thank you for joining us today. This is Kelly Barner, Editor at Buyers Meeting Point. Today I would like to welcome Donal Daly. Donal is the founder and CEO of Altify, a provider of enterprise sales methodology for enterprise database sales organizations. He is also the author of the Amazon #1 best seller "Account Planning in Salesforce" and the recently released "Tomorrow Today: How AI Impacts How We Work, Live, and Think.
 
Altify recently opened the response period for the 2017 Business Performance Benchmark Study and Buyers Meeting Point is one of a carefully chosen group of partners working to encourage participation, as well as learning from the study's results. The study, which is now open through December 21st, will examine revenue considerations, top priorities, and the metrics that we can use to gauge progress. All participants will receive a copy of the report, including results, analysis, and insights. It only takes 10 minutes to share your opinion, and I will make sure to share a participation link on today's Blog Talk Radio episode page. So, Donal, first of all, thank you so much for joining me today.
 
Donal: Hi Kelly. Nice to be here. Thanks for having me.

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2016 Nobel Prize for Economics Goes to: Contract Theory

I live in the Boston area, so when the 2016 Nobel Prize for Economics was awarded to Dr. Bengt Holmstrom, a professor at the Massachusetts Institute of Technology, and Dr. Oliver Hart, a professor at Harvard, it made a considerable splash in the local news. I love economics in action, so I started reading more - but I never expected to find contracts as the center of their work.

Each of the newly selected Nobel laureates has a different area of focus, but both are relevant to procurement and supply chain professionals.

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Capt. Sully Sullenberger on Crisis Leadership (Revisited)

“There’s a false dichotomy between cost and safety. Are we willing and able to account for the many costs of not having a quality operation: lack of cooperation, poor leadership, waste, and incidents and accidents? If we really and truly account for them, then safety can pay for itself. Getting it wrong is more expensive than doing it right the first time.” – Capt. ‘Sully’ Sullenberger

 

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Celebrating Procurement Excellence on a Global Scale

Procurement professionals are traditionally known for being more reserved than our colleagues in other disciplines (ahem… sales and marketing). And while there is nothing wrong with that, it does mean that we let opportunities to celebrate our colleagues and accomplishments go unrecognized.

Procurify recently announced the launch of the Global Procurement Awards (GPAs). As they say in their official press release, “The GPAs were created to recognize and celebrate those committed to excellence in the procurement profession.”

There are several awards categories and candidates can nominate themselves or another. The application is mercifully brief – leaving no reason not to throw your hat in the ring for a little recognition and an opportunity to share with colleagues.

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Procurement and SMB Suppliers: Corporate Labradoodle?

In a new effort, announced this week at ISM2016, ThomasNet is looking to put their considerable weight behind one of the trickiest cross-products in all of supply management – the attempt to align demand from corporate procurement and with the innovation and agility of small suppliers. In advance of their announcement, I interviewed Ed Edwards, Manager of Audience Outreach, and Travis Sherbine, Vice President of Marketing and Product Management, from ThomasNet about the realities of making a formal SMB program work.

Let’s face it, there is something unnatural about the fit between big (or even medium sized) corporate procurement and small businesses (hence my labradoodle reference above). But, just like lovable, low-shed labradoodles, there is huge upside for procurement AND small suppliers if they can invest the additional effort required to make their interaction a success.

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Q and A with Michael Raezler, a 30 Under 30 Rising Supply Chain Star

I recently got the opportunity to have access to the 2016 class of ThomasNet / ISM 30 Under 30 Rising Supply Chain stars. I looked through the whole list of impressive young professionals, and one individual really stood out to me. Michael Raezler is a Purchasing and Supply Management Specialist with U.S. Postal Service.

I specifically requested his insight (as captured in the following Q&A) partly because he has accomplished amazing things in his short professional tenure and partly because he is a living example of excellence in a segment of the public sector that all too often goes unrecognized and under-estimated. The procurement profession – and the U.S. Postal Service – are lucky to have him as part of our community.

If you are interested in the entire class of 30 Under 30 Rising Supply Chain stars, click here to read more.

 

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ISM-New York Takes on Procurement2020 with their Annual Conference

I had a unique opportunity yesterday to serve as the Q&A facilitator for ISM-New York’s annual meeting. What is so unique about that? I did it from Central Massachusetts! Through the magic of Google Hangouts (and with a little help from an eight hour phone call) I saw, heard, and interacted with the speakers and attendees in a meeting room overlooking Times Square.

Kudos to ISM-New York President Nancy Murray, Executive Director Julienne Ryan, and former Vice President Jim Martin for their adventurous, virtual approach to collaboration and networking.

 

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Do you have any idea how hard it is to research a legal company named Contractually online?

Last week I spoke with Donna Wilczek, Coupa’s VP of Strategy and Product Marketing, about the mid-January announcement that Coupa had acquired Contractually, described in the press release as “a cloud innovator based in Vancouver, Canada that helps reduce businesses’ reliance on antiquated processes or inadequate technology tools to version control or redline contracts.”

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Point Counterpoint: Has Procurement Caught the Social Media Virus?

Earlier this week, I joined Jon Hansen on Blog Talk Radio for the next installment in our series of ‘Point Counterpoint’ discussions. You can listen to it on demand here.

This month our topic was social media and how procurement is – or isn’t – incorporating it in our work. Professionally, I look at the potential of social media in two ways:

 

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Standing Tall Beside Amazon in Electronic Component Distribution

Note: This post originally ran on Design News.

There’s an 800-pound gorilla in the room. It’s called Amazon. Yet not everyone sees it as inevitable that the e-commerce and distribution giant will dominate electronic component distribution.

In a recent interview with Tom Galligani, global vice president of supply chain for distributor Future Electronics, I asked for his views on Amazon’s invasion of the B2B space. Given the size and power of Amazon, you might expect distributors like Future Electronics to be prepared to be put out of business, but that is not the case. In fact, Amazon’s entry into the B2B marketplace creates a unique set of opportunities for buyers as well as suppliers or distributors.

Nevertheless, like others in the electronic components distribution industry and beyond, Galligani and his team are keeping a close eye on Jeff Bezos’ $90 billion e-commerce behemoth. Amazon may have gotten its start with an unbeatable B2C experience, but it has made inroads -- both organically and through acquisition -- into the B2B market.

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Should Procurement Fear or Embrace Procurement-as-a-Service?

I recently had the opportunity to interview Phillip Ideson, the founder of ProcureChange, a new Procurement-as-a-Service (PaaS) provider. You can listen to the entire interview on BMP Radio.

My first reaction to PaaS – one that I think is quite natural – is concern about what it will mean for today’s procurement practitioners if it catches on. Will we be outsourced the same way we have outsourced so many other formerly in-house capabilities?

As it turns out, however, the news is better than I expected. PaaS, far from being a threat to procurement, may be one way for us to achieve the strategic status we crave.

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Actively Managing Procurement's Image

In September, Procurement Leaders ran an article by Tyler Chamberlain, Coupa’s global head of spend management, on the benefits of getting a solid procurement function established earlier in a company’s growth curve.

As he stated in the article’s title, “If it ain’t broke, don’t wait until it is.” The premise is that making investments in procurement talent and technology before problems arise prevents many problems from ever arising. Supplier records that are managed well from day one never need a massive clean up. Processes that have been in place as long as anyone can remember don’t have to overcome compliance hurdles. Spend that is managed centrally never has the chance to break between direct and indirect.

Perhaps more importantly, and as I had an opportunity to discuss with Chamberlain (click here to hear the conversation on BMP Radio), procurement has control of their internal image from the outset and can build their brand around positive results rather than problem resolution. When we hear Chamberlain’s message from this perspective, all organizations and procurement teams benefit from his recommendations, not just the start-ups.

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Guest Post on the Social Contracting Blog: P is for Procurement... except when it isn't

Click here to read this post on the Social Contracting blog.

The Finance team manages the finances of the enterprise. Marketing people market services and solutions to the purchaser (or customer). Human resources manages… well humans.

Given those examples, you would think that Procurement handled procurement. In an ironic twist, this is becoming less and less true—especially as technology evolves and blurs the line between Procurement as an entity and procurement as a process.

 

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Would Sales Describe Your Procurement Approach as ‘Peter Price’ or ‘Valerie Value’?

Elliot Epstein, CEO of Salient Communications, has partnered with organizations such as CIPS in the past to help sales and procurement professionals better understand each other. He has also done a series of podcasts on Sales vs Procurement with Paul Rogers – a three decade procurement professional that Epstein describes as the leading procurement coach in Australia.

He talked about the podcast series as well as the sales procurement divide in a YouTube interview titled Dealing with the Rising Power of Procurement.

For my podcast on the topic, including guest audio from YouTube, visit Blog Talk Radio or Sound Cloud.

The sales vs procurement divide has always been an interesting one. Who is really in the power position? How accurate is each side’s understanding of the actions and motives of the other?

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The Suzuki Volkswagen ‘Divorce’ – What Not to Do or a Case Against Partnerships Altogether?

Suzuki and Volkswagen have finally completed their ‘divorce’ or the breakup of their 2009 partnership that was supposed to bring market, manufacturing, and technical expertise together for the benefit of both parties. This true story sadly illustrates the dark side of collaborative business relationships – and that is the fallout for all parties if and when they fail.

For my podcast on the topic, including guest audio on the story from Reuters, visit Blog Talk Radio or Sound Cloud.

As sad as the state of the relations between these two companies is today, the partnership started with high expectations on both sides. In 2010, VW purchased a 20% stake in Suzuki, worth approximately $2B US, indicating that this deal was no informal initiative.

Unfortunately, it also started with ulterior – or at least secondary motives – that may have doomed the effort from the outset.

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Guest Post on Design News: Should Approved Vendor Lists Be More in Line with Design Cycles?

According to joint research done by Design News and Exploration and Insights in 2014, 67% of companies have design cycles of 3-12 months. The remaining 33% of survey participants are almost evenly divided between design cycles requiring longer than a year and those taking less than three months. Regardless of their length, we can be sure all of those teams are looking for ways to shorten them, without sacrificing quality or functionality, so that they can be first to market and get the greater share of customers.

CLICK HERE TO READ THIS POST ON DESIGN NEWS

While the need to speed up design cycles is top of mind today, it is not a new initiative. In fact, 20 years ago, Design News published what you might call a “multi-generational design engineering retrospective.” As stated in “Engineering Megatrends,” published on Aug. 28, 1995, “Since the first caveman decided to capitalize on his best idea for a new club, businesses have operated on the principle that the first to get to market owns the market — at least for awhile.” With increased competition from all corners of the globe, and the nearly universal consumer fascination with having the latest, most innovative products, cutting time to market is now a critical element of competitive advantage.”

Despite this pervasive emphasis on “faster, sooner, better,” the same organizations that have multiple design cycles a year only update their approved vendor lists (AVLs) on an annual basis.

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Three Things ‘Rock Star’ CPOs Know About Procurement Influence

Last month I had the opportunity to speak with Dave Bowen, Xchanging’s US Country Manager and CEO of MM4. Xchanging has now released two parts of the research they conducted into procurement and supply chain. You can read my coverage of the first two parts here and here.

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