ISM key supplier locator

By Purchasing Staff -- Purchasing, 5/8/2007 6:00:00 AM

ISM SHOW DAILY (MAY 8, 2007)
Economic growth slow, but steady

by Paul E. Teague

Despite slowing growth, the economy is still healthy and will continue to grow through the rest of the year.

That’s the essence of ISM’s semiannual economic forecast, announced this morning at the organization’s 92^nd annual conference.

Norbert J. Ore, chair of ISM’s manufacturing business survey committee, said there has been a lot of growth in manufacturing in general in the last few years, and that growth will continue.

Similarly, Anthony S. Nieves, chair of ISM’s non-manufacturing business survey committee, reported that non-manufacturing industries are growing and continuing to add capacity, but at a slower rate.

Among the specifics of ISM’s semiannual report:

1. Manufacturing plants were running at 82.8% capacity in April, down somewhat from the 84.5% capacity of April 2006. “So, capacity has freed up,” he said.

2. Capital expenditures in manufacturing companies were up 5.8% in April. That’s almost three percentage points less than the report for December 2006.

3. The report reflected strong belief in revenue growth. The forecast is for 5.6% revenue growth.

4. Manufacturing industries showing the greatest change: primary metals, miscellaneous manufacturing and electrical equipment.

More than three-quarters of manufacturing respondents to ISM’s economy survey expect prices to increase by 5.4%. But another 12% said prices would decrease 6%, and 11% said there would be no change. The average was a 3.5% price hike in 2007.

Ore said that supplier deliveries are at a pace that few items are in short supply. The rate of growth for new orders, he said, is 12.2%. New orders are exceeding inventory, he said.

For non-manufacturing, Nieves said the sector operating rate was at 84.4% of normal capacity, and that capacity will increase by 3.2% during the rest of the year. That number is down from the 6.2% forecast of December 2006.

Capital expenditures in the non-manufacturing sector will jump 5.6% this year over 2006, he said.

The price forecast for the non-manufacturing sector was an average 3.2% increase.

Biggest growth areas in non-manufacturing are professional, scientific and technical services; information and arts and entertainment.

 Economic price adjustment clauses have a place

by Dave Hannon

 

Sponsored by

As commodity prices become more volatile, buyers continually seek methods to work with suppliers to eliminate risk and impact of those price fluctuations. Consultant Robi Bendorf provided ISM attendees some real-world advice on this issue in his session “Economic price adjustment clauses to reduce supplier price contingencies.”

“We used to call them escalation clauses, but in today’s market prices are volatile both up and down,” Bendorf said of economic price adjustment (EPA) clauses. The basic idea of an EPA clause is to eliminate the “padding” suppliers often put in their pricing to cover potential cost increases. Bendorf contended that inserting an index-based price adjustment clause can keep the supplier’s profit even and help buyers manage their costs better.

The first step to creating such a clause is to complete a full cost analysis on the supplier’s cost structures. If those cost structures include a high level of “padding” for volatility the contract may be a good candidate for an EPA clause. (Bendorf recommended buyers check with their finance organizations to make sure that the company is willing to take on the risk.)

The next step is determining how to calculate price adjustments. Bendorf recommended buyers and suppliers collaborate to find an appropriate price index to tie the clause to such as Bureau of Labor Statistics (BLS) data. The actual level of the index is not what should be tracked, but rather the percent change.

Using the right index can determine the success of an EPA clause. Bendorf related a story of a company that created a price adjustment clause for uranium but (for whatever reason) tied it to a carbon steel price index. When the carbon steel price rose, and uranium did not, the buyer was left paying an increase when the actual commodity (uranium) did not go up.

Identifying the base date for the index is important as well. While the instinct may be to set the date of the contract as the base date, it makes more sense to set the base date to when the supplier got the price for the part or material.

The next step involves identifying the triggers for a price adjustment—is it a price change at time of shipment, at time of quote, at time of order?

Identifying how much of the contract price is adjustable requires a detailed cost analysis of the supplier’s product. “You can do that at the RFI stage and ask suppliers to provide that—then you can compare not only one price vs. another, but one cost analysis vs. another,” Bendorf said.

Setting limits on price adjustments can be tricky. While a buyer will likely want to set limits on the amount the price can increase, a supplier likely won’t agree unless a similar limit is set for a decrease, which means there is less volatility, but less chance for meaningful savings. “I would tend not to use limits, as it gives too much to the supplier,” Bendorf said.

Even profit level is negotiable with an EPA, Bendorf points out, because in a fixed price model, the supplier assumes the risk and tries to cover that risk with higher pricing. “But in a price adjustment clause, the buyer is assuming the risk and because of that, he or she can negotiate the supplier’s profit margins down a bit as well.”

He also recommended that buyers consider using labor indexes to include adjustment clauses in global sourcing contracts. “And it may even be possible to get your suppliers to use EPA clauses with their suppliers,” he pointed out.

A quick example of the EPA clause showed that even with a price adjustment upwards, the buyer can still save vs. a fixed price contract.

Steps to price adjustment success

Step 1 Establish if an EPA clause is appropriate

Step 2 Identify the index(es) which will be used to make the adjustments

Step 3 Identify the base point from which to calculate the change

Step 4 Identify times or events that will trigger price adjustments

Step 5 Identify the percentage of the base price subject to adjustment

Step 6 Identify any limits on adjustment or amount of change needed to trigger an adjustment

Step 7 Establish the EPA clause and calculation for adjustment

Step 8 Include an example of how the calculation will work in the agreement

Supply chain ethics a concern for buyers

by Maria Varmazis

Supply chain professionals discussed the ethical problems they confront within their own organizations and while dealing with suppliers in an open discussion with the ISM Ethical Standards Committee on Monday afternoon.“Companies are made and broken based on the ethical decisions employees made, and more important, how the executive board has responded to those decisions,” said committee member Judy Baranowski, corporate vice president of supply chain quality at Motorola.

Committee member Leah Kalin, director of supply chain operations at Breg, began a brief presentation on the meaning of ethical behavior to supply chain professionals and how both positive and negative influences play into business relationships. “Suppliers work to influence supply chain professionals,” Kalin said. She cited a 2006 ISM member survey where almost half of respondents revealed that there were “examples in [their] organizations where politics inappropriately influenced sourcing decisions,” where politics is defined as both internal business politics as well as external governmental politics.

In addition, 45% of respondents also agreed that “others outside of [their] function have received gifts or entertainment from suppliers outside of [their] organization’s policy.” Clearly purchasers and supply chain professionals faced ethical dilemmas in working with suppliers, and Kalin asked all attendees to consider their company’s own ethics policy—if one exists—and if attendees felt safe talking about ethics at their company. Several attendees agreed that even if they do have a company ethics policy, their corporate environments are not conducive to extended ethics discussions.

Baranowski then went in to some detail about the meaning of negative influences on supply chain decisions. One example was a supplier redirecting attention during a site audit, which she said happened more frequently than some realize. Buyers should think more broadly about how the supplier’s process works, that they may have other locations not as easily visible that may need attention. Baranowski also warned against suppliers dominating discussions with the intent to intimidate, especially when dealing with junior or new members of a supply chain team. “Tell [your new or junior team members] to be patient, make sure they understand they have every right to ask questions professionally and get a professional answer,” she said. Yet another negative tactic: a supplier creating a false deadline to pressure buyers, specifically at quarter- or year-end.

Some suggestions from the ethics committee on combating unethical include some basic measures that many purchasing organizations still do not address. The most basic of all is to have a written ethical code—not just for the purchasing team, but across the entire company—with expectations and consequences clearly delineated. Frequent ethics training, with regular team refreshes, is key to creating an environment where ethical behavior is easily carried out and not just given lip-service. Baranowski also encouraged buyers to include ethics as a topic during hiring interviews.

Documenting sourcing decisions seems like a relatively simple measure to combat unethical behavior but the ethics committee said it can be one of the most effective—when sourcing decisions are based on fact and fully transparent, any supplier influence (positive or negative) is much easier to detect.

There were several questions from the audience. One attendee asked the panel about influence—not from suppliers, but from supply chain professionals towards their suppliers. He wanted to know what the best practices are for “predatory buyers,” whether they are unethical or “just business.” Baranowski replied that while she has seen strong-arming practices in the span of her career: “It’s the supplier’s responsibility to accept a specification or say no, and we then have an obligation to understand if they do say no that it’s not a black mark against them.”

10 steps to building a global supply chain

by Dave Hannon

Thomas Crimi, a category manager at global energy giant Chevron Corp., provided a 10-step best practices primer for building global supply chains. His session was filled with the terminology and how-to tips to help global supply chain managers better cope with a quickly globalizing world.

Crimi started by outlining four major drivers of globalization: global production, global investment, global competition and global markets. “The world has shrunk in its ability to communicate and travel,” he said, indicating that the impact on supply chain management is huge. “The strategic objective of building a global supply chain is to meet or exceed customer expectations at a lower cost.” Within that objective, there are six more tactical objectives that need to be met: leverage spend, align incentives, optimize operations, reduce inventories, reduce total cost and assure supply.

There are certainly some major challenges to building global supply chains. Crimi pointed to several including: political issues, infrastructures in global markets, regulations and restrictions on global content (the requirement that a product made in a certain country must have a certain percentage of materials from that nation also).

10 steps to best practice in global supply chain

1.Form a cross-functional team

2.Identify needs and opportunities

3.Determine the commodity priorities

4.Identify potential markets/suppliers

5.Qualify potential suppliers

6.Determine supplier selection process

7.Select suppliers

8.Formalize agreements

9.Implement agreements

10. Monitor, evaluate and revise

Johnson & Johnson, Alltell and BPwin Richter innovation awards

by Paul E. Teague

The second annual ISM and R. Gene Richter Leadership and Innovation Awards were announced Monday evening. The winners: Johnson & Johnson, which won in the process category; Alltel Communications, the winner in the technology category; and BP, which won the people category.

Johnson & Johnson had launched a consulting sourcing initiative for North America “to better understand the consulting spend.”Thirty members were on the team, said Andrea Gable, worldwide director for the category at the company. There was the Find-it Team, the Get-it Team and the Keep-it team. The teams increased the value and emphasis on master service agreements, among other things.

Alltel Communications’ procurement team created a Workflow Management Tool to track and manage projects and provide status updates.

BP’s procurement organization developed a Rapid Sourcing Team to train university recruits. Among the goals of the team was adoption of e-sourcing tools. Between 2005 and 2006, the team contributed more than $500 million in spend sourced through the e-sourcing tool.

Six students win Richter scholarships

by Paul E. Teague

ISM and the R. Gene and Nancy D. Richter Foundation honored future purchasing and supply chain leaders at a special banquet Monday evening at the Rio Hotel in Las Vegas. The foundation granted scholarships of up to $5,000, plus the added benefit of mentoring by established professionals in the field.

Receiving the scholarships were:

Juliana L. Beall, Michigan State University

Paul Boyer, Miami University

Michael J. Ferrara, Duquesne University

Leslie Hubbard, Pennsylvania State University

Narissa Lee, Clark Atlanta University

Lindsay Sue Olthafer, University of Wisconsin-Madison.

This was the fourth year the Foundation awarded scholarships. Frank Richter, brother of Gene, said the foundation has awarded over $100,000 in scholarship over its four-year life. He said it’s the largest nationally recognized scholarship program in supply-chain management.

Logistics market presents major challenges

by Dave Hannon

The biggest challenges for procurement and supply chain professionals in the next 20 years may come on the roads, rails and water. In his presentation, “Combating the Logistics Perfect Storm,” professor Lee Buddress of Portland State University said issues such as lack of infrastructure investment and a “chronic shortage of logistics personnel across the modes” may cause more supply chain headaches than more often cited issues such as commodity price volatility and supplier consolidation.

Buddress and co-presenter Michael Smith, a professor at West Carolina University, cited a host of real-world examples to highlight the increasing limitations to the U.S. logistics network. Issues such as port congestion, driver shortages, aging rail car fleets and high fuel prices are increasing logistics costs and decreasing the service levels attainable by most logistics providers, the presenters said.

For example, on the water, a new class of container vessel now sailing can carry 14,000 TEU containers. Buddress pointed out that may sound like a capacity savior, but only five U.S. ports are currently able to handle the ship’s size and current container cranes are not large enough to reach onto the ship. And the amount of time it would take to unload those containers will likely add to port congestion, not reduce it.

“The first container could literally be in Chicago by the time the last one is unloaded,” Buddress pointed out. “Everywhere we look we have infrastructure problems.”

He also noted that on a recent trip to Chicago, he was astounded by how much Chinese freight containers were sitting in logistics yards collecting dust. He pointed out that under some proposed plans, ocean freight companies would only allow containers to travel 150 miles from port, creating another set of snafus involving transfer of freight from an ocean container to a trucking or rail container.

Smith cited some statistics from the Council of Supply Chain Management’s State of Logistics report in 2006, which found that ocean carriage spending was up 61% in 2006 from 2000.

To get an even better idea of the lack of funding planned for infrastructure in the U.S. Buddress recommended attendees read their state’s transportation plans and learn how much is focused on commercial logistics vs. how much is planned for public transportation. He said if current trends continue, the U.S. could stand to lose $844 million a year by 2025 due solely to infrastructure problems.

But it wasn’t all doom and gloom in this session. Buddress and Smith offered some strategies to combat all these challenges. First, coordinating inbound and outbound shipments better to avoid empty miles will reduce congestion and improve cost. Buddress pointed to a paper company that had trouble getting parcel and LTL carriers to make the trip to their remote locations, while they had their own dedicated fleets coming in often to make outbound shipments. The solution? Get the dedicated fleets to carry some of the inbound shipments where it made sense.

Driver retention programs will be key for trucking firms and shippers need to better evaluate their carriers’ plans and partner with the ones that have the best strategies. In fact, carrier-shipper relationships are increasingly important as more of these challenges encroach the overall supply chain.

Another strategy to combat the “perfect storm” is to share more forecasting data with carriers—accurate forecasting data, that is. Buddress pointed out that many companies produce forecasts mainly to tell their higher-ups what they want to hear. Developing a real forecasting method and sharing it with carriers will help them plan routes and shipments much more efficiently.

For buyers, Buddress suggested they include a logistics commodity report in with their regular commodity reports to get a better handle on the needs and requirements their companies have for logistics services.

Lastly, the presenters encouraged attendees to become more active in lobbying legislators to spend more on infrastructure projects. “The worst response I ever heard from a politician as to why they don’t spend more in these areas was that ‘freight doesn’t vote,’” Buddress said. “We have a collective responsibility to educate our legislators in this area.”

ISM SHOW DAILY (MAY 7, 2007)

Keynote muses on nature of sound decision-making
By Maria Varmazis

Nearly 3,000 purchasing and supply chain managers from around the world are attending the 92^nd annual ISM conference in Las Vegas, which kicked off on Sunday. Malcolm Gladwell, a writer for the New Yorker magazine and author of several books, welcomed the ISM attendees Sunday afternoon with his insights on decision making and trusting your gut in tough situations.

“We place a real premium on those who do their due diligence, marshal all careful facts in making a decision,” Gladwell said to a packed ballroom audience. He gave an example of the Getty Museum’s acquisition of a $10-million fake ancient Greek statue—even though the museum was sure it had an authentic piece after nearly a year of careful analysis, experts who knew ancient Greek art knew instantly the statue was fake, even though they couldn’t explain why.

Gladwell made four key points on the nature of judgment:

* The “coup d’oeil”—or ability to make a quick decision based on experience—is central to being good at any given profession.

* Judgment is mysterious, and sometimes the best decisions can be made through “wisdom without understanding.”

* Judgment is fragile, and can be heavily impacted by a slight change in environment.

* Good judgment can be made more easily where there is no information overload—so don’t drown yourself in data. “Knowing less frees up your judgment, which is a profoundly counterintuitive notion,” Gladwell said.

 Knowledge is power in commodities markets
by Paul E. Teague

Understand the market, and your own costs.

That was the key advice from the panel of experts addressing ISM attendees at a special workshop Sunday on Commodity Price Increases and Supply Strategies.

Another tip: Work with suppliers closely to tap their knowledge, understand their costs—and to let them know how important you are to them.

About 200 buyers and other purchasing professionals attended the session, which was one of the opening events on the first day of the ISM conference.

Shelley Stewart, Jr., senior vice president of operational excellence and chief procurement officer of Tyco International, and a member of the Purchasing Editorial Advisory Board, was the moderator for the session, which also included presentations by Craig Reed, vice president of sourcing at MeadWestvaco, Richard Carr, global director of Alcoa’s procurement center of excellence, and Russ Davis, senior director of corporate sourcing at Tyco International.

Quoting a World Economic Outlook report, Stewart told attendees that metals prices rose 57% in 2006 due to strong demand growth, increased labor disputes and unplanned disruptions to supply. “I can’t remember volatility like we have now,” he said. “We need to find other savings to make up for the increases in various commodities.”

Davis, who spoke of Tyco’s experiences in buying corrugated packaging and steel, said understanding the market, transportation costs, how suppliers service their locations and how the supply base is structured were critical factors in managing the commodities increases.

“Investigate whether your suppliers are integrated suppliers because if they are that’s an advantage,” he said.

Reed of MeadWestvaco said it was important to reassess what you buy and how you buy. “Don’t be defined by history,” he advised. “Figure out your overall costs and look at the system, not just the commodity.”

He also suggested making an effort to understand your own value to your suppliers so you’ll be able to convince them of the benefits of working with you to manage the cost increases.

Alcoa’s Carr agreed on the value of showing the benefits of cooperation to suppliers. He also spoke of Alcoa’s efforts to gather market intelligence around the world. “We have commodity teams in Brazil, Asia and other areas to help us get in front of impacts.”

In terms of specific tactics, Carr said that Alcoa hedges all its natural gas buys, but not electricity. The company also hedges fuel oils. “And when fuel oil goes up, we look for alternative energy sources,” he said.

MeadWestvaco shares its market intelligence success story

by Maria Varmazis

The key to real understanding of supply chain risk lies in comprehensive market intelligence, according to Daniel McNally, senior director of raw materials and energy sourcing, and Tony Milikin, senior vice president of global supply chain at MeadWestvaco. Milikin and McNally shared their success story on Sunday at ISM of how MeadWestvaco outsourced its company market intelligence gathering to a third-party firm. Thanks to the market intelligence they gained, McNally said the company got a clear upper hand at the negotiation table—in one case turning a supplier’s requested commodity price increase into a negotiated decrease.

McNally said he hoped attendees would bring away two main points from the presentation--that "market intelligence will give you a proactive response to supply chain and cost issues, and the cost of putting an organization together to gather market intelligence yourself can be prohibitive." MeadWestvaco ended up outsourcing to India-based Beroe Inc, whose CEO Vel Dhinagaravel was also present during the presentation.

Milikin said the company adopted a Friedman-“world is flat” mentality when it came to supply chain risk and low cost country sourcing. He cited changing needs from suppliers and competition, as well as a rapidly consolidating, yet global, supply chain. According to Milikin, it was more important than ever to have a comprehensive and customized understanding of what may affect the company’s supply chain without having buyers spend most of their time sifting through raw data.

Beroe CEO Dhinagaravel explained his company’s methods for rating supplier risk—which covered everything to geopolitical, environmental and financial risk—as well as how the company looks ahead to forecast key commodity pricing for MeadWestvaco. “Don’t use the perfect world as the basis for a price forecast,” he said. Wars, terrorism, natural disasters, governmental upheavals are all part of the global supply chain, all the time, so buyers should anticipate and plan for such disruptions in their supply chains.

Buyers learn quick tips for writing service contracts

by Maria Varmazis

There’s a big difference between contracts for buying commodities and for buying services, and ISM attendees Monday morning learned the basics for creating a services contract with Ernest Gabbard, director of corporate strategic sourcing at Allegheny Technologies.

Gabbard drew a distinct line between commodities and services contract laws—many buyers are familiar with UCC laws for buying commodities, but he said UCC does not apply when it comes to services. Instead, buyers need to be aware of their states’ laws, as each state has its own legal distinctions that mandate what needs to be in a service contract’s terms and conditions. What Gabbard said can snag buyers is that purchasing services is simply more complex than commodities, as the supplier of the service has to actually arrive on the purchaser’s premises. This means that the terms in the contract have to be more nuanced to provide for intellectual property and privacy protections that almost never apply in contracting for commodities. In other words, buyers hoping to re-use a commodities contract for purchasing services should toss the very idea.

As with all contracts, Gabbard warned about leaving any terms undefined, or saved for later. “Never defer a definition of a necessary component,” he said, adding that trying to modify a contract’s “to be determined” conditions after the contract has been agreed-upon is far more difficult than just defining all the terms from the beginning. One method Gabbard recommended is to use a check list of terms covering the risk that needs to be defined and allocated. Another mistake he sees buyers make is using old services contract templates with language that needs updating. Check to make sure the old terms and conditions still apply—if the service has changed in scope or manner, the contract needs to reflect any new risk that may bring.

Gabbard also advised buyers to be cognizant of their state’s electronic signature laws. A quick audience poll revealed that most present believed signing a contract electronically counts as a signature in writing under law; however, Gabbard revealed that in many states there are “very few court interpretations of the law.” This means that while the state might have a law such as UETA or E-SIGN, which allow for electronic signature of contracts, it is questionable whether or not services contracts fall under this protection.

Logistics session focuses on managing supply chain complexity

by Dave Hannon

Supply chains are getting longer and more complex, and that brings more challenges and more risk. But presenters Randy Strang of UPS Supply Chain Solutions and Joseph Cavinato of the Thunderbird School of Global Management provided ISM attendees some answers in their session on Logistics and Transportation Megatrends and Strategies for Supply Managers, which was heavily inspired by Thomas Friedman’s best-selling book The World is Flat.

“Globalization is accelerating and changing a lot of supply chain decisions,” said Strang, just before offering session attendees several “strategies and tactics” for improving supply chain performance, particularly the logistics operations.

Strang highlighted four major supply chain trends that impact supply decisions. First, supply chain is rapidly becoming a topic of interest for CEOs, which means logistics and supply chain professionals need to focus on cost improvements and presenting benefits in ways the C-level can easily interpret.

Second, global trade is increasing dramatically, putting more complexity into supply chains. “From our perspective, there’s an enormous amount of pressure for 3PLs to expand globally,” Strang said. 3PL stands for third-party logistics.

The third major trend Strang highlighted is the benefits of improved visibility. “Visibility is control in supply chain,” Strang told attendees, showing a slide of a typical inbound supply chain from Asia to the U.S. “At every step of the supply chain, visibility is a key component.” Strang pointed out that benefits of this improved visibility include reduced inventory and shorter order-to-cash cycle times (again, things the C-level folks are interested in hearing about).

The fourth major trend Strang pointed out was the increased emphasis on security in the supply chain. “It’s not just about managing risk—it’s about compliance and continuity of supply today. Can you make sure your supply chain can function in a changing environment?”

Overall, Strang said risk management in global supply chains is less about preventing risk than dealing with it. “Disruptions can be devastating. The 2002 port strike cost the U.S. economy $4.7 billion. Things happen. The challenge for supply managers is how you address those disruptions.”

Strang provided three tactical recommendations for improving inbound supply chains: preparing products more strategically for shipping (he provided an example of a company that paid extra to ship playground balls inflated, rather than deflated); sharing forecasts and objectives with supply chain partners; and managing the global network most efficiently—reducing empty logistics miles, and “balancing the bandwidth in your supply chain,” as Strang puts it.

Cavinato echoed many of those sentiments in his portion of the presentation. He pointed out that energy costs are playing a bigger role in supply chain decisions and planning.

And when it comes to outsourcing supply chain functions, Cavinato recommends that companies “not outsource your thinking. You can shift from being a player to an orchestra conductor.”

Cavinato also focused on sourcing of transportation services, saying “it’s less about cost today” after the deregulation of the 1980s led to a buyers’ transportation market.

ISM suppliers

Share information—all information—with suppliers
by Paul E. Teague

Purchasing professionals are managers of external resources and capabilities, attendees at the ISM conference were told today. And the best way to manage those resources and capabilities is to share information.

Specifically, said Peter O’Reilly, chairperson of ISM’s services group, understand the supplier pool and your own company’s supplier spend patterns. He and Eb Scheuing, ISM purchasing professor emeritus at St. John’s University, jointly conducted a special workshop entitled, Making Suppliers Greater Strategic Stakeholders within Purchasing Organizations.

Scheuing said that purchasing professionals need strong links also to their companies’ external customers. “You also have to understand their plans in order to do the best job for them,” he said.

He asked the nearly 150 in attendance at the workshop how many thought they knew all their company’s spend. Only a few hands went up.

O’Reilly said that it’s important that suppliers know as much about you as possible. And, he added, besides giving them the information they need, you have to be sure you are dealing with the right person in the supplier organization. Who should that be? He suggested you find someone at the supplier company with a role like national account manager for your account. “They can be a major ally,” he said.

Both O’Reilly and Scheuing stressed that honesty with suppliers is important. “They appreciate that,” O’Reilly said. “Tell them where they stand with you, why they might have lost business.”

Scheuing said that it’s critical to know your own strengths and weaknesses as you measure suppliers’ strengths and weaknesses.

He said that supplier councils are a good way to share information with suppliers and to get information from them. “Reward them,” he said, because it raises their profiles within their own companies. And, he added, ask them what they do for their other customers that they could also do for you.

“Information is our biggest strength,” he said.

Why they’re here

There are as many reasons for attending ISM’s 92^nd Annual Conference as there are attendees. Here is what some of the attendees are saying:

Kara Neville, Fleischman Yeast, Inc.: “I’m very interested in the certification program and I would like to take courses.” Neville attended the commodities workshop on Sunday as well as visited several booths in the exhibit area. She is also a user of Reed Business Information’s Kelly Search database, which helps her find suppliers. Reed Business Information is the parent company of Purchasing.

Paul Hoffman, Greenlee-Textron. “I’m here to learn strategy that I can bring back to the company and teach to my colleagues up and down the organization.” Paul wants to know, among other things, why companies use low-cost-country sourcing, how they have thought through the process for it and how to pass commodity price increases through to customers.

Kristee Shaffer and Dodie Fix, CarMax: “We want to learn what others are doing, particularly those in retail who have problems similar to ours.” They also said they want to find ways to work with suppliers as partners.

Claudia Howard, Iris USA: “I’m looking for new ideas and tools, best practices and trends.” Her interests are in managing risk, market indices and strategic concepts.

Network in the most interesting places

Attendees at ISM’s Annual Conference have found a new locale for networking: elevator hallways.

Meeting rooms for many of the conference sessions are on the 26^th floor of Bally’s, the hotel and conference center where the conference is taking place. There are only a few elevators that go to that floor, and attendees find themselves waiting in lines for an elevator car.

Said one, “it’s a great opportunity to meet new people and start a networking dialogue that you might be able to continue later.”

ISM PREVIEW (April 24, 2007)
Get ready, get set, go to ISM Las Vegas

With less than a week to go, buyers and supply strategists across the country are packing for Las Vegas to attend the 92^nd annual ISM International Supply Management Conference and Educational Exhibit. It’s one of the biggest trade shows in the supply chain world, and with nearly 30 countries represented by more than 2,200 expected attendees, there will be plenty of opportunity for purchasers to learn from and network with their peers. Attendees will have an opportunity to meet with over 100 suppliers in the exhibit hall as well as participate in over 100 workshops, roundtables, and seminars chaired by best-in-class global supply management pros.

The educational aspect of the conference focuses on exploring new ideas in supply management, from maintaining continuity of supply to gaining a competitive advantage in the field. In that vein, conference attendees will be the first to hear the findings of ISM’s semi-annual business forecast, complete with economist analysis and commentary to help make sense of it all. And there’s an opportunity to learn from winners of this year’s R. Gene Richter award, given for innovation and leadership. The late Gene Richter was a three-time winner of Purchasing magazine’s Medal of Professional Excellence, and a mentor and role model for many of today’s top supply chain officials. The winners of the award will share their strategies for success during two workshops on Tuesday.

It’s all about preparing buyers and supply managers for new challenges in the field and giving them the knowledge they need to ensure continuity of supply.

Conferences begin Sunday

Attendees at this year’s ISM show will have plenty of educational workshops to choose from for best-in-class training. Events kick off on the evening of Sunday, May 6^th, with the grand opening of the exhibit hall and conference, followed by a speech on successful decision-making by keynote speaker Malcom Gladwell, a writer at the New Yorker magazine. From that point the conference will break into smaller sessions, including roundtable discussions for buyers to network, benchmark each other or discuss new ideas. There will also be project management workshops--and even job interviews at the conference career center.

The main draws of the event are, of course, the educational workshops, and this year there are over one hundred from which attendees can choose. Below are just a few highlights, but you can read the entire list on ISM’s website right here.

“Commodity price increases and supply strategies,” chaired by Tyco senior vice president of operational excellence and CPO Shelley Stewart Jr (a Purchasing editorial advisory board member). 3:45pm, Sunday May 6, session AG.

“Making suppliers greater strategic stakeholders within purchasing organizations,” presented by ISM Services Group’s Peter E. O’Reilly and purchasing professor Eb Scheuing at St. John’s University.9:00 am, Monday May 7, session BA.

“Understanding buyer-supplier conflict,” presented by David Alewine, senior manager of contract and supply management at Fluor Corporation. 3:50pm, Monday May 7, session EA.

Keynote speakers sure to draw a crowd

This year’s ISM conference at Bally’s Las Vegas has, as usual, a great cross-section of keynote speakers planned.

Best-selling author and New Yorker staffer Malcolm Gladwell opens things up Sunday afternoon at 2:15 with a topic that any purchaser values greatly—decision making. Gladwell is known for his ability to translate psychological factors into the business world, which should make his take on decision-making very interesting to the buyers and negotiators attending. According to ISM’s conference promotion, “Gladwell's illuminating way of looking at snap judgments will provide inspiration and tools for you to better develop and execute a successful supply chain.”

Monday afternoon’s lunchtime keynote should provide a lighthearted break from educational sessions with Fortune columnist and author Stanley Bing (the alter ego of media executive Gil Schwartz) taking the podium. Bing is best known for his satirical views of the corporate world, but also for encouraging creative thinking in the workplace.

Tuesday morning’s keynote will highlight the release and analysis of ISM’s Manufacturing Semiannual Economic Forecast, presented by Norbert Ore, chair of the ISM Manufacturing Business Survey Committee. Also providing perspective will be economists John Silvia of Wachovia Corp. and R. Keith Schwer of University of Nevada, Las Vegas.

Tuesday’s lunch session will have Paul Laudicina, managing officer and chairman of A.T. Kearney, breaking out his crystal ball and delivering a presentation entitled, “Succeeding in a Dynamic World: Supply Management in the Decade Ahead.”

And Wednesday morning wraps up with a comic look at the “Importance of Social Responsibility and Community Involvement” from comedienne Bertice Berry, who uses humor to address difficult subjects as racism and sexism in the workplace.

So you’ve arrived in Las Vegas. Now what?

The ISM conference will be held at Bally’s Las Vegas, which is located right on Vegas’ famous Strip.If you’re driving to the city, you’ll find free valet parking. The hotel does share a parking lot with the Paris hotel, which you can enter via Audrie lane. Note that not even driving has escaped heightened security precautions and you may be asked for identification just to park, so be prepared.

Most people, however, will be arriving in Vegas by air. One convenience to note is you can check in to your hotel room and even get your room key right at the airport. In order to get to the hotel or the Vegas Strip from McCarran International Airport (LAS), you can take a shuttle service directly from the airport, near the Caesar’s check-in desk in the airport’s baggage claim terminal #1. The shuttle costs around $6 one-way. There are also taxis available in addition to rental cars—ISM has a discount rate set up through Avis Rent-A-Car for all attendees.

The hotel itself is full of all the standard business amenities, including restaurants, gym and pool facilities, and in-room internet access. Of course, this being Las Vegas, the hotel also offers plenty of casino and gaming to fill those quiet moments between workshops.

Bally’s Hotel has a free shuttle service to take visitors to other hotels on the strip, including Caesar’s Palace, Paris Las Vegas, Rio All-Suites Hotel, and Harrah’s Las Vegas.

If you want to go further out from those hotels, Las Vegas also has a monorail service to take you around the Strip. There are three monorail tracks, and the one that Bally’s is on runs from 7am to 2am, costs $5 for one ride, and spans the majority of the Vegas Strip.

Risk management a key topic this year

One of the most popular topics at ISM this year will be managing risk in the supply chain. Michael Carrara, corporate counsel at Pfizer, will present on the topic in
“Managing risk in supply agreements” while in another session two law professors will address contracting risks in “How lawyers can add value to the value chain.”

The issue of supply chain risk came through loud in clear earlier this year following the immigration raid of a New Bedford, Mass. leather products manufacturer in March that resulted in the arrest of 350 workers on immigration violations. For purchasing and supply chain professionals, the raid and resulting dialogue brought perhaps more questions than answers—questions like, “Do we need a contingency plan in place if one of our suppliers gets shut down as a result of an immigration raid?” and, “Is it in our best interest to evaluate the status of our suppliers’ workers?”

In a follow-up survey by Purchasing, 94% of buyers polled said they currently do not ask their U.S.-based suppliers anything related to their workers’ immigration status. Even among those that do ask their suppliers about their workers’ immigration status, there is little structure or enforcement around the issue.

“We only ask them and take them at their word, but don’t require any proof,” one purchasing professional told Purchasing.

John Guerin, sourcing manager at PacifiCorp in Portland, Ore. says his company asks suppliers “to certify that all employees in their employ are in the U.S. legally or legal U.S. citizens. We also ask them to certify they abide by all U.S. labor and OSHA laws. The U.S. needs to make it more expensive to break the law than follow it.”

A few buyers report that they have put clauses in contracts that stipulate suppliers must abide by all U.S. laws and failure to do so will be considered a breach of contract. Nicole Kelly, a sourcing lead at Sprint Nextel in Kansas City, says “a few years ago, we put wording into all of our service agreements that workers should be properly documented. The suppliers are responsible for ensuring that they are.”

ISM: What not to miss

Even those purchasing and supply veterans that have been to more ISM (NAPM) conferences than they care to mention can miss something useful at such a busy conference. With that in mind, Purchasing recently gathered up tips from its staff and other ISM conference veterans on some of the most commonly overlooked aspects of ISM.

* Mary Ellen Walker, procurement staffer at Hagemeyer and past chair of the ISM-Dallas affiliate, points out that, while it’s not in the conference brochure, the ISM Groups and Forum Reception is Monday evening from 5 -6 p.m. in the Bally's Pacific Ballroom. “Also note that the pre-conference seminars are NOT at Bally’s but at Harrah’s. Bally’s offers a free shuttle though. Also, be sure to pick up your conference packet as early as possible, so you can review it and make your plans ahead of time.” NOTE: To read Mary Ellen Walker’s detailed blog post on the 2007 ISM conference, click here.

* Paul Teague, chief editor, Purchasing: “A lot of attendees may not realize that the conference proceedings are posted on the ISM web site ahead of time. This gives you a real head-start in setting up your agenda.”

* Susan Avery, senior editor, Purchasing and veteran of 18 ISM/NAPM conferences: “Attendees should be sure to attend the sessions by the winners of the R. Gene Richter Awards, which are Tuesday afternoon. Because the award-winners are not announced until the conference, attendees may not have these sessions on their schedules, but they are often some of the best sessions of the week.”

* Jean McHale, public relations manager, ISM: “On Sunday, there will be an update on the new Certified Professional in Supply Management (CPSM) certification. The focus of the session is on general requirements and the bridging process.”

* Mike Gifford, chair of the Las Vegas conference program for ISM, points out that in response to attendee requests, ISM’s Permanent Conference Committee is sponsoring the Networking Roundtable Discussions on Sunday afternoon. “This is a chance for attendees to meet and network with others in their field, a chance to ‘speak what's on their mind.’ There will be a different subject at each table, facilitated by members of the Permanent Conference Committee. It should be fun.”

* Dave Hannon, managing editor, Purchasing: “I’ve been told by several folks that ISM’s Conference Career Center—a career fair within the conference—is very helpful in connecting buyers with prospective employers. New this year, on Monday at the Career Center, attendees can meet with an ISM expert to get tips on job-searching.” Employers participating include Harley-Davidson, Wachovia, BP and Pfizer.

* Kathy Becker, administrative assistant, Purchasing and veteran of six ISM conferences as an exhibitor: “First-time exhibitors should be aware that usually Freeman Co. has a booth on-site to help you with any booth problems or find materials that were not shipped. And the exhibit hall hours are typically scheduled for breaks between sessions, so exhibitors want to be sure they’re ready when the rush comes.”