Purchasing and Negotiation Training

Applied Cost and Price Analysis  is available on the American Purchasing Society’s site.   This

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

course meets the demand voiced by the purchasing community for a practical, user friendly, and powerful tool to meet the challenges of both Cost Analysis and Price Analysis.  It has modifiable templates, examples and, even anecdotes from personal experience all applied to negotiation, supplier management, and cost drivers.  A more complete specification of the course’s horsepower is here.

Online courses in general have become the go to medium of education and training as the budgets have been cut throughout this economic downturn.  This means that dedicated employees, rather than employers, have turned to online solutions rather than live instructor lead seminars.  Most employers reimburse employees for the cost but generally, the courses are taken on employee instead of employer time.

The Society and I will continue to develop course content to meet the needs expressed by members and the purchasing community at large.  The next online course scheduled for publication in winter 2013 is Spend Analytics Using Excel followed by Supplier Relationship Management in spring 2013.   These two will join these listed below as education and training resources growing in popularity amongst the professional purchasing class.

The Science of Negotiation presents the process side of negotiation.  It includes research and planning, concession behavior, win-win and other strategies, and tools and techniques used by the best negotiators all built on the foundation of instruction on the total cost of ownership.

The Art of Negotiation   is more troublesome for the purchasing crowd.  It includes studies of speaking and listening communication skills, communication techniques, personality issues, tactics and counter tactics, and legal concepts.

The Science and Art of Negotiation combines both courses and comes at a discount.  Additionally, for a limited time, a free copy of my negotiation book, You’re the Buyer – You Negotiate It accompanies this course.

How to Buy a New or Used Car is a course that meets the needs of professional and non professional buyers alike.  In the more than two decades of doing purchasing seminars, no issue has arisen more often than how to buy a car.

Green Purchasing and Sustainability I and II are comprehensive courses aimed at coupling the concept of sustainability and cost savings.  Sustainability is all about conservation and preservations, two synonyms for savings.  This course is also a requirement of the Certified Green Purchasing Professional designation.

Body Language   is fun and interesting on its own but is also essential to the completer skill set of the professional negotiator.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

In doing research for a new online course, I consulted Supply Chain Management Review (SCMR) . This is a subscriber site so the full text may not be available to non subscribers. If you do not subscribe, add this periodical to your required reading list. We all have plenty to read and I would not burden you with idle recommendations. SCMR is a good source of high end treatment of business concepts.

Each edition has several feature stories, some of which have more or leas appeal to the reader. The September/October 2012 edition contains a feature story entitled “ALLIANCE MANAGEMENT: Engaging Suppliers the Right Way”

Alliance Management is defined in the story as a higher level of Supplier Relationship Management (SRM). It says that according to the Institute for Supply Management , “supplier relationship management refers to the practice and processes for interacting with suppliers” and is essentially “a one way communication channel – that is, from the buyer who conveys direction, control, and information to the supplier.”

SCMR Sept/Oct 2012

The author, Bob Engel of Resources Global Professionals goes on to state that Alliance Management is one of collaboration where “both buyer and seller jointly engage in reducing overhead, cutting costs, simplifying business processes, and improving the alliance to ensure growth.” Other than this minor differentiation for marketing purpose, the story is well written and clear in its prescription of cogent points.

Any practicing purchasing professional seriously engaged in SRM knows all about the mutual collaboration and broad two lane boulevard of exchange between customer and supplier.

It would be inappropriate to cite much more of the copyrighted story except to say that it is worth your time and attention. I’ll be asking folks in Linkedin groups about their experiences and practices (or the lack of) in the near future. Meanwhile, I’d like to hear your comments. Please send an email to me at RobertMenard@RobertMenard.com

Spot on!  This brief story’s message is an obvious yet astute explanation of what separates the winners from the mediocre in business.  Lapide states directly and undeniably that “Finance is the Language of Business”.  I can not agree more.  In my experience with supply chain pros whether in training or consulting, the same discouraging blank stares are foundwhen we discuss supplier finance, ratio analysis, and especially Balance Sheet and the Income Statement (Profit and Loss).  Indeed, almost all do not know the difference between the two latter absolutely essential financial statements, let alone the Sources and Uses statement.  Occasionally, some folks in publicly traded organizations will understand the Earnings Per Share (EPS) ratio but usually because their pay plan depends upon it. We purchasing and supply chain pros must be educated and trained in economics, corporate finance, and accounting.

This skill set is not an option.  How to heck can we be the first line of defense in supplier qualification if we cannot read the supplier’s financial statement?  Debt/Equity Ratio is an indication of management or debtor control.  Current Ratio is an indicator of the supplier’s ability to pay its bills.  If we in purchasing are ever to shed our dreadful image of a clerical bureaucrat, it will be through education, training, skill, and leadership.  In terms of financial literacy, it can not come too soon. 

Although I am not a fan of flow chart illustrations, the DuPont model used in Lapide’s piece was clear, precise, and something every pro should understand and appreciate.  It was an authoritative and elegantly simple visual representation of  Return On Assets.  

DuPont Analysis Return on Assets

Graphic used with the permission of 12manage.com – Management E-learning Portal

The short captions presume knowledge of the terms such as Current Assets, Non-Current Assets, Total Costs, and the like.  If you are not amongst that sapient crowd, your future is here.  

Test your financial acumen by taking this quiz on corporate and suplier finance.  If you did not do as well as you shuld, you are not alone.  Bet up to sped on finace with this online course, Accounting, Finance, and Cost Management for Buyers and Managers from the American Purchasing Society.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

Readers may recall the controversy raised in a November 2010 post on this blog entitled “Which is More Sustainable: Print or Digital Media?”    It stirred up a small haboub amongst faux environmentalists because it dared challenge the baseless assertion that electronic media was “obviously” more sustainable than paper.  The indisputable fact is that electricity, the least efficient form of energy amongst the major sources, is overwhelmingly created by coal all across the planet.  And coal is the bane of the so called environmentalist extreme left movement.  

Some voices of reason are now pitching heavy duty data that provide reason into this dispute.  In a cover story of its September 10, 2012 edition, ENR Engineering News Record,  a McGraw-Hill publication and the leading business magazine of the construction/engineering industry, has this headline.  “GREENING THE ENERGY GLUTTONS” and this subtitle, “Data-center owners are trying to control skyrocketing utility costs by reducing water and electricity use in their resource-thirsty facilities” 

ENR is a subscription source so I will summarize some of the most salient points.  Many of us are familiar with the great amounts of cold air required to cool servers that exhaust huge amounts of waste heat.  It states that water conservation has not been of great interest to “data-center owners”.  According to Kevin O’Brien of Gilbane Building Company, one of the largest general contractors in the US,  “Going forward, water will remain the largest challenge to data centers”. 

Green Purchasing and Sustainability

The story asserts that “…the data center sector is the fastest growing user of the public power grid.”  Recall however, that almost nothing is ever clear or scientifically provable in the sometimes shadowy world of sustainability.  Data center operators claim (no proof is offered in the story) that online banking and shopping reduce car trips.  That sounds reasonable but without facts, data, and quantities, anyone can speculate in any fashion  that suits his or her cause. 

This story is a fascinating and illuminating peek into the data center controversy.  The waste of energy put into cooling air and water as utilized by old technologies is highlighted by the story authored by Nadine M. Post.  There is scant little criticism of EPA  regulations which have a heavy handed affect on penalizing and promoting undesired behavior.  

While respect for copyrights restrict revealing much more detail, perhaps you are a subscriber to ENR or a sustainability expert.  In any event, please accept my invitation to comment on this blog post  More importantly, if data centers are permanent structures on the sustainability landscape and energy consumption will only grow, isn’t it well past time to use clean coal, shale oil, and natural gas solutions so abundant in North America?

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

Is it fair to say that most of us want to be careful stewards of the Earth and environment?  As education and awareness improves, vast sectors of the population is much more compliant and wants to do its part to preserving and conserving resources and having the best quality natural environment . 

Those who have translated their good intentions into buying electric powered vehicles have probably learned lessons that they should have already known before they made such an expensive and poor quality investment.  The batteries on these vehicles are made in countries with very low environmental standards.  Electric cars are very expensive and the payback is spread over 15-20 years – and that is only if the costly battery doesn’t fail and require replacement.  The fact that electric vehicles have not progressed in more than 100 years to anything but golf carts and kiddy kars is proof that anyone who is willing can see.  Add to this calamity the fact that most cars are charged with electricity generated by coal and electric cars are the poster child for good sustainability intentions gone drastically wrong.  

So what about Compressed Natural Gas (CNG) vehicles, are they sustainable?  Let’s look at a real world example.  Chrysler makes a 2500 Heavy Duty CNG Ram pickup truck for 2012 to compete with the 2013 Chevrolet Silverado and GMC Sierra 2500 HD trucks with a natural-gas option.  According to Edmunds,  Chrysler states that there are about 1,500 CNG fueling stations in the U.S, “half of which are accessible to the public” and warns that the lack of filling stations is a considerable obstacle. 

This Chrysler truck is actually a dual fuel vehicle powered by gasoline and CNG engines.  The first issue to evaluate is if the dual fuel engine adds weight and inefficiency to the truck.   While that calculation takes some advanced science, there is  absolutely no doubt, and Chrysler concedes, that cargo space is reduced because at least one third of the 8 foot long bed is consumed with a fuel housing for the 13 liter CNG and 18.2 gallons of gasoline fuels, more if the larger fuel tank option is chosen.  This means that cargo space and weight are displaced making the net payload far more expensive to transport.  Worse yet, according to Edmunds, the base price is $47,500 but popular options, including a larger gas tank, easily add $10,000 to the final purchase price. 

The question of sustainability of this vehicle needs close scrutiny.  The CNG price is low but the fuel is hard to find.  The net payload is reduced by the dual fuel tanks and the weight of the vehicle reduces fuel efficiency.  Chrysler is not bragging about the mileage.  In fact, this spec sheet on its site is silent on the issue.   Users report about 8-12 mpg for the V-8 motor but there is confusion about how to convert therms per gallon to miles per gallon. 

What do you think?

 Editor’s note:  Maureen Sullivan, President of NECI based in Victoria, BC, is a guest contributor to this blog.  She may be reached at www.neci-legaledge.com .  This blog post is used with permission and first appeared in The Legal Edge Issue 90, April – June 2010.

Posts with similar messages are found at

https://purchasingnegotiationtraining.com/purchasing/is-the-can-or-the-bottle-the-most-sustainable-way-to-drink-beer/

https://purchasingnegotiationtraining.com/purchasing/green-procurement-purchasing/the-food-and-fuel-dilemma/

https://purchasingnegotiationtraining.com/purchasing/green-procurement-purchasing/which-is-more-sustainable-print-or-digital-media/

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Most of us understand the importance of incorporating sustainability and equity values into our procurement decisions and most organizations have implemented sustainability policies to guide their procurement staff. But what does that really look like for day-to-day procurement initiatives? Are you achieving your desired goals? How can you measure and demonstrate that?

 Here is an example that illustrates how elusive achieving sustainability objectives can really be.

 Best Intentions

A Victoria, B.C. organization that provides beverage service to its large customer base recently ran a Request for Proposals (RFP) competition to select a single coffee provider for all of its buildings for a period of five years. In keeping with its newly minted sustainability policy, the Planning Committee was very clear that it wanted to support organic fair trade coffee. It also knew that this would be demanded by its customers and expected by stakeholders. The committee structured the RFP accordingly, putting significant weight on the provision of “organic fair trade coffee” products.

 The RFP for “organic fair trade coffee” drew significant attention from major players, in large part because of the predicted volume and the lengthy contract term. A multinational coffee company won the competition, based on a 1% price advantage over its competitors. The multinational committed to providing nothing but “organic fair trade coffee” to meet the buying organization’s requirements over the term of the contract. The pricing was certainly competitive, so the buying organization awarded the contract to the multinational, which was the lowest-cost compliant proponent.      

A procurement success, right?  But Not the Best Solution      

As those in the coffee business know, but procurement folks may not, companies that provide coffee for end users are not designated “fair trade”; rather, it is the coffee itself that carries the designation (see sidebar). Some companies provide nothing but fair trade coffees; others carry a mixed inventory. Unfortunately, the RFP was not structured to take this into account. 

About 90% of the coffee sold by the large multinational company is not fair trade coffee at all. This company does offer one coffee that is fairly traded, and that is the product promised to the buying organization for the next five years. The multinational will therefore be able to meet the technical requirements of the contract, at the lowest price. What is not factored in, however, is that on the way to delivering that fairly traded coffee, the multinational may stop at all of its other customers along the way delivering non-fairly traded coffee. 

Green Purchasing and Sustainability

Best Practices

By contrast, one of the smaller companies that responded to the RFP carries nothing but fair trade coffee products. It works directly with coffee farmers to ensure that the farmers receive fair value for their beans and are treated equitably in all respects. This company spent a lot of time and resources trying to figure out what an RFP is and how to respond to it. The company is a leader in the fair trade coffee industry, and its ethical and environmental virtues are beyond dispute, but the idea of competing for contracts was fairly new for it. 

Ultimately, the smaller company was unsuccessful in the RFP competition because of that 1% price advantage that the large multinational could offer – the multinational that deals mostly in non-fairly traded coffee. Deeply disappointed by the RFP process, this company is unlikely to respond to another one. 

Best Lessons

Do your research! While the whole area of sustainable procurement is still emerging, what this particular example shows is that purchasing organizations need to thoroughly research their procurement requirements at the planning stage. Especially when moving in any new direction with procurement activities, or exploring new and different types of contracting arrangements. At the very least, some market sounding or other discussions with industry can uncover nuances of which even skilled procurement professionals might not be aware.           

 Why invest the time and resources? Two key reasons: first, without adequate research, the buying organization may not achieve its stated objectives, so would be unable to defend its decision, if challenged. Second, and perhaps more importantly, the most innovative suppliers may be shut out of major procurement activities and contract opportunities. The buying organization can’t benefit from what they offer, and the suppliers won’t have the business. Worse, they may not come back.

 These days, research is ubiquitous, cheap (if not free), and accessible. There’s no reason to not do it early and often. 

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Wake Up and Smell the Coffee Facts

• Twenty-five countries throughout Latin America, Asia and Africa produce Fair Trade Certified™ coffee.
• By linking directly with markets, farmers in Fair Trade co-operatives are able to earn three to five times more than they would receive by selling their coffee through conventional mechanisms.
• Licensed Fair Trade importers pay $1.26/lb ($1.41/lb if organic) to Fair Trade coffee co-operatives.
• Small farmers who work without the benefits of the Fair Trade label most often sell to middlemen, capturing a mere 2% to 4% of the retail price of coffee.
• At 2.3 billion pounds each year, Americans consume more coffee than any other nation.
• For every daily coffee drinker in the U.S., there is one worker elsewhere in the world who depends on coffee for his or her livelihood.
• Fair Trade Certified™ coffee is the fastest growing segment of the U.S. specialty coffee market: U.S. retail sales of Fair Trade Certified™ coffee grew from less than $50 million in 2000, to nearly $500 million by 2005.
• Approximately 85% of the Fair Trade Certified™ coffee sold in the U.S. is certified organic.
• Fair Trade certification ensures environmental stewardship and forbids the use of ISO-designated “dirty dozen” pesticides. Source: www.coffeeresearch.com 

• More than 25 million people in the tropics depend on coffee, a crop that is the economic backbone of many countries and the worlds second-most traded commodity after oil.
• Organic coffee beans have been produced without the use of pesticides or herbicides. Non-organic coffee is typically higher yielding because it is not usually shade grown. The definition of certified organic coffee can be extended to include an emphasis on recycling, composting, soil health, and protection of the environment. These are important aspects to sustainability that are both cost effective and socially responsible. That is why organic fair trade coffee and organic shade-grown coffee often go hand in hand.
• Fair trade coffee, or equal-exchange coffee, is coffee that is traded by bypassing the coffee trader and therefore giving the producer (and buyer) higher profits.  Source: www.rainforest-alliance.org
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Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

The Associated Press (AP) recently ran the title story under the heading of CLIMATE CHANGE.  Apparently, AP subscribes to the political belief in climate change because there is precious little scientific evidence.  Nevertheless, the story goes on commit serious flaws and potentially misleading conclusions.  

For instance, the story states that carbon dioxide released into the atmosphere in the U.S. is at the lowest level in 20 years.  It cites unnamed “government officials” who “say the biggest reason is that cheap and plentiful natural gas has lead many power plant operators to switch from dirtier-burning coal.”  AP offers not a shred of proof of how coal is “dirtier-burning.” 

There are many other things wrong, some completely wrong withthis story.  One is that no attempt is made to equate the CO₂ produced per net unit of energy derived.  AP would better serve the reader by learning more about physics rather than promoting political beliefs.  Coal is a very rich fuel in terms of Btu/$, six times greater than natural gas.  I would gladly send the AP writer(s) a copy of my book to help them out if they contact me with a request.

Green Purchasing and Sustainability

If meddlesome government got out of the way and let market forces such as finance, engineering and technology work, we would be surprised by logical consequences. 

To its credit, AP points out in another referenced to anonymous sources, that “Many of the world’s leading climate scientists didn’t see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide…”  In this instance, AP would better serve its readers if it learned a little about economics.  AP also failed to assign blame to government for its incompetent and regulation because this fact does not match its politics. 

AP does cite an academician, Michael Mann of Penn State University who claims that “the shift away from coal is reason for cautious optimism about potential ways to deal with climate change.”   Another academic source, Roger Pielke, Jr. a so called climate expert from the University of Colorado states an economic fact.  “…if you make cleaner energy sources cheaper, it will displace dirtier sources”.  No, duh! 

Natural gas has fallen more than 50% in price over the past three to four years as exploration makes it more available.  Yet the EPA  is on the blockading fracking  policies that bring us cheap domestic fuel. 

Incredibly, the story closes with another citation of Pielke who is quoted as, “Natural gas is not the long term solution to the CO₂ problem.”  Does the question, “Huh” come to mind?

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

If you are among the vast majority of purchasing pros, your enterprise wide software is notoriously weak in spend analytics and reporting capability.  Unless you enjoy the horsepower of the giants in the enterprise software industry, or have one of the “Cadillac” purchasing software products, you are, like most of the rest of us, at the mercy of the enterprise software product.

Well, we resourceful purchasing pros are never without alternatives.  While we cannot solve the software problem, we can solve the spend analytics and reporting by resort to an Excel spreadsheet. 

Help is on the way in the form of a new online training course called Spend Analytics and Excel.  This course is being developed jointly iwth the American Purchasing Society.  It will not delve deeply into mathematics but will demonstrate in step by step fashion, including short tutorials for those “Excel averse” types, the purchasing analytics that will optimize your effectiveness. 

online training in purchasing, negotiation, and sales

We will show how to use Excel to analyze supplier responses to RFQs, to evaluate supplier performance, to project demand forecasting and replenishment models, even to analyze supplier financial health.  You’ll learn shortcuts on sorting, presenting, and analyzing data so you can make sound decisions based upon user friendly dollars and numbers that you have created out of raw data.

We have researched the market demands and are customizing the content to meet these demands.  The course will be available toward year end.  in the meantime, contact me with any suggestions at RobertMenard@RobertMenard.com

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

This new online course, Applied Cost and Price Analysis, results from the demand of American Purchasing Society members and the purchasing community at large for an education and skills solution to one of the most vexing problems in the purchasing profession, how to manage, apply, and benefit from Cost and Price Analysis.  

Based upon your input, these are the three primary goals for this online course.

1. Identify, define, describe, and differentiate the constituent elements of  both Cost and Price Analysis 
2. Provide step by step processes, lists, and actions that must be taken and/or avoided in selecting and managing suppliers and their performance
3. Furnish specific tools and templates that make the Cost and Price Analysis decisions based on hard “Dollars and Numbers” criteria. 

Cost and Price Analysis skills are amongst the most effective purchasing management tools.  They reduce prices by eliminating unnecessary costs which leads to mutually beneficial results for supplier and customer.  

Some of the important skills you will learn are:

• The eight most common Pricing Strategies revealed and explained
• How prices are established
• Dozens of tools, techniques, and modifiable, reusable templates
• How to identify and apply Cost Drivers
• How to apply Cost and Price analysis to basic Spend Analytics

 In addition, the course will demonstrate with tables and templates how to use Cost and Price Analysis for better results in

• Supplier negotiation
• Bid analysis
• Supplier performance evaluation

 Some web site sources investigated and found to be useful for purposes are included as supplementary resources.  As with all of my online courses, practical advice is punctuated with personal experiential anecdotes experience, and scores of pointers on what to do, what not to do, what to expect, and what you need to understand about the Cost and Price Analysis.

 This course goes live in late summer.  When it does, notify me of your order and I’ll send you You’re the Buyer – You Negotiate It free!  Choose from paper or ebook version.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

This online course is now live .  Notify me of your order and I’ll send you You’re the Buyer – You Negotiate It free!  Choose from paper or ebook version.

Many of us overpay when we buy a new or used car. Take this course to learn how to save hundreds, maybe even thousands of dollars when you buy a new or used car. You will learn the best places to find information about the car you want. It will tell you how to negotiate with the dealer. It will let you know how pricing methods may mislead you and how you can avoid being deceived. It will tell you about different ways to finance the car. It will give you information about leasing compared with buying. It will give you what you need to know about trading in your old vehicle. The course covers certified cars and service agreements. What you learn will help you now and for many years in the future.

don't be upside down on your next purchase!

Here is what you will learn from this course. 

• What kind of vehicle should I buy
• Is new or used best for me
• How much should I pay for a new or used car
• What is the “true cost” of a new or used vehicle
• Should I buy or lease
• How do I manage the car salesman
• How do I manage the car dealer
• Where can I obtain the best financing
• How do I know if my trade-in price is realistic
• What is negotiable when buying a car
• Should I use a dealer, private party, or internet sources to buy a new or used car
• How do I finance the purchase
• What role does my credit profile play in the financing
• What information resources are best to consult
• What kind of things do I not know to avoid drastic mistakes

You will find practical advice along with personal anecdotes that punctuate the buying experience, and scores of pointers on what to do, what not to do, what to expect, and what you need to understand about the car buying world.