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Bombardier signs MERX for e-tendering
Montreal—Bombardier Aerospace has signed a three-year contract with MERX for electronic tendering.
MERX, a subsidiary of Mediagrif Interactive Technologies Inc., conducted a pilot project with Bombardier last April. The project enabled suppliers to access procurement business through the MERX web site.
“The pilot project launched last Spring at Bombardier demonstrated in a very short period of time that substantial benefits are generated to buyers and suppliers…” said Alain Miquelon, chief operating officer at Mediagrif.
As of September, 2005, Bombardier’s worldwide aerospace suppliers have access to opportunities through the private tenders section of the MERX web site.
“The [project] will provide Bombardier with an effective and efficient way of doing business and will allow Bombardier to expand in markets that it is currently not doing business with…” said Martin Perrier, sourcing director of IT/IS with Bombardier Aerospace.
MERX bills itself as the leading provider of government e-tendering solutions in Canada. It also provides solutions to the private sector.
Companies formalize good citizenship
New York—Successful global companies are integrating their corporate citizenship reporting into their overall business missions, according to the Conference Board, a non-profit analysis organization in New York.
Many companies still use an informal or ad hoc approach to improving the environment, making charitable donations, and participating in their communities.
But the bigger global firms are setting goals, measuring performance and monitoring their compliance in stewardship, the Board reports. There’s a high degree of transparency in setting the targets and tracking progress. It cited a few examples:
• Proctor & Gamble conducts product life cycle assessment to ensure its consumer products are manufactured and disposed of in a responsible manner;
• UPS strives to minimize the company’s impact on the environment;
• Hewlett-Packard is trying to bridge the “digital divide” in both North America and less developed countries.
“Looking to the future, the biggest growth area is likely to be in applying best practices in corporate citizen reporting across the extended enterprise,” said Amy Kao, a consultant with the Conference Board.
In the future, companies will be judged not only on their own performance, but on their suppliers’ level of corporate citizenship, she said.
Union wants derailment probe
Montreal—The union representing front-line track workers with Canadian National Railway is calling for a public inquiry into recent derailments, particularly the accident at Lake Wabamun, Alta.
The United Steelworkers national director, Ken Neumann, blames privatization of the railway for the accidents. “Since privatization 10 years ago, available manpower has been a growing problem,” Neumann said.
“Cutbacks and downsizing have been compounded by the ongoing practice of deferred maintenance, so that not only is our members’ health and safety at risk, they are spending more and more of their time on emergency repairs instead of on scheduled maintenance tasks.
“This means more potential for exposure to dangerous materials that may be released in a derailment.”
The union is sending letters to the federal Ministers of Transport and Labour, demanding an inquiry.
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New options for old computers
By Lisa Wichmann
Denville, NJ—Purchasing managers have other options for disposing of old computer and office equipment besides recycling and destruction.
PlanITROI, a Denville, NJ-based company focused on retired IT systems, has announced a new program to buy end-of-life equipment, at a guaranteed minimum price. It then resells the equipment back into the market.
Purchasers can buy their hardware directly from any vendor around the world, such as Dell or IBM, resellers or catalogue companies.
At that point, they may enter into an agreement with PlanITROI, which issues a purchase order offering to buy the equipment for a guaranteed minimum price within 60 months of the purchase date.
“There’s no obligation by the buyer to exercise the purchase order unless we pay a percentage of it up front,” said Paul Baum, founder and CEO of the company, in an interview with Purchasing b2b. “There are no fees for the program.”
The amount of money customers receive for retired equipment varies, depending on what they buy. PlanITROI’s web site allows purchasers to calculate what they will receive for certain products.
“It’s amazing how the notebooks, peripherals, even some desktops just hold their value over a long period of time. Even though here in the United States or Canada or even in Europe, they don’t have as much value, in Eastern Europe and Asia and parts of Eurasia, there are plenty of folks that want this equipment and are willing to pay money for it.”
Purchasers thinking of reselling their computers are naturally worried about data security. On that note, the company uses US Department of Defense-standard erasure systems to ensure data is removed from old computers before they’re sold, said Baum.
“The important thing is not only to destroy the information, but adhering to reporting requirements afterward,” he noted. For some customers, that can mean drilling a hole through the hard drive and taking a photo of the hole and the drive’s serial number, according to the company.
PlanITROI—which was recently recognized by Gartner Inc.—is marketing its service as a means for buyers to know—at the point of purchase—what the equipment will be worth when it’s time to get rid of it. It’s more environmental as well, Baum notes, because “the best use is reuse.” The program also uncovers the hidden value in the old machines.
“For some corporations, the value of retired IT assets could be in the millions,” Baum said. The company provides consulting to help buyers determine which equipment holds its life better, based on 15 years of market data.
PlanITROI isn’t alone in the remarketing space. Other companies such as Redemtech Inc. and Retrobox offer IT disposition services that include options to re-sell.
Phil Downe, a Toronto-based independent IT consultant says before jumping in, purchasers should inquire about fees for the service. They should also find out what happens if they decide not to exercise pre-arranged purchase orders.
CN expanding intermodal
Montreal—Citing customer demand, Canadian National Railway (CN) is increasing train capacity for overseas containers moving between Vancouver, Montreal and Toronto by more than 20 per cent.
It’s also boosting domestic capacity between Toronto and Montreal and major cities in Western Canada by 10 per cent. The new service plan came into effect August 22, allowing CN to carry an additional 125,000 intermodal units per year across Canada—a 15 per cent increase.
E-sourcing adopters reaping savings
Boston—Companies using e-sourcing are generating 12 per cent incremental savings beyond what can be gained from reverse auctions alone, according to a new report from the Aberdeen Group (Boston).
It cited Alcan, HJ Heinz, Merck & Co. Inc., Siemens and Nationwide as good examples of companies that are using sophisticated sourcing tools such as flexible bidding and optimization (using advanced analytical tools to evaluate bids and negotiate).
Flexible bidding allows suppliers to suggest alternate specifications or materials to reduce costs, vary order quantities to provide volume discounts, and bundle products to enter a more competitive bid.
“As companies reach the point of diminishing returns from reverse auctions, they’ll look to derive the next wave of e-sourcing savings,” said Richard Waugh, vice-president of supply management with Aberdeen.
Though four in five of Fortune 1000 companies have experimented with e-sourcing, only one in five has experience with the more complex tools.
A full copy of the report, including case studies, can be found at http://www.aberdeen.com/summary/report/benchmark/RA_BPAdvNegotiations_RW.asp
Better investments required for IT
New York—Efforts to contain spending on information technology (IT) frequently backfire, according to a new report from Accenture.
The study—called “IT Investing for High Performance” surveyed chief information officers from more than 300 leading companies around the world. On average, IT budgets are going up nine per cent every year, but much of that money is spent on maintaining and repairing outdated systems—not on innovation.
Respondents spend 39 per cent of their time running and fixing applications, while only 14 per cent is spent building new ones. High performing companies don’t necessarily spend more on IT, but they make better use of existing systems, largely by conducting more business electronically.
IT departments should be spending 40 per cent or more of their budgets on building and integrating new systems, according to the report. The time spent fixing systems should be no more than five per cent to achieve “high performance.”
The report mentioned other trends:
• Razor-thin margins and increasing labour costs have forced the manufacturing sector to make better use of technology, to the point where it has surpassed the services industry.
• In terms of radio-frequency identification (RFID), 50 per cent of respondents are “doing nothing” about it, while 35 per cent are “reading and monitoring.”
• Fifty per cent are doing nothing about wireless telemetry, while 22 per cent are reading and monitoring;
• For Linux desktop, the breakdown is 49 per cent and 37 per cent respectively;
• About 70 per cent of respondents are committing technology to security software; 47 per cent said meeting compliance needs was the main reason for these investments.
Hurricane effects are far-reaching
Oakland, Calif.—Analysts predict Hurricane Katrina, which slammed into the US Gulf Coast in August, could be the most costly storm in US history.
Risk modeling firm EQECAT Inc. (Oakland, Calif.) pegs insured losses ranging from US$9 billion to $16 billion.
The effects of the hurricane—expected to be felt for months—immediately impacted energy prices and could disrupt supply chains, according to a report in the Dallas Morning News.
The Gulf Coast is home to about a quarter of US oil and gas production, and five of the nation’s 12 busiest ports. The region’s refiners produce about 45 per cent of US gasoline, according to the report.
The Port of South Louisiana handles 15 per cent of all US exports. “Anytime you have a transportation supply disruption, there are going to be ripple effects,” said John Robertson, senior economist at the Federal Reserve Bank of Atlanta.
Business Front: A tale of two manufacturing sectors
By Michael Hlinka
The manufacturing picture seems to be looking up in the US. Too bad the same isn’t true here.
American companies cleared over $6 billion worth of inventory in the second quarter of 2005, allowing them to ramp up future production. The National Association of Purchasing Management (Chicago) business barometer jumped from June’s 53.6 to 63.5 in July, far exceeding forecasts.
Finally, the Institute for Supply Management (ISM) factor index rose to 54 in July (any reading over 50 indicates expansion). This points to increased activity south of the 49th parallel.
Meanwhile, the sector isn’t doing nearly as well in Canada. The story is best told in workforce numbers. Even while June unemployment in this country fell to a three decade low at 6.7 per cent, it was striking that there were almost 78,000 fewer people toiling in the manufacturing sector compared to June of the previous year.
Moreover, there is seemingly no end in sight to declines of this sort. Several days ago, Canadian manufacturers were surveyed with respect to their hiring plans for the remainder of this year. The consensus is that many more businesses will cut jobs than add them over the next five months.
There’s a very simple explanation. It’s the $.82 cent dollar. Last June, it was bouncing in the $.74 to $.75 cent range. This means our manufactured products have become over 10 per cent more expensive vis-à-vis goods made by American competitors.
Because of currency hedging programs, the full impact of the loonie’s appreciation hasn’t been felt yet—but it will be.
In my experience, most small and medium-sized businesses tend to hedge over a time frame of one or two years at most, which means that as contracts expire, we’re going to see a further erosion of Canadian manufacturing in the months to come.
To some extent, Canada’s losses will be America’s gains. I hope that the Bank of Canada is looking carefully at the key manufacturing sector and holds the line on Canadian interest rates. The Federal Reserve Board will continue to raise rates in the US, largely to protect the value of the American currency for Japanese and Chinese Treasury bill buyers.
We don’t have the same pressure here. But ultimately the actions taken by the American Central Bank will delay the slide that I believe is inevitable. I’ve said it before in these pages: Before the decade is out, the loonie and greenback will be trading at par.
To thrive, Canadian businesses should recognize this fact and begin to re-organize their affairs accordingly now.
Michael Hlinka provides daily business commentary to CBC Radio One and a bi-weekly column that is syndicated across the CBC network. He also conducts financial planning courses.
World view: Overseas sourcing requires care
Establishing a low-cost country sourcing (LCCS) program is a “matter of survival” for many companies, according to a report from the Aberdeen Group (Boston).
In general, companies plan to double their spending with offshore suppliers by 2008. But research is suggesting there are significant pitfalls to avoid. In its reported titled “Low Cost Country Sourcing Success Stories,” the research firm outlined several trends:
• Cost savings is the primary reason for overseas sourcing. Total cost for goods purchased from low-cost countries are 10 per cent to 35 per cent less than costs in America and Western Europe.
• Enterprises source an average 21 per cent of their total spend from low-cost countries and plan to increase that to 39 per cent in three years.
• LCCS comes with risks—longer supply chains, trade regulations, tariffs, cultural issues, poorly-developed infrastructures and immature suppliers.
• Most organizations interested in LCCS have not developed well thought-out strategies and most are ill-equipped to undertake such ambitious efforts.
Payment terms getting longer
Commentary by Sam Tulip
It is a truth universally acknowledged that, when the going gets tough, the tough take it out on the little people.
Figures from a leading European credit reference agency, Intrum Justitia, claim one in four business insolvencies are caused through late payment, costing 450,000 jobs a year, and €23.6 billion in money foregone.
As you might expect, the poorer countries—Portugal, Greece, and some of the new EU members—have the worst records, but the UK, the land of ‘my word is my bond’, is hardly blameless. On average, payments are 17.4 days late, a figure which remarkably, represents an improvement over recent years.
Government has supported many ‘prompt payment please’ initiatives, although it should be no surprise that Her Majesty’s Treasury is one of the worst offenders. In continental Europe, public sector performance is actually even worse than that of the private sector—24.7 days late.
And that isn’t all. Whereas in the UK, the standard or default terms of payment are typically 30 days, on most of the Continent, 60 or 90 days are not uncommon.
Major players are starting to arbitrarily extend payment terms to suppliers. For instance, Debenhams, a well-respected department store group, has just required key suppliers to sign up for a 120-day period.
On the other hand, small suppliers could do a little more to help themselves. The UK, and many other European nations, has laws entitling firms to add interest, at over bank rate, to outstanding late invoices, but hardly anyone dares.
The UK’s Office of Fair Trading (OFT) is inundated with anecdotal evidence of major supermarkets and other retailers ‘screwing’ small suppliers. So a voluntary code of conduct was introduced a few years ago and the OFT recently reviewed its performance.
The review process received only 29 responses. Smaller suppliers are every day losing business, or their businesses, because they cannot, for example, afford to pay upfront costs for ‘marketing’ or privileged shelf space, or fund extended payment periods, but no-one dares complain.
The OFT consoles itself with the thought that “by and large, suppliers were satisfied with their relationships...or had developed a working relationship in the interests of continuing business.”
Further, it stated, “the Code is not meant to shield suppliers from hard bargains,” and “most importantly, consumers are benefiting from competition.”
Of course, professional purchasers aren’t in the business of driving their supply base to extinction. It’s odd, though, that even the OFT notes “none of the sample of suppliers asked...for written details of particular terms of trading, such as prices to be paid and volumes to be delivered. In our view, the effective resolution of disputes relies on both sides being in possession of written terms.”
Call me old fashioned, or a lawyer’s patsy, but the idea that the bulk of retail trade in the fourth largest economy in the world is being carried out without any detailed contracts is staggering. Retail buyers may think this is quite clever, but I have a feeling it will all come back to bite them!
Sam Tulip is a UK-based freelance writer.
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