“When It Comes To The NIGP, Just Follow The Money Mr. Hansen . . . Follow The Money” by Jon Hansen

This morning by way of e-mail, I received from the NIGP’s Executive Director – Finance & Administration Tina Borger, electronic copies of the not-for-profit’s 990 documents for their fiscal years FY13, FY12, and FY11.

I have to admit that I did not open them right away.

My reason for the delay was quite simple.  I knew that once I opened the attachments, and began to review the information, that I would likely be entering a phase of this story in which there would be no turning back.

Like the proverbial bell that you cannot unring, one could sense that the NIGP controversy that became #CodeGate, was about to move from shadowed innuendo and questionable dealings, to a more concrete portrait of possible human failing.

It is at these very moments that one appreciates the sentiments behind the statement “ignorance is bliss.”

As a journalist I knew that I had to report my findings with objectivity and clarity.  So in the same manner that I had to confirm the identification of Deep Throat – and the nature of his relationships relating to the Missouri protest, I now have to do the same relative to what the financials show regarding NIGP Chief Executive Rick Grimm.

Starting with the most recent filing, which covered the period July 1st, 2012 to June 30th, 2013, I looked at Mr. Grimm’s compensation.

Now before I provide you with that number, I wanted to do some research in terms of what the average annual compensation a U.S.-based nonprofit CEO receives.

Based on a 2013 study by Charity Navigator, and taking into account the regional differences in terms of cost of living, the average salary is $148,250 (see IMAGE 1A below).

IMAGE 1A

In the spirit of fairness, I wanted to see if there was any difference between the above referenced overall average, and the nonprofit category relating to the educational services that the NIGP provides.  Here is what a separate commentary on the same report had to say:

While location matters, so do categories: For example, Education ($170,178), Arts, Culture and Humanities ($159,650), Public Benefit ($142,661) and Health ($137,919) led to higher-paid CEOs, while Religion ($82,746), Animals ($104,816), Human Services ($114,000) Environment ($117,644) and International ($120,000) led to lower-paid CEOs.

According to the documents provided by Ms. Borger (refer to IMAGE 1B below), in the year ending June 30th, 2013 Mr. Grimm received total compensation in the amount of $248,977.

IMAGE 1B

I also discovered in the document, that Mr. Grimm “is permitted to travel with companions from time to time” (refer to IMAGE 1C).

IMAGE 1C

I do not know at this point if said travel benefits with companions are over and above his reported compensation.  However it lends credence to the suggestion by some, that his expenses need to be examined more closely.

There is obviously much more investigative work to do however, and based upon this very preliminary review, one might be hard pressed to explain why Mr. Grimm’s annual compensation appears to be $80K to $100K above the average pay that the nonprofit CEOs of similar organizations receive. Especially given the fact that the average salary of a procurement professional in North America, according to a just released study from the Next Level Purchasing Association, is $79,027 per year.

In the end, when it comes to Mr. Grimm’s compensation, it is the opinion of this group, and in particular those working in public sector procurement, that will ultimately matter the most.

NOTE: You can review the NIGP Form 990 Return in it’s entirety through the following link: http://ift.tt/1JEC6SU

Just started following the NIGP #CodeGate story? Use the following link to access the Post Archive; http://ift.tt/1D4xMYc

Follow my coverage of this story on Twitter using the hashtags #missbid and #CodeGate

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Lawler: More Builder Results (updated table)

Housing economist Tom Lawler sent me this updated table of builder results for Q1.

For these seven builders, net orders were up 19.9% year-over-year.  Although cancellations are handled differently, this is about the same year-over-year increase for Q1 as for New Home sales as reported by the Census Bureau.

The average closing price is only up slightly this year following a sharp increase in 2014.

From Tom Lawler:

Net orders per active community for the seven builders combined were up 13.5% YOY, while their combined order backlog at the end of March was up 13.8% YOY.

	Net Orders			Settlements			Average Closing Price
Qtr. Ended:	3/15	3/14	% Chg	3/15	3/14	% Chg	3/15	3/14	% Chg
D.R. Horton	11,135	8,569	29.9%	8,243	6,194	33.1%	$281,305	271,230	3.7%
PulteGroup	5,139	4,863	5.7%	3,365	3,436	-2.1%	$323,000	317,000	1.9%
NVR	3,926	3,325	18.1%	2,534	2,211	14.6%	$371,000	361,400	2.7%
The Ryland Group	2,389	2,186	9.3%	1,463	1,470	-0.5%	$343,000	327,000	4.9%
Beazer Homes	1,698	1,390	22.2%	936	977	-4.2%	$305,800	272,400	12.3%
Meritage Homes	1,979	1,525	29.8%	1,335	1,109	20.4%	$387,000	366,000	5.7%
M/I Homes	1,108	982	12.8%	717	732	-2.0%	$325,000	299,000	8.7%
Total	27,374	22,840	19.9%	18,593	16,129	15.3%	$316,437	$306,271	3.3%

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Earlier from the BEA: Personal Income increased slightly in March, Core PCE prices up 1.3% year-over-year

Earlier the BEA released the Personal Income and Outlays report for March:

Personal income increased $6.2 billion, or less than 0.1 percent ... in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $53.4 billion, or 0.4 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in March, in contrast to a decrease of less than 0.1 percent in February. ... The price index for PCE increased 0.2 percent in March, the same increase as in February. The PCE price index, excluding food and energy, increased 0.1 percent in March, the same increase as in February.

The March price index for PCE increased 0.3 percent from March a year ago. The March PCE price index, excluding food and energy, increased 1.3 percent from March a year ago.

The following graph shows real Personal Consumption Expenditures (PCE) through March 2015 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

On inflation: the PCE price index as up 0.3% year-over-year (the decline in oil prices pushed down the headline price index).  However core PCE is only up 1.3% year-over-year - still way below the Fed's target.

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Price analysis: Chinese magnesia price wars; Asian challenges for GCC

Anonymous bidders drive down prices in magnesia at a time when industry still burdened by high inventories. Steel sector overcapacity a looming concern. In calcium carbonate meanwhile prices hold steady as market leaders control values, though end market overcapacity in Asia may hit demand. Producers seek margins on high grade products.

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Breakthroughs In Supplier Collaboration

Most companies seem to be trying to address risk and CSR challenges in traditional ways, but few have had tangible achievements at scale that promote long-lasting trust. So, what’s the alternative? 

In this guest post, Procurement Leaders invites 2degrees’ Martin Chilcott to highlight a changing approach to supplier collaboration, in connection with the latest whitepaper on the subject. 

Tragedies such as Rana Plaza and incidents like the horse meat scandal in Europe highlight the human and corporate risks and challenges that stretched and fragmented supply chains face in a global economy that often lacks transparency.

Most companies seem to be trying to address these challenges in traditional ways - enforcing standards, audits, top down diktat, transactional approaches, organizing global conferences - but few have had tangible achievements at scale that promote long-lasting trust.

However, a handful of pioneering businesses have taken a different approach, using online collaboration tools and third-party facilitated programme, to build unprecedented levels of trust and transparency across their supply bases, to cut millions of dollars of costs, risks and drive innovation.

At 2degrees, we call this new approach ’fully linked collaboration’. It involves thousands of operational managers from supplier companies coming together on a managed online platform to share best practise, experience and work together to solve otherwise intractable  problems. As Rick Lloyd of Stateside Foods, a supplier to retailers such as Asda, puts it: "I can contact my opposites in big companies. There are now no inter-silos saying - ‘can’t tell you this, can’t tell you that’. It’s gone. We are sharing with Greencore and Arla Foods to discuss LED lighting and centrifugal technology for separating water. I would never have done this without this exchange. It’s a phenomenal tool."

The result is a move away from traditional ways of operating with the supply base to a more effective super-connected partnership between customer and supplier that builds resilience and secures supply.

With this in mind, Procurement Leaders, has published its Supplier Collaboration White Paper, which demonstrates the vital case for adopting a fully linked collaborative approach to supply chain management and shows how global brands are leading the way with ground-breaking supplier collaboration programs.

The whitepaper covers:

• Candid insights, input and advice from GSK, ASDA, Cranfield University, Royal Bank of Scotland, and the Institute of Grocery Distribution on the new approaches to building large scale collaboration and transparency across the supply base. 

• How ASDA’s Sustain and Save Exchange supplier program has evolved into a vital tool for its suppliers, who use the online hub to collaborate with each other, to drive efficiency and cost and risk reduction.

• How GSK went from engaging with individual suppliers to working with them at scale, in order to make a tangible difference in the sustainability performance of its supply base overall.

• New research that will help you understand how extraordinary levels of trust are built between suppliers and customers who use these new approaches.

• How you can use the critical skill of facilitation to create and reward collaborative behaviours whilst ensuring compliance with competition law.

• Examples of online community programs orchestrating a ‘richness of opportunity’ for you ‘that otherwise wouldn’t exist’.

Martin Chilcott is CEO and Founder of 2degrees, the world’s leading collaboration platform and service for sustainable business.

Published in association with 2degrees, the Procurement Leaders whitepaper on supplier collaboration can be downloaded for free, here.

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A Study In Absolute Power At The NIGP? by Jon Hansen

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Defective Component Slowed Apple Watch Rollout: WSJ

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Brief comments on the FOMC Statement and ECI

For the first time in probably 10 years, I had a personal time conflict at the time of the FOMC statement release. Luckily I wasn't worried about a "surprise" ... but the next few meetings could be very interesting (I don't want to miss those releases)!

From Tim Duy: FOMC Snoozer

The FOMC concluded their meeting today, and the result left Fed watchers struggling to find something interesting to say. ...

The FOMC statement provides little new information about the timing or pace of future rates hikes. Even if you believe, as I do, that the first quarter weakness will prove to be largely transitory, the Fed is not willing to take that chance. They will need better data to justify a rate hike, and that need is pushing the timing of a policy change ever-deeper into 2015. There just isn't that much data between now and June to move the needle on policy. You need the jobs and inflation data to turn sharply better to pull the Fed back to June. It could happen, but I am not confident it will happen.

Bottom Line: Wait and see - that's the message of this statement.

And on the Employment Cost Index tomorrow from Business Insider: DEUTSCHE BANK: 'Hold on to your chair...'

In an email blast with the subject line "Hold on to your chair," Deutsche Bank's Torsten Slok warns Thursday's report could once again be a catalyst for volatility as it could have implications for monetary policy, in particular the timing of the Federal Reserve's first interest rate hike.

"Because of year-over-year base effects we could see a solid uptrend in wages," Slok wrote. "This kind of increase would have to make the Fed feel better about its inflation forecast, and recall that Chair Yellen has said that rising wage and price inflation is not a precondition for liftoff."

CR Note: I don't think this ranks as "hold on to your chair", but a consensus reading might be a sign that wages are picking up a little.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 290 thousand from 295 thousand.

• Also at 8:30 AM, Personal Income and Outlays for March. The consensus is for a 0.2% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• Also at 8:30 AM, the Q1 Employment Cost Index. The consensus is for a 0.6% increase in this index.

• At 9:45 AM, Chicago Purchasing Managers Index for April. The consensus is for a reading of 50.0, up from 46.3 in March.

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FOMC Statement: Slowdown "in part reflecting transitory factors"

I was out, but no surprises.

FOMC Statement:

Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that underutilization of labor resources was little changed. Growth in household spending declined; households' real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high. Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined. Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. 

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

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Third-Generation Shoemaker Gives Broadway Its Sole

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Lumber Liquidators Reports a First-Quarter Loss

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Perfect Commerce Weighs In On The Deep Throat Connection Post by Jon Hansen

Thank you, Jason.

I will share this with our readers.

Please keep in mind that I was not the one to reveal Mr. Blaine’s identity, but said revelation came as a result of his being named by Rick Grimm as one of the respondents to the very RFI he had provided comment on in the Deep Throat post.  

Unfortunately, Mr. Blaine did not indicate that he was one of the respondents – even after his name was published.  In fact, and in quoting an e-mail from Mr. Blaine regarding his identity, he wrote the following; “By now you have discovered Tomblaine is a commune in France and a state on one of the tour de France’s” clearly suggesting that it was a pseudonym.

Had Grimm not provided his name, then I most likely would have continued to operate under the assumption that Tom Blaine was indeed a pseudonym.

There was of course never any mention of his being associated with the Missouri bid in any way, nor was there ever any indication that he had any involvement with Perfect Commerce. This poses a significant problem on many levels. 

While I understand the importance of unnamed sources, the fact that these relationships were not disclosed to me up front meant that when I discovered the nature of Mr. Blaine’s involvement, had I not reported it, then it could be reasonably argued that my coverage was biased against the NIGP, Periscope and in particular Mr. Grimm.  Even though I believe that there are serious problems relating to the conflict of the NIGP – Persicope relationship, by withholding material information that could draw into question both the motives for Mr. Blaine sharing it, as well as its overall veracity, would undermine my creditability with the readers and draw into question anything that I have or will write regarding problems at the NIGP. This could include suggestions that Procurement Insights’ coverage was unfair and/or designed to further the interests of Perfect Commerce at the expense of Periscope.

In the end, by not disclosing what I discovered I would in essence be letting the NIGP, Periscope and Grimm off the hook.

The above was my response to the following message I received from Perfect Commerce regarding my April 27th post  The Deep Throat 2015 – Perfect Commerce Connection.

As is my policy, what I am about to share with you has not been edited or changed from its original state, so as to preserve the integrity of the dialogue.

In relation to Tom Blaine (aka Deep Throat), it is still my intention to share his complete and unedited statement once I have received the answer to two very important questions, which are as follows:

1. Would he (being Tim Blaine) have come forward as Deep Throat, if the award of the contract by Missouri to Perfect Commerce had not been challenged by Periscope (NIGP) or, if he was not involved with both Missouri and Perfect Commerce?
2. If he was not motivated by his involvement with Missouri and Perfect Commerce, and the subsequent Periscope (NIGP) challenge, then why did he wait so long to come forward? After all, it was clear that he had serious issues with the 2012 RFI process that resulted in Periscope taking over the NIGP consulting arm.  In fact, and based on his e-mail dated April 6th – which was sent while he was still working with both Missouri and Perfect Commerce, it appears that he was not alone in his concerns regarding overall NIGP conduct. This was reflected in his written statement “There is a lot of frustration in the public procurement community to what NIGP has done over the past few years. You have given that frustration a voice.”

Once I receive Tom’s answer to these two questions, I will post his statement.

The reason his response is important is that he had contacted me while he was still engaged with both Missouri and Perfect Commerce. According to Tom, his relationship with Missouri ended on April 15th – after he had begun his dialogue with me as Deep Throat.  According to the Perfect Commerce response below, his relationship with them ended following my April 27th post.

Obviously I take no pleasure in Tom having to end his relationship with Missouri and Perfect Commerce. However, given that he had an active and direct involvement with both of these organizations, and that they were part of a dispute with Persicope (NIGP), there was what could be construed as a vested interest in the outcome. As a result, this could draw into question not only his motives for approaching me, but perhaps even the veracity of his information in general.

While my investigation clearly shows that there are indeed serious problems regarding the apparent conflicts of interest of NIGP relationships – particularly with Periscope, it would not have been fair to either Periscope or the NIGP to remain silent once Tom’s identity and involvement became known to me.

In the meantime, here is the Perfect Commerce official statement:

Since 2012, Perfect Commerce has valued and benefited from the independent consulting services of the distinguished public procurement professional, Mr. Tom Blaine.   In 2012, Perfect Commerce, the successor to Commerce One (formerly NASDAQ: CMRC), entered the state and local government e-procurement sector when it acquired WebProcure, a state and local government procurement software product built using Commerce One procurement software.   Mr. Blaine, as a former Director of Purchasing for the State of Missouri (1991) and past President of NIGP (1993), has proven to be a valuable resource for Perfect Commerce’s product development efforts as it has adapted itself from a company focused solely on the commercial market into a serious competitor in the state and local government e-procurement market.   We believe a critical point is missed in all of the recent articles that subject companies like Perfect Commerce build software to streamline public procurement hence the actual procurement professionals are users and consumers of our products. As a result, it is not only normal but should be very critical/expected to have people with former or current expertise in public sector procurement advise on improving these products. Tom’s role has been and will continue to be exactly that.

We understand from Mr. Blaine that he had been communicating with you and was one of your sources of information regarding the NIGP’s relationship with Periscope.  Mr. Blaine is not a spokesman for Perfect Commerce and was communicating with you without our knowledge.   He has indicated that you had promised to keep his identity private.   It is clear that he felt strongly that NIGP and Periscope had acted unfairly when they jointly participated in the bid protest against Perfect Commerce in Missouri.   Mr. Blaine states that he never hid his identity from you or his relationships with Missouri, Perfect Commerce, or with the NIGP.  After reading your most recent blog post, Mr. Blaine informed Perfect Commerce that he would be removing himself from any involvement in the Missouri implementation project.  We believe that you may not have treated Mr. Blaine fairly. 

It is inappropriate to compare Mr. Blaine’s relationship with Perfect Commerce to the NIGP-Periscope relationship.   Mr. Blaine is a private individual and has not worked for the state of Missouri in over twenty years.   Perfect Commerce is a privately held “for profit” company.   Mr. Blaine helping our product team as an independent consultant (implying free to consult others) has been a public knowledge. Perfect Commerce’s market approach has always been to meet and exceed customer expectations while offering a low price.   We compete fairly and openly.   We believe in competition and transparency in public procurement. We fully support your rightful efforts to free NIGP organization from commercial objectives and become a true non-profit for public’s benefit organization with transparent processes treating all vendors fairly.

NOTE: The above statement was sent to me via e-mail by Jason Vincelette, VP, Marketing & Product Management for Perfect Commerce.

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Follow my coverage of this story on Twitter using the hashtags #missbid and #CodeGate

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US Seeks Criminal Charges Against Lumber Liquidators

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Reflections Of A Newly Departed CPO by Alastair Merrill

piblogger:

Editor’s Note: Procurement Insights European Union Edition contributor Alastair Merrill, reflects on his time as the Scottish Government’s Commercial Director and Chief Procurement Officer from 2009 to 2015.

Originally posted on Procurement Insights EU Edition:

How do you sum up five years and seven months?  It was July 2009 that I took up the post of the Scottish Government’s Procurement and Commercial Director.  And in February 2015, after fourteen years almost to the day as a civil servant in Scotland, I left Her Majesty’s employment to take up a post at the University of St Andrews.  Looking back on what has been one of the most interesting, stimulating and rewarding periods of my career, much has changed, and largely for the better, but big challenges remain if Scotland is to remain a global leader in public procurement.

Back in 2009, Audit Scotland report had just published a report, “Improving Public Sector Purchasing”, which examined the achievements of the first three years of the McClelland reforms.   Lots done, but lots more to do was the overall message – and the same, arguably, could be said today…

View original 1,259 more words

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BEA: Real GDP increased at 0.2% Annualized Rate in Q1

From the BEA: Gross Domestic Product: First Quarter 2015 (Advance Estimate)

Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 0.2 percent in the first quarter of 2015, according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.
...
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) and private inventory investment that were partly offset by negative contributions from exports, nonresidential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the first quarter reflected a deceleration in PCE, downturns in exports, in nonresidential fixed investment, and in state and local government spending, and a deceleration in residential fixed investment that were partly offset by a deceleration in imports and upturns in private inventory investment and in federal government spending.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 1.5 percent in the first quarter, compared with a decrease of 0.1 percent in the fourth. Excluding food and energy prices, the price index for gross domestic purchases increased 0.3 percent, compared with an increase of 0.7 percent.

Real personal consumption expenditures increased 1.9 percent in the first quarter, compared with an increase of 4.4 percent in the fourth.

The advance Q1 GDP report, with 0.2% annualized growth, was below expectations of a 1.0% increase.

Personal consumption expenditures (PCE) increased at a 1.9% annualized rate.

The key negatives were trade (subtracted 1.25 percentage point) and investment in nonresidential structures (subtracted 0.75 percentage points). Trade was impacted by the West Coast port issues, and the decline in nonresidential structures was probably due to bad weather and less investment in oil and gas.

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China Sourcing: A Guide For SMEs

There are a number of factors that make China a good sourcing fit for the risk averse SMEs: skilled labour, raw materials, sub-suppliers and the maturity of the Chinese supply chain.

In this guest post, Procurement Leaders invites Xchanging’s Yang Cao to explain how small and medium enterprises (SMEs) approach sourcing from China, and what considerations need to be factored into low-cost country sourcing strategies. 

SMEs, in terms of procurement capability, are often at a disadvantage when compared to big multinationals. They don’t have the same scale necessary to garner mass savings or, when needs must, to set up factories wherever required. SMEs, more or less, have to follow the market and more and more, the market is looking to China.

Low-cost country sourcing (LCCS) isn’t new. Tier-1 sportswear companies like Nike have been sourcing from Asia since the 1960s, but for a lot of SMEs it’s unmarked territory. Because of that, and a host of other factors - the language barrier, cultural differences, currency and exchange rates and the huge distance separating buyer from supplier, LCCS can be rather daunting. 

Why SMEs are sourcing from China

China is the perfect starter-country for companies testing the waters of low-cost country sourcing. Big business paved the way more than 40 years ago and now, because of that, China has a very mature and stable supply chain making it a relatively low risk choice for companies new to LCCS. There are a number of factors that make China a good sourcing fit for the risk averse SMEs, but for the purposes of this blog I’d like to highlight what I consider to be the most important.

• Skilled labour - The Chinese labour force is highly skilled. China can produce extremely complex products from toys to electronics to automotives and machinery. For complex technical and industrial products, there is simply no equivalent low-cost competition. Beyond the high complexity level of China’s output, one of the reasons that keep SMEs coming back is the speed at which goods can be produced. For many products, China can produce them better and faster than any other low-cost country.
  
  
• Raw materials and sub-suppliers - China has a large sub-supplier market meaning, many low-cost countries actually source their materials from China. If a UK-based hardware company decided to outsource its manufacturing to India, more than likely that Indian factory would be sourcing parts, screws for example, from China. China also produces cotton and many other raw materials required for manufacturing. Being able to source everything locally reduces both cost and delivery times and it reduces the number of countries, and therefore the level of complexity, of low-cost country sourcing.
  
  
• Mature supply chain - China has the trained labour, the sub-suppliers and, after years of experience working with international companies, it has the necessary understanding of the export market. China has the infrastructure and the logistics in place to efficiently support the global manufacturing market. China has the years of experience to be able to ensure quality throughout the entire supply chain from sub-suppliers, materials, transport, manufacturing and so on. That, more than anything, is why China has become the benchmark for low-cost country sourcing.

How SMEs should source from China

For SMEs sourcing from China, there are a few key tasks that must be undertaken to reduce risk, increase the potential benefits and guide the process. Obviously, due diligence is required as is an entry/exit strategy but more important than that, the SME must first fully and truly understand its own product and acquire local knowledge.

• Know Your Product - Before a company can source from a low-cost country it needs to first understand its own product. What are the main components? Is it labour intensive? Does it need high-skilled workers? Does it require long lead times? Every low-cost country has different strengths depending on the requirements. For SMEs, companies who are new to LCCS or for complicated products that require a lot of downstream suppliers, China is the best country to work in. Any organisation thinking of low-cost country sourcing must know exactly what they are looking for in terms of these categories.
  
  
• Know The Market - China is a completely different supply market. It has a different language, different currency, different geography, different politics and different culture. In order to enjoy the benefits that sourcing from China offers, SMEs must take the time to understand the market. Procurement teams need a local understanding and knowledge of how the Chinese supply chain operates, that includes having someone on the team who speaks the language. If a company doesn’t have that ability in-house, then they need to work with a partner company who does. Jumping into the market blind is really difficult and mistakes can be huge.

Growing consumption and increased consumer demands are driving a more international approach to sourcing. SMEs are going further and further afield in the hunt for the lowest cost suppliers. Due to its maturity and stability, a lot of companies are using China as a foundation when low-cost country sourcing and then, depending on how big the business is, looking at other countries from there. For small or medium-sized companies China is the perfect place to start.

Yang Cao is managing director - China, Xchanging Procurement. 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

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Wednesday: GDP, FOMC

From Bloomberg: Fed Decision Day Guide: From Cooling Economy to Forward Guidance

Investors will scrutinize changes to the description of the economy for hints on the likely timing of liftoff after policy makers all but ruled out an interest-rate increase at this meeting.

Expectations for the first increase since 2006 have shifted out to September from June as the economy weakened in the first quarter ...

Inflation: Signs that consumer prices are stabilizing following a rebound in oil costs could encourage policy makers to tweak their language on inflation.  ...

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, Gross Domestic Product, 1st quarter 2015 (advance estimate). The consensus is that real GDP increased 1.0% annualized in Q1.

• At 10:00 AM, Pending Home Sales Index for March. The consensus is for a 1.0% increase in the index.

• At 2:00 PM, FOMC Meeting Statement. No change to policy is expected.

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A Comment on House Prices: Real Prices and Price-to-Rent Ratio in February

The expected slowdown in year-over-year price increases has occurred. In October 2013, the National index was up 10.9% year-over-year (YoY). In February 2015, the index was up 4.2% YoY.  However the YoY change has only declined slightly over the last six months.

Looking forward, I expect the YoY increases for the indexes to move more sideways (as opposed to down).   Two points: 1) I don't expect (as some) for the indexes to turn negative YoY (in 2015) , and 2) I think most of the slowdown on a YoY basis is now behind us. This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $276,000 today adjusted for inflation (36%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.6% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Nominal House Prices

The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through January) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to May 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to December 2004 levels, and the CoreLogic index (NSA) is back to February 2005.

Real House Prices

The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to June 2003 levels, the Composite 20 index is back to March 2003, and the CoreLogic index back to April 2003.

In real terms, house prices are back to 2003 levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to May 2003 levels, the Composite 20 index is back to December 2002 levels, and the CoreLogic index is back to March 2003.

In real terms, and as a price-to-rent ratio, prices are mostly back to 2003 levels - and maybe moving a little sideways now.

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Is Respected George Washington University Director of Government Procurement Law The Fall Guy In The NIGP Consulting RFI Controversy? by Jon Hansen

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Case-Shiller: National House Price Index increased 4.2% year-over-year in February

S&P/Case-Shiller released the monthly Home Price Indices for February ("February" is a 3 month average of December, January and February prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Widespread Gains in Home Prices for February According to the S&P/Case-Shiller Home Price Indices

Data released for February 2015 show that home prices continued their rise across the country over the last 12 months. ... Both the 10-City and 20-City Composites saw larger year-over-year increases in February compared to January. The 10-City Composite gained 4.8% year-over-year, up from 4.3% in January. The 20-City Composite gained 5.0% year-over-year, compared to a 4.5% increase in January. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.2% annual gain in February 2015, weaker than the 4.4% increase in January 2015.
...
The National Index rebounded in February, reporting a 0.1% change for the month. Both the 10- and 20-City Composites reported significant month-over-month increases of 0.5%, their largest increase since July 2014. Of the sixteen cities that reported increases, San Francisco and Denver led all cities in February with increases of 2.0%and 1.4%. Cleveland reported the largest drop as prices fell 1.0%. Las Vegas and Boston reported declines of -0.3% and -0.2% respectively.
...
“Home prices continue to rise and outpace both inflation and wage gains,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The S&P/Case-Shiller National Index has seen 34 consecutive months with positive year-over-year gains; all 20 cities have shown year-over-year gains every month since the end of 2012. While prices are certainly rebounding, only two cities – Denver and Dallas – have surpassed their housing boom peaks. Nationally, prices are almost 10% below the high set in July 2006. Las Vegas fell 61.7% peak to trough and has the farthest to go to set a new high; it is 41.5% below its high. If a complete recovery means new highs all around, we’re not there yet.

“A better sense of where home prices are can be seen by starting in January 2000, before the housing boom accelerated, and looking at real or inflation adjusted numbers. Based on the S&P/Case-Shiller National Home Price Index, prices rose 66.8% before adjusting for inflation from January 2000 to February 2015; adjusted for inflation, this is 27.9% or a 1.7% annual rate. The highest price gain over the last 15 years was in Los Angeles with a 4.3% real annual rate; the lowest was Detroit with a -3.6% real annual rate. While nationally, prices are recovering, new construction of single family homes remains very weak despite low vacancy rates among both renters and owner-occupied homes.”
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 15.2% from the peak, and up 0.9% in February (SA).

The Composite 20 index is off 14.1% from the peak, and up 0.9% (SA) in February.

The National index is off 7.6% from the peak, and up 0.4% (SA) in February.  The National index is up 24.3% from the post-bubble low set in December 2011 (SA).

The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 4.8% compared to February 2014.

The Composite 20 SA is up 5.0% year-over-year..

The National index SA is up 4.2% year-over-year.

Prices increased (SA) in all 20 of the 20 Case-Shiller cities in February seasonally adjusted.  (Prices increased in 16 of the 20 cities NSA)  Prices in Las Vegas are off 41.1% from the peak, and prices in Denver and Dallas are at new highs (SA).

The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

As an example, at the peak, prices in Phoenix were 127% above the January 2000 level. Then prices in Phoenix fell slightly below the January 2000 level, and are now up 50% above January 2000 (44% nominal gain in 14 years).

These are nominal prices, and real prices (adjusted for inflation) are up about 38% since January 2000 - so the increase in Phoenix from January 2000 until now is about 10% above the change in overall prices due to inflation.

Two cities - Denver (up 64% since Jan 2000) and Dallas (up 47% since Jan 2000) - are above the bubble highs (a few other Case-Shiller Comp 20 city are close - Boston and, Charlotte).    Detroit prices are still below the January 2000 level.

This was below the consensus forecast for a 4.6% YoY increase for the National index. I'll have more on house prices later.

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Rosslyn’s “Five Ways” Webinar And How To Find The Value From Big Data by Jon Hansen

“More importantly, how are we being equipped to handle Doug Laney’s volume, velocity, variety hypothesis relating to data growth, and the amount of information that bombards us on a daily even hourly basis?  In essence are we controlling the data or is the data controlling us and, are we seeing more but knowing less?” – September 9th, 2013 Procurement Insights Post, Is there such a thing as “Big Data” blindness? (Part 1 of 2) by Jon Hansen

In her weekly update from the world of procurement, Buyer’s Meeting Point’s Kelly Barner made reference to Rosslyn Analytics’ upcoming webinar “Five ways you can deliver new levels of savings through an opportunity analysis.”

While the information that Kelly shares regarding industry events and webinars are always worth noting, this one caught my attention, because it reminded me of a post I had written back in 2013 regarding big data blindness.  Specifically, the difference between volume versus true intelligence, and if greater access to ever increasing levels of information means that we will do a better job.

“The value of data is priceless. Unfortunately, many companies are unable to fully exploit this strategic asset because they lack the right level of visibility.  Those that do, outperform their industry peers.” – from Rosslyn Analytics “Five Ways” Webinar

Even though in the promotion of their webinar, Rosslyn indicates that they have “calculated that a company with an annual turnover of $1 billion can generate in excess of $32 million in savings by obtaining spend visibility,” it is the promise of their answering the volume versus true intelligence question, and what it means in terms of doing a better job that is the main draw for me.

It is also the likely reason why Kelly highlighted it as a must attend webinar on Monday.

The webinar is scheduled for Wednesday 29 April 2015 | 11:00 am – 12:00pm EDT | 4:00 pm – 5:00pm BST.

Use the following link to register: http://ift.tt/1docRaq

Check back here on Thursday to hear my thoughts on the webinar.

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The views expressed in this post and throughout the series are the autor's own and not intended to reflect the views the YQ Matrix platform, its users or any associated organisations.

For the procurement people among you, have a look at the latest YQ Matrix raw material and semi-finished prices. For: Prices on other websites.

Leadership On The Edge

Whether accepting a project role or a buyer’s role in procurement or whether your career started in another function it does not matter too much as long as you have defined for yourselves a clear future road map to become ultimate the procurement leader (CPO) or even beyond.

As part of the I Am A Procurement Leader campaign, procurement practitioners have been invited to guest blog and look ahead to what they see as the path to becoming a leader of tomorrow’s function. In this post, Kees van der Vleuten, former chief procurement officer of TenneT, Stork and Fokker Technologies looks at the elements of the leadership path of procurement.

The journey to becoming a procurement leader is a path riddled with twists and turns. Whether accepting a project or a buyer’s role in the function or whether your career started somewhere else, it does not matter so long as you have defined for yourself a clear road map get where you want to go. As an example, my career started in supply chain management and later this was combined with procurement.

Another great example of a procurement leader who has made this journey is Barbara Kux, former CPO of Siemens. She worked her way up to the board room of a number of large multinationals and now finds herself as a non-executive board member at many others. 

Now, the question is, if you’re looking ahead and thinking about your career in the function what should you take into account in order to become a true procurement leader?

• "Looking beyond boundaries"

A high dose of curiosity should be present in any procurement leader, especially at the start and mid-career phase. Curiosity should focus on working in different industries, with different cultures, in the organisational dynamics but also the broader array of procurement. Working in these different areas will widen your scope, enhance your experiences and help develop you personally.

• "Focus on business diversity"

Working in different companies – from those listed on the stock exchange to small start-ups – helps you to build perseverance, makes you an ‘agile’ leader but also helps you understand the dynamics of a corporate culture versus one that is venture-backed or even family-owned.

• "Learning by doing"

To follow your career as a procurement leader, the road will not be straight; you have to embrace different roles, different assignments and even different projects. Procurement and supply chain are two of the pivotal functions in the value chain and interact with many stakeholders (functional areas, board of management, board of directors/shareholders and even customers). Be aware of developments in the digital age (’big data’, ’cloud technology’), environmental aspects (HSEQ and the circular economy), changing supply chain and technical requirements (shared services, control towers, outsourcing, innovation, alliance management etc.) but also the changing financial environment (capital and equity provisions, changing financial systems etc). In other words, your leadership defines the right strategic direction for procurement if you are sensitive to these topics.

• "Growing by learning"

Education is part of the game and it seems that lifelong learning is the standard now. Learning comes also in your leadership in terms of how you manage your team and how you work with your peers, your management team or even shareholders. The procurement leader of today has to understand the (financial) dynamics of the business model, the complex stakeholder environment and the impact you should make as a leader. Your leadership-style is important here. 

• "Develop yourself"

When starting your journey you are almost certainly not aware of all the opportunities out there and probably not fully aware of your own potential. The key is to start developing yourself through (executive) coaching, leadership assessments and by personal reflection. Always ask yourself: "What could I have done better? How can I become a better leader?”. There is no shame in making mistakes, or to make judgements on business aspects so long as you know what you want and what’s good for the company. Various leadership assessments are there to guide your personal development. Most elements in leadership will require a blend of being a strategist, an expert, a mentor, a team player, a facilitator and an owner at the same time. This is what is expected from you.

A procurement leader must understand that there are many ways to become an excellent leader. My own personal roadmap in supply chain and procurement has given me the fruits from personal investment and hard work and my track record has expanded to be able to be positioned for company board work.

Procurement leaders are inspired by other leaders and in turn they inspire their own staff. Before you know it, the procurement leader of today is the CEO of the company tomorrow!

Look at the article of the "seven signposts" as defined by Korn Ferry Institute (see picture) as a guide to the identification of high-potential leaders.

Kees van der Vleuten is former chief procurement officer of TenneT, Stork and Fokker Technologies and a certified (non-)executive director.

To register to become a guest blogger for the I am a Procurement Leader campaign or to find out more about the initiative, click here.

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

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The views expressed in this post and throughout the series are the autor's own and not intended to reflect the views the YQ Matrix platform, its users or any associated organisations.

For the procurement people among you, have a look at the latest YQ Matrix raw material and semi-finished prices. For: Prices on other websites.

Chinese magnesia price wars; Asian challanges for calcium carbonate prices

Anonymous bidders drive down prices in magnesia at a time when industry still burdened by high inventories. Steel sector overcapacity a looming concern. In calcium carbonate meanwhile prices hold steady as market leaders control values, though end market overcapacity in Asia may hit demand. Producers seek margins on high grade products.

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Tuesday: Case-Shiller House Prices

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for February. Although this is the February report, it is really a 3 month average of December, January and February prices. The consensus is for a 4.6% year-over-year increase in the National Index for February. The Zillow forecast is for the National Index to increase 4.5% year-over-year in February, and for prices to increase 0.5% month-to-month seasonally adjusted.

• At 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for April.

• Also at 10:00 AM, Conference Board's consumer confidence index for April. The consensus is for the index to increase to 102.5 from 101.3.

• Also at 10:00 AM, the Q1 Housing Vacancies and Homeownership report from the Census Bureau. This report is frequently mentioned by analysts and the media to report on the homeownership rate, and the homeowner and rental vacancy rates. However, this report doesn't track with other measures (like the decennial Census and the ACS).

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The Deep Throat 2015 – Perfect Commerce Connection by Jon Hansen

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