BuyTrain News

March 2007

Education
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Education

Why Cost Analysis?

You may be asking yourself; “Why do I care about cost analysis. I don’t place government contracts where a cost breakdown analysis is required. The seller’s bottom line price is all I need to know.”  You have a good point. It would be very nice to only have to worry about the final price. However, I can easily think of 7 common, non-government examples, when doing a simple cost analysis is a cost-saving advantage. Read the full article...

All costs are not created equal

When I purchase a valve or hire a contractor to clean the HVAC systems in our office, the direct costs are generally very obvious. There is a the cost of the castings which become valve parts, the machining processes which make the threads, hardware, paint, testing, packaging, etc. When a contractor is cleaning the HVAC system I can see the people working, hear the big truck run, observe the filters being installed, etc. These direct costs elements either become part of the end product or are incurred by the seller directly as a result of my order. Obviously I expect to pay for the castings, machining, filters and labor hours needed to clean my HVAC ducts.

But, don’t forget that sellers also incur indirect expenses in order to provide products and services. The laborer, who gets paid $9.00 per hour, also receives fringe benefits in the form of insurance, vacation and sick leave. Obviously I owe the supplier $9.00 for each hour the laborer works on my job, but it certainly isn’t fair for me to pay the whole value of the laborer’s fringe benefit package. The seller may also be incurring expenses for a foreman, union dues, uniforms, training and certification in order to have the laborer available to work on my contract. In the case of the screw on the valve, there is the expense of storing and inventorying the box of screws and even the salary of the Buyer who purchased the box of screws. These indirect expenses are part of my contract and they become indirect costs in every valve  produced or HVAC duct cleaned.

Indirect costs are those costs which are part of multiple contracts. If the seller only charged us for the direct costs (the casting or screw to put in the valve) then the seller would soon go broke. So how can sellers accurately allocate  the portion of a Buyer’s time which should be charged to me as opposed to other customers? One answer is by using indirect cost pools. An indirect cost pool is a grouping of similar expenses that gets allocated equally across all of the work performed during the accounting period. .... more.......  Read the full article....

 

Seminar and Workshop Still time to Register -

On Tuesday March 13, I will be presenting a Seminar & Dinner program for my friends in the OMV affiliate. Thought you might be interested in seeing the synopsis. The seminar will be back-to-back 1/2 day workshops. Cost Analysis in the morning and Negotiation in the afternoon. It will be a lot of fun. If you are interested in participating, contact Sid Brown for details SIDBROWN@aol.com

Wonder what we are going to be talking about?   Take a look at the articles here - they are just a few of the discussion items I plan to cover..........

Computer Tips for the Supply Management Professional  (OMV dinner program)

A notebook and a pen used to be the only tools necessary for a business trip- but today it’s the laptop. And if the laptop crashes while you are traveling – it can sure impact the business. Worst of all, laptops seldom crash during business hours or when a helpful IT person is nearby. This workshop is geared toward the nontechnical professional who needs to keep his/her laptop healthy and functioning. We’ll review some tools, tips and techniques that everyone who travels with a laptop should be aware of. We’ll also shed light on some geeky computer terms and translate the computer tips into plain English.

Where Do Those Prices Come From?
Getting To The Juicy Roots Of Product Pricing

This workshop will start at the very basics of Cost and Price analysis. We’ll use a dirt-simple example to discover how producers construct product prices. At the same time we’ll expose cost elements and considerations which influence the selling price and pricing decisions. Once we have a common understanding of the basics, then we’ll explore various alternatives and options which can be influenced by our purchasing strategy. Along the way we’ll talk about more advanced products and production processes. Our goal will be to understand the cost factors that make the most impact on a manufacturer's selling price and determine ways we can take advantage of this knowledge to negotiate lower pricing.  Note; A ½ day workshop does not afford enough time to become cost analysis experts - but it does give us enough time to understand the basics and find some ways to reduce costs.  

Negotiation Tactics And Tips
Using Our Product Knowledge To Negotiate The Best Possible Purchase.

This will be a basic negotiation principles workshop where we will explore ways to use our production and cost knowledge to plan a negotiation strategy. We’ll identify cost elements and manufacturing processes that can be targeted for price-reducing negotiations.  We’ll also talk about negotiation tactics and Strategies which can be incorporated into day-to-day work habits. Our goal will be for each person to leave with a list of specific negotiation tactics ideas about how those tactics can be applied to reduce acquisition costs.

Personal Development

Did You Know?

There are many very complete and comprehensive web sites of information and support for buyers and sellers under government regulations. Even if you are not currently using government contract methods, the resources, educational materials and references can be very helpful. Here are just a few suggestions:

1- Find contract clauses used by the government for special types of contract actions: Look in the Federal Acquisition regulations, part 52.
www.acqnet.gov/far/current/html/FARTOCP52.html#wp340130
2- Search for detailed registration information about a contractor:
www.ccr.gov  (click Search CCR)
3- Look for prevailing wage rates in various locations around the country:
http://www.wdol.gov/
4- Find training materials appropriate for contract administrators and technical staff:
http://www.acquisition.gov/gsam/gsam.html

You don't have to be a government contract administrator to access much of this information. Use it for training, comparison, sample contract language, preparing justifications, estimating and negotiating.  It's fascinating reading and well worth the time spent in reviewing and just looking around. Spend lunch with one of these web sites to get acquainted with the resources that are available. I can just about guarantee that you will find links to web sites of useful information that you didn't know was available.

Acquisition Central http://www.acquisition.gov/  A relatively new web portal with links to lots of important information.
Federal Acquisition Institute learning resources and online courses  
www.fai.gov/
Defense Acquisition Community Connection, examples and resources for acquiring complex services:
  https://acc.dau.mil/ace  


I think this report is worth sharing with managers. It speaks to the value of communication.

http://www.deloitte.com/dtt/cda/doc/content/US_Value_AdoptingValueHabUpdated906.pdf

Among the other points it makes is this one.... [ I paraphrase] If you don't clearly say what you mean, you won't get what you want.

The report includes a number of interesting case studies mostly talking about improving customer relations. One of the examples I've heard about before relates to company newsletters. Basically it says that if you leave it up to a company newsletter or web site to communicate expectations and vision, then those principles won't be consistently heard and implemented by employees. Nothing motivates and empowers as well as directly hearing the opinions, feelings and concerns of management. Thus in my opinion - even thought they might be inconvenient - regular staff meetings give staff a valuable exposure to management, and managers a chance to clearly articulate their expectations and concerns.

ISM News

Did You Know?

That ISM maintains a glossary of Supply Chain terms on their web site. It includes many definitions and descriptions suitable for use in job descriptions, process reviews and  training programs. Here is one recent  ISM Glossary Term of the Day:

KNOWLEDGE WORKER    Employee hired for their mental skills, not physical skills.

Interesting. I know some Supply Chain people who are definitely very valuable to their company because of what they know. Not surprisingly, they spend a lot of their own personal time learning, researching, reviewing and gathering knowledge.  Unfortunately,  I also know some supply chain people who just don't get it.

http://www.ism.ws/glossary/

Software Tips

I've been reading a little about the new version of Microsoft Office including WORD 2007.    So far I know almost nothing about the new versions of the applications  - seems like some interesting new features, but I don't plan to change until I have plenty of extra leisure time to learn about it.   However, Office 2007 is available now and if you purchase a new PC or new software you could end up with the 2007 version.

One thing to be aware of is that the new version of WORD, creates and saves documents in a new format with features that are NOT compatible with older versions of WORD.   Just like previous changes, Microsoft has done a pretty good job of giving you options to edit and save files in "compatibility mode" - however, you'll need to scrupulously make sure that you do so.

 

Wrong Word?

I admit it – sometimes I type the wrong word and wish that Word’s spell checker would notice. Example: I use the words from and form so many times during the day, that I almost always type the wrong one. With this trick I have trained Word to flag from and form in the spell checker so I can verify them.

Here’s how:

  1. Specify a ‘preferred spelling’ for as many words as you want. [You can find this topic with more detailed instructions in the Word 2003 help file].
  2. Create a blank Word document and list each word you want flagged on a separate line – I listed both form and from and you can list as many other words as you want
  3. Save the document as a text file, filename Mssp3en.exc
    Use the SAVE AS function in Word to save it as a text file with the filename Mssp3en.exc. Be sure that Word doesn't slip a little .txt extension on the back end of it.
  4. The filename and location are specific to the version of MS Word you are using so check the MS Word help file if it’s other than version 2003.
  5. Save the new text file in this folder:
    C:\Documents and Settings\[your user name]\Application Data\Microsoft\Proof
  6. Make sure the file is saved as plain text.
  7. Restart Word and try it.

Let There be Light!

Hopefully you've heard that congress has changed daylight savings time. It's nice that they want to give us more light - but it sure has caused a ripple in the computing community. It's because many networks, some software programs and some web sites depend on all the computers having coordinated time clocks. But the software which automatically adjust clocks for daylight savings time  doesn't know about the change that congress made. Companies are scrambling to download and install software patches to change the date. 

Read more here.....http://blogs.msdn.com/securitytipstalk/archive/2007/01/25/don-t-let-your-computer-fall-behind.aspx 

Should you be concerned? Can't we just adjust the time manually like we used to? Yes.  I think most home users (and many office workers) won't have a problem if they adjust the computer's time manually. In fact, if you are using a recent version of Windows XP - it probably is synchronizing the PC time clock with Microsoft servers anyhow. So if they make the change - your computer will also. Right click on the time display > select Adjust Date/Time > then look at the Internet Time tab > select Update Now and/or Automatically Update.

HOWEVER::: If you use Outlook at home to track appointments, they could end up an hour off during the transition. This is because Outlook creates each appointment as a stand alone item with a Coordinated Universal Time (UTC) stamp.  Solve the problem if you must by downloading a free tool from Microsoft ( I plan to make adjustment manually anyhow). Read more....  

CD & DVD Backup - HEADS UP!

After making CD and DVD backups check the CD and DVD carefully to make sure all the files have been correctly written to the disk. I just proved to myself that this can be a problem - and had to make 3 backup disks to get one good one.

What Happens:  Some data backup programs will appear to work – but they will only write some – but not all files to the CD or DVD. After burning the CD/DVD eject and reinsert it – then use Windows Explorer to open a few files. Dig down and check files buried at the deepest level.

The problem revolves around long file names and very deep folder structures which the software can’t write correctly. If you have to dig into a subfolder of a subfolder of a subfolder, etc. to open a file, then check it to make sure it copied correctly!  Look at the software options and the software supplier’s web site to find out how to set it to correctly write those files. Look for guidance regarding long filenames and/or long file paths.

Also.......... If you leave a CD-R sitting in your car in subfreezing temperatures or baking in the summer sun, you'll run the risk of losing the data on that CD in a remarkably short period of time.

Hotlinks 

Speed?

A free test of your internet connection speed here. http://tech.msn.com/speedtest.aspx

35 things every PC user should know http://go.microsoft.com/?linkid=6319005


Wondering what to do about records? Here are a few items that might give you some ideas.

Obviously this GAO report has had something to do with the increased emphasis on records… http://archive.gao.gov/d32t10/146802.pdf

NARA record schedule related to procurement records
 http://www.archives.gov/records-mgmt/ardor/grs03.html

Other NARA record schedules
http://www.archives.gov/records-mgmt/ardor/records-schedules.html

NARA Record FAQs
http://www.archives.gov/records-mgmt/faqs/

This FAQ was eye opening……..
http://www.archives.gov/records-mgmt/faqs/irradiated-mail.html

So… are you going to add value or are you just going to sit there?

It took me a long time to learn this concept in scouts. When everyone just pitched in and did what needed to be done, it was a lot more fun than waiting for someone to assign tasks. It’s also a lot more productive, efficient and valuable to a team.

Working with people who know what needs to be done and then who do it without waiting to be told – is a big (I mean really big) benefit to the team. I was there, and so I know managers notice and appreciate that type of employee. When it comes to downsizing or finding a new job, what reputation do you have?

Not sure? Here are some personal performance improvement ideas, just in case:

  1. Pay attention to what management says & does. Learn about important policies and company values so you can reflect those values in everything you do. Also, so you can contribute appropriate ideas and suggestions. Management would much rather have someone who says  "I think we can make this a better team by….”,  than someone who is constantly whining.
  2. Pay attention to the jobs your coworkers are doing. You begin to see opportunities where you can make a difference by helping out.
  3. Keep an eye open for people or processes that are struggling. Become an expert or find some training materials.
  4. Look around to see want else is being done in the organization that you might enjoy learning or helping with.
  5. Separate the tasks that you do into two categories (directed or proactively done before being directed)
  6. Imagine that management is on a 3-week leadership retreat and you had to run the operation. Now do what needs to be done? The tasks need to be done even if management is around – so why wait?
  7. Consider that everything learned is an opportunity for new responsibility and career flexibility.
  8. Work as though you want the manager’s job – (also dress and act like it) True confession: I know a person who wishes he could be treated more like a professional and/or get into management. But he dresses like a field hand – and so will probably always be one.
  9. Hold your tongue. Don’t say it unless you can put a positive spin on it. What you say will come back to haunt you. True confession: The walls have ears – I know. Ask me about this story over a glass of wine sometime. ( Keeping my mouth shut is a difficult task for me)
  10. Mentally compare yourself to your coworkers. Now rank everyone based on who is best to work with and most helpful to the organization as a whole.  If you are not at the top, then you can be sure management knows it as well.
  11. Be reliable and responsible. Even the best workers are useless to management if they can’t count on them to always be there or to get the job done.
  12. Be honest with your management. If you haven’t received a compliment find out why. Ask, “What can I do to be a more valuable employee and obtain your recognition”. True confession: I once had a manger who had no clue what I did, presumed I was useless and never gave compliments to anyone. A few years later I had the opportunity to accept him as an employee in the group I was managing – needless to say I declined.
  13. Conversely – get in the habit of recognizing and thanking people. Praise and rewards are the most effective motivators (spoken like a true psychology major). Say “thanks” and “thank you “like there will be no tomorrow. Even if it sounds a little contrived, more people will enjoy working with you.

Provide Feedback and suggestions for future newsletters at any time. I'll try and use what I can.

I really do appreciate those of you who take the time to write and comment on this newsletter!  

TTFN, 

Mt


Read more articles in the Purchasing Toolbox at http://www.mltweb.com/prof/tools.htm and in the BuyTrain news article archive at http://www.mltweb.com/tools/buytrain/index.htm Return to MLTweb


MLTWEB is assembled and maintained by Michael L. Taylor, C.P.M. 
Materials and articles prepared by Mike may be shared for purchasing education provided that this source is cited and no fee is charged. The rights for any other use are withheld.
Copyright;  Michael L. Taylor, C.P.M.
Last Updated: 05/23/2006