Supply chain sustainability: Top trends, concerns and opportunities

on Thursday, August 25, 2016

Supply chain sustainability: Top trends, concerns and opportunities

One of the biggest trends impacting global supply chains today is the increased demand for sustainability. As both consumers and businesses are becoming more environmentally aware and responsible, companies are facing growing expectations around reducing the impact their operations have on the planet. 

More specifically, as a recent UN Global Impact report pointed out, supply chain managers are starting to embrace sustainability and exercise more responsibility to ensure they are responding and adjusting appropriately to the "geopolitical conflicts, changing weather patterns and raw materials shortages and to improve their impacts on the workforce, local communities and the environment." Furthermore, the source revealed that organizations are driven by the proliferation of operational, financial and regulatory risks associated with sustainability, yet many face issues with variances in compliance requirements. 

Ethical Corporation also released its State of Sustainable Supply Chains 2016 report which highlighted key trends, issues and opportunities regarding sustainability in supply chains today. Below are some of the biggest findings the research revealed.

Focus areas of most and least importance
Forty-seven percent of supply chain executives indicated that their number one priority is human rights, followed by environmental concerns (43 percent), traceability (42 percent), eliminating dependency on unsustainable raw materials (40 percent) and measurement (30 percent). On the other hand, supplier diversity is a topic they are least concerned with, as well as community engagement and certification. And while having a diverse network of vendors may not be a primary focus for organizations, establishing more integration with their existing partners is.

Biggest opportunities for 2016-2017
According to Ethical Corporation, supply chain professionals said they see resource efficiency as being the biggest opportunity for them over the next year, followed by industry collaboration and the development of a circular economy - indicating an increased interest in and goal of learning how to create more while also improving their environmental responsibility. It is also worth noting that more than 34 percent of participants said their biggest motivator is eliminating supply chain risks.

Supplier integration and traceability
Target Corp. recently severed ties with one of its textile suppliers after its investigation learned that the manufacturer had been selling the retailer products that were not made using the materials it claimed it would. This is just one example of the importance of companies ensuring ethical standards and practices are used not just throughout their own organizations, but along the supply chains of their vendors as well.

Improving supply chain sustainability requires strong collaboration and integration among suppliers. However, the UN Global Impact report revealed that traceability and transparency with distant tiers of the supply chain are major challenges for most companies. 

The role of technology
The rapid development of innovative technologies has provided businesses with the solutions needed to enhance a myriad of operations and processes throughout the entire supply chain - and these solutions may be the answer for improving sustainability as well. The UN Global Impact report explained that the maturity of technology solutions are advancing in a way that offers more insight into supplier performance and incorporates information from a wide range of parties and stakeholders. 

"Technology will continue to play an increasing role in supply chain sustainability, offering modular, cloud-based sector-specific solutions, with the potential of global cluster databases being created in the future," the source stated.

As supply chains expand and grow more complex, achieving higher levels of integration and collaboration is of utmost importance - a goal that becomes significantly easier to achieve by leveraging modern supply chain software and technology. As a result, businesses will likely continue to adopt this strategy as a way to further improve sustainability success.

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Target, Volkswagen experience supplier disruption

on Wednesday, August 24, 2016

Target, Volkswagen experience supplier disruption

Of the wide array of complications the increasing demand for traceability and transparency along the supply chain has presented businesses with today, being able to see - let alone ensure - compliance of its distance tiers has been among the most challenging. And this was recently exemplified by Target Corp.

According to The Wall Street Journal, the retail giant decided to cut business ties with Welspun India Ltd., a textile supplier, because, Target claimed, the organization sold sheets on the false promise of them being made from premium Egyptian cotton - something that the organization indicated went against its high ethical standards.

In its press release statement, Target explained that the product in question was its Fieldcrest Egyptian Cotton 500-thread count sheets.

"After an extensive investigation, we recently confirmed that Welspun substituted another type of non-Egyptian cotton when producing these sheets between August 2014 and July 2016," the retailer stated. "Neither Target nor Fieldcrest had any knowledge of this substitution. These sheets were produced by a number of vendors and only one of those vendors was substituting product."

Welspun concerned about business outlook
The Wall Street Journal reported that Target was one of the manufacturer's biggest customers and generated approximately 10 percent of its total sales. Other big-name retailers Welspun works with include Macy's Inc., Bed Bath & Beyond Inc., Wal-Mart Stores Inc. and J.C. Penney Co.

Shares of the company dropped 20 percent before trading was suspended, The Wall Street Journal added. Furthermore, Welspun representatives conducted a conference call with investors, during which an equity research analyst explained that it is still too early to come to a conclusion about where things went wrong.

"But, yes, a concern now is that other big clients may begin to look into Welspun's practices," the analyst said. "That is a big concern."

According to The Wall Street Journal, the textile supplier has hired one of the biggest accounting firms to conduct an investigation of its "supply systems and processes." Meanwhile, Target has removed the company's products from its shelves and is now issuing refunds to customers who bought the sheets.

VW Supplier disruption 
This occurrence highlights not only the importance, but also the difficulty global companies today have with mitigating risk throughout their entire supply chains, especially when it comes to ensuring the processes and practices of suppliers are up to the same level of standards.

Another high-profile case of supplier-related issues that gained significant attention is the controversy surrounding Volkswagen AG. In a separate piece, The Wall Street Journal reported that, last week, suppliers accused Europe's largest car maker of owing them millions of euros for not delivering on its contracts. This conflict caused massive production delays and affected the working hours of approximately 28,000 Volkswagen workers due to a shortage of parts. However,  an agreement was reached earlier this week between the car maker and its suppliers.

"There's been an amicable and fair agreement also encompassing open financial issues," ES Automobilguss Head Alexander Gerstung said, according to the source. Although the suppliers originally sought about $56 million in compensation, Volkswagen has agreed to pay around $14 million in contract damages.

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Give your Procurement Performance a Boost! - Infographic

on Tuesday, August 23, 2016

Did you know that according to a recent CPO survey of a majority of Chief Procurement Officers have mixed outlooks in regards to the effectiveness of their procurement departments? With a value proposition of organizational enablers and departmental unifiers with major impact on the bottom line, strategic sourcing and procurement groups should inspire confidence in their CPOs. So, what can SS&P do to improve performance? We’ve pulled together five tips for bolstering performance, including enhancing supplier relationships, establishing the right KPIs, and leveraging the right external support.

Do you have strategic relationships with your key suppliers? 

When was the last time you had an open dialogue with them? 
Was it the last time your contract was up for renewal? 

If so, you could be missing out on major opportunities for your company. A supplier relationship management program improves the workflow with vendors and third party groups. SRM is based on a conjoint set of processes and practices that compel constant open communication between the supplier and the buyer. Strategic Sourcing and Procurement uses principles, communications, processes, and other tools to fix shortcomings and improve performance.

How do you measure your Procurement Organization’s success? 
Is it strictly based on savings? 
Are your metrics aligned to your company’s overall mission? 

Assessing Key Performance Indicators allows for distinguishing and tracking key metrics that warrant procurement efficiency. KPIs can result in the company’s development of revenue and could be used to drive business objectives. For example, reducing the costs of product and service production allows for an increase in market share. While savings is a major driver for many procurement organizations, there are countless other ways to measure the value delivered by SS&P groups.

Is your procurement organization fully equipped to handle both tactical and strategic tasks? 
Do you have a partner that can help your organization with both? 
Do they offer flexible support catering to your fluctuating procurement needs?

Procurement departments can get external support by choosing the right outsourcing model to elevate staff’s productivity by transferring certain tasks that can be done more resourcefully by a third party. Companies can elevate themselves to the next level by partnering with outsource procurement service providers to access crucial market intelligence, industry best practices, and onsite and implementation support. One stop shop providers allow companies to save time and resources by providing support services such as processes, expertise, marketing knowledge, and people; wherever and however you need it. 

These are just the tip (pun intended) of iceberg of the ways in which procurement organizations can boost performance. Check out the infographic for more!

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Technology fueling the transformation of supply chain and procurement

on Monday, August 22, 2016

Technology fueling the transformation of supply chain and procurement

Advancements in digital technology have significantly altered the way organizations today operate. Businesses across the globe are reevaluating how they approach, manage and run virtually all aspects of the supply chain. By leveraging innovative solutions, such as robotics and automation, companies are able to streamline workflow processes, improve efficiency, increase visibility and lower costs.

Business.com reported that a study conducted by Capgemini Consulting and GT Nexus revealed that the majority, or 70 percent, of organizations have already started their supply chain digitalization. However, at least 30 percent are dissatisfied with how much progress they have made, mostly due to the key technology drivers being unused or ineffective, including:

  • Supply chain data: According to the source, one of the main focus areas for the digital supply chain transformation is enhancing the data readily available in the extended of supply chain. Only 15 percent  currently have access but more than half anticipate improvements over the next few years. However, having access to supply chain data is of little use unless it is being interpreted and applied in meaningful ways. Just 23 percent of survey participants said they currently analyze data from their extended supply chains, yet nearly 70 percent indicated they will five years from now.
  • Supplier automation: Suppliers play a pivotal role in supply chain success, which can help explain why nearly all, or 95 percent, of organizations plan to improve the automation processes they have with their partners in the near future, including being able to get real-time status updates.
  • Cloud-based software: Another area that Business.com reported as being a key driver of digital supply chain transformation is cloud solutions. Currently, only 6 percent of companies use cloud-based software for the majority of their processes and two out of three participants use it for less than a quarter of their software. Almost half of survey respondents still use traditional modes of communication throughout their supply chains, such as email, phone and fax.

Ensuring a successful digital transformation takes more than simply adopting the latest tools and technologies. Business leaders must make sure that the right investments are being made that will provide a high return on investment. And, for most companies, this means that a valuable area of focus should be order and spend management.

Transforming procurement processes
This week, Supply Chain Digital highlighted the reasons why an increasing number of companies are investing in order management automation. Facing growing pressure to reduce costs, increase value and enhance the experience of customers, automated order management systems allow supply chain leaders to eliminate many of the errors and inefficiencies attributed to paper-based processes. Additionally, this technology provides an opportunity to gather larger sets of supply chain data, mitigates risk and compliance issues and improves visibility. 

It is nearly impossible to achieve digital supply chain transformation, though, without assessing the state of procurement within the organization. According to Spend Matters, approximately 75 percent to 90 percent of companies have immature levels of procurement. Although these businesses use technology for procurement functions, it is not sophisticated and lacks integration and automation capabilities. On the other hand, those that are categorized as having mature procurement models (only about 10 percent to 15 percent) are able to "capture indirect spend, where buying processes are integrated with e-procurement deployments and where supplier networks are frequently used for onboarding and for sharing information and documents."

As the source pointed out, there a wide range of benefits that advancing toward a more mature procurement model can offer businesses, including greater levels of reporting, visibility, supplier integration, compliance and risk management. Yet, when it comes to deciding which procurement technology will prove to be a valuable investment, corporate executives have to make some decisions. Among the most important is what kind of digital procurement system to use.

In a blog post for The Huffington Post, Zak Mustaspha recently weighed the advantages of using cloud-based procurement software versus "on-premise" solutions. Below are some of the most important factors that should be considered:

  • Cost: Although the costs of on-premise software may initially be lower, the expenses associated with the hardware, servers and running and maintaining the critical infrastructure can quickly add up - making subscription cloud solutions a more appealing and cost-effective choice for many.
  • Performance: With so many supply chain managers wanting to gain more visibility and control into processes, it would be incredibly useful to have a procurement system that provides access to real-time data and on-demand adaptability. This is an advantage of cloud software that many on-premise applications don't offer. 
  • Security: One of the most crucial aspects of supply chain management is security. The sophisticated software and infrastructure provided by cloud computing platforms make it a preferable solution over in-house systems. 

There are many reasons why organizations today are starting to digitally transform supply chain and procurement processes. However, it is of utmost importance that, in their efforts to do so, company leaders take the time to not only ensure the right technological investments are being made, but that they are being adopted and implemented correctly as well.

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Luxury Brands Embracing the Internet?

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Luxury brands place a large emphasis on being customer centric, innovative, and continuously improving quality. Luxury brands pride themselves on their brand image. For example, even though two scarves may appear similar, the label dictates so much: price, prestige, value, and image.
So where are people turning to buy these products? Well, no longer do you have to travel to Italy to buy an Italian leather product or travel to France to buy a premium scarf. With the age of the internet these products can likely be found online. However, believe it or not, there are still some fashion brands that don’t sell their products online. Labels like Chanel, CĂ©line, Hermes and Dior still require that customers physically go to the store to purchase most, if not all, of their clothes and handbags. So, if more and more customers are turning to the internet to make their purchases, why have some brands refused to embrace e-commerce and seemingly given up this potential opportunity?
University of Pennsylvania’s Wharton School of Business article entitled “Selling Luxury: How High-end Brands are Embracing the Internet,” sheds light on this question.  The article begins with this paragraph, “Online shoppers won’t find a price or an ‘add to cart’ button when they visit the website of iconic watchmaker Patek Philippe. The most prominent visual on the home page is not a limited edition timepiece but a commercial featuring a father congratulating his son for winning a cricket match. The ad ends with the slogan: ‘You never actually own a Patek Philippe. You merely look after it for the next generation.’” Patek Philippe’s website is atypical. While you can read about all the models, there is no way to purchase the product from the website. And although it may seem like this strategy would hurt the brand and diminish sales, Wharton marketing experts see it as “an excellent example of how some high-end retailers are dealing with a dilemma born of the digital age.”
“Luxury is about scarcity, exclusivity. The internet is about mass and reducing those boundaries, and so it’s a real conflict,” said Barbara Kahn, a Wharton marketing professor and director of the school’s Jay H. Baker Retailing Center.  In the beginning of this blog, I mentioned that luxury brands are unique. Luxury brands require a special type of marketing. If you were able to go online and purchase a Burberry handbag on clearance or from any retailer, you would likely begin to question the brand and the image it is conveying. But if these luxury brands aren’t changing with the times and adapting to the internet, are they missing out on sales? In actuality, no. Wharton states that only 10% of sales in this market actually happen online.
It is really all about the type of business model the luxury brands choose to utilize. For Chanel, “fashion is about clothing, and clothing you need to see, to feel, to understand.” And, the marketing director at Dior stated that ready-to-wear items that are placed on the internet are mainly used as a tool to market the label’s other goods. These ready-to-wear items really only make up a small portion of the revenue for the luxury brand. The other argument for not putting luxury brands on the internet is to preserve the brand. Unlike brands in other industries, such as CPG, Insurance, or Pharmaceutical, luxury brands do not always have the goal of increasing sales. Often they want to preserve their brand image for years to come. By maintaining the brick-and-mortar stores, luxury brands continue to build relationships with their customers. They create a bond with them, they get to know their likes and dislikes and can customize their products to each person’s unique needs. Luxury is all about looking after the products for the next generations, and while the internet may be beneficial for some products, luxury brands will likely continue to be wary about placing their product on the internet for the masses.
Source One has experience working with numerous luxury brands. We understand their unique nature and realize they require specialized services, management, and marketing. Through a suite of procurement outsourcing, market research, strategic sourcing, and consulting services, Source One will give your brand the individual attention it deserves, allowing you to reach new markets, expand into alternate luxury segments, or accomplish any other objectives identified for your company.




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How to (properly) identify suppliers for your Direct Materials sourcing event.

on Friday, August 19, 2016


Request for Proposals can be useful tools when it comes to direct materials sourcing. When properly executed, RFPs can result in introducing new suppliers that can provide the best services at the most competitive prices. That being said, identifying good candidates as potential suppliers is not an easy task! It requires strategic thinking from the very beginning of the sourcing initiative. In other words, suppliers must be identified, prescreened through a verbal Request For Information (RFI) process, and selected with a set of criteria and requirements that best align with the sourcing project’s desired end results. Here are 5 important criteria categories to consider in order to successfully identify the best fit suppliers to invite to a sourcing event.

Strategy alignment
It is important to identify the strategic road map of the project prior to performing any sourcing activity. As a matter of fact, some suppliers are more eager to take on prototyping projects with lower annual runs than other suppliers who may set minimum order quantities for medium to high volume production projects only. Additionally, some suppliers might not be capable of taking on new business, but would still be interested in bidding on a RFP, which would result in higher lead time if the business is awarded to them. Therefore, it is important to identify suppliers that will best fit with the project strategy in order to maximize the competitive and qualitative outcome of the sourcing initiative. It is important to also identify the desired secondary services a supplier must be able to offer. Projects aiming at introducing new custom parts to a company product line will require DFM services. Inventory management and Kanban services might also be needed. Such services should be identified during the verbal RFI, and further vetted during the RFP process.

Manufacturing Capability 
Primary and secondary manufacturing capabilities required for the production of mechanical components need to be clearly identified, as they can vary depending on the part’s complexity. For example, medical instruments, such as surgical instruments, and mechanical parts for the aerospace industry, like fans or turbine blades, can require different primary precision machining capabilities, such as CNC or conventional turning with or without C-axis options, milling with 5 or more axis (depending on the part’s complexity), Swiss turning, or precision grinding. Secondary capabilities can range from heat treatment to passivation and other cleaning methods, such as deburring, electro polishing or sanding. These are just a handful of capabilities available in the market for precision machining services. Therefore, it is important to clearly identify which primary and secondary manufacturing services need to be provided in order to select the best fitted suppliers with the right core competencies. However, it might be difficult to identify suppliers that will perform all manufacturing processes in-house. Some suppliers will provide a service by outsourcing it, however, this should not necessarily be considered a deal breaker. The question here is how to differentiate suppliers that outsource similar services, such as heat treatment. The right criteria to consider is where the services are outsourced. Suppliers outsourcing locally will be a better option than suppliers outsourcing nationally or even internationally, as higher ancillary fees related to transportation will be applied with the latter.

Regulatory and Quality control 
Manufacturing capabilities are not the only focal point. Certifications and quality control methods are equally important to vet during the prescreening process of a candidate. Certifications, such as ISO 9001, ISO 13485 for the medical industry, or AS9100 or AS9120 for the aerospace industry, are good indicators to gage supplier reliability and quality. Some suppliers advertise the complete list of equipment they own or lease on their websites, such as optical comparator, CMM machine, and other quality control machines. Such information helps create a better understanding of a supplier’s service offerings. Ultimately, this will show how one supplier ranks better than another as they meet project quality control requirements that others don't.

Current market and product base 
Looking at a supplier’s current market and product base is essential. While this information is not always available on a supplier’s website, it can be discussed over the phone. This highlights the importance of conducting verbal RFIs in order to properly identify and select suppliers for a sourcing initiative. Suppliers with experience servicing an organization’s market and manufacture similar products as those requested in the sourcing project will be a better candidate than those who are novices in the space.

Geographical location 
Another criteria that can help differentiate suppliers is geographic location. Freight cost should be considered in the sourcing equation as they can have a significant impact on a product’s overall pricing. Suppliers located in the same industrial zone, city or state mean lower freight costs than suppliers located across the country. While not being the most critical criteria of this list, it is not to be forgotten due to its impact on the Total Cost of Ownership.

In summary, while it’s easy to find suppliers for specific service offerings through directories such as ThomasNet, choosing the ones that best fit a project’s needs requires more than just a few clicks. Verbal RFIs conducted with a set of pre-defined criteria provide an in-depth prescreen needed to properly identify potential future suppliers and therefore maximize the results of a sourcing initiative. This process also optimizes the entire RFP process as it ultimately limits the risk of suppliers dropping from the sourcing initiative due to a lack of interest or capabilities.
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Nike announces new supply chain deal with Apollo

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Nike announces new supply chain deal with Apollo

Athletic apparel giant Nike Inc. just announced that it has established a strategic partnership with affiliates of Apollo Global Management, LLC for its supply chain in the Americas. In its announcement, the organization explained that this deal is aimed at increasing its manufacturing capabilities, improving delivery times for its customized products and fueling sustainability investments. In addition, this new arrangement will enable Nike to operate its supply chain using a more vertically integrated approach, an effort that will be further developed with the acquisitions it expects to make in the future of textile and apparel suppliers located in North and Central America. 

"We are excited to be working with Apollo to rethink a new supply chain model to revolutionize apparel manufacturing in the Americas," Nike Chief Operating Officer Eric Sprunk stated. "The new company, under Apollo's leadership, is committed to embedding sustainability and transparency into the business, investing in new technology, vertically integrating critical elements of the supply chain and delivering the best Nike performance product to our retail and sports partners."

Apollo Co-Founder Josh Harris added that the company is excited about this opportunity and believes it will allow the brands to better meet the rising demands and expectations of today's consumers, noting that this partnership indicates Nike's mission to foster long-term sustainability, growth and innovation.

According to FX News Call, prior to this new supply chain deal, the leading athletic clothing and footwear retailer had been dealing with some logistics challenges. One of them, product delays, led to the corporation opening up a new Memphis-based distribution facility. The source also noted that Nike has struggled to compete with other brands in the industry, including Under Armour and Adidas AG. And, although it recently experienced an earnings increase of 6 percent, its sales have remained unchanged in North America.

Nike's press release revealed that the specific agreement terms were not released. However, what is known is that the foundation of this newly-formed supply chain organization is made up of two businesses it purchased: New Holland, an apparel manufacturing company, and ArtFX, a warehouse and logistics provider.

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Optimizing Custom Packaging Sourcing in a Volatile Commodity Market

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      Packaging is typically the first attribute noticed by a consumer making an in-store purchase, acting as an ambassador to the finished good inside.  The quality of packaging materials is important to protect the product and prevent loss from damage in transit.  The branding and design is equally as important for marketing and product differentiation.  These essential characteristics come at a cost, and are typically considered a direct material, one that is wrapped up into the cost of goods sold (COGS).

      Procuring direct items is a challenging endeavor, as the materials directly impact the customer’s perception of the finished good.  Quality and costs must reach a fragile balance to match the perceived value of the item and drive consumption.  To add to this, direct materials are often commodity items, meaning pricing may be volatile.  Packaging materials are not an exception to this rule, and there are certainly tactics that can be placed to reduce the level of risk associated with fluctuating raw material pricing.  While important in maintaining competitive pricing, hedging commodity indices is not the only opportunity for cost optimization in the packaging category.  Advanced purchasing strategies can reduce pricing margins beyond the raw material cost, and lead to more efficient sourcing.
      The first area of impact for cost reduction is in analyzing optimal run sizes.  A run size is the quantity of materials produced in one production cycle.  Purchasing strategy should take these quantities into consideration to fully optimize costs.  Ordering in quantities outside of the manufacturer’s optimal run size exposes the supplier to risk in holding overage inventory or having to short-run their production, both of which will come at an increased cost.
      Placing blanket purchase orders is a way to take advantage of pricing associated with these favorable volumes without taking on more inventory than is required.  Under a blanket PO, an order can be placed to cover the full run size with periodic releases of inventory from the manufacturer.  This also further reduces overhead costs associated with processing frequent purchase orders.  Once all releases have been fulfilled, the blanket purchase order is complete.  Inventory cost and risk can be reduced further through the implementation of a Vendor Managed Inventory (VMI) program. This allows the manufacturer to control inventory replenishment and have direct visibility into the quantities to prioritize and optimize their production schedule.
      Finding the ideal product mix is an additional way to leverage volumes for better pricing without necessarily having to take on additional inventory risk.  A high volume, low mix market basket is the ideal scenario for taking advantage of these benefits.  Periodically, packaging material specifications should be reviewed and rationalized, seeking areas of overlap to reduce the amount of differing items.  For example if item A utilizes a corrugated box with dimensions 8” x 16” x 4” with a custom foam insert and item B requires a slightly larger corrugated box with dimensions 8” x 18” x 4” also with a custom foam insert, there is opportunity for review and consolidation.  It may be more cost effective to use the larger box across both products, as the volume leverage reduces cost drastically enough to justify the extra material.  Alternately, the foam insert for item B may be able to be reduced in size to fit item A box specifications. As a result, material costs well be reduced while negotiation leverage simultaneously increases.
      Furthering specification rationalization is branding rationalization.  Procurement and marketing must work together to find the ideal balance of promotional package branding and cost optimization.  Custom prints using multiple colors while pleasing to look at, can be costly to produce.  Frequent design changes can require additional upfront investment in reengineering fees.  The level of detail in a design should strike a balance of consumer friendly and conscious of small details that may be better off omitted due to the risk of frequent change requirements.
      Frequently evaluating purchasing tactics and coordinating optimization strategies with internal departments and suppliers is an excellent step in becoming a procurement center of excellence.  It is important to exhaust every angle when seeking areas of opportunity, and to never assume an item’s cost is not impactable due to commodity material pricing. 
      Source One Management Services has developed expertise in sourcing direct material across many sourcing categories, including packaging.  Contact our strategic sourcing experts today, to learn more about optimizing your packaging spend.
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Source One Round Up: August 19, 2016

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Source One Round Up: August 19, 2016

Here's a look at where Source One's cost reduction
 experts have been featured this week!





NEW BLOGS:

Consider Potential when Hiring 

Without a doubt, recruiting, especially for procurement and supply management positions is difficult. You ultimately want to know if this candidate has the right skills and traits that will lead to success. So, you take a look at their resume and review a long list of experience or, in some cases you review their resume and see a lack of direct experience. Who do you hire? This week, Source One Project Nicole Mahaffey challenges your preconceptions on hiring based strictly on experience, offering additional factors to consider when evaluating if a candidate is the right fit for your organization. 

Fleet Sourcing: Evaluating Light Fleet Automobile Manufacturers


Having a well-maintained fleet is crucial - but not always easy to manage when it comes to maintaining costs and eliminating rogue spend. Relationships with OEMS and fleet management providers often become deeply rooted within organizations, making transitioning to other providers more challenging. However, achieving cost savings while maintaining a consistent fleet operation is possible. This week, Source One's Senior Supply Chain Analyst Jonathan Groda explains how to get started a strategic sourcing initiative for fleet components. He also shares insight into which areas to focus on during negotiations. 








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Transportation industry slow to adopt procurement technology

on Thursday, August 18, 2016

Transportation industry slow to adopt procurement technology

Digital technologies seem to be penetrating all aspects of the supply chain. However, for the freight transportation industry, it seems procurement technology is being put on the back burner.

The American Shipper Transportation Procurement Benchmark report, which was released in a collaborative effort by the National Retail Federal, Transportation Intermediaries Association and Retail Industry Leaders Association, revealed that shipper companies used manual processes for transportation procurement operations more often this year than last, Spend Matters reported. In addition, the study indicated that, for a large portion of shippers, the inclination to adopt a more modern and automated approach to procurement isn't strong.

Reasons for resistance
Some may assume that freight transportation businesses are reluctant to automate the procurement process because they don't want to change their traditional business models and conventional way of doing things. And while this most likely contributes to the trend, it is does not explain the entirety of it. The study indicated that shippers have a variety of reasons for maintaining their manual approach, including:

  • Lack of ROI (about 50 percent)
  • Satisfied with current systems and processes (27 percent)
  • Hesitant about new technologies (27 percent)
  • Systems inefficient functionality for specific needs (18 percent)
  • Lack of tech skills and experience with automation (7 percent)

It is not that the majority of transportation companies are resistant to procurement technology because they think their existing processes are particularly effective either. Because while 27 percent of those surveyed expressed satisfaction with their current systems, this number was 18 percent higher last year, indicating confidence in manual procurement is waning. Even among those who reported favorable feelings regarding what they're using now weren't very convincing. When asked how helpful they thought their existing tools were in sourcing activities, only 5 percent rated them as "very good." Twenty-eight percent cited them as "good" and about the same amount said they didn't have an opinion. 

Another surprising finding the survey revealed, according to Spend Matters, is that the majority of transporter buyers realize that procurement technology could benefit their processes. Most of the freight transportation buyers surveyed are using manual systems, included spreadsheet-based models - 44 percent compared to 39 percent last year. There are some who have started incorporating automation tools, though: 8 percent leverage procurement technology that is specific to freight activity when buying transportation and 7 percent use an automated procurement system for general purposes.

Making progress in procurement processes 
The above findings suggest that one of the areas where there needs to be more focus on procurement technology is upper management. Many shippers reported that they were uncertain whether or not their organizations even plan to adopt transportation procurement technology. Even those that plan to invest in automation don't seem to be too eager to do so: Eleven percent said it would happen in the next one to two years and just as many said within five years. Only 8 percent anticipate adding procurement technology to the budget within the next year.

The problem is that transitioning to an entirely new system is no small feat - and the longer organizations put it off, the more disruptive and complex it is likely to be once they finally do. Also concerning about the current state of transportation procurement is the variance and ambiguity among companies within the industry. Again, many respondents acknowledged that procurement technology could benefit their processes, yet few are taking the initiative to implement automation and the percentage of organizations using manual systems is actually on the rise.

There is a disconnect that suggests there is much room for improvement in the freight shipper market, for not only better communication about what solutions procurement technologies can help with specifically, but how to effectively transition to these systems in a way that will provide the organization with a higher return on investment.

Automating transportation procurement
According to The Wall Street Journal, Deloitte research recently found that most chief procurement officers need a clearly defined strategy for implementing technology - something only 40 percent currently do. The organization highlighted a number of ways companies can use to help move procurement toward automation, including gaining a better understanding of the struggles CPOs face, their specific needs and resource issues. The source indicated that a major driver of effective change lies in creating a more connected experience and collaborative relationship between the CIOs and CPOs, ultimately resulting in a more effective digital procurement solution.

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Latex Ink

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By now most organizations have realized the benefits and importance of "going green."  There are legal and tax advantages like tax credits on the state level and certain credits on the federal level as well.  Reducing waste can often mean reducing operating costs, saving energy, and so on--all things that generally lead to saving money, which every organization should be on board with these days. Improving the workplace, generating positive public perception, and having more sustainable practices are just a few of the other major advantages that organizations have found.

Improving technology is another practice that most organizations have embraced.  Hp has succeeded in combining the best of "going green" with technology advancement in the new latex ink for commercial print houses.

First, let's take a look at what typically goes into the standard commercial print job that your marketing department may outsource to a print house.  Typically art files are designed, uploaded, sized, and an electronic proof is created for approval.  For the most discerning, maybe a hard copy proof is generated and sent over-night for an extra charge.  Again, the most discerning, may raise concerns about exact color matching and review PMS colors with the printer to ensure everything prints exactly as planned.  After that, most do no know what goes into the print production.  There are different types of printing (offset, digital, large or wide format, etc.) but we will keep things simple and save those topics for another post.  Once the proof is approved and printing goes into production, the printer prints the file and then "spits it out."  At that point, the print job must be set aside for "degassing" and to allow the inks to fully dry and set on the print medium.  The printing facility itself needs to be well ventilated, often with an air purification system as well, and production staff has grown accustomed to the antiseptic-like smell of the inks.  After this step, the print job moves into fulfillment where it is packaged for delivery and any final touches necessary may be added.

Then there is the newest technology: latex ink.  It has no smell and it is sustainable.  The ink is non-flammable, non-toxic, and non-combustible.  This is because latex ink is 66% water!  From a design standpoint, this is huge.  Unlike other inks that settle into the print medium and can react with it, latex ink sits on top which means it does not react to the print medium in the same way as traditional inks can sometimes react.  Furthermore, latex ink is a huge step forward in "going green" for the commercial print industry because it is recyclable and sustainable.  The lack of strong odor means the print jobs that use latex ink will not require degassing right out of the printer.  Latex ink does not produce VOCs (volatile organic compounds) which, without adequate ventilation, can cause major health problems like asthma, central nervous system damage, and even cancer.  This also means that latex ink does not need time to set upon coming out of the printer because the ink is already dry.  All of this means greater production efficiency leading to savings for users of latex inks.

For those organizations outsourcing to a commercial print house, this increased production efficiency should mean faster overall turnaround time on print jobs.  It could also result in cost savings passed on to the customer.  Finally, customers will also be happy to know about the durability of latex ink.  Unlike traditional inks, it does not require lamination for durability.  In fact, latex ink can last up to three years without being laminated.  For the doubtful (or those needing extra-long durability), laminate latex ink and it will last up to five years.  Imagine the cost savings to an organization if print jobs do not need to be periodically reprinted.

While it is uncertain the exact effects latex ink will have on the commercial print industry, one thing is for sure: latex ink encompasses the best of "going green" with advancing print technologies.  While latex ink may not yet be the standard for all commercial printers, it certainly does remind the customer to evaluate how much print and fulfillment services are costing and look for savings opportunities.  Has your organization done this lately?


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Measuring the Value of Procurement Capability Improvement

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Special thanks to Charles Dominick, SPSM3 of the Next Level Purchasing Association for this guest post.

Whenever you get a procurement capability improvement initiative rolling, you have to utilize resources. By resources, I mean money or activities or things that cost money. When you complete a procurement capability improvement initiative – or a segment of it – you will likely be questioned what returns the investment generated. That’s not always easy to quantify, but here are three ways you can measure the value of procurement capability improvement.

Before-and-After Comparisons
When you started your procurement capability improvement program, you did so for a reason. There was something deficient. What was it? What measurements did you use to determine that performance wasn’t optimal? Those are the same measurements you need now.

While all top-performing procurement departments measure cost savings alongside other advanced metrics, even mid-range performers at least measure cost savings. So, let’s use cost savings as an example.

Let’s say that the procurement team saved $1,000,000 before the procurement capability improvement program. That wasn’t enough. So, you put in place the procurement capability improvement initiative. And, now that it’s complete, your annual savings is $6,000,000 per year. Then, the value of the procurement capability improvement initiative is the difference - $5,000,000.

Cost Savings Attributions


Reflecting on the prior example, any good devil’s advocate would say that there may be some of that additional $5,000,000 cost savings that’s not attributable to the procurement capability improvement initiative. And that’s a valid point. For example, maybe the commodity markets dropped, resulting in somewhat “automatic” cost savings that would have been achieved irrespective of whether the procurement capability improvement initiative was undertaken or not.

If labeling all gains as procurement capability improvement initiative-driven would be a problem in your organization, a more granular approach may be needed. For each line item that you record as procurement-generated value, you need to either flag it as related to your procurement capability improvement initiative or not. Then, you simply add up the value of all of the flagged line items to come up with the value that your procurement capability improvement initiative generated.

Again, because most mid-level or better procurement organizations track cost savings, we’ll use that as an example. In whatever system – or spreadsheet – you use to track cost savings, add a field for each record where a user can attribute the savings to the procurement capability improvement initiative. Then, follow the foregoing steps to identify how much of your incremental cost savings was attributable to the initiative.

Performance Appraisal Documentation
A final way to capture the value of your procurement capability improvement initiative is to incorporate value metrics into staff performance appraisals. Throughout the year, encourage each team member to identify the value that they generated that was specifically related to the procurement capability improvement initiative. At performance appraisal time, have each team member report what they’ve measured, then aggregate all of those reports for a team total.

If you’re doing performance reviews anyway, this is an easy approach to identifying the value of better procurement capability.

Concluding Remarks
Improving procurement capabilities is something every procurement leader should do continually. However, sometimes the need for improvement is much more significant than others. Regardless, you need to keep your eyes on the prize. Don’t just make changes for the sake of making changes. Make changes designed to better position your team to achieve its goals and mission. And, right from the beginning, think about how you will measure how much of a difference improved procurement capabilities will make. That way, when it’s time to report the value of your initiative, you can do so knowing that your initiative contributed in a very positive and measurable way.
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