Technology in and around the supply chain

on Friday, July 3, 2015

Technology in and around the supply chain

Over the course of the last few years, technology has quickly become so integrated into daily life that it seems nearly impossible to imagine a normal workday without some gadget or software to help make life a little easier. Not only have ordinary citizens adopted tech to suit their needs and desires in the form of smartphones, tablets, wearables and the various applications that exist on these platforms, but enterprises and different aspects of business also couldn't function in the manner we've come to expect without it.

There are few areas of life where technology hasn't made a large impact, and that seems to suit the general public just fine. Because of this close integration, technology in and around the supply chain is now a vital part of what makes life possible. Here are a few examples of the importance of the tech supply chain and software and gadget use in manufacturing and procurement services.

Reorganization efforts put tech first
As businesses across the world realize just how vital technology is to their operations, new positions have been added to take care of the growing need for expertise. However, some enterprises believe that refined knowledge on the subject that chief information officers are being promoted to senior operations positions. As The Wall Street Journal reported, Cisco Systems made Rebecca Jacoby, former CIO, the senior vice president of operations and put the well-being of the supply chain in her able hands - a move that highlights the importance of technology in supply chain management.

Cisco is not the only company to recognize the shift toward digital. Not only is management easier when leveraging applications for supply chain means, but there's far more control to be had. IT experts are not only ideal for this position because of their extensive knowledge of existing systems, but they are probably more likely to think of how they can leverage other technologies in the future.

Transparency is key
The best way for a supply chain to run smoothly is to have full transparency across the board. Suppliers and procurement services are more likely to fall into hot water if they shroud their transactions in secrecy. And these days, consumers have many questions about the origins of their food, clothing, electronics, etcetera, and outright transparency would be able to answer those questions with some swift moves of a finger on a smartphone screen.

CoinDesk reported that developers, using technology inspired by BitCoin, are working on an application that will be able to outline and address all questions that someone may have about the supply chain of a given item. The source noted that restaurants could list the ingredients in a dish and this new applications would be able to tell the diner where the crops came from and how they were grown. Not only is this transparent, but it gives consumers a sense of control - an appealing concept for many discerning "foodies."

Competition between companies
As far as the technological world is concerned, providing the public with the newest software or feature is the most important key to the game. If a company can beat out a competitor by getting the product out just a few weeks before a competitor, it will most likely be seen as the front-runner and a place for innovation, while the business that falls behind could be seen as a copy cat.

TheRegister noted that Apple has been playing around with the idea of a dual-lens for its camera that helps with depth-sensing technology. Currently, there's no patent for the sensor because there had been many issues and hold ups in the supply chain back in 2010. Of course, Apple is not the only company implementing this sort of camera, competitors such as HTC and Samsung are also looking into such tech.

Technology is important in and for the supply chain, and it's only going to get more integrated as time goes on.

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What's the deal with US manufacturing?

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What's the deal with US manufacturing?

Even though the United States economy has been in something of a renaissance for the past few years, people are still somewhat reeling from the Great Recession seven years ago. And while the unemployment rate is expected to fall to 5 percent by the end of 2015, according to The Associated Press, there are certain sectors that continue to layoff hard-working Americans and fail to meet certain revenue checkpoints.

One of the industries in question is manufacturing. The U.S. is seeing more manufacturing jobs come back to the home front from abroad thanks to various reshoring efforts, but it doesn't seem to be enough. Some sources claim that manufacturing is growing and doing fine while others assert that it's in trouble - so what's the deal?

Numbers don't lie - or do they?
Over the past few years, the unemployment rate has steadily declined thanks to job creation and a reinvigorated economy. This is great news for most sectors, but the manufacturing industry hasn't been singing the same tune. According to a recent article by CNBC, the numbers are increasing a little bit, but nowhere near enough to be considered a renaissance of any sort. In 2007, the U.S. had 15,000 more production facilities than it currently has now, and said facilities employed over 2 million people. These numbers show that the country isn't back to where it had been, and some posit that it might never get there. 

The source noted that the manufacturing industry has been on a steady decline since the early 1980s, while other sectors such as finance and real estate have been growing, though they are still experiencing some bumps in the road. One of the reasons that the manufacturing industry in particular is having a hard time is because of a talent shortage. Not only are there not enough jobs for skills factory workers, but now the sector needs individuals with a certain set of skills to operate and maintain machines and hardware, but there doesn't seem to be enough people to fill the necessary positions.

Hope for the future?
While some try to remain optimistic about the situation of the manufacturing landscape, it's hard to see how the U.S. will bounce back from damaging blow after damaging blow. MarketWatch reported that many manufacturing companies are reporting decreases after a month of marginal increases, the light at the end of the tunnel seems to be nothing more than a mirage. Experts estimate that recovery won't happen in the near future, which leads some to think that maybe the U.S. needs to be proactive before it gets any worse. 

So, what can people expect to see moving forward? Different aspects of the supply chain may experience a dip in the price of transporting materials and finished products to their next location. This, while certainly a helpful step, will not make up for the fact that there aren't enough jobs nor enough people to fill specialized positions. Perhaps if the nation, as a united front, helped the reshoring groups that endeavor to bring manufacturing back to the U.S., then more citizens will be back at a job and help boost the manufacturing sector that way.

Of course, all of this takes money and if you need to spend money to make money, it doesn't appear that manufacturing will be able to pay its dividends. A product that boasts the claim "Made in America" is one thing, but it's entirely quite another to actually make it in America.

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More recalls in the automotive industry

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More recalls in the automotive industry

Regardless of the industry in which you find yourself, if your company manufactures something, your first priority should be to make it safe for public use. This could mean that it functions properly so operators of said item don't hurt themselves or others, or perhaps it runs independently of human interference. Whatever the purpose of the product may be, the No. 1 concern should be public safety.

Unfortunately, there have been quite a lot of issues in the automotive industry pertaining to safety, and as a result, a number of recalls have been issued over the past few months to attempt to mitigate the situations at hand. In the last full calendar week of June 2015 three separate car companies have issued mass recalls to take care of a variety of issues.

Keeping an eye out for airbag problems
Regular readers of this blog will remember airbag manufacturer Takata's serious issues with its product. While Takata and the various car companies that use its faulty airbags try to collect as many vehicles as possible to prevent anymore accidental fatal injuries, Mitsubishi announced that it, too, would recall cars for an airbag issue. Manufacturing.net reported that the Japanese car manufacturer has issued a recall of over 460,000 vehicles that run the risk the airbag pushing into the sun visor and injuring people's eyes. Though these airbags are not related to the Takata issue and no fatalities have been reported in regard to Mitsubishi's safety problems, people are very concerned about the overall state of airbag safety.

A small portion of those recalled cars have issues with the anti-brake unit, mentioned the source.

Feeling the heat
In a small, but still significant, recall, Acura found out that some of its SUVs are unsafe for other motorists on the road because of a problem with an air conditioner pulley, noted Matt Schmits, news editor for Car.com. Apparently, a bolt can come loose under the vehicle which then releases a piece of the air conditioning system onto the road, which can cause an issue for other drivers as is creates an obstacle that is small but could potentially result in car damage or an injury.

Fortunately, the source reported that there haven't been any accidents or injuries in relation to this recall. It was discovered during a routine warranty claim. This specific instance will affect about 106,000 vehicles from model years 2014 and 2015, noted the source. The car company will start to contact customers about the complementary fix late next month.

Spotlight on the issue
In yet another round of recalls, Ford Motor Company has issued a recall for certain vans and SUVs over faulty instrument panels and seatbelt problems, according to the Ford Motor Company media site. The source noted that the instrument panel did not light up as it was supposed to, which could potentially lead to problems down the road when the car's warning lights fail to illuminate. The seatbelt issue in question is over an issue of labeling, not a specific safety issue directly related to the belt as a mechanism.

Much like the Acura recall, there have been no reported injuries in relation to these issues. However, Ford still insists on the recall of over 203,000 vehicles to prevent any further issue from occurring.

Ideally, these issues would have been caught during the number of tests that cars have to go through before leaving the factory floor, but it's best that these problems were brought to light with only a few injuries as a result. Of course, there have been (and are currently) more dangerous issues with vehicles and let's just hope the problems get taken care of before anyone else gets hurt. It would be in everybody's best interest to check out which cars, trucks, SUVs and vans fall under the recall so that faulty mechanisms can be fixed as soon as possible.

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Webinar Review: 2015 Gartner Supply Chain Top 25

on Thursday, July 2, 2015

On June 25th, I attended the 2015 Gartner Supply Chain Top 25 webinar. Each year Gartner surveys the business landscape and identifies companies that standout in supply chain management, evaluating with a continuously evolving methodology based on financial and opinion data. These companies are placed on a pedestal to help evaluate and extract trends and best practices in the discipline. Traits that endure the test of time and separate the good from the best in supply chain management include an outside-in focus, embedded innovation, extended supply chains, an addiction to excellence, and vision coupled with phenomenal execution. Gartner recognized three predominant supply chain trends that recurred among the top 25 over the past year:

  • Bi-modal Strategies – finding ways to drive down costs while simultaneously promoting the company’s top line
  • Customer Intimacy – utilizing the supply chain to improve customer experience and making it a supply chain priority
  • Digital Business – digitally synchronizing factories with upstream suppliers and incorporating predictive analytics

Many on the list are exactly who you would expect, with Amazon taking the number one spot and Home Depot tying the list off at number 25. The list comprises a wide range of industries, from Retail to Food and Beverage to Automotive to Technology. Two companies, Apple and Procter and Gamble, have been left off of the list and placed in a category of their own, as they are recognized as Masters in the field of supply chain management. We will see in the coming years who else will achieve such success. Some additional highlights that I found to be particularly interesting include:


  • Amazon – Amazon is distinguished as number one (despite a return on assets of zero), not only for its excellent logistics but particularly for its adamant commitment to innovation (e.g., same-day deliveries in 50 metro areas, Amazon Dash, etc.)
  • Coke and Pepsico – 11 and 15 (respectively), these companies are recognized for their direct-delivery models, as well as their impressive demand management
  • Seagate – at 16, Seagate is acknowledged for its customer value centers; more impressively, Seagate provides access to in-house “tiger teams” (small teams of highly skilled individuals in various disciplines) to suppliers in order to generate improvements in their respective companies (which tends to be far more valuable than simple monetary aid), which translates into money saved on both sides
  • Home Depot – sliding in at 25, Home Depot is recognized for its direct fulfillment centers, as well as its click and collect capabilities (i.e., buy online and pick up in store)


The three main recommendations Gartner makes in light of its findings are as follows:


  • Tailor your supply chain capabilities and align them to support both growth and cost efficiency where they are needed most by the business.
  • Make customer experience a first-tier metric in your supply chain organization.
  • Explore and adopt digital business capabilities in the areas best suited to your industry, business model and supply chain maturity level.


The respective report goes into much more detail regarding methodology, key takeaways, and company analysis. If you would like to view the entirety of the report yourself, you may do so by following this URL (if you have not set up a free account with Gartner, you will be required to do so):

www.gartner.com/doc/3052620?ref=SiteSearch&sthkw=supply%20chain%20top%2025%202015&fnl=search&srcId=1-3478922254

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Source One Round Up! July 2, 2015

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Source One Round Up: July 2, 2015

Here's a look at where Source One experts have been published this week!

Blogs:

Imagine having a system in place where you could easily access spend by supplier, break that spend down in a meaningful way (division, business, unit etc.), and know with clarity what was being purchased from that supplier. Then imagine being able to quickly access the contracts associated with that supplier, as well as a history of the relationship, including scorecards, RFP results and other relevant documentation. Imagine getting an overview of quality audits, risk assessments, and relevant supplier contact information. These are all capabilities a comprehensive SRM (supplier relationship management) platform built with data analytics and market intelligence can provide.  Procurement is changing, and supplier relationship management is a critical component of its evolution.
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Supply Market Intelligence Trends to Help Clear the Way

on Wednesday, July 1, 2015

This guest blog has been brought to you by Jeanette Jones of Cottrill Research 



As a writer and follower of supply market intelligence (SMI) research resources, it remains clear that unintended hurdles created by both procurement at large and third-party data providers continue to hamper SMI initiatives. A couple of these hurdles include procurement's timidity towards SMI and the costly nature associated with acquiring authoritative information resources. What can procurement and third-party data providers do to help clear these hurdles? Promising trends are developing that can ease the way for professionals who want to transform their function to provide competitive value. Here are three trends that have potential.

Trend #1 - Intelligence Creation
Recognition by procurement of the value and growing importance of intelligence creation is increasing. When comparing procurement's struggle with proving value to the organization, I have written about the "spirit" of the open access/knowledge movement and the transformational impact it is having on the information industry and in academia. Procurement has in its grasp to be transformative by positioning itself as the expert creator and curator of intelligence that provides true competitive advantage. Procurement creates this intelligence from a unique perspective. This perspective utilizes internal intelligence, such as historical spend data and corporate growth strategies, combined with external market intelligence acquired through targeted research efforts. In addition, this perspective allows for identification of anticipated intelligence needs and the ability to proactively push (as opposed to the old "pull" model) what is discovered to fellow professionals, internal stakeholders, and the organization as a whole.1 Confession: I'm not sure if this is a full-blown trend, but my fingers are tightly crossed.

Trend #2 - The Emergence of Open Access Data and Shared Knowledge
Open access is everywhere. When using the term open data or open access, I am referring to information that is freely accessible in terms of cost, registration requirement, or sharing restrictions (except for author attribution). Businesses are starting to understand the opportunities associated with open data. McKinsey, in a report entitled, "Open Data: Unlocking Innovation and Performance with Liqid Information," states: "Businesses are finding new ways of segmenting markets by blending open data with proprietary data and discovering new ways to raise productivity by using open and proprietary data to benchmark operations."2 Open access data, provided by governments, world organizations, interest groups, associations, trade journals, third party content providers, and free content provided by analysts, is widely available for procurement professionals. Open access is basically about sharing information. We also see this concept in the form of crowdsourced resources and wikis. Corporate-wide Knowledge Management initiatives will become more prevalent as shared information, to be useful, will need a search/retrieval system and repository. Blogs and social media are also enabling the sharing and identification of open information. A good example of this is the use of blogs. Blogs, written by analysts and experts that follow a certain market, service, or product, combine news reporting with analysis, thus providing enriched intelligence in a compressed timeframe. With adopting open access resources and initiatives, there is the understandable concern of security. Also, open access resources should not be thought of as replacements for the analysis and "deep dive" coverage that third-party content providers and industry analysts offer. Which leads to my next trend:

Trend #3 - Flexible Content Access Models
Third-party data providers continue to embrace flexible content access models that are more adaptable to individual procurement department budgets. HfS recently noted that "most procurement functions have been cut to the bone in most organizations" in a post about Procurement As-a-Service.3 High quality market research is expensive. Having a single report eat up a large percentage of your department's research budget can be a strong incentive to turn to Google. Buyers are turned off when they have to purchase an entire report, or pay full subscription price, when what they specifically need is embedded in a segment within the report. Market analyst firms that traditionally allowed access only through paid full subscriptions are offering slivers of their research for free and selling reports individually. Even better, there are providers offering content that is retrievable at the segment or table/chart level and you pay only for the segment of data used. An example of this type of provider is research aggregator Profound.

  
Notes
1. "The Open Access/Knowledge Movement: Inspiration for Strategically Advancing Procurement," Cottrill Research Blog, February 26, 2015, http://cottrillresearch.com/the-open-accessknowledge-movement-inspiration-for-strategically-advancing-procurement/

2. "Open Data, Unlocking Innovation and Performance with Liquid Information," McKinsey Global Institute, October 2013, file:///Users/dlj740/Downloads/MGI_Open_data_FullReport_Oct2013.pdf


3. "Procurement Makes Its Move to As-a-Service…. So Who’s Leading the Market?" Horses for Sources, June 21, 2015, http://www.horsesforsources.com/procurement-as-a-service-blueprint-2015



About the Author

Jeanette Jones, founder of Cottrill Research, has over twenty-five years of experience providing corporate business and strategic sourcing research services. Her corporate experience includes establishing libraries with research functions for Arthur Andersen and the IT Vendor Management group at Bank One (JP Morgan Chase) and providing research services for Wachovia’s Strategic Sourcing group. In these positions, she routinely researched and wrote about industry and market trends and events, enabling consultants and procurement professionals to make informed critical decisions. 

Ms. Jones recently co-authored a book with Ms. Kelly Barner (Managing Editor, Buyers Meeting Point), published by J. Ross, entitled Market Intelligence for Procurement Professionals: Research, Process and Resources. It details how to develop, execute, and maintain a Supply Market Intelligence program and provides detailed listings of resources that are available for various direct markets and indirect spend categories. She has authored detailed research guides, covering the subject areas of business, supply chain management, hotel management, and casino management. She maintains the Cottrill Research Blog, which provides news and analysis about the latest research and information resource offerings for procurement professionals.



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Attracting Talent to Procurement

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One of the biggest developments in business over the past decade has been renewed recognition of the importance of the procurement department. After spending billions on developing their procurement teams, businesses have seen astonishing results. From improving M&A outcomes, to increase brand and product stewardship, the procurement unit of a business has evolved into becoming a service provider. However, one issue remains- human capital. There is a lag in talent that needs to be addressed if their hugely important business unit is to continue its successful upward trend, which is quickly becoming a driver or broad business objectives.

An issue that plagues procurement is perception. Procurement is no longer a silo that operates independently, rather, it is a decentralized activity involving many individuals and units addressing their own purchasing needs. In order to be successful, firms need to embrace procurement executives, and charge their HR and talent acquisition departments with filling any talent gaps.  So how do you attract top millennials to your procurement department when there is so much competition? Easy! You market the position as multidisciplinary, because that is exactly what the position entails.

The average tenure for a millennial is two years, with 54% of millennials believing they could easily find a new job if they were unhappy. As a sign of the times, these individuals also have a short attention span, quickly becoming disinterested if they are kept on the same project for too long. According to Psychology Today, millennials prefer new assignments every 12-24 months, which fits well with the multidisciplinary nature of the job. Other important factors in a job include “meaningful work,” “high pay,” and “sense of accomplishment.” Luckily, procurement departments have very clear products, allowing the employees to see the results of their efforts, and revel in their ability to have accomplished an objective.

One of the other important factors in procurement deals in mobility and flexibility. While at times inflexible, the variety of projects and quick turnaround allows the employee to learn a variety of skills that may allow them to have a degree of flexibility. Mobility may be one of the most important factors for procurement professionals. According to Deloitte, at a particular CPG firm, sell-side category managers are often future business presidents or CEOs. While buy-side managers are left to independently run their own mega-category. The upward progression coupled with the career opportunities alone can attract top leadership talent.

Another selling point of procurement is industry hot button topics. Industry dependent, a firm’s efforts can draw talent interested in a broad spectrum of value creation, external capacity building, sustainability, and sales and marketing support. For many executives, the procurement area was and remains to be a leadership proving ground.

It is impossible to discuss talent without also discussing compensation. Following the economic downturn in 2008, many procurement organizations were downsized. Of course, compensation will be addressed on a case-by-case basis, but there is a need to generously compensate procurement executives. Align salaries with expectations and organizational objectives, in an attempt to entice top-talent into giving procurement an opportunity. Deloitte has benchmarking data that suggests high performing organizations pay top procurement talent an additional thirty percent or more than typical performing organizations. Firms can also consider augmenting salaries with performance programs and incentives. This might lead to more entrepreneurial leaders creating new processes to advance the business further.

The intention of this article is to provide you with an understanding of how to internally and externally your procurement organization. With the field rapidly expanding, the adoption of processes that encourage the creation of success of such a team increases in criticality. While you can certainly use your skills in procurement to establish a distinctive competence, you can also quickly fall behind to your competition if you are not proactive.

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What is your suggestion?

on Tuesday, June 30, 2015

The CFO of a leading US food manufacturer is asking employees to present ideas for cost savings to help their organization continue to be successful and profitable. Employees can approach this request in various ways and their answer can show their strategic thinking and speak to their level of commitment to the company and their future career.

There are employees that may present ideas that are directly related to their department. This suggestion is valuable and can result in cost savings however it may not be considering all aspects of the organization. Employees utilizing this approach may find that is easier to provide a limited suggestion because they may not feel like they have the expertise in all facets of the company to identify areas of opportunity, they may have limited time to dedicate to providing ideas, or visibility may be limited into the supply chain to suggest solutions that would impact the bottom line. There will be other employees that will spend their time developing suggestions by looking for overall process improvements in the company's supply chain, identifying suppliers and contract relationships that have not been evaluated in some time, and developing actions on implementing solutions that would benefit the company.

A possible suggestion may be based on one aspect of the company, their raw materials. This company's raw materials include agricultural products that are produced at company owned facilities in California. Due to the impact of the current drought, you could evaluate the agricultural products grown in California and the impact of the drought on the company’s input supply and costs. California is a main source of food supply for the US and the restricted water supply hinders production impacting all of us. This company has production facilities outside of California and may consider shifting production and developing a diversification plan to grow a variety of products necessary for their finished goods at a facility. This may include investigating other growing methods to alleviate potential supply shortfalls or expanding their production facilities to outside farms that can produce their products. While this potential opportunity does have an overall impact to the supply chain it will most likely require a significant amount of upfront work to research and develop an action plan. Implementation of shifting production will also require significant planning to avoid any gaps in production.

Another employee suggestion may be a more comprehensive approach and requires a clear action plan to gain buy in from the CFO. This suggestion is to have an outside party evaluate the entire organization by reviewing spend categories, supplier contracts, and processes to identify areas of opportunity. In addition, having a third party conduct this analysis and benchmark the company's information provides a path for establishing an action plan on how to tackle savings opportunities and process improvements. The assessment provides a clear case for the CFO to determine next steps to implement sourcing events, supplier negotiations, or scope improvements across multiple categories and departments in the company. An overarching suggestion that shows you can apply resources and experts where you need them to show your value to the CFO and the organization.
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Sourcing from Mexico, the 5 things we have learned so far.

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So, while it’s been several year since I began participating on global and nearshoring initiatives for many companies, I have failed to share some of the learnings I’ve experienced that keep being brought up to my attention every time I talk about (or engage in) nearshoring projects. So here are a few basic, yet paramount, lessons to consider on the matter:

1)  The economy is thriving.

Despite the difficult environment driven by a muddy oil dependent economy (over 30% of the government revenues comes from oil exports) which has had a negative impact on Mexico’s currency and buying power (i.e. imports), Mexico has continued to prospect fairly positive growth. The reason behind investor confidence is primarily the set of economic reforms that the government is expected to legislate in critical areas such as telecom and energy. It’s no surprise that many investors are already realizing value in some sectors and fostering exports for the economy.

2)  The right conditions to Nearshore could not be better.

ü  Not only is Mexican labor lower than China’s on many industrial sectors, but is also steady. Let’s not forget that one of the main reasons companies moved to China and south East Asia in the late 80’s and early 90’s was driven by low wages in those countries, this no longer being the case, brings back an advantage to Mexico.
ü  Mexico is moving toward an entrepreneurial economy and the level of competency is rising rapidly. Mexico is producing graduates in engineering and technology at higher rates than Canada, Germany or Brazil and flooding the market with specialized professionals and skilled labor. In addition, many universities, both private and public, are becoming competent business incubators, providing scholarships and offering executive education programs to business executives.
ü  Infrastructure has never been sounder. From railroads to ports, to industrial clusters that support the already established automotive and aerospace industries, companies can move their products much more efficiently and securely through the country and beyond its borders.

3)  Suppliers’ online presence is still floundering.

One big challenge that we’ve faced when conducting nearshoring engagements is identifying the right suppliers by browsing the web. Many of us will agree that one of the primary struggles is to navigate websites that are dated, unclear, overly complex (in that they will provide too much irrelevant data and too little quality information), or simply in-existent. While some supplier sites may indicate otherwise, these continue to be the exception, and when trying to conduct a comprehensive supplier base for sourcing initiative, using the web to identify competitive bidders continues to be a challenge.

4) Communication is paramount.

Possibly the more time consuming phase of the sourcing process is keeping suppliers engaged. Ongoing communication is necessary to establish the goals and objectives of the initiative from the get go but also to re-educate them constantly. Suppliers in Mexico will easily assume that a project has been cancelled or they are no longer in consideration if communications halt for a period longer than what they may consider reasonable, and they are unlikely to follow up on their own. Technical aspects such as spam filters may further complicate the flow so ongoing reassurance and instance is important. This process alone will reinvigorate the relationship (and to their eyes) legitimize the business opportunity.

5) There are still many questions.

How is the social instability and drug cartels going to impact our initiative? How mature is the industry in Mexico to be able to support our requirements? What will be the advantages from a logistics and tax perspective?... and many more legitimate questions are brought up to our attention everyday, all of which are resolved based on the unique scope of the initiative. The fact is that a lot of companies do understand the benefits and advantages of nearshoring, so is not a matter of Why? anymore, is a question of Where to begin?


There is so much to say and so much yet to be discovered, the reality is that the nearshoring phenomena is gaining momentum, as we continue to unravel its uniqueness and as the practice evolves we will continue to provide our advice on how to make your initiatives competitive and sustainable.
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Controlling the Controllable with Suppliers (Part I): Effective Forecasting & Planning

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When working with your suppliers there are certain things that are in your control and certain things that are not. It is of paramount importance to identify those variables in which you (the customer) have control over, and what effect your expertise and your relationship with the supplier will have on pricing. In my experience, the top three “customer-controllable” factors that will have the strongest impact on cost include: 1) effective forecasting & planning, 2) an understanding of vital requirements and accompanying regulation of superfluous demands, and 3) monitoring compliance. When these three best practices are optimized, my experience has shown it will result in lean, efficient, and symbiotic relationships between customers and suppliers. Here I will talk about the first best practice: Forecasting & Planning.

Accurately forecasting consumption and demand of products/materials from your suppliers and communicating it, enables effective planning and allows the supplier to run a lean operation with rapid product turnover. However, when suppliers and customers are not aligned on expected volumes, delivery schedules, and appropriate run sizes (in the case of custom materials), excesses and shortages of product may occur that will have detrimental consequences to pricing and service levels. If there is an excess of inventory, this inherently takes up warehouse space in which the supplier absorbs this cost. If a supplier is consistently experiencing this with a customer, they typically will hedge the cost of extra or “flex” warehouse space and will absorb that risk in the form of higher unit pricing.

On a recent packaging project I participated in, a similar situation to the one I describe here took place  in which the supplier had over a thousand units of finished goods taking up shelf space in their warehouse because the customer ordered a years’ worth of expected inventory and only ended up using half. Oftentimes a misstep in forecasting is a result of demand shifts, product recall, or other uncontrollable factors from the buyer’s perspective; however, sometimes they result from conscious decisions that are well-founded in their making, and tight controls should be placed in a similar circumstance. For example, if a buyer over commits to volumes in order secure competitive material prices a supplier will often stipulate large run sizes. In other words, the supplier agrees to the customer’s price demands by running larger quantities of product at once. This results in efficiencies from the suppliers’ standpoint and the ability to order materials from their supply chain in bulk (thereby lowering material costs). The higher cost of this practice to the customer comes from larger run sizes exacerbating the inventory levels (over ordering) in a situation where forecasted usage may have been slightly off. Again, though the intention of securing cost savings was well-founded in this example, the customer agreed to terms that exposed them to compounding risk as run sizes go up, only worsening the inventory that could potentially be stuck in the suppliers’ warehouse which drove up unit pricing in the first place.

During our market evaluation and sourcing effort, we realized that consistent poor forecasting practices were the primary driver for higher pricing from the incumbent supplier when compared to the alternate suppliers’ pricing in the market. As a result of our RFP and supplier optimization efforts, the obsolete inventory was bought out scrapped, or repurposed in order to take the first step towards fixing the problem. The long term issue however, i.e. the mistrust in accurate forecasting by the supplier and bulk run sizes indirectly initiated by the customer still needed some fixing.

This situation had transpired for over 15 years, where the customer would approve large run sizes in which they thought they were getting a “sweet” deal. Once it was identified that there were recurring forecasting and planning issues, which were being magnified by the large run sizes, the solution was clear. By implementing a forecasting and ordering best practices program (optimum inventory triggers, smaller run sizes, enhance forecasting capabilities, and consistent communication, etc.) excess warehouse space issues were resolved and true lower cost initiatives that offered a sustainable warehousing model were enacted and resulted in a win-win scenario for both the customer and supplier.
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A Different Kind of Digital Sourcing, Part 1: Know Your Fingerprinting Requirements

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There is a good deal of (perhaps reasonable) concern these days about the upswing in electronic biometric data collection and its uses with respect to our private lives potentially becoming not-so-private anymore. In some contexts, however, the technology is still a necessity and not likely to disappear any time soon (if anything, it’s more likely to keep moving forward in increasingly unsettling ways).

Fingerprint collection is one such technology. Fingerprinting is commonly required by law for the purpose of checking someone’s criminal history in certain situations, such as pre-employment or licensing for individuals with access to vulnerable populations or sensitive information. Whether you are working in the healthcare or financial industries or you are a Department of Defense contractor needing clearance, your employees may have to undergo this process before they are considered fit to work and finding someone to provide those fingerprinting services is not as straightforward as it used to be. The practice of fingerprint-based background checks will only continue to gain popularity as technological advances lead to easier collection and submission, and plenty of companies are stepping up to get a piece of the action. Simultaneously, more and more law enforcement facilities are doing away with the fingerprinting services they offer to the public, so the days of simply heading down to your local PD or sheriff’s department are coming to an end in many states.

Turning to private third-party vendors is the growing trend, but the world of fingerprint processing can be more complex than many expect. Whether or not the FBI is surreptitiously collecting and hoarding all of our prints NSA-style as some might fear, they are still going to require a fresh set to be submitted for any record check and doing a little homework before you have your employees get printed can save not only time and money, but a good deal of frustration.

Know Your Requirements

The most important thing you can do before you begin is get a solid understanding of what you need. While the prints themselves generally stay the same and your criminal record (or lack thereof) may not be likely to change too often, the reason you need the prints can make all the difference in terms of processing as well as price. It should also not be a surprise that there is usually too much red tape involved for government agencies to share your prints or background check results amongst one another, so do not fall into the trap of thinking that being printed for one requirement will absolve you from having to do it again later for something else.

Below are some of the key questions you should be able to answer about your fingerprinting needs:

  • Why is fingerprinting required? Believe it or not, the government does have rules in place concerning justifiable reasons for requesting fingerprint-based background checks. You cannot typically demand your employees to have this done on a whim. You may be able to conduct other types of background screening simply with employee permission, but the FBI require permissible purposes unless the applicant is requesting the information for themselves and merely handing their results over to you (at which point you open yourself up to the possibility of tampering).
  • Who is requiring the fingerprinting to be done? This is typically some state or national government agency. It is not enough for an applicant to say their employer told them to do it. If you know the answer to this one, you can contact the agency or look at their website to gather other pertinent requirements.
  • How do the prints need to be processed? The agency in question may have requirements about both the method of fingerprint collection (electronic vs. ink) and the submission (electronic vs. mail). Live scan is the term for electronic fingerprint collection, and it is generally the preferred method to produce higher quality fingerprint images. Many entities are also making the switch to electronic submission, which is more complicated than dropping fingerprint cards in the mail, but it can speed up the process exponentially.
  • Do you know your ORI number? This may not always be necessary, but knowing the ORI (Originating Identifier) or its equivalent and any other relevant numbers required for fingerprint transmission can really help you get straight to the heart of your needs when talking to a potential vendor. It will also ensure that your fingerprints get to the right place.

Other useful information to gather includes timelines, whether any other paperwork or a photo needs to be included with the submission, and how (and to whom) background check results are returned. You will also want to confirm what the base fees are that go to the state and/or FBI for the checks they run, so that you can easily identify what portion of the price is added by the vendor.

Once you understand your own requirements, the next step is selecting the right vendor that meets your needs. In my follow up piece, I will explain some of the key considerations to help guide the selection process. 
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Reining in Telecom Tail-Spend

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Most organizations employ an 80-20 management approach for their voice and data telecommunications spend. That is 80 percent of their spend is with the top 20 percent of their suppliers, and conversely, 20 percent of their spend is with the other 80 percent of their suppliers within the category. That 20 percent of tail-spend typically goes unmanaged due to a variety of factors: it’s tactical and low value, inadequate resources exist to manage it, there is limited visibility into it, among others. But even with a keen awareness of these concerns, many organizations fail to see that development of a program to address these challenges would translate into opportunities for significant cost reduction and go-forward management efficiencies.

The first natural objection to focusing on that last 20 percent of tail-spend would be that it’s only a small piece of the overall category spend, it’s tactical, and it will perceivably take a lot more work than the other 80 percent to rein in and control. But that’s precisely the reason that it should be your company’s focus within the telecom category. Things move quickly in telecom. Services are ordered and disconnected all the time. Contracts are all over the place, invoices are for small amounts and are difficult to understand, and so unused services bill at un-discounted, tariff rates without anyone noticing. The problem is all of these small invoices add up to costs that can be easily significantly reduced once you understand what you have. What’s more, telecom tail-spend is often the place where you can find and recovery money due to billing errors. So, of course focusing on the top 80 percent of your spend makes sense at first, but that spend is highly visibly and much more thoroughly managed than the tail-spend and it’s for that reason we have actually had clients realize more savings within their tail-spend than the top 80 percent of spend.

The biggest challenge to taking on telecom tail-spend is finding the time and resource to do the due diligence and create the visibility necessary to make better decisions about the services you’re buying and utilizing. Some may be able to plan it as a special project, but there are almost always more mission critical needs that take priority. Most hire outside help, but the risk there is that many consulting firms also focus on the top 80 percent of your spend and want little to do with the rest. So vetting partners is critical and really drilling into their approach to your challenges and how much involvement they will require from your team will help you to make the right decision. From that point on, they can create visibility and your team can develop a plan for how to address your tail-spend. Typically, services fall into a few buckets: they are unused and can be decommissioned, they can be replaced by other services available at a location (e.g. POTS and PRIs with SIP, Internet via the WAN, etc.), they can be consolidated under existing primary carriers, they can be optimized (i.e. configured to get the most value for your dollar and potentially eliminate other services), or some combination of these. All of these adjustments almost always result in reduced cost accompanied by simpler management and better visibility.

While data gathering is occurring, your team can determine some basic metrics to better understand and rationalize the connectivity requirements to each location. After auditing a few locations, this will provide you with a gauge to quickly assess whether or not you are overspending at a particular location or on a particular service. Further, having a standardized approach in mind as you embark in this process will allow you to consider your current state as it relates to your desired end state vs. trying to look at your current state and then plan from that point forward. Depending on your industry or operation, the metrics may vary but some examples would include metrics based on staff quantity, users, or location category (e.g. warehouse, business office, call center, etc.). These will not only give you an idea of the services and costs you should have for each location, but they’ll also help you to place each cleanly into your roadmap.

When it comes time to execute, all of your decisions will be based on the hard-earned due diligence done during data gathering and discovery. Based on this and the parallel planning you’ve completed, you should be able to gain an upper hand in managing your spend by increasing the amount of spend with your top 20 percent of your suppliers and reducing the number of suppliers supporting the bottom 20 percent of your spend. The savings and cost recovery you will have realized will be well worth your efforts and the impact of your consolidation and rationalization efforts will make controlling costs into the future much easier.
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