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Source One Round Up

April 28, 2017

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



RECENT INSIGHTS:
Michael Croasdale, ThomasNet Tom's Blog, April 26, 2017

The smaller suppliers that account for about 20% of total spend but consist of 80% of the total supply base are commonly referred to as the tail of the supply chain. Optimizing this specific group of spend can be a challenge, but it has the ability to reduce costs and improve the overall performance of the entire supply chain. Source One Senior Consultant, Michael Croasdale, discusses how failing to analyze tail spend and organize it to ensure compliance can have negative effects on any supply chain. Croasdale's recommendations include establishing preferred supplier agreements, developing a communications plan, and continuing to review tail spend to identify further opportunities. 

Joe Payne, LinkedIn, April 26, 2017

While the capabilities of procurement have expanded since the traditional role was developed, the function is still being treated as reactionary within many organizations. The existing strategic processes are transactional operations that AI is becoming capable of, and could serve as a more cost-effective option compared to Procurement. Vice President of Professional Services Joe Payne explains how Procurement can easily become obsolete to technology if it does not begin to act as a proactive force in an organization that shifts from being strictly supportive to more of function that assists with setting strategy and designing real business requirements. Payne emphasizes the urgency for Procurement to become more strategic or risk becoming obsolete to artificial intelligence systems. 

UPCOMING EVENTS:
The Institute for Supply Management's annual, international conference is quickly approaching! Next month, over 2,500 global supply chain professionals will meet in Orlando, Florida to attend the four day event. Consultants from the Source One team are looking forward to meeting with colleagues and other industry experts from around the world. ISM2017 features informative sessions, educational presentations, and a variety of networking opportunities for attendees. Exec In, a sub-conference designed specifically for supply management leaders and sponsored exclusively by Source One, is also included as a highlight during ISM2017. The attendees at Exec In act as decision makers in their organization and are invited to take advantage of this opportunity to reconsider processes and plan ahead for their organization, according to the future of procurement and supply chain management.

On the Road to SYNERGY, Corporate United will host regional events welcoming local supply chain professionals to meet and collaborate on hot topics. The series kicks off this summer as CU looks forward to their national SYNERGY conference that will be hosted in the fall of this year. As one day events across the U.S, the Road to SYNERGY builds anticipation for the sessions to be hosted for people from around the country in September. Baltimore, Maryland is the first stop for the Road to SYNERGY in June, and Source One's team looks forward to joining other procurement and supply chain professionals in exchanging insights, as Source One is featured as a Gold Sponsor of the SYNERGY conference. 

Previously scheduled for the end of March, ISM New York's Risk Management annual conference has been rescheduled for the June 14th. The agenda will remain as planned, and attendees can anticipate the small sessions that discuss industry trends and expert's predictions for 2017. Procurement professionals local to the area look forward to the opportunity to regroup after the international ISM conference that will be held in May, just less than a month before. Source One's procurement and supply chain team are looking forward to this regional event, and collaborating with other industry leaders following the ISM international conference.


While Amazon and Apple often get credit for sustainability initiatives, other major brands are also making efforts. Among these is Walmart, a company not as famous for "going green" but apparently making the change to be more environmentally friendly.

That can include large-scale attempts across the entire supply chain and technological upgrades. To accomplish all of this, companies may need better benchmarking research to coordinate procurement strategies. Walmart's Project Gigaton, in particular, seems to be at a significantly large scale and could encourage other businesses to plan further into the future than they may have before.

The significance of 'Gigaton'
Though this project seems to have more eyes on it now, Gigaton dates back to last year and perhaps even longer if you consider the previous Walmart environmental policies it builds on. According to the company's official mission page for the initiative, Walmart wants to drop supply chain emissions by 1 billion metric tons, or 1 gigaton, within the next 13 years.

The position has two notable features: its scope and the fact that it's open to other businesses. Walmart has several subsections of emissions control under the same project, including deforestation, agriculture and packaging awareness.

"Walmart has several subsection of emissions control under the same project."
Each subsection (or pillar) comes with its own guidelines for following it, and many companies can choose to abide by these different elements, based on their official industries and which will make the most direct impact. Committing to these pillars can include not just pledging to be consistent, but also to taking note of new results and reporting them.

This open nature of the project is an important factor, since it sets this up as something to invite more companies to take part in. The adaptability spreads throughout the descriptions for the different "pillars." The section on "deforestation," for instance, gives examples of different products a participating business could source sustainably, from food substances to paper.

Better competition
Is part of the motivation behind this undertaking a desire to stay evenly matched with other businesses on a similar level? It seems like the move to innovative green measures could be a way to keep pace, as a recent Motley Fool article said, since some of Walmart's newer options have directly challenged Amazon's own offerings. However, the author ultimately said that the big box business couldn't ever "out-Amazon Amazon" despite its efforts.

As an example of Amazon's own green commitments, it recently launched a deal to obtain forklifts that run on hydrogen and have zero emissions. The forklift provider, Plug Power, could help the company stand behind a future strategy that also sets a tone for further work.

In a statement, Plug Power CEO Andy Marsh explained the decision between the two companies.

"Our hydrogen fuel cell technology, comprehensive service network, and commitment to providing cost-savings for customers has enabled Plug Power to become a trusted partner to many in the industry and we are excited to begin working with Amazon," Marsh said.

Supplier relationship management and related systems allow for prioritizing to maximize ROI and efficiency.
A New Vision for Procurement
The March 2017 edition of Wired Magazine includes an interview with historian Yuval Harari, author of Homo Deus: A Brief History of Tomorrow. In the book and the interview, Harari analyzes the impact technology will have on the evolution of humans. To quote Mr. Harari:

 “The tipping point is when you have an external algorithm that understands you—your feelings, emotions, choices, desires—better than you understand them yourself. That’s the point when there is the switch from amplifying humans to making them redundant…. Take Google Maps or Waze. On the one hand they amplify human ability—you are able to reach your destination faster and more easily. But at the same time you are shifting the authority to the algorithm and losing your ability to find your own way.” 

There are clear parallels between Harari’s vision for the human evolution and the evolution of Procurement. As technology creates more and more opportunity to eliminate tactical tasks, procurement needs to recognize that the next version of the “Buyer”, “Strategic Sourcing Lead” or “Category Manager”, does not reside with placing purchase orders, running sourcing events or developing category strategies, respectively.

AI will make that workload redundant and obsolete, but the role for a human still clearly exists within the procurement ecosystem. From my vantage point, the fundamental changes we need to undergo as an industry are already starting to take shape. Looking back to ten years ago, part of my role as a consultant for Source One was teaching our clients what strategic sourcing was and how it could be leveraged in their organization. These companies had procurement departments, and in many cases sourcing groups, but the value they produced wasn’t clearly articulated throughout the organization. Today, most companies have a clear vision and understanding of the value of strategic sourcing.

More recently, the trend I see in the market is companies moving away from the fully outsourced BPO model for Procurement, to some level of hybrid that includes both internal and external resources. What are the external resources doing? Mostly, the tactical stuff. Internal procurement groups are seen as strategic – or at least that’s the goal.

The problem is, those strategic groups aren’t always sure what it truly means to be strategic. Engaging with internal stakeholders, embedding themselves in the business, developing category plans and leading sourcing events are all roles they play, but is that the future of our industry? I don’t think so – remember: 

“The tipping point is when you have an external algorithm that understands you—your feelings, emotions, choices, desires—better than you understand them yourself.” 

In other words, the technology will already know what the stakeholders want and need – and the most efficient way to get it.

So, where does that leave us? We’re currently in what I would call “Procurement 2.0” – we no longer have to demonstrate the value of our function or define our role within the business. We are already there. Procurement 3.0 is about optimizing that role. That means further automation of things that even now seem strategic, and Procurement truly setting a vision at the highest levels – helping to develop strategy with the business – from Engineering to Marketing, from HR to Operations and from Product Development to Finance.

How do we do this? How do we move from supporting the vision to help setting it? It’s not easy, but there are some fundamental themes you need to follow to get started.


  1. Set clear business rules and automate them. Procurement should be the gatekeeper for all purchasing within the organization, by mandate (I know, controversial stuff). Without 100% compliance, you won’t have the data you need to be effective in Procurement 3.0 - but you have to make it a streamlined and easy process. 
  2. Focus on analytics and data science. Today, every procurement group should have a strong analyst team with access to a broad range of internal and external data. Procurement’s role in the organization should be to translate this data into information the business can use, and help guide strategic decisions based on what supply markets are telling us.
  3. Continue the shift in mindset. The traditional role of procurement was reactive and customer service oriented - procuring what the business needs, when they need it. In Procurement 3.0, the systems should already know what the business needs and when they need it. It will be our job to help define what those requirements are and what strategy led to those requirements.


Leading procurement groups already have a say in overall business strategy – Apple, Tesla and others all have great case studies you can find online. The laggards are moving in a different direct (see Pepsi’s decision to take procurement out of marketing, and connect the dots between that and their latest ad campaign).

The future for procurement moves us into a truly proactive role within the organization. When will it happen? Well, right now the biggest limitation isn’t the ability to automate or collecting meaningful data. Those things are already available if you want them. The harder part will be building the right sets of skills within our own function to take that next step in our evolution. The good news is, regardless of when that shift happens, it will be faster than you think.

The difference a day makes: UPS to deliver on Saturdays
Cutting time in delivery and supply measures can be challenging for businesses. What's even more pressing is the need to stay financially stable while doing so. That's part of why risk management can help steer businesses through daunting new changes, all to the ultimate benefit of the bottom line, as well as the customer. This can also help supply chains stay at the same pace expected in the world of modern e-commerce.

That's part of what UPS seems to be interested in with its recent Saturday services. In a statement, the parcel delivery company announced that it would work on this important weekend day, potentially saving their customers time.

Adding a day
Though the changes aren't expected to take root until next year, the program has been in development since 2016. Once it's fully unveiled, the initiative should add operations in 15 metropolitan areas around the country. The key highlight of this program will be Saturday ground deliveries, which stand to have a noticeable impact for businesses and consumer recipients as well.

"The initiative should add operations in 15 metropolitan areas around the country."
In an official statement, UPS Chief Marketing Officer Teresa Finley said that the new process is an important addition to what the company can already accomplish.

"The addition of another ground operations day more efficiently utilizes our existing delivery network and offers customers an even faster ground delivery solution," she said. Later she added that "we are confident that it will help our customers capture market growth."

The move doesn't come without additional cost. USA Today said that adding these Saturday services could drive up operational costs by as much as $200 million. Though this seems like a possible burden, it needs to be seen against the possible disadvantages of not increasing this capacity.

The risk that comes with speed
There's a lot to gain from an ambitious project like this, and it also illustrates the need for strong risk management. One of the things that sets a company apart is how it's able to respond to sudden demands. Before such changes happen, it helps to have insight into procurement and supply data.
Low supply could ultimately lead to difficult setbacks that tarnish a company's brand. Apple, a business often associated with innovating its supply processes, is reportedly set to deliver the next iPhone model at least a month later than originally planned.

According to 9 to 5 Mac, the analyst KGI Ming-Chi Kuo said that the delay could come from supply issues, as well as the manufacturer's desire for new features. The setback could cut the anticipated amount of unit shipments by around 30 million this year, the source said, possibly disappointing customers during this time.

There's also obvious risk associated with trying to meet an unrealistic pace. Low oversight and transparency may lead to mistakes as companies work without the right systems to back them up. It may seem like gathering more data could restrict flexibility, but it can actually allow for more informed moves as the different suppliers contribute.

To get the benefits of management without the dangers of losing time, businesses should seek out those who can help with their supply chain issues.
How to streamline manufacturing for continuous cost reduction
As a manufacturer becomes more familiar with a specific organization's product overtime, they learn unique efficiencies and can reduce the time of production by streamlining manufacturing. By reducing the time the supplier dedicates to manufacturing the product, the client can receive savings in labor and overhead costs, an opportunity for cost reduction that many organizations do not take advantage of.

These can be achieved through a joint effort between the supplier, OEM and customer by realizing mutual savings within their existing process. For example, the customer can fund equipment for the manufacturer to streamline manufacturing, maybe a specific machine that assists with optimizing the assembly process. When the supplier can be more efficient in diminishing labor and overhead costs to achieve savings with support from the customer, cost savings can be passed on to the client for a greater ROI overtime. Essentially, a strategic capital investment can reduce the total cost of ownership of the product being sold.

Previously in the Continuous Cost Reduction segment for Source One's Countdown to ISM2017 series, Source One Consultant Ken Ballard explained how to achieve transparency and leverage economies of scale. Utilizing both of these methods can help your organization earn additional savings without changing supplier or sacrificing quality, and Ballard explains in this next episode how streamlining manufacturing also offers similar opportunities. The Source One Countdown to ISM2017 series offers insights from procurement and supply chain professionals as we look forward to the Institute of Supply Management's annual conference next month. ISM2017 welcomes supply chain professionals from around the world to join together for four days in beautiful Orlando, Florida to collaborate, learn, and advance as experts in the industry. ISM2017 also features sub-conference ExecIn, exclusively hosted by Source One. ExecIn welcomes decision making, high level procurement professionals that attend ISM2017 with their teams to attend sessions designed for these executives that act as decision makers in their enterprises.
ICYMIM

ICYMIM: April 24, 2017

Source One's series for keeping up with the most recent highlights in procurement, sourcing, and supply chain news week to week. To stay updated on the latest supply management articles, check in with us every Monday.

The "Easter Egg Hunt" of Procurement
Charles Dominick, SPSM, SPSM2, SPSM3, Next Level Purchasing Association, April 19, 2017

After celebrating the holiday with his family, Dominick compares the egg hunt his children participated in with an aspect of procurement he believes to be a similar experience for professionals in the industry. During contract negotiations, it is crucial to carefully search for language that implies risk and/ or cost fall to one party. Dominick warns that these words may seem innocent and be as difficult to find as eggs strategically hidden in grass. Especially for longer contracts, terms that seem fair may reveal, with further investigation, that suppliers may be attempting to take advantage of technicalities and specific definitions. Identifying these areas of a contract can prevent the responsibility of costly situations falling on the wrong party.

Predictive Modeling Can Unlock Logistics Optimization
Christina O'Handley, THOMASNET, April 19, 2017

Procurement and supply chain professionals can agree that optimizing logistics is high priority for them that is also one of the most challenging. One factor that contributes to the challenges associated with optimizing logistics is a lack of visibility, as revealed in a recent study. This lack of visibility is consistent throughout operations, supplier relationships, providers, manufacturers, distributors and consumers. Data has solved the issue of lack of visibility in the past, and cloud-based analytics tools could assist in collecting data to allow supply chain professionals to utilize predictive modeling that offer new insights for cost savings opportunities in different potential situations. This information can allow procurement groups to make strategic decisions in these areas that otherwise lack visibility in their supply chain.






The steel import investigations and procurement
Steel, like many other resources, can face importing challenges. A recent focus on policing steel could also make procurement difficult because of the changes it will bring to standard policies.
The government is specifically looking more closely at steel as part of a new executive order titled "Buy American, Hire American." As the name implies, this is an effort to focus on domestic production with the hopeful benefit of encouraging the U.S. economy. The process hasn't begun in full as of yet, but is in the earlier stages as officials look more into current practices and enforcement.
In an interview posted online, an unnamed Senior Administration Official said that the "Buy American" order actually gets its basis from a similar one from the 1930s, and that the current program will also include enforcement to ensure that agencies carry out the right measures in response.
"Agencies have their clear marching orders, and they will be held strictly accountable for any failure to fulfill the Buy American mission," this person said. "As part of this accountability, each agency will conduct a comprehensive top-to-bottom Buy American performance review, including an assessment of the agency's use of waivers and exceptions, as well as a requirement to provide recommendations to strengthen Buy American.
"This is an effort to focus on domestic production."
Procurement impacts
This focus on new procurement measures seems to be an important one for the new administration. The Official mentioned above went on to say that the executive office wants to reduce the number of waivers granted to the steel industry while developing the domestic sector.
The speaker also implied that relying on outside steel could reduce the quality, since dealing with steel from countries such as China could encourage using "lesser standards."
As Politico pointed out, the order might be considered vague in some areas at the moment, since it doesn't specify things such as all of the different visa programs affected, which could also allow for a new look at labor initiatives. The impact for businesses is yet to be fully certain but could include new procurement strategies that are both efficient and practical.
Following previous examples
The new Executive Order is reportedly connected to the US Trade Expansion Act of 1962, the BBC said. John F. Kennedy originally signed this Act into existence and the text granted certain authorities to the president that could have to do with business. These included the ability to levy duty or import restrictions that might help avert harm to U.S. industries.
Decisions over the steel industry could also be extremely important depending on what happens in the global market. The World Steel Association recently announced a "cyclical upturn in steel demand", based on current figures for the globe. This also forecast an overall figure of 1.3 percent growth for 2017 demand in total, with next year bringing .9 percent, a slight decline.
To continue global sourcing while making good decisions for all parties, steel businesses and others can focus on strategically sourced providers to make up the supply chain.
Source One Round Up

April 21, 2017

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


RECENT FEATURES:
The Nuts and Bolts of MRO Spend
Lisa Arnseth, ISM Magazine, April 2017

This article features top MRO professionals advice for reducing the complicated spend within the category specifically, including Source One Senior Consultant in the MRO practice Michael Croasdale. In the article, Croasdale is quoted with a statement on removing the common misconception that MRO is a category too complex to contract for unplanned purchases, and explains that with the right approach, MRO professionals can identify important patterns. At the end of the article, Croasdale elaborates in a sidebar titled When to Bring In An MRO Service Provider.... And When Not To, where he explains how third-party firms can provide spend analytics and data aggregation, data management support and strategic sourcing and procurement transformation services to get a solid grasp on MRO spend.

UPCOMING EVENTS:
ISM 2017
Next month in Orlando, Florida the Institute for Supply Management will host their annual conference that welcomes more than 2,500 supply chain professionals from around the world, including consultants from Source One. ISM2017 includes educational sessions, informative presentations, and networking opportunities for attendees over the course of four days. The ISM conference features Exec In, a sub-conference designed specifically for supply management leaders and sponsored exclusively by Source One. Attendees for Exec In act as decision makers in their organization and can take advantage of this opportunity to reconsider processes and plan ahead for the future of procurement and supply chain management in their organization.

The Road to SYNERGY - Baltimore, MD
Corporate United will host regional events in their Road to SYNERGY series kicking off this summer, in anticipation of their national SYNERGY conference in the fall. These one day events around the country will invite professionals local to the area for smaller collaboration sessions that will prepare them to meet with colleagues from all over the U.S. at SYNERGY. The first stop for the Road to SYNERGY series will be in the fall in Baltimore, Maryland on June 6th. Procurement and supply chain professionals can anticipate members of the Source One team's insights as we follow along on the Road to SYNERGY as Gold Sponsors of the national event.

ISM- New York Annual Conference- Procurement Risk Management
After being rescheduled due to Snow Storm Stella at the end of March, ISM New York's Risk Management annual conference will be postponed until June 14th. Attendees can anticipate the agenda as planned, with small sessions that review procurement trends and anticipations for 2017. This event serves as a great opportunity for professionals local to the area to regroup after the international ISM conference in May. Members of the Source One procurement and supply chain team look forward to attending ISM New York's Procurement Risk Management conference and talking to other industry leaders in the area!

Now more than ever, consumers are conscious about what harmful effects the products they buy have on the environment.

As a society, we are more aware of environmentally friendly practices beyond recycling and are demanding more corporate social responsibility from the organizations we choose to invest in. New technology and scientific studies allow us to approach sustainability from all angles of operations, including facility management, manufacturing, production, distribution and even billing. Initiating more environmentally friendly processes in all areas of your business can not only decrease your carbon footprint and boost your corporate social responsibility, but also help you to reduce costs.  In honor of Earth Day on April 22, the Source One team has brought together their most efficient strategies for creating more sustainability in any supply chain. These environmentally friendly best practices are a great way to initiate going green and demonstrating how your business values the environment by utilizing the most effective methods for sustainability.

If you're looking for more ways to be sustainable in your organization's supply chain, check out the recommendations in our most recent infographic!


Sustainability in Supply Chain Infographic


Source One provides sustainability and green strategic sourcing solutions for companies looking to advance efficiency, reduce costs, and improve the environment. Last year, Source One received the Supply and Demand Chain Executive Green Award for the fifth consecutive year as recognition for their efforts in advancing the role of sustainability within supply chain management operations. The Source One team strives to help their clients achieve their environmentally-friendly supply chain goals and understand how sustainability is such a high priority for many sizable organizations today. To learn more about how Source One can assist your business in becoming more sustainable and environmentally friendly, visit sourceoneinc.com.

Mexico plans for port expansion as part of trade strategy
It's dangerous to reduce an entire country to just one shipping point, especially when many different areas could all open up under a single plan. While the future of relations between Mexico and the U.S. is uncertain, the southernmost of these nations has developed an initiative to invest in national ports for better trade.
The efforts to put $5 billion into these areas depend on some other outside factors, such as the country's relationship with NAFTA, according to Ship Technology. However, though it still has international concerns to consider, Mexico is still reportedly committed to improving trade for Latin and North America in general with a multi-prong plan. Just as Mexico is working on its strategic shipping expansions, businesses wishing to operate there can focus on strategic sourcing as well.
Where Mexico will focus
Because there are several potential projects in motion at once, companies that want to stay involved need to make a cost-conscious effort to choose procurement wisely. Some of the recent improvements either completed or in progress are:
  • Port of Lazaro Cardenas: This April saw the APM Terminals station in this port finally open, with a 30 percent higher container turnaround time capacity than originally predicted, as Container Management reported. The site is both an important geographical position for shipping and a place where operators plan to try out new technology for better efficiency.
  • Port of Veracruz: The Journal of Commerce said that this port is one of the several that have borne the majority of expansion efforts in the country in a plan stretching back years. The Veracruz port could also play a role as a destination for ships heading between any of the other major trading centers.
  • Three open corridors: On a similar note, the region could also be a source of new channels encouraging trade. The same Ship Technology article also said that Mexico will work on a trio of economic corridors in the north, center and south. Of these, the center channel seems to be the most immediately significant, since it accounts for more than half of Mexico's national GDP, Mexican Ports and Merchant Marine General Coordinator Guillermo Ruiz de Teresa told the source.
These and other projects are meant to propel Mexico forward as a strong figure in trade, while also possibly opening up further ways for both the country and the region to connect with the rest of the world.
"Mexico would work on a trio of economic corridors in the north, center and south."
NAFTA and international relations
The ongoing impacts of NAFTA and other trade conditions may have repercussions for the U.S. economy as well, as it adapts to fit new policies. Dairy Economist Scott Brown of the University of Missouri recently spoke to the Associated Press about the relationship between the dairy industry in the U.S. and NAFTA's influence.
"Can we renegotiate and get a better NAFTA deal?" Brown asked. "Only time will tell. Those trade agreements traditionally have taken a lot of time and effort to get everybody on the same page and we know we've benefited tremendously on the NAFTA agreement that we have."
Making procurement decisions with accurate data and benchmarking may be necessary going forward, regardless of trade policy changes, simply to match increasing complexity.
Bad RFPs make your company...look bad
Being in the business of strategic sourcing (and a lot more), the team at Source One has spent decades refining the way we administer RFPs. We understand how important it is to craft documents and communicate with potential suppliers to set the stage for successful future business partnerships.

That’s why it’s particularly painful when we see other procurement service providers running bad RFPs. I’m going to share some excerpts of a bad RFP we received a couple months ago and the surrounding bad communication, which was administered by a third party on behalf of another company, whose name we were not given.

Obviously I’m not going to reproduce the RFP in its entirety or include specific names and such - not just to preserve confidentiality and anonymity, but also to be professional. My intent here is not to viciously malign, but to present a real life, pretty dramatic, example of "what not to do" in a sourcing event. It's all well and good to talk about best practices, but dramatic examples of bad practices stick out more in our minds. Humans are interesting creatures.

Anyway, this bad RFP experience began with 3 (!!) different emails to our general emailbox and a phone call to our CEO (!?) inviting us to the RFP. That sounds like them being really thorough (read: general overkill to compensate for a lack of organization) - but there seemed to be more going on here than simple thoroughness. Here is the written correspondence we received:

Bad Sourcing Team: “Please submit your response to this RFP no later than [two business days from now] as we are running this process on tight timelines.” 

Wow, two business days is a crazy fast turnaround on a consulting/services RFP. What happened? Did someone drop the ball and now the client expects their sourcing event to be completed in a week? Or is it that thing where you tell people your party starts at 7:00 when it actually starts at 8:00, so that when they are inevitably “late” by arriving at 8:00, they’re actually on time?

In any case, with a 2 day turnaround, the opportunity is highly suspect. We don't know who the ultimate customer is, and we're being asked to drop everything and respond to an RFP or else lose out on a business opportunity.

I mentioned earlier that we were not even told who the customer is, just that this RFP was being conducted by BPO Firm X on behalf of some other company. That’s Reason #2 to be suspicious of this RFP.  A closed door secret you're-not-allowed-to-know-who-we-are RFP does nothing to make a potential bidder believe that there's a serious opportunity on the table, not just a price shopping exercise.

Even when faced with these factors, Source One is not in the business of knee-jerk reactions and dismissing opportunities. Even with that tight turnaround and limited info on the customer, maybe the opportunity is worth it. We’ve responded to, and won, rapid RFPs when the services requested were a strong fit for our strategic sourcing services, and where there was a clear business case for a long-term partnership. So in this case, I thought, “Let’s not rule it out – let’s first dig into the RFP and find out what the scope is. Maybe there’s gold in them thar hills!”

There wasn't. Not even fool's gold. I'll show you in Part 2...

Q&A with Martin Przeworski on Product Lifecycle Management
"Go and buy the materials."
That is often the command from other departments to strategic sourcing and procurement (SS&P) groups. Often later in the product lifecycle, SS&P is brought in to help acquire the goods and services needed to enter the market or worse, sought to reduce costs while the product meets it's maturity in the market and consumer demand for it has decreased.

Sure, SS&P is happy to help it's stakeholders find the most competitive prices for the needed products and services. However, this reactive approach can limit SS&P's impact. In reality, when collaborated earlier in the product lifecycle SS&P can optimize cost targets and even deliver a better view of the market landscape. This added value SS&P provides when consulted earlier in the product lifecycle is the topic of Source One's latest whitepaper,  Strategic Sourcing Throughout the Product Lifecycle.

As one of the main contributors to the piece, Source One Consultant and Direct Materials sourcing expert, Martin Przeworski elaborates on the concepts behind the white paper and his sourcing experiences that led to the white paper development in a Q&A podcast session. Przeworski shares how his background in engineering and previous experiences as an applications engineer allow him to take a unique approach to supporting clients when sourcing raw materials for their products. With his efforts to bridge the gap between engineering and procurement teams,  a common ground is developed that allows for more efficient processes and additional savings.

Read the full interview below to find out how Przeworski works to bridge the gap between engineering and procurement teams and find a common ground that allows for more efficient processes and additional savings.

Can you start off by giving us a little more background on what you do at Source One and what it is that inspired the whitepaper?

Przeworski: My education is in science and engineering with 5 years working in the industry as an applications engineer before making the transition to procurement consulting and joining Source One, where I've helped clients with strategic sourcing in the directs and indirects areas for the past 3 years. I believe my experience gives me a first hand insight into the daily pain points and bottle necks encountered by engineers and the pressures management faces to stay competitive within the market. I've worked hard to bridge the gaps between engineering, management, sales and marketing on technical projects to dissipate miscommunication and misconceptions and help everyone find common ground in order to make progress and achieve savings.

You mentioned that there's opportunity for better results when strategic sourcing teams are engaged earlier in the process. When is the sourcing team usually involved in the product lifecycle?


Przeworski: Strategic sourcing is usually involved as a somewhat 'necessary evil' during the manufacturing phase, or growth and maturity stages of the product's lifecycle to reduce costs as production volumes increase. In the classic analogy - if we can save 10 cents on a capacitor, we can save $10,000 on the production run of 100k units. Strategic Sourcing may also get involved to help reduce the overall costs of an established product by partnering with a contract manufacturer and opening-up the company's time for New Product Introduction (NPI) and development work. Some companies even progress to the point of taking the burden of manufacturing off their shoulders completely and recast the business as a design house.

But Strategic Sourcing and Procurement can achieve even greater savings by expanding on existing component opportunities to include the Engineering team's insights into critical and non-critical component selection, and leveraging DFM services provided by fabricators to reduce component count and increase production efficiencies in order to more than double original projections in most cases.

We often see that as procurement professionals - that for many organizations procurement groups are a 'necessary evil' that they're not initially inclined to engage. How have you approached strategic sourcing for clients?

Przeworski: Yeah, unfortunately procurement can often be viewed as an added obstacle to the sourcing process. But the reality is, they're driving added value by providing a clear view of the market landscape when it comes time to make a major purchasing decision - especially early on. By getting involved in and even leading key activities throughout the product lifecycle instead of simply being asked to 'go and buy the materials', Strategic Sourcing and Procurement can facilitate the process and add value for all key stakeholders. By bridging the gap in understanding between engineering, manufacturing, marketing/sales, and the management teams - and speaking a common language - Strategic Sourcing can  help shorten the development time frame and meet cost targets to make the design of a quality product in a competitive market a repeatable reality.

When it comes to meeting cost targets, it absolutely makes sense that sourcing would be involved prior to the manufacturing phase, but can the sourcing team actually help during the Ideation Phase?

Przeworski: Yes, during the Ideation Phase the product is conceived, and where many costs are built into the product before it even exists in physical form. When establishing the Market Need, a thorough understanding of the competitive landscape and market pricing can provide key guidance for product placement and feasible manufacturing cost targets.  This is the value Strategic Sourcing and Procurement can bring - enabling manufacturers to understand the market for material/functional design considerations, evaluate their current contract engineering relationships and determine the best approach to balance costs with technical considerations.

And, when should suppliers be involved in the PLC?

Przeworski: The production phase is an ideal time to gather input from key suppliers. In this phase, the product's construction and components parts are established, typically by engineering with little to no input from Strategic Sourcing and Procurement.But during this phase, Strategic Sourcing and Procurement should be engaged to begin supplier identification, identify opportunities to localize designs to low cost regions, and guide the Engineering teams through the off-the-shelf (OTS) commercial offerings to ensure a cost-competitive and sustainable initial design. By utilizing the experiences and insights of manufacturers who have already successfully addressed these changes with similar customers (and are more than willing to share their knowledge to expand their business opportunities), SS&P can take the heavy burden of 'getting everything right' off the engineering team.

To hear the entire conversation, check out Source One's YouTube channel. For more information on how Strategic Sourcing and Procurement groups can deliver at each stage in the product lifecycle, check out Source One's most recent whitepaper: Strategic Sourcing Throughout the Product Lifecycle: Balancing Competitive Costs with Innovation and Speed to Market.