How does integrated reporting launch business transformation?

on Monday, October 20, 2014

How does integrated reporting launch business transformation?

Accounting and business process management professionals are discussing a relatively new concept that involves synchronizing all facets of an organization. 

According to the Chartered Institute of Management Accountants, integrated reporting consists of defining an enterprise's strategic approach, administration and efficiency. The source maintained that it allows experts specializing in different facets of a company to identify connections between the entity's financial performance and operations. 

One of the reasons why IR is becoming a more popular business practice is that it serves as an effective measure of sustainability. It's quite similar to benchmarking, or comparing an organization's general practices with what industry experts define as optimal protocols. 

IR as an investment driver 

IndustryWeek contributors Sean Smith and Roberto Cruz discussed the strategic advantages of integrating IR into company operations. They both noted that the results produced by IR initiatives (which are typically carried out on a continuous basis) provide potential stakeholders with the type of thorough information they're looking for. 

A large part of investment is all about weighing risk by observing a business' decisions and how they affect its surrounding environment, which is comprised of workforce liabilities, ecological considerations, social cognizance and other factors. Basically, will the organization in question cause residual changes that are viewed favorably by the public and will it make a profit doing so? 

Cruz and Smith maintain this is what differentiates IR from conventional financial reporting endeavors, which typically focus on dividend yields, free cash flow yield, net income, return on equity and earnings per share. In reality, this side of accounting fails to consider managerial capabilities and decisions. 

Various data sets 

To better understand the value in observing corporate governance and culture, consider the difference data scientists are defining between unstructured and structured data. The former contingency has been regarded as the driver of the big data analytics movement, and is comprised of video, written text, photos and other media that isn't easily classified by relational databases, which can organize information that is has easily identifiable components. 

Yet, unstructured data provides a plethora of information to those observing it. The saying "a picture's worth a thousand words" is applicable in this respect. The human brain can process an incredible amount of data when reading documents, watching videos and so on. 

IR considers the unstructured data that resides in every organization. Those putting the concept into practice recognize that numbers represent a relatively marginal part of enterprise operations. Culture, methods and practices define where enterprises are headed from an investment standpoint. 

An investigative approach 

Accountants and business analysts can be regarded as detectives in their own right. In regard to investment, approaching an investigation with IR in mind can allow them and their associates to deduce whether a company's decisions are negatively impacting global societies and/or economies. 

As one can imagine, this is when transparency comes into play. Suppose a professional is hired to scrutinize the procurement practices of a computer hardware manufacturer. In order to assist the auditor in his or her endeavor, the production company provides the expert with its supply chain reporting and accountability files. Once the investigation is underway, it's likely one of two situations will unfold:

  1. The sourcing specialist will notice discrepancies or inaccuracies in regard to supplier relations, such as a lack of clarity in how a factory in Southeast Asia acquires gallium. 
  2. The web of suppliers is clearly defined, enabling the auditor to weigh the impact these partnerships have on global sustainability and social events. 

It would be wrong to consider IR to be the next generation of procurement management - that's just one business facet. IR regards every component and determines how each one affects businesses on a holistic level. 

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Scrutinizing procurement concerns, practices in the automotive industry

on Friday, October 17, 2014

Scrutinizing procurement concerns, practices in the automotive industry

Conducting business with fair-minded suppliers is just as much a part of procurement as quality assurance.

When it comes to purchasing a wide variety of goods, those in the automotive industries rely on teams comprised of professionals with differing backgrounds. While one person may know what to look for in a spark plug manufacturer, another likely knows which enterprises produce the best pistons. 

The reason for a diverse buying portfolio

As an single car is made up of thousands of separate components, one can imagine how complex sourcing can be for the average car company. In addition, it's not as if these companies rely on one supplier to provide them with lug nuts, ignition coils or fuel level sensors. 

For example, suppose an automotive enterprise purchased all of its camshafts from a single company. While this practice simplifies the material acquisition dramatically, what would happen if a fault were discovered with the camshafts after 2 million vehicles were shipped? The car producer would have to recall all 2 million automobiles. In contrast, if the business only bought 25 percent of its crankshafts from the original supplier, it would only have to request returns for 500,000 vehicles. 

Ideally, it's preferable for recalls not to occur at all. Yet, such situations are regular components of risk evaluation and assessment protocols. Worst-case scenarios always need to be taken into account. Ignoring the possibility that something might go wrong may cause unfavorable occurrences to become exacerbated.

Learning from mistakes 

Whenever issues with specific automotive parts arise, manufacturers can take advantage of two solutions:

  1. If faults were caused by a specific supplier, then purchasing offers can mark that company as an unreliable partner. 
  2. If the defects were caused in-house, design and development protocols can be reevaluated to identify where issues persisted. 

One particular Japanese manufacturer hopes it can benefit from the same lessons. IndustryWeek noted that Toyota recently announced it will recall 1.75 million vehicles used by customers across the globe. Assessment professionals found brake glitches and other problems that could cause components to spontaneously combust. 

In regard to the braking system, Toyota specialists recognized that one part wasn't shaped properly, which could transform the pedal over time. Although Toyota maintained that the brakes would still function in the long run, "performance could begin to gradually degrade." 

Amid other concerns regarding fuel-suction plates and fuel delivery pipes, Toyota has submitted requests for returns of an estimated 11 million vehicles since the beginning of 2014. In March, the company paid the U.S. government $1.2 billion in settlements after allegedly misinforming regulators and consumers about accelerator mishaps. These defects caused cars to speed out of control and experience brake failures. 

A level playing field 

A major concern of purchasing management teams is whether or not suppliers are committing fraud, colluding with perceived competitors or engaging in other unfavorable activities. The automotive manufacturing economy is incredibly competitive, especially when it comes to providing parts to major enterprises. Some entities attempt to change this factor. 

Business Day contributor Amanda Visser noted the South African government is investigating 80 vehicle parts production businesses suspected of conspiring to fix prices over the past 14 years. The nation's Competition Commission noted the case commenced when one of the alleged perpetrators opted for leniency in exchange for information. 

The primary goal is to deduce whether the cartel's actions hindered the progression of South Africa's automotive components manufacturing industry. Authorities conducting the examination will collaborate with officials investigating similar offenses in the U.S., Europe and Asia. 

Again, it's situations such as ones outlined above that encourage a need for thoroughness in strategic sourcing. The more professionals know about their partners, the better they'll be able to align themselves with best practices. 

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Source One sponsoring Medical Device Strategic Sourcing Conference

on Thursday, October 16, 2014

Source One Management Services, LLC is proud to announce that it is sponsoring the 1st annual Medical Device Strategic Sourcing Conference in Atlanta, Georgia this upcoming January 26-27, 2015.

New regulations, vendor qualification requirements, competition from low-cost country manufacturers, and poor international enforcement of intellectual property laws has created a challenging landscape for medical device manufacturers.  Procurement and sourcing professionals at these medical device manufacturers are often tasked with trying to deal with a rapidly changing industry; while simultaneously working to find the best possible prices, products, services and suppliers to align their businesses with.  

Strategic Sourcing Services for medical device manufacturing is one of our hottest and fastest growing areas of expertise.  Therefore, it makes natural sense that Source One will have a substantial presence at Q1 Production's 1st annual conference dedicated specifically to the topic.


  • Learn more and register for the medical device strategic sourcing conference event: here
  • Learn more about our strategic sourcing services for medical device companies: here




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What does off-shoring look like for the mid-market economy?

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What does off-shoring look like for the mid-market economy?

While nearshoring to South America is a big topic of discussion among large businesses, the mid-market economy is also regarding the benefits of outsourcing manufacturing to foreign entities. 

Cost is often highlighted as the main reason why companies choose to procure items from other countries, but mid-sized enterprises also focus on several residual benefits. Close proximity to domestic markets and the ease with which intellectual property can be protected are just two of these advantages, The Wall Street Journal noted. 

Bolstering long-term strategies 

IndustryWeek contributors Amar Shah and Danielle Moushon noted a survey of C-suite executives working at mid-market businesses conducted by The Keystone Group, which found that commodity pricing wasn't necessarily their greatest concern. In regard to expenses, respondents typically weighed the pros and cons associated with certain liabilities. 

For instance, quality control, hidden logistics grievances and risks, duplicative management and lead times were top of mind for many participants. In addition, nearshoring initiatives are intensely motivated by factory proximity to raw materials and skilled labor.

The fewer assets that are needed to transport goods to production facilities, the less risk involved with transportation. A similar concept applies to the workforce: The more knowledgeable employees are in certain manufacturing techniques, the better procurement management professionals will be able to measure quality. 

Weighing risk and insurance 

One of the disadvantages of offshore production is that it's difficult for personnel to keep track of every indirect supplier relationship. Sourcing officers need to be cognizant of a number of risks, such as natural disasters, crime, long-term management fluctuations, shifting political climates and other factors. 

This is when the appeal of nearshoring to Mexico and other South American countries grows considerably. For one thing, North American enterprises are likely well aware of conditions outlined in the North American Free Trade Agreement, which translates to political understanding. Secondly, proximity to these nations means that some domestic insurance companies may cover logistics partners that frequently cross the U.S.-Mexico border. 

Available resources 

As was mentioned above, access to raw materials is a key differentiator in nearshoring. For example, if a company procures tungsten and other rare elements from Africa, it logistically makes more sense to deliver those products to a factory in the Caribbean or Mexico as opposed to China. If it chose to transport goods to the latter country, distributors would have to rendezvous several times. 

Simplification is the key to success. The more complex the supply chain, the more difficulties and risks exist. 

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Malaysian Airlines: A Thorough Approach to Strategic Sourcing

on Wednesday, October 15, 2014


Whether struggling to keep your company above water, or looking for ways to increase an already profitable operation, strategic sourcing offers a reliable platform for companies to increase or attain profitability. Commonly, strategic sourcing is mainly associated with cutting supplier costs and re-negotiating contracts. This definition and common school of thought ignores the other, oftentimes more critical, components of strategic sourcing; that being process optimization. In order to execute an effective strategic sourcing initiative, strategic sourcing itself must be thought of in a broader sense in terms of evaluating alternative cost savings methodologies attained through process improvements and corresponding soft cost savings. When traditional cost reduction methodologies such as executing RFP’s, RFQ’s, or conducting direct negotiations with suppliers are combined with a thorough evaluation of process optimization opportunities, results oftentimes exceed expectations.

In current news, this comprehensive approach is being utilized by a company who has been the subject of an unfortunate series of events and ongoing financial woes-- that being Malaysian Airlines (MAR). MAR has had their fair share of setbacks within the past fiscal year. First came the disappearance of flight MH370 in March, and then the crash of flight MH370 over Ukraine in July. Both of these tragedies compounded the financial troubles that MAS had been experiencing over the past few years. In fact, the company posted losses of £770 million in 2013 after three years of consecutive losses prior. With the brand name as of late at an all-time low, and the company at risk of bankruptcy, MAR has set their focus towards recouping losses by cutting costs and improving current processes.

One of the first steps MAR has taken to cut costs has been to eliminate 6,000 jobs across the company, which represents approximately 30% of the total workforce. This immediate cost savings approach for struggling companies is something that a thriving company would generally want to avoid, but in this case, the move made sense for MAR. Leading up to the job cuts, MAR had approximately 183 employees per aircraft (a common unit of measure in the airline industry). Considering Singapore Airlines, who is one of MAR’s top competitors, has a rate of 138 employees per aircraft; this metric reveals that MAR is less efficient than their direct competitors to begin with.

In addition, historically MAR has been known to pay a higher price than that of their competitors for equipment and services. This condition represents the opportunity to cut costs by leveraging benchmark pricing and volumes to attain more competitive prices via direct negotiations and leveraging volumes in RFX events for both indirect and direct materials. For example, Air Asia is a well-known player in the international airline market and is notorious for their low air-fare prices. It is no secret that part of the reason they are able to offer lower prices is because their operating costs are lower, and supplier contracts more competitive. MAR is leveraging this knowledge in one of their main cost cutting initiatives by re-negotiate existing supplier contracts to bring them in line with industry utilizing benchmark pricing.

The actions listed thus far are typical of a traditional sourcing effort and focus on reducing supplier costs, re-organizing their supplier base, and cutting operating expenses. However, as previously mentioned, by taking an all-encompassing approach to true strategic sourcing, one must consider process improvements and alternative areas of soft cost savings that oftentimes go overlooked by procurement departments, sourcing professionals, and category buyers. As an example of this practice, MAR has evaluated the opportunity to invest, despite the company’s instinct in such times to do the opposite. MAR has begun to switch out Boeing 737-400 aircraft and is investing in 737-800 models that have higher fuel efficiency and lower maintenance costs. In addition, the re-engineering of existing and new aircraft has begun to include more business class seats in order to increase utilization and general population capacity.  This tactic is being complemented by route rationalization and cutting infrequent travel lanes. MAR is instead turning focus to flying within the regions with the highest current utilization, including routes to Japan and Australia.

This recent example displays at a high level the type of approach necessary to achieve greater cost savings through multiple different channels. By not only focusing on cost cutting, and by improving their processes and operational strategy, MAR has positioned themselves to possibly avoid bankruptcy. 
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Is integrated business planning simply another buzzword?

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Is integrated business planning simply another buzzword?

Creating a healthy balance between supply and demand isn't as easy as it sounds, especially when offshore supplier relationships and a complex distribution chain are added to the mix. The more dispersed business processes become, the more difficult it is for an organization to align its operational goals.

For example, suppose an automotive manufacturing expert runs a spend analysis of how many tires the company will need to procure in Q2 2015. Because he or she did not coordinate with the enterprise's sales director, the assumption is made that factories will require 800,000 sets of tires. However, because the sales director expects demand to decrease in the second quarter of next year, the purchasing officer will unwittingly order a surplus of tires.

A symbiotic environment

Resolving the aforementioned issue requires a platform capable of combining and supporting a combination of multiple applications. According to IndustryWeek contributor Dean Sorensen, this involves merging sales and operations planning and enterprise performance management to create a single solution. IBP enables enterprises to conduct the following tasks:

  • Initiate and manage relationships with suppliers
  • Conduct demand forecasting based on real-time sales data
  • Orchestrate materials handling endeavors, whether these include acquisition or logistics
  • Develop holistic goals and assign teams to initiate those projects
  • Organize finances and accounts

An intelligent system

Supporting these capabilities requires an intelligent foundation capable of recognizing discrepancies and making smart decisions. Sorensen noted many manufacturers believe they already use IBP implementations. However, there are some who translate the word "integrated" a bit too liberally, believing that throwing a simple set of S&OP and and EPM tools into the same infrastructure creates an IBP deployment. In actuality, this is hardly the case.

Analytics and machine learning are essential to make IBP environments work the way manufacturers, health care providers and other professionals require them to. Sorensen used the term "embedded logic" to describe IBP's operational functions, which can perform these seemingly banal, but essential responsibilities:

  • Identify time-sensitive data and factor it into how it changes demand forecasts, benchmarking conclusions, etc.
  • Track industry fluctuations that affect predefined approaches to the market

The smarter the system, the more succinctly strategies will be developed.

Why the cloud is necessary

For developmental reasons, creating, deploying and supporting an IBP solution in a cloud environment is the optimal choice. Sure, cloud computing has been surrounded with a lot of hype over the past year or so, but there wouldn't be so many discussions regarding the technology if people didn't think it was useful.

To obtain a better understanding as to why the cloud (specifically, Platform-as-a-Service) and IBP go hand-in-hand, it's important to observe the kind of data and applications IBP solutions handle:

  • Web-based: Whether from Google News or social media, the Internet can provide a lot of insight into how specific industries are changing on a weekly, or even daily, basis. This consists of unstructured and semi-structured information, which can only be stored in expansive, flexible infrastructures.
  • Collaborative: Whether email or project-based, logging communications takes up a considerable amount of capacity, as well as network bandwidth.
  • Analytics: As IBPs are smart systems, they require an enormous amount of processing power to perform at an optimal level.

These sources are only three out of dozens of actions that produce more data and require a fair amount of computing power. Add this element with a company's need to customize its IBP solution, and PaaS appears to be the best option. According to WhaTech, such environments allow administrators to define security protocols, set up databases, develop software and manage networks.

Of course, IBP users don't have to contract a cloud provider to receive the operational benefits. Pre-existing data centers can be modified into cloud infrastructures, delivering the same benefits as companies that offer the technology as a service.

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IT and Procurement: Sometimes Opposites Attract

on Tuesday, October 14, 2014

In 2014, tech trends focused on a transformation of application development, data ecosystems, and crowdsourcing into more digital applications. With these initiatives, IT professionals aim to show potential by making a case that an investment’s net present value and payback period projection results would be deemed worthwhile in terms of time, money and assets saved. This, however, requires an understanding of the distinct benefits of the proposed investment and the technological components—which can be a far-fetched endeavor for colleagues without an IT background. For this reason, IT groups feel push back from other departments who don’t feel that proposed technological innovations are necessary.

At the other side of the spectrum, Procurement looks to cut costs in operations and manage processes and efficiency in supply chains to integrate leaner ways to achieve business objectives. Although value and innovation is a goal of procurement, the department serves to eliminate the unnecessary. This perspective can clash with groups who believe that pricey investments are fundamental, when they offer convenience and other benefits but are not truly essential.

The disparate interests of IT and Procurement departments offer a challenge that makes it seem as though the groups are incapable of collaboration. Believe it or not, this is not the case. There are actionable steps toward seamless IT/Procurement partnership that allow synergy in the two departments’ organizational goals.

To begin to build a set of best practices to fulfill this coalition, Source One is hosting a free webinar on October 22, 2014 at 1:00PM EST to provide steps to form a strong foundation. This webinar, presented by David Pastore (Director of IT Sourcing at Source One) and Jim Cantell (Director of Channel Programs at Liaison Technologies), will outline key steps that your procurement and IT departments can use right now to improve communications and increase internal value.

Don’t miss this opportunity to increase the value of your internal staff. Register here: http://goo.gl/forms/xtQ9usgFhg


Photo couresty of Dollarphotoclub.com
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ProcureCon Pharma and the Future of the Industry

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This October 27-29, Source One plans to attend the premier procurement conference for CPOs and senior procurement professionals working in the healthcare sector (pharmaceuticals, generics & biotechnology)—ProcureCon Pharma 2014. With the event just around the corner, we wanted to take a deeper dive into the shifting pharmaceutical landscape and explore some of the changes over the past few years.

Of course, the first thing that came to mind was the big patent cliff. There was once a time when patent-protected products ruled the marketplace. Many pharma companies profited from this structure, but as the economy and legal system changed, so did the industry.

Though we are at the tail end of the patent expiry, pharmaceutical companies are still dealing with the fallout. These patent cliffs have had a huge impact on revenues, and that will only increase as more low-cost generics come to market. It actually has been suggested that from 2012 to 2018, more than $290 billion of sales would be at risk from patent expirations. (1)

However, with a healthy pipeline of new innovations and strategic focus on reducing robust categories of spend, some pharma companies have a bright future ahead. In fact, most pharma companies look to sourcing to help consolidate the supplier base, which in turn reduces cost and administrative burden. Many pharmaceutical companies find this more efficient, working with a preferred selection of suppliers who provide strategic insight as well as goods and services. Spanning across categories such as Marketing, IT, and Professional Services, this supplier strategy creates stronger, more collaborative relationship constructs.

Even more so, the growth in emerging markets has been a tremendous impact on pharma companies’ bottom lines. In fact, one healthcare strategist was quoted on saying, “If you go back a decade, emerging markets contributed very little to the overall growth of the pharmaceutical industry. If you fast forward to today, you’re looking at emerging markets contributing close to 20% — or over 20% — of top-line sales.” (2)

With emerging markets making up a sizeable amount of the world’s population, it is easy to understand why pharmaceutical companies are looking to Brazil, Russia, India and China for growth opportunities. According to some, these emerging markets will be, “30% of global pharmaceutical spending by 2016.” (3)

However, these markets are not without troubles of their own. For example, bribing doctors in China has become prevalent, and many are seeing kickbacks from major pharmaceutical companies. In Africa, cases of testing dangerous products on children have come to light. Though profitable, the loose governance around pharma in these emerging markets could easily push companies into unethical territory.

So as we began to gear up for ProcureCon Pharma, we understand that the conversations about supply chains may shift to globally sourcing suppliers. These emerging markets offer a great opportunity for pharmaceutical companies to rebound from the patent cliff crisis. However, it is clear that as these roles develop in other countries, the need for international ethical processes should be established.

If you plan to attend ProcureCon Pharma and have an interest in the subject matter discussed in this blog, we would love to meet and continue the conversation. If you would like to set up some time with Source One, please contact me directly at hgrossmuller@sourceoneinc.com to arrange a meeting.

Photo courtesy of Dollarphotoclub.com

1. C. Harrison, Nature Reviews Drug Discovery 12, 14-15 (2013).
2. http://www.forbes.com/sites/wallaceforbes/2014/06/18/emerging-markets-offer-a-new-channel-of-demand-for-pharmaceutical-products/
3. http://www.industryweek.com/emerging-markets/how-big-pharma-can-win-emerging-markets
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Animal welfare considered during procurement process

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Animal welfare considered during procurement process

The world's appetite for meat is nearly insatiable. High demand has caused some food organizations to ignore animal rights completely, putting chickens in cramped hen houses and cattle in unsanitary slaughterhouses. 

Social cognizance of these issues has pressured beef, pork and chicken producers to pay more attention to their procurement practices. Thorough surveys of chicken, pig and cattle facilities aren't as common as consumers would hope, but some corporations are taking proactive measures to ensure they're sourcing from enterprises that are considerate of animal welfare. 

Nestlé's mission 

The Hartman Group recently noted an endeavor undertaken by popular food brand Nestlé, which is implementing animal rights standards that will impact an estimated 7,300 suppliers. Specifically, the company stated that it will refrain from purchasing food made from pigs raised in gestation crates, chickens grown in battery cages, cattle whose tails or horns were removed while conscious or livestock detrimentally affected by growth hormones. 

While gestation crates keep pigs confined in painfully small compartments that prevent them from turning around, battery cages cramp chickens raised for egg production, forcing them to live in their own filth. It's these kinds of conditions that have drawn concern from many consumers and organizations such as the Humane Society. 

What's the general sentiment?  

Over the past half-decade, market research endeavors have shown that people aren't too fond of companies known for animal cruelty. The Hartman Group conducted a survey regarding these concerns last year, discovering that 76 percent of consumers asserted they favor organizations that avoid improper treatment of livestock - 5 percent greater than 2010.

Yet, when a company asserts it procures meat products from agriculturalists cognizant of human rights, people don't take such statements at face value. Some of them may conduct research on the matter in order to validate the business' word. If it's difficult for those assiduous consumers to find information, they will likely conclude that the company in question is hiding something. 

Transparency is key 

That's why food corporations are building supplier relationships with farmers participating in organizations dedicated to animal rights. One such association is the Verified Beef Production program, of which Canadian Ranger Coy Schellenberg is a member, according to Farm Animal Care.

"The originators of VBP had it right when they built the program around the simple statement: 'I have nothing to hide and you are welcome to see,'" Schellenberg told the source. 

When an organization proactively divulges its practices, it induces trust among consumers. This is a quality every enterprise should look for before initiating the RFP process. 

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The Decoupling Debate - A Source One Marketing Category Blog Series - Part 3 - The Pros and Cons of Decoupling Agency Services

on Monday, October 13, 2014

In the fist two posts of this series, we introduced the topic of decoupling and provided a brief overview of how the concept has evolved over the years. As a brief recap, decoupling is a term used often by marketing professionals and agencies referring to the separation of certain campaign assignments from the core creative and strategic elements of a marketing campaign. Typically, various production activities are decoupled. Decoupling as a sourcing strategy began with the creation of standalone print houses and it now also applies to media buying and digital development services. In this post, we will address why marketers choose to decouple certain services; we will also examine some drawbacks tied to decoupling.

Some of the advantages of decoupling include the following:

  • Specialized Experience/Expertise. As mentioned in Part 2 of this series, one of the main reasons a specific component of a marketing campaign is decoupled is because there is a high degree of technical expertise required to complete these services as well as a large demand for the services. Production houses are solely dedicated to the production of assets; therefore, they have a great deal of experience in a particular category and have been able to develop best practices over the years for the services they deliver.
  • Faster to Market. This benefit goes hand in hand with the former. A dedicated production team establishes best practices and process efficiencies from completing a number of projects within their service category. Process efficiencies translate to less time required to complete assignments and marketers are able to bring their campaigns to market more quickly than utilizing an agency without core competencies in the decoupled service category.
  • Greater Transparency and Stronger Control. The costs tied to production services for a campaign can sometimes be difficult to calculate if managed by an agency that often needs to engage a third party to complete the assignment. Decoupling eliminates the need for agencies to engage third parties with marketers now having a direct relationship with the third party themselves. This direct relationship delivers greater visibility into the costs of producing a tactic. It is important to note this benefit cannot be fully realized without implementing the proper procedures, communication channels and analysis to track all marketing activities, managed by both the agency and those suppliers handling the decoupled assignments.
  • Creative Freedom. Decoupling allows for greater flexibility in the generation of more in-house creative ideas that can be implemented without the involvement of a creative agency. Marketers with in-house marketing teams can develop their own creative concepts for a campaign and engage a production house for the execution.
  • Asset Standardization. Agencies have varying methodologies when it comes to approaching a production assignment and can lead to inconsistencies across assets distributed through multiple marketing channels. By utilizing the same production house for the execution of all production activities, there is greater consistency in the appearance and flow of content across all marketing platforms.
  • More Competitive Pricing. Typically, larger agencies have higher overhead costs when compared to smaller production shops and these overhead costs trickle down to every component of a campaign within the scope of work. By decoupling services to smaller shops, these overhead costs decrease and do not have as much of an impact on the cost of services. Also, as mentioned previously, decoupling leads to faster turnaround times for campaigns and less time and resources dedicated to production activities translates into lower costs.

The disadvantages of decoupling agency services include:

  • Managing Multiple Relationships. Decoupling means taking a certain set of services away from one agency that you are currently working with and assigning them to another supplier. Engaging with multiple agency partners to produce a campaign means managing multiple relationships. A great deal of time and resources will have to be dedicated to monitoring and managing each relationship to make sure they are operating effectively.
  • Ineffective Cross Agency Collaboration. Although creative and production take on different assignments, they must both operate under the same overarching marketing strategy. This means that both agencies will have to collaborate with one another in order to make sure that their activities are aligned. You may find these agencies not being able to work well together, competing against one another for a fair share of the budget.
  • Communication Issues. By having multiple agencies dedicated to the deployment of a specific campaign or set of activities, the path of communication lengthens and becomes more complex. Marketers need to manage the communication process with all agencies effectively and consistently communicating the goals and strategies of the campaign. Similarly, agencies need to communicate with one another in order to convey their ideas and concepts to make sure they are properly executed and delivered on time.

There is no right or wrong answer to whether or not a marketer should decouple agency services. Advantages and disadvantages exist for both scenarios and it really comes down to the marketer's overall needs and internal resources. In-house agencies are becoming more and more popular as well, which blurs the lines even further. The decision to decouple depends on the culture and strategy of your organization, the resources that you have internally, and the latest trends in the market. If you are really struggling with determining if decoupling is the right strategy to employ for your organization/brand, it might help to look at the concept from a different angle. Below are disadvantages and advantages we wanted to clearly outline that call out the benefits and drawbacks of choosing not to decouple. 

The benefits to utilizing one agency for all of your marketing needs include:

  • Cohesion. Marketers are able to keep a consistent and cohesive message and brand identity across all marketing channels.
  • Unified Strategy. Rather than each agency developing their own strategies for their respective tactics, there will be one overarching strategy dictating all marketing activities for the campaign.
  • Strong Relationship. Utilizing one agency means only managing one relationship, which allows for a strong focus on developing a true partnership where your goals are well understood and eventually achieved.
  • Growth Opportunity. Having a strong agency relationship where both parties have a familiarity and understanding of the others goals and culture means there is a greater opportunity for future successful engagements.

The drawbacks of utilizing one agency for all of your marketing needs include:

  • Increased Risk. There is a great deal of risk associated with using one agency for all your marketing needs. If some of your agency's team members decide to pursue other opportunities, you may find yourself not pleased with their replacements and the relationship can suffer as a result. Therefore, with all of your eggs in one basket, you may eventually realize you rely too heavily on a single agency.
  • Difficult Transition (if the relationship does not work out). The transition of all marketing assignments from one agency to another can be a very cumbersome and time consuming process. A great deal of coordination is required and the learning curve can be expensive.

In the next and final part of this series we will review some situations where decoupling makes the most sense to marketers. Also, we will be closing out this series with an infographic summarizing the key takeaways from the Decoupling Debate - stay tuned for this as well.
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Sourcing Change Management

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During the interview process with analysts that have applied for positions at Source One, I always ask candidates what they see as the most difficult part of the job they are applying for.  I get a diverse range of answers, sometimes they say market research, sometimes analytics, sometimes negotiating with suppliers and identifying savings opportunities.  Rarely does an analyst really know what they are in for with this job – all of those things are truly the easy part.  They are easy because they are controllable, they are easy because most markets have capacity and competition, they are easy because no matter how good you buy, you rarely get the absolute lowest price available. 

As any good senior sourcing person will tell you, the hardest part of the job is not identifying opportunities for savings.  The hardest part of the job is getting the business – your own company (or in our case client) to participate in the process and accept and implement the savings opportunities that are identified.

For Source One, you might think this is counter-intuitive.  Clients hire us specifically to help them obtain cost savings through the strategic sourcing process.  If they hired us, they obviously want cost savings and have the intention to support the process.  And this normally the case, at least for the people who bring us into the engagement.  But most of these sponsors are not under the illusion that their team has already exhausted all options for savings and need additional support to identified new areas of opportunity. Most of them realize that their team could surely do more than they are right now, but don’t simply because they lack the internal political capital to get the departments they support to accept their help and utilize their expertise to drive organizational savings.

They are tired of dealing with roadblocks, circular logic, and meetings that rehash projects from years ago, and have brought in Source One to challenge the status quo. 

We have a slide that we use during a kickoff with a new client that is titled “Inhibitors to Success”.  On this slide, we list out different statements or thoughts stakeholders may have when sourcing engages them to support a cost savings initiative.  These statements include “We’ve already tried that, it didn’t work”, “I don’t have time for this project”, “We have special requirements”, “Our supplier is giving us the lowest price” and “We’re already doing that”. 

When we show this slide to our sponsor, they almost always laugh because they have heard these excuses before.  Our goal in reviewing it with stakeholders, of course, is to show them we understand their concerns and highlight that none of them are unusual.  Normally this gets a conversation started that helps us get past initial reluctance and into a more collaborative space.  But not always.  Engineering groups, marketing departments, IT and HR all still find ways to push back.  For us, even purchasing and sourcing groups will try to passively or actively resist the goals and objectives of the initiative, because if it’s not their idea, then they don’t get credit for it.

So as we continue to debate the future of procurement, the diminishing returns of strategic sourcing, and the next big thing that is going to replace it, keep in mind that in most organizations the dysfunction still exists.  There is a lot more work that needs to be done from an organizational and cultural perspective before we can say that sourcing is an outdated process.  Sourcing still has a long way to go.
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IT/Procurement Collaboration: Free Webinar

on Friday, October 10, 2014

Procurement and IT are two very different groups, with two very different objectives. Tech departments are looking to implement robust services to streamline business processes, and procurement is looking to cut costs and impact the organization's bottom line. How can IT and procurement collaborate more effectively and still achieve both results?

Source One will be hosting a free webinar on October 22, 2014 at 1:00PM EST, presented by David Pastore (Director of IT Sourcing at Source One) and Jim Cantell (Director of Channel Programs at Liaison Technologies).  The speakers will outline key steps your procurement and IT departments can use right now to improve communications and increase internal value.

 In this webinar, you will learn:

 -How commoditization and consumerization of IT services is paving the way for unprecedented IT/Procurement collaboration
-How IT and procurement can learn from each other, improving their value and increasing buy-in from internal customers
-Insight and best practices for CPOs, CIOs, and other senior managers 
-Actionable solutions to improve your own IT and Procurement relationships that will lead to reduced cost and improved service


Don’t miss this opportunity to drive departmental collaboration. Register here: http://goo.gl/forms/xtQ9usgFhg
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