Big announcement for green technology

on Monday, March 30, 2015

Big announcement for green technology

Eco-friendliness has become one of the more commonly discussed topics among boardroom executives, public sector officials, consumers and others in the past few years, as the world appears to be moving along a greener track as time goes on. Whether individuals want to save the world or do not believe that climate change is a real threat, green technology makes good business sense given its ability to reduce costs and drive efficiency. 

What's more, consumers and corporate purchasers are moving in a definitively eco-minded direction, looking for brands that are conscious of their carbon footprints and act aggressively to reduce strain placed on the Earth. Now, one state has announced that a major project - which will be the first of its kind in the green energy arena - is set to wrap up, and the buzz will surely be quick to follow as the media stir begins to grow. 

Green New York

GreenTech Media recently reported that New York State has announced a joint project with the State University of New York Polytechnic Institute to create a research and development facility that will be the biggest of its kind in the world. The main focus of this project appears to be the need to take more proactive steps to reach goals of efficiency across the state, most notably those involved electricity utilization and the use of renewable resources for various energy needs. 

According to the news provider, the facility will be called the Advanced Grid Innovation Laboratory for Energy, cleverly shortened to "AGILe," while the projected time of completion has yet to be revealed. 

"This is new and innovative and will allow New York state to lead the country in energy development, smart grid and other technologies and provide economic benefit to the state," New York Power Authority's Head of Research and Development Allen Ettlinger affirmed.

The source noted that NYPA will act as an advisor to SUNY Polytechnic Institute and other members of the state's initiative. 

Strategic sourcing implications

Chances are good that more of these types of projects will be launched by municipalities, businesses and others in the future, as all signs point to a greener future in the public and private sectors. The time is now to get on board with green strategic sourcing for the betterment of brand images in the future. 


Market experiences resurgence in real estate


Market experiences resurgence in real estate

Real estate was one of the most severely damaged industries during the recent recession. It became a buyers' market, with desperate owners selling homes far under their value just to get them off their hands. Slowly but surely, the market has been recovering and sales of homes both new and resold are seeing an increase of popularity. So, what exactly is causing the resurgence of sales in the real estate industry?

Turning over a new leaf

Following the ups and downs in the real estate market is always popular, especially in times of economic crisis. Back in 2008, people were trying to sell their homes to no avail. Even with the bottom-of-the-barrel prices, no one seemed interested in buying. Once-fruitful neighborhoods turned to forlorn communities, with vacant windows staring out onto deserted streets. But just as people tend to pull themselves up by their bootstraps and get back on track, real estate climbed its way back to a more profitable position on the industry ladder.

According to IndustryWeek, February 2015 saw new home sales hit a seven-year high. This marks a three-month streak of continual growth for these sales. Analysts didn't think that there would be any spikes in purchasing for February - in fact, it was estimated that there would be a 3.3 percent drop due to the sub-zero temperatures and mountains of snow that piled onto many parts of America. However, the cold didn't keep buyers inside, as single-family home sales saw a 7.8 percent increase from January.

Contractors are responding to this demand for housing, but are behind in their efforts because of the weather woes in parts of the country, reported CNBC. The choice of homes, whether new or existing, is slim pickings. With fewer houses on the market, prices are creeping up to the point where prospective buyers are unable to purchase, despite an otherwise perfect real estate climate. Should builders get back on their schedules, this will be to the benefit of many more people who are looking to secure a home.

So, who's buying?

Way back in the day, prospective homebuyers were young professionals and their families. Prices were low, there were jobs aplenty and things seemed peachy. Fast-forward to today: Young professionals are in debt from their college years, there aren't as many jobs as there are candidates and the price of living is on the upswing. Interestingly enough, millennials are the largest segment of buyers in the United States housing market, asserted Business News Network.

Millennials are sinking their teeth into homeownership as the rents of their apartments continue to rise, noted the source. Now that more adults in their 20s and 30s are in secure jobs and interest rates on mortgages are lower than they've been in a while, it makes sense for this group of people to invest in their futures rather than paying increasing rent to a landlord. The source mentioned that the cost of leasing a property has been steadily climbing every quarter since 2010. With this trend, it's no surprise that people are turning to owning their own places - it just makes good financial sense.

These trends are promising for the material market and sourcing products necessary for home building and refurbishing. It will be fascinating to see which industry in the supply chain will profit as the real estate market continues to grow and evolve in the future. 


Current oil prices are great for consumers, global suppliers worried


Current oil prices are great for consumers, global suppliers worried

The end of 2014 and the beginning of 2015 saw some of the lowest gas prices that the United States and the rest of the world had seen in about 6 years. People could barely believe their eyes when they realized that gas had finally fallen below $1.99 per gallon. While this was amazing for consumers - with some even going as far to take a picture of the price for their social media accounts - suppliers and those in the oil and gas sectors were seeing red. How are these low prices going to affect the supply chain?

The plunge

During the colder months, homeowners usually dread their gas bill. This winter, however, was a different story. This past winter season, we saw oil drop to the lowest price in six years, thanks to a full supply and a renewed strength in the American dollar, according to IndustryWeek. There was an urgent call to sell the oil that's been stored in American reserves, as they were very close to capacity, noted the source. The International Energy Agency laid on the pressure to make sure the oversupply in storage didn't fill up entirely.

Why the sudden surplus? The U.S. has been producing more of its own oil, as opposed to having it imported from the Middle East and other suppliers. More supply plus the same demand equals purchasing power for consumers. Now, our hard-earned dollars aren't being depleted at the gas pump. However, our gain is directly linked to the industry's struggle.

Sector backlash

So now we're seeing an issue with companies that are part of the supply chain. Insider Media asserted that various projects are either delayed or canceled because the funds just aren't reaching those lower down the chain. Companies that profit from or help manage the exploration side aren't being utilized because there just aren't any trips out into the untapped world to search for crude oil. The enterprise as a whole is suffering because there is too much oil that isn't being sold, a fascinating issue but very prevalent nonetheless.

The last time we saw these kind of prices, it was 2009 and we were just beginning to see how damaging the Great Recession really was. Now, the economy is looking up and gas prices are leveling out, but the volatility is still present. How will this affect the oil and gas supply chain in the future? No one can say for sure, but in the mean time, let's make sure our reserves aren't about to overflow before this issue happens again.


Playing catch-up: Food magnates join forces, face change together

on Friday, March 27, 2015

Playing catch-up: Food magnates join forces, face change together

On March 25, 2015, two food and beverage giants H.J. Heinz and Kraft Food were announced to join forces later in the year, provided the closing goes as planned. This is a huge deal for both companies, as the food magnates are struggling to keep up with health-conscious individuals who are turning a blind eye to processed foods. This merger could be the first in a long line of companies forming alliances to stay afloat in the shifting tides of change in the food industry.

Breaking bread

This merger was made possible by billionaire and junk food enthusiast Warren Buffet along with 3G Capital. The two well-respected business institutions will be looking to change the way people view Kraft products and institutions closely linked to Heinz. This comes on the heels of the public mocking some marketing choices for Kraft Cheese Singles. 3G, known for its tough cuts, is bound to make some strong changes as the merger finalizes later in 2015.

News of the merger broke in the early morning of the last Wednesday in March. This information, while new, doesn't come as a complete surprise for those of us following the market trends. The deal, according to MarketWatch, is likely to reach over $40 billion. The combo company, to be dubbed The Kraft Heinz Co., is expected to have a revenue of over $28 billion, with spend management savings to top $1.5 billion by 2017, indicated the source.

These numbers for the annual cost savings is a huge relief for Kraft Foods, which has been suffering as a result of the health food trend and consumers' desires to veer away from processed foods or any products with additives or chemicals. Fortune noted that Kraft executive teams felt that their marketing was no longer effective and the company has not kept up with the changing times.

Food for thought

After Kraft's slew of failed attempts to brand its yellow processed cheese products as healthy, the public has been moving toward brands with fewer ingredients and a more holistic health image, asserted NPR. The way that these gastronomy giants are dealing with the shifting tides is acquisition. When the end game is to simply survive, getting roped into the competition and going through a slight rebranding process doesn't seem so bad.

Also, these mergers are good for consumers. Since companies are paying attention and taking note of our changing tastes, we're beginning to see more promising ingredients like "real cheese." If these giants can transition to more natural products rather than just buying out natural companies, then perhaps we can begin to see real change in the food industry landscape.

How long were companies hoping to ride the wave of their past successes and simply change their market strategy when people are closely reading labels for allergy purposes and dietary restrictions? When people are able to comp​letely customize their wardrobes and their technology, they are going to make sure they know what is going into their bodies. This shift toward organic and healthier options has been in the works for many years but just now taking over corporate America, no longer just he lives of "granola nuts" or people on diets.

We love having choices - even our guilty pleasures have a place in our hearts - but we aren't going to continue supporting certain brands simply because the packaging suggests a more healthy food production process. We insist on the best, and we want our food providers to be on the same page as us.


Procure new technology or face horrid music

on Thursday, March 26, 2015

Procure new technology or face horrid music

Technology has become the single most important asset for a wealth of businesses in the past few years, and has also effectively transformed virtually every organization on the globe, not to mention consumer demands, corporate purchaser expectations and the like. For this reason, procurement management has become a bigger pain point for a wider variety of firms, and will only continue to be a more pressing matter as time goes on and digital assets diversify. 

Companies that do not embrace new technologies, or those that do without putting much effort into strategic sourcing and spend management, will likely face relatively tumultuous situations before long, especially as competition heats up in the global economy. Creating sound supply chain management and provisioning processes for new technologies is certainly an achievable goal, while those entities that do not have faith in their own abilities can look toward sourcing service providers to get the job done. 

However, the single most important thing to remember is that the world is evolving, and businesses that keep their feet rooted in the past will simply not be able to deal with the widening range of competitors, challenges and demands as the years go on. With a proactive approach to technology procurement, the sky will be the limit for performance improvement and financial growth, as digital commerce has provided a new pool of potential for every company. 

Case in point

International Data Corporation recently released the results of a new study that sought to discover how technologies are impacting digital commerce and competition in virtually every industry, and the findings were extremely telling when it comes to what the average market will look like a few years down the road. Remember here that cloud computing and other modern technologies have indeed been hailed for their abilities to level the playing field between larger and smaller companies. 

This report indicated that this idea is being perpetuated and has become intensified of late, and that it will only become a more pressing matter for organizations as time goes on. According to IDC, roughly one-third of the largest 20 companies in each industry will be faced with a more diverse range of competition within the next three years, meaning that smaller firms and overhauled ones that have been around the block for a while will indeed be biting at the heels of major corporations by 2018. 

"Digital technology has and will continue to alter the landscapes of business, education, healthcare and government. The past couple of years have seen breathtaking change at an accelerating pace," IDC Senior Vice President of IT Executive, Industry and Financial Research Meredith Whalen asserted in the report. "Digital transformation is one means of creating self-adapting businesses that can rapidly respond to change. These organizations will not only weather the coming storm, but also thrive on it."

The researchers argued that reaching optimal levels of digital enablement and performance will help companies of any size and industry reach the top of their respective markets. 

Procurement demands

How will companies expect to remain competitive or increase their edge without procuring the right solutions in the right ways? Simply put, they will not. 

Procurement management for digital assets is no easy task, but it can be achieved through the right types of support and increased effort to diligently form strategies and policies. As long as spend and deployment oversight are centralized and the right types of sourcing providers are taken in as partners, businesses will have an easier time leveraging modern tools to compete in novel markets of the future. 


How is health care technology playing out?


How is health care technology playing out?

Health care providers, government agencies and others have endeavored to completely overhaul the medical sector and patient care, all under a relatively tight timeline that is at once achievable but highly difficult. Think about the Health Information Technology for Economic and Clinical Health Act of 2009, which forced medical firms to adopt electronic health record systems and achieve meaningful use of digital patient files within only a few years.

In this situation, the incentives were plenty to get more medical organizations involved and behind the concept of overhauling what were decisively antiquated systems of file storage, sharing and analysis. Thanks to those financial incentives, a wealth of hospitals and others in the field have already started to achieve meaningful use, and this snowballed into several other trends that all have the potential to improve patient care significantly.

However, it is not all apple pies and ice cream when looking at health care technology, and a combination of supply chain sourcing and supply chain management is expected to have more weighty implications with respect to the average patient. From security and privacy concerns to leveraging more advanced technologies in shorter periods of time, the lion's share of effort will need to be placed on the acquisition processes involved in IT provisioning.

Teamwork is an issue

Regardless of which industry might be in the discussion, a division between IT and operations staff has appeared and grown in the past few years. Considering how important digital assets are to virtually every department in each organization, this might just represent one of the more significant challenges leaders face and, in the case of health care, it is an obstacle that must be hurdled as soon as possible to actually strengthen patient care.

HealthcareITNews recently reported that point-of-care technology is certainly becoming more advanced, effective and efficient, but many have become concerned about the interactions between IT personnel and clinical staff. According to the news provider, the division is leading to lackluster productivity and enhanced issues at the point of care, which inherently leads to less than desirable performances in both areas of the business and could reduce returns on investment.

PC Connection manager Gretchen Jakway affirmed that teamwork might be a very widespread issue.

"Oftentimes it can feel like a game of tug of war going back and forth between IT and the clinical staff about what is the right device and making it work in your environment," Jakway told HealthcareITNews. "Spending time sifting through the constant flow of requests from the clinical staff on what they would like to see used for a device – from everything involving CPOE to patient data to the ability to view images at the bedside – takes an enormous amount of resources and time."

So, should medical firms begin to be a bit more proficient in streamlining collaboration and workflow between various departments, the ability to improve will be enhanced.

How sourcing helps

Completely eradicating miscommunication, poor collaboration and similar issues is not only something that is unattainable for health care industries, but also an endeavor that will likely be impossible as long as human nature remains as is.

Focusing on perfecting the ebb and flow of objective creation, procurement management and evaluation is a far more feasible pursuit that can yield similarly advantageous outcomes for any business, health care-related or otherwise. In the coming years, those firms that optimize relationships between professionals in each department with those in IT will likely enjoy more fluid, resilient and productive operations, and better sourcing can be the ticket to that greener pasture.


Gluten-free gastronomy: Celiac disease and the growing product market


Gluten-free gastronomy: Celiac disease and the growing product market

"Gluten-free" is now a term that we're seeing pop up on labels with increasing frequency, even on items that have always excluded wheat, and foregoing flour has become something of a craze. Some people are  adopting gluten-free diets to see if  the approach helps their tummy trouble, while others simply want to know what all the hubbub is about. Whatever the case may be, gluten-free food items are becoming increasingly popular. There is such a huge demand for the products that companies are hopping on the bandwagon to try to profit from the craze. And they might as well do just that, since the market for wheat-free fare is growing by the year.

The disease

Celiac disease is a condition that involves the body responding to gluten by having the immune system attack the small intestines, explained the Celiac Disease Foundation. This does not allow the small intestine to properly absorb food nutrients, thus causing myriad health problems if left untreated. While seemingly innocent, Celiac is an autoimmune condition that is estimated to affect one in 100 people globally. There is no cure for this disease and the only treatment so far is a strict gluten-free diet, meaning wheat, rye and barley are entirely off-limits.

The market

Up until a few years ago, most of us had no idea what gluten was, let alone Celiac disease or a gluten intolerance. Now, gluten awareness is much more widespread. The grocery store used to have a few offerings for people afflicted with Celiac, but now there are large sections and many more options of gluten-free products. Menus specifically note when items are gluten-free, which indicates that restaurants are doing their best to cater to the masses of people afflicted. In 2014, gluten-free foodstuff sales reached $973 billion in the United States alone, reported More businesses are looking to offer gluten-free options and take advantage of the craze to accommodate more customers.

Out in Kansas, scientists are looking into the genetic make-up of wheat, trying to pinpoint what exactly about the plant DNA causes such adverse reactions. Should the hard science work out, there could be an entirely new market for genetically modified wheat that doesn't include the intolerable ingredient, noted the source. If this does indeed occur, companies that provide procurement services will be falling over themselves to satisfy the wants of consumers who desperately miss the texture of fluffy, fresh bread.

Other therapies

While some scientists are hard at work in the wheat fields of Kansas, there are others in North Carolina looking to develop a therapy to help manage the symptoms of Celiac sufferers, stated Reuters. There are still many more tests to go before this treatment can be tested on a larger population, but the earliest results are proving to be promising. It's not clear whether people will be able to consume gluten without restriction while taking the drug, or if it can only control small amount of the DNA protein in the system.

Should these early tests continue to be positive, we could see these therapies hit the market in as early as three years, asserted the source. This is huge for those who suffer from an intolerance or full-out refusal of gluten. If the remedy does pass the FDA guidelines, hundreds of thousands of people will be aching to get their hands on the miracle pills, resulting in the creation of a new market for the materials of the drug itself and its various components.

In the meantime, gluten-intolerant individuals will wait with bated breath, eating corn pasta and flourless cakes until there are more scientific solutions to treat Celiac. Looking forward, the wheat-free food market may suffer, but other sourcing sectors will undoubtedly rise to prominence and the procurement of these new products will become paramount.


How will the IoT impact strategic sourcing?

on Wednesday, March 25, 2015

How will the IoT impact strategic sourcing?

Unless you've been living under a rock for a while, chances are you have heard all about the growing trend known as the Internet of Things, which is essentially characterized by all "things" becoming connected to the Web. This impacts larger frameworks and systems such as power grids and even cities, as well as smaller items including baby monitors and dishwashers.

In the not-so-distant future, the world will look very much like, well, the very distant future, with data being generated around every corner and in every crevice of the world. Businesses in virtually every industry are going to need to face this trend head-on or run the risk of going the way of the dinosaur, as consumers demand relevance and modernity from the companies they choose to frequent.

For obvious reasons, strategic sourcing and procurement will be major points of interest for all businesses that begin to embrace the IoT, especially in the earlier stages of deployment when feet still need to get wet. Before diving into those considerations, though, it will be helpful to understand just how quickly the IoT is coming to pass on the global scale.

Move over George Jetson

Gartner recently released a study that estimated roughly 1.1 billion things will be connected to the Internet by the end of this year amid the push for smart cities. As a brief note here, smart cities are catching on significantly, with buildings, facilities, transportation systems, utilities and more getting a boost in functionality from the use of Internet connectivity.

According to the researchers, the biggest drivers of the IoT in smart cities this year will be commercial buildings, homes, transportation and utilities, each of which have already started to gain traction in the realm of Web connectivity. Although many business leaders have looked at this trend as a threat and challenge – which it certainly could be – progressive mayors and other city officials are looking at it as an opportunity.

In many ways, business leaders would do well to face the IoT in an opportunistic fashion, as there are so many applications and potential advantages of having a well-crafted strategy to capitalize on the trend.

"Electric mobility, charging stations and embedded IoT will generate additional IoT opportunities in smart cities," Gartner Research Vice President Bettina Tratz-Ryan affirmed. "This could be, for example, IoT in vehicles, or vehicle batteries sensing and communicating with the driver, or the next charging station to negotiate charging terms. New and transformative business environments and ecosystems will emerge. For instance, automobile companies are investing in streetlights with charging stations embedded in the post to reduce the infrastructure investment for automobile charging stations. Sensors allow these companies to identify vacant charge-parking spaces for their customers, communicated via mobile applications and on-board systems. They will also be the facilitators of the payment and transaction for ease of use."

Now, with all this in mind, let's talk procurement and sourcing.

Where to begin?

Business leaders will not only have to worry about sourcing and procuring the right devices that fall into the category of the IoT, but also the staff to manage these tools, the solutions to support them and so much more. The IoT is similar to enterprise mobility, which caused a wealth of headaches in the provisioning realm, only the IoT is far more robust, diverse and enormous.

As such, companies should consider leveraging professional strategic sourcing services to get the job done and make the most out of this highly novel and advantageous trend. With the right procurement and sourcing support, investments can fly high and yield strong returns every step of the way.


The Importance of Spend Analysis


Spend  Analysis ConsultingSourcing initiatives start with a spend analysis for a simple reason: You can’t improve what you don’t measure. But we shouldn't think of spend analysis as only a component of strategic sourcing. Your company shouldn't only be doing a spend analysis when trying to justify something or decide on a course of action – just like you shouldn't go to the doctor ONLY when you’re sick. Think of a spend analysis as preventive maintenance for your ledger.
But, if you’re not using the right tools for this maintenance, you won’t be effective. The process can end up taking too long, won’t be repeatable, and can ultimately give you un-actionable results. Bringing together disparate, decentralized data through cleansing, standardizing, and enhancing to get to the right level of detail within and across all applicable categories? To do this requires discipline, time, and resources that companies don’t always have to spare.
Suppose you do manage to pull off a good spend analysis in your time of need. What about when you need to do it again? Repeat analysis helps you identify spend changes across suppliers and products/services, incorporate forecasts as well as past data, and audit your contracts to make sure you’re getting the value you expect.
Spend Analysis expert and Source One Associate Director, Jennifer Ulrich, will be speaking at LaSalle University this week. Speaking for LaSalle’s Business Systems and Analytics program, which educates students on the methods of capturing data and producing decision-ready information, Ulrich will provide insight into the application of spend analysis for continuous program optimization. 

Dips: A necessary evil or a trend?


Dips: A necessary evil or a trend?

Dips in trade are about as common as ripples on a pond. They occur, the effects are felt, but then the water returns to a calm state and business is once again fine. These little trade hiccups can happen for all sorts of reasons and disappear just as quickly as they emerged. For example, the cost of purchasing materials or products can fluctuate based on the season or an unexpected weather event. Whatever the reason, the supply chain experiences dips, and while there is not always a bad omen attached to the lower numbers, a downward trend does raise some eyebrows. How are consumers reacting to dips in trade?

Steel production

Steel production is a large business with China at the top, manufacturing over 65 million metric tons for the month of February 2015. This number, while immense, is down 0.7 percent from the month before, while production for the first two months of 2015 was down 1.5 percent compared to the same time frame from 2014, according to Industry Week. These small percentage changes may seem paltry to some, but when there are hundreds of thousands of metric tons of crude steel that isn't being used and it's the third month out of four during which numbers are dwindling, others are beginning to ask questions.

The production of steel and some alloys has decreased from January to February 2015 while the demand for the same materials increased by 3.8 percent from January to February 2015. Why this change? It is posited by some that people are searching for recycled materials to satisfy the relationship between supplier and procurer. If this is going to be a continuing trend, there could be a significant change in the way steel refineries are managed and marketed. Moreover, this is not the only market that has seen a decline in the last month.

Trailer orders

The demand for large-scale trucks also decreased in February - it was a whopping 26 percent lower than in January, reported SupplyChainBrain. This dip, however, is not surprising, nor is it ominous. SCB asserted that while the number of orders fell significantly, there is a huge backlog in processing orders and fleets of trucks are booked in full for Q3, which is nothing but good business for trailer rentals. It's estimated that the industry will see about an 8 percent increase for the year of 2015, despite woes in February.

What can we assume was the reason for the lag? The adverse weather that the United States experienced in February could certainly have something to do with it. For many around the country, it felt that the snow and ice would never subside and trade could very well have suffered as a result. Other guesses include the idea that people were sourcing in smaller numbers or were able to receive shipments via train or cargo boat instead of trailer.

Our perspective

While there is always demand for some items, steel and trailers among them, trade is a business with many variables and chances for decline are almost always around the corner. There are so many factors that go into procuring materials and making sure that global sourcing can stay a cost-effective enterprise. One thing is for sure, some products will never go out of style, and there will always be a demand if the supply can keep up.

The idea behind smarter sourcing practices in the world of trade is that customers get the better end of the deal to keep them coming back for more. If there are dips in the economy, trade-caused or otherwise, prices are likely to fall, whereas times of assurance drive prices up. Consumers experience these dips just as often as businesses do and the most important thing to mention is that there will always be a need for some services. Who knows? Next month might be better.


Public sector to take pages from English university procurement process?

on Tuesday, March 24, 2015

Public sector to take pages from English university procurement process?

When it comes to total containment, colleges and universities really know what they're doing. They have to support a certain number  of students on a predetermined budget and while tuition does rise, much to the dismay of students and parents, the allocations generally stay the same. In order to achieve this grand feat year after year, higher education institutions need to procure their materials in smart and economical ways. If there were to be an award for smart spend management and procurement, it would have to go to the colleges and universities in England. The savings they've managed to accrue could put the public sectors of many countries to shame, so perhaps these nations should learn some lessons from English higher education institutions.

Smart savings

Universities all over the globe have many small moving parts, and they all require money. Food services, cleaning products and a wide array of other materials are necessary to make institutions habitable and safe for students. While it would be possible to save a lot of money by getting the cheapest stuff available, that would not appeal to people paying tuition. Public Finance reported that English universities have saved over £1 billion in the past three years due to smart spending and proper procurement. 

These colleges have been working closely with procurement services to ensure that they are getting the most out of their money while still adhering to the standards for which they are known. The market is difficult for universities on an international scale, as students want to get the biggest bang for their buck and not have to sacrifice anything in the process. 

Learning some lessons

The public sector should take a class from English universities, at least as far as their spending habits are concerned. While, of course, spending is a necessary evil for the public sector just as it is for education institutions - creating jobs, fixing infrastructure, maintaining prisons - there is a way to spend the budget without overstepping fiscal bounds. In an opinion piece for The Wall Street Journal, the author noted that reducing taxes would be a smart impetus to jump-start monetary austerity. This would encourage those who divvy out the funds to look at how they procure materials and spend tax dollars.  Universities have caught onto something - success can be profitable and still be smart. 

Emulating universities' approach however, is not a surefire plan, or even one that could work in the long term. However, it does spark a conversation that could force those in charge of our money to take a long, hard look at how we procure necessary items and how much it's actually costing the people. 


Identify the Right Targets with Spend Analysis

on Monday, March 23, 2015

Within the larger process of strategic sourcing, a spend analysis is the necessary first step in identifying savings opportunities and providing a baseline for improvement. But surely before having a formal spend analysis (and undertaking a sourcing initiative), companies can already have particular savings opportunities in mind, such as changing to a preferred national or regional supplier. But pre-ordaining a particular course of action, before you have the analysis to back it up, you could set yourself up to achieve inferior results – or at least, not the best results you could possibly get.

In a recent Harvard Business Review article, finance keynote speaker Joe Knight noted, “most people use [return on investment] analysis as a way to justify something they really want to do anyway.”  He recounted how, in a previous job as a CFO, the company’s owner asked him to do an analysis to justify purchasing a $100k 3-D printer. The idea was that the printer would reduce instances of rework in the fabrication of component parts, because often the translation of CAD data into a real-life object revealed issues in dimensions. Knight provided a quick projection based on five years of operating and associated costs. He suggested that the analysis might conclude that it’d be more cost-effective to make due with occasional scrap parts and rework rather than invest $100k plus ongoing maintenance. 

Ultimately, the owner went ahead with the purchase, saying that Knight’s analysis was wrong. This way of operating is not just for equipment purchases, but mergers and acquisitions as well. Knight notes, “Even large companies make investments such as acquisitions based on irrational projections. The CEO negotiates with a company he or she wants to acquire. If the numbers don’t work, the CFO is told to revise the projections so that they do.” 

Due diligence exists as a mechanism to identify risk and, plainly speaking, not do risky things. Aspirations are great, but you need the numbers to back it up. As we learn in elementary school studying the Scientific Method, we start with a hypothesis as the basis for experiment – but we have to accept that our hypothesis can be disproved. If, after repeat experiments, your results indicate that your hypothesis was incorrect, then you need a new hypothesis.

When undertaking a cost savings initiative, companies must keep an open mind to what the spend analysis will reveal. Maybe migrating to one national supplier, for example, looks attractive on paper, and could cut down on the number of invoices to manage, or the number of line items in the ledger. But does migrating to one supplier produce the most practical savings opportunity? Does it ensure sustainable cost savings? Source One Associate Director, Jennifer Ulrich, will speak at La Salle University’s Business Systems & Analytics Club this week, covering how a solid spend analysis will provide the best visibility for decision support – not only for sourcing initiatives but also for any spending course of action. 

Image courtesy of LexisNexis