Nicole Mahaffey on Friday, April 29, 2016
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Supply chain transparency, sustainability, environmentally conscious - these are all terms that have been thrown around frequently when discussing supply chains. Consumers everywhere are starting to ask questions about where their products are made and in what conditions. The general takeaway from these conversations has been a push toward more sustainable and ethical practices across supply chains. Yet, one major question remains unanswered. Are customers willing to stomach a price increase for more ethically-sourced products?
The question is being raised once again in light of the recent report by Fashion Revolution and Ethical Consumers which revealed a ranking of supply chain transparency for 40 major apparel brands. The research, which we covered in depth last week, found that 40 percent of the 40 analyzed organizations had no monitoring system in place to investigate whether or not their supply chains were compliant with current labor standards.
These kind of supply chain issues still run rampant across industries and the reasoning has a lot to do with money. While global sustainability is increasingly becoming a consumer expectation, according to Supply Chain Brain contributor Robert J. Bowman, not all customers are willing to pay the price. And a recent Associated Press-GFK poll proves just that.
Respondents were asked to choose between two pairs of pants. The garments were made of the same fabric with identical designs. The difference? One touted a "Made in the USA" label and cost $85 while the other was made overseas at $50. Regardless of their household income, 67 percent chose the cheaper pair.
While this doesn't necessarily directly address poor labor standards, it does clearly indicate that price is a distinct value for American consumers, TakePart explained. According to Starre Vartan, a titan in the sustainable fashion industry, it all comes down to understanding the real-life human price of a cheaper garment and contextualizing the issue in terms of broader societal issues.
"If the people reading support women's empowerment, they will support fair fashion. The vast majority of garment workers in the world (60 million) are women (80 percent), and most clothing is consumed by women," explained Vartan in an email to TakePart. "Are you willing to throw another woman under the bus for a cheaper shirt? Considering how responsive the younger generation is on gender issues in the U.S., it doesn't make sense to dismiss issues of who makes your clothes."
While many major businesses are making some distinct moves to improve the sustainability, transparency and general ethicality of their supply chains, true changes can't be made until consumers are willing to pay the price.
Jennifer Ulrich on Thursday, April 28, 2016
I just completed a project for a client who was looking to renegotiate with a facilities related supplier and in short order. They were happy with the current provider, but had not recently vetted the costs in the contract to ensure they were the most competitive. This particular category is one where we have a great deal of experience and market intelligence and could meet the client’s needs as requested. The timeline for the project from first stakeholder contact to contract draft was 30 days.
In order to meet the rigorous timeline it was important to apply supplier engagement concepts as mentioned and do so effectively. I began by interviewing the stakeholder to determine his wants and needs on the project, followed closely by a similar interview with the account representative contact I was given. It was clear right away that this representative, while effective in his role, was not the right person to speak with, in other words he was not a decision maker. This is a critical point in any negotiation, make sure you are talking to the right people on both sides, otherwise you will quickly find yourself running into roadblocks as those you work with have to constantly “go back to their manager” to get anything accomplished. Once I was able to connect with the correct individual that would drive the decision on the supplier’s side, I initiated the conversation in a manner that was reflective of the mutually satisfied relationship with the client. I was very clear about what I was trying to accomplish and the timeline associated. I requested that they present their ideas on how to improve the contract while offering my insight into this as well. The supplier communicated their appreciation for the transparency and committed to meeting the deadline I established.
Throughout the next steps of collecting some initial data, benchmarking and providing targets, I maintained a clear line of communication with the supplier and the client. In doing so I was able to complete the negotiations portion of the project within seven business days. I worked closely with the supplier to collaborate on ways to ensure that the contract was drafted right the first time with minor changes needed thereafter.
In the end I was able to reduce the billing cost to the client, improve the contract language to provide more clarity where needed, as well as adding value through incentives to the staff on the contract with wage increases. All of which met the needs of the client and the supplier, and within the 30 day timeframe. And as a side note I developed a good working relationship with the supplier, one that may benefit me in the future if I come upon this category in their region in the future. My belief is that this is very much due to my application of supplier engagement best practices. Sometimes, it is just a matter of being straight forward and working as a team to meet the set objectives.
Source One Management Services is the exclusive sponsor of Exec IN, an elite forum for industry-leading supply chain and procurement executives at ISM2016. Visit our supplier engagement experts at Booth #528!
The Strategic Sourceror on Wednesday, April 27, 2016
The issue of supply chain visibility has recently been a major area of concern for companies across the globe. Failing to enhance operational transparency can lead to legal ramifications, reputation damage and noncompliance fees. It also puts businesses at increased susceptibility for disruption. Unfortunately, being able to see into end-to-end operations is particularly difficult for operators in some markets.
The Sustainability Consortium, or TSC, recently published its 2016 Impact Report that revealed most manufacturers of consumer goods lack supply chain visibility. Of the 1,700 businesses that participated in the survey, less than 20 percent said they have end-to-end transparency. Furthermore, the majority, or 54 percent, of companies said they didn't have any visibility into their supply chain whatsoever.
A glaring problem with these findings is that, without being able to see into the supply chain operations, organizations can't identify, let alone resolve, any unethical or damaging areas. And for consumer goods manufacturers, this is especially troubling. According to the report, these products are the cause of more than 60 percent of greenhouse gas emissions worldwide. Additionally, when it comes to instances of forced and child labor in supply chains, more than 75 percent of cases occur along consumer good assembly lines.
Manufacturers must measure and monitor
"The Sustainability Consortium's findings are helping us solve a big challenge, which is how do we get our arms around our total supply chain," Wal-Mart Senior Vice President of Global Responsibility Sustainability Laura Phillips stated in the announcement. "And how do we really focus for impact in our supply chain with our partners? TSC's 'hotspot' analysis approach helps us do exactly that, together with the global community."
The report outlined three essential steps needed in order for manufacturing companies to improve the state of their supply chain:
- Retailers and procurement leaders should measure and track the sustainability of products
- Manufacturers must focus on enhancing visibility and performance throughout the supply chain
- Stakeholders should collaborate to create better scalability
In society's efforts to build a greener planet, a major priority is producing products that are sustainable and energy-efficient. And this eco-friendly initiative starts in the manufacturing process.
But, as the TSC report pointed out, it is not possible for companies to manage parts of the supply chain that they're not able to measure or even see. And, as Environmental Defense Fund Corporate Partnerships Managing Director Elizabeth Sturcken said in the press release, "Progress can only be achieved if companies are measuring performance within their supply chains."
Additional tips for increasing supply chain transparency
In an article for Green Biz, Adam Siegel, vice president of sustainability and retail operations for the Retail Industry Leaders Association, highlighted some of the ways companies can improve supply chain visibility. One strategy he suggested is leveraging a third-party partner that can ensure responsible sourcing practices. These firms can also help with risk assessments by conducting audits. Siegel added that organizations should train workers and suppliers and encourage them to be more transparent.
The importance of having a visible supply chain is obvious. But achieving it can be challenging. This is why it is critical that companies are proactive in their attempts to gain more transparency along end-to-end operations. Organizations that lack the resources, time, tools or experience needed to ensure the successful execution of such initiatives are highly encouraged to work with consulting firms and solutions providers that do.
Increased visibility can help companies reduce the risk of disruption, uncover cost-savings opportunities, demonstrate social and environmental responsibility and properly maintain compliance. As the pressure to enhance the efficiency of operations and crate a more sustainable organization intensifies, it will become increasingly necessary for supply chain leaders to embed transparency into their business models.
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Martec International and RELEX recently released the State of the Retail Supply Chain 2016 report which revealed some interesting findings surrounding the primary issues affecting supply chains today.
The report surveyed retailers with annual sales surpassing $110 million from the U.K., North America and the Nordic countries, explained Material Handling & Logistics. The research covered forecasting challengers, supply chain planning, productivity, stock pools and overall supply chain transparency.
Of the issues addressed in the report, three major business issues arose as the top concerns:
- 62 percent of retailers are concerned are about increasing availability without increasing stockholding
- 47 percent are worried about reducing stockholding without affecting sales
- 44 percent cited the automation of key processes/better collaboration with suppliers as a top concern
The research also revealed some interesting findings concerning forecasting. Of the mentioned forecasting challenges, effective forecasting across supply chains was cited as a major issue by 69 percent of respondents. MH&L explained that this highlights the continued struggle of global suppliers to effectively analyze and report on their supply chains.
"It is interesting to discover that whilst 64 percent of retailers globally highlighted forecasting for promotions as one of their main challenges, only 35 percent have a system in place that can build automatic demand forecast for promotions and only 22 percent have a system that can manage promotion stock run to clear fixtures for the next promotion," noted Group CEO of RELEX Solution Mikko Karkkainen, according to the source
Supply chain process improvement and omnichannel offers
Clearly, improving supply chain processes needs to be a major goal of retailers throughout the remainder of 2016. Spend Matters reported that many upper-level executives plan to increase their spending on improvement processes for supply chains as well as omnichannel fulfillment.
In fact, 56 percent of respondents claimed their investments would be higher than in 2015 while 42 percent reported their spend would remain the same.
Another pressing priority for retailers involved the increased consumer demand for omnichannel offers. This is causing leaders to innovate when it comes to supply chain management in order to ensure they are equipped to handle the demand.
While responding to these consumer preferences with additional warehouses and backroom inventory is a smart move it certainly adds a whole new level of complexity to business and supply chain oversight, explained Spend Matters.
As retailers move further into 2016 they will need to keep a focused eye on their supply chains in order to ensure they are not just responding to consumer demands but meeting them at an exceptional level.
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In this week's episode of the Countdown to ISM2016 Podcast Series (The People Track: Evolving and Optimizing Human Capital Strategies), we're taking a deeper look at the People Track. This Annual Conference learning track focuses on providing you with the tools, resources, and solutions necessary to evolve and optimize your talent management strategies.
This week we sit down with Howard Levy, Co-chair of ISM2016's People Track and VP of Global Sourcing at Zimmer Biomet to learn his vision for the Annual Conference. Levy shares why attending ISM2016 and conferences like it are vital for professionals at any stage in their career, along with his plans for attending the various sessions with his team. As moderator for the panel titled Transformation Superchargers: What Private Equity Expects from Sourcing Leaders, Levy explains how sourcing in private equity is unique and makes the case for why more supply management professionals should be exposed to these types of firms.
For more information on the annual conference, visit www.ISM2016.org.
Don't miss out on any of the cost-reduction best practices or conversations with ISM leaders covered in the Countdown to ISM2016 Podcast Series!
Strategic Sourceror on
They’re the difference between accepting an annual “discount” from a supplier versus going to market not just to reduce costs but to find a strategic partner that offers value added services and innovation. Outcomes are the difference between only interacting with your vendors when making a cyclical purchase, as opposed to frequently discussing new opportunities for product improvement, and market expansion. They’re the difference between settling for procurement operations that ‘just work’ versus establishing policies and procedures that deliver a sustainable strategic advantage for your company.
No matter what your supply management goals are – results count - Which is why this year’s Institute for Supply Management’s Annual Conference is focused on providing you with the insights necessary for achieving your goals. For the first time r, ISM2016 is bringing you a solution oriented track: The Corporate Team Experience, designed for executive level conference attendees to get you up to speed with supply management best practices and the latest tactics delivering results.
Executives from organizations with over $1.5B revenue won’t want to miss out the exclusive Exec IN forum, sponsored by leading procurement consulting firm Source One Management Services. This invite only event is packed with thought leadership sessions centered on addressing challenges specific to companies with large scale supply chain operations. The highly elite Exec IN forum also features exclusive sessions from keynote speakers Alan Mulally, former President and CEO of Ford Motor Company and Susan Cain, best-selling author of Quiet: The Power of Introverts in a World that Can’t Stop Talking.
To check out the conference agenda visit, www.ISM2016.org. To save on your event registration, contact Source One’s Carole Boyle at CBoyle@sourceoneinc.com.
The Strategic Sourceror on Tuesday, April 26, 2016
Earlier last week we reported on the Japanese earthquake that forced Toyota Motor Corp. to considerably reduce production. The company's facilities - located in southern Japan - are projected to be closed down for two weeks or more. This production halt could reduce operational profits by as much as $267.15 million.
The 6.5 magnitude earthquake is what supply chain leaders refer to as a supply chain disruption. A report by the British Standards Institute concluded that in 2015, global supply chains accrued a combined $56 billion in additional costs due to a variety of different supply chain disruptions including extreme weather, terrorist threats and crime, reported Supply & Demand Chain Executive.
Supply chains are very delicate systems and when links in those chains are severed or otherwise disturbed, the damage can spread quickly throughout the remaining links. Disruption within a supply chain can result in major consequences such as increased production costs and decreased productivity levels.
In fact, according to Supply Management, a recent analysis by Allianz Global Corporate & Specialty found that global supply chain disruptions are playing a big hand in the growing severity of business interruption. The average losses were found to total up to $4.3 million as a result of the increased interdependency of supply chains in our global economy.
"Whereas in the past a large fire or explosion may have only affected one or two companies, today losses increasingly impact a number of companies and can even threaten whole sectors globally," explained CEO of Allianz Global Corporate and Specialty Chris Fischer, according to the source.
Tips for dealing with supply chain disruption
Supply chain disruptions have always been an unpleasant reality of operations. As with any potential risk, supply chain leaders should make an increased effort to effectively prepare for the near-inevitable arrival of supply chain disruptions. This involves taking some critical measures to minimize risk to a business's bottom line. Let's take a look at a few tips for preparing your supply chain:
1. Ensure end-to-End visibility: Visibility is a critical component of dealing with supply chain disruptions in a quick and efficient manner. According to Thomas Net, 72 percent of suppliers lacked the full visibility needed during a supply chain meltdown to effectively address the problem. Supply chain managers must ensure they have a complete view of every last piece of their respective supply chains in order to ensure an optimal response during periods of disruption.
2. Create and implement a strategic plan: Organizations should have distinct plans in place that work to lessen the impact of potential disruptions. Leaders must reconsider the way things are organized within their supply chains. From inventory positioning to sourcing, a flexible supply chain is better suited to brave most disruptions.
3. Perform a supply chain vulnerability audit: Supply chain disruptions are essentially inevitable. And while vulnerability audits can be time-consuming, they are a great way to prepare your organization for future disruptions. Test the potential pain points of your supply chain and determine whether your proposed solutions are effective or if there is a better way, explained Thomas Net.
4. Update plans consistently: The only thing more important than having a plan in place for supply chain disruptions is consistently updating those protocols. There are hundreds of factors that could warrant strategic revision, from new suppliers to updated government regulations. It is crucial to update your plans on a regular basis to reflect these changes. An outdated plan is nearly as bad as no plan at all.
5. Communicate: Supply chain disruptions require increased communication by nature. There are a million different things being done to mitigate the problem and keeping your team on the same wavelength is crucial for success, explained Thomas Net. Every level of the supply chain should be informed of every move to ensure consistency and efficiency.
Supply chain disruptions, like the quake in Japan, are an unfortunate reality of business. The best thing and organization can do is equip its team with the relevant tools to mitigate the crises as best as possible. When supply chains are compromised, the consequences can be costly. Ensure your supply chain is ready to face the problems head on to secure optimal business continuity.
Ken Gaul on Monday, April 25, 2016
The Strategic Sourceror on Friday, April 22, 2016
Safeguarding the supply chain is a critical endeavor. But it is one that is growing in complexity. As the systems and processes used to drive a business become more connected, it is increasingly challenging for supply chain managers to ensure end-to-end protection.
Cybersecurity has quickly become a priority for all organizations - even federal government agencies. And with good reason. The risk of data breaches and other digital disruptions threatens the production, profitability and intelligence of a company. The possible ramifications that can be incurred from operating on unsecured platforms and networks are serious, which is why preventative measures must be taken along all points of the supply chain.
Supply chain risk management is an ongoing necessity that needs continuous updating. Efforts to combat cyber risks must adapt in tandem with the rapid pace at which they are evolving and becoming more sophisticated. It is safe to assume that there will never be a day when an organization can be sure there is absolutely no possibility of a disruption. However, there are specific steps and strategies to implement that can greatly reduce the chances of disasters occurring.
Understanding the depth of security threats
When trying to ramp up cybersecurity initiatives, it's important for supply chain leaders to look beyond their immediate operations. In a blog post for BitSight, Melissa Stevens recently pointed out that it would be beneficial for business managers to consider the ways in which all tiers of the production line can contribute to its overall vulnerability. For example, for organizations that assemble products in their facilities, it would be wise to consider what processes outsourced suppliers use to manufacture the necessary pieces and parts.
Another point Stevens touched on is the importance of addressing the security obligations of vendors in their contracts. The digital landscape of supply chain management has provided organizations access to more potential suppliers and partnerships. And while cloud-based systems can help businesses enhance visibility and connectivity between themselves and third-party contractors, it also makes them more susceptible to cyber threats.
Evaluating contractual agreements
Exploring this topic further, CIO Contributor Stephanie Overby recently interviewed Paul Roy and Lei Shen, partner and senior associate, respectively, of Mayer Brown, a global law firm well-versed in cybersecurity and data protection.
Roy explained that, even if the vendor is responsible for a IT-related disruption or failure, it is the customer that ultimately pays the price of damages. And this is why it is crucial that companies that outsource a contract set forth clear guidelines on the requirements for both legal and technical compliance. Essential protection measures that should be contained in the contractual agreements include ensuring the vendor will be held responsible for breach-related costs and fines, as well as those for remediation and notification.
In addition, Roy highlighted some of the most important contractual provisions that can help combat the risk of cloud vendors, which are:
- Supplier security requirements
- Subcontracting restrictions
- Worker-related safeguards (training, screening, etc.)
- Security assessments and audits
- Investigation and reporting of security incidents
- Data restrictions and accessibility
To increase efficiency and reduce costs, many supply chains are outsourcing IT operations to third-party vendors. However, as the supplier network grows, it can also become more permeable. It would be in the best interest of organizations to extend their cybersecurity efforts beyond the contractual level.
On top of ensuring vendors will be liable for any data breaches or digital disruptions, businesses are encouraged to regularly monitor suppliers to maintain effective risk management operations.
"Customer data and systems are only as secure as the weakest link in the vendor ecosystem," Paul Roy said, according to Overby. "The risks for customers are twofold: Not only does the customer increase its risk of a data breach, it also increases the risk that it will be in breach of its regulatory or contractual obligations if its vendors fail to comply with such obligations."
The cybersecurity expert also added that as these threats become a growing concern, regulations will likely continue to evolve. And, therefore, it is imperative that organizations stay up to date on any adjustments or changes that occur and ensure both their own supply chains and those of their outsourced vendors are maintaining compliance.
Ken Gaul on Thursday, April 21, 2016
The Strategic Sourceror on Wednesday, April 20, 2016
Fashion Revolution and Ethical Consumer recently released a report that revealed some of the world's most popular fashion brands have been less than honest about their supply chains. According to Vice, industry fixtures including Forever 21, Chanel, Michael Kors and Prada are seriously lacking when it comes to supply chain transparency for consumers.
"Lack of transparency costs lives," the report states, according to the source. "It is impossible for companies to make sure human rights are respected and that environmental practices are sound without knowing where their products are made, who is making them and under what conditions."
The report release comes on the heels of the third anniversary of the Bangladesh factory collapse. On April 24, 2013 over a thousand people were killed and 2,500 injured when the eight-story Rana Plaza factory complex fell apart.
The tragedy was undeniably tied to the terrible conditions in garment buildings across the country. Yet it took weeks for retailers across the globe to determine what part they played in the disaster, explained Ecouterre. The cause of delay? Transparency.
The fashion industry contains supply chains that are notorious for their levels of complexity. In fact, they are so intricate that they often become opaque, explained the source. A given company could place an order with one supplier but the actual work could be done among numerous unregulated "shadow" facilities. This goes on without the knowledge of brand supply chain management.
Additionally, the majority of fashion brands have no ownership over the buildings where production is handled. This means they have no ability to monitor or regulate conditions for laborers, reported Ecouterre.
"Some brands may work with thousands of factories at any given time," explained the report, per Vice. "And that is just the facilities that cut, sew and assemble our garments, but there are also further facilities down the chain that dye, weave and finish materials and farms that grow fibers too."
Advocacy organizations Fashion Revolution and Ethical Consumer authored the report to shed light on the importance of understanding these supply chain intricacies. The data they found was rather troubling.
According to the report, 40 percent of the 40 major companies analyzed had no system in place to monitor whether their supply chains are compliant with labor standards. While most organizations have an active and publicly accessible policy on environmental and labor standards, only three companies (Gap, Primark and Levi Strauss) have long-term initiatives in place.
So, which organizations topped the list for worst transparency track record? Chanel hit dead last on the scale with Hermes, Claire's, Forever 21 and Fendi following close behind.
"These companies have little to no information about their supply-chain practices available to the public," Fashion Revolution said, according to Ecouterre. "Many of these companies seem to do little more than have a code of conduct in place - whilst this might have been best practice in the 1990s, corporate responsibility has moved on a great deal in the last 20 years."
Admittedly, the survey did not have the full spectrum of information. According to Vice, Fashion Revolution sent a questionnaire to all 40 fashion companies listed in the study but only received 10 filled out copies. The remaining 30 organizations were analyzed based on the information they made public.
It is possible that some of the non-participating companies received lower scored due to the fact that they were not able to present all the relevant internal information, noted the report.
One thing is clear: Supply chain transparency is a major issue throughout the fashion industry. While some major companies are taking strides toward remedying the inconsistencies, more needs to be done in terms of supplier relationship management to ensure more ethical production methods.