William Dorn on Tuesday, October 6, 2015
The Strategic Sourceror on
Whole Foods Market has announced that they will officially eliminate foods produced via prison labor from their supply chain.
The transition will specifically target their sourcing of goat cheese, Tilapia and trout. All three products are tied to distributors who partner with Colorado Correctional Industries, according to NPR. This program at the Colorado Department of Corrections, seeks to equip inmates with skills that could potentially be used to leverage employment opportunities after release.
However, Michael Allen, founder of End Mass Incarceration Houston, believes programs like this are covert forms of exploitation.
Allen, who organized a protest in Houston soon before the announcement by Whole Foods, was informed of the switch in policy directly by Whole Foods.
"They say they care about the community, but they're enhancing their profit off of poor people," Allen said, according to The Associated Press.
In an email to The Salt, as reported by NPR, Whole Foods spokesman Michael Silverman noted that the company liked the idea of supporting suppliers who valued getting inmates integrated into the workforce.
However, Whole Foods ultimately listened to the concerns of customers and reevaluated its sourcing.
The Strategic Sourceror on
You know the saying: you don't know what you got until it's gone? Well, coffee-drinkers should try and appreciate that cup of joe a little more from now on. BloombergBusiness reported that a global coffee shortage could be on the horizon due to climate change concerns and increasing demand.
According to the source, global production of coffee will have to increase by 40 to 50 million bags within the next decade in order to keep up with global consumption. That amount in itself outnumbers the entire crop of the main coffee producer in the world - Brazil.
As TIME Magazine noted, the International Coffee Organization reported a projected 25 percent increase in coffee consumption over the next five years. This is mainly due to the beverage's increasing popularity in developing markets such as India and China.
Along with climate change and increasing demand, Bloomberg cited the low price of coffee as a major factor for farmers. With such low return, farmers feel little incentive to increase output at such aggressive rates.
A familiar concern
This new alarm over a coffee shortage may cause some people to feel slight deja vu. In 2014, there was an overall global shortage of 6.4 million bags of coffee beans.
"What we are really seeing as a company as we look 10, 20, 30 years down the road - if conditions continue as they are - is a potentially significant risk to our supply chain, which is the Arabica coffee bean," said Starbucks' head of sustainability, Jim Hanna, in a 2011 interview with the Guardian.
Four years later and Arabica is the bean most at risk, according to Bloomberg.
So, what is there to do? Some companies like Nestle SA's Nespresso have moved to more varied and strategic sourcing for their coffee, seeking different suppliers from Latin America, Asia and Africa, reported Bloomberg. Suppliers themselves have been increasingly moving their crops to higher altitudes in response to warming issues due to climate change.
There is not much more suppliers or buyers can do when it comes to this new wave of coffee scarcity. Let hope CNET reporter Danny Gallagher was just going for theatrics when he declared: "A world without coffee would lead to the end of productivity and civilization as we know it."
The Strategic Sourceror on Saturday, October 3, 2015
Hurricane Joaquin is the first tropical storm of the season to hit the East Coast. The National Hurricane Center has officially classified the storm Category 1 with 80-mph winds. According to USA Today reporters Matthew Diebel and Doyle Rice, the storm is set to strengthen continuously over the next two days and could approach the East Coast by this weekend.
In an interview with the hurricane center, Diebel and Rice were told that this storm has a wide range of potential outcomes - ranging from scattered heavy rain to major hurricanes on the U.S. East Coast.
What does this mean for distributors?
While it may still be too early to talk about specifics of this storm, it is not too early to prepare for the affects a hurricane like this could have on East Coast distributors.
Any form of natural disaster has a deep effect on the world of distribution and supply chains. For example, when Hurricane Sandy hit New Jersey supply chains all along the East Coast were disrupted as shipments were halted in major ports. According to GENCO, the storm resulted in suspended air traffic for several important airports as well as halted shipments in and out of major ports in key cities such as Philadelphia.
Major East Coast cities including Boston, New York City and Newark are home to key ports for exports and imports across the U.S. While the true power of Hurricane Joaquin still remains a mystery, it is a good time for supply management executives to prepare their staff and supply chain partners for potential scenarios.
Natural disaster preparation for supply chains
According to the University of San Francisco's supply chain management resources, there are a handful of ways to prepare your supply chain for a natural disaster. However, the top three most useful options are: Establish a crisis team, use a variety of suppliers and remain vigilant.
Establishing a crisis team is a great way to ensure that, when disaster strikes, you are already prepared. Select members from every level of your team and put them in charge of certain functions of decision-making and communication throughout the supply chain during times of crisis. This ensures little to no discrepancies in your plan of action.
Using a variety of suppliers is the most useful preemptive tool to protect your supply chain against natural disasters. Maintaining relationships and business with suppliers that use various ports decreases the likelihood that you will be cut off from all your goods. USF also suggested creating alternative transportation routes for your suppliers in case of an emergency.
Lastly, remain alert. The best offense is a great defense. If you are prepared for what is coming in the regions of your suppliers, you will have more time to enact any crisis plans. Keep close tabs on potential blockages to trade, such as impending storms, but also things like political unrest and currency inflation.
While Hurricane Joaquin may currently stand as just a blip on your radar, it is always good supply management practice to have a plan in place. Confer with your suppliers and your team to make sure you are all on the same page regarding what to do in case of a disaster. You know what they say: "Better safe than sorry."
Jacquelyn Palantino on Friday, October 2, 2015
The Strategic Sourceror on
Online shopping is a large market for any business. Online shopping sales are expected to reach $370 billion by 2017 according to CMO. An industry with those types of numbers is certainly doing something right.
However, there is one particular point of concern when it comes to spend management within online options. In a study conducted by HRC Advisory, 95 percent of respondents reported that online returns and the costs that are attached to them are their biggest concerns. Survey participants consisted of 20 executives of retail in the electronics, food and health industries.
When it comes to strategies for optimizing these retailers' supply chains, returns presented a major obstacle.
President of HRC Advisory, Farla Efros, addressed the roadblocks returns present to e-commerce leaders. Efros noted that to remedy the discrepancies there would need to be a "significant increase in supply chain flexibility and better integration between the physical store and e-commerce network."
The problems with supply management
The issues lie in the numbers. When it comes to items purchased online, True Ship reported that 30 percent of all products are returned. While some may attribute this to compulsive shoppers or flat-out picky consumers, the truth is the problem often comes from the supplier. Consider these supporting statistics from True Ship:
• 65 percent of returns are not shoppers' faults.
• 23 percent of returns are a result of the wrong product being shipped.
• 20 percent of returns are due to the item being damaged upon arrival.
• 22 percent of returns involve a disconnect in physical appearance from the online image.
Returns have a negative effect on both business and consumer. PYTMNTS.com found that returns can end up costing retailers more than the sale a staggering 85 percent of the time. Consumers are impacted because they often have to pay money to return an item they already paid for. Internet Retailers found that only 10 percent of online companies provided free return shipping.
Overall, the current system for returns within online retail is a lose-lose set up in a highly profitably industry. Owners of e-commerce shops should take a step back and carefully analyze their supply chain's role in these returns. True Ship found that 80 percent of customers are deterred by inconvenient return processes. The potential loss of costumers combined with the added cost to retailers should make returns a major focus for any business owner.
Jennifer Ulrich on Thursday, October 1, 2015
I don’t know what it is lately but it seems as though I spend more time sorting out issues with damaged packages arriving than I do on the actual browsing and purchasing of the goods. As a consumer it is hard to say where the defect truly is when you get a box that appears to have been through the ringer and back, for example a lightweight package that clearly states “Do Not Bend” and it shows up bent to hell in multiple places. Is the issue at fulfillment or through the sometimes multiple carriers that handle the package? These days even if something is said to be shipping FedEx, UPS, or USPS, you will find that there are third party contractors used to meet the SLAs that these organizations are required to. It is clear that companies are being so distracted by the need to meet ordering quotas and shipping SLAs that they overlook quality check points in the kitting and fulfillment arena and then again in the care of the shipping of the goods.
However ultimately when damaged goods continue to go out again and again it costs everyone time and money to fix. The company has to deal with claims that not only cover the cost of the goods but the people that have to process those claims. The customer loses some degree of faith in the organization and reconsiders their next purchase, depending on the severity of the issue and the resolution of it. So what is the solution? Do we stop ordering online? Not likely!
It starts with the retailers themselves and within their warehouse and distribution networks. Setting up more stringent quality checks to ensure the packaging of the goods meets the quality standards that the company establishes. During the sourcing and procurement process it is important for companies to focus on the qualitative aspects of their people and processes and not just on the costs of goods sold. Finding suppliers that fit their needs overall is critical to the continuity of their business model, not just in retail but in any industry. Most consumers appreciate high quality standards and will return based on positive experiences.
Vishal Sheth on Wednesday, September 30, 2015
David Pastore on
What I realized while preparing the presentation is that the audience would likely include a mix of procurement maturity ranging from category and supplier relationship owners buying reactively all the way to organizations with Procurement centers of excellence that are proactively managing their supply chain and indirect spend holistically and strategically. In order to address strategies that make sense to such a diverse mix of conference participants, I had to identify a few engagement models that cover the majority of requirements and could be considered fairly standard, they were: traditional, tactical procurement BPO, Staff Augmentation, and Advisory. The traditional BPO mostly speaks for itself. The idea for Staff Augmentation is that companies who have gaps in category expertise, market intelligence, or resources could benefit from outside help related to these strategic sourcing needs. Finally, Advisory encompasses strategy and management consulting related to developing a mature strategic sourcing department and program within the organization.
Among these models attendees could begin to determine where their company is on the Procurement maturity curve and where outsourced help may best fit into accelerating their improvement. Ultimately, a bottom up or top down approach may make intuitive sense for some, but a hybrid may be a possibility. For example, a company may find that outsourcing tactical procurement and working a consultant in advisory capacity to further develop strategic sourcing best practices would be the best fit.
After providing some guidance on developing a requirement set for enhancing existing capabilities with outsourced help, the remainder of the presentation focused on selecting the right partner including key criteria to consider, understanding short term and long term objectives, gaining internal and executive buy-in, supplier qualification, as well as some statement of work best practices. The presentation culminated in an in depth look at some supplier relationship management best practices.
A theme we saw throughout the presentations across both days was that savings is no longer the only metric procurement by which Procurement is measured. In fact, it has become de-emphasized substantially within most companies. Procurement leaders are tasked with managing stakeholder alignment, increasing financial performance, risk management, and talent management as well. What that means is the Procurement Department’s evolution along that Procurement maturity curve needs to accelerate to support these strategic imperatives. In most cases, that translates into obtaining help from third party with some or maybe even all areas within procurement and strategic sourcing. But not only does it mean getting help, it means making sure the value is delivered and not just dumping work onto a supplier. Collaboration and management of procurement BPO relationships are critical to the Procurement’s mission.
Brian Seipel on
Reference checks are a great way to cut through the spin we often see from a supplier’s RFP response or pitch presentation. Yet reference checks often either play a small role in sourcing initiatives or are ignored entirely.
Why? Because reference checks can take a lot of time and, done incorrectly, simply don’t add value.
Inefficient reference checking practices don’t pay off, and reference requirement too often end up relegated to the “just-another-formality” section of an RFP questionnaire – but they don’t have to be. Here are a few tips to hone your reference checking strategy to help you produce actionable results.
Reference Check Ground RulesTo be clear, this isn’t a rundown of every question you need to ask a reference. The right mix of questions for your needs depends on your goals, the type of supplier you are looking for, and the role they will play in your organization. What this list provides is a set of ground rules for making the most out of the process.
First things first: Not every reference provided deserves to be checked. Suppliers provide references they think will make the best case for them – regardless of how valuable they will be for you. Your first goal, then, is to identify which references are worth your time. So, what makes a good reference? Which ones should you avoid?
- Aim for similar organizations. This one is simple: Stay on top of the supplier to choose customers that are as close to your business as possible in terms of size, industry, needs, and implemented solution. Supplier who struggle to comply are either overly interested in cherry picking references or just don't have enough experience with companies like yours. Either situation is a red flag.
- Keep work history in mind. Speaking with new clients helps focus the conversation on implementation issues. However, there isn’t enough longevity to gauge the supplier as a long-term partner. Suppliers are still putting their best foot forward early in a relationship, and new clients may be more willing to forgive mistakes as part of the learning process.
- Seek out past clients. Related to the point above, a previous client will not only understand the entire life-cycle of their relationship, but is more likely to be candid about their previous relationship.
- Speak with the right contact. Low-level stakeholders who work with suppliers on day-to-day issues are often more valuable to you than high-level managerial leaders who inked the deal. Make sure you’re talking to titles that are in the trenches to get a true sense of how suppliers function as partners. Be sure to have those same titles on the phone on your side as well.
- Identify relationships in play. If you are looking for the supplier to play a mission-critical role, are they mission-critical to the reference company? How did the reference identify the supplier as a potential partner – through an RFP process, or was there a personal relationship in play? All add a great deal of context, and may make a reference more or less valuable in terms of applicability to your organization.
- Uncover conflicts of interest. While some clients offer to be references because they feel strongly about a supplier, others may have tit-for-tat arrangements, including free or cheaper services or other value adds. If a reference is getting a better deal on products or services than what you were offered, then their experience will be different from yours.
Once you have vetted your supplier’s references, structure the conversation in a way most likely to result in objective, actionable takeaways:
- Guide the conversation. Open-ended questions are excellent for reference checks, but leave a lot of room for references to choose where the conversation flows. Begin the conversation with a brief overview of why you are interested in the supplier, and what matters to you most. Otherwise, references will naturally focus on what matters to them. If your biggest concern is training, adherence to timelines, or an ability to proactively seek out cutting edge solutions, say so.
- Ask for actionable responses. Asking a reference to describe their relationship with a supplier won’t yield valuable information. Asking for specific examples of how a supplier has impacted their business gives more insight. What problem did the reference seek out the supplier to address? How long did it take for them to do so, and did the solution fall within the timelines agreed to? How often does the reference need to escalate issues, and how quickly are they resolved? In broad terms, was there a strong ROI on the project?
- Ask for specific, actionable responses. Asking a reference to describe their relationship with a supplier won’t yield valuable information. Asking for specific examples of how a supplier has impacted their business gives more insight. What problem did the reference seek out the supplier to address? How long did it take for them to do so, and did the solution fall within the timelines agreed to? How often does the reference need to escalate issues, and how quickly are they resolved? In broad terms, was there a strong ROI on the project?
- Give ‘em a gut check. Some questions beg for canned responses, such as asking about strengths and weaknesses. Better alternatives ask the reference to think about their own experience more fully. In hindsight, what does the reference wish they knew prior to signing with the supplier? What advice would the reference give to help you avoid headaches? What does the reference wish the supplier provided that they aren’t currently?
- Network. Even after your call is completed, stay in touch with any references that were particularly open and helpful. If you end up selecting the supplier in question, they can be invaluable assets in the future, as they’ve already travelled the road you are about to start on.
Reference Checks – Worth the time?There may not be a clear cut answer to this question at the outset. However, following these rules will help you determine if you should invest the time in reference checks, or if you are better off focusing on other methods of evaluating your potential suppliers.
Liz Skipor on
When undergoing an agency search, the most ideal situation is when marketing and sourcing work as one collaborative team. It is procurement's role to both achieve a solid equilibrium between cost and value and facilitate of a prosperous, long term relationship between marketing and their creative agencies. Having the right parties involved goes hand-in-hand in the success of this initiative. Through marketing procurement, you will be able to assess the scope of work per each of your relationships and pinpoint any duplicate deliverables. This will allow you to consolidate overlapping work and negotiate better terms around the specific campaigns. Alongside this, you will be able to breakdown any barriers between brand silos. Even though each brand may have its own vision, through consolidation of SOWs, there is typically overlap identified within the type of services each brand is receiving. This will allow room for consolidation and negation as one entity. Also, efficiencies across the full brand portfolio will occur and alignment amongst the marketing departments will transpire allowing for decisions to be made together as one synergized team.
There are many benefits in finding the right agency to be your strategic partner. You obtain more than just marketing expertise. When outsourcing some, if not all of your marketing initiatives, you obtain outside marketing talent, access to cutting-edge technology, synergies amongst in-house and agency partners, and full transparency into all initiatives. While encompassing outside talent, you obtain access to marketers with unique backgrounds and experiences, differing educations and new ideas into marketing strategies. As we all know, within the marketing landscape, you must remain current on the latest trends. Not all in-house marketers have the time to constantly educate themselves on the ever-changing social media trends, content marking, SEO, and technology. With an outsourced marking agency, there is no learning curve. Creative agencies are constantly educating themselves on the latest marketing trends occurring throughout the landscape. They typically stay well-informed on the latest tools, technologies, and strategies, which allows them to incorporate the latest and greatest to your marketing needs. Allowing a creative agency to bear most of the burden, gives your in-house staff room to concentrate on critical developments and synergize with the creative agency to form the most strategic plan to market.
According to Matrix Marketing Group, marketing departments are often technology deprived, due to being at the bottom on the IT department’s priority list. Throughout your agency search, you will be able to identify the types of marketing tools and technology each agency offers. Technology trends are important for any business to maintain your competitive landscape, impact how your customers reach your business, and influence growth within your brands. To give an example, advertising agencies are trending towards reliance on automation. Ad Age states that, “Plenty of advertisers today are buying digital ads without speaking to a single human at a media company, and print and TV ads might not be far behind. Automated, or programmatic, buying is growing not only because it makes ad transactions more efficient but because it can make them more effective, as long as the right data is applied.” Keep in mind, these tools do not provide the actual marketing services. They do require a marketing expert who can apply the appropriate data and interpret the output data, and in turn, can then strategize smart decisions to apply to your campaigns; an outsourced marketing agency can do just this. Overall, you want your business to thrive and remain current, and when having access to the technology and marketing experts to apply and analyze the data, you have the advantage on your side.
During my experience working for 2 major U.S. Retailers, I’ve learned you always want to be ahead of the game, especially in regards to your competition. We all know the saying, “Sink or swim,” which is very prevalent in the business world today. One of the retailers, unfortunately, reminded behind the curve, followed the trends and is currently beginning to sink; the other works hard to remain ahead of the game in all verticals of business and continues to innovate every day. You want to be the leader, the trend setter, not the follower. Undergoing an agency search will give you great insight on where your incumbent marketing agency stands against the market, access to unlimited human talent and will give you measure on where you fall within current trends and technology. This process may take time, but in the end, it is tremendously worth it to keep your business alive!
Ken Ballard on