EU looks to cut back on food waste

on Thursday, April 24, 2014

EU looks to cut back on food waste

Anticipating the demand for food can be especially challenging for those involved in the edibles procurement process. Between magazines praising particular vegetables for their health benefits and the low cost of processed, frozen produce, figuring out what consumers want is quite difficult. In some areas of the world, the supply of food is quite slim, whereas other nations suffer from obesity as a result of overeating. 

Who's to blame? 

Though food companies are typically held responsible for waste, recent studies would suggest otherwise. According to The Guardian, a study conducted by the United Kingdom's House of Lords noted that consumers are responsible for approximately 42 percent of uneaten edibles while only 5 percent of the blame lies on the way in which retailers sell products to households. Though many would attribute lethargy and poor eating habits to the statistics, researchers found that people who typically cook from scratch are often guilty of contributing to food waste. 

In addition, a desire to eat well has driven up the demand for fresh fruit and vegetables, prompting distributors to organize their strategic sourcing around obtaining these coveted items. The problem is, people forget that these products can only be preserved for so long in refrigerators. At the slightest hint of decay, consumers may throw out a bundle of kale or broccoli. 

Redistributing waste 

In response to the study, The Poultry Site reported that the European Union Committee of the U.K. called for the redistribution of wasted food and developing a policy that defines a tarnished edible item. Although the task of effectively monitoring and managing such a practice is difficult, members of the House of Lords claimed that something had to be done in order to mitigate the issue. 

"Retailers lie at the heart of this approach," noted the report, as quoted by the source. "They influence the behavior of producers, manufacturers and consumers but, thus far, have failed to take their responsibilities seriously."

A few members of the committee stated that procurement management strategies should refocus on delivering surplus food to charities and the needy. This procedure would necessitate assiduous attention from logistics experts using predictive analytics tools so that excess materials can be anticipated. Other House representatives claimed that wasted food should be redistributed to livestock farms and used as feed. Either way, each option requires a strong team of product supply professionals to orchestrate such endeavors. 

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Interesting Reads From the Sourcing Blogosphere

on Wednesday, April 23, 2014

Marketing fingers in the pie

"Too Many Marketing Fingers in the Pie"

Sourcing Innovation just posted a great article on running those first pilot projects following a successful access-gain into the Marketing category. Among some of the tips, notes, and warnings:
  • "You need to have a firm understanding of what Marketing needs and a solid understanding of the lingo used by the Agencies as well as Marketing."
  • "You need to present Marketing with a clear picture of the process you are going to follow up-front and make sure that Marketing understands the process you are using and the critical importance of not circumventing the process, no matter how many times the incumbent Agency representative uses his direct-dial rolodex and asks someone in Marketing to let a requirement slide or just skip straight to the pitch."
  • "You won't be thanked for your many successes, even though proper benchmarking and reporting will have you recognized by the CFO and CEO, you will get all the blame for any and all failures if you screw up just once."
Follow the link above to see the article in full, and for more advice on collaborating with Marketing, check out http://marketing.sourceoneinc.com.

A 1-2 Punch of SRM and Internal Marketing

Your average procurement group - and maybe your procurement group - is inundated with recommendations and advice concerning the pursuit of strategic initiatives. The message is clear that future and long-term success for procurement and sourcing groups is going to be in the form of strategic initiatives that see procurement move from tactical rubber-stampers focused solely on cost reduction to strategic resources focused on the long-term growth of the organization. But many groups are resource-light and are up in the air about which strategic initiatives to pursue in order to get the strategic ball rolling, so to speak.

This article from Buyers Meeting Point, put together from a collection of Source One personnel, details two of the most common recommended initiatives - internal marketing and supplier relationship management, or SRM - and outlines how to optimally pursue them. The result is a 1-2 punch that delivers an early impact, a recognizable ROI, and gets procurement moving towards a position more centric to the organization's overarching goals.

And for more information on Supplier Relationship Management, check out http://srm.sourceoneinc.com.

Image courtesy of Cape Cod Magazine
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You Need Real Benchmarking Data – Here’s Why.

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You wouldn't buy a car based on a dealer's sticker price alone.  So why do company spend hundreds of thousands or millions of dollars with a supplier when the only market intelligence they have is the results of an RFx.   Procurement and sourcing is evolving.   Companies can't get away with expecting a generic RFx process to be the end-all-be-all to getting the best supplier at the best price.  A lot of things can impact price; raw material costs, natural disasters, supplier capacity, supplier capabilities, service levels, political stability, currency and the brand name of the supplier itself (just to name a few).  Unfortunately, an RFx alone doesn't root out all of these cost components, especially for indirect categories like professional services.

In order to get the best price and the best services, you need market intelligence, as much or more than your suppliers.  You need benchmarking data.

Access to new, more difficult strategic categories
We’ve seen a few trends emerging in the procurement and sourcing world these last few months.   The biggest trend by far is that procurement and sourcing groups appear to be breaking down the walls that traditionally separated different silos within many organizations.  We’re talking about procurement and sourcing groups finally getting a seat at the table to work on spend categories like marketing, human resources and information technology (IT). 

Sourcing teams seem to be getting access to these hard-to-penetrate categories through a variety of different methods. Whether it’s mandated top-down directives where C-level executives are getting tired of hearing from department heads that their suppliers are golden and procurement can’t help; or if it is from the department heads themselves feeling the pressure to get more with their budgets and they finally ask procurement for help.  And in other cases, no one was resisting, its just that their internal teams have simply gotten to all of the low-hanging fruit and now need to move on to more strategic spend categories.

No matter how they got there, the fact remains that more and more procurement and sourcing groups are now getting access to strategic categories that they have not traditionally ever been exposed to.   But, in many cases, procurement groups aren't really prepared for what they are about to see.   These groups are now going to be exposed to spend categories that require a much greater level of subject-matter expertise than they've ever needed before.  I've not met many sourcing people that off the top of their heads can explain the difference between virtual processors, cores, or physical processors; MIPS licenses, named user, or device licenses; and who could simultaneously be able to easily explain the differences between a creative agency and a branding agency and how to get more media exposure for less money. Chances are, if the procurement team already has that level of experience, then they already work in a company where the silos have been broken down and they might have in-house specialists already working on these categories.

So, the sourcing teams are now at a huge disadvantage.  They've got the attention of management and the cautious desire for stakeholders to work with them, but they have to prove their value to both groups?   How do decrease the costs, or improve the output of a creative agency without upsetting the supplier or derailing your internal marketing groups progress?  How do you challenge a supplier proposal for infrastructure or implementation services when you don’t really understand the terms that are being used; and you have a department who’s main concern is up-time, not costs?  

An RFx doesn't generate all of the info you need to make a decision
Procurement groups often start by attempting to apply their standard sourcing methodology to these new spend categories.  And, while that may help produce some minor results on fringe costs, the fact remains that most companies consider “strategic sourcing” to be nothing more than a 3-bid and a buy process. More specifically, they may look at their buying habits, attempt to bundle some spend together, but then ultimate just rely on an RFx process. Companies that rely on software and pre-built RFP templates for their strategic sourcing are even less likely to produce results that will have any positive impact to their business.  After all, if you are really being honest, what does your RFP process consist of?  Is it just a bunch of questions meant to disqualify outlier suppliers and provide a simple scorecard for supplier selection?  In most cases it is.  

Even if your process is a bit more in-depth than that, what you’ll get at the end of an RFP process is likely to be a confusing mishmash of offers with a variety of prices and service offerings.  Good teams will be able to normalize these offers, reestablish communications with the suppliers and refine the proposals so that they have a better basis for equally comparing the proposed solutions.  But, at the end of the process, you really only have two evaluation criteria: The quality/ services of the supplier and price.   And what if, for whatever reason, you can’t go to RFx at all;  you just have an incumbent supplier proposal, or an existing contract and they know they have your business moving forward, what do you do then?  Do you just pick the lowest price supplier (that meets your qualitative needs) and sign a contract?  No, you need benchmarking data.

Let’s look at an RFx process and assume that your company has really good, smart people, and has already done their due diligence in normalizing supplier responses and qualifying the SLAs from a potential supplier.  Now you have one last evaluation criteria or thing to negotiate, and that is price.  But all you really have is other competitive RFx responses to qualify the offer against.  And while, true that you may have some additional information about published market index prices for base components (like metals raw material costs), those things aren’t readily available when it comes to negotiating things like Agency fees, hourly rates for programmers, licensing structure, benefit costs or insurance costs. Getting access to the appropriate benchmark data is the next best thing, it just not in the manner that you might be familiar with when you source direct materials.  

You need real information, not a grading system or generic advice
Benchmarking services, in the generic sense, have been around for a very long time.  Analyst firms like Gartner have been selling them for decades.  Recently, there has also been a huge influx of new companies that offer subscription services for benchmark reports.  But in many cases, those services don’t really provide you with the information you need to effectively negotiate a best-in-class agreement for your company.  Traditionally, these benchmark reports provide high level guidance on if it is the right time to source a category (based on market conditions using revolving around supplier capacity).  Alternatively, they may provide a generic ranking system providing an A, B, C, F grade on whether or not you should source a category right now, but don't consider your exact needs, contracts, or requirements.   Some providers get a little more specific and will review your proposals or contracts and may give you generic responses like “your price is within the 85th percentile of buyers”.

But in many cases, we feel that these providers do little more than stroke the ego of the person that ran the RFx and provide validation that they did an okay job.  Of course, in some rare cases, where the baseline price is obviously wrong, they may point out a significant opportunity, but those situations are rare when you have a competent sourcing process. What those generic analyst firms and subscription reports don’t do is provide specific advice on how to grab further savings opportunities or provide you with the ammunition to enter a negotiation.
Still not convinced you need benchmarking services?  Well, if you were out buying a car, and all things being equal, would you solely rely on the offer you got from going to two different car dealerships and asking for a price? Probably not.  And would the only guidance you get be a news article online that simply states "wait till the end of the model years to buy a new car?" Nope again. But that is what many companies currently do via an RFx process.  In your personal life, you’d likely handle things differently.  You’d probably spend a lot of time researching the cars first and deciding on a make and model.  You’d probably learn about seating capacity, dependability studies, customer satisfaction, gas mileage, horsepower and a variety of other factors.  You’d probably test drive a few first.  Then, you’d look at one of the many resources online to determine if now is the right time to buy.  Are incentives available?  Are there dealer holdbacks?   Should I finance through my credit union or the manufacturer?  What should I pay for a warranty, for how many years, and should I use a third party?  Should I prebuy the maintenance? Should I lease or buy? There is probably over a hundred questions you ask in the car buying process.  But, the information is so readily available (published in magazines and online) that you can knock out the entire sourcing process in a single day, including the test drives.   Buying a car has become such a commodity that people regularly post what they paid, the deals they got, and from where to buy on the Internet.  That, information is benchmark data.  Unfortunately, things aren't as simple as buying a car in the business world.

But, there are firms that can help.  To be very specific, there are actually firms, like Source One, who go way beyond offering a generic ranking system and offer highly-customized benchmarking analysis reports.  A proper customized benchmark report, like the ones that Source One delivers, can give you specific market intelligence about the prices or rates that your suppliers are charging.  They can not only tell you if you are competitive, but give very specific advice on where you can improve.  The reports leverage, the market intelligence of thousands of sourcing events across a variety of industries. Instead of telling you percentiles and grades, you can learn that other similarly sized deals paid $XXX per hour for a consultant’s time or achieved 3 minutes of prime-time viewing on a top rated television show for the same price you paid for 30 seconds.
Customized benchmark reports also review the structure of your proposals or contracts and can point out areas where what you asked for may cause you to overpay or not get the proper level of service.  Can your benchmark partner help with evaluating:
  • Is your software implementation consulting team front loading your development costs? 
  • Are they properly specifying the infrastructure and hosting requirements needed to run your new applications?
  • Are the costs for project management reasonable?
  • Have you requested, or are you being proposed, the right type of license?
  • Can you break out service and product offerings and use multiple suppliers?
  • Are there opportunities to negotiate lower cost resources into the mix such as offshore programmers or junior analysts; or are you paying the highest rates that firm charges regardless of the work that is being done?   
  • Does your digital agency have access to the big data tools and resources to help you identify and target the right demographics? 
Think about this... Most organizations rely on their Human Resource department and Finance department to negotiate the company benefit and health care programs.  If they are lucky, procurement might get a seat at the table during that process.  Those departments rely on an insurance broker, who they've used year over year over year.  That broker assures them they are getting the best price and service offering.  The broker also explains that laws forbid brokers to provide any discounts so you’ll get the same price from each provider no matter which broker you choose. Together HR and Finance have no way to validate that, and like working with that broker, so take they take them for their word, and every year do what the broker tells them. You, in procurement, can do nothing other than negotiate some minor concessions and still would have no basis for comparing the pricing or the mechanisms for soliciting the pricing.   But a third-party firm that is not vested in the interest in you signing a contract like a broker (to earn commissions) can bring true validation to your purchases.

Real benchmarking agencies can help ensure that you are getting the absolute best supplier and best product or service for the lowest cost possible. But don’t be fooled.  When you go out to select a benchmarking partner, be sure what the deliverable will be before you subscribe to their service.  Is an ABC ranking system really going to help you?  Is a percentile evaluation really going to be able to give you the information you need to ask for pricing or contract improvements?  Just like you would properly source any other category, you should do the same with a benchmarking partner.  Don’t just pick them because they have a well known name, validate and choose the right benchmarking provider for your needs.


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Shoe retailer gives its inventory a technological boost

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Shoe retailer gives its inventory a technological boost

Satisfying the needs of customers shopping online and in-store consists of multiple operational factors, but it all starts out with the procurement process. A comprehensive view of all direct inventory enables retailers to determine how shipments should be organized based upon varying consumer demand. This omnichannel strategy is forcing businesses to utilize technology that can provide a real-time vision of all distributed materials. 

Putting the best foot forward 

According to Retail Info Systems News, footwear merchandiser Aerosoles merged its direct and e-commerce avenues to streamline inventory processing, with the goal of having all stock lists housed in one location. Aerosoles Vice President of Merchandising Steve Siebel told attendees at the 2014 Retail Technology Conference in Orlando, Fla., earlier this month that linking core functions such as assortments, warehouses, material management and demand planning has had a profound impact on the retailer's omnichannel blueprint. 

"The organization needs to realign to one customer service team and one allocation team to handle the new demands," said Siebel, as quoted by the news source. "We realized we have to determine what the best level of inventory actually needs to be at each location." 

As opposed to having two disparate procurement software systems - one to handle e-commerce, the other to administrate brick-and-mortar operations - Aerosoles chose a holistic solution that would enable it to monitor fluctuations in consumer demand and compare those changes to current product storage. 

The rise of radio frequency identification (RFID)

The ability to log incoming materials at a warehouse bay and have managers be able to view the inventory changes in real time is one of the benefits associated with RFID. The technology has grown in popularity as companies realize they can sync the information recorded by the system with records management software. When an item arrived at a facility, where it was stored, and the time it left a distribution center can all be entered into a comprehensive solution.

Merchandisers throughout the globe have recognized the significance of RFID, so much so that a conference showcasing the technology - appropriately named RFID Journal LIVE! 2014 - was held in early April. RFID Journal reported that the event attendees displayed RFID-related services at the Item-Level Retail and Apparel Workshop on April 8, displaying how the systems improve inventory accuracy and enable users to adequately meet the demands of customers. 

Marks and Spencer Head of Packaging Kim Philips opened the conference's keynote presentation by explaining that RFID will become more prevalent as merchandisers move toward omnichannel practices. 

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Protecting data throughout the distribution process

on Tuesday, April 22, 2014

Protecting data throughout the distribution process

The prevalence of procurement software and other related programs in materials acquisition has obligated users to find new ways to secure their data. Digital intelligence collected from sensors, expense reports and other sources are often aggregated onto cloud servers where the information can be dissected by data analytics. Though this technique provides suppliers with valuable insight, it opens up avenues that hackers could exploit. 

Too good to ignore

With security considered, the benefits associated with spend management cannot be ignored. Many of these programs sync with automated invoicing, allowing companies to quickly process and file purchase orders. This electronic workflow allows organizations to quickly and efficiently determine which expenses are congesting budgets and where savings can be achieved. 

According to Supply Management, Head of Indirect Procurement at textile manufacturer CWS-boco Marcin Chramega stated that his centralized team managed about 40 percent of the company's $278 million annual indirect spend with the assistance of an expense analysis program. Chramega noted that the software allowed his department to eliminate operational inefficiencies, in addition to helping him deduce how the company can save money.

"I will show all these misses and gaps with the assessment of the data," said Chramega. "This will help me to drive the business and procurement to the next steps."

Where the challenges lie

However, with electronic invoicing comes avenues through which malevolent figures could gain access to company networks, meaning that business account information could be compromised. Dan Wiech, managing director of Tools4ever, a company offering robust identity and access management software, stated in an interview with Manufacturing.net that data protection is just as much a part of distribution as procurement and spend management. Wiech noted that companies should implement policies that allow access to financial information only when it's absolutely necessary.

Although Wiech believes that manufacturers and distributors alike are cognizant of data security, there are three components that they may be neglecting:

  • The use of role-based access control arrangements to prevent unauthorized people from accessing sensitive information. 
  • When a worker's responsibilities shift, firms need to ensure their security permissions are appropriately updated.
  • Once an employee leaves an organization, his or her database entry must be terminated immediately. 

To sacrifice the benefits of automated processing and procurement software would put a distributor at a grievous disadvantage in the marketplace. Rather, they must implement common, non-technical best practices that will protect their data from a variety of different threats. 

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The Value of Subject Matter Experts

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Who doesn't like good fried chicken? Nevermind that I'm asking this shortly before lunch, the work that goes into innovating the food you eat at your chosen establishments has a lot of parallels with your daily work, and I'm about to break down how. But first, a bit of backstory.

In my work prior to Source One, I was an editor and journalist. My last journalism job was for a startup men's publication running their Philadelphia bureau. The publication was very heavy in the food/drink/"new places to go to seal the deal", so I and my writers found ourselves in kitchens and the back rooms of bars a lot. The food scene in Philly is pretty diverse, but dining establishments can be over-generalized into one of three groups.

The Old Standbys - These range from your chain restaurants, to your mom & pop BYOs, to your diners. Good for a weeknight meal when you just want something familiar, these aren't going to have anything unique or adventurous on the menu - save for maybe that $3.99 steak & eggs "special" at the diner that's adventurous for all the wrong reasons - and no one in the front or back of the house has any culinary training above the mandatory food safety stuff, but they still serve their purpose and make a little money for themselves.

The High End Restaurants - This also includes some better chains, but this is mainly the domain of local restaurateurs who've been at the game for a while and have an education and experience. The chefs in the kitchen have c-school degrees, the front of the house is run by someone with a degree in hospitality management, and the experience is nothing short of what you'd expect. Your steak is expertly prepped medium rare, the flavors of the carb-laden sides complementary, and the decor is exactly what you'd expect from a steakhouse. And you can get that same experience in any of their well-run establishments around the city or region. They are perfectionists at the tactical level and very efficient. In Philadelphia, this is what you get from a Stephen Starr restaurant, or those from Jose Garces, Marc Vetri, and Michael Solomonov.

Boutique and Specialty Locations - These are highly specialized ventures and they run the absolute gamut. Maybe it's an 8-seat counter staffed by a lone chef who has studied noodles his entire life, and he only does ramen but it's amazing ramen. Or maybe it's an out-of-the-way bar run by an eccentric/lunatic who spent years traveling the world for cocktail ideas and inspiration, and learning about liquor. Or maybe it's the gastropub run by a beer expert bartender and a chef with such an in-depth knowledge of food that he's able to pull in unusual combinations that WORK, and a creative streak capable of producing things like deep fried Four Loko or a burger with  foie gras buns.

All three of these options will get you fed. And the High End Restaurants promise a great experience. But the boutiques and specialists, that third group - those are destinations. They are the best at their respective craft, and are able to perform at the highest levels because of the level of control they have over their work - their assigned subject matter - because of their expertise.

So, parlay this into your organization.

The old standbys are just following the same old procurement practices someone else showed them, slinging out three bids just as easily as big-as-your-head portions of chicken parm and just as prone to resorting to cutting down portions when the money gets tight.

The high-end spots have the best tools and educated resources at their disposal, but their methods are nothing new. "Overhead in Department X getting a little high? My MBA professors said to outsource it - Google "BPO" and go with the top result!" These efforts likely produce reasonably good results, but when dining trends change from grilled dishes to sous vide, or when industry trends change and the old school savings methods aren't enough, both are left with useless resources.

The specialist subject matter experts, with the freedom to leverage their expertise and creativity to properly innovate - the sourcing version of the guys in the kitchen going "Our exotic Asian restaurant's covers are plateauing, the move seems to be for more honest, simple food - BAM! Korean Fried Chicken!!" - are the ones who develop and succeed with innovative strategies that produce the next-level results that others soon follow. So, when one restaurant creatively, and successfully, fuses Asian spices with fried chicken wings for Korean Fried Chicken, others follow up with their own Korean Fried Chicken... and Jewish Fried Chicken and Israeli Fried Chicken from a donut stand. And suddenly everyone in Philadelphia is awash in fried chicken. Or, when one company has the supply chain knowledge and vision to see competitive advantages in consolidating their supply chain down to critical suppliers, then working so tightly with those suppliers that their relationships are practically partnerships, and has tremendous success from the resulting competitive advantages - Supplier Relationship Management becomes a hot topic and a sourcing "next step".

So, the next time you're headed out to dinner, and you pick a spot that "does amazing things with chicken", think about why they're able to do that and how that appeals to you as a customer. It just might help you reconsider how you utilize those subject matter experts within your sourcing department and organizing.
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The challenges of supplying humanitarian aid

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The challenges of supplying humanitarian aid

Strategic sourcing for organizations such as the International Committee of the Red Cross often revolves around providing food, basic housing and medical supplies to people living in particularly impoverished regions around the world. Due to the absence of consumer data, obtaining the necessary materials becomes quite a challenge, as Red Cross personnel have to accurately determine which materials are needed.

Working with humanitarian distribution 

Although demand for particular items is prevalent, humanitarian supply is not derived from consumerism, but genuine need. People affected by natural disasters require robust distribution strategies so that materials essential for human sustenance can be readily obtained. National governments are typically charged with maintaining a viable procurement process by providing regular aid, but deducing how much of which particular products are required becomes a challenge

According to Supply Chain Brain, researchers at the Massachusetts Institute of Technology Humanitarian Response Lab are devising new critical situation assessment methods of delivering aid. Jarrod Goentzel, founder and director of the department, claimed that comparing conclusions derived from social media and big data with seaport and highway operability could give organizations a better perception of how essential materials should be transported to areas affected by natural disasters or disease. 

Goentzel also noted the importance of the private sector, stating that brick-and-mortar stores should leverage data to figure how to best meet supply needs. Before a hurricane shakes a region's infrastructure, it's imperative that retailers stock up on necessary items. 

Deducing government intervention 

Sometimes, organizations such as the International Committee of the Red Cross have to deduce how public authorities will hinder procurement management. According to the Sudan Tribune, Sudanese officials recently announced that they were suspending ICRC activities after the organization refused to abide by Khartoum's extortionate demand that funds and resources be transferred to the Sudan Red Crescent.

In addition, the news source reported that the National Islamic Front/National Congress Party regime in Darfur recently expelled the Agency for Technical Cooperation and Development (ACTED), a humanitarian aid organization from France supporting water and sanitation infrastructure for camps surrounding the region of Zalingei. An anonymous UN official told the Sudan Tribune that this move left many charitable sectors without effective spend management or oversight, leaving many of those living in poverty with little to no knowledge of how operations should continue. 

These suspensions and expulsions ultimately hinder materials acquisition. For this reason, it's important organizations such as ACTED and the ICRC take a diplomatic approach to procurement and work with national governments so that aid can be delivered. 

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Building a Supplier Relationship Management Program

on Monday, April 21, 2014

Establishing a formal supplier relationship management program within your organization can be challenging. Some risks that come into play include ensuring the right level of accountability with the suppliers versus the organization, the effect that ill-defined roles and responsibilities can have on the program, and maintaining a successful program throughout the life of the contract. The best way to mitigate these risks is to ensure that the program is well structured from its onset and that the right people are in place to manage the program on an ongoing basis. The following tips will help guide the proper design of a Supplier Relationship Management (SRM) program.

Developing an SRM program starts long before the supplier on-boarding process with effective strategic sourcing. It is critical to select the right business partner – one that shares an understanding of the organization’s culture and goals – especially in more strategic partnerships. Always try to keep in mind the end state vision and future plans when selecting suppliers during the sourcing process, this will help to ensure the supplier will fit into those plans adequately.

Along these same lines is the necessity to have a person or small team assigned to manage the supplier relationship from contract negotiations through the on-boarding process and throughout the life of contract, the earlier they are involved the better chance they have of appropriately establishing the parameters of the relationship. This should include regular communication at the account management level to ensure that service levels are being consistently met, that the scope is being adhered to, and that pricing remains within the agreed upon conditions. These interactions aid in the support of assigning accountability to each side of the relationship. Understanding who is responsible for what in the contract is dependent on the scope of the category and agreement, however typically the supplier is required to maintain such conditions as service level agreements, processes and procedures, quality and on time deliverables, and more. Consequently, accountability is not a one-sided story, the business is typically responsible for maintaining up to date information provisions, processes and procedures, and ensuring that approvals are provided in a timely fashion as to not disrupt the supplier’s timelines, among other things. Communication is the key to ensuring that all involved parties are maintaining their end of the deal. Within these elements lie accurate and well-defined roles and responsibilities. Accountability cannot loosely fall on one party or the other, there needs to be clear assignment of tasks and general duties. Just as in any well-organized plan, without specifically assigned roles and responsibilities, the relationship and subsequent contract can easily become derailed.

Another key element to Supplier Relationship Management is continuity. At the onset of a new contract all those involved typically pay close attention to the contract terms but within months this attention slowly begins to slip away and drive to other priorities. Before you know it the contract is up for renewal and there is a convoluted mess to deal with – irrelevant SLAs, out of date account structures on file, and pricing that does not apply to the scope of work being conducted today. This is another vital reason that a specific team be assigned and held accountable for managing all aspects of the relationship throughout the entire life cycle of the contract. Not only is there a great deal of risk to the business, but there is also much more work involved in renewing an agreement that is essentially obsolete.

Developing and implementing a proper Supplier Relationship Management takes time and expertise. Follow me to learn more about Supplier Relationship Management and Source One’s experience.
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Mitigating risk with procurement software

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Mitigating risk with procurement software

Surviving in the global economic arena necessitates an eye for risk management and an understanding of the capabilities of procurement software. Manufacturers, distributors and retailers throughout the world have to orchestrate profitable relationships while abiding by inter-governmental regulations, considering social responsibilities and exercising sustainable practices. In order to satisfy these demands, market participants must possess a comprehensive view of all material sources.

Assessing risk management requirements

Whenever merchandisers buy a particular product, they're inherently taking a risk. There's no guarantee that the purchased item will be sold, that it won't be damaged or stolen en route or even that it will function properly when it's taken out of the package. The only factor that retailers have on their side is probability. Through assiduous market research and analysis, commodity-based companies deduced that obtaining such a good would result in a return on investment. Consumer demand supports this claim.

Carlos Alvarenga, a contributor to Procurement Leaders, noted that risk management is currently in its nascent stages as it relates to contemporary strategic sourcing practices, but its role is going to become much more prominent in the near future. As of now, charting probabilities primarily consists of conducting qualitative analyses in the form of supplier audits and typically scrutinizes discrete, disruptive and unlikely transactions. However, the future will produce material acquisition that inherently carries out the following tasks:

  • Identify which third-party factors (i.e. governments, associations, competitors) may hinder procurement.
  • Deduce the total cost of risk at the distribution and supplier level.
  • Determine which in-house investments either will or will not produce a return on investment.

Spearheading this movement will be cloud-based software capable of aggregating data from multiple different sources and processing this to form actionable intelligence. Warehouse management systems, port administration programs and other technologies will contribute, providing executives with a comprehensive perspective of all product obtainment practices

Attaining more to reduce expenses

Richard Waugh, a contributor to Spend Matters and vice president for a materials acquisition technology developer, stated that the majority of procurers utilize some form of technology that helps them execute more effective spend management strategies, find cheaper goods for better quality and enhance distribution routes. Looking toward the future, Waugh noted that these organizations are beginning to attain more technology that pertains to specified areas, such as supplier performance measurement and financial savings execution.

However, attaining advanced technology all depends on how much capital organizations have available. A study conducted by Waugh's company surveyed an unspecified number of global enterprises regarding procurement management. Out of the respondents, those that reported higher cumulative savings were much more likely to claim higher software adoption rates. What's even more interesting was that enterprises that encountered such success often reduced operational expense by using computing solutions in the first place.

It could be said that these savings were accomplished by factoring in the risks involved with procuring certain goods from particular sources. For example, a spend analysis program could correlate manufacturing costs in India with those of South Africa and then compare the quality of the goods being produced. In addition, other elements would be factored into the equation, such as:

  • Which ports are more expensive to dock ships at?
  • Are the goods manufactured in politically volatile nations?
  • How do companies producing raw materials treat their employees? (This point is particularly relevant, as many consumers base their purchasing decisions on how socially responsible an organization is.)
  • Do the original source manufacturers utilize automated or manual processes?

Procurement risk management essentially takes basic economic principle and seeks to derive the most information out of probabilities through algorithms. A global enterprise is connected to dozens, if not hundreds, of indirect partners and subsidiaries all engaged in different aspects of the distribution chain. Figuring out which transactions will carry the less amount of risk is imperative.

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Logistics hub to be constructed in Oman

on Saturday, April 19, 2014

Logistics hub to be constructed in Oman

Located just below the Strait of Hormuz, Oman serves as a key player in the global energy procurement process. Iranian and Iraqi oil producers ship millions of barrels of the material from their respective ports on a regular basis, often rendezvousing with Omani vessels to deliver to countries located all over the world. In addition to fossil fuel transportation, Oman plays a signature part in the distribution of materials bound for Yemen, India and the Middle East.

According to Arabian Supply Chain, Ahmed al Azkawi, project director of the Omani Supreme Council of Planning, publicly stated that the nation will begin construction of a 90-square-kilometer logistics center in South Batinah at the end of this year. Al Azkawi informed the press that the endeavor will be completed by 2030. It is hoped that the initiative will invigorate the growth of a distribution-based economy.

The news source stated that the South Batinah Logistics Hub will consist of the Sultanate's first ever inland port, featuring zones dedicated to supporting multi-modal transactions, light industries, commercial services, warehousing and procurement management. In addition, infrastructure will be built to supplement the livelihoods of South Batinah workers, such as residential developments, convention centers and leisure areas. 

Fostering economic growth 

Conrad Prabhu, a contributor to The Oman Daily Observer, claimed that the ambitious project is appropriately located between Muscat and Sohar, connecting the two regions through commercial road and railways, ocean ports, airports and manufacturing hubs. Many claim that the region will become a key participant in both domestic and Asian strategic sourcing. Al Azkawi told the news source that the initiative will bring other residual markets to South Batinah, such as hospitality and tourism. 

"Imports by sea, air or land will go into the logistics hub, where it will be value-added and then go out in the form of exports or goods for distribution within the country," Al Azkawi said to The Oman Daily Observer. "The goal is to build a state-of-the-art facility, which offers one-stop-shop services to logistics providers and customers and thereby promote Oman as a gateway to the region."

Al Azkawi also noted that the inland port aims to foster growth in private sector logistics and industry, decrease empty container activity on highways and mitigate the congestion of commercial traffic in Muscat. Al Azkawi and the Supreme Council of Planning's proactive efforts to boost the Omani distribution market shows that the country intends on being a major player in the southwest Asian market. 

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Ocean carriers strive to attain profit

on Friday, April 18, 2014

Ocean carriers strive to attain profit

Global economic growth remains steady in 2014, but ocean carriers have struggled to gain profits from increased shipping activities. Although recent alliances between a few European companies have largely mitigated this issue, spend analysis reports have shown that quarterly profits from 2013 resulted from cost reductions, slow steaming and service cutbacks. 

The current overview 

According to SupplyChainBrain contributor Robert J. Bowman, JOC Group economist Mario Moreno anticipated that the United States' containerized imports will grow by 6.7 percent over the next year, reaching a new high of 19 million 20-foot equivalent units (TEUs). In addition, American exports will most likely rise by 1.8 percent, totaling 12.4 million TEUs. Bowman noted that the activity looks promising, but whether or not carriers will be able to handle the demand is another matter entirely. 

So what's hindering the oceanic procurement process? Bowman pointed toward an increase in ship scrapping, with many of the vessels still functional. In addition, the slack demand as a result of the global economic downturn of 2008 slowed trans-Pacific and trans-Atlantic distribution, causing many carriers to scrap ships in order to make whatever money they could. Leaving liners to sit idle at foreign ports is expensive, so jettisoning the material appeared to be the best option. 

Future disruptions 

DC Velocity contributor Toby Gooley recently interviewed Brian Conrad, executive administrator for the Transpacific Stabilization Agreement, a self-proclaimed research and discussion forum that creates voluntary, optional pricing and service guidelines for ocean carriers serving trade between Asia and the U.S. Conrad noted the following factors that may disturb the 2014 contract negotiation season:

  • Alliances between different shipping companies may put independent operators out of business, as larger concords between three or more carriers result in more resources being available to efficiently transport goods across the Pacific. 
  • Though short-term rates are often viewed as ways to drive down long-term pricing, Conrad cited this technique as misguided spend management. Temporary charges won't cover lengthy rate agreements and could destabilize pricing. 
  • Budgets are expected to be constricted in 2015 and 2016, as more carriers move toward low-sulfur fuel, which costs on average $120 per metric ton more than traditional resources. 

Also, the addition of larger vessels could exceed demand in 2016, resulting in more idle ships. Though bigger ships will be able to satisfy immediate demand more efficiently than smaller counterparts, carriers should be wary of this predicted shift in demand. 

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Procurement software affected by Heartbleed Bug?

on Thursday, April 17, 2014

Procurement software affected by Heartbleed Bug?

Though the systems themselves aren't necessarily vulnerable, the data that procurement software attains from sensors located throughout all facets of the distribution process may be compromised by the Heartbleed Bug. After specialists revealed that the Open Secure Sockets Layer/Transport Layer Security protocols were unprotected, consumers expressed the most concern. However, new revelations show that manufacturers and logistics experts may also have something to worry about.

Holding on to effective programs

By integrating the Internet of Things into procurement programs, public and private organizations alike have benefited from better visibility into their materials acquisition processes. Walt Sirene, a contributor to Washington Technology, explained that the software has helped the United States federal government - as well as foreign authorities - scrutinize which aspects of product obtainment are hindering expense reduction. He also noted that spend management strategies have been optimized by the integration of data analytics tools.

"When done correctly, spend analytics can unlock valuable insights that can help federal acquisition and procurement organizations drive structured acquisition strategies and make informed decisions," noted Sirene.

As such programs utilize information that is primarily aggregated from Web-driven sources, it's possible that the Heartbleed Bug could be used to distort the intelligence being processed by the spend analytics program, which would in turn produce inaccurate, inapplicable knowledge. Executing analytics programs isn't an easy task and in the event that this distortion occurs, the resources spent collecting and processing the data would be wasted.

Securing all assets

The Heartbleed Bug allows hackers to tap into certain electronic devices used to integrate data into spend analysis programs. Any gadgets connecting to the Web could possibly be exploited to manipulate company market intelligence or even listen in on corporate video calls. According to CNN, tech companies Cisco and Juniper identified a number of networking mechanisms that have been profoundly affected by the Heartbleed Bug, servers, routers, switches, phones and video cameras among them.

  • Allowing warehouse managers to upload and access files pertaining to facility inventory is quickly becoming the norm, but malevolent figures could possibly hack into devices to view any information stored on them.
  • Select versions of Juniper's virtual private network service are exposed, meaning that anyone who managed to tap into the VPN can obtain whatever is on the user's PC's memory.
  • Though difficult to access, one type of Cisco software that operates Internet switches is at risk.

As multiple departments within a procurement agency utilize a number of Web-connected devices, critical information pertaining to the business is at risk. However, software developers and server engineers are developing ways in which Heartbleed can be addressed and resolved.

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