In recent years, businesses have taken action against the problem of dark purchasing or procurement. This occurs when companies don't have proper visibility of their purchasing and supplier processes and need technology to look more closely at the different actions all happening in confluence with each other. Without this examination it's not possible to weed out corruption and other problems.
Procurement corruption a strong contender
The Organization for Economic Co-operation and Development established the persistence of procurement difficulties in a 2016 report on the subject. The source determined that public procurement volume was responsible for 29 percent of OECD member country expenses, but that this sector was also susceptible to problematic bribes. Citing previous information, it said that 57 percent of foreign bribes were intended for procurement contracts.
This was a significantly higher percentage than any of the other given purposes for bribes, including customs clearance or favorable tax treatment. This corruption was said to ultimately be expensive and hurt public funds, and it isn't difficult to imagine even private businesses suffering some of the same results through unacknowledged corruption and payment scams.
"Corruption was said to ultimately be expensive and hurt public funds."
Perhaps unsurprisingly, there can be marked differences in the chances of corruption depending on where organizations choose to operate. However, this doesn't mean that only certain countries represent the key dangers to procurement: Every company can stand to investigate possible issues.
Transparency International's 2016 Corruption Perceptions Index measured 176 countries to determine where each stood in a ranking of corruption: the higher the score, the less corrupt the country. The two nations tied for first place were Denmark and New Zealand, both of which achieved a score of 90. The U.S. ranked at No. 18 with a score of 74.
The index took various symptoms of corruption into account, including how effective laws and regulatory measures were, as well as whether or not any major, significant corruption cases surfaced to swing the scales.
Moving away from "dark" procurement
Information, benchmarking and proactive sourcing can all be tools to help lower corruption. This is reflected in the relationship between the various business partners working together and the ultimate opinion of the consumer. Global Supply Chain Institute Director Mike Burnette recently spoke to Global Trade Magazine about the importance of transparency.
"A lack of ability to provide that kind of information in the face of safety or environmental violations can create a negative perception of the brand that may require immediate remediation and could take a brand years to recover from, if at all," he said of product sourcing data.
Complete procurement transformation could help change the nature of business operations for the better. One way to be more aware of procurement threats is to upgrade the strategy and BPO model so there's a relevant structure in place. Over time, the business will likely need to adapt its sourcing solutions to proceed, and a more advanced platform will be flexible enough to allow for important changes in the future.
February 24, 2017
Here's a look at where Source One's cost reduction
experts have been featured this week!
As a Senior Sourcing Analyst, Jonathan Groda has worked with clients that had histories of not using the full breadth of services provided by their Fleet Management Company (FMC). These companies have the potential to deliver a range of core services, through a variety of programs offered by most FMCs, that are most often used to help manage larger fleets. This otherwise time-consuming and tedious task can be simplified when utilizing services available through existing resources, like FMCs, that can not only save time and money, but also ensure that your fleet is as efficient as possible. Groda provides sample of said programs, and explains the benefits of utilizing these programs.
Guiding Millennials in Your Workplace
Project Analyst Nicholas Harasymczuk discusses how his role has allowed him to mentor new hires, including those on the younger end of the millennial generation, and shares the techniques he feels are crucial to utilize when managing this specific group of young professionals. Harasymczuk recommends applying structure in the workplace, communicating often, demonstrating leadership, and valuing a work-life balance when it comes to managing millennials effectively. As a millennial in the middle of the generations spectrum, this advice comes from a source that has experienced the management patterns of previous generations and the work ethic of younger colleagues.
Source One is preparing for various industry events approaching in 2017, including the Institute for Supply Management's annual conference in May. Designed for global supply chain and procurement professionals, this event brings together over 2,500 for four days of networking, educational sessions, and opportunities to learn from some of the leading supply chain and procurement executives. ExecIn, a sub-conference created as a meeting specifically for supply management leaders, is exclusively hosted by Source One. Featured speakers at ExecIn present exclusive sessions produced for executives at non-consulting organizations, that provide the opportunity for them to reevaluate their processes and discover potential for improvement in their business.
The Road to SYNERGY - Baltimore, MD
In preparation for the annual SYNERGY conference Source One's partner Corporate United will host one day regional events in anticipation of the annual national meeting held later in the year. The first meeting will be in Baltimore, Maryland in early June, As a Gold Sponsor, Source One will be attending and sharing their innovative category solutions with other procurement professionals in the area. A day focused on leadership in the industry, best practices and personal development, local procurement professionals won't want to miss the opportunity to network with their peers on a smaller scale before the national conference.
As of May 2015, the Bureau of Labor Statistics estimated that 72,600 people worked as procurement managers throughout the U.S., and 71,740 worked as procurement clerks. The company and enterprise management industry employed the greatest amount of managers, and the three states with the highest employment rates were California, Texas and Illinois.
California and Texas were also the two biggest employer states for clerks during this time, though the third was New York.
Employer and employee needs
Both businesses and the millennial staff they hire have something to gain from the equation. Employers can fill out their workforce with engaged talent that is ready to commit to a longer career. Furthermore, the millennial employee base seems ready to embrace that sense of stability, and could offer relevant savvy and skills in exchange for a stable job option.
Spend Matters recently spoke to Southeastern Louisiana University management professor David Wyld, who explained the link between millennial values and the procurement industry in particular.
"I think that procurement as a profession will only be helped as millennials come to the fore," he said. "They see themselves as more solutions-oriented, more socially aware and certainly more comfortable than prior generations in working not just with new technologies, but [also] with new people and in new situations."
Facing industry costs
Procurement also needs to keep costs down for businesses, which could demand new strategies and workers. A 2016 Deloitte and Odgers Berndston report surveyed 324 senior procurement officers about the most pressing needs in their industry. Nearly three quarters of respondents said that cost reduction is their highest priority in 2015. This was a 5 percent increase compared to similar figures from a year earlier.
What's more, the report also showed a strong need for employment and staff changes. CPO confidence in their respective staffs dropped noticeably between 2014 and 2015. The latter year saw 62 percent say their workforces could not follow through with the company's procurement efforts.
The millennial necessity
Adding new talent to the workforce is more than just sensible business practice: it could become unavoidable. A ManPowerGroup report said that both Generation X and millennial workers will each account for 35 percent of the overall global workforce.
The U.S. was also one of the nations where millennial workers felt the most confident about jobs. Other countries in this same bracket (with between 70 and 80 percent of millennials optimistic about work) included China, Germany, India and Mexico.
This concern over millennial workers also echoes the need for procurement management staff in general. Staffing services augment existing teams and leave them with more ways to approach difficult demands.
Enter strategic sourcing and procurement.
SS&P is then brought in as the "necessary evil" to help cut costs. And, we can do this in a number of ways: negotiate prices decreases through order volume increases, partnering with a contract manufacturer, or even support the process of taking manufacturing on internally. These may all be viable options, but the truth is, waiting later in the product lifecycle is selling SS&P short. Waiting until maturity or even the decline stages of the product lifecycle caps the impact SS&P could have when it comes to not only optimizing budgets, but also innovation.
It's a symptom of a greater challenge for many Strategic Sourcing and Procurement Groups - a lack of strong collaboration between SS&P and other functional department stakeholders. Demonstrating SS&P's impact beyond cost savings remains a challenge in the industry and a topic to be addressed during the Institute for Supply Management's Annual Conference coming up in May. For many companies, functional departments simply see SS&P as an added obstacle to the process of obtaining the goods and products they need. As a result, particularly in direct materials sourcing, SS&P is brought in later in the Product Lifecycle. As a result, major opportunities are left on the table.
Addressing this continued challenge, Source One's direct materials sourcing experts have published a new supply management white paper titled, Strategic Sourcing Throughout the Product Lifecycle: Balancing Competitive Costs with Innovation & Speed to Market. The white paper, which includes case study examples, presents the business case for engaging SS&P at each stage of the Product Lifecycle, including Ideation, Production, Manufacturing, After Sales Service, and Product End of Life. The white paper aims to demonstrate Sourcing's value as a strategic partner and not just a resource for cutting costs.
The new mode will use one of Wal-Mart's buying teams for goods both meant for in-store and online purchases. By trying to manage items for both of these spaces, the company wants to mature in two sectors simultaneously, in a way that could be easy for customers to understand and efficient for suppliers behind the scenes.
A combined change
According to this report, the shift is intended to further blur the lines between in-store and e-commerce as Wal-Mart tries to bridge the gap between the two spheres. Reuters spoke to an unnamed "large consumer goods supplier" which told the source about the problems in the previous system.
All retail operations should perhaps note this new approach, as it indicates a dual strategy for handling the twin channels of online and in-store purchases.
Since the strategy also seeks to make the product offerings in both settings match, companies that want to follow suit may have to use new spend management options to make the best use of resources.
E-commerce set to expand
In a forecast for the current year, the National Retail Federation recently announced improved sales for the sector as a whole, but especially online. The latter channel could end up growing as much as 12 percent compared to 2016, whereas the highest estimate for in-store sales growth is 4.2 percent.
The lowest forecast for in-sales purchases would mean a .1 percent decrease from the 3.8 percent rate seen in 2016. While that number was up from the previous year, an overview of changes since 2008 has shown some ups and downs since 2013. However, every year since 2008 has seen some level of growth, the source said, except for 2009, when these sales dropped by 3.6 percent.
The changing world of retail
For retailers, acknowledging both growth rates could be the important task going forward. The physical store may still exert some influence over the customer experience, which means the system for handling supply needs to enforce strong relationships no matter where the sales are ultimately going to take place.
Digital technology is expanding its reach, enabling retailers to host online experiences within their stores as visitors enter. One way to keep costs low is to prioritize spend management for indirect costs that pose a drain on the company's resources as it tries to expand on a global level. The sourcing technology needs to be ready to address the needs of every individual entity involved.
Just like the analyst interns, I perform extensive research and evaluate data but rather than being directed towards client sourcing projects, my efforts support the internal marketing and business strategies for Source One. Being actively involved in the communications initiatives at Source One has helped me understand both the broad range of service offerings Source One provides and the expanding procurement, sourcing, and supply chain industries. I’ve experienced a variety of functions in the communications department to discover my preferred focus, which I have found to be with media and public relations specifically.
After observing the processes for arranging and sponsoring event and speaking opportunities in the fall, I’ve learned how we prepare for these occasions to demonstrate Source One’s presence in the industry. Now that I’m familiar with the process, I can confidently communicate with correspondents for the conferences and events we are interested in for the upcoming year. As the service offerings at Source One continue to grow, I had the opportunity to create webpages for new offerings and generating content for the website to demonstrate our capabilities and experiences.
These are simply a few examples of the many processes I've been involved in during my time at Source One. My understanding of the different initiatives, beyond how to execute them, has always been a priority for everyone I've worked with, from upper management to my direct supervisor. Besides the dedication to professional development, Source One also has a unique company culture. Even as the organization expands, they maintain a familiar environment that values work and personal life balance. No one gets lost in the crowd here, every member of the team contributes a particular expertise that contributes to the organization overall.
Megan Urbas, Corporate United, 2/16/2017
As the role of procurement professionals expands beyond cost-reducing efforts, the responsibilities included in the profession are increasing and the influence procurement has in other areas is becoming more significant. While safety culture isn't a direct responsibility, suppliers and facility management is, and as an extension of your organization's safety culture, you'll want to ensure suppliers and facilities meet local, regional, and national regulations to avoid costly fines and mitigate risk.
Standard Terms and Conditions in Your RFP
Charles Dominick, SPSM, SPSM2, SPSM3, Next Level Purchasing, 2/15/2017
Any procurement expert can argue that multiple factors of the RFP depend on specific details based on the organization and their individual goals, and can rarely be standardized. The terms and conditions for the RFP are mainly dependent on the market, and while they can be similar across other businesses that prospect suppliers are working with, these can still differentiate depending on the client. If a supplier can't agree to the terms and conditions you've provided in the RFP, the can be disqualified from the process fairly easily.
Do College Grads Have The Right Degrees For Today's Manufacturing Workforce?
Michael Cosgrove, ThomasNet, 2/15/2017
While the strategic sourcing function can contribute to just about any area of an organization, it is also influenced by many industries, including manufacturing. During the RFP stage of the sourcing process for direct materials or engineered products, procurement experts work directly with manufacturers as potential suppliers for these products. Recently, the industry has seen changes that are altering it's capabilities to be much more involved, creating a skills gap that manufacturing companies are responding to with worker training programs.
February 17, 2017
Here's a look at where Source One's cost reduction
experts have been featured this week!
While we prepare for the supply chain and procurement industry events of 2017, the Institute for Supply Management's annual conference in May is highly anticipated. Over the four day event, more than 2,500 global supply chain and procurement professionals will be networking, attending educational sessions, and getting exposure to some of the leading supply chain and procurement executive's through informative presentations. Source One will be hosting ExecIn, a sub-conference designed specifically for supply management leaders. The keynote speakers at ExecIn present exclusive sessions designed for executives at non-consulting organizations, that ultimately allow them to evaluate their processes and find opportunities for improvement in their business.
As part of this effort, the company announced it would buy more than 26,000 solar panels for use in eight current locations, and install them before the end of the year. The plan reflects a continuing interest in solar, a statement from the business said, and could potentially ensure power generation for at least 25 years to come.
While this is just one of the "green" tactics UPS is reportedly undertaking, the company's Facilities Procurement Director, Bill Moir, emphasized the importance of solar power specifically, as it connects to other aspects of production.
"Solar technology is a proven way to effectively and efficiently provide long-term power to our facilities," Moir said. "We have a significant number of facilities that are well positioned to deploy solar at scale and increase our sustainable energy options for our buildings and electric vehicles."
Is solar gaining steam?
The cost of using solar power may prove to be a big incentive for businesses. In December, Bloomberg reported on the changes in the industry, compared to the similar (but more consistent) wind power. As data from Bloomberg New Energy Finance showed, solar power cost finally dropped below wind late last year.
And while wind power was almost at exactly the same average price at $1.66 million, the activity also showed an interesting and definite downward trend for the industry, suggesting it might continue in this direction in the future, offering further eventual cost efficiency for companies as a whole.
An international interest
Solar power might have multiple advantages to companies expecting international business. In addition to granting them greater efficiency, these updates could put companies on the same playing fields as efforts in other countries, either in competition or in alignment.
China's National Energy Administration recently stated that it is in the midst of a plan to increase the amount of photovoltaic capacity it uses over the course of the next three years. Reuters reported on the country's new claims to have added 34.54 GW last year, making it the "biggest producer of solar energy by capacity" on the planet. This perhaps reflects the statement made last April cementing both the Chinese and U.S. commitment to the Paris Agreement for combating climate change.
Whatever this means, it does show a growing use of solar power in different regions, perhaps paving the way for more pressure to be placed on businesses that want to expand their commitments among other activities. As UPS shows, it doesn't have to be among that large a percentage of facilities to make a notable difference.
Along those same lines, global sourcing could still be a significant tool for new plans.
Intern Corner introduces the students and young professionals that are joining the Source One team as analyst interns throughout the year. These individuals are sharing their backgrounds and what brought them to Source One, and reflecting on their experiences so far at Source One while discussing their intentions and aspirations for the future. Through the internship program, these students receive hands-on experience in strategic sourcing efforts and supply chain processes that allow them to see their potential with a career in consulting.
Source One provides services and solutions for businesses from a variety of industries, which creates opportunity for students seeking early career experience to apply their education whether focused on supply chain management, engineering, accounting, or finance. This spring, Source One welcomes Vincent, Maxwell, and Nick as analyst interns from both our Chicago, IL and Willow Grove, PA locations. Learn more about them below:
While I still have much to learn about the role, the surrounding support network has been tremendous in helping me to transfer my financial knowledge to the practical situations I am being tasked with handling every day.