ICYMIM: July 24, 2017

Source One's series for keeping up with the most recent highlights in procurement, sourcing, and supply chain news week to week. To stay updated on the latest supply management articles, check in with us every Monday.

IT's Role in Procurement Digitization
Andrea Brody, BravoSolution

Procurement's relationship with IT is much more involved compared to their relationship with other functions in an organization. Both share the common initiative of improving business processes throughout the company through automation, and strive to reduce costs while increasing efficiency. When IT and Procurement can collaborate effectively and support one another, both teams can optimize their results and reach their greatest potential. Procurement can deliver more value while IT has better control over the security and performance of systems throughout the organization. 

Deconstructing Procurement
Kelly Barner, Sourcing Solved, 7/14/2017

In this conversation, Kelly Barner describes the challenges that come with deconstructing traditional approaches to procurement and why it's necessary for professionals in this industry to make this change now for their organization. This includes a focus on bringing together other functions in the business, such as IT and Finance, to understand the greater goal of driving value and not substituting current processes for less expensive options. Translating that procurement offers innovation, not just cost reduction, and can be utilized even without the need to reduce spend. 

The Advanced Supply Management Phoenix Takes Flight
Michael Lamoureux aka The Sourcing Doctor, Sourcing Innovation, 7/24/2017

Advanced spend analytics can discover savings throughout every category of spend by identifying value across the overall spend from consistent suppliers of products or services in multiple categories. The results of this evaluation will allow you as the buyer to create beneficial supplier relationships and begin SRM best practices if they aren't already in place. By utilizing this partnership as more than transactions between buyer and supplier, your organization has the opportunity to realize innovative solutions that can reduce costs for both you and your suppliers. 

Source One Round Up

July 21, 2017

Here's a look at where Source One's cost reduction experts have been featured this week!


In early June, Source One's spend management team joined Corporate United for their Road to SYNERGY event in Baltimore, Maryland. Now Source One is heading down to Dallas, Texas in August to meet with industry professionals local to the area through out the educational sessions and networking opportunities available during the one-day conference. This series is allows members across the country to learn from the leading service providers who offer solutions in the specific categories they possess expertise. Source One is included as a Premier Sponsor of the Road to SYNERGY events and has appreciated meeting with members all over the U.S. throughout the series. 

As the summer winds down, we're gearing up for all the industry events the fall season has in store. First on the list is the third annual networking event hosted by Source One's Chicago office. This happy hour invites businesses in the area out to Chicago River North for a social event without the sales pitch. We're also celebrating our 25th anniversary this year, and hope our business partners, clients, and friends in this part of the country will come out and recognize this milestone while enjoying a few drinks with us. If you're interested in connecting with other Procurement and Strategic Sourcing professionals, visit the event page to find out how you join us on September 14th. 
While with a group of friends recently, someone brought up that they heard Michael Phelps was going to be racing a shark. Needless to say, we spent the next 20 minutes debating this topic – primarily just how they were going to pull this stunt off. For those not familiar with “The Battle for Ocean Supremacy” as its being promoted, Discovery Channel announced earlier this summer that Michael Phelps will be racing a great white shark to kick off Shark Week 2017.

This conversation got me thinking how impressive Shark Week is from a marketing perspective. After nearly 30 years, Discovery Channel is still able to pull in millions of viewers each year to watch seven days of programming about sharks. Even I find myself tuning in at some point during the week to watch the jumping sharks off the coast of South Africa and to see if they finally solved the mystery of where great whites give birth.

So how does Discovery Channel pull this off? They capitalize on their brand awareness with creative content. In this post, I will highlight some of the key tactics that they have used in recent years, aside from awe-inspiring shark videos, of course.

Social Media
Discovery has been integrating social media into their programming for years with live feeds from Twitter displaying on-screen during programming to social media Q&A sessions with experts. Additionally, they utilize branded hashtags to promote both the program itself, as well as individual episodes during the week. Finally, this year they will be working with Snapchat to develop custom content that will be available to users during the week, including filters and other content libraries (i.e. stories). Discovery is doing its best to bring audiences closer to the action of Shark Week through these social media interactions during their programming.

Celebrity Marketing
Partnering with Michael Phelps is only one example of Discovery using the fame and appeal of celebrities to promote Shark Week. They have brought in hosts for the week from other Discovery Channel personalities such as Mike Rowe and The Mythbusters to comedians Craig Ferguson and Andy Samberg, and even the author of Jaws, Peter Benchley. Beyond that, other notable personalities have been featured in programming including Paul Walker, Rob Lowe, Blake Lively, Seal, and more. In addition to that, Shark Week receives numerous endorsements each year from celebrity fans via social media posts, whether intentional or not. By capitalizing on these individuals’ popularity and influence, Discovery is able to expand their reach to more potential viewers each year.

Brand Partnerships & Sponsors
Along with celebrities, brands also hop on the Shark Week bandwagon through partnerships and sponsorships – with everything from movie promotions, custom products, co-branded content, and more. For example, as a sponsor of the 2012 program, Volkswagen created a model of their car to drive on the ocean floor. Also, last year the move The Shallows (a movie about sharks) used this programming as a promotional opportunity. These partnerships have also resulted in limited edition shark-themed products, such as with Dunkin Donuts and 7-Eleven. Other companies, simply get wrapped up in the excitement of Shark Week and create oceanic content.

While Shark Week will always have its die-hard viewers, the challenge Discover continually faces is keeping those fans engaged and growing their audience year-over-year. It will be interesting to see what new and innovative content they develop in the years to come.

And for the record, my money is on the shark (sorry Mike).
Source One is a consulting firm that provides strategic sourcing services and procurement advisory solutions to companies around the globe.  One of the ways we provide support to internal corporate procurement and sourcing teams is through the use of contracted labor when companies have a need for on-site short term support.   However, we find it’s not always easy for organizations to engage with providers such as ours for this type of labor; and we find that it is often due to a fundamental misunderstanding between contracted labor and temp labor.  More specifically, there is often confusion about what you get and how costs are modeled for traditional temporary labor versus contract labor.  This is often due to HR being involved in the mix and/or having a rigid procurement process for the onboarding of procurement temp/contingent labor.   This post is intended to help arm you for the conversation/negotiation that you might need to have in order to ensure you get the RIGHT resources in place to fit your temporary procurement talent needs.

While the below is very oversimplified, let’s try to look at it at a high level. We’ll try to break down three of the most common ways that procurement contingent labor costs are modeled.

  • Temporary Labor – Temp works are typically employed by a temp agency for limited periods of time.  While these individuals are sometimes also called “contractors,” the reality is they are usually employees of a temp agency, and the agency itself pays them their salaries and benefits. In many cases, these types of resources are able to purchase benefits from their employers.   Temp staffing firms typically charge a markup on top of the wage rate (inclusive of overhead charges and taxes) in order to establish the “bill rate” that the temp staffing provider charges. Many times, temp labor providers can provide help for as little as a one month period.
  • Independent Contractors - Independent Procurement Contractors are typically individuals who work for themselves and handle billing directly to their clients.  They are often much more experienced and specialized in the procurement space, and as such bill at a higher rate.  In most cases, these contractors bill as 1099 workers; and in some cases might bill through a third party agency or have their own LLC set up for billing purposes.  They typically seek out engagements that will last 3 months plus.

  • Consulting Firm Managed Services – Consulting Managed Services firms typically have their own highly experienced and specialized procurement resources.   These resources are managed by the consulting firm and may consist of employees or employees and sub-contractors.    The rates are often similar or slightly higher than those of independent contractors, but may have the additional flexibility of getting down to an hourly rate (vs daily, weekly, or monthly).  Consulting firms will typically not be transparent with their cost margins and markups, similar to independent contractors.
Now let’s take a look at the differences in the types of workers and procurement positions each type of supplemental procurement solution provider may provide, and the pros and cons of each procurement labor supplement solution:
  • Temporary Labor – Typically, temp labor firms are providing resources that are of a more tactical skill set than alternative procurement providers.   More specifically, they tend to be acceptable places to turn when you need transactional jobs; such as placing purchase orders or reviewing inventory cycles; but should not be relied upon for category strategy, analytical or negotiation skills.   While the cost of this type of labor is often the cheapest, it often would create more harm than good to deploy this type of solution into areas that have large spend or strategic spend.  Think about it rationally, and it makes sense.   Good procurement professionals are in very high demand right now, and the pay scale is increasing.    To find individuals that are ready on a moment’s notice for a low cost means that you are getting a low skill, junior, or unreliable resource; or someone who is temporarily in-between positions and could leave the temp position at any time to pursue greener pastures.   Additionally, typically a temp provider provides no management responsibility or supervision of the resource; and instead relies on you to manage them. 
    • Pro: Low Cost, Rapid Deployment, Quick to Scale
    • Con: Low Skill, Tactical Focused Only, High Turnover, High Degree of Management Require
  • Independent Contractors – If you only have a need to fill a singular position, and you don’t see that role expanding; and independent contractor might be right for you.  Typically independent contractors are highly capable, self-managing, more experienced, and bring a particular focus and subject matter expertise in a particular subject/category.  However, some have a tendency to chase the next big gig; meaning turnover is a risk, they don’t have the ability to scale (since they are one individual) and they have the most time consuming interview, onboarding and ongoing financial/billing management costs.
    • Pro: Highly Specialized Subject Matter Expertise, Self- Managing, Reliable, Accountable for Results
    • Con: Can Be Expensive, Moderate Risk of Turnover, Typically Seek Longer Term Gigs, Can Be Very Time Consuming to Find, Onboarding and Interviewing Can be Time Consuming, Can’t Scale Beyond Their Own Small Network of Other Contractors
  • Consulting Firm Managed Services – Often, the best of all worlds is to use a managed services firm to supplement your procurement or sourcing team.  Though, admittedly, this can be a bit confusing as well.  A managed services firm can help provide resources utilizing their own staff in an offsite capacity; but can also place individual contractors on-site for you.   This means that they can not only place a named individual onsite, but they can provide access to a broader team; often on an hourly basis.  That broader team can do things like provide back office analytical support; expertise and subject matter experience in categories outside of the onsite individual’s own capabilities; and can generally help ramp up and down more quickly.  Consulting firms also typically assume greater responsibility and accountability for their teams than a traditional temp labor firm.  You also can rely on them to prescreen candidates and have confidence in the reliability and work product of the on-site people they would place; which is something you can’t always say when you individually bring in direct independent contractors.  And, consulting firms typically have knowledge bases, templates, previous project results, tools and technologies that will help their team perform faster and better than your internal team could typically do on their own. 
    • Pro: Self Managing, access to institutional knowledge and category benchmark data, multiple SMEs and Skills, can get to hourly instead of daily or monthly commitments; can flex up and down quickly via offsite support, they remove the individual interview component of hiring a contractor.
    • Con: Not as cheap as a traditional temp worker (but returns a high turn on investment).
The above is very much an oversimplification of the temporary procurement labor landscape; but it gives you a better understanding on how to build a business case with your HR team and controllers of budget on why you probably should not be chasing low cost temp labor.    

One major problem when HR departments, MSPs, or VMS staffing solutions get involved is that they want to have negotiations with your temp labor provider on controlling markups.  While this is a valid sourcing strategy for traditional temp labor firms; it simply does not apply to independent contractors or consulting firms.   Your task will be to help communicate why you may need to deviate from this type of thinking; and show them that the total Return on Investment of more experienced labor is much more important than keeping an ultra-low hourly rate for support.    

The below decision matrix can help you understand some of the key decision points in selecting a procurement labor provider:

And this table gives you an idea on which type of procurement temp labor provider you should be utilizing based on the job requirement:

And of course, the easiest way to solve your staffing and procurement temp labor and contractor needs is to simply call Source One.

Tuna company commits to supply chain change

Making a sustainable, compliant fishing supply chain can put a lot of pressure on companies, but big corporations still strive to be better. That could be one of the lessons companies take away from the recent announcement from the tuna business known as Thai Union Group.
Working together
On July 11, the company and Greenpeace released a joint statement detailing shared efforts from both organizations to enforce change. According to this release, the new agreement focuses on multiple different improvements meant to enhance both the quality of life for laborers and the habitat quality of marine life affected by their operations as well.
This includes everything from a bycatch mitigation best practice implementation plan set to appear later this year to an audit program and ethical recruitment practices. Taken as a whole, the agreement could be a major milestone for green commitments in fisheries, especially given the immense size of Thai Union Group and its holdings. As with all major changes to big companies, this could have an extra impact if it proves to be a working model that others in the same industry can follow.
In an article on this development for National Geographic, Greenpeace International Executive Director Bunny McDiarmid wrote about the decision and what Greenpeace's role will be in keeping the company accountable.
"At our request, Thai Union has agreed to pay for an independent third-party audit of their progress on this agreement in just 18 months' time," McDiarmid said. "We will build on the momentum created by these reforms and demand that other seafood businesses step up and follow suit."
"Thai Union Group seems to specifically be looking at some of the recurring issues found in fisheries."
Persistent problems
Some of the issues the agreement aims to fix can apply to supply chains and sourcing in general, but Thai Union Group seems to specifically be looking at the recurring issues found in fisheries, mainly poor regulation for workers and a lack of information on catches.
Despite the awareness others have brought to these issues, there is still much at stake, and the confusion within the supply chain could be enough to dissuade some companies from investing in the supplier relationship management tools they need to course correct.
Is insufficient monitoring the root?
Even though there are many actions Thai Union Group is committing to as part of the agreement, ultimately it seems that the biggest problem is the single one of transparency, or the lack thereof. A 2015 report from Oceana (the most recent of its annual reports available) listed transparency alongside other priorities for companies in heavy fishing countries.
The same report also said that "illegal, unreported and unregulated" fishing was responsible for as much as $23 billion in economic losses each year, as well as more than a fifth of the total amount of fish caught annually. This source also cited data showing an uptick in yellowtail flounder and redfish in the Atlantic Ocean after fishing limits were proposed in the late 1990s for each of these species.
In the effort to follow these and similar trends, businesses in fishing and other food industries might all need to look into new ways to measure activity.
When online shopping was first introduced, consumers jumped at the opportunity to make purchases that would be delivered straight to their door without ever leaving the comfort of their home. This was back when shipping took multiple weeks, and online shopping was mainly utilized for items that couldn't be purchased from local brick and mortar stores. Amazon aimed to become truly competitive with traditional retailers and began offering a wide variety of household items, health and beauty products, sports equipment, and much more. The expansion of their fast delivery options, from two-day to two-hour has allowed them to offer perishable grocery products that raises concerns for an industry that was otherwise safe from the competition of e-Commerce. Amazon and other online retailers aren't showing signs of slowing down any time soon, and the opportunities for e-Commerce's future are seemingly endless. 

Check out this infographic provided by Villanova University's Online MBA Program, and visit their site for the full story. 

Inside the mind of the Corporate Buyer: Supplier Diversity Trade Show Etiquette

The supplier diversity business trade show season is currently in full bloom.  Companies are strategizing over which events to attend, who should go to represent their company, and what their targeted list of potential clients should be.  As a former corporate buyer, I have several tips that if implemented, can increase a diverse supplier’s ROI with these events:

1)      Never ask the potential customer’s Buyer/Rep: “What does your company do?”

Usually most organizations publish a list of companies having booths at business fairs in advance. Attendees of these events should use that list to do research on the businesses they wish to target in advance of the fair.  Not doing so shows a lack of maturity in your sales strategy.

2)      Focus on demonstrating how your business can help their company.

As a salesperson, it is your responsibility to explain the benefits of a new company buying your products or services, not the other way around. Will your ‘X’ provide improve speed, quality, or cost as compared to the company’s current supply chain partner? If this is a new service, how would it help a company gain an advantage over its competitors and increase market share?  If you cannot clearly state these reasons to a potential customer, you have more work to do.

3)      Being a MWSBE cannot be your only value proposition.

Each time a Procurement Professional makes a supplier recommendation after an RFX, she or he places their reputation on the line.  If something goes wrong, they will receive some blame for leading the process that recommended a supplier that failed.  Because of this, evaluation criteria for RFX’s include several different factors, including but not limited to cost, quality, speed of delivery, etc. Being a diverse supplier is a plus, but it cannot be your only differentiator.
4)      Know your competition, and why your value proposition is better than theirs.

Be able to speak specifically on how doing business with your company instead of your competition would be beneficial to the buyer’s company. 

5)      Register as a supplier on the prospective client’s website.

If a prospective company has an online supplier registration (OSR) tool, be sure to fully complete the registration of your company prior to the event.  Be prepared to upload any diversity certifications you have obtained.  Why is this important?  These tools are normally the first place a buyer goes to start building a potential supplier list for RFX’s.  At a glance, buyers will choose to discontinue or pursue investigating your company further based on this information!  View these opportunities as mini RFI’s.  Your chances of being invited to RFX’s could solely depend on the breadth and depth of information provided here.  If the potential client does NOT have an OSR Tool, it is appropriate to ask the buyer/ trade show representative how can your company get on their radar.  

By keeping these five simple steps in mind, I guarantee you will leave a positive impression on the potential customer.  The rest is up to you.  Good luck!  

Prioritizing the innovative procurement programs that will last
Procurement management can benefit from new technology, but it can also be tough to tell which methods to prioritize as part of a transformation effort. Companies like Apple and Amazon have historically gained attention through big "moonshot" ideas that could take hold or fade away. Although some of these innovations can cause ripples throughout different logistics sectors, others might not have the same staying power.

The underwater storage proposal
Take Amazon in particular. The company has helped spark conversations about the role of drones in logistics thanks to its ambitious plans, and it's likely that we'll only see more of this in the future. But there are other projects Amazon may pursue which could simply fail to take off. CNET, for example, recently led readers through a detailed patent for underwater storage centers.

According to the filed patent, the centers could contain the means to keep packages submerged until it was time to transport them. CNET called the idea "crazy" and Fast Company also noted that the patent could simply be speculation and not actually lead to anything.

It begs the question: How do companies know which innovative risks are worth taking? A few years ago, it may have been difficult to see the drone-based supply chain as any less of a leap than these underwater facilities.

Telling forecasts
Related predictions for the future may tell us something about the type of logistics and supply chain advances to expect. A July 14 press release from MarketsandMarkets said that 2023's industrial robotics sector will be worth more than $71.7 billion, with articulated robots showing the highest degree of growth between now and then. These robots could reportedly influence industrial production.

Another forecast projects the drone market itself. Goldman Sachs asserted that commercial use of drones had the "fastest growth opportunity" of all applications, alongside civil government use, with an estimated $13 billion going toward these uses between 2016 and 2020.

"How do companies know which innovative risk is worth taking?"
Breaking the potential use cases down even further, the source said that the construction market would be responsible for owning the largest share of these drones, accounting for more than $11 billion. Other top uses, as the source predicted them, could include agriculture and insurance claims.

As big as it may seem, the total commercial industry contribution to possible drone use is actually small compared to the $100 billion the market may represent during this same timeframe. Outside of business, the largest potential drone users were said to be the military and consumer sectors.

An interest in disruption
In March, Fabian Heileman of Earlybird Venture Capital said that there were several signs of the need for change within logistics as it stands, even calling the industry "broken." Some of the indicators included a growing preference for fast processes, a new digitally-oriented mindset among customers and a fragmented market along with the potential efficiency that the digital options already available.
To guarantee stability alongside whatever trends arise, businesses can perform research and use insights from gathered data to source responsibly, whether a major change is looming or not.
Who's driving the job market?
Whether you are a professional seeking a new job or a recruiter seeking new talent, you more than likely have established your own opinions on the current status of the job market. Either way, having a general idea of patterns and trends within the market can offer insights that can support you in your search. These trends can also help recruiters to ensure they are appealing to talent and assist job candidates with discovering employers who could be the best potential fit for their career goals.  To understand the general priorities of the talent pool will allow recruiters to attract the top talent who will be most effective in contributing to the future of their organization and meet the concerns of stakeholders as changes in employees can shift company culture, management approaches, and even compensation packages.

In today's workforce, employers are becoming increasingly concerned about finding new talent to replace the Baby Boomers as their generation begins to step down from upper management and decision making positions to retire. These executives in particular will not be easy to find replacements for, and a recent study by the MRINetwork reveals that more than 70% of recruiters believe they are not prepared for the shift that is soon to take place as Baby Boomers step down and their successors from younger generations take over. While many organizations are attempting to implement programs that will retain this particular group of employees, their efforts can only delay an inevitable change that enterprises everywhere will have no choice but to accept. With the need to fill these stakeholder's places, are Millennial and Generation X and Y professionals getting the upper hand?

Recruiters seem to think so, as 90% of those surveyed said they believe today's job market is driven by the candidates. But the more than half of the candidates in the survey disagreed, and a similar amount of employees agreed with these candidates as they consider the market to be driven by employers. The recruiters who were surveyed explained that younger generations prioritized a work-life balance, and require their Human Resources and management teams to meet these demands that stray from previous generations habits that included significantly longer work weeks that surpassed the average 40 hours. Candidates are also demanding advancement opportunities and generous compensation packages before committing to new employers, as these two priorities can be the deciding factors when making major career changes.

Check out the complete results of MRINetwork's Recruiter Sentiment Study.

ICYMIM: July 17, 2017

Source One's series for keeping up with the most recent highlights in procurement, sourcing, and supply chain news week to week. To stay updated on the latest supply management articles, check in with us every Monday.

Against the Odds: Four Keys to Procurement Outsouring Success
Philip Ideson, Art of Procurement, 7/06/2017

A service provider that demonstrates innovation, offers subject matter expertise, and possesses market intelligence is a valuable partner for any organization. If both parties can take a strategic approach to the relationship, it can be a beneficial partnership for everyone involved. If you're considering engaging a firm to access their insights and expertise, there are a few things you can do to structure this partnership to deliver value that surpasses short term cost savings. A successful relationship is flexible, and includes a team approach between the buying organization and service provider. Check out these suggestions to unlock hidden potential in your outsourced procurement partnership. 

Why Can't We Get No Satisfaction? 
Michael Lamoureux aka The Sourcing Doctor, Sourcing Innovation, 7/14/2017

Now more than ever, professionals in the procurement industry are emphasizing how long term success and overall value are priorities over short term cash savings. While they strive to do the best they can, hard constraints from stakeholders can hinder their ability to select the best possible solution for certain situations. Even with modern Procurement and Sourcing solutions, more than 40% do not possess modern spend analysis solutions that could be especially supportive to the professionals in this function. And for remaining percentage that do have access, these tools are often outdated or offer a negative user experience, demonstrating that an investment in this area could in turn be an investment for other functions in the organization.

The Recruiter's View: Top Hiring Insights of 2017 
Nysha King, MRINetwork, 07/06/2017

In a recent study conducted by the MRINetwork, data gathered from recruiters and employees offers insights on why attracting the ideal talent has become a struggle, and what can be done to overcome this challenge in the recruiting process. Factors like workplace expectations and traditional management strategies have changed as younger generations begin to fill these roles and introduce their own approaches to office culture. While recruiters are working to make this adjustment, they are also recognizing that the market continues to be candidate driven, as it has for several years now due to decreases in unemployment rates throughout the country.  

What 'smart cities' may mean for the supply chain
The growing role of the Internet of Things isn't just an opportunity for businesses to improve their own logistics functions and procurement management. It's also a chance to connect with a wide-reaching trend, as the promise of connecting various different devices increases. The IoT innovations that are most exciting seem like they will coexist, creating some possibilities for companies that want to enhance their current shipping practices.

An IoT News piece recently examined this potential future, exploring the way that cities equipped with intelligent software and sensors could work with supply chains for efficiency, and also help support it. According to this source, the capability for this already exists. However, that doesn't mean there isn't still work to be done to achieve the goal of smoothly functioning logistics in cities that adapt to available systems.

What is "smart" about these cities?
Translating the infrastructure needs of cities to the digital world could, in an ideal world, have several dramatic impacts. A post on NZTech explained these as they would apply to cities in New Zealand, according to the New Zealand IoT Alliance. That group's chair, Graeme Muller, mentioned a few of the uses for IoT-enabled cities, including new ways of gathering data to help inform policies, and, presumably, affect social change.

Muller specifically referred to a safety initiative in Wellington drawing from collected data.
"It's possible the logistics side could  try to meet smart cities."
"The data is used operationally to help make the city safer and the Wellington council is also using it to inform its new policy on homelessness," he said.

Though the source didn't particularly explore supply chain IoT usage, it did discuss the overall cost reduction that could come with the innovations. For a supply manager, it isn't hard to imagine the benefits of cities with lower crime rates, more efficient traffic management or other functions that can impact how shipments travel through an urban space.

More IoT planning in supply chain
If the cities themselves are evolving, it's possible the logistics side will be ready to meet them, at least based on current reports. SAP Leonardo, a smart system with IoT relevance is one of the platforms businesses might be able to use to improve and prioritize IoT enhancement. The company launched a series of IoT Solutions at a recent event in Frankfurt, including tools for manufacturing insights and end-to-end tracking.

Like the infrastructure benefits in a smart city, a supply chain stand to harness data and potentially allow for managers to make smarter changes with IoT. A key aspect of this promise is the ability for integration and collaboration, between solutions and, perhaps eventually, on a grander scale. An IoT agenda piece for TechTarget also mentioned the importance of a collaborative approach for furthering smart city development, at least based on the oneTRANSPORT trial program.

Regulation and oversight
Along the same lines, businesses and city planners alike need to be ready for what the Internet of Things really offers. Along these lines, an integrated spend analysis approach can help increase transparency before IoT-related devices become more commonplace.
Source One Round Up

July 14, 2017

Here's a look at where Source One's cost reduction experts have been featured this week!


Bot Technology: A Procurement Expert's Thoughts
Ken Ballard, Buyers Meeting Point, 7/11/2017

Apple's App store has been offering users thousands for applications for almost a decade, but there's a new type of software application in town. With artificial intelligence on the rise companies are experimenting with bot technology, which runs on scripts over the internet to pull data from other places and improve the function of existing applications through updates. Facebook specifically has experimented with human versus bot and bot versus human to demonstrate the new technology's ability to negotiate. Automated negotiations could support e-Sourcing initiatives as negotiations in these processes are still completed by human interaction with the system.


Members of Source One's spend management team accompanied partner Corporate United as they got started on their Road to SYNERGY tour in early June, en route for their first stop in Baltimore, Maryland. The one-day conferences on the Road to SYNERGY invite industry professionals local to select regional areas across the country to participate in engaging conversations, educational workshops, and informative presentations from supply chain leaders. Members in Dallas, TX are preparing for the next stop on the Road to SYNERGY as Source One and CU travel down south August 15th to host the next event in the series. 
On this day, 25 years ago, just as Source One was on its way to becoming a leading provider of strategic sourcing and cost reduction services, 386BSD – frequently known as “Jolix” – was officially released to the public. As one of the early operating systems, Jolix was responsible for determining basic computer functionality, but soon was overtaken in popularity by its competitor, Linux.

Despite Jolix’s 1992 launch compared to Linux’s 1991 launch, Linux proved to be the more advanced system, leading to its swift adoption into major computing markets: today, Linux is the primary operating system for Android products, while out of the top 500 super computers in the world, 498 of those computers run on Linux.

Thus, if its popularity is any indicator, Linux (and even its competitors) remain fundamental in Source One’s day-to-day IT strategies. As a part of Source One's portfolio of procurement solutions, Source One's IT Sourcing team works with clients to identify cost-effective, high-quality,
IT software and hardware. 

If one thing is for certain with computing, it is this: we have basic operating systems, like Jolix and Linux, to thank for our current state of technology; without these fundamental building blocks, the way we interact and operate in the world through technology may be very different today.
25 years ago, a star procurement and consulting firm – Source One Management Services, LLC – was born! It was destiny that led to Source One’s inception in the greater Philadelphia area: just at the dawn of the internet, corporate buying teams were burdened with identifying suppliers through experience and word-of-mouth alone, in turn channeling a communicative disconnect between businesses and manufacturers.

But with the inception of Source One, suddenly, this buyer-supplier relationship was about to change for the better. Guided by principles of optimizing spend and reducing costs while producing the highest-quality products and relationships, Source One began offering a plethora of initiatives to professional firms: from strategic sourcing to pinpoint opportunities to broaden product services, to benchmarking practices to optimize value, Source One has provided novel ways to bridge the gap between businesses and suppliers since Day 1.

Since its humble beginnings in 1992 as the firm-next-door, Source One has truly blossomed over its 25-year lifespan: after the onboarding of CEO Steve Belli in 2003, Source One’s core-service offerings shifted to accommodate the launch of its own, free, eSourcing website in 2006, WhyAbe. By 2008, Source One also moved into the blogging sphere through its Strategic Sourceror platform, a Google-verified news source. By 2011, Source One’s publications included Managing Indirect Spend, a book detailing pertinent procurement practices. Then, in 2014, Source One opened its second branch in Chicago, while in 2015, Source One partnered with ISM and sponsored their exclusive, executives-only conference. Finally, Source One finished the year strong in 2016, by launching its online spend-analysis service, Spend Consultant, concluding with its soon-to-be relaunch of WhyAbe come the later-half of 2017.

While Source One has certainly grown and evolved over the years, our mission of enhancing procurement practices through offering competitive consulting tools and sourcing skills  has remained the same. So today, Source One pays homage to these roots and says thank you – thank you to all our clients, employees and even our competition that made it all possible. Cheers to another 25 years in the rear-view mirror!
As grocery shopping becomes the next frontier for tech companies to conquer amid the Amazon’s and Peapod’s of the world, it is difficult to remember that food is not a guarantee for everyone. According to Feeding America, about14% of Americans experience food insecurity, which is defined by the USDA as “consistent access to adequate food is limited by a lack of money and other resources.” On the flip side, up to 40% of food goes towaste each year. Clearly, the basic math indicates that our country’s hunger problems are not an issue of lack of supply, but an issue of disproportionate distribution. So where does that 40% of waste come from? According to research from the NaturalResources Defense Council (NRDC), food waste occurs in each and every step of the supply chain.

At the source, food is lost on farms due to weather, market conditions, and staffing issues among other causes. When farms sell their product to suppliers, the culling (QA) process removes any produce with blemishes or dents that would likely not sell on the shelves of glossy grocery stores. The food lost during this step in the supply chain is perfectly edible, but it might not look pretty to the natural eye.

Food is also wasted when product is damaged or spoiled during the distribution and transportation processes. Damages along the way might also occur in packaged food where one mistake taints an entire batch. For example, in a box with a dozen gallons of milk, if one gallon has a leak, then that entire box becomes unsellable goods even though the remaining eleven are perfectly fine. By the time the food makes it to the shelves, damages from employee and customer handling can cause otherwise perfect products to be labeled as unsellable and thrown away. Furthermore, when suppliers aren’t properly educating both their employees and consumers, lack of knowledge can cause the disposal of edible foods over fear of illness from expired product.

Of course, all of this waste comes at a cost to suppliers and consumers. According to the NRDC, food waste translates to about $165 billion per year (compare that to the Amazon/Whole Foods deal that cost $13.7 billion). Aside from any startling costs or figures, the core issue is primarily human rights: according to Food and Agriculture Organization of the United Nations, if just one-fourth of the food wasted globally could be saved, it could feed 870 million hungry people. Food is one of the most fragile goods to supply, but it is also one of the most precious goods on Earth. Studies have shownthat extended hunger can result in chronic disease, let alone the stress of having to manage the insecurity itself. As food delivery methods become high tech, it is imperative to remember how lucky we are to have access to food in the first place.

What options are available for reducing food waste? The answer has two sides. On a macro level, supply chains and supplier attitudes must shift in order to optimize distribution. Supply chains must be equipped to handle all distances, temperatures, and storage requirements. While food surplus is common in the restaurant industry as they strive to prepare their locations for demand from customers, overcompensating can often lead to food waste. In these situations food suppliers can consider adopting sustainable practices such as donating food at the close of business, which would otherwise be disposed of, to food rescue organizations in their area that donate the food to those in need.

On a micro level, consumers should be aware of their purchasing habits consider volunteering for food rescue organizations that redistribute food that would otherwise go to waste and share it with community organizations such as food pantries and soup kitchens. Non-profits across America are spearheading the food rescue movement, and it is mostly lead by volunteers. Organizations such as 412 Food Rescue in Pittsburgh, Lovin’ Spoonfuls in Boston, and City Harvest in New York City rescue millions of pounds of food using volunteers. Even these volunteer efforts require advanced supply chains to execute their missions. From the logistics of trucking to uber-like apps, food rescue organizations work on the cutting edge of technology to deliver food to the communities that need it the most.

As a college student and intern at Source One, it is helpful for me to remember these philanthropic opportunities as I apply my supply chain management capabilities inside and outside the office. My experiences at Source One, coupled with my work in food rescue organizations,  has enabled me to understand how each individual can play an important role in addressing hunger on a global scale. Truly, the skillset of a strategic sourcing consultant is invaluable, not just to businesses, but to our society as a whole. Food waste is a reality of our current consumer culture, but it doesn’t have to remain that way. As our population continues to rise, we must be proactive in eliminating unnecessary waste, as suppliers and consumers.  
Being a frequenter of some well-known chain restaurants: Panera, Dunkin Donuts, and Starbucks, just to name a few, I know that loyaltyprograms can give you some pretty great perks.

So here is the latest scenario, a couple months ago I used my “MyPanera” card and the employee at the register said “Nicole” or “Dennis,” and I responded with my name, however, I later found out that my dad had also recently gone to Panera and by responding with his name, Dennis, the employee said that he had a month of free coffee. Well, the next time I went into Panera, you can be sure that I responded with “Dennis” when the employee asked which account. Now, I attributed this to the fact that my dad often gets Panera catered for his work and therefore has visits Panera more frequently and spends additional. Therefore each time I now go into Panera, I type in the phone number and respond with “Dennis,” but lately there haven’t been any great rewards as the free coffee.

That got me wondering, how does the MyPanera loyalty program really work? Would it be better sometimes if I responded “Nicole,” and built up my own points? I just assumed that because my dad most likely went to Panera more often and spent more money that he would then be given more rewards….however this is where the “surprise” comes in.

Looking up the MyPanera reward program, I soon found out more about the types of free items you will receive: free food and drink items, invitations and exclusive previews, free recipe books, ideas for cooking, etc, “however, you will not know which rewards you’ll receive, or when you’ll receive them. The Panera website says ‘that’s part of the fun-it’s always a surprise.’” Well I mean I guess that’s nice to occasionally get some sort of surprise when you visit Panera, but for me I would rather know how many points equate to a certain dollar or visit amount and then what I can redeem that point figure for. Sure I might be getting a “surprise” of free coffee for a month now and then, but what if I knew that the more I spent translated into more points that I can redeem for certain items? I would then want to keep going to Panera and rack up the points in order to get another free month of coffee.

Like I said though, Panera isn’t the only one that has points programs. I also have the Dunkin app and have enrolled in the DD perks program in order to get rewards. The “points” program here varies from that of Panera, as “members earn 5 points for every $1 spent on qualifying products, exclusive of sales tax.” “A reward coupon for a free single serve beverage will be issued for every 200 perks points eared.”  Dunkin is incentivizing perks members to spend a higher dollar amount thereby earning more points. It doesn’t necessarily matter how many visits, because the points instead relate to the dollars spent. This works for me, I spend more at Dunkin such as throwing in a donut to my coffee order now and again, and then I get more points to a free coffee the next time. However, with the good there sometimes are bad parts of a loyalty program. For example, the other day for national donut day I soon found out that in the drive through even if both people have the loyalty program, only one coupon can be shown and therefore while one donut might be free the other must be paid for.

As you can see loyalty programs can be a great marketing tool to draw new customers to your business, and also retain existing customers as they continue to get rewards for repeat visits. Source One has extensive experience working with clients to develop their loyalty programs in order to increase sales, improve customer appreciation, allow for trial and error to pinpoint incentives that work well, promote business offerings, and expand consumer reach to an omni-channel environment. We have subject matter experts who are able to identify the needs within your company and match them to the most ideal partner.

So, while a “surprise” might be nice once in a while, consumers also need to understand how the loyalty program functions in order to reap the rewards of their purchases! Learn more about Source One's experience in strategic sourcing for loyalty programs.

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Over the last two weeks, we’ve discussed 7 problems Procurement Pros can make that can and will lead to problems while conducting a spend analysis.

In part one (click here), we reviewed issues of timing. In part two (click here), we went over issues of selecting suppliers to account for in our analysis.

For a full rundown of the issues, here are all seven once again:
  1. Ignoring time parameters,
  2. Not accounting for shifting spend trends,
  3. Ignoring low-spend suppliers,
  4. Not taking into account niche players,
  5. Improper cleansing techniques,
  6. Seeking too much granularity,
  7. Failing to act.

We’re in the home stretch now! The final three issues are less about the data we are pulling into our analysis and more about what we do with this data. In the end, we could have excellent data from the timespan and supplier coverage perspectives, but this alone won’t be enough if we don’t use our data wisely.

Improper cleansing techniques
One of the biggest issues that will prevent us from getting a good visual of our supplier landscape is improper cleansing techniques. As a simple example, consider the case of AT&T. At the outset, there are a number of ways this company could be named within the systems we are pulling from. “AT&T,” “AT&T, Inc.,” “AT and T,” “A T T,” and “ATT” are just a few that I have seen – and this name fragmentation is compounded when we consider AT&T’s cellular subsidiary “AT&T Mobility,” which falls prey to not only these same issues, but the chance that such spend records are lumped together with their wireline counterparts. Already, we have 10 possible naming conventions instead of two, with the added threat of consolidating the two different types of spend together erroneously. That’s a good bit of headache!

All organizations face this problem, but it can be most pronounced when:
  • Multiple supplier databases exist that aren’t tied together with some form of Master Data Management;
  • Different departments, business units, or other silos share the same pool of suppliers, but don’t seek to align with each other on said suppliers;
  • Mergers or acquisitions slam two completely separate sets of supplier bases together, at a time when rooting through supplier databases is likely low on either side’s list of priorities.

I spoke before about the domino effect of these issues, and it certainly comes into play here. If we are already of the mindset to mistakenly ignore the small fry in our analysis (see problem #3), then the heavy fragmentation of suppliers will only serve to make potentially big suppliers look insignificant. In other words, our spend with AT&T may be pretty large and warrant further investigation, but if we only see 1/10th of this spend split among all these different names, we may be tempted to ignore each of them entirely. It may require elbow grease to do so, but taking the time to identify alternative spellings and apply a single, universal supplier name is well worth the time.

Seeking too much granularity
Throughout these posts, I’ve tried to stress that due diligence is key. So why am I dialing back here? Isn’t granularity important to truly understand spend?

Yes and no. Ultimately, it depends on our ultimate purpose – In this case, our purpose is to set the stage for strategic sourcing initiatives. Good granularity, in this sense, is doing due diligence and understanding any niche players and how they impact the supplier landscape, as discussed in the last post. So what is bad granularity?

Consider the relationship between an organization and Staples. There is a lot of data that we could collect, right down to the number of blue felt tip pens compared to black ballpoints that get purchased. But why do we need this detail at this stage? Since our goal is to identify candidates for sourcing initiatives, all we need to know right now is how large our spend is so we can further qualify it as a candidate. To do otherwise and seek too fine a level of detail is to risk paralysis by analysis.

There are thousands of items we could purchase from Staples, Office Depot, and a number of other suppliers. The only thing we need concern ourselves with during this spend analysis is the aggregated total we spend with each supplier.

To be clear, there will be a time where we do genuinely want to know all about the types of pens we purchase at a granular level, hence my “at this stage” qualifier. There are plenty of reasons to want a clear understanding of our market basket once we go to market, but this comes into play during the later phases of the sourcing process… let’s first make sure we get to that phase.

Failing to act
Which brings us to our final mistake, failing to come to any sort of actionable conclusion. This one is simple: Think “trees falling in vacant forests” – the best analysis in the world means nothing if we don’t actively use it to advance our strategic sourcing initiatives.

It seems obvious, but this is a real concern. Let’s add up all our issues above to see how:
  • We spend too much time in trial and error trying to identify our correct spans of time (problems one and two)
    We face an uphill struggle connecting with end users and stakeholders to carve out out critical suppliers (problems three and four)
  • We fall to our own internal problems managing our spend profiles, or worry too much about details that aren’t important (problems five and six)

By the time we finish, our analysis may be out-of-date, upper management has lost drive for our initiative, we’ve missed opportunities because contract renewals have come and gone, or a combination of these things. And so, despite best intentions, we’ve failed to act.

Know These Mistakes In Order to Avoid Them
None of the mistakes or examples I’ve used throughout these posts are hypothetical. These are all problems we have seen working with clients over the years, and each of them could have caused big problems if not addressed. By understanding these problems in advance, we can know what to look for moving forward and avoid unnecessary delays and headaches.
Back in 2015, Amazon launched Amazon Business to provide industrial products and office supplies at exclusive rates unavailable for their regular consumer market. Buyers from small to large scale businesses compare suppliers in a variety of areas, and Amazon Business must take these specifics into consideration in order to truly be competitive with other MRO, IT, and office product suppliers. This is no small feat, as some of these suppliers have been in business for generations and are experts in their industry.

However, Amazon has some advantages of it's own, and it's becoming dependent on the buyers to determine priorities when evaluating the pros and cons of the increased supplier selection to find the best fit for their organization's needs. Most recently, Amazon has proven to be competitive in the MRO distribution market for pricing, account management, shipping because of their Prime feature, and more. While Amazon Business has it's strengths, their traditional distributor competitors have their own advantages, and only buyers can determine which supplier's offerings are the best fit for their organization.

Our latest infographic features a comparison between Amazon Business and a sample industrial distributor evaluating their strengths and weaknesses in areas that buyers prioritize the most when deciding on a supplier for their MRO, IT and office products.

'Chokepoints' report looks at critical food supply chain sites
Identifying the key points in any supply chain can help you prioritize your company's newest actions. A Chatham House report recently looked at the issues surrounding the food industry's major trade "chokepoints." The source defined these as coastal, inland or maritime areas which see a large amount of trade and could have huge effects on companies in the event of a disruption.

Seeing the supply network this way might be useful for benchmarking and other management processes as you take action to stop major losses. According to this report, the key chokepoints around the world don't get the level of scrutiny they should, and need support to balance out the risks.

Although there are clear geographic points that take prominence, this can also be a broad-scale, international concern instead of simply the focus of those shipping businesses that directly pass through one heavily-trafficked point or another.

Where are the chokepoints?
The location of the most valuable trade ports might not be surprising, but they can still be important for strategic planning. Some of the most significant maritime areas for crops such as wheat and soybeans, at least for the first 15 years of the new millennium, included famous trading areas like the Strait of Malacca and the Panama Canal. Each location serves as a critical passage for resources depending upon the market, with the Black Sea, for example, a possible boom area for wheat.

One of the main points of the study was the need to understand chokepoint weaknesses. Without a backup option, heavy traffic or other factors could pose serious concerns for companies reliant on a single major trade route. Some grain shipping paths, in particular, have no apparent alternative, leaving participants in possible jeopardy and putting all of the strain on single areas, when there could be better dissemination.

"Some grain shipping paths have no apparent alternative, the report said."
The ports are changing
Since this report mentioned specific ports and routes, it's also worth acknowledging the differing projects which could affect standard trade processes. The Panama Canal seems to be constantly undergoing changes and updates, some of which may affect typical activity or how you plan your own routes.

A July 10 press release said that the expanded canal has been in use for more than a year, and is part of the larger plan to reduce negative environmental impact. Alexis Rodriguez, Environmental Protection Specialist for the important site, mentioned the canal's efforts to reflect the environmental policies of the International Maritime Organization, after already reportedly cutting millions of tons of carbon dioxide emissions.

"Taking IMO's new strategy into account, the Panama Canal remains committed to reducing its impact on the environment to combat global warming, as we have since the Canal was inaugurated 102 years ago," Rodriguez said.

Aside from altering the ports themselves, strategies like these can also signal the more direct threats to food industries. In its "Engage the Chain" look at agriculture, Ceres recently listed the commodity exposure levels for different products. This source said that beef, dairy, fiber packaging and palm oil all had high impact on climate change.

Once again, having the facts available is an obvious benefit for strategic sourcing, especially when the status quo threatens to shift so rapidly.

ICYMIM: July 10, 2017

Source One's series for keeping up with the most recent highlights in procurement, sourcing, and supply chain news week to week. To stay updated on the latest supply management articles, check in with us every Monday.

Kelly Barner, Procurement Leaders, 7/5/2017

Certain traditional procurement best practices are now being recognized as more of a risk factor and experts are recommending reconsidering following these strategies. While consolidation and lower costs were once major goals, modern procurement is redefining what it means to deliver value. Their approach and the processes they follow are also being revisited, as they realize opportunity for the best result of any sourcing engagement comes from catering to the specific needs of not only the category, but the suppliers participating as well. Innovation and individualized solutions are Procurement's go-to for delivering the most value 

Greg Tennyson, Art of Procurement, 7/5/2017

Before attempting to implement any changes for a transformation, it is crucial to understand where your procurement organization is now. From there you can identify advocates and the managers who will support the transformation to ensure it is an efficient and effective transition for your organization. There is no single outline that will work for every company, the approach will need to be individualized based on values, overarching goals, culture and employee demographics of the enterprise. 

Christina O'Handley, ThomasNet, 7/5/2017

As we consider the future of logistics, and transportation and delivery of goods purchased through e-Commerce, traditional trucks, planes and trains can't compete with modern technology. Recent studies and trials with drones that can bother operate in the sky and on land are showing progress towards same-day or even same hour (depending on location) delivery for online shoppers. Once these drones meet safety requirement and are approved for use, online vendors are expected to invest and reduce transportation and shipping costs.