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Simply put, tail spend is one of Procurement's least favorite topics. More often than not, organizations let it fall through the cracks and devote their attention to obviously strategic spend.

They're potentially missing out!

While tail spend's value will vary from organization to organization, many Procurement teams stand to gain quite a bit from taking a closer look. Want to turn this afterthought into a source of strategic value? Check out these tips from Source One's spend analysis specialists.

Digging through historical spend data is often a tall order. Brian Seipel kicks off this week's episode of the Source One Podcast by describing a particularly taxing initiative. "By the end," he remarks, "we analyzed roughly one million transactions from dozens of disparate systems."

The hard work payed off. Now, the client is poised to act on cost reduction opportunities that could potentially lead to millions in savings. Not all heavy lifting, however, is warranted. In "an age where analytics reign supreme," Seipel suggests that organizations often find themselves conducting (and paying for) far more analysis than they actually need. What do they get for their troubles? Stalled initiatives and a heap of data points they'll never actually interact with.

How can Procurement tell which spend analysis efforts are worth their time and effort? Seipel identifies four questions that should help organizations make this decision.

1. What Impact are We Trying to Make?
"If you can look at a report," Seipel says, "and not know what specific challenge it helps solve, odds are good the answer is none." He advises Procurement professionals to check-in with end users to confirm that their reports are actually providing the value they're intended to.

2. How Much of an Impact Can We Expect?
Some spend simply doesn't warrant a lot of attention. While sometimes challenging to estimate value before digging into the numbers, Seipel cautions organizations against moving forward without at least some number in mind.

3. How Much Buy-In Can We Expect?
"I've seen plenty of projects die on the vine because of hesitation or outright hostility on the part of key stakeholders." Before investing in analytics, he encourages Procurement to ensure it has secured the enthusiasm of all relevant parties.

4. How Deep Does our Dive Need to Be? 
Seipel uses office supplies purchasing to illustrate the value of this consideration. He suggests the category is the perfect example of an area where ultra-granular detail is not necessary. He asks, "Will knowing how many black ballpoints versus blue felt tips make project identification easier?" Certainly not.

Subscribe on iTunes today to learn more about devoting resources efficiently and carrying out impactful initiatives.

January 18, 2019

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

New Whitepaper: 
Procurement in 2019 
Source One's spend management experts share their predictions for the year ahead. Topics of discussion include Procurement's ever-present talent gap, the perils of low visibility, and the numerous challenges associated with America's trade war. What's next for Supply Chain Management? Download today to find out.

New Blog:
How Supply Chains Should Adapt to the Trade War Truce
Michael Vu, Future of Sourcing, 1/16/2019
Source One Analyst Michael Vu comments on recent developments in the trade war between China and the United States. He focuses, in particular, on the temporary 'truce' announced over the holidays. Unfortunately, he suggests the reprieve will have little positive impact for the manufacturers and distributors affected by last year's string of tariffs. The soy bean supply chain, for example, will still contend with 25% tariffs.

New Podcast:
Stop Paying for More Spend Analysis Than You Need
In an era where data reigns supreme, organizations often devote considerable time and resources to the collecting, categorizing, and cleansing their historical spend. Often, this hard works pays off. In other instances, however, organizations are overenthusiastic about the potential benefit of data science. As a result, they find themselves working hard to collect data points and run reports they'll never actually leverage. How can Procurement decide which analysis is worth the effort? Subscribe on iTunes to hear Seipel's advice.

Upcoming Event:
Corcentric Symposium | February 13 - 15 | Orlando, FL
Designed to spark exciting conversations and bring out the visionary in you, Corcentric's annual Symposium features a packed agenda of presentations and workshops. Reserve your spot today.

This year marks the 101st anniversary of the 20th century's deadliest pandemic. Between 1918 and 1920, the Spanish flu infected an estimated 500 million across the globe and killed at least 50 million. A new study, published in the medical journal PLOS ONE, suggests that problems with the vaccine supply chain could make the next pandemic even deadlier.

Credited to a trio of researchers, the study examines the potential value of increased visibility into inventory levels. Throughout the 2009-2010 flu pandemic, state governments were encouraged to collect and report on data related to vaccine distribution. Few states, however, "collected detailed information on how many vaccines were administered in each location (e.g., a county or a census tract)." This meant poor visibility into both inventory levels and uptake rates. Without insights into the supply chain, certain areas were burdened with excess inventory and others were woefully under-served.

Vaccine supplies are often limited. This is especially true during pandemic periods. The most recent saw the Center for Disease Control and Prevention (CDC) develop an emergency distribution system based around population. "As new batches of the vaccine became available," the report reads, "they were allocated to each state proportional to the state's population."

At a glance, the approach looks like a fair and effective plan. In practice, however, it contributed to a slew of inventory-related issues throughout the 2009-2010 pandemic. Areas with high populations and low vaccination rates found themselves paying to store and dispose of unneeded vaccines and low-population, high-demand areas watched infection spread.

The study proposes an alternative approach where vaccines are distributed based on both population and demand. Its various experiments suggest the plan would both reduce the number of infections and cut leftover inventory by around 20% without sacrificing fairness.

Unfortunately, putting the plan into effect would require access to data that simply is not available at present. While certain state governments (Oregon's, for example) collect immunization data in detailed registries, the practice is far from standard. The report concludes, "our results indicate the need for greater vaccine inventory visibility in public health supply chains, especially when supply is limited, and uptake rates vary geographically." More effective cataloging and sharing has the potential to reduce infections and identify areas that might require additional public awareness campaigns.

Poor visibility plagues supply chains in all industries and across all regions, but vaccine distribution represents the rare instance where it's actually a matter of life and death.

I wrote about disrupting procurement last month, specifically in terms of MRO spend. I wanted to continue that discussion, but this time in the Marketing space.

As a refresher from last month, I have a bone to pick with the tried and true strategic sourcing toolbox we’ve all grown reliant on. Going to market with an RFP to aid supplier consolidation and direct negotiations is one example. The longer we rely on that toolbox, the smaller and more incremental our cost savings will become year after year. Thinking differently and creating disruptive change is what we need moving forward.

Disrupting Product Photography 

First, let’s outline some challenges organizations face.

Specialization Limits Options

Many products require highly specialized skills to produce impactful images. Jewelry, with highly reflective metals and stones, makes for a lighting challenge. Not every photographer can play with this light in just the right way. A limited number of experts creates a risk:

  • Fewer suppliers means a wider net. This increases time tables and costs as we factor in product shipments and makes in-person relationships difficult to maintain.
  • Negotiation leverage is on the supplier’s side. Scarce skills are expensive skills. Expect such photographers to command pricing and SLA negotiation leverage to your disadvantage.

Suppliers May Be Small

Unless you’re working with a big agency that staffs in-house photographers (or if you’re in the process of decoupling your marketing services), you may be working with some small studios. This can cause a few headaches:

  • Volume shifts can be a pain. Fluctuations in volume are hard to handle when you have only one or two photographers. Such small shops may not be able to handle large volume increases from you or another customer… Either occurring could spell trouble.
  • Lack of workflow support. There are plenty of ancillary services that support the photography workflow. Your relationship will sink or swim depending on customer service, inventory management, IT-based services for online portal management, and many other factors. Small studios may have an ineffective workflow if they don’t have resources to help here.

Traditional Solutions

Traditional solutions to the challenges above start with a specification review. Depending on how shots are used (consider hi-res magazine versus website images), lower specs could produce big savings without sacrificing image quality. Better SOP can be put in place: setting up process that minimizes expensive reshoots or post-shoot product changes could be very impactful.

Next, going to market will help in a couple ways. Including more studios in an RFP increases our chance of finding the right skillset we need. More competitors also moves negotiation leverage back to us, and helps to establish backup studios in the event of volume spikes.

Sounds good. But are we really solving our problems?

Disruptive Solutions

Everything we discussed boils down to a temporary solution. Errant stakeholders will eventually ignore SOP, and any market knowledge gained from an RFP will get dated as the market shifts. We’ll have to keep reinforcing SOP and keep going back to market every so often to keep up. Meanwhile, we’re still at the mercy of logistical problems and supplier workflow shortcomings.

Longer-term solutions could involve avoiding these challenges. Disrupting product photography means considering digital rendering as a replacement. Renderings are computer generated images with a few key benefits:

  • Digital renderings mean no more reshoot costs – renderings can be saved and edited without the traditional setup/breakdown costs of a photography set.
  • Logistics issues disappear since we’re working all digitally – no physical product.
  • Photography costs may go up or down depending on the market. However, as with all technologies, rendering costs are only getting more competitive thanks to technological advances.
  • Renderings go where photographs simply can’t. Renderings give customers the ability to move around and through tiny products to see every detail, and allow those intricate parts to be seen in an exploded view, highlighting them individually before coming back together again. Rendering also gives us entrée to Augmented Reality applications for more interactive customer experiences.

Should You Consider Rendering?

Is now the right time for you to cut ties with photography in favor of rendering? The answer depends on how challenging the photography process is for your organization and how you end up using product imagery in marketing campaigns. That said, if you haven’t explored rendering yet, it may be worth investigating.

Let’s end on a higher-level note. Forget the benefits or detriments to photography or rendering for a moment: Many teams have never considered cutting out photography services to begin with. We need to make sure our eyes open to new possibilities, or else we’d never consider a move like this at all. Put another way, don’t be so focused on diving into the traditional toolbox that novel (and potentially game changing) alternatives go by the wayside.

Of the new roles Procurement has embraced over the last decade, its role as a force for ethics and responsibility is among the most essential. Whether we look at ethics through the lens of environmental sustainability, human rights, or another one altogether, it's a consideration that more and more Procurement groups own.

Like its talent development efforts, however, Procurement's work to promote ethical behavior suggests a function that 'talks the talk' without always 'walking the walk.

Few professionals would dispute the idea that ethics are an increasingly vital concern. Last year, Supply Chain Management Review found that only 5% consider the issue unimportant. Despite their convictions, organizations are unlikely to emphasize their commitment by tracking and reporting on ethics metrics. A recent survey conducted by EcoVadis revealed that just 1 in 10 companies actually track ethics KPIs.

Supply chain ethics is just one of the evolving issues discussed in Source One's latest whitepaper: Procurement in 2019. Let's take a closer look.

Why Should Procurement Care?

Businesses that behave unethically not only leave themselves open to legal repurcussions, but also risk alienating (even losing) their customers. Young consumers, in particular, are eager to do business with brands they consider ethical, responsible, and purpose-driven.

A 2016 report by Nielsen even suggests that a majority will pay more for that guarantee. Other studies have also refuted the notion that ethical behavior is inherently costly for businesses. Quite the contrary. Loyola University Chicago's Supply and Value Chain Center asserts, "CSR will drive more revenue, profitability, and be a competitive advantage."

What Are Businesses Doing?

Ethical sourcing was an exceedingly hot topic throughout 2018. Dozens of fashion leaders joined forces to combat climate change, Mars announced sweeping plans to reform the cocoa supply chain, and consumers everywhere continued to express their evolving values. Though we're just a few weeks into the new year, several organizations have already taken similarly newsworthy steps to improve their own ethical standards.

Promoting Supply Chain Visibility

Legendary jeweler Tiffany & Co. last week announced its Diamond Source Initiative. Aimed at improving transparency and visibility, the initiative will see the luxury retailer offer new information to consumers.

This quarter, they will begin adding the country of origin to each jewel's Tiffany Diamond Certificate. Over the next year, they'll also add information related to the full "craftsmanship journey." They suggest the initiative will go far beyond ensuring consumers that their new diamond ring is conflict free. "Tiffany believes," a press release reads, "that knowing provenance is critical to ensuring its diamonds are among the most responsibly sourced in the world." 

The diamond supply chain is among the world's most controversial. Since the late 1990s, when the terms "blood diamond" and "conflict diamond" entered the lexicon, it's attracted attention for rampant human rights abuses. Tiffany's decision to provide consumers with additional visibility comes shortly after De Beers' establishment of the industry's first blockchain-powered tracking platform. Tracr, unveiled last year, attaches a unique identification number to each diamond and intends to provide mine-to-consumer tracking.

Addressing Human Rights Concerns

Last week also saw the perils of doing business in China reach the headlines once again. Badger Sportswear, a North Carolina-based apparel company, announced it would to cut ties with a particularly controversial supplier.

Badger's move follows a sweeping Associated Press investigation into Hetian Taida Apparel. The factory, they write, is staffed by unpaid detainees who work under intense supervision. Their report serves as a cautionary tale and a reminder that traditional auditing methods are not always effective. Hetian Taida had previously passed investigations by Worldwide Responsible Accredited Production. The organization, which only performs audits upon request, was not aware of the internment facility.

Badger has announced it will not merely sever its relationship with Hetian Taida, but cease to do business in China's Xinjiang region altogether. The supplier, for their part, has flatly denied the accusations. Lu Kang, a spokesperson for the Chinese Foreign Ministry laments that "misinformation" has forced Badger's hand.

With the affected products removed from shelves, Badger has taken pains to ensure its customers that Hetian Taida accounted for just a tiny portion of its sales. It remains to be seen, however, what legal action they might face. U.S. Customs and Border Protection was investigating the case prior to the ongoing government shutdown.

ICYMIM: January 14, 2019

Source One's series for keeping up with the most recent highlights in procurement, strategic sourcing, and supply chain news week-to-week.  Check in with us every Monday to stay up to date with the latest supply management news.

Art of Procurement: E Pluribus Unum
Philip Ideson, Art of Procurement, 1/6/2019
Since 2015, Phil Ideson has offered insights and support to Procurement professionals through a number of outlets. Kicking the new year off with some big news, he has announced his intention to consolidate these brands as a single entity: Art of Procurement. While the goals of Palambridge, CatalystCo, and the Art of Procurement podcast have not changed, they should prove even more effective as a united resource.

The U.S. State Department recently advised professionals and tourists to exercise extreme caution when traveling to China. Quoting from riskmethods, Morris reports that China rates as a particularly risky area to establish supply chain operations. While consumers increasingly expect their preferred brands to behave ethically and responsibly, Chinese supply chains score poorly on the Corruption Perception Index as well. He also casts doubt on the widely-held idea that China and its leadership have grown increasingly liberal and progressive in recent years.

Ad Hoc Working Capital and Diversification of Liquidity
Helen Castor, Future of Sourcing, 1/9/2019
"Digital transformation," Castor writes, "is front and center of the C-level agenda." Skills gaps, however, still stand in the way of most organization's digital efforts. That's the bad news. Castor suggests the good news is that emerging technologies are beginning to automate the process of identifying and assessing critical talent. Freeing up recruiters to engage face-to-face with candidates, these tools make it easier to aggressively and successfully make strategic hiring decisions. 

The federal government shutdown, now in its third week, means a dry season for craft beer producers across the nation. Without formal approval for new packaging and recipes, organizations are finding themselves burdened with excess inventory and rampant inefficiency.

President Trump's feud with congressional Democrats has stalled many activities associated with the Alcohol and Tobacco Tax and Trade Bureau (TTB). Affiliated with the Treasury Department, the Bureau not only approves labels and formulas, but also oversees any mergers and acquisitions within the growing industry. Since the beginning of 2018, TTB has received nearly 200,00 applications for new labels. Though the approval process is generally quick, the shutdown will undoubtedly lead to a crowded backlog and slower-than-usual progress even after the government reopens.

According to the Brewers Association, the number of craft breweries has more than doubled since the last protracted government shutdown. To make matters worse, a saturated marketplace has forced these organizations to rely on seasonal releases and specialty products to set themselves apart. Without the means to do so, it's likely many fledgling organizations will have to close up shop.

It's not just the scrappy up-starts struggling. The Boston Beer Company, a giant among craft brewers, has had to put several key initiatives on hold. The Wall Street Journal reports that the makers of Sam Adams cannot move forward with plans to update their Summer Ale formula or introduce a new beer brewed with Himalayan sea salt. That's not to mention the heap of logistical hiccups the situation has created. "Some experimental beers," the Journal writes, "can't be moved out of their tanks because the company doesn't have approval for the labels on keg covers."

Boston Beer Co. co-founder Jim Koch estimates his organization is missing out on "tens of millions of dollars of sales." Worse still, he continues, "That number goes up every day the shutdown continues."

Certain organizations have managed to identify workarounds. Austin's Jester King Brewery, for example, has shuttered plans to distribute five new beers nationwide. Since in-state sales do not require TTB approval, the company has managed to mitigate the shutdown's damage by keeping the new formulas in Texas. The strategy, however, has put a definite ceiling on potential earnings. Co-founder Jeffry Stuffings remarks, "It hasn't cost us any money yet, but it's basically taken the pool we can sell to and shrunk it."

With no end in sight, the shutdown could soon impact the bottom line for craft breweries and major corporations alike. Speaking to NPR, the president of the National Beer Wholesalers Association expressed his concern. "It doesn't matter," he says, "what the size of the company is; when nobody's answering the phone, the work stops and it really puts the beer industry at a disadvantage."

Source One's internship program looks to identify and empower the next generation of Procurement leaders. Many of our most successful teams members got their start as interns, and we're constantly looking out for new young professionals to join their ranks.

Providing interns with a diverse set of hands-on experiences, Source One intends for its internship program to familiarize participants with the ever-evolving duties of an effective Supply Chain professional.

Say hello to some of the interns joining Source One's spend management team this spring.

Hello! I’m Katie Fandozzi and I’m a senior at Clark University. After growing up in South Jersey, I decided to move to Massachusetts to pursue a bachelor’s degree in economics and management. When I’m not studying or working, I’m usually doing Sudokus, trying new restaurants in town, or watching too much television. Some of my favorites are The Bachelor, Breaking Bad, and Avatar the Last Airbender.

Before joining Source One, most of my work experience has involved sales and marketing. Most recently I was a business development intern at a start-up video game company called Petricore. That internship taught me how a start-up operates and how a company can grow from very little. Most importantly, interning at Petricore allowed me to pursue my love for numbers and even gave me an interest in project management and consulting.

I am so excited to be a Source One intern! I cannot wait to learn more things about procurement, sourcing, consulting, and even business in general that I would never be able to learn in a classroom. I do not know what the future holds, but I am grateful to have the support from the Source One team!

Hello! My name is Christina Ling. I am currently a graduate student at Syracuse University pursuing my MS in Applied Data Science. I completed my BBA majoring in Actuarial Science at Temple University. I am 26-years-old and spent most of my life in a small town called Holland, PA in Bucks County. Recently, however, I relocated to Bensalem. When not working or studying, I am either playing video games, taking pictures, cooking/baking or hiking.

Prior to Source One, I worked at SOFWERX as a remote data science intern. I assisted on machine learning projects including deep speech and object detection. The deep speech project involved lip-syncing facial movement to audio to create a fake believable video. While the object detection project’s goal was to identify cameras in a given city based on its Google Street Map View. Additionally, I am working as a poker dealer at Parx Casino on the weekends – where I am one of the top dealers (in terms of hands per hour).

I’m a Business Intelligence Intern and am excited to be joining the Source One team! Everyone has been extremely welcoming. This internship help me gain hands-on experience in the data science field. I look forward to learning about data science’s application and knowledge. 

On last week's episode of the Source One Podcast, Brian Seipel addressed a wildly unpopular topic: tail spend. While it's typically ignored, Seipel suggests the spend area is often a source of surprising value for Procurement. He joins the Podcast once again to provide additional insights and outline his five-step approach for approaching tail spend more strategically. 

Though the value of tail spend management will vary based on an organization's unique goals and objectives, Seipel encourages all listeners to consider carrying out the following process.

1. Conduct a Spend Analysis

"I spend enough time in the world of spend analysis," Seipel remarks, "that it is usually a go-to recommendation when tackling a procurement problem." While acknowledging this bias, he reminds listeners that there's no overstating the value of a thorough, strategic spend analysis. Even a quick clean-up can bring serious inefficiencies to light and help an organization get its tail spend under control

2. Prepare Internally

If an organization has historically taken a hands-off approach to tail spend, it's unlikely they'll have a wealth of subject matter experts ready to address it. What's more, Procurement will need to work against the misconception that tail spend is low-value if they want to encourage action. Leveraging the findings from its spend analysis, the function has to engage experts from across the organization and build a compelling business case.

3. Integrate into Core Spend Where Possible

"Is there enough aggregated spend to move the needle with bigger suppliers?" Now is the time to find out. Rather than simply consolidating spend to its largest incumbents, Procurement can use this opportunity to go to market and identify alternatives. The effort could arm the unit with both a carrot and a stick. "Incumbents," Seipel says, "can renegotiate our agreement to earn more of our business or lose it all to a hungry competitor."

4. Reduce Transaction Costs Everywhere

In addition to consolidation, Procurement should take time to identify opportunities to automate or otherwise streamline its processes. Taking these steps to minimize the resource impact of tail spend purchases will keep these agreements from growing more costly than they're worth.

5. Monitor Results

Procurement's work isn't over yet. It's entirely possible that buyers will fall back into bad habits if they're not monitored and managed. Seipel takes care to remind listeners that consistent check-ins and audits are key if an organization hopes to realize the value of better tail spend management in the long-term.

Want to learn more about tackling tail spend? Subscribe on iTunes to hear the full episode. 

January 11, 2019

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

New Whitepaper: 
Procurement in 2019 
Source One's experts are sharing reflections and predictions once again. This time around, topics of discussion include cybersecurity, business ethics, and Procurement's ever-pervasive skills gap. What's next for Supply Chain Management? Download Procurement in 2019 today to find out.

New Blog:
Savings Rationalization: What Would You Sacrifice to Maximize Savings
Leigh Merz, Future of Sourcing, 1/3/2019
In the office supplies category, Merz suggests, successful sourcing comes to down to "balancing end-user experience with product viability." Despite the category's universal and critical nature, however, many organizations have little or no policy in place for managing it. As a result, usage is often wildly inconsistent and vendor relationships are anything but strategic. Likening office supplies sourcing to holiday shopping, she offers several tips for finding a competitive price without sacrificing quality.

Ocean Freight and the Great Unknown
Joe Lazzerini, ThomasNet, 1/9/2019
With new tariffs and regulations introduced on an almost daily basis, it's an uncertain time for ocean freight shippers and carriers. To make matters more complicated, shifts in the market have meant big changes for capacity. Though Lazzerini acknowledges the future of ocean freight is impossible to predict, he expects to see organizations continue shifting operations out of China and into neighboring countries like Vietnam and Cambodia.

New Podcast:
Start Tackling Tail Spend Today (Part 2) 
Spend Analysis Lead Brian Seipel returns to outline his five-step plan for effective tail spend management. Beginning with a thorough spend analysis, he suggests, organizations can turn this neglected spend area into a source of considerable strategic value. He reminds listeners, however, that it's not enough to carry out the process once. Establishing and maintaining a standard operating procedure is essential to ensure Procurement doesn't fall back into its old bad habits.

Upcoming Event:
Corcentric Symposium | February 13 - 15 | Orlando, FL
Designed to bring out the innovator in you, Corcentric's annual symposium welcomes thought leaders to Florida to network and absorb thought leadership. Reserve your spot today.

Conducting reference checks is often a great way to look past the sales pitch and get to the root of what a supplier can really offer your organization. I say 'often' and not 'always' because many organizations treat this process like a simple formality. Moving forward without enthusiasm or a clear sense of purpose, they waste time and resources conducting reference checks that don't get them any closer to an objective assessment.

Want to make the most of the reference check process? Check out these tips for determining if, when, and how to dig into supplier references and uncover actionable insights.

Want to learn more about effectively assessing a supplier's references? Listen to Brian Seipel share tips and best practices on a recent episode of the Source One Podcast