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Less-than-truckload shipping is an infamously complicated spend category. That's due in no small part to the series of factors that help determine. These include cargo weight, pallet count, and - crucially - freight classification.

The National Motor Freight Classification standard includes 18 different type of freight classes. Ranging from high-density, low-value cargo to high-value low-density cargo, the system makes LTL spend management significantly more complicated than a system based on dimensional pricing would.

Want to learn more about the 18 different freight classes? Check out the infographic below.

The delivery war being fought between Amazon and Walmart, both of which recently committed to providing one-day shipping, has been good news for consumers and the United States Postal Service.
However, the continued growth in shipping and packages has not been enough to offset the decline in volume and revenue suffered by other USPS categories, such as first-class mail and marketing mail, according to the agency's most recent quarterly report.

The Postal Service reported total revenue of $17.5 billion for the second quarter of fiscal year 2019, representing essentially no change from the same quarter last year. The agency also reported a $2.1 billion net loss for the quarter, which is $747 million more than the $1.3 billion net loss posted in the same quarter of FY 2018.

Shipping and packaging lone bright spot in negative report

Amid mostly bad news for the agency, USPS took heart in volume for shipping and packaging increasing by 5 million pieces in Q2 FY 2019, or a 0.3% rise over Q2 FY 2018. To accommodate the increasing volume in this area, the Postal Service has extended Sunday service and added non-career employees during peak seasons.

The reported credited shipping and package growth to the agency's "successful efforts to compete in shipping services, including 'last-mile' e-commerce fulfillment markets and Sunday delivery, as well as end-to-end markets." However, the report also noted "the rate of growth is slowing."

USPS is looking for ways to cut costs and raise revenues as fist-class and marketing mail volume decline. USPS is looking for ways to cut costs and raise revenues as fist-class and marketing mail volume decline.
The tepid growth in shipping and package revenue was accompanied by steeper declines in other areas. First-class mail revenue was down by $217 million, or 3.3%, on a volume decline of 576 million pieces compared to the same quarter last year, and marketing mail revenue similarly dropped by $155 million, or 3.9%, down 959 million pieces.

"We continue to face challenges from the ongoing migration of mail to electronic alternatives, and we are legally limited under current law in how we can price our products and streamline our legacy costs," USPS Chief Financial Officer and Executive Vice President Joseph Corbett said in a statement.

Corbett also said that the agency was looking at ways to increase its revenue while cutting expenses, but declined to elaborate on those plans. On a recent finance call, though, USPS CEO and Postmaster General Megan Brennan said The Postal Regulatory Commission needs to issue its final ruling on the USPS pricing system that began three years ago, and called on the commission to eliminate the price cap that keeps the agency's "ability to generate revenue… constrained by law."

Because so many shippers and third-party logistics providers rely on the United States Postal Service for last-mile deliveries, the government agency's continued financial problems and inability to meet service goals is of significant concern to the supply chain.

May 24, 2019

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

New Whitepaper:
Building an Effective Procurement Organization
Our new white paper series is moving quickly: we're already coming up on our fourth release, Part 4: Tools! Thus far we've covered everything you need to know from People (and purpose), Metrics, and Processes, in order to build your procurement organization to its most efficient and effective state. We've included insights from our experts here at Source One, that have helped countless companies over the years build an effective procurement department. Learn how to inspire your team to purpose, move beyond simple cost-cutting and become a strategic advisor based on the metrics of your procurement team, how to develop the right procurement processes for your organization, and coming up, which tools and technology to leverage--stay tuned for Part 4: Tools!

New Blogs:
How To Select A Procurement Services Provider
Carole Boyle, Vendor Centric, 5/23/2019
If you're a late adapter to the evolving Procurement function, and therefor don't have the internal expertise needed to perform the way you'd like, a Procurement Service Provider (PSP) would be perfect for you. Carole Boyle helps you prepare yourself to find the best PSP for you and your organization's needs. There are certain things to consider before diving in like how are they paid, how supplemental/integral will they be to your organization, whether they rely on off-shore sourcing, and more--Boyle walks you through and gets you in the position to begin these conversations and have a better idea of what you're looking for in your PSP.

Retail companies continue to become casualties of the ongoing trade war between the United States and China, and some of the biggest players in the industry are warning that consumers will be the next victims.

Walmart, the world's largest retailer, recently sounded the alarms in predicting that U.S. shoppers will be forced to contend with higher prices if more tariffs are imposed on imports from China, echoing previous comments made by department store chain Macy's.

"We have mitigation strategies that have been in place for months," Walmart CFO Brett Biggs told Wall Street analysts during a recent earnings call. "But increased tariffs will increase prices for customers."

Macy's CEO Jeff Gennette expressed similar sentiments on a first-quarter earnings call, ominously referring to a proposed fourth tranche of tariffs placed on $300 billion worth of imported Chinese goods as "the big one," and admitting that such an increase "was not contemplated when we provided annual [earnings] guidance."

Furniture was already affected by the third round of tariffs, but the potential fourth tranche would impact home goods, shoes, clothing and accessories, cutting closer to the heart of Macy's product portfolio.

"Looking at all those categories and those brands that are included, it is hard to do the math to find a path that gets you to a place where you don't have a customer impact," said Gennette.

Walmart has been publicly critical of the trade war for many months now.Walmart has been publicly critical of the trade war for many months now.
In September, Walmart warned the White House that further tariffs would raise prices on products ranging from shampoo to bicycles to food, according to CBS News. The company also predicted that in addition to customers paying more, the tariffs had the potential to reduce profits for suppliers, lower retail margins or even force consumers to buy fewer goods or forego purchases entirely.

Macy's potentially can exercise more control over critical decisions, notes Supply Chain Dive, since approximately 20% of the company's affected products are private label brands. The American department store chain has for years been attempting to move production of these goods out of China, but according to Gennette, the People's Republic is "still an important piece of our overall mix." Macy's has also been consolidating business in an effort to reduce the number of manufacturers it must work with, giving the company greater negotiating power, which smaller retailers likely lack.

In fact, although large chains like Walmart and Macy's have the biggest platforms for decrying these tariffs, it is the smaller retailers that will have less capacity for supply chain adjustments.

"Tariffs can mean lower wages, fewer employees, deferred investments and higher prices for consumers," the National Retail Federation complained in a statement earlier this month. "Small businesses are particularly vulnerable, since they don't have the resources and flexibility to quickly switch suppliers."

Artificial intelligence is now standard operating procedure in virtually every aspect of life, particularly within the consumer product and service space. In fact, according to Gallup, 85% of Americans regularly use equipment, devices or technology with at least some AI elements. Some have decried this new normal as a threat to individuals' gainful employment, the theory being that they could be replaced by the rise of the machines.

But the developers of a new restaurant reservation app are determined to show the naysayers why they're wrong.

As reported by Forbes, the app is called Allset, a touch-and-go mobile system that enables customers to not only reserve tables at more than 2,000 participating restaurants throughout the U.S., but also order and pay for the dine-in meal.

Stas Matviyenko, Allset CEO, told Forbes that the app is ideal for diners who are pressed for time or simply want to make the transaction process as seamless and straightforward as possible. It also serves as an assist to restaurateurs and their employees - particularly hosts and hostesses - when business picks up on weekends.

"We help busy diners save time and help restaurants provide quick service to their customers, and this way gain their loyalty," Matviyenko explained.
"Two-thirds of Americans view the restaurant industry positively."

Restaurant industry highly regarded
Similar to other industries, the restaurant sector is a customer satisfaction-driven business, as the better the food and service - assuming it's consistent - the more likely it is that diners will return in perpetuity. For the most part, eateries are doing fairly well in this respect, with two-thirds of Americans in a Gallup poll viewing the restaurant industry positively, tied with computers as the top rated sector.

But lengthy wait times and sticker shock - when diners receive their bills following a meal - can be tough to swallow, part of the reason why 7% of Americans view the industry in a negative light. Matviyenko says the app's AI and machine learning capabilities may help to resolve foodies' frustrations.

"For example, we analyze peak hours and capacity at restaurants to decide if we should send more or fewer orders," Matviyenko added. "Also, AI helps us identify profiles of potential free credit abusers and block them automatically."

He further stated that since the app is compatible with most point-of-sale systems, most restaurants won't have any issues with integration. In short, AI provides the means through which restaurateurs can optimize their supply chain, increasing foot traffic without creating unnecessary delays.

Few anticipate losing job to robotics
Will the rise of AI lead to net job losses? Americans seems to think so, with 73% of them stating as much in a recent Gallup poll. However, few think they'll be among those affected, with just 23% worrying about such a scenario in a separate Gallup survey.

While the mobile app isn't available everywhere just yet, the 2,000 participating restaurants are located in 11 cities, including Boston, Seattle, Los Angeles, Houston, Las Vegas, Chicago, New York and San Francisco, Forbes reported. Miami is believed to be the next metropolitan area where Allset will go live.

The popular clothing chain Old Navy is separating from its parent company Gap, and the parting of ways will mean a splitting of supply chains, as well.

Founded in San Francisco in 1969, Gap has since grown to become the largest specialty retailer in the United States, and today operates six primary divisions: the namesake Gap, Banana Republic, Intermix, Hill City, Athleta and Old Navy. The latter brand, which emphasizes affordable yet fashionable clothing for all ages, has outgrown the others in recent years, and in late February, Gap announced that it intended to spin off Old Navy as its own separate, publicly traded entity.

The separation will be finalized by some point in 2020. Until a new name is announced, the remaining five divisions will rebrand as "NewCo."

New companies may experience some supply chain separation anxiety

While industry experts seem to view the decision for Old Navy to leave its parent company as one that will ultimately prove mutually beneficial for both companies, some significant growing pains are expected as the newly estranged organizations are forced to split the supply chain.

"We're certainly doing the work to the back-end from a supply chain standpoint," Gap CEO Art Peck said on a fourth quarter 2018 conference call. "There has been an accelerating divergence between the businesses with the path for Old Navy and the path for other businesses, and that's also true on the backend with our vendors, where there is more alignment with Old Navy and less overlap with the other brands."

Peck also maintained confidence the move would "unlock significant value creation potential," yet also admitted there were "a lot of questions we can't answer right now."

Old Navy's responsive supply chain has given it an edge over other clothing companies. Old Navy's responsive supply chain has given it an edge over other clothing companies.
Simon Croom, academic director of the Master's in Supply Chain Management program at the University of San Diego, told Supply Chain Dive that Old Navy has enjoyed far more success with a responsive supply chain than Gap has in recent years. While the traditional model for apparel companies is to predict what fashions will be stylish in eight months' time, place orders in countries with cheap labor and then deliver product, Old Navy moves faster than the competition by spending less time on the development cycle, getting apparel in store more quickly and then updating on the next round.

"It makes sense to split out the supply chain operations," Croom said of Gap and Old Navy. "They basically had two different supply chain environments and were trying to respond to those with one approach."

However, there are many potential pitfalls when it comes to breaking up such a large supply chain, particularly when it comes to supplier relationships. It's likely that once the separation occurs, there will be some suppliers that only want to continue dealing with one or the other organization, leading to severed supplier relationships and cancelation clauses. In addition to new suppliers, one or both companies may also be forced to find need to find new logistics and transportation providers, new lanes and new routes.

Then there is also the question of what to do with Gap's current supply chain teams. The company could split them in half, or hire new talent to handle the new company, but either approach carries its own unique risks.

"Supply chains are really complex things that we think we may have a handle on, but there's always some unanticipated risk we didn't account for," warned Shay Scott, Executive Director of the Global Supply Chain Institute at the Haslam College of Business at the University of Tennessee, who was interviewed by Supply Chain Dive.

As an organization grows it will often have common business functions that sit in many different operating units. For instance, it might have multiple teams that handle business analytics across the organization. If these individuals are siloed then this will invariably lead to using different technologies and methodologies being used across the organization.

What is a center of excellence?

center of excellence (COE) is a team, a shared facility, or an entity that provides leadership, best practices, research, support, and/or training for a focus area. The focus area might be a technology such as Python, a business concept such as data analytics, a skill such as data visualization, or a broad area of a study such as spend analysis. Typically, leaders of an organization are responsible for the destination and managers are focused on the execution. A COE is responsible for discovering paths and improving existing ones that connect these things in the most efficient and effective manner possible. In their book Management of Portfolios, Stephen Jenner and Craig Kilford state that a COE can be viewed as a coordinating function which ensures that change initiates are delivered consistently and well, through standard processes and competent staff.

NOTE: Python is mentioned here because it is a common programming language used for cutting edge procurement analytics.

What does a center of excellence look like?

A typical COE brings together people from different disciplines and provides shared facilities/resources. For instance, you may have the heads of various procurement categories gather in a COE that focuses on implementing and maintaining best-in-class procurement. The responsibilities of this group would then be defined by its organizational objectives. For instance, it might provide training, best practices, and resources across the organization. In conjunction with this effort it would gather the data and learnings from the teams represented which will hopefully lead to a positive feedback loop. The ideal realization of a COE, as defined by Gartner, is that it should be “concentrating existing expertise and resources in a discipline or capability to attain and sustain world-class performance and value.”

What is the value proposition for a center of excellence?

A COE can drive innovation by ensuring that the knowledge gained across the organization through the parallel evolution of skills and capabilities (or the acquisition of these through M&A) is shared. Its important to note that a COE must be transparent and anchored in both the quantitative metrics of the business as well as the qualitative evolution of capabilities. Transparency and consistency will ultimately encourage members within the organization to measure and experiment together which will in turn accelerate the pace with which innovation and adoption occurs. Most importantly, a COE ensures that the organization is aligned around common business goals rather than individual departmental metrics.

What does a center of excellence look like as it relates to procurement and supply chain?

Typically the primary purpose of a procurement/supply chain COE is integration. Responsibilities may include designing, analyzing, implementing and monitoring new ways of doing business. This is accomplished through some combination of policy, process, technology, analytics/measurement and change management. Their focus is almost certainly on unlocking and sustaining potential rather than day-to-day tactical execution. If you are interested in understanding what a best-in-class procurement COE looks like, or deploying one within your organization, please contact Source One's subject matter expert Jennifer Ulrich to explore the topic further.

When embarking on a cost reduction initiative, one of the first and most essential steps to take is collecting and analyzing spend data. In a perfect world, organizations would keep strong records and freely submit their historical data. Obviously, however, things rarely go so smoothly.

In reality, all companies will at least keep track of their receipts. This means the diligent professional can determine an organization’s spend practices by requesting data from suppliers.

Data requests are sometimes easier said than done though. They'll typically result in one of three outcomes.

1. Acceptance – Where suppliers agree to pull the data for you, send it along, and go on to conduct business as usual.

2. Avoidance – Where suppliers agree to pull data for you, but then neglect to follow through. There are a number of reasons a supplier might drag their feet. Maybe pulling the data is difficult and time consuming, or maybe they've simply let it slide down their list of priorities.

3. Pushback – Where suppliers don’t agree to your request. Though an infrequent outcome, when it does arise, typically it’s because they may not know how to pull the data, they had trouble pulling the data and gave up, the relationship between you/your client and the supplier is bad, their pricing is not competitive (and they know), or - in a worst case scenario - the data simply might not exist.

In the latter two scenarios, here are a few tactics you can employ to cure a data collection headache:

Provide a template: Giving the supplier a template that details exactly what you are looking for will help strengthen the communication process. It will cut out any unnecessary back and forth and provide the basis for an informative discussion.

Provide a timeline: After submitting data requests to suppliers, you should provide them with a clear deadline so they can prioritize the request appropriately. Make sure to follow-up as well. In addition to holding the supplier accountable, it will remind them that you're serious about the request.

Work with internal users: Sometimes working with internal end users can be beneficial for finding a new contact within the organization who can help you. This could entail requesting a new primary sales rep or identifying a new point of contact from the same business unit as your initial contact.

Go to a higher level manager: If a supplier is difficult to work with, sometimes the best case scenario is to work around them by going to the next person up on the totem pole. Since this can cause friction with the original supplier contact, make sure you use this as a last-resort approach.

Pull the competitor card: Another workaround for difficult suppliers is to let them know that you’re considering other options. Inform them that their competitor would provide you with the data you are searching for, or that you may not renew the supplier contract due to the difficulties of working with the,. Since these conversations can instigate friction, it is best to reserve these tactics as another last-resort approach.

Ultimately, it is important to understand your supplier’s behavior before formulating your response. By understanding why they may choose to be easy or difficult to work with, you can tailor your interactions to receive the data you need and find the best path forward.

ICYMIM: May 20, 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.

Best Procurement Solution Persona? Configurator!
Pierre Mitchell, Spend Matters, 5/20/2019
Admitting he believes comparing Procurement Solution Personas is like comparing a an introvert and an extrovert: each has its purpose and one is not necessarily better than the other, unless put in a particular context, Pierre Mitchell poses a new question: "which type of solution is generally most appealing to the most buying personas," to which he answers, "configurator."

Human Ecosystems: How to Achieve Breakthrough Performance in Partner Management
Will Harper, Future of Sourcing, 5/17/2019
They key to a successful firm, according to Will Harper, is a leader or leadership style that can successfully manage the interconnected web of relationships that the firm has, both internal and external. Harper displays diagrams of Integrated versus Technical Leadership styles as they related to human technical factors and goes into detail about the "Human Ecosystem," and the four steps to implement active management in your organization. Refresh your views on leadership and visit the article for more.

Top 6 Benefits Of Local Sourcing
Team Thomas, ThomasNet, 5/13/2019
It's so popular to go global at this day and age, however, Thomas Net takes the liberty to highlight six of the main reasons procurement professionals might rather source locally from flexibility, reduced costs/more revenue, and being more eco-friendly. Take a look and maybe you'll rethink the next sourcing strategy.

Intern: Nicole O'Connell

Happy Monday! We've got a treat for you this week. We spend our Mentorship Mondays hoping to reach young aspiring procurement professionals to help guide them to the right path and choices. One of our own Analyst Interns, Nicole O'Connell as shared a bit of her own experience with us and what is helping her as she arrives at the inevitable crossroads of life, post graduation.

Nicole O'Connell is graduating from St. Joeseph's University as an Accounting and Business Intelligence and Analytics double major (pause for applause), and has decided to begin her professional career with us, here at Source One, a Corcentric company, as a Data Analyst Intern.

At the start of her education Nicole was sold on becoming an accountant, however, in her studies she developed an interest in the data anylitcs and consulting aspects of Business Intelligence and Analytics and decided to make that her second major. As O'Connell faces graduation she admits that she is at a bit of a crossroads between the two and is using this first position to help her make that big decision as to what path she'll take. When asked what she has learned thus far on her journey as an early professional, she responds:

 "Everyone tells you to ask questions, and they're right. You really don't know until you ask. Whether it's for advice, about a project, or even why someone decided to transition into or out of a field or position--you can learn from someone else's experiences, even if you don't have a ton for yourself already."

Finally, as these posts are meant to motivate and guide are younger professionals, Nicole would like to leave a message to her peers at the brink of their next chapters:

"Do what you enjoy! Don't be intimidated by that overwhelming feeling. Be confident that you know what's best for you."

From Cracker Barrel to Olive Garden, catering is a service that more and more restaurant chains are providing for their customer base, one that requires a well-maintained supply chain to pull off successfully. And it appears as though it was a fruitful amenity for the companies that offered it in 2018.

As reported by Restaurant Dive, the rate at which dining establishments participated in catering last year jumped 6%, Technomic principal Melissa Wilson noted at a recently held conference. Growth was so impressive, in fact, that it outpaced the industry as a whole by more than 50%.

"As brands and independent operators look for ways to increase same-store sales or generate incremental revenue, catering is definitely a conduit," Wilson explained, according to Restaurant Dive.

The uptick in catering doesn't appear to be a flash in the pan, either. To the contrary, 90% of restaurateurs consider it to be an important component to their business structure, based on a report that was released at the conference held April 30.

Although catering as a service is expected to level off somewhat in 2019, sales as a whole are projected to intensify potentially reaching $863 billion combined by year end, according to estimates from the National Restaurant Association. Supply chain optimization may help make this projection a reality.
Like Procurement, Accounts Payable has seen its reputation and influence improve considerably over the last several years. More and more, executives are recognizing that AP has the potential to serve as an essential strategic asset.

In their recent eBook, Ardent Partners and Corcentric report that 52% of organizations consider their AP function "very" or "exceptionally" important to their operations. That doesn't mean it's smooth sailing for Accounts Payable. In Ardent Partners' Accounts Payable Metrics that Matter in 2019, the research firm goes on to identify a number of challenges still facing the function.

Check out a summary below.