Top Strategic Sourcing Articles by Source One:

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ICYMIM: August 19th, 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.

3 Tips to Improve the 'First Mile'  of Your Supply Chain
JP Morris, Spend Matters, 8/15/2019
Companies who design a solid foundation to work from have a clear advantage in the industry. The flaws in your supply chain will carry through the entire process, so it's critical that the "first mile" is well thought out. Back in July, Spend Matters notably pronounced, "The 'first-mile' flaws hinder last-mile success'". JP Morris provides three solid tips that will help to improve that first mile.

The Rise of the Ethical Consumer and Why Businesses Need to Follow
Franco Vessio, Future of Sourcing, 8/12/2019
Consumers are becoming more and more aware of the climate change crisis and food production is one of the most relevant talking points of the movement. Dairy and meat consumption is declining as consumers ethical sensitivity heightens and companies need to keep up. Franco Vessio will discuss how a new awareness of consumer eating habits and environmental concerns will transform the way the food industry will operate in the coming years. 

Cooperative Ecosystems: Finding Suppliers That Give a Damn
Sarah Scudder, Sig Speaks
Procurement teams want suppliers that demonstrate values a little more deep than a quality project or a completed timeline. We want morally strong people who care with good ethics. Scudder speaks to the importance of choosing suppliers who your company can be proud to represent and be able to depend on in difficult situations. 
The RFx process will essentially determine whether your strategic sourcing initiative is strong and successful or a total flop. The way you approach an RFx will not only leave a lasting impression on your potential supply base, but it will determine how efficiently you will get the information you need to inform your purchasing decision.

You want your RFx documents to read direct and concise. You certainly don’t want your work to come off as worthless documents to add to a supplier’s shred pile. We gave you the lowdown of RFP spam, but here are some best practices of how to avoid the dog pile and establish a connection with a potential supplier.  In this Infographic we talk how to maximize the RFx stage; we broke it down into two stages: the Request For Information (RFI) and the Request For Proposal (RFP).

Why do business owners and category stakeholders continue to maintain incumbent relationships that are damaging and costly to business operations? Is this resistance to change due to the longevity of the relationship, lack of category expertise, free dinners, or just pure laziness to invest in the market for a better fit solution and supplier engagement?

I once had a customer whose 20+ year long relationship with its marketing firm resulted in 40% higher costs compared to the competitive landscape. My customer did not have the internal resources or knowledge to know this problem existed and never expected their “buddy” to rip them off. It was only after a Procurement lead strategic sourcing initiative that unveiled the truth; where alternative proposals for “like” services showed lower pricing was available in addition to more modernized solutions. When the customer’s CEO confronted the company’s President, the response was simply; “You are right, I have no excuse, we just never adjusted pricing to align with the market”; basically saying they have been over billing for MANY years and probably for other customers as well.

Procurement teams can offer objective support in approaching the market and promote cost savings by identifying innovative services that fulfill and surpass the requirement. These professionals have the subject matter expertise to help navigate contractual best practices and improve supplier relationships to be more strategic and beneficial for all parties versus expensive dinners and friendly conversation. Category leads are typically too in the weeds in order to stay ahead of current market conditions and facilitate up-to-date benchmarking activities. Procurement can coach stakeholders to shift their thinking while letting them focus on their operational responsibilities taking on the burden of keeping suppliers honest for the experts.

At the end of the sourcing initiative, my customer did remain with the incumbent based on the complexity of the services being provided and still holding on to the past too tightly. However, pricing was now aligned with the market, they received a large credit to offset historical cost variances and to build up trust again, while setting ground rules for ongoing business reviews and the ability to test the waters as needed throughout the contract term. This experience also lead to other sourcing activities across many spend areas where the supplier in place had been around for more than 5 years.

Don’t overestimate the value of personal relationships and don’t underestimate the value of what Procurement can offer. It’s business; nothing personal!

August 16, 2019

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

New Interview:
Perspectives: Practitioner Q&A
Reginald Peterson, Inside Supply Management, 8/2019
In the latest issue of ISM's magazine, Corcentric Director Reginald Peterson discusses the challenges facing today's Procurement professionals. True spend management, he suggests, still eludes many organizations.

Upcoming Events:
Procurious Big Ideas Summit | Chicago, IL | 9/18
Industry professionals will gather in Chicago this September at the Big Ideas Summit hosted by Procurious. The digitally-led networking event will welcome supply chain management professionals to engage in thought-provoking conversations concerning the future of procurement. Catch Source One's spend management team's presentation sharing their insights into procurement today.

Scope: Procurement Summit | Red Rock, Las Vegas | 9/18-9/20
Quartz Events will be hosting the Scope Procurement Summit will be hosting a networking event for procurement professionals to learn new things and share new ideas. Big industry names like IBM and the NBA will share their insight into procurement trends and innovations today. Source One will be presenting "Perception is Reality: Refining Procurement's Brand for Maximum Impact" on Monday at 3 pm, see you there!

Procurement Professionals Networking Happy Hour | Chicago, IL | 10/24
This October, Source One will be hosting it's annual Procurement Professionals Networking Happy Hour. For the fifth year in a row, procurement experts from industries far and wide will convene for drinks, hors d'oeuvres, and valuable connections. 

From August 18th to the 20th, Procurement and Supply Management thought leaders will gather in
Las Vegas for the SCOPE Procurement Summit. Corcentric is sponsoring the invitation-only event and joining experts from organizations like Siemens, Bayer, and the National Basketball Association to exchange insights and discuss the challenges facing today's Procurement professionals.

Key themes from this year's agenda include Procurement's lingering skills gap, the promise of emerging technologies, and the global economy's evolving risk factors. On August 19th, Corcentric Director Jennifer Ulrich will address another all-important subject: Procurement's brand identity. Titled Perception is Reality: Refining Procurement's Identify for Maximum Impact, the presentation will call on Ulrich's history of empowering clients to elevate Procurement and make the function a trusted business leader.

"When we discuss branding," Ulrich remarks, "we almost always focus on the individual and organization-wide perspectives. We tend to ignore the fact that business units like Procurement have brand identities of their own. The same principles that drive personal branding efforts and company-wide initiatives could help Procurement set itself apart too."

Though Procurement units have evolved considerably over the last decade-plus, the function is still often perceived as low-value and tactical. Ulrich contends that it cannot reach its full potential unless it commits to building a new, more impactful identity. "To become a trusted ally," she suggests, "Procurement has to first refine its vision, align itself with stakeholders, and emphasize its power to enable the entire." She hopes her presentation will inspire SCOPE attendees to carry out these initiatives within their companies.

Headed to Vegas? In addition to sitting in on Ulrich's presentation, be sure to stop by Booth #101 to meet the Corcentric team and learn more about the future of Procurement and Finance.

Throughout his campaign, Donald Trump made deregulation a common theme, a promise to prospective voters. Though he's had mixed results, he's consistently acted on his deregulatory ambitions as President. More rollbacks are incoming. This week the Federal Motor Carrier Safety Administration (FMCSA), a Transportation Department agency, proposed amendments to the trucking industry's "hours of service" (HOS) rules.

FMCSA Administrator Raymond Martinez believes the proposal will allow for "a commonsense approach to crafting hours-of-service regulations that are more flexible for truck drivers and promote safety for all who share the road." Others suggest the changes would do nothing to promote safety. Harry Adler, executive director of the Truck Safety Coalition, charges the government with "offering flexibility without regard for the fact that these weakened rules could be exploited by the worst actors in the industry."

HOS rules aren't new regulations. The trucking industry first introduced them in the late 1930s. Recent updates, however, have made them particularly unpopular among truckers and trade groups. In December of 2017, a long-dreaded mandate went into effect and brought HOS regulations back into the headlines. Requiring that all drivers track their road hours with Electronic Logging Devices (ELD), the so-called ELD mandate brought a slew of inflexible requirements. It has proven no more popular in practice than it was in theory

Truckers were particularly outspoken during the "public listening sessions" hosted by the FMCSA throughout the last year. "I feel," one New York fleet owner remarked, "as though some of these rules and regulations have been put in place by people that have never seen the inside of a truck."

The FMCSA is now suggesting five key changes to the current HOS rules:

1. Split Sleeper Berth

Current Rule: A driver can use the sleeper berth to get 10 consecutive hours off duty. But the driver must spend at least eight hours (no more than 10 hours) in the berth, which does not count toward the 14-hour window. A second period has to be at least two consecutive hours (but less than 10 hours) and would count toward the 14-hour window.

Proposed Rule: The 10-hour break requirement could be split in two: One break of at least seven hours in the sleeper berth and another break of no less than two hours spent either off duty or in the sleeper berth. Neither counts toward the 14-hour driving window.

2. Split Duty Provision

Current Rule: Once a driver is on duty, a 14-hour clock starts to run continuously. When it runs out, the driver may not drive again until they have taken ten or more consecutive hours off duty. Nothing will stop the 14-hour clock except a period in the sleeper berth of at least 8 hours.

Proposed Rule: A driver can stop the 14-hour clock by taking a break of at least 30 minutes (no longer than three hours). This, the FMCSA hopes, will reduce the effects of fatigue and enable drivers to wait out traffic without losing valuable drive time.

3. 30-Minute Break

Current Rule: A driver must take a 30-minute, off-duty break if more than eight hours have passed since their last off-duty break of at least 30 minutes.

Proposed Rule: The break requirement only applies if a driver has driven for a period of 8 hours without at least a 30-minute interruption. Additionally, drivers can satisfy the break requirement with thirty minutes of on-duty, non-driving time.

4. Adverse Driving Conditions 

Current Rule: A driver may operate their vehicle for two additional hours beyond the maximum time allowed. They cannot, however, extend the 14-hour window.

Proposed Rule: Adverse conditions would allow drivers to extend their "driving windows" (14 hours for property-carrying vehicles and 15 hours for passenger-carrying vehicles) by up to two hours. This will encourage drivers to take more caution during inclement weather and potentially reduce crashes.

5. Short Haul

Current Rule: Short haul drivers may not be on duty for more than 12 hours or drive beyond a 100-mile air radius.

Proposed Rule: Short haul drivers can extend their on-duty window from 12 hours to 14 hours and operate across an 150-mile air radius. '

In addition to promoting more cautious driving and providing flexibility, the FMCSA believes its proposal could mean more than $250 million in cost savings for carriers. The agency is accepting public comments until late September. While Martinez did not indicate how long it would take to review these comments and present a final proposal, he suggested that his organization is "ahead of schedule."

In recent years, the number of flexible tech options that allowed companies at every point in the supply chain to get a better handle on their operations has proliferated. Innovation in the sector is now to the point that just about every business - at every step of the supply chain - has at least some sort of technology in place to monitor how efficient they are. The question many in the industry may have, then, is what comes next?

As recently as a decade ago, most companies' reliance on tech was relatively siloed off - they could see what they were doing on their end, but not what the businesses shipping to them, or those receiving shipments from them, were doing, QAD DynaSys global product manager Shaun Phillips recently told Supply Chain Brain. Now, there is more integration between companies at every step of the supply chain so the old metaphor of "one hand not knowing what the other is doing" no longer applies. That, in turn, enables far greater efficiency, and has firms striving for even more transparency from the beginning of the chain to the very end.

One area where this kind of integration between supply chain partners could spur significant innovation in the years ahead is where artificial intelligence is concerned, Phillips noted. When AI systems are able to get a look at the data all these businesses are producing, they may be able to identify inefficiency that's not necessarily visible to human interpreters, and make suggestions or decisions to iron out those kinks in short order.

Digital tracking in a warehouse is key to the entire supply chain.Digital tracking in a warehouse is key to the entire supply chain.
What's needed
Of course, for AI systems to make the best possible decisions, there likely needs to be even more buy-in from businesses in the supply chain, according to Supply Chain Dive. After all, those platforms can only make the most informed decisions based on the data available, and if the information isn't being collected properly or doesn't paint a complete picture, the decisions AI makes about improving efficiency won't be as good as they reasonably could be.

Experts say there's no reason most large- and medium-scale logistics operations shouldn't at least adopt RFID tracking for many of their daily functions, the report said. The cost of that technology has come down so far that it's eminently affordable and, while it may not provide the keenest insight into every facet of operations, something is far better than nothing.

A global vision
The more that can be done to implement smarter data tracking across the entire international supply chain - so that an item can be tracked from a factory in China to a retailer in Kansas with absolute precision - the better off all involved are likely to be, according to First Post. That kind of effort could even include giving consumers a better understanding of where the items they purchase come from, as well as providing assurances about their authenticity.

With all this in mind, companies that haven't yet made a step toward broader adoption of tracking technology - or which are not integrated with partners - would be wise to make this leap sooner than later.

Conversations around artificial intelligence and automation tend toward the apocalyptic. In January, the Brookings Institution reported that more than 35 million Americans hold jobs with "high exposure" to automation. These vulnerable professionals - occupying roles in production, food service, and transportation - could already see at least 70% of their day-to-day tasks replicated by a machine. It's clear that these machines will soon graduate from replicating tasks to replicating entire jobs, even mechanizing entire industries. The report anticipates this massive shift and concludes with a call to action. To "mitigate coming stresses," it reads, organizations will need to pursue a number of strategic initiatives. This should include "promoting a constant learning mindset."

A new study from the Technical University of Munich and Rotterdam University echoes this advice. In addition to teaching new skills, the researchers encourage business leaders to consider the psychological impact of replacement and unemployment. This impact, they suggest, is even greater when an employee is replaced by another human. Their study arrives at the intriguing conclusion that employees in automatable positions feel more threatened by other people than by machines. Intelligent machines might dominate the headlines, but they're not necessarily an immediate concern for the professionals who are preparing to confront them.

The study's findings appear almost paradoxical. A summary reads, "In principle, most people view it more favorable when workers are replaced by other people than by robots or intelligent software. This preference reverses, however, when it refers to people's own jobs. When that is the case, the majority of workers find it less upsetting to see their own jobs go to robots than to other employees." These same professionals do, however, consider automation that greatest long-term threat to employment.

People don't compare themselves to machines the way they compare themselves to peers. This, the study's authors suggests, is why robots pose less of a threat to self-worth. They go on to suggest that the social impacts of replacement and unemployment have gone largely un-addressed. Reskilling should help professionals experiencing technological replacement, but more psychological support might prove necessary for other displaced workers.

These workers, for their part, have largely expressed interest in reskilling. According to Randstad US, 67% of U.S. employees believe they'll need new skills to survive in a changing economy. Employers, however, have been slow to embrace the opportunity. While 80% of workers believe their company should provide for reskilling, nearly 40% have seen no progress.

Employees aren't just hungry for new skills. They're also beginning to insist the employers promote their mental well-being. Far from just a Gen-Z talking point, the demand for more empathetic workplaces touches every generation. As automation moves from theory to reality, businesses will need to devise plans for addressing its full economic, social, and psychological impact.

Last week, Chainyard and IBM announced their collaboration on a blockchain network. This network, called Trust Your Network, is meant to improve supplier qualification, validation, onboarding, and life cycle information management. It also serves the purpose of reducing risk of fraud and errors, which then creates continuous connectivity across supply chains. It enables businesses to store information in a decentralized and secure database on the cloud, which cannot be tampered with, thus building trust in the chain. Chainyard, a blockchain specialist firm is providing the technology and building the network using IBM's blockchain platform.

Prior to blockchain, managing suppliers was a very difficult and time consuming process. The validation of identities and documents such as ISO certifications, bank account information, tax certifications, and certificates of insurance through the lifecycle of a supplier was not an easy task. Blockchain can be applied to several supply chain processes and allows for a secure collaboration for contracts and preventing counterfeit products. The main uses of blockchain are for transparency, verification, and risk mitigation. The time stamps increase transparency in the bidding process, smart contracts allow for the verification of transactions prior to their execution, and the possibility of money laundering decreases due to visibility of untampered data in the ledger.

Trust Your Network assigns its suppliers a digital passport. It then allows those suppliers to share information with the permissioned buyers who are on the network. By the suppliers sharing their information, is saves time for companies conducting research on potential suppliers. This generates more business between suppliers and buyers. Blockchain also connects existing procurement business networks by relaying necessary supplier data required for exchanging Purchase Orders and invoices without having to enter it into multiple networks and then automating onboarding processes to those networks. Companies who share the same goal of IBM and are alongside them in solving challenges related to supplier information management are Anheuser-Busch InBev, Cisco, GlaxoSmithKline, Lenovo, Nokia, Schneider Electric, and Vodafone. These companies taking part in blockchain, upload their suppliers data and expertise onto the network, which in turn expands it. Gartner Inc. has estimated that by 2023, blockchain will support the global movement and tracking of $2 trillion of goods and services annually.

Although blockchain is in its early stages and has some kinks to work out, such as the rules and regulations it will follow and the standardization of it across different countries, it has significant potential. The advantages of blockchain are its cost savings and its ability to increase transparency and traceability. Going forward, blockchain is something that we will definitely hear more of.
For some time, the Trump administration has been saying it would impose tariffs on imports from China, raising concerns about the impact on companies on both sides of the Pacific. However, it now appears as though at least some of those tariffs will be delayed, largely due to concerns about what impact they might have on the holiday shopping season that's a few months away.

Originally, most of the higher tariffs on Chinese goods coming into the U.S. were supposed to go into effect on Sept. 1, according to CNBC. These increases would have likely resulted in significantly higher prices for many things consumers will be eager to scoop up in November and December, and which retailers would need to start stocking in September and October. Now, many tariffs won't be
put into place until Dec. 15.

Many Chinese imports will see their tariffs delayed until December.Many Chinese imports will see their tariffs delayed until December.
"We're doing this for the Christmas season," President Donald Trump told reporters in announcing the change of plans. "Just in case some of the tariffs would have an impact on U.S. customers. So far they've had virtually none, but just in case they might have an impact on people, what we've done is we've delayed it, so that they won't be relevant to the Christmas shopping season."
Perhaps not surprisingly, many of the delayed tariffs are for items like electronics or apparel that would be popular during the holiday season, as well as Christmas-related decorations like lights, ornaments, nativity figures and so on, the report said.

Digging in
Altogether, the tariffs were expected to be applied to about $300 billion worth of Chinese-made goods, and could be as high as 10% above current import taxes, according to a separate CNBC report. In addition to the announced delays of tariffs on certain items, others will be removed entirely, but the U.S. Trade Representative office has not revealed what those will be, simply saying they will be considered "based on health, safety, national security and other factors."
Representatives from the Commerce Ministry in China have already been in contact with U.S. officials about the delays and they will speak again before August comes to a close, the report said.

A change in position?
Trade experts noted that Trump's comments on this issue mark a potential shift in attitudes for the White House, as it previously did not admit higher tariffs could end up impacting individual consumers, according to The Washington Post. With the president stating these changes are being made to potentially avoid higher costs for consumers during the holidays, the change is considered a tacit acknowledgement of the fact that, in the end, consumers pay for higher tariffs, rather than foreign entities.

Indeed, The Tax Foundation previously estimated this round of tariffs would have resulted in average costs of an additional $350 per year to the average family of four, the Post reported. That's because these import taxes would have been applied to consumer goods, rather than those targeted by previous tariffs, like components used in U.S.-based manufacturing processes.

Nonetheless, any companies relying on a supply chain that originates in China would be wise to keep a close eye on any developments here, and alter their forward-looking strategies accordingly.

If there's any one industry that a highly functional retail supply chain depends upon, trucking may be it. The vast majority of the tonnage delivered in the United States is by motor carriers, yet an ongoing driver shortage threatens the speed and frequency with which department stores, grocery aisles and toy sections receive product. Indeed, in an annual survey conducted by the American Transportation Research Institute, respondents cited the driver shortage as the most pressing issue facing the sector.

But it isn't just people behind the wheel that's in short supply. There's also a dire need for professionals who work under the hood.
"Roughly 34 million trucks are on the road today."

75,000 more mechanics required by 2022
According to government data cited by Supply Chain Dive, an ever smaller number of high school and college graduates are going on to become automotive mechanics. In fact, among diesel service technicians specifically, an estimated 75,000 new mechanics will be needed to by 2022 to keep pace with the rate at which commercial trucks are used, according to the Bureau of Labor Statistics. The number of big rigs currently on the road is approximately 34 million, based on ATA figures.

Andy Dishner, chief operating officer for Konexial, a Knoxville, Tennessee-based carrier, told Supply Chain Dive that the shortfall in repair professionals is quite apparent.

"We have all felt the consequences of the skilled labor shortages in the over-the-road transportation industry," Dishner explained. "Not only does this affect the fleet owners and managers, but it has the potential to dramatically alter the economic equation."

Disher went on to note that aside from the fact that commercial trucks are always on the road, which puts additional pressure on drivers, too few mechanics can potentially create safety hazards.
"Not having a driver to man the truck is a priority issue for sure, but a driver simply can't do his job if his rig is down without someone to fix it, Disher added. 

Stereotypes may be playing a role
Part of the problem is stigma, the notion that vocational professions such as HVAC workers, boilermakers, tradespeople and plumbers don't pay much and ultimately lead to nowhere fast. That's simply not the case, including for mechanics, noted Jennifer Maher, CEO at TechForce Foundation.
"The skills required to be a professional technician are highly technical and advanced, Maher told Supply Chain Dive. " Technicians can go from entry level to master technician, and have the opportunity to shift from hands-on work to become advisors, managers and corporate leaders."

Depending upon experience and demand, automotive service technicians and mechanics can make upwards of $67,000, according to BLS figures, which is well above the median salary ($59,039).
"Technicians have a virtually limitless ceiling when it comes to income because of things such as shift options and flat-rate pay plans," Maher further explained.

In the meantime, organizations like TechForce and Penske Truck Leasing are on a recruitment tour, looking to bust myths and set the facts straight among teens and young people so more people consider entering the field. In doing so, they may wind up improving operational excellence for businesses that rely on a well-oiled supply chain, which goes for just about all of them.

It's safe to say the increased usage of artificial intelligence isn't just on the way, it's already arrived. The question companies - as well as employees - now wonder about is the extent to which AI will factor into business processes moving forward. Several studies suggest manufacturing may experience the most substantial impact of AI in an effort to better improve the supply chain.
However, representatives for the industry indicate they will do everything they can to ensure the sector's backbone - its people - is not left behind.

"In excess of 1.18 million will be trained over the next five years."
In a joint statement from the National Association of Manufacturers and the Manufacturing Institute, several organizations say they intend to train as many as 1.18 million workers between now and 2024 to improve their skills and keep up with the times, thus improving their overall performance and output.

Jay Timmons, NAM president and CEO, indicated that the industry is at an impasse, as more jobs are becoming available but at an unsustainable rate.

"Manufacturers face a workforce crisis with more than half a million unfilled manufacturing jobs today and 2.4 million jobs that may go unfilled by 2028," Timmons explained. "But manufacturers are also problem solvers and committed to being part of the solution. So today, manufacturers proudly make this pledge to the American worker: we will continue to invest in our workforce and provide 1,186,000 Americans with the opportunity to receive training and development that will enhance their skills and prepare them for the next step on their career journey."

Sector experiencing a growth spurt
This promise comes as the industry is in the midst of what might be described as a renaissance. A decade ago, during the throes of the recession, the sector bore much of the adverse effects, with companies offshoring millions of positions that were previously located in manufacturing hubs. With each passing month, however, more jobs are returning from overseas. Roughly 509,000 were created in May alone, according to the Labor Department, which is a record monthly high.

That said, numerous jobs are going unfilled for weeks, if not months. Some believe that AI may be the answer to these issues, as Oxford Economics predicts as many as 20 million manufacturing positions could be displaced by industrial robots come 2030. The states most vulnerable to AI replacement include Oregon, Louisiana, Texas, Indiana and North Carolina.
Manufacturing Institute Executive Director Carolyn Lee stressed that the future of the industry is heavily influenced by its people.

"That's why we are committed to supporting the manufacturing workforce of today and growing the manufacturing workforce of tomorrow," Lee said.

Lee added she's supremely confident the training opportunities provided to the sector's men and women will help keep American manufacturing a force to be reckoned with in the years ahead.