Top Strategic Sourcing Articles by Source One:

Top News

Tightening access is critical to supply chain security

Security in your supply chain is a must, whether it's physically safeguarding the items you ship and receive to keeping the data you and your partners generate protected. However, with such an interwoven relationship between so many businesses at every step of the chain, security is far more said than done these days. That's especially true because it's not always easy - and sometimes it's impossible - to control what your partners are doing.

Case in point: When it comes to setting up cybersecurity systems, you can't tell who at another company has access to those platforms, according to Threat Post. A recent study found that the average company has as many as 4,700 partners that have access to at least some of their sensitive data, and no business could possibly keep tabs on all of them. That is broadly understood, as only about 1 in 7 companies are confident they could track all those third-party firms.

Third-party data security should be front of mind in the supply chain.Third-party data security should be front of mind in the supply chain.

Risks from something as simple as targeted phishing attacks that weren't intended to affect more than one company could compromise massive amounts of your data, the report said. Less malicious issues, such as someone accidentally sharing data they were unauthorized to reproduce, can have similar effects, and you would have no way of stopping it.

What can be done?
For all these reasons, companies would be wise to create as many contingency plans as they can to deal with these issues, and that should start with a careful examination of who has access to what data, according to HelpNet Security. For instance, such an effort may find that you're still sharing data with a third party you no longer do relevant business with, or that you've granted access to another company inadvertently.

Furthermore, it's vital that you do what you can to make sure whatever data you collect and share is stored both on the cloud - whether others can access it as needed - and in-house so that you cannot have your operations crushed by a ransomware attack or a partner being compromised, the report said. It's also vital to rely on encryption so even if someone does gain unauthorized access to your data, it would be useless to them without the right keys.

Getting it right
Finally, as supply chains evolve and more technology comes into them as everyday tools - for instance, something like sensors connected to the internet of things - your security plan will need to be reimagined, according to Supply Chain Beyond. Each new device on your network, and those of your partners', is another point that can potentially be compromised, so all involved must strive to properly safeguard them on an ongoing basis. Crafting a plan for integration in advance is perhaps the best way to go about this.

None of these steps may be easy - or cheap - to deal with, but they are certainly critical to ensuring none of your sensitive data is compromised.

The procurement organizations continue to evolve as a core function within the top 500 Fortune companies and as world trade dynamics continue to challenge the supply chain, companies will need to focus on enterprise cost management to create added value that will contribute to the bottom line. As a result, companies announce transformation initiatives across organizational boundaries at all levels of their business as a reaction to market conditions, cost pressures, and regulatory requirements. A wide array of terms are used to describe change - transformation, optimization, lean, operational excellence, restructure, re-engineer, re-organization - however, inevitably most companies would agree that the ultimate goal is to gain business efficiency and improve operational effectiveness. Having achieved this, it will naturally yield sustainable cost reductions throughout the business operations lifecycle.

To this effect, the procurement function plays a key role in any organization transformation initiative, as cross-functional core processes are redesigned to link activities, functions, and policies in ways that will achieve breakthrough improvements in cost, quality, and timeliness. Together, these three forces represent the fit-to-purpose that the company must achieve to be successful. Nothing new under the sun, however, the question remains how to embark on a transformational journey that will balance and integrate these three forces into a cohesive transformation program. Hence, enterprise cost-management techniques can be applied to align corporate strategy and functional area execution to reap additional benefits such as: enhanced spend analytics to accelerate analysis, category-based sourcing strategies to leverage spend, risk-sharing to promote partnership, the total cost of ownership (TCO)-based decisions making and supplier network rationalization. Furthermore, as companies use hybrid systems to support the day-to-day procurement process, it becomes increasingly important to align people, process and technology to formalize goals, establish accountability metrics and drive external collaboration with partners and suppliers.

Among the external factors impacting the business are the nature of the market and supplier competency. This creates an opportunity to identify a supplier base that can become a strategic asset to the business and integral to achieving business goals. Suppliers are becoming a driving force behind innovation, capable of identifying innovative solutions through their broader business network across multiple industries. New ways of collaboration with suppliers are needed to develop suppliers into better future relationships. Therefore, categorizing the supplier base and establishing a Supplier Relationship Management (SRM) program is critical to a sourcing strategy that ensures continuous business alignment throughout the relationship life cycle. It also drives a disciplined approach and consistent way of interacting and managing suppliers which results in continuous improvement from the supply base.

As companies seek to transform their procurement function to radically improve the benefits to their organization, an integrated business strategy in a structured manner must be designed to optimize the acquisition of goods and services. This can be accomplished by an initial assessment of the organization purchasing maturity to design a tailored program that will deliver a competitive advantage by eliminating waste and inefficiency through detailed analysis, careful planning, strategy implementation, and continuous improvement. A transformation program needs to address fundamental issues related to internal processes, technology and spend data while conducting an evaluation of the procurement staff's knowledge, capability, and capacity. Using this coordinated approach will revolutionize the procurement function and allow companies to capture untapped value.

A new vision for procurement organizations will make them become a major driving force within their companies. But this is just a starting point, a comprehensive approach coupled with intelligent spend engines and advanced analytics solutions are key to successfully transform the procurement function.

For some time now, concerns have been brewing about how the international supply chain would be impacted by a full-scale trade war between the U.S. and China. While some volleys have been passed back and forth between the countries, with the potential for more to come, things have been relatively muted to date. With that in mind, companies are nonetheless adapting so that they're prepared for just about any eventuality.

Just in case a more significant trade war erupts, a number of companies based in the U.S. with manufacturing or production centers in China have at least begun shaking up their current supply chains so they can make their products in other foreign nations as well, according to CNBC. However, it's worth noting that in most cases, those companies are unlikely - at best - to withdraw operations from China completely.

There's a simple reason for that situation: Some materials or components that cannot be sourced anywhere else, at least not at a price that makes sense for manufacturers and, by extension, their customers or partners, the report said. Moreover, the fact is that the supply chains these companies have invested massive sums of money setting up can't just be uprooted and moved to entirely different countries with any sort of ease.

A U.S./China trade war requires a lot of vigilance from companies.A U.S./China trade war requires a lot of vigilance from companies.
It's not so simple
At the same time as some firms are being proactive about setting up contingencies, a recent poll from DHL Resilience360 shows just how much of a challenge of these efforts. Nearly half of all companies in the engineering and manufacturing sectors with operations in China say they have no backup plans in place if the trade war escalates, and the same was true for about 2 in 5 companies in the automotive sector.

Overall, there are companies in many industries that would face little to no effect from such a situation, but manufacturers and automakers are among those that have likely already taken a hit, the report said. Indeed, it may simply be easier for them to take the hit than find new solutions on relatively short notice. As such, 43% of respondents with long-running relationships with Chinese suppliers and factories cited cost and time as major factors behind their decisions. This despite the fact that 92% expect the tariffs in such a dispute to linger long-term.

Reason for hope
While some companies are fretting for obvious reasons about the implications of a protracted trade war, experts now say the strength of today's supply chains are actually part of the reason why this might not last as long - or be as significant - as some believe, according to Knowledge at Wharton. It's not as though companies on the other side of the Pacific aren't facing the same issues as those based in America do now, and it appears as though the complicated nature of establishing and maintaining those chains will keep the trade war from becoming a sort of "deep freeze" for all involved.

Nonetheless, companies should still make sure they at least have the flexibility to react to new developments as they happen so nothing takes them by surprise.

Group Purchasing Organizations (GPOs) can be leveraged for a variety of products/services, but the most strategic use revolves around Indirect Spend. Indirect describes any company expenditures that are required for running the business, but aren’t directly related to the company’s final products or services. Examples of indirect spend are: office supplies, temporary labor, furniture, janitorial services, and hardware. Joining a GPO allows for significant discount, since there is a larger markup on buying stationary though retail outlets. Below are some features of a GPO that allow for cost savings:

  • Specialized Programs: Used heavily for Hardware and Technology, which allows for discount on a large capital expenditures (smartphones, laptops, servers, etc.).
  • Negotiation: GPO’s handle the overall management of relationships, granting organizations backing and control over what they purchase and when.
  • Accessibility: Small and mid-sized companies don’t have a big enough name needed for aggressive pricing from well-known suppliers. A GPO assists these organizations in receiving better pricing and capability of a market-leading supplier.

According to the Hackett Group, “a decision not to use GPO’s for specific indirect spend categories is the same as leaving money on the table”. The ideal products purchased through a GPO contain low customization, high volume, and are found in your indirect spend category. ProcureCon found that 58% of organizations aren’t utilizing a GPO. These organizations are also spending way too much time on contract management, sometimes 25-50% of their total productivity, and aren’t achieving similar results to others leveraging GPO’s. Procurement teams can certainly benefit from handing off some of the indirect spend/management responsibilities to a GPO.

As mentioned previously, there are other savings not associated with the category spend. Costs that will be cut internally include: Companies that capitalize on the opportunity of leveraging a GPO see results in their cost savings, as well as their supply chain. It’s also important to mention the benefit of an eProcurement solution, which will integrate the data provided by the GPO and treat it as another vendor in the companies supply chain.

There are plenty of reasons for companies to continue pushing for efficiency in every aspect of their supply chain. From reduced costs to greater clarity, the benefits for businesses are tangible. However, new analysis from one of the leading organizations related to climate change suggests more efficient supply chains can also be a boon for the entire planet.

Indeed, companies across the supply chain were able to increase efficiency significantly in 2019 alone, reducing 563 metric tons of carbon dioxide in pollution that would have previously been there, according to the new study "Changing the Chain" from CDP Worldwide, a global non-profit for emissions disclosures. This is important because, right now, the average supply chain generates 5.5 times more emissions than the operations needed to produce goods.

The reduced emissions added up to the equivalent of removing more than 119 million vehicles from the road for an entire year, and as a benefit to the companies involved, it saved them some $20 billion in costs they would have otherwise faced, the report said. However, fewer than 1 in 3 suppliers actually cut emissions over the course of the year, so there is still a long way for the industry as a whole to go. This all comes at a time when global climate change poses the risk of worldwide industry amounting to some $1 trillion in potential losses.

Carbon emissions are dropping for many major companies.Carbon emissions are dropping for many major companies.
A growing trend
What those in the supply chain sector may find interesting is how much companies have been buying into these efforts over the last year, and what's changing about their operations. The 2018 version of the Changing the Chain report, for instance, showed more than half of suppliers have been making business plans with issues around climate change in mind, but more than three-quarters identified some risk from these concerns.

However, despite the advances, the average supply chain emissions have increased to 5.5 times what production generates, from last year's 4 times, the report said. Meanwhile, the number of companies cutting emissions has grown to about 30% from the previous 23%, so that represents significant proportional progress.

An idea in action
One major U.S.-based company trying to significantly cut carbon emissions is the retail titan Target, which plans to make itself 25% more efficient than it was in 2017 over the next five years, and 30% by 2030, according to Supply Chain Dive. That makes it one of just seven companies in the U.S. that have made such goals for itself, and its efforts are by far the most comprehensive.

Simply put, Target is uniquely positioned to achieve these goals because its partnerships with other companies in the supply chain is so vital to their bottom lines, the report said. As such, what Target says about everything from pricing to emissions goals is often taken as gospel.

With all this in mind, it shouldn't just be industry giants that set and follow through on these goals. Companies of all sizes should at least try to reduce some of their emissions, which may in turn reduce costs.

Once again, Corcentric's S2P team is partnering with the Institute for Supply Management (ISM) to sponsor the organziation's Annual Conference. 

ISM is a not-for-profit organization that provides a landscape for supply chain professionals to further their education and connect with other experts in the field. Through a series of events and training opportunities, ISM propels its members' careers forward and drives the conversation around crucial issues. Most notable among these events is ISM's Annual Conference.

This year, the premier Supply Chain conference will take place from April 26th to 29th in Boston, Massachusetts. Thousands of professionals will gather at ISM 2020 for three days of insightful presentations, thought-provoking discussions, and worthwhile networking opportunities. 

Corcentric's VP of S2P  shares his optimism for the event, "With a new decade about to begin, Procurement and Supply Management professionals face a wealth of both challenges and opportunities. ISM2020 should provide a valuable opportunity to address both and learn how professionals at each stage in their careers can more confidently enter the next generation.".  

In addition to notable Procurement practitioners and Fortune 500 executives, ISM2020 will feature insights from a pair of keynote speakers. This year's honored guests are former United Nations Ambassador, Nikki Haley, and former Secretary of Defense, General James Mattis. They will reflect on this year's theme: "Revolutionary Ideas."

Registration for ISM2020 is. Sign up now for Early Bird pricing. 

In today’s modern business environment, the competitive landscape and requirements to successfully compete are evolving and shifting constantly. The primary reason for this is that the rapid escalation in disruptive technology has led to increased customer demands. It’s been happening since the rise of the internet. Another factor driving change is the steady performance of the global economy over the past decade and the resulting increases to standards of living. The combination of these two factors has drastically changed the way consumers value and evaluate the goods and services at their disposal.

These changes and disruptions are impacting small businesses and large enterprises alike. With consumer preferences shifting towards features and convenience, businesses are forced to attack product development from a value perspective as opposed to taking the historically popular cost-centric approach. On the B2B front, customers are placing more emphasis on supplier competencies such as visibility, integration, and risk management. In recent years this has brought increased attention to the concept of value change management. While the definition of a value chain will vary slightly depending on the source, it is in essence a set of integrated activities performed to deliver a valuable product or service to a given market. The overall goal of value chain management is to deliver the most value for the least cost in order to create a competitive advantage.

The idea of a value chain was pioneered by American academic and Harvard professor Michael Porter in his 1985 book Competitive Advantage: Creating and Sustaining Superior Performance. In this book, Porter introduces the five activities that contribute to establishing a company’s value chain. Maximizing the value in any one of these five areas will provide a company with an immense competitive advantage in its industry.

  1.     Inbound Logistics: Receiving, warehousing, and inventory control.
  2.   Operations: Value-creating activities that transform inputs into products, such as assembly and manufacturing.
  3.      Outbound Logistics: Activities required to get a finished product to a customer. These include warehousing, inventory management, order fulfillment, and shipping.
  4.     Marketing and Sales: Activities associated with getting a buyer to purchase a product.
  5.      Service: Activities that maintain and enhance a product's value, such as customer support and warranty service.

In some professional circles, the terms “supply chain” and “value chain” are often times lazily used interchangeably. While the activities associated with supply chain are of central importance to the value chain, the value chain covers a broader scope of activities. Supply chain refers to all of the steps and processes that go into producing and delivering goods or services such as sourcing, procurement, manufacturing, and logistics. Value chain on the other hand, includes all of the business operations which add utility or value for a business’s customers. Below I will discuss a few examples to make this picture clearer.

       Samsung is a manufacturer of high end electronic products such as TV’s, tablets, and cell phones.
o   Supply chain- all of the components that go into producing Samsung’s products are part of the company’s supply chain.
o   Value chain- the extended warranties Samsung offers on its products are part of the company’s value chain.

                     Best Buy is a consumer electronics retailer.
o   Supply chain- all of the products Best Buy sells are part of its supply chain.
o   Value chain- Best Buy has a very strong value chain. Some components include: free delivery into your home, installation and repair services performed by Best Buy’s Geek Squad.

Now that I have provided more definition around what a value chain is, hopefully it is clear why now more than ever it is important for companies to focus on developing their value chain in order to obtain and retain customers. In my next post I am going to dive deeper into value chain competencies specific to supply chain management and procurement such as risk management and supplier integration, and discuss how these competencies are being valued by business customers.

Despite their evolving, essential role, Procurement groups still tend to fall under the radar. When it comes time to carry out maintenance and repairs, many organizations look everywhere else before diving into Procurement's capabilities. This leaves the function under-resourced and makes it challenging for Procurement professionals to align themselves with the wider organization.

There are a number of reasons an organization might drag their feet on evaluating and optimizing their Procurement function. Most common, perhaps, is a lack of resources and insight. There's also often a simpler culprit: complacence. If the lights are still on, it's sometimes tempting to adopt  an "if it ain't broke, don't fix it" mentality. This attitude is wildly short-sighted and forces Procurement groups that are already struggling to try and get by with fewer resources and less engagement from the organization.

Companies lacking the resources for conducting such an evaluation are often the ones who'd benefit most. Even a quick assessment of Procurement's current state may present cost savings opportunities while simultaneously bringing ineffective processes to light. For example, an assessment may reveal that recent M&A activity has left the function ill-equipped to serve the business. If it's conducted diligently and strategically, the assessment will also reveal how Procurement can refine its approach.

Why Take a Closer Look?

While changing business environments and evolving strategic goals often stimulate the need for improvement, sometimes processes and tools simply grow outdated. Take, for example, a Procurement team that's become attached to a single template for its RFP documents. While that template may have been ideal in a particular category or for a particular supplier, it's possible (even likely) that's become less useful over time. Today, it might include information that's redundant, irrelevant, or just plain incorrect. A simple review of RFP design and administration practices can identify these overlooked inefficiencies and provide ways to tailor these processes to serve present-day needs.

As part of a comprehensive Procurement Transformation initiative, a maturity assessment can also provide the insights necessary for selecting the right technologies and third-party partners. Without taking the time to dig into Procurement's efforts, stakeholders might assume that the function is simply not using its technology effectively. An assessment, however, could reveal that that this technology is no longer suited to the function's needs.

Even in the best of circumstances, growing companies often find themselves leaving Procurement in the dark. Taking the time to conduct a maturity assessment will provide opportunities to realign Procurement with the rest of its peers, reopen the necessary lines of communication, and eventually repair those aspects of Procurement that need attention.

Like any other improvement activity, an assessment must be goal-oriented and measurable. For a maturity assessment to produce the necessary insights and lend itself to a Procurement Transformation Initiative, the organization needs clear goals and a means of measuring the results. These should strike a balance between qualitative and quantitative factors.

Potential Goals

Your organization may have some or all of the following goals in mind:
  • Better aligning Procurement to serve organization-wide strategies.
  • Identifying actionable cost savings opportunities.
  • Assessing competitiveness against market standards,
  • Understanding how well current processes, tools, and workflows serve Procurement's needs.
  • Determining the efficacy of processes for managing risks and enforcing compliance.
  • Defining procurement processes that provide the visibility, insight and transparency needed to drive every step of the sourcing and purchasing cycles. 

Defining Success

Next, your organization must define the “units of measure” for achieving these goals. Let’s take the identification of actionable cost savings opportunities as an example:
  • What constitutes savings?
  • How does your organization define “actionable”?
  • What other factors are dependent on cost savings?
  • Are there goals upon which cost savings is contingent?
Your assessment should reach two conclusions before you can start to embark on a Procurement Transformation in earnest. First, you need to establish the questions you want to answer. Next, you need to define what these answers will look like and why they'll prove meaningful to the organization. Only then will an assessment lead to a successful, holistic, Procurement Transformation. 

ICYMIM: December 9, 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.

Lease Spend is a Hidden Category worth Millions in Savings, Strategic Value for Business
JP Morris, Spend Matters, 12/8/2019
If you’re looking for a new spend category to pull value from, you may want to look more closely at your leases Unfortunately, leases are often weakly managed. Favorably for procurement teams, there’s an opportunity to sharpen things up and realize some serious cost reduction potential. JP Morris demonstrates the true value of the lease management and how you can make the category a serious value driver.

5 Tips on Buying Procurement Technology (Part 2) - Learn to walk before you run
Magnus Bergfors, Spend Matters, 12/6/2019
The tech market has a lot to offer, and that can make the buying process complex. If your procurement team is in the process of adopting new software, a full-proof strategy is a necessity. Magnus Rober explains five tips for making informed and strategic decisions about procurement technology investments.

Where We Stand on the Journey to Gender Diversity
Sarah Scudder, Future of Sourcing, 12/03/2019
There’s a wide gender gap in Procurement that demands our attention. While there have been some notable leaps in workplace diversity in the past few years, there is still a lot of work to be done. Sarah’s Scudder lays out what some companies are doing right and what other companies are missing completely.

Automation is a scary word. For individuals, it sounds like "displacement." It conjures up images of lost wages and a long, arduous job search to come. For organizations, it sounds like the end of business as usual.

In warehouse management, however, it should bring to mind pleasant images and bring about positive results: more effective processes, more satisfied customers, etc. For many organization and individuals, the first step in overcoming these fears is recognizing that warehouse automation almost never happens all at once. It's not an all or nothing endeavor, but a gradual process of optimization and resource allocation.

Equipment Depot's Definitive Guide to Warehouse Automation identifies four different levels of automation. "A warehouse," they note, "doesn't go from zero automation to fully automated overnight

Which level of automation have your warehouses reached?

1. Systems Automation 

With systems automation in place, warehouses still rely mostly on human labor for picking, shelving, and other tasks. Typically, however, these processes are made more productive with the addition of a solution like a Warehouse Management System. Equipment Depot suggests investments in these helpful solutions will increase throughout the next year. More than half of the organizations they surveyed (55%) expect to investment in one during 2020. They'll reap benefits including more streamlined repeatable tasks and better visibility into inventory levels.

2. Mechanized Automation 

Warehouses with mechanized automation take advantage of labor-reducing tools that provide for speedy horizontal motion. These include conveyor belts, stretch wrap applicators, and other picking equipment. In addition to expediting repetitive processes, these solutions can reduce (or even eliminate) product damage. In time, this will boost customer satisfaction.

3. Semi-Automation

Semi-automated warehouses rely on automated storage and retrieval systems (AR/RS) which can include racking systems, load-handling devices, and conveyor systems for moving goods to and from dock areas. Such warehouses also boost the efficacy of their WMS with the addition of Warehouse Control Software like RFID classification and automated vehicles.

4. Full and Sophisticated Automation 

These are the world-class warehouses that include a complex, sophisticated network systems and solutions. In some instances, these even operate as true "lights out warehouses." These are warehouses that operate without a single human worker. Most, however, still leverage a combination of traditional labor and automation. 

Are you ready to automate some or all of your warehouse management processes? If your processes are too labor-intensive or your resources are utilized ineffectively, the answer is probably yes. Reach out today to learn more about taking the right approach to automation in the warehouse. Our experts will ensure you address obstacles and optimize processes without disrupting everything you're already doing well.

"Is another recession coming?" 

"When will it happen?"

 "Who will be affected?"

These are hot questions that professionals across all industries want answers to. The possibility of a recession makes everyone from CEOs to shift workers understandably nervous. At the beginning of the month, Bloomberg Economics predicted that there was a 26% chance of a recession occurring in the next year. Perhaps it's not time to panic quite yet.

Nevertheless, that's enough probability to start your survival plan ahead of time. As the problem-solvers and disaster-avoiders in a company, Procurement professionals can't wait for a sure sign to prepare for a potential economic crash. It's wise for supply chains to prepare for the worst and start mitigating risk now rather than later. 

Senior Analyst at Corcentric, Sam Cagle, will provide some guidance for procurement teams in a presentation this upcoming January. "Building a Recession-Proof Business with Help from Procurement" will demonstrate why Procurement is so valuable during periods like a recession. He will also provide some best practices for not just surviving, but thriving throughout such periods. 

Cagle aims to answers these key questions: 
  • Where the U.S. is financially and why might a recession surface in 2020?
  • What different methods can businesses use to respond to a recession? 
  • How can World-Class Procurement help companies survive?  
Recessions can be a scary subject to approach, but it's up to Procurement teams to courageously lead their companies through adversity and this situation is no different. Start your recession-proofing journey with some insight from one of our experts. 

The presentation will be hosted by ISM NJ on January 9th at 11 AM. To register, sign up by Wednesday, January 8th here.  Both members and non-members of ISM are encouraged to tune in.

Procurement, Transportation, Logistics, Fuel, Fuel Card, Supply Chain, Consulting

Here on the Source-to-Pay team at Corcentric, a part of the way we identify opportunities for our clients is by analyzing how much they spend annually in a certain discipline or category. Depending on the category, the theory is that there is a certain amount of that annual spend we should be able to influence and by working with our client and their suppliers, create savings for our client’s bottom line. This can be done in a number of ways:
  1. Engage new prospective suppliers in the market to benchmark current pricing standards across the industry     
  2. Conduct an RFx event allowing both incumbent suppliers and new prospective suppliers a chance to put together a proposal or bring the most current pricing.
  3. Negotiate contracts with the current suppliers that your client uses.
  4. Consolidate from many suppliers to a few.
A common mistake in the spend analysis process is to overestimate the cost savings impact within a particular category. Upon a cursory review of spend, certain categories may be targeted strictly because of the volume. However, once you take a deeper dive into the category you can see how simply negotiating a percentage decrease isn’t possible. Fuel is a prime example. Pricing in the fuel industry is volatile, which means a typical RFP process isn’t necessarily going to be effective. Procurement professionals need to get creative.

In a recent engagement with a client, fuel was an area of spend that was targeted. To really achieve savings, we needed a comprehensive approach to cost management. As a third party consultant, we have no ability to impact the actual pricing of fuel, which in this case is direct spend. What we could control was what our customer was getting on the back end of their business, in discounts, rebates, services and incentives from their fuel card management suppliers. The amount that our customer was getting back from these incentives was roughly 3% of their total net spend in the fuel industry.

By engaging the market at large via an RFP, it was clear that the standards in the fuel card management suppliers were long standing and ubiquitous across the market. It became apparent that we were only going to be able to carve out another 1% in savings annually for their bottom line in the form of negotiating discounts, rebates and incentives. Thus we had to get creative in order to create supply chain efficiencies that could drive value other than just true cost savings.

Since we had our customer’s purchase data for an entire fiscal year, we were able to put together an analysis of the sites where their drivers in their network were most frequently fueling up at, and the total spend that our client spent there. From there we worked with the suppliers that we were choosing to move forward with to negotiate further specific discounts at the fuel provider chains that our client’s fleet fueled up at most often. This way, we can create greater supply chain efficiencies and savings by supporting the already existing behavior and tendencies of their operators.
Another focus of our sourcing effort was to increase the intangible services that our client was receiving from their supplier. In this case, we upgraded the service package our supplier was receiving, at no cost to them.

Our solution is projected to increase our client’s annual ROI from 3% to 5% for every dollar spent in the next two years within this product category. The client was happy we were able to revamp their fuel card operations, align them with the best possible suppliers for their supply chain and create a solution that not only catered to how they currently do business but provided room for growth in the future as well.  

This example serves as a reminder of why it is important to analyze your supply chain for process efficiencies and cost savings opportunities regularly. There is always room for continuous improvement.

For more on what supply chain consultants at Corcentric can do for you and your company, check out