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Study: Supply chain efficiency changes could reduce emissions

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

Procurement's workforce is changing, but it might not be changing fast enough. Throughout the last decade, organizations have watched demand for talented, flexible Procurement teams begin to outstrip supply by a considerable margin. Per Deloitte's latest CPO survey, just 46% of Procurement leaders are confident their teams can deliver.

As the function enters a new decade, it's imperative that Procurement act quickly and strategically to close its various talent gaps and become truly world-class.

Blended Teams

The term "blended workforce" has historically referred to the practice of leveraging different types of resources (most often, a "blend" of full-time and part-time employees). Today, however, the term has begun to take on a new, broader and more complicated meaning. Organizations are still leveraging a combination of contractors, temporary resources, and full-time employees, but they're also beginning to consider how they can leverage a workforce that blends both humans and machines. Leaders are beginning to find that the right mix of automation and traditional hands-on effort is necessary to maximize Procurement's efficiency and equip it to enter the 2020s, 

While discussions around AI and automation tend to sound apocalyptic, studies show that as many as 67% professionals are actually optimistic that automation will help them perform more effectively and transition into new, more strategic roles. It's worth noting, however, that the same amount believe they'll need new skills to succeed in the future. A whopping 80% believe their employers should provide the means to develop these skills. Most sectors have been slow to take these steps.

Manufacturing is - unsurprisingly - one of the industries that's made building a new kind of blended workforce a priority. Jobs within this sector are more vulnerable to automation than almost any others. Oxford Economics predicts that 20 million workers could find themselves displaced within the next ten years. America's National Association of Manufacturers has pledged to meet this threat head-on by offering "reskilling" to more than 1.2 million workers between now and 2024. It's a start, but if estimates are to believed, it's clear the industry (and other industries) will need to ramp us these efforts sooner rather than later. 

New Skills and New Roles

While organizations plan to devote most of their 2020 training dollars to traditional strategic sourcing and category management skills, it's clear their priorities are evolving. More than 20% of CPO Survey respondents intend to train their teams on ethical sourcing, a full 40% will place on emphasis on project management. By expanding Procurement into new areas, they are hopeful the function can accept a more nuanced role and distinguish itself as indispensable.

Even more crucially, Procurement leaders are starting to take so-called "soft skills" more seriously. These are the attributes like leadership, empathy, and emotional intelligence that aren't easily learned or taught. They are also the skills that will make Procurement resources invaluable as relationship builders, risk managers, and business partners in the new decade. Most importantly, they're skills that computers cannot (and likely never will) replicate. As automation continues to make an impact on Procurement's workload, it's essential for both businesses and individuals to consider how soft skills can help create roles that machines can't occupy.

Whatever strategies organizations employ, whatever skills they emphasize in the new year, it's clear they need to widen their net when it comes to talent. From both a recruitment and retention perspective, the definition of Procurement excellence must evolve to suit a new fast-paced, digital world. Organizations should look for talent in new places, retool their existing job descriptions, and identify every possible opportunity to introduce new skills. 

Procurement's Decade Ahead

This year’s Black Friday demonstrated some significant cultural changes to the 120-year-old holiday. With reduced early morning shopping and dramatically increased online shopping, the traditions of the famous holiday aren’t proving static.

Going into the Thanksgiving holiday, Black Friday sales figures were looking uncertain due to a number national circumstances. Trade uncertainty is one of the biggest reasons economists were unsure if the holiday would be as lucrative as 2018. Additionally, consumer confidence shrunk slowly over the early months of 2019 and finally plummeted in September. Would Americans have the financial courage to spend liberally? With a possible recession in the cards for 2020, should they?

Nevertheless, U.S. consumers persisted. Black Friday sales skyrocketed once again this year and new shopping trends have become highly apparent. Despite the ease of digital transactions, a quarter of consumers were willing to travel over 25 miles for in-store discounts. According to Fiserv, Brick and Mortar sales were up 4.2% from last year. 

The increased willingness to shop in-store did not, however, leave a dent in online shopping figures. Adobe reported that consumers spent $7.4 billion online shopping on Friday. That's up 22.3% from Black Friday last year. Purchases made from the comfort of consumers' homes might explain why those infamous midnight shopping trips have lost popularity. Salesforce reports that under 10% of digital purchases were made as before 7AM on Black Friday. Some  shoppers in  Las Vegas reported empty malls at 5AM. This suggests door busters and door-busting lines could soon be a thing of the past.

But what caused shoppers to spend confidently despite economic worries? Was it the nation's currently low unemployment rate? Or could it have been retailers' savvy ability to offer competitive prices despite an escalating trade war

Trends suggest that improved consumer experience might have had something to do with it. User-friendly apps and mobile websites hosted 36 % of online sales. With social feeds teeming with shopping inspiration, many consumers were able to make purchases right there on their smartphones.

Marketers also played a hand. Salesforce recorded a record-high number of emails and SMS promotion messages sent out to promote Black Friday deals.

The IoT has already changed the Black Friday landscape for good. With a more customer-centric shopping experience and serious sales figures, the outcome is looking like a win-win for consumers and companies. The digital takeover might have Black Friday and Cyber Monday looking more and more comparable in the coming years.  

The supply chain for just about every industry is increasingly global and requires innovative solutions to emergent problems on an ongoing basis. Particularly when the end point for delivery of completed goods or services is in remote areas that are difficult or unfeasible to reach by automobile, a growing number of logistics experts advocate for use of drones in last-mile fulfillment. Others, however, are concerned this option as currently constituted may not be all it's cracked up to be.

The case for use of remotely piloted or even automated drones is clear enough: In places like the developing world or even highly rural parts of industrialized nations, it may not be practical or even possible to have drivers in land vehicles hand-deliver packages, according to DevEx. For instance, in parts of Malawi, health care providers often struggle to get the medicine they need simply because there's little to no infrastructure that allows delivery drivers to make it across rugged terrain. This has led some organizations to begin using drones to both deliver needed medicine and pick up samples from patients that can be tested in more advanced medical laboratories in larger cities.

Can drones really revolutionize logistics?Can drones really revolutionize logistics?
However, for a larger and more successful rollout of such options, more companies may need to buy into the idea that drones are a potentially beneficial part of existing supply chains, rather than just using them to forge new last-mile options, the report said. That may include more training for use and better communications between companies approaching the end of the supply chain as a whole.

Proof of concept
In the U.S., shipping titan UPS recently received its first certification from the Federal Aviation Administration to use drones through its Flight Forward subsidiary, according to Supply Chain Digital. Since the program launched earlier this year, UPS Flight Forward has completed more than 1,500 deliveries to a hospital in Raleigh, North Carolina, using drones - and now it will be able to expand even further. Partnering with the pharmacy giant CVS, the package delivery company plans to make residential deliveries a reality in the near future for consumers who can't get to store locations.

"We now have an opportunity to offer different drone delivery solutions, tailored to meet customer needs for speed and convenience," said Scott Price, UPS chief strategy and transformation officer. "Delivering prescriptions by drone directly to homes could greatly improve the patient experience for CVS customers."

Potential drawbacks?
While businesses will also have the obvious benefit of cutting their fuel and man-hour costs by eliminating complicated last-mile deliveries with drone options, there are other costs and challenges to consider, according to SpendEdge. For instance, the initial cost of investing in a drone army is clearly prohibitive, and ongoing insurance premiums for potentially dozens or hundreds of these devices would at least be similar to those for trucks and vans in some cases.

Furthermore, there may be challenges with deliveries during inclement weather, and urban deliveries could be far more difficult to complete than rural ones, for a number of reasons, the report said.
With all this in mind, decision-makers in the logistics field certainly have a lot to consider when it comes to adopting drones for last-mile deliveries.

A Group Purchasing Organization (GPO) is a group that’s leveraged through multiple businesses interested in buying similar products. There are several other reasons why business would benefit from a GPO such as: preferable prices and contract terms, more internal procurement resources, and additional time on other initiatives. On the other hand, suppliers also benefit from GPO’s because their market share expands, access to industry insights increases, and develop better buyer relationships. It’s hard to believe that companies don’t take part in using GPO’s for benefiting their supply chain.

GPO’s can be broken down into three main types:

Vertical Market: Focused on one industry or vertical (examples: healthcare, food service, automotive, electrical, etc.).

Horizontal Market: GPO members in the horizontal market exist in different industries, but purchase similar goods and services.

Master Buyer: One buying organization contains significant contracts in place with vendors and allows other companies to purchase of those current contracts.

One may ask: How does a GPO work? GPO services can be outlined in three summarized steps:

Step 1: Membership

The GPO membership base consists of companies seeking to channel spend using certain GPO agreements. The collective buying power of these businesses is what creates leverage. The leverage stimulates better pricing, since the supplier market share has expanded.

Step 2: Better Pricing and Contract terms Generated by Leverage

GPO’s achieve their advantages by benefiting both the customer and supplier. Although the profit margins for suppliers may not be as high, the amount of spend in one place sparks extreme interest.

Step 3: Risk Reduction Due to GPO Improvements

GPO’s continuously manage the contracts and negotiate for competitive discounts/ improved terms with suppliers. As more members join, GPO’s are able to leverage the increased spend stream that attracts suppliers.

It’s important to educate yourself on GPOs, as you may be missing out on immense cost savings opportunities. Think about which GPO can benefit your company and decrease specific category spend - I'll cover all that and more in my next blog.