March 2014
West African trade discussions remain variable

Though West Africa is a region ostracized for its tumultuous political climate, its leaders recently assembled in order to solidify its position as a part of the world's global sourcing strategy. As the economic climate improves, the Economic Community of West African States opened discussions with foreign organizations interested in investing in the Republic of Cote d'lvoire, Ghana and others. 

Future discussions 

According to Port News, Terminal Operations Conference Worldwide, an organizer of events focusing on maritime trade and distribution, scheduled a two-day event to take place in Tenerife, Spain, on Dec. 11 of this year. The article noted that the assembly is set to focus on the budding West African region, which is quickly integrating itself into the European procurement process. On average, the area has produced 3 million to 4 million 20-foot equivalent units of materials per year. 

Event director Paul Holloway claimed that the discussions will analyze West Africa's maritime trade network, what's to be expected of the logistical infrastructures of shippers and carriers, the service capabilities and security. He cited recent changes in port authority, private indulgence and the arrival of foreign terminal operating groups as causes for improvement. 

"The Canary Islands have served for centuries as a strategic Atlantic bridge between Africa, Europe and the Americas, making Tenerife a great location to meet, network and debate the future for West Africa," said Holloway, as quoted by the news source. 

Meeting some hesitation

All Africa reported that the Economic Community of West African States recently ended negotiations with the European Union in Yamoussoukro, Cote d'lvoire​, earlier this month, believing that the Economic Partnership Agreement requires further review. Republic of the Gambia President Yahya Jammeh claimed that regional economic communities incited by EU participants sparked deals that are inequitable to African communities. 

"If we have a partnership it has to be a partnership based on mutual respect," said President Jammeh, as quoted by the news source. 

Countries such as Ghana and Cote d'lvoire currently possess free trade agreements with the EU, but nations such as Nigeria resisted lifting tariff barriers over fears this could cripple developing industries incapable of coping with European imports. Officials also expressed a dire need to improve the procurement management strategies of large businesses within the area as well as a desire to control the pricing of exports. 

Currently, Ghana and Cote d'Ivoire are in interim bilateral deals set to expire quite soon. The nations are two of the world's greatest cocoa exporters, meaning that a discontinuation of their agreements could divert European companies away from placing strategic sourcing processes in the region. 

Conducting a sourcing event for a marketing project can be a bit overwhelming. Ensuring that the correct agencies are invited to pitch their strategies, selecting a finalist that will help deliver a return on investment (ROI), carefully sifting through rate cards and estimated expenses to make certain that all tactics are covered and offered at a competitive rate... the list goes on.

Once a company has selected an agency and is confident that they can accomplish the strategic objectives set forth, one may think that all they have to do is draft up a simple statement of work (SOW) and it’s all done. However, the contracting phase of any sourcing initiative, especially marketing, is critical to a company’s relationship with the supplier or agency as it will establish the roles of both parties as well as define the project scope and expectations. Below lists the five main sections of a thorough SOW as well as tips that a company should be mindful of when developing one for a marketing assignment:

Project Scope: All marketing SOWs should contain a scope of work. The scope of work defines the tasks that will be performed and any deliverables produced as a result of those tasks. It is important that the language found in this section is aligned with the clauses in the master services agreement (MSA), meaning that if there are certain service exclusions mentioned in the MSA, they should not appear in the SOW and scope of work section. For example, if there is a clause in the MSA that no subcontractors are to be used in any engagements with that agency, the SOW should not include services of including subcontractors.

When drafting the project scope of an SOW, it is important to read through each task and ensure that they are not too complex or vague. The language should be concise in that it clearly states what services the agency will provide without the need for clarification. If the project scope is limited or difficult to understand, it will lead to the agency making assumptions and delivering services and deliverables that fail to meet the needs of the company.

Objectives: The objective of the statement of work outlines the purpose of the overall assignment as well as the expected outcome. Objectives should clearly describe expectations as this will allow a company to measure the success of the agency attaining these goals. An example of a poor objective for an SOW is as follows:

Agency will develop email marketing campaigns.

This is a bad example of an SOW’s objective because it does not clearly define expectations and it would be difficult to measure the outcome of the initiative based on the wording in that statement. The objective can be improved by adding specifics in terms of the number of campaigns or
deliverables and what the company would like to achieve:

Agency will develop four (4) email marketing campaigns during a one year period to increase traffic to a brand awareness site by 15%. The campaigns will target physicians and nurses within the neurology space.

The statement above details the expected services and desired outcome of the project as well as provides specifics that can be used to measure a company’s ROI.

In service contracts, it’s important to incorporate service level agreements (SLAs), which clearly states the definition of services, performance measurement, and problem management. The SLA also dictates what penalties an agency would incur if the SLA is not met. For example, during the launch of a new product, a company may set up a help desk to address questions and concerns from customers regarding the new drug. When drafting the contract with the help desk provider, the company may include SLAs such as how long it takes for an operator to answer a call, the number of dropped calls allowed, and then expected number of resolved issues. The SLA will also include details around compensation to the company if the SLAs are not met.

Resources and Responsibilities: This section of an SOW establishes the resources that will be assigned to the project as well as their primary responsibilities throughout the engagement. The appropriate skill sets necessary to complete the project are also found in this section.

Each resource’s name, job title, and project functions should be detailed for both the agency and company. If the agency will be expected to work with another supplier or agency, that information should be listed as well.

Project Scheduling: It is critical for an SOW to include the schedule of the project. The schedule will include the milestones and deliverables, the parties involved, and the planned completion date. The terms of the SOW and the expiration date should also be stated in this section. Below is an example of how this information can be illustrated effectively:

MilestoneCompany Resources InvolvedAgency Resources InvolvedPlanned Completion Date
Approval of Project PlanSr. Project LeadProject Management and Operations TeamsMay 1st
Development of Campaign StrategySr. Project Lead and Brand LeadProject Management and Business Development TeamsMay 5th
Review and Finalize Marketing TacticsSr. Project Lead and Brand LeadProject Management and Business Development TeamsMay 27th
Program LaunchSr. Project LeadOperations TeamsJune 2nd

Marketing projects are often time sensitive as tactics will need to be deployed by specific dates in order to meet the goals of a particular campaign. Language around any associated penalties the agency will incur if a deadline is not met should also be included in this section.

Project Costs: The SOW must outline the total cost of the assignment, detailing all fees and expenses necessary to execute the campaign and meet the objectives of the initiative. Costs associated with marketing projects can range from management fees of a program to passthrough expenses such as production costs associated with printing materials, slide deck creation, etc.

Project cost sections usually begin by outlining the management fees for the assignment. This includes the rate of each resource and the estimated number of hours the resource will be investing to complete the assignment. It is important to have the agency break out the rate for each resource instead of blending the rates across all the resources, so the company can clearly see the true cost of each resource. All other costs outside of management fees should follow, outlining the additional cost for each task as well.

As with all sections in the SOW, the project costs should align with the Master Services Agreement. For instance, when entering into a contract, an agency and company will often work together to establish a rate card. The rate card will detail the rates applied to each resource for all projects handled by the agency. It is important that the rate card contained in the MSA is applied to the project costs outlined in an SOW. In some cases, it may be beneficial to request a supporting document containing detailed backup to the SOW in an effort to ensure that the appropriate rates are being extended.

The SOW is one of, if not, the most important part of a contract. It is important that the SOW clearly states the scope of work and resources, objective, timing, and costs of a project. Each section should be detailed, limiting confusion and services issues later in the relationship between a company and the selected agency.

Malaysia looking toward new investment

As of late, Malaysia has been looking to enhance its global financial benchmarking by encouraging transnational trade and financing from abroad. Amid criticism of the country's premiere airlines after the disappearance of Flight 370, diplomats and ambassadors are doing whatever they can to foster new interest in the Southeast Asian economy.  

Russia takes the initiative 

According to Free Malaysia Today, the Russian Federation's Deputy Economic Development Minister Alexey Likhachev recently announced that the country is interested in establishing bilateral commerce and investment with Malaysia through new collaborative means. Likhachev cited a desire to enhance his nation's foreign procurement management practices in energy, infrastructure, green technology and Islamic banking. 

Speaking in Kuala Lumpur, Likhachev claimed that a trade accord would be beneficial for both countries, as Russia requires more textiles while Malaysia is in dire need of pharmaceutical products and machinery. Private investment in the Pacific nation is expected to rise as a result of the informal agreement - the news source stated that the World Bank ranked Malaysia as the sixth easiest nation to conduct business with. The country's total trade with Russia increased by 66.6 percent last year, adding up to about $1.8 billion. 

Pacific republic follows 

Neighboring economies have followed suit by inviting Malaysian business leaders to lead a trade and investment mission. The Business Mirror reported that President Benigno Aquino of the Republic of the Philippines expressed interest in fostering financial ventures to Malaysia's Chamber of Commerce in Kuala Lumpur in February. Herminio Coloma, communications secretary for the Philippines, told the source that the Malaysian executives desire to bring strategic sourcing to his home country once the Bangsamoro Peace Agreement is fully implemented. 

The BPA is an accord between the Moro Islamic Liberation Front and President Aquino to create a self-governing political entity that will replace the Autonomous Region of Muslim Mindanao. The conflict between ARMM and the primary state disrupted trade for several years, prompting foreign business leaders to remain wary of investing in the wartorn country. Due to the pacification, President Aquino spoke with representatives of Air Asia in order to foster interest in inciting routine trips from Kuala Lumpur to Kalibo, a region famed for its beaches and Boracay Island. 

Currently, the Malayan Banking Berhad owns several branches in the Philippines, which dispatched representatives to speak with President Aquino during his visit to Kuala Lumpur. As this monetary investment already exists, it's possible that the two countries will organize a stable currency trading business. 

Process automation helps manufacturers improve finances

Although the global economy is recovering, it's doing so at a snail's pace. Manufacturers from the Pacific to the Atlantic have raised production standards and quotas while trying to cut down on the cost of doing business. As a result, organizations are reviewing their financial benchmarking in order to deduce what expenses can and cannot be afforded. 

A different form of public assistance

In the United States, some government authorities are creating incentives to bring jobs to impoverished and economically struggling cities. According to Industry Week contributor Charlie Spies, the federal New Markets Tax Credits program has attracted capital to multiple businesses looking to construct new factories, purchase new equipment or obtain software capable of giving executives a comprehensive view of the procurement process. In addition, manufacturers participating in the movement help invigorate struggling communities. 

Spies cited Horsehead Holding, a Pittsburgh, Pa.- based company specializing in manufacturing zinc products, as an example of a company that has encountered success with New Markets. In 2009, the enterprise was looking to build a plant to recycle electric arc furnace dust, a hazardous byproduct of minimill steel production. In an effort to bring jobs to Barnwell County, S.C., a community with poverty rates exceeding 20 percent, Horsehead received $10 million through the program's allocation from CEI Capital Management and Bank of America. The location has since acted as a pivotal part of the zinc producer's strategic sourcing protocol for EAF dust. 

Investing in the digital platform 

Many organizations are reporting success with software programs and other management tools that assist them in finding the most affordable, quality materials. Other technologies such as data analytics and cloud computing have contributed to the growth of these and other similar systems. According to Manufacturing Business Technology, process automation tools have eliminated losses incited by poor organization and outdated office management practices. The average U.S. office worker loses nearly 40 hours a year looking for lost or misplaced items. That's a full work week that could be spent enhancing production rates.

The news source noted that overall cost savings are also expected, along with waste elimination. After implementing an electronic data management program, R.J. Reynolds Tobacco witnessed a 53 percent reduction in invoice processing expenses as well as a 16 percent increase in transactions. Frito Lay saved somewhere between 30,000 to 50,000 work hours per year. 

Automation tools have the ability to streamline a business' transaction process, effectively resulting in more free time that can be spent on producing actionable data.

It’s Friday afternoon and you just finished a three-hour board meeting. You’re sitting in your office and you receive a call from a new consulting firm. Score!

If you somehow overlooked my sarcastic undertone (or are an optimistic consultant), a lack of enthusiasm is a thought process shared by many executives concerning the thought of a consulting firm lending a hand in things “we’d rather do ourselves.”

The organization-consultant relationship can seem like a difficult situation to piece together into one cohesive business unit. Executives often have preconceived notions from “horror stories” of situations gone wrong and the versatile title of “consulting firm” can be misleading to people with previous negative experiences. Whether a sour situation is due to miscommunication or poor results—believe it or not, there are positive and efficient consulting relationships out there.

What may be most surprising to some is: that is the norm. Carol Lukas, author of Consulting with Nonprofits, points out, “Far more common are the success stories—those of consultants who have helped organizations move to new levels by crafting new strategies, solving persistent problems, discovering efficiencies, or facilitating partnership relationships that transform the organization and result in greater impact. Another group of nonprofit executives might report: ‘Our consultant focused on our most important programs and helped us eliminate those not contributing to our mission,’ ‘We got beyond years of circular discussions that never went anywhere’ ‘We dramatically improved program outcomes thanks to our consultant's expertise.’”

The first step is knowing when it is appropriate to hire a consultant. If there is a problem a business is trying to solve and hiring an in-house specialist is an unrealistic option, a consultant can present a fresh outlook on many situations paving the way for breakthrough improvements. They can also present businesses with resources and models that have driven success around the world in some instances. An alternative perspective can challenge a strategy and allow executives to approach decisions in new, creative ways.

If consulting assistance seems like the best path, then an in-depth search and preparation period is essential. During this time, since consultants’ schedules can be booked far in advance, it is important to plan ahead.

Even if the work needed isn’t overly complex, a detailed Request for Proposal can ensure specifications are met with the optimal firm. An RFP addresses what you want done, the qualifications and experience you’d like the consultant to have, the project budget, and clear timelines. This is an area where if information is left unaddressed, there is a high likelihood that you will be unsatisfied with the end result.

After a pool of candidates have been interviewed and evaluated, a written agreement is a further way to guarantee a business that they’ll get exactly what they’re seeking through a consulting relationship.

When the terms been established, communication is the final key to a rewarding and long-term relationship. This involves frequently checking in on how things are going, making sure that the project is on schedule, and that tasks are being done to the satisfaction of the business. To solely focus on your interpretation of the work and assume that the consulting firm is aligned with your intentions can be a recipe for disaster.

Attention towards all these elements will help achieve your goals. There is no magic way to guarantee you’ve found a perfect consultant that will perform to your expectations—however, these goals are obtainable through clear communication and detailed guidelines. With that being said, the next time you hear a consulting-relationship campfire “horror story”, consider the lack of clarity that could’ve been the cause.

Article Referenced
Photo Courtesy of: 20th Century Fox Film Corporation
Transporting pharmaceuticals around the globe remains a challenge

While developed countries are better able to obtain necessary vaccines and other liquid medicines, distributing these necessities to remote, impoverished regions poses a challenge. The global sourcing capabilities of a select few overseas health care organizations are severely limited, resulting in widespread epidemics caused by diseases that could easily be cured. 

Overpopulated Asian countries face century-old illnesses 

For the past few years, India - along with 140 other countries around the world - has heavily relied on the oral polio vaccine to keep the notorious virus at bay. The Hindu reported that the solution is cheaper than the injectable inactivated (IPV) option and is easily administered. However, the IPV method is much safer than the alternative, as it doesn't use live, weakened forms of the virus, thus eliminating the chance that it will turn virulent and compromise the health of patients. 

Though India is looking to switch to the injectable form, the procurement process of obtaining IPV necessitates stringent maintenance standards so that the treatment doesn't become tarnished. However, the Global Polio Eradication Initiative claimed that the vaccine can protect those receiving care from any one of the three strains that lie active in an environment. IPV testing conducted by virologists at the Christian Medical College at Vellore during the 1980s reported widespread success throughout the Mumbai slums. 

Finding a better transportation method 

Due to the fact that a good portion of India's population lives in areas bereft of or severely lacking electricity, procurement management of liquid vaccines with dormant viruses remains a challenge. Containers storing the materials typically refrigerate them so that the biological products don't break down in warm temperatures. However, overcooling that can occur in particularly cold climates also poses a danger. 

According to News Medical, Bruce McCormick, president of thermal packaging designer SAVSU technologies, developed a solar ice-maker to cool high-performance packaging that safely delivers and stores climate-sensitive biopharmaceuticals. Using the renewable energy resource extends the amount of time distributors can take to transport materials, creating more flexible strategic sourcing as a result. 

"If you have a cooler that can keep the vaccine alive for 24 hours, that's how long you have to load, bring it to the village, community or health care center and administer," said McCormick, as quoted by the news source. 

Diseases have the potential to decimate populations as large and congested as those in China and India, as these countries possess limited access to medical supplies and some of their people live in adverse conditions. 

Global renewable incentives remain sporadic

While utilities and legislators are gradually pushing the United States toward a more sustainable future, a few European organizations are scaling back on renewable investments. As wind levels and sun exposure vary across the world, some power distributors are conducting spend analysis studies to determine whether or not a return on investment is expected out of sustainable resources.

Nevada's techniques

Sustainable Business reported that Nevada has witnessed more than $5 billion in green electricity investments over the past four years. The Clean Energy Project credited the state's Renewable Energy Tax Abatement program, which has created just under 3,000 construction jobs that pay $37.30 an hour on average. In order for a corporation to receive sales and property tax reduction, at least of half of its employees must be Nevada citizens and provide health insurance to laborers and their families.

As a result, many organizations have integrated green technology into their strategic sourcing agendas, finding that certain areas could produce enough energy to power more than 93,000 homes on a consistent basis. Nevada's Silver State South Solar Project is anticipated to produce 250 megawatts of electricity. Apparently, it is the first farm of its kind to be constructed and owned by a Native American tribe, the Paiute.

All in all, $500 million spent on tax abatements resulted in a 10-to-one return on investment, which doesn't count the state's receipt of $820 million in employment and property benefits as a result of those projects.

Scaling back

In other parts of the world, some companies are not meeting the desired financial benchmarking goals set for the upcoming year. James Murray, a contributor to Business Green, stated that Scottish and Southern Energy, a major power provider based out of the United Kingdom, recently announced that it is going to significantly reduce involvement in the offshore wind industry, effectively ceasing further funding of three large-scale projects.

The statement comes in tandem with a recent announcement that the business will continue financial backing of the 750 MW Beatrice incentive, but will cut 500 employees. In contrast, SSE is looking to offload its 50 percent stake in the Galloper effort, claiming that the required procurement process necessary to support it won't result in a return on investment.

"SSE does not currently believe that the costs of constructing and operating Galloper, and the revenue likely to be earned from it once built, will provide a return on SSE's capital investment that will enable the project to compete successfully against other projects in SSE's wider investment portfolio," stated the company, as quoted by the news source.

Like Colorado, the government of a small country in the Pacific had recently legalized the recreational use of marijuana.  While pot smokers rejoiced, the Minister of Public Safety knew that she had a leviathan task to overcome.  Time was of the essence, and once the law was passed, she immediately contacted her procurement consulting arm, Zweisimmen & Bern, in search of an advertising and public relations agency that would be able to create an effective full-scale campaign to prevent the population from driving while under the influence.

“Quite frankly, I can’t afford to go at a snail’s pace,” stated the Minister, “The P.M.’s going to be scrutinizing my department and the increase in the number of accidents on the road, so not only do we need to find an agency that’s able to generate concern in marijuana-induced DUIs under a limited budget, but we also need to onboard this shop as soon as possible. Can you run through my list of eight agencies and complete the selection process in two and a half weeks?”

Arnold, a lead analyst at the consultancy, balked at the timeline.  Having worked for over ten years in sourcing, he was no stranger to criticisms of selection processes that dragged out too long, despite his team’s ability to wrap up the process in three weeks. Avi Dan captures the Internet’s general sentiment towards the Request for Proposal (RFP) process timeline, stating that it is “too slow for a marketing world that functions at the speed of light, and it is too wasteful for [all parties].  It can take five or six months, or even a year to finish….”

However, several factors made the two-and-a-half week timeline an unreasonable goal.  In drafting a response to the Minister of Public Safety, Arnold outlined the following points to demonstrate that a thorough selection process of this scope requires at least four to five weeks, from initial contact with agencies to picking the finalist:

Week 1: Introducing the process to potential candidates and creating the RFP.
  • It is important to spend time reaching out to potential candidates, and scheduling a brief but critical discussion where one can assess the agency’s capabilities, willingness to participate in the RFP process, as well as the their interest in committing to a relationship with the client.  Furthermore, as a standard procedure, prospective clients should screen for any potential conflicts of interest with each agency and ensure that there are no conflicts that exist with the agency’s current client base.  This way, the list of bidders can be refined.
  • Secondly, both procurement and those seeking the agency’s services should collaborate and draft an RFP that contains detailed information on the expectations of the client. A good RFP—one that will enable the bidders to craft responses that cater to the assignment—is one that does not provide only standard boilerplate information.  Boilerplate RFPs will be returned in kind, with generic answers that will make it difficult to distinguish one shop from the other.  Such a scenario demonstrates to agencies that the client did not spend the time to conduct preliminary due diligence, and so agencies, regardless of their industry, may not want to participate due to the perceived lack of engagement and poor collaborative mindset.

 Week 2-3: RFP release, briefing session, Q&A
  • Once the list of agencies is narrowed down (as a best practice, eight is too large a number for an RFP process.  A more suitable number participants is four or five, in order to for decision makers to fully process proposal materials), the RFP documents may be released.  In some instances, it may take a day or two for the team members at the agencies to regroup and determine whether they would be a good fit for the project, prior to confirming their intent to participate.
  • During this time period, the agencies will be working hard to craft a detailed response.  The client may want to schedule a briefing call with the bidders to ensure that the vision and strategic objectives are conveyed directly, and to provide the opportunity to answer any questions based on the information shared in the RFP.  To eliminate variables that cause confusion to the agencies, a briefing call may also be a good opportunity for the client to provide additional data and/or research related to the assignment.  The candidates will also be utilizing this period to perform their own research.

Week 4: Review submissions, conduct deep dive with finalists
  • Once agencies submit their initial RFP responses, it is important for the client and procurement to review the responses and select finalists from the pool of candidates. As the objective of the RFP process is to help secure a productive business relationship between two parties, one of the most crucial steps is to allow the two sides to have a direct conversation in the form of an onsite pitch presentation.  In instances where only four or less agencies are invited to the RFP process, it may make sense to go straight to a pitch presentation without downselecting.
  • In any case, agencies should be given the courtesy of being notified a few days in advance, since they are dedicating valuable resources and traveling time to be present.
  • Once onsite pitches are complete, the client may need some extra time to regroup to select the bidder. 

To conclude, Arnold explained to the Minister why such steps were important in the first place.  Given the limited budget and need for an effective campaign, it was necessary to have opportunities for the Minister to clearly express her objectives and vision to the agencies.  Furthermore, there needs to be enough time and information available to the agencies for them to convey the factors that make them the best fit for the assignment.

Simply rushing to select a bidder based on superficial factors increases the risk of selecting an partner that falls short of expectations.  This issue is, after all, quite common in today’s advertising world, where, according to a Forbes article, 67%of clients believe that the parties could be better aligned.  Ultimately, if the Minister does not allow for enough time to make a truly informed decision, time, and money may be wasted in the effort to revise work and/or select a new agency.
Southeast Asian shipping industry aims for improvement

A strange contradiction has been brewing lately in Southeast Asia. On one hand, shipping companies based out of China that were once fierce competitors solidified a partnership in anticipation of a lackluster global sourcing economy. On the other end of the spectrum, the vessel manufacturing industry is expected to witness a turnaround in the upcoming year.

Burying the hatchet

According to The Wall Street Journal, Beijing-based China Ocean Shipping - more popularly known as Cosco, not to be confused with the American wholesaler - and China Shipping have agreed to consolidate procurement management efforts, sharing resources in ports, shipbuilding and oceanic transportation. The news source stated that the pact was signed earlier this month, in light of sluggish cargo traffic on Asian and European routes over the past few years.

The accord between Cosco and China Shipping accompanies an anticipated second-quarter launch of a major route-sharing alliance. Denmark's Maersk Line, France's CMA CGM and Switzerland's Mediterranean Shipping Company are all expected to receive approval on their unity from the United States Federal Maritime Commission. The concord is expected to put pressure on independent Southeast Asian shippers looking to solidify a place in the market.

Some analysts, such as Alan Murphy, chief operations officer at SeaIntel Maritime Analysis, claimed that the settlement between Cosco and China Shipping should be viewed as a concerted step toward a full merger.

"It represents a solid step towards becoming a consolidated Chinese container carrier," he told the news source.

Production increasing

Although the global retail procurement process seems to be moving away from Southeast Asian oceanic transport, some statistics would suggest otherwise. Steel Guru, an English website specializing in analysis of the global metal manufacturing and production market, noted that there were 153 new cargo ships ordered by shipping industry participants, a 76 percent increase from 2013. The news source commented that the unexpected demand contradicts the slowly recovering worldwide economy.

Tay Linsiau, a consultant of the website, has been working in the transportation business in Singapore for more than 13 years. The correspondent claimed that 64,000-ton ships are cheaper than 57,000-ton vessels, meaning that if companies don't have cargo they can find a way to re-let or sell the ocean liners.

Barclays Group, a British global financial services provider, predicted that cargo volume will increase by 5.8 percent in 2014, exceeding vessel capacity for the first time since 2008. The U.S. and other consumer economies are demanding more goods, but many retailers have chosen a strategic sourcing plan that invests in domestic manufacturing, reducing the need to ship from overseas producers.

Contractors look to combat rising cost of materials

Although homeowners and developers feel confident enough to begin construction projects delayed by the 2008 recession, particular materials have become expensive. Instead of abandoning building initiatives, these professionals have sought to reevaluate their strategic sourcing to find more cost-efficient methods of obtaining necessary goods. For those without the proper software or resources, doing so has become much more difficult. 

As they currently stand 

According to Transport Topics, the Associated General Contractors released a spend analysis based on data amassed by the United States federal government, concluding that construction prices increased more than the overall costs for final demand in January. Ken Simonson, the organization's chief economist, told the news source that despite the fact that the bid prices proposed by contractors correlated with materials expense increases, commodity, building type and specialty trade produced mixed results. 

"Increases in prices for gypsum, lumber and plywood, cement, insulation materials, and copper and steel products drove the increase in construction producer prices," said Simonson, as quoted by the source. 

The AGC reported increasing employment rates in the construction industry, as well as rising private-sector demand. However, some firms with inadequate procurement management strategies typically fell behind the competition, losing profitable projects to more capable contractors. 

No reason to panic 

Many domestic manufacturers recognize the drawbacks of higher construction materials. Although they may certainly earn an extra dollar from the increased prices, some developers may choose to delay projects or abandon them all together. As a result, many of these fabricators have been taking proactive measures to balance out the market. 

Wall Street Cheat Sheet reported that Ohio-based steel producer AK Steel implemented a new procurement process for obtaining raw materials. The overall cost of iron ore is expected to witness a general decline throughout 2014, positioning the company for significantly profitable results in 2015. The news source cited advanced production methods and in-house expense revisions as key instigators of the organization's success. 

The organization recently announced that it entered into a new $1.1 billion, five-year revolving credit facility with Bank of America, J.P. Morgan Securities and Wells Fargo among two other lenders. The new asset will provide AK Steel with greater financial knowledge and increased distribution flexibility. The move has been acknowledged by spend management professionals as a positive step toward reducing the price of their finished products, as it will give them greater visibility of their transportation and sourcing logistics. 

In an article published in our newsletter earlier this week, Diego De La Garza began dispelling the myth that data is a commodity. If you're not subscribed to the newsletter (click here to sign up), De La Garza tweaked the traditional definition of "data" as it relates to strategic sourcing, so that data isn't merely a factual observation - however minute that observation may be - but an understanding of those observations.

Similarly, a recent article on Quartz broke down how Lego reinvented itself, in part, through a more thorough analysis of the data it had and a better gathering of relevant information. Quick synopsis - in the mid 2000s, Lego was losing $1M a day, and began to get a better understanding of what kids (as my wife keeps insisting - Lego's intended market) wanted to get out of their toys and out of playing. By studying data rendered from studying kids, Lego's analysts found things like:

  • an interviewed boy's "dream bedroom" with metal doors and booby traps, 
  • one kid's collection of "poisonous" mushrooms he grew in a shoebox in an otherwise spotless bedroom, 
  • and a group of kids continued obsession over which of them held the highest video game scores.
Rather than interpret this data as 1) that kid's got issues, 2) that kid's just gross, and 3) these kids need to be outside more - like you probably just did - Lego's analysts dove deeper, connected dots that, to the casual observer, weren't there, and determined that:
  • kids play to instill a bit of danger that their overprotective parents otherwise guard against
  • kids play to determine their role (alpha, beta, etc.) in their group
Lego then turned these findings over to their product development team, and they've been performing like gangbusters since. 

Turning this analysis over to our own use, the statement's been said that Big Data is like sex in high school - most of who claim to be doing it aren't, and those that are are very likely doing it wrong. (Also, the less said about paying for data, the better.) There are claims everywhere that Big Data is the answer you need. 

Buy into Index X - only the cost of a midsize luxury car - and have all the insight you need! 

Buy System Y to manage all this data and produce in-depth, colorful reports!!

While it's possible that these products and services may help you, they're ultimately going to prove fruitless if you don't know what to actually DO with that data and those reports once you have them. These are the analytical skills that are so often discussed as being necessary for a sourcing department to truly move to a strategic position. These are the analytical skills that new procurement hires are supposed to be bringing in now that Supply Chain Management is a hot college degree. Truth be told - these are skills that are hard to quantify, and even harder to instill. Years of experience are just as likely to yield a heightened analytical awareness as are years of schooling. 

You notice that your company is spending a disproportionately large amount on cyan printer cartridges. This can indicate a number of things:

- the pricing agreement is out of whack
- there's rogue spend
- spend is scattered across a bunch of non-optimal suppliers
- a change in document templates has led to a lot of blue-heavy documents being printed

A supply chain education can produce someone that can research the first three quite well, but to varying degrees of success depending on if the conditions exist. Insight from experience is what will solve the fourth issue - having seen a similar situation happen before, or having the forwardness to look at what's being produced and questioning if it's necessary. 

Knowing what the information is telling you is a critical skill to analyzing large chunks of it. And that ability is dependant on the individual person.
Potential freight regulations cause disarray in trucking industry

Improved road transportation tonnage shows that the United States is on a path toward recovery after a brutal winter left many drivers stuck at distribution centers. Over the arduous three-month period, managed IT services were often consulted by third-party logistics providers requiring real-time data of all assets in an attempt to figure out how they should transport materials in the adverse weather conditions. Though still consulting with those professionals, many distributors are realizing that the roads are opening up. 

For better or for worse 

In light of this increased usage, the Federal Motor Carrier Safety Administration is considering requiring trucking companies to install electronic logging devices in heavy vehicles in order to bolster best practices. According to Logistics Management, the action was proposed on March 13 and received both praise and criticism from those in the industry. The source cited a spend analysis assembled by the FMCSA, which showed that the motion could cost the industry $1.6 billion. 

The article noted that despite lengthy measures designed to drive down accidents, trucking-related crash fatalities are rising. Government authorities reported 3,921 deaths in 2012, a 3.7 percent increase from the previous year. The American Trucking Association lauded the FMCSA's efforts to decrease this harrowing statistic. 

Jeff Brady, director of transportation and logistics for a specialty retailer, stated that the flack accumulated by the organization is due in part to the idea of trading safety for lower costs. He noted that insurance fees may decrease after ELDs are used, as providers will perceive that there's less risk involved in trucking. As a result, it's possible that procurement management may change sign​ificantly for retailers relying on road transportation. 

Rising activity 

The proposal comes just in time for an improving transportation industry. As reported by the City Wire, the ATA revealed that, after a 4.5 percent decline in January, February witnessed a 2.8 percent gain on the organization's truck tonnage index - a 2.3 percent improvement from February 2013. Bob Costello, chief economist of the association, claimed that a backlog in freight early in 2014 contributed to the initial dip. 

Rosalyn Wilson, senior business analyst for Declan Corp., told the source that progressive trends between shipments and rates indicate consumers could potentially encounter a rise in prices. She claimed that customer expenditures remain greater than the current volume carriers can handle, signifying that businesses will have to execute creativity in the procurement process. 

Food companies seek to bridge gap between consumers and products

The food industry has sustained intense scrutiny from the United States population as of late, spearheaded by documentaries and literature detailing just how removed people are from the products they ingest. This may appear as a wholly domestic issue, but the fact of the matter is that global sourcing is a major contributor to this disconnect. It can either be a bane or boon to supermarkets, depending on where they choose to obtain produce.

Such enlightening media as "Food Inc." ultimately empowered the U.S. population, notifying them that they are in control of what they ingest. Therefore, how food companies obtain provisions and what they sell are somewhat dictated by the appeals posed by consumers. Currently, supermarket customers are looking for organic, local and fair trade. 

Reacting to public sentiment

Of course, faced with a rising global population and increasing demand, food corporations define sustainability in a completely different light than the rest of the population. Implementing eco-friendly practices into the procurement process is part of it, but making sure that the supply satisfies customer needs is also a factor in the equation. 

Sarah Hills, a contributor to Food Navigator, spoke with Emma Gubish of Leatherhead Food Research regarding current sustainability trends in the market. Gubish told the source that how a company utilizes ecologically cognizant methods can either make or break its business foundation. So far, lobbying efforts calling for cleaner ocean habitats have caused many food corporations to focus on the strategic sourcing of seafood products. However, she claimed that this reactionary approach isn't constructive to an organization's survival. 

Gubish noted the importance of agricultural practices and how they can effect consumers' perception of a particular company. A demand for organic products has sparked a new sub-industry within the market, forcing larger corporations to adapt to the times. Breaking off decade-long relationships with particular farms on or offshore poses as an intimidating task for many of these businesses, prompting them to open communications with agricultural assets in order to see how organic solutions would be economically feasible for both parties. 

Providing straightforward information 

It's true that there's a significant contingency that believes it knows what food products are safe to consume and which ones aren't. However, consumers such as restaurant owner and BBC News contributor Oliver Peyton are downright befuddled by the amount of contradicting reports that are released by officials.

"Take oily fish. One minute we are told we are meant to be eating it to be brainier and healthier," noted Peyton.  "The next we hear, oily fish is contaminated with toxins and to be avoided, then all of a sudden it's back in fashion again. 

Even if a report released by a supermarket chain concerning a particular kind of produce is true down to the bare facts, there's a good chance the population will either view it as biased or disregard it completely. Therefore, corporations have taken it upon themselves to disclose nearly every detail of their business practices, from procurement management to what growers they buy from. Again, this doesn't entail developing a white paper carrying a promotional tone, but inviting the press and other unbiased media outlets to perceive the sourcing and acquisition practices in their own way. 

A common challenge faced by many food corporations is the inability to accurately view every stage of their distribution, especially if they're connected to farmers in the Caribbean and a fishing company in the North Pacific. It may be socially and economically favorable for these large enterprises to invest in procurement software to provide executives with a real-time view of operations. 

Air freight making a comeback in 2014

Despite what many North Americans may believe, air cargo is expected to witness steady growth over the next year. Even though the recent winter kept a lot of flights on the ground, activity remained higher in January 2014 than in the same month of last year. Wary of hazardous road conditions, manufacturers and retailers utilized strategic sourcing approaches to take advantage of aircraft to deliver goods whenever the opportunity presented itself. 

Positive foresight 

According to the International Air Transport Association, global freight tonne kilometers underwent a year-over-year growth rate of 4.5 percent in January. Increased activity was consistent across all regions, a significant improvement over the mild progression carriers encountered in the second half of 2013. Tony Tyler, IATA's director general and CEO, expects that airfreight global sourcing will continue to see improvements over the next year, due in part to the manufacturing expansion. 

Although consumer confidence remained strong, the IATA reported that North American airlines encountered the weakest rise in tonnage volumes, with an additional FTK of just 0.7 percent. However, Tyler's acknowledgement of a burgeoning on-shore production economy in the United States may result in greater returns over the next three months. 

The Middle Eastern air procurement process boasted the greatest FTK increase, standing at 10.7 percent year-over-year. Carriers in the region have continued to expand their networks, communicating with European distributors on a more regular basis. The source noted that capacity growth remained in line with demand, rising by approximately 11.5 percent. 

Open trade inciting domestic growth 

It seems as if the U.S. will become a major exporter over the next half decade. Fossil fuel reserves recently discovered throughout previously untapped parts of the country have caused oil manufacturers to consider marketing their products overseas. In addition, domestic production has witnessed steady growth, a clear sign that the nation is beginning to shed the skin of its 2008 downturn. 

Brandon Fried, a contributor to Air Cargo World, noted the significance of international trade, citing a statistic produced by the Business Roundtable, a group of CEOs and large U.S. corporations dedicated to promoting pro-business policies. According to the organization, about one in five U.S. jobs is tied to foreign commerce and investment. Fried wrote that executive legislature may enhance productivity. 

Apparently, President Obama is looking to obtain fast-track authority to enact the Trans-Pacific Partnership and the Trans Atlantic Trade and Investment Partnership in an effort to breathe life into transnational commerce and redirect many corporate procurement management to include increased exports. Although some critics have stated that trade agreements ultimately bring jobs to overseas countries, Fried noted that the North American Free Trade Agreement substantially benefited the U.S., Mexico and Canada. 

"If you look look closely at what has happened since NAFTA's ratification in 1994, you'll find that trade among the three NAFTA nations has more than tripled from $297 billion to $930 billion over the past two decades," wrote Fried. 

Specifically, Mexico currently stands as the largest importer of U.S. goods in Latin America, purchasing more than France, Germany, the Netherlands and the United Kingdom combined. 

Fried noted that 95 percent of the world's people - about four-fifths of global purchasing power - live outside of the U.S., making it imperative that trade agreements are encouraged and implemented to ensure the nation's survival. 

Even if it means importing goods from other businesses, domestic personnel are still required to ensure the operability of the distribution process. Wherever manufacturing occurs, logistics experts are sure to accommodate its shipping requirements, creating jobs in transportation, warehousing and product management. 

Retailers see positive February gains

Despite severe cold and a seemingly endless flurry of snowstorms across the country, the United States retail industry witnessed positive progress in February. Finance executives and distribution professionals developed optimal procurement management policies that drove inventory fulfillment and attracted customers to brick-and-mortar stores and e-commerce websites. 

According to Logistics Management, a report assembled by the National Retail Federation and the United States Department of Commerce showed that last month's merchandising sales were up 0.3 percent from January, standing at $427.2 billion. The spend analysis excluded vehicles, gas stations and restaurants from the study, but the DOC noted that the three industries were up 2.3 percent on an unadjusted annual basis. 

Although NRF Chief Economist Jack Kleinhenz remained optimistic, he claimed that the aforementioned statistics did not guarantee a bustling spring season, primarily due to fluctuating weather habits. However, the news source noted that the U.S. unemployment rate is declining at a slow, but gradual, pace. In addition, the housing and automotive industries seem to be recovering from the residual effects of the 2008 recession. 

Looking for the best deal 

The strategic sourcing techniques of certain business executives have fostered growth in bargain retail. Reuters reported that discount store chains are appearing throughout North America, delivering setbacks to pre-established merchandising giants and competing with e-commerce initiatives. In response, the commercial real estate economy is showing growth, with shopping center vacancy rates in 60 major U.S. industries falling to 8.6 percent at the end of 2013. 

Due to the prevalence of online shopping, the procurement process of the average retailer has changed dramatically, favoring distribution routes that can readily deliver small shipments of numerous different products to hundreds of thousands of separate locations. However, some merchandisers have failed to adapt to the changing climate. Earlier this month, Staples and RadioShack announced that they planned on closing a combined 1,325 stores nationwide. 

"Analysts said they were slow to react to declining foot traffic and surging amount of consumer shopping moving to the Internet," the new source reported. 

Despite these drawbacks, many U.S. shopping center proprietors have claimed that vacancies are quickly filled. Dollar stores have witnessed significant growth over the past few months, with some corporations planning on opening up several hundred additional stores in the upcoming year. Mall owners also claimed that discount merchandisers - such as Costco Wholesale, T.J. Maxx and Marshalls - have been filling up space. 

Overall, it looks as if the U.S. retail economy is expected to bounce back after a weighty recession and unforgiving winter. 

US manufacturing improves despite apprehension among economists

The United States may not expect a gross influx of manufacturing development over the next two years, but the current decade is expected to yield gradual improvements. Political uncertainties and increased labor wages overseas have resulted in a slight reduction in global sourcing, leading a number of organizations to invest in domestic factories. Although a booming economic renaissance doesn't look to be in the country's future, the prospect of stability remains promising.

Immediate acknowledgements

As a result of the retail market's general success over the first quarter of 2014, the U.S. Bureau of Labor Statistics released a report on March 7 stating that manufacturers added 6,000 new employees in February. These statistics correlate with a sluggish hiring rate in January 2014 and December 2013, a residual effect of a winter that delayed product deliveries and kept consumers relatively conservative.

On a more positive note, February marked the seventh consecutive monthly expansion for manufacturing employment. Since August 2013, manufacturers acquired an additional 12,000 new employees every 30 days after assessing positive financial benchmarking. As of the 2008 recession, approximately 17 percent of all factory hires were conducted during that time period. This positive outcome could be influenced by the wholesale industry's addition of 15,000 jobs to the market, as on-shore product fabricators looked to satisfy the monthly demand.

Looking ahead

According to Reuters, the U.S. Conference of Mayors reported that energy-intensive manufacturing jobs will increase by more than 1 percent a year over the next six years, with 72 percent of those positions going to cities. The organization cited the country's recent domestic oil and natural gas expansion as the largest contributor to market growth and noted that fabricated metals and machinery were critical contributors to the economic boom.

"We're all aware of the incredible impact the energy revolution is having on our national economy," said Virg Bernero, chair of the conference's advanced manufacturing task force, as quoted by the source. "The growing competitiveness and increase in employment from these manufacturing sectors are important to our cities and metro economies."

Metropolitan manufacturers specializing in metal fabrication and steel production have greatly benefited from the improving energy economy. Oil and natural gas companies looking to reduce the time on machinery deliveries have reevaluated their procurement process to include on-shore suppliers. Heating demand rose over the past few months in response to an exceptionally cold season, putting pressure on power companies to quickly obtain necessary resources.

South Carolina representative looks to foster aerospace production

Although the United States occupies at least a dozen countries throughout the world, the nation is attempting to transition away from full-fledged combat, focusing more on intelligence-gathering, peacekeeping and special forces operations. Despite budget cuts, the U.S. military's procurement process still consists of heavy expenses to replace grossly outdated equipment still used by a small contingency of service members. 

Stifling growth

Nevertheless, the U.S. Budget Control Act required the Pentagon to cut $487 billion from its budget over the next decade. According to CFO, the automatic spending cuts prompted by the act's removal of provisions could possibly result in a $500 billion reduction in the organization's expenditures during the same time frame. Tim Dragelin, senior managing director for a financial advisory firm, noted that these cutbacks could coax the U.S. Congress to intervene in order to keep the country's defense manufacturing industry on its feet. 

Lockheed Martin, a Maryland-based military contractor, boasted $47.2 billion in net sales in 2012. Bruce Tanner, the company's chief financial officer, adjusted the organization's spend management plan in preparation for the effects of the Budget Control Act. As a result, he has consolidated various facilities and invested capital in acquisitions. 

"Sequestration adds a bit more amplitude to previous cycles, but we are prepared nonetheless," said Tanner, as quoted by the news source. "We don't wait for downturns. We're constantly assessing our portfolio and the shape and size of our business."

Pushing for intervention

In an effort to bring foreign investment in aerospace and defense to South Carolina, State Commerce Secretary Bobby Hitt recently testified before a U.S. House of Representatives panel, Charleston Business reported. Hitt presented a spend analysis showing how the Palmetto State is regaining manufacturing jobs. His major push was for small business development and how the federal government could change its policies to foster domestic economic growth. 

Shirley Mills, a senior analyst with a global investment firm, acknowledged the fact that public legislatures could greatly dictate whether or not re-shoring will become a prevalent occurrence. She offered three suggestions of changes to be made to the country's policies:

  • Review corporate tax laws and environmental control
  • Consider implementing an energy export mandate
  • Pay attention to the strategic sourcing behaviors of foreign businesses

Although the residual effects of the Budget Control Act may depress domestic production of aerospace and defense equipment, U.S. lawmakers should focus on attracting investment from overseas nations heavily entrenched in military development, such as China. 

US energy companies grapple with consumer demands

In an effort to bring foreign capital into the United States, a number of energy executives are looking to export the majority of domestic oil and natural gas products overseas. However, many U.S. consumers disregarding the long-term benefits of such endeavors are more concerned with lowering gas prices. The country's miscellaneous corporations have mostly been on the receiving end of international commerce, viewing global sourcing as a means of obtaining cheaper goods. Of course, the latter strategy was based off customer desires, which are now shifting to domestic preferences.

Expanding assets

It seems as if U.S. export opportunities are growing. Dan Molinksi, contributor to The Wall Street Journal, wrote that an agreement has been reached between American officials to complete the Panama Canal by 2015, a $5.2 billion investment. Wider locks and waterways are anticipated to reshape the world's procurement process, as they will enable more flexible shipping routes and greater import and export opportunities between Pacific and Atlantic economies.

As the U.S. utilizes the canal more than any other country, energy companies could capitalize on the expansion by streamlining the fossil fuel delivery process. The news source noted that the U.S. Energy Information Administration stated that the country's oil production grew by almost 1 million barrels a day in 2013, the highest production level in 25 years. Due to the fact that the agreement may result in lower fuel transportation costs, it is anticipated that many Asian countries will choose to outsource energy requirements to American producers.

Meeting some resistance

Many U.S. citizens aren't thrilled by the prospect of exporting oil that could be used to manufacture gas on-shore. According to The Journal Sentinel, a poll issued by Reuters and Ipsos showed that 77 percent of respondents would rather benefit from lower gas prices than ship fossil fuels overseas. When oil transportation does not hinder cost reduction at the pump, the majority of those surveyed generally supported delivering resources to other countries.

Large oil producers argue that export restrictions will reduce the price of U.S. oil and fold output from new production hotspots in North Dakota and Texas. In contrast, refiners claim that overseas shipping would deplete cheap supplies and exponentially raise petroleum costs. It looks as if a comprehensive spend analysis of the industry will ultimately determine where these energy tycoons will choose to allocate resources.

It is uncertain whether or not U.S. legislators will change the current policy restricting oil exports. Lobbyists and representatives from independent refiners and producers are currently participating in a tug-of-war match on Capitol Hill, with members of Congress as the rope.

US manufacturing experiences rebound

Despite an uncertain fiscal cliff, a government shutdown and the doubtful attitudes of economists, the United States manufacturing industry experienced a sharp rebound at the end of 2013. Close analysis of spend management practices, a healthy holiday shopping season and a rise in export orders contributed to the improvement. As a result, market professionals believe that the industry will continue to progress throughout 2014. 

Looking at the numbers 

A survey of economists conducted by Bloomberg predicted that the manufacturing index would rise to 55.1 in the first quarter of 2014. However, The Institute for Supply Management's indicator surpassed the estimation and climbed to 57.3, the highest it's been since April 2011. The source stated that U.S. factories have benefited from increased exportation. Meanwhile, a recovering housing industry boosted profits for companies such as Deere and Company, which provides construction equipment and domestic appliances. 

On the other end of the spectrum, global sourcing has witnessed a slight decline despite convalescing foreign markets. The news source noted that major manufacturing industry participants like China have increased production, but can't seem to keep pace with the U.S. Andrew Kenningham, senior global economist at Capital Economics in London, claimed that European factories are enhancing operations, but appear lackluster compared to Asia and the West. 

California looks to capitalize 

Industry Week contributor Michele Nash-Hoff noted the importance of manufacturing, as it creates residual industries in order to support it. Retailers eager to cut down on transportation costs consider domestic production into their strategic sourcing, while distributors set up operations in order to supplement merchandising delivery needs. The article noted that California is the number one state in the U.S. in terms of manufacturing jobs and firms, accounting for 11.7 percent of the country's total output. 

"In 2010, the manufacturing sector began adding employment, regaining 7,900 jobs." Nash-Hoff stated. "California exports have also increased - up from $104 billion of manufactured goods in 2009 to $124 billion in 2010."

However, the article acknowledged that further industrial growth in the state is hindered by a number of factors. In order for California to remain a viable competitor in domestic and foreign manufacturing, businesses need to conduct spend analysis with the following aspects taken into consideration:

  • The intense regulatory climate is difficult for many organizations to navigate 
  • Environmental compliance drive up production expenses 
  • High corporate tax rates burden companies trying to expand
  • Competition from low-cost markets in Asian countries results in offshore procurement, taking business away from domestic manufacturing

Although foreign competition from China, Vietnam and other Pacific economies have hindered industrial growth in the past, overseas factories have raised their prices to meet increased wages and higher fuel expenses. 

The foundation of any project, strategic sourcing or otherwise, is the requirements. They must be known in order to finish the project and, in turn, solve the problem the project was trying to address. According to the IIBA Business Analysis Body of Knowledge®, a requirement is a condition or capability needed by a stakeholder to solve a problem or achieve an objective. So it can be reasoned that without clear identification of requirements, a problem is less likely to be solved, if at all. From a strategic sourcing perspective, identifying requirements is especially important because a third party will often need to be involved to provide a solution. Proper requirements must be gathered to identify the ideal solution to the problem. The gathering of requirements is a process that oscillates between research and asking the right questions. So, the issue at hand is how do we go about finding what the requirements are?

The first and most visible requirement is that there is a problem. Problems can appear in various forms, for example:

  • Our current infrastructure is becoming too expensive to maintain
  • Are the prices we are paying competitive?
  • Do we have the resources or subject matter expertise necessary to accomplish this initiative?b
  • We need to create a mobile application to market our services/products, etc.

Next the validity of the problem must be addressed. Is the problem valid? Will addressing this problem help the business overall or will it only address the small individual need/want of a stakeholder? This is a critical juncture for a project, because if the project only addresses a small need and does not add value to an organization or department it may be best to forgo the project all together, to avoid tying up resources that could assist with larger, more business critical projects.  

As an aside, if a project is too small to be a worthwhile endeavor, it may be beneficial to search within the organization for similar sized needs and combine them. From an organizational perspective, this allows needs across multiple departments to be fulfilled. From a strategic sourcing perspective, the prospect of having a potential supplier be part of multiple facets within an organization can create powerful negotiation leverage and may help organizations reduce costs.  

Once the validity of the problem has been established; the project team must gather the predefined requirements. They are requirements that have been identified by the stakeholders as necessary to solve their problem. They can be as simple as “We need Microsoft Windows Azure for our European offices” or the more cryptic “We need a cloud computing platform and infrastructure.” Other requirements already identified by stakeholders are usually quantitative in nature. The quantitative requirements are relatively easy to identify and analyze. In IT, this can be something as simple as the number of licenses required and/or amount of storage capacity desired, etc. All known predefined and quantitative requirements must be collected and validated at the onset of the project, as they provide crucial details that will influence the rest of the requirements gathering phase.

The project team must combine its general knowledge of the problem at hand and their organization’s business processes, with the previously gathered requirements, to conduct appropriate research. All requirements gathering phases begin with research. Research can be conducted in a variety of ways, such as, reviewing stakeholder provided documents, similar past projects, articles by research companies such as Gartner, Forrester, IDC Research, etc. or good old Google search.

               Please review the following article on how to maximize your Google search results. 

The research phase is meant to give the project team additional insight into various aspects surrounding the project that a stakeholder may not have known or communicated. Once this phase is complete, the team must take their new found knowledge and use it as a guide to ask appropriate questions of the stakeholders. It is ideal to start asking broad questions, using the answers provided to chisel down to get to the heart of the requirements. Typical questions include:

  • What will you use the solution for?
  • How did you come up with the (insert quantitative requirement) need?
  • Do you prefer an open source or proprietary software solution? Why?

New questions will bring new insights, which lead to new avenues of research, which leads to further questions. This recursive process is continued until the requirements are fully understood and articulated or how long the project timeline permits.  

The gathering of requirements is a process that fluctuates between research and asking the right questions. By this stage the typical questions, such as what is the problem, why it is important, who are the stakeholders, and quantitative needs have been answered. The answers provide direction regarding where further research should be targeted; therefore, they form the building block of the requirements gathering process, which ultimately creates the foundation of a proper sourcing project. 

Michelangelo once said “The sculptor's hand can only break the spell to free the figures slumbering in the stone.” In business analysis terms this quote means, the requirements are there, it is up to the project team to identify them.

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