In Part 1 and Part 2 we provided an overview of benchmarks and the benefit to using independent companies like Source One to provide you with a reliable and actionable benchmark report. The last part of this series is the secret ingredient to a successful benchmark: stakeholder involvement.
In Part 1 and Part 2 we provided an overview of benchmarks and the benefit to using independent companies like Source One to provide you with a reliable and actionable benchmark report. The last part of this series is the secret ingredient to a successful benchmark: stakeholder involvement.
Charles Dominick, the President, CPO, and founder of Next Level Purchasing Association, sat down with us for a phone interview, and we've packaged the results in a Partnercast, available for viewing on Youtube.com/GetSavings and in the image above.
Mr. Dominick offers his thoughts on present trend worthy of the hype, future trends that he perceives becoming important in the next 18 to 24 months, and the one measure he would implement if given the opportunity within an organization without fear of repercussion. Throughout his interview, Mr. Dominick offers insightful commentary that is sure to be useful. Give it a listen!
Why Source One?
At Source One, work is much larger than simply collecting data or writing reports: your unique education and experience will contribute to the solutions for our clients’ most challenging problems. You will work shoulder-to-shoulder with VPs and the CEO. Your skills will be put to use and your insights heard.
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What available roles?
Supply Chain Analyst
- Will act as part of our consulting team and will provide consultative services including research, Request For Proposal (RFP) development, contract review, data analysis, and report drafting for our customers. Will be responsible for developing strategies to reduce cost of procured goods and services as a consultant for our clients, while improving upon all qualitative aspects of the relationship with their suppliers.
- Candidates have strong analytical skills, understand and enjoy learning about all types of technologies, and have a strong aptitude for reviewing contracts for key business terms and factual errors. Will work as a liaison between business and technology stakeholders and suppliers to develop requirements and identify solutions that solve business problems or capitalize on opportunities. Collaboration with clients will include providing insights based on a holistic understanding of their requirements, future objectives, and culture in order to help them to achieve their goals. Candidates should have cross-functional expertise (general business, finance, supply chain) and the ability to explain technology issues to business management.
- Will act as part of consulting team, providing research, RFP development, contract review, data analysis, and report drafting services for clients. Candidates will manage a pool of analysts, assisting in their day-to-day work activities. Will actively communicate with suppliers and clients, documenting the qualitative and quantitative requirements; develop RFPs and other go-to-market processes, create financial analyses in Excel, and evaluate information from multiple and diverse data streams—all with the goal of identifying areas for cost reduction and value improvement in a client’s supply chain.
The high-maintenance nature of consumers and increased global trading activity has caused manufacturers to consider the pros and cons of outsourcing to a procurement services program. Companies are sourcing from organizations originating from across the globe and customers are demanding fast delivery of quality goods, which has made financial management more complicated for producers.
An international platform
According to Procurement Leaders, the rise of consumer markets in Brazil, Russia, India and China will likely cause many material acquisition companies to set up physical operations in these countries by 2025. As a number of these organizations are headquartered in different countries, a need for software specializing in currency exchange and account management may rise at a significant rate.
The source predicted that Chinese brands will possess extensive leverage in particular domestic and even some international markets, which may cause Western firms to base strategic sourcing on standards, designs and blueprints set by Chinese industry leaders.
In addition, sub-Saharan Africa's manufacturing sector is expected to grow significantly over the next decade due to miscellaneous social and demographic reasons. As of now a fair amount of foreign investment has been funneled into the region's economy, inciting a need for overseas account and relationship management processes.
Moving to the electronic realm
Transitioning the procurement process from a paper-based practice to electronic workflow appears to be the wisest choice for manufacturers, especially in light of the fact that relationships among global distributors, raw material producers, governments, retailers and other economic participants has expanded with the rise of cloud computing and the Web.
Greg Pfahl, a contributor to IndustryWeek and audit partner of Hein and Associates, noted that automated processing significantly reduces an organization's chances of encountering fraud and eliminates mistakes. Most importantly, it enhances a manufacturer's ability to recognize and scrutinize revenue quickly and efficiently. It can also help organizations resolve complex order and payment instances.
For example, bill and hold transactions can be especially tricky because even though a sales agreement has already been established, the entity purchasing the products in question requests that the manufacturer delivers the items directly to its customer's buyer or ships the goods at a specified date. Monitoring such a procedure as well as keeping a record of it is much easier to do electronically.
In a complex, global economic society, it's imperative that all transactions are accurately observed so that overhead expenses are reduced and mistakes are avoided.
- Manage it! It’s called supplier relationship management for a reason. You have to put in the time required to manage the program, even the tactical stuff – coordinating meetings, creating agendas, etc. Without Sourcing Departments providing a formal (and somewhat tactical) management layer, you cannot expect the program to be successful.
- Invite the C-level. High level executives should be involved in supplier meetings, and they should be making it a priority. It’s the only way to sustain the program and make the commitment to SRM organization-wide. But if you have the C-level attending the meetings, you also need to give them a script! They should be coming to the table knowing what message they need to provide to suppliers.
- Align with organizational and market sector strategies. If your SRM program is heavily focused on purchasing-related activities and KPI’s (hard dollar cost savings, VMI, etc), then you will only gain operational improvements. However, if your objectives are tied to the over-arching goals of the organization or the market you service, the results will produce a competitive advantage.
Faster processing generally means a reduction in overhead expenses. Technology has enabled organizations across the globe to expedite the manner in which they obtain and transcribe information, enabling executives and public authorities to respond to situations quickly. As far as procurement services are concerned, an electronic approach gives professionals the ability to oversee materials acquisition and human capital administration in a more thorough, accurate manner.
Taking financing to the next level
BizTech Africa reported that Kenya's National Treasury is prepared to launch an e-procurement solution in July in an effort to automate and accelerate the East African government's financial management procedures. Kenyan National Treasury Cabinet Secretary Henry Rotich told the press that the program is being implemented under the supervision and initiative of the Integrated Financial Management Information System. All purchasing, spend analysis endeavors and payments will surpass the limitations associated with manual operations.
"This will increase control and visibility over the entire life-cycle of a procurement transaction from procurement planning to payment," said Rotich, as quoted by BizTech Africa. "Electronic procurement will therefore play a key role in prudent government financial management and resource allocation."
Through the IFMIS, the National Treasury hosted nationwide training sessions regarding supplier relationship management between May 12 and May 21 in 13 different regions. Requisition administration, quotation organization, purchase order applications and a number of other tools will soon be at the disposal of nearly every government entity in Kenya.
Keeping track of health care assets
Medical industry participants handle a wide variety of complex, expensive equipment and pharmaceuticals on a daily basis. Losing items or unwittingly purchasing more costly options can detrimentally affect patients looking to receive care. This is one of the many reasons why the British National Health Service plans to roll out an e-procurement solution to help hospitals better monitor materials acquisition and expedite payments, Supply Management reported.
A study conducted by the United Kingdom's Department of Health claimed that although implementing such a system across every hospital in the country would take several years, widespread adoption of the technology would produce annual savings of up to £5 million per 600-bed facility. The new process would involve recording all products purchased by NHS providers, and require them to submit a monthly spend analysis detailing all purchase order transactions and accounts payable.
The DHS report went on to claim that frontline clinical care has always been supported by backend departments providing it with the goods and resources it requires. Therefore, it's time to illuminate and streamline this relationship.
Promising to provide scalable environments capable of adequately hosting data analytics applications, cloud vendors have been known to support corporate cost reduction endeavors. Although there are thousands of these organizations located throughout the world, their service models vary, meaning that businesses looking to benefit from the cloud may have difficulty discerning which provider is the right fit for them.
As a result, a number of organizations have outsourced to firms providing electronic procurement services, a tactic that makes searching for cloud hosting companies much easier. Detailed descriptions, as well as thorough reviews of these organizations, can be found on e-procurement websites.
What they're looking for
While some enterprises want to be able to run software applications off a private cloud, others want to use Software as a Service deployments for storage. According to Cloud Tweaks contributor Mojgan Afshari, one of the key features of cloud computing that makes it so appealing is that it enables employees distributed throughout different regions to access files and data from a single location in a seamless manner.
"Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction," stated the National Institution of Standards and Technology, as quoted by Afshari.
Benefits and conditions may apply
Whereas in-house data centers were the norm 20 years ago, cloud servers and storage are becoming industry standard. However, just because the technology has the ability to enhance efficiency and drive business growth doesn't mean the organizations providing solutions will meet expectations. Like any other sector, some cloud vendors are better than others.
Datamation noted that accurately predicting the return on investment of cloud adoption can be exceptionally tricky because how much a company profits from the solution depends on the ways in which its departments utilize it. Every business has a different operating model, meaning that comparing and contrasting user experiences is somewhat ambiguous. For example, two organizations may source from the same cloud vendor, but one may use its services to host an enterprise resource planning program while the other may utilize it to run data analytics applications.
Business process outsourcing, such as using a different company to help find a cloud vendor, may be a good option for executives looking for detailed descriptions of multiple services. Having an extra bit of guidance never hurts.
"Who needs a tolerance that small?
"It doesn't have to be made from this specific, does it?"
"Who cares how big or small it is. It's an ink pen!"
And with that, let's turn our attention to the standard government ballpoint pen. This 2010 article from the Washington Post talks about some of the folklore behind the pen's specifications, but aside from the folklore, the actual specifications of the pen's manufacture are fantastic on their own. A six page document, available for download here, breaks down the specifications of a government-issue ballpoint pen. Among the specs for your standard retractable ballpoint pen:
- two part barrel with a contoured grip
- pocket clip
- 0.7mm ball, with a .05mm tolerance
- 13.8cm overall length, with a 2mm tolerance
- pocket clip that acts as locking/retracting device
- ink cartridge filled with water-based ink, sealed to avoid ink loss in liquid or vapor form
- ability to write continuously for 1000m with less than 1% errant inkflow
- ability to write immediately after being left "open" for 24 hours
- ability to write within 10 seconds of being exposed to temperatures of 140 degrees Fahrenheit and -5 degrees Fahrenheit
- The pen needed to fit undetectably in a pressed military uniform
- It needed to be usable as an emergency replacement for a 2" fuse
- It needed to be usable in emergency tracheotomies (!)
- It's length was determined by the scale of naval maps, allowing navigators to quickly measure 150 nautical miles
Within your own company, the standards may be a bit more lax...
"What kind of pens you need, Chuck? Uhhhh... blue ones. With a comfy grip. And they should look cool! None of that white-barrel crap, get me some Zebras."...and you'll likely be buying in such small quantities you can't demand your own model from a manufacturer. But requirements should still be considered.
An ink pen may not be just an ink pen. Consider each department's requirements before disregarding them and just ordering a gross of blue Bic sticks to be distributed across the facility. If they don't have requirements, maybe its worth having them look at their usage and generating some. Are they writing in unique conditions? Are they customer-facing and losing a lot of pens? Are they writing on a unique surface that requires a specific type of ink?
While your interns definitely do not need Mont Blancs, no matter how many times they ask, Accounting may actually need retractables over capped, and manufacturing may actually need a gel-inked pen with a bit more durability in the case design. Determining who needs what can help consolidate purchases to save money, but can also help keep unique items purchased under agreements going to the write - sorry, right - departments to avoid wastage due to non-use and maverick spending to buy what they like.
Every creative business idea is likely to be challenged by the procurement process and logistics concerns. Although the concept of covering every roadway, parking lot and highway in the United States with solar panels is certainly interesting, whether or not such an endeavor is economically feasible is another matter.
It's evident that demand for silicon - the material used to construct photovoltaic panels - would rise immensely, which would put pressure on manufacturers to create the compound as quickly and efficiently as possible. Organizations charged with spearheading solar road projects would require workers with knowledge of PV technology and infrastructure, a need which could be filled with vendor resource management.
According to Fast Company, the idea of replacing all of the U.S.' asphalt- and concrete-based roadways with solar panels was conceptualized by Scott and Julie Brusaw, a couple from Idaho who formed Solar Roadways. The pair claimed that the initial hurdles involved vehicle traction and making sure that glass could withstand heavy trucks. However, the Brusaws addressed this issue by laminating several sheets of tempered glass together - the same process used to make the material bulletproof. The source noted that the duo's roadway can easily support 250,000-pound oil drilling equipment.
The primary features of the construction include LED lights that can illuminate dividing lines and spell out warning messages, a textured surface that prevents automobiles from sliding, self-powered heaters that can melt ice and snow and, of course, the ability to power charging stations for electric vehicles and contribute immensely to the nation's grid.
What happens when a panel breaks? The news source noted that the entire system is wired, meaning that utilities, highway departments and other authorities would be notified when and where a mishap occurs in real-time. The couple is hoping to raise $1 million on Indiegogo to hire more engineers and continue to refine their product.
Hit the brakes
There's no doubt that the Brusaws have developed a solid base for a project that could potentially spark a nationwide revolution. According to Brad Plumer, a contributor to Vox, there are about 30,000 square miles of roads, driveways, parking lots, bike paths and sidewalks in the contiguous U.S. If organizations succeeded in covering this pavement with solar panels possessing an 18.5 percent efficiency rate, the nation could create more than three times the amount of electricity it produces annually.
However, Plumer referenced a spend analysis conducted by the Brusaws, which concluded that it would cost $56 trillion to cover all of the roadways in the U.S. - nearly 20 times the federal government's budget. This estimate was assembled in 2010, prompting the couple to revisit their research and figure out whether or not the country would meet a significant return on investment.
In addition, a couple of other questions remain unanswered. How will the roadway remain clean? What will such an endeavor cost authorities in maintenance and repair? Storage will also be a major hindrance to making such a project a reality.
Slow and steady wins the race
It's clear that a massive-scale reconstruction of the U.S. transportation infrastructure simply isn't feasible. In contrast, gradual, constructive investment in Solar Roadways appears to be the safer option. Plumer acknowledged that the Department of Transportation is requesting smaller demonstrations located in parking lots, for example.
There's also the matter of making solar panels cheap to produce. In order to fabricate silicon more cheaply, manufacturers should consider the pros and cons of outsourcing to a company that will provide them with procurement services. They should also look into investing in new technology. One such producer, Argonne National Laboratory, created a solar panel design with new ceramic material that's thinner than current models, uses cheaper materials and can switch polarity, which improves efficiency.
United States chemical manufacturers can expect more stringent federal laws protecting the safety of factory employees. Because synthetic materials consist of numerous different compounds, monitoring where each compound originates from and is held requires thorough transparency during the procurement process. Most importantly, such oversight will be required so that audits can be adequately responded to.
Getting on par
Numerous chemical companies engage in global sourcing, whether they're purchasing single elements from Chinese mines or finished compounds from Swedish facilities. Such an intricate product acquisition procedure needs to be tracked and monitored as much as possible so that purchasing companies can figure out what processes were used to develop potentially harmful materials. For example, if a standard process for forming a particular synthetic is manipulated in any manner by an organization, is there a possibility that employees can be harmed?
As far as the U.S. is concerned, improvements could be made to current regulations. According to Manufacturing.net, the Government Accountability Office recently assembled a report noting that the country's chemical safety standards generally fall short when compared to global participants such as Canada, France, Germany and the United Kingdom.
Finding the root cause
Although supplier relationship management tools will assure companies of whether or not a particular substance was constructed correctly, U.S. facilities may have to pay more attention to what's occurring in-house. The Washington Times referenced the GAO's report, which focused on storage and processing protocols pertaining to ammonium nitrate, the gas that exploded last year at a Texas fertilizer plant and killed 14 people. The GAO blamed poor information-sharing between state regulators, industry exemptions and outdated federal policies as indirect causes of the accident.
Currently, the Homeland Security Department has a database containing information regarding 1,345 facilities in 47 states that store the chemical. However, the GAO discovered that the federal list doesn't account for nearly two-thirds of the total number of ammonium nitrate storage warehouses. One of the problems is that the Occupational Safety and Health Administration rarely inspects places that store ammonium nitrate, which fails to give regulators a proper perception of how organizations are handling the substance.
As a result of these concerns, the Obama administration established a federal working group that will submit a report later this month outlining ways to improve oversight. It can be expected that enterprises handling ammonium nitrate and other harmful chemicals will be required to conduct self-assessments, which may cause them to outsource to managed IT services companies that can provide them with product oversight technology.
News broke in the past few weeks that scientists have begun observing the collapse of the West Antarctic Ice Sheet, a globally significant glacier system that's predicted to cause sea levels to rise somewhere in the range of 10 to 15 feet. Globally. The loss of the West Antarctic Ice Sheet alone will cause sea levels to rise upwards of three feet. More significantly, the release of methane from the ice sheet's collapse and melting will expedite the melting of the remaining Antarctic ice, which will cause another 10 to 12 foot rise in sea levels.
We've known this was going to happen for decades - at least since a global temperature rise of one degree celsius was observed in 1980 - but what we didn't know was how long it would take. Estimates at the time of the Kyoto Protocol (late '90s) ranged from centuries to millenia. However, more accurate observations from new satellite imagery now peg that number to decades.
Long-term - like, really long-term - impacts will be substantial. Virtually every port city will be partially or completely overtaken by the rising ocean, including Shanghai (#1 container port, by traffic volume), Guangzhou (#7), Mumbai, Ho Chi Minh City, Kolkata, Osaka-Kobe (#28), Alexandria, New York (#25), New Orleans, and Miami. The majority of South Florida will disappear, as will portions of Louisiana. Short-term, we're already seeing the effects. Weather shifts are altering and shifting product availability and logistic plans by hindering and destroying production capabilities, making roads impassable, altering or eliminating the availability of natural materials, or just flat out destroying production facilities.
A few examples:
- This past winter brutalized the Midwest, Northeast, and even the traditionally balmy Southeast U.S. as a result of changes in the flow of the jet stream across the U.S. So even though the weather was colder - it was due to the effects of global warming. And it caused delays throughout the country. Regions were without power, people missed a lot of work, and roads were delayed and impassible. Between January and March alone, I was out of office for 10 days of work due to the conditions, and twice my travel on the Pennsylvania Turnpike was delayed for hours due to weather-related accidents that snarled trucks up for the better part of a day.
- We all remember the Asian flooding of 2011 and its impacts on the availability of hard drives and other computer components. Pricing for digital media storage was affected for the better part of two years. Now, many Balkan states are flooding at levels not seen in centuries, which is alarming not only for humane reasons and the millions of displaced people, but also because Eastern Europe, including the Balkan states, had been cultivating an emerging manufacturing center.
A burgeoning Chinese economy is driving demand for raw materials within the country, but whether or not European producers will be able to sate the nation's appetite is another matter entirely.
Procurement services are connecting organizations across the world in order to develop robust, profitable connections. Retailers, fabricating companies and sources of unfinished goods are all benefiting from the Asian country's prosperity, but regulations defined by the European Union are hindering EU members from supplying China with the goods it demands.
Boosting global commodities
According to IndustryWeek, French research group Cyclope reported that Chinese demand for grains, metals and meat will maintain its upward course over the next year. Huge reserves of dollars have given the country an economic advantage over countries competing for these goods, as the majority of materials are traded in the American currency. Philippe Chalmin, a professor at Paris Dauphine University and a leading market research analyst with Cyclope, claimed that China's hunger for these products coincides with Beijing's transition from an investment economy to consumerism.
For example, the source noted that China has become the world's second-largest purchaser of world beef, its imports quadrupling in recent years due to concerns regarding local cattle meat after numerous health scares have shaken the country. Such evidence would suggest that Chinese organizations have made use of strategic sourcing services to help them find meat products that originate from nations possessing more stringent health standards.
EU out of the game?
EurActive reported that European industry participants may not be able to supply China with some of these commodities, as the EU Commission has been criticized for conflicting mandates that prohibit its members from capitalizing on newfound opportunities. Goran Backblom of Swedish iron ore manufacturer and distributor LKAB claimed that demand for raw materials is going to grow as the world's population increases, and if Europeans can't contribute to supply, a global disaster may ensue in the future.
"We are in a new super cycle of demand and consumer will need new products," said Backblom, according to the source. "It is more of an economic issue."
Though regulations pertaining to environmental policy are held in favor by many EU members, Nickel Institute's former President Kevin Bradley noted that such mandates could actually hamper metal recycling, which is a process that would put Europeans in a good position to supply China with steel. It's clear that the EU has to reassess the continent's procurement process to identify any contradictions that may be occurring.
At the end of April, you might have read a great article called, "Five Ways to Optimize Benchmark Data Usage," on The Strategic Sourceror. Our strategic sourcing experts wanted to share simple yet effective steps you can take right now to cull more value from your data to benefit your supplier analysis. To take that a step further, we made an infographic that highlights the main points on how you can enhance your benchmark data usage. So stop comparing apples to oranges, and check out the infographic below.
There are two primary challenges global production companies are currently facing. First, organizations previously considered to be original equipment manufacturers have transitioned away from the fabrication process to focus more on assembly. Secondly, attracting new employees to fill factory positions and engineering jobs is becoming quite a challenge.
In order to mitigate these issues, many businesses are taking advantage of supplier relationship management and vendor resource management. While the latter solution assists companies looking to secure and administrate staffing requirements, the former helps organizations connect with other enterprises that can provide them with materials essential to the users' operations.
Setting targets, hitting the bull's eye
Procuring a large number of goods from numerous different companies requires accuracy and efficiency. Aside from the practical aspects of such transactions, it's imperative for the business acquiring materials to know how they were made, where they were sourced from and the best practices of the enterprise selling the products. According to Paul Ericksen, a contributor to IndustryWeek, more organizations are paying attention to the procurement process now than in the past.
Traditionally, OEMs are purchasing more finished materials now then they were half a century ago, primarily because of their transition from fabrication to assembly. Essentially, this means that supplier operations are now the greater part of an OEM's extended enterprise - and this is forcing executives to consider the practices of the entities at the very beginning of the distribution chain.
For example, say a manufacturer began producing every car wheel component in its factories. Then, after deciding to strictly compose the product as opposed to making the lug nuts, rims and tires, it would simply assemble them. In order to make sure such units are properly fabricated, the wheel-maker should weigh the pros and cons of outsourcing to a company providing e-procurement.
Garnering future workers
According to USA Today, United States production companies are finding it difficult to garner fresh interest in manufacturing. As a temporary fix, many of them are turning to vendor resource management to help them fill positions, but executives are still wary of the fact that many young people don't find the prospect of working in a factory to be appealing.
The country's manufacturers have taken a technological approach to producing goods, a factor they hope will attract new workers. Automated technology has sparked a need not for assemblymen, but for engineers, computer programs, machinists and designers. If manufacturers can't find the talent in high schools or colleges, they'll have to continue to use vendor resource management.
Following an online submission process, Source One was evaluated on project objectives, scope, timeline and outcome—and also the clarity, efficiency and impact of each area. Through the collaboration of an experienced team, Source One believes this award stands as a testament to their cohesive and fine-tuned processes.
"Our adaptability allowed this client to achieve their main objectives, to cut their operating costs in a number of categories, and to enjoy savings from existing suppliers," states Joe Payne, Source One's Vice President of Professional Services.
Supply and Demand Chain Executive magazine also recognized several employees earlier this year for the Pro to Know award. Adding to that success, the Supply and Demand Chain Executive 100 is just another example of the hard work and strategic thought leadership at Source One.
During the procurement process, businesses often look to obtain materials produced or harvested by organizations that exercise best practices. It's not difficult for consumers to come across a news article detailing a horrific event that is somehow connected to a well-known brand. Even if said enterprise wasn't directly connected to the mishap, the media coverage can still put a blemish on its reputation.
Going into damage control mode
According to Manufacturing.net, an underground coal mine explosion in western Turkey resulted in the deaths of at least 284 people on May 12. As of now, 18 miners remain missing and the final death toll is expected to reach 300. Though mining company owner Alpu Gurkan expressed regret, that didn't stop hundreds of protesters throughout the country's Soma district from expressing their discontent.
A fair amount of the hostility has been directed toward the Turkish government, which has been criticized for failing to enforce stringent safety standards upon mining enterprises in the past. One official, Huseyin Celik, responded by claiming that public authorities "vigorously" inspected the mine 11 times since 2009, and that this isn't the time to "look for a scapegoat."
Finding the appropriate solution
The mine released a statement claiming that the explosion was caused by an unidentified spark, discrediting assertions that it was incited by a power distribution unit. For the safety of its workers (and the mine's good name), the enterprise may have benefited from outsourcing to a company providing procurement services.
Timothy Garcia, founder and CEO of Apptricity and contributor to Digital Journal, noted that businesses using electronic materials acquisition programs benefit from improved accuracy and operational efficiency, and encounter more thorough contract negotiations. Garcia claimed that employees engaged in strategic sourcing are often prone to mishaps, no matter how well-trained or capable they are.
"E-procurement solutions eliminate most of the manual data entry involved in the procurement process, which eliminates opportunities to make mistakes," said Garcia. "Additionally, with all ordering functions automated through an e-procurement system, purchasing can be handled quickly and according to established policy, with set authorizations and catalogs."
These advantages could have been leveraged for the sake of the aforementioned mining company, helping it procure equipment produced by corporations with a reputation for manufacturing quality materials. Whatever the source of the explosion was, it's evident that faulty machinery was the root cause. Maintaining a concise, digital record of when products were purchased would have allowed government officials to view whether or not any equipment was outdated.
Manufacturers interested in committing to sustainability and corporate cost reduction are beginning to consider solar power. As the production rate of photovoltaic panels depends on weather conditions, demand for advanced storage technology is likely to increase with burgeoning interest.
Moving past fossil fuels
Fujifilm Recording Media recently announced that it built a solar energy installation on one of its manufacturing facilities located in Bedford, Massachusetts. The compound currently uses 1,870 panels, which will produce about 644,000 kilowatts on a yearly basis. This level of electricity production is equivalent to the carbon sequestered by 7,820 acres of United States forest annually, reducing 444 metric tons of carbon dioxide.
Fujifilm President Peter Faulhaber noted that the company set a goal to reduce carbon dioxide emissions by 30 percent by fiscal 2020. Marketing analysis has shown that U.S. consumers strongly favor companies that use renewable resources, prompting organizations such as Fujifilm to set priorities for themselves.
"The new Fujifilm rooftop solar array will generate more than 15 million kilowatt hours of electricity over its lifetime while producing zero carbon emissions," said Chris McCarthy, vice president of Columbia Energy, one of the organizations that installed the panels. "It will also reduce the global demand for fossil fuels."
A boon to battery producers
If manufacturers follow in Fujifilm's footsteps, it will likely lead to increased demand for energy storage components. Peter Kelly-Detwiler, a contributor to Forbes, spoke with Phil Giudice, CEO of battery production company Ambri, which recently received $35 million in series C financing from investors such as Khosla Ventures and Bill Gates. Giudice stated that the monetary boost will enable the company to develop cheaper products for customers powering large-scale operations.
"These systems can be deployed in conjunction with renewable resources, at large industrial end user locations, on military bases, or directly on the utility transmission and distribution system," Giudice told Kelly-Detwiler.
Essentially, Ambri is making wind and solar power more feasible by producing state-of-the-art batteries. As the technology becomes more available over time, organizations with large facilities ranging from factories to distribution centers will consider procuring renewable resources. For leaders unfamiliar with the technology, business process outsourcing may be a viable option for them.
Installation of large-scale solar projects has undoubtedly boosted demand for new batteries, and it appears that Ambri is looking to satisfy this need. Affordable systems mean greater profit margins in spend analysis - an attractive prospect for enterprises.
In a highly competitive global economy, with multiple services and businesses springing up, an increasing number of corporations are regarding the benefits of business processing outsourcing. More often than not, the idea of cutting expenses is considered first. However, in the age of educated and informed consumers, enterprises should consider social cognizance and sustainability to be a part of the equation.
Adopting technology remains a popular trend
Supply Management referenced a study conducted by Gartner, which showed that the global market for procurement services software grew 7.3 percent in 2013, standing at $8.9 billion in 2013. Chad Eschinger, research vice president at the company, claimed this burgeoning investment is likely the result of shifting business priorities and increased connectivity. For example, before partnering with a supplier, corporations are choosing to compare and contrast numerous options in order to find out which companies can indirectly boost customer satisfaction rates.
On a practical note, Eschinger maintained that logistics managers "kept their priority," even though IT budget professionals remained wary of investing in new technology. Though financial concerns loomed, executives were enchanted by the potential corporate cost reduction they could encounter as a result of installing the technology.
"Both influences have impacted strategic planning processes and have resulted in strong price-based competition and smaller contracts," said Eschinger, as quoted by the source. "Cloud and subscription-based pricing is shifting revenue streams and influencing growth.
Making a different approach
However, some professionals would suggest that this expense-obsessed culture may detrimentally affect a company's bottom line. Rene Carayol, a contributor to Business Reporter, claimed that investment in automation and technology such as supplier relationship management can lead to error reduction, as well as a more versatile, faster operation. Eliminating repetitive processes and tedious, mind-numbing tasks will lead to a healthy workforce, in turn creating a more productive environment.
In addition, Carayol recommended that enterprises integrate analysis programs with their procurement process software in order to figure out how certain decisions affect outcomes. For example, say a corporate coffee shop wanted to consider sourcing from a fair trade bean plantation located in Mexico. A predictive analytics tool would factor in shipping laws, consumer opinion regarding the shift and where transportation routes will be forced to change. Will operations be harder for employees to execute? Will this move attract new business? All of these questions can be answered through predictive analysis.
Enterprise optimization isn't about merely cutting costs, but improving and solidifying the business as a whole.
In order to maintain a positive public image and discourage socially unfavorable practices, enterprises should strongly consider utilizing supplier relationship management tools. From factory safety protocols to employee compensation, it's imperative that businesses know their partners' practices so that no shady practices go unacknowledged.
Trouble in the fields
Despite the United States' stringent laws prohibiting the employment of child labor, the issue still persists in the the country. According to Manufacturing.net, the Human Rights Watch recently discovered that more than 140 children, some of them 7-years-old, are working in tobacco farms in North Carolina, Kentucky, Tennessee and Virginia. As the majority of these plantations lace their plants with nicotine and pesticides, HRW urged government authorities and tobacco companies to implement further measures that protect those working in the fields.
The group noted that U.S. agriculture labor laws allow the employment of children, but if the proper safety measures aren't in place, it can result in grievous ailments. The kids who were interviewed claimed that they have been subjected to work long hours, sometimes in extreme heat. Additionally, the chemicals used to kill insects and fungus frequently cause vomiting.
In order to subvert these poor practices, tobacco organizations could leverage vendor resource management solutions to indirectly inform suppliers that they will not give business to farms that fail to appropriately protect their workers. Supporting growers that do abide by such standards will send a clear message of discontent to those that do not.
A far-reaching problem
Companies partaking in global sourcing have to tread lightly when purchasing materials. Regulations vary with each country, meaning that child labor laws may be relatively lax in some instances. The Huffington Post referenced a campaign spearheaded by Made in A Free World, an organization focused on eliminating modern-day slavery. The nonprofit is currently combating child labor in India, where 60 percent of the Earth's mica is mined.
The news source noted that the mineral is quite common in cosmetic products, sourced by corporations headquartered in developed countries. Although India prohibits people under the age of 14 from working, citizens as young as 5 years old are forced to work 12-hour work days in dangerous mine shafts for $4 per day.
In order to discourage these unfavorable practices, it's important that makeup companies find innovative, creative ways to evaluate their strategic sourcing. Cognizant consumers are unlikely to purchase goods from enterprises that support organizations that blatantly disregard child labor laws.
Source One has been in the news again. If you missed it, here's a quick recap.
- Understand (and embrace) Marketing's Culture
- Have the Right Executive Involvement
- Get Tactical to Be Strategic
- Internalize the Nature of Agency Relationships
- Know What Procurement Methods Have a Place in Managing Marketing Spend
If you'd like to know more about the difficulties in utilizing traditional BPO offerings in a modern, strategic Sourcing group, visit bpo.sourceoneinc.com.
Group Purchasing Organizations, or "GPO's", have been around since the early 1900's to provide the healthcare industry with cost savings on those purchases made by hospitals, nursing homes, and other healthcare organizations. They work with healthcare professionals to select the suppliers and materials required for their facilities and then use purchasing volumes to negotiate pricing and discounts. With these established rates and discounts the GPO's create contracts with the suppliers for use by the hospitals working with them. They do not specifically make the purchases for hospitals; they simply establish the contracts that are then utilized by healthcare providers to meet their own purchasing needs.
While GPO's have been popular in the healthcare purchasing market, there are certain objections to this type of service. One of the biggest criticisms of GPO's is their emphasis on cost reduction through volume-based purchases, rather than looking at overall value. Another objection says that GPO's don't assist hospitals in controlling supplier's invoices by establishing reporting guidelines, which opens the door for overcharging on invoices.
Consultants can provide purchasing services for healthcare providers and help to alleviate the concerns GPO's raise. Consultants work with individual healthcare organizations and their procurement departments to develop a solution, manage budgets, and deliver value. Following procedures similar to GPO's, consultants work with healthcare providers to determine the materials required for the organization and then contract with the suppliers that are able to deliver the best valued products for that organization.
Unlike GPO's, consulting firms frequently have best practices in invoicing requirements, which can be implemented with healthcare organizations for better visibility into spending. Consulting firms are focused on achieving cost savings and value for their specific client. This means that their focus is not on achieving discounts through large-volume purchases, but on finding the best market price for the products required by their client.
Consultants are able to leverage best practices, cross-industry expertise, and previous work experience to develop recommendations and solutions that best fit the client's needs. As an added bonus, consultants also have the ability to work with GPO's and assist in navigating the contracts and tools they have to offer. Therefore, organizations are able to continue working with GPO's, but with the added benefits from consulting services.
Source One has worked with a number of healthcare organizations to optimize purchasing budgets, as well as other GPO's on clients' behalf. To learn more about our healthcare procurement services check out our website!
Image courtesy of: TransactRx
Mergers and acquisitions typically revolve around the consolidation of resources, enabling two or more companies to expand their reaches to new markets or strengthen their positions in pre-established ones. It also provides them with the opportunity to reevaluate their strategic sourcing. New partnerships mean more connections, which can lead to cheaper or more flexible materials acquisition endeavors.
Bracing for a hit
According to The Los Angeles Times, the Pentagon and NASA are expected to enact lengthy budget cuts in the near future, which has prompted aerospace companies across the United States to combine efforts in preparation for an industry that will yield lesser profits. Stephen Perry, managing director at aerospace investment bank Janes Capital Partners, stated that 56 M&A deals occurred in the first quarter of this year.
For example, Alliant Techsystems and Orbital Sciences recently partnered to form Orbital ATK, which is expected to employ 13,000 people in 17 states. The move has been well-received by investors, as Orbital's shares rose by 16.5 percent.
Vying for cheaper materials
The news source noted that these efforts were likely initiated to cope with reduced market activity, as combat operations in Iraq and Afghanistan have decreased significantly. Gaining financial support from former competitors is a good tactic to employ if organizations are looking to reduce expenses.
In order to support future operations, it's important that these newly formed partnerships assess the pros and cons of outsourcing to an entity that can help them decrease procurement costs. Aerospace corporations deal in particularly expensive materials, so any areas where money can be saved must be exploited. As distribution is largely labeled as one of the largest expenses, it's important that newly formed companies find ways to scale back on overhead.
Redesigning the procurement process
Toby Brzoznowski, a contributor to Logistics Viewpoints, wrote that M&As present organizations with fresh opportunities to restructure their distribution practices. He claimed that businesses can expect to find success in this endeavor by leveraging technology, which enables executives to evaluate alternative sources, troubleshoot multiple hypothetical scenarios and develop precise materials acquisition strategies.
What is e-procurement? It's the electronic process of building relationships with suppliers. The technology has been utilized by manufacturers, logistics professionals, retail companies and government agencies in need of fast, easy ways to construct connections with other organizations that have made use of the service. For those entering a new partnership, the technology provides a good opportunity to optimize operational capabilities.
In part one of our series; we discussed how benchmarking is an exercise where an organization evaluates their performance or procedures against market data, either internal or external. We also reviewed how benchmarking data can be utilized by the organization for such purposes as defining best practices, identifying areas of improvement, and understanding the competitive environment.
No matter the purpose of your analysis, engaging in any type of benchmarking exercise is extremely beneficial. Once an organization obtains benchmarking data, they can apply the information to various aspects of their operations.
A good benchmark uses as much information and data as possible to get the most in-depth understanding of the market and organizational status. Time and resources need to be dedicated to collecting the necessary data, analyzing for relevant information, and developing a report that can be easily understood and utilized by many. This is just one reason organizations use independent benchmarking companies to perform analyses on their operations. There are a number of benefits to using an independent firm for your benchmarking needs, such as the following:
Best Practices: An organization that is dedicated to performing benchmark analyses for clients will have established processes and procedures for performing evaluations and creating reports that clients are able to benefit from. Independent firms have best practices that are at your disposal, they are able to perform benchmarks efficiently and effectively, alleviating the time and resource requirements.
Database Accessibility: Not only do independent firms have best practices that your organization can benefit from, but they have databases and information which can be easily accessed for your analysis. These companies can provide you with readily available information you would not have otherwise had access to, including data collected from previous work, subscriptions to data resources, and partnerships with other independent firms.
Industry-Specific Knowledge: Independent firms may specialize or have significant experience with a particular industry or business category. For specific industries, such as the healthcare or pharmaceutical industry, there needs to be a certain level of understanding of the industry in order to deliver an effective report. Those firms that have a specialization are aware of the latest trends in the industry or business category and have an understanding of the competitors in the market most applicable to your organization.
Multiple Category Expertise: Unlike specialized benchmarking companies, those that do not specialize can provide your organization with a diverse service offering for your entire operation. They will have access to a variety of information in their databases for all of the business categories you wish to evaluate. They will be able to offer you cross-category examples that you may not have considered or thought to be relevant before.
Objectivity: One of the biggest downfalls of performing your own benchmark analysis is the lack of objectivity when evaluating the performance of your organization. Without an objective point of view looking at your internal operations, personal biases may come into play which could affect the end results. Independent benchmarking firms offer the outside-perspective needed to get the most honest and un-biased results and recommendations about your organization.
Benchmarking is an important business exercise so that organizations can operate at peak performance levels and gain a competitive advantage in their industry. While it is possible to perform an analysis internally, there are multiple advantages to using an independent benchmarking company. At Source One we have established practices and procedures in benchmarking for a variety of industries and business categories.
In part 3 of Source One's benchmarking series, we will discuss the key to stakeholder involvement to ensure a successful benchmark.
Though such a consideration would initially seem inapplicable, United States appliance maker Whirlpool pays particularly close attention to the building industry. SupplyChainBrain reported that the manufacturer conducts marketing analysis reports on a regular basis to chart the health of the construction sector because it often coincides with demand for goods such as driers, dishwashers and refrigerators.
Right now, economic conditions look quite favorable for the company. According to Ahwatukee Foothills News, the U.S. Bureau of Labor Statistics reported that residential building added 100,000 jobs last year. On a per-monthly basis, 8,000 positions were produced from September 2013 to February 2014. The source also cited data produced by the National Association of Home Builders, which suggested that moderate increases in construction is likely to occur in the near term.
"The gradual, persistent increase in the number of markets improving is further indication of the slow but steady process of resolving the economic and housing problems that developed during the Great Recession," the NAHB stated in its recent Eye of the Economy newsletter, as quoted by Ahwatukee Foothills.
A need for oversight
In order to keep distribution costs low, Whirlpool weighed the pros and cons of outsourcing to a third-party logistics provider. SupplyChainBrain acknowledged that the company strongly considered the benefits of hiring an independent market research analyst to give the company a better view of the construction economy. Scrutinizing distribution and the housing market in a cohesive manner is more favorable than considering each aspect of the business separately.
Michelle VanderMeer, Whirlpool's senior director of North American logistics, noted that a variety of elements are factored into the equation. The company's domestic manufacturing operations, transportation expenses and commitments to sustainability are all considered when VanderMeer's team analyzes the housing market. Generally, the construction of new homes generates residual demand for large household appliances - meaning that the manufacturer may witness fluctuations over a large period of time.
VanderMeer's spend analysis reports have also caused Whirlpool to find creative ways to reduce shipping costs. SupplyChainBrain noted the organization's partnership with ceramic tile maker Dal-Tile, which puts its materials underneath Whirlpool's appliances whenever they're placed in a trucking container.
"We take 70 percent of the cube and pay 50 percent of the freight," said VanderMeer, as quoted by the source.
Additionally, Whirlpool has sought to achieve corporate cost reduction by committing to sustainable practices, which in turn lowers the price of its overall goods. Ultimately, such a process allows the corporation to remain competitive.
Abiding by stringent regulations and ensuring that all products are fairly grown and affordable are the primary challenges food companies face in the modern era. In order to satisfy consumer demands and standards set by government agencies, these organizations have weighed the pros and cons of outsourcing to businesses that can provide them with e-procurement and sourcing technology.
Reducing the overall cost
Transporting food from one end of a country to another can be a costly endeavor. Produce needs to be kept refrigerated en route and livestock often need to be tended to on the way to slaughterhouses. Therefore, many brands selling edible items often purchase raw materials from farmers and ranchers who can cheaply produce massive amounts of product in order to make the food more affordable on supermarket shelves. For those wondering "what is the procurement process?" deducing how the aforementioned scenario weighs against company preferences is materials acquisition in a nutshell.
According to MIT Technology Review, Silicon Valley startup Hampton Creek Foods is aiming to reduce the price of commodities derived from eggs by manufacturing a plant-based alternative. CEO Josh Tetrick claimed that the idea is ethically sound and economically sustainable.
"If we were starting from scratch, would we get eggs from birds crammed into cages so small they can't flap their wings ... eating antibiotic-laden soy and corn to get them to lay 283 eggs a year?" asked Tetrick, as quoted by the source.
Weighting price and market value
Though the idea seems appealing, marketing analysis suggests that Hampton Creek Foods would find it challenging to push its brand to companies that are wary of their customers' preferences. Cattle Network referenced a study conducted by the U.S. Farmers and Ranchers Alliance that named three primary concerns consumers keep in mind while shopping for food.
- Though approved by the U.S. Food and Drug Administration, the general population believes that genetically modified organisms are often linked to cancer.
- People often prefer products labeled as "all natural," because they believe it will benefit their health.
- No matter how many scientific facts are presented to them, individuals like to know that the companies providing them with food care about their safety and well-being.
Ultimately, the aforementioned points could play against Hampton Creek's endeavors. In reference to point No. 1, suppose that the company sourced from farmers using genetically modified plants so that it could cheaply produce large amounts of the material. As a result, businesses making egg-derived products may hesitate to purchase Hampton Creek's materials - unless the latter organization could ensure that its products will result in more affordable items.