July 2014
What's essential for developing strong supplier relationships?

Enterprises need to leverage supplier relationship management tools in order to eliminate any logistical mishaps from occurring. 

Demand planning shouldn't go unacknowledged, but developing solid, thorough connections with overseas manufacturers will ensure someone else is taking extra effort to complete product deliveries. Unanticipated shipment problems can arise at any moment, and knowing others are working to mitigate the issue just as hard as you are can be valuable. 

Take a unique approach 

How is such a strong relationship developed? IndustryWeek contributor Dave Blanchard recommended professionals take a risk-oriented approach to the procurement process. Scrutinizing the strengths, weaknesses, capabilities and limitations of potential suppliers is a necessary first step to figuring out whether they'll be willing to help customers in dire times of need. 

Ultimately, manufacturers and other such companies are made up of people. As humans are opinionated beings, professionals have preferences as to which enterprises they would rather do business with. Sometimes, clients can be viewed as simply revenue-builders, not entities who are a pleasure to do business with. 

Essentially, strategic sourcing professionals need to develop empathy with their suppliers. They can do this by following two best practices:

  • Exercise transparency: If a supplier isn't aware of how a customer conducts business on a daily basis, it's going to make it that much more difficult to identify what needs to be done to deliver optimal service. In addition, whenever an enterprise acknowledges a pressing matter that needs to be satisfied, suppliers will be blindsided by the demand and may become embittered about the relationship.
  • Acknowledge they're human: Even multi-billion dollar corporations have shortcomings. No matter how impeccable a supplier's practices may appear, it has its own faults to account for. If a mistake or miscommunication ever occurs, realize accidents happen. However, this doesn't mean organizations should excuse conduct that's blatantly incompetent. 

What is e-procurement? 

There's no doubting the usefulness of a email, but there are more refined platforms available for enterprises to put to use. Supply and Demand Chain Executive Contributor Bob Cohen acknowledged the concept of connectivity, maintaining that real-time networking can do wonders for procurement operations. 

Establishing supplier relationships through cloud-based, e-procurement platforms has a number of benefits. Both parties can access invoice records, monitor distribution activities, sanction payments, orchestrate inventory management and complete a number of other tasks through such an environment. Best of all, the two organizations are never left in the dark in regard to where shipments are in the event a disaster transpires. 

Latin American countries encounter burgeoning e-commerce market

Recent marketing analysis shows that Latin American countries are poised to encounter growing online shopping trends.

Even merchandising companies based in the United States are weighing the pros and cons of reaching a wider audience. The potential for e-commerce sites such as Amazon appears quite attractive. Not to mention, these companies will have to contend with Latin American enterprises of the same ilk.

Looking good

The Latin Post referenced the "Latin America 500" study conducted by research and analysis business Internet Retailer, which maintained that Latin America is the globe's second fastest-growing online shopping economy. Apparently, the region remains a close second to China.

As for which countries are leading this burgeoning e-commerce market, Brazil ranks in first place due to its high Internet usage. The country itself is becoming known for selling affordable mobile devices, which only amplifies online purchasing activity. Internet Retailer's study identified the most active e-retail economies as:

  • Argentina
  • Bolivia
  • Brazil
  • Chile
  • Colombia
  • El Salvador
  • Mexico
  • Peru
  • Uruguay
  • Venezuela

What are the sales figures?

Before foreign companies consider redirecting their procurement process priorities to accommodate Latin American consumers, it's important for them to determine whether or not setting up shop in the continent will be financially rewarding. Internet Retailer discovered the top 500 merchandisers in Latin America encountered increased sales of 23 percent, cumulatively.

This growth amounted to $17.94 billion in 2013. The rate of e-commerce expansion surpassed activity both in the U.S. and European markets. As for where to invest, approximately 299 of the 500 enterprises surveyed were based in Brazil, which accounted for $11.7 billion in transactions last year.

Fierce competition

Latin American businessmen recognize the stability of this market, and have reaped the benefits of penetrating it. CNBC referenced the success of MercadoLibre, the largest online shopping site in the continent, which is headed by Stanford University graduate Marcos Galperin.

MercadoLibre was originally launched as an auction site in 1999, and eBay acquired 19.5 percent of it in 2001. The news source noted Latin American consumers conduct nearly 2,000 searches per second on the website. Galperin told CNBC that mobile commerce is expected to take MercadoLibre to the next level.

"Twelve percent of our gross merchandise volume comes from mobile phones," said Galperin, as quoted by the source. "It's a huge opportunity, but it's a huge execution challenge in terms of continually writing the software to adapt all of our services to the new formats."

Once this medium is established, marketplaces such as Amazon will likely have a more difficult time permeating into the Latin American e-commerce economy.

Think conflict minerals aren't a part of the procurement process?

It's scary to think that a percentage of consumers may be indirectly funding global conflict by purchasing smartphones and vehicles.

Yet, they're not the ones getting the blame: Companies that fail to employ thorough supplier relationship management tactics are receiving the brunt of the criticism.

At first glance, figuring out whether the tungsten, gold or tantalum they source originates from countries such as the Democratic Republic of Congo appears difficult. Thankfully, there are technologies and services available that allow enterprises to gain a holistic view of the procurement process.

Not up to par

Bloomberg View reported the United States government responded to allegations regarding poor strategic sourcing tactics by implementing a provision in the Dodd-Frank Act, which requires U.S.-regulated production companies to submit analysis reports on their distribution practices.

The first round of conflict mineral investigations was due June 2, but only 6 percent of audited companies satisfied adequate compliance standards. Worst of all, of the nearly 1,000 enterprises that submitted reports pertaining to conflict minerals, 94 percent failed to validate their suppliers' sourcing tactics.

What's the concern? 

Child soldiers, slavery and mass rape are all tactics employed by organizations operating in the Democratic Republic of Congo. Amnesty International noted that the Congolese army and the M23 rebel group (the latter of which is comprised of several sub-factions) have been fighting for control not just of the country, but of natural resources as well.

Both parties are notorious for committing atrocious human rights abuses.

Bloomberg acknowledged a harrowing statistic. Last year, a spend analysis showed that central African mineral exports amounted to $2.1 billion, a large portion of which funded the Congolese military and M23 rebellion. Therefore, smartphone and computer manufacturers may have indirectly funded a grievous conflict.

The options available

In order to prevent the progression of this heinous war, enterprises engaged in global sourcing have two options:

  1. Weigh the pros and cons of outsourcing to procurement specialists capable of connecting the dots between widely distributed suppliers
  2. Install enterprise-wide software that allows organizations to identify patterns and correlate conflict with essential minerals

Software developer GTKonnect announced the release of its conflict metals product, which helps businesses meet compliance standards set by the U.S. and other national authorities. The technology helps companies:

  • Develop "product-chains" that connect suppliers to end products
  • Create analysis reports regarding certain minerals
  • Conduct risk assessments of particular regions

GTKonnect's provision is just one example of how organizations can stop the flow of money being funneled into the DRC.

Corporate cost reduction strategies benefiting global enterprises

A healthy combination of creative thinking, strategic sourcing and cost-saving tactics has led to greater profit margins for private enterprises.

Although the U.S. economy is recovering at a slow pace, sales reports are growing more positive. At the onset of the 2008 financial crises, revenue was generated by efficiencies, labor cuts and operational shutdowns. Future priorities would suggest that this trend is going to continue.

Back on track?

According to FactSet, 74 enterprises in the Standard & Poor's 500 reported "actual" earnings for Q2 2014, with 73 percent of those companies generating sales above estimates. Essentially, original marketing analysis predictions regarding true revenue have fallen short of specialists' expectations. The source also acknowledged several notable trends:

  • Over the past four quarters, 55.3 percent of S&P 500 members have underestimated mean sales.
  • During the past four years, 57.2 percent of S&P 500 companies, on average, have generated sales above the anticipated mean.
  • In aggregate, S&P 500 companies are ringing sales 1.43 percent above predicted outcomes.

In regard to future trends, it appears consumer confidence and near-shore manufacturing are going to bolster economic activity. Although people are still exercising caution when browsing e-commerce stores, individuals are feeling more financially secure now than they did four years ago.

What's the cause?

Business Insider contributor Sam Ro named corporate cost reduction as the root cause of these positive revenue reports. He cited several instances in which companies took measures to cut operational assets - including labor - in order to turn a profit over the long run.

"We remain focused on cost discipline to offset the negative effects of our gross profit dollar growth," said one such firm, Walgreen's​, in a statement, as quoted by Ro. "We will be accelerating our optimization efforts, taking additional steps to lower our expenses company-wide."

Launching a new benchmarking plan

According to BakeryandSnacks.com, after reporting negative operating revenue, General Mills CFO Don Mulligan announced the implementation of a program that is expected to create $40 million in free tax savings for the next fiscal year. Jerry Smiley, a partner at Strategic Growth Partners, speculated that this approach may involve several cereal plants being shut down and a reduction in the labor force.

However, Smiley acknowledged that an innovative approach to a changing food economy is imperative to the success of General Mills. The problem is, if little creativity is being realized, then the logical step is to eliminate expenditures wherever possible.

Audit satisfaction should be a key concern during the RFP process

Although the RFP process is usually characterized by bidding wars and operational capabilities, those in the pharmaceutical industry need to evaluate a manufacturer's ability to satisfy audits. 

Lackadaisical factory policies can accumulate over time and negatively impact a vaccine producer's ability to deliver quality goods to the market. Contaminated medicine can also result in grievous illnesses that can potentially result in a public relations nightmare. 

Not up to par 

Most importantly, consumer health may be detrimentally affected by poorly formulated vaccines. The biopharmaceutical fabrication process is incredibly delicate, vulnerable to the slightest manufacturing misstep. This is why government organizations regularly conduct audits on facilities focused on medicine creation to ensure all the right practices are being implemented. 

According to The Canadian Press, a recent inspection of a Sainte Foy, Quebec, development center owned by pharmaceutical company GSK - formerly named GlaxoSmithKline - revealed 10 problems cited by Health Canada, a regulatory agency. 

Although none of the issues were considered public health risks, the Canadian authority maintained that the report suggests the facility consistently fails to abide by basic standards. In June, the U.S. Food and Drug Administration sent a warning letter to the GSK-owned factory, referencing concerns of bacterial contamination. 

A public relations nightmare 

In order to satisfy such extensive reviews, pharmaceutical resellers - such as hospitals, care clinics and other organizations - have weighed the pros and cons of outsourcing to private auditors. Conducting thorough inspections of manufacturing facilities before submitting a bid is imperative for enterprises that want to avoid government shutdowns. 

When a biopharmaceutical plant is shut down, entities sourcing from the company that owns the facility are left to scramble in search of other manufacturers, thus having to reinitiate the RFP process all over again. It's a costly, lengthy endeavor that can be avoided altogether by contracting procurement services with thorough knowledge of government standards. 

Improving measurements 

On the other end of the spectrum, it's also important for public authorities to develop sound biopharmaceutical inspection policies so private enterprises can receive business from overseas sources.

According to BioPharma-Reporter, World Health Organization Director Margaret Chan asserted that the China Food and Drug Administration's vaccine development standards have improved considerably since March 2011. 

For those who would assert that regulations hinder production quality, this certainly isn't the case. Chan referenced a Chinese encephalitis vaccine that was "easier to administer" than counterpart medicines on the market. In addition, the solution was cheaper than competing vaccines. 

How can managed IT services satisfy Web development needs?

Both companies new to and familiar with the business arena recognize that having an updated website is imperative to acquiring market share. 

There are a number of Web developers out in the market, but what perspectives should a managed IT services company bring to the table? Programming skills are one thing, but a solid grasp of concept design and usability must be prevalent. 

What to hire 

Weighing the pros and cons of outsourcing to a Web designer itself isn't too difficult. After all, there are few people within an enterprise who have the expertise necessary to make the project run smoothly, let alone know how to work with HTML or CSS. But what should enterprises be mindful of?

Forbes contributor David Teten recently spoke with Kyle Stalzer, president of development firm Tackk, who maintained that organizations should look for Web development professionals who understand that a creating a good-looking homepage isn't the be-all and end-all. A quality webpage fabrication firm possesses:

  • A team of graphic and website designers that can correlate layout, text and navigation with colors, visuals and fonts
  • Marketing specialists who understand what aspects of a website influence conversion rates and bolster traffic
  • Coders who are aware of cybersecurity needs and can spot faults that are easy to overlook or difficult to identify

Creative Bloq contributor Kyle Fiedler maintained that one of the most important aspects of creating sound website designs is usability. If potential customers find it difficult to find specific information and need a service representative to answer their questions, then the layout needs to be reassessed. 

How to hire 

Vendor resource management providers often conduct thorough research on prospective designers before giving their clients the go-ahead to finalize a contract. There are a number of steps these professionals take to assess a Web developer's capabilities and limitations:

  • Visit previously constructed websites to see how sophisticated and navigable the implementations are
  • Check for online search engine patterns to figure out how difficult or easy it is to find Web pages
  • Speak with previous clients to get a solid idea of past experiences, looking for inconsistencies in satisfaction
  • Discover how transparent developers are, favoring those that create an open line of communication and maintain constant connection with clients
  • Challenge prospects with questions pertaining to situations, deducing how well they'll respond to major and minor disruptions 

Above all, it's imperative that enterprises contract a developer capable of conducting website maintenance over a long period of time. If a designer is willing to create a long-term relationship, it's one that will be there when clients need it most. 

Is Myanmar set to be the next big procurement partner?

Myanmar, a Southeast Asian country formerly known as Burma, remains an attractive prospect as far as the procurement process is concerned.

Although the nation is strategically located by the Indian Ocean and has a climate perfect for agricultural production, global labor concerns are preventing enterprises from integrating Myanmar into strategic sourcing plans. 

A raw materials giant? 

IndustryWeek contributor and ENVIRON Executive Vice President Mark Travers acknowledged the vast amount of natural resources Myanmar has at its disposal, oil and natural gas being among them. The C-level decision-maker referenced a report conducted by the Organisation for Economic Co-operation and Development.

"Myanmar is well positioned to engage a multi-pronged development strategy that draws on agriculture, mining and extraction, manufacturing and services," asserted the OECD, as quoted by Travers. 

What's more, the Asian Development Bank added that the nation's economy could grow from 7 to 8 percent a year for more than a decade. Increasing Chinese labor costs are making Myanmar more attractive to foreign businesses looking to procure cheaply manufactured goods. 

Taking a chance 

In response to lifted U.S. and European Union sanctions, Gap Inc. became the first American retailer to produce apparel in Myanmar, according to Foreign Policy. Gap executives claim that the move will keep its global sourcing operations "flexible and nimble." 

However, there are two risks the apparel brand is taking by setting up shop in the fledgling nation. For one thing, only 30 percent of the 55 million people living in Myanmar have electricity. Secondly, the country lacks a minimum wage law, which has led some critics to speculate that labor abuses could become prevalent. 

Initial considerations 

First, it's important for organizations prospecting the country to hire a market research analyst to conduct a thorough, predictive inspection of where Myanmar's economy is heading. For example, will the nation be a solid telecommunications partner in ten years? Or will it be better positioned to satisfy the needs of apparel retailers? 

With this in mind, organizations should be prepared to develop strong relationships with budding industries within the nation. In addition to keeping up with changing regulations set by global authorities and burgeoning Myanmar standardization, interested parties must pay attention to the financial mindset of the nation's business leaders. 

Finally, companies should hire procurement services to help them connect with entities already conducting operations within Myanmar. A part of getting familiar with the country is networking with those who have prior experience. 

U.S. businesses and their suppliers are facing a major threat to revenue – a union worker strike at U.S. ports on the west coast. These ports happen to handle 40% of all U.S. container imports. As a result, the Canadian National Railway is seeing a significant bump in their cargo, specifically within U.S.-bound imports. Alternatives like this are effective while precipitating a major change in operations, but redirects to Canada are not a full proof contingency plan. How can suppliers and businesses better manage risk?

One major tactic to offset risk is to consider business interruption insurance. Business interruption insurance offers some protection from unforeseen circumstances. In this case where union workers go on strike, this insurance in theory would grant the supplier and buyer the ability to reassess their logistics without a significant financial loss during the disruption.

Additional protection can be possible through a force majeure clause in contracts. As mentioned in Source One’s all-you-need guide to procurement, Managing Indirect Spend, this clause provides an exemption from liability in the case of extraordinary events, such as war, natural disaster, or even a union strike. For example, in the Summer of 2010 some suppliers affected by the closure of European airports due to the ash from an Icelandic volcano relied on force majeure because they could not supply goods in a timely manner. This was not ideal for buyers, but many were able to terminate the agreement and seek other suppliers to avoid a financial crisis.

Proactively managing risk can also involve establishing manufacturing closer to the U.S. In a practice known as nearshoring, many U.S. companies have been seeing benefits from working with Mexico and other Latin American manufacturers. This option offers lower shipping (by sea and land) and labor costs. Previously, China was a target for a large portion of U.S. outsourcing; however with a drastic shift in wages demanded, intellectual property compromises, and rising fuel and shipping costs, Mexico is becoming a more enticing option.

Although every supply chain is different, there are a great deal of scenarios where proper risk management can lead to cost efficiency and savings in unpredictable scenarios. Through prepping for the unexpected, companies and suppliers that utilize the U.S. west coast ports can secure profits and the public opinion of their brand can be protected.

News courtesy of: http://www.cnbc.com/id/101844372
Photo courtesy of: www.dredingtoday.com
Four strategic sourcing guidelines for public sector IT departments

It's a rare thing to come across a news story detailing how a government organization is increasing its budget.

Nowadays, authorities are looking to cut costs in a number of ways, one of which involves purchasing software capable of optimizing certain practices. However, spend analysis endeavors hamper the procurement of technology necessary for the public sector to keep up with the pace of enterprises.

So, where do government CIOs start? There are a number of steps these professionals should take in order to acquire the necessary hardware and software to advance operations without exceeding budgets.

1. Keep a sustainable mindset

Eric Gies, a contributor to The Guardian, noted that procuring assets or services that were responsibly manufactured (with regard to environmental and sociological factors) will not only improve a public authority's perception, but also enable the utilization of best-in-class, affordable technology.

For example, say the U.S. Department of Defense contracts a managed IT service provider to create a scalable, secure private cloud environment. Sourcing an environment from a company known for powering its data centers with green energy will help the organization save on what would be exorbitant energy costs in the long run. Not to mention, taxpayers will favor an institution that makes a commitment to reducing its carbon footprint.

2. Search for the lowest risk

News Factor referenced a study conducted by research firm Gartner, which asserted that CIOs and IT asset managers should work together to look for the most secure solutions. Security doesn't only pertain to protecting databases from cybercriminals either, as the study maintained that new software or hardware implementations should be easily manageable.

In other words, procuring advanced software isn't the same as acquiring complicated implementations.

3. Look for flexibility

Gartner also regarded the importance of searching for malleable service-level agreements. The more accommodating an IT services provider can be to a public organization, the greater the return on investment will be. However, that's not to say organizations should get lost in the number of provisions offered - only invest in those applicable to operations.

4. Look for additional financing

Although one branch of the DoD may only have a certain amount of money to allocate for a certain project, procurement process specialists should network with other teams that may benefit from using a specific IT implementation. Sharing information regarding a supplier is the first step to making this process a success. It's important not to push the idea on parties - investment should be seen as an opportunity, not an obligation.

Oil regulations may disrupt fossil fuel procurement process

While oil companies want to continue to deliver the resource to refineries throughout the United States, government regulators are calling for more stringent safety regulations.

If recent proposals are implemented, procurement services may have to help energy businesses reorganize distribution routes to help flow remain consistent. Despite the fact that it's the middle of the summer, organizations are thinking ahead in anticipation of the upcoming winter. Two seasons ago, U.S. power prices rose as transporters struggled to satisfy demand.

Replacing old equipment

Employing strategic sourcing professionals to recycle old assets and purchase new property is likely to become a common practice. According to The Wall Street Journal, U.S. legislators recently presented a rule that would force transportation enterprises to rotate out tens of thousands of DOT-111 tank cars with upgraded models over the next two years.

The proposed measure is a year shorter than Canada's identical law. The two pieces of legislature apply to containers that carry ethanol, oil and other hazardous liquids. In addition to this mandate, discussions regarding a 40 mph speed limit would be enforced until existing railcars can be updated.

The two rules were developed in light of an accident that occurred in Lac-Mégantic, Quebec, in which 47 people were killed as a result of a derailed train carrying Bakken crude oil from North Dakota.

Switching up tactics

Marketing analysis reports have shown that transporting oil by pipeline is cheaper and safer than delivering the substance by rail. With this in consideration, it's important to regard the costs associated with constructing a feasible, continental pipeline network - some of which are politically motivated:

  • Procuring the property and land necessary to construct the pipelines
  • The materials required to build the infrastructure
  • The skilled labor needed to oversee the operation's completion

It turns out companies are already making the transition. According to NGI's Shale Daily, crude oil rail transportation from North Dakota decreased 59 percent in May. North Dakota Pipeline Authority Director Justin Kringstad stated in a webinar that pipeline traffic increased 41 percent during the same month.

Energy Transfer Partners LP, a company based out of Dallas, proposed the construction of a 30-inch diameter, 1,100-mile pipeline that would transport light sweet crude oil from Bakken to the Gulf Coast. Kringstad noted that the endeavor is still being developed, but remained optimistic about the project.

Drafting and putting the initiative into action may require the logistical expertise of a strategic sourcing company - one capable of predicting the anticipated output of and demand for Bakken oil.

As more insurers incorporate fitness and wellness programs into senior health insurance plans, there are several factors to address internally to ensure that these plans run smoothly. With complex plan payment structures and arrangements involving multiple parties, it can be overwhelming for an insurer to assess new strategies while they are trying to promote a new program and ensure its success. This is why Source One serves to assist health insurers in managing their Wellness Programs and driving the most value to members. In realigning structures and tightening controls, Source One works with wellness program providers to reduce costs of healthcare plans, optimize partnerships for a strong, sustainable future, and increase membership levels.

Based on a changing healthcare environment, no insurer is the same; however, Source One is able to assess the current landscape to achieve efficiency and profitability in essential areas for wellness program providers. Learn more about how to strengthen your wellness program’s value in the below Source One infographic.

How strategic sourcing can mitigate pharmaceutical concerns

There are two concerns procurement services have regarding the pharmaceutical supply chain:

  1. That the drugs they sell can be legally distributed in certain countries
  2. That logistics companies are assigning an equal amount of attention to regulations

Being able to connect the dots between medicine manufacturers and pharmacies selling the products is imperative. Organizations such as the U.S. Food and Drug Administration enforce stringent standards regarding the sale of drugs, and failing to comply with these codes can result in grievous consequences for enterprises.

Attention to illicit distribution

According to Supply Chain Digital, logistics company FedEx was recently indicted by the U.S. Justice Department for allegedly transporting drugs sold by illicit online pharmacies. The source noted that authorities had repeatedly warned the distribution giant of several organizations that were not allowed to market goods in the U.S.

"From as early as 2004 the indictment alleges, federal authorities and members of Congress informed FedEx that illegal Internet pharmacies were using its shipping services," said a statement from the Justice Department, as quoted by the source.

As opposed to abiding by these regulations, the government agency asserted that FedEx would deliver packages assembled by illegal shippers to designated locations at which customers could pick up the items. This process not only put FedEx employees at risk, but arguably exposed consumers to potentially dangerous substances.

How does this affect strategic sourcing? Companies that chose FedEx as a primary distributor are now likely to be associated with such activities. Pharmaceutical companies selling authorized, legal drugs may have to comply with investigations to ensure that none of their shipments were harboring illicit substances - a lengthy and expensive process to satisfy.

Holistic oversight

Therefore, it's important for such organizations to conduct research of their own regarding potential distributors. Susan Haigney, a contributor to Pharmaceutical Technology, acknowledged the FDA Safety and Innovation Act, which requires drug enterprises to divulge the contents of controlled substances, as well as how they're manufactured. The Act authorizes the FDA to:

  • Aggregate and scrutinize information from companies to assess the risk of sourcing unfavorable products
  • Share and collaborate with foreign authorities to trace the origins of fabricated pharmaceuticals
  • Conduct domestic and overseas inspections of facilities

A global sourcing strategy that can be easily scrutinized by authorities is essential to have. Not only will it help entities satisfy audits, but it will enable them to identify which distributors are most likely to be involved in unsavory practices.

How to respond to environmental hindrances with strategic sourcing

There's been a lot of talk regarding sustainable strategic sourcing, but what about the impact environmental changes have on the procurement of materials?

Droughts, severe summer storms, winter blizzards, rising temperatures and a number of other ecological factors can hinder the distribution of goods destined for manufacturers across the globe. The key to mitigating the effects of these deterrents? Networking. 

Keeping options open 

Melissa Clow, a contributor to The 21st Century Supply Chain, acknowledged a report conducted by Aberdeen Group, titled "The Chief Supply Chain Officer's View of Supply Chain Disruptions: How the Best-in-Class Respond." After receiving responses from 151 logistics professionals, the researchers discovered an overall willingness to advance operations on a constant basis.

The study found that the cream of the crop are:

  • 50 percent more likely to assign resources toward improving distribution visibility
  • 37 percent more likely to communicate with suppliers than others. 

It's a "who you know" world 

Of the aforementioned conclusions, the latter point remains essential. Having a holistic perception of global sourcing is a good start, but actively using supplier relationship management tools to strengthen connectivity with critical logistics partners is imperative to adequately respond to environmental fluctuations. 

Worldwide operations are comprised of thousands of relationships. Therefore, if one manufacturer, resource provider or distribution expert cannot fabricate or deliver goods due to a climate-related issue, another company of the same ilk can be contracted.

The concept of never burning bridges goes far beyond maintaining friendships and ventures into the world of providing products to consumers or businesses. 

Pivoting priorities 

What happens if an environmental fluctuation impacts an operation model? The San Francisco Gate recognized California's struggle to use hydroelectric dams to power its cities due to a pervasive drought that has plagued the state for the past three winters. 

The prolonged dry spell has ultimately hindered California from reaching its emissions goals - reducing output to 431 million metric tons by 2020. In addition, the closing of the San Onofre Nuclear Generating Station has contributed to the rise of greenhouse gases as utilities have been forced to source energy from conventional sources, such as coal-fired facilities. 

Essentially, what the state needs to do now is jumpstart initiatives geared toward getting wind and solar farms online. California law obligates utilities to source 33 percent of their electricity from green resources by 2020, but this recent drought could cause legislators to raise that bar. 

How does this relate to procurement? Sourcing wind turbine and photovoltaic panel components from manufacturers throughout the globe remains California's best option. 

Is Mexico a strategic sourcing nightmare?

At first glance, sourcing goods from Mexico appears feasible for North American businesses.

Initial considerations

The country's proximity to the U.S. border, as well as its coastal ports along the Pacific and Caribbean, make it a strategic networking hub of the Americas. With the right approach to the procurement process, obtaining goods manufactured in Mexico would be a lot cheaper than acquiring materials from overseas.

However, many strategic sourcing companies have speculated as to whether Mexican infrastructure and assets can adequately handle a dramatic influx of goods. In anticipation of the re-shoring trend that is sweeping North American enterprises, transportation companies operating south of the border need to purchase the right property.

Weighing the pros and cons of outsourcing to a Mexican logistics business

Coronado Logistics CEO Matt Hamson recently spoke with SupplyChainBrain on the matter, asserting that Mexican trucks are having a difficult time handling the amount of volume they're expected to distribute. The professional acknowledged that the majority of the Mexican transportation industry is comprised of small companies - with 75 percent of entities participating in the logistics industry possessing 100 vehicles or fewer.

What's the problem with this picture? According to Hamson, these logistics businesses cannot adequately transport the amount of materials their clients require them to deliver. He cited an example of one refrigerated trucking company in the nation that turned down an average of 30 loads per day because it lacked the necessary assets.

On the other hand, there are a couple of benefits organizations should consider, not including Mexico's proximity to U.S. and Canadian consumers:

  • Despite what many may initially believe, Mexican violence is primarily influenced by the drug trade as opposed to theft, as criminals have little interest in commercial goods.
  • Another assumption is that Mexican transportation companies lack contemporary technology, such as GPS, when in fact such businesses possess digital logistics assets.

Output increasing

As more manufacturing-related investment is directed toward Mexico, managed IT services will be able to bring more advanced implementations to logistics companies. Advanced planning and distribution analysis software will likely be brought to the nation through companies interested in sourcing from the country's businesses.

The reason why this would occur? Dow Jones Business News noted that Mexican production rose 3.6 percent from May of last year, supported by growth in the country's automotive industry, which accounts for nearly a fifth of its manufacturing economy. More than 1.5 million light trucks and cars were produced as of June.

In this respect, vehicle production will likely support Mexican logistics companies that are struggling to acquire the appropriate assets.

Is ERP an obsolete spend analysis platform?

Although software companies are working constantly to make their solutions more flexible, scalable and intelligent, many professionals remain skeptical of ERP's capabilities.

The reason why? In the traditional sense, ERP has functioned more as a spend analysis platform, used by financiers to make sure an organization isn't operating at a loss. However, the complexity of global sourcing has obligated accountants to consider three elements:

  • Manufacturing operations management
  • Demand fluctuation
  • Sales success

In regard to these three factors, enterprises with hundreds of partners distributed worldwide need to be able to swiftly collaborate and scrutinize data together. The majority of ERP systems, according to SupplyChainBrain contributor and NeoGrid CEO Paulo Viola, are incapable of doing just that.

What is e-procurement? A solution

In his article, Viola acknowledged the disparity of systems and how it negatively affects materials acquisition and liquidation. He noted the importance of operating at the speed in which contemporary consumers purchase goods, which is incredibly fast considering the technology individuals have at their disposal.

So where does the solution lie? E-procurement. Capitalizing on the benefits of business process outsourcing isn't a bad idea, all things considered. Enterprises would benefit from contracting a company that can not only provide enterprises with professional insight and expertise, but supply them with a platform through which they can:

  • Easily share information with overseas partners
  • Measure demand for goods with manufacturing capabilities
  • Map out a sustainability plan that all entities contributing to the procurement process can participate in
  • Help production enterprises measure performance against sales output
  • Organize efficient, flexible global logistics routes
  • Quickly change strategic planning based on disruptions (warfare, protests, natural disasters, etc.)

Where does it reside?

An e-procurement solution's capabilities are optimized when hosted in the cloud. Such an environment makes it easy for partners to share data, sanction meetings no matter what the distance and conduct marketing analysis endeavors in real time.

Viola outlined an example of how such a platform can streamline business processes. Suppose a manufacturer and a retailer can trade information on the same platform. Whenever the latter company's inventory reaches a certain level of deficiency, the former organization will receive a notification detailing what goods its customer requires and set up a delivery time.

Flexible operations

Manufacturing.net contributor Greg Goodwin referenced a study comprised of 56 responses, the LNS Research 2013-2014 Manufacturing Operations Management survey, which showed that production companies are still having difficulty adapting to sporadic changes in global demand, fluctuating client priorities and other such factors. A cloud-based, e-procurement solution succeeds where ERP fails in this respect, providing modern manufacturers with the connectivity necessary to prioritize responsibilities.

How new UN food regulations may affect global sourcing

Feeding more than 7 billion people is one challenge, but ensuring they're receiving edibles that are safe to consume is another.

Today, food companies are heavily entrenched in global sourcing, making it difficult for them to accurately determine how produce is grown and livestock is raised. Global regulations and national standards aside, many enterprises are worried about transporting perishables to needy markets before products are tarnished.

A push to increase safety

According to AllAfrica, the United Nations Food and Agriculture Organization and World Health Organization recently concluded that no more than 0.01 milligrams per kilogram of lead should be found in baby formula. In addition, the two entities asserted that a minimum of 0.2 milligrams per kilogram of arsenic can be allowed in rice.

The standards were developed by the Codex Alimentarius Commission, which has created similar regulations in the past. Representatives from approximately 170 countries congregated at the CAO's annual meeting in mid-July, agreeing that infants are particularly vulnerable to the poisonous effects of lead.

Measures for success

The key question is, how are organizations going to be able to identify such precise measurements on a global scale? First, procurement services should identify areas where baby formula is most likely to come into contact with lead, and how arsenic can leach into rice.

For example, the news source explained that arsenic is most likely to be absorbed by rice than any other vegetable. Therefore, it is important for companies to scrutinize locations where rice production's frequency correlates with arsenic's prevalence. Where is such a relationship most likely to occur? AllAfrica maintained that those living in Asian countries are most likely to suffer from arsenic poisoning due to these two factors.

Eliminating waste via transportation

The bottom line is that food enterprises have a heavy responsibility. The problem is, the only organizations that are going to make a commitment to delivering edible products to those living in indigent countries are nonprofits. With this in mind, these particular charitable entities need to make sure they don't operate at a loss, inciting a need for corporate cost reduction.

Where do nonprofits need to focus their efforts? Devex contributor Anna Patton asserted that eliminating food waste is one of the biggest concerns the world faces today. Although many believe the problem lies with developed countries, she noted that infrastructure and logistics inefficiencies often cause produce to rot before it reaches the market.

With this considered, charitable organizations should leverage a healthy mix of technology and expert insight to network with distribution assets operating in struggling economies. If effective planning is executed, critical edibles will likely be saved from tarnishing.

When talking about low-labor costs, cheap materials and mass-production, many people immediately correlate the thought with outsourcing work to areas in the Far East, and for the most part China. However, in today’s shifting landscape, some of the most cost-efficient aspects of outsourcing to those areas are now presenting unforeseen challenges. Workers are demanding higher wages, intellectual property has been compromised, and transit times and rising fuel costs have created a burden in arranging business logistics.

With these changes among others, Source One has recognized distinct advantages in working with suppliers in Mexico and other closer to home countries. We call this practice Nearshoring. Learn more about the potential of Nearshoring for businesses in this exclusive Source One infographic:

Finding corporate cost reduction through benchmarking

When considering the procurement process, conducting thorough benchmarking of companies offering near-identical materials can help enterprises save big in the long run. 

It's the same protocol many computer manufacturers look for when choosing whether to power their machines with CPUs produced by Intel or AMD. Affordability needs to be taken into consideration, but quality and performance can't be sacrificed. 

The weigh-in 

Scrutinizing procurement and productivity in a comprehensive manner is a good way for companies to identify ways to achieve corporate cost reduction. However, as with any sector, comparing internal operations with those of competitors is essential for winning market share. 

Take the laundry industry for example. According to American Laundry News, although factors related to geographies and climate have an impact on contention within the linens cleaning economy, because operations among sector participants are relatively the same, benchmarking presents a solid opportunity for laundromats to see whether or not they'll lose business as a result of:

  • Obtaining new washers and driers
  • Expanding facility capacity
  • Installing solar panels
  • Offering patrons the chance to purchase one-time use detergent 

Collecting and using information 

How are benchmarking tasks conducted? The source outlined the tactics used by Textile Rental Services Association, which leverages surveys and other various resources to help laundry companies develop concise, accurate comparisons between them and competitors. 

Laundry-Consulting.com Managing Director David Chadsey acknowledged the benefits of business process outsourcing to conduct cost and productivity analysis. Hiring professionals to survey expenditures and output and show where improvements can be made is profitable because they can dedicate more resources to the task and scrutinize a client's competitive pricing in an unbiased manner. 

"I think vendors are a very good source," said Chadsey, as quoted by American Laundry News. "Your chemical vendor doesn't just come into your plant - he's going into other plants that are similar to yours."

Capitalizing on opportunities 

Depending on what industry a business is in, it should consider participating in publicly sponsored initiatives that reduce the cost of conducting certain operations. 

For example, CTBR noted that the Scottish government recently gave £2.2 million to the Carbon Trust's Offshore Wind Accelerator program, which promises to reduce the expenses associated with installing turbines by 10 percent. The move was initiated in the hope of encouraging collaboration between organizations focused on eliminating costs pertaining to activities in Scottish waters. 

Most importantly, strategic benchmarking is about identifying opportunities wherever they may lie. If a new business process, supplier or operation model is recognized, then the analysis was a success. 

IoT: Procuring the right software

Before manufacturers conceive of new analytical insights, optimized factory production and innovations capable of reshaping business goals, they should shift priorities toward obtaining the appropriate Internet of Things platforms. 

Cost, need and ROI 

Conducting a spend analysis on how much money a production company is likely to invest in IoT is a good first step for these organizations to take. In addition, it's imperative that these companies carry out the following activities:

  • Compare and contrast provisions from technology enterprises offering solutions applicable to IoT
  • Initiate thorough background checks pertaining to on-demand support and security protocols
  • Figure out how scalable and adaptable solutions are to more data, new applications and complex software
  • Interview users to identify key pain points

What's needed from professionals? 

In regard to the people responsible for administrating an IoT system, companies can either:

  • Hire personnel knowledgeable of such architectures
  • Train existing staff on the technology's infrastructure

What such skill sets are going to be required? According to Electronic Design, Cisco recently presented a graph pertaining to IoT's influence on contemporary enterprise needs at the Internet of Things Developers Conference, held in Santa Clara, California, in early May.

The company discovered that businesses are most likely to use "fog computing," a multi-layered implementation that operates IoT frameworks on-premise while providing network support through cloud technology. Therefore, vendor resource management tools should be geared toward looking for IT experts knowledgeable of:

  • Allocating tasks to smart objects
  • Storing and processing information on virtual environments
  • Optimizing response time to new data input by the fog network

Getting a handle on security 

Suppose a factory implements 2,000 smart sensors. At first glance, this doesn't seem too intimidating given the amount of storage a cloud environment can handle (virtually endless). However, it's important to remember that this isn't a network of assets operating at the mercy of a centralized system - it's connected to the Internet. 

So, what does the facility need to do? Procure technology capable of sanctioning communication between smart devices and the Internet while preventing malware from contaminating the network. From what InformationWeek contributor Christian Borcea would assert, either a closed-loop framework or an advanced architecture should be implemented

What's closed-loop? If the aforementioned factory wants to use Internet technology but disable the system from communicating with, say, a website user, it can launch an environment through which administrators remain in control. Manufacturers with no interest in connecting to the Web should contract companies capable of constructing such an architecture. 

It’s no secret that Source One has been welcoming some recent expansion, both in client base and office reach. As of July 1st, Source One opened a second office in downtown Chicago, Illinois. In order to accommodate the needs of Midwest businesses, Source One has positioned themselves to offer their unique service portfolio in a local environment.

Source One CEO, Steven Belli points out that due to the large volume of clients in this area, it made sense to open an office close by. Along with the increasing client demand, he believes, it will be more efficient to provide local, on-demand resources while in the area.

Diego De La Garza, a Source One Senior Project Manager, has been the head of the new office addition and is optimistic about the value Source One is able to provide to the Chicago market. With a talented workforce dedicated to delivering value to clients, Diego believes there will be enhanced success in engagements with this new opportunity.

To learn about this development, please view our recent Press Release surrounding the topic.
Vendor resource management: Finding unique security experts

When it comes to finding the talent required to ensure IT infrastructures are secure, enterprises usually look for professionals with extensive experience regarding defensive strategies. 

However, knowing the techniques hackers are using to infiltrate databases and networks can give companies a more holistic view of IT security. Using vendor resource management tools to connect with experts possessing the wherewithal to bypass sophisticated IT protection systems is a solid first step. 

The world of white-hat hacking 

The image of a teenager glued to his or her computer screen, navigating through the Web and dismantling enterprise operations is often associated with criminal behavior. However, there's an entire contingency of such figures dedicated to helping organizations identify security faults.

Joseph Williams, a contributor to Take Part, acknowledged these IT enthusiasts as white-hat hackers - cyberwarriors who are either self-educated or instructed by a third-party in the craft of database and network infiltration. A company dedicated to providing such an unorthodox but helpful service is ESET North America, which tests business websites for defects. 

"White-hat hackers are to computer programmers as editors are to writers," said ESET North America Senior Researcher Stephen Cobb, as quoted by Williams. "If you do it yourself, you don't always see the flaws." 

Networking with budding professionals 

Given this perspective, the benefits of contracting a strategic sourcing agent to connect enterprises with potential hires specializing in hacking can be enormous. These firms can sanction communications between clients and organizations that foster interest in white-hat tactics. 

For example, Williams referenced Cyber Boot Camp, a week-long convention sponsored by ESET North America that instructs San Diego high school students in IT infiltration methodology. A procurement services provider could contact enrolled students and offer them positions at companies in need of different cybersecurity approaches. 

The aim of "Project Zero" 

Hiring white-hat hackers to identify vulnerabilities is becoming a popular practice. According to Wired, Google security engineer Chris Evans has assembled a team of former cybercriminals in order to identify security faults in Internet-based software. 

One of the team members, 17-year-old George Hotz, a hacker notorious for reverse-engineering the Playstation 3 and bypassing AT&T's lock on the iPhone in 2007, was awarded $150,000 by Google for helping the company solve the protection problems he exposed. 

Hiring experts 

Organizations with stringent cybersecurity needs, such as health care companies, the Internal Revenue Service, investment agents and others should strongly consider hiring infiltration experts. The better businesses understand database and network vulnerabilities, the more comprehensive defense strategies will be. 

Global sourcing and labor: The other end of sustainability

When professionals think of global sourcing sustainability, they often regard their suppliers' environmental impact - such as water and electricity consumption.

However, there's another aspect consumers and businesses should  consider: whether or not organizations are taking appropriate measures to eliminate unsavory labor practices. People don't want to be associated with companies that have directly or indirectly contributed to poor employment initiatives.

Suspending a relationship

One mobile phone maker recently discovered its strategic sourcing initiatives didn't have the oversight necessary to encourage sustainability. According to Bloomberg, Samsung Electronics failed to recognize labor violations committed by Chinese labor relations, despite stating a commitment to root out any employment transgressions.

The South Korean company conducted an audit of 100 Chinese suppliers, discovering poor practices at 59 companies. A separate study assembled by the China Labor Watch was launched after the fact. Cumulatively, the two reports discovered that a number of manufacturers were allegedly:

  • Failing to provide personnel with proper safety gear
  • Neglecting to pay staff overtime
  • Employing workers below the age of 16

In light of these allegations, Samsung has suspended its relationship with producers accused of committing wrongdoing.

"Samsung will strengthen its hiring process not only at its production facilities but also at its suppliers to prevent such cases from reoccurring," said Samsung in an emailed statement.

Setting standards isn't enough

Using a supplier relationship management tool to set standards for global partners is a good first step, but it's not the ultimate solution to attaining social sustainability. A study conducted by Ernst and Young discovered that although corporations are taking measurable approaches to encouraging favorable labor practices in their suppliers, problems still persist.

What's causing this inconsistency? EY outlined several reasons as to why employment-focused sustainability initiatives are failing: 

  • Audits that detect the prevalence of health and safety grievances exist, but they often neglect to identify the root causes.
  • Although this is not always the case, verification agencies with personnel possessing no experience regarding human rights violations are sometimes relied on too much.
  • Surveyors and investigators may not take the time to scrutinize fraudulent claims related to best practices.
  • Some organizations remain tolerant of intermediaries that provide inconclusive reports related to factory practices.
  • Sometimes, those in the procurement process will sanction purchase orders from manufacturers that have not been properly audited. 

​Fundamental issues 

There's an underlying, more elemntal reason as to why human rights abuses are going unacknowledged. The report asserted that countries such as Bangladesh, Haiti, Lesotho and Cambodia are favored as production hubs because they all have a surplus of indigent labor. In addition, each of these nations has experienced civil war in the past 40 years. 

There's no getting around it - issuing compliance audits costs money. Although the perspective is nefarious, expense is one of the reasons why unsavory enterprises source from countries with sustainability standards less stringent than those of more developed economies. If it takes a short amount of time for a review to be completed, overhead costs can be reduced. 

Fixing the problem 

Thankfully, executives who understand the need to exercise sustainable labor practices have a number of options at their disposal. EY maintained that procurement services can not only lessen the expenses associated with conducting audits, but dedicate more resources to completing such endeavors. 

In this respect, an outsourced materials acquisition specialist may be able to better conduct covert, thorough reviews of factories without facility managers knowing. It's not uncommon for companies to prepare for monthly inspections by changing day-to-day processes for a day and then reverting back to previous practices after the fact. 

In addition, supplier relationship management software must be implemented to ensure that no unauthorized orders are submitted before a manufacturer's sustainability practices have been approved. Taking the easy way out could ultimately damage an enterprise's bottom line. 

On July 8, 2014, Source One’s Communications team was featured in the Philadelphia Business Journal’s “People on the Move” Awards. Business Development and Marketing Manager, Rebecca Lorden, was featured for her new role within the team managing all internal/external marketing communications. Marketing Manager, Heather Grossmuller, was featured for her role in social media and strategic marketing management.

With a recent boost in hiring, Source One welcomes the recent expansion and seeks to accommodate a demand for an even larger presence. Lorden states, “We are excited to begin this new chapter of engaging further with companies that we have the opportunity to help dramatically. Source One has a ton of upward potential to provide to clients—we serve to make that fact realizable.” Grossmuller states, “With a developing business environment, we look forward to optimizing our communications to best reach clients. Along with Source One’s team of experts, Rebecca and I strive to break down the often negative connotations associated with ‘consultants’ and work to help clients understand the potential to improve their performance.”

Through enjoying a job description synonymous with their strongest passion each day, Lorden and Grossmuller seek to pave the way for additional Source One successes in the future. Read more about their recent awards here: 

Dissecting Harley-Davidson's unanticipated business move

In regard to the procurement process and marketing analysis, it's interesting to scrutinize an unexpected move made by United States motorcycle manufacturer Harley-Davidson.

Industry Week noted the producer recently constructed an electric street bike, an approach that spawns a number of questions:

  • What happens when a company digresses from its traditional strategy?
  • How will life-long customers respond to this product?
  • How will the business's materials acquisition protocol change?
  • Can the enterprise manufacture a machine with the same power and ruggedness as its traditional models? Will consumers expect this? 

Introducing: LiveWire 

The source noted that Senior Vice President and Chief Marketing Officer Mark-Hans Richer lauded the motorcycle, dubbed LiveWire, as "an expression of individuality and iconic style that just happens to be electric," featuring:

  • 74 horsepower
  • 52 foot-pounds of torque
  • The ability to go from zero to 60 in four seconds
  • A top speed of 92 mph
  • A 53 mile range
  • A charging time of 3.5 hours  

What do the customers say? 

The interesting thing is whether or not Harley-Davidson enthusiasts will take to the new model. When an enterprise considers manufacturing a new product - one that strays away from its signature offerings - it's not uncommon for it to hire a market research analyst to deduce whether or not a return on investment will be realized. 

The Verge referenced a showcase Harley hosted just outside of its Lower Manhattan store in June, giving riders the chance to try out LiveWire for themselves. George Pelaez, a member of the Harley Owners Group's New York City chapter, regarded the technology as "unbelievable."

As opposed to worrying about the bike's specifications, Richer asserted that the initiative was geared more toward finding out who the vehicle should be marketed to. One of the biggest challenges is recreating the powerful, rebellious attitude characteristic of Harley-Davidson's V-twin engines, especially as the LiveWire is incredibly quiet. 

Procuring the appropriate materials 

Marketing analysis aside, it's a wonder how the manufacturer plans on obtaining components that can take the vehicle out of metropolitan areas and into the open road. Although a new development, Power Japan Plus's Ryden battery may be the key to making the LiveWire a success. 

CNet reported that Power Japan Plus constructed a carbon-based battery that provides the same power density offered by contemporary lithium-ion batteries, but can be charged at a much faster rate. 

The materials and production costs involved with producing a vehicle such as LiveWire is one thing, but marketing it under the Harley-Davidson brand name is certainly a challenge. 

Is re-shoring a reality or a delusion?

Aside from using outsourced services and software, the easiest way to simplify the procurement process is by sourcing from companies closer to domestic operations. The more remote suppliers are, the more complex logistics becomes. 

North American enterprises may benefit from the re-shoring trend so many executives are discussing as of late. Due to a number of factors, experts have surmised that China is losing manufacturing jobs - but where's the proof behind this assertion and how will it impact strategic sourcing? 

Not dramatic, but evident 

A boost in Western consumer confidence and the prevalence of online shopping habits has demanded that businesses within the United States and Canada respond by expediting the distribution process. This is the estimation of Michael Dominy, research director with Gartner, who recently spoke with SupplyChainBrain on the matter. 

Dominy maintained that corporations can respond to fluctuations in demand more quickly when operations are closer to their headquarters. For example, if consumer desire for jeans shoots up in January, it will be easier to adjust logistics priorities when the manufacturer producing the pants is located in Mexico as opposed to Thailand. 

In addition, procurement services are wary of how the environment affects overseas factories. Dominy referenced the tsunami in Japan and flooding in Thailand as foreshadowing an age of relentless disruption at the hands of climate change. Therefore, North American companies are moving essential operations away from areas particularly vulnerable to sustaining super storms. 

Following the trend 

As consumer confidence grows, people are more likely to spend money on large purchases, such as cars and homes. In the U.S., faith in the market is growing at a steady pace, and one vehicle brand is taking note of the nation's economic improvement. 

According to The Associated Press, Germany automotive maker BMW recently announced that it plans to invest $1 billion to construct a new luxury car facility in the Mexican state of San Luis Potosi, which is located near the nation's northern border. BMW board member Harald Kruger noted that the factory will be capable of producing 150,000 cars annually, employing 1,500 workers. 

In addition, BMW intends to spend $1 billion on its plant in Spartanburg, South Carolina, so that its manufacturing capacity increases to 450,000 vehicles by the end of 2016. The company also announced its commitment to building a production center in Santa Catarina, Brazil. 

By positioning factories closer to the North American continent, BMW is in a good position to avoid overseas shipping and consolidate logistics resources. 

What do health care organizations look for in procurement services?

No matter which country a medical organization conducts business in, it likely has to contend with stringent health care regulations. Therefore, many look for procurement services possessing several characteristics that are conducive to company goals and needs. 

Mitigating logistical risk 

Between pharmaceuticals and delicate equipment, enterprises operating in the medical industry require experts who can provide them with thorough oversight of the distribution process. Last year, at the Gartner Supply Chain Executive Conference in Phoenix, Arizona, Memorial Hermann Healthcare Director of Financial Operations Daron Whisman described what he looks for in a strategic sourcing partner, according to SupplyChainBrain. 

Whisman noted that regulations have obligated Memorial Hermann - which consists of 12 hospitals, seven cancer centers, three heart and vascular facilities and 27 sports medicine institutes, among others - to ensure that its materials can be properly transported. 

A personal touch 

Whisman acknowledged that one of the most important aspects of the procurement process was having specialists and partners communicate with Memorial Hermann's physicians. As the organization operates in the United States (Houston, to be exact) the Affordable Care Act mandates that the organization commits to providing patients with quality-focused care. 

"We were very cognizant of risk-mitigation issues, but also what the physicians wanted as a tool," said Whisman, as quoted by the source. "So we took those parameters and asked them, what do you want as a strategic partner, two or three years down the road, to make sure you have the right tools to perform at a high-quality level?"

Finding a market research analyst that understands the demand incited by health care regulations and consumer expectations is key to procuring necessary goods. 

A trustworthy partner 

In regard to leveling with hospital physicians, many supplier relationship experts had to get in touch with Memorial Hermann's patient base. In this respect, the health organization's partners were handling particularly sensitive information.

Exercising responsible, considerate use of this intelligence is imperative to the success of the entity. Knowing which treatments are essential is important for procurement officers to know, but the manner in which the information is regarded must be respectful of patient confidentiality. 

Knowing what's legal

Although a revolutionary device invented by Turkish scientists may serve as a feasible liver substitute, that doesn't mean hospitals in another country have the authority to employ it. Manufacturing.net acknowledged that Jon Sacker, of Moore, Oklahoma, was saved by doctors at the University of Pittsburgh Medical Center after they implanted a Hemolung - which hasn't been approved by the U.S. Food and Drug Administration. Although the mechanism saved the patient's life, the hospital may now be subject to litigation.

Jerry Seinfeld used to have a bit in his stand-up routine about a person's demeanor before and after dinner at a nice restaurant. Before dinner, when everyone at the table is hungry and excited at the prospect of a good meal, everyone is eager to order as much off the menu as possible.

"More appetizers! More wine! Bring it all," Seinfeld would riff in his comedy act.

But once dinner was finished, and everyone was groggy with full stomachs, Seinfeld notes how the mood turns sour once the bill arrives.

"This can't be right. Who ordered all this stuff?", Seinfeld would ask, looking at an imaginary check.

Not surprisingly, this can happen to business in the software licensing and support space during times of significant growth. I've seen it time and again. The Sales Group purchases a big data analytics software package to that its salespeople can gain insight into their customers, while at the same time, marketing is purchasing the same software to help understand the larger marketplace. Eventually, companies find themselves with a disorganized mess of licenses and support agreements that are duplicitous, or worse yet, not being used. But that's okay, because the company is hungry and it wants to innovate and use every tool it can get it's hands on to try and improve it's bottom line.

However, when  the inevitable downturn that occurs in every business at one point or another arrives, management is now like Seinfeld looking at the check. "Who ordered all this stuff?" More importantly, how do we optimize what we have, shed unneeded licensing and support, and rightsize our technology?

Here's an overview of some best practices when rightsizing software and support:

1) Know what you own

Start pulling contracts. Look at the number of licenses the organization has purchased and understand how the structure of the agreement. Were perpetual licenses purchased or were the licenses purchased on a subscription basis? Look to see if there is a clause that allows the company to sell back some or all of the licenses. Also understand the underlying software support agreements that are in place. Those can cost upwards of 25-35% of the yearly cost of a license subscription.

2) Validate your findings with leadership

Once you've learned how many licenses you have, you need to approach management to learn how many of those licenses are being used. This is important on a couple of levels. For one, it will inform the organization as to whether or not they are in compliance with the terms and conditions of the licensing agreement. Secondly, it will allow to you have all of the facts on hand when it is time to go back to the software company and negotiate a better contract for the licensing needs you need today. Finally, it will allow the business to understand how it's current licensing agreements may affect future IT related projects. For example, IT may expect to save money by transitioning from an in-house data center to a outsourced cloud infrastructure, but existing license and support agreements may not allow for that to happen right away.

3) Begin optimizing your licenses

This is the most difficult task primarily because a deep dive into license rights needs to be completed and rarely are two license agreements ever alike, even within the same software vendor, (We're looking at you, IBM). This must be done however as the software account representatives tend to be less than forthcoming when explaining licensing terms and conditions (if they even understand it)

Another, easier way to optimize licensing is to remind IT staff to mine active licenses when decommissioning servers. This is particularly important when the organization is paying for licensing and support on a processor basis.

Software rightsizing and optimization is a very complicated subject and this blog post only scratches the surface of everything that goes into helping an organization reduce costs and run more efficiently. If you would like to learn more about this topic, Source One has great Spend Analysis, Benchmarking, and Contracting and Negotiations teams that can guide you through the path to rightsizing your organization's software licensing and support needs.