November 2015
Jack in the Box, Taco Bell and General Mills go cage free

The phrase "sustainable practices" has become commonplace in many industries. Consumers are increasingly seeking out ethical sourcing practices when making purchases. Whether it is food, clothing or makeup, people want to know what kind of labor was used to create the product. Were any animals harmed during the process? Could any of the labor be considered inhumane?

When it comes to the food sector, industry leaders are hearing these consumer demands loud and clear. In response, many leading fast food chains have pledged to make the switch to cage-free eggs. The latest companies to join the move are Taco Bell, Jack in the Box and General Mills. These new commitment statements follow similar promises from powerhouses such as McDonald's, Starbucks and Chipotle.

Taco Bell takes the plunge
Earlier this month Taco Bell announced its plan to become completely cage free by December 31, 2016 in a company statement. The business owns over 6,000 restaurants in the U.S. The rapid switch to cage-free products will undoubtedly be a challenge. While many other companies have set out 10-year plans, Taco Bell has committed to making the same move in a year flat.

According to the statement, Taco Bell is expecting to be the first fast food restaurant to execute the switch. The company also noted that this change will help benefit around 500,000 hens annually.

Taco Bell's announcement is an interesting development considering recent criticism. The fast food powerhouse, owned by Yum! Brands, was subject to questions when it came to sustainable practices as of late, reported The Washington Post.

"When you look at the major fast food brands, Taco Bell really stands out,"  explained U.S. Director of Compassion in World Farming Leah Garces, according to The Washington Post. "They're the only big player in the United States that doesn't have plans to change how it sources its food."

The source credited this in part to the restaurant's low pricing points. A switch to sustainable supply chain practices should cause price bumps that would be unwelcome by consumers.

Clearly, Taco Bell has taken the criticism and flipped the switch. Now, the company stands to be an industry leader with its quick turnaround time. Taco Bell's statement largely credits this to its sturdy supply chain relationships.

"Delivering a sustainable and safe egg supply to Taco Bell restaurants nationwide in one year is possible due to the brand's large yet flexible infrastructure, and years of close collaboration with our partners," said Taco Bell's Chief Food Innovation Officer Liz Matthews.

Jack in the Box and General Mills make moves
While the timelines for Jack in the Box and General Mills are about 10 years longer, the moves towards cage free eggs are still notable achievements in the world of sustainability.

Jack in the Box released a company statement outlining its projected goals. In a combined effort with leading industry groups and supply chain management, Jack in the Box aims to have a majority of its locations serving cage-free eggs by 2020, with a full transition by 2025.

The company stresses that while it is not directly responsible for the upbringing or processing of animals, it has clear standards for suppliers throughout the supply chain. All relevant parties must adhere to industry and government regulations regarding animal welfare.

General Mills has projected a similar timeline. While the company did commit to cage-free eggs in July, it was only in early November that General Mills specified a date, reported Fortune. The company aims to be 100 percent cage-free in all U.S. products by 2025.

General Mills also committed to keeping a clean supply chain across the broad, with promises regarding restricted antibiotic use and humane treatment of all animals.

Source One Round Up: November 27, 2015 

Here's a look at where Source One experts have been featured this week!


Key Factors in Successful Client Management 
Without a doubt, every client engagement is unique. There are some that make your job a breeze and others that make you want to tear your hair out. However, both ultimately want the same thing: successful project/ program completion. This week, Source One's Senior Project Analyst Vishal Sheth share's his client management experience, providing 4 key tips  for making client management smoother. 

AT&T announces plans to improve supply chain sustainability

In today's business environment, it's essential for companies to harness strategies and technologies that ensure their operations facilitate long-term growth and success.

Last week, AT&T announced future plans for significantly reducing its carbon footprint and moving toward greener management practices, emphasizing a specific focus on transforming supply chain sustainability. The company's goals were explained in its recently published white paper, "Connect to Good: Roadmap to 2025."

Improving efficiency through measurable goals
"Connect to Good represents our company's vision of using the power of our network to build a better tomorrow," AT&T Senior Vice President Charlene Lake said in the statement. "Our technology will guide us as we work with our employees, customers, suppliers and communities to fulfill our goals."

The white paper indicated that the telecommunications company intends to establish itself as an industry leader in sustainability metrics, sourcing and performance.

AT&T's citizenship and sustainability strategy implies  that, by amplifying the use of innovative technologies, it will be able to improve network efficiency, create low-carbon customer solutions and enhance supply chain technology with strategic suppliers.

"We want to work with other companies and experts to create a methodology for measurement, especially regarding our carbon savings goal," Jenny Robertson, AT&T's director of sustainability, told Sustainable Brands. "We are looking to make an impact beyond our own company. That's part of why it's a long-term goal, and an exciting challenge since nothing like it exists yet. We also know that a methodology built on industry expertise and stakeholder consensus is more meaningful than what we can produce on our own. It helps ensure apples-to-apples measurements and fosters collaboration."

Strategic solutions for sustainable operations
According to its report, AT&T already uses an annual Sustainability Scorecard to evaluate suppliers on environment and social factors. In 2014, the average score was over 70 percent, which the company said it plans to exceed by at least 10 percent in 2017.

In an effort to cut greenhouse gas emissions, AT&T will work with strategic suppliers that have already initiated sustainable practices. It will also base at least 80 percent of its sourcing decisions on sustainability performance metrics.

The company's white paper explained that these goals were fueled by findings from the Global e-Sustainability Initiative's SMARTer2030 report, which proposed that the use of information and communications technology could reduce carbon emissions by 20 percent.

Additional long-term goals mentioned by the white paper included requiring the AT&T fleet to use alternative-fuel vehicles, increasing customers' access to technology, closely tracking, monitoring and measuring performances, and collecting and recycling more than 20 million devices by 2020.

PepsiCo eliminates global procurement department from supply chain

In the ever-evolving world of manufacturing and distribution, companies must consistently monitor supply chains to maximize efficiencies and increase ROI.

Sometimes this means re-strategizing, which is exactly what PepsiCo is doing.

The elimination of procurement professionals
In an effort to improve its operating model and processes, the company recently announced it has let its global procurement team go, which consisted of about 12 team members, some of whom have been placed in other departments, Advertising Age magazine reported.

"We continue to evolve our operating model to be more efficient and effective," a PepsiCo representative told the magazine. "These changes are made with careful consideration and are necessary for us to stay competitive while meeting the future needs of our business. Unfortunately, as a result of these changes, some positions have been impacted. These are never easy decisions but we are committed to supporting affected employees by offering severance packages and comprehensive career transition support."

Of course, laying off procurement professionals does not translate to the removal of procurement processes altogether. According to Ad Age, the company's brand executives will now be responsible for handling the wide range of agency services, including media buying, direct mail and sponsorship. 

According to Spend Matters, PepsiCo's procurement division only needed to add 0.1 percent in value to the company's over $2 billion annual marketing allowance.

The place of procurement in future supply chains
PepsiCo just celebrated 50 years in business this month, and is the parent company of several well-known brands, including Pepsi, Tropicana, Mountain Dew, Quaker, Gatorade and Doritos. As one of the most established leaders in the market, its decision to rid the supply chain of any designated procurement team may influence other companies' approach to in the future handling of procurement operations.

By centralizing the marketing procurement department, companies are able to streamline operations in a way that increases effectiveness and efficiency. The reason for this is because brand executives "are closer to the consumer and allows them to more quickly balance cost value and quality in all of their decisions," explained a non-PepsiCo executive to Ad Age.

However, after surveying 148 members, the Association National Advertisers recently found that 68 percent of participants did not think the elimination of procurement departments would be a long-term solution for companies.

The participants indicated that procurement teams possess distinct value with specific capabilities, and that procurement processes are too substantial to be absorbed by marketing divisions.

Nestle admits to supply chain problems

Nestle took a bold step and announced the concerning findings of an independent study of the company's supply chain practices in Thailand, reported The Associated Press. The investigation found that some fish that ends up in their Fancy Feast products is the result of forced labor.

The investigation began at the tail end of 2014, according to the source. Around the same time, reports from the AP "tied brutal and largely unregulated working conditions to their shrimp, prawn and Purina-brand pet foods."

Apparently, many of the laborers come from poorer areas such as Myanmar and Cambodia, upon arrival they are charged a fee to work and then are trapped into working off unreasonable payments, explained the AP.

Proposed solutions
In response to the findings Nestle has proposed a plan for 2016 to address these supply chain issues.

"As we've said consistently, forced labor and human rights abuses have no place in our supply chain," Nestle's Executive Vice President in charge of operations Magdi Batato said in a written statement, according to AP. "Nestle believes that by working with suppliers we can make a positive difference to the sourcing of ingredients."

Undercurrent News reported on the six-page action plan released by Nestle this week. Titled "Responsible Sourcing of Seafood - Thailand," the plan sets out to include new requirements for supplier relationship from the start.

Logistically, that will include things like training initiatives for workers and their boat captains. Nestle is also planning to launch a human rights campaign in the country and create an emergency response team to deal with reported abuses.

"This should include ongoing monitoring of business partners' supply chain management systems by independent third party assessments and identification of risks and issues to be addressed," the action plan states, according to Undercurrent News.

The backbone of these initiatives will be transparency. The company plans to release annual reports regarding progress on these new plans.

A wider reaching problem
The independent study was conducted by a non-profit organization called Verite. The company interviewed over 100 people involved in the process. From site supervisors to boat owners, as well as 80 workers from Myanmar and Cambodia, the interviews revealed deplorable working conditions.

"Sometimes, the net is too heavy and workers get pulled into the water and just disappear. When someone dies, he gets thrown into the water," one Burmese worker told the nonprofit organization Verite commissioned by Nestle, reported AP.

The nonprofit noted that the problems with Thailand working conditions are not limited to Nestle's supply chain. In fact, all workers in the Thailand seafood sector are susceptible to abuses and any companies that source fish from this region face the same problems as Nestle.

Nestle is being applauded for its move towards self-disclosure. While many industries claim to monitor supply chain issues, few are quick to share unfavorable findings, explained the source.

"It's unusual and exemplary. The propensity of the PR and legal departments of companies is not to 'fess up, not to even say they are carefully looking into a problem for fear that they will get hit with lawsuits," said President of the nonprofit Freedom House Mark Lagon, according to AP.

The disclosure does come in the face of lawsuits against the company. Late this summer, Nestle was handed a class-action lawsuit from consumers who had purchased Fancy Feast cat food products. The suit cited an AP report that linked the product to slave labor.

Whatever the reason for Nestle's public disclosure of supply chain issues, the company is taking some noble steps towards fixing supply chain practices for the better. It will be no surprise if more major industry leaders follow suit.

Pfizer proposes $160 billion merger with Allergan

Another merger is topping headlines, this time in the health care industry. Last week pharmaceutical powerhouse Pfizer announced a $160 billion merger with Allergan, reported Healthcare Finance News.

The deal is still pending approval but if it goes through, it will go down as the largest merger of all time in the health care sector. The company's executive offices will move over to Ireland in what is being pegged as a tax-saving inversion deal, explained the source.

Pfizer is set to pay over $360 per share for every Allergan share. Pfizer is best known for its production of Viagra, an erectile dysfunction pill; whereas Allergan is best known for Botox.

"The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better," said Brent Saunders, Allergan CEO, according to Healthcare Finance News. "This bold action is the next chapter in the successful transformation of Allergan allowing us to operate with greater resources at a much bigger scale."

New company roles
USA Today noted that the combined company would have a projected $25 billion in cash flow by the start of 2018. The new company will be renamed Pfizer and would be set to trade under the PFE ticker at the New York Stock Exchange.

The merger allows the new combo company to preserve Allergan's Irish legal and tax residency. Global operations are set to be based in New York. Current CEO and Chairman of Pfizer Ian Read will keep both titles in the new business and current Allergan CEO Brent Saunders will become president and chief operating officer at Pfizer, reported USA Today.

The company's board of directors will retain all 11 of Pfizer's current directors and four current directors at Allergan will be brought on board.

Regulation road bumps
The agreement will almost certainly face some intense scrutiny from U.S. and European regulators, noted USA Today. Moreover, shareholders for both companies will need to vote to agree on the transaction. Despite these obstacles, company heads are projecting the deal to go through by the end of 2016.

The deal comes at a shaky time for tax inversions in the U.S. Less than a week ago the Obama administration pointed a renewed attack on corporate tax inversions. The Pfizer-Allergan deal is undoubtedly guilty of some form of these tactics.

USA Today defines tax inversions as "transactions in which a U.S. company reincorporates in a lower tax nation in a bid to cut its future tax bills while it's leaving domestic operations in place."

Healthcare Finance News explained that U.S. federal regulators may have a hard time blocking the deal. The merger has been structured to make it appear as if Allergan, based in Ireland, is buying out Pfizer, based in the U.S.

Where regulators may see tax inversion red flags, others may see a beneficial marriage of two pharmaceutical powers. The two companies claim to be pursuing the merger in order to pioneer new developments in the health care realm.

"Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry," said Pfizer CEO Ian Read, according to the source.

Supply chain heads for both companies should be ready for some serious reconfiguration if the deal breaks through. The two pharmaceutical leaders will undoubtedly consolidate resources in search of improved spend management, making the new combination company an even bigger force to be reckoned with in the health care industry.

New research lab reveals Internet influence on supply chains

The Internet and technological advancements that have been introduced over the past decade have transformed nearly all facets of business, including supply chain operations.

Though it will likely be years before we know exactly what long-term effects these technologies have on supply chain processes, two Arizona State University professors have already started the process.

Elliot Rabinovich and Dale S. Rogers recently created the Internet-Edge Supply Chain Lab to closely examine the relationship between the Internet of Things and various programs, operations and systems. According to its website, the research consortium aims to analyze and assess Internet and digital technologies as they relate to supply chain management, with a specific focus on e-commerce, social consumer behavior and omnichannel retailing.

The influence of e-commerce business and supply chain management
The digitalization of today's business environment has made it possible for people to acquire virtually any product, good or service from the comfort of their homes. While this is ideal for consumers, it presents a distinct set of obstacles for companies.

Internet technologies offer many benefits to business operations, including faster and easier access to essential data and information, increased levels of transparency and insight, as well as expedited delivery times. However, it has also made it necessary for companies to adjust their supply chain processes.

As Rabinovich recently pointed out in W.P. Carey magazine, customers are no longer bystanders; they are now actively involved in the supply chain. The final stage used to be getting a product into stores. Now the final stage is about getting it delivered directly to the consumer's home and efficiently handling return processes.

In the magazine feature, Rabinovich also noted that the level of sociability allowed by the Internet has played a prominent role in matching supply and demand process. Instead of interacting with retail store employees, consumers now make buying decisions from their own home or office, heavily influenced by online reviews and other online shoppers.

The rise of e-commerce also emphasizes the importance of seamless omnichannel retail purchasing experiences, which Rabinovich said is one of the researchers main focus areas, specifically the execution of shipping and fulfillment processes.

Consumers expect a consistent and fluid experience between platforms, from retail and online stores to mobile and desktop applications. And this is not just with business-to-customer transactions, since 86 percent of B2B organizations now offer online shopping directly through their websites, according to a recent Accenture report.

The use of digital devices for data tracking and measuring
With the prevalence of Internet and digital technologies also comes a heavy influx of data. To ensure efficiency, companies must be strategic in their data and tracking analysis. Smart devices provide unprecedented capabilities for tracking and measuring supply chain processes, which is especially important when it comes to inventory management.

"Inventory records at stores generally don't reflect accurately the actual inventory of the stores because store environments are very complex," Rabinovich explained to the magazine. "Customers come and go. They grab products and misplace them. They are not controlled environments, so inventory records tend to be inaccurate."

Digital instruments now allow companies to not only see how much of a product is being bought, but how much of the product is actually being used, how often, and in what way.

The Terra Technology 2015 Forecast Benchmark Study recently revealed 82 percent of the 187 percent greater amount of new products introduced in the past five years have been terminated.

Technological advancements have provided more ways to design, develop and create new products. However, entirely new and innovative items hitting the market can also present complications because it is often difficult to forecast the supply and demand of such products. 

In my most recent blog post, Social Media shaping thefuture of Marketing, I talked about how social media can help businesses reach their target audience. Social media is influencing both consumers and businesses. Herein lies the concept of consumerization of IT. “Consumerization of IT is a phrase used to describe the cycle of information technology emerging in the consumer market, then spreading to business and government organizations, largely because employees are using the popular ‘consumer market’ technologies and devices at home and then introducing them in the workplace” ( Consumerization of IT refers to the use of consumers’ electronics such as iPhones and tablets at work, as well as online services such as data storage, web mail, and social media. It is driven by employees who buy their own devices, use their personal online service accounts, install their own apps and connect to the corporate network with that device.

The label IT consumerization has been around since at least 2005 when Gartner Inc. stated that consumerization would be the most significant trend affecting IT in the next 10 years. Gartner traced the trend to the doc-com collapse, when IT budgets shrank and many IT vendors shifted focus to bigger consumer IT markets. This resulted in the way technology enters the marketplace. In the past, as with the desktop computer, new technology flowed from business to consumer, however, now the flow has been reversed and the consumer market often receives and buys the newest technology before the enterprise.

Consumerization of IT affects all companies no matter the industry and it affects all aspects of work, not just social media. Because of the way that technology enters the market, employees are often first to purchase the latest and greatest technology. For example, you may see some employees buying the latest smart watch, tablet, or iPhone, while the company itself is still utilizing older devices. With people spending a large amount of time on these newer devices, they come to expect certain functionality on enterprise applications. For example, they expect applications to be more streamlined, easy to use, and good to look at. This means that companies are then influenced by their employees, the consumers, to adapt the functionality of these IT systems, making them more similar in look, feel, and design to those in the market.

According to the IDG Enterprise press release last year, the proliferation of personal devices being used for work purposes has required the majority of organizations (82%) to make changes. The benefit of consumerization of IT is that it puts pressure on the organization to maintain a policy of innovation. When you have users constantly demanding the newest technology, organizations are forced to innovate.

There is a universal expectation that both enterprise IT applications and all digital marketing output have a similar look, feel, and design. With more organizations adopting the BYOD (Bring your own device) policies, continual adaptation to the technology trends is required. Some companies may be the innovators of digital design, but others need to be aware of the trend to keep up. Source One is well versed in these technology trends and we can help you evaluate whether or not your organization is innovating with consumer technology trends.
New report reveals Apple Inc. has greenest supply chain in China

The 2015 Corporate Information Transparency Index report recently revealed Apple Inc. has the greenest supply chain management practices in China. CITI analyzed the supply chain operations of 167 brands to determine the environmental impact of each, and examined how willing each seemed to be in making movements toward more sustainable operations.

The Institute of Public and Environmental Affairs and the Natural Resources Defense Canal collaborated to create the CITI annual evaluation, first published in July 2014.

Apple received a higher score than it did last year, tallying a record-setting 72 points.  Coming in second and third were Adidas and H&M, with other major brands occupying the top 10 spots, including Levi's, Marks & Spencer, Panasonic, Microsoft and Walmart.

The index evaluation offers a comprehensive look into which brands and companies have shown promising proficiency in green management practices throughout their facilities in China. The evaluation also aims to help companies identify and resolve wasteful operations along supply chains. Brands are assessed in five main categories, including how inquiry responses are handled, the level of public transparency and data disclosure, recycling programs and supplier screening.

Apple's green practices and sustainable supply chain
Last month, after finishing a 40-megawatt solar project in Sichuan Province that generates more electricity than is used by all Apple offices and retail stores throughout the country, Apple announced its operations are now entirely carbon neutral in China.

"Climate change is one of the great challenges of our time, and the time for action is now," Apple CEO Tim Cook explained. "The transition to a new green economy requires innovation, ambition and purpose. We believe passionately in leaving the world better than we found it and hope that many other suppliers, partners and other companies join us in this important effort."

The results of this report shed a much-needed positive light on Apple's progression. In the past few years the company has faced an array of issues regarding its operations and processes in China.

In 2012, Apple was widely criticized for its factories' labor conditions in China, particularly the ones handling iPhone assembly, The New York Times reported. According to a recent study by University of California, Berkley, an approximated 1.6 million deaths in the country are attributed to air pollution every year. Apple's efforts to integrate green management into its supply chain exemplify the company's adamant attempts to improve conditions and take significant strides toward being a more sustainable and eco-friendly operation.

Green procurement processes
In addition to claiming the No. 1 spot for green supply chain operations, Apple is the top company in the IT industry, highlighting the fact that it is the only one in this category to implement green management practices such as a centralized water treatment system, the report indicated.

Although they may not have ranked at the top of the list, there are still some brands in particular that have shown significant efforts to initiate and implement green procurement processes. It also noted that the IT and textile industries are making considerable efforts to work together to integrate processes and share suppliers, with the hopes of reducing the impact supply chains have on the environment.

Marriott-Starwood merger focuses on supply chain consolidation

Marriott has announced it will buy Starwood in a $12.2 billion deal that will create the world's largest hotel chain, reported Reuters.

The deal would create a hospitality-industry powerhouse with over 5,500 combined locations. Marriott, whose hotels have struggled to establish an international presence in the past will be greatly aided by Starwood's presence in European, Latin American and Asian markets, noted Reuters.

The deal comes during a time of increasing popularity for Airbnb, an apartment-sharing business that allows homeowners to rent out rooms in their houses for travelers. The merger will reportedly help the hotel giants better compete, explained the source.

Analysts doubt that there will be anti-trust objections to the hotel deal. The combination of the two hospitality giants will still only account for fewer than 20 percent of all hotel rooms in the U.S.

In total, Starwood will be in possession of a little over 35 percent of the new company. However, Marriott will add three of Starwood's members onto the Marriott board of executives upon the closing of the deal, according to Reuters.

Arne Sorenson will continue his role as president and CEO of Marriott with the hotel's headquarters in Bethesda, Maryland, reported The New York Times.

Reasoning and supply chain effects
This is not the first merger for Starwood in recent history. Just last month, Starwood's time-share business, Vistana Signature Experiences, merged with Interval Leisure Group, according to NYT.

Moving forward, Marriot will have to keep a close eye on Starwood's Sheraton hotel chain. NYT reported that this branch of hotels has been a pain point for the Starwood brand in recent years. JMP securities analyst Robert LaFleur noted that the Sheraton brand was a major catalyst for Starwood's review process.

This newest merger comes at a time of increased consolidation in the hotel industry and online travel spaces, explained USA Today.

"The online travel reservations operators have been consolidating as well,'' said Kellner Capital Research Director Scott Kim, according to the source.  "So as online travel aggregators get larger, I think the suppliers, which are namely the hotel operators and reservation systems, really have to try and get larger as well to keep some balance of power in negotiations. So it's really consolidation along the whole supply chain.''

The source also pointed out that the merger is less about rebranding efforts and more about consolidating practices among the two hotel industry supply chains.

Starwood owns major hotel chains like Westin Hotels, Four Points by Sheraton and Sheraton Hotels. Marriot brings The Ritz-Carlton, Courtyard and Renaissance Hotels into the mix. The combination of these hotels' suppliers, distributors and other supply chain sources could be key in terms of cost reduction and overall supply chain management.

"The announcement of this acquisition continues the consolidation trend in the travel industry, it is unlikely that it stops here," said Euromonitor International's Travel Analyst Wouter Geerts, reported by NYT.

If Geerts' predictions ring true, this could mean big news for supply chains across the globe. Consolidation will become the name of the game and supply chains will have to readjust accordingly.

Source One Round Up: November 20, 2015 

Here's a look at where Source One experts have been featured this week!


Marketing: It's Time to Give Procurement a Seat
Of the many trends occurring in marketing and advertising, none compared to tremendous number of agency reviews. However, an agency review isn't a decision made overnight and stems from the need to drive further value from the client-agency relationship.Enter the role of procurement. This week Source One's Marketing pundit and Project Analyst Peter Portanova explains why marketing and procurement need to work together to get the most bang for a company's marketing bucks. These two departments don't need to be enemies and Peter breaks down how both core competencies can be leveraged for an impactful win. 

General Mills vows cuts in supply chain emissions

In early September General Mills announced a pledge to reduce company greenhouse gas emissions by 2025 to 28 percent of 2010 levels, reported Environmental Leader. This is not the first set of strides toward sustainability by the business. Since 2005, General Mills has committed to focusing on its overall emissions and has largely succeeded. In the past ten years the business' emissions have been reduced by 13 percent.

"We know our greatest impact is outside our four walls particularly in agriculture, ingredients and packaging," said Chairman and CEO of General Mills Ken Powell, according to the source. "To reduce emission levels, we must work across our value chain with growers, suppliers, customers and industry partners."

The company plans to continue efforts toward supply chain emissions cuts in the future. Environmental Leader listed General Mills' plan for the next 10 years.

  • Make $100 billion more in investments towards clean and efficient energy.
  • Continue to seek out partners to help with a speedy transition to sustainable farming practices. This effort will be specifically focused on creating climate-proof soils.
  • Improve packaging measures in a sustainable fashion.
  • Support farmers throughout the supply chain in their paths towards climate resiliency.

General Mills focuses on global impact
These measures have great potential to make an impact on sustainability. General Mills' supply chain is far-reaching. The company is a world leader in manufacturing with major foods falling under the company name, from Haagen-Dazs to Yoplait, reported The Climate Group.

The business' decision to make the move toward a more sustainable commitment arose for a few different reasons. First, General Mills saw a clear opportunity to help improve global conditions. The sheer size of the business and its supply chains allows the company to take big steps towards cutting down global greenhouse emission rates, explained the source.

Second, General Mills has been able to save money via these supply chain measures. Transfiguring supply chain production techniques to accommodate more sustainable practices has the added bonus of increasing efficiency and creating overall cost reductions for many companies.

"Since we've been on this journey, we've saved money," said John Church in an interview with The Climate Group. "When you look at an entire value chain, there is the opportunity to apply only the right amount of inputs to reduce waste - waste that, inevitably, leads to greenhouse gases generation."

Lastly, the marketing power of taking a supply chain down a greener path is a smart move for any company. A recent study by Nielsen found that 55 percent of consumers are willing to take on price increases to ensure a business is committed to positive environmental impacts.

"Consumers around the world are saying loud and clear that a brand's social purpose is among the factors that influence purchase decisions," said Nielsen's Global Leader of Public Development and Sustainability Amy Fenton.

Whichever way you slice it, this move by General Mills will have major impacts on supply chain practices and can be considered a big win for the green movement.

Anyone working in the supply chain industry knows what MRO stands for: Maintenance, Repair and Overhaul. MRO can be applied to a wide range of industries, from small products to bigger ones, like aircraft. As explained in a previous post: The Aeronautical Industry: ready fortake-off!, the aeronautical MRO market is experiencing booming growth due to an increasing number of passengers. Airline companies have to closely follow manufacturers’ instructions and comply with standards defined by national and international authorities, with the sole goal of continuously increasing flight safety and ensuring better flight quality for the passengers. Yet, most airlines companies’ clients know little about how MRO contributes largely into making planes the safest way to travel today, what it entails to, and how much it costs.

Aeronautical MRO can be categorized in 4 branches: Engines, Line Maintenance (including any unscheduled maintenance due to unforeseen events, scheduled checks as described above, maintenance on en route aircraft, etc.), components repair and spare parts inventory, and heavy maintenance & modification. Each of these categories vary in necessary allocation of resources. For example, maintenance operation performed on engines (representing the current biggest cost segment of the 4 MRO categories) requires more material than Line Maintenance, which requires mostly man power. Also, MRO operations are performed either in-house, by the airline companies’ personnel, or out-sourced to certified sub-contractors, raising the question: what MRO services are outsourced and to what extent?

As described in a previous blog post and in studies from IATA, the contract maintenance industry is continuously growing. Reaching 65% of the total direct maintenance spend for airline companies in 2013, it is predicted to continue to grow in the near future. While line maintenance is commonly performed in-house, airline companies tend to outsource heavy maintenance and overhauls operations, as these operations require more sophisticated equipment and more experienced personnel. Smaller startup airlines, for which investing in associated capital expenditure (equipment, personnel and training, etc.) is not feasible, are particularly interested in outsourcing such services. Moreover, heavy maintenance along with spare part management are areas where airlines companies have often identified potential for cost-savings if out-sourced, as repair stations offer efficient and attractive solution to such services.

So, who can perform maintenance operation on planes, and what is typically done during these operations? MRO in the aeronautical industry involves multiple actors. Airline companies are responsible for maintaining and repairing their crafts, while manufacturers are tasked with providing their clients with a complete set of documentation and maintenance and repair instructions. Only personnel authorized by the national airworthiness authorities (the Federal Aviation Administration (FAA) in the United States) can perform and validate maintenance tasks, following a strict maintenance plan defined by the manufacturers and to be completed every specified hours of flight or cycle (a cycle is one takeoff/landing).

So, what is an aircraft MRO operation? Most of the manufacturers require their products to undergo regular testing, or “checks,” usually categorized as A, B, C or D. While the A, B and C checks usually refer to Maintenance operations, D checks refer more to heavy maintenance and overhaul operations. Indeed, the D check requires the aircraft to be immobilized for several weeks or months, depending on the type of aircraft and its associated total flight hours, and involves partially dismantling the aircraft to inspect and repair, if needed, every single component. 

Outsourcing MRO operations in the aeronautical industry is not a simple task. Airline companies’ challenged to maintain their aircrafts’ airworthiness while reducing the associated costs. Selecting and managing subcontractors capable of providing MRO services in alignment with international regulations and company objectives require resources, internal or external, such as strategic sourcing firms, to be done correctly.
Despite production problems, Apple Inc. estimated to sell 2.5M iPad Pros

The iPad Pro, Apple's latest tablet, has received mixed reviews since its official launch last week.

In a research note to investors recently obtained by blog Apple Insider, KGI Securities analyst Ming-Chi Kuo revealed the iPad Pro production process has run into some problems. However, despite supply chain issues, the company is still expected to sell an estimated 2.4 million to 2.6 million units in the fourth quarter of 2015.

Apple's manufacturing and production issues
The two main issues with the device, designed with the intention of incorporating both tablet and notebook features, are with the display and Apple Pencil accessory.

According to Business Finance News, Sharp, the sole supplier for iPad Pro high-resolution display panels, is having trouble keeping pace with production demand for the 12.9-inch screens. Samsung is expected to offer some assistance to help increase production, though it likely won't be until later in the quarter.

The second issue Kuo noted is the manufacturing of the Apple Pencil accessory, which has an intricate building process, Apple Insider reported. Considering the novelty of this product, supply and assembly issues are more or less to be expected, with inefficiencies likely to improve over time.

The current setbacks involved in the Apple Pencil production process should not drastically influence the overall estimated sale units of the iPad Pro, since the Pencil is sold separately for $99.

However, this is not the first issue the Apple Pencil has presented. According to OppTrends, when the stylus accessory was first released several weeks ago, demand was high but supply was limited - resulting in shipping time estimates of four to six weeks.

iPad Pro estimated sales for 2016
Though the sale unit estimates for the fourth quarter may be hindered by production complications, the numbers likely reflect the inflation of sales expected for the holiday season.

Kuo noted that he expects estimated sales in the first quarter of 2016 to drop to 2.1 million to 2.3 million units, according to Apple Insider.

If this research note is correct, Apple iPad Pro suppliers include: TSMC as the sole manufacturer of all A9X processors, Parade for all display time controllers, GIS for 75 percent of LCM and touch modules, Radiant for the iPad Pro backlights, and Foxconn leading the overall supply chain process. 

Allocating one supplier to handle the majority, if not all, of each assembly component is risky - an issue exemplified by Apple's lacking screen supply from Sharp.

Another factor that may impact overall sales this coming year is the increasingly competitive market share, with major companies such as Microsoft and Samsung offering similar products.

According to the Good Technology Mobile Index Report, while iOS still leads the market share, claiming 72 percent of all mobile device activations, Android and Windows have made significant gains in the tablet marketplace.

In the first quarter of 2015, Windows and Microsoft tablets experienced a jump from 1 to 4 percent in activations, and Android has doubled its market share since 2014, the report revealed.

Right now there is a wait for customers to receive their iPad Pros. Though people can get the Wi-Fi-only, Silver Edition model for $799 within a few days, even small changes, such as choosing the space gray model or adding additional gigabytes, tack on at least one to two weeks in wait time.

Supply chain trends in the world of engineering and manufacturing

The worlds of engineering and manufacturing are taking a step back to reevaluate supply chain practices. Deutsche Post DHL Group recently released a whitepaper that found the engineering and manufacturing sectors are revamping to better suit future market conditions.

The paper found that supply chain management plays a key role in successful business models. As such, DHL set out to report on supply chain trends that need to and will be integrated into supply chain practices of the future.

Many organizations have already begun this transformation, with an increased focus on becoming more customer-focused and competitive.

"Generally speaking, we expect that supply chain managers will have to deal with even higher complexity in the future", explained President of DHL Engineering and Manufacturing Reg Kenney. "Customers will expect a broader, more customized product portfolio. In combination with shifting growth markets, thus more suppliers, a lack of qualified workforce and new technologies, this will have companies rethink their current supply chain models."

Key trends in engineering and manufacturing supply chains
While DHL released a whitepaper on the matter, its researchers are certainly not the only subject matter experts with opinions on the subject. Engineering and manufacturing is a huge sector. DHL noted that this industry alone accounts for 14 percent of global employment, 17 percent of worldwide GDP and "70 percent of the entire global trade volume stems from manufacturing companies."

As such, we have added some key insights from CIO contributor Raman Mehta, who is a member of the executive management team at East West Industrial Engineering Co Inc. Here are the top six supply chain trends in the engineering and manufacturing industries.

  • Sustainability: According to the DHL whitepaper, today there is more attention than ever paid to stakeholder value. Increasingly, stakeholders are looking to the sustainability practices of companies due to consumer demand for climate-sensitive supply chain practices and sourcing. DHL noted that implementing energy-efficient tactics as well as levels of increased transparency will be a key trend for success within engineering and manufacturing supply chains.
  • Internet of Things (IoT): Both Mehta and DHL point directly to technology when looking to future trends in these supply chains. Mehta explained that IoT can help companies and their supply chains on a variety of levels, from predictive features that map out customer demand to real-time visibility of product and service. "In a global supply chain, strategic deployment of IoT technologies can improve asset utilization, customer service, working capital deployment, waste reduction and sustainability," argued Mehta. DHL echoed this notion, noting that utilizing IoT will help companies stay competitive by helping with supply chain management on every level.
  • Resilience: DHL takes climate change and it's volatile consequences into consideration when looking forward.  Engineering and manufacturing companies and their supply chains will need to become more durable. This will require ample levels of disaster planning with an emphasis on strategic sourcing. E&M companies should be well-equipped to handle sudden disruptions in supply chain functions.
  • Strategically-distributed manufacturing: Mehta noted that there have been many discussions surrounding sourcing methods. Should E&M companies partake in strategic outsourcing for manufacturing needs or bring the efforts in-house? Mehta says the trend is toward the former. Strategic outsourcing provides companies with a bunch of benefits. From flexibility to cost reduction all the way up to speedier product development, Mehta definitively declared strategically-distributed manufacturing to be the leading inclination.
  • Integrated supply chainsThere will be a future trend toward more integrated supply chains, argued the DHL whitepaper. Companies should look to closely analyze supply chain data in order to better connect the chains from end to end. By doing this, businesses would see an improvement in collaboration processes across different stages of production and distribution.
  • Additive Manufacturing (AM): Mehta described this trend as a potential game-changer for the world of manufacturing. AM allows businesses to make objects from 3D model data. The process involves layering where materials are joined together. This differs from traditional methods because it adds to existing structures to create the desired shapes as opposed to subtracting. The AM process generally produces less waste and allows for the use of less material, explained Mehta. The trend toward this process could mean more efficient manufacturing, both in terms of finances and production techniques.
AB InBev-SABMiller merger could result in major cost reductions

Anheuser-Busch InBev announced the completion of its merger with SABMiller earlier this month. The deal will cost AB InBev a reported $106 billion, according to The New York Times. The merger will have major impacts on the beer industry as well as the two supply chains. The two companies combined will have a reported annual revenue of around $64 billion, explained the source.

The joining of the two beer powerhouses is said to also have much to do with AB InBev's ambitions of becoming a "truly global brewer," reported NYT. The merger will give the company new footholds in Africa and a considerably larger dominance in Latin American countries.

Regulation concerns
There has been much speculation regarding reactions from U.S. regulators, considering the deal would make the new company responsible for a large chunk of worldwide beer sales. The New York Times estimated AB InBev would now have a hold on about 30 percent of revenue in the beer industry.

SABMiller was a step ahead of these worries, however. The company sold its 59 percent stake in U.S. MillerCoors to Molson Coors Brewer. The two companies were joint venture partners for MillerCoors beer products. SABMiller has sold its stakes for around $12 billion, noted the source.

Global rights to the Miller brand were handed over to MillerCoors through this deal. Now, Molson Coors stands as the second-largest brewer in the U.S.

Despite this concession, there is still speculation about whether or not the merger will get the green light from regulators. If the merger does not get the approval stamp, AB InBev will be forced to pay SABMiller a $3 billion fee, according to The Times.

Cost reduction and supply chain consolidation
While the deal (and its potential penalties) will cost AB InBev a pretty penny, the beer company stands to save a considerable amount due to supply chain consolidation. Spend Management contributor Paul Snell reported that the merger is expected to amount in over $2 billion in savings for the companies.

Of these savings, procurement and engineering will make up 20 percent. This will be consist of resourcing from raw materials, consolidated packaging efforts and a complete reengineering process, explained Snell.

Efficiencies in brewing and distribution methods are set to make up most of the cost reduction. Improvements in bottling and shipping, as well as reduced energy and water use will make up around a quarter of company savings.

The consolidation of supply chain practices, sourcing and overall efforts will provide new opportunities for improved supply chain procedures.

"AB InBev believes that by pooling its resources and expertise, the combined group would also make a greater and more positive impact on the communities in which we live and work, by providing opportunities all along the supply chain and aspiring to the highest standards of corporate social responsibility," said the company in a statement, according to Spend Management.

Before the official merger announcement was made, SABMiller had reported $221 million in savings in 2015. The company projected savings of up to $430 million in 2016 by way of increasing spend management and centralizing procurement team efforts, explained Snell.

As procurement and supply chain professionals in 2015, we’re seeing something develop that was long overdue for our industry. We’re seeing companies starting to understand the value of the procurement, and more importantly the strategic sourcing and supplier relationship management roles within their organizations. As such, in almost every single industry; we’re seeing a HUGE demand for talented strategic sourcing professionals.

Businesses of all types and all sizes are starting to understand that strategic sourcing professionals can have as much, or more, of an impact to the bottom line than even their top sales people can bring. Businesses are starting to get that supply chain has risk, and the right professionals can mitigate risks (which minimizes profit loss). Those same professionals can ensure a fair price for a good product or service, and ultimately can drive meaningful savings to the bottom line. Aligning with the right suppliers can also help increase efficiency, and in some cases, launch new products; which both help the bottom line. A lot of global manufacturers have known this forever, but now mid-market and smaller companies are getting on-board the procurement band-wagon; and it’s every industry trying to improve their procurement and sourcing talent. Okay, arguably the Government isn’t doing much in this regard (even if they like to pretend they are); they really need a ground-up overhaul.

So procurement is important. Management is starting to understand why the word “strategic” is attached to strategic sourcing. The sacred cows of Marketing, IT, Engineering, and HR are actually now asking sourcing groups for help. Yet, one thing I hear from Strategic Sourcing managers almost universally; “I don’t have the resources to support them”. These sourcing groups are being tasked with getting involved in strategic decisions for the business, yet they don’t have the people to get it done.

Worse, when they put in the request for a sourcing professional the HR department comes back with a salary range that is in alignment with a classical “purchasing” function. They are assigning tactical salaries to strategic positions. To make it worse, the industry is hot, and the more progressive companies are out their poaching the talent from smaller and mid-market companies left and right. Let’s face it, if you are a talented sourcing professional, in this market, you can write your meal-ticket to just about anywhere. Progressive companies understand that a moderately high salary is easily offset by the results a good sourcing professional will bring to the table.

But, I continue to see job postings, and field “sourcing contractor” requests from companies that have ridiculously antiquated salary expectations. I saw one today (which spurred this post), from a decent size company, that wanted someone that is bilingual, with 15 years of sourcing experience in engineered products, legal, travel and marketing; in the Philadelphia market (a very hot market) that would work on a 1099 contract position for 1 year at the whopping upper limit of $35.00/hr. Note, this is a 1099 position without benefits or paid time off. So assuming the person works the full year, they’d be lucky to net around $45K per year after the expenses associated with being self-employed kick in.

Wake up Management and HR. The “strategic” sourcing positions that need to be filled in your company are not good fits for tactical people. And tactical people will be the only ones replying to your requests for contractors and full-time positions when you are only paying tactical salaries. Most companies wouldn’t hesitate to pay a premium for a top sales person. That’s why commissions work. You don’t really care if you have to pay a salesperson $20K more if they bring in another $200K of profit. So why will you not pay a sourcing professional $20K more to save $200K annually? Good sourcing professionals can do that, and so much more.
Boeing drops GKN PLC as a supplier

Boeing has fired GKN PLC as a supplier of a key component in the new 737 MAX jetliner, reported Reuters. The move is not expected to affect the anticipated arrival date in early 2017.

The company also assured consumers that the new aircraft will be in the air by 2016, despite the hiccup in the production process. Boeing dropped GKN PLC largely due to a design change around the engine and a fear the supplier would not be able to produce the new models fast enough, explained the Seattle Times.

The design switch involved the inner wall of the plane's thrust reverser. The change was executed in order to decrease the diameter of the 737's engine pod. With the original design, the plane had very little ground clearance, explained the source.

Reuters noted that while GKN has been dropped for this part of the production process, it is still on board for several other key parts of the new jetliner.

"We made this decision to ensure we have a product that is not only maintainable and reliable but is producible at the high production rates of the 737 program," Boeing's spokesman said in a statement, according to Reuters.

Increased demand
Supply chain managers will be feeling the heat as Boeing has also announced its intentions to increase its assembly line production. The 737 assembly lines will be expected to churn out 47 jets per month in 2017, with an even bigger increase in 2018 to 52 jets, noted The Seattle Times.

According to the Boeing website, Jet Airways placed an order for 75 737 MAX airplanes during the Dubai air show in early November. This is the largest order in the history of Jet Airways, India's leading international airline.

"Incorporating the latest design and technology features, the highly efficient 737 MAX will allow us to drive our operational efficiency and reaffirms our commitment to providing a best-in-class full service travel experience to our guests," said Chairman of Jet Airways Naresh Goyal in the Boeing statement.

The deal also sets aside the potential for 50 additional aircraft requests in the future. The pressure for production could have played a role in Boeing's decision to drop GKN as a supplier for the newly designed parts.

While the first 30 to 40 jetliners will still include the GKN-made titanium parts, future models will include the new supplier's materials. GKN refused to comment on its failure to deliver at Boeing's desired speed, according to The Seattle Times.

Source One Round Up: November 13,2015 

Here's a look at where Source One experts have been featured this week!

Making Heads and Tail of Telecom Tail-End Spend
Telecom spend can quickly get out of hand. With constant organizational shifts, how often can you say your company takes the time to review spend and take cost cutting action? You know, like getting down to the nitty-gritty of checking individual phone lines to learn which are still connected? For most companies, the answer is: Not often. As a result, telecom costs quickly spiral out of control. Rather than putting off your laundry list of category management responsibilities, Source One's Ken Gaul explains how to find the right partner to help you achieve your cost savings goals.

Special Thank You to everyone who attended Source’s Chicago Office Opening Happy Hour and Networking Event last month. It was an absolute pleasure to celebrate such a milestone in Source One’s history with both long-time friends and fresh faces. While the Cubs World Series loss did have the city in a somber mood, that didn’t stop attendees from making the most out of the evening, enjoying great food at company at the Fadó Irish Pub and Grill.

Guests representing a variety of companies such as Motorola, Blue Cross Blue Shield, and PSAV took advantage of the opportunity to network without the pressure of a sales pitch or presentation. But that didn’t mean the procurement professionals couldn’t talk shop. A common topic was the emerging focus on supplier relationship management, which has been in demand for Source One in recent years. Starting out in finance due to regulatory pressure, SRM is quickly expanding to other industries to drive further value from procurement endeavors, such as pharma.

After both an informative and entertaining evening, Source One extends a warm thank you to those who helped make it a success. We look forward to our continued growth in the Windy City!

On November 12, AdAge broke a story concerning the elimination of a centralized marketing procurement team. In a move seen as many within the agency space as a major victory for advertisers, the story has quickly become convoluted, making it difficult to truly understand PepsiCo’s actions, and their broader implications on marketing procurement.

To summarize, PepsiCo had a dedicated marketing procurement team of 12 people that were responsible for overseeing agency compensation for the many individual PepsiCo brands. Few would disagree that marketing and advertising are incredibly fast moving industries, and that decisions can sometimes be hindered through a bureaucratic process. In an effort to reduce the corporate layers responsible for managing and approving marketing decisions, PepsiCo is also electing not to employ a dedicated procurement professional in each brand, and will have each brand manage the process uniquely.

The value of marketing procurement is often questioned. Advertisers and marketers alike remain unsure of the value presented by a seemingly cost-conscious department.  However, the financial downturn of 2008 underpins the importance of procurement, with and ISBA survey stating that 33% of marketing professionals genuinely believed their departments were not efficient with their spend, and that they wanted to achieve greater value. Furthermore, another study by the World Federation of Advertisers in 2014 found that 51% of their respondents simply handed off negotiations and implementing to their procurement teams.

PepsiCo is not making a broad statement concerning the value of procurement in marketing. Rather, they are simply acknowledging that the two departments work differently and that forcing them to work harmoniously proved incredibly difficult. Instead of bringing two fundamentally different organizations together, PepsiCo is allowing their brands to make their purchasing decisions, and is trusting these teams to identify cross-functional employees capable of being marketing-minded and procurement-conscious.

The move to eliminate this centralized department is logical on behalf of PepsiCo. In an effort to build a lean and agile organization, any potential bottlenecks must be eliminated, and by switching the responsible to the individual brands, corporate PepsiCo is no longer housing an additional layer. While the long-term implications of their decision will be closely watched, PepsiCo is charging its brands with the difficult responsibility of negotiating.

While bringing in a marketing individual to make these negotiations provides an additional strategic layer, a well-staffed and experienced procurement team would also provide that lens. Marketers will have to become more comfortable with tough negotiations, and be forced to justify their decisions as more than just cost cutting to achieve best-in-class contracts.

In a far more critical report, MediaPost proclaims PepsiCo has “seen the light,” and that “agencies rejoice.” This article does little more than proclaim that procurement is nothing more than a bureaucratic layer that provides no utility, and that search firms are also irrelevant at this time. The article is critical of taking any responsibility away from internal marketing departments, and claims that outside organizations complicate the matter, equating the agency selection process to “second-grade math.” The article makes a single valuable point questioning the value of an external player involved in the process, but neglects to understand that PepsiCo’s marketing department was engrained in the agency relationship. Both procurement and marketing fall under the same umbrella, which is PepsiCo. The organizational objectives for both departments should have been exactly the same, and if they were not, that is more of a management issue than a capabilities mismatch.

Today is not a day to celebrate, as MediaPost claims. Today, and many days to come, are a time to watch and understand the implications of choosing to place procurement responsibilities with each brand. Procurement is valuable, and those who disagree hold a pre-conceived notion that procurement is only concerned with cost savings, and does not understand marketing. Marketing is volatile and fluid, and while I agree more layers are not the answer to fixing problems, charging individuals unfamiliar with procurement processes may not have the intended consequences.

Supplemental Information was also taken from an article by The Drum
Last week marked a highly successful ProcureCon Pharma 2015 hosted by Worldwide Business Research. The main conference took place over two days consisting of all things pharma sourcing related. Day One, themed Structuring Relationships for Maximum Competitiveness, consisted of a loaded agenda focused on strategies for developing strategic cross-functional relationships between procurement and other stakeholders. Reinforcing that theme, Source One’s VP of Professional Services, Joe Payne presented an Innovation Spotlight: Procurement Reality Check.

During the presentation, Payne challenged traditional measures by which Procurement demonstrates value, and how they structure their teams to deliver that value. While many pharma companies choose to outsource certain procurement responsibilities, such as accounts payable and IT functions to boost daily in-house efficiencies, managing and ensuring that outsources functions are managed properly can be challenging. With the constant pressure for pharma procurement departments to adhere to regulatory and compliance guidelines effectively and efficiently, now and in the future there will be a constant push to drive the most value from outsourced functions. Meaning, now more than ever, there is a need to develop strong protocol around outsourced responsibilities and manage outsourced procurement teams in alignment with internal goals and timelines. The solution, Payne explains, starts with understanding your procurement department maturity and selecting a partner that suits your needs, keeping in mind both short-term needs and long-term goals.

Procurement departments are shifting, gearing away from historically tactical roles and serving companies at a strategic level. With that said, achieving cost savings is no longer the sole goal of these critical organizations. Instead, procurement departments are bringing together cross-functional teams to achieve company-wide goals. As such, there are countless other metrics aside from savings that procurement can be measured on; for example retention, training and CE. Measuring your procurement organization on items outside of savings creates motivation and ability to better track how these departments are impacting your organization beyond just cost avoidance. Just as important as setting new metrics is getting the right talent.

Progressive procurement leaders realize that to truly become trusted advisors, their value proposition must be clearly stated, understood, and executed across the enterprise.A 2015 Panel of CPOs, said that organizations must have not only top-notch negotiators and commodity experts, but also the right amount of technical resources to effectively and proactively manage work with engineering, suppliers, R&D, and other key cross-functional teams to deliver the best supplier value.

All these elements considered, knowing the maturity level of your procurement organization is the first step to determining the right course of action for your outsourcing needs. And, while traditional molds of outsourcing dictate tactical tasks be handed over to third parties, more and more organizations are realizing the benefits of alternative options, such as seeking the support of category experts and strategic thinkers to drive further value from procurement initiatives.

In addition to the presentation, Source One engaged countless industry leaders from pharmaceutical companies such as Celgene, Janssen, AstraZeneca, Bristol Myers Squibb, and Roche to discuss industry trends and insights. Source One’s experts enjoyed the opportunity to network with other procurement professionals, participate in workshops, and listen to guest speakers. The informative event helped shed further light into the challenges pharma procurement professionals face, as well as provided strategies for navigating these difficulties to enhance strategic sourcing and procurement departments’ impact.
It is common for business professionals to think of procurement simply as a game of price. To some extent they are correct; any good sourcing initiative will feature unit-cost negotiations that ultimately lead to price reductions and hard-dollar savings. However, to get the most out of your procurement efforts, you should go beyond the dollars and cents to also add implicit value to your company’s supply-chain. A well-rounded sourcing project will address procurement strategies and fundamental supply-chain properties, including Supplier Relationships, Predictability, and Sustainability.

Supplier Relationships:
When sourcing a strategic spend category, identify suppliers with whom your company can form mutually-beneficial, and in some cases long-lasting, relationships.  Collaboration is absolutely essential to optimizing your procurement processes. First of all, this will help ensure that all agreements are honored and upheld by both parties. Furthermore, symbiotic relationships foster continual progress and improvement, so you can truly get the most out of your supply-chain. Purchase goods and services from reliable vendors that you can trust. Ultimately, by connecting with the most dependable and responsive suppliers, you will be able to add long-term value to your company.
Tip:  Communication is key! The best suppliers will always be transparent because they have nothing to hide; they know that they offer high-quality products, reasonable prices, and good customer service. So, by engaging in meaningful, dynamic discussion with all your incumbent and alternate sellers, you can quickly identify the best of the best, while weeding out those who fall short.

A comprehensive sourcing initiative should work to enhance supply-chain predictability through dynamic forecasting. This will make for a lean and efficient procurement operation that uncovers hidden value for your business.  When buyers and sellers are not on the same page about demand and usage schedules, you will often see surpluses and shortages which can have dire consequences to your operational efficiency and your bottom line.  Too often, purchasers over-commit to volumes to secure low prices. While the intention of reducing hard-dollar cost was well-founded, the agreed-upon terms actually expose the buyer to compounding risk as they begin to pay for over-utilization of storage space.  However, if you can communicate accurate demand forecasts to your suppliers, you will ultimately achieve increased value and further savings.
Tip:  Accurate market and usage data is absolutely necessary for predicting demand and developing a sound procurement plan. Software and other tools are available to help you collect and organize this data. Once you have access to this valuable information, you can leverage it to make informed supply-chain decisions.

Promoting ethical procurement practices is another great way to add intangible value to your company’s supply-chain. Believe it or not, in the modern economy, sustainability and profitability often have a positive relationship. Consumers increasingly insist that companies act in a socially and environmentally responsible manner, especially when it comes to procurement. They are willing to spend a premium on goods and services that were manufactured ethically. Therefore, when conducting a sourcing project, it is essential to balance cost-reduction with sustainability. While you may be able to achieve low unit costs by exploiting cheap labor or harmful materials, you could ultimately lose out when consumers opt for a competing product that was manufactured more ethically.  Therefore, by emphasizing sustainability and social responsibility in the sourcing process, you can boost the value of your corporation.
Tip:  It is important to hold your suppliers accountable for their actions. This can be done in a variety of ways, including creating sustainability guidelines or even incentivizing ethical behavior. If you constantly demand responsible practices from your vendors, your customers will take note.

All in all, to truly maximize your sourcing potential, you must work to add implicit value to your supply-chain, on top of explicit savings. Intangible improvements can be achieved by emphasizing relationships, predictability, ethics, and more. If you take your procurement efforts to the next level, you will find that your company flourishes in the long-run.