March 2016
The past year has seen more and more air freight carriers attempting to address concern over surcharges in varying ways. Weight-based fuel and security surcharges are a headache to track and shrouded with just enough mystery to leave the nagging doubt that adjustments only ever reflect the market in an upward direction, with none of the savings shared when conditions are favorable (such as a sustained decrease in oil prices, for instance). Transparency and simplicity are the longed-for goals of all who deal with surcharges.

Lufthansa Cargo and SWISS Air proposed a new solution last fall, with October marking the start of a change to their previous price structure – A combining of the fuel and security surcharges into one lower weight-based fee called the airfreight surcharge. The lower cost may sound exciting at first, but the carrier went on to clarify in their announcement to customers that even though “ the surcharge level will be decreased, the change in the pricing structure will subsequently lead to a re-aligned and increased net rate that will reflect the value of our service in an adequate way.” Ultimately the total cost would remain the same and the change represented more of a redefinition of what those funds were for.  Lufthansa highlighted one of the main benefits of the restructuring as reduced complexity that will lead to faster processing on their end. 

This seems to be Lufthansa’s answer to the clamoring for a switch to all-inclusive freight rates. Per a statement by SWISS Cargo’s Chief Cargo Officer, Oliver Evans, the new surcharge is where we should see the influence of those uncontrollable external factors that sometimes require adjustments to pricing “in a more transparent way”. He asserted that this “would not have been the case with an all-in rate, which both airlines reviewed in detail.” Earlier in 2015, carriers like Emirates and Qatar Airways made the decision to adopt such pricing models that would roll the surcharges and the regular freight rate up into a single rate. The general hope has been that eliminating the separate surcharges entirely will lead to more stable pricing overall and, if adopted by more carriers, easier comparisons between companies.

Lufthansa’s decision was a bit of a wrench in those spokes as they now present a third option and it remains to be seen if any other carriers will follow their lead or perhaps even try to come up with their own solutions. Alaska Air Cargo, at least, has since come down on the side of all-in rates, implementing their own single rate program at the start of March. Will any of these models increase customer satisfaction, though? None of the new options truly guarantee the transparency so desired by shippers and freight forwarders alike so it is undeniably a good thing if carriers continue trying to respond to customer concerns. In the meantime, however, increased diversity amongst available pricing structures will likely only contribute to the headaches of those trying to validate pricing across multiple carriers.

Is one method better than the other? Hopefully time will tell. How should these changes factor in to your air freight decisions? All-in rates and combined surcharges may give you fewer numbers to look at, but in either case it is essential to know where the numbers came from, particularly while this growing trend of restructuring continues. Rather than waiting for the carriers to implement glacial reform across the board, be sure to do your own thorough cost analysis to determine what will truly work best for your company. Negotiation is still your best route to savings. Prepare yourself with an understanding of all costs involved so that you will be able to recognize the charges that are not going to budge and focus on making up the difference elsewhere. 

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With the rise of social media, today’s businesses are able to access more information about their customers than ever before.  People are constantly blogging, commenting, and tweeting their opinions to the public.  Though most of this information is topical, these posts are retrievable by companies through data mining, and can be converted into useful information through a variety of analytical techniques.  Data mining can give a company insight into how the public views them, and in turn can be used to develop business strategy.  The data mining of social media websites keeps companies active in the conversations regarding their products and services without having to be the ones directly asking the questions.  It is a form of market research that is not dependent on prompts and, therefore, limits the response bias associated with surveying and other traditional forms of market research. Traditional forms of market research oftentimes can not yield the same results as companies who use this specific data mining technique centered around the abundance of social media and publicly available information.

For many companies, a presence on social media is seen only as a way to market products, and establish relationships with current and potential customers.  Through the use of data mining, however, social media can be used to analyze the market for trends and opportunities.  Some websites, such as Twitter, encourage users to use hashtags to emphasize key words and phrases.  When sifting through large data sets (such as a live Twitter feed) these hashtags make it easy to pick out important words.  Businesses can see which key words and phrases are used in combination with the name of the company or individual products in order to analyze the opinions of their customers.  A common way to visualize this text data is through a word cloud, which makes frequently used words larger than less common words as a way of determining relevance.

Although there is a plethora of information that can be obtained through social media, much of it is irrelevant to business decisions.  The challenge with big data is transforming it into usable information; trends in public opinion can be determined through different types of data analysis. Through sentiment analysis, which involves ranking key words according to positive or negative connotation, a company can decipher how people feel about their products and services.  This allows a company to find areas for improvement and other opportunities. For example searching for the word "terrible" when used in the same text string as the company name can be used to aggregate negative information about your company which can then be used to determine solutions to solve grievances.  Location analysis can be used to look for regional trends by looking at the location data associates with bits of information. For example if your company runs a location analysis for where people are talking about your product and allocating marketing dollars to that region to reach more consumers  Moreover, these and other techniques can be used to look for successes and weaknesses in the business strategy of competitors.
Implementing a supplier transition is always challenging especially within the MRO space. Plant and warehouse managers who are happy with their incumbent suppliers generally have little incentive to gain. Sourcing and procurement can present all the cost savings figures they want but this means little to them as it is not typically something which they are measured on. The current supplier provides them with the items they need in a timely fashion, provides value added services and offers training free of charge. Most importantly there have not been any significant issues throughout the relationship. Their question is why risk damaging a good thing? The rebuttal is simple. How do you not know if something is better if you are unwilling to try it?

Of course, with every transition you must evaluate the associated risk. If the risk outweighs the long term benefit the transition is not worth undertaking. But if the savings are substantial, and the quality of the product or service exceed current standards, ultimately achieving an overall lower total cost of ownership it’s time to discuss supplier transition. The major roadblock here can be overcoming an unwilling plant manager. They may not see the long term benefit or have little skin in the game. They fear that the transition will ultimately create more work for them especially if it doesn’t go smoothly. So how do organizations overcome this challenge and gain buy-in?

Within some organizations this happens inherently. Companies with employee stock ownership plans tend to create an atmosphere where all employees care about the bottom line since it has a direct performance on the stock which they own. As long as the message is clear that dollars saved translate directly to bottom line revenue employees generally are much more cost conscious. However, with the majority of organizations this is not the case. Some companies I have seen have bonuses tied to savings goals for plant and warehouse managers. Others have a budget for their associated department. If cost are being cut there becomes extra room in the budget to work on other projects, replace dated equipment or create a better work environment. These types of environments tend to create increased engagement from stakeholders especially when it concerns a potential supplier transition that reduces total cost of ownership.

In some cases, the initiative is driven top down and senior management pushes the change without associated buy in. This tends to create friction not only between corporate and the plants but also between the plants and the new supplier. The plants will take even the slightest opportunity to make the new supplier look bad or make life difficult for them just to prove corporate wrong. Resentment such as this is easily created when plant managers and employees are forced to do something they don’t want to do.  It’s imperative the right steps are taken to alleviate any concerns the plants and end users may have with the new supplier. Be transparent and involve them in the beginning of the process, listen to what they have to say and gather their opinions. Ask them to help you shape the KPIs and have input in the contracting process. The more you get their buy-in to the process the more likely the supplier transition will be a success. 
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Companies with long-standing supplier relationships should be evaluated on a few key factors including an evaluation of cost, overall performance, quality of the product and service, and their ability to demonstrate strategies or offer solutions that will have a positive impact. As part of a regular evaluation process, suppliers should also be getting feedback from the client to help continue to make the relationship successful.

Outside of the regular evaluation process, there may be times where factors such as changes in the economy or mergers and acquisitions require a company to evaluate their supplier relationships and determine where potential opportunities exist to demonstrate cost savings and optimize their supply chain. When clients are specifically requesting their long-standing suppliers to identify hard dollar savings because of these factors, we have found that suppliers provide responses in a few different ways. It’s interesting to see how some long-term suppliers value their client relationships and their business when they are posed with this task.

There are suppliers that can tell a great story about their relationship but never get down to the details of presenting an actual plan of real, hard dollar cost savings. Suppliers selling their value and using it as a deflector to drive cost reduction in the products and services that they are providing is not providing a complete solution. Services such as free training, rationalization of parts or products, or evaluating their systems for improvements are offered with an estimate of “cost savings” but can be difficult to quantify as hard dollar savings. These services are valuable and might be considered cost avoidance but when a company specifically asks for savings that can be clearly demonstrated through unit cost reductions, this is not solving the problem. This should not be considered the sole solution to the client. In a long-term supplier relationship, it is expected that these types of programs are already taking place and should be actively presented and utilized.

Then there are the suppliers that do nothing when asked to identify savings. These suppliers are too comfortable in their current state and may feel as though they have the advantage based on a product or service that they provide. It is probably time to consider the type of products and services and the criticality of the supplier relationship and identify potential alternate suppliers and compete the business.

Finally, there are the suppliers that demonstrate their true partnership to a company. They truly engage and find areas where they can help improve the company’s supply chain and demonstrate hard dollar cost savings. These suppliers come to the table with a variety of options which may include: unit cost reductions, improved discount structures, tiered rebate programs or other incentive programs based on their current business. Companies may find that they have the opportunity to drive further business to these partnerships by leveraging additional business whether through company expansion, or by determining if these preferred partners can competitively provide products and services from the suppliers that did not respond to the requests for cost reductions.

Developing preferred supplier partnerships, by engaging on a regular basis and developing metrics to measure the products and services that they are providing, helps to maintain long term relationships, improve the supply chain, and drive savings to the company.

Next discussion: Developing and managing KPIs with suppliers.
Telco vendors are pushing for customers to migrate to VoIP systems and suppliers are promoting VoIP services such as SIP. There are so many benefits and technology enhancements when integrating these services into business processes; so why aren’t companies moving forward?

I have identified some of the opportunities available when making this change and the excuses customers are giving when confronted with the question why they aren’t moving:

Unified communications/consolidation: Companies love the idea of consolidating the various services and programs they use on a daily basis. However, in order to set up and integrate unified communications that accompany most VoIP solutions, employees must be educated about the new technology. This can involve on-site training with all employees which can be very time consuming and costly. Also, since VoIP shares the same infrastructure with a business’s data network, it can inherit all security problems from data network as well as its own security problems coming from new protocols and network components.

Improving internal communications: VoIP is known for enhancing communications within companies that have multiple locations; but this does not happen easily. In order to effectively improve your communications internally there are many infrastructure changes that must occur and each location would require new circuits or a new system that allows locations to speak to one another. Again, adding costs and additional training requirements.

Business continuity: The one thing all businesses depend on most is their phone and internet connectivity. If a business goes down, this can have a significant impact on productivity, revenue, and public image.  With a VoIP solution, the high availability capability does not automatically come with the required technology or service; it needs to be designed in or planned for. Therefore, if you want your VoIP solution to be reliable you must make sure it is properly engineered and implemented along with an accompanying disaster recovery plan.

Cost savings: One of the most attractive reasons businesses chose to switch to a VoIP solution is the cost savings potential through infrastructure reduction, additional voice services and functionality at no cost, and reduction in long distance costs. What about the up-front investment in new systems and resource training? The deployment of necessary equipment is often accompanied by significant CapEx costs in addition to costs for retaining back up services such as extra POTS lines and circuits, as well as other expenses for new software licensing and security measures.

Simplify management: Most businesses hear that by moving their voice services to VoIP, it will simplify management’s requirement to handle everyday challenges that come with running a business and its technology. This may be true eventually, but converging voice and data onto one network might require parallel staffing convergence, which proves challenging to organizations unprepared to share their resources.  Once the merge is complete what happens to employees who managed the voice services? Job security is a major concern for those considering this migration.

Some businesses are extremely enthusiastic about migrating to an innovative and converged solution like SIP but realize there are a lot of unexpected problems that can arise like those discussed above. Others are afraid to take the leap and are simply not ready. Whether you have just installed a new PBX, are locked into a contract, or you believe your company does not need all the features VoIP offers, it is okay to wait. Just make sure when you are ready, you are proactive and understand the total scope of the investment instead of reactive for potential problems and disruptions to your business.
In a previous article I wrote about The Biggest Mistake You Can Make in Managing Your Wide Area Network Budget: waiting too long to negotiate a new agreement. While it's true that time can be the biggest risk factor in managing your wide area network's cost, the are also important levers that can be maximized with the right strategy. The combination of optimizing your timeline and maximizing your leverage with the best practices in this article will help you to ensure the best possible deal you can achieve on your own.

Have a Plan

This may seem a bit trite for some of you, but many organizations truly do not adequately plan their wide area network procurements. Some organizations are more technologically and operationally focused and others simply address the spend on an as needed basis (i.e. when contracts expire). Irrespective, there are some fundamentals that everyone should make sure they understand and are prepared to address. You must know your term, commitments, and your technology road map or WAN future vision. Carriers nowadays often try to get multiple commitment hooks into their customers during the contract process. They want circuit or service commitments, i.e. you will keep a service for a given period of time or else pay an early termination charge. They want a minimum revenue commitment such as a monthly, yearly, or term revenue quota that you must hit or pay a shortfall charge accordingly, and in many cases, they want a mix: you will commit to spend a certain number of dollars for certain services or basket of services throughout the contract period. No matter how successful or unsuccessful you may have been at combating some of these carrier practices during your most recent contract negotiation, you need to be extremely familiar with these commitments and be certain you understand how they may be favorable or unfavorable to you in order to identify and develop your negotiation position.

Minimize Non-contractual Commitments and Integration

Beyond contractual commitments lie more subtle, implicit commitments to your carrier(s) of choice. As you seek to develop your negotiation position, you should be aware of any barriers to changing carriers. Examples would include significant head-end infrastructure builds that would be difficult, costly, and time consuming to replace, heavy network native SIP deployments, or 3rd party integrations (e.g. AWS, Azure, Salesforce, etc.). Of course there are trade-offs -it's much simpler and easier to manage things when there are fewer carriers involved, but you compromise your ability to change carriers so finding a balance is important.

Decrease Loyalty and Introduce Competition

Stemming off of the idea of diversifying where possible/reasonable without unnecessarily complicating your operation, consistently testing your primary incumbent carrier(s) by bidding elements of business is a great way to keep them honest and on their toes. Need to replace or introduce a new Internet circuit? Why not shop around? Need to connect a new location to your private network? Maybe a private line or VPN would suffice instead of an MPLS link. Allowing your incumbent to bid and lose some of these opportunities goes an extremely long way in making them realize your business is not a foregone conclusion.

Leave Yourself Time

If you take only one thing away from this blog it's that you need to leave yourself time. It takes time to develop a plan for a renewal or procurement. It also takes time to develop a future vision for your network. And most of all -and the carriers know this best- it takes a lot of time to rip out and replace what they have installed. The instant you cross the threshold of what can be reasonably accomplished before you come off contract, you lose an incredible amount of leverage in your negotiations.

Bring It Together

Taking advantage of these best practices will undoubtedly yield dividends in your new agreement with your incumbent or an alternate carrier. But don't mistake these ideas as something you do only when you're getting ready to go to market or begin a negotiation. You should be consistently revisiting and managing around these ideas and in doing so, managing and reducing cost will become less painful and yield better, more consistent results then scrambling to catch up each go around. Getting started is the hardest part, for help getting your arms around your spend and developing and executing a sourcing strategy that will result in more robust infrastructure at a lower cost, contact us at
Startup makes first official urban drone delivery in U.S.

There has been a lot of discussion recently about the possibility of drones making deliveries to customers in the future. And it seems that such a reality may not be too far out of reach.

Flirtey, a flying robot startup, recently announced that it has officially made the first residential delivery using an unmanned drone in the U.S. that has been approved by the Federal Aviation Administration, the Associated Press reported. On March 10, in Hawthorne, Nevada, the six-rotor autonomous aerial vehicle traveled approximately half a mile, guided through the pre-programmed route by a GPS. The package, which contained a first-aid kit, food and water, was delivered to an unoccupied home.

Federally approved UAV delivery
"Conducting the first drone delivery in an urban setting is a major achievement, taking us closer to the day that drones make regular deliveries to your front doorstep," Flirtey CEO Matt Sweeney stated.

This is not the only time the flying robot manufacturer made history. The AP also revealed that, in July, Flirtey claimed the first FAA-approved delivery made in a rural setting, which was at a Virginia-based medical facility.

The most recent milestone, which the AP said was recorded to include in an documentary for ABC-TV, signals that other companies may soon be able to accelerate their plans for drone deliveries in the U.S. Although retail giants, such as Amazon and Wal-Mart, have already begun developing unmanned aerial vehicle transportation, the operations have mostly been conducted in other countries.

Safety measures
According to the AP, the FAA has allowed UAVs to be tested in six states, Nevada being one of them, and the agency is currently working with NASA on creating regulations, guidelines and systems that will minimize the safety hazards of the drones. And the fact that Flirtey was able to use the flying robot to deliver a package without incident indicates progress.

"We think the safest way to deliver packages is for the drone to remain at a distance and lower it into the customer's hand," Sweeney told Fortune.

The box was placed on the front porch of the residence, using a rope to lower it down, the source said. In addition, thee drone was being observed and monitored by a pilot on standby in case anything went wrong. Fortunately for Flirtey, and other companies and consumers anticipating the rise of flying robots making deliveries, nothing went wrong.

In this recurring series, the partners and consultants of MRA Global Sourcing share their learnings, observations, and the occasional rant cultivated from years of experience in recruiting and placement for supply management functions.

SCM - Smart Cookie Millennials

For today's musing, we wanted to share a SCM story. We at MRA Global Sourcing have the privilege to get to know hundreds of Supply Management, Sourcing, and Procurement job candidates across every industry and category specialization. As our readers recall from an earlier post, we have met some millennials whose attitudes and behaviors reflect poorly on the whole generation. But as promised, today we'll focus on the flipside - the Smart Cookie Millennial (SCM).

This young lady went from a top tier management consulting firm to an Industry role for a F500 company. It’s a double-promotion that catapulted her to a Manager role with a 25%+ bump in total compensation.  Key here was that she was an extremely passive candidate that had to be courted for an extended period of time before she made the move.  On its merits, it would seem to be a no-brainer because the hiring manager had first made her acquaintance at an external event and remembered her and then solicited our help in wooing and closing her on this potential opportunity. Point is that this young professional did her due diligence and made the move when she was convinced that it would truly advance her career and help her new company as they enhanced their Procurement organization. Kudos to this budding professional Millennial, and may the Supply Management Force be with her!

'Til next time – Save Big and Prosper!

MRA Global 

MRA Global Sourcing is the preeminent firm specializing in recruitment for procurement and strategic sourcing, connecting the best talent with the best opportunities. Visit them on the web to learn more.
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Working closely with each supplier and being as transparent as possible during the sourcing process can mean the difference between a successful initiative and running around in circles.

Depending on the commodity group in question a simple request for quotation (RFQ) can be very successful. We've often seen that for off-the-shelf components suppliers actually prefer this approach. But, any time manufacturing services are concerned or the spend is high in the commodity group a closely managed request for proposal (RFP) has proven to be key.

Working closely with the suppliers means capturing both quality and value added services in a questionnaire and line item pricing in a costed bill of materials. By conducting telephone and in person conversations along with an online platform to distribute documentation a holistic picture of each supplier's offering can be brought into focus. Then, by weighing both service and price in this manner, you can be confident that a long term mutually beneficial relationship can be established between the suppliers and the client. After all it's year over year sustainable cost savings that's the reward you're seeking for your efforts.

In order to capture the true service offering of each supplier during the RFP open communications and transparency has proven to be critical. An NDA between the supplier and client will help alleviate tension and allow the sharing of the technical drawings driving manufacturing projects. In this way, the supplier can understand the full scope of the initiative and feel more comfortable sharing information concerning their supply chain optimization efforts during the RFP.

By not beginning openly and developing a relationship the process can turn quickly into a pricing exercises or reach a point of mutual standoff.

As a result, you may still identify which supplier has the best pricing, but will be unable to qualify the supplier. In other words, is the pricing sustainable, or is there underbidding because there is an eagerness to initially secure the business, with a sharp increase in cost after the initial agreed upon period? More importantly, does the supplier even have the capability to produce a quality product at the necessary volumes?

For Contract Manufacturers (CMs) there is the larger question of who is actually producing the products. Is it the CM contacted, or is it an offshore partner performing the actual manufacturing with the domestic company simply inspecting the products and passing on the costs with a markup.

These concerns will certainly become clear during the implementation phase of the process, but then the initiative will have to be restarted from step one.

Even when conducting an RFP, expectations have to be set up front by being clear about what information is expected. But, expectations should be balanced with an understand that not all suppliers are able to provide a complete set of information initially. And, these incomplete initial responses may have to be weighed before a final and complete costed bill of materials, labor, OH, and markup structure can be considered.

Although, most suppliers will understand that the client will not be able to make a final decision unless all information is shared.

Therefore, the success of the initiative rests on setting expectations at the beginning of the sourcing process, working closely with the supplier that are willing to work with you, and managing to a project plan while being flexible with requirements.
Labor workers concern about port automation technology

Robotic automation processing has been streamlining workflow production in warehouses for years. And while these digital innovations have helped businesses steadily improve supply chain optimization, they have also consistently raised concerns, specifically among factory and other workers. Now, the latest debate about artificial intelligence threatening the job security of United States employees is hitting the transportation industry.

The Wall Street Journal reported that one of the biggest ports in America, the Port of Los Angeles, has begun using robotic technology for cargo handling at its

How cargo robotics work
As explained by the source, these autonomous machines, also known as "straddle carriers," load and unload cargo containers from ships and transport them around the terminal. Using robotic cranes, they are able to pick up loads and bring them to organizing stations to, eventually, be picked up again and loaded onto truck beds.

The machines operate on magnetic grids that are embedded in the pavement and are directed by workers in the terminal office, who are able to control where and what the stacking cranes pick up and where they drop objects, using cameras installed on the cranes.

Peter Stone, a 

Robots raise workforce worries
Although the robots have the power to reduce labor costs and enhance cargo handling efficiency, not everyone is happy about them. Many have argued against free-trade deals in the U.S., arguing that it would limit the job market for American workers and this technology will likely only fuel these fears.

The Atlantic recently revealed that a survey conducted by the Pew Research Center found that the majority, 65 percent, of Americans predict that within the next 50 years, robots will likely handle most of the tasks that humans are responsible for today and, of those worried about their job security, laborers were the most threatened.

Both the West Coast's International Longshore and Warehouse Union have permitted the robotic systems in contracts, but have not come to an agreement about exactly how the automation should be used, according to The Wall Street Journal. International Longshore and Warehouse Union's Local 13 President Bobby Olvera Jr. told the source that it has sought to "ensure there's a future for workers" and define "minimum manning standards."

Another concern is how expensive the technology systems are. The Wall Street Journal revealed that installing the automation in the TraPac terminal will cost about $1 billion to complete in its entirety and the return on investment is still unclear. The source added that union resistance has led to ports in the U.S. being slower to implement the robotic automation systems and that there has been ongoing debate over preserving longshore jobs, since adding positions increases operational expenses.

Terminal automation and labor job market outlook
Although the use of this machine technology could reduce the amount of

Aethon recently pointed out that the President's Council of Economic Advisors annual report has suggested some ways in which the technology can help, not hurt, the conventional workforce in America. For example, it can lead to productivity growth which can provide employees with better education and training, working conditions and even higher wages. By delegating the menial tasks to robotics, laborers can focus on areas of the business that consist of "higher-value work."

The source pointed out that robotic systems should complement, not substitute for, the workforce and that history has not shown any strong correlation between an increase in automation and the loss of worker employment. On the contrary, it has changed the nature of laborers' responsibilities in a way that has resulted in more job opportunities and higher pay.

              When we last left the Office Depot – Staples merger saga, the deal was approved by the European Union and smaller competitor Essendant agreed to a deal to purchase $550 Million in wholesale contracts from Office Depot and Staples in order to keep competition alive within the business to business sphere.  The plot thickens this week as U.S. District Judge Emmet Sullivan knocked the Federal Trade Commission (FTC) for encouraging key witness Prentis Wilson to falsify his testimony.

Prentis Wilson is the Vice President of, a controversial entity throughout the case of this merger.  While the transcripts of the testimony were released to the public on March 24th, much of the document is redacted.  If I were to speculate the nature of the statements, I would assume it is surrounding customers that currently purchase office and breakroom supplies from the online giant.  Throughout the case, Staples and Office Depot have insisted that competition would not be eliminated upon completion of the merger because giants such as also operate as office supply retail outlets.  The FTC’s stance is that they are not a direct competitor, as Amazon typically sells directly to the consumer, not to businesses.  If Amazon can produce testimony that they are indeed strictly a business to consumer market, the FTC’s case against the merger strengthens.  The FTC is denying the claims made by Wilson, however that did not stop share prices for both Office Depot and Staples from rising after the announcement.

              The argument made by Staples is not the first stretch of proof that has been scrutinized by the FTC and antitrust agencies when it comes to the mergers of giants.  As the Rite Aid and Walgreen merger approaches close, the FTC is already rumored to order Walgreens to spinoff 1,000 of the company’s stores, fearing a reduction in competition should too many continue to operate.  The combined store volume of the two companies will exceed competitor and current largest pharmacy retailer CVS.  The argument being presented by Walgreens is that the existing competition far exceeds just CVS.  Walmart, Giant, Jewel-Osco, and other large grocery chains all offer in-store pharmacies, meaning that their share of the market is much less than perceived.  As such, Walgreens expects the deal to close as early as June of this year.  The supply chain risk associated with this deal opposes the risk with the Staples – Office Depot merger.  Upon closing, Walgreens will have full authority over the Rite Aid brand.  This could be bad news for Rite Aid suppliers of both direct and indirect materials as they could be pushed out to optimize spending.  Diametrically, the Walgreens suppliers may experience a boost in business.

              The corporations do not always come out ahead in these monopolistic seeming merger attempts.  Back in 2014, Comcast Corporation’s attempt to acquire Time Warner Cable was withdrawn after it was reported that the U.S. Department of Justice was planning to file an antitrust lawsuit against the cable giant. The fear of content ownership and rising cable prices was criticized not only by the FTC, but also from streaming services such as Netflix and Hulu.

              Competition in the cable sphere may not be protected for long, however.  After the deal disintegrated, Charter Communications announced plans to acquire Time Warner Cable, and the merger is backed by Netflix who negotiated their own perks within the agreement.  The deal may in fact increase the competition for cable providers as Charter will now have to compete in new areas rather than operate primarily where they are the only cable provider.  It also makes them the second largest provider of cable behind Comcast, putting pressure on Comcast to increase performance.   There is concern that the affiliation with Netflix may push Netflix further ahead in the online streaming market, and may hinder the performance of competitors HBO Go and Hulu.

              Regardless of the strict scrutiny set forth by the FTC and antitrust groups, the mergers and acquisitions hit a record volume in 2015 and do not appear to be slowing.  There is a thin line between a merger benefiting the customer or it destroying all sense of competition.  Office Depot and Staples are still cause for concern as concrete proof of competition is still up in the air, however Walgreens and Rite Aid puts pressure on CVS to strive to continue to be a top performer.  How these upcoming mergers handle aligning synergies will be interesting to follow.  Opening up new stores and hiring employees can be expensive, but closing plans and layoffs are expensive too.

Source One's Office Supplies category management experts will be at ISM2016, where Source One is the exclusive sponsor of the Exec IN forum. Want to save on registration costs to attend this landmark event? Learn more over at SourceOneInc.Com. 
Global supply chains see growth in operational risks

Risk mitigation planning has continued to become a primary focus for supply chain leaders. However, safeguarding operations against potential threats is becoming increasingly difficult, with no signs of it getting easier anytime soon.

The Load Star recently reported that research conducted by the British Standards Institute revealed that disruptions last year, attributed to everything from harsh weather conditions to criminal activity, cost global supply chains a total of $56 billion.

Non-economic disruptions threatening supply chains 
The source added that some of the disturbances were due to cargo theft and, although FreightWatch International explained it is hard to get a definitive number of these crimes, BSI released a global intelligence report that said that $22.6 billion was lost internationally.

Furthermore, there has been an increase in trucking and vehicle robberies in regions within South Africa and China, with thieves now targeting both high- and low-value goods. The Load Star pointed out that criminals are becoming more sophisticated in their schemes. Although Europe has not suffered the same rising rates of theft as other regions across the globe, it has experienced trade disruptions from migration issues and terrorist attacks. Damages from natural disasters, such as floods throughout the United States and Indonesian forest fires, resulted in businesses losing $33 billion globally.

"Companies are facing an increasingly wide range of challenges to their supply chain, from human rights issues to acts of violent theft and natural disasters," BSI Global Intelligence Program Manager Jim Yarbrough said, according to the source. "Such complexity creates extreme levels of risk for organizations, both directly affecting the bottom line but perhaps more seriously, hidden threats to the supply chain which, if ignored, could do serious harm to a company's hard-earned reputation."

Consumer confidence impacted by business uncertainty  
These were not the only findings recently published that highlight the extreme operational risk facing supply chains today. The Chartered Institute of Procurement and Supply Risk Index found that last year's fourth quarter marked a continued incline of global threats, Material Handling and Logistics reported.

What is especially noteworthy about this trend is that the majority of recent disruptions were not attributed to economic shifts. Oana Aristide, a Dun & Bradstreet executive, explained to the source that although terrorist attacks and refugee crises may not cause direct damage to business operations, they impact consumer and investor relations.

So what makes the “Request For Proposal” process so special these days? The answer is simple: not a whole lot. Which in my profession is almost a wrenching statement. Over the last few years I’ve witnessed many strategic sourcing projects supported by all kinds of RFPs and their variants, “Quotation”, or “Pricing” (RFQ), or simply “Information” (RFI), and truthfully only a handful of those bidder evaluation mechanisms have proven to really effective.

In an effort for sourcing departments to vet more suppliers more quickly, and for the suppliers to be able to respond to more opportunities, both buyers and sellers have affected a massive standardization of questions, terms and responses. It may have made the process more efficient by itself, but it has not only turned the RFP process unexciting, it has rendered it ineffective.  Through the RFP, a solicitor should present an opportunity and the bidder should respond with a creative solution given its capabilities - in other words, developing a true business case uniquely drafted to address the opportunity at hand. What it really is (in most cases) is very different from this: solicitors ask a lot questions that won’t address their needs because they are either too generic or so specific that are impossible to address satisfactorily; and bidders respond with boiler plate responses to questions they’ve seen over and over.

I find that the market has been inoculated against the true purpose of RFPs, and it strikes me that suppliers are offering to provide RFP templates to the organization claiming to provide all “relevant” questions that need to be asked. I mean, how can a supplier know exactly what questions I need to ask, without even knowing what I need? That is not to say that structure and content isn’t helpful to achieve an adequate flow, or that guidelines can’t be provided to nurture the thought process; but let’s not fool ourselves, the main purpose of these template RFPs is to help bidders present winning responses to prefabricated questions. Where’s the strategic value on all this? Why waste everyone’s time on an exercise like this when I could simply ask bidders to provide me with their FAQs?

I know this sounds like an exaggeration, but the matter of fact is that I see a lot of companies running RFPs for the sake of complying with their 3 bid process requirement, and I see suppliers presenting the same responses to the same questions to everyone; then making the selection of a true business partner either more difficult and time consuming – with subsequent rounds, revisions, and complex negotiations, or just too naïve and unproductive.  

We need to get back to the purpose of an RFP as the first step in developing a relationship with a new services provider, or in re-evaluating an existing relationship – in both cases the goal being to create stronger partnerships. When viewed from this angle, it naturally means that RFPs must be approached analytically and strategically. After all, this is a Proposal request, not a FAQ request. By definition, a proposal should be the resulting recommendation to a specific need, based on capabilities resources or expertise; to this purpose, an RFP must define a need and an RFP response must present a solution that solves that need and adds value - a positive return over investment.  Though this is a much more challenging approach to the typical RFP process, it is the only one that nurtures success, true delivery, and a long-term business partnership.

Keep in mind that Supplier Relationship Management (SRM) begins with the supplier selection process; and the RFP is the first filter at which point delivery performance metrics must be established, qualitative commitments defined, and true value, not just competitive pricing, presented. In short, don’t think in terms of responses, but instead of proposals that can be measured from an ROI perspective. A properly managed RFP process will then aid in identifying candidates that are not only culturally aligned but strategically synergized. As a participant, true proposals should defy the status quo, presenting creative solutions to common problems and innovation to new ones.

Think about it, as a solicitor, when was the last time you conducted a comprehensive RFP that produced a true strategic relationship… or as a bidder, when was the last time you presented a demonstrable ROI-driven proposal, not just a response? The RFP process can be a powerful engine, a success driver, and a business enabler; but it can also be a waste of time if you approach it as “business as usual.”

Source One's RFP administration experts will be at ISM2016, where Source One is the exclusive sponsor of the Exec IN forum. Want to save on registration costs to attend this landmark event? Learn more over at SourceOneInc.Com. 

Source One Round Up: March 25, 2016

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


Sales vs. Procurement: Who wins control over your next sourcing initiative? 
This week Source One's Project Analyst Brian Seipel explores the relationship between sales and procurement. While for many companies, the relationship between the two can be described as "okay-but-not-great', Seipel explains the benefits of aligning the two functions for making better purchasing decisions.

Why you should transition your business to VoIP
Voice over Internet Protocol (VoIP) is quickly replacing landlines as the new standard for phone communication. VoIP is the delivery of voice communications over IP networks. Cost-effective and easy to use, many organizations are making the switch. Source One's telecommunications cost-reduction expert Jackie Palantino explores these, and other reasons why your organization should consider transitioning to VoIP. 

Source One has teamed up with the Institute for Supply Management (ISM) as a Diamond Sponsor for their upcoming annual conference, ISM2016, taking place in Indianapolis from May 15th -18th. The conference offers a unique opportunity to network and collaborate with more than 2,500 procurement and global supply chain professionals. The conference features keynote speakers, Alan Mulally, former President and CEO of Ford Motor Company, and Susan Cain, author of the bestselling book: The Power of Introverts in a World That Can’t Stop Talking.

Continuing our Countdown to ISM2016 Podcast Series, this week Project Analysts Brian Seipel and Nicole Mahaffey team up to take a look at the reasons why suppliers aren't responding to your RFP. Despite your best efforts to develop a comprehensive RFP to fully assess suppliers' capabilities, there can be a few red flags that can send a supplier running from your RFP. Mahaffey and Seipel explain these fatal flaws within your RFP and the steps to take to ensure suppliers stay engaged throughout your cost-reduction initiative. 

Whether you are experiencing problems with your current agency, or if you think you have a good relationship with your agency and are getting a good deal, it is beneficial to conduct an agency review. While we realize that agency relationships are important, it is also crucial to assess agency capabilities as well. In fact, about 61% of large companies choose an agency because they became aware of them through a colleague, but this does not mean that the agency was assessed thoroughly.

An agency review allows you to assess the current state of the existing relationship with an agency, as well as the options in the market, with the potential to source a new agency or revisit the existing contract with the incumbent agency. And while you might think large companies assess these relationships frequently, it’s daunting to think that only 41% of clients conduct an agency review every 2 or 3 years.

Agency reviews can be used to assess cultural fit, agency capabilities, agency costs, and technology, among numerous other aspects of the relationship. The American Association of Advertising Agencies reported that approximately 650 agency reviews are conducted annually. By conducting an agency review, your company can gain clarity into scope of work, the ability to negotiate terms, access to cutting edge technologies, improve KPIs, increase cost savings, gather insight into the market, or even the leverage needed to negotiate with an incumbent agency. Companies are realizing that there is added value from conducting an agency review, even if it is just to verify that you are receiving quality products and services from an incumbent agency. 

Source One has experience conducting numerous agency reviews that not only optimize your marketing budget but also ensure the agency you select is the best-fit for your campaign needs. 
We understand the crucial role marketing firms play for an organization and have developed an approach that strengthens the relationships between our clients' and their agencies. Contact Source One's marketing sourcing experts today, to learn more about how an agency review could be beneficial to your organization. 

On March 11th, Source One’s Leigh Merz had the pleasure of presenting to Temple University’s Economics Society of the career opportunities within supply management consulting. The Temple Economics Society focuses on providing students a better understanding of Economics in business and a forum for discussing areas of interests and future career exploration. Leigh Merz, a Telecommunications Cost Reduction and Administrative Expense Strategic Sourcing expert, shared with students how the Procurement function supports overarching business goals and a look at the role of a project analyst in supporting client engagements.

During the event, students were eager to learn more about Source One. A few of the questions included:

Why do companies work with procurement service providers?
Organizations turn to companies like Source One with the goal of reducing costs and optimizing overall procurement practices. In some cases, a procurement services provider is used to offset the burdens of an organization’s internal procurement infrastructure. This includes, analyzing a company’s spend to identify areas for cost reduction, executing an RFx to identify best fit suppliers, conducting negotiations, and managing supplier relationships.

What gives Source One an advantage relative to its competition?
Specializing in procurement services, Source One combines market intelligence, staffing augmentation, strategic consulting, and software and tools into a dynamic, effective package for clients. Each client receives a customized approach specific to their organizational needs, executed by category experts. Solely focused on procurement, Source One leverages decades of experience to implement strategic sourcing and procurement best practices that optimize our clients’ supply management operations and impact the bottom line.

How does Source One fit into a client’s organization?

Source One provides procurement decision support- serving as an extension to clients’ existing teams. This saves clients time and resources. Our clients receive a suite of on-demand services including: people, processes, tools, subject matter expertise, and market intelligence necessary for decision support- scalable to project needs. In addition, we’re invested in the success of our clients’ cost cutting initiatives. A major component of Source One’s approach is knowledge transfer. At each step of the sourcing process, Source One provides clients with the training and documentation necessary for repeatable success in the future.

Source One enjoyed the opportunity to engage Temple University’s future graduates on the career paths in procurement consulting and looks forward additional speaking events at the college. Source One’s cost-reduction experts are also gearing up and counting down the days until ISM2016, taking place this May in Indianapolis. Source One is the exclusive sponsor of the Exec IN forum, a private event hosting senior-level supply management executives of top organizations to address the challenges and opportunities specific to large supply chain operations. Source One will also be exhibiting and presenting at ISM2016. Attendees are welcome to meet experts from the procurement services firm by stopping by booth #528. Joe Payne, Source One’s VP of Professional Services, will present a session on managing responsibilities and succession planning in an increasingly contingent workforce.
Where (and how) to find top supply SCM talent

Robotic automation processing and other technological innovations have rapidly transformed the way businesses today operate. This digitalization has provided companies with devices, systems and platforms to streamline workflow, enhance visibility and reduce costs. The smart machines are able to take over the menial tasks traditionally handled by humans, and they are able to complete jobs quicker and more accurately then workers would be able to.

Although the widespread adoption of artificial intelligence has provided supply chain management with many benefits, it has also presented some challenges. For example, with the industry advancing and evolving at an unprecedented rate, today's workforce is experiencing a lack of employees equipped with the skill sets need to keep pace with it.

The importance and value of experienced and knowledgeable supply chain leaders were recently highlighted when Amazon sued its former employee and Target's new chief officer of supply chain and logistics, Arthur Valdez, for allegedly violating a non-compete agreement designed to shield confidential insight and information pertaining to the e-commerce giant's operational strategies.

In an article for Supply Chain Brain, Robert Bowman reported that faculty at the Haslam College of Business at the University of Tennessee, Knoxville published a white paper indicating that just about every level of supply chains is seeing a talent gap, one that isn't showing signs of narrowing any time soon. Most executives are aware of the problem, more than 90 percent in fact, and acknowledge the need to improve their ability to attract better supply chain professionals. The big question, though, is how can they do this?

Educating and training from the get-go
One of the paper's co-authors, Shay Scott, told the source that he "believe[s] we're entering into an era where the development of talent strategy is going to be required to go hand in hand with business strategy."

Furthermore, companies should not fall victim to the assumption that onboarding skilled workers is solely a human resources burden or that their respective budgets limit the ability to invest in recruitment and development strategies or the necessity of doing so. Bowman noted that a Deloitte study indicated a disconnect in how various levels of an organization perceive HR department's ability to attract top talent, with more than half of top executives and senior level positions saying they think they are doing a great job and just 28 percent of logistics and supply chain workers sharing the same sentiment.

The UT researchers suggested that one way to fill the gap is for companies to recruit students at the high school level and up. Businesses can offer apprenticeships and internship programs that allow graduates to immerse themselves in the supply chain atmosphere and jump-start their training.

Redefining supply chain and procurement roles
In a separate article, APICS Chief Executive Officer Abe Eshkenazi pointed out to Bowman that there are plenty of academic programs and degrees that emphasize professional development. There are also certifications and higher education classes centered on supply chain management, logistics and procurement practices. However, among those knowledgeable in SCM and operations, there is a lack of understanding regarding how these roles can be lead to executive-level positions.

Spend Matters recently revealed that one way to bridge this gap is, instead of focusing on hiring workers who are skilled in a specific category, restructuring roles to attract talented leaders who can exercise a dynamic range of capabilities, such as "increased business and leadership skills, technological prowess, knowledge of foreign policy and regulations and the ability to handle cross-functional complexity."

Certainly, there is a significant opportunity for business executives to target potential hires at the start of their careers and to promote more education in the field. Similarly, by creating a more cohesive and comprehensive relationship between business goals and supply chain objectives, companies will make it easier for both potential and existing employees to understand the corporate strategy and how their specific roles and responsibilities play a pivotal role in achieving success.

But, there are also more immediate solutions that can be utilized to fill the talent gap.

Workforce strategy experts
Businesses that are hesitant about investing in recruitment and training programs likely fear that they will be ineffective, or that their focus is of better used elsewhere. It can be all too easy for supply chain managers to get so caught up in day-to-day operations that the long-term strategy development falls to the way side.

However, in an increasingly competitive market, organizations simply can't afford to not onboard and retain top talent. This is why, to ensure the efforts are well worth the investment and minimize the chances of losing production by shifting current workers away from primary responsibilities, supply chain executives should leverage third-party partners that can provide them with staffing and recruiting solutions, as well as consulting services for strategic sourcing and training programs.

In this recurring series, the partners and consultants of MRA Global Sourcing share their learnings, observations, and the occasional rant cultivated from years of experience in recruiting and placement for supply management functions.

MRA finds itself musing over the fascinating course of events unfolding during this election year.  An oft-repeated fact these days is that Millennials will equal the Baby Boomers in terms of the share of the electorate – approximately 31% of eligible voters. And with that comes a warning for both parties that they shouldn’t take these Millennials for granted as all conventional thinking has been thrown to the wind. Almost 50% of these youngsters consider themselves independent but they also are categorized as more liberal than their parents. Key for the Democrats is to get them to come out and vote which isn’t expected to be easy this election cycle. The Republicans are trying to capitalize on this as they are hoping their two youngest candidates, the Senators, will help attract the youth to come out and stop the Trump train and derail the Democrats bid for a third term.

According to a 2014 Pew Research Center Study it found that Millennials are the most ethnically diverse generation in our American history. They are less religious then their preceding generations and slower to wed as well. The issue of college debt is what is causing these Millennials to pay attention to fiscal discussions and policies since that’s when they entered the workforce in circa 2008 and have seen government debt increase and slow growth as the norm.

A few weeks back the WSJ did a story titled, ‘The Young and Economically Clueless’ and the premise was questioning why the young people are voting against their own interests?  What they didn’t factor into their analysis was that according to the Director of Polling at the Harvard Institute of Politics, young voters generally seem less interested in politicians’ CV’s than their candor. This Institute has been polling Millennials since 2000 and states that the youth are looking for candidates that are focusing on emotion and talking about the moment and seem the most authentic rather than those with supposedly stellar accomplishments from the past.

To be fair to these Millennials, they have lived through prolonged economic duress and thus are more sensitive to the economic ‘unfairness’ they perceive around them. This enamors them to Senator Sanders’ message of income redistribution and going after the greed on Wall Street.  However, on the other side you have vague promises of ‘making America great again’ slogans that are as empty as our national coffers. It is populism taken to the fringes where the enemy is free trade and immigrants. We will discuss this political phenomenon from both parties in subsequent musings….
living in democracies that allow them to vote, they need to exercise that right to force their governments to pay heed to what’s important to them.

Next time, we'll discuss and praise an SCM - Smart Cookie Millennial!

‘Til then - Save Big and Prosper…


MRA Global Sourcing is the preeminent firm specializing in recruitment for procurement and strategic sourcing, connecting the best supply management talent with the best opportunities. Visit them on the web to learn more.
Amazon files lawsuit against Target's soon-to-be supply chain vice president

Retail companies across the globe have been facing mounting pressure to increase online market share and optimize supply chain strategies to better support the rising demand for omnichannel purchasing. Many have reported revenue loss attributed to inefficiencies in order fulfillment and inventory management.

Target Corporation has experienced a number of difficulties in these areas over the past year. Last year, it closed over 130 Canada-based stores and reported disappointing sales due, in large part, to implementing new supply chain management software that caused warehouse and distribution disruptions. It has since taken significant measures to reduce costs, streamline workflow production and enhance its overall business model. One of the moves was to onboard an experienced supply chain veteran.

Target hires former-Amazon leader
At the end of February, Target announced it was appointing Arthur Valdez as the retailer's new executive vice president, chief supply chain and logistics officer. At the time, the company released a statement saying that Valdez would head the planning, distribution and transportation operations of the organization. Target Executive Vice President and Chief Operating Officer John Mulligan said, "Arthur's leadership and experience will be a tremendous asset as we continue to drive improvements in end-to-end processes including leveraging our almost 1,800 stores to deliver a seamless experience for our guests."

And certainly the experience Mulligan referenced is extensive. Before being hired by Target, Valdez spent 16 years as a supply chain leader for Amazon Inc. Prior to that, he worked for other retail giants including Kmart and Wal-Mart. Valdez is set to assume his leadership role next week, on March 28, in Minnesota. But, if Amazon gets its way, this may not happen.

The e-commerce giant is apparently less than thrilled with Valdez taking his talents to a major competitor. GeekWire reported that, on Monday, Amazon filed a lawsuit with Seattle's King County Superior Court against Valdez, claiming his employment with Target violates a non-competition agreement. The lawsuit is being brought against Valdez, rather than Target Corporation. Amazon argued that it would be impossible for him to oversee supply chain operations at Target without compromising confidential insight he gained during his time of employment at Amazon. It also accused him of already releasing secret information during the interview process.

In its suit, Amazon said that, while working for Target, Valdez will be able to use proprietary information in a way that would put Amazon at a disadvantage and simultaneously benefit Target, with particular emphasis "in a core area of competition between the companies: the cost-effective and rapid movement of goods in the most efficient way possible for retail customers."

Amazon files lawsuit for alleged non-compete violation
The complaint went on to explain that, when Valdez decided to leave Amazon to work for Target, he said that his new job would not breach the non-competition agreement but failed to provide an accurate description of what his role responsibilities would entail. Furthermore, Amazon indicated that there are discrepancies in Target's press release that underline Valdez's experience working for Amazon would be directly leveraged to improve its own operations. Amazon has requested that the court enforce the 18-month "time out" set forth by non-compete clauses to prevent employees from working for competing organizations immediately after leaving a company.

In an email to GeekWire, Molly Snyder, a Target representative, said "We have taken significant precautions to ensure that any proprietary information remains confidential and we believe this suit is without merit. However, as this is pending litigation we are not going to comment further at this time."

According to the news report, Amazon implied it was forced to take legal action after Valdez and his attorney failed to respond to the company's direct attempts at communication.

Picture an organization with dozens of locations, supporting portions of the business, and having no standard operating processes across the board for service requests, incident, and change management, causing inconsistent service levels and redundant services.

Or, perhaps envision a company with a FTE staff overwhelmed by the effort it takes to manage the day to day support of the business critical applications, much less execute on the critical patch releases or upgrades.

Do these scenarios sound familiar?

These are just a few reasons why large IT departments turn to consulting firms such as Source One. Costs can quickly spiral out of control, especially for IT groups within a company equipped with massive application portfolios across their enterprise.

If a company is already outsourcing many of its application support functions to a managed service provider, because of a perceived expertise in a certain area (ERP, HR, Marketing, etc.) the vendor ecosystem may have grown to the point where the soft costs, like contract management, SRM, and SLAs are taking up a large portion of your sourcing and procurement group’s time.

Application management is an expensive proposition. A large company can have thousands of applications at various stages of a life-cycle
and keeping them available and running at peak efficiency is necessary for both internal stakeholders, as well as the customer base.  As a result, the expense can be justified as simply a part of doing business.

It doesn’t have to be this way.

Outsourcing application support services has been something companies have been doing successfully for years. And I don’t necessarily mean outsourcing to an off-shore facility, although that certainly does happen often. There are hundreds of companies who specialize in this service. Some are recognizable global brands, while others are more niche companies that do specialize in specific support activities like ERP or service desk. The advantage of the large choice of vendors is that an organization’s model can be specifically tailored to its needs.

Maybe an organization wants to supplement their regular FTEs with off-shore support during off-hours so their staff can enjoy their weekend without having to VPN into the office to address and clear an application alarm.

Some companies find it beneficial to have an on-shore/off-shore model where business critical applications receive a certain amount of in-office support while other applications receive support from a remote facility.

In whichever way a company decides to build its application support staff, the benefits can be almost immediate. Consolidating support vendors, eliminating duplicative activities, improving customer satisfaction, and streamlining service levels are all wins a company will see, in addition to realizing cost savings.

And, for most, the savings are significant. Source One has seen a minimum of 20% of hard dollar savings on these type of initiatives, and depending on the scope of applications and activities supported, an ROI within 12-18 months.

From a Strategic Sourcing perspective, the RFP that would be issued for an application outsourcing project would be a fairly straightforward document, but only if the data collection process is done correctly up front. A good RFP will thoroughly document the application inventory, service catalogs, ticketing data, existing service levels, etc.

Cue the involvement of IT. To help the bidders make their best effort in putting together a proposal, there should be a clear definition of business requirements, the scope of future services, and service level requirements. Business stakeholders must be included in these discussions. Nothing will put the brakes on a project like this quicker than some VP learning second hand that IT is contemplating replacing their incumbent support team. Just trust me on this.

As the sourcing process goes through its normal course of activities, the organization will want to complete a considerable amount of due diligence on the handful of vendors that have been short-listed for consideration. Visit the vendor’s off-shore facilities. Get a list of references and independently discuss with those references the vendors’ historical performance. Are they sticklers for the agreed upon terms and conditions in the contract or are the flexible enough to provide an extra resource or two during peak periods of activity without a change order?

At the same time, don’t be afraid to give vendors ample insight into your organization. Take the time to answer every question from a vendor and sit through their process workshops so there is a clear understanding of how they can support your technology. Answering their questions early on indicates to vendors your seriousness in working with them, as opposed to simply shopping around for pricing and allows them to better communicate to you their fit within your organization. This two-way communication promotes a strong relationship between your company and the contending vendor from the beginning.

Outsourcing application support can provide great benefits to a company, particularly for larger companies with a complex portfolios and direct interaction with customers. Sure, it can be a challenging initiative, but with proper planning, executive level buy-in, and the right strategic consultants, it can quickly help a company’s bottom line.

Source One's IT spend and category management experts will be at ISM2016, where Source One is the exclusive sponsor of the Exec IN forum. Want to save on registration costs to attend this landmark event? Learn more over at SourceOneInc.Com.