This ties into spend analysis in several ways. First, if your company has grown by acquisition, it is possible that different sites utilize different ERP systems. These systems may or may not roll into a single financial system.
Second, when the responsibility of ordering and paying for goods and services falls to multiple people (or groups of people), it usually results in a variety of procedures being used to actually pay for goods. For example, some locations might run all purchases through a purchase order system and pay via check, while others may pay via a purchasing (credit) card, and others may receive invoices and pay via electronic funds transfer. Depending on your situation, it may be a good idea to enlist the support of the finance department, the IT department, or both. If you are dealing with a situation in which multiple ERPs are used, finance can give you a good indication of how those systems interact with each other. Finance can also shed light on the types of payment options that are used within the organization and how those options are reflected in various ledgers and reports.
IT should also be able to help run the reports you need and provide assistance in standardizing and consolidating data sets coming from different sources. If some payments are going to vendors through a procurement card (p-card), the transactions you pull out of your ERP are only going to reflect payments to your p-card company, not the vendors you were actually paying. However, most providers of p-cards can give you reports that detail whom you have paid with their cards. These reports can be as simple as a list of suppliers and total amounts, or as detailed as a line-by-line account of particular items purchased and quantities.
If you do not already have access to this data, finance should be able to provide you with the appropriate reports. When working with IT or finance, remember that during this first pass of data collection you are simply trying to identify total spend by supplier over a period of time, normally a year. Two to three years might also make sense if one of your goals is to identify trends over time.
For further support in wrangling in decentralized data and performing a spend analysis, contact a Spend Consultant. These firms specialize in spend analysis and can provide a fast and comprehensive view of your organization’s spend profile.
As direct marketers, we’re always singing the praises of good old direct mail. And that’s because it works! (Editor's Note: The Strategic Sourceror agrees!) We understand that an integrated, multi-channel marketing approach is best, and direct mail deserves a nice slice of the overall budget. Check out these stats from the 2015 DMA Response Rate Report:
- Direct mail response rates outperform digital channels by a long shot. Direct mail achieves a 3.7% response rate with a house list, and a 1.0% response rate with a prospect list. All digital channels combined only achieve a 0.62% response rate (Mobile 0.2%; Email 0.1% for a Prospect list and 0.1% for House/Total list; Social Media 0.1%; Paid Search 0.1%; Display Advertising 0.02%). Telephone had the highest response rate at 9-10%.
- Cost-per-acquisition for direct mail is very competitive. Direct mail stands at $19, which fares favorably with Mobile and Social Media (both at $16-18), Paid Search ($21-30), Internet Display ($41-50) and even email ($11-15).
- 82% of respondents expect to use the same amount of direct mail, or more, in the coming year.
- Formats are playing a role. According to the study, oversized envelopes have the best response rate at 5.0%, followed by postcards at 4.25%, dimensional 4.0%, catalogs 3.9% and letter-sized envelopes 3.5%.
- Marketers continue to embrace multi-channel marketing, with 44% of the respondents using three or more channels for their marketing efforts. In these instances, the most popular channels tend to be email, direct mail and social media.
- Direct mail offers strong return on marketing investment. It returns the same ROI as social media (15-17%).
*1IPA Touchpoints 5, 2014 (Data based upon Monday to Saturday reading)
There is no shortage of challenges retailer supply chain managers today have to face. Among the various complexities that make navigating operations such as omnichannel distribution and fulfillment and e-procurement more difficult, reverse logistics is one of the lesser-talked-about obstacles.
However, IKEA recently set an unprecedented mark in this area by recalling of nearly 30 million pieces of furniture in the United States. The products the retailer is urging consumers to either anchor to a wall or return are dressers and chests due to a string of injuries and fatal accidents that have incurred because of the items not being secured properly, including the death of six toddlers.
"Consumers should immediately stop using any recalled chest and dresser that is not properly anchored to the wall and place it into an area that children cannot access," the company said in its press release. It added that shoppers who purchased one of the problematic chests or dressers between January 2002 and June 2016 will be offered a full refund, whereas those who own one that was manufactured before 2002 may receive store credit. The announcement explained that the recall, which is being issued by the U.S. Consumer Product Safety Commission, is happening because the furniture did not meet the industry's voluntary standard requirements.
Recall reverse logistics for retailers
According to The Wall Street Journal, this recall affects half of the chests the retail company sells in America, in addition to the more than 6 million pieces in Canada. And while IKEA declined to comment to the news source about how much this recall will cost the company, Reverse Logistics Association Executive Director Galen Vick said, to his knowledge, it is the largest recall of furniture that there's ever been.
The logistical challenge that IKEA faces is different than those that other organizations have had to deal with when recalling, for example, faulty vehicles, because retailers can't leverage the same kind of information base that dealerships have that could point them to customers who purchased the product.
The Wall Street Journal also reported that Aberdeen Group estimated that, on average, anywhere between 9 percent and 15 percent of manufacturers' total revenue is spent on returns.
However, this enormous recall is voluntary, meaning it is up to consumers to return the products themselves to receive the full or partial refund.
Why bother to check it though, there’s nothing that can be done about those charges, right? I mean, taxes aren’t negotiable and the carriers couldn’t get away with mis-billing them, right? Surcharges and fees just come with the territory, everyone charges them so we are just stuck with paying them, right? Wrong and wrong. While it’s true the mechanics of these charges are a bit complex, they’re not indecipherable. In fact, once you take the time to unravel them once, auditing them routinely can be done with relative ease. The truth is that some taxes aren’t actually taxes as we know them, their name just sounds like a tax, e.g. “Property Tax Allotment.” Some surcharges are indeed mandated while others are simply passed through from the FCC to the carriers to the end customer. But some of them are functions of one another and some of them change from time to time and as anyone who’s ever reviewed a telecom invoice knows, when changes occur on an invoice, the carriers will generally find a way to mess it up. Most notably, we’ve seen a few instances where –for better or worse- tier 2 carriers have made significant mistakes in their surcharge policies that led to massive swings in unbilled or overbilled surcharges. So from an audit perspective, a huge amount of the invoice flies completely under the radar and significant errors and recoveries may be identified. Further, gaining and understanding of these costs now can pave the way to better decisions in the future to help control costs beyond services, below the bottom line.
Am I suggesting to negotiate surcharges and fees? No. However, being savvy about which services are state regulated vs. federally regulated and how the taxation and surcharging for those services actually works can have a significant influence on your next purchasing decision. In fact, we’ve seen many instances where everything looks good on paper and a client can save good money by switching carriers and/or technologies, until you factor in taxes, surcharges, and fees only to realize that if that deal were to be signed, the customer would end up paying more money. Of course, many organizations don’t have the time or resourcea to develop a program that allows them to audit their telecom usage and billing and make go-forward decisions with the inclusion of taxes, surcharges, and fees, so for help getting started, contact Source One Management Services, LLC at www.sourceoneinc.com
But, invariably, this approach will lead to delays in already time constrained initiatives, and lead to inconsistent responses with high pricing 9 out of 10 times.
This is due to each supplier usually following their own internal quotation process that is optimal for their team. You get the price point, but without critical qualifying information to show that the supplier can actually fabricate the product.
With a Request for Proposal (RFP) process you can collect pricing, validate capabilities, confirm certifications, make sure the supplier services clients in your industry, and begin to build the relationship with the knowledge that your IP is protected with an NDA.
Capabilities are a go/no-go when it comes to finding the right supplier. The first step is initial research to verify that the primary manufacturing process you're in search of such as CNC milling or turning is offered by the company along with secondary processes like anodizing, powder coating, or heat treating. The key step is to then start a conversation with a known contact in the company or begin building a relationship and determine the details of those capabilities.
For example, is swiss turning a primary capability, or do they have 1 machine in a back corner that gets used every other month for small jobs. Or, worst yet, do they outsource the operation to a neighboring company and mark-up the price when combined with other operations.
In addition, secondary operation, finishing, testing, packaging, and shipping certainly carry their own costs. A simple supplier-driven RFQ may not include them for all suppliers. When not specified up-front and managed through further conversations, this point always leads to inconsistent price comparisons and higher than expected final pricing.
Certifications are just as critical. If you're in the medical device industry and your products need to be ISO13485 certified, there's nothing quite like attaining a competitive price point, building a great relationship, and investing months in testing first articles to then find out that the supplier doesn't have the certification, or would take 6 months to a year to acquire it. We've seen that both quality assurance and quality control always play a big role when maintaining and tracking the relationship once a product is established. If not addressed to some degree up-front the difficulties may become unsurmountable and lead to further supplier transitions.
While a successful relationship can be established with a capable supplier, a further match in industry focus can serve to expedite the relationship building process and reduce the transition time-line considerably. If the client is in the construction industry, for example, and the supplier has 70% of their business focused on this industry, then all of the processes the client expects are already in place and simply need to be verified. On the other hand, if the supplier has a focus on the automotive industry, but has the capabilities to produce the product for the construction industry the expected processes will have to be clearly stated as expectations and established over time. This can be a significant problem for short lead time parts as the automotive clients will of course get first billing.
Perhaps the most significant consideration when quoting with multiple suppliers is protection of intellectual property rights such as your proprietary designs with a non-disclosure agreement. This point is often glossed over by suppliers, especially in outsourcing or low cost region initiatives, but serves as vital legal protection and should be signed before any drawings can be shared.
In the end, manufacturers have very intuitive and original ideas that can save an established product base 20-40% in some cases, but finding the right combination of savings and risk requires a uniform approach and ample communications well captured by the RFP process.
This week, The Wall Street Journal reported that EZ Worldwide Express, a logistics and shipping provider, has dropped retailer Forever 21 Inc. as a client because it no longer offers it any value.
Earlier this year, EZ Worldwide filed for bankruptcy protection and was forced to let go of approximately 200 employees. Soon, it will be selling over 140 pieces of equipment, machinery and vehicles that it won't have any more use for after canceling Forever 21's contract. The shipping deal had previously said that EZ Worldwide would be the premier transporter for nearly 200 of the retailer's stores through 2019.
According to The Wall Street Journal, Forever 21's company generated about $25 million to $30 million a year for EZ Worldwide - almost half of its total revenue. However, because the clothing retailer's business has been suffering due to the rise of e-commerce and other shifts in the fast-fashion market, the logistics provider indicated the work has outweighed its worth.
The cancelation of this shipping contract is just one example of the broader trend taking place in the clothing industry, with many organizations struggling to properly optimize and manage retail supply chains in a way that allows them to meet the rising expectations and demands of consumers without losing profits.
Shoppers' tastes and preferences are rapidly changing and it is becoming increasingly difficult for merchants, especially those in the discount or fast-fashion sector, to enhance the efficiency of order fulfillment and distribution operations - especially as omnichannel purchasing evolves. Aeropostale Inc., Wet Seal Inc. and Delia's Inc. are all among the other chain retailers that have also recently been pushed to chapter 11 bankruptcy, the news source added.
In January, when EZ Worldwide first filed for bankruptcy protection, The Wall Street Journal reported that the business employed approximately 700 workers. In it's recent coverage, though, it revealed that its downsizing will include reducing its staff members to 225.
Identifying your primary, secondary, and key target audience is critical to the success of any initiative. Understanding the current relationship of individuals in relation to the project is a key place to start. By recognizing those who will be both directly and indirectly affected by the implemented changes will allow you to begin to tailor your approach to communicating. Consider what all needs to be accomplished and who will be accountable for each milestone along the way. Also look to previous projects to identify stakeholders likely to be involved for a particular project type or a particular client.
- What is this person perspective?
- What is their level of knowledge?
- What level of influence do they have over decisions and actions?
- What does this person need to know about this initiative in order to perform their role effectively?
- How will each stakeholder/group influence one another?
- What will it take to make this stakeholder a supporter of this initiative?
The United Kingdom's recent decision to leave the European Union marks an unprecedented event that is expected to have a reverberating and ripple effect - not just on the region itself, but across the rest of the world as well. In addition to the political chaos that has already begun to commence as a result of Brexit, one of the areas of most concern is what it means for businesses.
Supply chain, logistics and distribution sectors may be among those seeing and experiencing some of the most dramatic shifts and severe implications as the result of the departure. Most organizations across the globe are riddled with questions about how this decision is going to impact supply chain operations both in the short and long run. The problem is that this situation and its varying circumstances are clouded with confusion and uncertainty.
Logistics and supply chain disruptions
The Wall Street Journal reported that shipping and logistics companies will be forced to deal with supply chain disruptions until updated trade agreements and regulations are established. In addition to a hampered flow of goods, many organizations in the sector are also expecting a surge in retail and manufacturing organizations looking for assistance in adjusting to the new trade reality.
Amid growing concerns, though, there are still many trying to assure the business community that there is no need for panic and that conditions are generally still, and will continue to be, stable.
"There clearly is going to be a period of transition here where everyone is trying to figure out exactly how Brexit will take place," C.H. Robinson Chief Financial Officer Andrew Clarke explained to The Wall Street Journal. "But it's not like the U.K. will stop trading with the EU and the U.S. or anyone else."
Even so, it seems transportation and logistics businesses may already be experiencing some repercussions of U.K.'s vote to leave. According to the news source, last week, XPO Logistics Inc. shares dropped by almost 15 percent - 12 percent of the firm's total revenue is generated from the U.K. Furthermore, in New York, shares for both United Parcel Service Inc. and FedEx Corp. declined at rates of 2.2 percent and 3.8 percent, respectively. Some Europe-based logistics and cargo companies also saw a drop in shares.
A global e-commerce executive explained to the source that Brexit may also benefit retailers and logistics organizations in the U.K., at least in the short term, since a weakened pound means foreign buyers can purchase goods for less. From a retailer's perspective, the source added, the U.K.'s vote to leave has made countries throughout the region more closely resemble America, Japan or China because it has complicated the shipping and distribution process. Down the line, retail supply chain operations may get even more complex, as distribution channels become restructured and more specific restrictions are set in place.
Most organizations seem to be in agreement that, despite what Brexit could mean for future operations, developing new trade relationships and regulations will take a few years, at least, so there won't be too much immediately affected.
Lack of response planning and preparedness
Although talks of a possible U.K. departure were in the works prior to last week, the news came as a shock to many. Two weeks before the referendum, Logistics Manager issued a survey to logistics and supply chain professionals in the region that revealed over 80 percent of respondents had no contingency plan in place in the event that Britain decided to leave the EU - which is surprising considering that more than half agreed that it leaving would affect business. When asked about what additional concerns existed over the possible pull-out, participants cited:
- Economic stability (71 percent)
- Currency value (56 percent)
- Trade deals (52 percent)
- Migrant worker reductions (17 percent)
Although many regional and global supply chains seem to be approaching this event as a crisis, others are viewing it as an opportunity. The source noted that Europa Worldwide Group Managing Director of Logistics Operator Andrew Baxter referred to Brexit as "a great day for Britain," and that, in the long run, this decision will improve the economic safety and security of the region.
- Functional Requirements
- Interface Requirements
- Reporting Requirements
- System Administration Requirements
- Security Requirements
- Disaster Recovery Requirements
- Support Requirements
Navigating retail supply chain management and optimizing operations in response to the rapid acceleration in e-commerce is far from easy. And while some retailers are taking significant measures to expand their global online market share, others are taking a slightly different approach to business expansion efforts.
Wal-Mart, the biggest retailer on the globe, recently announced that it has agreed to partner with JD.com, one of the largest e-commerce companies in China. The alliance will fuel an abundance of new initiatives for selling both on and offline, though it does mean Wal-Mart will be handing over the majority of its Chinese e-commerce platform, Yihaodian, to JD.com.
E-commerce expansion in China
Of course, for Wal-Mart, this moves meaning expanding its footprint throughout China and gaining a greater share of its existing e-commerce market. Because JD.com already has a strong collection of consumers making purchases online, it could also mean the retailer will get more in-store traffic. And, thanks to Wal-Mart and Sam Club's imports, these customers will be given a greater selection of goods.
Furthermore, the press release revealed that, while JD.com will take control of the Yihaodian marketplace and brand, "Wal-Mart will continue to operate the Yihaodian direct sales business and will be a seller on the Yihaodian marketplace, leveraging its global supply chain to provide customers a wide range of products."
As TechCrunch explained, the decision Wal-Mart made to sell its Chinese e-commerce platform makes it so that, instead of completely running its own online store, now it will operate as a retailer within Yihaodian. It is also worth noting that one of JD.com's biggest rivals is Alibaba. Wal-Mart still owns a 5 percent share of JD.com, which equates to approximately $1.5 billion, the source reported. And this alliance will further increase JD.com and Alibaba's competitiveness with one another. As of right now, combined, the two companies account for at least 80 percent of e-commerce spending in China. However, JD.com is not exactly the same as Alibaba - it runs its individual logistics network and focuses on fresh groceries and goods.
Enhancing consumer experiences
Because China contributes a significant portion of Wal-Mart's foreign revenue, growing its distribution network in the region is crucial to the retailer, even if it seems to be taking a step back from the e-commerce side of business.
In the company's announcement, Wal-Mart President and CEO Doug McMillon said the retail giant is excited about this strategic alliance and that JD.com will provide the kind of value and experience needed to enhance the experience of its customers and expand its outreach. JD.com CEO Richard Liu added that this deal is a "landmark agreement" that will enable the organizations to take China's e-commerce offerings to new heights.
The press release also added that Morgan Stanley & Co. LLC and Morrison & Foerster LLP acted as Wal-Mart's financial and legal advisors, respectively.
What is cognitive procurement? Cognitive procurement, the application of cognitive computing to procurement, is the act of accessing structured and unstructured data and dynamically investigating spend categories, suppliers, and external risk factors. A cognitive procurement system enables one to systematically analyze data and subsequently generate meaningful results. A well designed cognitive procurement system may be self-learning. If this is the case, then it incorporates current information into future analyses.Cognitive procurement allows us to transition from a cross-sectional view of our suppliers to a time-evolving view. Furthermore, it shifts the role of technology from that of enabler to adviser. Some specific tasks where cognitive procurement may be highly useful include 
- Quickly sorting through very large amounts of structured or unstructured data
- Providing detailed supplier assessments
- Providing in-depth risk assessments, identifying hidden risks, and calculating risks
- Supporting and validating decision-making
- Uncovering new opportunities
Risk management example. A good supply chain governance system not only allows one to rank the risk of their suppliers, but it also allows them to rank them in a timely manner. As the world is ever-changing this means that we would like to be able to reduce our list of thousands of suppliers down to a manageable subset of those suppliers (for the more technically inclined readers we would like to reduce the dimensionality of our data set). This can be accomplished via cognitive procurement. Sentiment analysis studies the expression of mood, opinions and attitudes. In essence it attempts to determine whether a communication suggests a positive, negative or neutral sentiment. Some public sources that are commonly mined with sentiment analysis include Twitter, Facebook, news articles and feeds. However, it is becoming increasingly common that companies are starting to mine internal communications such as emails, phone calls, wiki, and chat rooms. According to Vasant Dhar, a data scientist and professor at New York University’s Stern School of Business and the Center for Data Science, “Sentiment analysis has become a form of risk management and is emerging as a useful risk control tool for a variety of businesses.”  By constructing a system using a procurement-specific sentiment dictionary, similar to the JP Morgan dictionary that was recently published at , one could cost-effectively develop a flagging system. News-related analysis would allow one to proactively identify good suppliers that may run into problems due to external risk factors. Alternatively, using internal communications allows one to cost-effectively identify problematic suppliers or even fraud related to those suppliers.
Conclusion. Cognitive procurement is a burgeoning field. According to Jeff Jarvis, director of the Tow-Knight Center for Entrepreneurial Journalism at the City University of New York, “By 2025, artificial intelligence [a technique considered to be part of cognitive procurement] will be built into the algorithmic architecture of countless functions of business and communication, increasing relevance, reducing noise, increasing efficiency and reducing risk across everything from finding information to making transactions.” By adopting cognitive procurement, a company shifts itself from a reactive company to a proactive one. Early adoption ensures that one is able to identify and take advantage of arbitrage opportunities in the marketplace. 
 What Can Artificial Intelligence Do for You?
 Sentiment Analysis: Are You Feeling Risky?
 You won't believe what gets an email flagged at Goldman: CNBC has the list
 Predictions for the State of AI and Robotics in 2025
Once serving as a tactical function with the mission of strictly reducing costs, Procurement departments are going beyond traditional three bid-and-buy processes to achieve more strategic goals. Best-in-class organizations now leverage procurement groups for making long term investments in critical business units such as Marketing and IT - creating an imperative for procurement professionals to align stakeholders with overarching corporate goals, manage supplier relationships, and constantly seek out innovation in various forms.
Procurement is more than just simply finding the right price for a product and service. As such, this business unit must pursue additional measures towards reaching success, including proper category Planning, supplier Partnerships, monitoring supplier Performance, and improving Processes.
Is your Procurement organization equipped with the proper resources, and tools? Do you have the proper strategic sourcing processes in place? Are you tracking the correct metrics? Source One can help. Backed by decades of experience and procurement best-practices our procurement optimization experts can help your Strategic Sourcing and Procurement department assess your current organizational structure and mechanisms, benchmark them against industry standards, and deliver a road map, including category management plans, for taking your operations to the next level.
While some major companies, such as Amazon.com Inc., are enforcing stricter control over their suppliers by outlining narrower regulations and increasing fees, it seems other corporations are taking a more lenient approach to achieving supply chain stability.
This week, The Wall Street Journal reported that General Motors Co. will start allowing approximately 400 of its suppliers to engage in contract term negotiations once a year in response to the increasing material costs and foreign market volatility. That the automaker giant is making it so its manufacturers, which provide parts for new cars sold in Brazil and Mexico, will be permitted to renegotiate their terms of agreements may come as a surprise to some, as it is a drastic turn away from its traditional, rigid approach to enforcing supplier contracts.
Improving supplier relationships
The driving force behind this decision, The Wall Street Journal indicated, is that GM wants to help to ensure that its suppliers do not face financial-related disruptions that could stall production. Put simply, these manufacturers play a pivotal role in the automaker's broader plans to expand globally. Because GM is making a $5 billion investment in selling Chevrolet cars in Brazil and Mexico, it is relying on the steady flow of components from these suppliers.
"What we have today are fixed, very rigid contracts and we tell the suppliers don't bother us with the details," GM Purchasing Chief Steve Kiefer explained in an interview with The Wall Street Journal. "On a very narrow band of business, that approach works. But when you have moving raw-material costs and currency rates, you find yourself spending too much time fighting over that."
Kiefer also said that the company is focused on working with manufacturers to make investment in the Brazil market work. The goal, he indicated, is to implement an easier, more collaborative strategy. Another GM executive told the source that this move is going to force other automakers to follow suit, since the majority of their earnings are used for suppliers.
In an interview with Rubber & Plastic News, Bill Kopicki, one of the directors of GM's global purchasing and supply chain department, recently offered more insight into how the company is looking to further implement better supplier relationship management, particularly with its tire manufacturers. He said that the organization is "making leaps and bounds" to do so, placing significant emphasis on its Strategic Supplier Engagement model. In addition to price, Kopicki explained, it also looks at a number of other key factors, including quality, technology, innovation, performance and service.