June 2016
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on Thursday, June 30, 2016 1
Chipotle is known for its sustainable business practices and captivates a large customer base because of it. Chipotle purchases only natural, cage free/free range chicken, pork, and beef from local, heavily audited ranches and farms. They also source vegetables from local farms and their dairy is free of added hormones. Chipotle has a sustainable building program in which they use low VOC paints, energy efficient appliances and kitchen equipment, and their paper products made out of recycled materials (bags, bowls, and napkins). The aluminum lids are made from recycled beverage cans. Even Chipotle’s uniforms are made from organic materials. The list goes on.

These “sustainable” and eco-friendly practices are great for the environment and make a lot of people feel better about paying the higher price. For those who haven’t checked-in to a store in a while, the cost for guacamole is a $2.00 add-on depending on store geography. People are aware of this, and people are aware that they will need to pay a bit more for better quality meats, locally sourced produce and eco-friendly in-store materials. Hence why many of their loyal customers are coming back day after day because they feel like they are supporting a good cause – food with integrity. Many of these same people claim to be pesca-pescatarian.

With all that said, Chipotle has historically maintained good margins and has been very profitable over the past 10 or so years, experiencing rapid growth. Chipotle has produced double-digit comps figures more years than not over the past 10 years. Their company culture coupled with their profitability seemed to have beat the odds by becoming a healthy fast-food restaurant/QSR.  With the exception of the recent e-coli breakout, and subsequent temporary closures of stores (which has caused their stock as of late to drop), Chipotle has a bright future ahead. On a side-note, Chipotle’s policy of avoiding the industrial food supply chain may have, ironically, actually led to this outbreak due to the increased variability, and subsequent increase in exposure of food sources to variable environments. I digress.

How does Chipotle remain profitable? The first reason is obvious – they charge a premium price that consumers are willing to pay. In addition, they are able to produce and distribute lots of their ingredients in-house. They get produce, meats and dairy products from farms (some owned, others not) no further than 350 miles from each local store cutting down on import other transportation costs for non-local goods. This cuts into the margins of would-be markup costs associated with buying ingredients from distant third parties and industrial food factories. Their eco-friendly stores also keep overhead relatively low. Side note: The margins on the guacamole also HAVE to be lining their pockets as well (personal opinion).

One area that I recently identified where Chipotle goes against all fabrics of their being resides in their takeout bags. Yes, their takeout bags. Don’t get distracted by their quirky marketing campaign where inspirational quotations are included on the bags and cups. Don’t get distracted by their 100% recycled fiber bags either. Have you ever noticed the takeout bags are much larger did they need to be? You can fit at least five or six orders in each bag, and probably more (assuming the standard recycled bowl and lid). Have you ever noticed that there is only one size option for takeout bags? Well I have.

Now why does this go against the message that Chipotle is trying to convey in their sustainability culture? And how does this relate to their stance of sacrificing cost for quality? Well first, by creating one oversized bag this creates a significant excess of waste since the packaging does not fit the product meant to go inside. If Chipotle was to offer different sized bags they could use small bags (say 50% smaller than current size) for orders of one or two people, medium bags for 3-4 orders and large bags for orders of four or more. Rarely do I ever see takeout orders of 3-4 orders or more. If small bags were issued 50% of the time and were 50% smaller than the current size this would reduce the waste from takeout bags by 25% alone. Even though Chipotle uses primarily recycled materials in these bags and have a strict recycling policy in-store, most takeout bags are disposed of outside of the store and end up at landfills rather than recycling centers. So not only are they creating an excess of waste, they are not able to adhere to their internal recycling process because the disposal of these bags happens outside their stores thereby compounding the issue.

As a packaging industry best practice to reduce the amount of waste, package sizes need to be precisely fitted for the item(s) they are housing. By having different sized takeout bag options this would minimize Chipotle’s carbon footprint by tailoring each packaging container to optimally fit each unique order.

Presumably Chipotle has one large bag option to chip away at their production costs in order to remain semi-competitive on price with other QSR and fast food competitors while still focusing on sustainability and high quality ingredients. By using a universal bag size the outsourced packaging company can, by default, produce more of the same bags at once. This results in a lower cost per order which occurs for a few reasons: First it minimizes the tooling costs necessary to produce different size takeout bags as different tooling is required for different size cuts and folds. Different adhesion patterns are required for each bag bottom. Different print patters are required for each bag face. All of these variables, coupled with smaller run sizes that are required for different bag sizes, attribute to a one size-fits-all solution being the most cost competitive option. But it is not the most “sustainable” solution.


So why does Chipotle choose to skimp on their takeout bags of all things? Did they think we wouldn’t notice? As Chipotle continues to promote sustainability while remaining semi-cost competitive I’m sure there are other areas I have not yet noticed in which they go against their values in order to cut-costs. I may notice something new next week for my periodic Chipotle visit. Stay tuned.
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on Thursday, June 30, 2016 0
So far in our Spend Analysis Series, we’ve covered Where to Begin in the process, and the Types of Data you’ll be looking at when you go to analyze spend with the goal of launching cost reduction initiatives. This leads us into the next challenge, which is how to deal with decentralized spend. When considering strategic sourcing for a category, decentralized spend typically means that a supplier relationship (and subsequent payment to that supplier) does not flow through a single point of contact or group, such as a cen­tralized accounts payable team and payment process. Instead, employees out in the field or at satellite locations are able to place, pay for, and process orders for goods and services without oversight from a centralized entity.

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.
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on Thursday, June 30, 2016 0
Whether you are strictly a Facebook person or on every social media platform out there, social media has become a large part of our everyday lives, both personal and professional, and is continuing to grow.

With this gaining popularity, businesses are expanding their reach and embracing more social media platforms, such as Snapchat. It is almost a requirement for business to have a social media presence in order to engage with their audiences. As ad blocking technologies advance and streaming services become more wide-spread, it is becoming more difficult for businesses to market to their target audiences. Along the same lines, customers are looking for the ability to engage with companies in real-time and social media provides those capabilities.

While sites like Facebook and YouTube have been around for over a decade, the social media medium is constantly changing and the rules for using these platforms from a marketing perspective are still being established. For example, while a topic or event may be trending on social media or be of interest to your followers, should you incorporate that into your content? As more companies turn to social media as a marketing outlet, this question is being debated more frequently.

Businesses may feel compelled to comment or post about topics if they see that they are trending with their target audience. However, just because something is being talked about does not make it an indicator that your organization should join the conversation. Topics like religion and politics are almost exclusively off limits for businesses, but recent events have also shown that you should think twice before posting about holidays or current events. Recently, some large organizations have gotten in trouble with the public for content they published about holidays or current events; whereas others have been acclaimed for their responses to such events. Similarly, some companies have received backlash for responding to these events, while others were criticized for not commenting.

It is impossible to please your entire audience in these situations, but it is up to organizations to determine the appropriate reaction to incite the least amount of criticism. Many suggest that as a general rule of thumb, unless the topic in question is in some way connected to your business, operations, or goals, it is best not to get involved so as not to appear insincere. Regardless, these types of situations should be discussed upfront when creating your social media plan - clearly outlining the rules of engagement and parameters for posting current event related content. It is important that you communicate this information throughout your organization, especially to those with access to your social media accounts.

It is almost impossible to escape the world of social media anymore, as new platforms are created and gain popularity with the public. Marketing agencies and social media firms specialize in staying on top of and understanding how to utilize the different social media platforms in the market. These agencies can help your organization create the social media plan best suited for your organization and manage your social media content accordingly. Source One can work with you to identify a marketing agency that can help you navigate the social media minefield and establish a social media plan best suited for your business model.
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on Wednesday, June 29, 2016 0
The following article comes to the Strategic Sourceror courtesy of Eire Direct, a direct marketing specialist firm based in Chicago, IL.

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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%). 
It’s also important to remember that mail tends to have a nice long life span. In fact, the average time advertising mail is kept in the home is 17 days.* Once it catches the attention of the reader, it will likely be left out or passed around the home. That “sharing” means your message is reaching more people and your audience is growing!

*1IPA Touchpoints 5, 2014 (Data based upon Monday to Saturday reading)
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on Wednesday, June 29, 2016 0
IKEA's massive recall presents a logistics challenge

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.

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on Wednesday, June 29, 2016 0
You just conducted a sourcing event, finalized negotiations and have selected a supplier. You have started contracting but you find yourself stuck in what seems to be endless redlines and negotiations. You are beginning to believe that you are never going to be able to finalize. There are significant savings on the table but you can’t seem to clear the final hurdle. Is your legal process flawed? Are you being too nit-picky on various business terms? Are you trying to enforce terms that don’t make sense for the supplier? Is your internal legal department inflexible? I’ve found that all of this needs to be reviewed from a cost benefit perspective. In most cases you will find the things that have become sticking points aren’t really worth it in the long run. In other cases your organization has created a legal review process that is cumbersome, time consuming and overall unnecessary.

Let’s review a few cases I’ve seen through various clients and projects that have proved to unnecessarily elongate the contracting process. It’s important to note that in most of these cases the client conducted business with the supplier prior to the contract negotiations with no contract or an unfavorable contract in place.

The client’s legal department developed a “one size fits all” Master Services Agreement (MSA) in order to streamline and standardize terms and conditions. The legal department attempted to utilize the same MSA language for Master Purchasing Agreements (MPA). The problem among suppliers was universal, the indemnification language was designed for contractors not for distributors and no distributor was willing to accept it. The client’s legal department insisted the template document could not be changed and the suppliers had no choice other than rejecting the contract. In turn, forcing purchasing to resort back to ordering against blanket purchase orders, drastically limiting their protection from a pricing and services standpoint. The lesson learned is that sourcing and legal need to work together proactively and collaboratively, ensuring legal understands the importance of securing the agreements to the organization. This will help to alleviate inflexibility and create an effective and efficient process.

Another more extreme case I’ve worked through was a dispute over business terms specifically payment terms and price increases. The sourcing department expressed an unwillingness to accept price increases of any kind within their contracts and were unwilling to accept any payment terms below 2% Net 45 days. We had just finished finalizing pricing negotiations within a commodity based category and had essentially reached the market low. Within commodity based product groups it is typical for the supplier to add price increase clauses tied to market indices in order to protect themselves if the price of raw materials is to rise. This is especially common given competitive pricing due to the fact that there is the potential the supplier could end up selling at a loss if they are to hold pricing. During contract negotiations we had worked to tie the products to the appropriate indexes and cap the year over year increases to a max of 3%.  However, the client’s sourcing department was unwavering and willing to lose the ~$1.5M in savings due to the potential for minimal price increases which would have an almost negligible effect on savings over the life of the contract.

Again this stresses the overall need for flexibility when contracting.  Negotiations are give and take. It is important to realize when you are requesting something reasonable and attainable or when you are operating outside the realm of how a supplier can conduct business. Don’t blow a deal that’s favorable to your organization over something that has largely a minimal effect on how you operate.

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on Wednesday, June 29, 2016 0
It’s no secret that an enormous percentage of wireline voice and data telecommunications costs –often in excess of 30%- are appended to the end of the invoice, mysteriously labelled as something along the lines of “Taxes, Surcharges, and Fees.” For most organizations, it’s difficult enough to reconcile all services and their contract rates across the dozens or hundreds of invoices received each month, many of which are hundreds of pages. In fact, most organizations simply don’t have the resource or expertise to truly audit their invoices each month so they very basic metrics to rubber stamp their invoices for approval. Within 10% of last month? Pay it! So what about that other 30%+ of the invoice? Is anyone checking that? No. They’re not.

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
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on Wednesday, June 29, 2016 14
If you're behind schedule and pressed for a quick turn-around time the on-line request for quotation form is very appealing.

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.
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on Tuesday, June 28, 2016 0
Logistics provider cancels shipping contract with retailer Forever 21

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.

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on Tuesday, June 28, 2016 0
There is a very big misconception about running – it is cheap. While running is thought of as an inexpensive sport, getting all the gear can still add up. However, there are cost saving options out there that make fitness and saving money possible. Here are a tips for low cost alternative options when it comes to running on a budget:

1. Shoes – Obviously, this is an area where you shouldn’t skimp, but you can still definitely find smart deals regardless. Many websites typically have quality shoes at discounted prices. You can even stock up on last season’s model for super cheap. Also, shop around you may be surprised to discover your favorite pair of shoes on clearance at your local running store or available at any non-running shoe/department store such as DSW, Nordstrom Rack and Macy’s where there are discounted prices or store coupons available to use.

2. Clothing - Running clothes, even the inexpensive ones, still aren’t that cheap, and you need a variety of them for all seasons. Skip the specialty stores for running gear and head to where the discounts are. Stores such as Target and Walmart offer their own line of athletic wear for running such as track shorts and dry fit material. If money is tight and you need to keep moving, you can pick up the basics for a very low cost if you take some time to browse around and price-compare.

3. Gym Membership – The best part about running is that you can do it just about anytime and anywhere. Gym memberships limit you to a time frame and a place crowded with others where you have to wait in order to use the equipment you want. Get outside and run around your neighborhood or purchase a compact treadmill on sale. When it comes to cross-training, you don’t need a gym membership to supplement your running. Do it from your home with online videos, old workout DVD collections, and even simple body-weight exercises.

4. Races – Races have a wide range of entry fees, depending on the distance, where you’re racing, and when you register. The one thing all race entry fees have in common is the sooner you register for the race the least expensive it will cost. Therefore, by planning ahead and taking the time to write down a yearly or seasonal race calendar you can take advantage of these early registration fees. Of course, there is the risk of injury that comes with such advanced planning but well worth the savings. Just make sure to train properly and fuel your body correctly with appropriate nutrition and rest to prevent any serious injuries.

5. Accessories – There are many extra add-on accessories people can purchase for running. However, people have been running for ages without GPS-enabled watches, compression sleeves, and fuel belts. These items and more make running more convenient and, perhaps, more fun, but leaning down to the basics will keep your budget in check. Also, rather than buying expensive GPS devices, many park trails mark distances to help you keep track of distance, pace and time as well as free apps available to download on iPhone or Androids. 

Saving money on running isn’t impossible, but beginner runners should be skeptical of the fiction that running is an almost-free sport. Even if you seek out the clothes, shoes, and races with the lowest price tags, it’s hard to keep your overall budget down. Follow these tips and try to set a yearly budget for running then plan ahead and stick to it or else the costs can get overwhelming.
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on Tuesday, June 28, 2016 0

As the basis of success within your project depends on the involvement of stakeholders, it is worthwhile to truly tailor your communication approach to ensure ideal understanding and outcomes are achieved. Effective communication inspires action and commitment and drives better program outcomes. Stakeholder communication can be complex, but performing thorough stakeholder evaluations upfront will aid in your ability to use personalized interaction to address individual interests and complications.

Stakeholder Identification
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.

Stakeholder Analysis
Stakeholder analysis is a process of thoroughly gathering and analyzing qualitative information to determine whose interests should be taken into account when developing and/or implementing a program. Doing so will help identify interested parties that should be incorporated in the decision-making process, in addition to understanding the basis for their inclusion. Consultants typically conduct broad, all-inclusive interviews to collect this level of information. The content and questions of these interviews should focus on validating background information, information that identifies key stakeholders from a variety of groups in the process, and clarifying assumptions about stakeholders’ power and interest in the decision-making process. You should consider the following when determining a communication approach for each stakeholder interview:  
  • 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?
This will allow you to interact more effectively with stakeholders and to increase support for any given program. When this initial analysis is conducted properly, any potential misunderstandings and opposition from stakeholders can be detected early in your initiative which allows the proper time to reconcile and address any concerns. Potential obstacles to implementation and reaching results can be avoided. Moving forward communication strategies may then be tailored for each stakeholder to address the identified concerns. Focus should be place on the highest priority groups, or key individuals driving the initiative, while providing sufficient information to keep the less influential groups satisfied. This will help to balance and reconcile all apprehension according to importance or urgency. Both stakeholder analysis and development of a communication approach should be reoccurring processes conducted throughout the program initiative. In order to truly be effective in your communication with each stakeholder, requirements should be framed based on the perspective of their operation. It is important to remember these requirements may change throughout the initiative and as such their communication requirements should be adjusted accordingly. 


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on Tuesday, June 28, 2016 0
The ruling came to fruition and the merger between Staples and Office Depot has failed.  The court upheld the fight of the FTC and did not approve the merger causing breakup costs, decline in sales, and an overall concerning impact on the market. 

What does this mean for Staples and Office Depot?
First of all Staples and Office Depot still rule the roost.  Although Staples had to pay millions of dollars to Office Depot and Office Depot numbers took an initial dip, they are both at the top of their game.  Both companies continue to strive in innovation and look to expand their offering in many categories other than office supplies.  As I mentioned in previous posts, the companies are working with customers on a one-stop-shop approach for copy center solutions, water and coffee services, technology, and other office service needs.  They will both continue to grow as leaders in their market place.

Now the competition begins again.  Office Depot is already trying to take the title contending for summer sales and back to school pricing…yes summer has just begun and back to school sales are already on the way.  Maybe in the future they will become best friends with Staples again and look to merge, but for now they have to focus on themselves and grow their business.

Where does this leave the originally concerned customer?  It puts them in the best light to leverage the playing field.  With that said, here is a reminder of some best practices for going to market and sourcing the various services discussed above.

Spend Analysis:
Once you have determined the categories you are looking to source; Office supplies and other related products, try to standardize the spend information.  This will allow you to identify the suppliers involved, products and services being purchased, and overall spend for these purchases.  Looking at the data in a holistic view makes it easier to see any overlap between suppliers and products/services being procured resulting in opportunities for vendor consolidation and purchase optimization.  For example, your corporate location may be purchasing with Staples but subsidiaries and remote sites may be using Office Depot., including all spend will provide leverage when looking at the competitive landscape.

Go to market: 
At this point you should know who the supply base is and the products/services they are capable of providing.  As I have talked about Staples and Office Depot being the big wigs, don’t forget to consider the smaller or more regional players who can still meet your demands and product or service requirements for a potentially greater savings opportunity.  Even if a change is not viable, LEVERAGE LEVERAGE LEVERAGE.  While Staples and Office Depot were so focused on the merger, other companies were focused on spreading their wings into new territories in order to be able to compete for the office supply business.

Moral of the story: 
Always do your due diligence and keep an eye out for the most important breaking news that may impact your buying decisions.  A good procurement pro already knows what is going on with Staples and Office Depot – but an experienced pro knows how to use it to their advantage.
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on Monday, June 27, 2016 0
What does Brexit mean for supply chain and logistics organizations?

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. 

Retail outlook
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. 

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on Monday, June 27, 2016 0
Far more often than I’d like, I find myself in a battle with my clients: trying to convince my stakeholders to first develop a comprehensive set of system and user requirements before going to the market to source a business critical IT application. The situation typically goes something like this:

There is a desire to go to the market and gather generic information on an application IT would like to deploy. Usually, Sourcing will be asked to create a RFI (and sometimes, if you can believe it, a RFP). In an effort to identify potential suppliers, Sourcing will ask the business for a User (or System) Requirements Specification Document.

The business will respond that it’s “too early” to get into all of that. They just want to get a “feel for the marketplace” or perhaps some baseline pricing for budgeting purposes. I’ll push back, explaining that without a good set of requirements, I’m in effect throwing darts at a board hoping that I will bring back a qualified set of potential suppliers and that the suppliers themselves may not be able to fully provide an adequate response to the business’ request. Sometimes, to satisfy my kvetching, stakeholders will send back a rudimentary set of core features and functionality they might want in their application.

The problem with this approach is that there is a significant waste of time and energy going back and forth with the stakeholders and the suppliers asking and answering questions that could have been easily addressed from the beginning with a good set of system requirements.

It goes without saying that developing a thorough list of requirements for an IT procurement can be a significant undertaking. There are numerous business units that need to be involved and several categories of requirements that need to be defined. The basic categories that should be included in a Requirements Specification Document are:

  • Functional Requirements
  • Interface Requirements
  • Reporting Requirements
  • System Administration Requirements
  • Security Requirements
  • Disaster Recovery Requirements
  • Support Requirements 

Then, depending of the type of system that is being procured, there could be additional requirements for items such as data migration and sub-system integrations.

So, from a Sourcing perspective, without a basic listing of requirements, it can be difficult to provide potential suppliers with the information they need to respond to a request for information. Beyond that, there are numerous other benefits in addressing detailed requirements as early as possible in the procurement process.

Thorough requirements documentation reduces the risk of project failure and lower the chances of rework throughout the sourcing event. It also enhances the communications between all of various organizational inputs that need to be considered throughout the life of the project (the PMO, Security and Privacy groups, etc.)

The good news is that the requirements don’t need to be perfect right out of the gate. It’s reasonable to assume that the business may not know everything it that needs or want from a new IT application. Requirements gathering should be considered a discovery and invention process. Furthermore, there is nothing that stops a project team from changing their requirements as new data is accrued and other insights gained.

At the end of the day, taking the time to create and maintain a strong set of system requirements before going into a sourcing event mitigates risk, builds consensus throughout the various stakeholders, improves communication among the project team, and allows the suppliers to provide a robust response to RFx documents.
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on Thursday, June 23, 2016 0
Whether you're looking to implement better category management plans, identify opportunities to reduce costs via strategic sourcing or entirely optimize procurement operations, conducting a Spend Analysis is the starting block. A comprehensive spend analysis will provide you with a clear view of spend history and patterns, so you can better align your spend to business needs. 

Step #1 to conducting a spend analysis: Data Collection. While on the surface seemingly easy - gather price and quantity information, further digging can reveal hidden complexities. What about if you receive quantity price discounts? Does the pricing include or exclude shipping costs? Is there a discount for early payment? These are all factors to consider when holistically gathering and assessing spend data - factors that are discussed in Part 2 of the Spend Analysis Podcast Series, with Spend Consultant Jennifer Ulrich. 

In this episode, Jennifer reviews the spend data foundational to conducting a spend analysis: Price and Usage. Procurement professionals beware - there are more elements to consider when collecting and analyzing spend data such as contract terms, quality levels, and scope of work. Jennifer discusses these factors and how they relate to a larger overall go-forward strategy. 

To know where you're going, you first need to understand where you're at. Source One's spend consultants can help your organization gain a clear view of your spend through a comprehensive spend analysis. Even better, our spend analysis service includes an opportunity assessment, providing you with a road map to cost saving opportunities by industry experts. 
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on Wednesday, June 22, 2016 0
Wal-Mart partners with China's e-commerce giant, sells Yihaodian

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.

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on Wednesday, June 22, 2016 0
Introduction. Modern organizations may utilize thousands of suppliers. Suppliers with poor or inefficient processes or inadequate compliance may directly impact production and revenue targets. Furthermore, suppliers with poor social responsibility practices may expose an organization to brand and legal risks. As such, an organization must regularly audit the products and services provided by its suppliers. In particular, an organization must evaluate suppliers based upon quality management procedures, supplier corrective action request (SCARs) responses, documentation, requirements and specifications, programming, testing, installation, change control, support and maintenance, security and electronic records compliance as well as review legal, ethical and regulatory aspects and for a large organization this process will take two weeks on average. Supplier audits are a necessary, but time and cost prohibitive, aspect supply chain governance. One widely used solution is to automate complex tasks such as audit planning, checklist preparation, audit schedule, data collection, record findings, and supplier ranking and incorporate the results as part of an enterprise-wide audit management system. While these systems may be highly useful, the biggest drawback is that they are often implemented as a static solution predicated on individuals having the time to complete assessments and analyze data. [1]

 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 [2]

  • 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.” [3] By constructing a system using a procurement-specific sentiment dictionary, similar to the JP Morgan dictionary that was recently published at [4], 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. [5] 

[1] Integrated Supplier Audits for Better Supply Chain Governance
[2] What Can Artificial Intelligence Do for You?
[3] Sentiment Analysis: Are You Feeling Risky?
[4] You won't believe what gets an email flagged at Goldman: CNBC has the list
[5] Predictions for the State of AI and Robotics in 2025
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on Wednesday, June 22, 2016 0
Procurement is evolving. 

 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. 

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on Tuesday, June 21, 2016 0
GM giving suppliers more contract flexibility

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. 

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on Monday, June 20, 2016 0

The marketing landscape is continuously changing, and 2015 was no exception. Mergers and acquisitions, the rise of activities with independent agencies, and the growing popularity of niche advertising agencies are some of the biggest trends that shaped the agency landscape in 2015, and will continue to do so as we enter 2016. Independent agencies are gaining popularity as a result of companies becoming increasingly interested in transparency with their advertising partners. Along the same lines, companies are decoupling agency work away from outsourced services and bringing them in-house to increase control and transparency of their advertising content. Decoupling, when advertisers choose to separate the production components of a campaign from the creative or strategic portion, has been used in a number of different marketing categories, including media and digital.

Brands today, more than ever, are specifically bringing creative, digital, and a wide range of agency services in-house, bypassing outsourced agency efforts. According to The SoDA Report, in the past year there has been a dramatic spike in the number of companies who no longer work with outside marketing agencies — 27 percent, up from 13 percent in the previous year. The result of this movement is being ignited by the need for companies to reduce costs dramatically while simultaneously increasing efficiencies, generating frequent content, and develop close relationships with their consumers.

In 2015, an abundance of Fortune 500 companies, such as Facebook, Instagram, and Allstate Insurance, are exponentially bringing creative agency work in-house, eagerly wanting to connect with their customers in innovative and engaging ways. These companies; they are doing this by leveraging segmented data analytics to cultivate targeted content marketing through social media and digital platforms. Facebook’s in-house agency, Creative Shop, works with brands such as Budweiser, Ford, Sprint and Toyota, to create custom branded videos to run on the social network’s platform, as well as develop tools for small and medium sized businesses to use when drafting campaign ideas (Advertising Age). Facebook has also recently hired the former CP&B, an advertising agency, CEO as the global creative director of the social network’s in-house agency in early January 2016; this indicates the forward momentum Facebook is taking to expand their internal creative agency. 
Likewise, Allstate Insurance brought its digital media-buying fully in-house, early 2015. Allstate’s programmatic buying, which makes up 70% of their media plan, moved away from their long-lasting relationship with Starcom and moved in-house not only for cost efficiencies and targeting abilities but has had programmatic experience in the past and felt comfortable doing so. Allstate’s relationship with Starcom is not final and will continue on the strategic side to gain market knowledge, content and data analytics.  

Digital and social marketing rely heavily on data-driven analytics and insight extraction to formulate and develop segmented and targeted social/digital campaigns. While big data can certainly improve a brand’s marketing efforts, little data is swiftly becoming the new data forefront allowing brands to cultivate closer consumer relationships by allowing strategic opportunities to present themselves. Little data is utilizing the right kind of information to extract actionable insights for effective marketing; it encompasses the “nuts and bolts” metrics, derived from Big Data, to allow companies to personalize content to their consumers. Historically, agencies provided marketers with reports of impressions on their campaigns; however, recently brands are building their internal teams to have core competencies in data analytics. For example, the U.K. Post Office has been putting more weight on building internal data analytics and has brought content operations in-house. Specifically, they, along with other marketers, are bringing data insight development in-house in order to more quickly respond to their consumers. These in-house teams have the ability to respond to consumers at a swifter pace - immediately discovering what campaigns are/are not driving engagement and providing the insight to adjust course as needed.

In a socially intensive world, brands need to execute continuous and relatable content around the clock, whereas the traditional agency model is not necessarily built to fully support this trending necessity. Along the same lines, there are a vast number of approval layers that content must to pass through before reaching the client, which causes bottlenecks for agencies trying to keep up with their clients’ needs. The traditional agency is quickly trying to adapt to the need for this type of on-demand support. The need for this key, strategic competency is increasingly compelling for brands to decouple this agency service and develop the internal talent to provide these insights.

So what does this mean for marketing procurement? Research indicates that, among those companies that have a marketing procurement department, 45% say procurement is somewhat or more influential in deciding to move agency work in-house, but only 5% are “extremely” influential and 10% “very” influential; this influence is likely to rapidly grow in 2016 and in the next upcoming years. The burning question for marketing procurement professionals and CMOs is whether the quality of work that results from an in-house agency can measure up to that of an external agency. Another key question is also whether or not bringing creative work in-house will yield savings and increase ROI.  Moving away from outsourced agencies can pose some concerns aside from economical savings. These concerns center around the people you hire, as your only real assets are those you hire and their skills, ensuring objectivity remains present when recommendations are made, holding each person and project accountable, as every agency knows that its relationship with a client relies on the success of its project output, and continuously investing in creativity. Marketing procurement can develop strategies and assist in making these decisions by understanding the project objectives, mapping out the category profile, which includes marketing spend and contractual analysis, to truly measure the quality and quantity of potential savings from transitioning to an in-house agency structure.

In-house agencies are on the rise and brands are hiring top talent from existing agencies at a rapid pace to help supplement this need to recruit experienced professionals. This rise in popularity of in-house agencies has created an interesting dynamic for the agency landscape. Traditional agencies are now longer competing with each other, but also with their clients’ internal talent. According to Campaign, creative agencies are not well placed to survive unless they distinguish themselves with exceptional skills and content, and even then agencies will need to continue to push their creative boundaries, develop exceptional skills and innovations, and continue to provide high value to their clientele in order to remain competitive in this shifting agency landscape.

Reference: http://smmadvertising.com/house-outside-advertising-agency/


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