September 2016

Procurement departments all over the world are utilizing procurement software and tools to automate the process of purchasing materials, finding new suppliers, running sourcing events and maintaining an inventory of goods, whether in distribution centers, in the pipeline or on the shelf. The advancement of technology is allowing procurement to enhance market coordination, foster increased compliance, introduce and vet new suppliers, and decrease human error within the sourcing initiative. These enhancements are not only beneficial to the procurement operation but beneficial to the buyer-supplier relationship through collaboration and communication.

Speaking of relationships, if you really think about it, technology has also allowed singles all over the world to perform their own e-procurement or sourcing event from their mobile phone, every day. Yes, I said it, online dating is a personal dating-procurement platform from your couch, on the bus etc.… With the influx of dating applications and websites, technology has indeed changed the dating game, forever. Let’s take the app, Bumble, for instance. Bumble allows you search (or vet in procurement speak) for single people in your area looking to meet for dating, friendship or any other activity you could care to mention. You can then do you research by googling, Facebooking, and “creeping” their Instagram feed to ensure this is a person you’d like to start and maintain a conversation with (moving into the RFP process). When this the small-talk is over, you already know their educational background, where they grew up, their job etc.… it’s rather intrusive, but we all do it. Each stage of the online dating experience and process replicates the basic sourcing initiative engagement:

Step 1 - Baseline:  The baseline would include past relationship(s), current relationship(s), dating experiences and other’s dating experiences. This corresponds with establishing your current state with your incumbent supplier and even past supplier relationships that you have encountered.

Step 2- Request for Information (RFI):  This is the process of reading profiles and selecting which suitors you’ll chose to engage in conversation and eventually “invite” to the Request for proposal stage of the initiative.   This mirrors calling and vetting alternate suppliers to potentially include in the RFP process.

Step 3 – Request for Proposal (RFP):  In this stage, just as you would in a procurement event, you are asking questions to understand if the suitor (supplier) will meet your requirements and if they would be a good fit.

Step 4 - On-Site Visit/Testing: Simply put, this is meeting your suitor(s) to really understand if the relationship would be a good fit. In procurement, it could be on-site visits, photography test shoots, test runs and so much more.

Step 5 - Supplier Selection: This is step we’ve all been waiting for… choose your suitor! (or supplier)

To conclude, dating and the sourcing process are really not that far apart. Technology is making procurement not only streamlined for the procurement industry, but also for meeting like-wise singles.
The practice of nearshoring has been on the rise in recent years in both domestic and multinational companies with operations in the US. Historically one has associated low-cost production regions with Asia (typically China, Vietnam, Philippines, etc.) where they would leverage the advantages boasted by this region to cut production cost and ship products back to the US for final assembly or distribution. Now why is this? Well the aforementioned regions have historically boasted well below market average wage rates. In addition raw materials are readily available to many Asian regions (China as a good example) and there is an abundance of skilled labor. Utility costs and other overhead fees outside of labor have also been well below that of North America and other European countries.   

However, a shift is occurring in many industries where more companies are looking towards Mexico as the new low cost production partner considering the newly developed benefits. Post 2000, China’s wage rates have been steadily increasing due to the economic and infrastructural advances made by the country – skilled laborers are now demanding higher wages. Conversely Mexico’s wage rates have remained relatively stagnant during the same time period. Many studies show that the average Mexican wage rate has fallen below that of China. The shorter lead times and economic advantages posed by the NAFTA is another factor that makes bringing foreign production “back home” to the US more attractive. I’ve outlined in detail the history and motivations to nearshoring in a previous publication found here.

Speaking more speculatively I would like to share some thoughts regarding what this movement means, and where it will be going in the future. China historically held strict restrictions and barriers against entrepreneurship and foreign investment/trade – especially as it applies to the manufacturing industry. With the relaxation of restrictions in the 1990’s as China realized the potential benefits of foreign investment came the first of many foreign companies looking to take advantage of China’s abundant raw materials and cheap, skilled labor. This untapped market quickly took off with the boom of electronics production seen in the 90’s.

Since the explosion in the Chinese outsourcing China’s infrastructure has advanced in suit, along with their standard of living, median income and GDP output. With this comes a proportionate raise in wages, improvement in working conditions and regulations, more advanced technology and robotics, and a general improvement in working conditions. China has essentially closed the gap on a lot of the pre-existing conditions that allowed for the wage disparity to persist through the 1990’s to early 2000’s. This fact, coupled with the prevailing challenges that outsourcing to China represents (i.e. long lead times, communication barriers, time zone difference, intellectual property integrity, etc.), have led to the phenomenon of nearshoring.

In the near future I anticipate the nearshoring trend to continue in terms of manufacturing operations moving to Mexico and other regions closer to the domestic US as the economic advantage to outsource to “low cost” countries decreases. Eventually I anticipate some manufacturing operations to even move back to the US since Mexico also poses some challenges A compared to domestic US operations (i.e. language barriers, lack of business development/sales in supplier organizational structures, etc.). You can read more about nearshoring challenges and warnings here.
Business communication channels grow increasingly numerous and complex with each passing day. In a procurement consulting role, these communication channels are constantly flooded by colleagues, clients, and suppliers. A fresh-faced analyst with a crisp Baccalaureate will quickly learn how to best manage these tool. For most, this is one piece of a thrilling puzzle. For others, communication is a challenge -- something that drains that individual of energy, focus, and productivity. These individuals struggle to find a place to think clearly when communication seems to be in endless demand. This group is best known as introverts, or folks who gather energy from silent thinking time and expend energy in communicative interactions.

In a social, fast, and loud society, the skills of extroverts receive the greatest value. Speaking quickly, commanding attention, and fast action come before the more introverted skills of careful consideration and planning. To make matters worse, the slower approach to handling a given situation can appear negative to coworkers and management. However, there are various strategies to help introverts strengthen communication skills and compete with their extroverted counterparts while retaining the strengths of their natural skillset.


Socialize - Take advantage of work events, prompt small talk, and attend collaborative work environments. These scenarios make it much easier to meet people and recruit friendly faces for necessary help in a new role. Introverts should do their best to take coworkers up on the opportunities they present. This will allow a new employee to find commonalities and speak in a low risk setting.

Schedule - Prioritize and plan time to re-energize by building each day’s schedule to balance calls and internal analysis type work as much as possible. The analysis work will restore social energy lost during the calls and meetings.

Mindset - Embrace the strengths of introversion and work according. The introverted approach can better refine and optimize ideas and make for a more powerful and persuasive end product. Avoid frustration by concentrating on learning and acknowledging improvement.

Non-verbal – Rely on less socially draining, non-verbal communication. For example, introverts should practice maintaining an upright posture and focus on making eye contact during face-to-face communication. Smiling makes everyone appear more approachable, social, and upbeat. These habits show confidence and give a stronger impression. Non-verbal communication is a significant factor in how people are perceived.

Verbal - Speak up in an articulated manner with confident tone. Avoid second guessing questions asked and statements made as doing so will lead to hesitations and an increase in filler words. Be authentic and concise. Verbal communication is typically the greatest challenge for introverts. The confidence, authenticity, and conciseness will have to be forced at first. However, it will not take long for it to become more natural.

Overall, the challenges faced by introverts in a communication heavy position will decrease with each passing day. Every positive experience will build upon the previous with learning occurring from mistakes and failures. Soon, the strategies will be seamlessly integrated into the introverted procurement professional’s daily routine.
You've gone through the RFP Process, vetted suppliers, and finally firmed up the contract to the relationship official. From here on out, your contact with the supplier will be limited, reserved only for reordering and timely infrequent account status updates. Is that really the best way to approach your supplier relationships?

Having a strong and positive relationship with key suppliers is important to the success of your business. Beyond this, having strategic relationships with your suppliers opens your organization up for innovative new products, services, and processes, as well as new market expansion. 

We've pulled together four major ways you can drive further value out of your supplier relationships!

Source One Round Up: September 30, 2016

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


5 Ways to Keep a Supplier Engaged and Build Supply Chain Partnerships

Relationships with suppliers are a two-way street. Whether you're looking simply get an update on the overall status of your account, source new products, or place an order - you expect your supplier to address your needs. But, what about the other way around? What do your suppliers want or expect of you? This week, Source One Project Manager Leigh Merz lends her years of experience managing supplier relationships to provide you with 5 tips for fostering fruitful relationships with your suppliers.


DePaul University Career Fair

On October 6th, catch members of the Source One team at the DePaul University Fall Career Fair! We're looking for bright and motivated undergrads to join our team as Analyst Interns. Supporting our analyst teams, interns gain exposure to a wide range of industries and supply management practices, all while learning about Source One's consultative approach. Interested in joining the team? Apply at

A recent guest post, authored by Maulick Dave of GEP, appeared on Spend Matters [1]. In it he espouses the use of predictive analytics in procurement. Dave’s article offers an interesting (and optimistic) viewpoint about the value of predictive analytics and may be used effectively within the procurement realm. He argues that if you construct a Savings Regression Analysis (SRA) model with multivariate regression of subcategory level past-realized savings data to forecast savings under current market conditions, then you will achieve better cash flow management, gain the ability to time the market, and ensure accurate goal setting and performance management.

Subsequently, a cautionary response was posted by Michael Lamoureux over at Sourcing Innovation [2]. In his post, Lamoureux emphasizes that a SRA model is useful for generating a point estimate (baseline) but constrained by the inherent assumptions involved in performing regression analysis. More specifically, Lamoureux states that the model would not be applicable if “a new buyer comes in that totally redefines the demand and the market strategy, or the market conditions have suddenly changed from supply shortage to supply surplus, or new production technologies could revolutionize production and trim overhead 20%.”

Read in conjunction, these two articles afford an exceedingly important point: Predictive analytics is very powerful, and should be employed frequently by procurement professionals, as long this is done in an intelligent and responsible manner. I cannot emphasize enough how important the words “intelligent” and “responsible” are in that sentence. In general, mathematical models can be described as simplifications of the real world in some that we may construct a computationally tractable understanding of it. As such, they have limitations. It is the responsibility of both managers and analysts to understand what these limitations are.

In order to put Lamoureux’s statement on a more concrete foundation I would like to explore a moment in history during which some very intelligent people forgot to heed his advice. Recall Black Monday (October 19, 1987). Leading up to this day, the financial market had become dominated by quants. The Black-Scholes equation, sometimes referred to as Midas Formula since it was believed to be a recipe for making everything turn to gold, was in widespread use for pricing options. Options are one of the oldest and simplest derivatives; derivatives are essentially bets upon bets. The development and widespread adoption of options led to ever-more complicated derivatives and just as many complicated mathematical models attempting to underpin their true value.

Rather than delve into financial literature, I will attempt to explain how a derivative might work through an analogy. Suppose that you bet your friend John $100 on the outcome of a football game. Say the Browns versus the Patriots. You choose the Patriots of course. At the end of the first quarter the Patriots are up 14 to 3. Rather than wait to see if the Patriots do in fact win, you would prefer to walk away with a guaranteed profit. You sell the right to the $100 bet to our friend Bill. Since it is very likely that the Patriots will win if the score is 14 to 3 already, Bill says that he is willing to pay you $20 for the right to the bet. You have now guaranteed your profit by creating a derivative (selling the right to your bet) and Bill has now assumed all the risk (albeit, he has a pretty good chance of seeing a payout for a nominal fee).

While the assumptions of the Black-Scholes model are beyond the scope of this article, it is widely accepted that when they hold true then the risk of using it is low [3]. Of the utmost importance to us is that the model, and other similar models, are only applicable when the market is stable. On Black Monday, this assumption was violated to an extreme. The world’s stock markets saw a loss of more than 20% of their value within a few hours. While the Black-Scholes equation was not sole the cause for the financial crash, it was “one ingredient in a rich stew of financial irresponsibility, political ineptitude, perverse incentives and lax regulation” and “may have contributed to the crash … because it was abused.” [4]
In Gerry Preece’s Buying Less for Less, the author discusses the dilemma of measuring success for procurement organizations. Preece focuses specifically on the growing marketing category, and the challenge this complex and fast moving segments has proven to be for procurement teams.

Utilizing a simple savings calculation to understand the value driven by procurement activities in the marketing space completely misrepresents the actually impact. While there is certainly value in sourcing for savings, sourcing professionals disadvantage themselves and the organizations they work with by maintaining such a narrow focus. In redefining savings, procurement and marketing can more easily align on the organizational objectives as well as the metrics used to evaluate success.

Take an important metric for marketing organizations- top line revenue growth. Marketers have a plethora of tools at their disposal to track any number of items, but a typical goal for the overall organization is to expand the business and grow the top line. An apparent correlation may not exist between strategic sourcing and the growth of the organization, but by recognizing the importance of looking past savings and measuring something slightly intangible, procurement quickly aligns more closely with the goals of the marketers.

Another area where procurement can focus their attention is in seemingly non-impactable spend. More often than not, your partner will assist you in identifying additional cost savings opportunities, whether making minor changes to the brand approach, or major adjustments to decrease cost and maintain value, opportunities exist outside of the typical to drive down costs. Be wary of the strategic nature suppliers and the historic relationship are critical to initial buy in. Prior negotiated rate cards along with proven success are useful for benchmarking exercises that will assist in competitive evaluation and internal support.

The real difficulty is selling the concept of an expanded savings definition to a mature procurement organization. While I prefer a marketer first approach to sourcing, I recognize within some organizations, savings remains king and any additional value adds are just that – value adds. Too often a focus on savings leads to disaster, whether through the implementation of a less-than-stellar partner, or the reduction of a budget. Marketing exists to grow the business, and in hindering that practice, procurement quickly earns the ire or brands and agencies alike.

No singular definition of savings will fit every organization, but by expanding the organizational thinking and recognizing the competing priorities will assist in aligning stakeholders to achieve continuing success. 
As we end move into the final quarter of the year, an area focus of my work for my clients is getting their software license agreements prepared for the upcoming year. Many businesses who run their fiscal calendar with the regular calendar will tend to align their software licensing agreements in parallel as it helps with the budgeting process.

As a category, software licensing is a key area of the Strategic Sourcing and Procurement workload. Even mid-sized companies will often have hundreds of applications in their information technology portfolio. While many of those systems will have been sourced with multi-year agreements up front, there are still numerous systems whose licenses will be up for renewal and that requires sourcing and procurement to review contracts, analyze the business need for those applications, and form a strategy for keeping licensing costs as low as possible.

Since the number of licensing agreements to be worked through can be significant, and because altering some licensing arrangements before the new license period takes effect can be upwards of two months, it’s very important to begin this work now so that you have the space needed to negotiate strong contracts.

The first thing to do is understand the types of licensing models for the typical software systems and applications. Please note that there are numerous types of license agreements, but the two noted below are the most common licensing arrangements that I come across.

Annual Subscription Agreements – As the name suggests, and subscription agreement gives the organization license to access an application for a set period of time, usually for a year. This is very common for cloud applications, such as a CRM tool, but extends too many other applications as well.

Annual License Support Agreement – Typically, these agreements come into play when a license for an application or software module was bought as either a perpetual processor based and/or named user license with the software provider tacking on a support agreement for maintenance, patching, and upgrading the software, depending on the terms and conditions in the agreement. The cost of support usually runs between 15 to 20% of the cost of the original cost of the license.

When reviewing contracts up for renewal, the first thing that should be looked at are the renewal terms. In some cases, if a business does not contact the software vendor early enough to inform them that they will require a lower number of licenses, or that perhaps the system is being decommissioned, the contract will automatically roll over into the next year with the existing license count and terms. If the licensing agreement is set up like this, a notification should be sent to the vendor you will be requesting changes to the agreement.

Doing this serves two purposes; it creates a paper trail that shows there will be discussions regarding that contract, but also often leads to reconnecting with the software supplier to understand what their product roadmap looks like, which is beneficial to the business stakeholders.

Upon review of the contracts, discussions should occur with the business partners to understand what the licensing requirements will be for the upcoming year. For example, if an organization’s sales force has significantly gone up or down, strategic sourcing will need to know this so that they can communicate the proper expectations to the CRM software provider.

With license support renewals, it is even more important to understand what the license requirements are in the upcoming year. If, for example, database servers were decommissioned, thereby making it so the processor based DB licenses are no longer needed. You will need to notify your supplier as early as possible so that the correct paperwork can be drafted.

Complicating matters is that the big, global software providers (think big blue and big red) have complex formulas for discounting their support based on an organization’s volume of modules and licenses. Removing licenses from the organization’s eco-system will not necessarily equal the amount of reduction in overall license support.

Because of this, sourcing professionals will need to be prepared for a prolonged round of negotiations with the supplier’s support team. If you have enough time and patience, you can wear down the supplier to retain as much of the previous year’s discount as possible.

The concept of Software Defined Networking has been around for some time. As with many of the buzzwords we hear in the tech world, we often hear a lot of hype, sometimes for long periods of time, before we see any real world, practical application of that hyped up buzz. Within the past year, Software Defined Wide Area Networking, or SD-WAN has been gaining momentum. Virtually every client running an RFP for network services is at least dipping their toe in the water and asking questions about the carriers' SD-WAN capabilities in order to evaluate whether or not there is a fit within their respective organizations. This trend is increasing as many clients are now not only asking about it, they're designing their networks around it. Exactly what SD-WAN holds for the future isn't yet 100% clear. What is clear is that it's a big part of next generation networks and enterprises need to get familiar with this new tool in their toolbox.

Up until recently, though, the technology and carrier services and their deployment models weren't exactly ready for prime time. Even today, major Tier 1 and Tier 2 carriers are forging new deals with SD-WAN platform providers, establishing relationships with broadband and wireless service providers, and developing models to suit various customer needs. So the technology is ready, the carriers are increasingly ready, and the customers are getting savvy. What's driving adoption and what will the average SD-WAN deployment look like? Well, that's still unclear. We have seen organizations completely scrap their MPLS network in favor of a fully SD-WAN based on DIA links and various broadband connectivity. We've seen companies optimize their bandwidth by bringing their broadband backup connections into an always on state to leverage the additional bandwidth. We've seen companies add broadband both as a backup and to bolster primary connections. We've also seen companies leverage the ability to quickly roll out new connections either as temporary or stop gap solutions, or for lower priority connectivity while maintaining MPLS links for critical locations.

What's nice about SD-WAN is that there are no standard models and the initial rollout or experimentation can be as complex and involved as you want, or as simple as testing a link on some low cost broadband and even 4G. As clients continue to show interest in SD-WAN, we've had more occasions to explore the carriers' portfolios and approaches to the technology. Generally, their experience has been the same. Most organizations are in an exploratory stage and many are beginning their testing to determine long term viability and the SD-WAN's capacity to meet their critical and/or non-critical networking needs, third party connectivity requirements, and operational requirements (deployment, QoS, visibility, etc.). One thing is for sure, the carriers and the technology manufacturers are deeply invested in the technology and its rapid deployment, flexibility, and reliability is proving to be extremely viable, and will continue to evolve into an invaluable tool for enterprises -if not their primary connectivity of choice- very soon.

If you're rolling out new network services or looking to check the market for wide are network services, contact Source One to get help identifying and evaluating your options and choosing the best fit solution for your needs. Contact us at
Within the Maintenance, Repair, and Operations (MRO) space, inventory management is a recurring and commonplace issue. In many cases companies are operating purely on a tactical basis. Forecasting is limited and orders are only placed when parts run out. Worst case a part runs out that is needed to maintain facility operations and the buyer or warehouse manager is forced to halt production while attempting to obtain it. This is typical in the manufacturing and industrial space and produces countless wasted man hours. Problems like this are difficult to manage since the part needed may never have even been ordered before. However, there are solutions to a large portion of the issues. Analyzing purchasing patterns and historical data can help to alleviate future problems and suppliers are more than happy to assist you. One way to optimize your inventory management is to set up a vendor managed inventory program or (VMI). In a perfect world facilities could get exactly what they need, when and where they need it, without maintaining excess inventory, while keeping accurate record of the transaction. This is not always feasible but VMI can certainly look to streamline your operation.

By working with the vendor you can review previous years of purchasing history to understand the approximate quantities of items you order a year, determine how much excess inventory you have on hand and gauge at what point you should be reordering each item. This way your purchasing patterns are proactive rather than reactive. Typically within VMI after you review the data you work with the vendor to establish what you feel is appropriate from a core item and quantity standpoint. The vendor will then put a system in place to review the number of items in stock and at what inventory level that item should be reordered.

For example, the supplier creates a database of the items by manufacturer part number tied to client part number and price along with the particular bin or cabinet the item is stored in. When a specific preset reorder point is reached it alerts the supplier that the item needs to be restocked. Conversely, if you would like to keep it in house the system can be configured to either automatically send out a PO request or alert the warehouse manager that an item needs to be re-ordered. The product is then shipped out from the warehouse to the local supplier location and then arrives at the facility to be restocked (either via freight or local representative). All transactions are recorded by the supplier and readily accessible for the client to view. 

Most suppliers are more than willing to help setup VMI because it is mutually beneficial. It entrenches them within the organization, helps them to allocate inventory for their clients and solidifies purchases. It's a simple concept, if they are assisting in the management of the inventory and establishing reorder points, the reordered items are going to be pushed through them yielding increased revenue.

This is just one of many industrial VMI solutions, each solution can be custom tailored depending on the company's needs and operations. Industrial vending machines are another common form of VMI for smaller common use products such as gloves or disposable ear plugs. Vending machines are just another form of efficient, controlled, just-in-time automatic replenishment.  Remember to utilize your suppliers as resources and let data drive your decision making.
Digitalizing the supply chain Part 3: Security

In part one and two of this blog series, we covered the importance of properly planning and strategizing supply chain digitalization, as well as how to best go about the implementation process. However, once new technologies, tools or systems are incorporated into the business model, there is still a lot for supply chain managers to do. 

When it comes to digitalizing the supply chain, one of the biggest issues most organizations encounter is ensuring its security. Cybersecurity has become a global concern - and with good reason. Hacker capabilities are rapidly accelerating in both maturity and sophistication. Nearly all digital devices - and just about any connected tool - can be compromised. Therefore, while the Internet of Things and a digital supply chain provide companies with a wide range of benefits, they also present a growing number of disruptions, particularly if they are not maintained properly.

Everyone's at risk
Making sure in-depth policies and procedures are in place while implementing supply chain technology is of utmost importance. And while this may seem obvious, even many big-name, global companies fall victim to the mistake. For example, earlier this year, after a power outage, Delta Air Lines' backup system failed to work and it faced massive production delays and was forced to cancel thousands of flights.

However, sometimes a digital disruption is inevitable or unavoidable. Recently, Yahoo confirmed it suffered data breach last year in which hackers were able to penetrate its system and obtain private information from over 300 million user accounts. In this ever-evolving threat landscape, companies can't afford not to be careful. 

Knowing what to protect - and how
Protecting the digital supply chain is particularly important when it comes to data sharing and information. Integration tools are needed to enhance collaboration, gather insight to enhance both internal and external operations, ensure compliance and improve communication. However, all these benefits of heightened connectivity that organizations can use to gain a competitive advantage can also backfire and become a source of major disruption for the company.  

Supply chains already face a massive amount of threats - from cargo theft to natural disasters - so they can't afford to leave their digital tools and technologies unsecured or unprotected. Information Age recently explained that, as supply chains across the globe (and in virtually every sector) grow more complex, they increasingly need IT products capable of handling the expanding operations. However, vulnerabilities with these products can very quickly and easily become a vector of attack, whether an intentional or accidental one.

Product quality and third-party risks
Being able to verify the quality and integrity of products is important, not just from an ethical, social or environmentally responsible standpoint, but from a security one as well. This is why many are starting to place a stronger emphasis on purchasing from trusted and reliable providers and partners. As the source explained, not only is it crucial for companies to ensure that proper development procedures were followed in the creation of the pieces and materials, but that the vendors also adhered to best practices with supply chain security - adding that hackers are aware that organizations are only as stable and secure as the weakest link in their networks. 

Businesses are facing continued pressure to increase supply chain visibility, traceability and transparency. It is becoming increasingly difficult to do this as globalization continues to gain widespread adoption. Being able to see into distant tiers of the supply chain is crucial. However, maintaining and ensuring compliance and end-to-end supply chain security isn't just important for internal operations. Businesses must also do this for their suppliers. Unsecured practices used by third-party partners can compromise the safety and security of operations. Considering this, when digitalizing the supply chain, one of the most important steps company leaders must take is ensuring the credibility and quality of the providers they partner with. 

Monitoring digital devices
Incorporating an increasing number of technology tools and digital devices into the supply chain puts it at a greater risk. Many companies realize their computer networks are a security vulnerability, but not as many consider that every other type of connected electronic - from RFID tags and sensors to smart thermostats - can be compromised. 

A new platform, system or software is only as valuable as it is secure. Therefore, one of the most critical aspects of effective supply chain digitalization is ensuring ongoing security monitoring and detection practices. And while it is imperative to take every preventative measure possible, it also helps if managers develop and implement clear, written policies and procedures for risk mitigation, incident response plans and disaster recovery. Doing this not only helps reduce the chance of a breach, but also minimizes the amount of damage, financial loss and production delays that may result if an attack does place. 

Whether simply looking to retain your business or gain new business, suppliers in general will stop at nothing to put themselves in a better light and win the battle. They will throw competition under the bus and make up stories about why alternate solutions will not fit your needs. The reality is many supplier representatives have come over from a competing company and now are pushing their product to you.  They promote their new employer as being number one in the market for whatever product and service they are trying to sell. What they forget to mention is what the competition has that they do not, as they are only focused on winning. The truth is typically that they themselves do not know what is best for you and only care about making money!

In telecommunications, acquisitions have strong influences on pricing structures, service offerings, and overall capabilities. The competition for these services continues to boom with more localized suppliers playing against the big wigs. Going for the “popular” name does not always result in the best fit for your company. When choosing a provider whether through a formal sourcing engagement or going to the market direct, you need an unbiased opinion and should focus on the facts versus fiction. I have listed out some of the key considerations when choosing your supplier:

  • Understand your requirements: One of the most critical factors before making a decision is to really understand your needs...and wants. Most businesses make a decision to change or upgrade their services because of an immediate issue that needs resolution. They might neglect looking at a holistic view of their requirements for both the present and future, resulting in another financial investment down the line. Take some time to consider what will help now but will also allow you to grow your business into the future from both a productivity and technological perspective.
  • Product Offering: Now that you know what you need, make sure you know what you are getting. Many suppliers offer the same solution but have a unique way of bundling and selling services.  This is one reason suppliers “trash talk” about each other because they themselves do not completely understand the offering. You should understand all elements being proposed for each solution, how each is going to address the requirement, and the cost breakdown. Does the offer meet all of your infrastructure and technical requirements? Will the solution allow your business to grow? Are there too many superfluous bells and whistles that should NOT be considered? If you are able to decipher each piece of the puzzle, then comparing suppliers against one another should come with much more ease.
  • Pricing: In the same way you need to understand what is actually being offered to you, you should understand how it is priced. What are all recurring and non-recurring charges as well as the miscellaneous costs? Are incentives being offered and how are they being applied? Again, when comparing proposals you may not be able to line every item up side-by-side but you can at least look at the bottom impact. On a separate note, some suppliers will leverage their “limited time only” promos encouraging you to sign by a certain time or the promo will go away. This tactic is typically used to leverage you in choosing them without really investigating your options. Don’t always take threat to heart. If they want to be a partner, then they will do what is needed to keep or win your business.
  • Customer Support and Service Level Agreements: How will your account be managed and will there be local representation? For some suppliers, the level of account support depends on how big $ your account is and the services being purchased. If it is important to have a dedicated account team and chain of escalation that is no overseas, then this should be a factor in your decision making. What are the commitments to SLA aspects of the services being purchased? Basically you should be familiar with all of the supplier’s commitments and yours.
  • References: Do not be afraid to ask for references and actually check them. You understand how other businesses use suppliers, what types of services they have, and what the history of the relationship has been like. You should start at the beginning to learn about contracting, ordering, installation, and on-going support, just to name a few.
As stated above, suppliers like to play hard ball when it comes to acquiring business; they are not your friend or each other’s. At the end of the day their objective in any engagement is to pad their pocket. Telecom services have many moving parts and every company has their own way of selling them. So remember, don’t only listen to what the competition has to say. Do your own research and make sure you are truly getting the most bang for your buck!
The success of this year’s Council of Supply Chain Management Professionals’ Annual Conference kickoff propelled a great second day of activities. Events on the agenda included recognition of The SmartWay Excellence Award recipients, induction of members into The Supply Chain Hall of Fame, and Source One’s presentation on Sourcing from Mexico: The Supplier Development Challenge.

The US Environmental Protection Agency’s SmartWay Program was created in 2004 to promote energy efficient transportation in supply chains. With the EPA’s assistance, companies can identify more sustainable operational strategies. The SmartWay Excellence Award formally honors program partners committed to decreasing the impact of climate change and air pollution in supply chain processes. This year’s nine recipients are Bacardi, Home Depot, HP, Johnson & Johnson, Kimberly-Clark, Lowe’s, Transportation Insight, Union Pacific Transportation Services, and Whirlpool.

A welcomed addition to the CSCMP annual event was the formation of the Supply Chain Hall of Fame. Created to recognize those who have made a lasting impact on the supply chain discipline. The first inductees distinguishes for their innovation were J.B. Hunt, Henry Ford, and Malcolm McLean, the shipping and trade revolutionary.

A highlight of the day was Source One’s Diego De La Garza and his presentation on Nearshoring. Addressing the conference as a featured speaker, De La Garza shared his experience with assisting companies relocate their supply chain operations from Asian counties to Mexico. The talk also includes the discussion of factors that influence this nearshoring trend as well as the obstacles that often arise once a company has committed to moving their operations. Diego De La Garza was excited to address the CSCMP Annual Conference attendees so that he could share Source One’s dedication to finding innovative supply chain solutions.

During the New Product Introduction (NPI) phase of product development engineering teams often work on strict time-frames and under the mandate of restrictive cost targets. The design goals are often application focused and contain a broad range of factors that need to be determined before the product is ready for release.

Oftentimes past experience guides decisions, but when competing materials or processes are considered the familiar one tends to win solely on the basis of precedence. This may be a fail-proof choice in most cases, but leaves out the consideration of the market's ability to offer cost savings. Alternate materials and processes that may perhaps be better suited for the current product and offer not only efficiencies in manufacturing, but time savings to market and overall production cost reductions.

By engaging with the sourcing group the design team can integrate real market data to rationalize the design under development with the current state of the supply base. Suppliers are experts in their fields and can act as advisers to constrain and guide broad design goals into clear specifications. Design teams certainly interface with their established suppliers on a regular basis, but the opinions may be very localized to the individual supplier's core capabilities and not be a true and objective portrayal of the market and their competition.

The areas we've seen most often have the greatest impact on final costs and time to market are materials selection and manufacturing process determination.

Material choice may not be an option in certain medical devices with bio-compatibility mandates or strict approval guidelines, but in most cases are seen from a simple mechanical property perspective such as hardness, elasticity, and yield strength or environmental factors such as corrosion resistance. In these cases a wide range of materials will fall within the range of consideration. If we take tooling for example, 316 SS, 304 SS, 17-7 SS, and 440C SS may all be applicable, while with engineered structural or automotive components Aluminum grades 6063 and 6061 are often comparable.

The choice then becomes one of precedence to use the common 316 SS since it's worked for other parts, or to explore alternatives. By contacting a range of small and large shops the sourcing team can quickly determine which materials are most commonly used by the shops, have the best raw material pricing and supply in your area, and which shops offer the best pricing. Often shops use a large quantity of a specific material with other clients and can offer cost savings even on low volume and high-mix parts lists due to existing relationships. A moderate heterogeneous sample set of suppliers will give the most objective quotes.

Manufacturing processes are often tightly coupled to material selection and shops design their floors around specific and expensive machinery they like to operate at high capacity. Newer processes such as MIM or alternates to tradition CNC/turning operations such as swaging may not be an option for incumbent shops, but other shops may specialize in these processes and offer considerable savings to produce the same quality part. Even a simpler consideration such as the broadening of non-critical feature tolerances can decrease the cost of the finished part by 20%-30%. The key is knowing both how the component is used and how it will be manufactured to minimize the costs.

Sometimes a combination of the right material and process is critical for cost savings, as is often the case in injection and compression molding. A non-significant change in material may allow it to be used on a much higher throughput machine and offer significant higher volume production savings that were hidden by initial costs incurred with low-volume runs.

When considered as a tool within the NPI process, sourcing can offer the critical insight on current supplier practices that will achieve time and cost savings not only for materials but also manufacturing process selection to insure the success of the finished product from NPI to full scale manufacturing.