March 2017
During a direct materials data collections process the initial time commitment to gathering technical and qualitative data and developing a robust market basket pays off great dividends in time savings and alleviating confusion during the sourcing initiative.

Key steps include determining what specifications must be shared, if non-disclosure agreements (NDAs) are necessary to protect IP rights, gathering a complete set of designs from the technical team, and paying careful attention to the qualitative criteria of the product or supply base.

An accurate quote and achieving sustainable savings are the main objectives of most sourcing initiatives. In order to ensure that the supply base knows the product or service they're bidding on a detailed technical package must be compiled. The key tradeoff is deciding what specifications and documents must be shared and what you would like to leave out in order to manage intellectual property (IP) concerns. This is especially critical in regions such as China and India.

To some extend IP concerns can be addressed with NDAs. And, NDAs are always necessary if sharing engineering quality 2D or 3D mechanical drawings or electrical designs such as CAD drawings, STEP files, or Gerber files.

But, for less complex items you can consider drafting a table of the critical or key specifications which must be met to fabricate the component. Since materials are large price drivers a preferred materials and characteristics list along with acceptable alternate materials and even material specification documentation should always be included. Other items include primary fabrication process, secondary or finishing processes, and assembly processes to ensure supplier capabilities. To narrow down the supply base a component sizing, volumes, and ship schedule table is necessary. You may also consider including list of acceptable deviations and no-go criteria to uncover possible cost saving alternatives.

The next step consists of gathering the complete set of all of the pre-selected designs contained within the market basket into a technical package for the suppliers. If it's a large market basket you'll have to select representative drawings to determine if the supplier is capable of manufacturing that part type at a competitive price. This includes tolerances and manufacturing processes divided by commodity group. But, there can be enough feature variability within a single product group to warrant multiple drawings in cases such as machined shafts, couplings, non-flat feature items, and complex cavities.

The last key factor which is commonly overlooked is developing a scope of work for qualitative criteria. Establish qualitative requirements for prospective suppliers includes reviewing service levels, technical support, certifications, required account management, reporting capabilities, and any other commodity group specific supplier selection criteria. Most critical factors can be determined during stakeholder interviews and reviews of previous sourcing efforts. Logistics are also a key area and include order placement, lot traceability, packaging, shipping, and stocking.

As with any sourcing effort key factors vary by commodity group, but by ensuring careful attention is paid to critical specifications, IP concerns and NDAs, technical design files, and qualitative criteria the overall timeline of the initiative can be shortened and supplier confusion avoided.
In recent weeks, YouTube and parent company, Google, have come under fire as high-profile companies have halted their advertising due to controversies with ad placements. Earlier this month major advertisers like AT&T and Verizon announced that they would no longer be placing ads on YouTube citing concerns that their ads were being placed with controversial content (e.g. hate speech, politically motivated, etc.). Along the same lines, advertising agencies have been reviewing their relationships with YouTube and Google following the news of the controversy. Havas Worldwide, one of the largest advertising agencies, announced that their UK office would halt all media buying from YouTube or Google until the issues can be resolved.

In an effort to amend the situation, YouTube released a statement outlining how they will be addressing the issue and reviewing their current policies. They have always had policies surrounding the type of content that is eligible for advertising with restrictions on what could lead to a channel being removed from this “advertising-friendly” list. As of last week, YouTube has strengthened these restrictions to capture a broader range of content and “demonetized” a number of channels based on these new parameters. YouTubers have already started to feel the effects of these policy changes, with many noting a loss in revenue over the last few days as their channels were impacted by these changes.

Similarly, YouTube has added more options to their “sensitive subject exclusions” filters that marketers can apply to their campaigns. The intention of this filter was for marketers to be able to ensure that their advertisements were not posted alongside content that was related to “sensitive social issues” and/or “tragedy and conflicts”. Following recent events, YouTube has expanded the filter selection to include a broader range of categories that marketers can exclude from their campaigns.

Many agencies are taking this a step further and leaning on big data to increase transparency into the content tied to their ad placements. GroupM announced that they will be partnering with OpenSlate, an analytics firm, to provide further insight into the content associated with campaigns their clients are running on YouTube. By leveraging the learnings from this data, GroupM will work with their clients to create better controls around brand safety to avoid potential issues as digital advertising platforms like YouTube continue to evolve.

It is with these changes that YouTube and Google are hoping advertisers will increase their confidence levels that content is being monitored effectively and potential risks are being mitigated. Only time will tell if these changes will be enough for YouTube to regain the trust of advertisers.

The concept of supply chain in business has grown substantially over the last three decades as well as the need for young supply chain professionals. Universities across the country are quickly catching on to this as they continue to add courses into their curriculum in hopes to catch up to the likes of Michigan State and Penn State Universities. Everyone seems to have their own definition as the idea of supply chain varies significantly depending on a company’s point-of-view within a given industry.

Often when people hear the words “supply chain” they often think of logistics from a distributor’s or manufacturer’s mindset when there is much more to the equation. In short, supply chain focuses primarily on process improvement. The process improvement can come in a variety of ways and is represented by many key metrics or KPIs. Supply Chain encompasses all of the processes and activities that move a company’s product or service, from raw materials (or beginning stages) to finished goods/services, to the end-user, as quickly, safely, and cost-effectively as possible with a strict focal point on supplier selection and management. Given the definition it becomes easy to understand how a supply chain can vary when looking from unique point-of-views’ of a manufacturer, distributor, wholesaler, retailer, consulting firm etc. Departments within a company can include anything from inventory management, lean Six-sigma, manufacturing, engineering, operations, sourcing, procurement, logistics, category management, merchandising, and many more. In the best environments, these departments all work cross-functionally to increase revenue/profit margin or reduce cost in a healthy/sustainable matter.

The above definition lends itself to an ever-changing/ever-growing area in business that is supply chain. Technology has driven and will continue to drive a majority of this change but it’s equally important to understand changes in the market as well as the user base; whether it be generational or current trends. The goal of any business is to generate revenue. In order to maintain sales growth you need a flexible supply chain to react to all of the changes around you. Supply chain professionals must be equipped with the following:

Analytical capabilities – Being good with numbers is only the beginning. It’s what you can do with those numbers and how you can present them that is most important. Taking large sets of data and manipulating them into tangible tasks, goals, and strategies is what makes supply chain professionals so appetizing to employers.

Business acumen – Having the ability to think from a high-level is crucial. The best way to so is to draw from past experiences and keeping up with the industry you are in to make educated decisions based on your findings in a project. Business acumen comes from experience and continuous learning initiatives.

Interpersonal/Communication skills – At all stages of a project supply chain professionals must keep their key stakeholders engaged. Whether you are in scope of work, data collection, research, analysis, RFx, negotiation, contract, presentation, or implementation ( communication skills are essential to keeping things moving. The concept of relationship building is always present as you never know what potential business/projects are down the road.

Software/Program/Language understanding: Often times, companies require an understanding or fluency of certain software or programs. They may be (should be) willing to invest in training but becoming fluent in SAP, AWR (Advanced Warehouse Replenishment), Alternate Planning, Microsoft Access, PowerPoint, Visio & Excel, Tableau, SharePoint and writing Sequel will only help build a career in supply chain.

Flexibility: Act like a sponge absorbing as much category, department, and industry knowledge as possible.

·         Willingness to jump between departments and see the business and supply chain from as many perspectives as possible will aid in seeing the bigger picture

·         Willingness to jump between industries and sectors can also enhance one’s career

The main takeaway is that Supply Chain isn’t going anywhere! Young professionals who can analyze a problem and successfully communicate results and go-forward strategies will be needed for years to come. As technology continues to advance and the push to automate processes accelerates employers are actively searching for critical thinkers. There is more to it than first meets the eye. Building a career in supply chain requires experience in many departments, categories, and industries. As your resume continues to grow with subject matter expertise opportunities will follow. A lot of what you’ll learn along the way can be applied to new projects down the road. The exciting part is learning from your mistakes and drawing from past experiences. Inventory Management and Procurement are two of the larger sectors in supply chain. In a future post, I will discuss how many supply chain experts, have experience in both as they dramatically sharpen one’s analytical ability.
We have a core philosophy here at Source One that says that we, more than being strategic sourcing and procurement experts, are at the heart of our work, consultants.

So in everything we do, we constantly strive to do more than execute a task for our clients, but to deliver extra value by providing advice, or asking questions of our stakeholders to better understand their business, their industry and most importantly, their needs and goals. It’s this consultative approach that has made Source One a pre-eminent strategic sourcing and procurement firm for 25 years.

What made me think of this was a whirlwind day earlier this week I had with one of our clients. It started on a train I was on heading to the client’s office. I spent an hour and a half of a two hour train ride on the phone with the client’s procure to pay department trying to locate a purchase order. The week before I had negotiated a large technology hardware purchase leveraging the end of the quarter to get our client additional discounts. But without the purchase order issued to the vendor and the items shipped by the 31st, we’d lose that discount. Of course, the purchase requisition was stuck somewhere in the “automated” workflow, and as the amount spend was significant, required additional financial approvals. It took a half dozen phone calls, and several e-mails, but I was able to have PO issued and just learned that all of the gear shipped today. Problem solved. The lesson here is more times than not, the consultant knows more about the inner workings of a client and how to get things done than the regular FTEs.

I arrived at the client’s office and stepped into a supplier relationship management meeting with one our client’s largest IT support vendors. The partnership between the client and vendor had become frosty over the past couple of months. Why? Because they hadn’t been following SRM best practices. The client felt that the vendor had become complacent in their efforts to innovate and improve efficiency within IT and the vendor felt the client wasn’t acknowledging the hard work and investments they had made in within the company in the past six months.

Both client and vendor were a little right and a little wrong in their positions and it just took a quick conversation to learn that the root of the issue was a lack of communication at the right management levels. I mediated some quick initial solutions and worked with the vendor to set corrective measures of the next six weeks. There is still a lot of work to do, but I have no doubt the relationship will get back to where it needs to be.

Next up was a quick trip down the hall to another conference room to discuss the implementation of a software asset management (SAM) tool. I provided my counsel on how to best get the client’s vendor database, contracts, license entitlements, and purchase orders migrated over to the SAM application. I also provided insights into the role procurement has to play in SAM and thoughts as to what I have seen as best practices in setting up an asset management program.

From there, I was off to a meeting with Legal Affairs to discuss the renewal of a master licensing agreement with my client’s largest software vendor. Here I discussed items like compliance and audit language in the new contract and explained what the client would want to see in the agreement on key items like data security and privacy, and retention for any cloud services they are, or will utilize in the future.

Then I was off to a vendor demo of a component of a lab information management system (LIMS). I had written the RFP for this project a couple of months ago and was leading the meeting that brought key stakeholders from the business, IT, and project management office together to meet the vendor, see their solution in action, and ask questions. Afterwards, I provided my stakeholders with an analysis on vendor's price proposal, licensing model, implementation timeline and research I had done on the vendor’s history, client profile, and financial stability.

Finally, my day (and early evening) was done. It was a long, productive day. I provided my client with tactical results, operational insights, and strategic guidance. Believe me, this isn’t something that is unique to me. This is something that all of Source One’s consultants do on a daily basis across dozens of industries. Give us a call and let us show you how we can improve your business processes, improve your vendor’s performance, and lower your strategic spend.

The tech industry can be a volatile market when it comes to customer loyalty. With technology continually evolving and new technology becoming available to the market every 6-12 months, there’s constantly a new device that is shifting customer attraction. With that, any product defects that plague a brand can sometimes lead to their ultimate demise. Samsung, one of the leading tech brands in the world, went through one of their biggest brand embarrassments in 2016 with the ‘exploding’ Samsung Galaxy Note 7. The news surrounding the defective batteries became very public and lead to a PR nightmare for the tech giant. Customer brand loyalty began to fall and it raised the question of how they could ever recover. With that question in mind, let’s dive into the details a little more.
 First, some history: After 35 device owners reported that their phone had overheated, for some the device caught fire, Samsung made the decision to recall every Galaxy Note 7 that was sold worldwide (at the time it was reported that this equated to 1 million devices of the 2.5 million manufactured) and stopped all sales of the device. Before the final recall on October 13th, 2016, there were attempts at replacement batteries and units however they still had reports of devices of the phones catching fire which lead to the inevitable end of the Samsung Galaxy Note 7. 

Now for some science: In January 2017 it was reported that the cause of the fire was that when the lithium ion batteries were continually over-charged, the lithium ions would start to cover the surface of the negative contact in a coating of lithium metal through a process call “plating”. In extreme conditions, that lithium metal can form tiny spikes (dendrites) that can poke right through the separator between the electrodes causing a short circuit.

In between the time that the recalls occurred and the report of what caused the battery malfunctions, Samsung remained fairly quiet in the news. It wasn’t really until the announcement of the Samsung Galaxy S8 that consumers heard anything about the future of their Galaxy devices. During their time of silence Samsung went back to the drawing board to not only finalize the design of the S8 but also to re-engineer their battery testing process.

How Samsung is improving their battery testing: With the release of the S8 all eyes are on how they plan to ensure the safety of their phones batteries in the next line of devices. To ease those consumers worries Samsung has revealed an 8-point battery check that improves upon previous testing measures and includes new tests to ensure the safety of the batteries. Below is a breakdown of the 8-point battery check and what each step entails. The first 5 points are previous processes that have been improved upon:
  1. Durability Test: the engineers overcharge the batteries, puncture the casings, and expose them to extreme temperatures.
  2. Visual Inspection: Visually inspect all batteries against enhanced criteria.
  3. X-Ray Test: X-Ray inspections to view the inside of the battery for any abnormalities.
  4. Disassembling Test: Increased battery disassembling test to assess its overall quality, including the battery tab welding and insulation.
  5. OCV Test: Checking every device for any change in voltage throughout the manufacturing process from component level to complete device.
  6. Charge/Discharge Test: The batteries undergo a large-scale charging and discharging test.
  7. TVOC: Additional testing to ensure battery integrity.
  8. Accelerated Usage Test: Intensive test simulating accelerated consumer usage.
Samsung’s Future: While I don’t think consumers will ever forget the ‘exploding’ Samsung Galaxy Note 7, it is worth noting that Samsung has taken full responsibility for what happened and has put in extreme measures to prevent it from happening in the futures. As a consumer, I feel that Samsung has taken the correct steps in controlling the future of their Galaxy devices.  I also don’t think that I am alone here; since the spring of 2016 Samsung’s stock price has been steadily rising which indicates that investor and consumer confidence is returning. I don’t believe that they are completely out of the woods but if they continue to remain accountable and transparent, I expect the Samsung Galaxy S8 (and future devices) to continue to be top consumer devices. 

4 factors influencing procurement transparency in the near future
Why continue focusing on transparency in procurement? While doing so can take more effort from companies, it can also line up with several different priorities for enterprises around the globe. Because of changing standards and expectations, businesses may also have to try new low-cost country sourcing/nearshoring solutions to keep up with newer goals.
These are some arguments in favor of working toward transparency in the years to come, and what that could look like in the new world of globalized business.
1. Transparency alone may not be enough
First of all, we can question whether simply being "transparent" is enough. Making figures available and reducing complexity could spur positive change, but it might need to come with more specific efforts as well. A recent report from the NYU Stern Center for Business and Human Rights, "Putting the 'S' in ESG: Measuring Human Rights Performance for Investors," examined this point, among others.
One of the things authors Casey O'Connor and Sarah Labowitz wrote about was the difference between transparency and sustainable practices. According to this paper, 98 percent of transparency measurements were only looking at the efforts, and not the results.
The different frameworks businesses use can have their own special focuses, but whatever they decide on risks limiting the other policies. The solution, according to the authors, involves looking at the actual effects and rewarding healthy work environments.
2. The impact of blockchain
Just as it isn't enough to simply rely on transparency, no one solution may be the thing enterprises need. Still, no matter what the overall effect, it's already clear that blockchain technology, which involves making ledger data more available, is going to be a possible factor for new effective models.
Naturally, this may come with some roadblocks. A TechTarget piece recently explored the possible downsides of blockchain: It could be difficult to convert existing supply chains to this model, for one, and the process of laying the groundwork for implementation could take more time than businesses are aware of. This isn't to say that transparency through blockchain is unfeasible, though, so much as a challenge.
3. More pressure to disclose
It's impossible to know exactly how effective current labor rights campaigns to promote transparency will be. It does seem that there are still strong advocates for companies around the world to make the right choices and pressure their suppliers to do the same thing.
In a recent Human Rights Watch article, HRW Director for Germany Wenzel Michalski described the necessary impact for apparel manufacturers specifically, giving one well-known example.
"Adidas, a leading German brand, has been publicly disclosing its supplier list since 2007 - demonstrating that transparency is both possible and desirable," Michalski said. "Adidas, a leading German brand, has been publicly disclosing its supplier list since 2007 - demonstrating that transparency is both possible and desirable."
Addressing spend management and other functions can be a good means of adjusting the procurement segment of the full business chain without risk or losses. In light of all of these above factors, it's important to get the most out of resources with careful sourcing.
At the end of my first week at Source One, I was lucky enough to join the Chicago team in celebrating their 2016 Q4 success.  As I became acquainted with the Chicago team in a fun and exciting environment, I was amazed when I learned that the company has surpassed its performance projections in each of the last two years. Since then, I have had an outstanding opportunity to contribute to projects across all of Source One’s verticals.  

From auditing, to spend analysis, to market research, I’ve had the pleasure assisting Source One’s consultants, project analysts, and directors at both company locations.  Most notably, I was given the responsibility to streamline a RFP process for a chief client.  This month long project involved RFP analysis, price negotiation, qualitative evaluation, and a unique experience in building relationships with suppliers.   This assignment was a great learning experience into one of the most notable ways that Source One delivers value to our customers.

The best opportunity that Source One has provided to me has been the ability to learn outside of the classroom.  The  team here at Source One  has been so involved in my development by continuously providing learning opportunities and always being available for console.  Whenever I need assistance, everyone is always willing to be a teacher or to lead by example.  In addition to the Source One staff, the interaction with suppliers and customers across industries has given me direct exposure to the different levels of a supply chain structure.  Through this, I’ve discovered how improving one’s direct and indirect spend management is a crucial step to maximize the efficiency of any supply chain.  I am amazed by the number of savings opportunities that Source One can offer to their clients.  With Source One, I’ve gained a better understanding of how to identify and eliminate wasted spend using a resound procurement process.

In order to become a competitive business, you have to tighten the belt in every spend category – no matter the industry.  This is a crucial step to successful operations management, which is why this internship aligns perfectly with my studies.

 It pleases me to know that this internship has delivered a valuable experience that I can progress forward in my career with.  A year from now, I am set to graduate from DePaul University with an MBA degree—and will once again be cast out into the full-time working world.  I’m interested in leveraging my chemical engineering background with my newly acquired skills in business management to deliver results for a value driven firm.  Ideally, I would like to contribute to manufacturing and other large scale operations.  Thankfully, Source One has enlightened me in a variety of ways to deliver value to such industries. Whether my future company provides a product or a service, I am confident in my ability to deliver value to the firm.  I am glad that Source Once has given me the opportunity to contribute to the success of the company.  I’m looking forward to celebrating future company milestones in the coming months.    

Source One Round Up

March 31, 2017

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

Is UNSPSC Really the Best Route? 3 Reasons 'For' ...
When it comes to selecting a classification taxonomy, UNSPSC is often a first choice for many organizations. While these standards have their advantages, there are other options that may be more suitable depending on the goals of your organization. Source One Consultant Brian Seipel's two part series begins with this post advising a thorough evaluation of the goals for the spend analysis project, and considering the benefits of a standardized taxonomy. Ultimately, he suggests selecting a standard taxonomy to get a kick start to the project, which can be beneficial in the long run. 

Countdown to ISM2017 Episode 2: Achieving Transparency for Continuous Cost Reduction
In Episode 2 of the Countdown to ISM series, Source One Consultant Ken Ballard discusses how a transparent supply chain can offer support in achieving continuous cost reduction. This is the first of a multi-episode contribution from Ballard, highlighting effective methods for ensuring your business is earning unending savings. The Countdown to ISM2017 series by Source One features category experts and procurement professionals offering their insights in anticipation of the international conference hosted by the Institute for Supply Management in just a few months.

ISM 2017
Source One is looking forward to one of the most anticipated industry events of 2017, the Institute for Supply Management's annual conference in May! ISM2017 is an international event that brings together over 2,500 global supply chain and procurement professionals for four days of networking, educational sessions, and exclusive opportunities to work with experts in the supply chain and procurement industry. ExecIn, a sub-conference featured at ISM2017, is designed specifically for supply management leaders and is exclusively hosted by Source One. With a specified audience, ExecIn offers the opportunity to reevaluate processes through sessions prepared by select presenters for executives at non-consulting organizations.

The Road to SYNERGY - Baltimore, MD
 Baltimore, Maryland is the first stop on the Road to SYNERGY, where procurement pros in the area can network on June 6th. Corporate United hosts these regional events in anticipation of their annual national conference SYNERGY, to be held later in the year. The Road to SYNERGY series includes one day opportunities for collaboration on a smaller scale, before procurement and supply chain professionals from around the country gather during the national conference. As a Gold Sponsor, Source One is looking forward to these focused opportunities to share their innovative category solutions with other experts in the industry from across the nation.

ISM- New York Annual Conference- Procurement Risk Management
Originally scheduled for late March, this annual event was postponed due to Snow Storm Stella. The Institute for Supply Management's New York Chapter rescheduled it's annual Procurement Risk Management conference for June 14th, and the itinerary remains as originally planned. Procurement and risk management experts can still anticipate this one day event to collaborate and share their predictions of industry trends in the upcoming year. Source One's procurement and supply chain experts are also looking forward to share their insights and exchange expectations for 2017 through the variety of educational and informative sessions presented by experts in the industry.
ISM Tech 2017
Last week I attended ISM Tech 2017 in Washington D.C. I went to the conference with three goals in mind: to gain insight into industry trends and best practices, to learn about how technology will influence Procurement's role in the future, and to network and find out how others are thinking about and planning around these concepts. The conference provided a healthy balance of all three objectives and was elucidating in terms of how quickly and significantly technology will shape the supply chain and procurement world.

A large portion of the conference was future-driven and therefore fairly conceptual. Sessions of this kind covered everything from how 3D printing will affect manufacturing and MRO to the future of supply chain automation including forecasting and mitigating real-world disruptions that may be caused by weather, natural disasters, or even social unrest. Naturally, the other common buzz topics we're used to hearing about were heavily covered which include such topics as Internet of Things (IoT), big data analytics, artificial intelligence (AI), and advanced robotics in manufacturing. It was refreshing, however, to hear about these topics within the focused context of Supply Chain and Procurement and to hear ideas about how we can expect them to evolve and find their way into commonality across industries. Even more, according to those presenting, the pace of this technological evolution and the pace at which adoption is moving was stunning.

Many of the other sessions were more practical and revolved around solving more contemporary Supply Chain and Procurement challenges. There was an excellent session on negotiating software agreements where many of the underlying concepts transcended the category. Some of the others included data driven approaches to managing transportation and travel, as well as leveraging technology platforms for spend analysis and e-Sourcing. All of these are themes we are all familiar with and helped to ground the rest of the technology and future focused sessions.

The most interesting part of conferences like ISM Tech is hearing about what challenges others are facing in their respective industries, and how they're approaching them or how they've resolved them. It's also extremely beneficial to see how the trends presented in the conference actually fit into what's going on within most companies. In this case, much of the more futuristic content of the conference was still fairly conceptual for most with not clear vision of how it fits into their road map but a common understanding of its imminence and therefore a need to be prepared. Even more than being prepared, conferences like ISM Tech call attendees to action as technology is moving more swiftly than businesses' ability to react. Clearly, maintaining an awareness of the evolution of the technologies with which we have become familiar (analytics, robotics, etc.) is imperative in order for companies to merely survive. In order to maintain a competitive edge, though, companies need to become experts at constantly searching out and applying emerging and new technologies. Being current is the new falling behind, and being behind is no longer an option -once you fall behind, you will never catch up.
I spend a lot of time thinking about how to properly classify the products and services vendors offer to their customers. Bringing order to what can sometimes be the chaos of company spend data is the first step in identifying savings opportunities. How products are classified also plays a part in tariff rates, with different percentages being applied to different classes of product.

Usually, this process is simple enough; welding supplies are welding supplies, plastic containers are plastic containers, Snuggies are… well… wait, what?

When Classification Isn’t So Simple

A key pitfall of any given classification taxonomy is an incomplete structure that leaves blind spots among product or service types, allowing a few to fall through the cracks – Exhibit A, submitted to the US Court of International Trade, is the Snuggie. Part blanket, part garment, the product has caused some confusion in terms of how it should be classified. Although it sounds silly, the hard dollar implications are real: as these products are made abroad, classifying them as a blanket rather than a garment means a difference of 6.4% in terms of tariffs. Hence, the court case.

In the end, the court sided with the producers, putting the to-blanket-or-not-to-blanket question to bed (pun merrily intended). The Snuggie is officially a blanket, meaning big savings for the producer but a loss of revenue for the government.

Real Lessons Learned from a Silly Subject

At the end of the day, unless you are actually in the Snuggie business trade, this court decision may not apply to you directly. However, there are real lessons to be learned in terms of spend classification:
  • Always recognize the limitations of the classification taxonomy you employ 
  • Address these limitations through organizationally-specific custom classifications 
  • Review your taxonomy to ensure it addresses current-day business needs

Many organizations adopt UNSPSC codes or other industry standards when performing a spend analysis, and this can be a wise move in terms of utilizing an already built system with a wide coverage. However, classifying via UNSPSC and sourcing via UNSPSC are two very different things. The structure works for some industries and for some purposes, but not all – review the resulting spend classifications with key stakeholders, and confirm that they will meet your needs of classifying spend for the purpose of identifying savings opportunities.

If you find any gaps, work with stakeholders to modify your classification structure by adding additional layers. Perhaps your organization is in the specialty chemical business, but UNSPSC doesn’t delve deep enough to accurately represent your data – add additional layers needed to properly segment spend and suppliers. Finally, recognize that business goals change; certain changes may make your current taxonomy invalid. Although organizations grow and evolve, a taxonomy is going to stay static – unless you take the time to update it. Identify activities that should trigger a taxonomy review, such as the launch of a new service product line. Consider what the new direct costs associated with these new products will be, as well as any indirect costs that support them. Likewise, take a fresh look at existing spend categories and determine if the new products will require any more depth be built into them.

Sustainability update: What these 3 businesses are doing to improve procurement
In some ways, this year shouldn't bring too much of a change for sustainability measures. After all, companies need to continue developing the habits encouraged over the past few years. However, the growth of new technology, as well as general concern over instability, can put roadblocks in the way of businesses that want to reform their supply chains more seriously.
Pursuing sustainable procurement can be a path to several different benefits, including cost savings and compliance. The forthcoming International Standards Organization guidance known as ISO 20400 could shift the focus to a different understanding of sustainability as well, as a Spend Matters contributor commented. This article also pointed out that the new standard could specifically refer to things each member of a procurement company needs to do individually.
This is just to say that changes can be on the horizon, challenging companies to work harder to meet new requirements. As always, you can look to major names for inspiration, and some well-known brands are doing more to make procurement and supply sustainable.
This month, Ford explained the impact of its Partnership for A Cleaner Environment program, also known as PACE, which looks to share the duty of sustainability across different suppliers in a single chain. Whether or not businesses copy this completely, the important thing is the emphasis on equal participation from all links.
The statement said that this program applies to different kinds of environmental tasks, such as reducing water, emissions and energy, as well as involving several entities that work together.
In just the next five years alone, the company hopes to save 550 million gallons of water and 500,000 metric tons of carbon emissions. As Ford tackles this incredible responsibility, it can also use everything it learns along the way to help all of the suppliers individually do a better job following best practices.
"The company hopes to save 550 million gallons of water and 500,000 metric tons of carbon emissions."
General Mills
For years, this cereal company has had environmental friendliness on its mind, according to GreenBiz.  Over the course of ten years, from 2005 to 2015, General Mills reportedly reduced manufacturing emissions by almost a quarter (23 percent). Now, it's focusing on a more ambitious cut, dropping 28 percent more of emissions by 2025, which is just part of its forecast.
General Mills CSO Jerry Lynch spoke to the source and explained the plans guiding the company's policies.
"In the case of climate change, clearly we wanted to take a long-term view of this, and so that's why we've got two milestone dates out there: 2025 and [achieving sustainable emission levels in line with scientific consensus by] 2050, which much of the world is measuring up against and aligns with other deadlines that governments and organizations are setting," Lynch said.
This layered approach to long?-term goals can be more effective as it sets up a broader spectrum to work from.
This is another example of a major company with efforts on multiple fronts. The Environmental Protection Agency recognized IBM's commitment to sustainability as part of the organization's Climate Leadership Awards.
Among other qualifiers, IBM stood out for using an Environmental Management System to assess multiple criteria at once. It shouldn't be surprising that the company used IT to try and accomplish this, with IBM more closely at data. Once again, this effort focused on both emissions and saving water, putting forth a concentrated plan.
Facilities Management Sourcing Challenges Blog Mini-Series Part
Over the course of this blog mini-series, my colleague and I will detail some of the challenges of sourcing within the Facilities category. This first blog details challenges at the baseline stage.

One of the most important steps in strategic sourcing is establishing a baseline for the spend profile you intend to negotiate. It seems like the easiest step as well, a baseline is, simply put, a current state assessment of the spend profile including a qualitative and quantitative overview. Some categories are easier to baseline in nature due to the type of information and how it is tracked traditionally by a company or its suppliers. One example is Utilities spend, you can easily determine from a contract and a handful of invoices what the current rates are and get a good idea of usage. The information is historically tracked due to the nature of the costing model within the supply base.

Other areas, such as many of those identified as Facilities Management spend are not as simple. Within this category companies are oftentimes managing multiple suppliers of varying levels of sophistication. This category is also heavily service oriented and based often on time and materials cost models. Unless the suppliers are set up with the expectation of tracking information such as labor hours spent per job, both capital and ad hoc work, materials costs by line item including markup and unit cost, and any ancillary fees assessed - they likely will not track this information for their own records. This is especially the case for those "mom and pop shops" using off the shelf technology to quote and invoice their customers.

So what does this to mean to you, the procurement professional? Worst case scenario is that it puts you in a very difficult position when attempting a solid sourcing effort. Without data such as typical labor hours billed within a specified time period, it will be very difficult to forecast savings results on a labor rate reduction. The same goes for materials markups, without a detailed list of materials used including quantities and markup structures, claiming savings on this spend will take some creativity.

With that said, it is not impossible. At the baseline stage it is important to identify the gaps in data that might create these challenges and develop a methodology for calculating savings that Finance will support and recognize. Please also keep in mind that data not available historically does not limit your ability to recoup these savings in the future through contracting and billing best practices applications. One of which includes requesting that moving forward all invoices are detailed at the line item level so that in quarter or six months the data can be revisited for analysis or sourcing. Contracts should also include language binding suppliers to provide more visibility into how they are costing jobs so that an apples to apples comparison can be made in the future.

More challenges to come in the next blog, but in the meantime check out our website for more information on sourcing in the Facilities Management category.

              There is an ongoing inside joke amongst my family and friends that despite my constant reminders, none of them are exactly sure what I do for a living.  To my liberal arts friends I work in business, to my business friends I work in consulting, and even to my niche group of consulting peers the exact role of a procurement professional is opaque at best.  The role of a strategic sourcing consultant is one that requires a broad knowledge base of business functions, and an only slightly tighter range of subject matter expertise.  Consider this blog a freebie to the internship applicants who are slightly hesitant when asked what they know about the procurement consulting role.

             So what types of skills and expertise enable success in a strategic sourcing role?  Well, first one must become a Jack of:

Enterprise Software Platforms – A fundamental understanding of an organization’s procure to pay (P2P) model is critical for pinpoint areas of opportunity for streamlining workflows.  Being able to identify and map the dataflow from PO creation through invoice payment, GL coding, and Key Performance Indicator (KPI) reporting is necessary to properly assess the value of procurement, and eliminate manual integrations which are hurting the bottom line.

Dashboard Creation and Reporting – Tracking KPIs is all but useless if the metrics are not being communicated in a clear, concise, and accurate manner.  Procurement professionals must understand the metrics that are most valuable to the organization and ensure that those metrics are available to the key executives driving the organizational strategy.  A well maintained dashboard delivers a valuable storyboard showing the successes and opportunities identified in the procurement space.

Culture Adaptation – Adapting to a client’s organizational culture is not a skill limited to strategic sourcing consulting.  What is unique to this particular role is that the adaptation must flow from supplier to client and back to foster meaningful strategic partnerships.  A strategic sourcing consultant must be able to clearly and appropriately convey a message to suppliers from family owned packaging operations to multinational technology companies.

Category Adaptation – While most procurement professionals have one or more specific categories of expertise, those in the consulting space must be able to adapt the sourcing process to categories that may be less familiar.  The ability to perform efficient and effective market research is vital in finding opportunity in more obscure or less frequently sourced categories.

Interpretation of Product Specification and Requirements – Similar to category adaptation is the ability to interpret product specifications in categories outside of your immediate realm of expertise.  While stakeholders can be relied on for the more technical aspects, a sourcing analyst should be able to identify gap areas in the documentation that may become a roadblock during a competitive sourcing process.

           Essentially the procurement processional needs to have at the very least a proficient understanding of all areas within an organization that interact with procurement.  As the value of procurement becomes more apparent across organizations these interaction are becoming more frequent and more intricate, leading to a competitive advantage for those ahead of the learning curve.

           To fully take ownership of the various functions of procurement from identifying a need or opportunity to execution of a contract and the sourcing functions that fall between, a sourcing professional must be a Master of:

Data Analytics – A sourcing consultant must be able to validate data across multiple sources and reconcile to form a complete picture of current purchasing habits.  This relies heavily on the ability to manipulate and summarize data while maintaining its integrity even in categories with complex pricing structures or thousands of SKUs of data.

Market Intelligence and Research – One of the most frequently terms in business, procurement being no exception, is the word “opportunity”.  Utilization of market intelligence and research is key in identifying areas of opportunity prior to investing resources into a full sourcing initiative.  Efficient use of this skillset reduces the risk of wasted resources on a project that does not have feasibility, and ultimately increases your procurement ROI.

Negotiation – Possibly one of the more obvious required skills, the importance of negotiation tactics cannot be overstated.  A procurement professional must be able to approach negotiation from the standpoint of adding value both to the client and the supplier, and finding the ideal mix of leverage points to satisfy both parties and create the foundation for an ongoing strategic partnership.

Contract Development – While the legal terms are best left to the lawyers, the business terms are what drive the most value from the contracting process.  Procurement professionals must be able to integrate knowledge of best practices in payment terms, additional pricing incentives, termination and auto-renewal clauses, and language specific to the product or service in question to secure the relationship and maximize value.

Ongoing Category Expertise – While being a Jack of all categories is an asset, a procurement professional should always strive towards achieving and maintaining subject matter expertise in a particular area(s).  Many purchasing categories face frequent regulation changes, technological advances, commodity price fluctuations, and a multitude of other factors that require a dedicated subject matter expert to remain competitive as industry conditions change.

      While this list is certainly not exhaustive, it does begin to offer some insight as to what types of skills and expertise are needed to support procurement functions on a daily basis.  Certainly as procurement moves to the forefront of a business value driver, this list will only become more robust, and the need for experienced procurement professionals will grow.


Prioritizing procurement for better results
For smarter sourcing, businesses may have to break down their traditional procurement systems to improve each part. This could end up being effective in the long? run, since it allows companies to do what's best for several sectors and the whole at the same time.
Needs and demands
Writing for Spend Matters, Adobe's senior director of global procurement, Conrad Smith, recently wrote about structuring procurement based on the the classic hierarchy of  needs. The best way to do this could include seeing the early stages of development as necessary for the later ones.
In the "pyramid model" Smith uses, the top is dedicated to "design & strategy" while the lower layers concern themselves with aspects like transaction management. His conclusion states that attacking the basics this way sets a standard for reaching future goals. However, one thing Smith doesn't go into as much is the "need" to meet goals even after an organization has moved on to a "higher" level.
Cost efficiency
Factoring the need to save into the equation can complicate things. The elements of a good supply or procurement setup can help support the company's evolution by effectively adding recovered funds to the overall budget.
"Look for areas where you can save money through situation-related solutions."
Investigate each of the pieces of the chain and look for areas where you can save money through specific situation-related solutions, which can reflect the specifics of each and every function as the business develops more needs though its expansion.
A procurement plan can make this efficiency the target while even cutting certain aspects of the existing chain that are no longer valuable or can somehow be made more cost-effectively. Assessing supply decisions strategically could mean reduced spend in different categories.
Digital solutions
Reaching this kind of specificity can take procurement management improvements that integrate into the existing model easily, with no disruption. The transformation plan can incorporate this from the beginning, with an intent to slowly build into full integration for whatever the new procurement solution is. In a way, this can parallel the gradual development Smith mentioned.
That's what a Strategy& piece for Forbes said, outlining the goals of strategy based on a well-structured approach that starts with an honest assessment of the starting position. It's interesting to note that the final product of the piece's five-step plan actually involved a segmented rollout to move through the most important supply chains based on company priorities.
This is all in keeping with the author's commitment to a new view of business modernization called Industry 4.0. This is the vision of the fully-digitized business world, where the different sectors of the supply chain can all connect. The source also noted that simply embracing digital solutions could be transformative, so it recommended a small-scale pilot program first to develop the plan.
Taking a comprehensive approach
The most effective procurement management implementation plan will include new staff as well software, so the company uses the latest technology effectively.
How to achieve transparency in supply chain for continuous cost reduction
Strategic sourcing and procurement groups often view continuous cost reduction efforts as unsustainable, or believe the only opportunities to reduce costs beyond the initial efforts would require reducing the quality of the product. In reality, over time more opportunities can present themselves to allow further cost savings without sacrificing quality.

As the economic landscape of the industry changes, and factors that effect the costs associated with direct materials used, there is constant potential for further savings. The procurement experts at Source One have a few best practices for achieving continuous cost reduction with downstream suppliers based on their experiences, and they've provided three methods for delivering cost savings by creating transparency in your supply chain.

1. Track annual price increases - While it is typical to receive price increases from downstream suppliers at the beginning of each new fiscal year, documentation justifying the price increases is still important to collect to ensure the increase is even. This gives you the opportunity to anticipate increases, mainly for direct materials, and be aware that your supplier will increase the cost of your goods.

2. Negotiate superficial cost increases - Procurement professionals possess quality negotiation skills as demonstrated during the sourcing process, but they can apply these tactics when suppliers announce the annual price increases year to year. If suppliers are aware that your business will want to discuss the price increases and won't simply accept the superficial cost, they'll allow you as the customer to negotiate savings.

3. Request a paper trail to ensure price increases are justified - As the customer, you can ask detailed questions and make requested that require the supplier to be more open about where the price increase comes from. If they can provide documents stating the price increase and you can match it to their increase passed on to you, your business can be confident the supplier isn't padding their margins with the new price for your commodity or service.

Source One Consultant Ken Ballard provides further details on the most effective methods for discovering saving opportunities regularly in his recent podcast Achieving Transparency for Continuous Cost Reduction. This episode is the first in it's series, as Ballard continues the conversation by discussing leveraging economies of scale, streamlining transactional and manufacturing processes, and decoupling value added services such as design and development from a product's unit cost. This episode is featured in Source One's Countdown to ISM2017 series, in anticipation of the international industry conference hosted by the Institute of Supply Management later this year. Source One is the exclusive sponsor of ExecIn, a subconference designed specifically for high level procurement professionals attending the event.

ICYMIM: March 27, 2017

Source One's series for keeping up with the most recent highlights in procurement, sourcing, and supply chain news week to week. To stay updated on the latest supply management articles, check in with us every Monday.

Philip Ideson, Art of Procurement, 3/23/2017

As procurement professionals, it's important to consider the difference between where we focus our efforts and where the executives in our organizations believe we should focus our efforts. Traditionally procurement offered cost reducing initiatives that offered savings viewed as extremely valuable throughout the business. Procurement has developed, and their strategic efforts are proven to be a higher priority for company executives that are seeking to utilize the procurement function to it's full potential.

Contingent Workforce Management Is Changing - Are You Ready?
Tim Holland, Corporate United, 3/20/2017

When it comes to non-employee labor, there is considerable value that sourcing can offer when hiring independent contractors and other managed services. Achieving the paradigm shift in the way you approach this contingent workforce usually requires the support of your procurement group or other strategic sourcing professionals. It's more than updating old practices, focusing on qualitative and quantitative measures, applying ICC and technological advancements can upgrade your program to be best in class. 

Spring Will Be Here Soon. Time To Clean Up Your Procurement Operation
The Doctor AKA Michael Lamoureux, Sourcing Innovation, 3/16/2017

Identifying the people, processes, platforms, and progression in your procurement organization that require support to be reevaluated or redesigned is crucial in ensuring every aspect of your department is running smoothly. This is a first step in guaranteeing that your being as efficient as possible, and every part of your procurement group is on the same page. If you're using the latest platforms but you feel you aren't reaching your full potential, review the talent and change management to discover what is necessary to fill those gaps.

What procurement can get from predictive analytics
Why is it important to bring predictive power to the procurement sector? As IT evolves, procurement technology can also keep pace so it stays relevant. Predictive systems aren't just about knowing what's likely to happen: They're about consistency and efficiency, some of the core values of businesses today in general. We can go even further, though, and analyze what it is about predictive tech that will continue to make it essential.
What predictive analytics means to procurement
To understand this, we need to have a definition of what predictive technology really means for the procurement and supply sector. Unsurprisingly, a big part of predicting procurement is setting up accurate plans for future shipments.
Naturally, this can build off of a strong foundation of data, which procurement organizations should have plenty of access to. However, it's possible that the sense of scale could actually harm companies by giving them unrealistic expectations.

Analytics still offers much to procurement.Analytics still offers much to procurement.
Getting too far ahead?
Forrester Research research analyst Mike Gualtieri believes that businesses can invest too much into this: instead, he told Health Data Management about what really makes predictive analytics work. He specifically referred to this as predictive analytics and machine learning, or PAML.
"The best PAML solutions have model management," Gualtieri said. "The dirty little secret about machine model is that they are based on correlations that work on historical data. That can be a problem since the models created using that historical data are used to predict future outcomes."
While this publication may be health care focused, the basic principle of staying level-headed can still be relevant to procurement professionals in every sector. This might require a data-oriented plan, though, to start at the areas with the most information and work off of that for important tasks. These can include benchmarking, logistics adjustments and other necessities.
New management structures
Overseeing predictive transformation could also require a new focus from the top. Existing leadership might have to refocus, and the isolated tech sectors may take on a larger role to help the overall effort take shape.
Whether this is in the C-level or some other similar high position, the organization can shift to accommodate the latest predictive availability. Being in charge of so much important data means the business may have to change the system it uses to handle it. There's no reason that the added responsibility of this information has to be a burden, though, if companies are well-equipped enough to respond.
Strategic sourcing and effective decision?-making
?At its heart, the big advantage of predictive tech could be translating different data factors into strategy. Strategic sourcing can be a similar corollary, since it's based on using various measurements to guide procurement choices. With other trends such as the Internet of Things also confronting businesses, the scope of this sort of plan likely needs to get wider and more comprehensive.
These can include pricing, stability, fuel concerns and other granular issues. Identifying the most relevant data begins the process, and establishing appropriate purchasing management protocols could help develop more effective, efficient coordination.
Is an RFP always your best option?
When people hear the term strategic sourcing, it is commonly associated with Request for Proposal (RFP). However, it is a misconception that strategic sourcing and RFP are synonymous. Rather, a RFP is just a tool in the strategic sourcing toolbox. Behind strategic sourcing there is a process; some processes may vary but the general process flow is pretty much the same. The most important thing to keep in mind is that your approach to each step of the process should be shaped around developing the best strategic path forward for a given sourcing category. What I mean by this is that you should be thinking about how to shape a solution that elicits the lowest total cost of ownership (TCO) and is actually implementable for the organization. These two elements are key and need to be at the forefront of when executing all sourcing based activity.

Essentially, strategies centered on TCO and implementable solutions are the focal point of strategy development and should heavily factor into approach. Your approach to strategy development must factor in numerous elements, such as the organization’s outlook, insight gained from contract analysis, supplier relationships, as well as a cost analysis, and proceeding with a RFP isn’t always going to be the right approach to execute. Remember it’s just one tool in the toolbox. Other options include request for quote (RFQ), direct negotiations, reverse auctions and benchmarking to name a few. I find it always helpful to have a candid conversation with the end users and the suppliers in order to fully understand the relationship and let them know what your objectives are. From there you can work together to attain your goal.

Suppliers understand the business and sometimes the business is calling for cost reduction. Incumbents will do their best to help reduce costs, but they also understand that sometimes they aren’t the best fit solution. For example, there may come a point where these suppliers, due to company size etc, may not be able to meet the target cost requested in order to continue operating while making a profit. However, I’ve always found that supplier’s appreciate this transparency, and are more willing to take a first pass at reducing costs by working with you rather than being drug into a RFP process. In my experience, sometimes the threat of a RFP works better with incumbent suppliers rather than actually pursuing the more burdensome activity of taking the category out to market. This is an even more effective strategy when you have benchmark data against which to compare the incumbent’s pricing.

From a pure negotiation standpoint, the incumbent generally appreciates that you reached out to them first and gave them a first pass opportunity to hit your goal. They are more apt to work with you and even more importantly, being transparent with the incumbent, is a more effective method of handling an important supplier relationship. Now if you have a limited understanding of the category, and the incumbent supplier isn’t one that would be considered a preferred supplier, or identified as being a partner, I’d be more likely to take the category out to market in order to gain an understanding of what the market has to offer. Then I am able to include the incumbent supplier in the RFP process and compare their proposal to the rest of the market and negotiate from there.

 Now for more tactical categories with a much lower risk impact to the organization, like office supplies, I’d be much more likely to benchmark and negotiate, or proceed with a RFQ. For this type of category, the requirements are fairly basic and consistent across the industry, limiting the need to conduct a full qualification assessment. I’ve also used reverse auctions where appropriate. Again this is a good strategy to utilize for categories that are less strategic in nature and very price driven. Let’s say I’m making several large purchases of rebar over the course of a year, I’ll most likely conduct an RFI to identify a supplier who can fulfill my needs. Then run a reverse auction for each product purchased. The rationale here is that I can take advantage of the hungrier supplier. Supplier X might be at capacity but Supplier Y is desperate for business.

The lesson overall is that each category needs to be looked at individually in order to shape the most effective strategy for a given category for a given organization. There is no cookie cutter approach and all factors must be considered in order to be strategic and effective. Strategic sourcing is not synonymous with Request for Proposal, and an RFP is just one strategy, “tool,” that can be employed when shaping a strategy and working to achieve sustainable cost savings.
Source One Round Up

March 24, 2017

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

40 WMS selection tips to help you find the perfect software
Software selection projects are typically long and tedious processes, and any individual that has had to be responsible for reviewing RFP responses, vendor demos, and stakeholder meetings can appreciate suggestions for making the process more efficient. Senior Consultant Torey Guingrich and other industry experts offer their advice in this extensive list of tips for the WMS selection tips. Guingrich suggests considering both existing and future warehouse requirements, creating a WMS vendor shortlist with practical considerations, and including all key stakeholders input on the RFP.

Strategic Sourcing Throughout the Product Lifecycle Q&A
Direct Materials Sourcing Expert Martin Przeworski offers his perspective on sourcing throughout the product lifecycle in this recent Q&A. Based on his experience, Przeworski provides examples for how sourcing and procurement groups can create value in every stage of the product lifecycle. These professionals possess the market intelligence, ability to engage suppliers and cost-reducing methods that can be applied beginning to end of the product lifecycle, not just when looking to cut spend during the manufacturing stage. Further insights on this topic are available in Source One's most recent whitepaper Strategic Sourcing Throughout the Product Lifecycle: Balancing Competitive Costs with Innovation & Speed to Market.

Today is the last day of ISM Tech 2017! The three day even kicked off on Wednesday in Washington, D.C. and the information technology and services sourcing experts from Source One are enjoying the last few sessions of the conference. Over the last few days, attendees have had the opportunity to hear from industry experts as they presented educational sessions focused on technology and all the options available to take business operations to the next level. The informative conference delivered excellent insights into the best practices for identifying, sourcing, and implementing performance boosting technology and software.

Industry professionals around the world are looking forward to the highly anticipated international conference hosted by the Institute for Supply Management in May. Over 2,500 global supply chain and procurement professionals come together for four full days of presentations, networking opportunities, and educational sessions that allow attendees to work with experts in the supply chain and procurement industry. As the exclusive sponsor of ExecIn, a sub-conference at ISM2017 designed specifically for supply management leaders, Source One prepared a schedule that attendees can anticipate as an opportunity to reevaluate their business operations and existing procurement processes with the support of best in class procurement experts.

The Source One team looks ahead to SYNERGY national conference in this summer. Baltimore, Maryland hosts the first conference in June, where local procurement professionals can collaborate with other experts in their industry on a smaller scale in anticipation of the national conference. As a Gold Sponsor for these Road to SYNERGY events, Source One's procurement experts are looking forward to connecting with attendees and sharing more information on our cost reduction services.