October 2017

In this new monthly Strategic Sourceror series I’ll be reviewing all matters in New and Emerging 
Tech. My goal in this series will be to share insightful considerations on emerging tech trends and the respective sourcing implications/implementation for your businesses and stakeholders.  This series will be kept at monthly review to cover only the most relevant information in the industry - so please feel free to sign up for our monthly News Letter to keep your business in the know and innovating.  

First up in the series, and what better place to start, than the highly anticipated tech and promise Supply chain's across the world have for Blockchain. This tech has been piloted in the most notoriously difficult industries in the world for buyers and sellers.   

Problem: Fraud. Solution – Blockchain? The Diamond Trade: Supply Chain Folk, Take Notes.

Is Blockchain the “TECH” that will make all of your supply chain troubles go away? Potentially. But one thing is for sure, there are still many problems that both MFG industries and the technologies need to work through before the major tipping point occurs. Just like in any new tech that shows promise, there will always be earlier adopters that urgently need the promise this solution makes, PERIOD. One of these industries that has more than theoretical hype is the Diamond Industry. The social/moral justice concerns, popularized by Leonardo Di-Caprio’s Blood Diamond, now finally has a solution that beats Leonardo’s machete to cut through the forest of corrupted local forces as the foremost “tough guy” in the country (smh). That solution and company name is Everledger, a provider of the immutable ledger for diamond ownership and related transaction history verification.

This solution is the story of young tech that as of a couple years ago was considered a “moon-shot”.  But through creative application, the sourcing and purchasing of diamonds has become much more transparent for the benefit of the industry overall. In 2012 alone, 65% of fraudulent claims went undetected -costing nearly $3 billion USD annually (in just direct costs.) With claims of fraud this high it is no wonder that this industry has been one of the first to take on the blockchain charge.

To date, there are 2M stones registered on Everledger’s semi-private network. While the program only tracks quality and stone. There is much hope that this can begin to track history and other factors alike with 100% certainty. This process has been unverified previously through paper records and fragmented networks. And while maybe your next diamond can be less expensive (though unlikely, as we all know diamonds are artificially inflated market), these diamonds that are being tracked seek a 30% consumer premium. The market premium will eventually normalize once this guarantee on quality of purchase reaches entire ubiquity.

To the un-familiar eye this advent seems like a digitization play but there is much more under the hood here. Digitization seems in comparison as though it is for the digitization’s sake and the relative internal use of that effort. The point use-case for diamond trade was to bring transparency through digitization. And primarily because the goods at trade are so pricey we can let the diamond industry pave the way and be the frontier in this new supply chain wading through uncharted waters. This tech is here to stay and you need not fret this impending change. It will very likely come to your organization agnostic of the crypto-currency taint that is currently beginning to face regulator pressures. More to the point, Blockchain tech can be incorporated for efficiency gains and what we like to call an Enterprise Resource Plan 3.0 that will revolutionize the matter in which operationally disparate systems and firms/groups operate.

ICYMIM: October 30, 2017

Source One's series for keeping up with the most recent highlights in procurement, strategic sourcing, and supply chain news week-to-week.  Check in with us every Monday to stay up to date with the latest supply management articles.

Michael Lamoureaux AKA The Sourcing Doctor, Spend Matters, 10/24/2017
The Doctor points to the recent Kobe Steel Scandal to address the importance of consistent quality checks.  This is an area, he suggests, where thoughtless cost cutting can lead to especially disastrous situations.  Third-party audits and quality testing are absolutely necessary for procurement groups that want to maintain high standards and preserve organizational integrity.

Sydney Lazarus, Spend Matters, 10/26/2017
Millions of drivers have already made the switch to electric vehicles in hopes of reducing their carbon footprint.  A new report from Verisk Maplecroft, however, has exposed social and environmental risk that consumers may not have expected.  Production of electric cars depends on a number of raw materials that come from high-risk countries.  Cobalt, aluminum, nickel, and other metals come largely from regions with poor labor standards, and the sheer scope of the supply chain makes auditing difficult.  As demand for green vehicles continues to rise, risk will rise in turn.  Companies will need to work even harder to maintain green, ethical images.

5 Tips to Manage Risk Before You Begin Exporting 
Greg Castello, Tom's Blog, 10/24/2017
Companies often leverage international expansion to make up for sluggish earnings or oversaturated domestic markets.  It's worth noting, however, that expansion can sometimes create risk instead of correcting it.  Planning and forecasting are utterly essential to keep expansion initiatives from turning into costly failures. Investing in a diversified workforce and calculating the precise cost of failure are a good start, but solutions will differ for every organization.

As Source One continues to celebrate our 25th anniversary, we chose to give back to community that we have been a part of for the last 25 years. 

On October 22, 2017, members of the Willow Grove office got lost for a good cause! Together, the team supported the Keystone K9 Search and Rescue, a local non-profit organization whose mission is to train search and rescue dogs. Keystone K-9s is a volunteer-based non-profit organization located in Bucks and Montgomery counties established to train qualified dog teams and make them available to assist law enforcement and first responders in the event of lose or missing persons. Source One’s team voluntarily got “lost” to help train the dogs tracking and finding a scent. The volunteer event proved to be a great opportunity to support the community but an even better for team building!

Analytics in the supply chain: An idea becoming a reality

The world of procurement, sourcing and supply chain logistics in general is in a constant state of transformation, due to the fact that technology is steadily improving. Keeping practices steady through the years may mean falling behind rather than keeping pace with competitors, because some companies will surely take the reins and harness the latest developments.
One of the most relevant and prominent areas to see advancement in recent years is business intelligence. This data-driven concept naturally leads to other, more advanced forms of number-crunching and insight gathering: Big data analytics, machine learning and artificial intelligence all flow from the same central idea. The process of moving goods generates useful information, and increasingly precise algorithms are crunching those numbers to give insights.

The move toward AI
The increasing discussion of AI in the supply chain world has been brought on by the convergence of ambition and ability. Supply Chain Dive recently noted that years of speculation have finally given way to realistic and attainable business goals. Companies are getting enough computing power to make their content into coherent insights, even when the information is massive in scope and lacking structure.

Today's digital-native online services companies have become better at delivering powerful, affordable computing power based in the cloud. Organizations that have spent a long time wishing for the ability to plan their supply chain moves with less speculation and more predictive capabilities have now become more responsive and effective. Firms that have failed to make this connection may be surprised by how far the technology has come in recent years.
The long-term goal with AI, laid out by the Supply Chain Dive piece, is more automatic elements and less hands-on optimization work. This amount of autonomy allows speed and effectiveness that wouldn't be possible with individual actions needed for every step. This means that AI and big data won't replace sourcing roles filled by humans. Instead, they'll create whole new capabilities.

The march toward AI is a natural progression for insight-hungry professionals.The march toward AI is a natural progression for insight-hungry professionals.
The data is there
As Logistics Viewpoints contributor Karen Sage recently noted, companies have the data they need. The act of shipping and receiving goods generates the digital-age equivalent of a paper trail, allowing professionals to plug the content into algorithms and find the insights they need. Sage listed some of the relevant questions companies may seek answers to, including spend numbers by company by year and the cost of performing moves such as consolidation.

Using BI and analytics at various links of the supply chain can drive different results depending on the individual goals of the organizations themselves. Sage noted that in the world of transport and logistics, the backend practices that will empower companies in the high-speed digital commerce age, BI and analytics are absolutely essential.

Making the connection between existing data and long-held goals is the role of better BI usage. This means that the move toward these systems is downright inevitable: The fuel for progress is there and companies are interested in using it. Putting these two existing concepts together into a mixture is the way to move forward, and companies that don't make the connection may fall behind.

October 27, 2017

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

Recent Whitepaper:
Poor stakeholder engagement can derail a strategic sourcing initiative.  This is especially true in 'untouched' categories.  Source One's latest whitepaper, a collaboration with Corporate United, draws from years of experience to provide strategies for effectively building relationships between IT and Procurement.  Strategic Sourcing professionals should find these strategies help foster collaboration, boost efficiency, and better manage spend.

New Podcasts:

25 Years of Service from Source One
Since the early 90s, Source One's been at the forefront of evolution in procurement and strategic sourcing.  Though procurement teams once performed mostly tactical purchasing, the best now function as fully strategic units.  Take a closer look at the history of Source One and its industry with this new short.

How Much of your Telecom Spend is Going Unreviewed?
Mysterious taxes, fees, and surcharges make up a huge percentage of most company's telecom spend.  Though these charges look both complicated and unavoidable, a close audit could reveal considerable savings opportunities.  Check out this video for more cost reduction strategies from David Pastore.

Upcoming Events:

American Supply Association Fall Dinner: Oakbrook Terrace, IL
Source One will join ASA members for their Midwest Distributors annual dinner on November 13th.  There, they'll discuss the issues facing supply chain management professionals and propose strategies for addressing purchasing concerns in 2018.

Practical, positive effects of strategic sourcing
While there is value in abstractly discussing supply chain improvement - preparing for the future, anticipating what may come next and suggesting uses for new IT - direct examples of advanced processes in action are especially useful. Seeing how strategic sourcing has enhanced practices can be an eye-opening moment for leaders of procurement departments and C-suites alike.

Giving supply chain representatives a higher-profile role in overall company operations can be a big change for businesses, and therefore leaders may be eager to receive proof that their efforts are in service of a valuable and worthwhile goal. Examples of strategic sourcing in action can give them the confidence they need.

McCormick's accomplishments
A recent Supply Chain Quarterly feature gave a relevant glimpse at an organization reaping the first benefits of a new approach to sourcing and procurement. McCormick & Company implemented a strategic sourcing operational style, with the plan created by supply chain officials and approved by the rest of the organization. The new procurement style involves a focus on individual employee contributions and is a global undertaking, rather than being limited to one of the company's many markets.

McCormick officials told Supply Chain Quarterly that their new strategic approach was crafted as a response to increasing global focus by the company as a whole. The procurement team decided to step up to support the organization in its efforts to grow around the world. Procurement leaders now speak with company higher-ups on a monthly basis, ensuring that their strategies are still aligned and factoring in any recent changes in conditions. Sourcing and procurement teams around the world keep up with analytics and ensure efforts are scalable.

The company's representatives explained that the new, unified and highly visible approach to sourcing has had operational benefits. Namely, it is far simpler than using procurement as a low-priority department and breaking its responsibilities up by territory. Now, there is a chance for suppliers to strike up advantageous and universal deals with McCormick, forging the kinds of partnerships that can deliver long-term value for the spice company and its network of ingredient providers.

Spices from around the world make up the McCormick supply chain.Spices from around the world make up the McCormick supply chain.
Tech makes global operations possible
Considering the blistering pace of business today, it's easy to imagine large-scale global procurement networks becoming unwieldy or difficult to manage. This is one area where the latest technology is making its impact felt. EBN contributor Rajesh Kalidindi, for instance, cited advanced analytics engines based on artificial intelligence as a possible cornerstone of cross-border procurement efforts. The speed with which these solutions can detect relevant insights from large data sets can help sourcing departments become more active, switching from periodic checks to always-on sourcing.
Old-fashioned approaches to data use, ones involving employees poring over huge spreadsheets, are becoming less necessary in the analytics age. This is a gift to both workers, who will have more time to perform other mission-critical work, and companies, which will receive better overall insights in a more timely manner. Creating advantageous conditions within the supply chain is one of the roles that procurement departments should perform in strategic sourcing arrangements. New tech can help them accomplish this task.
In strategic sourcing, procurement and leadership are close allies

The procurement department's move out of obscurity to the forefront of corporate planning and value creation has become a movement, namely strategic sourcing. This concept is based on the realization that procurement and the supply chain in general can and should have a continuing interest in managing contracts with suppliers, before during and after signing deals. This increased engagement has the potential to create much more value than simple cost negotiations.
The usefulness of strategic sourcing can only truly emerge when companies focus on it, at all levels of the organization. When leaders don't know how to work productively with their procurement teams, it can be difficult to internalize the process of involving supply chain stakeholders in overall decision-making. Forging this connection should therefore be a priority.

The alliance with finance
According to Financial Executives International, the bond between companies' financial teams and procurement departments is essential for businesses to extract maximum value from sourcing. The pressure on chief financial officers to realize bottom-line improvement means these leaders are likely searching all departments for possible value. The way to get this kind of return from procurement involves bringing these departments into the company's strategic planning.
Instead of simply issuing orders and seeking short-term cost cutting, CFOs can trust their procurement counterparts to take a leading role in strategy and overall organizational direction. Sourcing professionals who are able to actively assess their efforts and improve them over time are able to upgrade processes and change the way the whole company functions. This goes far beyond a traditional procurement role, in which the department only gets involved in vendor relationships at the last moment.
Financial Executives International noted that procurement leaders can also serve as canny guides to current and future corporate trajectory. CFOs who seek advice from their sourcing teams may find that these departments have a unique and valuable perspective on the way the company is developing, having been involved in setting the contracts for all the assets and materials being used throughout the corporate structure.

Time to form strong alliances between departments.Time to form strong alliances between departments.
Going to the top
While the CFO is one key ally in updating sourcing, the C-suite connections don't stop there. Winning over the rest of the executive team is likely to be essential in truly freeing up procurement teams. Spend Matters reported that many leaders aren't ready to make this jump yet, resisting giving technology upgrades and related resources to the supply chain because it isn't customer-facing. This is a persistent problem for sourcing departments, as they must demonstrate their huge impact on the bottom line despite being mostly invisible to clientele.
The news provider pointed out that sourcing teams in strategic companies have allies both internally and externally, and that they extract value from the bond they create between these parties. Dealing with suppliers and the C-suite means that the procurement team is a unifying factor within a company.
Winning trust and earning a spot in a company's long-term plans may involve finding new ways to measure value and worth. If sourcing departments become better at showing the long-term value of strategic operations, they may earn trust - and a more permanent role determining companies' trajectories.

Anyone who's ever made telecommunications purchases for their organization can agree on at least one thing: Invoices inevitably feature a huge number of vaguely defined  'taxes, surcharges, and fees.'  In fact, these mysterious expenses often constitute more than 30% of total costs.  It's hard enough for most companies to address that other 70% - why should they look more closely at these expenses? After all, aren't taxes and fees set in stone?

You might be surprised to find that many of these charges are far more negotiable - even avoidable - than the word 'taxes' might suggest. Some aren't really taxes at all. These charges are certainly complex, but they're far from indecipherable.  Once you've committed to auditing them once, you should find that they're actually far simpler than you imagined.

Want to learn more?  Visit Source One's YouTube channel to hear some insights from Source One's IT Practice Lead, Dave Pastore. In our latest podcast, he explains the possible pitfalls of letting spend go unchecked as well as the considerable benefit of more thoroughly assessing and addressing these charges.

It's entirely possible your company lacks the resources to develop an effective program for auditing telecom usage and spend.  If that's the case, give Source One's cost reduction experts a call today.  We'll act as an extension of your team to to develop actionable strategies for more efficient purchasing in the future.

Retail competition and supply chain: A close link

Sourcing and procurement are important in every industry imaginable, and serve subtly different roles depending on the product or service being offered. In retail, for instance, the goal of the supply chain is clear: Companies have to put goods in front of customers at an acceptable rate, without breaking the bank. A great deal of overall performance may be determined by how hard companies lean on modern technology and strategic innovation.

The retail industry is experiencing changes on a global scale, with consumers still needing products but facing more choice than ever regarding how to get them. Organizations that are able to evolve and become more intelligent will be better prepared than their competitors to thrive in such an evolving industry, and supply chain innovations are one area to look at closely.

A high-level differentiator
Supply Chain Dive contributor Karl Siebrecht explained that every few years, supply practices change drastically, and that e-commerce has provided such a driver. He added that in the era of online-first innovation, with Amazon leading the charge on new trends, companies have fallen naturally into strategic sourcing practices. The behind-the-scenes nature of supply chain operations, which was largely unchanged in the era of dominant in-person retail, has broken down as businesses have begun to treat responsiveness as a selling point.

The pressures of getting up to speed are intense, but Siebrecht stated that there is an equal worry about making mistakes, and that some traditional retail organizations have had trouble becoming more nimble and responsive. Not coincidentally, these are the brands that are having trouble responding to current market conditions and falling behind their fresh, digital-native competition.
Becoming a more effective retailer in the age of supply chain dominance may mean taking a bold approach to the use of new technology such as analytics. Siebrecht reported that organizations are facing a lack of talented big data users, and that logistics departments are becoming the home of analysis. Taking on a strategic leadership role is a way for supply chain managers to prove their worth and improve companies overall, but the move comes with a heavy burden: Innovation has to follow.

How fast can retailers supply chains become? The next few years will tell the tale.How fast can retailers supply chains become? The next few years will tell the tale.
The future is arriving
In a Forbes column, e-commerce entrepreneur Tom Popomaronis explained that supply chain improvement is one of the "invisible" moves coming to the retail world. Consumers won't necessarily see how hard companies are working to enable faster and more effective delivery of goods, but they will be able to judge the end result. Competition between organizations will therefore play out behind the scenes, with changes to delivery and sourcing practices granting improvements to several functional areas.

Strategic sourcing means using procurement departments for more than raw cost-cutting. That said, price tags will come down when these processes are completed effectively. Popomaronis stated that fluidity and agility in supply practices lead to reduced spending by customers, as companies become better at having inventory available when and where it's needed. Companies will need quick and easy access to data to make predictions of the kind that are needed to become more responsive. New, powerful IT in the supply chain will therefore prove critical in the near future.
Even industry leaders occasionally fall ill and suffer through lost savings and efficiency.  Whether your company is in need of short or long-term support, an independent procurement contractor could prove the perfect treatment. Misconceptions, however, still keep many organizations from leveraging the skillsets and expertise of these talented individuals. Supplementing your efforts with a dedicated procurement recruiter should help dispel these misconceptions, diagnose your company's needs, and identify the right treatment.  Here are some qualities to look for when selecting a recruiter for your business.

The right recruiter will accurately determine your organization's symptoms to prescribe the appropriate candidate.  Soon, you'll enjoy a clean bill of health with renewed savings, reinvigorated efficiency, and a replenished company culture.

Source One's staffing experts can help you locate the right procurement recruiter to encourage a quick recovery or help maintain healthy practices.  Contact us today for an assessment from the very best.

ICYMIM: October 23, 2017

Source One's series for keeping up with the most recent highlights in procurement, strategic sourcing, and supply chain news week-to-week.  Check in with us every Monday to stay up to date with the latest supply management articles.

What is Your Spend Analytics Persona? Understand Your Requirements to Find the Best Technology Provider
Spend Matters Analyst Team, Spend Matters, 10/23/2017
Procurement, finance, supply chain and IT organizations are all different in their own ways. All of these categories have their own little spin to it, but they all fit together like a puzzle. The Spend Matters Analyst Team put together this article to go over how each of these five different categories fit together. The main purpose of these five categories is to help benefit stakeholders within the company. 

It's Hard to Find Fraud in Big Spend Stacks ...
Michael Lamoureaux AKA The Sourcing Doctor, Sourcing Innovation, 10/17/2017
T&E spend, travel and entertainment spend. Organizations have business trips all the time, they send out employees on trips for work, most of the time these trips turn into a big expense for companies, but how do they cut down on T&E spend? Many companies are looking into different approaches to cut down on T&E spend. 

Upwork Releases 'Freelancing in America' Report: Will Freelancers Be the Majority by 2027?
Sydney Lazarus, Spend Matters, 10/23/2017
"Which do you consider more stable, freelancing or traditional employer-based work?"
Research is now suggesting that freelance work can be equally beneficial. Freelancers Union has recently published a article on how freelancing in America is going to become the new thing and it is rising in numbers. Freelancers are more opened to change, which we see everyday in procurement offices. Is freelancing the way to go? We will have to see. 

October 20, 2017

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

Recent Whitepaper:
Stakeholder engagement is a crucial component to any budget optimization strategy, particularly when it comes to complex spend categories such as IT. In Source One's latest whitepaper in collaboration with Corporate United, we explore how companies can establish strong, effective relationships between Procurement and IT business units.  

Recent Blogs:

Sourcing and Sustaining Human Capital
Source One offers insights in ISM's latest Forward Scan article discussing talent strategies, sourcing, and sustaining human capital in the procurement and supply chain field. To view this article, subscribe to the links below.
ISM Newsletter
ISM Corporate Information Program

Upcoming Event:
October 24th, Source One will join procurement and strategic sourcing professionals from leading pharmaceutical companies for a three day conference.  This event will provide valuable networking opportunities and enable thought leaders to discuss Procurement's ability to drive value in the pharma industry.  This year's festivities promise more of the enlightening discussions and presentations attendees have come to expect.

Supply chain excellence means finding opportunities for value

Modern supply chain management has become increasingly complex, with a few different forces combining to raise interest in improved processes. One of these changing conditions is the increasing role of impressive new technology which has enabled previously unreached levels of efficiency. Another concept on the rise is a more creative mindset among organizational leaders. These individuals are letting their supply chains become more important parts of their operations.
When some businesses become more strategic about their sourcing, procurement and other supply chain operations, their competitors will have to follow suit. Seeing rival companies extracting previously unthinkable financial and efficiency benefits from the way they source and procure goods will doubtless inspire organizations to new heights in the years ahead.

More than cost-cutting
As Supply Chain Dive pointed out, the real mindset change regarding supply chain management has involved getting beyond the idea of cutting costs. While getting the best possible prices has always been and remains a focus area for sourcing and procurement, these departments can accomplish more with an expanded purview.

The problem with taking a cost-centric approach to supply chain management is that it reduces the possibilities to two: either an item is more or less expensive. Supply Chain Dive stated that by considering new sustainable sourcing options or using data analytics to increase their efficiency, procurement leaders can create more long-term value for their companies. In the end, this is more impactful than just setting a slightly better commodity price.
The source quoted RV Products Vice President of Operations Sandra Jessop, who explained that modern supply chain executives should be working carefully with members of other departments to get on the same page. When leaders keep open lines of communication with the managers of other departments - including finance - it becomes possible for the supply chain's impact on the company budget to be managed and quantified more effectively. This is all part of the strategic sourcing mindset of taking an active hand in supply processes, rather than simply letting them run.

Technology and mindsets are expanding in tandem.Technology and mindsets are expanding in tandem.
Data's new impact
In addition to a strategic mindset, the march of technology can assist companies with their supply chain improvement efforts. Better data utilization is at the forefront of this IT revolution, as it is relevant to companies of all kinds: There's no organization out there without digital data, and where these resources exist, there's the possibility of extracting insights.
As Business.com contributor Nicole Pontius recently pointed out, better supply chain analytics may come from organizations' abilities to make data available throughout the company. When departments perform analytics to predict likely outcomes or find hidden patterns, the relevant factors are likely to go well beyond their own walls. When data is trapped in silos, it can't make its impact felt.
Pontius explained that supply chain operations are embracing predictive analytics, using flows of unstructured data to make highly accurate predictions about their future needs. It's easy to see how these processes can get organizations one step ahead, but it's clear that they work better when they are given the maximum amount of input - this should come from all parts of a business whenever possible.

As I made my way to Source One’s Chicago office for the first time, I felt an odd mix of nervousness and excitement. This was definitely going to be different than any of my previous work experiences, and had little idea what to expect. I had done my research on the company, read some strategic sourcing articles online, and ensured my Excel skills were as sharp as ever. Nevertheless, there was still a feeling of apprehension as I faced the unknown.

When my first day started, that trepidation soon disappeared. Everyone that I met was extremely welcoming. After gleeful introductions and setting up my desk, it immediately became clear how important everyone at Source One considers training.  Clearly, I was here to learn. Over the next couple months, I split time working on things like data entry and pulling invoices while also learning valuable lessons from experts in strategic sourcing and procurement. These lessons were provided by dedicated consultants who brought real-life experience to the training process.

Both my daily tasks and these hands-on learning experiences have proved valuable. The work provides me a better understanding of the basic building blocks of the sourcing process. Simultaneously, the lessons help me see how what I'm doing fits into Source One's uniquely strategic approach. Some of my favorite experiences so far have involved listening in on stakeholder calls. I find learning how different consultants handle such conversations and present themselves in a professional, articulate, and intelligent manner to be both fascinating and instructive.

Even more valuable experiences have come from collaborating with our consultants on various client initiatives. While I learned what a BATNA (Best Alternative to a Negotiated Agreement) is through my coursework, direct involvement in one's execution offered me a fundamental understanding of how it actually fits into the sourcing process. Similarly, knowing what a baseline is - and actually going through the process of establishing one - turned out to be two very different things.

Up to this point, my experience at Source One has been everything I could have asked for and more. After I graduate from DePaul, I plan to pursue a career in consulting. It's clear that the valuable experience I've gained with Source One will greatly benefit me in these pursuits.  I am thankful for the wide range of skills I have honed during this internship, and I'm eager to continue applying them.

Source One is visiting the City of Brotherly Love for Procurecon Pharma 2017.  Beginning October 24th, the three-day conference attracts procurement and strategic sourcing professionals from leading pharmaceutical companies.  This year's notable speakers include individuals from Pfizer, AstraZeneca, GlaxoSmithKline, Merck, and other industry giants.

In addition to networking opportunities, the conference provides thought leaders a chance to share best practices and promote their vision for procurement's future. Day 1's packed schedule looks to focus on leveraging Procurement for Elevating the Standards For Medicine's Life-Changing Mission. Surely, discussions and presentations will focus on strategies to drive Procurement's evolution, foster unity across departments, and create socially valuable savings.  Day 2 - Pro-Collaboration One World, The Ultimate Goal: Excelling as a Unified Procurement Function, includes keynotes focused on effectively managing supplier relationships.  These should prove especially valuable for Procurement professionals hoping to become forces for change management within their organizations.

Every year, Procurecon Pharma provides the valuable insights and inspiration that produce best-in-class services.  This year promises more of the same.

Hospitality Supply Chains Have Room for Improvement

In the hospitality industry, the details matter. Customer service is the main product that any hotel provides, and having a strong sourcing and procurement operation can materially improve the guest experience. Keeping vital items stocked and costs down is a complex balancing act, and one that demands an active and involved approach to procurement, as opposed to simply signing contracts and letting them run without paying attention.
In addition to the unique dynamics of serving guests, the hospitality industry faces a lot of challenges that affect every sector imaginable. Dealing with a variety of different suppliers and contract types will present a worthy task for procurement departments, and they can rise to the occasion with focused and active strategic sourcing approaches.

Elements to manage
Within the complex network of any hospitality supply chain, there are many different areas where hotels may be losing money on non-optimized processes. Hotel Management contributor Chip McIntyre recently pointed out a few of the ways attentive managers in the industry can keep their costs in check while never compromising the guest experience.
For instance, one of the most important ideas procurement professionals can embrace is keeping close track of prices, rather than assuming commodities will cost the same amount at all times. Even zooming in on single ingredients within finished products can grant insights pointing out the best times to make major orders, and optimal suppliers to buy from. McIntyre added that hotels shouldn't be too set in their ways when it comes to food and beverage providers - while some contracts are central to the way companies operate, others can be switched out for potential savings.
According to McIntyre, hospitality procurement should be carried out with an eye to total cost of ownership rather than initial purchase prices. Departments that focus too hard on seeking low prices when they sign contracts may find that their chosen goods are problematic over time, failing to deliver promised value. This focus on TCO demands a more focused and considered approach to procurement, with the financial rewards manifesting later.

International chains are unique
Supply Chain Digital recently described the way Marriott improved its overall supply chain operations by consolidating the department. This is no small feat for the company, as it operates in dozens of countries around the world. According to the source, the initial combination of so many supply groups was rather shocking - buying for each country's hotels individually was undoubtedly simpler. Once the procurement departments were unified, however, the company increased its coordination and managed to extract long-term value from the new style.
The news provider reported that the international hotel chain has increased its ability to sign advantageous contracts with its new unified approach. Marriott executives credit their employees within the supply chain with enabling them to achieve this level of success. Leaders take charge of increasingly large regions, with continental procurement heads reporting to the centralized department. These many sections keep in touch to ensure that contracts are optimal for their respective areas. The constant communication represents a difference from a partitioned or siloed version of supply chain management and keeps the company focused.

If you haven't already heard, Source One - a leader in procurement and strategic sourcing - is celebrating its 25th anniversary.  To commemorate this milestone and the myriad smaller milestones we've passed along the way, we've spent the last few weeks sharing our advice for excellence in the field.  Today, we conclude with some practices to avoid when managing supplier relationships and executing strategic sourcing initiatives.

21. Don't Forget to Stay in Touch
Even a vendor that doesn't ultimately win your business can make for a valuable contact later on. Keeping lines of communication open is a great way to bolster your market intelligence and potentially discover new opportunities down the road.

22. Don't Settle for a Handshake

Never forget that the convenience of a so-called 'Gentleman's Agreement' could lead to a world of inconvenience later on.  If conflicts or confusion arise, you'll be glad to have the irrefutable evidence provided by official documentation

23. Don't Get Sentimental 

Stay neutral by priding statistics over sentimental feelings.  Put your faith in analytical tools and digital data even if that means rethinking your current supplier relationships and moving in new directions altogether.  Renewing ongoing contracts 'just because' might seem convenient, but it can lead to wild inefficiency becoming habit.

24. Don't Skim

Written policies and documents should never, ever be skimmed over.  It's essential that both parties in any agreement are fully aware of what exactly they're agreeing to.  Plus, offering your full time and attention is just the respectful thing to do.  Perhaps nothing is more important for building and maintaining business relationships than mutual respect.

25. Don't Miss the Big Picture

Even in strategic sourcing, savings aren't everything.  Establishing solid and stable relationships throughout your supply chain can have soft-cost benefits that ultimately prove far more meaningful than dollars alone.

Source One's team of cost reduction experts boast decades of experience and unparalleled access to real-time market intelligence.  Don't let these tips speak for themselves.  Contact us today and see what 25 years as a premier provider of procurement and strategic sourcing services really looks like.
On my previous blog, “Pulp and Paper Prices On The Rise Again”, I discussed the main factors impacting the pulp and paper industry and the increases that are expected in the near future. As mentioned, the price of wood pulp was forecasted to rise at an annualized rate of 5.1% in the two years to 2019. Though, at the time, a natural disaster as big as Hurricane Harvey and Irma were not foreseen nor built into the forecast. Damages caused by Hurricane Harvey have been estimated anywhere from $65 billion to $190 billion, while Irma is thought to have caused $50 billion to $100 billion in destruction. The packaging industry, as well as several other industries, have been impacted by the post hurricane effects. 

According to Bergmil, a total of 18 pulp and paper mills from Texas to Georgia and Florida were forced to shut down due to damages from Hurricane Harvey and Irma. The total combined production capacity of these mills is near $6.5 million tons a year; this resulted in an immediate supply disruption on materials coming from that region. The demand for paper-based packaging products continues to increase, but supply rests at its lowest point to date. The question that remains unanswered is how will this affect the pulp and paper industry and do we expect any more increases in the near future? Well, if we compare Hurricane Harvey and Irma to a similar disaster in the past, Hurricane Katrina we can get an understanding on potential price increases coming our way. 

To give you some perspective, Hurricane Katrina was a category 5 storm that occurred in August of 2005 and caused $108 billion in damages, according to Time. This means that on the high end, Hurricane Harvey and Irma caused $182 billion more in damages than Hurricane Katrina. The Hardwood Market Report noted that the North American pulp and paper industry faced several challenges after Hurricane Katrina hit, which resulted in a 10-15% increase in pulp and paper prices by October of 2005. Additionally, the hardwood chip market saw price increases of 5-10%. The two main factors behind the price increases are as follows:
  1. The law of supply and demand, which tells us that commodity price increases can arise from higher product demand. After Hurricane Katrina hit, supply was unable to keep up with demand, resulting in price increases. 
  2. Shortages of raw material supply, which forced pulp and paper producers to pass on surcharges to paper consumers. 
Both factors that drove up pulp and paper prices after Hurricane Katrina are the same effects that we are seeing after Hurricane Harvey and Irma. Demand for paper-based packaging products has been on the rise even before Hurricane Harvey and Irma hit, and continue to increase, while supply has decreased. Additionally, we are seeing shortages of raw material supply in the southeast region where Hurricane Harvey and Irma hit, which will force pulp and paper producers to pass on their costs to consumers, as seen with Hurricane Katrina.

To confirm potential price increases, I reached out to a few packaging suppliers that I am currently engaged with on a sourcing project that Source One was asked to undertake for a large client. After discussing the current market with multiple suppliers, each confirmed that they are expecting price increases to hit as of November 1, 2017. The exact percent increase is still unknown, though by comparing increases from Hurricane Katrina we can expect some significant increases to be underway. Source One has extensive experience in the packaging category and can help you reduce your packaging costs. To learn more click here.

Recently, I have been involved in a few projects with my clients where the stakeholder teams wanted to perform “pilot programs” as part of the vendor evaluation process.

It goes without saying that a strategy of “try before you buy” as a form of assessing an IT solution can be advantageous to a company before signing up for a long term partnership.

That said, what I have seen is that even a short term, three to five month, pilot can cost over $100,000 to execute successfully and that’s not including the soft costs involved like the resources needed to run the program (especially if a side-by side comparison of two or more systems are being evaluated), the data security and IT life cycle assessments, testing and validation requirements, the strategic sourcing and contracting activities, and so forth.

With the movement to SaaS subscription services prevalent in most organizations, we need to understand that the big dollar line items on a quote or SOW come in the provisioning of the system. The vendor needs to acquire the infrastructure through their cloud provider to create your environment. They need to configure the platform to your requirements and specifications. They may need to load company data into the environment. They need to train your user base to competently utilize the application. In short, there is a considerable amount of time and resources that need to be put forth  by the side to get our pilot up and into production. Once that part is finished, the actual cost of running and maintaining the application is cost beneficial to your compared to hosting on-prem or in a dedicated hosted instance, hence the reason we look towards SaaS solutions for new initiatives.

A mistake that I have seen my clients make is that they are introducing the idea of a pilot program too late into the process of evaluating the suppliers. They may have issued a RFP/RFI, gone through series of demos, and perhaps even asked for an initial quote before bringing to a vendor the request to run a pilot program.

From a negotiation standpoint, bringing the pilot up at the later stages of a vendor evaluation puts you at a disadvantage. A considerable amount of time has been invested in creating, distributing, and analyzing the RFP. Project team members have sat through vendor demos and everyone is anxious to move the project forward. 

Project team leads and their sourcing partners will review the Pilot Program proposals and typically will go through several rounds of discussions and negotiations. While you can leverage the idea the “if the pilot goes well, we’ll move towards a longer term engagement”, and try to keep your requirements as "Out of the Box" as possible, it’s difficult to force the account reps hand on reducing costs when they know they have gotten very close to a sale.

So what are some solutions? Below are a couple of ideas that we should use going forward on these types of engagements:

  1. If issuing a RFP/RFI, the question should be asked if the vendor is able to provide a Pilot evaluation of their solution at no cost to your organization.
    1. I recommend having this question in the RFP even if you don’t think you would run a pilot program. It’s just another evaluation point for your team to consider.
    2. You should ask what the vendor would provide in a pilot program (length of program, amount of custom configurations they will provide, training, support, etc.)
    3. If a vendor cannot run a pilot at no cost, you should know up front what they would charge for the short-term engagement. This will help with budgeting, and may influence the decision to even pursue a pilot program with a particular vendor.
    4. It goes without saying that having a very strong set of requirements and desired outcomes will go a long way in working through the needs for a pilot, as well as how the team would design the pilot in conjunction with the vendor.
  2. If not issuing a RFP, and going straight to demos or direct discussions with vendors, the same set of questions should be asked.

Pilot programs can be a part of a smart and effective strategy for assessing information technology partners. But they can be budget busters also. As with all strategic sourcing initiatives, you want to gain as much insight as early in the process to gain the knowledge needed to make well-informed decisions.

Source One has been providing Strategic Sourcing consulting services for 25 years. We have subject matter experts in all areas of information technology and are ready to help with all of your IT sourcing and procurement challenges. 

ICYMIM: October 16, 2017

Source One's series for keeping up with the most recent highlights in procurement, strategic sourcing, and supply chain news week-to-week.  Check in with us every Monday to stay up to date with the latest supply management articles.

Can the Latest Supplier Relationship Management Tools Deliver the Clinically Integrated Supply Chain?
Tom Finn, Spend Matters, 10/11/2017
Hospitals outsourced their supply chain management and procurement operations to the industry’s group purchasing organizations many years ago. The group purchasing organizations took on individual health systems that did not know what they were buying, organized their data and assumed responsibility for maintaining them. Health systems are taking back control of their respective supply chains. The supply side has been the one managing the buy side all of these years. Studies have shown that this has improved outcomes more quickly and with more certainty. 

Sourcing the Day After Tomorrow Part XIV
Michael Lamoureaux AKA The Sourcing Doctor, Sourcing Innovation, 10/11/2017
In each of the six steps to date, some were a waste of skilled talent time, some were crucially needed. We still know that the entire sourcing cycle must be done by humans. THE FINAL STEP: The contract step. The contract step includes; standard terms and conditions, modification & risk mitigation to supplier & country, key metadata definition and obligation specification, and contract analytics. 

Can Procurement Save the Government?
Pierre Mitchell, Spend Matters, 10/10/17
Think about the role of an effective government, now think about procurement. Procurement in companies is charted with bringing innovations and helping defend the enterprise from external risks in the supply chain. Stakeholders want to maximize value from their money which includes the money invested in procurement. A good way to start with procurement saving the government is by looking at strategies & techniques to drive innovation. 

Strategic sourcing a boon to restaurant supply chains

Food service businesses possess complex supply chains, with specific quantities of many perishable ingredients required to keep customers happy. Whether a restaurant operator is responsible for one location or a whole chain, there are likely challenges involved in managing the procurement supply chain. Getting everything right can mean focusing more closely on supplier relationships and not taking anything for granted: In other words, strategic sourcing can help.
Instead of treating procurement matters as afterthoughts, organizational leaders can integrate these concepts into their high-level thinking. In food service, as in so many other industries, they may be surprised at the sheer amount of savings to be found through this process.

Spotting the opportunity
Nation's Restaurant News contributor Bill Carmody recently pointed out several elements of procurement that are potential value-providers for restaurant supply chains. His general argument is that restaurant owners don't typically pay enough attention to their sourcing supply chains, often treating closer oversight as an "issue but not a priority." However, digging deeper into the contracts determining the flow of goods can preserve restaurants' bottom lines.
Huey Magoo's CEO Andy Howard told Carmody that data is a critical element of creating advantageous and optimized supplier contracts. He suggested breaking purchasing and distribution decision-making into two separate functions, to make sure that each gets enough focus. One of the key breakthroughs he made was hiring an outside partner to work on some of his functions, such as inbound freight. That left him with more time to make procurement decisions.
Restaurant chain supply chains also tend to improve when officials are available to become more hands-on with inspections and audits. Cost Reduction Management's president Steven Salzberg told Carmody that when companies spend too long away from the relevant issues, there is a chance that substitutions have been going on. If the items restaurants hoped to purchase aren't actually the ones they're getting, their food quality may be suffering. Budget issues can also result - there may be costs associated with those replacements.

Greater oversight of ingredient supply chains could turn up hidden value.Greater oversight of ingredient supply chains could turn up hidden value.
Greater collaboration incoming
The restaurant ingredient supply chain in general may soon see some changes, according to Forbes contributor Kate Vitasek. She explained that brands and suppliers have begun to attend industry-wide summits to make their practices more efficient. This means working together to make processes more collaborative and wipe out inefficiency at all levels. The spreading benefits of this teamwork are clear: More effective performance at the production levels could lead to lower costs that extend all the way to consumers.
Improved connectivity between the various partners involved in food service appears to be the next great goal for this industry. Vitasek reported that at the latest summit, companies collectively expressed a desire for better data quality and availability. When restaurants and their supply partners are able to communicate more easily, there is a better chance for them to optimize their ordering and delivery processes and deliver efficiency that extends to many levels.
Getting delicious food onto the table for customers requires a complex network of supply partners. Careful oversight of this environment could extract efficiency and value that haven't previously been achieved.
1. Lead first, Manage Second

According to Steven Covey’s 7 Habits of Highly Effective People, “Management is a bottom line focus: how can I best accomplish things? Leadership deals with the top line: What are the things I want to accomplish?” As opposed to solely focusing on how to accomplish short-term tactical goals, successful interim CPO’s understand that within their finite amount of time within a Procurement organization, their objective is to influence and enable other Procurement and Sourcing professionals towards organizational milestones. This does not mean a good Interim CPO does not manage the day-to-day at all; rather, successful Interim Executives strike a harmonious balance between idealism and pragmatism—a balance between realizing the end state, and the most effective and efficient way to get there.

2. Err on the side of Action, rather than Inertia

Companies hire Interim Chief Procurement Officers for a number of reasons, but the resounding underlying theme is to provide momentum on strategic supply management initiatives. Temporary Procurement Leaders have a history of producing tangible results across a number of direct and indirect sourcing categories, their experience spanning a wide array of industries. The ability to quickly and seamlessly rollout a change management structure and framework within Procurement to continue forward progress is essential to the success of any Procurement Transformation Initiative. Although Interim Executive Procurement and Strategic Sourcing Leaders seek to be well-informed, they do not allow a lack of information to deter them from making a deliberate action –they maintain a focus on moving a project forward, and can fill in the knowledge gaps as they progress.

3. Passion for Procurement

Interim CPO’s who are passionate for what they do have the ability to excel. Knowledge leads to a well-developed and refined understanding of the intricacies of the Supply Management function, but passion is what fuels the motivation to make things happen. Passion for Procurement is the one trait that can produce exceptional results, over and over again.

4. The Ability to Influence

The really successful Interim Chief Procurement Officers are constantly adapting and evolving with the function. To gain a better understanding of how they can influence the organization, these Leaders have perfected the art of listening to know their audience on a more personal level, and to sell their own agenda by intertwining their goals with those of other business partners across the enterprise. Top Interim CPO’s drive value and cost savings by relaying their successes, whether big or small, to the successes of the other stakeholders, and it is this collaborative relationship that embeds procurement as an essential tool for success.

5. A Big-Picture Focus, but Detail-Oriented Approach

The best Interim Procurement Executives approach the situation as a whole, avoiding the trap of not seeing the forest through the trees; however, that does not mean they are not detail-oriented. Interim CPO’s know when to dig deeper on critical issues, without reaching outside their purview. Speaking again to the idea of balance, Interim Procurement Leaders keep enterprise-wide strategic initiatives at the forefront, while executing on the more intricate details of day-to-day operations to realize fundamental change and sustainable success.

Whether these qualities come naturally, or are developed over time, when combined, these five qualities make a successful Interim Chief Procurement Officer. If your organization is in need of the right Interim talent to transform your people, process and technology, contact Source One and ask about our Executive Supply Management Staffing Solutions.

October 13, 2017

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

Recent Whitepaper:
Effective collaboration between Procurement and IT can help optimize budgets and vendor relationships. A lack of stakeholder engagement, however, presents challenges for companies attempting to foster this relationship.  Calling upon years of experience and a number of case studies, Source One and Corporate United provide strategies for understanding stakeholder motivations, identifying synergies, and better managing IT spend.

Recent Blogs:

Nothing New Under the Sun: Taking an Advanced Approach to Supplier Diversity
Vernon Griffin, Spend Matters, 10/6/2017
The advent of sabermetric analysis changed the way we evaluate athletic performance.  New, more advanced metrics could similarly change the ways we look at supplier diversity.  Amending the traditional diversity considerations can provide companies with greater insight and, ultimately, produce greater value.  It'll take time, but soon leading organizations will analyze supplier diversity in ways that would look totally unfamiliar today.

Upcoming Event:
October 24th, Source One will join procurement and strategic sourcing professionals from leading pharmaceutical companies for a three day conference.  This event will provide valuable networking opportunities and enable thought leaders to discuss Procurement's ability to drive value in the pharma industry.  This year's festivities promise more of the enlightening discussions and presentations attendees have come to expect.