September 2018

MRO, or Maintenance Repair & Operations is known as the materials and services used in production to maintain, repair or operate the facility, machinery or equipment. These items typically include industrial supplies, safety supplies, janitorial products, power transmission products…etc.  These items are typically low in spend, however the category as a whole can generate significant spend and greatly impact profitability if not managed correctly. For this reason, it is important for organizations to evaluate their MRO purchases and gain visibility into their purchasing behaviors.

The most effective way to quickly gain visibility into MRO purchasing is to gain visibility into the overall MRO spend. This can be done through a supplier usage report, or directly through a 12 month invoicing report that outlines critical information such as the product information, annual quantity, unit price, and unit of measure. Once this information is gathered from each vendor, the information should be consolidated into a single standardized excel file. The next step would be to categorize the items within this file and run an analysis to determine which vendors are being utilized for which category purchases, and how much the organization is spending with each vendor. After this information has been obtained, the following three strategy opportunities should be assessed to help reduce cost and increase overall profitability.  

Supplier Consolidation
An industry best practice when managing MRO is consolidating purchases into as few vendors as possible. Supplier consolidation is a proven strategy to concentrate buying power and reduce purchase prices. Suppliers will be more willing to reduce product pricing when being granted a larger amount of spend, which in result can lead to substantial cost savings. Additional benefits of consolidating suppliers is overall efficiency of fewer transactions being processed, and the ability to improve supplier management while developing longer term supplier relationships.

Order Optimization
Analyzing volume usage over a period of time can bring insight into the average number of orders for a given product in a given year, as well as any peak times during the year. Using this information to bundle product purchases into a few orders will result in maximum profits by reducing delivery cost and overall product cost through a larger order quantity.

Contract Negotiations
In many instances, organizations purchase materials from a specific supplier, but do not have a contract or pricing agreement in place to manage the price of the products being purchased. Implementing long-term contracts with preferred suppliers gives an organization leverage to lock in pricing for a specific period of time, and the ability to implement category discounts on current MRO category purchases,. Suppliers will be willing to add additional incentives and category discounts knowing that purchases will continue for a specific period of time.

MRO spend can quickly add up and greatly impact the bottom line when left unmanaged. It is important for organizations to understand their purchasing behavior within this category to reduce overspending and utilizing best practices to effectively manage MRO. When managed properly, MRO can generate large savings and increase overall profitability within an organization.

Yesterday's Procurious Big Ideas Summit delivered on its promise to bring together Procurement's top minds and build discussions around its most prevailing issues. Topics ranged from the function's role in promoting social responsibility, the looming threat and promise of automation, and the ever-intense battle for world-class Procurement talent.

Members of Source One's team were among the 50 thought leaders in attendance. Here are a few of the big ideas they absorbed.

"Knowing yourself in the beginning of all wisdom."
Procurious Founder Tania Seary opened the day's proceedings with this quote from Aristotle. It suggests that self-reflection and self-awareness provide the foundation for every other kind of learning. If we take Aristotle's words at face value, it seems that few of today's Procurement groups qualify as particularly wise.

Back in March, Deloitte's CPO Report found that a staggering 65% of organizations lack visibility past their tier 1 suppliers. In a sense, this means they lack a fundamental understanding of themselves and their operations. Without this first level of understanding, these organizations cannot hope to act wisely across their supply chains. Imagine attempting to undergo a Procurement Transformation without developing an understanding of Procurement's current state, or kicking off a sourcing initiative without analyzing spend in the relevant categories. Both efforts are tantamount to seeking wisdom without first obtaining self-knowledge.

"Sustainable practices aren't just good for the planet and its people, they're good for business." 
Dell Computer's Oliver Campbell delivered this statement shortly after polling the room. He asked the crowd in attendance how many of them believed that sustainability initiatives would ultimately cost their organization money. In a testament to the crowd's forward-thinking attitude, only a small portion raised their hands. Campbell's exercise might not have been as dramatic as he'd hoped, but the presentation that followed certainly packed a punch.

In a stirring call to action, Campbell outlined Dell's approach to responsible sourcing and urged Procurement to take a leading role in promoting sustainable practices. Dell's efforts to reclaim ocean plastic and repurpose diesel emissions provide a case study in the power of Green Procurement. In addition to serving the planet, Dell has proven time and again that more sustainable practices can also serve the bottom line.

"Focus on big changes to big things." 
In keeping with the day's focus on big ideas, SAP Ariba's Pat McCarthy encouraged attendees to focus on risk, impact, and size when setting their priorities and taking strategic action. Most Procurement professionals, he suggested, got into the business because they enjoy fixing problems. Today they're in luck, because the opportunities in front of Procurement are bigger than ever before.

Like Campbell, McCarthy expressed his belief that a well-appointed Procurement function has the power to change the world. With the right level of visibility, Procurement ensure that Corporate Social Responsibility is more than a buzzword by working to solve issues like modern slavery, climate change, and corporate corruption.

"Welcome input from amateurs." 
The Conversational Century's Elizabeth Linder opened her presentation by discussing one Moldovan politicians attitude toward social media. While social networks don't have a great reputation in American politics, Linder remarked that this particular leader adores Facebook. Providing for open communication with her constituents, the website is a great source for feedback. Linder suggested that businesses and politicians alike can afford to adopt the same mindset.

In Linder's mind, sites like Twitter and Facebook are so valuable because they give a platform to amateurs. While expertise will always be crucial, Linder believes that an outsider's perspective is often the most constructive. She encouraged the Procurement leaders in attendance to leverage the various social channels at their disposal to gather amateur insights. Though they'll certainly run into trolls, Linder is confident they'll also get a look at new and interesting perspectives.

There are two ways of consuming reports for decision making. The first is that of performing a quick high level assessment to answer a well-posed question. These tend to be static reports that are automated on a recurring basis. An example is a weekly resource utilization report which answers a question around how well resources are being used over some time horizon. The second use case is an insights driven analysis where the objective is for the end-user to interact with the report in an interactive capacity and in doing so identify insights or generate new questions that should be answered. A reasonable way to think of this second use case is that of R&D where the underlying asset is data. However, in order to generate these reports there are an awful lot of complexities that must be implemented and managed against. Let us first consider the typical data pipeline.

Data Pipeline

A typical pipeline involves the following steps:
  • Integration
  • Preparation, Curation, & Enrichment
  • Exploration & Refinement
  • Analysis
  • Visualization
Every analytics implementation has a data pipeline. In some cases this may be reasonably simple. In other cases this may be extremely complex. The one certainty is that there will be data flowing in and out. What needs to happen in between these two steps will significantly differ depending on the complexities intrinsic in your data, the manipulations that must occur within your process, and the availability of people, process, and technology to execute. 

Data Considerations

The primary considerations for procuring analytics tools are the same as those for any procurement initiative: people, process, technology, and value. At a more technical level, it's important to account for what are known as the V's of data. 


How much data is being processed?

If it's small (i.e., ~ <600,000 rows) then Excel may meet your needs. If it's medium (i.e., can be held in computer memory) then a more technical solution like Python or R may be appropriate. If it's large (i.e., can't be held in computer memory) then perhaps a combination of a database and chunking with Python and R may be appropriate. If it's really large maybe you need to consider Hadoop and MapReduce.

Many modern technologies distribute parallel data access and computations over lower cost solution rather than continue to optimize vertically. Further efforts have begun on optimizing against the hardware itself such as SSD. Keep in mind, if you have a small dataset then processing in parallel may actually slow down your analytics pipeline due to the overhead of introducing a slave/master relationship that must be managed. Furthermore, this assumes that the underlying software you are using even addresses parallelization in the first place.

The volume will have significant implications in your process due to limitations from write speeds and read speeds. Specific attention should be paid to the tasks that you will be performing most frequently as not all technologies are made equal. 


What types of data sources are being processed?

Data comes in many different formats. The three classes of data are structured, semi-structured, and unstructured. Some example consumables include images, video, audio, numeric, spatial, and text. Many deliverables are actually a combination of multiple consumables. Consider for example a video. It may include visuals, audio, and text overplayed on top of each other. As such it's very important to consider the types of data you will be handling and your organization's requirements for ingesting, manipulating, analyzing, and presenting it. For instance, an organization handling Geographic Information Systems (GIS) data will likely have very different primary considerations than a financial institution.


How frequently is the data received? How frequently is it consumed?

Data comes in two types that play a significant role in determining their velocity: streaming or non-streaming. Theoretically a streaming data source can be thought of as infinite data processes in small temporal chunks.

Velocity considerations may impact both our confidence in the accuracy of the data, how powerful (and so costly) our technology needs to be, and how complex our analytics use cases can be built. For instance, if we need to instantly process data because we receive it at a high frequency (i.e., stock market data) then it might not be viable to have bi-directional machine communication that properly validates the correctness of the packets being exchanged. Alternatively, if we need to make quick decisions with the data (i.e., a credit card company validating fraud with its models) we may need to have disparate analytic processes (i.e., an immediate feedback mechanism based upon a standard model and a small time horizon that's likely done in memory and a separate system that allows us to build, backtest, and tune a model from the a larger pool of data).


What is the quality of the data being processed?

The quality of the data and the steps that one needs to apply in order to make it useful are an important technology and resource consideration. It is often estimated that 70-80% of a data resources time is spent cleaning data. There is definitely truth behind this assertion.


To what degree is the data interconnected?

Data that has a clear primary key / foreign key relationship or columns with a standard recurrent structure is wonderful because then you can easily connect it through joins, vlookups, appends, concatenation, or whatever flavor of connectivity functions you may be familiar with. However, most data is not this easily connected and requires some level of processing and/or entity resolution. Real value and insight typically doesn't come from structured data. Rather, it often comes from taking unstructured data and layering it on top of the structured data.

Further Considerations

Now that we've properly considered the data that we are handling and what we need to do with it in order to generate insights and visualizations we must also consider the appropriate organizational philosophy.


Do we need backups of our data? Where and how often?

As much as we want everything to work all of the time, this is not a practical expectation. There will be disruptions to your process and technology. The real question is when and to what extent. It is extraordinarily important to consider how, where, and with what technology the data and associated processes should be developed, version controlled, backed up, and audited. Furthermore, what are the down-time versus up-time requirements? What is the plan in the unlikely scenario of a catastrophic event? Most importantly, it's important to consider how issues will be managed and communicated back to the developers, IT, and end-users, among others.


What can we ethically do with the data, what must we divulge about it, and are our results potentially biased in some way?

This is a consideration that could potentially have huge PR impact. Ethics have now become a mainstream consideration given the problems that have surfaced in the media around Facebook, Microsoft, and other major tech companies. Let us assume that you have a machine learning model. Can you reasonably assume that your data science made it without any preconceived notions? This is not likely the case if they all come from similar academic or cultural backgrounds. Let us assume that there are no preconceived notions. Can you assume that the data itself is not the product of an underlying societal or cultural norm that is suboptimal and being reinforced by the model itself?


How long should we keep the data? Who should be able to access it? What are the security requirements around it?

Most IT teams would agree that it is very important to know what level of restrictions and security protocol exists around your data. Does the data get transferred server-to-server? Then there should definitely be some form of encryption and decryption protocol in place. What considerations have gone into administrative rights? Who may actually access the data at any given point? Should they be able to access it? These are important considerations that must be managed and continually updated. Ideally from a secure, central location that offers easily deployed updated through some level of automation.

Of course, these days security is not limited to administrative and IT rights. There is also a data risk component associated with security. What is the shelf life of the data and how long should it be kept? The more data that might require a user agreement or NDA that your company has the more it might risk your company might be at if it's acquired by the wrong people. While unfortunate, it's imperative for every organization to consider the risk/reward surrounding its data, the shelf-life of that data, and the importance of insurance surrounding it.


The first step in the journey to analytics technology adoption is identification. From there it's all about executing against the above. Technology consideration, procurement, and adoption is a decision that should not be taken lightly. Many people think of an analytics solutions solely from the perspective of the operational efficiencies, visualization capabilities, and/or the insights to be gained from using them. While these are important considerations, they do not necessarily take into consideration the full picture. There are inherent complexities in selecting analytics solutions, such as a Business Intelligence (BI) tool, for your organization. As such, all of the relevant stakeholders including but not limited to IT, software engineering, analytics, operations, and legal should be involved in the decision making process. Feel free to review Source One's procurement technology advisory services roadmap or contact us directly if you need further guidance.

Small-business owners, trade organizations and multinational corporations haven't been shy about airing their opinions regarding the potential repercussions of the import tariffs installed by the White House, particularly as they pertain to supply chain management.

The latest to join the throngs of the none-too-pleased is Procter & Gamble.
As reported by CNN Money, the consumer goods giant issued a request to the Trump administration in early September, asking that it not be subject to the $200 billion tariff placed on a variety of imported products that P&G manufacturers. The company's requests fell on deaf ears, however, presaging challenging times may be ahead for the multinational corporation's distribution supply chain.

Selina Jackson, vice president of government relations and public policy at P&G, restated its opposition to the tariffs in a missive sent to the U.S. Trade Representative, which falls under the executive branch's purview.

"These imports are necessary to P&G's ability to delight consumers and meet their needs," Jackson explained, according to Fox Business. "Higher costs from tariffs may also translate into higher prices, reduce P&G sales and undermine American jobs in the P&G U.S. operations."

Unlike a growing number of manufacturers, which produce their products to save on operating expenses, 90 percent of the goods that P&G develops are made in the U.S.A., according to CNN Money. However, the parts, materials and equipment used to make these goods largely come from China, the same country that's engaged in a tit-for-tat trade war with the U.S.

Not only does buying these parts raise the cost of business for P&G, but it forces the company to charge more, creating a domino effect that could ultimately harm consumers and the U.S. economy at large.
"The West Virginia plant is expected to create around 1,800 jobs."
Tariffs will harm P&G workers, company says
In its original letter to the U.S. Trade Representative, Jackson warned that the tariffs would harm P&G workers. The multinational corporation is in the midst of developing a $500 million plant in West Virginia, one that's expected to create an estimated 1,800 jobs, according to CNN Money. But because much of its internal infrastructure derives from China, important tariffs will make it more expensive to finish off the plant's development.

"These new P&G jobs in West Virginia will be undermined by proposed tariffs," Jackson wrote in a Sept. 6 letter. "As the tariff impact ripples through P&G's manufacturing cost structure, P&G will be under intense pressure to increase the price of finished goods."

U.S Trade Council issues response
Although the initial comments were brushed off, White House National Trade Council Director Peter Navarro has since responded, in an interview with Fox Business Sunday Morning Futures host Maria Bartiromo.

"This argument about prices - there's very high cost to low prices," Navarro noted.
Navarro went on to state that P&G was being somewhat hypocritical by profiting off of goods coming from China instead of buying domestic, which led to companies shipping many of their manufacturing jobs overseas. Navarro said that the ongoing trade dispute is designed to put U.S. businesses in a better strategic position and ultimately lead to corporate cost reduction.

"If you look at this as an economist, what you see is the use of tariffs to pull down the unfair trade practices and tariffs in these foreign countries, but you also see it as a way to build capacity here," Navarro told Bartiromo. "Wages go up, jobs go up, factories get built, investment goes up and that's how you build a strong America."

Most of the tariff declarations have yet to be implemented, but since July, approximately $50 billion in new import and export tariffs have been enacted
Commercial developers hammered by skilled labor shortage

The extraordinary growth of the economy is a classic good news/bad news situation for commercial builders and developers. The encouraging aspect is more people are back at work, as the unemployment rate has stayed below 4 percent for half of the year, according to the most recent statistics from the Labor Department. This is partially due to business expansion, which requires more space and more workers to satisfy customer demand.

The bad news? Robust growth is exacerbating the poor shape of the skilled labor production supply chain, impacting a worker shortage that may have further to go before it gets better, based on newly released estimates.

The commercial construction sector is in dire need of more people to fill created as well as departed roles, and according to the USG Corporation and the U.S. Chamber of Commerce, this shortfall is expected to continue for the foreseeable future. Indeed, the joint report revealed that the scarce amount of qualified builders in construction could worsen through to 2021.
"Commercial construction skilled labor shortages could be evident through to 2021."

Nearly 9 in 10 anticipate deleterious effects
Commercial contractors almost uniformly have felt - or expect to feel - the effects of the skilled labor deficit at least somewhat. Nearly 90 percent of respondents in the construction index analysis indicated as much, with 57 percent percent suspecting the fallout will be significant.
It isn't just the commercial sector that's hurting from a labor perspective. The same is true among residential real estate developers. The issue has become so apparent, it's reached 1600 Pennsylvania Avenue, where in July, the White House issued an executive order that will see to the training of as many as 50,000 new construction workers. This has the potential to make the recruitment and employment procurement process less intensive. Unsurprisingly, the National Association of Home Builders applauded the decision.

The only problem is training takes time, and developers need help right now.
Jennifer Scanlon, CEO and president of the USG Corporation, said recruitment efforts have been slow, although strides have been made. Construction businesses must ensure that they make the most of what help they have to ensure organizational adaptability.

"The commercial construction industry is growing, but the labor shortage remains unresolved," Scanlon conceded. "As contractors are forced to do more with less, a renewed emphasis on safety is imperative to the strength and health of the industry."
In other words, contractors can't afford to lose someone due to an injury because that will magnify the severity of the shortage situation for them.

63 percent working on advancing workplace safety culture
Contractors seem to recognize this predicament, which is why 63 percent of respondents in the USG/Chamber of Commerce poll said they were working on developing a more comprehensive safety culture for crews to live by while on the job. More than two-thirds - 67 percent - said they were going about this by developing training programs that engaged workers.

Aside from training, some suggest the best way to replenish the production supply chain is through automated intelligence. Smart technologies are being utilized in an ever increasing number of industries, although some fear that this trend may lead to job loss. Sixty-two percent of respondents in a recent Gallup poll said manufacturing and construction were the most likely sectors to have fewer employment openings if AI gains traction.

Industry experts say the best strategy for developers moving forward may be to use a combination of AI and skilled laborers, perhaps utilizing technologies for tasks that are more menial in nature.

It's hard to believe, but the Strategic Sourceror has offered news and thought leadership to Procurement professionals for a decade. In that time, we've published nearly 5000 blogs and infographics. More importantly, we've engaged over half a million readers.

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September 28, 2018

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

New Whitepaper:
MRO Demystified Part II: The Value of a Spend Analysis 
In the second installment of their series on MRO spend management, Source One offers tips and best practices for conducting a thorough, effective spend analysis. More importantly, however, they discuss the ways Procurement can quickly turn the data provided by a spend analysis into action. 

New Blog:
What Makes a Spend Analysis Valuable

Brian Seipel, Future of Sourcing, 9/21/2018
When the subject of spend analysis comes up, business leaders often ask how they'll see a return on investment. While a hard dollar ROI is rarely obvious, Source One's spend analysis lead suggests that timely and effective initiative is inherently valuable. He cautions Procurement, however, from spending too much time on any analysis. Paralysis by analysis will not only cost the function time and money, but could lead it to miss out on opportunities for more high-value initiatives. 

New Podcast:
Blockchain and the Supply Chain
Few emerging technologies command more attention than blockchain. Providing for tamper-proof ledgers and total traceability, it promises to fundamentally change supply chains across the world. This week, Brian Seipel joins the Source One Podcast to cut through some of the hype and take closer look at what blockchain-empowered tools will mean for Procurement professionals. Listen to the full conversation today.

Upcoming Event:
Procurement Professionals Happy Hour: Chicago, IL 
Source One is hosting its fourth annual happy hour for Supply Chain and Procurement professionals. Join us October 18th for cocktails, hors d'oeuvres, and a chance to network with industry peers. Interested in attending? Contact Kaitlyn Krigbaum ( for more information. 

MarTech Conference: Boston, MA
October 1-3, members of Source One's Marketing Procurement team are headed to Beantown for this intense and exciting conference. Focused on breaking down the siloes between Marketing, Management, and Technology, the event should provide countless new insights and networking opportunities. 

Michael Kors acquires Versace for $2.1 billion

In a bid to improve operational excellence on behalf of customers, as well as supply chain management, two of the more well-known names in the retail space are joining forces.
"The deal is worth a reported $2.1 billion."

As reported by numerous media outlets, Michaels Kors has agreed to buy luxury designer Versace, a move that could very well shake up an industry that's witnessed substantial turnover due to the impact of e-commerce. Worth a reported $2.1 billion, the deal will also purchase the luxury designer's debt, although Versace turned a corner in 2017 by finishing the year in the black, Reuters reported.
John Idol, CEO and chairman of Michael Kors Holdings, said in a statement that the merging of the two companies is mutually beneficial.
"With the acquisition of Versace we have created one of the world's leading fashion and luxury groups," Idol explained.

This isn't the first time Michael Kors Holdings has tried to purchase its former rival. Earlier this year, Idol met up with Donatella Versace, who took over the company when her brother, Gianni, passed away in 1997. Idol inquired as to whether she'd be willing to sell the business her brother founded.
"I wasn't thinking about selling," Versace told The Wall Street Journal. "But I talked to John. He has the same passion for the business. And he can offer us expertise."

Versace added that Idol's expertise in digital commerce helped to seal the deal, which is a core
component of how the luxury designer manages its production supply chain.

To be renamed Capri Holdings
When two companies combine into one, there's always a question of what the business will be called, which can take a while to determine. As soon as the deal closes, which is slated for some time in the fourth quarter, Michael Kors will change its name to Capri Holdings. The company said the name derives from the island of the same name which is situated in the Bay of Naples off the Sorrentine Peninsula, CNBC reported.

In a statement, Donatella said she couldn't be happier with Versace's new partnership.
"We are all very excited to join a group led by John Idol, whom I have always admired as a visionary as well as a strong and passionate leader," Donatella explained. "We believe that being part of this group is essential to Versace's long-term success."

Poised to widen locations internationally
In addition to the potential impact the merge could play on the European luxury market, one that's highly sought-after given its exclusivity, the deal runs counter to what's been a theme among retailers of late, where brick-and-mortar locations have closed due to slow-moving sales. Versace intends to expand its locations, jumping from 200 stores worldwide to an anticipated 300, according to multiple reports. It also hopes to increase its supply of accessories and footwear, something Idol specializes in. If all goes according to plan, its revenues from accessories and footwear would increase to 60 percent of revenue from their current 35 percent.

However, the company's physical footprint likely won't be quite as widespread in North America, although it will remain where the majority of its operations are located. Specifically, Michael Kors plans to reduce its visibility in the Americas to 57 percent from 66 percent, while expanding in Europe and Asia, in particular - to 19 percent from 11 percent, CNBC reported.

Michael Kors' acquisition of Versace is only its latest strategic sourcing plan of action within the luxury retail segment. As reported by BBC, the business purchased luxury shoemaker Jimmy Choo in 2017 for $1.2 billion. Industry insiders say Michael Kors needs to be careful, however, to avoid the saturation effect.
Big Ideas Summit Chicago
When you consider the risks facing your organization’s supply chain, your mind probably races through series of headlines topping the news. Most recently: the US Trade War with China, impending natural disasters, Brexit; the list goes on. Leading companies have taken proactive action to mitigate supply chain disruption and ensure business continuity. However, as discussed during Procurious Big Ideas Summit, it’s not often those risks making the headlines that catch organizations off guard. Rather, the downstream consequences of those events or what Justin Crump, CEO of Sibylline describes as systems of systems affects that can dismantle an enterprise if not prepared.

With Procurement teams at the forefront of supplier decisions and interactions, these teams are in a prime position to help enterprises remain resilient during times of uncertainty or even disaster. However, when polling the room and supply chain and procurement professionals during Big Ideas Summit Session in Chicago earlier today, less than half the room raised their hand in agreement that they collaborate with internal departments responsible for addressing risk within their enterprise.

His advice for companies looking to effectively address risk: taking an intelligence-led approach with a framework that not only addresses the risks that immediately come to mind, as well as those do not:
  1. Understand that intelligence inherently isn’t a perfect process. Everything is a “best effort” – and you more or less get out what you put in.
  2. Answer the “So what?” You’re going to be bombarded with a mountain of information, clear requirements will help you define what’s most important to your organization. 
  3. To generate the best possible approach, take a balanced approach to your people, processes, and technology. 
  4. Make an impact by considering the needs of your audience. How much information is enough vs. how much information is overkill? 
  5. Recognize that intelligence needs to be managed as a project, with rigor and due diligence 
This is just one of the many insightful discussions had during this year’s Procurious Big Ideas Summit. Justin Crump of Sibylline joined an impressive line-up of keynote speakers including Tom Derry, CEO of the Institute for Supply Management, and Pat McCarthy, SVP, and GM of SAP Ariba. A unique event experience, attendees were able to attend in person in Chicago, as well as digitally through the live stream. For both types of participation levels, attendees walked away with insights into how leading companies are approach risk mitigation, sustainability, diversity, and more.

Procurement's digital revolution is well underway. According to Hackett's most recent CPO Agenda report, few organizations have any doubt it will continue. The report found that 95% of surveyed CPOs believe digital tools will fundamentally transform their supply chains within a matter of years.

A number of emerging technologies are expected to hasten this transformation. With respect to both hype and potential applications, however, one commands more attention than (perhaps) any other - blockchain. Recent years have made it clear that blockchain is useful for far more than keeping cryptocurrencies in check. The blockchain-powered IBM Food Trust, for example, helps retailers trace produce from shelf to farm in a matter of seconds. Such improvements to traceability promise to protect consumer safety and corporate reputations alike.

This week, Brian Seipel joins the Source One Podcast to examine what blockchain could mean for Procurement professionals.

Seipel begins the episode with a few disclaimers. In addition to reminding listeners that he's no "tech guru," he points out that blockchain's future is by no means certain. While it could come to represent "a monumental advancement" for supply chains everywhere, it could still just as easily fade into obscurity when the next big thing comes along.

He makes no attempt to predict which outcome is more likely. Rather, Seipel contrasts the much-discussed technology with the (often outdated) tools Procurement currently employs. Blockchain's tamper-proof ledgers, he suggests, will make it easy to diagnose issues across the supply chain and address them before they become costly.

He reminds listeners, however, that the technology is not fool-proof. "We live in an age," he says, "where our coworkers are still falling prey to phishing schemes." The worst a Procurement group can do is let blockchain's promise lull them into a false sense of security. Organizations who fail to train their teams effectively will find themselves falling into many of the same technological traps as always.

Despite the potential drawbacks, Seipel ends on a hopeful note. "The only limits to this technology," he concludes, "will be in how Procurement can envision using it."

Subscribe to the Source One Podcast today to listen to the full episode.
Just wait - any moment now… The temperature will drop, leaves will start to change color, and America’s youth will have a collective sugar coma that lasts for no less than three dark and stormy nights.

It’s that time of year again – just as we’re getting ready to say ‘goodbye’ to September (and summer, and the beach), we’re gearing up for Halloween. That process includes buying bulk candy, costumes, and decorations.

As Procurement pros, I thought you might like to see a breakdown of just where this spend is going…

The Halloween (Pumpkin)Pie Chart
The National Retail Federation is predicting heavy spend this year for Halloween, reaching $9 Billion. Broken down among all the happy Halloween enthusiasts, they’re estimating an average total of about $87 per person. That’s a lot of candy corn!

And other items as well. The NRF is expecting a breakdown that resembles the chart below:

If this number seems eerily high to you, you may be right. Halloween is becoming one of the most expensive holidays. I wouldn’t expect the October fright fest to overtake Christmas any time soon – The average American spend about ten times as much on Christmas as they do on Halloween. At the same time, however, Halloween keeps getting more and more expensive as the years go by. NRF lists Halloween costs as far back as 2013 when Americans were expected to average about $75 per person. Although 2013 seemed like a somewhat lighter year, the average over the last half decade reached about $77 – still a big difference between this year and years prior.

Click here for a breakdown of annual costs from the NRF.

The Impact of Tariffs on Halloween
We can’t forget the other big news on the block besides Halloween. Tariffs are scaring plenty of American businesses that face steep increases in the price of goods they depend on to produce their products. While we’re all focused on heavy hitting product categories including early steel and aluminum tariffs, it can be chilling to think just how far-reaching the list could grow to be.

The Halloween Industry Association recently released a statement on the subject. In that statement, the organization clearly and explicitly opposed any tariffs that might hit Haloween costumes and other products imported from China.

Happy Halloween to you Procurement Pros!
I’m not normally one to recommend taking work home with you. However, do me a favor this year. When you’re out there prowling the streets with your costumed kids collecting candy – I hope you’ll join me in thinking about the immensity that is the American Halloween supply chain monster!

This summer, an E. coli outbreak from tainted romaine lettuce killed five people, put nearly 100 in the hospital, and caused over 200 to fall ill. According to the Center for Disease Control, these numbers made this the deadliest E. coli outbreak on American soil in over two decades. Though the tainted greens were eventually traced to a single farming region, both the CDC and the Food and Drug Administration struggled to identify how, when, and where the contamination actually occurred.

Responses from consumer groups were not kind. A late-May letter signed by nine organizations read, "Retailers using advanced technology, such as blockchain, now report they can identify the origin of certain produce shipments in as little as 2.2 seconds. Given these advances, it is no longer acceptable that the FDA has no means to swiftly determine where a bag of lettuce was grown or packaged."

Walmart announced this week its intention to join these tech-enabled retailers. In a letter to its leafy greens suppliers, the corporation unveiled the Walmart Food Traceability Initiative. Powered by blockchain technology, these measures are intended to "increase transparency in the food system and create shared value for the entire leafy green farm to table continuum."

The announcement represents a milestone in Walmart's ongoing partnership with the IBM Food Trust Network. Over the last eighteen months, Walmart has worked with IBM and select suppliers to develop and test a blockchain-enabled system for tracking its lettuce. The trials have proven it possible to trace an individual package from farm to Walmart store in a matter of seconds.

This week's letter makes it clear that Walmart considers such innovation long overdue. "Walmart believes," it says, "the current one-step up and one-step back model of food traceability is outdated for the 21st century." The retail giant goes on to insist that its suppliers join them in entering this new era. 

By February of next year, Walmart expects each of its direct suppliers to leverage the IBM Food Trust Network to provide at least one-step back traceability. By October, they are required to work directly with their own suppliers to provide Walmart with full, end-to-end visibility. This might sound like a big ask, but Walmart also ensures its suppliers that joining the initiative requires little more than "a smart device and internet."

Walmart's initiative is just one example of an organization leveraging blockchain tools to improve traceability and promote consumer safety. The IBM Food Trust Network alone constitutes a massive, collaborative effort to put this evolving technology to socially responsible use. Its progress thus far suggests, at the very least, that blockchain is far more than an empty buzzword.

Still, not everyone is convinced. Sarah Taber, an independent food safety consultant, expressed her skepticism to Supply Chain Dive. "People get excited about blockchain," she remarks, "because it is fantastic for tracking digital assets, but for physical assets, it's just not." She suggests that disorganization and poor communication are generally to blame for poor traceability. A new technology, however revolutionary, cannot hope to remedy these. Speaking from years of experience, she presents "investing in people" as the only real answer to the food contamination issue. Taber's warnings provide a helpful reminder that investing in new tools at the expense of people is a short-sighted, potentially ruinous move.

Walmart concludes its letter by reminding suppliers that it is striving "to create a safer, smarter, and more sustainable food system so people can live better." To reach that goal, the ambitious retailer must take care not to let technology obscure its view of those people.

Supply chain optimization isn't just a matter of ensuring efficiency and expediency. It can be a matter of life and death when customers are unable to obtain pharmaceuticals and other products that contain ingredients people need to overcome health emergencies.

Such is the situation for pharmacies, many of which are experiencing severe shortages of EpiPens that individuals use to overcome extreme allergic reactions to certain substances.
"The FDA warned about the EpiPen shortage in May."

In May, the U.S. Food and Drug Administration issued an alert that was widely reported by numerous news outlets regarding the relative unavailability of EpiPens. Sold by Mylan, a subsidiary of the pharmaceutical giant Pfizer, EpiPens contain epinephrine, a naturally occurring hormone that when injected can counter the effects of anaphylaxis. When not treated swiftly, anaphylaxis can result in death due to the extreme symptoms that result from allergic reactions to foods like peanuts, wheat, soy and shellfish, among others.

Parents frustrated in preparing kids for school
Because there are several generic versions of the EpiPen, they're still available for purchase, but they can be hard to find in large quantities, an issue that's come to the fore now that schools are back in session.

Julie Cook, a mom of two teenagers with severe food allergies, told The Wall Street Journal that she's devoted a lot of time and effort to the search, but has come up empty, being told by her pharmacist that refills wouldn't be available for several weeks.

"It's so frustrating," Cook explained. "Why is this happening in August? What's going on? And what's going to happen in the future?"

In the spring, when the FDA first warned of the shortage - which Pfizer attributes to the effects of changing its manufacturing process to comply with federal regulations - the agency didn't expect the
EpiPen scarcity to last for long. But several months removed, the shortfall persists, an issue that California resident Tory Palenscar realized in August while preparing his 7-year-old daughter with food allergies for the school year.

"I started panicking," Palenscar told the Journal, alluding to when her pharmacy didn't have the lifesaving devices. She was able to find a pharmacy that still had EpiPens available farther away from her home but is eager to buy more.

Generics differ in administration
Complicating matters further is that the generic equivalents of EpiPens aren't necessarily used like the originals. The Food Allergy Research & Education made this reality apparent via social media messages in the aftermath of the FDA's May announcement and now devotes a portion of its website to helping consumers understand the differences.

The shortage isn't exclusive to the U.S. either. As reported by BBC News, its affecting the United Kingdom as well, also due to manufacturing complications that haven't been detailed with specificity. The Department of Health, which serves as the equivalent to the U.S. Department of Health and Human Services, said developers are seeking to "resolve the supply situation as quickly as possible" and advised patients to "speak to their doctors about using an alternative adrenaline auto-injector device."

Meanwhile, back in the States, the FDA has been in close contact with manufacturers to ensure that the distribution supply chain avoids serious disruptions and improve supplier relationship management.
The following blog comes to us from Dennis Speath of Cutting Tools Engineering

It’s no secret that America’s manufacturing industry is on the rise in more ways than one. Even though automation, offshoring, and other trends have caused about five million job losses throughout the past 10 years, the industry is quickly making a comeback. In fact, America’s manufacturing industry is currently producing about 12% of the country’s gross domestic product.

Manufacturing industry trends are continuing to evolve, though; many specialized jobs in the field require more technical training as well as a college degree. This is mainly a result of the many technological advancements the industry has seen. And by 2027, it’s estimated that the industry will add up to 3.5 million jobs to its workforce. These jobs require more in-depth experience with technical and advanced machinery, but they open countless doors to what’s possible within the realm of high-tech manufacturing. It’s even prompted companies to reshore operations to maintain the advancements in productivity and technology.

As a result of these spectacular innovations within the American manufacturing industry, workers are earning more income from their jobs. In fact, some of the most specialized jobs within this industry sector pay up to $26 an hour. 

This advancement in technology will have a ripple effect on America’s entire social economy, paving the way for increased educational opportunities and underlying growth. This was far from the case half a century ago, when the majority of workers within the manufacturing industry had little or no college education. Currently, nearly 72% of the workers within the industry have a two year college degree, which brings the total percentage of workers with any type of higher education to 32%.

Ultimately, the ‘reshoring movement’ that’s rapidly occurring within America’s manufacturing industry has countless benefits on companies as well as individuals within society. Now, virtually anyone can improve their quality of life through the growing opportunities available in the high-tech and high-paying manufacturing workforce.

Dennis Spaeth, who served as electronic media editor at Cutting Tool Engineering, from January 2007 through May 2018, is now Publisher and Chief Executive Officer of the magazine and CTE Publications Inc. Dennis holds a bachelor’s degree in journalism from Northern Illinois University, and has more than 32 years of daily newspaper and trade journalism experience.
A good juggler can keep three balls in the air at once. A great juggler can maybe keep seven or eight circling above them. All things considered, however, each of these two jugglers only has a single ball in hand at once.

With all the day-to-day tactical tasks on Procurement’s plate these days, just trying to keep the trains running can seem a lot like juggling. There are only so many tasks we can focus on each day. At some point, with so much going on, we’re bound to make at least one mistake.

Mistakes happen. Even the best Procurement team will drop a ball now and then. However, even seemingly small mistakes can have huge consequences.

While not exhaustive, I’ve listed several big mistakes that are becoming all too common these days.

Not checking the market. I’ll start with the most obvious mistake first. There are always long-term suppliers that we’ve worked with for years. They know our business and we trust them to support us. Perhaps we’ve conducted a few rounds of negotiations over the years and, to their credit, they conceded some marginal price reductions. Is this a win? Hard to say – if you haven’t gone to market in the past couple years, you have no idea what competitors are charging. Beyond costs alone, you don’t know what advancements hungry competitors are devising that could revolutionize your own processes.

You don’t know what you don’t know. Identify the key players in the market today, and gather intel through an RFI or RFP – see what you’re missing out on. Minimally, your incumbent will likely come to the negotiating table with a much stronger discount next time.

Discounting Suppliers’ Value. I want to return to one point I glossed over above. To be sure cost reduction is important, but getting a lower price isn’t the only value suppliers bring. Suppliers know their markets better than Procurement can – they have the benefit of deep focus, where we need to be familiar with a great breadth of offerings procured. Too often, however, Procurement ignores valuable insights from these experts. Reach out to your suppliers at a more strategic level – find out where they see the industry moving, and what advancements they’re making that could benefit you.

Failing to communicate with suppliers. As mentioned, running an RFI or RFP is a great way to learn more about a supplier’s offerings and how they can solve your problems. However, communication needs to be a two-way street. You can’t simply outline a short list of specs and expect a supplier to respond with the perfect plan. Suppliers will have questions. They’ll have a need for clarification. Too often, an open forum for Q&A is omitted from the RFP time line.

Make no mistake, blocking off this communication will hurt you. If suppliers don’t get the information they need, they’re left to make assumptions about your needs. The more assumptions that get baked into a proposal, the more likely they won’t be a fit for your needs. Additionally, comparing two proposals filled with assumptions is essentially comparing apples to oranges.

Failing to negotiate. By the end of our market event, if we played our cards right, we should have strong market intelligence on competitive pricing and SLAs. If the lowest cost supplier also offers competitive service, that’s a win, right? Yes – but not as much of a win as it could be. Identifying a competitive initial cost does not replace the need to further negotiate. Everythign is on the table until you sign on the dotted line.

Failing to enforce policy. So we’ve set up a competitive agreement with a new supplier that should save us huge sums of money. Great! Or is it? That all depends on if that agreement is adhered to. Office supply spend is a simple example, and a very common place for this mistake to occur. You’ve worked to put together a competitively priced contract list of common items. However, employees continue to order off-contract, thereby sidestepping all the work you’ve done in order to buy supplies that are more expensive than the items you negotiated.
We’re rounding out the bottom of the third quarter of 2018 and, when you consider the upcoming holiday season, not too far away from 2019. Many of you may already have your eyes on developing trends as we approach the New Year and may be wondering, “What’s 2019 going to bring for Procurement trends?”

Another year has gone by without me getting my hands on a crystal ball. That said, I’d wager a few concepts will be on everyone’s mind. You’ll find my predictions below in no certain order. While all may be big topics moving forward, they aren't necessarily concepts that Procurement pros have made their minds up about yet. In my mind, 2019 won't be about whether these trends continue, but how Procurement reacts to them.

Where do you stand on these hot button items?

Why do so many companies fail to optimize their MRO spend profile, even after committing to making a change?

In many cases, it's because they neglect to conduct a thorough and effective spend analysis. The process of diving into historical spend provides the foundation for a more effective, strategic approach moving forward. Done correctly, spend analyses make it possible for Procurement to achieve an overview of their historical purchases within a category and identify opportunities for both short and long-term cost reduction. In a high-volume category like MRO, however, the process often looks too daunting for Procurement to even attempt.

In Part II of Source One's new whitepaper on MRO spend management, the Strategic Sourcing experts take a closer look at the value of a good spend analysis. They offer best practices backed up by their collective decades of supply chain experience and aim to alleviate any misgivings Procurement might have about this complicated category.

Check out MRO Demystified Part II: The Value of a Spend Analysis to learn more about:

  • Rethinking historical approaches to analyzing and managing MRO spend. 
  • Developing the right goals for spend analyses and sourcing initiatives.
  • Selecting the right taxonomy for an MRO spend analysis.
  • Collecting and categorizing spend data in the most efficient way possible.
  • Leveraging MRO spend data to identify opportunities for cost reduction. 
  • Encouraging suppliers and stakeholders to develop more effective data collection processes.
  • And more . . . 
Make no mistake, wading through years of MRO spend data is a time-consuming process. This is doubly true for organizations who've historically relied on their suppliers to collect and store data. That's no reason to abandon hope. With the insights offered by Source One, organizations should find that even the (admittedly) hard work of constructing an MRO market basket is simpler. 

Download the whitepaper today to start refining your approach to MRO spend management and be on the lookout for Source One's team at ProcureCon MRO next month. The leaders in spend management aren't just attending, but serving as sponsors for this exciting event. Stay tuned for more updates in the coming weeks. 

Like all business units, Procurement stands at the brink of a new technological era.

You don't need to be an expert in Supply Chain Management to understand this. A quick glance at any industry blog should provide a sense of how loud and how pervasive the hype machine has become.

It's not hard to see why. Long dismissed as a tactical, low-value entity, Procurement is eager to land on the next big thing. This enthusiasm, however, has its downside. In their efforts to embrace new tools and reach the cutting edge, Procurement groups often rush into things. As a result, many find themselves struggling to implement tools that are mismatched to their actual needs and capabilities.

To make matters more complicated, most solution providers are moving away from the consultative space to focus on developing their core competencies. Oftentimes, this means Procurement is left to assess, select, and implement technologies on its own. Even the most well-appointed team can feel overwhelmed when this is the case.

That's why Source One introduced it's suite of Procurement Technology Advisory services. Leveraging their collective decades of supply chain experience, the spend management experts offer end-to-end support to help organizations develop an optimal approach to their tools and solutions.

Source One's Procurement Technology Advisory Services include:
To learn more about how Source One's team help your organization kick off its digital transformation, check out this new video outlining Source One's Procurement Technology Advisory practice. 

It’s a hard pill to swallow, but Trump’s tariffs are here to stay (at least for now). China has been the Mecca for raw materials, labor, electronics, etc. at incomparable prices. However, that might all be changing. President Trump hit China with tariffs on $200 billion worth of goods earlier this month on top of the $50 billion worth already taxed earlier this year. Goods on the list include: steel, aluminum, solar panels, circuit boards, vinyl, automotive parts, food processing machinery, lasers, medical equipment, plywood, and much more.  If that wasn’t enough to rattle financial markets,
Trump stated that he was prepared to “immediately” place tariffs on another $267 billion worth of imports if China retaliated again. 

What does this mean? It means roughly half of all Chinese imports into the US will soon face levies. High profile companies Microsoft, Google, and Amazon to name a few are investing considerable resources lobbying against the tariffs. Recently, retail giant Wal-Mart has warned the US Trade Representative that they will have to raise their prices for house items ranging from cribs to Christmas lights due to tariffs. Unfortunately, the trade war will not only affect corporations but also affect the everyday consumer. The tariffs are said to raise prices on food, electronics, tools, furniture, and much more.

For readers not keeping up with political news (don’t worry, you’re very much not alone) and wondering why Trump is tariff happy, here's the gist. The tariffs are intended to pressurize China to change their trade practices that Trump states are hurting American businesses. Trump asserts that the US can no longer tolerate the trade gap between what is exported to China and what is imported back in. America’s economic strength along with China’s economic slowdown was an advantageous environment for Trump to strike. The only way for China to gain relief would be to reach an agreement with the administration’s trade demands, which include allowing American companies have greater access to the China market. Economists and trade analysts widespread are stating that Trump’s actions are unfavorable for U.S. growth. The National Association for Business Economics survey showed 91% of respondents stated the tariffs will have “unfavorable consequential impacts” on the U.S. economy. Furthermore, let’s not forget that China isn’t the only one being taxed. Trump’s administration have also imposed tariffs on other countries such as Canada, European Union, Australia, Mexico, India, and Argentina.

This trade war has intensified pressure on companies, specifically, Procurement organizations to reevaluate their strategies in order to mitigate the current landscape. 

Three approaches Procurement organizations can take include: 1) find alternatives sources/suppliers; 2) optimize their supply chains; 3) identify cost savings opportunities in other areas of the business in order to remain cost effective, competitive, and retain their customer base. 

Option 1 would include extensive market research into the category(s) affected by the tariffs in order to find new sources. Once you do, you will want to strategically negotiate a new agreement(s) to ensure continuity of supply while reducing transitioning costs. Option 2 would require a full investigation of your organization’s supply chain and thoroughly understanding the logistics and handling of your goods to identify efficient work arounds to alleviate added costs. Option 3 would require a collaboration across the enterprise to review the organization holistically and engineer a savings pipeline in order to offset costs. If you have exhausted all three options or if the three options don’t make sense for your organization, you will have to strategize an effective way to communicate with your customers and allow them to fully understand the reason for the downstream impacts and possibly incentivize in order to hold their business.

Though President Trump continues to tweet upbeat about his actions and progress, only time will tell the future of the economy. We will have to continue to keep a close watch and remain agile in order to sustain this ever changing landscape of the global economy.  

ICYMIM: September 24, 2018

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 news.

Brian Alster, Spend Matters, 9/21/2018
It is incredible how much a typo in data can cost a company. Brian Alster explores 3 common, dangerous problems businesses run into when doing data collection and analysis. Citing Gartner, Alster states that organizations with problematic data quality lose $15 million annually on average. Duplicate data, inaccurate data, and conflicting data can be expensive, but the article provides a starting point for understanding how to prevent, and possible remedy, these data errors within your company.

Charles Dominick, Next Level  Purchasing, 9/19/2018
Regardless of your political position, the Trump Administration's new approach to trade puts a great deal of American businesses in an interesting spot. Years ago, changes in the global market made it, for some, an almost unconscious decision to begin purchasing from China. Now, due to drastically different tariffs, American suppliers have seemingly regained their edge on their overseas competition. The change in steel prices has been heavily covered by the media, but there a number of other tariffs that may also effect the way your company spends. Charles Dominick asks you to take the appropriate time to review your sourcing. Is it a good idea to explore American suppliers and gut your Chinese spending this early? Due to low production capacity and high demand stateside, Dominick thinks the answer may be yes.

Biji John, Spend Matters, 9/18/2018
It feels like all anyone is talking about these days is blockchain. But how useful is it really, and in what fields can it be utilized most practically? Though it seems that a lot of the buzz surrounding the topic is in the realm of finance, the supply chain management functions have a lot to gain here and have been making effective use of blockchain for some time. Though it may seem like a no-brainer now, unlocking businesses from the traditional, silo-style management technique was nuanced and seemingly risky less than a decade ago. John dissects how everyone has something to gain here, and how finance and supply chain management can be, and should be, leading the charge.