December 2018

December 7, 2018

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

Whitepaper Series
MRO Demystified: Parts I - IV
Few spend categories are as consistently overwhelming as Maintenance, Repair, and Operations. Source One's newest whitepaper series offers tips for addressing the categories challenges and driving maximum value. Covering everything from the problems with typical approaches to the strategies that make for long-term success, the series is exactly what your team needs to refine its approach to MRO spend.

New Podcast:
How Not to Sell Supply Chain Staffing
Nobody likes a sales pitch. When the salesperson is offering staffing services, the pitch is often especially unwelcome. On this week's episode of the Source One Podcast, Supply Chain Recruiter Andrew Jones discusses some of the best practices that have made him a success. He suggests that thorough research and an emphasis on the human side of things make it possible to sell supply chain staffing without coming off like a salesperson.

Many procurement organizations determine the importance of a software/service renewal by the price. The million-dollar-plus purchases are usually cared for and checked to ensure the company is getting the full value out of them and that they are renewed on time. The lower the dollar value, the less attention is paid to it.
Sometimes the smallest purchases can have an outsized impact on business operations. 

Yesterday, 4G mobile networks across 11 countries suddenly went offline and it took hours to bring them back up. The culprit appears to be an expired certificate on certain Ericsson devices that carriers had installed in their infrastructure. 

Although Ericsson didn't specify the type of certificate it was (i.e. code signing, SSL, etc.), most certificates are well under $1000/year, depending on the type and vendor. For a company of their size ($22 billion in revenue last year), a purchase that small is a drop in the bucket.

While procurement is almost certainly not at fault in this instance (the team in charge of the software would be), it highlights how procurement can be an extra fail-safe in the system and increase their value to the company. Renewals should be prioritized not just by dollar value, but what would happen if the product were to accidentally lapse.

Don't assume a 1:1 correlation between cost and business impact. Procurement should understand not just what they are buying, but how even the smallest purchases could affect the company as a whole.

The following blog comes to us from Aniruddh Parmar of Software Suggest

ERP software provides some amazing benefits, but the cost of these platforms goes well beyond what's on the price tag. Even the most low-cost option promises to saddle Procurement with a number of additional charges. Unfortunately, many organizations neglect to factor these into their budget discussions. These groups find themselves sadly disappointed when the low-cost ERP they've invested in begins to put a serious strain on their resources.

While Marketing teams and salespeople might convince you that their ERP is well within your organization's budget, it's important that Procurement take time consider any secondary costs. Some of these - implementation, for example - are easy to plan for. Charges for upgrades and maintenance, on the other hand, might prove more unpredictable.  Here are a few of those hidden costs you might want to think about before selecting a new solution.

Organizations adopt ERP systems to reduce costs as well as their own workload. Ironically enough, implementing an ERP tends to require a lot of both money and effort. The more complex the ERP, the more potentially costly and time-consuming the implementation process. That's why it's so essential to carefully assess your team's actual needs before making a commitment. No one waste time and resources implementing a solution that their organization can't or won't leverage.

You can't realize the benefit of ERP software if your team can't use it. For Procurement professionals, embracing a new ERP often means learning a lot of new concepts and processes to gain an understanding of the tool. Not everyone will need to understand the software completely, but it's important that those who need to do. Training Magazine reports that companies spend more than $90.6 billion developing their employees - new technologies account for a large chunk of that sum.

One of the best things about world-class ERPs is the customization options they provide to users.  If the features present in the software don’t suit the business, administrators often enjoy the option to customize them. While helpful (and possibly necessary), the development fees associated with tailoring the system can add up quickly. Some organization might even find that this process leaves them spending double or triple what they intended. 

Software Upgrades
Don't forget that investing in a new solution means investing in support, maintenance, and periodic updates too. A new update might even mean re-training employees to leverage new features and understand new functionalities. When evaluating providers, it's crucial to identify those who'll offer value adds like consultation to eliminate as many of these costs as possible. You'll also want to look for vendors who offer customer support without tacking on additional charges. If these charges aren't covered by your annual package, your organization could find itself paying for each and every issue it brings to customer support.

Integration with other software
If you want the ERP system to show its full potential then it is important to integrate it effectively with your Procurement team's other business software. This is rarely an easy process. Depending on what solutions your organization leverages, integration mean navigating a protracted implementation process and even breaking the bank. Once again, you can mitigate these costs with proactive research during the selection process.

These are just some of the hidden considerations that Procurement often overlooks while navigating the market for ERP software. Don't forget to give them some thought before your organization makes its next big investment.

Author Bio:
Aniruddh Parmar is a Blogger and Software Analyst at SoftwareSuggest. He loves to dig deep into various ERP Software, Payroll Software and Project management software. He's also ready to grab a cup of coffee anytime, if you want to talk about tech, cars, business, or cricket.

Telecom invoices are designed to confound and confuse. Even at their simplest, they tend to leave Procurement teams scratching their heads and handing over far more money than they ought to. 

Want to get the category in order? Check out Source One's six steps for reining in telecom costs and taking a more strategic approach to provider relationships.

USDA expands ground beef recall that began in October

Coming at perhaps the worst possible time for grocers, massive amounts of ground beef are being pulled from the supply chain due to foodborne illness concerns, a move that's sure to cause frustration for consumers and headaches for supermarkets as well as butchers.

The U.S. Department of Agriculture's Food Safety and Inspection Service announced on Dec. 4 that it's expanding a recall that began earlier this year by removing 12 million additional pounds of raw beef from purchase availability, multiple news outlet reported. The cause is potential exposure of the beef to salmonella, a bacterial disease that attacks the lining of the gastrointestinal tract and can cause a host of unpleasant symptoms, including diarrhea, abdominal pain, and fever, which usually become apparent as early as 12 to as late as 72 hours after eating, according to the Centers for Disease

Control and Prevention. It's estimated that salmonella leads to more than 1 million sicknesses in the U.S alone each year and 23,000 hospitalizations.
"At least 246 cases of salmonella poisoning have been reported in more than two dozen states."

26 states linked to salmonella outbreak
This latest recall is an expansion of one that began in October, when health officials were apprised of an uptick in foodborne illness manifestations among many Americans, much of which were in the southwest. An ensuing investigation determined that the source of the issue was JBS Tolleson, Inc., one of the country's major beef, pork, and lamb product suppliers that's headquartered in Arizona. Since the inquiry began up to the present day, at least 246 cases of salmonella poisoning have been reported in more than two dozen states, according to CBS News. They're all believed to be linked to the same supplier.

"[FSIS] is concerned that some product may be frozen and in consumers' freezers," the USDA warned in a statement at its website. "These products should be thrown away or returned to the place of purchase."

The latest recall comes on the heels of a separate, but similarly wide-reaching recall that also occurred at an inopportune time - right around Thanksgiving - only due to E.Coli concerns. The CDC and Federal Drug Administration urged all Americans to throw out romaine lettuce - even if they had eaten from romaine lettuce heads without experiencing any symptoms of the food-borne illness. A week after the recall was announced, health officials traced the origin of the strain to California's central coast.

Bill Marler, a Seattle-based food safety attorney, told USA Today that the beef recall is one of the biggest in history, but noted that, overall, they aren't as prevalent as they used to be.
"Recalls have been down substantially in the last several years," Marler explained.
He further pointed out that the USDA likely decided to expand the October recall after evaluating some of the recordkeeping particulars at the JBS Tolleson plant in Arizona. He also speculated that the order could be due to internal testing done to examine any sanitation issues.

"That's what usually prompts the recall to get bigger," Marler said.

Not the largest red meat recall
Although there's no such thing as a good time for a food recall - neither from grocers' perspective, nor that of American families preparing for holiday feast festivities - it could be worse. In 2008, for example, supply chain optimization among grocers took a major hit after 143 million pounds of ground beef was recalled by Westland/Hallmark Meat, USA Today referenced. It's believed to be the largest meat recall in U.S. history, which was sparked as a result of meat products potentially containing mad cow disease.

The USDA said that as soon as it obtains the information, it will post the retail distribution list at its website, detailing what stores carry the ground beef products under recall orders.

It's not always easy to admit you need a helping hand. Many organizations would rather exhaust their internal teams and totally deplete their resources than leverage third-party support. This is often especially true where staffing is concerned. Understandably, hiring managers and Human Resources teams are likely to trust their own instincts and insights over those of an outside operator.

Supply Chain recruiters and staffing firms don't help themselves when they lean on sales pitches to sweeten the deal.

This week on the Source One Podcast, staffing expert Andrew Jones discusses some of the strategies he's employed to evidence his understanding and promote his services without coming off like a salesperson.

Jones suggests that thorough research tends to separate the sales-y nuisances from the welcome strategic partners. Before reaching out to any applicant or organization, Jones takes time to immerse himself in relevant information. That way, he can enter each conversation armed with impactful insights rather than empty sales rhetoric.

Throughout this process, Jones considers people his most valuable resource. "You'll learn far more," he says, "in one conversation than you'll learn in ten articles. As useful as many blogs and publications are, they can't provide what a detailed discussion will." Hearing practitioners describe their pain points and daily concerns has helped Jones distinguish himself as an authority even in new and unfamiliar areas.

Interestingly enough, Jones finds the most productive conversations are often the most negative. The costs of a mismatched hire are myriad. Sharing these figures, Jones believes, inspires far more action than simply speaking to the benefits of third-party staffing.

Subscribe to the Source One Podcast today to hear the rest of the conversation.

From an environmental perspective, the consequences of the Earth's climbing temperature are pretty clear cut. Climatologists note that in addition to rising sea levels, which can trigger more common flood events, global warming can spawn larger wildfires, intense droughts and powerful hurricanes.
But could these catastrophes also be disastrous for the U.S. supply chain? In a word: Absolutely.
"The U.S. economy may shrink 10% by 2100 due to climate change."

recent report released by the White House said the economy has the potential to shrink by 10 percent come 2100 due to the effects of climate change. The Fourth National Climate Assessment doesn't pull any punches, stating quite flatly that America's financial system could be hit hard if nothing is done to curb greenhouse gas emissions.

"In the absence of significant global mitigation action and regional adaptation efforts, rising temperatures, sea level rise, and changes in extreme events are expected to increasingly disrupt and damage critical infrastructure and property, labor productivity, and the vitality of our communities," the report warned. "Regional economies and industries that depend on natural resources and favorable climate conditions, such as agriculture, tourism, and fisheries, are vulnerable to the growing impacts of climate change."

Second hottest October in recorded history
The National Oceanic and Atmospheric Administration regularly releases updates - usually on a monthly basis - on the Earth's temperature. Throughout much of 2018, temperatures were at record levels. For instance, this past October was the second-hottest October on record for the globe overall. Interestingly, the previous 10 warmest Octobers have all occurred within the previous 15 years. The average temperature in the month was 1.5 degrees Fahrenheit higher than what the median temperature during the 20th century (57.1 degrees).

It's this seemingly unabated warmth trend that the NCA most sternly warns about. The study noted that power generation could weaken because there will be greater strain on the electrical grid with the mercury higher. This added demand could produce a domino-like effect, touched off by higher utility payments. These adverse impacts on the economy would stretch beyond the U.S. mainland, the report cautioned.

"With continued growth in emissions at historic rates, annual losses in some economic sectors are projected to reach hundreds of billions of dollars by the end of the century - more than the current gross domestic product (GDP) of many U.S. states," the report said.

Ship clearance problems poised for ports
The nation's ports, where the U.S. conducts much of its import and export activity, could be in the crosshairs as well. As noted by Supply Chain Dive, sea levels are poised to rise between 1 and 4 feet by 2100. This could lead to clearance issues for ships and cargo entering and leaving ports, with some of the worst effects impacting low-lying areas along the Gulf of Mexico and Los Angeles.
The roads and rail aren't immunized from global warming either. As it is, when storms strike, streets often get closed off and traffic jams intensify. Higher temperatures would also lead to a worsening of crumbling infrastructure, evidenced by deteriorating asphalt and stressed components found in abutments and bridges.

Of course, this is all assuming that temperatures continue to get hotter and reach the levels that some computer models suggest. For example, in order for the economy to shrink 10 percent, the Earth's temperature would have to climb by 14 degrees Fahrenheit between now and 2100, noted Bjron Lomborg, president of the Copenhagen Consensus Center, in a column published by the New York Post. The U.S. climate assessment doesn't project such a dramatic increase, forecasting instead an uptick in temperatures of between 5 and 8.7 degrees Fahrenheit.

How to prepare
It always pays to be prepared for worst-case scenarios, however, so businesses can do things now to tamp down the potential adverse effects. As referenced by Supply Chain Dive, the report urged companies to make an assessment of what operations would most likely be impaired by climbing temperatures and to ask themselves a series of questions. For example, would storm water management become problematic? Would evacuations needed to be carried out for businesses in or near low-lying or coastal areas? Planning for these contingencies now can pay off later on.

The same is true for business owners along the West Coast. Drought can lead to more common and widespread development of wildfire activity. Wildfires are particularly devastating for the supply chain, so companies in risk zones must be cognizant of their risk profile and protect themselves through various prevention and mitigation strategies, such as by eliminating brush, keeping lawns well hydrated and establishing defensible spaces.

April 7th to 10th, Source One's spend management team will join over 2500 Procurement and Supply Management professionals in Houston for ISM2019. In addition to attending, Source One is partnering with the Institute for Supply Management to sponsor the highly anticipated conference. 

ISM and Source One are natural partners. Both commit themselves to promoting innovation and Source One's experts have presented their insights at the last several Annual Conferences. While this year's agenda is still under construction, the leaders in strategic sourcing intend to share thought leadership once again.

Though ISM2019 promises to include discussions around countless topics, the proceedings are themed around a single idea - Spark. Source One's VP of Operations, William Dorn considers this an apt area of focus. "Even the most comprehensive initiative begins with a single spark. ISM's Annual Conference is always a great reminder of what Procurement can do to generate these sparks. Our entire team hopes that ISM2019's discussions and thought leadership presentations will spark big ideas and inspire innovations in the way we serve our clients."

This year, ISM welcomes former Federal Reserve Chairperson Janet Yellin and former Hewlett-Packard CEO Carly Fiorina as keynote speakers. They'll join dozens of Supply Management's most noteworthy figures in addressing the issues facing today's organizations. Both will also deliver private presentations at ExecIn, an executive-level sub-conference hosted by Source One.

Will Source One's consultants see you at ISM2019?

It's harder than ever for organizations to get away with unlawful or unethical supply chain practices. Today's consumers and job applicants are more discerning and socially engaged than any previous generation. What's more, they're increasingly vocal about issues related to the environment, human rights, animal cruelty, and corruption. They're increasingly connected too. Thanks to the advent of social networking, even an isolated incident can quickly evolve into an internet-wide scandal.

A new study from EcoVadis suggests that organizations still have a lot of work to do when it comes to meeting consumer expectations and weeding out unethical practices. Titled "The Fight Against Corruption: Insights Into Ethical Performance in Global Supply Chains," the survey of 20,000 global companies found that the world's average business ethics score is 42.4.

This figure, EcoVadis writes, "indicates most organizations are taking a reactive, unstructured approach to fighting corruption risks."  On the report's 1-100 scale, any score below 45 presents businesses with a "medium to high" risk of corruption and the resulting consequences. That the average business falls within this zone is troubling, but that's just the beginning.

The study also found that organizations are unlikely to track and report on ethics KPIs. Across the globe, a paltry 10% of organizations make a point to do so. While the figure is slightly higher (12%) in North America, it's clear that far too few organizations give business ethics the attention it deserves.

Over the last decade, Procurement groups have accepted an increasingly essential and strategic role within leading organizations. The best refuse to take a reactive, unstructured approach to anything. There's no reason the function's duties should not evolve to include anti-corruption efforts across the supply chain. With visibility into supplier relationships, purchasing practices, and all manner of activities at the site-level - Procurement is better positioned than any business unit to identify corruption and demand change.

EcoVadis employs a broad definition of corruption. Their methodology identifies a corrupt practice as "any kind of abuse of entrusted power in the workplace for private gain, taking the form of bribery, conflict of interest, fraud, and/or money laundering." Procurement, too, should operate with a comprehensive understanding of the term. If anything, they should aim for an even broader definition and look to address any and everything that a consumer might identify as corrupt or unethical.

Procurement can start by helping organizations refine their methods for mitigating corruption. Whistleblowing, anti-corruption training, and internal audits are common, but comprehensive risk assessments are shockingly rare. Ecovadis reports that just 4% of companies currently implement this best practice. Evolving security threats and uncertain global markets are already making risk a more and more important consideration for Procurement. Corruption and its consequences are a risk like any other. If they haven't already, Procurement professionals need to introduce ethics and responsibility to their conversations around risk management. An earthquake or cyber-security attack might present a more obvious danger, but unchecked corruption could have even greater consequences down the road.

While it's difficult to quantify the cost of a tarnished brand, it's easy to recognize that public perception matters. This year alone has seen giants like Uber, Facebook, and Wells Fargo devote considerable resources to repairing their image and winning back consumer trust. All three might have avoided these costly re-branding campaigns if they had taken extra steps to identify and address ethics concerns head-on.

Is your business doing everything it can to eliminate corruption and build an ethical supply chain?

ICYMIM: December 3, 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.

RFX Creation - Kicking You When You Are Down (Part I)
Michael Lamoureux, Sourcing Innovation, 11/28/2018
Lamoureux opens this series on current generation Procurement software by wondering aloud why so many underwhelming solutions continue to thrive. e-RFX, e-Auction, and basic SIM have been around for decades, but they're still all that most solutions are offering. The Doctor suggests that low standards for usability, efficiency, and effectiveness have all contributed to our current situation. Today, organizations that use their platforms to create RFX documents will find themselves faced with limited templates and forced to perform most tasks manually. He concludes by detailing the potential benefits of a more modern platform. These tools, he suggests, will auto-score RFI responses, automatically define critical gating questions, and provide informed suggestions for which templates to use. 

Phil Ideson, Future of Sourcing, 12/1/2018
Over the last several months, Art of Procurement's Phil Ideson has published this series aimed at challenging 'conventional wisdom' in Procurement. This time around Ideson addresses the notion that RFPs are always the most effective way to compare suppliers and make a strategic selection. Buyers, he suggests, often make a dangerous assumption. Putting too much faith in the RFP administration process, they let themselves believe that strong responses are a guarantee. The reality is far murkier. Ideson advises Procurement to conduct thorough research and even informal interviews to create more precise supplier shortlists before sending out their requests. This alternative to the spray-and-pray approach will likely result in more useful responses and more fruitful supplier relationships.

A Simplified Approach to Indirect Spend Management 
Sean Bliss, Spend Matters, 11/29/2018
Poor indirect spend management can quickly prove costly. Taking a more effective approach, Bliss suggests, starts with visibility. He writes, "Having poor visibility into your indirect categories means you have no real understanding of your actual spend, cash flow, and working capital status." Indirect purchases can represent as much as 40% of an organization's corporate spend. It's not hard to see why visibility is so important. Bliss offers four steps for bringing this essential spend area under management. Consolidating indirect spend to key suppliers, providing employee education, seeking out real-time visibility, and avoiding complacency all promise to improve Procurement's performance.