January 2019

While coffee addicts may have been made even more fidgety than usual by
the recent report that 60 percent of all wild coffee species are in danger of extinction from climate change, chocoholics are likely to be just as unnerved by similar threats to cocoa bean procurement.

Warmer temperatures and drier weather conditions are poised to make West African nations responsible for producing most of the world's chocolate unsuitable for cocoa plant growth, according to Business Insider.

Before anyone with a sweet tooth begins nervously biting their nails, though, it should be noted that Hershey has just announced increased efforts to fight climate change and deforestation in the cocoa supply chain.

New environmental policy announced in Ghana

On Jan. 24, 2019, Hershey announced from Kakum National Park in Southern Ghana a new set of environmental initiatives and commitments, which include the establishment of a new comprehensive environmental policy, the signing of the United Nations Global Compact and participation in the Science Based Targets initiative.

The American chocolate manufacturer also launched the Kakum Cocoa Agroforestry Landscape Program, which seeks to better the well-being of cocoa farmers and their families, in part by improving the area's socio-economic and ecological resilience to climate change.

"Hershey has long demonstrated its belief that business has a responsibility to help protect our communities and the planet we all share," Hershey CEO Michele Buck said in a statement. "Together, these strategic environmental policies and initiatives will further strengthen how Hershey operates, creating a positive social impact from farm to finished product."

Acknowledging the threat of climate change, Hershey says its new environmental policy aligns with the Paris Climate Agreement and supports the UN's Sustainable Development Goals, as well as the company's own sustainability strategy, named Our Shared Goodness Promise. The policy is said to create a framework for guiding future business decisions that have an impact on the environment.

Hershey's new initiatives include joining Science Based Targets in its efforts to keep the global temperature rise below 2 degrees Celsius.Hershey's new initiatives include joining Science Based Targets in its ambitious efforts to minimize the global temperature rise.
The United Nations Global Compact that Hershey has joined is a voluntary initiative that encourages businesses to implement sustainable and socially responsible policies, and take steps to support UN Sustainable Development Goals. As a member of the initiative, the company will receive help from the UNGC in aligning its strategies with 10 principles focused on the environment, human rights, labor and anti-corruption.

The Science Based Targets initiative is another voluntary global effort that sets science-based targets for companies attempting to transition to a low-carbon economy and keep the global temperature rise below 2 degrees Celsius. Hershey says it has now begun developing science-based targets that take into account the company's total environmental footprint, which is slated to be a two-year process.

Agroforestry Landscape Program to fight deforestation in West Africa

The newly launched Kakum Cocoa Agroforestry Landscape Program represents a collaboration between Hershey, cocoa supplier Ecom, Ghana's Nature Conservation Research Centre, the Ghana Forestry Commission and the Ghana Cocoa Board, and also supports the company's own half-billion-dollar Cocoa For Good sustainability strategy to drive zero deforestation.

Designed to benefit local cocoa farmers and the more than 100,000 people living in the region, the Agroforestry Landscape Program seeks to protect the 118,000 square hectare forest surrounding the Kakum National Park in Southern Ghana. Hershey says the initiative will also develop the area's socio-economic conditions and ecological resilience to climate change.

The program is part of Hershey's membership in the Cocoa Forest Initiative, which began last year when the company partnered with the World Cocoa Foundation and 11 other leading cocoa and chocolate companies to end deforestation and forest degradation in the global cocoa supply chain. Côte d'Ivoire and Ghana are the two West African nations that the CFI will focus on to start.

"Protecting forests and preserving the natural resources of the cocoa-growing areas here in West Africa is good for society and the bottom line," said Jeff King, Hershey's Senior Director of Global Sustainability and Social Impact. "Our commitment to forest protection aligns perfectly with our sourcing partners in the region and we know that by combining resources we will have greater impact on these communities and surrounding landscapes."

Supply Chain Dive noted that other members of the World Cocoa Foundation, including Mars and Mondelez, have also announced new or enhanced sustainability initiatives in recent months. The renewed commitment to protecting the cocoa supply chain from deforestation and climate change could be a response to the 2018 Cocoa Barometer report released this past April, which found that a previous 10-year effort to increase the sustainability of the chocolate industry had little impact.

Monthly Round Up: January 2019

Gain new Supply Management insights with these highlights from the last month. Want a monthly recap sent directly to your inbox? Subscribe to our newsletter today.

The new year's most popular blog examines the paradox of Procurement's approach to talent. While most CPOs worry their teams don't have what it takes to deliver, a surprising few are actively taking steps to correct the situation. In addition to calling for a greater focus on training, the blog asks Procurement leaders to consider emphasizing so-called soft skills. Often dismissed as low value, these are the qualities that should come to define excellence in Supply Management.

For leading organizations, responsible sourcing practices are no longer an option. As the supply chains around the globe begin the feel the effects of climate change, they've become an absolute necessity. In this blog, Brian Seipel provides a working definition for 'sustainable sourcing' and describes some of the tangible benefits such practices can bring an organization. 

Among the more pressing issues facing today's Procurement groups, low visibility leaves organizations vulnerable to an incalculable number of risks. Unfortunately, organizations without insights into their supply chain vastly outnumber those with insights. Source One calls on organizations to address the issue in a new year. In addition to helping mitigate risk, increasing visibility makes it possible to address consumers with greater transparency. 

Kicking off a new series on Procurement Transformation, Consultant Jaisheela Setty outlines the steps an organization can take to evolve its Procurement function. Purchasing teams become Procurement teams, she suggests, when they adopt a proactive, strategic approach to their activities. The benefits of such an approach are numerous. When companies commit to driving Procurement's evolution, they produce greater value, eliminate inefficiencies, and boost the quality of their supplier relationships. 

The effects of the Trump administration's changes to trade policy impacted supply chains across the globe throughout 2018. Forbes recently identified the trade war as the year's single most important supply chain story. Though the trade war cooled over the holidays, experts expect the issues associated with it to reemerge throughout the new year.

This guest blog comes to us from Megan Ray Nichols of Schooled by Science

Thanks to growing economic pressures and a troubled industry, oil and gas providers must consider prioritizing their procurement functions. The massive expenditures that have been possible in the past are no longer viable. Nearly all providers must come up with cost-effective and resource-light strategies if they hope to survive going forward.

Why Procurement Is More Important Than Ever

Oil prices are relatively low, and while that could change, it will be some time before they climb again. That means oil companies must prepare to meet long-term market trends. Luckily, natural gas prices are rising, but there’s no telling how long that will last.

Conventional day-to-day operations coupled with regulatory events tend to balloon costs, especially when you factor in sub-contractors and outsourced workers. Of course, this setup is what most companies are working with, which means something has to change.

It makes sense that project work makes up a bulk of operational costs, and it follows that a focus on procurement can cut down on said costs. Optimizing the supply chains for petroleum as well as for parts, materials and services can significantly lower overall costs and increase productivity.

According to the Harvard Business Review, over 50 percent of the average oil and gas company’s costs come from purchased products and services. So, even a small reduction in purchase costs can help alleviate some of the financial burdens as well as provide higher returns and profit margins. Even one component of a drilling operation can have a substantial impact.

As an example, when using sealed bearing mud motors, you need mud motor seals to retain bearing lubricant and keep out drilling fluid and abrasive debris. These seals are essential for the reliability of the motors. They need replaced regularly, so you need a procurement protocol that ensures you always have a supply of seals available. Otherwise, you may be forced to pause drilling operations while you wait to obtain new seals. The quality of the seals procured can also significantly impact costs. Some seals have a relatively short life, while others can last for more than 500 hours. Mud motor seals are just one of many examples of components that can cause severe issues if their procurement is not managed correctly.

Identifying Procurement Efficiencies

Companies can prioritize procurement and better organize their supply chain operations to achieve optimal efficiency and lower costs. By deploying more thorough supply chain market intelligence tools, along with other newer technologies, companies can cut down on many of the associated costs. Greater intelligence means greater opportunities to find talent and strengthen materials or supplier relationships.

By focusing on the supply chain directly, it’s possible to find not only better partners and suppliers but also ways to cope with the shifting market. Things like constrained capacity, infrastructure issues, volatile markets and shifting demand all become that much more manageable.

With the right insights and intelligence, it becomes possible not just to make the right decisions but also to accurately take predictive measures. You can see at a glance where a market might be shifting and what that means for the various elements. Lower costs might mean higher demand, which would, in turn, mean sourcing more supplies in anticipation. It could also mean the exact opposite. You can use supply chain intelligence tools to uncover trends to help discern what’s happening.

With the right tools in place, there are three major ways in which procurement can become more balanced:
  • Resetting supplier relationships to negotiate better contracts and gain new insights into their internal operations. 
  • Improving capital expenditure efficiency by mitigating complexity, costs and operations requirements.
  • Transforming your business to be more cost-conscious through added transparency and data-driven infrastructure.

You may or may not have noticed that all of these areas are meant to foster a culture of cost-effectiveness. It highlights what oil and gas companies should strive towards now and into the future.

Welcome to the New Reality

For decades, the oil and gas industry has been a well-oiled machine with little to slow down its operation. Companies have had little reason to scrutinize their supply chains to lower the associated costs. Things have changed. These costs are proliferating, and many organizations need to mitigate these cost increases before things get out of hand.

Since the procurement of supplies and goods makes up a huge chunk of those operating costs, it makes sense to come up with new ways to manage it. By prioritizing the process, oil companies can discern what elements need to be optimized to improve overall efficiency. Procurement and business intelligence technologies and strategies can help with this as can new platforms, processes, and protocols.

I worked with a client recently who was working through an emergency situation. The details aren’t critical for this discussion today – to relate, just pick one of the “my house is on fire” moments you’ve had to deal with in your organization (they crop up for all of us eventually).

Long story short, I needed information to respond: which locations were burning and which were likely to catch next. These outcomes, despite being simple enough on their own, required complex calculations of a number of variables. I requested a simple report to understand the landscape. This was not the report handed to me.

Instead, I got a data dump of those many variables. In an emergency situation, with locations on fire in real time, this dump required me to crunch the numbers and weed out all of the locations that were safe in order to pick out the burning few. In other words,

There’s Plenty of Room for Improvement
How do we get data analysis so wrong considering we spend so much time working with data? I believe it ties back to the daily data wrangling tasks we’re mired in. Extracting data from our warehouses and data lakes, cleansing and consolidating it, building a single, unified data set to work with... Data, data, data, data. This is a real grind. We sometimes become so focused on data management that we can’t see the forest for the trees. We resort to summarizing data rather than using it to create valuable information.

Before sending that next report, perhaps we should make sure it is worth sending to begin with. How? By asking ourselves,

  • What challenges do our stakeholders need to solve with it?
  • What question does the report answer? 
  • What is causing us to spend the time – a known need or simply because “that’s the report we always ship out Monday morning?”
  • What value does it add?

Don’t think about analytics in terms of the tactical elements or simply pass around chunks of data. Instead, be the voice of that data.

What are You Trying to Say?
We’re between a rock and a hard place in becoming this voice. On one hand, we have an overdose of raw figures. On the other, we have oversimplified visualizations. This means two things:

We lose when stakeholders have to dig into data to interpret reports. How many stakeholders could fill in the blanks when we don’t? If our audience is a member of the C-suite, I’d venture to say very few – that isn’t their role. Besides, they have their hands full dealing with the crisis du jour. Regardless, asking them to complete the analysis is asking them to do our job.

We also lose when those reports are unclear or ambiguous. We also shouldn’t rush to simplify data through visualizations to the point of being meaningless. Visualizations should make interpreting facts easier, not alter the interpretation. I don’t need to delve into data visualization sins as we’ve all seen them before. However, as an example:

It is incredibly easy to misinterpret data visualizations without having clear parameters and an understanding of the underlying data. Both examples above show a rising trend, so there is some truth to both. However, the sharp rise on the right isn’t really true because of the impact of changing the Y axis starting point.

Get Better
In order to get better, we need to understand what our stakeholders need, and give them no less and no more. Don’t just pass around data others will use to find answers. Be the one who comes up with those solutions.

Today's consumers have little appetite for company secrets. More and more, they expect businesses to both behave ethically and provide visibility into this ethical behavior. Recent research, conducted by professors from MIT's Sloan School, found that a majority will even pay a premium for these guarantees.

Source One's spend management team discusses the push for visibility and transparency in their latest whitepaper: Procurement in 2019. At the end of last year, they write, just 14% of North American companies were committed to providing consumers with data related to ethics and responsibility KPIs. Source One expects this figure to rise as more companies find themselves confronted by discerning, socially-engaged customers.

Investors Join the Conversation

For a number of fast food brands, the shift toward greater responsibility and transparency could happen sooner rather than later. This week, a group of investors representing more than $6 trillion issued letters to McDonald's, Chipotle Mexican Grill, and several other quick-serve titans with a list of new demands and expectations.

The coalition of investors includes the Farm Animal Investment Risk and Return (FAIRR) Intiative and the sustainability non-profit Ceres. Their letters take the fast food industry to task for expanding rapidly without developing plans to mitigate pollution and educate consumers.

"Fast-food giants deliver speedy meals," says Ceres President, Mindy Lubber, "but they have been super slow in responding to their out-sized environmental footprints." FAIRR's founder, Jeremy Coller, compares the industry unfavorably to "Other high-emitting industries, such as cars or oil and gas." Even these long-time offenders, he remarks, "are beginning to set clear yet ambitious climate targets." This makes the fast food industry with its various animal product supply chains, "one of the world's highest-emitting sectors without a low-carbon plan."

How Big is the Problem? 

The coalition's letters detail the fast food industry's immense environmental impact. They identify three key causes for concern: Climate risk, water use, and land use. In addition to pollution, they associate these areas with "increasingly material reputational, operational and market risks" for companies along the animal product value chain

Producing more than 14% of the world's greenhouse gas (GHG), the agricultural sector is among the largest contributors to rising temperatures and extreme weather patterns. In spite of this fact, FAIRR reports that two-thirds of meat and livestock companies still operate without clear targets for cutting down on emissions. Agriculture, they report, is also responsible for 70% of global water use and 80% of deforestation. 

Worse still, demand for animal products is expected to rise considerably over the next few decades. The Guardian reports, "If global demand for beef increases 95% by 2050 as expected then catering to growing appetite could have severe consequences."

What's Next? 

Calling on each company to adopt a "clear sustainability strategy and a more forward-looking approach," the letters list four demands:
  • Develop policies that compel direct and indirect supplies to measure, report on, and reduce both GHG emissions and freshwater pollution across their supply chains.
  • Establish quantitative, time-bound targets for reducing GHG emissions and freshwater pollution across the companies' own supply chains. 
  • Publicly share these goals as well as any progress toward them. 
  • Undertake and publish the results of a climate scenario analysis aligned with recommendations from the Task Force on Climate-related Financial Disclosures.  
They don't offer the recipients much time to think on these requests. The letters ask for responses "detailing how the compan[ies] plan to address the above points with key milestones" by March 1st.

This week's news is further proof that the call for sustainability and responsibility has gone mainstream. With cost-conscious investors joining the conversation, it should no longer surprise anyone that green practices aren't just good for the planet. In the coming years, they could determine not merely the reputation, but the viability of entire industries.

Source One is partnering with the Institute for Supply Management (ISM) to host the fourth-annual ExecIn Forum, an exclusive sub-conference during ISM’s Annual Conference, ISM2019. This year’s conference will take place April 7 – 10 in Houston, Texas. ExecIn will occur throughout Days 2 and 3 of the conference.

ExecIn is designed to offer executive-level Supply Chain professionals a high-impact experience including private keynotes from former Hewlett Packard CEO, Carly Fiorina and former Federal Reserve Chairperson, Janet Yellen, as well as spirited discussion concerning the industry’s most pressing topics. Discussions will likely address emerging solutions, recruiting and retention, and elevating the procurement function—all of which were discussed in Source One's most recent white paper: Procurement in 2019.

In past years, ExecIn has inspired collaboration among a variety of Supply Chain professionals, inviting them to share common pain points and work together to find solutions for those issues. This year’s private conference is meant to stimulate thought-provoking conversations and encourage the same synergistic experience.

Want to join Procurement and Supply Management leaders at ExecIn? Contact Carole Boyle (cboyle@corcentric.com) today to learn more.

Well, here we are again. This Sunday, football fans will tune in to watch Tom Brady's New England Patriots face off against Jared Goff and the Los Angeles Rams. You know what that means. We all just might have to watch as Brady and company take home another Lombardi Trophy.

It's easy to hate the Patriots. Really, really easy. For what seems like forever, they've managed to overcome injuries and controversies to distinguish themselves as perhaps the NFL's greatest dynasty. Though they couldn't ruffle the Philadelphia Eagles' feathers in Super Bowl LII, they've made more than their share of enemies and broken a whole lot of hearts since upsetting the Rams back in 2003.

While their quarterback collects most of the hardware and tends to dominate the headlines, he owes much of his success to one team member in particular: Head Coach Bill Belichick. Like Brady, Belichick attracts a peculiar mix of admiration and revulsion. He's the best at what he does - maybe the best to ever do it - but most NFL enthusiasts cannot stand the thought of him.

You don't have to like someone to learn from them.  After all, you never know where borrowing from an adversary could pay off. In the spirit of putting aside our differences and learning from our rivals, here are few of the future Hall of Famer's tips for effective leadership.

1. Preparedness is Everything

Back in 2017, Belichick sat down for a wide-ranging interview with CNBC's Suzy Welch. He quickly stressed the importance of exhaustive preparation. There is just one sign hanging in the Patriots locker room. It shares a line from The Art of War that reads, "Every battle is won before it is fought." For Belichick and his team this means immersing themselves in game film to identify their opponent's weaknesses and devise an attack plan. This level of research and planning is equally essential in Supply Chain Management. Managing a supply chain is nothing if not an exercise is risk management and mitigation. As extreme weather and geopolitical uncertainty evolve into everyday concerns, it's more important than ever that Procurement prepare itself for every potential disruption.

2. Be the Boss

While we're no advocates for leading through fear, Belichick has used his trademark scowl to supreme effect over the years. Speaking to Welch, he recalls an episode from his time as the Special Teams Coach for the Indianapolis Colts. Belichick, just 23 at the time, noticed two star players were slacking off. He quickly and emphatically laid down the law, "Look, either you shut up or you get out of here. That's it." The players got the message. While no manager should exercise quite that level of bluntness, everyone can learn from Belichick's quick and decisive action. You can't maintain accountability unless you insist on it. That'll sometimes mean starting an uncomfortable conversation or even stepping on some toes. So long as your leadership style remains respectful, exercising your authority should ultimately have a positive effective.

3. Never Accept Good Enough 

"Act like you've been there before." Intended to discourage showboats, it's an adage that even the most casual sports fans should recognize. Belichick and his Patriots have practically made it a credo. "You can't look back," he tells Welch. "We don't talk about last year. We don't talk about last week. We talk about today, and we talk about the next game." Recognizing big wins is an important part of boosting morale and retaining top talent, but there's definitely some wisdom in Belichick's philosophy. How many times have we seen championship teams suffer the symptoms of a Super Bowl hangover? Here's another area where finding the proper balance is everything. Managers need to recognize their teams to ensure they're happy, productive, and engaged without encouraging them to rest on their laurels.

Go Rams!
Hello readers! 2018 was a super busy year at Source One and Corcentric, and it shows no signs of slowing down in 2019.   The combined offering of source-to-contract (Source One) and procure-to-payment solutions (Corcentric) that we’ve developed through Corcentric’s acquisition of Source One has received such a positive market reception that we’ve been moving full steam ahead since day one.  I underestimated how much demand Procurement professionals and Finance professionals would have for a true source-to-pay solution; but its been a wonderful challenge and adventure developing and implementing these bundled spend management solutions.     This isn’t just a self-promotional intro, it has relevance to this post, as I’ll demonstrate in a second.

The busyness of business this past year has made it difficult for me to find the time for one of my favorite (work-related) pastimes, ranting. it’s been a while since I was last able to ramble on about my procurement pet peeve of the month.  But no worries, I am here to day to remedy that. 

Here’s the tie-in to the source-to-payment plug in my first paragraph.  Tail Spend Management has rapidly become one of the most talked about hot buttons in procurement this year.   And as expected, with it came a bunch of companies claiming they could manage your tail spend for you.   But most of those companies aren’t offering anything new, and aren’t actually managing anything.  I’m here to call them out.

We’ve seen two types of providers start to re-brand their services to be “tail spend management”.  The first is the traditional procurement BPO companies.   The second is the tech providers. 

I’ve got a lot to say about the business process outsourcing (BPO) companies and their approach to tail spend management, but I am going to save that for something more than blog post; we’re likely going to be publishing a white paper on the topic.  Suffice it to say, labor arbitrage and low-cost resources doesn’t automatically mean that your tail spend is magically being managed.  In fact, it can actually increase the cost of goods and services because it is so removed from the rest of the business’s spending.   In many cases, the only savings your business sees is short-term head count reduction; but you don’t see material reductions in the spend cube under the “tail” moniker.   Most BPOs may be relying on robotic process automation and other tech to streamline the source-to-procure cycle, but they lose focus on sourcing, category management, working capital improvements, and many of the other things a true spend management program requires.   And continuous improvement?  Forget about it.  You can’t improve continuously when your turnover rate is 45-50%.   But’s let’s save that for another day.  Onto the tech providers:

Every couple of years, I go on a new rant about what I call “RFP Spam” .  This year, it seems that many software (SaaS, cloud, insert other buzzword here) have embraced the entire 3-Bid-&-Buy RFP Spam mentality and packaged it together in something they call “Automated Tail Spend Management”.   These tech providers are selling nothing new, they are simply repacking old products that have been around for the better part of 2 decades.  

What’s worse is (a sign of a new tech bubble?) many of these companies have big venture capital dollars behind them because they’ve somehow convinced equity providers that they’ve invented something new.  I’m not going to name names, but it is easy to find who I am talking about.   Some of these companies have already raised tens of millions of capital, with only a tiny fraction of that number in revenue.   They’ve done so by taking e-sourcing technologies that have been around for a long time, and branding them and positioning them as the solution to Tail Spend Management.  Sure, some of them have slick interfaces, and are pretty easy to use; but running an RFP, or more properly, an RFQ is not true spend management.

Let’s see how some of the most popular “automated tail spend management solutions” work.  In many of these organizations, they provide a hybrid software/service that is really just a slightly automated RFQ process.  You kick a specification over to them, they (or you) set it up in their tool, invite a bunch of vendors, get some bids and choose one of the least expensive ones.  They then “prove savings” by taking the average price of the three bids subtract out the lowest bid, and show that to you as savings.    In other examples, the tool providers just provide the e-sourcing suite (or plug-in) itself and you do all the work, again, looking for an RFQ or even Reverse Auction result of a lower price.   Nothing new or innovative here.  Effective?  Sure, it can give you some minor savings; but it definitely doesn’t deserve to be called tail spend management.  In fact, in some cases, the process itself might have been more expensive than if you had just allowed a spot-buy.

So if making sure most major purchases go through a 3-bid process isn’t Tail Spend Management, then what is?   Well, I am saving this for a future whitepaper, but here’s a preview.  Tail spend management is the act of actually managing spend.  This means a lot more than a 3 bid and a buy:

A strategic sourcing process that engages suppliers (not a simple email asking to bid)
A category management approach that reviews all spend and determines consolidation/replacement/substitution opportunities for cost reduction
A category management approach that understands the procurement requisition, not just processes it as a line item
A program that looks to maximize working capital through extended payment terms and/or supply chain financing agreements
Resources to manage/process the work
Payment consolidation solutions so that you aren’t cutting thousands of checks or setting up hundreds of new vendors
Marketplace and GPO preferred pricing for categories where your individual spend is not attractive to suppliers
Continual review of spending and procurement pattern recognition for process improvement opportunities
Tie-ins to your ERP solution or existing technologies
Niche solutions for areas such as expense management
RPA for spot buys, but pattern recognition to identify when something is no longer spot
Compliance tools to eliminate maverick buying
Ongoing catalog management to drive the largest amount of compliance
Analytical spend diagnostics leveraging other company’s results
Comparative benchmarking pricing analysis that reviews categories/purchases from sources outside your own 3 bid RFQ process.
Process creation and enforcement of spending thresholds and routing
And much more.

So, rest assured, I’ll be back on this topic again; and will be providing a lot more detail.  Until that time, don’t be fooled by a simple e-sourcing suite that’s been re-branded to be called Tail Spend Management.   In the meanwhile, we’d be happy to discuss with you a solution that can be much more effective at reducing your tail spend.

3 in 4 online buyers say they expect shipping to be free

With online buying as popular as ever, the retail supply chain is a crucial component to business owners' operations. Customers expect to have their items delivered in a timely fashion and for their purchases be accurate to what they ordered. But there's something else that Americans increasingly expect when they shop via the internet: free shipping.

That's according to a newly released survey conducted by the National Retail Federation, which found that approximately 75 percent of respondents said free shipping was a major priority for them in the e-commerce space. That's up from slightly over two-thirds who indicated as much in a similar poll conducted by NRF a year ago.

No-cost shipping is a sales promotion that retailers often advertise to further persuade customers to buy. The inducement is particularly common for orders of $50 or over. Even here, though, more customers expect free shipping to be included regardless of their orders' dollar value, the poll found.
Mark Matthews, vice president of research development and industry analysis at NRF, indicated that point-and-click purchases have ratcheted up consumers' urgency for convenience. Free shipping is like icing on the cake.

"Consumers want free delivery, and they're willing to meet retailers halfway to get it," Matthews explained. "If we can get their purchase to the store, they'll come pick it up if that's what it takes to avoid a delivery charge. And once they're in the store, they are very open to seeing what else the retailer has to offer."

Robust supply has enabled retailers to keep their shelves and warehouses sufficiently stocked as consumers seek to take advantage of free shipping. Indeed, the American Trucking Associations' advanced seasonally adjusted For-Hire Truck Tonnage Index jumped 6.6 percent in 2018. That's the most appreciable year-over-year gain for the measure since 1998.

Around the turn of the 21st century, diamonds lost some of their shine amid news stories about the problematic supply chain used to source the valuable minerals.

While the industry's recent slump has, like many recent industry slumps, been largely blamed on millennials, lingering concerns over the nature of diamond procurement could also bear some of the blame.

In an effort to assuage concerns regarding their own sourcing methods, Tiffany & Co. has recently announced that it has begun disclosing the provenance of its newly sourced diamonds, and by 2020, will become the first in the industry to share details of each individual diamond's "craftsmanship journey."

Tiffany's seeks to lead industry on controversial matter

In the late 1990s and early 2000s, the diamond industry became a source of controversy as scandalous details emerged about the ways in which the sourcing of many precious gemstones was helping to fund violent conflicts.

Amid the revelation that diamond profits were being used to fund the Sierra Leone Civil War, which lasted from 1991 to 2002, questions were raised about the ethics of jewelry purchases. Eventually "blood diamond" entered the popular lexicon as a term meaning any diamond mined in a conflict zone and used to finance a warlord, insurgency or invading army. The phrase gained even wider recognition after serving as the title of a 2006 Leonardo DiCaprio film, which portrayed many of the atrocities committed in Sierra Leone.

In 2003, the diamond industry teamed up with the United Nations to create the Kimberley Process Certification, a process designed to reduce the flow of "rough diamonds used to finance wars against governments" around the world.

However, some have taken issue with the Kimberley Process' narrow definition of a "conflict diamond," wishing to expand the term to also encompass minerals used to fund violence caused by governments. That debate was one reason why IMPACT, a Canadian non-governmental organization that acted as one of the original founding NGOs of the certification, left the Kimberley Process in 2017.

In lieu of stricter industry standards, Tiffany & Co. hopes that its new Diamond Source Initiative will spearhead a "new era of diamond transparency," according to a press release.

Diamond Source Initiative to expand in Q1 2019, 2020 and possibly beyond

On Jan. 9, 2019, Tiffany stores around the world began including a diamond's region or country of origin in Love & Engagement caselines, alongside a selection of diamond rings that have their individual provenance visibly displayed. Additionally, Tiffany & Co. sales professionals and customer service representatives will be able to provide geographic sourcing information for all individually registered diamonds.

The term "region" will be used for single suppliers that manage mines in multiple countries, according to the company, which cites as an example the designation "Botswana sort," which would be used for one supplier that mainly operates in Botswana, but also in Namibia, South Africa and Canada.

The company is also promising not to source any diamonds of unknown provenance moving forward as part of its commitment to 100 percent geographic transparency for every newly sourced, individually registered diamond.

By 2020, Tiffany will be providing customers with even more information about their jewelry's supply chain journeyBy 2020, Tiffany will be providing customers with even more information about their jewelry's supply chain journey
"Tiffany & Co. has long been committed to diamond traceability and going above and beyond industry norms to promote the protection of the environment and human rights," said Anisa Kamadoli Costa, the jeweler's chief sustainability officer. "A transparent journey of responsible sourcing reflects the many positive and far reaching benefits along every step of the diamond supply chain."

Tiffany's Diamond Source Initiative will grow more ambitious with time. In the first quarter of 2019, the company will differentiate itself from other global luxury jewelers by including provenance on the Tiffany Diamond Certificate for individually registered diamonds, listed alongside the stone's other specifications.

By 2020, Tiffany will make available information regarding the diamond's craftsmanship journey, which includes details such as cutting and polishing workshop location. The practice will highlight the fact that Tiffany & Co. is unique among its competitors in owning and operating its own diamond polishing shops around the globe and employing over 1,500 artisans worldwide.

"Diamonds, formed up to 3 billion years ago and brought to the earth's surface by a miracle of nature, are symbols of the most important moments in our lives. There should be nothing opaque about Tiffany diamonds," said Tiffany CEO Alessandro Bogliolo. "Our clients want and deserve to know where their most valuable, most cherished diamond jewelry is from, and how it came to be."

It's possible that the jeweler will eventually provide even greater specificity regarding provenance that goes beyond region or country, though for the time being, a Tiffany spokesman told Supply Chain Dive, "Providing region or countries of origin is a significant first step in our journey, and while we cannot share further details at this time, we will continue our industry leadership in responsible sourcing and will work with our trusted partners to enhance transparency as the industry evolves."

ICYMIM: January 28, 2019

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.

How Do You Find Hidden Costs Part II
Michael Lamoureux, Sourcing Innovation, 1/22/2019
Lamoureux reminds us that there is no cookie-cutter way to formulate costs from production to transportation, and to pricing. In part one to the series, he covers how to find hidden costs in production by looking at the costs for raw materials, energy, labor, and overhead costs. In this follow up, he exposes costs hidden in transportation expenses and expenses associated with transportation--fuel surcharges and extra tariffs are just a couple he mentions. Lamoureux emphasizes, while it may require a lot of analysis to unravel the hidden costs in Supply Chain, its as simple as tracing from end good to raw materials, if you really want to cut down.

A writer at Thomas discusses some concerns many in the supply chain and logistic sphere are buzzing about, considering the new minimum wage increases voted into action in the 2018 midterm election. While we expect labor costs to increase, and thus prices increase to account for the higher compensation, there may be a silver lining for the industry. Better paid employees tend to stay at their jobs longer, lowering turn-over rates, and hiring and training costs. However, supply chain management must be prepared to pay over minimum wage to remain competitive, and procurement departments must be ready to negotiate and consider product cost versus labor costs. Click the link for more ways to prepare for higher minimum wage.

McDonald's Supply Chain May Set Bar on Sourcing Antibiotic-Free Beef, Experts Say
Kyra Senese, Spend Matters, 1/24/2019
McDonald's is trying to set a new standard for the fast-food industry, an interview with professor, Suresh Acharya, discusses potential challenges and what it means for the rest of the industry. Acharya acknowledges the growing area of ethical supply chains and why McDonald's might want to launch an incentive in this arena--people are willing to spend a little more for what they perceive to be healthier. The fast food company's biggest challenge with this launch is finding beef suppliers that will not only say they commit to antibiotic-free beef, but will live up to their words. Audits and certain mechanisms will need to be in place to ensure compliance, and Acharya suggests blockchain methods to help audit and track violators. He ends his interview by noting that if McDonald's is successful in implementing this change, other burger or beef institutions, like Burger King or Arby's will have no choice but to follow suit.
With another year of surprises and supply chain disruption in the rear-view mirror, Source One's spend management experts have once again shared their predictions for the months ahead.

Haven't had a chance to read Procurement in 2019? Check out the infographic below for a quick overview, but don't forget to download the full whitepaper to learn more about the new year could have in store.

Study finds climate change a major threat to coffee procurement

Coffee is something of an unofficial fuel source powering many levels of the supply chain, particularly in the United States, where workers at every level rely on the caffeinated beverage to keep them energized and alert while on the job.

America consumes the most coffee in the world, and a 2018 study found that 64 percent of its citizens enjoy a cup a day – the highest level in six years. Particularly popular are gourmet blends, which nearly half of all millennial respondents in the same report said they had consumed recently.

Yet at the same time that employees are growing more dependent on the popular stimulant, the coffee supply chain itself is facing a looming threat, according to new research.

Most popular coffee species in danger of extinction

A study conducted by the Britain's Royal Botanical Gardens and published by Science Advances concluded that 60 percent of wild coffee species are at risk of extinction due to climate change.
Included among that alarmingly high portion of endangered species is Arabica, otherwise known as Arabian coffee. One of the first species to ever be cultivated, Arabica also happens to be the world's most commonly cultivated species, accounting for roughly 60 percent of all global coffee production, according to Forbes.

In addition to its ubiquity, Arabica is known for its sensitivity to changes in temperature. In order to thrive, the species must be grown in cool regions with distinct rainy and dry seasons and year-round temperatures that remain within the range of 15 to 24 degrees Celsius, or 59 to 75 degrees Fahrenheit, according to Bloomberg.

The natural range for wild Arabica plants is becoming even more narrow due to climate change, fungus and deforestation, according to scientists, who now believe that more than half of all wild coffee species could be extinct by 2088.

Arabica, the bean preferred by Starbucks, is especially endangered by climate change. Arabica, the bean preferred by Starbucks, is especially endangered by climate change.

Economic threat posed to African nations

While farmers have begun adjusting to changes in temperature through various methods, including moving their farms higher into the mountains in search of cooler temperatures and interbreeding Arabica plants with Robusta coffee to create more heat-resistant plants, only so much can be done to mitigate the effects.

Those effects are likely to be felt quite acutely on the continent of Africa, which accounts for less than a quarter of global coffee production, yet is uniquely vulnerable to the impact climate change will have on the industry.

For example, Madagascar boasts the highest proportion of threatened species, with 72 percent of its coffee species among those at risk of extinction. And the greatest impact will be felt by Ethiopia, which only accounts for 3 percent of the world's coffee supply, yet relies on the crop for 60 percent of its export income. Additionally, approximately 15 million Ethiopians are supported by the coffee industry, according to Forbes.

Lower quality and higher prices likely in the future

Here in the United States, where coffee is a $200 billion industry, the effects that climate change has on America's breakfast drink of choice will also be acutely felt by both producers and consumers.
The quality and supply of coffee will drop as warmer weather fuels the prevalence of pests and disease, forcing coffee growers to increase pesticide usage or accept smaller crops, according to Forbes. Assuming demand remains the same or continues to rise, a smaller supply also naturally translates to a costlier cup of coffee.

Supply Chain Dive notes that some of the biggest players in the coffee industry are attempting to address the issue. Nestle invested $500 million in improving sustainability across Nescafe's supply chain in 2010, and recently pledged an additional $6 million to support coffee farmers in East Africa.
JM Smucker, however, which is the parent company of Dunkin' and Folgers, has no such dedicated coffee sustainability plan.

With coffee growing more popular with each passing year, and temperatures continuing their own steady rise, something much more troubling than a weak pot of coffee could be brewing.

On this week's episode of the Source One Podcast, host Bennett Glace is shaking things up. Though he's usually heard interviewing members of Source One's spend management team, he's decided to turn the spotlight on himself. What's the special occasion? The Academy of Motion Picture Arts and Sciences just announced their nominees for the 91st Academy Awards.

Earlier this week, Glace shared some reflections on the nominated films and the lessons they can teach Supply Management professionals. Today, he turns his focus to a genre that's conspicuously absent from the list of nominees: horror. For a majority of Americans, he suggests, this is the genre that most resembles the workday. "A paltry 19% of professionals," he remarks, "rarely or never think about quitting their jobs."

Using horror cinema's tropes as a jumping off point, he offers up four telltale signs that it's time to get out while you still can. How can you tell if a job is haunting your life? Glace advises keeping an eye out for the following:

1. A Toxic Culture

Not everyone will become fast friends with their co-workers. We should all hope, however, that we can at least get along with them. Toxicity can take many forms. Glace lists tyrannical leadership and incessant gossip among the most common. However it reveals itself, he suggests it can quickly make your average weekday a terrifying endeavor.

2. Boredom

"We spend a third of every weekday at work," says Glace. You would think that this would inspire professionals to seek out jobs that inspire and challenge them. Recent Gallup polls suggest this is rarely the case. In addition to wasting their own time, disengaged employees are a often a burden to their employees as well.

3. Excuses

Characters in horror movies, Glace says, are particularly fond of excuses. Whatever ghostly events take place, you can count on a scary movie's protagonist to try and explain it away. In that respect, Glace believes they're not so different from unhappy professionals. "Looking for the bright side in a job you hate," he says, "is like staying put in a haunted house cause it's got a big yard."

4. No Opportunity

Advancement is much more than a new title or a heftier salary. Glace reminds listeners that moving through the ranks is a sign that they're valued and respected by their employer. If there's nowhere to go internally, he encourages listeners to seek out new and exciting opportunity elsewhere. He concludes, "Horror movies might recycle the same narratives, but your work life shouldn't."

Want to hear more about escaping professional terror? Subscribe on iTunes today.

January 25, 2019

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

New Whitepaper: 
Procurement in 2019 
Here are some predictions for the year ahead from the spend management experts at Source One.
Get the heads up on topics include: Procurement's ever-present talent gap, the perils of low visibility, and the numerous challenges associated with America's ongoing trade war. Download today to discover what's next for Supply Chain Management.

New Podcast:
Is it Time to Quit: Lessons from the Movies
Do you find yourself yelling at the characters in haunted house movies: Why don't you just leave!? The reasons are so obvious to you, right? Allow Bennett Glace to open your eyes to the parallel between the foolish movie character who stays in a house with ghosts and blood on the walls, and the typical American professional that is miserable at work with no intentions of quitting. Is it time to throw in the towel? Subscribe on iTunes to hear Glace's advice.

Upcoming Events:
Corcentric Symposium | February 13 - 15 | Orlando, FL
Let out the visionary in you! Corcentric's annual Symposium features opportunity for exciting conversation with industry peers, and a packed agenda of presentations and workshops. Reserve your spot today.

ISM 2019 | April 7 -10 | Houston, TX
Get ready to spark some creative thinking at Institute for Supply Management's (ISM) Annual Conference, sponsored by Source One. Expect breakout sessions, conversations with peers, inspiration from thought leaders in the industry, and solutions available with over 100 leading industry suppliers.
cyber-attack, data breach

Cyber-attacks are the fastest growing crime in the United States and as procurement trends shift to digitally enabled supply chains, the organizational supply chain becomes more vulnerable. This puts sourcing and purchase data like supplier contracts and financial details at risk. In fact, CAPS research stated that in 2017, 60% of reported attacks on publicly traded U.S. firms were launched through the IT systems of suppliers or other third parties. In response to the growing cyber security threat, procurement teams must protect sensitive information belonging to their own organization and their customers. 

Costs of a Cyber-Attack

The cost of a successful cyber-attack to a company is over $5 million. In fact, by 2021 damage related to cyber-attacks is projected to hit $6 trillion annually. These costs include direct damage and even post-attack damage, such as loss of customers and reputation. No matter how you look at it, cyber-attacks are costly to a business, and they are not going anywhere.

Here are a couple examples of organizations that suffered after a third party experienced a data breach.

  • The 2014 attack on Target caused an estimated $162 million in damages. This was due to a small HVAC company, Fazio. Hackers broke through Fazio’s firewall and stole Fazio’s credentials to break into Target’s system. 
  • [24]7.ai, a vendor that provides customer support to clients via online chats, was breached affecting customers of Sears, Delta, and Best Buy. 
  • In 2015 about 1,025 Wendy’s locations were hit by a credit card breach. Wendy’s placed blame on an unnamed third-party that serves Wendy’s locations. 
  • The major credit bureau, Experian, suffered a major data breach in 2015. The hackers got access to the personal information of 15 million people who recently signed up for T-Mobile's service. 

Preventing a Data Breach
  1. Stay up to date: Implement cyber security solutions that offer up-to-date security measures and mechanisms. This can also include staying up to date on news of cyber threats to other companies. 
  2. Collaborate with the IT team: A procurement team should collaborate with the IT department to monitor systems and update internal policies. Additionally, holding company-wide cyber security meetings allows everyone in the organization to review the company’s policies and any recent cyber security threats. Holding these meetings can help prevent and manage cyber-attacks if one occurs. 
  3. Develop a disaster recovery strategy: If all else fails and your system has been hacked, it is important to already have a plan in place to limit the negative effects of the data breach. 

As a procurement professional it is your responsibility to protect the financial data of your customers. Not only have customers trusted you with sensitive information, if a data breach did occur, your company losses all credibility. Keep this in mind as procurement becomes more technological dependent and cyber security continues to increase in risk.

The cybersecurity skills gap is one of the many trending topics addressed in Source One's latest whitepaper. Download Procurement in 2019 today to learn more. 

While unmanned aerials vehicles (or drones) have been around since the 1980s, they've attracted a new level of enthusiasm in recent years. Helping consumers and businesses alike take to the skies, drones offer countless opportunities to innovate and update traditional processes. Uber, for example, hopes to see drones support its food delivery service within the next several years. They're just one of the business giants looking to pioneer unmanned shipping.

It's no surprise that package delivery has become an early priority for drone-based initiatives. Transportation is currently the world's largest contributor to climate change with a staggering 415 million metric tons of carbon dioxide coming from medium- and heavy-duty trucks alone. Delivery by electric drone, research suggests, could help organizations cut fuel costs and potentially reduce their carbon footprint. Working on behalf of the Smithsonian, a team of scientists recently determined that small drones are more environmentally-friendly "than any truck or van, whether powered by diesel fuel, gasoline, natural gas, or even electricity."

Reducing emissions is just one of the ways drones promise to protect our planet and its people. Here are a few more green applications for these exciting, evolving resources.

Optimizing Agriculture

Shipping and eCommerce companies aren't the only organizations looking to replace gas-guzzling vehicles with more sustainable alternatives. Agribusinesses, too, are hoping to realize the benefits of seeding and fertilizing from above. In addition to reducing emissions, PWC reports that some drone-based planting systems have the potential to decrease planting costs by as much as 85%. 

Drones also promise to dramatically improve the efficiency and efficacy of crop supervision. Analyzing plant health in real-time, drones can ensure a rapid response - even in the face of extreme and unpredictable weather conditions. What's more, they can calculate the optimal distance and volume for spraying crops to reduce pollutants and provide for better crop yields. They'll even prove helpful when disaster strikes. "In the case of crop failure," PWC writes, "the farmer will be able to document the losses for insurance claims much faster."

Protecting and Monitoring Wildlife

Drones have repeatedly proven more effective than humans at counting and tracking animal populations. As Nature Magazine puts it, drone technology represents a "new frontier" for environmental research and conservation efforts. They're especially useful in areas that are otherwise hard to reach or hazardous to human researchers. So far, they've helped keep an eye on vulnerable species including chimpanzees and orangutans. 

Activists and animal enthusiasts are also hopeful that drones will help protect endangered species from poachers. California-based Air Shepard has already leveraged drones to protect rhinos and elephants in three African nations. They have plans to expand into three more in the near future. With 80% of illegal hunting taking place at night, it's exceedingly difficult to combat the $70 billion dollar industry. Air Shepard's drones can track poachers at all hours, alert local authorities, and encourage a speedy response.

Maintaining Renewable Energy Sources

Installing a wind turbine or a solar panel is only one part of promoting renewable energy. Once they're in place, these energy sources require regular monitoring to ensure they remain effective. Typically, these processes have required much in the way of both money and man-power. They've also required human inspectors to risk life and limb by scaling windmills and tall buildings.

Drones have the potential to make maintaining our energy infrastructure a far less costly and far less risky endeavor. Providing for quicker and more effective data collection, they can make assessments on high to ensure potential problems are addressed in a timely manner. It's likely they'll play a pivotal role in promoting a shift toward new, greener energy sources across the globe. 

The Sky's the Limit!

Technological innovation and environmental responsibility are no longer optional. For leading organizations, they are both necessary for outpacing the competition and attracting world-class talent. Though we're just starting to get a sense of their potential, drones look poised to take forward-thinking businesses to new heights. 

Phil Ideson is dedicated to elevating the role of Procurement. So dedicated, in fact, that he evangelizes the function every day on a blog and podcast. The Art of Procurement, Ideson argues, isn't just about spreading the word or converting skeptics. It's also about continuing his own education, embracing new perspectives, and absorbing fresh insights.

"I set out," he writes, "to learn as much as I could about the nuances of the procurement profession." Since founding the site in 2015, he's encouraged others to embrace the same attitude and commit themselves to gathering and sharing knowledge. He continues, "The way I look at it is that we are all in this together, collectively striving to move procurement forward."

In the spirit of bringing things together, Ideson recently announced the consolidation of his Art of Procurement brand:

  • The Art of Procurement blog and podcast will retain their name and continue to provide daily insights from Supply Management leaders. 
  • Palambridge, Ideson's managed services offering, is now AOP Experts On-Demand. As an arm of Ideson's brand, it supplements organizations with support from industry-recognized, pre-vetted specialists. 
  • CatalystCo is now AOP Nudge Microlearning. This web-based platform challenges traditional talent development by creating a community of like-minded professionals and providing for an open exchange of insights. 
He's joined by Kelly Barner. In addition to serving as the Managing Director of Buyers Meeting Point, she'll support the Art of Procurement and its audience as Content Director.

Ideson acknowledges that the variety of Art of Procurement offerings may have inspired some confusion in the past. "In launching multiple brands," he remarks, "we made it difficult to understand exactly how we can help." Always an advocate for challenging the status quo, Ideson recognized the need to change his own. In doing so, he hopes to better serve clients, prospects, and the Procurement community has a whole.

A lot has changed for Art of Procurement over the last several months. More importantly, however, a lot has remained consistent. "The goals are the same. The philosophy is the same," says Ideson, "But now, we are working toward one unified vision - with you." 

Learn more about Ideson's vision at Art of Procurement