April 2019

Nearly a decade ago, Swiss Food and Beverage giant Nestle made a commitment to eliminate deforestation across its various agricultural supply chains. At the time the brand relied on boots on the ground to assess risk factors and enforce compliance from partners. Nevertheless, they announced their intention to fully eliminate deforestation by 2020.

Satellite-Powered Sustainability

Their efforts got a significant digital boost last year when they became the first company in their industry to implement Starling. Developed by Airbus and The Forest Trust, the satellite-based verification system has helped Nestle take to the skies and gain visibility across its entire palm oil supply chain. In a press release, Nestle also revealed its plans to expand Starling's purview to include its value chains for pulp, paper, and soy. Those are expected to go into place by year's end.

Starling's program uses cutting-edge cameras and sensors to monitor land and forest cover changes year-round. Grazia Vittadini, CTO at Airbus, elaborates, "Starling turns terabytes of satellite images into actionable insight, enabling customers to understand where and why deforestation happens and make the best possible decisions." In short, the technology empowers Nestle itself and its network of palm oil suppliers accountable.

Today, Nestle revealed the progress it has made. 77% of the 12 key commodities the organization purchases come from deforestation-free supply chains. This represents a steep climb from 63% at the end of 2018. Though the upswing is promising, Nestle's Head of Operations remains cautiously optimistic at best. "We are satisfied with our progress," said Magdi Batato, "but there is much more to do. The last miles to go are always the hardest."

Sustainability Concerns Remain

Some suppliers are easier to hold accountable than others. For large suppliers, Nestle has typically answered deforestation with blacklisting. Speaking to journalists in Toulouse, France, Batato suggested there's precedent for taking this action. He cited a blacklisted company that responded by cleaning up its operations and was welcomed back into the fold three years later. 

Independent farmers (smallholders), however, typically require a more nuanced approach. "Some extreme views," Batato remarked, "would say you just de-list everybody." He asks, "If we do that, how are these smallholders going to live?" In many instances, smallholders are unfamiliar with the sustainable forestry practices that a large plantation can employ (or choose to ignore). What's more, many are subsistence farmers. Chris Ware, Nestle's global head of responsible sourcing, acknowledges that a huge chunk of smallholders are "starving."

Accounting for around 20% of Nestle's palm oil supply, smallholders are also difficult to identify through the Starling platform. Tracking deforestation from these parties depends on collaboration with suppliers and mills. When these stakeholders lack visibility, they present another roadblock to Nestle's efforts. 

Treating smallholders as strictly as large plantations is not an option. Neither, Nestle suggests, is eliminating them from the supply chain entirely. "Cutting out smallholders and vulnerable communities," the company's Responsible Sourcing Leader for Palm Oil and Seafood writes, "would not only harm tends of thousands of livelihoods, it would also increase pressure on forests.

The company has instead elected to embark on campaign to educate smallholders on more responsible agricultural practices. Working with organizations like Earthworm, they hope to fill in the gaps in their visibility and drive sustainability without using unnecessary force. 

A Call for Collaboration

Addressing global deforestation will require nothing less than a global effort. Nestle recognizes this. That's why the organization continues to call on its peers in the Food and Beverage industry to enforce sustainability and engage with consumers in an honest, transparent way. Today's press release concludes, "By inviting others to embark on this journey, Nestle hopes to inspire further collective action towards sustainable supply chains and help transform the whole industry."

On March 10, an Ethiopian Airlines 737 MAX crashed shortly after takeoff, killing all 157 people on board and recalling a similar tragedy that occurred five months earlier, when another 737 MAX crash left all 189 passengers and crew dead.

Boeing responded by reducing production levels for the 737 MAX from 52 aircraft per month to 42, which the company says has cost it at least $1 billion thus far. On a recent earnings call, Boeing CEO Dennis Muilenburg also confirmed that the delivery of new planes is still on pause.

"This decision will enable us to invest in the broader health and quality of our production system and supply chain," Muilenburg said. "We will continue to assess our production plans, and we'll make decisions at various waypoints as to whether further rate adjustments are needed based on information we have at that time."

Muilenberg also said that 737 MAX fleet's return to operation and full production levels remains "uncertain."

As a result of the grounding, Boeing has delivered 50 fewer 737 MAX planes than planned, which Boeing CFO Gregory Smith said has dealt a blow to the company's revenue, operating income and cash.

A full recovery for Boeing will require a supply chain that's operating at full capacity.A full recovery for Boeing will require a supply chain that's operating at full capacity once the 737 MAX is cleared for takeoff. 
"In our view, we continue to see risks in Boeing stock until the US, European, and other regional aviation regulatory bodies certify the MAX fix and the aircraft returns to service," said Bank of America Merrill Lynch Global Research in an analyst note after the call.Analysts believe that the American airplane manufacturer's ability to recover from the crisis will hinge upon whether regulators allow the plane to once again take to the skies, according to Supply Chain Dive.

Also playing a significant role in the company's recovery will be its supply chain, according to Smith. Getting the planes delivered quickly and ramping up production levels will require the agile machinations of a speedy supply chain.

According to Reuters, the U.S. Federal Aviation Administration could clear the 737 MAX jet to fly in late May or the first part of June. If and when the plane is cleared to fly again by regulators, Boeing will have to quickly start getting orders for the plane off the assembly line and get the necessary updates to planes that have already been delivered to customers.

"We have teams that are ready, positioned by tail number with the 737 MAXs that are already out in the fleet to get those airplanes ready and back up and flying for our customers, and we also have an integrated introduction plan including our supply chain that will allow us to pivot and move forward," Muilenberg said.

However, some analysts view Boeing's supply chain not as a source of strength, but as an additional vulnerability.

"Risks specific to Boeing would include increased supply chain operational issues which cause significant delays in deliveries," UBS Investment Bank said in an analyst note. "If the company is unable to continue to squeeze cost out of their operations and the supply chain, it could result in margins not reaching our estimates."

Monthly Round Up: April 2019

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Every industry could benefit from an optimized approach to Supply Chain Management. Retail might have the most to gain (or avoid losing) by addressing the supply chain more strategically. Macy's is hoping it can stave off the ongoing retail apocalypse by creating a new C-suite role - Supply Chain Officer. Dennis Mullahy will supervise product development and delivery including global sourcing, inventory management, and distribution across both eCommerce outlets and brick-and-mortar stores.

Redefining Win-Win with Kate Vitasek
We hear all the time that Procurement and Supply Chain Management are evolving. More and more organizations are shaking up the way they purchase and taking a more strategic approach to managing their spend. Why then, Kate Vitasek asks, is the function still relying on centuries-old logic to drive its negotiations? Vitasek calls for a new approach to build deals and encourages Procurement to think about itself as a deal architect rather than simply looking to win.

Target's New Climate Goals Include Reductions in Supplier Emissions
Consumers want their preferred brands to embody a commitment to sustainability and provide consistent transparency. More and more this means it's no longer sufficient for businesses to police their own supply chains. True leaders need to engage their supply base to address sustainability together. Target has announced its plans to do just that with new climate goals. By 2030, the retailer aims to reduce greenhouse gas emissions across its supply base by 30%.

McDonald's built its brand on quick service and efficiency. With the recent purchase of a decision technology company, the fast food giant is looking to take its speedy operations to a new level. Leveraging predictive AI, they hope to provide a more personalized customer experience. In effect, the technology will provide a more modern, automated way of asking, "would you like fries with that?"

Mexico is one of America's most essential international trading partners. Issues at the border, however, could soon threaten the relationship. Should President Trump elect to close the U.S.-Mexico border, avocado imports could take a particularly huge hit. Steve Barnard, president and CEO of Mission Produce, suggests America's supply of the popular food could dwindle in as little as three weeks.

This guest blog comes to us from Christina Morrison at Top10ERP.org

When we look at the top supply chain technologies to come, we see a ramped-up version of what we’ve been seeing consistently in the past five-plus years. There will be all sorts of digital innovations at play—drones, self-driving forklifts, virtual reality training! But while none of these technologies–collectively dubbed Industry 4.0–are new, we will see them used in all-new ways, with 2019 catapulting them into realms of higher accessibility

Small- and medium-sized enterprises (SMEs) and start-ups will finally have the chance to implement some of the long-prototyped automation equipment and connected devices that have made waves at revolutionary factories like Amazon, Audi and LEGO. From procurement to inventory management, there’s a lot to look forward to in terms of supply chain innovation this year. Here are some of the things we’re most excited to see enter the game.

       Lightning-Fast 5G—The latest iteration of cellular communications will officially roll out in April of 2019, offering speeds at as much as 1,000 times faster than its 4G predecessor. Every advancement in information speed is a noteworthy one for manufacturing, as it helps enhance high-tech systems and makes real-time, relevant results possible. 5G has the potential to improve factory efficiency by speeding up both software and—now that just about every piece of manufacturing equipment will soon be digitally connected—hardware as well. 5G is poised to be one of the biggest tech trends of 2019 in all industries, not just manufacturing.
       Do-it-All ERPs—Take a look at some of the top manufacturing software out there and review see mind-blowing solutions for data tracking, management, facility optimization and beyond, and it’s only going to get better. This year, we’ll see enterprise resource planning (ERP) solutions that revolutionize the way manufacturers produce, manage and fulfill, with core functions becoming automated. Companies will rapidly migrate to the cloud for lighter, more flexible solutions while leveraging their software to build out detailed analytics. We can also look forward to many more industry-specific ERP options, more customization tools and systems that help manufacturers earn government compliance and approvals.
       All Things VR and AR—Virtual reality (VR) and augmented reality (AR) have the power to transform many industries, and manufacturing is not immune. From allowing remote employees to complete full-scale equipment inspections to providing staff with engaging, virtual trainings, there are so many incredible ways savvy businesses will leverage this technology this year. We can expect to see these innovations move away from the realm of gimmick and into the realm of practicality this year. For example, AR is already being used in medical manufacturing to help companies see the positions of a medical device inside a person’s body. This is just one awesome way AR can actually be useful to the intelligent entrepreneur.
       Enhanced Security—Manufacturers, warehouses and distributors are tasked with a double-whammy security-wise—they must simultaneously safeguard their physical assets and protect their digital ones, or they risk reputation-damning breaches. Luckily, we’re seeing incredible new trends in both realms, helping us safeguard materials, goods and data for the long-term. Some examples include embedded, microcontroller security systems that protect through cryptography and stronger cloud security solutions to keep a facility’s data safe, even if it’s entirely cloud-based.
       (Even) More Connectivity—“Internet of Things (IoT)” is arguably the buzz phrase of the decade, but it’s not unearned. Wi-Fi- and Bluetooth-connected devices are ubiquitous in both the consumer landscape and the business one, and it’s only expected to grow. Some hot new supply chain gadgets to look out for include connected manufacturing equipment, mass-market picking robots, self-driving forklifts and even an incredibly efficient and precise connected screwdriver. Looking even further into the future, we expect to see intelligent factories becoming fully connected.
       Drones Everywhere—One of the biggest hurdles in large-scale fulfillment, distribution and warehousing centers has long been magnitude. Of course, it’s not super simple (and practical) for employees or heavy machinery to retrieve fast-moving items from the very top of the rack day in and day out. That’s where drones come in. The high-flying robots can do a whole lot from above, including measuring inventory and inspecting facilities, giving manufacturers a much broader, eagle-eyed view of their business. When paired with the right software, drones impress further in applications such as creating 3D building models and more.
       Robotics Adoption—The automation of manufacturing is more like an innovation of the century rather than the year, but new robotics technologies are especially noteworthy for 2019. The biggest development in this space is that more robotics will be adopted in medium-sized facilities, with top developers making their machinery more accessible to smaller companies. In terms of innovation, we’ll see industrial robotics become more collaborative with humans and watch as they’re more reactive and flexible than ever.
       Virtual Prototyping—We tend to celebrate the tangible innovations in manufacturing, but there are so many incredible but silent revolutions in the mix. For example, Industry 4.0 will embrace digital twinning, a technology that lets engineers produce virtual prototypes that can be maintained and iterated digitally, creating a leaner product development process that works significantly faster with much less waste. This is just one example of a supply chain link that will go from physical to digital this year and in the coming years.

Prepare for Manufacturing to Be a Big Part of the Conversation

Since the advent of outsourcing and automation, manufacturing has been highly politicized. With more and more companies rolling out hyper-efficient models of production, we can almost guarantee that the debate will heat up as we brace ourselves for yet another election year. But we can’t ignore the sheer ingenuity and creativity born out of manufacturing. From this industry comes the pre-laid groundwork for many revolutionary innovations, making Industry 4.0 one of the biggest drivers of technological advancement within the global marketplace. We will continue to observe this sector to identify digital trends at large.

Procurement is a business function that is being brought into the spotlight more frequently nowadays. When first thought of, we often immediately think of cost and cost reduction as the primary focus of procurement. Though this is a crucial component, it is certainly not the only topic we should keep our eyes and ears focused on. As the world of procurement expands and increased emphasis is placed on it, there will be more variables that businesses will need to keep high on their radar in order to lead their teams to greater success.

Traditionally, procurement professionals are thought of as “number crunchers” who are working extremely hard to achieve the highest quality product or service for the lowest cost. In this core concept alone, there are many subtopics that businesses need to emphasize in order to achieve these better products, services, and costs. For example, how do we determine what a product or service should cost? How do we know the best way to approach a new or existing supplier to begin these types of conversations, or negotiations? These ideas may seem like no-brainers to experienced professionals within the space, however even the most experienced procurement professional can benefit from breaking down the process and performing their own market research, analyses, and develop a strategy in order to organize their thoughts and approach. By stepping back and thinking about these additional, yet crucial elements, it allows these professionals to assess the situation from other perspectives.

Even though some of these smaller, subtopics seem silly to put emphasis on, topics such as determining a strategy or running a quick benchmark can greatly impact a next step such as engaging a supplier in a negotiation for cost reduction. Again, cost reduction is primarily seen as the main component of procurement, however there are several other components that significantly contribute to a procurement team’s success. Aside from achieving savings within a particular spend category, this field is also perceived as “the match maker” function of a business, as procurement is responsible for identifying, qualifying, and working very closely with suppliers.

Like many business functions, there are a lot of responsibilities that come with a role in procurement. These roles include managing supplier relationships, which involves regular communication, performance evaluations, and cost and inventory assessments. As procurement rises to fame within businesses, companies will alter their perception of procurement to heavily include a greater appreciation for those who are responsible for managing these supplier relationships to ensure smooth operations and product or service flow. Also included in this section of the practice is working alongside the suppliers to develop long-term partnerships to develop a mutually beneficial relationship. This enables the buyer and supplier to collaborate to determine business process efficiencies and other value-added opportunities within the current relationship, and again, changing the way companies view the procurement function.

Procurement is no longer a seemingly simple section of a business where the main focus is on reducing costs. Perception, both internal and external, is everything within a business and there is an intense sense of awareness being placed on the various perceptions of the roles within. When thinking about how procurement is perceived internally, it can include how the team identifies suppliers, analyzing data, or developing go-forward strategies. When considering how it is perceived externally, it involves the impressions that the suppliers have on the company when working with them, for example. Ultimately, procurement is a function of many tricks and it is a function that can be viewed in many different ways. Take some time to reflect on your company’s procurement operations and identify what you observe in assessing these activities from different angles.

Amazon's mastery over logistics has been a major factor in the company's evolution into the largest e-commerce marketplace in the world. The tech giant's ability to provide standard free two-day shipping to Amazon Prime members has been a key factor in its growth, and in 2018, CEO Jeff Bezos announced the company had achieved over 100 million Prime members worldwide.

And now even more membership milestones appear likely, after Amazon CFO Brian Olsavsky said during the company's recent first-quarter earnings call that over the course of the next year, the online retailer will transition the standard shipping time for Prime members from two days to one day.

The gold standard for free shipping grows even more refined

Since it first began in 2005, Amazon Prime free two-day shipping has been the gold standard by which all other competitors have been judged. It has also pushed the other industry players, and the third-party logistics partners that support them, to fulfill and deliver faster.

Currently, Amazon also offers one-day, same-day and even one-hour to two-hour shipping on select items, through its Prime Now service.

"We've already started down this path," Olsavsky said. "We've, in the past months, significantly expanded our one-day eligible selection and also expanded the number of zip codes eligible for one-day shipping."

With competitors like Walmart and Target offering two-day shipping, Amazon is moving swiftly to retain its advantage over other online retailers. With competitors like Walmart and Target offering two-day shipping, Amazon is moving swiftly to retain its advantage over other online retailers.
According to Supply Chain Dive, Olsavsky emphasized the necessity of third-party logistics partners to accomplish one-day shipping, while also praising the internal logistics capability Amazon has developed as an essential component of the ambitious new service. Focusing on the balance between logistics partners and internal logistics development has been a frequent subject of recent earnings calls, as some suspect the company of making moves to become a 3PL itself.

"I would say, we're going to be using all of the available levers that we have right now, both AMZL and also third-party carriers, and we'll just see how it develops going forward. But we're going to definitely need continued support of our external transportation partners," Olsavsky said.

With this move, Amazon is continuing to move the goalposts for its competitors. In the last year, other retailers like Walmart and Target have matched the two-day shipping bar set by Amazon, while also providing alternative options such as in-store pickup for online purchases and same-day delivery services. With this move to one-day shipping, Amazon stays a full day ahead of the competition, which helps explain why the day after the announcement, Target shares closed down almost 6%,

Walmart shares fell by 2% and Amazon's stock finished up 2.5%, according to CNBC.
Amazon says it is initially allocating $800 million for the transition from two- to one-day shipping. The money will be spent on improving warehouses and delivery infrastructures during the second quarter of this year.

"We're able to do this because we spent 20 plus years expanding our fulfillment and logistics network, but this is still a big investment and a lot of work to do ahead of us," Olsavsky said.

Vertical integration in the retail and grocery supply chain is a fairly recent phenomenon. Back in 2017, Food Dive reported that chains including Kroger and Albertsons were realizing the benefits of processing and bottling their own milk. Albertsons' 55,000 square-foot facility has even provided additional capabilities to produce juices, teas, and other drinks.

Costco took in-housing to another level last year in an effort to optimize the supply chain for its famous $4.99 rotisserie chickens. Experiencing 8% annual sales growth since 2010, the chickens have become a popular selling point for the chain.  Costco has, nevertheless, maintained the $4.99 since 2009. They hope a new poultry production facility in Nebraska will help stave off any price increases.

The decision made Costco the first retailer to shoulder the risks associated with the meat supply chin. It was immediately clear, however, that their efforts would likely set a new precedent.

Last week, the world's largest retailer announced its own ambitious plans to create an end-to-end meat supply chain. According to Walmart's senior VP of meat, the company is on a mission to "create an unmatched system that allows [the company] to deliver consistent quality and value." They're pursuing this mission by partnering with best-in-class providers and entering the Angus beef business.

This news comes shortly after another major change to company's beef supply chain. Since 2017, Walmart stores have exclusively offered Angus cuts. Their new supply base will include a partnership with Texas' largest producer of black Angus beef, 44 Farms. Sales for the higher-quality cattle breed hit record levels during the last fiscal year. 

Walmart will also retain partnerships with major suppliers including Tyson and Cargill. Analysts are skeptical that the move will hurt Tyson in the near future. Heather Jones, an analyst at Vertical Group, remarks, "I don't anticipate much of a near-term negative impact on Tyson." Tyson, for their part, maintains that its largest customer is still integral to success.

While Tyson and Cargill will continue to provide the majority of Walmart's meats, 500 stores across the Southeastern states will enjoy access to a supply of the retailer's own no-hormone-added steaks and roasts. Walmart expects the new supply chain will also create hundreds of jobs across locations in both Kansas and Georgia.

Most crucially, Walmart's latest move will arm the business and its customers with a new level of visibility into the agricultural supply chain. The company suggests the call for more supply chain transparency was among its strongest motivators. "As clean labels, traceability and transparency become more and more important to customers," they write, "we've made plans to enter the beef industry."

We'll soon know whether the last several years of effort can help Walmart continue fighting off eCommerce and maintain its position as the nation's largest grocer. Other recent initiatives include plans to trace leafy greens with blockchain and double the number of stores offering delivery services.

ICYMIM: April 29, 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.

Procurement's Digital Transformation Goals Not in Sync with Development Priorities, Hackett Study Finds
Tom Cosgrove, Spend Matters, 4/23/2019
According to new research from The Hackett Group, digital technologies have yet to make it possible for Procurement to do more with less. Results are slow, Hackett suggests, because a number of Procurement organizations are still attempting to carry out digital transformations with a clear go-forward plan or actionable list of priorities. The study does not, however, merely report on Procurement's shortcomings. Hackett concludes by providing tips for Procurement organizations looking to improve their analytical capabilities and grow more customer-centric.

For Global Procurement You Need a Global Platform
Michael Lamoureux, Sourcing Innovation, 4/22/2019
Today's global economy demands global Procurement teams, and these Procurement teams will require truly global platforms to build supply chains and effectively drive their organizations. The Sourcing Doctor details some of the key features these platforms should include and offers up steps for effectively implementing them. Many so-called global solutions, he suggests, still leave a lot to be desired. True multi-lingual support, for example, is still far from standard.

Can the Whole Foods and Amazon Grocery Chains Exist Under the Same Corporate Umbrella?
Kelly Barner, Determine, 4/23/2019
Following Amazon's recent announcement that it will open its own 'traditional' grocery chain, Barner takes a closer look at the eCommerce giant's now three-pronged approach to retail. In addition to the new chain, Amazon owns the Whole Foods brands and continues to offer groceries through its online platform. "It is intriguing," Barner writes, "to think that all three of these chains may have their own procurement team, despite that fact that they are all part of the same enterprise." She examines some of the hiccups Amazon should expect as it looks to broaden its approach to offering groceries.

What comes to mind when you think of Procurement Transformation? What about Accounts Payable Transformation? Interestingly enough the term Procurement Transformation seems to elicit more of a holistic thought process, it is more about setting the strategy for the People, Process, and Technology of the entire function. So why is it that AP Transformation has a straight through line to automation and technology? Accounts Payable also has people, processes, and technology to consider when constructing a long term strategy. Just like Procurement, AP can be overshadowed as such a tactical function so the assumption is that technology is the easiest fix for efficiency. While I would agree that a best of breed AP automation solution is a very effective means of taking laborious work and streamlining it, I would say that all too often the other equally vital components are less focused on.

The decision to implement an AP solution is just as onerous as selecting the best fit Procurement technology, whether it is P2P, eSourcing, or Contract Lifecycle Management. There is no doubt that it can a complex puzzle of sorts, how does this plug into that, what will integrate and what will need to adapt in order for this module to work, all while considering how the supply base will be impacted as well as the internal stakeholders. When selecting technology there are a lot of boxes to check and decision makers to involve. But what about the bigger picture?

Before any technology can be effectively implemented in an organization, the workflows that govern the process need to be evaluated. As we have discussed in relation to Procurement technology, an overly complex and painful process will not be automatically fixed by technology in AP, or any area of the business for that matter. Oftentimes as organizations grow they add process for the sake of adding process with the belief that it will create consistency and efficiency. It’s not long before they turn around and see that the process has taken on a life of its own, and may even require a full time job to manage it. Processes that are too complex will create confusion more than anything and ultimately lead people to find ways around them, negating the original purpose altogether. When you try to implement technology using those overly complex workflows the likelihood of success is low. Even if the technology can somehow survive in that environment it won’t be long before the same pain points pre-technology arise post-technology and you find that now the finger is being pointed at ineffective technology. There has to be a scapegoat and it’s easier to blame the technology than to look beyond it to understand what the root cause is.

Now that we have identified the problem, what is the solution? It can be easier than you think. Before you make the investment in the technology, take the time to evaluate your processes against best in class measures. There will always be a business case for the technology to create efficiencies. Improving your processes ahead of the technology is a way to ensure that business case comes to full fruition. Implementing an improved process along with an automated solution can help the organization to digest the change in one bite rather than trying to change the process first and then the tech, or worse the other way around.

This week, our #MentorshipMonday blog features Source One Consultant & Spend Analysis Lead, Brian Seipel.

Brian began his career in Sales and Marketing. Once he graduated college, he mainly pursued Marketing, with a focus in campaign management and copywriting. According to Seipel, he randomly got the urge to try something new, and that's when he joined the Marketing Procurement team at Source One. From there he's transitioned into various other departments in procurement, including Telecom and IT. He now consults and and conducts Spend Analyses in categories like Facilities.

When asked to give some advice to younger professionals, Seipel encourages everyone to hone their communication skills. He recommends garnering some sort of sales experience, as it helped him build the confidence to speak one-on-one with clients and negotiate with suppliers. Seipel notes, "people struggle with being comfortable talking to other people. Many professionals know the analytics portion of Procurement, and they can carry on a project plan, but the idea of negotiating seems adversarial." Seipel explains, however, that Procurement often ignores the collaborative potential of negotiations. A lot of people don't realize, he suggests, that suppliers are looking forward to working with clients, they want that business, they want that partnership. Ultimately, that means they want to negotiate. In short, Brian's advice to young Procurement professionals is:

"Be comfortable making an ask. It's not a brawl, it's about building a relationship."

For more of Brian's tips and best practices, check out some of what he's written on the subject of contracting and negotiations. If it's a particular challenge for you, you might enjoy How to Negotiate (when you're Scared of Negotiating) as well as our 6 Steps to Stronger Supplier Negotiations.

April 26, 2019

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

New Whitepaper:
Building an Effective Procurement Organization
Source One experts combine their knowledge and expertise to craft the latest whitepaper on the methodologies used over the years to help countless companies build and enhance hteir procurement operations. Explore the insights from our experts as they list tips, tools and best practices to help you optimize your procurement department. Part I of Building an Effective Procurement Organization is available for download today, stay tuned for Part II coming soon!

New Podcast
The Total Cost of Ownership in Recruiting and Hiring

Taking a strategic approach to supply chain management is all about looking beyond price to consider the total cost of ownership. On this episode of the Source One Podcast, recruiter Andrew Jones suggests that Procurement’s hiring managers should keep TCO in mind as they search the market for talent. 

The McDonald's brand was built on efficiency, and the company has for decades been known for its elite supply chain management, having placed on Gartner's Supply Chain Top 25 several  years running. But with the recent acquisition of a personalization and decision logic technology company, the Golden Arches appears poised to optimize its supply chain even further.

In March, the McDonald's Corporation announced the purchase of Dynamic Yield Ltd., a decision technology company based in New York and Tel Aviv. The global fast food chain stated it would use the technology to provide a more personalized customer experience by automatically adjusting outdoor digital Drive Thru menu displays to show certain food items based on variables such as time of day, weather, current restaurant traffic and trending items. The tech could also suggest additional items based on a customer's order, like recommending bottled water with a salad order or upselling a sandwich to a combo meal.

McDonalds will be one of the first companies to integrate decision technology into the customer point of sale at a brick and mortar location.McDonald's will be one of the first companies to integrate decision technology into the customer point of sale at a brick and mortar location.
"Technology is a critical element of our Velocity Growth Plan, enhancing the experience for our customers by providing greater convenience on their terms," Steve Easterbrook, McDonald's President and Chief Executive Officer, said in a statement. "With this acquisition, we're expanding both our ability to increase the role technology and data will play in our future and the speed with which we'll be able to implement our vision of creating more personalized experiences for our customers."

In one sense, this new development may appear to be simply a more modern, automated way of asking, "Would you like fries with that?" Yet the company is taking it to a whole new level of sophistication by using real-time data to drive the upselling process, and finding a way to improve supply chain management as well.

The data can not only help McDonald's better analyze and predict customer buying habits, but could also nudge consumers in the direction of certain items, based on inventory. For example, if a location is running low on grilled chicken, it could remove that option from the menu and instead prominently feature hamburgers or something else that's in high supply.

By using artificial intelligence to both predict and influence a customer's order, McDonald's could potentially generate millions in new revenue and make up for the traffic declines it has seen in recent years.

"It allows for an integrated supply chain that starts from customer's decisions and goes all the way to operational, strategy and tactical decisions," Ohio University professor Ehsan Ardjmand told Supply Chain Dive. "It could mean lower operational costs, lower lost sales and better planning."
This guest blog comes to us from Fieldpoint.net.

Field service management is a system for managing activities such as scheduling, dispatching, invoicing and billing. That said, if technology is going to evolve anywhere to make the workplace more efficient, it's in the field service management industry.

Although we're only a few months into 2019, there have already been many technological trends that have made changes in field service management.

Here are some of the biggest tech trends that have made headway in the field service management industry so far this year.

Virtual and Augmented Reality

Virtual and augmented reality applications have been talked about for a while. But now, virtual and augmented reality has been developed enough that technicians are capable of overseeing all kinds of machines in the field digitally.

This enables technicians to guide contractors and other technicians step-by-step though repair projects and processes. What's more, virtual reality can also be used to train prospective technicians before they even enter the field so they have more experience under their belt.

Virtual and augmented reality applications have come so far that it's predicted that 10% of emergency field service work will be scheduled by artificial intelligence (AI) by 2020.

The Internet of Things

The Internet of Things (IOT) refers to the extension of Internet connectivity into everyday objects and physical devices. Devices that are connected with IOT can communicate and interact with others through the Internet and can also be remotely controlled and monitored.

Technology experts predict that there will be 26 times more connected objects and physical devices by the year 2026. Those devices include tablets, smartphones, laptops, desktops, and more.

What does this mean for technicians and the field service management industry? Technicians can use IOT to access data from connected services. They'll be able to access data from manufacturing equipment, household appliances, and utility meters.

This a major advancement for the industry because it helps technicians be more efficient. It also enables them to compare and contrast data from appliances and other equipment.

According to market research company Forrester, up to 85% of companies plan to implement or have already implemented IOT adoption this year.

Zero Stock Inventory

Zero stock inventory is a system where a company keeps little to no inventory in storage. Companies using this system only order exactly what they need and order inventory only when it's needed.

Research shows that computerized inventory control systems can help to cut back on inventory-related errors and can lead to an additional inventory reduction by up to 20%.

Field service management software that integrates with customer relations management (CRM) systems are capable of displaying real-time inventory numbers. This enables field service companies to have even greater control over their stock inventory so they never have unused spare parts sitting inside a warehouse.

New and improved technological systems have a major impact on workplace efficiency and productivity. With advancements in virtual and augmented reality, developments in IOT, and new-and-improved inventory control systems, it's safe to say the field service management industry is headed for a wave of innovation for the rest of 2019.


Though pilot tests are a new phenomenon, dreams of a market for self-driving cars date all the way back to the 1920s. In 1925, inventor Frances Houdina created a radio-controlled vehicle, much to the public’s fascination. Over 40 years later, John McCarthy (a founding father of artificial intelligence) described the idea of “automatic chauffeurs.” He theorized a future in which a computer would pilot a vehicle toward its destination.

In 2016, some of these ideas began to move from theory to reality. In that year alone, big players such as Ford, Mercedes, Apple, and Google, among others, invested an estimated $46 billion into researching and developing their own fleets of autonomous vehicles. 

Some key milestones in this ongoing, increasingly-crowded race include:

Self-parking: At the start of the new millennium, car manufactures began exploring vehicular autonomy by introducing self-parking systems. Using advanced sensors, Toyota’s 2003 Prius and Lexus’s LS Sedan offered automatic parking assistance, while Ford produced the Active Park Assist in 2009. A series of manufacturers have improved on the technology in the years since. 

Google launches Waymo: In 2009, Google launched its secret driverless car project, Waymo. Through the Waymo program, Google has seen its autonomous cars drive over 300,000 miles without a collision or system failure. After five years of tests, they unveiled images of their prototype. Their proposed car lacks a steering wheel, gas pedal, and a brake pedal.  

Car manufacturers catch up: By 2013, automotive giants like GM and Toyota had joined the race for driverless cars in earnest. Certain manufacturers, Mercedes for example, have sought opportunities to refine existing technologies. These have included features designed to prevent accidents and keep drivers in their intended line. Other, more ambitious, competitors have set their sights on introducing fully driverless cars by the early 2020s. Competition has also begun to arise around certain self-driving business opportunities. Ford and Toyota are just two of the brands looking to pioneer the field of autonomous pizza delivery

The first fatalities: The first fatal accident involving an autonomous vehicle occurred during the first weeks of 2016 in China's Heibei province. The first fatality on American soil came just a few months later. Both incidents involved Tesla Model S cars and were described as "scarily similar" by Quartz.  Model S drives into a tractor trailer. In 2018, the first pedestrian death put Uber's self-driving trials to a brief stop. These crashes have quickly turned the conversation around driverless vehicles from an enthusiastic one to an uneasy one. The public is understandably apprehensive about the technology and its (seemingly inherent) risks. According to AAA's 2018 Vehicle Technology Survey, nearly three quarters of American drivers would not trust an autonomous car. 

Despite the public's concerns, the automotive industry’s race towards a driverless future does not appear to be slowing down. Last year, technology company Nvidia revealed its driverless car chip, Xavier. Partnered with Volkswagen, Nvidia’s chip will be the first to fuse driverless technology with artificial intelligence, beating out Toyota’s work with the MIT and Stanford labs. Such milestones suggest that industry leaders are more than capable of navigating around bumps in the road. It's unlikely the automotive industry can outpace its most ambitious, but the prospect of sharing the road with self-driving cars and trucks is no longer the stuff of science fiction. 

Shortly after acquiring Source One last year, Corcentric was named to Spend Matters' list of 50 Procurement Providers to Watch. This year, they've delivered on their potential and earned a spot on the more prestigious list of Providers to Know.

Each year, the Spend Matters team recognizes the consulting firms and solution providers that are elevating the Procurement function and promoting consistent innovation. Corcentric is recognized for a series of major initiatives including its recent acquisition of Determine.

Matt Clark, Corcentric's COO and President, remarks on the news, "A spot on the Provider to Know list is a sign that our efforts to transform Procurement and Finance and empower our clients are paying off." 

"Spend Matters only makes its decisions after a thorough assessment," says William Dorn, VP of Operations at Source One, a Corcentric company. "The providers who've made the list are true leaders when it comes to innovation and execution."

The honor is one of several the Corcentric team has earned this year. In February, the organization's spend management team earned 4 Procurement Pro to Know awards from Supply and Demand Chain Executive and a pair of spots on ISM's 30 Under 30 list.

The world's largest company by revenue is partnering with Europe's largest bank, in order to provide financial incentives to suppliers working towards creating a more sustainable supply chain.
Walmart has joined forces with HSBC to allow its suppliers to apply for improved financing with the

London-based bank if they can show progress under the Arkansas-based retailer's Project Gigaton or Sustainability Index program initiatives.

The new global sustainable supply chain finance program directly links a supplier's financing rate to its sustainability performance, allowing a company with higher sustainability ratings to receive better loan terms.

Suppliers key to reducing Walmart's carbon footprint

Most of the environmental impact that can be attributed to a company of Walmart's size is created by its suppliers, which explains why they have been the focus of the retailer's sustainability initiatives in recent years.

In 2012, the company pledged that by 2017, it would buy 70% of the goods sold in its U.S. stores and clubs from suppliers participating in the Walmart Sustainability Index program, which was developed by The Sustainability Consortium to help Walmart benchmark suppliers and encourage continuous improvement.

In March of 2018, Walmart announced Project Gigaton, its commitment to cut 50 million metric tons of greenhouse gas emissions from its China value chain by 2030, and one billion metric tons of greenhouse gas emissions from its global value chain of upstream suppliers and downstream consumers over the same time period. A little more than a year later, Walmart has revealed that its suppliers have thus far successfully avoided 3.46 million metric tons of emissions in the Chinese value chain, which is equivalent to the amount of CO2e associated with the average annual electricity consumption of over 3 million Chinese households.

In Fiscal Year 2017, Walmart achieved the goal it set in 2012 to buy 70% of its U.S. goods from suppliers participating in the Sustainability Index. In Fiscal Year 2017, Walmart achieved the goal it set in 2012 to buy 70% of its U.S. goods from suppliers participating in the Sustainability Index.
Walmart has also committed to reducing the carbon intensity of its own operations in China, and the company says it incorporated energy-saving features into the 33 new stores it opened in the People's Republic last year. But increasing supplier sustainability is a much larger goal for the supermarket giant.

"The procurement standards of a buyer are a huge driver for sustainability," Natalie Blyth, HSBC's Global Head of Trade and Receivables Finance, said in a press release announcing the new financing incentive for Walmart suppliers. "In many industries it is a company's supply chain - rather than the company itself - that is responsible for most of the environmental impact and therefore offers the greatest potential for sustainability improvements."

Effects of climate change a practical concern for many suppliers

While the perception of environmental friendliness is no doubt a public relations win for corporations, for many companies, climate change presents a genuine threat to revenue, as certain environmental changes can seriously disrupt operations.

"Embedding sustainability in global supply chains is not only beneficial for the environment and society, but also for companies' bottom lines," Blyth noted.

The Carbon Disclosure Project's 2019 supply chain questionnaire found that only 57% of suppliers report emissions reductions activities and just 35% having a structured carbon reduction target, concluding that those suppliers who fail to act sustainably may pay a significant price.

The CDP believes that incentives like the improved loan terms being offered by HSBC and Walmart are a good way for companies to encourage emissions reductions, as opposed to only threatening suppliers who fail to reduce their carbon footprint with financial consequences.

"Alongside the stick, purchasers can offer carrots: members of the CDP supply chain program recognize that supplier incentives, reward and recognition can go a long way to instill sustainable change," the global organization said.

The following blog comes to us from Christina Morrison of Top10ERP.org.

Whether you’re running a small family business or a large-scale distribution center, you know that gaps in efficiency can seriously slow your business. And, in today’s consumer-driven economic landscape, there is no room for moseying, with 63 percent of consumers saying they expect three-day delivery as the standard. Taking a good hard look at your process can help ensure that you’re running an efficient operation and that your customers are always pleased with your services.

Inefficiencies in the form of inaccurate inventory, slow restocking, under-performing technology and others could cost you millions per year if not addressed, but identifying them can be its own costly challenge. Here are some of the ways you can find, and close, the vulnerabilities in your fulfillment process.

  1. Boost Inventory Accuracy—Did you know that, on average, retail inventories are only accurate 63 percent of the time? Why is this such a big deal, you ask? If your inventory numbers are off, you’re unable to properly store, pick, package and ultimately fulfill at peak efficiency. Not to mention, we all know that customers and partners expect to see what’s in stock and when while they’re ordering. Improve inventory accuracy with fulfillment inventory solutions that ensure unparalleled accuracy.
  2. Make Your Process Predictable—When your process varies widely from one day, week, month or season to the next, inefficiencies arise. The fact of the matter is, if you don’t know what to expect each day, you’ll lose out on labor and operational costs, not to mention an over- or understock of goods. Invest in a good business distribution software to help monitor, predict and automate your systems for more predictability. When your software does a good portion of the monitoring and maintaining for you, it’s easier to refocus your attention and improve efforts elsewhere.
  3. Invest in an RFID System—Budget-drainers in the fulfillment process can add up quickly and prevent your business from rapid growth, but it can be really tough to identify them if you don’t have the proper systems in place. Transparency and data tracking at every level of the supply chain is vital to helping you develop solid analytics, and analytics are necessary for making impactful changes on a day-to-day level. With radio-frequency identification (RFID) technology and a detailed tracking software, you open up transparency and tracking like never before, helping to ensure better data aggregation.
  4. Reduce “Touches” and Handling—Take a look at the average number of touches—that is, number of times an item is being handled—of a typical item in your facility. The more touches or steps, the more room for error and mishandling. Reducing the amount of times each unit is handled is a worthy fulfillment effort that can help prevent error, damage and theft while boosting the speed of your process. Note that touches aren’t limited to human touches. Any step in the fulfillment lifecycle could be considered a touch, whether it’s a robot picking, a pallet transporting or a human packaging.
  5. Optimize Facility Flow—You may think that the way your facility is laid out has little impact on the efficiency or success of your business, but that’s simply not so. Creating a fluid flow, from accepting inbound goods to shipping items out, is important to helping prevent roadblocks and inefficiencies in the process. Hiring a warehouse layout optimization specialist is the best way to go about this if you think that your facility needs a pretty massive overhaul. It will also help you optimize your storage space so that you can store more without the need to upgrade.
  6. Use Less Packaging—It should be every fulfillment manager’s goal to reduce the amount of packaging used. More packaging equates to more steps, more handling, more time, more money and more waste. Take Amazon as an example of how to reduce packaging to boost inventory: The eCommerce giant is working to challenge their massive packaging inefficiencies by using more envelopes and developing a system that allows them to ship items in their original packaging. Your aim should always be to figure out how to best protect items in transit with the least amount of materials.
  7. Optimize Picking Operations—Picking—the act of grabbing specific items to prepare them for shipping—is one of the core components of any well-oiled fulfillment center. Because even miniscule inefficiencies in picking can seriously affect your bottom line, there are all sorts of incredible picking technologies out there (again, just look to Amazon for examples). But you don’t have to shell out millions on high-tech picker robots to get the job done right. Small changes, like combining orders into single travel units and keeping all picking operations at the ground level, can equal massive changes over time.
  8. Optimize Slotting Operations—Slotting is the process of organizing your center’s inventory before it’s picked, processed and fulfilled. Like picking, optimizing your slotting efforts can bring massive returns with small and affordable changes. Even minor adjustments, like keeping your fastest moving items in the most accessible spots in the facility, can revolutionize the way you do business. Look at slotting as a science and follow best practices to ensure that items are fulfilled in a reasonable timeframe.

It’s All About Analytics

At the end of the day, you’ll only get so far in any fulfillment endeavor if you perform, test, measure and adjust as part of an agile, ever-evolving optimization strategy. But how do you make measurable changes if you don’t have the measurements to begin with? The very best thing you can do to constantly improve your processes is to track, track and track some more. With the right software and equipment, you’ll be able to closely monitor, measure and adapt based on past performance data. From there, closing efficiency gaps is easy!

More and more, sustainability is top of mind for corporations and consumers. As forecasts grow increasingly dire, it's clear that businesses have a lot to lose if they fail to make environmental responsibility a central component of their missions. The last several years have seen campaigns to eliminate plastic, cut down on carbon emissions, and promote recycling have recently moved from the fringes to the very center of cultural discourse.

Nearly every day, it seems, a new industry leader leverages ambitious goals and initiatives to make headlines and win consumer confidence.

A recent Nielsen report suggests sustainable efforts are essential for securing this confidence. While millennials and members of Generation Z are often credited with driving this shift, they're far from alone. Nielsen found that a staggering 81% of survey respondents feel strongly that organizations should commit themselves to improving the environment. Businesses recognize the need to take action. PwC states that 72% of organizations have worked the UN's Sustainable Development Goals into their annual reports. Recognition and actual action, however, still do not go hand-in-hand. Just 27% have actually begun to work these goals into their strategies.

Maintaining trust - and winning back the trust that's been lost - will mean making green Supply Chain Management more than a buzzword. Retailers, in particular, face both a wealth of risks and a world of opportunity.

Retail's Sustainability Problem

No industry can avoid the conversation around sustainability. While some sectors have seen more progress than others, just about every business out there has had to at least pay lip service to sustainability and green sourcing. For organizations in the retail space, the conversation has proven particularly inescapable.

Leaders throughout the retail space have made an outsize contribution to climate change and pollution throughout the last decade. A recent estimate from the Ellen MacArthur foundation charged retailers with releasing one million tons of plastic microfibers into the planet's oceans every year. This is in addition to a growing carbon emission problem. The Foundation predicts that - by 2050 - retail will use up more than a quarter of the world's carbon budget.

Consumers got an eye-opening lesson in the retail industry's wasteful practices last year. When luxury brand Burberry revealed its environmentally destructive methods for eliminating excess inventory, the floodgates opened up. Brands ranging from H&M to Urban Outfitters found themselves faced with boycotts and harsh critiques for similar practices.

A number of these organizations responded to the controversy by joining the industry-wide fight against climate change. As 2018 drew to a close, Burberry and H&M aligned with 41 other organizations in signing the Fashion Industry Charter for Climate Action. Outlining a number of ambitious goals, the Charter hopes to "set an example" for businesses across across both the industry and the globe.

Gap's Ambitious Plans

Gap Inc., another of the Charter's signatories, announced a broad series of sustainability initiatives just in time for Earth Day 2019. Affecting the Banana Republic and Old Navy brands, today's announcement builds on commitments announced back in 2017. Over the last two years, Gap's flagship brand has taken an especially active role in reducing water use across its supply chains. Their Washwell program, they report, has saved over 220 million liters of water in comparison to more conventional washing methods. 2017's announcement also saw the brand establish its Gap for Good program and commit to fully sustainable cotton sourcing by 2021. 

The issue of water waste is a particularly critical one for the Gap family of brands. A company spokesperson writes, "The global apparel industry is one of the largest, most intensive users of water in the world." That's why they've taken pains to set new industry standards for "product innovation and efficiency improvements at fabric mills and laundries." Their ongoing efforts began over a decade ago with the introducing of a comprehensive Water Quality Program.

Washwell will serve as an important component of Banana Republic and Old Navy's efforts over the next several years. By 2025, the former has committed itself to produce 50% of its products with techniques that will reduce water waste by at least 20%. In addition to adopting Washwell's principles, the brand will also employ more sustainable methods for dying and finishing its denim products. 

Mark Breitbard, Banana Republic's CEO, remarks, "Banana Republic is committed to using production techniques that will save and preserve water quality while creating versatile and more sustainable fabrics that our customers have come to know and love." The retailer also aims to source all of its content from sustainable sources by 2023.

Old Navy, for its part, will ramp up its participation in Washwell. While 60% of the chain's denim is currently washed through the program, Old Navy hopes to bring that number up to 100% by 2022. "The brand," Gap's press release notes, "sells 27,000 Rockstar jeans a day." As such, this change to its denim supply chain represents a potentially transformative opportunity. 

Earth Day Every Day?

Deloitte's most recent survey of young professionals confirmed that corporate reputations took a hit in 2018. Just 48% of respondents believe that businesses are committed to ethical behavior. That's down from 65% in 2017. Whether this trend continues, it's clear that corporations need to start putting their words into action and making actual progress toward more sustainable supply chains. It's not enough to make commitments on Earth Day, true business leaders will live out their promises all year round.