October 2019

There’s a seismic shift happening in the real estate market. The Millennial generation has become the most dominant market segment in the home buying arena. It may have taken us some time to get here, but now that we are – we’re changing the way it’s done.

Our lateness to the home purchasing party isn’t because we prefer the comfort of living in our parents' basements over the prospect of having our own place. Rather, for a bulk of my generation, it's the affordability of owning a home that presents the biggest barrier to the real estate market.

Competing Priorities

Our status as the most college-educated generation comes at a cost - Student Loan Debt. Fun fact: there are more than 45 million borrowers who collectively own $1.5 trillion in student loan debt - that's right Trillion. According to the Federal Reserve, a "$1,000 increase in student loan debt causes a 1 to 2 percentage point drop in home ownership rate for student loan borrowers during their late 20s and early 30s." The Fed attributes student loan debt to the 20% drop in home ownership. So, while we would absolutely love a beautiful home with a nice big yard for our dogs, we simply have to prioritize paying off our debt before making a property investment. This is especially true when you consider just how expensive it is to buy a home.

Short Supply

If you’ve ever watched the shows Fixer Upper or Property Brothers, you’re probably familiar with the real estate term: Starter Home. A Starter Home is usually the first house that a family or individual can afford to buy. In the real estate industry, it commonly denotes a small one- to two- bedroom home that is older and may require a bit of renovating. As it turns out, Starter Homes are actually in short supply in many U.S. cities. According to a report by Realtor.com, the number of homes listed at $200,000 or less (the range at which many first-time buyers with a limited budget tend to shop) has dropped over the past year. The number of homes priced over $750,000, however, grew by 11% last year. Additionally, the rate of single-family home construction is also lagging. With a limited supply, would-be first-time home buyers are stuck renting.

Revolutionizing Real Estate

For those of us that are breaking out of the rental cycle, we’re changing how real estate is done. Our captivation with technology has revolutionized many industries and aspects of our lives - house purchasing is no exception. While past generations would find their homes through personal referrals to realtors, flipping through the Yellow Pages, or simply wandering into an open house. Millennials do not (and simply can’t) afford to rely on a stroke of luck.

According to the National Association of Realtors, 81% of older Millennials found their home through a mobile app. That's right, we're swiping left and right for our houses, too.The real estate world has caught on and is leveraging technology to continue capturing the youngest generation of home buyers.

  • Research: Like they would for countless other purchasing decisions, Millennials are doing their research when it comes to home buying. With the rise of real estate apps and sites, Millennials have the ability to understand the market before they go through the purchasing process. 
  • Match Making: Realogy has partnered with TurnKey Home Purchase Service to create a unique home-buying experience. By simply asking a few questions online, the potential home buyer is matched with an agent who is best suited to help them in their home search. 
  • Real-time Updates: American real estate database Zillow keeps potential home buyers well-informed on properties of interest by offering regular email alerts. When users opt in for updates, they’ll receive notifications when properties change in price or status. 
  • Social Media: Pinterest, Instagram, Facebook, and even LinkedIn are go-to sites for Millennials searching for a home. Social Media Marketing, as a result, has found a place in the real estate market. 
The bottom-line: Millenials are faced with an economy that's far different from that of past generations. Our life choices and purchasing habits point to those differences. Our captivation with technology and growing purchasing power continue to disrupt industries.Our pursuit of a place to plant our roots is no exception.

Procurement's evolving, essential role is a double-edged sword. The function has earned the respect and executive buy-in it needs to drive organization-wide change, but it's numerous talent gaps have grown ever wider. More than half of CPOs doubt their teams have the skills they need to deliver on their goals. Faced with evolving technologies and emerging risk factors, this talent gap could soon grow even wider.

Skills and expertise aren't the only things most businesses are missing. Many lack the internal resources to close these gaps on their own and get Procurement headed in the right direction. They're reliant on over-worked HR departments and struggling to update age-old processes. What can they do? They might consider working with a dedicated Procurement and Supply Chain recruiter.

Job seekers know that recruiters are valuable resources for the (often long and difficult) application process. They're often just as useful for organizations looking to supplement their efforts and bring leading talent into the fold.

Here are just a few of the ways a recruiter could benefit your organization.

Recruiters Save You Time, Money, and Effort

As mentioned above, your Procurement and HR teams already have their hands full with day-to-day responsibilities. HR doesn't have the resources to familiarize themselves with the ins-and-outs of Procurement, nor does Procurement have the resources to become a full-fledged hiring function. Keeping a position open is costly. With the time and resources to focus on open positions, recruiters keep you from wasting money and help you quickly move best-fit candidates through the hiring process. 

They'll streamline that process from end-to-end by vetting candidates and reducing the workload for your internal team. Once you've on-boarded a new hire, a recruiters efforts will continue to pay off in a big way. You won't need to break the bank training them and preparing them to succeed because your recruiting partner will ensure they're ready to hit the ground running on Day 1.

Recruiters Engage Passive Candidates

Unemployment is the lowest its been in decades. That means the pool of active candidates is about as small as its ever been. To fill the talent gap, organizations need to cast a wider net and seek out more passive candidates. These are candidates who aren't currently sending out resumes and searching on job boards. A recruiter will extend your search by connecting you with candidates that might not realize what a great fit your organization could make - or how much they're looking for a change. They'll inspire these professionals to take action, present your Procurement team as the best possible fit, and provide for long-term, mutual benefit.

Recruiters are Marketplace Experts

Recruiters are out in the trenches every day. If they're any good at their job, they've developed a through understanding of what it takes to succeed in your industry. What's more, they know where to find those top-notch candidates and what your organization can do to win them over and welcome them aboard. They'll ensure you're putting your best foot forward - by offering the right incentives and benefits - and prepare candidates to do the same by familiarizing them with your organization's approach, expectations, and unique culture.
Are you struggling to identify candidates and welcome them onto your Procurement team? Learn more about Source One's end-to-end approach to recruiting. From internal capabilities reviews to on-boarding support, they provide everything you need to build a best-in-class team.

While it's usually a good sign when the unemployment rate hovers at or near historic lows, it can also create a problem for many companies within the supply chain. With the holiday season approaching, many companies that usually staff up heavily for much of November and December may suddenly have difficulty doing so.

Many of the biggest names in shipping and retail - not only nationwide but around the world - have announced plans to hire tens of thousands or more workers ahead of the holiday season, according to Supply Chain Dive. However, that all comes at a time when unemployment nears lows not seen in half a century. Some experts believe joblessness could  be the lowest ever recorded when accounting for other factors.

Companies are already putting in huge seasonal hiring efforts.Companies are already putting in huge seasonal hiring efforts.
This means, however, that companies looking to hire heavily in the months ahead will be competing in a relatively shallow pool to hire the most qualified seasonal candidates, the report said. Simply put, hiring at a high volume in a short window - given the current industry constraints - could prove difficult.

"That's a huge undertaking," Lucas Hiler, director of strategic sales at recruiting and staffing agency Aerotek, told the site. "It makes me wonder, how are they able to hire a quality employee? Or are they just bringing in somebody that is not qualified for the job?"

What's being done?
As with many supply-and-demand scenarios like this, when unemployment drops, the cost of labor necessarily has to go up, so companies are doing more to appeal to would-be hires than ever before ahead of the 2019 holiday shopping season, according to Penn Live. Some also started their searches for seasonal hires as far back as August to get ahead of the pack.

Included in many of these upgraded offerings are on-the-spot hiring decisions, higher pay, flexible scheduling, eligibility for retirement savings plans, employee discounts and, perhaps most crucially, the ability to be hired on full-time at the end of the holiday rush, the report said. All of this may be critical for companies at every step of the supply chain to figure out as soon as possible so they don't find themselves shorthanded come November and December.

Taking the next step
Companies don't want to get pulled into a cycle where they must continually staff up every holiday season, so a transition program that allows part-time hires to become full-time is often seen as a must, according to Logistics Management. Not only should companies be screening for people who can do the short-term work, but also look at all applicants to see if any are future leadership material. With the right approach, seasonal hires can become effective managers that make next year's efforts easier to handle.

When companies are offering top dollar and great perks for seasonal hires, their difficulties in finding talent - even when the marketplace is incredibly competitive - are likely to be relatively minimal. That may be just what they need to get ahead this holiday season.

Naseem Malik is a Managing Partner at MRA Global. With over 15 years of supply chain management and logistics experience, he now focuses on recruitment function in the space. He'll share his tips for developing the right skills, seizing the right opportunities, and growing as a professional later this month. He's just one of several thought leaders who'll serve as panelists during Closing the Talent Gap on October 30th.

Check out some of the insights Naseem as shared with Source One in the past:

Discussing Procurement’s Talent Gap with Naseem Malik
As Procurement's role grows more diverse and essential, its various talent gaps continue to widen. It's more important than ever that businesses change up their talent development processes to serve a new generation. They'll also need to refine their recruitment practices and place a new emphasis on retention. He shares his thoughts on this episode of the Source One Podcast. He advocates for an aggressive approach and encourages organizations to seek out both hard and soft skills.

ExecIn Spotlight: A Conversation with Jami Bliss & Naseem Malik
Back in 2017, Naseem Malik and Jami Bliss served as moderators for the ExecIn CPO Roundtable. They preceded the event by recording a conversation on the Source One Podcast. They discussed some of the issues facing CPOs as well as the recent strategic growth Procurement has seen throughout the last decade. 

Source One’s IT and Telecom team has spoken, written, and generally waxed-poetic about the challenges with - and benefits of - building a strong IT and Procurement partnership. But similar to the procurement function as a whole, before you can start applying these best practices, it's important to take a step back and examine the maturity of the current (if any) IT procurement support. As with general procurement operations, there is not a quick fix to get to “best in class” and starting with incremental improvements can go a long way in advancing the value that Procurement brings to IT.

To assess IT-specific procurement maturity, we'll leverage the Procurement Maturity Model that was introduced by Source One in 2018 and understand how that model applies to IT Procurement:

Laggard (Tactical): When we talk about “Laggard” procurement teams it’s those that are stuck in the function's tactical past…Cutting costs and making purchases on a reactive, as-needed basis, they're helping keep the lights on…

When IT Procurement is tactical within an organization, they are typically working in an extremely reactive nature to IT spend management. Typical activities may be simply processing renewals or purchases, pushing paperwork without adding value to the process, and generally just reacting to what IT and its suppliers are pushing. Tactical IT Procurement does very little to understand holistic IT supplier relationships and the criticality of those suppliers on the organization’s infrastructure and systems.

Traditional (Operational): Traditional Procurement is where purchases are still made on a largely reactive basis with little thought to anything other than hard dollar cost...Managing inventory, processing purchase orders, and renewing contracts constitute the bulk of their daily workload...

When applied to IT, operational procurement may have a sense of when larger software or maintenance renewals are due, have a role in managing and maintaining POs, and take on maintaining hardware and software inventories, but little strategic or long-term value is being added. I think of these groups as “record keepers” – they’ve started gathering and maintaining the information and inventories to make strategic decisions, but they don’t have the time, resource, and/or capabilities to turn that information into proactive supplier, contract, and service management.

Augmented (Strategic): These Procurement departments enjoying a good level of executive support and buy-in, employ a strategic sourcing process that takes into account far more than price alone. It's earned internal respect by optimizing supplier relationships, providing for greater spend visibility, collaborating with other business units and perhaps, most crucially, gathering metrics to report on its success.

For IT Procurement, strategic work begins when procurement teams turn their “record keeping” information into actionable strategies and discussions that inform and define a holistic IT category plan. Strategic IT Procurement works with the IT department to understand the organization’s technology roadmap, anticipating where and when sourcing, negotiations, and supplier/contract management can benefit and support IT’s short, mid, and long term goals. By shifting from a reactive to a proactive approach, IT Procurement starts to add value and become a true partner of IT. This is where Procurement should begin expanding the IT areas/subcategories it supports. Where tactical or operational IT Procurement may have an eye on hardware and software purchases/renewals, strategic IT procurement understands and supports oversight of managed service providers, staff augmentation, infrastructure and hosting needs, and project-based products and services - all the while seeking opportunities for optimization and consolidation, and establishing a framework for KPIs and metrics around supplier performance.

Consider that many IT suppliers do not sit in silo-ed subcategories as we may see in other areas of indirect spend – many service providers within IT can resell hardware and software solutions, and many “traditional” hardware and/or software suppliers offer services and are expanding vertically within their own supply chains. Given the range of products and services that IT suppliers can provide, it’s important for someone (read: Procurement) to have a holistic view of spend and service performance to inform negotiations and long-term relationship planning.

World-Class (Innovative): These Procurement teams occupy a fully-strategic, highly-valued role within their organization. They have the ear of the C-suite and are trusted to drive organization-wide strategic initiatives. Change is not merely a goal, but a cultural imperative for everyone across the business. A culture of continuous improvement enables them to stay on the cutting edge of emerging technologies and consistently refine their own internal processes.

Innovative IT Procurement teams are in lock-step with IT and are applying procurement best practices with consideration for the IT department’s performance goals and technology roadmap. These procurement folks understand and are able to balance optimizing costs, mitigating technology risks, and supporting IT as they look to innovative solutions/suppliers and are actively engaged by IT based on the value they provide to vendor selection and management processes. Similarly, Innovative Procurement ensures IT is brought into sourcing events and supplier selection decisions within other areas of the organization to ensure alignment with IT’s current and future requirements.

It’s worth considering that the level of maturity that any IT Procurement team can achieve is going to be dependent on how mature the IT function is within your organization. By asking the right questions, Procurement can help IT to be more proactive in anticipating and meeting the changing needs of the organization and developing a longer term vision for the technology roadmap. Consider where your IT Procurement team is on the maturity curve and take active steps to strengthen the value proposition to IT. For many, the first step is having a conversation with IT and beginning to form collaborative working relationships with key stakeholders. Simply start by engaging stakeholders with the goal of understanding their priorities to form a solid foundation for longer term IT and Procurement collaboration!

ICYMIM: October 21, 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.

Leases Lurk in Businesses, Leak Money: Why Lease Spend Isn't Managed well
JP Morris, Spend Matters, 10/21/2019
Many businesses don't have a clear picture of their lease spending. This is problematic for spending because then details like contract terms, monthly rent payments, and end-of-lease obligations go unnoticed and cause rogue spending bubbles. JP Morris demonstrates the importance of ease management and now new accounting efforts can provide valuable spending insights for companies.

How to Use Solutionmap Buying Personas
Spend Matter Team, 10/17/2019
Even with similar industries, the procurement needs of one organization will not exactly match the needs of another. Buying personas use a combination of variables to help identify the profile of a company. With this information, you can create a customized procurement strategy for each unique company. The Spend Matters Team dives into how to generate and categorize buyer personas for organizations in need of a  procurement initiative.

6 Strategies That Help You Overcome Supply Chain Disruption
Zachary Smith, Thomas Net, 10/2/2019
A supply chain disruption is defined as a major organization breakdown in the distribution or production of a product or service. Supply chain disruptions have the potential to majorly cripple a business's budget, credibility, and so on. Zachary Smith shares 6 key tips on how to avoid these destructive incidents. 

Spend analysis is the process of assessing business spend your organization with the goal of identifying savings opportunities and, ultimately, reducing expenses in the long term.

Throughout a spend analysis, your organization identifies, collects, categorizes, and analyzes every purchase it makes. This analysis provides the means to identify areas where the business can save money, negotiate better contracts, and increase efficiency. The process might uncover additional opportunities to eliminate maverick purchasing, enforce contract compliance, and shorten delivery cycles benefits during this process, such as discovering unapproved spending, improving compliance, and shortening delivery cycles.

Simply put, spend analysis involves bringing historical purchase data together in one place to build insights and answer a number of questions including:
  • Why are we making these purchases? 
  • Are our suppliers charging a fair price? 
  • Can we do better? How?
Spend management is critical for every aspect of business because once you know where your money goes, you can make better decisions about where and how it should be spent. These analyses are often the first step in broad, transformative initiatives.

Opportunity Assessment:

 A high-level portfolio spend analysis that covers all categories of spend is performed as part of an initial opportunity assessment to identify the best commodities, or spend categories, on which to focus strategic sourcing efforts. When conducting an opportunity assessment questions you might ask questions like:
  • How many vendors are being used for a specific commodity? Too many? Too few?
  • Is the organization buying from the right vendor(s)? At the right price?
Observing and comparing recurring spend with all of your suppliers over time empowers your organization to forecast and build a strategic sourcing plan for the future.

Next Steps - Developing a Sourcing Roadmap:

After the data is collected and classified, it is important to then start making decisions based on the information you have gathered. You can map these decisions out in a sourcing roadmap. A good place to start when developing a sourcing roadmap is to outline your target business outcomes. You should keep these in mind throughout each subsequent decision and initiative. Then, you’ve got to evaluate your suppliers by asking questions like:
  • Is pricing the same for each transaction?
  • Is this item or service critical for business operations?
  • Is there room for savings or discounts on these items?
Preparing yourself with organized and accurate data on your suppliers, costs, risks, and other important criteria is extremely crucial in understanding where to focus your sourcing efforts, but additional analysis of your organization’s goals, market conditions, and spending patterns can help you develop a sourcing roadmap that generates the greatest results.

For all intents and purposes, the U.S. economy is going like gangbusters. The stock market has notched several all-time records throughout 2019, spending remains robust and the unemployment rate is operating at record lows, thanks to increased recruiting activity among employers.
The combination of these factors suggests the all-important holiday season will be a successful one for retailers. However, a newly released report warns it may not turn out quite as expected, due in part to the ongoing trade war.

Slightly less than one-third of shoppers expect to spend as much or more for Christmas and Hanukkah in 2019 than they did a year ago, according to figures obtained by Retail Dive from the consulting firm AlixPartners. That's down from 35% who indicated as much around this time in 2018.

Tariffs busting budgets
The reason, according to economists, is tariffs, which have driven up the price of certain goods shipped in from overseas markets. Among individuals who confirmed their budgets likely won't be what they were 12 months ago, 20% said they would avoid buying given items if tariffs raise prices by 10% or more.

Roshan Varma, director at AlixPartners' retail practice, said that what the economy looks like on paper versus how consumers feel are two entirely separate things.
"We saw a dramatic drop-off in consumer sentiment and future outlook in this year's survey," Varma explained.

Indeed, consumer confidence, which is measured regularly by The Conference Board, has fallen in back-to-back months. In August, the index dipped only marginally from July, but in September, it plummeted to 169 from a previous reading of 176.

The Conference Board Senior Director Lynn Franco said she believes tariffs are adversely impacting Americans' sentiment.

"The escalation in trade and tariff tensions in late August appears to have rattled consumers," Franco explained. "However, this pattern of uncertainty and volatility has persisted for much of the year and it appears confidence is plateauing. While confidence could continue hovering around current levels for months to come, at some point this continued uncertainty will begin to diminish consumers' confidence in the expansion."

New round of tariffs installed in September
That point may have already arrived, as a 15% tariff was placed on various electronic goods in September, including smart speakers, headphones, televisions, drones and smartwatches, Varma noted. He went on to explain that value-added services will be a key difference maker for retailers to persuade buyers to dig deeper into their wallets and pocketbooks.
Meanwhile, other economists aren't too concerned and believe that what looks like a major obstacle will prove to be a blip.

"Consumers could be spooked by the escalating trade war, but even with consumer goods coming under tariffs in the next few months, we expect the direct impact to the consumer to remain limited," said Tim Quinlan, senior economist at Wells Fargo, Supply Chain Dive reported. "It is the indirect hit to consumer confidence that is more worrisome."
"87% of parents say their children affect their purchases."

At the same time, though, consumer fundamentals are all on solid footing, such as savings, employment, income and overall wealth, Wells Fargo analysts further explained. Spending will ultimately determine what the future holds for the holiday season and whether retailers will experience a windfall during end-of-year sales events.

Generation Z - defined as individuals born in or after 1995 - may have a role to play as well. According to a recent report from the National Retail Federation, 87% of parents say their children affect their purchases, in terms of what they buy and how much. This includes many of the same goods that are often purchased as gifts for Christmas and Hanukkah, such as toys, clothes, books and games.
NRF Vice President for Research and Industry Analysis Mark Mathews said that since Generation Z is much older nowadays, they're more actively involved in parents' buying decisions. Retailers should be mindful of this fact moving forward to derive insight on how to better optimize the supply chain.

Market Intelligence should be a procurement professional’s best friend. It ensures that they make informed decisions throughout the sourcing cycle rather than relying on estimates or hunches. With the proper insight, procurement can cut costs, create new opportunities, optimize supply chains, and more. But for your procurement team to collect worthwhile data, you’ll need an effective system in place.

In previous installments of this series on market intelligence , we’ve explained how to choose the right individuals for your team, establish the proper criteria, and use your resources. We’ll wrap up the series by giving you some best practices on asking the right questions.

You’re probably already aware that identifying internal subject matter experts is imperative during any sourcing project. These specific individuals will equip you and your team with the information you’ll need to go forth with your project. Don’t be afraid to engage with other departments or stakeholders who might have product knowledge that you’re missing.

After you determine who these individuals are, you need to ask them the right questions. The information you request should complement the unique features of that project. Your team needs to figure out what you know, what you want to know, and even what you don’t know you want to know. Here are four key questions you should always remember to ask:

1. When was the last time this product was sourced?
If you have information on how the most recent sourcing event, you can build an estimated timeline. You’ll also get a good grip on the success of the last sourcing attempt and identify which processes you may want to update or perform differently. The biggest benefit to asking this question is learning the lessons the last sourcing manager had to learn without going through it yourself. Keep note that it’s helpful to collect any supporting documentation or data from the last sourcing event so you can make inferences on your own.

2. How old is the data that you currently have about the product or service?
Putting an age to the data you’re analyzing also several advantages. For one, you can detect if prices are fluctuating and in what direction they are moving. You’ll also be able to determine your current status with that supplier. Are you still sourcing from them under the same contract? Has your company kept in touch? Have they kept in touch? This information is also important to ensure you’re not making decisions based on outdated or irrelevant data.

3. How static is the data?
The age of the data becomes more or less relevant depending on how static the data is. Different products or services come from different landscapes and the nature of that market is relevant to your sourcing process. Is this a timeless product that doesn’t see major shifts in pricing and availability? Or is this a product with inconsistent costs that are sensitive to changes in the market? 

4. What meets my requirements?
Your requirements for a product should have specific and well-informed standards. Avoid simply listing three specifications that match the product you’re already sourcing. Be able to discover the wide range of products that could fit into your supply chain so that you have an array of options and can make the best decision It’s smart to cast the widest net possible and let suppliers come to you with alternatives that you may not have considered.

You should be able to check the preceding answers off your checklist, but don’t limit yourself to just the basics. Take a larger look at your project and ask yourself if there are any considerations you didn’t address. Even if you think a colleague or stakeholder will know the answer, they might surprise you or suggest an idea on how to answer that question.  

That said, you also want to make sure you know when to stop collecting data. After all, the data collection process is an investment in time and you’ll want to monitor how much you’re getting out of it. There's no such thing as too much data, but it will lose its value after a certain point. 

Whatever the strategy may be, remember each sourcing initiative has its own set of challenges and you shouldn’t get stuck in a cookie-cutter format of market intelligence retrieval.

While many companies are trying to gain more insight into their supply chain for a litany of reasons, this may be particularly important to food producers. Not only are food producers importing more items than ever, they are also facing increased scrutiny from consumers - and others - when it comes to how they source their products.

As such, it's important that companies be able to gain additional information about the provenance of everything they put into the products that stock shelves across the country, according to Freight Waves. Moreover, food loss and waste is a massive problem, with billions of tons going to rot or coming up missing every year, which costs producers about one-third of all food produced globally.
There are numerous basic areas where food producers may be able to improve their supply chain operations, but perhaps the most important is the extent to which production can be automated, the report said. Few if any industries still rely as heavily on manual labor at just about every step of the supply chain to get products to end users. Innovation in the automation field may be particularly important to meeting all the goals companies have for streamlining operations.

Knowing not just where food comes from, but how it gets from there to stores, is vital for producers.Knowing not just where food comes from, but how it gets from there to stores, is vital for producers.
Can blockchain play a part?
"The blockchain" has become such a common buzzword in just about every industry that it's sometimes difficult to separate practical application from pie-in-the-sky thinking. However, experts agree there's plenty food producers can do to implement the technology to improve supply chains, according to a new study from the European Commissions Science EU Science Hub. When it comes to being able to get a clearer picture of how a food product gets from field to store shelves, the ability to exchange such data at every step of the way could be exactly what food producers have been looking for.

"Traceability and quality control as regards how products are grown, stored, inspected and transported - that is, from the farm to fork - could enhance accountability for all involved, including suppliers, regulators and consumers," the researchers wrote. "In a blockchain system, everyone has access to and a copy of the same updated record, so relevant parties can verify or inspect it at any time or at specific moments."

Getting it right
All this comes at a time when consumers are increasingly savvy about what they eat and drink, so companies have even more of a vested interest in keeping tabs on products throughout the supply chain, according to The Wall Street Journal. Many can now more or less give consumers GPS coordinates for where their products come from, whether that's somewhere in the middle of Africa or as close as a farm down the street. It's one thing to get a handle on food waste, but it's another entirely to appeal to conscientious consumers who want to know exactly where their food derives, both of which improve the bottom line for producers.

When trying to improve supply chains, food and beverage producers likely have plenty of options to do so, and examining as many avenues for such success as possible is critical to ensuring ongoing business success.

Trade tensions with China may dominate the headlines, but that's not the only region presenting new challenges for American supply chain managers. The Office of the United States Trade Representative (USTR) announced earlier this month that - effective October 18th -  the U.S. will levy $7.5 billion in tariffs on goods from the European Union (EU).

This news came as a direct result of the largest reward in the World Trade Organization (WTO)'s history. Bringing a years-long dispute to a close, the WTO ruled that the EU had effectively subsidized Airbus by providing favorable interest rates. These actions, the organization asserts, have harmed U.S. interests and warrant a response in the form of retaliatory tariffs. While the WTO has authorized tariffs of up to 100%, they will begin at 10% on large civil aircraft and 25% on agricultural and other products. The bulk of these new tariffs will affect goods from Spain, Germany, France, and the United Kingdom. They'll also have an outsize impact on the price of one particular Italian commodity - cheese. Rabobank reports that 55% of all EU cheese imports (73,000 metric tons) are vulnerable including nearly 60% of cheeses from Italy (20,000 metric tons). This makes the nation behind Provolone, Mozzarella, and Taleggio a prominent combatant in the ongoing trade war. 

Things are going from bad to worse for specialty grocers and their networks of distributors and importers. Many are already scrambling to mitigate the impact of the 15% tariffs the U.S. imposed in July. Cheese industry leaders expect to pay more, charge more, and ultimately see jobs disappear. Their business - which brings in $1.5 billion worth of imports annually - could shrink by as much as 30%.

Will Stockpiling Help?

Stockpiling has become a popular strategy for organizations facing down Brexit. With trade relations between the U.S. and EU curdling throughout the summer and fall, American organizations have widely borrowed the practice. According to Reuters, "Importers began ordering millions of dollars of extra wheels of Parmigiano Reggiano and other hard cheeses" back in July. One importer in particular, Ambriola CEO Phil Marfuggi, has ordered an additional $15 million worth of product. He expects to store it for over a year to ensure supplies and pricing remain stable. Reuters notes that he and his competitors can't do the same for soft cheeses. "If you're a Gorgonzola lover," he quips, "you're definitely out of luck."

Supply Chain Dive surveyed a number of Procurement professionals to examine some of the other risks and drawbacks of stockpiling. These include the need to divert funds as well as the various costs associated with storing products for extended periods. For perishable products like cheese, stockpiling also presents food safety challenges. These are pervasive enough for Errol Schweitzer CEO of Farmer Direct Organic, to dismiss stockpiling outright. "Customers," he remarks, "tend to like fresh product, so forward buying has limited benefits." He advises organizations to avoid potential recalls and communicate more directly with their customers, "letting [them] know that prices will increase and why."

The strategy favors large, powerful organizations that might partner with distributors to secure additional sourcing space. Small grocers, however, will find it difficult to acquire products or places to keep them. Some are hoping they'll find new opportunities to sell domestic alternatives, but others are skeptical that they can fully recoup their losses. Speaking to the Philadelphia Inquirer, cheese shop owner Jack Morgan expresses this sentiment. He says, "I don't see my domestic sales going up that much that it would make up for the sales I'll start to lose. You slap a 25 percent hike on something, and people are going to notice."

While far from ideal, organizations sometimes find themselves dealing with categories of unregulated spend yet simply do not have the resources to run a full sourcing event.  If you find yourself in this situation but are assigned a tight deadline to generate savings, the opportunity to gain a “quick win” is still possible via aggressive contracting.

The first step in this process would be to identify the top spend suppliers you wish to begin direct negotiations with that are related to this category.  The most effective approach to identify these suppliers would be via internal GL data reports exported and properly sorted to identify suppliers your organization conducts the most sales volume with.  Once the top spend providers are identified, begin reaching out to these sources and explain your interest in entering into an exclusive contract with one sole supplier.  From this point forward, you now have leverage to begin the negotiation phase of potential terms and conditions of a future contract with the supplier that provides the best deal for your organization.

Below is a list of potential contractual terms and conditions that can help generate immediate savings for your organization:

Signing Bonus 
If you envision this supplier being a required provider for as long as your company is in business, the agreement of a long-term non-compete deal in exchange for an upfront signing bonus may be obtainable.  Be forewarned however, many supplier often times attempt to recover their losses from a signing bonuses via inflated unit costs.  To help avoid this, I strongly suggest implementing customer specific pricing which leads us to our next point.

Exhibits Section for Customer Specific Pricing
Customer Specific Pricing, which is also abbreviated as CSP is a quick and effective way to have discounted pricing applied to your top spend items.  A quick analysis of top spend items utilized by your organization through supplier usage reports will help identify which items are purchased the most on an annual basis.  Working with the supplier to quote and apply specialty pricing as an exhibit at the end of the contract will generate immediate and noticeable savings as a result of the consistent high usage historically identified with these items.

Rebates can be delivered and negotiated in a variety of ways.  For instance, you may be able to negotiate a percentage rebate on total annual sales once a certain threshold of spend is achieved.  You may also be able to apply incentivized rebates associated with parameters that make doing business with the supplier easier and less labor intensive on their end.  For instance, an incentivized rebate can be negotiated if your organization agrees to place orders on the supplier’s website instead of manual PO submissions.

Value Adds
Value adds qualify as an area where the supplier can provide additional services that historically have a fee associated to them that are now free of charge or negotiated at a discounted rate.  For instance, free shipping would qualify as a strong value add in any contract.  Other services such as free on-site repair and service are other points that could help negate costs that your organization had historically paid for.

Category Discounts
Often times suppliers offer products that fall within numerous subcategories.  For instance, a general industrial supplier offers a wide array of products that fall within subcategories ranging from safety equipment to hardware, abrasives, and electrical components.  Negotiating a percentage discount to each of these subcategories will generate savings across the board as these discounts would be applied to the standard catalog price your organization has historically paid.

In a perfect world, a full sourcing event can achieve significantly more savings.  However, if you’re in need of a quick win the terms and conditions noted above can still help put your organization in a better position that it previously was.

Many who don't deal directly with business supply chains may be shocked to find how much companies still require ground shipments, specifically by truck. However, those within those sectors understand just how vital this type of freight shipment can be to their operations, and should always strive to maximize efficiency.

In fact, even those that rely on tractor trailers for some or all of their shipping may not realize how inefficient it can be; many truckers know that "empty miles" are an all-too-prevalent part of their job, according to Convoy. With that in mind, more is being done to reduce these stretches in which truckers have nothing in the back of their tractor trailers, and Convoy's Automated Reloads program has become a critical part of that, and comes with the added benefit of reducing carbon emissions for total empty-mile freight shipping by about 45%.

Empty miles have a major impact on supply chain inefficiency and pollution.Empty miles have a major impact on supply chain inefficiency and pollution.
While it's not likely to happen any time soon, if similar reductions were to take place across the entire U.S. trucking sector, it would be the equivalent of taking the entire number of vehicles registered in Florida off the road, the report said. Such an effort would save some 78.3 million barrels of oil annually. And that's in addition to greater efforts across the industry to improve routes and schedules to further reduce unnecessary miles.

How big of a deal is it?
Empty miles have long been accepted as simply a fact of doing business. Today, data suggests as much as 20% of drivers' total miles are empty, according to separate data from Convoy. That's not such a big improvement from the 20-30% seen in the mid-1970s, when data on this kind of driving was first sought out. By the 1990s and early 2000s, that share slipped to 15-18%.

In fact, some companies are likely underreporting their empty miles as a number of those in such surveys say they have little to no empty miles at all, the report said. If those businesses are instead judged to deal with roughly industry-average rates of empty miles among those that reported any at all, the industry total may be closer to 1 in 3.

A big contributor
Shipping is still one of the biggest contributors to carbon emissions in the world today, according to The Guardian. Among the 20 companies most responsible for such pollution globally (all of which are energy companies), 90% of the emissions they create come as part of fuel use - such as what's used in the supply chain - rather than extracting, refining and delivering fuel products.

Consequently, businesses that rely on relatively localized or fully global supply chains face similar questions about issues that not only impact their bottom lines, but the entire planet. The more that can be done to improve efficiency will do more than just be important financially, but also when it comes to reducing emissions on an ongoing basis.

ICYMIM: October 14, 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.

Software Surplus! Over-Subscription Could be Costing Your Company Millions
Bradley Killinger, Future of Sourcing, 10/8/2019
Not keeping a close eye on software subscriptions could be killing your company's budgets. Once subscriptions are purchased, they are hardly ever monitored and there isn't generally a system in place to track how useful that software is.  Bradley Killinger warns procurement professionals of the dangers of over-buying software subscriptions.

Aspects of a Tax-Efficient Supply Chain
Michael Lamoureux, Sourcing Innovation, 10/8/2019
A tax-friendly procurement plan can deliver numerous financial benefits. The tax savings opportunities your strategy could produce could optimize every level of spending in your supply chain. Michael Lamoureux demonstrates what a tax-efficient supply chain should look like and why it's worth taking the extra steps. 

Customer-centric Focus Can Help Digital Procurement Departments Stay Relevant and Unlock Upside
JP Morris, Spend Matters, 10/8/2019
Modern procurement strategies offer endless benefits, but often the digitization of the field leads to a blurry view of procurement's true impact. How can leaders of a company recognize procurement's effect past cost-saving figures? JP Morris explains how a customer-focused tactic will bring procurement's true power to light. 

In Procurement, the talent gap is really more like a gulf. The function's leaders aren't confident that their teams have the skills necessary to deliver on their goals and objectives - let alone carry businesses into a new, tech-powered era. More than half of the executives surveyed for Deloitte's last Global CPO Survey reported these concerns. That's an improvement over last year, but it still suggests Procurement's talent gap has gotten wider as the function has evolved throughout the decade.

As both soft skills and digital savvy grow more important, Procurement's talent gap could grow even wider over the next several years. Still, most organizations aren't investing in their teams. 72% of organizations spend less than 2% of their budgets on training and development programs.

Closing the talent gap doesn't have to mean breaking the bank. What it will require, however, is a new, more strategic approach and a new understanding of what Procurement excellence can mean. Here are just a few of the ways your organization can begin to better nurture the right skills and build a more effective Procurement team.

Introduce a Mentorship Program 

The Society for Human Resource Management suggests that mentorship programs can reduce turnover, boost recruitment efforts, and provide for a more productive workplace culture. These programs are also one of the easiest ways to ensure your team members can exchange insights. Whether you're looking to get new hires up to speed or provide long-time employees with a crash course in new technology, a mentorship program can transform your business. 

Strengthen Procurement's Brand

Young professionals are eager to make an impact by working on dynamic, innovative teams. At a glance, Procurement doesn't usually fit the bill. More often, it strikes applicants and emerging professionals as a tactical business unit that's set in its antiquated ways. Organizations can change this by defining a clear, compelling mission for Procurement and communicating it throughout the recruiting and hiring processes. 

Encourage Cross-Functional Collaboration

Today's Procurement teams require a far more diverse set of skills than in generations pass. The best aren't just well-versed in Procurement best practices, but understand the ins and outs of every unit within the organization. There's no better way to build these skills than by encouraging Procurement to step outside of its comfort zone and work closely with its peers in Marketing, IT, and other functions.

Discuss the Talent Gap with Procurement Leaders

ISM-Chicago's Emerging Leaders Committee is hosting Bridging the Talent Gap, a panel discussion featuring several Supply Chain staffing and recruiting experts. They hope to provide the next generation of professionals with the insights they need to refine their skills and elevate the Procurement function. Register today.

Part I of our series on Category Management (CM) defined CM and described how its application in procurement differs from its application in retail. Parts II and III of the series delve into what type of players you’ll need on your CM team and how to get a CM program off the ground. CM is a detailed process that requires a special mix of people and resources to perform correctly. It takes hard work, time, and consistency. So why use CM?

The answer is complex. CM strategies can deliver to a wealth of benefits to your business. Here’s a list of just a few:

Better Spend Visibility

Probably the most immediate and obvious benefit to a CM initiative is a heightened sense of spend visibility. When you take a close look at every cent of spend within a category, there's far less chance you'll overlooking a hidden costs or accept an unnecessary fee from a supplier. You can get a better understanding of how much it actually costs to source your essential products and materials. Better insight into spending will continuously deliver results to your supply chain and provide for better decision making.

Increased Vendor Visibility

In learning more about each spend category, a company is bound to learn more about its supply base. Companies can use their CM program as an opportunity to gain an in-depth understanding of each vendor. With greater vendor visibility, you can assess the operational risk of each supplier more efficiently and negotiate contracts from a more strategic position. Learning more about what each supplier has to offer also generates more opportunities for consolidation. If a category manager can offer a single supplier a larger scope of work, they save time and identify new opportunities for value generation.

Stronger Supplier Relationships

Introducing a CM system will push your team to have more contact with vendors. Category managers will need to establish consistent and effective communications to ensure relationships remain mutually beneficial in the long term. A good supplier will want you to have as much visibility into the material as they do. Additionally, suppliers will feel better about partnering with organizations that have taken a genuine interest in their processes and put in the effort to build a relationship.

Heightened Client Satisfaction

With better awareness of the market, your company will be able to better gauge which areas it excels in and which ones could use more attention. Are customers satisfied? Is there an area untouched that your company can better address? When you fully grasp the ins and outs of sourcing within a category, you’ll have a better sense of how you can make your products and services better. 

Implementing a category management initiative isn’t easy, but the benefits far outweigh the costs. You’ll find a CM program can help clear the fog on your entire supply chain.

It’s never a bad option to utilize a third-party to help you along with the category management process. Bringing in expert category managers could help to see your spending from an outside perspective and identify spending patterns you wouldn’t otherwise recognize. For more best practices on category management, check out the previous installments in this series.
Digital Procurement solutions have eliminated much of the function's tactical workload and provided a new level of clarity and connectivity throughout the sourcing cycle. Technology is not, however, a magic bullet. Professionals and organizations that are already prone to rushing through the sourcing process and neglecting their due diligence may find that a digital platform only exacerbates the issue. 

Does your organization leverage a digital platform during the sourcing process? Take care to avoid these four potentially costly mistakes. 

Historically, Procurement's peers have viewed the function's role through a narrow lens. They see it as a cost cutter - and little more. The function, conventional wisdom suggests, is there to save the company money and otherwise keep its mouth shut and keep its hands out of other business areas. In many instances, Procurement is happy to pigeonhole itself by playing this role.

In reality, Procurement is capable of much more than merely saving dollars and cents. It has proven time and time again that it can find new opportunities, improve products or services, and even strengthen stakeholder relationships. More importantly, Procurement has the capacity to make a difference in the world.

Global issues such as environmental conservation have become more and more time-sensitive - we can't afford to put them on the backburner. Businesses must devise an approach that allows them to focus on social responsibility and environmental sustainability in addition to profits. You don’t have to wait to hit a cost-reduction number to start driving change. Procurement has a unique position where it can reach out and impact every corner of an organization and its supply chain. It's time for Procurement to use this unique position to its advantage.

With a single-minded, limited approach to procurement, you might be able to save a couple of bucks here and there, but you won’t transform the nature of the company. The company won’t reach its highest level of potential unless it’s able to look at the big picture and empower Procurement. Yes, your department wants to cut costs, but who says you can’t have your cake and eat it too? You can promote change for the greater good within your supply chain and still save money down the road.  

Diego de La Garza makes this case in a new blog for Procurious. He states, “ This macro-level approach to cost-saving lets you support the needs, beliefs or even the employees of your company to help bring about changes that will have an impact”. Realizing this means fearlessly driving positive initiatives, investing in socially conscious projects, and continually emphasizing Procurement's central role.

Check out the full blog to learn more about Procurement can provide for a better, healthier business and a better, healthier planet. 

Every day approximately eight million pieces of discarded plastic find their way into the world's oceans. There, they kill around 100,000 marine mammals and a million sea birds each year. Packaging  plastic bottles and takeout containers, for example  plays an outsize role in this escalating crisis. The category accounts for 36% of all plastic production and nearly half of all plastic waste.

Fittingly, packaging is at the heart of Unilever's ambitious new pledge to ensure "that plastic stays in the economy and out of the environment."

The British CPG giant, which owns brands including Dove and Vaseline, has pledged to halve its virgin plastic use (currently 700,000 tons a year) by 2025. "We can only eliminate plastic waste," said CEO Alan Jope, "by acting fast and taking radical action at all points of the plastic cycle." Unilever's radical action, "a fundamental rethink in [its] approach to [its] packaging and products," will include ramping up plastic collection efforts, identifying new materials, and exploring business models that discourage single-use plastic. 

Virgin Plastic? 

Virgin plastic is any plastic resin that doesn't come from a recycled source. It's instead derived from sources like natural gas and crude oil. 99% of plastic comes to life this way. Most of it still ends its life in a landfill within a year of production. 

These facts have made plastic production increasingly controversial among environmentally-conscious activists and consumers. Virgin plastic production not only requires more energy and generates more waste than recycling, but provides support to much-despised Oil & Gas industry. In a recent report, Greenpeace goes so far as to call endless demand for virgin plastic "a lifeline" for the sector's high-polluting organizations. 

Another reason for virgin plastic's ubiquity is the relative weakness of recycled materials. When plastic packaging gets recycled, it invariably loses some strength and durability. As a result, most so-called "recycled" products include a blend of recycled and virgin plastics. That's why especially conscientious consumers keep their eyes out for labels that read, "Made from 100% Recycled Materials." 

Unilever's Pledge

While it's made perhaps the most ambitious commitments, Unilever is not the first brand to address plastic waste in its supply chain. Keurig Dr Pepper plans to produce 100% recyclable K-cups by year's end and PepsiCo intends to reduce its own virgin plastic use by 35% before 2025. Activists are skeptical, however, that these organizations can deliver on their objectives. Groups including Greenpeace suggest that even the most sweeping and well-meaning of initiatives won't fully address the issues of over-production, over-consumption, and pollution.

Graham Forbes, global project leader for Greenpeace USA, responded to Unilever in an official statement. While acknowledging the "step in the right direction," he contends, "Unilever's continued emphasis on collection, alternative materials, and recycled content will not result in the systemic shift required to solve the growing plastic pollution problem." He goes on to ask that Unilever make greater efforts to fully eliminate single-use packaging from its supply chain and provide specific insights into its investments, actions, and progress.

Nestle and Procter & Gamble, two of Unilever's peers in the consumer goods space, recently announced that they would fail to meet the ambitious sustainability goals they outlined at the start of the decade. We'll have to wait and see if Unilever will succeed or  like those competitors  find itself wishing it hadn't made quite so many promises. 

For all intents and purposes, this past year has been a smashing success for the manufacturing sector. Employers have added jobs, orders are up and production solid when compared to recent history. However, due in part to the brewing trade war that shows no sign of slowing down, September will not go into the "W" column for the industry, based on newly released figures.
The Purchasing Managers Index fell to 47.8% in September, a low last witnessed in 2009."

According to the Institute for Supply Management's Purchasing Managers Index, domestic manufacturing took a step back in the 30 days that spanned September, falling to 47.8, down from 49.1 in August. Not only was this the lowest reading of 2019, but a nadir last witnessed in 2009 during the height of the Great Recession.

Tariffs taking a toll
Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, chalked up the contraction to uncertainty caused by the tit-for-tat tariffs lobbed between the world's largest economies in the U.S. and China.

"Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019," Fiore explained in a press release. "Overall, sentiment this month remains cautious regarding near-term growth."

Several anonymous sources who participated in the ISM survey acknowledged the impact the trade war has had on their supply chain."Chinese tariffs going up are hurting our business," noted an entrepreneur in the food and beverage industry. " Most of the materials are not made in the U.S. and made only in China."

Knowing from where foods and packaged goods derive is a major issue both for customers as well as the professionals who sell them. Health-conscious customers enjoy the ability to buy local so they know the foods they eat are fresh and sustain the economy. Tariffs, of course, also adversely affect business owners by raising production costs and, in some cases, weakening demand.

"Business has been flat for us," conceded an employer in the manufacturing space, as reported by ISM. "Year-over-year growth has slowed dramatically."

Three subsectors log growth
Although it wasn't a September to remember for most manufacturers, it was an encouraging one for a few. Of the 18 manufacturing-related subsectors measured by ISM, three reported growth. They included miscellaneous manufacturing, chemical products as well as food, beverage and tobacco products. Contraction was the story for the remainder, led by apparel, leather and allied products; printing and related support activities; wood products and electrical equipment, appliances and components.

Although no immediate end appears in sight in the trade dispute, National Association of Manufacturers President and CEO Jay Timmons is hopeful a successful resolution can be reached sooner than later - for the betterment of all involved.

"If the U.S. economy slows, the world economy will follow quickly, and China's people will suffer mightily as well," Timmons warned. "China should be willing to conclude an enforceable, bilateral trade agreement that ends the uncertainty and levels the playing field for all manufacturers."