March 2020

COVID-19 has consumed all our lives for the last few weeks – there is no getting around it whether you are directly impacted or indirectly there are a whirlwind of things being done to save lives across the United States. The approaches taken from a government perspective have been haphazard at best. While this post is in no way meant to cast any sort of political viewpoint I want to look at the approach our government has taken to procure vital equipment – ventilators, Personal Protective Equipment (surgical masks, N95 respirators, gowns, gloves and shields), swabs, test kits and other vital medical equipment like hospital beds. We have chosen to take a decentralized approach to obtaining these supplies on a state level with the federal government out in the marketplace as well. You have heard governors frustrated that they are competing against other states and the federal government for these precious supplies driving the price up. The formula is simple: increased demand = increased price. Is a decentralized approach a best practice to procure the largest quantity at the best price? Procurement best practices often rely on consolidation and other methods to leverage larger volume leading to unit price decreases or service cost decreases.

This leads me to an important question: can the government learn a thing or two from procurement professionals and practices? The short answer is yes. Purchasing at a national level would make the United States more competitive on a global level leading to higher volume of fulfilled orders and a more competitive overall price. This would ensure that the leveraged buying power of the entire United States is effectively used to get us what we need, when we need it and for a more reasonable price. In this time of need cost is not necessarily the objective however speed, volume and efficiency are. These aspects can help save lives and make a difference in the community. Robust supply chains and best practices in procurement could be of great assistance in this arena. This extremely difficult situation truly highlights the necessity of a robust supply chain coupled with procurement methodologies to deliver much needed supplies in a crisis.

When all the dust settles and we are through the thick of this, people in power will have to seriously evaluate governmental procurement practices and try to mimic some of the best practices companies across the globe implement. If we were to ever face a pandemic crisis in the future our supply chains and procurement policies must be able to meet the influx of demand in the marketplace while rationalizing cost and efficiency. This will most definitely save lives, keep our healthcare workers safe and result in better outcomes for society. While we should be laser focused on the health crisis and the science behind savings lives in the current day, going forward it is important that we have a holistic approach that ensures effective procurement practices. You hear the word “procure” come out of politician’s mouths exponentially more these days, let’s make sure that they learn from this crisis that effective procurement is vital to an effective response in a pandemic.

The current COVID-19 pandemic we are all experiencing right now has put some hefty financial burden on many businesses. Companies are therefore looking at or have already taken extreme measures to minimize financial loss, ensure ongoing profitability, and at least guarantee job security. However, some companies are being overly reactive without any strategic direction or planning to continue to procure critical business needs while maintaining the resources necessary to preserve operations. Every day I hear about pay cuts, layoffs, or employee furloughs along with service disconnections and supplier contract terminations.

Coming from a procurement perspective, I suggest taking a more proactive and thought-out position that produces the same objective, considers EVERYONE, and will not negatively affect your business or your employee’s well-being. Therefore, I have identified a few recommendations regarding your telecommunications and IT services and supplier partnerships that could be deployed holistically throughout the business and will result in lowered expenses and the ability to “keep the lights on”.

Most companies have elected or have been mandated to implement work from home policies. That means ensuring employees have the tools and communication resources available at home to be productive and that the business has the bandwidth allowing users to be connected. In return, this should limit the need for specific services at your physical place of business such as basic phone, internet, or cable TV. However, in the expectation we will resume “business as usual” in the near future, you would not want to disconnect the service completely or terminate your supplier relationships. So where does that leave you

Talk to your suppliers. Everyone is going through some type of shift in business models and ability to maintain profitability not to mention stay afloat. Telco companies are more than willing to work with you and offer options to address your concerns without the need to turn down service completely.

  • Interim discounts or price concessions: One-time credits, recurring discounts, or price concessions will help you lower monthly costs while allowing suppliers continued revenue.
  • Temporary suspensions: Suspension without billing, for a period of time, negates the need to disconnect now and activate later where new activation charges or delay in activation may occur.
  • Implement provisional services: As bandwidth requirements will surely fluctuate take advantage of flex services that allow you to turn-up and turn-down on the fly where billing is measured based on actual need versus fixed at potentially a higher recurring cost.
  • Loaner/refurbished products: Instead of purchasing new hardware to accommodate all WFH employees, ask about renting devices versus big dollar purchases even if short-term contracts are needed or look at buying low-cost refurbished hardware that will get the job done.
All of the above considerations can be leveraged within most areas of the business and can not only address immediate issues but help build stronger supplier relationships and prepare you for the future. For example, when revisiting contracts, consider adding in flexibility and clauses that may address these types of situations in the future; hopefully nothing this extreme but along the lines of temporary business impacting events. Regarding the flex service approach, although it might not be viable now based on potential long-term install timelines, it might become feasible during your next contract renewal or service upgrade.

I leave you with this thought; we are all suffering to some degree right now so work collaboratively and be mindful of how your decisions may impact your business, your employees, and your customers.

Now a days there are many activities that we just assume as natural or part of our routine; getting dressed, making a call, taking a vacation, writing on a computer, and getting food at a supermarket are just a few examples of these mundane activities that we take for granted; but have you ever tried pulling yourself away of these normalized behaviors and really wonder why we do them or how they came to be?
Most times we do things because everyone does them or because they feel completely normal, they are part of life, but if you take that step back and ask yourself why and where did they start, you will start realizing that some of these behaviors have somewhat of a prehistoric origin.
If you look at pictures of some off the grid Amazonian tribe, do you ever wonder why they paint peculiar patterns on their faces or why they would ever wear such ornaments in their bodies? The feeling of distance to that culture is huge and in that you are right, you both probably live in very different worlds, but how different are these two worlds in reality?
Today, all cultures use different types of makeup, hats, necklaces, bracelets and other jewelry; so what is the difference? None, the reason is that as cultures become mundane we tend to normalize what we perceive as ours and don’t react to it as we would if we were exposed to it for the first time, but how do you think the Amazonian tribe’s folk would see our use of ties and polished shoes?
As we continue to normalize behaviors we lose track of their true origins and why they came to be. In particular I was interested on why we buy and sell things and why it feels so natural, enough that a whole practice, art, and science has been created around it.
To help me understand this, we have to go back a couple of million years ago when our ancestors basically lived like animals, their sole existence was based on obtaining sustenance, but unlike most animals they had an advantage, this advantage consisted on the use of tools. The use of tools gave way to division of labor, some would hunt and others would gather, this division, in unison with our own particular capabilities led to the development and enhancement of skills, skills that would be used to create more intricate tools and gadgets that would ultimately make our lives more complex, kick starting this cycle of evolution and naturally forming markets where we trade our skillset, products and ideas for others, especially those that we cannot create on our own.
These young markets were basic and based on trading goods and services of equal or similar value, which limited the purchase and sale of all goods and services. The solution was the invention of money; this was a great enabler because it became a medium that allowed any good or service to be broken down into smaller units, allowing the exchange of goods and services of different values.
In today’s highly complex markets, the basic idea holds, for the most part we produce and sell goods and services to be able to acquire others, just like our ancestors did. We are so used to buying and selling that we no longer bother much on understanding why some good or service costs a certain amount; for most purchases in our life, excluding a few situation such as a house or a car, we just trust the price tag and pay. I believe we do this because we don’t have leverage, don’t dare to negotiate, or because of social stigmas associated to negotiating.
In other cultures, negotiation is part of their daily bread, you are able to negotiate for your food, your clothing and everything else, which for most of us is unthinkable.
Thankfully, in the business world things have been taken on a different direction, more and more businesses are walking away from this normalized behavior of buying things at face value and have taken steps to study these goods and services, learn how they are comprised, understand their trends, calculate the effort required for it, and how much it should really cost so that they only trade the exact amount of money that we think that particular good or service is worth.
This level of expertise has led us into being more conscious, especially as markets become more competitive and we are obligated to optimize our resources. Changing the way we look at things might help us understand better what it is we are acquiring and sprout fresh ideas of how to get them. Alternatively, if you don’t feel you have the time and energy, firms like Source One can help you make these decisions using real world data and subject matter expertize to accomplish your savings goals.
It is important to break from this purchasing and selling normalization state we are in, we could all benefit, materially and intellectually from the exercise. The break from normalization is applicable to all sort of exchanges, not just business to business, but also between people to people, business to people or vice versa.
Next time you are looking to buy something try to pull yourself away from the automatic notion that it is fairly price, take a second to look at what gives that product its value, break it down and provide the seller your rationale why it is not fairly priced, you might just save money; if not, at least you learned something about the product, the way it is priced, and even reach the realization that you really don’t need it.

Today, we will dive deeper into the levels of emotional intelligence important to the procurement sector and take a closer look into the benefits of mastering soft skills within this area.

Emotional Intelligence (EI) refers to a person’s ability to recognize, understand, and manage emotions throughout their day-to-day activities. According to Daniel Goleman, there are five key elements of emotional intelligence: Self-Awareness, Self-Regulation, Motivation, Empathy, and Social Skills. Many believe emotional intelligence skills are directly linked to our overall success within the Procurement industry. Investing in your emotional intelligence improves the ability to effectively approach client relationships, manage negotiations, and lead strategic initiatives.

To perform effectively as a procurement professional, communication is key to Supplier Relationship Management. The growth of EI within employees or leaders allow staff to collaborate, innovate, and cope with change throughout an engagement. An effective client relationship is developed through an ability to understand client satisfactory needs and strategically achieve their needs through a collaborative effort. Often, professionals have the tendency to suppress or dismiss feelings primarily when uncomfortable circumstances arise, such as a staff vs. client disagreement relating to a strategic approach. If we’re self-aware of our emotion (e.g. frustration), regulate the urgency to act impulsively, and use this as a motivation factor, this breaks associated road blocks and allows for creativity to become the driver.

In addition, the procurement industry has valued negotiation skills and the ability to drive a bargain as a key skill-set for successful procurement professionals. The pressure to innovate products and services during complex negotiations can invoke emotions of stress during high-stake conversations. This demonstrates how EI is an important concept and should be recognized as a key player during these valued strategic sourcing exchanges. The procurement professional who has the ability to utilize EI is able to identify the source of the stakeholder’s internal resistance and create a dynamic approach without letting their emotions hijack things in an unproductive way.

Adaptable leaders understand the personalized wiring, key differences, and motives of others during collaborative efforts. They often embrace differences, observe reactions, and connect with stakeholder pain points in a nonjudgmental and empathetic way.

Procurement as a function requires stakeholder relationships, sourcing initiatives, and inherently has conflict built directly within engagements. Customers view us as a trusted partner, adviser, and mentor during these collaborative efforts. Maintaining client relationships, influencing stakeholders, and leading initiatives are key aspects of the procurement industry. Mastering our EI can improve how we engage, manage, and lead our partnerships in a productive, cost-effective practice.

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When you work in the supply chain, your ability to stay nimble and react to changes requires a top-down organizational approach. Often, a big part of such strategies will require you to rethink your internal processes when it comes to how your employees complete their tasks every day and how efficiently you can run all various aspects of your operations. That kind of versatility and flexibility will serve you well as you try to grow.

With that in mind, it's a good idea to strive to improve all aspects of your business from time to time, including the following steps:

1) Reconsider your inventory storage

If you're not properly storing your inventory - with the most popular items on the shelving closest to the packing area, and typically at or around eye level - you may be losing precious seconds on every order, according to Dear Systems. An extra 30 or 45 seconds spent picking items for a given order may not be a big deal, but if it's consistently happening, that's a lot of lost productivity.

Take a bird's-eye view of your organization to improve it.Take a bird's-eye view of your organization to improve it.

2) Label everything

You never want to leave anything to chance when it comes to picking and packing; a single incorrect order can create major logistical headaches, Dear Systems added. With that in mind, it's important to make sure everything is properly labeled (and stored where it's supposed to be) so that even the newest picker on your team knows exactly what they're grabbing.

3) Maximize storage space

It's also a good idea to make sure you're getting the most out of the cubic footage of shelving space you have in your facility, according to Kardex Remstar. Just like every extra few seconds on one picking job, a few wasted cubic inches here and there may not seem like much, but if it's a persistent problem, you might end up running short on space sooner than you expect.

4) Clean regularly

A clean workplace is great for a lot of reasons, both aesthetically and as it relates to keeping workers motivated, Kardex Remstar noted. Moreover, it's also important for employee safety, so you never have to worry about people slipping and tripping, and potentially injuring themselves. After all, when a workplace injury occurs, you may have to shut down entire sections of your warehouse for an hour or more.

5) Train your staffers

Like most businesses, you likely train newly hired workers but may not provide much additional training or guidance beyond that, Kardex Remstar further advised. If that's the case, you may be missing a lot more opportunity than you realize.

6) Consistently assess the state of your equipment

Just like you should consistently make sure your employees are operating at their best, you should do the same for the equipment they use, according to Emerge. A regularly testing and repair strategy will help you stay on top of any emergent issues and address them before they become a problem.

7) Review how everything is working

Finally, it's always smart to ensure you are consistently reviewing all appropriate data and finding areas of improvement, Emerge said. That way, you are never resting on your laurels, organizationally speaking, and help promote ongoing growth and success.

If your organization is concerned about the uncertainty of the economy ahead, an excellent way to protect your bottom line can be through the utilization of GPO programs or consortiums.  This article will help explain the savings benefits of a GPO program and whether or not this solution is a viable option for your organization.

A GPO is an acronym within the strategic sourcing community that stands for “Group Purchasing Organization.”  GPOs carry many benefits associated with them, and this article will help you identify if participating in a GPO program is suitable for your organization.

Is a GPO Right for Your Organization?

GPOs are built upon one simple core philosophy – businesses that buy similar products are able to combine their purchasing power to help establish improved savings via category discounts and unit cost reductions.  For instance, six small market businesses purchasing industrial supplies can establish immediate savings through the utilization of a GPO program connected with a national supplier such a Grainger.

If you are an organization that lacks centralized supplier purchasing within similar categories, has uncontrolled rogue spend across business units, or if you’re an organization that simply wants to understand and consolidate purchasing habits while establishing strong savings then a GPO program could be for you.

Lack of Negotiating Power

As noted above, many businesses that have low or unknown annual sales volumes over the course of a year simply don’t have the leverage to negotiate a strong contract that can provide competitive pricing and discounts.  When coming to the negotiating table with national suppliers your greatest strength is power in numbers, or in this instance annual sales volume.  In fact, many suppliers will provide very minimal unit price reductions and/or category discounts due to low spend volumes, which is where a GPO program can enter the picture and immediately eliminate this hurdle.  Corcentric’s established GPO program has the purchasing power of numerous organization rolled up within it, including strong negotiated category discounts reflective of a much higher annual spend.

Establish a Quick Win for Immediate Savings

The category discounts and unit cost reductions noted previously also help establish immediate savings for participants within a GPO program.  If your organization is concerned with the current economic uncertainties ahead, the utilization of Corcentric’s GPO program will help establish immediate savings and quick wins across multiple categories.  These savings will continue to rise as internal communication and education spreads throughout your organization which will continue to drive compliance.

Establish Greater Discounts through Data Collection & Establish CSP

As noted above, when compliance begins within your organization it will lead to the consolidation of rogue spend spread across numerous suppliers.  This consolidation will in turn give your organization the ability to review data identifying top spend items.  Once these top spend items are identified, Corcentric can help lead negotiations for unit cost reduction of these items which can lead to additional savings opportunities.

The examples in this article are just a few instances of how Corcentric’s GPO program can help your organization today.  The sky is truly the limit when it comes to utilizing a GPO for savings opportunities.    Don’t hesitate to reach out to Corcentric today to establish a quick save during tough times.

Companies everywhere have a tough choice to make: start cutting costs now… or cut down on the workforce.

No manager wants to make that call. The Procurement team, however, is in a position to help them avoid the need to let anyone go.

Procurement teams have plenty of strategies to help here – and now is certainly the time to use them. Yet many Procurement pros default to the typical three-bids-and-a-buy strategy. Why rely so heavily on this single technique when we have others at hand? More importantly, why rely on it when so many situations aren't responsive to this approach?

Over the next few days, I am going to examine how supplier relationship management can inform alternative strategies. To do this, I’ll use the time tested Kraljic Matrix as a foundation.

The Kraljic Matrix

So, what the Kraljic matrix and how does it work? Peter Kraljic proposed this matrix as a way of updating supplier negotiations in the early 1980’s. Procurement teams at the time were approaching supplier relationships in a static manner. Essentially, the three-bids-and-a-buy process and checking a few standard negotiations boxes. It worked back then because organizations benefited from relatively stable economic conditions. Kraljic acknowledged in a Harvard Business Review article that such stability was eroding, and gave this warning:
“Now, however, no company can allow purchasing to lag behind other departments in acknowledging and adjusting to worldwide environmental and economic changes. Such an attitude is not only obsolete but also costly.”
Thirty years later, this warning still applies to current world challenges.

To start the process, Kraljic defined two primary dimensions to describe suppliers:

  • Complexity of the Supply Market (Supply Risk) – What does the market landscape look like in terms of product scarcity? Is the market owned by a few (or one) key players or are there low barriers to entry? Are there inherent supply chain risks? Are substitute products or services available?
  • Importance of Purchasing (Profit Impact) – How important is a product or service in terms of value added to an organization’s product? What percentage of that product’s total cost can be attributed to this purchase?

These dimensions separate suppliers in a way that also points to key supplier relationship insights.

We will begin in the“Non-Critical” quadrant.

Non-Critical Supplier Relationships

Purchases in this quadrant share several commonalities:

  • They are largely commoditized: Offerings (and price points) are undifferentiated among competitors.
  • The supply is abundant, with plenty of suppliers able to fill needs.
  • Supplier relationships are short-term, ranging from a single transaction to a year.
  • Purchases are relatively low cost and high volume. 

Many Procurement teams ignore this quadrant. If we need to cut significant costs quickly, this isn't the place: there isn’t enough spend here to move the needle even if we cut costs in half or more. At least when we use a three-bids-and-a-buy mentality.

The flaw in this logic comes down to thinking in terms of price versus cost.

Cost Cutting Strategies for Non-Critical Relationships

Organizations likely spend substantially more money managing the purchasing process than the cost of the products, themselves, in this quadrant. Procurement will therefore cut costs by spending as little time in it as possible.

Consider the source-to-pay process. A requisition must be created and routed for approval. Once approved, a PO is created and, again, routed for approval. Once we confirm goods are received or services rendered, an invoice is received and processed, and payments must be made with a new round of approvals. All for, say, a small office supplies order… a few boxes of pens, some staples, maybe a ream or two of paper.

Think of all the time spent managing this process and the number of individuals involved. Reducing these FTE costs is where we want to focus our energy.

Product Standardization

First, Procurement should seek to minimize the great breadth of purchases in this quadrant. Look for organizational needs that are similar enough in nature that they can be described by a single, unified specification. How many products, across how many suppliers, fit this spec?

Consolidating across products and suppliers offers a few key benefits:

  • More vendors means higher incremental costs to maintain them. If there are fewer supplier relationships to manage, and fewer monthly orders to oversee, we spend less time and money on operational activities.
  • End users won’t need to spend time training or getting used to multiple products – they can focus on a single one. Stock management also becomes easier, requiring less time and bringing increased focus to avoid wastage and depleted stocks.
  • Some hard dollar savings may be instantly realized. Where discount or rebate tiers exist, consolidating spend to a single supplier may bump up to the next tier for automatic savings. This may not be much – but it also requires no effort.

Process Automation

Automating parts of a process removes the need for Procurement’s intervention. Organizations have their choice among multiple eProcurement platforms with sophisticated features and tools. For organizations new to automation, there will be time, money, and energy spent in getting these systems up and running. That said, the benefits are huge once this is done:

  • Punchout catalogs allow stakeholders access to purchasing without the need for Procurement to manually escort them through the process. At the same time, Procurement can be assured that stakeholders are buying from pre-approved products.
  • Approval workflows can be automated, in whole or in part (automatic form population and dissemination for human review).  This cuts away a large degree of administrative activity.
  • Reporting needs can be automated as well. Procurement won’t need to spend time building up excel spreadsheets full of data or visualizations by hand. The right tools handle these things by default. 

Group Purchasing Organizations

Many Procurement teams are familiar with the unit cost reduction potential that GPOs offer, particularly for small- to mid-sized companies. However, GPOs also help improve efficiencies and reduce Procurement’s time managing spend.

GPOs offer instant access to a pre-negotiated agreement and pricing. All the effort involved in the strategic sourcing, negotiation, and contracting processes are taken care of, allowing an organization to immediately reap the benefits.

Moving Forward

When looking to cut costs among high-volume, low-priced purchases, think outside the typical three-bids-and-a-buy mentality. This tactic will fail to deliver because there simply isn’t enough meat on the bone. Cost cutting needs to come from another source – in this case, by automating away what we can and streamlining the rest.

The steps above will help Procurement do more than simply cut costs – we are also freeing up resources that will be critical in managing the next three quadrants.

As we round out March and move into April, we’ll continue our review of the Kraljic Matrix to better understand how our SRM approach can yield cost savings. Stay tuned as we move ahead into our next quadrant, “Bottleneck” supplier relationships.

Overcoming legacy software inertia to boost the supply chain

Most companies are trying to get ahead in their industries, but in the supply chain in particular, doing so can be difficult because of how rapidly the sector is evolving. Compounding this issue for many companies is the reality that their operations are based heavily on data stored within or interpreted by legacy software they purchased several years or more earlier.

The fact of the matter is that having old software platforms is a potentially major issue that many companies within the supply chain overlook, according to Manhattan Associates. This entire industry is growing increasingly complex and systems developed a decade-plus in the past just aren't going to be up to the task, especially because you have likely had to customize various aspects of the software, so even if support is still provided by the developer, it's going to be applied in a patchwork at the best of times.

Legacy software could be holding your supply chain business back.Legacy software could be holding your supply chain business back.

Moreover, because you are likely to have several partners or more connecting with you to find success, you need to make sure your systems are compatible with theirs; that becomes more difficult when you're dealing with legacy software, the report said. Consequently, you simply can't afford to go forward relying on legacy software that is increasingly challenging to wrangle.

Getting specific
The problem with legacy software is often that it may seem to be working well enough, but the areas of drag it creates are sometimes difficult to spot, according to Oracle Director of Content Strategy and Implementation Margaret Harrist, writing for Forbes. With that in mind, it's good to think about some of the more common issues you face, and the time you have to spend dealing with them.

If you're like many other companies, these include a lack or shortage of actionable data about the supply or demand you face on either side of your operations, issues related to your ability to pivot off your data to make quicker business decisions, and more, the report said. Furthermore, older software platforms - particularly those that are no longer supported by their developers - tend to be more vulnerable to cybersecurity threats.

Identifying the benefits
Of course, many companies may see the cost of investing in new software to run their logistics operations as prohibitive - meaning too high to justify, according to CeMAT Insider. But what that concern doesn't take into account is the loss of both efficiency and new opportunities that can cost a business significantly, and over a relatively short period of time. For that reason, it's wiser for you to view investment in a new platform as an investment in your broader business.

No matter where within your operations you're using years-old software, you're always going to have an opportunity to improve and, in doing so, become a more critical part of the supply chain as a whole. By working more closely with partners to share and interpret data, you may all be able to get ahead together.

5 supply chain training tips

When you run a logistics operation, it's vital to ensure you have proper structures in place to continually train your staff. After all, the supply chain is evolving rapidly, so you would be wise to make sure your team's skills do the same.

If you're not certain how to set up a proper and effective training program within your warehouse, the following tips should help you develop a strong, responsive workforce that helps guarantee your long-term success as an organization:

1) Thoroughly assess your needs

No one knows your organization better than you do, so it should be relatively easy to determine areas where training may be needed to truly maximize your facility's efficiency, according to Inbound Logistics. Take a look at all the data your operation produces and see where inconsistencies or kinks in the system tend to arise. Then, work on identifying the cause of those issues. If you can do so successfully, you may find aspects of your work where training would be quite helpful.

2) Keep your efforts carefully focused

Once you know where you should start your training sessions, it's important to keep the efforts relatively centered around those hurdles - at least initially, Inbound Logistics added. That way, you know that every hour spent on training is going to directly improve your overall operations. On the other hand, if you take a more scattershot approach, you may not get the full benefit of your training efforts.

3) Put the right managers in charge

Generally speaking, employees like training sessions that not only inform, but also motivate, according to Global Training Center. For that reason, it's a good idea to make sure your training sessions are run by managers who have a good track record of whipping up engagement while also encouraging and teaching workers the right way to do things. You likely know who your "people person" managers are already, and putting them in charge of these efforts is always smart.

4) Make sure everyone who needs the information is involved

While you may want to laser-focus your training sessions at the workers who need these specific skills, it might be wise to broaden your view, according to Tortal Training. Making sure not only those workers, but also the people who support and work with them on a daily basis, get the knowledge you want to impart could help boost understanding and efficiency throughout your whole operation.

5) Track results

Once a training session has been completed, keep a close eye on the metrics you used to determine where to start in the first place, Tortal Training said. You may find that they improve sharply, but whether they do so enough to truly bolster your standing in the industry is something you will have to keep a close watch over - on an ongoing basis. Proper training is an effort that should never stop in your organization, and if you have the right strategy to react, improve, then react again, you'll be setting yourself up for serious success.

When starting a transformation in a company’s Procurement organization, one common thread we often see is people who insist that the organization is fine and working as they expect. Items are being bought and often savings have been negotiated. Once we dig down a bit though, we find that there is often a large number of problems beneath the surface.

Some of the easiest ways to know if your Procurement organization is working properly is by looking at these metrics:
  • How much of Procurement’s time is spent putting out fires (last minute requisitions, vendor issues, chasing down approvals, etc.)? 
  • At what stage do business groups engage Procurement into their sourcing process?
  • Are end users often complaining about cumbersome and difficult-to-follow policies?
  • Does Procurement purchase everything “onesy-twosy” as it comes up, or is it done on a more holistic view?

The answers to these should be fairly obvious: If you are not happy with the answers to one or more questions, your Procurement organization is likely not operating as well as it could be, and is not generating the true value to the business that should be expected.

As long as Procurement spends most of their time dealing with never-ending day to day issues, there is no time to invest in more strategic initiatives. We often find that needing to use a large portion of a Procurement team’s resources towards consistent fire drills are indicative of a broken process rather than part of a typical Procurement organization.

Many of these can be solved through a Procurement transformation. Look at where the process is broken. See how your existing technology could be better leveraged, or if what you have is not optimal. Ensure your people are in the right roles to match their skillsets and the company’s needs.

Define your end goals and determine which metrics will show a proper turnaround, and ensure you are not sliding back into old practices. And most importantly, work to elevate the role of Procurement so that departments across the company see the organization as a strategic asset rather than another required step to making a purchase.

Logistics Series – Blog 6 – Marine Fuel Regulations? Brexit? Coronavirus? The Global Economy and Supply Chain Keeps Taking Hits

Back in June of 2019, we posted a blog title “Global Economy Vs Transportation Industry” and it
focused on how a variety of global and domestic events can truly test how prepared one’s supply chain is when faced with new sets of obstacles and hurdles. From recessions to driver shortages and from tariffs to the holiday season, some changes or disruptions to the global economy are very predictable while others are quite sudden and highly impactful.

Previously, I have stated, “Shippers must also be prepared for the unexpected shift in supply chain patterns. There could be an influx of a particular product entering the system or there could be cases where the opposite is true. Something as simple as bad weather can cause common spring and summer goods to be sitting on the shelves instead of in the back of a truck.” I then went even further and stated “When extreme weather conditions threaten the US, there are several short and long term planning options to consider. Shippers can move freight out of a region early if something like a hurricane is imminent. In other cases, like an earthquake, time is not something a company has so moving freight ahead of time is not possible. Companies can have a list of back up suppliers and vendors so if critical items needed for production cannot be shipped from a particular region, a backup is in place from a totally different region.”

Those comments focused around severe and extreme weather events. There was no mention of a global pandemic. Or a change in regulations on marine fuel. Or what would happen if England decided to leave the European Union. All of which have happened within the first two and half month of 2020.

With all that said, all of these major body-blows to the global economy and supply chain relate in a way that is very important when trying to develop and maintain a well-run logistics network with limited disruptions and optimal pricing. Timing is critical.

Even the most prepared shipper with the most well-thought-out network with dialed in pricing models can’t be prepared for everything that has happened so far in 2020. I completely agree in measures companies take to help mitigate potential disruptions or price hikes. Some of those measures include diversifying your supplier base, becoming a shipper of choice (Logistics Series – Blog 5 – The Art of Becoming a ‘Shipper of Choice’), and using planning models to become predictable and reliable in your process.

Price increases are part of the game. We would all like to be able to reduce cost year over year but the key to doing so is knowing when to strike (run a RFP) or when to accept a negotiated, fair, market appropriate increase. Often the most important goal to a shipper is to limit the disruptions to the supply chain. Understanding when to take a hard stance and expertly negotiate cost decreases or possibly even switch vendors for even greater savings is very dependent on the state of the industry and the global supply chain. It is possible, that doing nothing, could be the best option.

One final piece to this blog, here are a few bullet points on the three main supply chain pains of 2020:

IMO 2020 – Marine Fuel Regulations:
  • IMO banned ships from using furls with a sulfur content greater than 0.5%
    • Previously was 3.5%
  • Regulation aimed at improving human health by reducing air pollution
  • New regulation causes shipping lines to incur additional costs
    • Some carriers have already invested as much as $2 billion/year in this area
  • Ocean shipping is predicted to see price increases throughout 2020 to offset the increased cost of fuel
  • Due to IMO 2020, cost of marine fuel doubled
    • 1/3/2019 3.5% heavy fuel oil (HFO) was $363/ton
    • 1/3/2020 VLSFO was $724/ton
  • The changes in fuel prices and the implementation of surcharges means shippers may require a different approach to their annual contract negotiations
  • Short term effects will be time, partial trade contraction
  • Long term effects will be structural changes with adjustments in logistics and value-added chains therefore the location of productions and partial reorientation of trade flows is more than certain
    • Also long term: allocation of resources, reallocation of production, and resulting impact on economic growth Reduced trade
  • Almost half of UK's exports distributed to countries within EU
  • After Brexit this number will decrease and over time will hurt UK's GDP
  • Reduced trade across Europe's mainland leads to a decline in demand for road haulage (regardless if rate of export remains unchanged)
  • Stricter border control
    • Increase in barriers at borders for administration of trade in both directions
    • Decreases efficiency
    • Goods transported slower
Coronavirus (Chinese Exports):
  • Wuhan which is a manufacturing hub is on lock-down
  • Industries impacted by shutdown
    • High-tech industry
  • Foxconn is a critical manufacturer in high tech supply chains
  • Other active contract manufacturers for high tech products are located in regions with similar restrictions as Wuhan
  • Hard to easily transfer/start up high tech production facility due to its high costs therefore causing the options in the short term to be significantly reduced
  • Wuhan heavily supports/impacts automotive industry
  • Robert Bosch GmbH (one of the largest auto parts makers in the world) closed 2 of its plants near Wuhan
  • Hyundai in Korea announced they ran out of Chinese parts for their just in time inventory process
  • US and European car manufacturers estimate they are 3-4 away from running out of their Chinese supplies
  • Due to China being the largest exporter of intermediate products, its closures are severely disrupting global supply chains
  • Even if secondary suppliers were to be utilized, the surge in demand will overwhelm them
  • Many supply chains are vulnerable because supply chains within supply chains and even their supply chains rely on each other for parts and raw materials
  • Hyundai had to suspend operating at a manufacturing plant in Korea due to its inability to receive parts from China
    • Hyundai is one of the first to announce its interruption in manufacturing
  • Probably won't be the last though
  • Airlines and air cargo were first on a restricted holiday schedule but now are suspended
  • Many factories and logistics warehouses are on extended leave, not just in Wuhan but in other large Chinese cities
  • For the factories that are not being forced to shut down, people are scared to go back to work
  • Some companies are trying to source parts to stock up on inventory but this will cause various shortages therefore increasing premium pricing strategies and part hoarding
  • Should products be exported from China, there would be extensive screening for the virus at seaports, airports, and other China border crossing thus causing severe delays
Coronavirus (US Imports):
  • In just 4 weeks, the concern went from the Chinese Export market into the US to a mass manufacturing stoppage where the goods unable to come into the importing country is becoming less and less critical
  • This will get worse before it gets better
  • Stay Safe Everyone

Businesses in the supply chain are always on the lookout for the slightest sliver of added efficiency, because even an improvement of 1% can pay major dividends and give them an edge on the competition. Because of the endless search for just a little bit more of a boost, many logistics companies may now be considering the ways in which 3D printing can help them become more nimble.

The case for using such processes these days - as 3D printing technology improves - is that printing products on demand is a more efficient use of resources than producing large batches and having them sit on warehouse shelves, according to Logistics Viewpoint. In addition, companies that 3D print their offerings may be able to make changes within the printer file rather than retooling an entire production line, saving money in the long run as well.

All these changes, in turn, could also have a positive environmental impact by reducing the need for production resources, large shipments and more, the report said. If adopted on a mass scale - a process that would likely take years - it could revolutionize the way the entire supply chain operates.

3D printers could be the wave of the future in the manufacturing supply chain.3D printers could be the wave of the future in the manufacturing supply chain.

A closer look
Experts say that use of 3D printing is such a big shift because it will allow them to complete production processes - albeit at a potentially slower pace - without scrap or tooling, according to the World Economic Forum. That shift alone may allow companies to save large amounts of money that can then be invested into other aspects of their operations.

Moreover, the time it may take to ramp up full production can be reduced, and that's a trend that will only grow as time goes on, the report said. Eventually, it's likely that companies would be able to completely 3D print products using multiple materials that combine during one cohesive production process.

Seeing the advantage
Given the potential benefits of using 3D printing at various steps of the supply chain - for producing either components or end products - it should come as no surprise that both public and private organizations are increasingly interested in pursuing these avenues. That includes the Australian military, which recently assigned a number of soldiers from its 1st Combat Service Support Battalion to train in the techniques needed to make 3D printing easier, according to 3D Printing Industry. The hope is such experience will help make the military organization more responsive to evolving supply chain needs on an ongoing basis.

"At maturity we see it becoming an essential enabler that will redefine how logistics is employed to support our dependencies on the future battlefield," Lieutenant Colonel Kane Wright, Commanding Officer 1 CSSB, said in announcing the program.

The initiative comes after other military organizations around the world have an eye toward placing 3D printing at the center of their ongoing needs, the report said. That includes multiple arms of the U.S. military.

Certainly, any manufacturing organization in the supply chain would be wise to at least investigate its 3D printing options, especially as others are likely to do the same in the years ahead.

 In today’s world, market conditions and the business requirements to compete are changing on a daily basis. The main drivers behind these changes are advances in technology and increasingly steeper customer demands. Now more than ever successful organizations need to be agile; ready to adapt, shift, and modify their business model and service offerings. This means they also need to be internally agile so they can adapt and shift their processes and workflows to become more efficient and deliver greater value. Nowadays, this typically involves the adoption of new tools and technology solutions.

Defining solution requirements and sorting through available products is resource-intensive and time-consuming enough. Developing a strategy to ensure employees understand the need to change and possess the skills required to adopt the solution implemented is another challenge altogether. Unfortunately, this is the area of project management that is typically overlooked and most often causes gaps between a projects forecasted and realized return on investment. Eliminating these gaps is where change management comes into play.

So, what is Change Management you may ask?
Change management involves the processes, tools and systems used to manage the human aspects of change in an organization, and it takes multiple forms:

On a Project Level
  • Change management is the application of a structured process and set of tools for leading the people side of change to achieve target business outcomes.

On an Organizational Level
  • Change management is a leadership competency for enabling change within an organization.
  • Change management is a strategic capability designed to increase change capacity and responsiveness.

Why is Change Management needed?

So now that you understand what change management is all about, I am going to explain why it is necessary. Some of you reading this article might be thinking “But if we have a better solution, our employees will understand this and be excited to change.” WRONG. The natural human reaction is to resist change, and this is no different when it comes to people and their jobs. If we want to be successful at transitioning through organizational change we need to anticipate resistance, and be ready with plans in place to mitigate it. Change management efforts when focused on individuals help to create an understanding about the reasons for change and thus foster an interest in making the change. After this is achieved, change management strategies should be leveraged to educate employees and equip them with the new skills they will need to successfully operate in their future states. Finally, in order to ensure sustainability of new behaviors and attitudes organizations should plan efforts to reinforce adoption. The easiest way to do this is to celebrate success early and often. This can be as simple as giving an employee a shout out during a meeting, or providing incentives and rewards.

There are many simple business justifications you can use to convince your organization to include change management in your next project’s SOW. For starters, studies show that an extreme positive correlation exists between well-defined change management strategies and meeting or exceeding objectives. In Prosci’s 2018 executive change management research study, it was found that organizations who have mature versus lagging change management competencies were up to six times more likely to fully achieve intended project objectives. Another major selling point is that change management reduces negative effects such as resistance, rejection, disengagement, and general office negativity. The worst case scenarios resulting from poor change management include: turnover of valued employees, tangible customer impacts, active resistance, and employees opting out of change. These negative consequences can never be completely eliminated, but the more change management is applied the more they will be mitigated. Lastly, change management directly addresses the people-dependent factors of ROI. Change management accelerates adoption within the user community, increases utilization, and improves individual proficiency levels.

Unfortunately, most organizations today do not have the internal capacity or competency to effectively develop change management strategies and integrate them into project management plans and timelines. That said, not all organizations necessarily should invest in developing a change management function. Outside of larger enterprise businesses, change is rarely occurring on a regular basis. For most companies, the best option is to outsource the change management component of their projects. Consulting firms like Corcentric can develop, deliver and integrate change management strategies into your organization’s project plans. The current business landscape demands organizations embrace continuous improvement and digital transformation, or else lose the ability to compete. Organizations who deploy proper change management strategies will improve employee adaptation and solution adoption during periods of transformation. These companies are far more likely to:
  • Achieve their planned objectives
  • Complete projects on time and within budget
  • Receive the forecasted return on investment (ROI)

Whether you are struggling with employee adoption of a new process already in place, or planning a major implementation, Corcentric’s Advisory team is here to support your business as it prepares to transition to its future state. For more information about our change management practice and other professional services and solutions, please visit our website.

Companies in the supply chain are always on the lookout for ways they can improve their positions within the industry, and make themselves more efficient. That often requires investment in various aspects of their business so they can be more responsive to various forces beyond their immediate control. However, that understanding also brings with it a serious risk of "analysis paralysis," as there are many potential areas of investment and all may be equally appealing at first blush.

One wise area for any type of investment is under the umbrella of "supply chain tech," but that obviously brings with it a wide variety of subcategories, according to the MIT Sloan School of Management. For any company that hasn't jumped on the opportunity presented by the internet of things yet, now is the time to do it, as that will give them far greater insight into more aspects of their operations than they likely have today. The IoT allows you to identify areas of inefficiency, however small, and make more informed decisions about how to smooth over those kinks whenever they arise.

Keep better tabs on your inventory with new tech.Keep better tabs on your inventory with new tech.

But if you already have IoT devices under your roof, you might want to look at other opportunities, such as relying on artificial intelligence to do a better and more efficient job of interpreting the larger quantities of data you now collect, the report said.

"With just-in-time manufacturing, we care a lot about where a product is, when it's going to arrive, and how it fits into the overall logistics flow," said Stuart Madnick, an emeritus professor of information technologies at the MIT Sloan School of Management. "IoT devices, combined with the cloud and AI, make all that much more effective and comprehensive."

Why it's important
Having the ability to get a better handle on how items flow through your facilities is important not just for your own operations, but for those of your partners in the supply chain, according to Green Biz. Sharing the critical tracking data you collect with those companies gives everyone more insight into the process of shipping every item you handle, improving traceability and helping to ensure all the right items get where they need to go in the most timely manner possible.

This may be particularly true when it comes to the food supply chain, where the provenance of every item is of the utmost importance, the report said. Using the IoT, AI and the blockchain in concert will help guarantee all items are genuine and easily verified at every step of the overall supply chain.

What comes next?
Of course, when it comes to investment of this type, you should never rest on your laurels, according to Logistics Management. There's always a new wave of next-generation technology a year or two away, and staying on top of what's being developed - and how it can help you - will allow you to make better decisions going forward as well.

Simply put, you never want to be in a position where you're using legacy technology that's a decade-plus behind the times, through inertia alone. Always being ready to see what's next and where your money should go is a must in the supply chain sector.

The value of a good supply chain is more obvious than ever, as companies that have efficient and coherent plans around these multi-faceted partnerships continue to prosper. With that in mind, it should come as no surprise that many major businesses are now diverting hundreds of millions of dollars into shoring up these aspects of their operations, so that they can continue to improve their bottom lines and evolve more effectively over time.

Hardware giant Lowe's recently announced that it will invest some $1.7 billion into improving its supply chain, according to MarketWatch. A big part of the reason the company is going through such a major effort is because it has encountered occasional problems on the e-commerce side of its business and wants to make sure it can be agile and responsive in that increasingly competitive sphere.

Neil Saunders, managing director at GlobalData Retail, noted that Lowe's may need to do more to boost growth and quality in its e-commerce operations simply because most people these days start shopping for any products online, including those they plan to buy in brick-and-mortar stores, the report said. Meanwhile, investors say the biggest competitor? Lowe's faces - Home Depot - is stronger in its overall organization, so this kind of supply chain investment may be seen as a necessity more anything else.

Major companies are putting more resources into last-mile deliveries.Major companies are putting more resources into last-mile deliveries.

Getting it right
Meanwhile, furniture retailer Wayfair recently put new emphasis on its supply chain and logistics operations in the wake of layoffs late last year, in hopes of being able to improve its position in the market overall, according to Supply Chain Dive. The company offers free two-day shipping much like Amazon, but given that it specializes in furniture, which obviously requires large-format shipping, it faces unique challenges.

Interestingly, the company sees nearly one-third of its revenues come from those bulky items, and that presents bigger logistical needs for the company, such as how items have to be grouped together to make last-mile deliveries as efficient as possible, the report said. That also means trucks are loaded with far fewer items that need to be handled with far greater care, and that's where Wayfair says it must be more attentive to customer expectations while also handling higher insurance costs for those shipments.

Reducing long-term costs
Meanwhile, shipping titan UPS recently made a different kind of logistics investment, investing in some 10,000 specially designed electric vehicles that will help the company substantially reduce fuel costs and improve safety, according to Supply Chain Digital. This is part of a massive investment in Arrival, a platform developer based in the U.K. that produces standardized parts for electric vehicles, which UPS now has a minority stake.

With all these changes in mind, it may be wise for other companies to look at their options for supply chain investment and find a strategy that will work for them in the long run. That, in turn, allows them to remain competitive in an increasingly difficult market.

6 steps to improve your facility's safety record

If you're concerned about your operational efficiency in your supply chain business overall, one of the biggest things you should be worried about is your facility's safety record. After all, even a single accident or mishap can lead to worker injury, and shut down part or all of your facility for days.

With that in mind, even basic steps can help improve your overall safety record can go a long way, and any measures you take should include the following:

1) Clean more often

Not only is this a good idea simply from a tidiness standpoint, but when debris is allowed to pile up in your facility, it poses a slipping and tripping hazard that can lead to workplace injuries, according to Material Handling & Logistics. For that reason, it's good to institute a policy of never thinking trash pickup is someone else's problem, and that includes getting managers to focus on the change. It's also a good idea to have people sweep and mop more often over the course of a week.

2) Think about ergonomics

Your workers likely go through a lot of repetitive motions during the day, and something as simple as bending down a few dozen times per day can lead to wear and tear on the body, Material Handling & Logistics noted. With that in mind, any changes you can make to ensure workers can stay comfortable throughout the day could go a long way toward avoiding a repetitive stress injury.

Companies have to evaluate their unique safety risks.Companies have to evaluate their unique safety risks.

3) Provide protective gear

Other, more general concerns about workplace injuries, from falling items, nicks, cuts and so on need to be address on an ongoing basis, with proper protection provided at all times, according to Flash Global. That can include everything from hard hats and work gloves to eye protection, masks, heavy-duty footwear, etc.

4) Keep everyone informed

For many companies, new risks evolve as operations grow and change over time, and as such you need to continually evaluate whether there are issues you'll need to address with workers, Flash Global added. Meanwhile, it's important to ensure there's proper signage posted throughout your facility that warns everyone under your roof about the unique risks they may face in a given area.

5) Train employees on best practices

Training should be a regular part of any supply chain business operation, but those efforts should include instructions around safety efforts, whether they're new risks or refreshers about how to handle older ones, according to McCue. Even one mistake may lead to potentially catastrophic consequences, so it's wise to help everyone keep all the best practices at front of mind.

6) Only allow certified equipment users

If you operate heavy machinery anywhere on your property, it's vital to make sure that the people using those items are properly trained or certified to do so, McCue cautioned. That should go without saying for vehicles like forklifts, but even pallet jacks can pose serious risks to people who aren't fully aware of how they operate.

Simply put, companies in the supply chain can never take safety too seriously, and may need to do a bit more to ensure they're upholding the strongest possible posture.