2021

In the past several decades, there has been a growing amount of manufacturing and supply chain work moving out of the U.S. and across oceans instead. However, that has begun to shift back in the past decade or so, as companies once again saw the utility in operating domestically. Now, after a year-plus of the pandemic and all the logistics problems that came with it, it seems there is going to be an acceleration of reshoring in the months ahead.

Indeed, over the course of 2020, almost 1,500 companies across the U.S. announced reshoring efforts, adding up to an estimated 161,000 jobs coming back to the U.S., according to the latest data from The Reshoring Initiative. As a consequence, the total number of jobs brought back to America since 2010 now stands north of 1 million. The reshored jobs announced last year was the second-largest total observed since 1997.

Reshoring is a growing trend  but how strong is it?Reshoring is a growing trend — but how strong is it?

The most common reason why companies brought jobs back to the U.S. — cited by nearly one-quarter of companies making these changes — was quality of work, the report said. More than 200 companies said freight costs were their biggest motivating factor, and nearly as many indicated that risk around supply chain interruption, natural disaster or political instability were at issue.

What comes next?
Despite all these reshoring initiatives, the number of jobs specifically in the supply chain that are coming back to American locales may be somewhat muted, according to The Economist Intelligence Unit. While there have been efforts on the part of U.S. policymakers and legislators, the odds that there is going to be a boom of reshoring between this year and 2025 are not seen as particularly likely.

"North America boasts several advantages — including years of economic integration, a large free-trade area, short travel times and new opportunities for policy coordination under USMCA," said Andrew Viteritti, the Economist's commerce and regulations lead. "However, a number of obstacles will prevent businesses and investors from viewing North America as a realistic production substitute for Asia, at least through the medium term."

Among these obstacles: A still-fraught relationship between Canada and the U.S. over tariffs and new rules intended to bolster American production, as well as emerging political concerns in Mexico, which could make it more difficult for the U.S. to have a nearby production and trading partner, the report said. As such, while things are certainly trending in the right direction, the improvements won't make up the ground lost over several decades.

Still on the table
With that in mind, however, the latest Thomas Industrial Survey Report shows that roughly 5 in 6 manufacturers say they are "likely" or "extremely likely" to reshore some operations in the near future. After all, the disruptions that accompanied the pandemic laid bare problems related to availability, lead time, total costs and more. Consequently, this could bring as much as $443 billion in economic benefit.

Reshoring may not be a viable option for everyone in the supply chain, but when companies can at least evaluate their options, they may be able to find ways to improve their logistics efforts overall.

 


The concept of Corporate Social Responsibility (CSR) has increasingly been making its way into the zeitgeist of good corporate practice for years; many companies are increasingly aware of their participation and response to social issues and are looking at ways to improve their charitable contributions while empowering their employees to participate in volunteer opportunities. Customers are paying closer attention to company values when making purchasing decisions, and employees are also looking to their employers for actionable responses to social issues such as racial equity, diversity and inclusion. For companies who are trying to increase their participation in this space, it can be difficult to understand where to start and where to allocate resources. This is where companies can lean on procurement as an unexpected ally (pun very much intended). By working with procurement teams, companies can carefully source external resources that can help to achieve CSR related initiatives.

 

Many 3rd party organizations exist that provide both strategy consulting for creating CSR programs, as well as technology solutions through which employees can donate money or sign up for volunteering events. These platforms can also document and report on individual and corporate-wide participation to help track performance against CSR goals. These are services that companies - particularly those who are still new to the CSR concept - may not be familiar with and can act as a conduit between volunteer opportunities and employees looking for ways to get involved.

 

When looking for external resources, procurement can help to document your organizational needs and ensure that solutions align with your priorities. For example, many companies are focused on diversity & inclusion initiatives related to race, sexual orientation, and gender identity. But CSR initiatives can also be focused on environmental protection, education development, addressing homelessness, or a combination of many other examples. When running a sourcing event for CSR services, sourcing teams can award business to companies with expertise or insight into those identified organizational prioirities. This does not preclude you from participating in other volunteer opportunities outside of those identified initiatives, but it does help highlight initiatives that align with your organization's culture and priorities. Importantly, utilizing these services does not prevent you from establishing your own direct non-profit relationships - it can simply supplement your existing offerings and make it easier for employees to connect with company sponsored events.

 

While we may not like to think of CSR as an industry, there are a multitude of external resources that can help guide and govern your organizations efforts to improve your CSR strategy. Procurement can be the vehicle to help document organizational needs, scope out external services, compare offerings across multiple providers, and negotiate both price and services to align with your organization's budget and requirements. CSR is a culture, and sourcing can help drive that culture and promote participation by finding the right partner. But finding the right partner is key to making impactful contributions in this space, and working with experienced sourcing professionals like Corcentric can help ensure a successful CSR implementation.

 For those of us in the Procurement field, negotiating can be the most uncomfortable skill that we must master. Many factors play into a negotiation, and the considerations can easily become overwhelming. There is often so much on the line. The supplier relationship, the client relationship, and the sourcing initiative’s success can all ride on this one simple step.

I believe the skill of negotiating also has the most misconceptions attached to its name. Many think the best of the best dig a hard line in the sand and stick to it. The most successful negotiators are the sternest. But, when you are searching for a win-win, is this the most logical strategy? I do not believe so. Being aggressive towards your counterpart does not lead to successful partnerships. To give an inch and take a mile will not build a long-term relationship that promotes positive growth for your organization.

So, how do you deploy a negotiation that is successful, builds partnerships, and does not make you want to rip your hair out? Read on to see my favorite tips that I employ with my friends, family, clients, suppliers, and in long conversations with my dogs when they are being bad that they absolutely do not understand.

Do NOT Draw A Line in the Sand

As I stated before, the misconception of drawing an arbitrary line and sticking to it no matter what is not negotiating. Negotiating requires some form of compromise from all the parties included. Even with all the power, do you really want to crush a smaller sized supplier? Will the supplier want to help you when times get tough, like in the supply chain disruptions of 2020 due to COVID, if you just gauged them for a single sided contract? Instead, hear each party’s wants and needs and craft a deal that is mutually beneficial. It almost always creates a better agreement in the long term.

Business is Business, Kind Of…

In a negotiation, even when attempting to create a mutually beneficial deal, things can get heated. Remember that your negotiation counterpart is a representative of a larger organization. They have higher ups, in most cases, that are really making the decisions. So, what should you do? Separate the negotiation from the person. Just because they are not compromising on a specific piece of the sought-after agreement does not mean they are attacking you. The issue is YOU. You are too closely tied to your points and are projecting the same attachment on your counterpart. Talk it through and find out why they are not budging. Attempt to craft a solution that provides enough promises to get them to budge or ask for something in return elsewhere to even the playing field.

Kindness is Not Necessarily Good

If you are not a confrontational person that is often a positive. However, sometimes that can cripple you. Just because the goal is a mutually beneficial deal in your mind does not mean that it is in your counterpart’s mind. If you are too kind to objectively quantify your position and stick up for your reasoning, you can open yourself up to getting steamrolled. The lack of tact can lead to bad terms for you and portray that you can be taken advantage of. This will harm your future negotiations, as well. If you have sound reasoning, explain it until the supplier wholly understands. If you do not feel you can push back, get someone who will. Using your coworker’s skills is a benefit to the organization and there is nothing shameful about requiring help.

Require Objectivity and Objectivity Only

Finally, perhaps the most important tip I can offer is to keep negotiations objective. Subjectivity leads to the “drawing a line in the sand” type of negotiations in my first tip. It can also lead to a personal attachment to the items you are negotiating. If you do not think of objective reasons as to WHY compromise should take place, you are not crafting solutions. You are creating whimsical ideas and acting as if they are objective. There is no room for impulsive decision making in negotiating. Use logic, math, statistics, and hard data to provide actual reasoning as to why you want what you want. Use the same objective standard to provide solutions that simultaneously show how your offering gives the supplier what they want, as well. That is creating a true win-win situation.

Hopefully, employing these tips can aid you in more successful and less stressful negotiations. This step in the Procurement process does not have to be the worse. If done right, it can be an enjoyable way to build your rolodex of supplier contacts for future projects. Long lasting, very beneficial relationships can be built that put you and the supplier in an advantageous position within your market.

For more on this topic click here!

In my role as a strategic sourcing specialist, obtaining market competitive and effective contracts, creating, and steering the process for selecting strategic partners and implementing design solutions are detailed focus areas of responsibility.

However, this can all be negated if the selected solution is not properly implemented and adhered to.

Within the telecommunication and IT space, in order to ensure maximized results, critical programs must be implemented, managed, and complied with as an ongoing course of action. Compliance is the act of following and obeying the rules or requests and coupled with conforming to company expectations, this allows for optimal results or savings.

The risk of being non-compliant is loss of potential savings, decentralized supplier and program management, and lack of program success and longevity.

What does compliance look like?

  • Forecasted savings are achieved and reflected in supplier billing, usage, and internal reporting.
    • Nominal impacts are possible due to unforeseen activities; however proactive measures exist to address changes.
  • All impacted personnel are well versed in program objectives and practice the company policies.
  • Proactive planning continues throughout engagement.
    • Supplier business reviews are established with defined expectations.
What are the puzzle pieces to being compliant and maintaining compliance?
  • Develop project plans that include setting roles and responsibility expectations.
  • Ensure all resources who will be impacted by the product / service are educated about the program and understand company expectations for success.
  • Solicit feedback from end users to proactively and ongoingly address risks and roadblocks.
  • Have clearly defined policies and protocols in place for each selected solution.
  • Confirm policies and procedures are written with detail and easy to follow.
  • Have an executed MSA (Master Service Agreement) with each supplier and accompanying pricing agreements. Have these stored in an easily accessible location to refer back to if need be.
  • Establish metrics that display the data being tracked in easy to understand graphics or terms.
  • Have current terms & condition contracts for the various service types with each supplier stored in an easily accessible location to refer back to if need be.
  • Ensure your supplier support teams are engaged and are effective.  
What are some metrics that can be used for validation?
  • Supplier usage reports
  • Supplier invoices
  • Internal GL reports
Many of my clients select multiple suppliers to support their telecommunication service requirements; typically, one or two for local and long distance and another for network services. In an ideal scenario, spend and supplier selection is centrally managed with minimal hands involved with new installs, office openings, or incumbent service changes.

Unfortunately, in most cases, locations are managed independently with many stakeholders participating in the process. If all the stakeholders feel their input and assistance is of value, then all will be engaged throughout the sourcing engagement. The key is full cooperation by all to ensure the success of the program; hence being able to maximize the savings opportunity.

Each location can establish its own relationship with suppliers but there must be uniform alignment and messaging from the corporate level. With this type of united front, services and lowest available cost pricing options can be presented by a supplier and implemented efficiently.

Stay tuned for another episode discussing Implementation Best Practices… “and that’s all folks”.

For those who have just graduated high school, a difficult decision lies ahead. You may be enjoying your freedom for the summer, but what career field you will study will need to be decided very soon. If you already made your selection, you also may be wondering if the choice was the right one. Your whole life will be greatly affected by your decision. Will you do something you enjoy, something fulfilling, or something challenging? How about all the above! Procurement is your answer.

So, what is Procurement? According to Investopedia.com, Procurement is the act of purchasing or otherwise taking possession of something, especially for business purposes. To simplify, we in the field of Procurement strategically setup relationships to buy the goods and services a company will need to operate. This seems like something that every company already does, but surprisingly it is not. Every organization, big or small, can benefit from effective Procurement.

Here are a few reasons as to why Procurement is such a great selection for your future career.

1.   Growth Within the Field

Remember in 2020 when the Coronavirus pandemic hit the world and companies were tightening budgets? A simple way for a business to save money is to get strategic about HOW they are buying their needed goods and services. Many companies realized this throughout the last year, and even a little before. By 2028, the Procurement as a Service (PaaS) market is expected to reach 12 billion! This is simply for outsourcing functions related to purchasing. Imagine what the number would be if you added companies who internally control their Procurement functions.

2.    Challenge Yourself How You Want

The art of scoping, sourcing, contracting, and finding savings is more of a challenge than you may think. You must find your current state as a comparison tool to know if your effort was effective. You must know exactly what you want to purchase. You must find who you want to purchase from and come to contract terms that benefit both your organization and the supplier. Planning, organization, data analysis, negotiation, and communication are just some of the skills you will need to develop. Whatever you enjoy, a function of Procurement will require knowledge in that area. You can become a jack of all trades or become a subject matter expert. You can be a strong negotiator or analyze data on your computer for a living. The option to do what you want and challenge yourself how you prefer is absolutely within the field.

3.   
You Will Pay For Yourself

If you are effective, a Procurement department will literally pay for itself. That is job security! Being strategic about how you purchase goods and services can save a company millions. If you analyze expenditures and personnel, the ability to pay for yourself is clearly there. When we were dealing with COVID-19, tightening of budgets caused many to be laid off. Not in Procurement. Us Procurement folks have the business case of being paid for with our efforts. It is not a difficult business case to make either.

These are just a few of the benefits that working within the Procurement field can offer. The career journey can take you from entry-level positions all the way to the C-suite. It is exciting and fulfilling. Whether you are unsure about your choice or completely confused on what your calling is, take the time to consider Procurement. If you are like me, it may be the perfect fit!

One of the hallmarks of the pandemic was that many companies — regardless of industry — shifted at least some of their operations to remote work, as a means of avoiding health risks. Of course, this created a number of other problems for businesses, including the need to coordinate with teams spread across multiple cities and towns, or in some cases, even different time zones.

In procurement, in particular, this kind of work spread over multiple sites can be a difficult issue to overcome. But even as things return to "normal," your company has likely loosened its policies around remote work and will allow teams to continue working from home (or elsewhere) as long as it makes sense. If that's the case, you need to ensure your organization can run smoothly despite the distance, and the following tips should help:

1) Make all pertinent data and tech easily available

First and foremost, your team needs all the tools and access they would normally have at their disposal in the office when they work from home, according to Global Trade Magazine. That means the right software, permissions to access files stored in the cloud, and hardware that allows them to more effectively stay connected to other members of the team. If they're forced to make do with a patchwork of non-standard solutions, their performance — and therefore your entire procurement efforts — may suffer.

Remote work is easier with a little support.Remote work is easier with a little support.

2) Set expectations

There are lots of reasons why companies and employees alike should favor at least a partial work-from-home schedule, but that does not mean your team should not abide by a number of rules that set everyone up for success and ensure a level playing field, Global Trade Magazine added. When everyone is operating from the same basic expectations, it becomes easier to work together as a team no matter where you're all located.

3) Check in regularly

Even when you are clear about what you expect of your procurement team members and give them everything they need to get the job done, you should still strive to always provide resources, help and an understanding ear in case they encounter any issues, according to Business 2 Community. In addition, it's important to have regular video calls — ideally more than once a week — just to check in, give everyone a little "face time," and make sure they remain on the same page.

4) Communicate about future changes and plans

Finally, as with concerns around COVID itself, you shouldn't expect your work-from-home policies to remain the same in perpetuity, according to management expert Dede Henley, writing for Forbes. As such, if your plans or needs as a business (or just within the procurement team) change, you should give your workers plenty of runway to adjust, find alternative accommodations or otherwise ensure they can continue to contribute with greater confidence that they are being considered and included in decision-making processes.

Like a lot of other industries, many companies in the supply chain are increasingly aware of the carbon footprint their operations leave — and want to do something to reduce that environmental impact. Of course, when dealing with global or even regional sourcing, production, packaging and shipping, the footprint can be rather large, but efforts are nonetheless underway to improve these issues nearly across the board.

The good news on this front is that, in a recent survey from the global bank Standard Chartered, 78% of large multinational companies will begin to remove external suppliers from their operations if those suppliers compromise the companies' carbon transition plans by 2025. This is vital because respondents reported that for these massive corporations, supply chain emissions accounted for 73% of their organizations' total carbon footprint and two-thirds believed addressing this issue is the first step to reducing their impact. Put another way, even if they could reduce their own internal carbon outputs, the impact wouldn't be as significant, and therefore it's not at the top of their list.

Supply chain emissions create a major percentage of total carbon footprint.Supply chain emissions create a major percentage of total carbon footprint.

One way in which 57% of these companies will take such steps is by transitioning away from suppliers based in emerging markets, and focus on those in already-developed regions, the survey showed. The reason why? Nearly 2 in 3 believe the suppliers in emerging markets will struggle to meet emissions targets, and they're willing to pay more to do so; 45% of respondents said they would be willing to pay 7% more on average to buy goods and services from suppliers with net-zero emissions.

Understanding the costs
Indeed, one of the biggest reasons why companies may be hesitant to switch suppliers — apart from the established relationships they've leaned on for years — is that they may be worried about the increased price, and the effect that passing it on to the consumer would have on their bottom lines, according to Fortune. However, there's growing evidence to suggest that the increase wouldn't be that substantial. In fact, the "7% more" cited by the multinational corporations responding to the Standard Chartered survey might be overshooting things.

Data from the World Economic Forum cited by Fortune shows that the largest increase in consumer prices to de-carbonize various sectors' supply chains would be for food — at just 4%. Likewise, construction costs as a share of consumer price would only rise about 3%, and the number drops to 2% for the fashion and auto industries. Finally, decarbonized electronics manufacturing would increase prices just 1%.

A specific example
One of the sub-industries that is among the biggest carbon producers is beef production, as its supply chains produce about 6% of all global greenhouse gas emissions, according to estimates from Rabo Bank. However, if practices are changed in major markets like North America, Europe, Oceania and some of the larger producers in South America, those emissions can be reduced by as much as 30% before the end of the decade. Many companies in the industry have set high goals and are moving quickly to meet them.

Likewise, you may want to consider the impact (large or small) your supply chain has on global emissions, and perhaps move to take similar steps in the near future.

Many often think of procurement as being solely a part of the business world, but the reality is that nonprofit organizations and government entities of all shapes and sizes also rely on such processes every day. However, these efforts may be a particular pain point for local governments because they tend to operate on rather tight budgets, and under processes that have been in place for potentially decades.

In the post-COVID world, the ways in which all types of organizations operate are being reordered. Many within the world of local and regional government see that as a prime opportunity to improve their procurement efforts in a number of ways, according to American City & County. After all, many changes were put into place on an emergency basis during the pandemic, and with things returning to normal in the coming weeks and months, there is no real necessity to just revert back to pre-pandemic operations.

How can government departments improve procurement?How can government departments improve procurement?

Instead, decision-makers should sit down and consider what's worked and what hasn't in recent years, and then strategize about ways to improve processes based on the lessons they learned when problems arose throughout the pandemic, the report said. These could include finding new ways to increase agility (or to make temporary efforts previously put into place more permanent), investing in new technology thanks to federal COVID relief funds, or even partnering with other local government entities to boost your buying power.

Cooperation pays
The rise of cooperative agreements in recent years has been a boon for procurement pros in the world of government, especially because they can use their heft to sway existing supply chain partners to efforts that benefit smaller, potentially more diverse suppliers, a separate report from American City & County said. Data suggests that among 13 long-standing organizations of this type, the dollar value of total transactions has risen appreciably in the past several years, from $29 billion in 2015 to $47 billion last year, and with the potential to climb to $61 billion by the end of 2025, the report said.

"It definitely provides for a successful synergy of the interests of saving money through large-volume purchases, coupled with providing additional opportunities for small, minority- owned, women-owned and other disadvantaged businesses," Keith Glatz, purchasing and contracts manager for the City of Tamarac, Florida, and member of a government co-op, told the site.

What can be done?
When government entities are trying to improve their procurement efforts, there are a few areas of focus that could set them up for success, according to procurement software expert Adam McInnes, writing for LinkedIn. These include looking at risk management over the entire course of a contract, making sure current technology and software is aligned with current needs, and that they have as close to complete visibility in their processes as is feasible.

This all starts with careful strategizing and an honest assessment of where it is now, where it wants to be, and what may stand in the way of getting from Point A to Point B. That extra effort at the start of the process could pay serious dividends even within the course of a few months.

The pandemic created a lot of problems for just about every kind of industry, but in the U.S. in particular, few were more heavily affected than the manufacturing sector. The good news is that, as COVID risk has declined in many states throughout the second period of the year, factories have come back online. While there's still quite a way to go in terms of getting back to pre-downturn levels of production, the recovery appears to be going well.

At the end of May, for instance, the Institute for Supply Management found that its manufacturing index rose to a reading of 61.2 — up slightly from the 60.7 seen in April. Any reading north of 50 indicates growth, and at this point, the month-over-month improvements are picking up speed. Overall, though, this marked 12 straight months of the industry trending upward.

Manufacturing is getting back to pre-pandemic norms, but issues persist.Manufacturing is getting back to pre-pandemic norms, but issues persist.

It wasn't all positive news in the sector, though, the ISM report said. While new orders were up and growing quickly, production and employment slipped on a month-over-month basis, and customers' inventories were considered "too low," shrinking more quickly than they were in April. At the same time,  the backlog of orders manufacturers were sitting on increased more quickly as well. Despite that, however, prices declined somewhat, but remained at an extremely high reading of 88.

Similar findings
Meanwhile, the Purchasing Managers' Index from IHS Markit showed almost identical findings, but further reflected that business growth was starting to even off a bit despite being quite high for the third straight month. Likewise, the costs manufacturers faced to make their products in June were also rather high, especially when it came to acquiring raw materials and paying for fuel. Furthermore, they faced pressures related to labor — specifically to hire new employees amid tight competition for blue-collar workers.

"Although price gauges have also slipped from May's all-time highs, it's clear that the economy continues to run very hot," said Chris Williamson, the chief business economist at IHS Markit. "Prices charged for goods and services are still rising very sharply, record supply shortages are getting worse rather than better, firms are fighting to fill vacancies and manufacturers' warehouse stocks are being depleted at a worrying rate as firms struggle to meet demand."

A ways to go
When it comes to labor, hiring has rebounded sharply in just over a year. According to data the Federal Reserve Bank of St. Louis, between March and April of last year, employment in the sector cratered to about 11.4 million, representing a low not seen since early 1941. In the 14 months since that trough, however, things have trended upward, hitting almost 12.3 million as of the start of June (the most recent month for which data is available).

Unfortunately, the new higher number is well below where it was just before the pandemic took hold in the U.S., in February 2020, the data showed. At that point, the manufacturing industry stood at almost 12.8 million — meaning the sector still needs to add about half a million jobs to get back to square one.

In the years leading up to the pandemic, the global emphasis on e-commerce and just-in-time fulfillment led companies to continually winnow down their inventories so they could increase their agility. In the face of the COVID-19 outbreak, though, demand for many items spiked — leading to those thinned-out inventories becoming almost entirely depleted, and supply chains worldwide highly constrained.

While just-in-time operations were a godsend for procurement departments for much of the early 21st century, the pandemic certainly highlighted some of the weaknesses the approach carries, rare though these catastrophic events may be, according to The New York Times. The effects of shutdowns — first in China, then in the U.S. a few months later — were cascading.

Constrained supply chains could continue for some time to come.Constrained supply chains could continue for some time to come.

Companies first relied on lean inventories because they could count on suppliers to continually produce the products or raw materials they needed. But when production facilities shuttered for months at a time, and came back in limited capacities in many cases, that left companies deeper down in the ecosystem going without, leading to empty warehouses and bare shelves.

"It's sort of like supply chain run amok," Willy Chih, an international trade expert at Harvard Business School, told The Times. "In a race to get to the lowest cost, I have concentrated my risk. We are at the logical conclusion of all that."

Back to normal?
Of course, many of those pressures are loosening up around the world, as manufacturing centers in Asia and the U.S. are getting back to full capacity, but they have a lot of ground to make up amid growing demand from renewed business and consumer activity, according to CNBC. That's leading to still-tight supply chains and, as a consequence, higher prices for all sorts of consumer goods, manufacturing components and more.

To date, domestic manufacturers have reclaimed nearly two-thirds of the jobs they shed during the pandemic, but competition for talent is growing, the report said. And with the lingering manufacturing skills gap — and potentially millions of unfilled (and perhaps, unfillable) jobs — this is not an issue that is likely to be resolved in the near future.

How widespread is it?
There have been a number of items that have garnered significant attention for being at the center of supply chain shortages, such as microchips used in all kinds of consumer electronics and vehicles, or toilet paper at the start of the outbreak, but those are really only the tip of the iceberg, according to Business Insider. In recent months, there have been shortages of both new and used cars, rental cars, gasoline, plastics, lumber, several types of toiletries, furniture, various types of meat, imported foods, domestically made produce and more. These shortages may have different types of origin stories, but the end result is the same: tight supply chains.

For these reasons and more, companies in the logistics industry need to be more cognizant of their potential shortcomings when it comes to inventory and ordering, and be strategic about how to meet these challenges as needed.


During the first half of 2021, we have seen a record number of ransomware attacks with unprecedented impact across the economy. Before this new wave of attacks, hackers often limited their targets to large corporations and international businesses. Now, government agencies/public institutions and small/mid-sized businesses are the primary victims.

In this article, we will focus on the key actions a Procurement Department can take to prepare, prevent, respond, and recovery when it comes to ransomware attacks.

First, what is ransomware?

According to the U.S. Government’s Cybersecurity and Infrastructure Assurance Agency (CISA(opens in a new tab)): “Ransomware is an ever-evolving form of malware designed to encrypt files on a device, rendering any files and the systems that rely on them unusable. Malicious actors then demand ransom in exchange for decryption. Ransomware actors often target and threaten to sell or leak exfiltrated data or authentication information if the ransom is not paid.”

A few recent examples:

-        Colonial Pipeline: DarkSide, the company behind the attack, targeted
the billing system and internal business network of the Colonial Pipeline in the United States. The impact was widespread gasoline shortages in multiple states. The FBI covered a significant amount of the $4.4 million paid as ransom.

-        Brenntag: DarkSide also targeted Brenntag in a similar way, receiving a ransom payment of $4.4 million as well (not yet recovered.

-        CD Projekt Red: Attacked by HelloKitty hackers. The result was encrypted devices and threats of leaked source code.

Other companies that experienced a major hack:

-        Acer

-        JBS Foods

-        Quanta

-        National Basketball Association

-        AXA

-        CAN

-        Kia Motors

 

The methods hackers use are constantly becoming more complex and agile. Cybersecurity experts learn new ways to fight these threats each day. The most prevalent methods are 2-factor authentication, strong and effective firewalls/antivirus/anti-malware software, limited access to information for each employee, and routine backups.

What role can Procurement take in contributing to security success?

First, Procurement, Risk Management, and IT need to collaborate when onboarding strategic partners. The strategic sourcing process is integral in establishing the right tools and actions to protecting a company. We can break this down into 4 major sections. Each is in relation to vendor interactions, contractual requirements, and policies.

Prepare

Prevent

Respond

Recover

Prepare:

The safest way to prepare for a malware/ransomware attack is to assume it is inevitable. The security organization will more likely have an infrastructure in place to handle this. We should work this same mindset into our partner relationships.

Procurement is encouraged to require vendors to prepare for an attack in the same ways as their own organization. Partners can be mandated to routinely backup client data, have safeguards in place, and have a full redundancy plan in the event an attack occurs.

Prevent:

Procurement, Risk Management, and IT should collaborate on choosing the best IT Security Partner (or in-house solution) to prevent a malware/ransomware attack. When procurement facilitates strategic sourcing projects, they can effectively collect the requirements from across the company and ensure effective communication. Getting the right contract in place requires cross-team functionality. Procurement is best equipped to make this happen.

During supplier selection, an IT vendor assessment/questionnaire should be worked into an RFP. This assessment aims to test the partner’s cybersecurity strength and redundancies.

Respond:

Paying a ransomware attack is highly discouraged. Payments often influence “copycats” and more malicious behavior.

As this becomes more common, contracts with vendors should explicitly address how vendors should respond to ransomware attacks. The cost of the ransom and the cost of not paying should be compared. Contracts should aim to build every possible outcome and even stipulate who will be responsible for the actions taken and how those impacted will be made whole.

Recover:

Speaking of being made whole, procurement can foresee this by building in cybersecurity insurance requirements into each contract. This insurance is specific and often not included in general insurance requirements. Setting limits and requiring proof of insurance must become the standard moving forward. As seen before, some attacks could require millions of dollars in ransom, or even more when trying to recreate or deal with the ramifications of losing authentic data. Having financial protection against this is key for a company’s survival. Ensuring vendors can survive an attack is a key to business continuity.

In addition, when contracts ensure vendors/partners must back up and store data securely, recovery is much less costly and difficult for the clients. Procurement and Vendor Management can request vendors stress test their systems and practice for if/when an attack occurs.  

 

In the world of logistics and procurement, it's not uncommon for companies to run a few days, weeks or sometimes even months behind on their payments to suppliers. It may not be what anyone wants, but it's a reality. Unfortunately, even as the effects of the pandemic draw down, and many businesses return to normal operations, late payments to suppliers remains a persistent problem.

Many companies experienced all types of difficulties throughout the pandemic and even now, as the effects of the outbreak are winding down in most parts of the country, the financial stressors continue, according to The Wall Street Journal. Indeed, recent data from the Hackett Group provided to the newspaper showed that the average large business in the U.S. was taking 58 days to pay suppliers through the end of the first fiscal quarter of the year, up from 55 days at the same time last year.

That was still down from full-year 2020 data, which showed average payments came in 62 days — but of course, much of the year was spent living under COVID restrictions and economic tightness, the report said. However, the persisting problem is of interest because the average company examined carried a cash balance that was up 14% on an annual basis.

Many suppliers are dealing with late payments.Many suppliers are dealing with late payments.

Small businesses affected
With cash reserves rising for many big companies — which are powering out of the recent downturn in a major way — growing so much, some smaller companies believe the decision to drag feet on paying for orders is by choice, rather than a necessity of a trying time, according to a recent Melio/YouGov survey. Indeed, 55% of small business owners say they believe these are "deliberate" and half believe they should be able to charge interest on those orders.

A big reason why so many small businesses are irked? A quarter say they have orders that are between 20 and 30 days late on payment, and 47% say orders specifically from larger businesses have gotten worse in the past year, the report said. For 30%, this issue has become so problematic that they may not be able to keep their business open. They've also prompted 40% to delay plans for hiring, 39% to delay inventory purchases, and 36% have been forced to cut their employees' hours.

How to handle the uncertainty
Of course, companies shouldn't be forced to make these kinds of decisions, and anything they can do to boost their flexibility until things return to normal will be of significant benefit, according to the law firm Faegre Drinker. That may include accepting discounted or partial payments, especially if business partners are effective in communicating their challenges. That way, businesses gain the capital to continue operating without putting a pain onto longstanding business relationships.

The more you can do to plan for these potential issues, the better off you will be when you actually have to deal with these obstacles. Whether they're a one-time problem post-pandemic or a whole new way of working with others in the supply chain, you could be setting yourself up for a smoother road in the future.

Many businesses in the supply chain are now shifting back to operations that at least resemble pre-pandemic norms, but they are doing so with renewed insight into what's valuable and better ways of doing business. Of course, all companies are different, so the paths they take to emerging from the past year are going to vary widely.

The overarching theme in the industry, however, is that customer experience has moved to the forefront and simply cannot be overlooked, according to a recent survey from SuperOffice. In all, CX was cited as the No. 1 priority for almost 46% of businesses, well ahead of providing quality products (just under 34%) and pricing (almost 21%). However, there's a clear reason for this strategy: The survey also found that 86% of buyers said they would pay more for products or services if the customer experience was "great."

Great customer experiences will buoy your business.Great customer experiences will buoy your business.

Of course, suppliers generally understand this intrinsically even if the data isn't there to back it up, the report said. In all, 42% of businesses say their No. 1 reason to invest in customer experience was to boost instances of upselling and cross-selling. Another 33% said it was to improve customer retention, and 32% wanted to boost customer satisfaction.

Why it matters
Being able to be accountable to customers and help them through both good and bad times is clearly important, and at a time when supply chain disruptions were grabbing headlines around the world, not always easy. This is, however, an industry-wide problem. Indeed, 94% of IT, security and procurement managers at companies in the U.S. and EU recently responded to a survey from Vanson Bourne and Interos saying their operations have been negatively impacted by supply chain disruptions.

More important, perhaps, is the fact that 83% felt they suffered reputational damage as a direct result of those disruptions, the survey found. In more than half of cases, these incidents were at least somewhat related to the pandemic, and for almost 9 in 10 of those firms, it was their production lines or individual business locations that were impacted.

Consequently, 50% said their top priority in the next two years will be increasing supply chain visibility, the report said. Only 39% felt this was the case today. That shows just how much, and how quickly, the winds are shifting on this front.

Assessing risk
Managing disruptions and improving the customer experience starts with an internal examination of risk assessment on an ongoing basis, according to Supply & Demand Chain Executive. Companies need to look at their abilities to source products from numerous sources, increase flexibility, build inventory to weather unpredicted difficulties and more, as they will all not only smooth internal operations, but translate to better customer dealings as well.

Companies should be able to continually assess how their risk factors on this front are changing all the time, especially as they ramp up to full capacity in the wake of COVID. Doing so can boost business in ways they may not have been able to foresee.

The supply chain industry has gained plenty of steam in recent years and its importance to businesses of all stripes means that those who handle it deserve to be well-compensated. The good news is that recent industry data shows this is happening even for new entrants into the field, and that's a trend that appears likely to continue for some time to come.

Today, the median salary for a supply chain professional in the U.S. is roughly $86,000, and entry-level positions pay roughly $60,000, according to the latest Supply Chain Salary and Career Survey Report from the Association for Supply Chain Management. Furthermore, there has been a long-standing pay gap for women in the industry under the age of 40, but that's less of an issue these days. That demographic group actually out-earns men under 40 by more than $2,000 now.

And, because of the ever-growing need for qualified pros in the industry today, 87% of respondents to the survey said they received a cash bonus in addition to their salaries, the report said. Meanwhile, only 5% of those polled said they lost their jobs amid the pandemic. New employees into the field are also enjoying some benefits: one-third of recent college grads got a job in the sector in less than a month, and more than half did so within three months.

Hiring competition is increasing, and procurement pros are reaping the benefits.Hiring competition is increasing, and procurement pros are reaping the benefits.

Incentives on the rise
At the same time as salaries and cash bonuses continue to climb, companies also know they have to do more to attract top talent, according to The New York Times. Across a number of industries, the signing-bonus and ongoing perks new hires enjoy are proliferating.

This includes everything from fully remote work to paying student loans or tuition, covering meal costs and so on, the report said. For the most part, companies find even extremely generous benefits to be more affordable in the long run than providing all employees with higher pay.

A struggle persists
Despite all the positives above, the reality for many businesses is that there aren't enough people coming into industries in and around the supply chain to fill all the open jobs — even with the promise of higher wages, better benefits and more, according to Business Insider. That may be because other industries are following the footsteps of logistics and manufacturing companies have been setting for years, and offering livable incomes for work that used to be closer to minimum wage.

Fast-food companies and other employers that have traditionally paid lower wages are being forced by the principles of supply and demand to raise their offerings, moving them into direct competition with warehouses and factories in many parts of the U.S., the report said. They have a long way to go, however; in April, the average manufacturing worker earned almost $23.50 per hour — close to $49,000 annually — and that number was more than 50% above what the average restaurant worker made. However, as recently as a decade ago, the gap was 82%, so things are shifting quickly. 

For these reasons and more, businesses in the supply chain may need to be more proactive about boosting salary and benefits offerings, to not only attract talent, but retain it on an ongoing basis.

The pandemic changed significant aspects of how companies — and particularly those in the supply chain — do business, and many learned important lessons about the value of their procurement departments. However, even that level of recognition may not be enough to give the department the kind of "seat at the table" managers and stakeholders seek, which can help take an organization to the next level of operations.

As a procurement professional, you have likely proven your value many times over, but highlighting just how much your efforts helped keep your company going over the past year can be a great way to build trust with other decision-makers, according to Procurious. It's one thing to do a good job?, and it's another to show that you went above and beyond in extremely trying times. That means delivering on the goals and promises your organization set to get through supply chain snags, shifting quickly to adjust to new realities, and tightening spending if the company's bottom line suffered amid the downturn.

How can you boost your procurement team's standing?How can you boost your procurement team's standing?

Being able to show that you have completed these tasks, and explain how you did so, may make it obvious that you've done everything you can within your current organizational setup, the report said. That, in turn, can help you make the case that there's more to be gained from greater investment and flexibility in the procurement department.

Breaking free?
You may have found that many companies do not have their own procurement teams and often either handle it on a department-by-department basis, or have a team that is set up within a single department without much independence, according to IndustryWeek. In many situations, the need for procurement to be broken out into its own department may not be obvious, because even high-level executives don't know how much truly goes into not only getting a fair price for various orders, but also coordinating need, shipping specifications and more across multiple departments at all times.

Since you work in procurement, you know there's more to a successful organizational approach than finding the lowest possible price. As IndustryWeek points out, being able to explain why is another critical part of gaining managerial trust as you go up the corporate ladder.

Show the return
You have likely been leveraging all kinds of data — and, over time, a growing amount of it — to make better procurement decisions and to streamline ordering and visibility, but you may not have shown the return on your efforts, according to Supply & Demand Chain Executive. When you can show how your work has improved supplier lead times, reduced unexpected instances of late deliveries, informed better decisions, streamlined communications and so on, it becomes easier to get buy-in on the idea that you need to be involved in high-level decision-making.

All it may take is a little more evidence — and homework on your part — to boost your team's standing within the business and, with it, its influence on the company's direction.

As the economy begins to bounce back from the global health crisis, companies are working hard to rebuild and reassess how to drive growth. Procurement teams must adjust to a world focused on cost-centric measures as companies rethink the role of procurement to focus on cash management, savings, and supply risk mitigation to enable growth and agility.

As we build/ change our strategy, some key questions that arise are:
  1. Are we throwing prior strategies out of the window, making minor changes, or staying the same?
  2. What are the best practices for cash management in a cost-centric environment?
  3. How to set coherent savings targets aligned with corporate strategy?
  4. How should we manage supplier risk and uncertainty?
There’s much being said about post covid world and how it impacts the role of procurement. 

Procurement leaders were close to unanimous in agreeing that a re imagination of the procurement function will be required, both to succeed in recovery efforts and to transition to a new operating model that’s fit for the new normal. 

CIPS Procurement may need to renegotiate its relationship with finance departments, recognizing that a successful result should be determined by both qualitative and quantitative metrics. This is important because years of work applied to strengthening business relationships with suppliers can be quickly undone if the CFO dictates a refocus purely on achieving cost savings and improvements to working capital.

Is this going to be an inevitable mandate response by finance when emerging from the pandemic? If so, it will require a certain level of maturity for procurement to stand up to this dictate and demonstrate an alternative approach. 


Ardent Partners also conducted a survey in 2020 on Procurement Metrics that matter. Pre-Covid, the top concerns for a procurement organization revolved around driving digital transformations, improving processes and increasing agility. What is interesting is that prioritizing cash management seems to be top priority for organizations post-Covid. Increasing savings and improving visibility into the overall supply chain are the other areas of focus as per this survey.

In order to enable growth and build agility, focus on these 3 areas can guide and enhance your approach to any transformation plans.

Cash Management is at the forefront of every organisation’s agenda to drive performance. Some of the activities to focus on to gain traction include re-evaluating your business model, optimising your operational flexibility, capital availability market reach, accelerating decision making and strengthening your personnel/talent.

Savings has always been the biggest measure of a procurement organisation's performance and can play a key role in your big picture transformation plan.  It’s also important to refine policies, understand and define training needs for your team, gain stakeholder buy-in to drive results and establish a supplier relationship management process as you start building this roadmap. Understanding your supplier contracts in detail will help you narrow down on those potential quick wins and can act as a starting point for the roadmap.

Supplier Risk Management : Traditionally, Procurement focus on supplier risk management constituted of t continued efforts with existing providers to improve the relationship, multiple rounds of attempted negotiations based on negotiation strategy and working sessions to improve service and account management. Although these are great things to do, a better way to improve relations with supplier to minimise risks would constitute engaging incumbent in current scope and quality discussions, vetting alternate providers based on specific requirements, using sourcing process to refine understanding of emerging trends and technology and leveraging market data to engage incumbent in conversations around performance, process & innovation, and cost improvements.

The value of a procurement organisation lies in not only driving savings, efficiency and compliance but also delivering value-based strategic procurement that can translate into bottom line improvements to the corporation …to ensure that the Procurement strategy is aligned with, and that it rolls-up to, the overall corporate strategy.

All activities individually have value, but the sum of their parts delivers the best results (e.g. spend analysis without strategic sourcing doesn’t bring savings in the door).


The world of supply chain businesses was indisputably affected by the recent pandemic in ways that will have lasting effects, but the same is true for how consumers shop. That, in turn, will likewise continue to impact companies for many years to come, but the sooner businesses can alter their response to shifting customer preferences, the better off all involved will be.

First and foremost, it appears that consumers have largely come to expect free and fast shipping as a matter of course — but interestingly, they don't always mind paying for it, according to Inmar Intelligence. More than half of respondents said they would spend between $25 and $50 if it meant they would qualify for free shipping, and 85% said they would go pick up their packages at a local store to reduce shipping costs.

And while almost half of those polled indicated they expect deliveries to arrive within two or three days of placing the order, 87% said they would be willing to wait as long as a week if they didn't pay for shipping, the survey showed. However, that wasn't the case for all types of products; almost 4 in 5 said they expect to get free shipping when they order apparel or home goods online.

Is your company set up to handle the shifting sands of e-commerce?Is your company set up to handle the shifting sands of e-commerce?

Different kinds of shopping
It should come as little surprise to those in the logistics industry that online shopping increased across the board during the pandemic, and that was particularly true of groceries. Now, though, consumers are returning to pre-pandemic norms, a recent study from Brick Meets Click found. In April 2021, online grocery sales hit $8.4 billion, down 10% from March but still well above where it was in the same month last year.

That came as fewer households made such purchases, a drop of 12% to some 68 million, the report said. That may seem like a bit of a disconnect — there was a 12% drop in households ordering groceries online, but revenues on those purchases were up 16% — but this shows increased engagement among the people who found they liked this kind of ordering. Indeed, 78% of total online grocery sales in April came from a dedicated set of monthly active users.

Meeting expectations
If consumers are changing their habits when it comes to online shopping, companies may need to do more to meet them where they are. Recent polling from FullStory showed that 81% of people plan to shop online more often in the months ahead, despite the waning effects of the COVID-19 pandemic. However, just 12% say they are "very likely" to provide feedback when they run into problems completing a transaction, and the vast majority will instead abandon the sale.

"The rise of digital-first business brings great opportunity but also risk, as this survey correlates a poor digital experience with customer and revenue loss," said Kirsten Newbold-Knipp, chief marketing officer of FullStory.

As such, companies may need to do more to engage consumers to understand what they want from these e-commerce transactions and how the business can better meet those requirements.

 

In May, the prices of lumber reached historic highs. Now, they are dropping quickly, although there is still much further to go to return to pre-pandemic pricing.

On Friday, futures fell all the way to $774.00 – a sharp 53.7% decrease from the early May high of $1,670.50.

Suddenly, the bubble is bursting.

How did this bubble form?

Across several industries, shortages that happened as a result of the COVID-19 pandemic impacted development, supply, and price. This was felt in the construction industry, as prices for supply has risen along with a shortage of labor and increase in demand.

When the COVID-19 pandemic began, many lumber mills across the country shut down production in anticipation that there would be low demand for houses during the low point of the pandemic. Other factors, such as mills having to close out of precaution directly related to the pandemic, played a role as well.

This assumption that the housing market would suffer, however, was incorrect. During the pandemic, homeowners looked to do DIY projects around their home that involved lumber. And, as interest rates remained low, demand in the housing market boomed, causing a spike in demand for lumber.

Softwood lumber prices increased by 154.3% from May 2020 until May 2021, per May’s PPI report. In this same time, hardwood lumber prices increased by 36.4% and plywood increased by 70.4%. Other construction materials were impacted too – iron and steel scrap, for example, increased by 76.6%.

This increase in price coupled with a labor shortage that is impacting industries across the board caused a construction backlog that could not keep up with the demand for projects, specifically housing.

What caused the bubble to burst?

As the pandemic wore on and lumber mills remained closed or unproductive, some builders began to stockpile lumber.

At its May peak, the lumber reached a price point that was too high for most consumers. So, at its highest price, wood wasn't selling -- and the price turned.

This decrease in demand caused whose who stockpiled lumber to begin to sell off. So, the change in price of lumber the last few weeks have been a classic economics lesson. Demand decreased, supply increased and prices plummeted. 

What next?

While lumber prices are in a free fall, it does not appear that they are even close to returning to the pre-pandemic prices, according to Devin Stockfish, chief executive of lumber producer Weyerhaeuser Co who spoke at a conference last week per Ryan Dezember of the Wall Street Journal.

“I don’t think $1,000 lumber prices are the new normal. But that being said, when you think about the amount of housing that we’re going to have to build in the U.S. over the next three, five, 10 years, that’s just a significant amount of demand for wood products.”

Interest rates remain low, so demand in the housing market is not going anywhere. Per Dezember, others at the conference thought that the price of lumber would hover between $700 and $800 – clearly well below where it was this May, but still above the pre-pandemic pricing.

The ever-changing lumber market over the last 16 months is just one example of how COVID-19 has changed the market in a significant way. It’s

And while prices are returning closer to normal, it is clear that the construction industry will continue to feel the effects left by the pandemic's original impact.

How does this impact sourcing?

The current freefall in prices changes the procurement strategy from even a month ago and serves as a reminder of the importance of evaluating your sourcing strategy as situations change.

Sourcing for lumber in this tumultuous scenario may be complicated in an RFP process. Lumber mills may now be inclined to just sell to the highest bidder, especially as prices quickly plummet. On the demand side, it may serve best to find the lowest price as mills try to unload as quickly as possible rather than settle on a long-term agreement before prices return to a steady price.

Turning to Corcentric to help source through the after-effects of the pandemic can pay dividends, with service offerings that can help to navigate these fluctuating prices and find the best value for your company.