2021

The microprocessor chip shortage seen around the world has grabbed plenty of headlines and ground numerous supply chains to a halt for months now — and it's expected to continue well into 2022. Of course, the countless companies that rely on the easy flow of these chips through global supply lines can't wait around for the better part of another year for things to get back to pre-pandemic norms. For that reason, industry groups are now urging federal lawmakers to lend a hand.

Earlier this year, Congress passed a bill known as the Chips Act, built into the annual defense funding bill, that would incentivize manufacturers to build factories that produce chips within the U.S., according to Bloomberg News. Crucially, however, the funding for those incentives and grants was never pushed through along with the bill itself, so officials from the Semiconductor Industry Association and 19 other organizations recently sent a letter to top lawmakers urging them to find the funding necessary (some $52 billion) to underwrite the bill.

Microchips are likely to remain hard to come by for some time.Microchips are likely to remain hard to come by for some time.

"To be competitive and strengthen the resilience of critical supply chains, we believe the U.S. needs to incentivize the construction of new and modernized semiconductor manufacturing facilities and invest in research capabilities," group leaders said in the letter. "The need is urgent and now is the time to act. We look forward to working with you on this national priority."

What's the issue?
Over the past few decades, the U.S. standing in the microchip manufacturing sector has certainly faltered, according to Richard Howells of the tech giant SAP's supply chain management department, writing for Forbes. In the early 1990s, the U.S. was responsible for making more than 1 in every 3 microchips in the world, but today, that number is closer to 1 in every 8.

With more chips being imported to the U.S. these days, that leaves supply chains highly vulnerable to any number of risks, and the work stoppages and backlog engendered by the COVID-19 pandemic showed just how much of an issue this would be, the report said. With no end to the shortage in sight, at least for the near term, it's not that lawmakers speeding up funding will lessen the impact anytime soon — but rather that investment now would insulate the U.S. from future risk.

The short-term impact
As mentioned, the global chip shortage arose not because of COVID shutdowns directly, but due to those relatively brief shutdowns created huge, pent-up demand that would take well over a year to unwind. Indeed, the Taiwan Semiconductor Manufacturing Company recently announced that its production of chips in the first half of 2021 had increased 30% on an annual basis, with plans to double that number by year's end, according to Supply Chain Dive. But even that extra effort isn't likely to be enough to meet global needs until at least the start of next year, if not longer, because since demand continues to grow.

With all this in mind, it's vital for those in the supply chain to continually assess risk and generate whatever fallback plans may be feasible at any given time. With contingencies in place, the impact of disruptions may be reduced.

During the last 16 months, the Covid-19 pandemic has plagued the supply chain. Specific industries, like construction with lumber shortages and the automobile industry with microchip, continue to slowly recover and still have a long way to go.

But the new variant of Covid-19, known as the delta variant, could stand in the way of a full recovery being around the corner. And it has yet to be seen how this variant, which has spread rather quickly over the last several weeks, could hamper this recovery in an already tightened supply chain.

How is the variant impacting supply chain?

While leadership, including Dr. Anthony Fauci, has claimed no lock downs are around the corner, the numbers are certainly worsening. According to the Washington Post, cases rose by 55 percent last week. Additionally, deaths rose by 29 percent and hospitalizations rose by 42 percent.

Last week, the CDC has made recommendations for mask mandates to be back in place for even those who are unvaccinated. These mandates have been put back in place in some spots across the country including Washington D.C. and Las Vegas, and implies the possibility of more potential restrictions around the corner.

At the moment, it does not appear that the delta variant will create shutdowns comparable to what was put in place at the onset of the pandemic in March. But, this does not mean there will be no measurable impact on supply chain.

According to Reuters, several countries in Asia saw a decrease in factory production in July that was specifically related to a surge in cases. Additionally, the delta variant’s quick rise has led to many countries not allowing access to sailors – a big problem, considering that 90% of the world’s trade is done by ships.

Just last week, Toyota had to stop production at plants in Asia because they were unable to get parts. U.K. factories were shut down because employees were forced to isolate to avoid the spread of the new variant. According to an executive at a South Korea auto parts producer, a rise in steel prices related to the higher transportation costs is having a negative impact on production.

While the delta variant might not lead to another full economic shutdown, its current impacts on the economy are undeniable.

What about other factors impacting supply chain?

But the delta variant alone is not the only thing that is impacting supply chain.

Domestically, workforce shortages are also having an impact that is preventing supply chain to get back to pre-pandemic levels. According to National Association of Manufacturers CEO Jay Timmons via CNBC, there are 851,000 open jobs in manufacturing – a figure that is expected to increase to over 2 million by 2030.

Globally, last month’s floods in Europe and China have had devastating impacts. Specifically, the floods in China have slowed importation of coal, which is needed for factory production.

What can you do?

The delta variant, in addition to workforce shortages and last month's floods, serve as a reminder of how quickly the supply chain can change. It is important for companies to remain flexible because of this, and to have contingencies in place as the availability and price of raw materials ebbs and flows.

Some materials are better sourced in an RFP process. The best strategy for other products that are seeing rising prices that may soon again fall could be to search for the lowest price on the market. Turning to Corcentric to help create a strategy to source your needs will help combat the consequences of this tightening supply chain.

 

 

 

 

 

Whether most people know it or not, a large and growing percentage of our lives is based around technology that needs rare earth minerals to operate — and as such, the supply chain for these materials is a major issue around the world. Large quantities of these minerals are mined overseas and important to manufacturing centers, but within the U.S., there are deposits that need to be mined, processed and shipped.

Recently, an energy company based in Georgia began mining a substance called monazite, and shipped 20 tons of the rare-earth carbonate to Utah for processing, according to Freightwaves. From there, it was sent to another plant in Estonia so that it could be refined further and used in the manufacture of high-end electronics. As one of just two operations mining rare earth materials in the U.S., getting a more efficient supply chain off the ground is a must.

Rare earth mineral supply chains are just getting underway in the U.S.Rare earth mineral supply chains are just getting underway in the U.S.

"We didn't even know we had a role to play in the industry until probably a year and a half ago," Curtis Moore, a vice president at the energy company, told the site. "[Monazite] is very high in magnetic rare earth elements — that's neodymium, praseodymium, dysprosium and terbium — which are the raw materials you need for these permanent rare earth magnets used in everything from electric cars to fighter jets."

Numerous companies are in the planning phase for introducing mining and processing efforts within the U.S., but it may take some time before the nation is able to handle these materials within their own borders at scale, the report said.

Outside competition
With so much riding on access to rare earth minerals, and the U.S. still largely in the nascent stages of being able to meet any kind of real demand for them on its own, lawmakers are nonetheless taking a hard look at where they are sourced, according to Politico. Currently, a significant percentage of them are sourced from China, and that may be a problem for the U.S. Department of Defense and other entities, because international relations between the U.S., its allies, and the East Asian titan are volatile. That, in turn, creates supply chain risk that could leave the military and other critical aspects of the American economy in a vulnerable position.

Recently, a bipartisan Congressional task force asked the Defense Department to "deploy the full range of American innovation to secure the supply chains involving rare earth elements" so if normal sources aren't fully available, fallback positions can be easily leveraged, the report said.

Why it's important
Currently, one of the most common uses for rare earth minerals is in the manufacture of renewable energy technology and adjacent products, such as solar panels, wind turbines, and electric vehicles, according to the Institution of Engineering and Technology. The supply chain needed to meet ever-growing demand for these materials from a "greening" energy sector is clear, but there is also environmental risk inherent to increased mining and shipping operations.

For all these reasons and more, decision-makers in a number of sectors must keep a close eye on the rare earth mineral supply chain and its development within the U.S. and abroad.

Issues with the supply chain were quite common and gained a lot of attention throughout 2020, and especially in the early days of the novel coronavirus pandemic, but they have also persisted at a lower level ever since. This has affected a number of industries, not the least of which is the restaurant sector, where shortages of food and ingredients have become a serious issue in recent months the world over.

For instance, Korean chains say they are facing a major shortage of potatoes needed to meet demand for french fries, and green tea is increasingly hard to come by in the U.S., according to Reuters. The reason why? Snags in the supply chain. Customs checks for international shipping are taking longer these days thanks to an increased focus on health and safety due to the pandemic, and also because bottlenecks in other types of shipping have made containers needed to send food items overseas harder to come by.

Large quantities of chicken and other popular foods are increasingly difficult to come by.Large quantities of chicken and other popular foods are increasingly difficult to come by.

Experts say this is not a temporary problem, having lasted many months already, and are expected to extend well into next year as well, the report said. Simply put, there is so much pent-up shipping demand that needs to unwind, that all types of supply chains will likely remain constricted. However, this also comes at a time when lockdowns around the U.S. and elsewhere are also coming to an end, so demand for food products in particular is on the rise as people return to their pre-pandemic behavior.

On the ground
Of course, it's not just a lack of shipping capacity that is affecting restaurants and stores all over the world, according to Transport Topics. Many companies across all industries are also coping with a worker shortage or trying to make up for lost time that resulted from COVID shutdowns. This means that even when things are being delivered, they're not arriving in the quantities restaurants need to satisfy demand.

Moreover, those in the industry say the issues are getting more difficult to navigate as business activity ramps up, the report said. Meanwhile, minimum order requirements are on the rise from suppliers, putting a different kind of squeeze on restaurants and consumers as costs continue to rise.

Not just small outfits
This is an issue affecting everyone from small, family-run restaurants to those with thousands of locations around the world, according to Yahoo Finance. Taco Bell, under the umbrella of mega-corporation Yum Brands (which also owns KFC, Pizza Hut and more), says it has seen numerous restaurants running low on basic ingredients in its offerings, including beef, tortillas, chicken and even hot sauce. The issue has become so widespread the restaurant recently placed a banner notification in its dedicated app warning users of "national ingredient shortages."

With no end in sight to this issue, it's important for restaurants to keep an eye on these shortages and continually strategize to find solutions that can keep their customers happy and their operations running smoothly.

 


I believe that the health of a department depends on the strength of their systems – especially in the realms of procurement and strategic sourcing. As a consultant with over 10 years of experience, I’ve worked within the procurement departments of numerous, global organizations. These days, I can quickly assess whether a team will meet its goals simply by understanding which systems (if any) they have in place.

The truth is: when the proper systems are put to work, everyone’s work life is better. When they aren’t, everyone’s work life is hell.

In a previous role, I experienced first-hand what it was like to work on a procurement team with little to no systems. Instead of complaining at the virtual watercooler with my colleagues about how messed up things were, I chose to do something. I decided to advocate for the implementation of more solid systems. And since this article is designed to help you understand the reasons why things like this are critical to the success of your teams, let’s just jump right in:


1. Strong systems dramatically reduce email inbox clutter and instant message pings

Being a successful strategic sourcing professional requires focus. One must properly prioritize their ever-growing to-do list and expertly manage their time.

In my 10+ year career, I’ve found email and instant messaging to be one of the biggest time drainers. Still, as a team it’s important to have multiple channels of communication because things can and often do change in an instant. Essentially, striking balance in how much time you spend communicating with your team is critical to the success of any strategic sourcing team. After all, no one can get work done if they’re constantly wading through email or if they often have to divert their attention to answer a “quick question” via instant message.

At my former organization, I quickly realized the procurement team was very unorganized. Some members of the team saved contracts and other important documents to their desktop or personal One Drive. Other members of the team saved files in shared folders like BOX, or on the Teams site. However, everyone on the team didn’t have full access to all items in the BOX drive, which hampered productivity severely. For instance, if I needed to see current contracts to understand the history of a vendor relationship, I would have to reach out directly to a member of the team. However, oftentimes, that team member would inform me that they didn’t have access to said contract. This would result in hours of wasted time attempting to track down where the contract was saved. This became very frustrating, because internal stakeholders who inquired about specific information within a contract would have to wait an unreasonable amount of time to get an answer to a basic question, which didn’t reflect well on the Procurement team.    

That’s why strong systems are important and need to come into play. When everyone is on the same page, knows where all the files are, knows who is working on what, teams are more productive. There’s less time and energy spent on reaching out to ask and answer the same repetitive questions and more time spent getting things done.



2. Strong systems make collaboration a breeze

Prior to me joining the team, my former company had recently divested from its parent company. Subsequently, the company acquired another. All this change took place within the span of six months. With this massive change, teams were left to their own devices to get things done, which meant there was no centralized information hub or efficient processes. Trying to collaborate on anything always felt like an uphill battle – mostly because everything was always so all over the place.

I implemented a centralized hub: a Procurement Tracker and Contract Repository that innovated the way the procurement team communicated, managed vendor and stakeholder relationships, shared information, and stored contracts.

The new system I created tracked the Supplier Name, Vendor Contact Name and Email, Title/Purpose of Project, the Internal company the Supplier’s Location, Country in which the work is being performed, the Region in the country, the Level of Urgency, the Current Steps Taken in the project, the Next Steps to be completed, the Date the project was assigned to me, the Date the contract was Executed, the Expiration of the contract, the Dollar Value of the contract, Budget Approval status, Funding Approval status, Savings (if any) of the project, the Type of Document being executed (i.e. MSA, SOW, Order Form, etc.), who the Internal Stakeholder is, and their Contact Information, Vendor Onboarded status, and where the signed contract would be stored (i.e. Teams, Box).

I did this because I knew everyone on the team needed to know where to locate important documents like contracts and invoices at a moment’s notice. There’s nothing more frustrating than not being able to find a file to reference while on a call with a stakeholder or vendor.


3. Strong systems create solid teams who communicate well

I know no one particularly leaps for joy at the thought of attending meetings but having strong systems in place makes them more effective (and shorter!).

Before implementing new systems at my previous organization, I noticed many team members worked in silos and rarely met as a collective to debrief and request help. When we would meet, there were multiple instances where we discovered redundancies because there were team members often working on the same tasks or projects unknowingly. This was another red flag that I brought to leadership’s attention.

So, I introduced the idea of consistent weekly meetings, which became extremely important because the time together allowed us to calibrate, and back someone up if they were out of the office. Nothing is fun about trying to cover a colleague out of the office if you don’t know what they’re working on! It’s almost like drinking out of a fire hose.

Communication is a core reason why many teams fail and succeed. The best systems make it so that communication between team members isn’t overwhelming or even frivolous, but instead intentional and impactful.


 

Supplier relationships have always been front and center in the procurement world. They are pivotal to ensure operations are not disrupted, value is being created and performance measures are being met. Suppliers come in all shapes and sizes and have a varying degree of priority for each company. Oftentimes preferred suppliers get the front row from management however it is important to give focus and attention to the smaller guys as well who may provide a strategic advantage. In looking at suppliers there are direct and indirect. Direct being those that provide inputs for a final end product and indirect those that provide services enabling business operation.

In difficult times supplier relationships can become an organizational asset, ensuring that your businesses’ needs get the priority that they deserve. Commonly SRM or Supplier Relationship Management has been deployed to help keep both supplier metrics and relationships in check. However, one thing not commonly employed is joint ventures/partnerships or investments. Since the pandemic began one company, Stanley Black & Decker, is utilizing investments to build strategic alliances across its supplier base as noted in a recent WSJ article dated 6/18/21. The concept is relatively simple, Stanley Black & Decker will co-invest a substantial sum of money into the suppliers operations. This investment may be in a needed production line or other delivery mechanism for an end product that will be purchased by Stanley Black & Decker.

In this particular situation Stanley Black & Decker is interested in securing scarce battery and chip resources in todays marketplace. This is a great strategic move to shore up scarce resources. We are seeing chip shortages impact automobiles, computers, phones and gaming systems across the board. Employing an investment strategy can help ensure that your organization can have access to the right materials at the right time. If a supplier does not have any affiliation or deep connection to your organization they will be less willing to prioritize your needs above other customers on their list.

While some may view this practice as costly it actually can be advantageous in the long run. Employing this strategy can lead to a lower overall cost of business especially when supply chains are pushed to their max capacity as we have seen during the COVID pandemic. Taking an investment approach can be especially impactful for those suppliers who are small, growing and show a lot of future promise. These early consequential investments will help grow trust, partnership and collaboration that is sure to serve well into the future. Structure your organizations supply base with the right mix of diverse suppliers and supply relationships to serve your organization in good times and bad. The payoff will be immense and help to give you both upside and protect any potential downside.

Supply relationships and having the right inputs at the right times can have immense consequences on your organizations bottom line and financial performance. Remember the correct investments will not only lead to a positive and high ROI but will also help maintain the right relationships to help give your organization a strategic advantage.

Big data has become the lifeblood of countless businesses in almost every industry, and that's especially true when it comes to companies in the logistics sector. Your firm no doubt collects all kinds of information from your internal operations, those of your suppliers and customers, shipping partners and more. But how much are you really getting out of all that information?

If you don't really know the answer to this question, you're probably leaving plenty of opportunity on the table when it comes to increasing your efficiency. The following tips should help you get a better handle on the entire process:

1) Keep it simple

First and foremost, you likely collect a lot of data but put a lot of effort into interpreting and categorizing it, according to ArcBlue. The question is, how simple is your system? If it's overly complicated with a wide variety of tags and scads of data moving back and forth between departments, you may be missing out on some key insights.

With the right approach, a little more data can go a long way.With the right approach, a little more data can go a long way.

2) Collect as much data as you can

With that having been said, you should also be trying to find as much data from as many inputs as you can, ArcBlue said. When you have more data at your fingertips, it's easier to understand what's important and what isn't. That, in turn, allows you to lean into what is most important, and save the rest for deeper dives as needed.

3) Have an overarching plan

Your company needs to have a clear strategy when it comes to what you do with your data, according to Ivalua. You need to know who controls it, what they do with it, and whether they're getting as much out of it as they can. When you have a top-down directive in place, there is no confusion about the chain of custody or how data should be interpreted and utilized in decision-making.

4) Continually re-evaluate

The things that made your business work at its peak efficiency a year ago likely aren't exactly the same as what keeps you running smoothly these days, Ivalua recommended. Likewise, today's strategies probably won't work perfectly for you a year from now. As such, you need to convene your supply chain team regularly to see what's working, what isn't, and what's needed for the months, quarters or years ahead.

5) Gather it from more sources

When you're undergoing all these changes in a short period of time, it's certainly a good idea to make sure you are collecting all the data you've come to rely on, all on an ongoing basis, according to Procurious. However, you have to go beyond, and continually seek out new data sources so you can be sure you're getting the most out of these efforts.

6) Find ways to convert data into actionable ideas

Finally, you can't expect everyone in your organization to have the kind of deep understanding of supply chain data as the people who work with it regularly, Procurious noted. As such, you should always strive to think about ways you can interpret that data, translate it into visuals or simple explanations, and leverage it to take essential next steps that continually set your company up for success.

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.

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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.