Articles by "Administrative Expense"
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Many organizations in the manufacturing and industrial field often find themselves working tirelessly to ensure employee safety is practiced through the utilization and procurement of a wide variety of PPE equipment.  The immediate threat of COVID-19 to the workforce has also created greater visibility within the safety category to ensure employees are properly protected.  The purpose of this blog is to help establish a roadmap related to the processes and procedures that will help your organization improve its safety program while also establishing significant cost savings. 

Well before the process of aligning on safety SKUs should be made, the first critical step is understanding and agreeing on the key decision makers within your organization regarding anything safety related.  If an Environmental Health & Safety (EH&S) department is not established within your organization, now is the time to do so.  A reporting hierarchy within your EH&S department should also be clearly established.  For instance, an EH&S Director should be the final decision maker for safety compliance and SKU standardization at all facilities across the organization, while an EH&S Coordinator should be responsible for compliance and enforcement at the local level.  This reporting structure is a critical piece of your overall safety strategy not only to ensure compliance across the organization but to also guarantee significant cost savings.  

Once your EH&S team hierarchy is built and properly aligned, the next step is to understand the “need to have” vs “nice to have” safety SKUs for your organization.  Any “need to have” SKUs should be rather clear – these would include OSHA (Occupational Safety and Health Administration) required equipment related to your specific field or any gear that is paramount for employee safety that should be identified and clearly defined (hardhats, fire retardant coveralls, COVID facemasks, etc.).  Working to solve for the “nice to have” category is often times a very difficult to define gray area between comfort and cost.  For instance, if your team works outdoors often, consider investing in the “nice to have” option of weatherproofing materials to ensure rapid moisture evaporation and rain proofing to help drive efficiency.  When addressing the “nice to have” category, there are usually significant cost ramifications that need to be properly evaluated before making any significant decisions.

Once the need vs nice to have discussion has been aligned on, the next step is to begin understanding and developing a SKU consolidation strategy.  This critical step is what often separates a good safety program from a great safety program.  The goal here is to fully understand what PPE categories need to be utilized by your employees, and to establish EH&S approved only SKUs within each specific category.  This process will lead to a custom internal catalog between your employees and awarded safety supplier to ensure ease of purchasing and compliance.  In addition, this custom catalog will protect your organization from “off-catalog” non-compliant PPE gear that would create additional costs while also putting your employees at risk for potential injury.

When identifying the SKUs that will qualify for purchase in your custom safety purchasing catalog, it is important to do your due diligence and full evaluation of each SKU in the running.  For instance, when aligning on an item such as safety gloves, performing on-site testing and a comparison of cut-sheets for each product under consideration will help provide tangible data to help influence your decision.  The EH&S team can oversee this process by distributing the PPE gear under evaluation with accompanying surveys to select employees in the field, while also internally reviewing the safety standards and specs identified in each cut-sheet.  This process will establish both a qualitative and quantitative analysis of each pending SKU, which will prove to be tremendously helpful in guiding the EH&S team towards a final decision in establishing cost savings within an improved safety program. 



Let’s face it – everyone looks forward to payday. For most it comes every other Friday but the schedules vary across the board. Some get paid weekly, bi-weekly or twice a month, it all depends. Even the day of the week can be up for grabs with Friday being a favored pick for many companies but some paying on Wednesday’s or certain numbered days in a month. Many people are familiar with their payroll company as it normally shows up on the corner of their paystub. ADP, Paylocity and Fidelity are a few big names that readily come to mind. What many don’t realize is there is a lot that goes on behind the scenes to make sure you actually get paid at the end of the day. Depending on the service provider it involves some manual or automated steps and a seamless integration with your companies HR, Finance and Accounting departments. Payroll providers also do more than just paying employees. They help manage any unemployment claims, wage garnishments and even things like performance review portals. This leads us to a very important question, is your company getting the most value from your payroll provider? 

Value in the payroll space can be determined in many different ways. To name a few:

1. How seamlessly do they integrate with your companies systems?
2. Do they provide a suite of offerings or only core/basic services?
3. Do they offer competitive pricing in the marketplace?

Payroll companies at their base all offer a basic utility or service – the administration and transfer of funds from one party to another. However as described above many have competitively differentiated themselves in the marketplace to offer a full array of services catering specifically to the HR suite. Many HR leaders are overwhelmed with many different offerings, it is important to cut out the noise and really evaluate what is important to your organization. Cost may not always be the driving decision factor, rather capability and features may outweigh everything else. There is no one size fits all approach but it is important to ensure that you are not significantly overpaying for the basic utility or service and that is the actual fulfillment of payroll. Many important factors go into cost structure such as the frequency of payroll, number of employees and complexity of integration. This being said it is important to note that a “good deal” may be very different between a large and small organization.

Many times either a CHRO, other HR leader or Finance leader makes a final decision on a payroll provider. It is important to take a step back and truly understand if your organization is driving the right value for this service offering. Additionally, it is very easy to get engrained and comfortable with a payroll provider and see prices that continue to skyrocket year over year. Taking your offering to market can help ensure that you are getting the ultimate value for you, your company and your employees. If nothing else it will help reset your relationship with your current vendor. Realize that optimizing these services is ever more important in today’s environment where every dollar counts.

The phrase “survival of the fittest” originated from Charles Darwin’s evolutionary theory which highlights the concept that adaptation will lead to eventual long-term survival and success.  This theory holds value more so than ever as over the span of just a few weeks the entire global economy has been interrupted by the COVID-19 pandemic. Many organization went from record breaking revenue volumes to a seismic downturn once COVID-19 wreaked havoc across the globe.

This article will help highlight how entire industries have been practicing Charles Darwin’s theory as organizations have adapted and evolved from their standard offerings in order to survive and thrive during these challenging times.

From Vodka to Hand Sanitizer

When distilleries across America were forced to shut their doors indefinitely as a result of the COVID-19 pandemic, a shortage arose within a completely different marketplace that needed to be resolved.  As citizens began purchasing PPE and other vital supplies to keep themselves safe while sheltering in place, hand sanitizer quickly became a hot commodity.  Many distilleries identified this need and immediately pivoted their operation to answer the call for their local communities.  Across the nation in just a matter of days distilleries halted their production of grain alcohol and began producing hand sanitizer from 55 gallon drums to pints, liters and any other kind of containers they could get their hands on.  Many distilleries also provided high quality products by utilizing the exact ingredients, standards and guidelines required by WHO (World Health Organization) to establish complete transparency and trust with consumers.

From Trade Shows to Field Hospitals

Many event planning organizations that design and build custom structures for trade shows found themselves without a market to service indefinitely due social distancing in place.  In addition, facilities such as Convention Centers these organizations often utilized were being transformed into temporary field hospitals in order to support the surge of patients forecasted for COVID-19.  These event planning agencies identified an immediate need to help support the development and construction of these temporary hospitals.  As a result, they pivoted their services to provide labor, walls, tables, tents and other miscellaneous furniture and structural needs to help build a fully operational hospital.  This rapid response from event agencies large inventory of product offerings played a crucial part in providing their communities with an immediate need for creating temporary structures overnight.

From Clothing to Facemasks 

Clothing retailers across the country were forced to close their doors indefinitely in response to mandated social distancing orders.  As a result, many clothing manufacturers were left with an excess of raw materials and a lack of shelving space to sell their goods.  As citizens began taking their own measures of protecting themselves from the virus, one PPE product that became a hot commodity were facemasks.  Clothing manufacturers immediately identified this need and began pivoting their operations to meet this demand overnight.  Raw materials immediately transitioned to facemask production and any overstocked inventory was taken off the shelves and altered to help meet the need of bulk orders.  Retailers also shifted their operation to drive facemask sales through online ordering and shipping in order to continue practicing social distancing while still providing an essential service for the community.

While each of these industries noted above are very different in terms of product offerings, one thing that remains constant is the ability to identify and pivot their operations to survive.  Identifying and satisfying a new market need enabled these organizations to keep their revenue stream flowing during times of economic uncertainty in order to stay afloat.  The global economy is still facing much uncertainty in the coming months, but one concept that will remain true is the fact that only the strongest organizations will survive.


Accounts Payable is often thought of as just a cost center that needs to be controlled, and many finance organizations consider it a necessary evil. Historically, it’s true: Accounts Payable made sure invoices were entered into the books, approved, and paid. This does not have to happen today, and that mindset needs to change. The best way to do it is to stop the Accounts Payable organization from solely pushing paper and begin using the resources in a strategic fashion.


The first thing that needs to be asked is: What does management care about? Asking senior managers & CFOs who oversee AP will often provide one or more of these three metrics:
  • Invoice cycle times
  • AP employee productivity (i.e. invoices processed per team member)
  • Percentage of invoices paid on time
The common thread between all three of these metrics is that they only show whether AP is worth the cost. They are important metrics, but they only show the cost of AP while neglecting to show the value.

The key to making Accounts Payable profitable is thinking strategically beyond the above metrics and identify areas the team can help the business beyond the tactical. Any report to an executive should include additional metrics that detail the amount of money the department has saved. Some key examples are:
  • Identifying and stopping duplicate invoices or other fraud
  • Negotiating and meeting early payment terms
  • Persuading vendors to accept credit cards (that offer a rebate back to the business)
While the first one is important to any AP organization and will absolutely demonstrate value, using the latter two as the basis to perform an Accounts Payable transformation can elevate the role of AP from cost center to a potential profit center.

Imagine a company with $200,000,000 in invoice payments that spends $300,000 on an AP department. If they can demonstrate how they have negotiated 1% early payment discounts on $25m of spend and paid another $20m with a credit card that give a 1.5% rebate, that $400,000 AP department cost has earned the company $550,000.

A 1.8 ROI wouldn’t be considered great for a revenue generating department, but it allows AP to transform its role from a cost center to a department that can directly improve the bottom line.

Beyond considering the process to achieve this, the other key aspect is having clean, accurate data to report these Accounts Payable KPIs. Without that, executives will constantly question the validity of them. I've worked with clients previously who couldn't provide data for these revenue-generating numbers beyond shrugs and anecdotes. Getting them to accurately track these areas enabled them to report the numbers and confidently stand behind them.

Improving Accounts Payable will take some effort and require a shift in operating among all employees in the organization (Working from home is a great time for an Accounts Payable process transformation). If your organization runs almost entirely on paper, there will likely need to be some technology adoption (such as AP Automation) in order to manage it all. The end results though, can demonstrate that AP is more than just a cost of doing business.

I made a prediction earlier in the month that more organizations will look to become greener this year. There are plenty of things organizations can do to improve their sustainability, but Procurement pros are in an excellent position to help lead their organizations to meeting these goals. Why? Because we move beyond the confines of our facilities and can have an impact with all the suppliers our organizations choose to buy from.

So, what can Procurement do to help make our organizations more sustainable and environmentally focused, while still working to reduce costs and promote efficient purchasing?

“Sell” Green 

There’s cost savings in these initiatives, but also a level of change required to make them work – and it isn’t always easy to get stakeholders onboard with these changes. Here’s a tale of two organizations’ janitorial service providers to show what I mean.

Both organizations wanted to cut costs and considered moving to linerless trach receptacles to do it. Plastic trash bags take a notoriously long time to decompose (anywhere from 10 to 1,000 years). Cutting liners out can have a huge environmental impact for a large office – but requires personal change. One organization ended up cutting 80% of their liners to get greener and cut 2.5% of their monthly janitorial costs as a bonus. But this required employees to throw away gunky garbage (think lunch waste) in the still-lined receptacles in break rooms. The other organization’s management team felt this was too much of a burden to place on employees. Liners stayed in place.

Before we can start building a green Procurement strategy, we need to get our organizations and suppliers excited about the opportunities they bring. Is 2.5% monthly savings on janitorial services “worth it?” It certainly helps to position a change on cost benefits, but ultimately there’s an attitude change that needs to take place as well.

Establish Green Go-To-Market Events

Reducing or eliminating trash liners is just one green example. Green packaging options can cut waste while still offering exceptional protection for goods. Organizations can also push paperless initiatives. They can purchase green office and cleaning supplies, and eliminate disposable breakroom supplies in favor of reusable dishes and utensils. For organizations in deregulated areas, they can switch energy suppliers to those that offer green energy.

Procurement, naturally, has a hand in all of these decisions. As such, we should brainstorm such opportunities and propose go-to-market initiatives to bring such products in.

Even if a market event isn’t specifically focused on a green initiative, Procurement can promote sustainable purchases by including green elements in RFP documents. Ask suppliers to highlight green products in their quotes. Ask suppliers to outline their own green initiatives, and define what percent of their own suppliers offer green products and services. Make your commitment clear from the beginning.

Be a Green Advocate

Gut check question: Did you make any New Year’s resolutions this year? Follow-up: Have you already given up on any? If you have, you aren’t alone – less than 25% of people stick with resolutions after January ends.

Sticking with green initiatives will be much the same – it isn’t enough to sell green strategies once, or launch a few isolated green market events.

  • Work with management to set annual sustainability goals. Help the cause by tracking green purchases monthly as one of the overarching KPIs of this goal.
  • Work with suppliers as well. This will be particularly important for smaller suppliers that may not have much experience with sustainability initiatives, and don’t have the resources to devote to full-time team members to focus on being green. 

It Ain’t Easy Being Green

Beyond reducing environmental impact, there are certainly opportunities for cost savings from going green. But reducing an organizational environmental footprint and achieving those savings isn’t always easy.

Dedication is needed to identify green opportunities, see them through, and ensure that sustainability initiatives are a consistent focus as time goes by.

I’ve had quite a few conversations about data granularity with organizations seeking to conduct a spend analysis. One of the common questions I am asked is, “how do we know if we have enough detail?

I understand exactly where this question comes from – we live in a world where collecting and storing large swathes of data is commonplace. In the context of a spend analysis, however, I reject it. I think a much healthier question to ask at these early stages is “how do I know if I have too much?

Less Really IS More

Many people used to live by the words ‘less is more,’ opting to simplify in order to underscore and emphasize a main point or priority. It was a simple, efficient philosophy that often yielded results when applied correctly. Yet we now live in a world where having more is cheaper and easier than ever before. Surely the ‘less is more’ crowd only felt that way because it didn’t have the tools and big data capabilities that we have today… right?

Again, I reject this notion. I certainly agree that technological strides have in fact made collecting massive amounts of data much easier, but none of us are here right now with the stated mission of collecting data simply for the sake of filling up a data warehouse. We’re here to accomplish a mission – develop a clear, concise picture of where money is spent, with who, and how often. Then, we’re going to take that clear, concise picture and use it to identify key strategic sourcing initiatives.

I’m getting conceptual, so let me provide an example. Consider your latest Staples purchase. We have pens, pencils, paper clips, notebooks, and dozens of other individual line items. Digging into just a single one of these items, I have black vs. blue pens, felt tip vs. ball point, name brand vs. store generic, on-contract vs. off-contract buys, and the list goes on – just for the pens! For a simple office supplies order, there are a lot of data points to consider.

... Or are there?

Think about all of those data points in relation to our goal: Is our office supply spend a viable candidate for a strategic sourcing project? Maybe it is, maybe it isn’t… but I can tell you with absolute certainty that the answer isn’t hidden in the color of my pen’s ink, how thick a line it makes, or any of the other countless data points we could collect.

Choosing the Right Map

If we thought of a spend analysis as a map, then we have a few options for the type of map we want to create.

First, consider the topographical map – for those not in the Boy Scouts or Girl Scouts, topo maps are full of details, including elevation lines, man-made and/or natural structures, forested areas, and more. This is great detail, but I can’t necessarily use it to get from here to St. Louis. Now consider the lowly gas station road map. This thing has three colors – blue for water, yellow for land, and red line roads. Can’t get simpler than that. But, you know what? I can use it to get from here to St. Louis… and avoid driving into any lakes or rivers to boot.

So, the next question is, what are those few, basic details in a spend analysis? I would start by considering these high-level qualities:


  • Product Similarity: How similar are the goods and services being procured? More appropriately, can I group them by the types of suppliers that offer them?
  • Like-Suppliers: What differentiates my suppliers in the context of these products? Are their cost structures, SLAs, or contract terms similar? Do they offer similar value-adds?
  • Sourcing Strategies: Are there similarities in how I would go to market for these products? Can I group together products that would do well in a market basket for an RFQ? Is there a group that could be considered for a GPO agreement opportunity?
  • Projected Savings: Can I group products into savings range buckets? Are my savings ranges relatively high or low? Are they wide or tight?
Continuing on with our office supplies example, I would consider all of the products from Staples to be pretty similar insofar as office supplies go. I’d also consider suppliers like Office Depot or W.B. Mason to be similar based on how they conduct their business and structure their agreements. I know that a combination of product substitution, supplier consolidation, and a market event like an RFQ will drive cost savings, while internal pushes to drive adherence to an on-contract list will ensure those savings are realized. I also know that, off-hand, I can expect savings of somewhere between 10% to 20% of annual spend.

For all these reasons, we’re going to group these suppliers and products simply – We’ll call them all “Administrative Expense: Office Supplies” suppliers, and we will consider if 10% to 20% of that consolidated total is worth a strategic sourcing initiative.

The Right Time and Place for ‘More’

Everything above notwithstanding, I truly do believe there’s a time and place for looking at more granular details – during our sourcing event. Once we’ve identified a path forward towards savings, we can go nuts identifying all the best pens to include in our on-contract pricing agreement. But to put the cart before the horse and do this deep, granular analysis before we even know where we want our strategy to go puts us at risk of paralysis by analysis, and will lead to lost opportunity costs.

So, as we begin our spend analysis journey, let’s all keep the ‘less is more’ mantra in mind.
The strategic sourcing process today is about much more than finding cheaper prices from vendors. Strategic sourcing consultants are also reliable for bringing attention to how technologies can help improve your company as well as help realize why choosing the right vendors to partner with is so important and how much additional value is available.

When it comes to all the services and products businesses purchase for their company as well as their employees’ needs it is key to point out that it has become essential to look beyond cost and more at your overall partnership with vendors. There is a very well-known saying that states, “You get what you pay for,” which helps further prove this point and is exactly the way business executives need to consider services for their businesses. If all you look at when evaluating a proposal from a vendor is the price for their services then you may not get the best quality which is why companies need to start shifting focus from looking only at the purchase price to understanding the total cost of owning or consuming a product or service.

In order to increase value, it’s important to readjust traditional ideas of what that word actually means in the supply chain. In procurement and sourcing, value has long been measured by unit costs, with successful professionals mastering the art of negotiation techniques to lower prices. However, cheaper items often are lower quality than their more expensive counterparts, which can lead to greater costs and possibly more risk down the line. Additionally, time spent on replacing or supplementing low cost units often translates to loss of productivity.

Supply chain has shifted toward a more rounded approach that measures trade-offs and best value arrangements. Value in this sense includes forming collaborative relationships with suppliers, rather than purely transactions, in order to gain access to more innovative technologies and service offerings. Supply chain professionals that can leverage supplier expertise are often able to offer better products to customers and create more lasting value, including enhanced customer loyalty.

Identifying the total cost of ownership requires looking at the entire process of procuring and consuming the product or service, something that can only happen with cooperation and input from both the client and the vendor. Establishing a "total cost of ownership" mindset is a goal that the supply management organization needs to embrace and spread throughout the entire enterprise. It will not be easy, however, to convince your company's executive leadership to truly prioritize value over price since most chief executives tend to focus on cost reductions and savings.

Supply chain management is a constantly evolving field, and it’s important that professionals regularly reevaluate their process in order to get the most value. As stated above, traditional value structures that focus on cost-saving techniques have been redefined to include a more holistic understanding of value. By understanding how procurement and sourcing professionals can use these approaches to create value within their companies will be crucial for future success.


As my colleague Jennifer Ulrich previously discussed in part one, the first – and most critical – step in the sourcing process is establishing a sound baseline in order to lay the foundation for a successful sourcing initiative. When it comes to facilities, she highlighted the fact that sourcing projects bring with them several layers of complexity that procurement professionals need to be aware of before engaging the supply base and the market. Jennifer emphasized several key elements that are “must haves” for any procurement checklist including labor (cost per hour), material and markup costs, usage rates, invoice transparency, and ancillary fees. When properly captured, this information is the catalyst for success and savings.

Facilities Management Sourcing Challenges Blog Mini Series: Part 2
While conceptually inventory management is straightforward, it can prove to be a tedious and daunting task if the data is inaccurate and/or nonexistent. The larger the footprint a company has the more opportunities for data to be muddied and inaccurate. Recently, Source One was involved in a large scale facilities sourcing project for a client with over 200 locations throughout North America. These locations varied in size, region, and country (US/Canada). While a streamlined, single source provider was the original goal with the majority of these facilities projects, we quickly learned that the amount of data available was not sufficient. Conducting an efficient, standardized, national streamlined approach would require more information and detail that simply was not available. Market feedback was also unclear and was built around a variety of assumptions that did not align with the baseline data that we were able to capture. Many locations had scopes that were not able to be standardized (additional kitchen area to be cleaned, different sprinkler systems, multiple HVAC compressor units, etc), and proved to be extremely difficult to standardize in one RFx. It became clear a shift in strategy was required. Our team began to directly engage the incumbent suppliers at each location in hopes of leveraging a long term contract, client/supplier relationship, and long term strategic growth in order to achieve savings. This ensured that scopes were level set, and no service gap exposure. While initial projections fell short due to this shift, we were still able to secure savings on a site by site basis.

Whenever a major shift is strategy occurs during a sourcing initiative there are ripple effects that must not be overlooked. Our timelines had to be adjusted, resources allocated accordingly, and additional stakeholder engagement as needed while we implemented this shift. As with any project there were plenty of lessons to be learned, but the biggest take away from this initiative for our client was the realization that they did not have transparency into their line item cost(s) across their facilities. This resulted in binding language being added to every service agreement requiring each supplier provide line item breakout and detail for any and all goods and services rendered on site. While we were able to achieve some short term savings, this transparency will allow the client to not only better understand their spend, but also provide them with visibility into specific costs which will lead to future savings when this business goes back to market.

Contractual language requiring transparency and line item detail is a good start, but for companies with large amounts of inventory/several locations, additional long term options should be considered. There are a variety of facility management software programs that offer companies the chance to gain control of their supply chain operations and inventory. The costs can range from hundreds of dollars per month per service to annual subscriptions that can cost as little at $1,000 per month depending on the type of facility a company has to manage.

So what do you do after you’ve established your baseline, and gotten a handle on your inventory? Check back soon for more entries on how to take your company’s facility management to the next level!
December is a time for many holidays and celebrations with family and friends. This means, starting the day after thanksgiving, consumers will be out shopping for gifts. This boost in demand means all businesses must be prepared to handle the influx of sales. Even though we are already halfway through December this doesn’t mean things will be slowing down anytime soon. Actually, many of the best known sales and promotions will be coming up soon.


Here are some tips to make sure your business stays prepared this holiday season:

Staff up appropriately – Use past sales patterns as a guide for your staffing this year. Properly assign the minimum number of employees your business may need in order to run smoothly. Also, make sure to think of any additional staff that may be necessary for shipping/receiving crews, stocking associates, extra cashiers and managers to keep pushing product out the door during the season of peak demand. Another key point to keep in mind is that holidays are the time when most employees will want time off with their families, so make sure to factor vacation requests into your planning as well.

Track inventory – a business’s success this holiday season will depend on how well they manage their inventory. Being able to offer customers what they want when they want it is key during the holidays because if you can’t then they will find it elsewhere. Look at last year’s sales in order to gauge the products that sold the most and what products didn’t do as well. Also, it can be just as bad to order too much of a product as it is to run out of product that’s in high demand. Having shelves stocked with inventory that’s not moving is a loss.

Website preparedness – Online sales are at an all-time high and continue to grow each year. This means you much make sure your website is able to accommodate all of the sales that you are going to receive. Take the time to work out any bugs or kinks dealing with your website for a smooth checkout process. You don’t want to lose out on any potential revenue because your website was down or because credit processing was having issues.

Stay organized – In the midst of all the craziness and ordering, make sure to stay calm and stay organized. During this time of year it can be more difficult to stay on top of daily tasks, therefore, research online tools that you can use during the holiday season, which may include tools to track inventory and shipping as well as tools to help with accounting and billing.

Get ready for post-holiday rush - the days between Christmas and New Years can be almost as profitable as the holiday shopping season. Try to create a strategy now for handling returns in a streamlined fashion.

By following these tips and staying one step ahead during the holidays it will be less stressful which will make for a joyful and successful holiday season for your business.



In order to have an efficient, well run supply chain within your organization, there are a few key elements that are necessary for ensuring you are getting the most out of your people and machines. Resources need to be properly staffed, machines maintained, and WIP (Work in Progress) needs to continue to move and not get backed up a certain operation or link in the process flow. An efficient supply chain can be a work of art if properly managed. Ensuring your supply chain operations are on track, you have to start from the top – even before anything gets moving!


Semiconductor manufacturing is a prime example of an industry where truth in planning is essential for hitting lead times, improving variability, and avoiding delays that ultimately expose deliverables to the end client. Semiconductors (computer chips) have extremely long lead times compared to most manufactured consumable items. With an average lead time of six-to-seven months from order receipt to delivered goods (silicon wafer, chip, module), one would think that it would be easy to plan for the various material and capacity needs throughout the supply chain. However, in a world that is becoming more and more metric focused, supply chain leaders are finding more of their manufacturing facilities are sandbagging their production lead times, and over shipping to meet internal organizational metrics or exceed them depending on which metric they want to satisfy.


The Real Truth in Planning

What manufacturing teams fail to realize is that these inaccurate projections – while looking good on paper – cripple the downstream stages of the supply chain, and can cause massive churn. Semiconductors that are built into computer modules require several key components that make up their respective bill of material (BOM) including capacitors, lids, and laminates. Lead time for these materials can take up to six weeks, and MRP systems rely on pitched completion dates to generate purchase orders within lead time. These systems are designed to order components at lead time to avoid having too much inventory on hand prior to the rest of the materials arriving. If a wafer (manufactured silicon) arrives at a testing machine three or four weeks ahead of schedule, there is a high probability that something else is already scheduled to be run on that tester, so, the wafers will have to sit, consequently wasting the energy and time spent to move the WIP to that point. As WIP piles up at various operations, keen supply chain managers should inquire to understand why the WIP is sitting there instead of moving forward. Supply chain analysts will then highlight that components, and/or capacity is not available since the WIP arrived earlier than planned, with no advanced notice. It wasn’t supposed to be there yet…so naturally they’re not ready!


A Weak Chain

This is where inaccurate planning can break a supply chain. Whenever parts sit in queue longer than planned cycle time WIP begins to build up. MRP systems see WIP build ups and project them to close in time for quarter and year end which is actually not feasible. Other components also end up being affected. When parts arrive early, pressure mounts on missing components that are needed to continue to move WIP forward. Expedited shipping requests, expedite fees, personalized handlers, and additional unnecessary churn on all parties ends up costing time and money.


Supply chain managers and executives are then forced to prioritize this WIP over regularly scheduled deliverables in hopes of achieving revenue targets. While some additional parts may get expedited through the supply chain and additional revenue achieved, the hidden costs of that expedited energy (missed deliveries, WIP buildup, MRP ordering) sometimes prove more costly than initially thought.


Just because certain areas of your supply chain are operating more efficiently than others, does not necessarily mean the overall chain is performing well. In order to make your supply chain efficient, make sure you plan accordingly! There is something to be said when you hear “truth in planning.” Don’t be the one to get stuck in neutral when you could be moving forward with fundamental, accurate planning!
On March 11th, Source One’s Leigh Merz had the pleasure of presenting to Temple University’s Economics Society of the career opportunities within supply management consulting. The Temple Economics Society focuses on providing students a better understanding of Economics in business and a forum for discussing areas of interests and future career exploration. Leigh Merz, a Telecommunications Cost Reduction and Administrative Expense Strategic Sourcing expert, shared with students how the Procurement function supports overarching business goals and a look at the role of a project analyst in supporting client engagements.

During the event, students were eager to learn more about Source One. A few of the questions included:

Why do companies work with procurement service providers?
Organizations turn to companies like Source One with the goal of reducing costs and optimizing overall procurement practices. In some cases, a procurement services provider is used to offset the burdens of an organization’s internal procurement infrastructure. This includes, analyzing a company’s spend to identify areas for cost reduction, executing an RFx to identify best fit suppliers, conducting negotiations, and managing supplier relationships.

What gives Source One an advantage relative to its competition?
Specializing in procurement services, Source One combines market intelligence, staffing augmentation, strategic consulting, and software and tools into a dynamic, effective package for clients. Each client receives a customized approach specific to their organizational needs, executed by category experts. Solely focused on procurement, Source One leverages decades of experience to implement strategic sourcing and procurement best practices that optimize our clients’ supply management operations and impact the bottom line.

How does Source One fit into a client’s organization?

Source One provides procurement decision support- serving as an extension to clients’ existing teams. This saves clients time and resources. Our clients receive a suite of on-demand services including: people, processes, tools, subject matter expertise, and market intelligence necessary for decision support- scalable to project needs. In addition, we’re invested in the success of our clients’ cost cutting initiatives. A major component of Source One’s approach is knowledge transfer. At each step of the sourcing process, Source One provides clients with the training and documentation necessary for repeatable success in the future.

Source One enjoyed the opportunity to engage Temple University’s future graduates on the career paths in procurement consulting and looks forward additional speaking events at the college. Source One’s cost-reduction experts are also gearing up and counting down the days until ISM2016, taking place this May in Indianapolis. Source One is the exclusive sponsor of the Exec IN forum, a private event hosting senior-level supply management executives of top organizations to address the challenges and opportunities specific to large supply chain operations. Source One will also be exhibiting and presenting at ISM2016. Attendees are welcome to meet experts from the procurement services firm by stopping by booth #528. Joe Payne, Source One’s VP of Professional Services, will present a session on managing responsibilities and succession planning in an increasingly contingent workforce.
For years, the Supply Chain and Procurement worlds have been closely managed by baby boomers.  As young professionals and students are well aware, more and more of these seasoned experts will eventually exit the work force and create many employment opportunities for the next generation of specialists.  These new professionals will assume the same positions but bring with them fresh ideas and strategies to improve businesses.  A renewed outlook on strategies will include the same cost savings pursuits of the past, but will now consider overall growth as well.  Unfortunately, the demand for skilled professionals in Procurement is greater than the supply, resulting in a talent shortage, which makes for favorable conditions for ambitious young talent beginning to enter the workforce. 

Procurement offers an array of career opportunities including consulting. For many emerging professionals, the start of a career in procurement begins with the position as a project analyst. Simply put, an analyst collects and analyzes client data to identify savings and process improvement opportunities, interfaces with suppliers, and implements new operations and strategies to achieve the desired end state for the client. Whether supporting a company’s cost-reduction goals or enhancing supplier relationships to drive market expansion, each initiative allows procurement consultants to develop a wide variety of strong and transferable skills – gaining an enhanced understanding of all the decisions and supporting operations that make a business functional.  At Source One, analysts have access to a wide range of industries, products, services, spend categories, and more.

On Friday March 11th, Source One Management Services will be discussing potential career opportunities in supply management consulting with students from Temple University’s Economics Society.  The Temple Economics Society focuses on providing students a better understanding of Economics in business and a forum for discussing areas of interests and future career exploration.  Source One’s Leigh Merz, a Telecommunications Cost Reduction and Administrative Expense Strategic Sourcing expert, will share with how the Procurement function supports overarching business goals. 


“Our goal is to teach students about the career paths in procurement consulting, including those at Source One, in hopes of inspiring them to pursue these important and in-demand positions.” said Merz about the coming event.   
Contingent worker, temporary labor, independent contractor, freelancer, consultant, are just a few examples of what is considered to be a “non-employee” worker today.  According to Christopher Dwyer from Ardent Partners, during his webinar entitled, “Secrets to Mastering SOW Management”, currently the American workforce is 32% non-employee workers with the expectation that by 2018 this number will grow to between 45-50%.  As this population of the workforce continues to increase, the uniqueness of the spend and the challenges of management become even more apparent.  Contingent labor spend touches every line of business and impacts the bottom line from very tactical to highly strategic areas of the business.

As this non-employee workforce continues to grow, so does the need to manage Statement of Work (SOW).  In order to reach total talent management, the focus needs to start with SOW management.  Some of the many challenges that exist with Statement of Work include, understanding where the money is being spent (department), which suppliers the money is being spent with, what projects are being completed and on what timeline, and who the actual workers are.  All these questions can be answered by taking a step back and looking for a holistic program management solution for the contingent workforce.

A strategic plan must be developed and buy-in from leadership must be achieved before any forward progress can be made.  Typical obstacles to gaining executive buy-in include,  SOW viewed as low priority, Procurement lacking involvement in more strategic areas, and a lack of understanding of the value of managing SOW holistically. To overcome these challenges, education is imperative to success.

One of the major benefits of a SOW management is the relief of administrative burdens on hiring managers.  SOW management leads to streamlined negotiations with suppliers and decreased interviews for the hiring managers.  This allows them to more effectively perform their core job functions. Secondly, the addition of SOW management drives long-term value, creating visibility and spend forecasting that is easily accessed. Usually done through a third-party technology, SOW spend is centralized and contained in one record keeping system. Along with having a system of record, savings can be achieved by the addition of expense management, proper monitoring of milestones and deliverables to keep projects on time and developing solid upfront budgets.

Compliance is another major concern surrounding the growing contingent workforce. Through full management of the contingent workforce, compliance can be closely monitored, achieved, and have benefits that are two-fold.  From a resource perspective, the business will be able to identify who and where the workers are. The ability to identify contingent workers and where they work increases the ability to track company resources, such as laptops, as well as the control of access to internal systems and facilities.  By ensuring consistent on and off boarding practices, companies have the ability to confirm all items are accounted for and accesses are turned on and terminated appropriately. By adding a managed program to your organization, a clear division is developed between the contingent worker and your organization.  This separation decreases the risk of co-employment concerns and the financial implications that surround it.  Additionally, from a contract management perspective, all contracts will have standard terms and conditions.  This will allow for quicker ramp up time and get the project producing results in a more streamlined manner.

The non-employee workforce is only going to increase as the landscape of an American worker changes.  Be sure to place your company in a good position to be ready to take action for this evolution.  And according to Chris Dwyer, in order to move forward with the best talent, prioritize SOW management as the next frontier of contingent workforce management.
Campuses trying to cut expensesThe State University of New York has noticed major savings after a shared services agreement cut costs for multiple campuses. Multiple campuses have worked together and the service sharing initiative has saved millions of dollars. As university funding has been cut nationwide, higher education spending has become a serious concern for administrators. By having campuses work together to save money, SUNY has noticed significant benefits.

Sharing services to scale back on expenses
The shared services initiative aimed to increase collaboration between campuses and cut down on unnecessary spending. The money saved will be put back into the school's various campuses. Since the program was implemented last August, the campuses have worked together to determine where they could cut some overlapping services and merge others to save limited funds.

According to the source, Zimpher estimated savings of more than $2.5 million in the first year of the program. The saved money was funneled back into academics and more than 30 new faculty members.

"The SUNY campuses have made remarkable progress in this inaugural year of our shared services initiative - truly realizing the capacity of SUNY's systemness by sharing the costs associated with administrative salaries, IT functions, procurement and more - and freeing up funds for what matters most, our students," said Nancy Zimpher, SUNY's chancellor, according to local NBC affiliate WKTV.

New programs in the works
It's not just a select few campuses getting onboard with this agenda to save money. Twenty-seven different campuses are involved in a new plan to implement a comprehensive elevator and escalator maintenance service. Prior to the agreement, each campus was responsible for its own services, potentially costing the schools more money. By cutting the number of contracts from 27 to four regional agreements, the schools expect to enjoy significant savings.

Several different campuses are leading an initiative to save money on printing, according to the source. With the amount of mailing colleges do, obtaining letterhead and envelopes at a low cost is extremely important. SUNY Fredonia and SUNY Geneseo will begin receiving their printed goods from Alfred State College, as SUNY looks to expand the agreement to other campuses.

Procurement and services are not the only way SUNY campuses are enjoying enormous savings. SUNY Delhi and Cobleskill have created joint cabinets with shared presidents, vice presidents and several shared faculty members. Cutting back on administrative costs is helping these schools to scale back on their expenses even more, and the campuses plan to continue their initiative to cut costs even further.
United Way merges with Hands on Greater PortlandIn the world of for-profit corporations, mergers often streamline supply chains by creating synergy between companies with complementary strengths. The same principle can be seen at work in the nonprofit world as well. United Way of the Columbia-Willamette, one of the largest fundraising organizations in the Portland, Oregon, metro area, recently merged with Hands On Greater Portland, which is one of the most successful volunteer organizations in the city.

Keith Thomajan, president and CEO of United Way, announced the merger to board members recently and stated the merger was strengths-based, resulting in a powerful nonprofit presence in the region, according to Portland Business Journal.

“This merger gives us the horsepower and reach to move Portland/Vancouver metro region to the front of the pack nationally, both for total number of volunteer connections and also in terms of innovation and impact,” Thomajan said in a press release.

The merger is expected to eliminate close to $200,000 in administrative expenses and cement Portland's reputation as a city that is filled with people willing to volunteer, the Business Journal stated. The two companies began talks four months ago when Andy Nelson, the former executive director of Hands On, left to take a position with the Big Brothers, Big Sisters Columbia Northwest organization.

The merger of Stateline United Way and United Way of North Rock County was recently made official, increasing the organization's reach in the southeastern Wisconsin area.
Supernus Pharmaceuticals releases first quarter numbers Supernus Pharmaceuticals, a specialty pharmaceutical company, recently released its consolidated financial numbers from the first quarter of 2012. The company marked a significant milestone by going public in May.

The company reported cash proceeds of $47.6 million from the initial public offering of common stocks, following financing costs estimated at $3.3 million.

"We are very excited to be a public company, and look forward to building a successful commercial enterprise, starting with the launch of our first two central nervous system, or CNS, products," said Jack Khattar, president and CEO of Supernus. "We continue to have an active dialogue with the FDA regarding the filings for SPN-538 and SPN-804. We continue to build out the infrastructure for both the sales and marketing commercial teams as planned."

General and administrative expenses for the first quarter was $2.7 million, a significant increase from the $1.7 million reported in 2011.

In other news related to the worldwide pharma supply chain, Anderson Packaging and Brecon Pharmaceuticals recently combined to create a single global pharmaceutical packaging service provider, which will feature 12 facilities across two continents. The two companies will also combine to account for more than 1,500 associates who will work to manufacture products for medical treatment.
Many sourcing and procurement professionals find MRO (Maintenance, Repair, and Operational Expenses) one of the most complex categories of spend to source. The reason for the difficulty in sourcing this category starts with simply defining what the category is. A plant manager will usually define MRO as anything that is not a raw material or labor cost. A finance person of procurement manager would surely take issue with that, segmenting out MRO as something different than administrative expenses or shared services.

Regardless of what you categorize as MRO, the ultimate need you are looking to satisfy remains the same - it includes any of the “stuff” you buy to keep your plant running in a safe, efficient, and effective manner. The easiest way to figure this out is by looking at the catalogs and line cards of the major suppliers in the industry and understanding what they sell. This typically includes electrical supplies and components, bearings and power transmission products, fasteners, lubricants, filters, pipe valve and fittings, motors, safety supplies, machine parts, and even cleaning products. Depending on your industry, you may add or subtract from this list.

Adding to the complexity of the category, MRO products tend to span across multiple business units with spend falling under the purview of many different stakeholders. Some supplies relate to the prevention of safety hazards. Others are associated with providing a comfortable working environment for employees. Another portion relates to making sure there is very little disruption to actual production.

MRO means different things to different people, and the diverse definition of the category is indicative of the substantial size and scope of the industry. Thousands of suppliers exist in the marketplace; some provide a wide range of products and others are more niche or specialty players. At the highest level, the market includes:

Manufacturers - These include the companies that make the motors, bearings, and electrical components, etc. Examples might include WEG (for motors), Gates (for belts) and Philips (for lighting and other electrical supplies). In this industry, the manufacturers control the market, and often dictate pricing on a customer by customer (rather than distributor by distributor) basis.

Specialists - These are distributors with a single focus, such as pipe, valves, and fittings (PVF), electrical supplies or safety supplies. Specialists, such as Columbia Pipe and Fitting or Arbill, market their technical experience and ability to help customers not just by supplying parts, but identifying what parts a customer actually needs to perform a particular function or stay within compliance rules and regulations. Most offer engineering and design support as well.

Generalists - These include distributors that provide a wide array of parts over a wide variety of categories. They may provide electrical supplies, fasteners, general industrial supplies, and safety supplies, all in one catalog. Examples of Generalists include Fastenal, MSC, Grainger, and McMaster-Carr. Generalists focus on providing a “one stop shop”, easy ordering, and value added services such as vendor managed inventory or free next day shipping. Their focus is ensuring that you have the part you need (any part) at the time you need it (any time).

Partnerships - Partnerships can be fairly diverse in nature, but normally include a group of specialists (and sometimes manufacturers) in a particular industry that come together to compete on a regional or national level. In the category of electrical supplies, partnerships such as Vantage Group or Vanguard National Alliance have pooled in some cases hundreds of individual local companies together in a loose affiliation or even through the formation of a new company to compete with national (semi-)specialists such as Wesco Distribution. In the area of bearings and power transmission, national partnerships such as Precision Industries were developed to compete with the likes of Motion Industries, Applied Industrial Technologies, and Kaman.

Integrated Supply - Also known as outsourced storeroom management or consolidators, these companies will take over the entire process of purchasing MRO on your behalf. This includes ordering product, managing inventories, and paying for goods. Integrated suppliers cater to companies that want to focus on their core competencies and outsource the day to day activities of parts procurement to someone else. Companies utilizing integrated suppliers expect to see value in leveraging the overall volume purchased by integrated suppliers to reduce their per unit cost when purchasing parts and benefit from processing one vendor invoice a month rather than hundreds or even thousands. Suppliers focused in this area include supplyFORCE and Storeroom Solutions, although Generalists such as Fastenal or Barnes Group or Specialists such as Motion Industries are also beginning to offer some level of integrated supply services.

Retailers - Purchases from home improvement stores such as Lowes, Home Depot, and Sears Hardware, often fall under the MRO category as well. Retailers offer easy access to thousands of general items, but if you are looking for a part that is somewhat unique, or a specific manufacturer, you probably will not find it here. In addition, most retailers do not offer anything substantial in terms of corporate discount programs, so you are paying premium (retail) rates when buying from one.

The industry is further broken into local, regional, and national players, with some overlap. For example, your local electric distributor could fall into several categories. They may stand on their own and service your local plant, but they could also partner with other local distributors to offer programs nationally through an organization such as Vantage Group to accommodate companies looking for local service but consistent pricing across locations.

Just as diverse as the suppliers in the industry are services available and the sales teams that work day to day at your facilities. Sales representatives at national companies may be able to tout service offerings, technology, and consolidation opportunities, with local companies able to provide engineering support and technical expertise. Some reps can be highly capable, and others fairly unqualified, unknowledgeable, or down right sleazy - all within the same company operating under the same contract and service level agreement.

As you begin to analyze spend data and undertake an MRO sourcing initiative, you should keep this diversity in mind. You may see that multiple suppliers are used for the same type of purchase, or even the same part, either within the same plant or across multiple facilities. This may represent a consolidation opportunity, or there may be valid reasons for using multiple suppliers. Before digging into a project, make sure you understand these distinctions and plan accordingly.
Xerox software help LA school cut costs by $1.5 million  Colleges across the U.S. have had to tighten their wallets over the past few years as endowments sank following the financial crisis and contraction in consumer spending. In California, the Los Angeles Trade-Technical College (LATTC) successfully cut its operating expenses and improved efficiency by implementing a managed print service. 

According to university administrators, the college worked with Xerox and purchased its managed printing service to cut waste by students and teachers. After the system's implementation throughout the school, cost savings totaled more than $1.5 million. By consolidating output devices like printers and copiers, the software directs users to print jobs to the most cost-effective, energy efficient machines, saving money and reducing waste.

So far, the school has drastically cut back its spending on paper and power consumption. "By updating and improving the reliability of our campus print facilities, we're helping students work more efficiently day to day," the school's vice president of administrative services, Dr. Mary Gallagher, said in a statement. "The new print infrastructure makes it easier for all of us to champion the college's environmental sustainability and cost-savings goals, freeing up time and resources that we can reallocate to what matters most: providing a great education for our students." 
As BPO (Business Process Outsourcing) gradually gains traction, the make/buy decision continues to present itself in less traditional areas. One such area is a subset of BPO, KPO (Knowledge Process Outsourcing). Long past the era of diminishing returns for process re-engineering and personnel rightsizing, businesses are looking yet again to improve efficiency as a means for productivity gains. Training and the entire learning management process is quickly ascending to priority status in organizational development as a key element in enhancing per-employee productivity.

While KPO is in its nascence, firms should not ignore the opportunity to both enhance employee productivity and reduce costs while doing so. There are some hurdles to evaluating the benefits of KPO, as there are in any expense category. While firms can measure the reduction in hard costs and even soft costs, it’s difficult to ensure that outsourcing will produce a comparable benefit to that produced by internal resources. One can measure yield from training theoretically using learning/experience curve models, such as Bills’ or Wright’s, and these models have been validated by academia and industry. Researchers have used learning curve theory in measuring the limits of software development cycles as well.

Yet evaluation of the actual benefits of training is anecdotal at best. It appears that the post-mortem processes of training events are widely varied, subjective and lacking the hard metrics (e.g. testing) to evaluate the benefits of an event. Thus, measuring the cost of a widget, or even cutting a paycheck is far more evolved than post-event survey feedback that “the cookies were stale” or “the room was too bright”.

Yet with ever-increasing business dependence or workstation and infrastructure technology and coinciding training requirements, a process that was once seen as non-essential is crucial to everyday operation. The emergence of the CIO position in major corporations gave birth to training stewardship if not measurement. In many organizations, where technology and soft skills development are seen as operationally critical, even strategic in some operations, the CLO or Chief Learning Officer now stewards the knowledge process. With heavy investments in the tools and training necessary to enhance productivity through knowledge based initiatives, it behooves organizations to develop sound metrics to measure the relative value and effectiveness of the training investment. With these metrics in hand, organizations can gather, analyze and evaluate the data in order to optimize the investment.

Thus, the make/buy question wends its way back into the discussion. Of course there will be the instant objection that organizations can not measure something so subjective as learning. Even if that were the case, there are other hard metrics that serve as decision drivers in the make/buy of Knowledge Processes. Specifically, one can measure the cost of full time staff versus outsourced training. Typically, significant cost benefits are available in any form of non-core process outsourcing. Better still, part-time, contract training may further reduce costs, if carefully managed. Training firms typically use an average of 60% utilization of in house training resources as the cost case to outsource. While a 3rd party KPO may not yield the 40% savings one would think should be possible, it’s not unreasonable to think that 15-30% hard dollar savings are there for the taking in either outsource scenario. Additionally, there are 3-5% soft cost savings available, based on US DOL estimates for administrative costs per employee for small to large corporations.

It appears then, that the bogey in KPO equation is “quality”. Specifically, will your employees receive the same or better quality of learning experience from an outsource resource than they would with internal resources? Organizations will likely recoil at the loss of control over the program. As is the case in most outsourcing agreements, much of the quality issue is addressed by industry specifications. One such specification in technical and soft skill training is the courseware. Courseware, like fasteners or floor mops is produced by a short list of usual suspects and an array of specialists. As a result, organizations are empowered to control “quality” through the selection of courseware. Where the risk, if any, lies is in trainer selection. Courseware being equal, trainer selection is the key factor in the trainee’s qualitative experience.

One must consider though, the benefits of KPO trainers versus internal staff. It stands to reason that KPO trainers, in that training is their core business, will be more industry savvy having escaped the single institution vacuum. They’ll likely be better prepared to deliver the most current knowledge and possess a higher level of specialized knowledge in a given application, unlike their internal “jack of all trade” competitors. In essence, the same rules that apply to Business Process Outsourcing apply to Knowledge Process Outsourcing. It seems sensible then, that organizations seeking to optimize their training investment look hard at the benefits of Knowledge Process Outsourcing as a means not only to reduce costs but also to enhance employee productivity and ultimately, remain competitive.