Continuous cost reduction in the manufacturing industry is a supply chain best practice, but all too often it is mistakenly seen as unsustainable by strategic sourcing and procurement departments. For many companies the question is, ‘how can I reduce costs while limiting the impact on quality?’ Before jumping right to substituting materials, there are other options for delivering cost savings - yes, even over time.
In the first part of this two-part series, I established the reasoning behind establishing a diverse supply chain in the nontraditional sense. Emphasis on maintaining a supply chain that is diverse in geographical location, capabilities, and overall corporate values is vital in maintaining supply chain resiliency, sustainability, and adaptability. To achieve a supplier mix that fits these goals, the right questions must be asked during an internal supplier rationalization process, overtaking the traditional values of an RFx.
Supplier diversity is a concept with multiple definitions. Most commonly, a supplier diversity program focuses on the utilization of women owned, minority owned, and else certified diverse businesses within your supply base. There is, however, another interpretation of supplier diversity – a diversity of geographical location, sourcing practices, and overall organizational structure. Evaluating these factors in a meaningful way when evaluating suppliers can be an important factor in managing supply chain resiliency, sustainability, and adaptability.
Anyone who has ever completed a Request for Proposal (RFP) has had the unfortunate experience of informing all but one or two suppliers they have not been awarded the business. It may be difficult and at times uncomfortable, but when the unchosen supplier is the incumbent, there is more to manage than just this conversation. How this transition process is handled can either help or hinder the success of moving to a new supplier relationship. There are a few steps you can take to smooth the transition and ensure all parties are as satisfied as possible.
With the increased pressure to offer viable advantages over their competition, telecom giants like AT&T and Verizon have recently placed greater emphasis on how well equipped their networks are for the rapid increases in data consumption by consumers. While carriers show promising advances in “future proofing” their networks’ ability to accommodate such changes, it ultimately depends on how well their new network is designed to adapt to the rapidly changing technology available to meet increased demands.
The way we do business is changing rapidly. Workplaces are virtual – with employees working flexibly: at any time, from any location, and using many different devices. In the face of such continuous change, it is important to ask if your network infrastructure truly “futureproof.” Whether your organization is national or global in scale, it is imperative to execute any infrastructure related improvements based on both immediate and future goals.
This post was written by Michael Hinkley, an intern at Source One Management Services. If you are interesting in hearing his perspective on procurement as a career and as a part of the larger business, click here to listen to our conversation on BMP Radio.
Whether you’re preparing for a sourcing engagement or looking to improve supplier relationships, effective forecasting and planning is key to staying ahead of your supply chain and formulating a procurement blueprint. When buyers and sellers aren’t on the same page about expected volumes, usage schedules, and run sizes, both may experience surpluses or shortages. This, in turn, can lead to dire consequences for operational efficiency and the bottom line – yours and your suppliers’. For instance, the over unitization of warehouse space, as a result of a constant excess of inventory, will lead to increased effective unit prices. However, with accurate forecasting and improved supplier communication, you not only optimize your internal processes but allow your suppliers to run a more efficient operation with better turnover rates and proper resource allocation.
Direct marketing is not a new advertising strategy, but the associated tactics often change with the latest trends and technologies. Direct mail is one tactic under the direct marketing umbrella that has stood the test of time despite the shift to digital in most other areas of the advertising space. This post is the second in a series of two that discusses direct mail as a tactic and the cost drivers that impact the cost of executing one of these programs. You can read part 1 here.
As we described previously, there are four main cost components of a direct mail program: mail lists, creative and design, print and lettershop, and postage. There are different strategies for each of these and managing the costs of some are more complicated than others. Mail lists and postage are the two components that require more than a standard sourcing process in order to identify areas of cost reduction.
Previously, we took an in-depth look at gaining access to mail lists as a cost driver for direct mail campaigns and the strategies that can be executed to manage those costs. This post will take a deep dive into postage as a cost driver and the different postage optimization strategies that can be implemented to reduce costs.
While some may believe that direct mail programs have gone out of style similar to print advertising, industry trends indicate quite the opposite. According to the Direct Marketing Association (DMA) Statistical Fact Book, the spend associated with direct mail has been increasing over the past few years from approximately $44.3B in 2012 to $44.8B in 2013, and a decent leap to $46.0B in 2014 – and for good reason. The average response rate for a campaign targeting recurring customers was 3.4 percent for direct mail, compared to 0.12 percent with email. In addition, the average cost per lead for a campaign targeting new customers was $51.40 for direct mail; whereas email was $55.24, meaning that the cost to generate a qualified sales lead or order was about $4 less with direct mail than email.
If there was any doubt that managing the supply chain is also an exercise in managing risk, just ask someone who works in procurement – particularly the world of direct procurement. These professionals patrol the front lines of the manufacturer-supplier relationship, overseeing their company’s purchasing activity, executing purchase orders, and working with multiple stakeholders to ensure the right materials make it to the right place at an optimal cost.
It would seem procurement leaders thrive on a steady diet of pressure and caffeine. But even the most experienced professionals have their limits. Several experts weighed in on the topic this spring at the University of Tennessee Supply Chain Forum.
Over the past few years, the Federal Trade Commission (FTC) has been cracking down on unethical billing practices at major telecom carriers like Verizon and AT&T. This past October, Verizon paid as much as $64.2M in cash and phone credits to settle a class-action lawsuit for over-charging subscribers of their Family Plan[i].
The case against Verizon accused the telecommunications giant of charging Family Plan subscribers for “in-network” minutes that were supposed to be free, or charging customers with additional phones on the plan $0.45 per minute going over the allotted minute allowance (instead of the $0.25 that was charged to the primary phone on the plan).
The FTC also filed suit against AT&T for throttling data for unlimited data plan subscribers when they used over a specific amount of data during a billing cycle. They explained that AT&T failed to adequately inform customers who had signed up for the unlimited data plan that their speeds would be slowed if they used more than a certain amount of data. Even worse, “When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars,” the FTC said in a statement.[ii]
Telecom contracts aren’t designed to be easy to read and understand. As a result, customers frequently end up paying more than they should for their carrier’s services. While the cases of Verizon and AT&T are the result of dishonest billing practices, customers often fall victim to subpar contract terms and conditions, including overpaying or even paying for services they don’t actually need.
The long term plan of Tesla CEO Elon Musk to establish a widespread energy solution might finally be coming to fruition. After the public adoption of his electric cars, the Tesla Model S and Roadster, Musk has now moved on to the release of both a battery for residential use and a larger battery for industrial application, called the Powerwall and Powerpack, respectively.
Powerwall is a rechargeable lithium-ion battery designed for energy storage for residential consumers. According to Tesla it is primarily designed “for load shifting, backup power and self-consumption of solar power generation.” Two variations of the Powerwall have been released: a 10 kWh model which is listed at $3,500 and a 7 kWh model listed at $3,000. Their big brother, the Powerpack, is expected to be released in 100 kWh capacity blocks and is designed to be scalable from 500 kWh to 10 MWh.
Arthur Miller’s 1949 play ‘Death of a Salesman’ is often listed as one of America’s finest and most influential stage dramas of the twentieth century. It was a tale that conveyed the American Dream but was interlaced with flashbacks that betrayed the contrast between illusion and reality. The Enterprise software sector echoes this drama in numerous ways and shares its inevitable ending.
We’ve all heard the saying, “Don’t keep all your eggs in one basket.” Choosing to dual source a category means using two (or more) suppliers to provide identical copies of a product or service. Many companies choose to dual source a product to maintain quality levels of service to their customers and mitigate potential supply chain issues.
Supply chains are similar to humans—imperfect. Their successes within business plans are a product of accurately forecasting how to survive crises and minimize damage in high-risk scenarios. Balance is the key to surviving most situations. In a supply chain, the accord between supply chain efficiency and risk mitigation can be difficult to achieve.
Wouldn’t it be nice to know the future for certain? There are few fail-proof ways to see shifts in the business landscape before they occur, but there are ways to ensure your goals stay on the correct path regardless of what direction the future takes. Procurement departments, for instance, have objectives that require analysis of factors beyond historic trends—considerations like supply market volatility, supply chain disruption, regulatory changes, and a whole slew of other unpredictable situations. Unless corporations start adding fortune tellers to the payroll, successful procurement groups will continue to optimize their function from the insight gained through predictive analytics.
“The whole is more than the sum of its parts.” – Aristotle
We believe we have good data… but is it complete?
I’ve had many conversations with Travel and Procurement managers about how much addressable travel spend the company has. This is a critical number as it validates a company’s volume, and dictates the sourcing strategy and execution. In most cases, I’m immediately presented with the Travel Management Company’s report of phone and online bookings. While this data is helpful and telling, there is an average of another 55% of travel spend that is not being accounted for in those data sources*.
It’s no secret that when a company is looking to solicit bids for a project, opening up a Request for Proposal (RFP) offers a simplified, standardized, and centralized means to compare diverse bidders. A well-crafted RFP separates the best-fit from the less qualified. A poorly executed request, on the other hand, will shut out even the most qualified providers before they have a chance to shine.
I recently read an op-ed piece on the Sourcing Journal by Sigi Osagie that stood apart from other procurement perspectives I’ve come across recently. It observed that soft issues — issues based upon the fundamental mindset of employees — are holding businesses back from realizing their full potential. Although procurement practitioners often have a desire to better their effectiveness, they do not always recognize that these soft issues are the answer to their desire for increased influence and prominence. So how can procurement improve in line with existing performance metrics without loosing perspective of the larger organizational perspective?
Along with corporate services, capital procurement is often the last part of the procurement organization to mature.
It’s an opaque category that doesn’t immediately get attention for a number of reasons. It’s usually non-repeatable spend. It’s often decentralized and managed by folks at the site level. It’s sometimes assumed by management that these folks know this technical category best and meddling in their business will cause problems.
Because it’s often the domain of engineering, procurement must sometimes wedge themselves a seat at the capex table.
Sustainability is a word you seem to hear everywhere today, as consumers become more conscious of the environment. As you would expect, sustainability plays a significant role in the food supply chain. As an example, the commercial fishing industry has ramped up their focus on providing a more sustainable product. Sustainable seafood suppliers employ methods that simultaneously reduce bycatch, promote both small and large business distribution, and improve seafood quality. All seafood harvested within the United States is, in fact, sustainable, as the U.S. has developed a comprehensive process to ensure quality as well as monitor and improve the programs fisheries have in place.