June 2019

Tackling the Marketing category from a sourcing standpoint can be challenging; but with the right mindset and approach, you can deliver value and maximize your company’s Marketing investments. This post serves as an introduction to a series that will present best practices when sourcing the Marketing category.

Whether you are a Marketing or Sourcing professional, you may be tasked with developing a strategic roadmap to optimize your company’s Marketing budget. The best starting point is to gather as much intel available that will give you visibility into past and future spend levels. Looking at historical Marketing spend will only get you so far. A portion of spend, such as promotional items, may be considered recurring, but there is likely an overall shift from year to year. Budgets and active contracts will need to be collected along with qualitative information. Qualitative information may come in the form of new business requirements that need to be fulfilled in both the short and long term, feedback on incumbent agencies’ performance, and/or active sourcing and negotiation efforts. To gather this qualitative information, you will need to build relationships with stakeholders, conduct supplier interviews, and perform independent market research. Overall, there are multiple touchpoints with various parties and once you’ve completed this data collection process, you will be able to begin shaping a roadmap to achieve your company’s goals; but data collection is only the starting point. In our next post, we will dive deeper into this initial phase and share a “category tree” example that can be applied when aggregating and interpreting quantitative and qualitative data.

Next up comes strategy development based on initial findings. Your sourcing strategies will depend on timing of contract renewals/expirations, new product lines/launches, plus various other considerations. The roadmap will consist of strategies ranging in complexity, but all having a similar objective: establishing a long-term supplier partner capable of delivering value and operating as a true extension of a brand team. The path to forming these supplier relationships takes time and consistent collaboration, flexibility and engagement from all participants. Strategies can potentially be classified into 4 distinct buckets: quick win opportunities (e.g. negotiate contract renewal), immediate Marketing group need (e.g. conduct agency review for rebranding effort), Marketing Sourcing objective (e.g. implement single AOR model), and future-state Marketing strategy (e.g. develop in house design agency). Within this series, we will elaborate on Marketing sourcing strategies, calling out common themes/indicators for each and sharing success stories.  

This series will aim to capture best practices as they relate to:
  • Analyzing marketing spend and budgets and establishing a “category tree”
  • Marketing sourcing strategies ranging from tactical SOW renewals to strategic agency reviews
Additional insights will come in the form of:
  • Case studies outlining Marketing sourcing in action
  • Trends in the Marketing space that could very well change the short and long term landscape
Stay tuned for our next post which will walk you through the data collection/discovery phase and offer up suggestions on how best to categorize spend/budget figures.
Companies large and small, public and private, and across every industry have one thing in common: they want the very best talent; but premium talent comes from premium recruitment programs. There are multiple options available to companies for managing their talent needs, including driving standardization and compliance across the current recruitment model, or consolidating their recruitment agencies. This blog will focus on arguably the most robust solution: 

Outsourcing the talent management program to a Recruitment Process Outsourcing provider.

Recruitment Process Outsourcing (RPO), is a form of Business Process Outsourcing (BPO), where all or part of an organizations’ internal talent acquisition process is outsourced to a third-party provider for an agreed upon period of time in an effort to increase recruiting capabilities and effectiveness.

An RPO provider partners with an organization to design and deliver a customized solution to their talent acquisition needs, including augmenting, or replacing the need for internal recruiting resources. As a true extension of the Talent Acquisition team, an RPO provider has the capability to recruit for any/all roles across the enterprise, leveraging economies of scale as opposed to traditional staffing or search firms who only recruit within their niche, and typically for a lower volume of positions. RPO teams are Subject Matter Experts in talent management; they have a repeatable scientific approach to recruitment strategies, and invest heavily in analytics to propel a business forward.

How it Works: RPO Capabilities
  • Develop recruitment strategies and supplemental workflow diagrams/process maps
  • Strengthen employer brand with customized strategies and sophisticated candidate outreach tools
  • Greater access to passive talent, and consistent pipelining efforts
  • Manage all or part of the end-to-end recruitment process, depending on company’s needs
  • Comprehensive metrics tracking and reporting
  • Onsite, offsite, or hybrid team support models
  • Technology integration
  • Job board management

A reduction in recruitment costs: An RPO can deliver “quick wins” with lowered costs per hire, but focuses on the bigger picture of long-term value add rather than stopping after finite goals are met. Additionally, the RPO model alleviates the financial burden on the client by employing a shared-risk solution.

Greater access to top talent in the market: Consider the number of candidates in a company database; now consider the number of candidates in an RPO database. Not only are applicants applying directly to the roles the RPO provider posts on behalf of their clients, but several are passive employees contacted by the RPO recruiters using refined sourcing methodologies.

Promote employment brand: Candidates are inundated with job alerts, calls from recruiters, and oftentimes, multiple job offers at once. This talent-driven market allows candidates to be more selective in whom they work for, and often they require more than just competitive compensation. An RPO will drive a strong, consistent message, and build out the value proposition. The candidate experience is one of the most overlooked, but mission critical components in recruiting.

Scalability within Recruitment efforts: Whether you hire an onslaught of employees to manage seasonal peaks, opening new offices, or in a hiring freeze, an RPO partner can ramp up and down based on your needs. RPO partners are an ideal solution for companies growing rapidly, and need an extension to their recruiting department to match the capacity of growth.

Stay tuned for the main disadvantages to a Recruitment Process Outsourcing model in blog two of the series.

There have been several stories as of late about the coffee industry investing in initiatives to create a more sustainable supply chain, including Starbucks' recent billion-dollar sustainability bond to fund its Greener Retail program. But that's not the only beverage industry spending big bucks to build a more environmentally friendly supply chain in an effort to protect its cash crop from climate change.
Also making strategic investments are brewing giants like Molson Coors, which over the last decade has poured $20 million into initiatives like its Better Barley, Better Beer program, which is designed to incentivize sustainable farming and protect the company's supply of barley.

It turns out the drink that Americans need to get going in the morning is as imperiled by climate change as the one they use to unwind after a hard day's work. Just as coffee beans are threatened by rising temperatures, so too are barley crops at risk of severe weather and climate change. According to a study published last year in Nature, extreme drought and heat can damage barley and decrease yields by up to 17%.

A lack of barley means Molson Coors can't produce its line of beers, which includes well-known brands like Coors, Miller, Blue Ribbon, Keystone and more. So to protect its procurement process, the company has incorporated real-time data and technology into the mix.

Building a better barley crop with advanced tech

Malting grade barley is an especially sensitive crop that requires just the right amount of water and heat to thrive, with too much or too little of either producing low-quality or low-volume yields.
"The game in managing this really comes down to data," Bill Dempsey, Molson Coors' chief procurement officer, told Supply Chain Dive in an interview. "It's putting the data at your folks' fingertips so that they can make decisions quickly."

Barley is essential to beer production, and notoriously sensitive to heat and water levels. Barley is essential to beer production, and notoriously sensitive to heat and water levels.
Four years ago, Molson Coors shared that data between growers, soil management and crop production experts, and procurement executives by launching something called the Grower Direct Portal. The digital platform allows barley growers to enter data on yield, water use, pesticide use, tillage and more, which is then enhanced once Molson Coors overlays its own data, such as estimated rainfall in the farm location.

Though adoption took some time, Molson Coors says it now has 100% direct supplier participation from all 800-plus growers in the U.S., allowing the company to drill down findings to a farm level and better identify trends and opportunities.

With real-time data, Molson Coors and its farmers and agronomists can mitigate risk by making informed decisions, such as whether to delay harvest or harvest crops more quickly and move them to grain elevators.

Sustainability that starts at the seed

In 2016, the multinational brewing company developed a variety of barley known as Bill Coors 100, which the company claims requires less water than traditional barley crops and can create 33% higher yields.

This more efficient barley variety developed for suppliers is another way that the brewer is using its supply chain to meet the sustainability goals it set in 2016 to improve water efficiency in the supply chain and operations by 10% by 2025.

Molson Coors is also targeting 100% sourcing of barley and hops from what it defines as sustainable suppliers by 2025. To meet that initiative, the company is using financial incentives that encourage its suppliers to take steps to maintain soil fertility, water resources, air quality, and biodiversity.
And the Grower Direct Portal will also play a large role in making sure everyone in the supply chain is on the same page regarding sustainable practices.

"The biggest tactic... is to be very direct with those relationships," said Dempsey. "We've got agronomists in the field. We spend a lot of time with our growers."
Job seekers and job givers both recognize that LinkedIn is a vital resource. Used correctly, it can answer either party's prayers and pave the way for fruitful partnerships. When candidates use it incorrectly or irresponsibly, however, they run the risk of appearing disengaged - even unprofessional. Check out some best and worst practices from our Supply Chain recruiting experts. Following the tips on the left-hand side should help you stand out throughout your next job search.

How much should you tip an unmanned aircraft for delivering your pizza?

While it may be a bit early to start asking that particular etiquette question, Uber Eats has announced a new pilot program that appears to be putting us on a path towards a future full of flying, robotic delivery boys.

This summer, the food delivery service will begin using drones to deliver food in San Diego, as it experiments with the most efficient ways to connect takeout orders to customers living in dense urban environments where it's hard to find a direct flight path to the front door.

In fact, for now, the drones won't be ringing any doorbells, instead fulfilling "middle mile" delivery needs. The plan is for a restaurant to load a meal onto an Uber Eats drone, and for the drone in turn to fly to a staging location where an Uber Eats courier can pick it up and carry it the last mile to the customer. In some cases, the company says it also plans to land drones on the roofs of Uber Eats cars that feature an identifying QR code.

San Diego has been chosen as the "dense urban" proving ground for flying food delivery. San Diego has been chosen as the "dense urban" proving ground for flying food delivery.
The test program is a collaboration between Uber Eats and Uber Elevate, the company's urban air mobility division. San Diego was chosen because the company feels it's important to learn how drone delivery will work in dense urban environments, which is where 68% of the world's population is expected to live by 2050, according to Forbes.

"We don't need to get drones direct to our customer; we just have to get it close," Luke Fischer, Uber Elevate's head of flight operations, said during a recent Uber Elevate conference.

In May, Uber made a few initial test deliveries, using an off-the-shelf AR200 drone to fly some meals from a McDonald's location to the campus of San Diego State University. For this new experiment, the company will use a drone it built to be customized for food delivery.

The drone delivery pilot program will also expand beyond just McDonald's to other Uber Eats restaurant partners, including the popular and award-winning San Diego fine dining restaurant Juniper & Ivy.

Perhaps the biggest question to be answered by this experiment is whether such a system actually proves effective in cutting costs, especially since human couriers are still involved in the process. While it certainly sounds like one of the most futuristic middle mile solutions around, it may not be the most profitable.

Kroger has recently seen success with its autonomous grocery delivery pilot program, a "last-mile" delivery solution that America's largest supermarket chain has been testing in select markets.

And now Walmart, the world's largest company by revenue, is trying to determine the viability of using autonomous vehicles to operate in the "middle mile" between its warehouses and store-adjacent package pickup kiosks.

If successful, the self-driving delivery vehicles could cut logistics costs in half for ecommerce orders, which is why Walmart U.S. CEO Greg Foran recently told Bloomberg that the idea is a "no-brainer."

Walmart could be kickstarting a $1 trillion industry

Moving packages from a warehouse to a pickup point, rather than the customer's doorstep, may not be the most exciting prospect of the future driverless delivery business, but it could be the most profitable. In fact, analysts believe the market for these "middle miles" could reach $1 trillion.

"This area has the least number of obstacles and the most certain return on invested capital in the near term," Mike Ramsey, an analyst with consultant Gartner Inc, told Bloomberg. "If you're looking to start a business where you can actually generate revenue, this has fewer barriers than the taxi market."

That's one reason why Walmart is positioning itself on the cutting edge of this sector. Another reason is that ecommerce is becoming a larger portion of the company's total sales, but has a much lower profit margin than in-store purchases due to the higher shipping costs. In fact, gross margins were down 21 basis points in 2018, largely as a result of an increase in online purchases.

Of course, Walmart recognizes that America is years away from allowing autonomous vehicles on highways, and a company spokesperson told Supply Chain Dive that its private fleet remains critical to its supply chain. But even though it's a long way off, the middle mile sector is already showing a lot of potential.

To conduct its trial run, the global retailer is using Ford vans equipped with self-driving technology developed by Gatik AI, a startup that only recently came out of stealth mode. The tech company's CEO Gautum Narang told TechCrunch that the vehicles are ready to drive up to 200 miles per day in urban environments.

In keeping with the middle mile scope, Gatik AI is focusing on vehicles smaller than Class 8 trucks and larger than sidewalk delivery bots in these early tests.

Of course, Walmart is also aware of the potential profit to be found in autonomous last-mile delivery solutions. Later this year, a trial with driverless vans for groceries will go live in Surprise, Arizona, putting the retailer in Kroger's footsteps.

The Importance of Diversifying a Multinational Large Supply Base Today

Optimizing one’s supply base to function beyond national borders is an intriguing safeguard to one’s multinational supply chain. With months of geopolitical tension in Asia centered on the issues of global markets and foreign trade policies, the turmoil has challenged buyers to strategically consider this ideal. The resulting tariffs and regulations have placed critical roadblocks for businesses that function across China and the United States. As managers try to keep their supply chain operating as smoothly as possible, executives and key stakeholders are expanding the width of their supply chain operations to overcome these possible disruptions to their procurement and strategic sourcing efforts.

For example, multinational technology company Apple recently suggested transitioning some of their production away from China. For a vast majority of its manufacturing production, Apple has leveraged its supply base in both China and Taiwan. Apple is looking at Southeast Asia as an alternative in the face of the China-United States trade dilemma in that region. Currently, in China, Apple leverages key manufacturers such as Foxconn for their extensive iPhone production with Luxshare-ICT and Geortek for AirPods production. In Taiwan, Apple also leverages Compal Electronics, Pegatron, Quanta Computer, and Wistron for their production of iPhones, MacBooks, and AirPods. Altogether, Apples engaged with these suppliers to evaluate possible options outside of the China market. Besides their crucial assembler suppliers, Apple vendors for intermediate goods, e.g. printed circuit board (PCB), are closely observing for any decision to be made. Because any shifts in production can ultimately take months to years, long-term decisions may require swift actions by all of these suppliers to capitalize on the opportunity and ensure a smooth transition to prevent hiccups in Apple’s possible implementation outside of China.

Similarly, multinational conglomerate Alphabet, Google’s parent company, is transitioning the production of their technology goods, such as their Nest thermostats and server hardware, away from the United State and China. In their stead, Taiwan and Malaysia have begun implementation of these production processes. A similar movement occurred earlier with Alphabet shifting the production of their motherboards away from China and toward Taiwan. This effort came directly from the associated 25 percent tariff imposed on Chinese motherboard hardware. It cannot be overstated that Taiwanese and Southeast Asian manufacturing companies are eager to capitalize on the divisive geopolitics, and the gradual shift in production by Alphabet is a statement about the feasibility of diversifying their supply chain.

In another case, videography technology manufacturer GoPro transitioned their Chinese production to Mexico to combat future tariffs that could hamper their supply chain. GoPro’s decision came as a means to safeguard their long-term growth by expanding outside of Asia for an entirely different continent. As a result, the company will have to face new challenges and a distinctly different geopolitical space. Nonetheless, there come substantial positives to this decision. For Mexico, metal and plastics fabrication are advanced and time-tested manufacturing spaces that have been meted by strong, economic markets for the automotive and electronics industries.

In summary, we are witnessing companies question the viability of their multinational supply chains being tied too strongly with China. China’s position as a dependable source for low-cost manufacturing and production has led companies to put all their eggs in one basket. The economic disruption by the China-United States trade war caused major problems in cost-driven strategies and outsourcing initiatives for companies. As a result, many businesses find themselves struggling to get their materials and components outside of China in an affordable manner.

Ultimately, the key is to diversify supply chains. This investment will not be affordable in most cases. However, by investing and expanding their capacity elsewhere against supply-chain disruptions, companies may find the initiative worth the price to pay.

Monthly Round Up: June 2019

Gain new Supply Management insights with these highlights from the last month. Want a monthly recap sent directly to your inbox? Subscribe to our newsletter today.

5 Benefits of a Strong Supplier Diversity Program
In an increasingly diverse business world, it's essential for organizations to build relationships with a diverse selection of suppliers. Organizations with dedicated supplier diversity programs take a particularly proactive approach to partnering with minority, woman, veteran, and LGBT-owned businesses. It's not just the right thing to do. Source One's Brandon Hummons suggests it's also good business. Diversity, he writes, breeds innovation, caters to a new generation of consumers, and can even generate more brand awareness.

Before Procurement can transform its operations, it has to change its mindset. Rather than viewing transformation as something to achieve through a single initiative, the function needs to recognize that it's an ongoing process. Once they've reached this realization, Procurement teams will better succeed at earning executive buy-in and commanding respect throughout the life of transformative initiatives. 

Beleagured Business Owners Preparing for More Wild Weather
With hurricane season underway, supply chain managers across North America are preparing their disaster response plans. Organizations who took a hit throughout the last several years are not taking their chances. With meteorologists predicting as many as four major storms, they're planning alternate routes, developing contingency plans, and ensuring their lines of communication are dependable. Is your organization prepared for extreme weather? 

Fleet Management in Procurement: Where to Start the Evaluation Process? 
An effective approach to fleet procurement means attending to a number of vital subcategories. Fleet and logistics expert Ken Ballard looks at a number in this insightful blog. Many of these areas, he suggests, could provide significant cost savings to the savvy Procurement team. Fuel and maintenance costs, for example, could present countless opportunities to drive down costs, eliminate inefficiencies, and find additional soft cost value adds. 

How to Get a Best-in-Class Procurement Organization from Day 1: Buy It. 
Building mature Procurement organizations takes time and effort. For immature teams, the process is even more arduous. Organizations tend to forget just how many moving parts they'll need to address if they want to carry out a full transformation. Senior Analyst Ben Duffy suggests these organizations consider identifying a partner who can provide them with a turnkey Procurement solution. Partnered with such a firm, they'll realize ROI more quickly and avoid unnecessary headaches. 

Any child with an active imagination is familiar with the practice of turning disposable pieces of cardboard into thrilling tools of adventure. From playing house in an empty refrigerator box to swordfighting with the tubes inside used paper towel rolls, kids know how to get creative when turning trash into paper playthings.

And now it seems that Amazon is soon going to provide them with templates for further experimentation.

The U.S. Patent Office recently granted the Seattle-based ecommerce giant a patent for a perforated parcel shipping container that can be repurposed into children's toys, ranging from a doll house to a rocket. Other patented images show how customers could cut on the dotted line and reassemble a cardboard box into an airplane, a monster truck or a sword and shield set. In addition to cardboard toys, there are also some more functional designs, including a tablet stand, a tote bag and a bookshelf.

If implemented, customers would be able to pick the toy or object design they prefer and have their
Amazon purchase shipped in the transformable box of their choice. Most of the patent design sketches include the words "brand awareness" printed on the cardboard, implying that the company could generate revenue from this repurposable packaging by selling sponsorship to businesses that want their logo plastered across a paper plane or tablet stand.

For children with active imaginations, cardboard is the stuff that dreams are made of. For children with active imaginations, cardboard is the stuff that dreams are made of.
In addition to "brand awareness" sales, Supply Chain Dive has speculated that a second revenue stream could be derived through the concept of collectibility. For example, if Amazon creates a series of designs for related individual toys, children may want to have one of each. Alternately, the company could create boxes that include individual pieces needed to construct a single object, forcing customers to order multiple boxes.

Aside from revenue, the transformable boxes could also assuage consumer concerns regarding cardboard waste. Ecommerce enterprises like Amazon have driven up the volume of cardboard used for shipping boxes, and packaging research firm Smithers Pira estimates that the online retailer industry uses roughly $20 billion in corrugated cardboard each year. Although a cardboard sword and shield is not likely to last forever, it may still allow customers to have positive feelings toward shipping boxes.

Though still just a patent for the time being, there could be a variety of challenges for Amazon if the company does go through with the idea. Creating multiple designs of a transformable cardboard box would make distribution considerably more complex. Amazon fulfillment processes would either need to make the perforations to the box, or if the perforations were made beforehand offsite, pair the chosen box to the correct order. According to the patent, customers who do not choose a box design would have one assigned to them, which would be determined by an algorithm that analyzes the customer's purchase history.

There's also the fact that shippers are already inclined to find the most efficient box size for a package. Matching a product to a package based not just on size, but on box design preference, would make fulfillment that much more complicated.

A Decimated Meat Industry 

China eats more pork than any other country on the planet. The nation's appetite for the meat has helped establish a $128 billion supply chain network with more than 440 million pigs (half of the pigs in the world). Unfortunately, an "unprecedented" outbreak of African swine fever has made the Year of the Pig a disastrous one.

Countries including Spain, Italy, and Sardinia have contended with outbreaks of their own in the past. Spain needed 35 years to finally eradicate the virus. Bloomberg reports that Sardinia has tried and failed to do same for over four decades. Without a vaccine, nations have historically had to cull huge portions of their pig populations to slow the disease's spread. China has already eliminated more than 1 million. In total, the world's most populous nation will fatten 134 million fewer pigs than it did last year. This represents a 20% drop, the most dramatic since the country began collecting such data.

China's leaders have promised a 1,200 yuan subsidy for each lost hog to support struggling farmers. "Some local governments," however, "are reported to be withholding payments." This could discourage many farmers from disclosing outbreaks and help keep the disease alive.

The fever is so dangerous because it's both easy to transmit and difficult to trace. Research into the outbreak has identified non-disinfected workers and contaminated swill as two of the major contributors. An origin, however, is still unknown. According to Bloomberg, scientists suspect a contaminated pig may have been dumped from a ship and eaten by local animals. Just a single drop of blood from such a pig would be enough to contaminate drinking water and spread the disease throughout a region. With many farmers traveling hundreds of miles to take advantage of regional price differences, it's no wonder the disease has spread so widely and so quickly.

In the months (and potentially years) ahead, China will need to effectively convert its piggeries into quarantine zones. Careful monitoring and control is the only way they can hope to eliminate the un-curable infection.

A Shrinking Storage Infrastructure

The spreading disease has brought China's meat imports to record levels and could do the same to prices during the second half of the year. Brazilian imports, up 51%, have seen a particularly dramatic spike. Increased demand has other nations including the U.K., Germany, and Russia negotiating deals with China and still others eager to join the conversation. Unfortunately, their opportunities may have passed. In rushing to address pork shortages, China has run into a new problem. Its ports are running out of cold storage space - and fast. 

Cold storage units at ports including Tianjin, Shangai, and Dalian have so far accepted the majority of incoming meats. Wang Zhen, a representative from China's Cold Chain Logistics Subcommittee, suggests they're nearly filled to capacity. Tianjin alone is housing nearly half a million tons.

Many Chinese companies intend to keep the meat in storage until the end of the year. Wang suggests this will likely mean incurring significant costs as they "move the meat to inland areas" and begin storing it in more expensive facilities. Importers will likely need to put particularly large shipments on hold until China's mid-autumn festivals. 

China's ailing agricultural industry provides a case study an example of just how quickly supply chain risk factors can evolve and produce ripple effects. The outbreak of African swine fever has produced both costly shortages and similarly costly surpluses. It remains to be seen how the nation will repair the supply chain for one of its staple foods. 

Vendors and Buyers Consider the Sales Tax Supreme Court Ruling

Last summer, the U.S. Supreme Court ruled that out-of-state vendors are liable to collect and remit sales tax in the landmark case of South Dakota vs. Wayfair. States now could legally compel sellers to administer sales taxes whether the seller has physical presences in those states or not.

Consequently, the case has widespread ramifications on interstate commerce, e-commerce, mailing and fulfillment service providers, digital service providers, and buyers and sellers across multitudes of other categories. Companies now must identify and comply with state and local tax policies across the services for what cases where their products and services are sold.

Evidently, states have rectified or begun drafting the legal framework to take advantage of this taxation opportunity. For example, California recently enacted the administrative sales economic nexus statute for remote sellers exceeding $500,000 at the beginning of this second quarter. Ultimately, this Supreme Court introduces two substantial cost drivers into the Procurement space that buyers and sellers have to consider.

A Significant Increase in Compliance Obligations

Because this decision allows states to require businesses to register, track, collect, and remit sales and use taxes, buyers and sellers will face increasing requirements for reporting and compliance on their transactions. Therefore, vendors will need to reassess their sales tax collection compliances specific to each state’s economic nexus requirements. Furthermore, vendors may now need to register and file sales tax returns in certain states where they ship or deliver goods. This adds complexity to an already delicate space.

To minimize concerns and issues, vendors should inspect their internal controls and documentation capabilities. The optimal operation will depend on whether or not vendors can sufficiently account for the changes that will respond to this ruling. To counteract, companies may turn to program development to automatically track their inter-state commerce and transactions. This would include tracking their usage, spend, exemptions, and other factors that could change how sales taxes will be implemented across their goods and services. Because of the ruling, state governments can now build their sales tax system on the transactions and sales volume that goes in and out of their state. Likewise, vendors must monitor their usage history closely to answer and comply with these new regulations.

Because each state can have a uniquely specific application process and vastly different exemption requirements, companies may need to engage third-party firms who have sales tax expertise. This would result in contracting costs to leverage their best practices and streamlined approaches. Likewise, the need to monitor the effects of this ruling may require leveraging an external technology solution. This would come with regular expenditure or a substantial upfront cost as demand for these services increase.

An overhead cost that many vendors will have to consider is the resource cost in filing for resale exemption certificates in cases where their customer base resides in states where those vendors do not have a physical presence. To claim sales tax exemptions on their purchases, buyers must apply for and obtain certificates for exemption. Because of the ruling, buyers must issue these sales tax exemption certificates across their supply base to comply with the laws of the land and ensure no gaps in their strategic sourcing initiatives.

A Resulting Passover of Costs onto Buyers

Buyers must prepare for the inevitable increase in cost throughout their purchasing decisions as this tax change opens up more opportunities for regulatory actions. Buyers will need to consider the agreements that they have in place and examine closely for clauses that could exempt them from the pass-off of additional costs due to taxation. Because of the unique economic nexus requirement per state, this endeavor would mean buyers must consider not just their national accounts but also their regional and local vendors as well. It is crucial that buyers do their due diligence to ensure that their dues are paid accurately and as anticipated.

One noticeable point of contention we see in procurement is the legal language of how to handle the issue of these sales tax in proposed agreements. Contract negotiations will likely center on whether or not vendors are able to pass on any following sales taxes levied to buyers. Procurement should work with Legal to ensure that they can curtail these efforts during negotiations.

Buyers are likely to see noticeable increases in cost as states enact and enforce the complementary laws gradually that capitalize on this Supreme Court decision. Although there are some exemptions to this ruling, a majority of companies will be legally obligated to apply these costs to their supply chain, and ultimately, their sourcing initiatives. Long-term procurement results will be affected by these changes in the tax laws. In light of the potential, added costs, buyers must pay even closer attention to their usage history to confirm that sales tax is not being paid erroneously and that full compliance is made at the end of the day. A deeper understanding of North Dakota vs. Wayfair, as well as the correct monitoring of state-level law changes, will be vital to adapting your supply chain to these new regulations.

June 28, 2019

Here's a look at where Source One's cost reduction experts have been featured this week!

New Whitepaper:
Building an Effective Procurement Organization: Part 4 (Tools)
Procurement groups the world over are eager to realize a digital transformation. So eager that many will jump into tech-centric initiatives without doing their due diligence. Introducing a new tool isn't as simple as making a selection or facilitating adoption. It's a multi-step process that requires a deliberate and focused approach. Download Source One's latest whitepaper for a comprehensive guide.

New Blogs:
Why Do Introverts Make Good CPOs
Bennett Glace, Procurious, 6/26/2019
The stereotypical leader is an outgoing, charismatic character with confidence. However, studies have shown that none of these are of the top four qualities in a good CPO. The mose important quality to look for when promoting is the ability to produce consistent results. This proves better than the sporatic innovative ideas. This makes the case for introverts to step into executive level positions, even if they are not in your face for a promotion. Take a look at our Bennett Glace's article on procurious that might change the way you evaluate yourself or set of employees when the next opportunity for advancement comes along.

The Do's and Don'ts of Presenting Procurement's Data
Bennett Glace, Vendor Centric, 6/26/2019
Inorder to change the low value/low impact perspective other business departments, like IT, Finance and Marketing have on Procurement it is important for you to present the data in a way that transforms their perception. Here, Glace gives a list of what you should and shouldn't do when conveying the value and potential Procurement has to propel the business forward.

Extreme Weather & the Domestic Supply Chain
Joe Lazzerini, EBN, 6/25/2019
America has been faced with some of its most deadly and destructive weather this past year and Source One Senior Analyst, Joe Lazzerini, addresses it and takes a look at what it means for our domestic supply chains. Our hurricane paths reach all major ports with threats of damaged cargo and empty fleets. Lazzerini gives insights on proactive measures organizations take to maintain their supply chains during natural disasters.

Upcoming Events:
Webinar: End-to-End Supplier Relationship Management: Drive Value Through Segmentation
Jennifer Ulrich, ISM New Jersey, 7/17/2019
Signing a contract on the dotted line is just the beginning of a strategic partnership. In an ISM-New Jersey sponsored webinar, Source One's Jennifer Ulrich will advocate for a holistic, strategic approach to managing vendor relationships. She'll outline her approach to supplier segmentation and offer best practices for maintaining long-term, mutually beneficial relationships.

Procurious Big Ideas Summit
Procurious, Chicago, IL, 9/18/2019
This September, Source One will sponsor the Procurious Big Ideas Summit. The one-day event brings a select group of Procurement thought leaders together to discuss Supply Management's most thought provoking subjects.

A managed and strategic sourcing strategy for direct materials can pay great dividends in savings over the lifetime of a specific product line, but tends to be more technically involved and have a higher time commitment.

The gathering of technical specifications will usually take up the most upfront time. Interdepartmental communication within this phase of the sourcing process is critical in order to understand the hard requirements of the specifications as well as areas of flexibility.

For machined parts this will involve gathering a PDF drawing for each component for initial conversations with the machine shops, as well as design files in a generic 3D CAD format such as STEP (Standard for the Exchange of Product) which is in an ISO standard exchange format. Factors to consider may include tolerancing of critical dimensions, geometries of individual features, and material specifications and finishes.

In addition to engaging with the suppliers when initiating the relationship and during revisions of the drawings, frequent requoting with both the incumbent and a set of alternate suppliers can be a key factor in understanding the true competitive market costs.

When working with electronics parts such as Printed Circuit Board Assemblies (PCBA) the process becomes more involved due to not only maintaining the most current revision of electronic design files such as Gerber files, but also the management of individual off-the-shelf component specifications and availability, obsolescence, and substitution concerns.

The Gerber design files form the basis of the conversations with EMS (Electronic Manufacturing Services) suppliers and the quoting process, since they are in a generic ASCII vector format for 2D binary images of the circuit board's copper layers, solder mask, silkscreen, and drill data and can be read by any supplier independent of the original design program. PDF files describing the board's layout, schematic data, and fabrication requirements are also required for a complete and accurate quote.

Along with the design information a BOM (Bill Of Materials) is also provided to list each component of the board assembly. Within the BOM, passive electronic components that do not control current through a command signal are listed and may include capacitors, resistors, inductors, transformers, and filters. These components are usually more open to substitution, but sometimes have a critical tolerance value and any alternates need to be validated by the Engineering design team. The active components, which do control current, are more critical and can include most ICs/transistors/semiconductor devices, sensors, display devices, vacuum tubes, and silicon-controlled rectifiers. Active components have firm requirements due to design constraints and may be in short supply at times or need to go through a thorough end of life cycle upon obsolescence. This can include purchasing through brokers, negotiating directly with the manufacturer to ensure supply, purchasing a bulk supply to ensure a transition period, and working closely with the Engineering design team to validate an appropriate substitute and ensure a smooth transition to the new component.

Therefore, by dedicating the initial time necessary to gather all specifications and understand the constraints of the design, a program can be developed to provide year over year savings by requoting parts to maintain competitive pricing and utilize substitution and negotiation strategies with suppliers when individual part costs begin to rise.

This week's episode of the Source One Podcast welcomes Kelly Barner as guest host. The Founder and President of Buyers Meeting Point sits down with Source One Director Anthony Mignona to examine the value of better, more strategic tail spend management.

Organizations differs in how they define their organization's "tail." For some, it's the 80% of spend represented by 20% of their suppliers. Others employ a far broader definition and label all of their indirect purchases as tail spend. However they define tail spend, most organizations have one thing in common - they don't pay enough attention to it.

At a glance, tail spend purchases can look tactical and low value. Taking the effort to dig into it rarely looks worthwhile to Procurement teams who are already juggling a cross-functional workload. Mignona suggests, however, that these organizations could be holding themselves back. He advises listeners to rethink the way they approach tail spend and develop strategies for addressing it. It's an effort that could uncover a wealth of hidden value and help Procurement make a case for itself as an asset to the business.

Subscribe to the Source One Podcast today to hear the full conversation.

The ongoing trade war between the United States and China is continuing to force impacted businesses to make various concessions and adjustments, and the world's biggest tech companies are no exception. Now, under the looming specter of a fourth tranche of tariffs of up to 25% on $300 billion in Chinese imports, Apple Inc. is asking its suppliers to study moving final assembly of some products out of the People's Republic, sources told The Wall Street Journal.

Although nothing is set in stone, and major changes could require months or years to fully implement, the California-based technology giant is reportedly considering diversifying its supply chain by shifting up to a third of the production for some devices to Southeast Asian nations such as Indonesia, India and Vietnam.

Potential move presents new supply change challenges

Any transition would be unlikely to have an immediate impact on Apple's iPhones, the latest batch of which are set to launch in September, and which Chinese factories have already begun ramping up production of in order to meet demand. The Taiwan-based Foxconn Technology Group, the iPhone's biggest assembler, employs hundreds of thousands of Chinese workers to manufacture the high-volume product, but has also made investments in factories in Vietnam and India.

"We are totally capable of dealing with Apple's needs to move production lines if they have any," Young-Way Liu, the head of Foxconn's semiconductor business group, said during a recent investor meeting.

"There is some flexibility to move Mac and other products, but it won't be easy," cautioned Mehdi Hosseini, an analyst with Susquehanna International Group. "You have to have relatively skilled labor. You have to create an inventory hub. It would take time."

Apple products rely heavily on China not just for manufacturing, but for sourcing, as well. Apple products rely heavily on China not just for manufacturing, but for sourcing, as well.
Further complicating the matter is the fact that most Apple components, including lithium batteries, are sourced from China, meaning moving both procurement and production capacity outside the country would be especially challenging.
For now, Apple has rushed production and shipment of certain key components for stockpiling, in order to get ahead of the fourth tranche of tariffs that may go into effect this summer.

Various tech and consumer electronics companies expressing concern

Despite the obvious consequences for Apple's business, CEO Tim Cook has thus far remained publicly neutral on the trade war, repeatedly saying that the two countries are bound to reach an agreement and meeting with President Donald Trump and visiting the office of U.S. Trade Representative Robert Lighthizer.

However, in a recent letter to Lighthizer, Apple said the latest proposed tariffs on Chinese goods would limit the company's contributions to the U.S. economy, harm its ability to keep up with global competitors, and affect all of its major products, including the iPhone, iPad, Mac, AirPods and accessories.

Apple is not the only tech giant sounding the alarm about the potential negative impacts of prolonged trade tensions. Dell, HP, Microsoft and Intel recently submitted a joint statement to the USTR, warning that tariffs would require them to raise prices by at least 19%, causing the average retail price of a laptop to increase $120.

So far, none of these companies have announced plans to leave China, but have stated that rising prices would also adversely impact their own internal R&D functions and employment capability, as well as the many small- to medium-sized organizations that depend on affordable laptops, such as small businesses and schools. While it's unclear how many companies are following Apple's lead and asking suppliers to model cost of production outside of China, it's very apparent how strongly the tech industry has been affected by the trade war.

Procurement has the power to do far more than execute purchases and sign on the dotted line. The function has game-changing potential to mitigate risks, develop strategies, and, of course, drive savings. This all becomes much easier when it’s got access to a wealth of accurate, actionable data. 

Unfortunately, the word ‘data’ alone can often raise eyebrows across Procurement teams. Things are even worse when data resides in a silo that’s off-limits to Procurement. At Source One, we take a data-centric approach to Procurement. We it as fuel for each of our initiatives and consider it a vital asset for both building partnerships and elevating Procurement.

Predictably, getting started is often the hardest part for Procurement teams looking to take a more data-centric approach. Collecting data is an inherently time-consuming process that’s often complicated by push-back, avoidance, and poor data management practices. It's not surprising that so many organizations take an "out of sight, out of mind" approach to their historical spend.

Our team has succeeded in helping even data-averse organizations recognize what they could be missing out on. We take the lead in collecting data points by embedding ourselves within organizations and applying the best practices we've learned over more than two and a half decades. More importantly, we facilitate the process of identifying the truly high-value, high-impact data. Organizations who've typically practiced poor data management are often confronted with inconsistencies, redundancies, and other headaches throughout their spend profile. Unaddressed, these can stand in the way of savings opportunity and efficiency boosts. 

It's important to remember that simply analyzing data won't bring Procurement much closer to meeting its goals. We set ourselves apart by empowering organizations to take the next several steps. We apply a taxonomy to spend data that's designed with Procurement in mind. Rather than bombarding the function with data for data's sake, we present it in terms that will resonate and inspire action.

Next, we work alongside clients to build out an opportunity roadmap. The document outlines the most strategic and effective path to savings and provides guidance for each phase of Procurement's cost reduction efforts. This is where the raw information provided by spend data becomes something far more valuable - actionable, tangible opportunities to cut costs and optimize supplier relationships. 

Another forgotten step of data-driven Procurement is ongoing savings tracking. In addition to helping Procurement verify its results, keeping a record of savings will help build the business case for future investments. With access to verified savings figures, Procurement can make a more compelling argument that it can, in fact, serve an essential role within the organization. It's no secret that Procurement doesn't always have a great reputation. A more data-centric approach and better processes for tracking and reporting on savings could turn the tide. 

We’re currently leveraging our data-centric approach to support a North American gas company. After wading through more than $400 million in total spend, we identified nearly $5 million in potential savings across 14 spend categories. Together, we're now working to act on those opportunities and make Procurement a valued strategic adviser for the business. 

Want to learn more about what data-empowered Procurement can mean for your business? Reach out today

Cashless Dining - Explained

If you’re shopping at a trendy, millennial-oriented business the odds are increasingly high that you won’t be paying with cash. Instead, you may have to pay with a credit card, an app, or Apple or Google Pay. This is because these companies are phasing out cash payment, arguing that touch-less pay makes shopping hassle-free.

This March, Philadelphia became the first U.S city to ban cashless stores. The law won’t apply to businesses like parking garages, stores with membership models like Costco, or transactions that require a security deposit, like rental cars. In July, new legislation requiring all other retailers and restaurants to accept cash will go into full effect.

The debate around cashless restaurant originated with the idea that it will make a restaurant more efficient. Proponents argue it will eliminate the time spent handling and counting change, ultimately making it quicker and easier to serve customers. It has also been argued that cashless stores are safer. Employees have to carry large sums of money at times and cashless stores would eliminate the potential possibility of being robbed.

Since the late 1970's, the state of Massachusetts has had a law requiring stores to accept cash, but this is the first time a city has successfully enacted a ban on cash-free establishment. Philadelphia’s move comes just a year after Chicago’s government tried and failed to ban cashless stores. In February, similar legislation passed to make cashless businesses illegal in New Jersey, but the governor has yet to sign. New York politicians are pushing laws against cashless stores as well.

The Payment Side of the Procure-to-Pay Cycle

Cashless restaurants have meant tremendous controversy for the payment side of the procure-to-pay cycle. Opponents of cashless stores argue that stores that do not accept cash are discriminating against multiple groups of people. Lower-income customers, for example, might not have a credit card or bank account and therefore, would not be able to purchase from a cashless restaurant. Also, credit cards and bank accounts often have age requirements. Young people probably do not have a credit card, so they would not be able to order from these restaurants either.

What’s Next for Philadelphia?

Philadelphia has a poverty rate of 26 percent, and Philadelphia’s spokesman stated that officials have been focused on finding ways to increase access to banking services for all residents. But until the hurdles facing the un-banked are resolved, Philadelphia wants to remove any obstacles that could prevent residents from enjoying all of the city’s amenities.

The Council of Supply Chain Management Professionals has released its 30th annual State of Logistics report, putting into perspective the rough year that shippers endured in 2018 as various forces conspired to drive up the cost of doing business.

Last year, a strong economy caused the cost of logistics in the U.S. grow to $1.64 trillion, or an 11.4% increase over 2017. High demand, constrained capacity and rising prices all combined to massively inflate the logistics budgets of shippers in 2018.

Best of times and worst of times for logistics providers, shippers

In 2018, the spot freight market rose 25% from February's post-holiday slump to a summer peak, before declining 20% to end of the year, according to the report. The big hike forced shippers across nearly all industries to exceed their annual logistics budgets last year.
"You really saw shippers... have the worst year of their careers."

In addition to increased wages, carriers were also overwhelmed by more demand than they had the capacity for, thanks to rises in e-commerce traffic and stockpiling measures taken by shippers looking to shore up their inventory in the face of tariffs.

"You really saw shippers, as I said, and as the report observes, have the worst year of their careers," Michael Zimmerman,one of the report's authors, told Supply Chain Dive. "[Shippers were] scrambling for capacity, they were paying much higher rates [and] they were blowing up their budgets."

By contrast, logistics providers had a generally excellent 2018, due in large part to the trade issues that fueled US inventory build-ups in the year's second half, and despite the rising costs for drivers and warehousing staff.

According to the report's data, logistics costs rose across all freight modes last year. Thanks to e-commerce, spending on parcel services increased to $105 billion, driving prices in this mode up 4.9% compared to 2017. Ocean shipping, which was strongly affected by the trade war between the US and China, saw rates reach some of their highest levels in the last three years, despite a 5.7% increase in capacity. Additionally, air freight rates rose 5% on East-West lanes.

Last year's steep increases appear to have already "crested"

January 2019 was the 100th consecutive month in which employment increased and businesses had to spend more on wages, a trend that has been felt especially hard in the trucking and warehousing sectors, which passed its higher labor costs on to shippers. But these and other factors that forced shippers to pay more for logistics services in 2018 appear to be on a slight decline.

According to the report, the strong seller's market that began in 2017 and picked up even more steam in 2018 finally showed signs of weakening in the second half of the year, as capacity came closer to meeting demand and the pace of GDP growth similarly slowed. This year's report was titled "Cresting the Hill" to reflect the authors' beliefs that mid-2018 represented the peak of growth for this industry, and potentially for the near-term US economy as a whole.

Supply and Demand Chain Executive (SDCE) magazine has recognized Source One with a spot on their Top 100 Projects list. SDCE's annual list acknowledges the consultants and practitioners behind the year's most innovative and impactful supply chain projects. It provides an example for supply chain professionals interested in driving the function forward and refining their organization's approach.

This is the 13th year that Source One's team has earned this honor. The spot on SDCE's list commemorates a recent Procurement Transformation project.

Check out some details from the project.

The Challenge

Prior to engaging Source One, a pharmaceutical logistics courier struggled with a fragmented supply base. Historically, they had allowed individual sites to select their own air freight suppliers. In addition to rampant inefficiency, the situation meant the logistics courier could not leverage its combined spend for additional incentives.

These complications were especially unwelcome in a complicated, highly-specialized area of air freight spend. In addition to traditional freight and shipping services, the courier needed partners capable of providing temperature-controlled shipping and services for specialized cargo. 

Source One's Approach 

Leveraging a cutting-edge route optimization tool, Source One quickly analyzed more than 500 thousand rows of lane data. In addition to identifying providers capable of meeting the courier's needs, the logistics procurement specialists optimized routes based on region, service level, and other critical factors. 

Following a comprehensive RFP and negotiations process, Source One enabled the courier to centralize their decision making processes and build better, more strategic partnerships. In addition to cost savings, they found opportunities to secure volume-based commitments and pricing discounts.

The Results

With Source One's support, the courier realized savings of over 25% throughout the essential air freight category. These impressive savings were a direct result of the courier's more strategic, standardized approach to supplier relationships. Additionally, a new system for status reporting and KPI tracking ensured the courier could optimize relationships in the long term. 

Most importantly, perhaps, Source One provided the courier with a negotiations playbook. Including a wealth of insights and best practices, it promises to guide successful initiatives for years to come. 

What's Next?

This news comes half-way through what's already been an exciting 2019 for Source One. Next month, the firm's Procurement Transformation Practice Lead, Jennifer Ulrich, will host a webinar on effective Supplier Relationship Management. Sponsored by ISM-New Jersey, the event will provide best practices for segmenting, engaging, and optimizing the supply base. Register today.

ICYMIM: June 24, 2019

Source One's series for keeping up with the most recent highlights in procurement, strategic sourcing, and supply chain news week-to-week.  Check in with us every Monday to stay up to date with the latest supply management news.

Alex Behrens, Spend Matters, 6/24/2019
With hurricane season approaching, DHL has leveraged its Resilience360 solution to advise both North American and Asian organizations how to devise a response. Both regions, DHL reports, can expect a series of storms over the next several months. They encourage businesses to take preemptive measures to identify alternate sources of supply and secure their inventory levels. More tech-enabled firms should also identify opportunities to leverage mapping technologies.

The Real Cost of Employee Turnover
Simon Cartright, Future of Sourcing, 6/20/2019
Voluntary staff turnover is often deadly and always preventable. A recent Gallup poll found that a whopping 52% of resignations are avoidable. These departing employees cost organizations far more than money. Cartright encourages organizations to invest more time and resources into their exit processes. A positive experience will make employees more likely to recommend an organization and it will provide insights into employee challenges and pain points.

Workers’ Digital Skills Gap a Key Challenge for Businesses, The Hackett Group Says
Alex Behrens, Spend Matters, 6/18/2019
The digital skills gap is still a huge obstacle for Procurement groups. A new Hackett report finds that Procurement will need to re-skill or up-kill more than half of its workforce by 2022. Their findings suggest the function is ill-equipped to carry out this process. Though talent is named a priority, few organizations have dedicated themselves to nurturing digital skills. 
My client came to me the other day and asked me to put together a category management plan for the company’s Information Technology Department for the next 18 months.

Always helpful, my client who is a senior leader in the company’s finance department, put his thoughts on paper regarding the various areas of I.T. that could benefit for a strong sourcing and procurement presence. However, when I looked at the list the first item that popped up was the company data center and its co-location facility, I kind of had to shake my head.

While looking at how procurement can work with an I.T. infrastructure team in reducing costs for servers, storage appliances, networking gear, and telecom is a no-brainer, my client forgot that the company is beginning to migrate its data center to the cloud next month. Within the next 6-12 months, there will be no more data center. (Cue sad trombone music)

It got me to thinking about how IT Strategic Sourcing pros need to reflect on the changing landscape of technology, and how we need to both lead and support our stakeholders in I.T.

We all know the big changes that have occurred over the past several years in the enterprise technology space. The jump to the cloud, supporting the end-user via outsourced, off-shore MSPs, and SaaS platforms are just a few. But when thinking about I.T. as a category, and how it should be managed, what should be doing differently from what we’ve done in the past?

SupplierRelationship Management is as important as ever – As companies continue to outsource key technology resources to remain lean and effective, its vital to have constant and effective communications with your business-critical vendors. As technology rapidly changes, the resources supporting that technology may need to change as well. I.T. leaders and their strategic sourcing partners need to know in real-time if SLAs are being met, if there are any skill gaps in the talent a supplier is bring to the table, and ensure that the supplier has a qualified bench of personnel who can jump into the mix when a new technology is deployed. And as the marketplace of MSPs increases, the opportunity to negotiate rate cards downward increases. Sourcing must regularly be benchmarking hourly rates for developers, DBAs, help desk talent and the like.

Another aspect of SRM that needs to be pushed is innovation. The large MSPs have thousands of clients and have a pulse of the innovative, game changing trends in dozens of industries. Working closely with your supply base can provide ample opportunity to co-innovate applications, processes, and strategies that automate day to day activities, reduce overhead, and utilize budding technologies to get products and services to market faster.

Long Term Relationships, Short Term Contracts – I am a huge advocate for consolidating suppliers in the Information Technology space as much as possible. The outsourcing landscape is constantly changing, so retaining the flexibility to change direction rapidly is key. Of course that can be difficult to do when different leaders in I.T., such as Enterprise, Commercial, and Infrastructure, have maintained relationships with their preferred suppliers for years. But it makes sense to leverage the most strategic suppliers in your organization’s portfolio and get the most from their wide swath of technological expertise.

And, with the ever-changing needs of a business’ tech requirements, gone should be the days of multiple year contracts. Depending on the size and scope of a particular project, contracts can be shortened to six to twelve months. This applies pressure on those key suppliers to stay on time for deliverables and budget and offers the business the convenience of swapping out resources, or switching to a secondary supplier should the need arise.

Yes, the burden of managing contracts and processing purchase orders will increase, but with the improvement of automation tools in the sourcing and contracting space, this can be managed so that category managers are not overwhelmed with day to day paperwork minutiae.  

Focusing on the value proposition – Particularly in I.T., it is not always in an organization’s best interests to award contracts based on lowest bid price alone. Instead, sourcing and their business stakeholders should award contracts based on the principal of creating and sustaining value, while balancing cost factors and quality of delivery. An organization can secure suppliers with whom they can innovate to transform the underlying costs and value of IT services. This will help to achieve meeting annual savings targets and optimize the contribution of the supply base to the organization’s strategic objectives. By awarding contracts based on ‘lowest price’ only, organizations may miss opportunities to work with IT product and service suppliers who offer superior technical expertise, longer-term “shift right” opportunities, and longer-term strategic relationships.

Obviously, I am just scratching the surface here. Service level agreements need to be rethought in the new technology landscape. The opportunity to crowdsource and insource I.T. activities are more achievable than ever. And without a doubt, I.T. management needs to be brought along to a new way of thinking about their suppliers, technology delivery, and how to go about getting the most value out of their budget. Now is a great time to have a discussion with Source One about how our experts can transform your InformationTechnology Sourcing strategies.

June 21, 2019


New Whitepaper:
Building an Effective Procurement Organization: Part 4 (Tools)

Upcoming Events:
Jennifer Ulrich, ISM New Jersey, 7/17/2019

Procurious Big Ideas Summit
Procurious, Chicago, IL, 9/18/2019

Pipelining is a critical part of the sales process. Veteran sales teams know that healthy pipelines ensure continued growth, even in times of market adversity. Those with shorter vision are often left wondering why their growth is anemic at best (or see market share shrink at worst).

Lead generation firms offer a way to outsource some of this work, and Procurement is poised to help Sales get resources in place to keep pipelines full. Yet this isn’t territory that many Procurement pros have experience in. So, what can Procurement do to best support Sales in finding and selecting suppliers in this space?

I had a chance to sit down with two industry insiders to get their take. (Update: I've also posted the second half of this discussion here)

Meet the Experts

Kelvin Francis is the founder and CEO of LeadsBIXample. The firm was founded in the middle of the late 2000’s recession, at a time when small business was slated as the “the engine of recovery.” Kelvin’s goal was to serve that engine. After working in firms that catered to mostly enterprise clientele, Kelvin saw a gap in the market for smaller and mid-sized organizations and sought to fill that gap.

Michael Morris has worked in the sales and lead generation space for decades, often alongside Kelvin. Mike specializes in developing a clear the path to client growth, putting together all of the elements that make this possible. That includes B2B appointment setting and social media marketing, but also incorporates business and strategic planning needed to grow and support a sales team.  

Together, they helped answer two common questions Procurement has about lead generation firms: 
  • What can they do, and does my sales team need these services?
  • What’s the best way to go about selecting these firms?
In this first installment, we’ll take a deeper look into this first question.

What do Lead Generation Firms Do?

Procurement pros need a solid understanding of the services offered in the market and how their organizations can utilize them. This is simple in commoditized markets – to understand industrial supply needs, we’d look no further than annual usage reports. A market basket here takes shape quickly.

Not so with specialized services like lead gen. Usage reports, if a third party is used at all, may not detail all the services at play, and this category isn’t always one that Procurement has deep experience with. Sales teams aren’t always quick to fill in the gaps, either. Bringing in a third party supplier here can seem like an attack on a sales team’s abilities.

We need to understand the full scope of what a lead gen firm can provide an organization to better understand if those services can benefit our organizations. To start, I wanted a feel for how both Kelvin and Mike define lead gen offerings.

For an organization that has never really engaged with a lead gen firm, what are they and what services do they provide?

Mike     The most apparent answer is ‘generating sales leads,’ but that isn’t the full picture. Going out to the market to directly connect clients with their target audience is just part of what these firms can offer. Most provide additional services depending on how developed a client’s sales team is. Clients often engage lead gen firms to help get a better idea of what their target market really looks like, develop value propositions, brainstorm sales talking points, and refine their approach to either tackling a new market or expanding in an existing space.
Kelvin   Lead generation is all about adding fuel to an organization’s sales activities, either using internal resources or bringing in a third party. The act of generating leads is the opening activity to build a sales pipeline. There are different versions of lead generation, from serious appointment setting down to just exposing a company to the market and reinforcing branding and messaging – it’s all part of the chase that is sales.

Some sales teams worry that bringing in a third party interferes with how their process works or worry that they’re being outsourced. Do you think there’s overlap, and can lead gen companies replace parts of a sales team?

Mike     Whether or not they could, the true value of a lead gen firm is only realized through strong relationships with sales teams. These firms don’t eliminate sales teams but do cut out ‘sales waste.’ They allow sales people to prioritize warmer opportunities or those closing sooner than later. Generally, outsourcing lead gen lets a team focus efforts on chasing big fish where a relationship already exists.
Kelvin   Lead generation might be able to replace some sales functionality, but it shouldn’t be the first place organizations look to when evaluating their sales process effectiveness. Organizations should look at lead generation firms instead to evaluate how much pipelining ammunition those teams have access to, which is what helps determine how effective they will be.

You’ve both been involved in sales and lead gen for some time. What changes have you seen in the landscape over the years?

Kelvin   The biggest catalyst for change has been the amount of information that consumers have access to. They shop around and come to the table informed about their options. Sales teams need intel on where these savvier consumers are in the sales lifecycle and turn to lead gen partners to provide this reconnaissance. It isn’t just about getting an appointment any more, it’s about getting background on why that consumer is interested and what brought them to that conclusion.
Mike     There’s been a mindset change in sales leadership. Instead of relying on old fashioned sales tactics, leaders are looking for fresh ideas for approaching their audience. A common example is the adoption of CRM or other support technologies. Yesterday’s challenge was getting leadership to understand the benefits of analyzing and applying sales data. Today’s challenge isn’t convincing leadership of the value, but forming a strategy to leverage this data. Lead generation strategies are a way to directly capitalize on the analytics a lot of companies have spent time and resources building up.

Key Takeaways

The phrase "measure twice, cut once" exists for a reason. For Procurement, this means taking the time at the beginning of an initiative to delve deep into our scopes of work before relying on them in a market event. 

When it comes to lead generation, this discussion planted three key takeaways in my mind:
  1. Start by evaluating existing gaps in the sales process. Identify where the process can be strengthened, and research how lead gen suppliers can offer support. 
  2. However, do so carefully. Our goal is to bring Sales onboard, not drive them to fight against us. Establish early on that such third parties support Sales teams or, as Mike puts it, help eliminate sales waste. They aren’t meant to replace the team but to elevate it instead.
  3. Leverage suppliers early on. An informal RFI should be conducted before a scope of work is generated. Lead gen providers are in the perfect position to shed light on opportunities that Procurement may not be aware of.
In the next installment of this topic, we’ll discuss best practices for selecting and working with lead gen partners. (Update: I've also posted the second half of this discussion here)