My discussion with A&M's Steve Gold next turned to an area closer to procurement -- base and raw material sourcing. Steve suggested that as he looks across many of the industrial companies A&M surveys, "generally most organizations are unprepared on the hedging or demand aggregation front." Yet some companies are doing some pretty fascinating things, which may be signs of trends to come in 2012. In one instance, two very large food/CPG companies are currently co-mingling and aggregating spend for truckload procurement in North America. Together, these companies represent a large enough spend and overlapping transportation lanes that their volume has a material impact on carrier pricing.
Outside of the CPG world, Steve also suggests that certain manufacturers are thinking about ways to co-mingle or aggregate their spend together. Steve cited one example where two industrial companies aggregated their finished metals purchases (e.g., wires, cables, bearings, chains, etc.). Yet the fundamental challenge many industrial companies have in this regard is a lack of visibility into both historic spending data as well as future demand data, making aggregation strategies more difficult. Steve argues that a new set of skills and leadership within many supply chain groups are what's needed to overcome this challenge. But as there is a "great pool of CFO talent and executive marketing talent" out there in the industry, Steve believes there isn't yet equal depth among senior supply chain practitioners, creating a war for the best supply chain and procurement talent.
Headed into 2012, Steve sees significant opportunity for technology innovation and disruption in the supply chain market. One example he cites is openmile (disclosure: Steve's bio notes he is a board member of this organization). OpenMile cuts the ultimate cost of transportation compared to typical truck brokers by fixing their fee at a 6% mark-up. By blasting available loads 4x per day to thousands of small truckload carriers who are connected to the OpenMile network via the Web, the Company is able to provide lower costs as they notify truckers of available loads directly (via email, mobile devices, web, etc.) creating a true markets with higher degrees of information transparency through technology. Steve notes that "we used OpenMile when recently working with A CPG company and the ultimate transportation costs were more than 20% less" than they would have been through a traditional asset based or non-asset based transportation provider .
Spend Matters would like to thank Steve Gold for sharing his thoughts on supply chain predictions for 2012. We would also encourage you to read his latest guest contribution to Spend Matters: Shippers Face Sticker Shock as Trucking Industry Increases Prices.