ISM 2019 Houston Conference: Highlights and Musings (Part 1)

The ISM 2019 conference was held in Houston, Texas, in April with the goal to "spark" creative thinking about supply chains and procurement. (JP Morris photo / Spend Matters)

A small Spend Matters team descended on ISM 2019 conference this year in Houston (next year is in Boston, where I live!) and I wanted to share some thoughts on the event and a few of the great sessions there.

This was our first year doing a booth on the exhibitor floor, and I even did some booth duty, trying hard not to be one of those “attendee stalker” sales folks.

The few practitioners who did swing by really liked our SolutionMap offering, but next year I think we (and others) need to have some more engaging multimedia setups and presentation formats (e.g., a short TED Talk format might be good).

Thankfully there were also many fewer plastic chotchkies being given out that eventually end up in landfills. Along these lines, I attended an HP session on sustainability, and the speaker mentioned a company, Kaffeeform, that makes espresso cups from recycled coffee grounds and biopolymers — very cool!

The conference had over 1,500 people in attendance, and the event continues the trend toward smaller attendance but generally higher quality than the larger ISM events from years ago. However, with a network of more than 45,000 people, it’s a shame that more don’t make it to this annual event. That said, I think that the smartest strategic move that ISM has made has been to engage the younger procurement and supply chain leaders, including support of the “30 under 30” community.

If you meet some of these young professionals, you realize that they are truly some of the best of the best. However, after talking to a few procurement leaders at the event, the challenge is attracting and retaining this class of talent is very difficult, and it’s not made easier if CPOs are not selling the brand of their firms, their supply chains (and the social impact that they can make), and their procurement organizations that can have a meaningful impact on those supply chains through responsible sourcing.

At the conference, we also announced our 50 to Know/50 to Watch provider list winners for 2019, and of those winners, the following had booths at the conference (with a little snippet for each — just for fun):

  • Amazon Business — The tail (spend) is now wagging the dog
  • APEX Analytix — Fun fact: The earliest provider of forensic spend analysis
  • Avetta — A true networked compliance business (suppliers pay, but with real benefits)
  • ConnXus — Much more than just diversity
  • Coupa — “Hey, we had the booth paid for from Aquiire!”
  • Denali (WNS) — “Don’t worry, we’re still Denali”
  • GEP — Winner of the best booth and giveaway at the conference
  • Insight Sourcing Group (including SpendHQ) — “What are you prepared to do with that spend analysis, Ness?”
  • Ivalua — Single code base … configure to your heart’s content
  • Jaggaer — Best practice of sponsoring the exhibitor floor cocktails
  • LexisNexis — Psst … Want to buy some big data?
  • Omnia Partners — Yes, spend size does matter
  • Proxima Group — Services services services services
  • RapidRatings — Supplier financial health is only an API away
  • Resilience360 — Want the supply risk cockpit that DHL uses for itself?
  • Riskmethods — German engineered supply risk
  • Scanmarket — Sourcing with a big “S”
  • Sievo — The pacesetter in supply analytics
  • SynerTrade — The best suite that nobody has ever heard of
  • Tealbook — The cool “new” kid on the block
  • Tradeshift — Platforms is the new Plastics

OK, that was fun, but let’s get to the sessions …

After the keynote from Carly Fiorina, I sat in on a Zycus presentation focused on some research they’re doing with ISM related to AI/RPA. It’s a big study (over 400 respondents so far), and the most interesting takeaway was that only 37% had even heard of RPA.

The rest of the study focused on AI/RPA, and it’s too bad that the two areas were lumped together because RPA right now is basically more about “digital duct tape” for process integration than about embedded AI. Even so, the bottom line is that only 8% have implemented these technologies (11% for manufacturing firms), and organizations are struggling to implement because of other priorities, poor IT support and unwillingness to be early adopters of emerging technology without clear benefits in their minds.

Besides sharing the interim research results, Zycus also shared some of the BOTS that it’s working on developing:

  • Buyers Desk BOT
  • Invoice Email Attachment BOT
  • Invoice Metadata Extraction AI BOT
  • Contract Metadata Extraction AI BOT
  • Contract Clause Classification BOT
  • Contract Risk Analytics AI BOT
  • Buyer-Supplier Negotiation AI BOT
  • RFQ/Auction Assembler AI BOT
  • Supplier On-boarding RPA BOT
  • Request Fulfillment BOT
  • Approver Reminder BOT
  • Requester Reminder BOT

The next event I went to was GE Appliances (which was acquired by Haier back in 2016) and the topic was tariffs. GE Appliances has been hit hard by tariffs with roughly $100 million in adverse cost impact, especially given its supply chain that imports heavily from China. If you know about the Section 301 tariffs, and the 1300 HTS codes, you can understand why the firm is working hard to address this issue. The majority of impacted spend is finished goods, but the firm also has more than 5,000 parts from roughly 300 suppliers. Concerning tariff mitigation, here are the primary strategies that the firm was pursuing:

  • Reclassification of HTS codes. In terms of implementation, some SKUs are in a “gray” zone and will require more work to get it right. Also, if the supplier is the importer of record, re-classification can have some pushback — so involve them early.
  • Engineering changes. For example, can you redesign a heater so that it can be a burner and classified as such with a different HTS code?
  • Buy ahead. This is not always simple (e.g., accounting rules such as free trade zones and also how you recognize future costs within the current P&L)
  • Tariff share. GE Appliances used “speed dating” with 30 suppliers to ask them to share 50/50 in funding the tariffs. Although the net yield was actually 5% rather than 12.5%, it’s better than 0%! Also, pay attention to currency effects and the impact of foreign government subsidies.
  • Location move. For example, allocate business to an alternate supplier plant, like in Thailand, Vietnam, etc. — if suppliers have this footprint (which can also be a supplier selection criteria that you might want to look for).
  • New supplier. Finding new suppliers outside of China (e.g., Mexico, SE Asia and Eastern Europe).
  • Insource. “We haven’t found any opportunities to produce anything here in the U.S.,” but always be looking for such innovative new suppliers and also with insourcing opportunities.
  • “First sale.” This is an interesting strategy (see good webcast on the topic here), but difficult to implement. Basically, the tariffs only apply to the cost of the goods themselves, so don’t pay tariffs on total spend with a broker. If the broker buys for $80 and sells to you at $100, then you should only pay tariffs on $80. So, it means unbundling everything other than stripped down material. It can take over four months to do this (and needs a third-party compliance agent), but it’s a good strategy for many companies.
  • Tariff exemptions were also discussed where you can lobby for exclusion from tariffs if the U.S. supply simply doesn’t exist for what you need.

Tomorrow I'll follow up with a look at a session called "Procurement Hacks" and another session given by HP Enterprises that focused on sustainability. Look for Part 2 on Wednesday and more coverage of ISM next week.

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