Search Results for: sourcing
Accenture Spend Trends Report: MRO Category Intelligence – Not One Category, Not One Opportunity (Part 2)
In the first part of our update on MRO (maintenance, repair and operations) sourcing trends, we highlighted a number of our own observations as well as those that Accenture made in its recent Q2 . As our analysis continues, we turn our attention, courtesy of Accenture, to the area of supplier innovation and material substitution and how to access it. Accenture suggests there is no substitute for face time when it comes to learning from MRO suppliers. Specifically, attending supplier conferences is an important place to learn.more ▸
There are certain areas of procurement that all too often remain their own fiefdoms – sometimes effective, sometimes not – with little influence or management from center-led or overall functional leadership. Travel is one of these areas. But the opportunity to drive savings from better managing travel spend – and even to generate income through rebate programs – is significant indeed. The Q2 Accenture Spend Trends Report highlights a handful of travel savings opportunities including suggesting more active programs to source corporate cards (including p-cards).more ▸
For the first time, FedEx sets the bar, but will UPS follow? Since 1998, UPS has been playing "leader," setting yearly shipping rates, with FedEx left to play the "follower" role. My, how the tables have turned. Doug Caldwell from AFMS Logistics takes us through the current landscape, detailing the context behind FedEx's move, its new rates – and how USPS is getting hotter on the ground game.more ▸
With each passing year, there are fewer categories in which supply chain transparency (including visibility into total cost at different tiers) is not rising – often considerably. But the lumber industry is one in which total cost transparency is blurred through an intermediary-led brokerage model that has evolved little for over half a century. Woodbrowser is hoping to change this. With the support of one of FreeMarkets co-founders, Sam Kinney - probably one of the most authoritative experts on real-world market mechanisms and market design (and, in full disclosure, a friend and mentor) - Woodbrowser is hoping to shake up the economics of the lumber market.more ▸
Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on eliminating overspending on IT, telecom, and shipping. As carriers like FedEx and UPS announce 2015 rate increases in the form of new dimensional weight pricing policies, many smaller less-than-truckload and truckload (LTL and TL) carriers are also seeing room for rate hikes. In recent months, several have announced modest price increases for delivery services. The combination of rising labor costs and pressures to improve operating ratios make the case for higher pricing in 2015. There are five things shippers can do right now to minimize or mitigate the impact of rising LTL/TL costs in the months ahead.more ▸
You would be hard pressed to find a TV viewer that would argue watching a show in standard definition is better than watching in high definition. Similarly, it would be difficult to find a procurement executive that would argue a manual (Excel/Word/email) based sourcing process is better than utilizing an eSourcing tool. It’s almost universally accepted that eSourcing is more efficient, improves quality/standardization, and generates better results.more ▸
Auto News recently reported that Magna International, one of the top three auto suppliers based in Canada, has been rethinking its supply chain of late, noting that “local strategy and efficiency improvements as key cost-saving measures within its supply chain.” In particular, supply chain localization was one of three trends within Magna’s supply chain identified by Carrie Van Ess, vice president of procurement for the Americas, at a recent industry briefing. Van Ess said a new supply chain model is emerging in which “goods are produced, sold and consumed in the same geographic region,” according to the article.more ▸
Accenture Spend Trends Report: MRO Category Intelligence – Not One Category, Not One Opportunity (Part 1)
For many companies, maintenance, repair, and operations (MRO) represents a single (and large) area of procurement spend – often one which is rarely as proactively managed as it could be ( likely resulting in great savings on certain items and price gouging by suppliers on other SKUs that make up for all the savings in other areas). But MRO is not a single category. It spans everything from janitorial and cleaning supplies to fasteners and electrical products. But MRO typically has one thing in common – the majority (if not all) spend goes directly through distributors which may (or may not) perform value-added activities rather than to manufacturers.
We’ve covered MRO extensively on Spend Matters as of late, including taking a closer look at how to segment MRO spend and appropriate sourcing strategies in different areas. We’ve also looked at Amazon’s potential in the market, among other areas. See our list of related research at the end of this post for our most recent thoughts on the topic.more ▸
Accenture Spend Trends Report: Insurance and Risk Category Intelligence – Exploring the Total Cost of Risk
Procurement’s historic role in many companies is based on waiting for activities and requirements be tossed “over the wall” by the business as product and service lines, as well as taking action only when internal requirements change or are added (e.g., tracking new information such as diversity status, risk, environmental, and regulatory compliance areas, etc). Yet staying passive is a recipe for sub-optimizing sourcing and total costs results in new or changing areas given the time pressure to execute on activities when a new trigger occurs. One such area that is explored in the Q2 Accenture Spend Trends Report is the changes within insurance and risk management.more ▸
Earlier this month, Spend Matters published a story highlighting Auto News’ coverage of supply chain and procurement localization at Magna International. On the surface, supply chain localization seems simple – work with local suppliers in the areas where you do business globally. Supply chain localization is far from easy – in fact, its requirements and practices are often incongruous with some procurement and supply chain trends leading to greater centralization of efforts and management.
Moreover, without the right structure and design – not to mention technology – the supplier localization efforts can overwhelm individuals (e.g., category managers) tasked with global oversight of specific sourcing and related supplier management efforts.
So what enablers can procurement and supply chain organizations turn to as they move toward localization given this context? There's a bunch. Read the full post to find out what they are.more ▸
In a previous Spend Matters post titled Does Increased DPO Actually Destroy Enterprise Value?, I highlighted some analysis where, in 12 of 14 manufacturing industries I analyzed, I found negative correlations between days payable outstanding (DPO) and enterprise performance (e.g., debt you may incur to raise cash to invest in high payback initiatives such as B2B trade financing where early payment discounts and/or supply chain finance programs are established). In this Spend Matters PRO article, I’ll dive into the industry details and also provide some additional insights based on some recent research that we conducted with the Institute for Supply Management (ISM).more ▸
My old employer The Hackett Group sent me the results of their latest annual study on working capital performance (a downloadable version of the study can be found here). Hackett’s subsidiary REL Consultancy (or “REL” for short) annually extracts, adjusts, and reports on the working capital performance (and overall financial performance) of the top 1,000 publicly traded firms in the United States. For context, the average firm turnover is $11 billion in revenues and median turnover is $4 billion.
REL runs its business primarily based on a singular assumption and value proposition: Reduce your Days Working Capital (DWC) because less working capital is better for the business. Cash that is “liberated” from balance sheets can be used for stock buybacks, R&D, M&A, etc. Improving working capital is a no brainer, right? Unfortunately, this story is just that: a nice story.more ▸
With decreased levels of capacity for ethylene conversion, there has been a noticeable impact on the feedstock ethane. Ethane production has been growing steadily due to the shale gas boom resulting in oversupply and lower prices. Production averaged 1.0464 million barrels/day in May 2014, an increase of 12.8 percent (139,000 barrels/day) on the same period last year.more ▸
Regardless of whether it’s public or private sector, I would argue that the basics of strategic sourcing (i.e., aggregate and consolidate spending with fewer suppliers to create leverage in negotiations and more strategic relationships overall) are in conflict with the drive to encourage supplier diversity. But they don’t have to be. Here’s why: strategic sourcing does not only have to focus on demand aggregation and sourcing strategies based on driving down price with tier one suppliers.more ▸
Accenture's Spend Trends Report from Q2 (published in October) covers a number of macroeconomic areas impacting procurement and supply chain costs while also diving into a number of category-specific trends. One area the research brief explores is the logistics market, offering a global perspective on it and opportunities for savings and procurement improvement.more ▸
If I had to choose a spend category to be responsible for, what might that be? Well, I recently met someone who has what might just be my dream procurement job. Richard Kirstein runs Resilient Music, based in London. It is a small advisory and (in a sense) procurement outsourcing firm that advises and helps their clients buy music rights. So when you see a TV advert, or some fancy YouTube viral video campaign for a trendy fashion or drinks brand, and there is some music playing in the background, someone has purchased the rights to use that music.more ▸
For far too many companies, marketing is a category that is actively managed by key suppliers (e.g., agencies of record) rather than the organization itself. It’s one of the last “hold out” areas in which vendors typically have access to far better insight on performance and ROI than the organization spending money in the area. This is already changing, however, in larger companies, especially in CPG, retail and high-tech, as procurement leads and more analytical CMOs regain control and influence from the creative types that previously ran the show on what was all too often a solo basis.more ▸
So far in this series, I have written about both the strengths and some of the limitations of basic sourcing tools – and when organizations should consider using them as opposed working with those that really do specialize in supporting more advanced sourcing organizations and sourcing requirements. Another key area that I’ve observed again and again in my research (including both public and private sector) in the case of more advanced tools is when organizations must have sourcing applications reflect heavy levels of governance and process based on regulatory or other requirements.more ▸
Last week I was in the United Arab Emirates to present two of our Real World Sourcing briefing sessions in Dubai (Transforming Procurement – Myth or Reality?) and Abu Dhabi (Contract Management). The sessions are supported by Tejari (the BravoSolution joint venture in the region) and CIPS MENA – thanks to them for their effort and enthusiasm. I admit, I find Dubai a fascinating but deeply strange place – admirable in many ways, but I struggle with the pace of development and just the heat! But I love the sessions themselves – no criticism of our UK Real World Souring […]more ▸
As we continue our coverage of Accenture's Spend Trends Report, we turn our attention to the topic of energy prices and cost pressure. A number of Accenture’s findings are actually quite similar to a longer-term perspective we presented in a recent Spend Matters PRO research brief titled "Will the Cost of Energy Increase? On Statistics from the US Energy Information Administration." As Accenture notes in their analysis, energy prices are continuing on a long-term up-trend with short-term pullback and volatility along the way, albeit with a underlying long-term inflationary undertone.more ▸