The Supply Chain Management Category

Cold Weather Offers Lessons on Supply Chain Risks and Climate Change

With nature dealing much of the U.S. an arctic blast of cold weather this week, it’s a good time to look at the supply chain risks created by severe weather and climate change. The distinction is that weather consists of the day-to-day events, like high and low temperatures, rain or drought that can fluctuate wildly. And climate is the long-term weather pattern for a particular region. When there’s climate change, a long-term pattern is altered and can affect the daily weather in different areas. So global warming can heat large areas of Earth, causing wild swings in hot as well as cold temperatures in areas that once had a more consistent climate. For this current cold snap, read about all the tips to mitigate supply chain risks.

Supply Risk Management in Mexico: Tips and Analysis For Multinational Procurement Organizations [Plus+]

Editor's note: This is a refresh of our 2015 briefing on supply risk management, which originally ran on Spend Matters PRO.

Supply risk management continues to be an important topic of not just debate but practice, too, within global procurement organizations. And on a more frequent basis, supply risk management efforts are extending “south of the border” for North American companies, as manufacturers continue to emphasize a more prominent role for Mexico and Mexican suppliers in their global supply chains. In this Spend Matters Plus analysis, we explore how Mexican companies are managing supply chain risk. We also share survey results from a study in the region and provide tips and lessons learned for multinational procurement organizations that are increasingly sourcing and manufacturing in the region as well as general supply chain risk management best practices.

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For Hospitals Only (Part 3): How Prodigo Helps Pave Procurement’s Path to Clinical Integration

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The hospital market in the U.S. is undergoing a significant transformation at all levels. Rapidly consolidating markets, declining revenues and a fundamentally new reimbursement paradigm that links provider payments to improved performance are the current headliners. The latter is a value-based form of reimbursement that holds healthcare providers accountable for both the cost and quality of the care they provide. It’s a data-driven payment system that will reward the best-performing providers and penalize those that don’t measure up. Almost by definition, it’s a system where data accuracy and transparency have become the essential currency for improved decision making.

Traditional silos are giving way to cross functional collaborations, as the clinically integrated supply chain compels it.

In this final installment of our three-part series on Prodigo Solutions, we not only address how the company is helping to solve healthcare’s data standards challenge, but how it has successfully positioned itself to directly support the industry’s drive to clinically integrate its supply chains.

North America, Europe Include Top Business Performers in Anti-Corruption Efforts

As companies become increasingly aware of their own corporate social responsibility (CSR) obligations, various watchdog groups are beginning to take stock of these indicators. While some companies might look the other way as conflict gold passes through their supply chains, others might be making efforts to do positive things with their power, such as donating to charitable causes. In a new EcoVadis study, “The Fight Against Corruption: Insights Into Ethical Performance in Global Supply Chains,” the company considers the issue of corruption and how prepared companies are to address it.

Beyond Supplier Risk Management: How Procurement Can Take a Leadership Role in Enterprise Risk Management (Part 2) — Aligning Enterprise Risk to Supply Risk [PRO]

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In Part 1 of this series, we described the process that most progressive procurement organizations use to relate enterprise risk to supply risk. Throughout such transformations, a single theme pervades: alignment. The premise here is that while value chains are, in fact, a chain of value that flows across multiple stakeholders, the “signal” often gets lost as the components of that value go across organizational and functional boundaries. We’ve written before about this concept of “supply performance management” (i.e., where the definition of supply and the supply scorecard gets translated from the customer-facing value chain all the way down to a supplier/contract level) in terms of measuring and managing supply value, but this same concept also inherently applies to risk management.

Risk management is about protecting those value streams, and therefore the commensurate investment in risk mitigation should align with the value streams themselves. Unfortunately, they often don’t, because stakeholders are not typically measured on risk management explicitly (although they can be measured on it implicitly).

Procurement itself faces this problem. Based on our research, only 8% of procurement organizations are formally measured on supply risk reduction. Instead, they’re measured on overt reward (vis a vis savings) but not on protecting those improved supply outcomes. So, if procurement wants to protect supply outcomes, it will need help and resources from the natural risk owners (i.e., those who are measured on the business outcomes affected by those risks) — and that help will not come unless there is visibility, commitment and action. As such, in this installment of this series, we’ll discuss two critical frameworks that organizations can use to gain alignment.

Tradeshift Acquires Babelway, Adding Integration Heft to Its Platform

San Francisco-based Tradeshift, a platform provider for supply chain payments and marketplaces, announced Tuesday it has acquired Babelway, a Belgium firm that focuses on ways to simplify B2B integration. Tradeshift CEO Christian Lanng details the deal in an interview with Spend Matters' Jason Busch:

Beyond Supplier Risk Management: How Procurement Can Take a Leadership Role in Enterprise Risk Management [PRO]

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There is no shortage of news about supply risk in today’s volatile operating market:

 

  • The 12-month LIBOR rate has gone from 2% to over 3% in 2018, and suppliers are beginning to feel a capital squeeze as buyers further stretch their DPO to hoard cash (beyond stock buybacks of course).
  • Brexit continues to loom as a bugbear regarding UK/EU trade. More broadly, geopolitical risk continues to escalate in the Middle East, Eastern Europe, Central America and the South China Sea.
  • S. trade policy still swings wildly at the press of a POTUS tweet, and so do commodity prices and volatility in general. The VIX index has spiked up 65% in the last 60 days alone.
  • Natural disasters driven by climate change are becoming commonplace and calamitous.
  • Competitive risks are sprouting up as digital disruption is creeping into almost every industry sector — and as monopolies “becomes features rather than bugs” with ongoing market consolidation. In response, compliance regimes like GDPR continue to crop up although enforcement is highly variable by region and country.
  • Cyber risk continues to be the most omnipresent risk that organizations are experiencing cross-industry while everyone is flocking to the cloud in record numbers.


So, enterprise risk management should be alive and well. And, logically, supply chain and procurement executives need to be increasingly prepared to work with their internal business partners to reduce this risk and defend the proverbial gates to keep the risks at bay.

Unfortunately, the castle walls are often not well-guarded because the sentries are not getting paid to do so. Procurement organizations in particular suffer from a misalignment between missing incentives for reducing supply risk and zealous Finance-driven incentives for increasing supply reward in the form of narrow purchase cost savings. Regarding the latter, nearly all groups get measured on purchase cost reductions, but only 41% get formal credit for saving money during the sourcing process when there is no initial cost baseline. However, only 8% of procurement organizations get such "hard credit" for reducing supply risk.

Part of the challenge here is that from an enterprise risk management (ERM) standpoint, there is a broader disconnect between evaluating enterprise risk overall versus extending those risk factors in a cohesive manner out to the supply chain and also out to the supply base (via spend categories and then to individual suppliers) where contracts are signed that hopefully help mitigate most supplier risks. There are four “translations” here where alignment gets lost, and to make matters worse, the risk types being managed are highly fragmented, if addressed at all — especially when various stakeholders are in the same boat as procurement regarding not getting credit (and commensurate resources/investment) regarding supply risk. Risk management gets viewed as a glorified insurance policy and set of “check the box” regulatory compliance mandates rather than a sound approach to bringing risk into the value equation (i.e., protecting the value streams of importance through the value chain).

So, the question becomes how can procurement help solve this when so much seems outside its control? And why even pursue it when there are other things to focus on like hitting savings targets?

The answer lies in deftly “connecting the dots” between enterprise risk and supply risk so that various stakeholders like GRC, internal audit, external auditors, divisional presidents, etc. can not only extend their reach into the extended supply chain, but can also be tapped to help bring some corporate power (and resources) to bear and help drive some changes internally and with your suppliers.

In this installment of Spend Matters PRO, we’ll dive into some best practices for gaining this multi-pronged alignment and also how to align supply risk management within various points of the source-to-pay (S2P) process itself. And, of course, if you want to see how various providers handle supply risk, whether S2P suite providers, or more specialized supplier management providers, then definitely check out our SolutionMaps in these respective areas here and here.

How to Limit Nature’s Impact on the Supply Chain

Spend Matters welcomes this guest post from Graham Parker, CEO of Gravity Supply Chain Solutions.

Real-time data will provide visibility and inform decision-making that safeguards the supply chain from the unexpected.

Wildfires, tsunamis, earthquakes and hurricanes.

These are just a few examples of the types of natural disasters the world has experienced in the last 12 months. With California still reeling from the catastrophic impact of the recent wildfires, it is increasingly evident that natural disasters are becoming a regular occurrence.

So You Want to Build a B2B Marketplace: 8 Business Scenarios & Case Examples (Part 2) [PRO]

Just what is a B2B marketplace and, most important, why would you, as a procurement organization or distribution/business intermediary, want to build one? This Spend Matters PRO series provides insight into these and other questions. Part 1 and today’s installment begin by segmenting the market into (and defining) eight business scenarios they can enable that go beyond standard procure-to-pay or storefront/e-commerce enablement, which include “private” and “public” marketplace models.

Thus far, we have explored four models: Digital Trading Company (“buy/sell” models), Extended Bill of Material Orchestration, Group Purchasing Organization (GPO) and Distributor “Value Add.” Today, we turn our attention to four additional B2B marketplace concepts: Procure-to-Pay (P2P) Innovator, New Business Intermediary, Industry Captain and Supply Chain Steward.

For each of the eight areas we provide a summary description of the marketplace concept, technologies (off-the-shelf) that can enable it, selected vendor shortlists, best-fit industries that it can support and best-fit spend categories (if applicable). Later installments in the series will provider deeper insight into the following: what you’ll need to build one, technology vendors to consider capable of providing marketplace technology/infrastructure (based on SolutionMap benchmark data), and whether a marketplace, for procurement organizations, is a substitute (or not) for traditional cloud-based source-to-pay applications.

Spend Matters is involved in technology strategy and RFI projects for organizations building — or evaluating building — marketplaces using “off-the-shelf” technologies. Contact us to learn more.

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With High Intensity Hurricanes the New Normal, Procurement Must Plan Ahead or Suffer the Consequences

As the 2018 Atlantic hurricane season draws to a close at the end of November, it’s a good time to reflect on how one of the most disruptive periods of the year is affecting supply chain risk planning. If there were one lesson for procurement to learn from the past season, it’d be this: Hurricanes are becoming more powerful and lasting longer. The last several years of intense storms (think Harvey, Irma, Maria, Florence and Michael) are not anomalies but what appears to be the new normal. Businesses must therefore take stock of the new standards for natural disasters and prepare accordingly — or risk being caught off-guard.

‘More people in the tools, lower risk, faster processing, better results’ — Roy Anderson sums up procurement’s future (Part 3)

“Use your suppliers to get the work done more efficiently, effectively and start to manage the overall supplier base like an orchestra leader,” procurement veteran Roy Anderson says, laughing at the image — but not the lesson. “That orchestra leader can’t play every instrument and certainly isn’t going to sing every song, but has to be able to have the structure and the reporting and the analytics to be able to manage it more effectively.

“That’s the future. A virtual procurement operation living on a marketplace of capabilities is the future of procurement.”

In Part 3 of Anderson’s conversation about his career and digital changes in the industry, he talks about being at Tradeshift (“where ideas win”),  how “every CPO has a bandwidth problem” and the promise of AI.

Anderson, who became Tradeshift’s CPO and digital transformation officer in September, sat down with another procurement veteran, Pierre Mitchell of Spend Matters, to share some laughs and lessons about how the industry adapted to technology over the last 40 years.

The following is the last of a three-part series of their conversation, which has been edited for clarity. Part 1 ran Monday, and Part 2 ran Wednesday.

Study: Conflict gold from Africa may be in U.S. markets, passing through major companies

An October 2018 study released by a watchdog group that focuses on Africa has highlighted concerns that gold mined from conflict areas in the Democratic Republic of Congo (DRC) is making its way into international markets and becoming integrated in the supply chains of major U.S. companies. Documents reviewed and interviews carried out by The Sentry, a team of policy experts and financial auditors co-founded by George Clooney, raise concerns that the corporate network controlled by Belgian tycoon Alain Goetz, director at the Belgian gold refinery Tony Goetz N.V., has refined illegally smuggled conflict gold from eastern DRC at the African Gold Refinery (AGR) in Uganda and subsequently exported it through a series of companies to the U.S. and Europe. The study lists companies like Amazon, General Electric and Sony as possibly being ones that conflict gold may have been sold to.