The Supply Chain Management Category

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

risk

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.

AdaptOne: Vendor Snapshot (Part 3) — Summary and Competitive Analysis [PRO]

supplier management

The supplier management technology market is among the most fragmented of those in the procurement technology landscape.

It comprises multiple segments (and sub-segments), and Spend Matters now tracks approximately 50 providers that compete within niche segments of it. One of these providers is AdaptOne, a vendor specializing in supplier information management that perfectly matches Spend Matters’ SolutionMap “Turnkey” persona for supplier management. This Spend Matters PRO report provides facts and expert analysis to help procurement organizations make informed decisions about AdaptOne’s solution — and whether its “turnkey” services-driven approach is right for them.

Part 1 of our analysis provided a company background and detailed solution overview, as well as a summary recommended fit suggestion for when organizations should consider AdaptOne in the procurement, supply chain and finance technology areas. Part 2 covered product strengths and weaknesses. This final installment offers SWOT analysis, explores competitive alternatives to AdaptOne and provides insight into evaluation and selection considerations, including a prioritization/fit checklist.

Sustainable SRM Is Focus of 10th Annual State of Flux Report on Supplier Relationships

gig economy

Many businesses have come around to the idea that sustainability is not just a hashtag or a marketing ploy but something that can help a company advance its business goals. But as organizations dive into all the ways they can save energy and use friendlier materials, they soon realize there are only so many they control. Truly leveraging sustainability requires close collaboration all the way down the supply chain to find mutual incentives for all, according to the latest report by State of Flux, a global procurement and supply chain consultancy.

Supplier Relationship Management Needs a Jolt of Technology, State of Flux’s SRM Summit Finds

Procurement has made significant strides in supporting supplier relationship management initiatives, but poor investment in technology could limit the potential benefits those programs can deliver in the years to come, according to State of Flux, a consulting firm that specializes in SRM and which held its annual SRM summit in Chicago on Oct. 23. Over the decade that State of Flux has monitored SRM maturity, procurement organizations have made considerable improvements in several areas — but not in adopting and using technology dedicated to SRM.

How to Inspire a Cash Flow Revolution: Insights from Taulia’s Working Capital Summit

Investors, CEOs and suppliers are pushing procurement and finance organizations to improve working capital performance, and this renewed interest in the state of the balance sheet is poised to create a revolution in how businesses approach cash flow, according to Taulia, a provider of financial supply chain solutions. There is $14 trillion in annual spend volume trapped in global supply chains, and for every $1 billion in revenue, working capital programs can create improvements totaling as much as $70 million, Taulia said last week at its 2018 Working Capital Summit in Chicago.

Amazon Business Prime Updated: Analysis and Procurement Recommendations (October 2018 Update) [PRO]

AnyData Solutions

Earlier today, Amazon announced a host of enhancements to its Amazon Business Prime offering. To help procurement organizations understand the implications of these added capabilities, this Spend Matters PRO research brief provides an overview and analysis of the new solution components and offers recommendations to procurement organizations already using or considering Amazon Business.

The emphasis of this PRO analysis centers on the spend visibility/analytics, e-procurement (guided buying) and working capital/payment capabilities of the October 2018 Amazon Business release. While some of these areas are likely to be less interesting for organizations that already use a third-party e-procurement solution that integrates with Amazon Business (either via punch-out or API), Amazon’s enhanced invoicing, working capital and payment components can be applied to all potential users.

But perhaps most important, these enhancement offer some signals of how Amazon may continue to build out the capabilities of its Prime business solution. Let’s delve in.

Want to Know Your Industry’s Risks? CSR Index from EcoVadis Takes Deep Look

risk

As customers and businesses seek better environmental practices and fair labor standards, corporate social responsibility (CSR) reporting has taken on greater importance for executives who could face questions about why they use conflict minerals or buy products created by forced labor. To help take a deeper look at the issues, EcoVadis has assessed the CSR reporting of more than 33,000 companies around the world. The Paris-based company is a provider of business sustainability ratings, intelligence and performance-improvement tools for global supply chains.