A new report from Texas-based research firm Everest Group analyzes the factors contributing to suboptimal direct spend management. The report — “Is It Time to Outsource Direct Spend Categories?” — aims to provide a process for enterprises to begin changing their approach to direct spend management.
Because procurement is so often measured on cost savings as its primary KPI, another essential factor can be left by the wayside: risk. Especially when it comes to corporate social responsibility (CSR) and sustainability, risk remains hidden within indirect spend. To see how these dangers go unaddressed, here are three areas with examples of where organizations miss — but, with proper tools, can address — CSR and sustainability risks for indirect procurement.
Welcome to the January 2019 edition of Spend Matters’ monthly feature “The Contingent Workforce and Services (CW/S) Insider’s Hot List,” available to PLUS and PRO subscribers. For those new to the Hot List, each edition covers the prior month’s important or interesting technology and innovation developments within the CW/S space, where change may be accelerating or at least becoming more pervasive.
This edition also marks the first 12 months of Hot List coverage, launched in the February 2018 inaugural edition (and covering January 2018). Our goal was to show that under the surface of the obtuse, clinical label of “contingent workforce and services” (CW/S) was a hotbed of technologically driven innovation. We sought to set the record straight, perhaps turn a few heads (maybe even provoke a double-take) and possibly prevent some unwary practitioners from getting burned. Hopefully we have fulfilled our promise.
To mark the first anniversary of the Hot List series, this month we will leave the usual format behind and seek a glimpse of the CW/S elephant in the room: complex services spend.
The real features of this spend category have (strangely enough) been obscured in the shadow cast by contingent workforce. And while there has been lots of talk about SOW spend in the CW/S world, in reality, that’s been a little bit like lighting a match in the dark to survey the full enormity of the elephant (possibly only seeing a foot or a tusk).
With that, we will now begin our safari, turn our searchlight toward the relatively unexplored territory of services spend and wrestle with questions like: What is it? How is it being addressed in different sectors? Is there a pattern emerging that may mean more and more effective ways for businesses to source and manage complex services?
The likelihood of reshoring jobs to the U.S. or Europe from places like Asia seems to be gaining momentum in light of ongoing trade wars, fears over the possible China microchip hack that attacked the U.S. supply chain, and the reality of market forces like “fast fashion” and customer demand that typically drive business decisions. Current events and a recent study of the apparel industry can help gauge the state of the world as it feels the push and pull of globalism versus the rise in national policies.
A reader recently wrote in with a question about how to find group purchasing organizations (GPOs) or purchasing consortia. This individual is a U.S.-based sourcing manager at Heidelberg, a multinational company that provides equipment and services for the print media industry. The reader told us that his company is thinking about bidding out for copiers next year, and he became interested in looking into GPOs after hearing about them at a local ISM meeting. However, a casual internet search for GPOs yielded no shortage of results.
Spend Matters welcomes this guest post from Oliver Everhard, an associate with GEP.
For decades, conventional wisdom has said that anything you can manufacture offshore — in particular, less skill-intensive products like clothing — will end up costing your company less. From a cost perspective alone, this is likely true. Yet “reshoring” — the process of bringing manufacturing back into the United States — has become an increasingly popular option for American companies.
People have pointed fingers at United for pulling passengers off after they have boarded; at the security officers who didn’t think it inappropriate to drag a 69-year-old man by his hands; at the passenger himself for not complying with airline policy — but who reads those policies when booking tickets, anyway? But our question is this: How much of the blame also goes to Republic Airline, the regional partner that operated the flight?
Spend Matters welcomes this guest post from Raphael Demmer, of GEP.
In a recent article, Jason Busch pre-empted me in concluding that Donald Trump would make a successful yet polarizing CPO — a conclusion we had reached as well. This assessment was based on a projection of Trump’s mannerisms on the role of a CPO, not an analysis of his policy plans or business procurement practices.
Spend Matters welcomes this sponsored article from John Dreyer, CEO of The Shelby Group.
In the delivery of complex outsourced services, there is often a disconnect between the prices negotiated during the procurement phase and the actual costs of what is delivered over the term of the contract.
Spend Matters welcomes this sponsored guest post from Brian Miller, vice president of services at Intesource, a PROACTIS Company.
The grocery and retail markets are highly dynamic and exceptionally competitive. Facing historically tight margins due to the extensive resources it takes to keep product quality high, procurement teams in these sectors need to be on top of their game in order to compete and remain financially viable. Business today isn’t easy, but in the face of all these pressures, many grocers and retailers are thriving. What’s their secret? Incorporating a sophisticated, strategic approach to sourcing as part of their overall procurement strategy.
The majority of companies that experienced a supply chain disruption in the last year cited either a tier 1 or tier 2 supplier as the predominant source of the disruption, according to 2015 Supply Chain Resilience Report from the Business Continuity Institute and Zurich Insurance. Half of all respondents in the report cited a tier 1 supplier, the immediate or direct supplier, as the major source of the supply chain disruption and an additional 21% cited their tier 2 supplier, the supplier of the OEM’s tier 1 supplier.
Spend Matters welcomes this guest post from Eleonore de Montjoye, of GEP.
Like other mature industries, airlines have high fixed costs, capital and labor as the major cost buckets. While the legacy airlines are consolidating at least in part to gain synergies, the low-cost airlines have gained momentum with ambitious savings strategies while remaining flexible to the demands of their increasing customer base.