Category Archives: Guest Author

Ditch the Pepsi Blues, Already: Become a Marketing Procurement Asset Part I


Today’s guest post is by Brian Seipel, a marking project expert at Source One focussed on helping corporations achieve both marketing and procurement objectives in their strategic sourcing projects.

When discussing marketing procurement, conversations still sometimes slide back to Pepsi’s big move at the end of last year, when they did away with their marketing procurement department. This was a big deal, but was it really a shock?

Pepsi’s news was huge, but hardly isolated; marketing teams have never had a great relationship with procurement. Procurement is still trying to get their foot in the door when it comes to marketing spend, so it isn’t too much of a surprise if that door occasionally gets shut in procurement’s face.

Let’s focus on the positive, instead. As long as dollars are still being spent on marketing initiatives, then there’s a spot at the table for you … if you are able to earn it.

BAD MARKETING PROCUREMENT

Let’s just be clear: Organizations don’t get rid of marketing procurement — they get rid of bad marketing procurement.

Pepsi is still devoting a good-sized budget to marketing and advertising, they just did away with a bad marketing procurement middle man. To be more specific:

  • If an agency search doesn’t move at a speed that keeps pace with marketing initiatives, that’s bad marketing procurement.
  • If you’re seen as a road block, that’s bad marketing procurement.
  • If short-term cost savings trump any other longer term considerations (“but it works when I buy office supplies!”), that’s bad marketing procurement.
  • If you don’t understand marketing, that’s very obviously bad marketing procurement.

If none of these concerns apply to you, then don’t worry. If they do apply, still don’t worry. Focus your energies, instead, on adding more value.

How do you do this?

START BY BECOMING AN ASSET, NOT A ROAD BLOCK

Procurement pros need to do a better job selling one of our greatest values: We allow marketing teams to focus on what they do best — marketing — by clearing the other stuff out of their way. We can make the process faster, not slow it down.

If you haven’t built this business case for yourself as an asset, then marketing teams have no idea what you can offer. They can, and will, view you as a stereotypical bean counter because you haven’t given them anything else to work with.

When I hear marketing complain that procurement slows the process down, I bang my head against a wall. Procurement has honed processes that help speed the process for identifying, vetting, and selecting agencies. Show marketers all of the procurement-based work you can take off their hands (they don’t go away even if procurement leaves the room) so they can focus on finding agencies that are the best fit.

But this is just the beginning. In tomorrow’s post, we will discuss the next steps.


Thanks, Brian.

Aligning Procurement Strategies to Business Goals, Part II


Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, who focuses on helping global companies drive greater value from their expenditures.

In Part I, we noted that if you are applying the same strategy for every category, e.g. consolidate suppliers and sign a three-year contract, you may need to reconsider the variances in the categories and how these differences should affect the chosen strategy. We also noted that, over 30 years ago, Peter Kraljic published his ideas around how Procurement can transition from purchasing to supply management in a still-relevant 1983 article, and that if you look at the complexity of the supply market and contrast that with the criticality to the business, you can fit Procurement’s spend categories into different quadrants and develop a sourcing strategy around each.

Before we discuss what type of strategy generally works in each bucket, we want to make it clear that it is important to track changes and moves in the degree of availability/criticality and adjust your strategy when and where it makes sense. Each classification is examined below; remember that a given product/category can change classifications based on your company and the market conditions; the examples given below should encourage you to think of a comparable product for your company:

Highly Critical, Low Availability [Strategic]:
These are the areas that will stop production or service to customers and are also the hardest products or services to secure and source. To guarantee supply, you will likely need to establish long-term contracts and high quality standards. Due to the criticality, ideally, you would have an alternate supplier pre-qualified for failover or shortages with your preferred supplier. If the market is extremely scarce, you may even need to supplement your supply with multiple long-term suppliers to meet the demand you require. Depending on the products or service, companies can examine the make vs. buy decision and consider vertically integrating the supply into your own company.

Take iron ore for a steel company as an example. If quantities and quality are not met, it can severely impact or even halt production; there are very few suppliers in the market and high barriers to entry. Many steel companies have long term contracts and their own mining divisions to lower the supply risk.

Highly Critical, High Availability [Leverage]:
These categories of spend are still very important to the business, but the products/services are much easier to secure. Due to criticality, you will typically need to establish quality standards, but you can make changes in suppliers more easily and the market should be able to absorb increases in demand. This is one category where other market conditions will likely play a major role in determining sourcing strategy, i.e. how is the market evolving and how are vendors differentiating themselves? Because there is high availability of supply, Procurement should look to leverage spend and focus on cost and quality.

IT products and services are a prime example of this. They are highly available in the market and these can be critical to keep core processes or systems running. For many software and hardware products, there are multiple options to get the same end product by going direct to an OEM, utilizing a reseller, leveraging a VAR relationship, or even one-off buys from local or online suppliers if necessary.

Less Critical, High Availability [Non-critical]:
These products and services are still necessary to run the business, but do not have a significant impact on the end product and results should not be drastic if there is a lapse in supply or an alternate product or service is used in its place. This is where you may cherry pick among suppliers to achieve the lowest cost, introduce alternates/replacements, and use regular RFx efforts to drive down cost. Procurement should look to streamline purchasing and not invest their time heavily on non-critical items.

Office supplies could fall under this category. While office supplies are needed, there are certainly options and alternatives if they are not available, e.g. if pens aren’t available, pencils can be used. Essentially, you can continue to push production without office supplies and the supply base for these items is rather abundant.

Less Critical, Low Availability [Bottleneck]:
Similar to the items above, these categories of products and services are less crucial to running the business and do not add much value to the end product, but because the supply is limited, there is increased risk of scarcity. Procurement will need to secure supply by fostering the supplier relationship to ensure supply, while simultaneously qualifying additional suppliers, considering alternatives, and creating a cushion of inventory where able.

For example: electricity – the market is limited and electricity doesn’t add value as an input into an end product. For many companies, electricity is a utility and necessary to continuing day to day business, so it is crucial to ensure there is a supplier in place. The strategy for something like electricity may lean towards assurance of supply as opposed to finding alternates, but that strategy could adjust depending on presence in deregulated vs regulated energy markets.

These classifications are a starting point that Procurement should use to begin looking at categories and sourcing strategies in a more deliberate manner (or validate the strategies in place today). Determining where a category or even a specific product fits on the scales of criticality and availability will take heavy partnership with business stakeholders. By partnering with end users, Procurement can transform itself from a “buying” department to a “business-enablement” partner and gain inherent knowledge of the business you are supporting each day. The onus is on Procurement to understand how categories being sourced affect and fit into the core business to ensure alignment to overall company goals and business plans. By understanding and tracking the changes in criticality and availability of different inputs to your business, Procurement can ensure the sourcing strategy, category management, and vendor management are aligned to both the supply market and the company goals.

Thanks, Torey.

Aligning Procurement Strategies to Business Goals, Part I


Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, who focuses on helping global companies drive greater value from their expenditures.

Part of good category management is ensuring that the sourcing strategy in place for the products/services is intentional and logical based on the market and commercial aspects of your company. Consider how you are determining sourcing, contract management, and vendor management strategies for different categories of spend: what are the guiding factors that push you towards a long term versus a short term contract, or a consolidated versus a segmented supply base? If you are applying the same strategy for every category, e.g. consolidate suppliers and sign a three-year contract, you may need to reconsider the variances in the categories and how these differences should affect the chosen strategy.

In 1983, Peter Kraljic published his ideas around how Procurement can transition from purchasing to supply management in a still-relevant 1983 article. These ideas were introduced to me when I first began my career in Procurement. I’ve kept these ideas in mind throughout my career to understand at a high-level how the inputs being sourced relate to the business at hand and how to best position a category management strategy given the market conditions associated. We’ll walk through a simplified version of Kraljic’s original ideas and how they can be applied to Procurement at any company.


Complexity of Supply Market/Supply Availability:

To simplify the original idea around “Complexity of the Supply Market” that Kraljic introduced, I want to focus on the availability of supply within the market. Across categories, there are certainly areas where suppliers or additional production are more available than others. In the manufacturing world, I’ve worked with companies that pursued long-term contracts with key suppliers, e.g. over 10 years, and even shared in the capital investment of building plants or production facilities in order to secure supply. Certainly a decision that large would be made with many stakeholders and C-suite folks involved, but it serves as an example of understanding the availability of supply in a given market and strategically responding to scarcity.

Scarce goods or services have rigid supply curves; there are limitations that prevent supply from meeting demand by simply increasing production/output. I use availability to mean more than just physically scarce resources; low availability can be brought on by high barriers to entry, complexity in extracting or moving the materials, a rapid increase in demand, or a rapid decrease in supply. Consider a manufacturing company; an example of a relatively scarce service in that market would be railroad transportation. For railroad capacity, we see high barriers to entry (e.g. we don’t see new railroad companies popping up every year) and an inability to ramp up to changes in demand (e.g. new railroad lines can’t be quickly added). When in Procurement, it is crucial need to look at the supply markets of different categories related to your business – are you being approached by suppliers frequently; are you able to easily find new suppliers to include in sourcing events; have there been any large-scale events that impact supply? Additionally, you can research the number of suppliers in the market, limitations on delivering the product/service, alternatives/substitutions available, and any other limiting factors that can affect supply to determine the relative scale of availability.


Importance of Purchasing/Criticality to the Business:

Availability of supply works hand-in-hand with criticality of that category to the business. Kraljic calls this component “Importance of Purchasing;” I position this aspect as “Criticality to the Business” to refer to the level of spend for a category and the overall impact on profit or production. To be able to measure this, Procurement needs to understand the business perspective and what drives production (either physical production of goods or sale of services). When I was taught these concepts at a steel company, one of the key materials to production was coke to fuel the furnace to smelt iron ore. Consider the core elements of your business and the drivers of production/sales as well as high volume/high price goods; this will help to gauge how critical a given product/service is your business. It should be noted that when looking at criticality, that the quality of that supply can be just as important as actually guaranteeing the volume needed. If key quality specs do not meet acceptable levels for production, there is the risk that the material may not be usable at all.

Based on availability and criticality, you can begin fitting Procurement’s spend categories into different quadrants to develop a sourcing strategy around each.

We will dive into details in Part II.


Thanks, Torey.

Sales Vs. Procurement: Who Wins Control Over Your Next Sourcing Initiative?


Today’s guest post is from Brian Seipel, an information technology and marketing Project Analyst at Source One Management Services.

A while back, I had a chance to discuss why best-in-class suppliers may be, shall we say, less than enthused about the RFP you just released. I’d like to take a moment to move away from such 3-foot concerns of RFP development and address the 30,000 foot concern: Sales’ impression of Procurement’s involvement in the overarching decision-making process. It isn’t a secret that both sides are wary of each other. The name of the game is often winning out over the other side for control of the sourcing initiative.

Procurement’s value to an organization hinges on the ability to get the right solution in place at the right price point as quickly as possible. Sales can help us do this, or throw up barriers that make this goal harder to reach. I propose Procurement pros extend the olive branch and work towards bringing Sales into the equation as partners. There’s too much to gain not to — Sales teams that recognize their place as allies rather than adversaries can deliver better targeted solutions more quickly, and be willing to negotiate more readily.

Good News and Bad News

Most Procurement/Sales relationships can be described as a tenuous, “OK-but-not-great” alliance borne of necessity. The groundwork for forming true partnerships is there, but often not capitalized on. In other words, I have some good news and bad news for you.

Good news! Both sides are in an excellent position to understand end user needs, and know how the market can address them.
Bad news… Sales is often skeptical of Procurement’s willingness to share crucial insider information about needs or plans future development — let alone allow Sales to interface with end users.Good news! When Procurement engages in open dialogue, Sales can be leveraged as a business partner, suggesting otherwise unconsidered solutions that can benefit an organization greatly.
Bad news… However, Sales rarely looks to connect with procurement in the first place, opting instead to look elsewhere in an organization for points of contact, killing such dialogue before it begins.

Good news! Both sides have the ability recognize Total-Cost-of-Ownership and Total-Value as critical long-term.
Bad news… However, as the consequences of the problems manifest, the sourcing process is often derailed — Procurement seeks the lowest cost and Sales fights for the highest revenue. The end result may be a solution not as tailored to the end users’ needs as it should be.

Working Together

Communication is key — when Sales tries to avoid interacting with Procurement or tries to skirt sourcing processes, it is because they aren’t getting the info they need. While there are reasons to remain in control of the process,

  • open up communication, but stay in charge.
    When Procurement brings key stakeholders to the table to interface with Sales, Sales doesn’t feel the need to go behind Procurement’s back or otherwise work to undermine process. Build opportunities for such communication into projects, such as open Q&A sessions wherein sales teams review the goals and scopes of work with end users in a controlled environment. Sales will be less frustrated, and will turn around proposals that are both more targeted and more timely.
  • Process is important; make sure everyone understands why.
    Set out the purpose and goals of the initiative early, and lay out key milestone dates. Let Sales know exactly what the timeline is, what deliverables are due, when negotiations will take place, and when it’s time to put best prices forward or risk exclusion. Make sure everyone is on board internally as well. Be sure to let internal stakeholders know that communication during Q&A sessions is encouraged, but communication in other situations is not — have them direct any communication from sales to you if that communication doesn’t occur in a prearranged time and place.
  • Factor in shades of grey.
    When Procurement insists that every aspect of a proposal can and should be commoditized, focusing only on lowest common denominators to compare suppliers, Sales will fight back. When Sales insists that their solution is too unique and its value too complex to fit into an RFP, Procurement fights back. Both sides are right and wrong, because sourcing isn’t black and white. Procurement does need to factor in intangibles while striving to show why breaking down costs, when appropriate, is necessary to compare competing solutions.

Procurement’s Best Frenemy

Sales goes behind Procurement’s back because Procurement hides key details and stakeholders behind walls and gatekeepers. Procurement throws up bigger, tougher barriers knowing in advance that Sales will try to circumvent them. Being open and honest about the steps above is Procurement’s best bet for putting a cease fire in place.

It can be all too easy to view Sales as an enemy when sales professionals go out of their way to buck the system. But when we step back and consider their motivations for doing so, we see not only simple ways to keep everyone working towards the same goal, but also potential for improving the outcomes of sourcing initiatives by bringing together experts on both sides of the table.

Thanks, Brian.

3 Reasons STEM Education is the Future of the Logistics Industry

Today’s guest post is from Lauren Willison, the Director of Admissions at Florida Polytechnic University.

Today’s logisticians require more than a just basic planning and routing skills to succeed. This is due in large part to the continued development of cutting-edge technology such as robotics and automated machinery, which requires logistics employers to look for professionals with advanced technical expertise. Universities are matching this demand by offering logistics degree programs that focus on STEM subjects — science, technology, engineering, and math — in a hands-on learning environment.

A higher education in STEM offers the best training for the logistics field because it offers students tactical knowledge to improve logistics management and adjust to an evolving industry landscape. Here’s how:

Extensive Training in Technology

The STEM disciplines are unique in the academic world because they are quick to change and adapt to evolving industries and careers. STEM-focused institutions stay up-to-speed by offering students exposure to emerging technologies such as 3D printing. According to EFT’s 2015 3PL and Contracting Report, 19.2 percent of manufacturers and retailers use 3D printing in their businesses; however, only 1.5 percent have the expertise, knowledge and services to use these technologies effectively. STEM students have the opportunity to use 3D printers, for example, and practice producing exact replicas of parts and products. Increasing proficiency with new technology allows STEM-educated logisticians to make faster, cheaper, more reliable and more sustainable deliveries.

Cross-Disciplinary Education

An interdisciplinary education builds well-rounded logisticians and supply chain professionals who can eliminate the skills gap in the field. Although STEM focuses on four subjects, a STEM education provides in-depth training in a wide range of technical subjects that logisticians should know. With courses ranging from hazardous materials management to Six Sigma applications, students can apply textbook concepts to in-class activities modeled after real-world problems.

Logistics is no longer a field where employees can rely on just hard skills. Soft skills, such as time management and leadership ability, is essential to move forward in a logistics career. A STEM education develops a healthy combination of both skill sets, and provides a more managerial perspective on production and services in logistics. Students in STEM learn to efficiently manage logistics processes by studying concepts such as product design, inventory control and capacity management. During the process, they also learn how to work in teams, balance heavy workloads and think strategically to improve shipping and distribution processes.

Low Student-to-Faculty Ratios and Internships

Universities wholly dedicated to STEM often boast better student-to-faculty ratios. This means students receive more individualized attention from their professors, from extra help on assignments to career advice. Students who take advantage of this dynamic gain a more wholesome perspective on the logistics industry.

Additionally, some STEM universities will partner with key players in the logistics and supply chain industry. This opens up research and internship opportunities and allows students to gain valuable field experience. An internship, particularly one with a prominent or well-respected logistics company, gives students the chance to apply new skills, excel in the field and play an active role in improving the way society manages logistics.

Thanks, Lauren.