Future of Sourcing - Cost http://futureofsourcing.com/tags/cost en Why Companies are Prioritizing Procurement Digitalization to Gain Competitive Advantage http://futureofsourcing.com/why-companies-are-prioritizing-procurement-digitalization-to-gain-competitive-advantage <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/September%202022%20Article%20Graphics%20%282%29.png"><a href="http://futureofsourcing.com/sites/default/files/articles/September%202022%20Article%20Graphics%20%282%29.png" title="Procurement digitalization" class="colorbox" rel="gallery-node-2219-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/September%202022%20Article%20Graphics%20%282%29.png?itok=MRqJT_zp" width="624" height="325" alt="Procurement digitalization" title="" /></a></div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/leading-procurements-digital-transformation-three-steps-to-success">Leading Procurement’s Digital Transformation: Three Steps to Success</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p><span data-preserver-spaces="true">It is clear that the economic impact of the global pandemic, significant inflation, and the war in Ukraine is accelerating procurement&rsquo;s transformation from a transactional function to a key enabler of cost management and business growth. In 2020 and 2021, change was thrust upon us all. In 2022 and beyond, companies have the opportunity to own that transformation.&nbsp;</span></p> <p><span data-preserver-spaces="true">Globality recently collaborated with ProcureTech to gather insights on the Digital Future of Procurement from more than 170 procurement leaders worldwide across all industry sectors and company sizes. The findings highlight that digital transformation will be a top priority for the next three years as organizations adopt innovative, cutting-edge solutions that will enable them to pivot quickly and react to rising costs from both inflation and further supply chain disruption, as well as other unexpected geopolitical events.</span></p> <p><span data-preserver-spaces="true">As the digital futurist and Kearny partner, Dr. Elouise Epstein, writes in our survey report, &ldquo;This digital-first approach allows us to redefine every piece about how we do procurement. We simplify overly convoluted and manual processes (often resulting from poorly performing technology). We are employing the most sophisticated user experience technology to improve how our stakeholders, colleagues, and suppliers interact with us. And, the talent profile and competencies required are vastly changing.&rdquo;</span></p> <h1 style="color: rgb(14, 16, 26); background: transparent; margin-top:0pt; margin-bottom:0pt;; font-weight: normal;">&nbsp;</h1> <h1 style="color: rgb(14, 16, 26); background: transparent; margin-top:0pt; margin-bottom:0pt;; font-weight: normal;"><strong style="background: transparent; margin-top: 0pt; margin-bottom: 0pt;">New Operating Model</strong></h1> <p><span data-preserver-spaces="true">Procurement has a unique opportunity to lead company performance during these unpredictable times. Utilizing innovative digital technology means enterprises no longer have to rely on suppliers in a single location or country, minimizing operational and geopolitical risks while generating&nbsp;</span><a href="https://www.globality.com/resources/santander-group-revolutionizes-services-spend-with-globality-and-aquanima" target="_blank"><span data-preserver-spaces="true">immediate cost improvement,</span></a><span data-preserver-spaces="true">&nbsp;particularly on under-tapped indirect spend.</span></p> <p><span data-preserver-spaces="true">This new operating model will be characterized by digital processes that reduce costs, inject agility and resilience, increase business value, and enable companies to do more with less as they actively seek ways to gain efficiencies and improve their bottom line. Our survey found that:</span></p> <ul> <li><span data-preserver-spaces="true">90% of companies expect to transform their procurement operating model over the next three years to build more agility and resilience.</span></li> <li><span data-preserver-spaces="true">87% prioritize building digital and data teams to gain predictive insights, deploy new technologies, and react quickly to future disruption.</span></li> <li><span data-preserver-spaces="true">50% of organizations aim to move to a business-centric model, with procurement acting as strategic advisors and business partners rather than executing routine processes.</span></li> </ul> <p><span data-preserver-spaces="true">This reimagined model will also feature increased business self-service, enabling the democratization of procurement and the creation of flatter teams, all of which are typical of the optimal modern corporate structure. This will increase the function&rsquo;s decision-making speed and execution, allowing procurement to shift its focus to high-priority strategic initiatives and tasks.</span></p> <h1 style="color: rgb(14, 16, 26); background: transparent; margin-top:0pt; margin-bottom:0pt;; font-weight: normal;">&nbsp;</h1> <h1 style="color: rgb(14, 16, 26); background: transparent; margin-top:0pt; margin-bottom:0pt;; font-weight: normal;"><strong style="background: transparent; margin-top: 0pt; margin-bottom: 0pt;">High-Performing Teams</strong></h1> <p><span data-preserver-spaces="true">Critical to this transformation is the development of a new type of procurement team with different skillsets to that of the traditional category manager. Problem-solving and relationship management, data skills, and the ability to incubate ideas and work with suppliers to drive innovation are the traits that will enable procurement to create value instead of simply remaining a part of the business that negotiates contracts or runs RFPs.</span></p> <p><span data-preserver-spaces="true">Leading organizations that recognize this are:&nbsp;</span></p> <ul> <li><span data-preserver-spaces="true">Transforming their operating model and accepting that Future of Procurement will be one of permanent evolution.</span></li> </ul> <ul> <li><span data-preserver-spaces="true">Building dedicated digital teams to gain actionable insights and predictive data from new technology and platforms.&nbsp;</span></li> </ul> <ul> <li><span data-preserver-spaces="true">Optimizing cash flow by using new digital technology to immediately cut costs and improve compliance and risk management.</span></li> </ul> <h1 style="color: rgb(14, 16, 26); background: transparent; margin-top:0pt; margin-bottom:0pt;; font-weight: normal;">&nbsp;</h1> <h1 style="color: rgb(14, 16, 26); background: transparent; margin-top:0pt; margin-bottom:0pt;; font-weight: normal;"><strong style="background: transparent; margin-top: 0pt; margin-bottom: 0pt;">A Manifesto for Change&nbsp;</strong></h1> <p><span data-preserver-spaces="true">Procurement enjoys a unique proposition compared to other business functions, being outward-facing and interacting with every part of an organization &ndash; and its operating model should be aligned with a company&rsquo;s overall strategy, organization and culture. The model should start with stakeholder engagement and experience while helping drive new value across the organization.</span></p> <p><span data-preserver-spaces="true">Analyzing the survey results, ProcureTech and Globality identified the following key steps that every transformative CPO should prioritize to position their companies to gain a competitive advantage:&nbsp;</span></p> <ul> <li><span data-preserver-spaces="true">Commit to a full digital transformation that enables procurement to expand its ambition and achievements.</span></li> <li><span data-preserver-spaces="true">Create a dynamic digital procurement strategy, roadmap and digital ecosystem.</span></li> <li><span data-preserver-spaces="true">Identify and unleash more leaders with a digital-first mindset and capability in procurement.</span></li> <li>&nbsp;Adopt digital-first delivery models and agile project teams.</li> <li><span data-preserver-spaces="true">Embrace digital and data, process automation, integration and decision intelligence to focus continually on ROI.&nbsp;</span></li> </ul> <p><span data-preserver-spaces="true">Forward-thinking procurement leaders understand that by acting on the above immediately, they can play a crucial role in futureproofing and positioning their organizations to react more quickly and effectively to meet future unexpected disruptions.&nbsp;</span></p> <p><span data-preserver-spaces="true">Click&nbsp;</span><a href="https://www.globality.com/resources/what-will-procurements-future-operating-model-look-like?utm_campaign=22Q2-Content-ProcureTechSurvey-WP&amp;utm_source=SIGFutureofSourcing&amp;utm_medium=article&amp;utm_content=SurveyResultsReport" target="_blank"><em>here</em></a><span data-preserver-spaces="true">&nbsp;to read the full survey report.</span></p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procurement</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Inflation</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/digital" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Digital</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/cost-mitigation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">cost mitigation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/automation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Automation</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Why Companies are Prioritizing Procurement Digitalization to Gain Competitive Advantage - Future of Sourcing" addthis:url="http://futureofsourcing.com/why-companies-are-prioritizing-procurement-digitalization-to-gain-competitive-advantage"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 18 Sep 2022 16:03:49 +0000 Keith Hausmann 2219 at http://futureofsourcing.com http://futureofsourcing.com/why-companies-are-prioritizing-procurement-digitalization-to-gain-competitive-advantage#comments What Procurement Pros Need to Know About Trends in Marketing Spending for 2020 http://futureofsourcing.com/what-procurement-pros-need-to-know-about-trends-in-marketing-spending-for-2020 <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/2020%20Marketing_Budgets_Sarah%20Scudder.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/2020%20Marketing_Budgets_Sarah%20Scudder.jpg" title="What Procurement Pros Need to Know About Trends in Marketing Spending for 2020" class="colorbox" rel="gallery-node-1639-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/2020%20Marketing_Budgets_Sarah%20Scudder.jpg?itok=y0Y3z1LB" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>With the fourth quarter of 2019 now underway, many companies have already started developing their marketing plans for 2020. A major aspect of the planning process will be setting the overall marketing budget for next year and allocating the budget across marketing channels, tactics and other spending areas.</div> <div>&nbsp;</div> <div>Ideally, marketing procurement professionals will be involved in the planning process and to participate effectively they will need to have a solid understanding of current marketing trends, including those relating to marketing spending.</div> <div>&nbsp;</div> <div>Three recent research studies provide important insights about how marketers have been spending their budget and where spending may be headed in 2020.</div> <div>&nbsp;</div> <div>&bull; <a href="https://cmosurvey.org/results/" target="_blank">The CMO Survey (August 2019)</a> by Duke University&rsquo;s Fuqua School of Business, the American Marketing Association and Deloitte</div> <div>&nbsp;</div> <div>&bull; <a href="https://www.gartner.com/en/marketing/research/cmo-spend-survey-2019-2020" target="_blank">The Annual CMO Spend Survey 2019-2020 (October 2019)</a> by Gartner, Inc.</div> <div>&nbsp;</div> <div>&bull; <a href="https://www.bdo.co.uk/en-gb/insights/industries/technology-media-and-life-sciences/martech-2020-and-beyond" target="_blank">Martech: 2020 and Beyond (October 2019)</a> by WARC and BDO (with interviews by the University of Bristol)</div> <div>Collectively, these studies identify three macro spending trends that marketing procurement professionals need to keep in mind for 2020.</div> <div>&nbsp;</div> <div> <h2>Marketing Budgets</h2> </div> <div>The research indicates that marketing budgets in 2019 have been relatively healthy, and marketers are generally optimistic about the prospects for marketing spending in 2020. The CMO Survey found that current (2019) marketing budgets, on average, represent 9.8% of company revenues, up from 7.3% in the August 2018 edition of the survey. On average, respondents expect their marketing budget to increase by 8.7% in the 12 months following the survey. While this doesn&rsquo;t cover all of 2020, it indicates that marketers expect budgets to grow during the first part of next year.</div> <div>&nbsp;</div> <div>Gartner&rsquo;s CMO spend survey found that 2019 marketing budgets will average 10.9% of company revenues, down from 11.2% in 2018. Gartner&rsquo;s survey also found that most CMOs are confident about budget growth in 2020. Sixty-one percent of the respondents expect their marketing budget to increase next year.</div> <div>&nbsp;</div> <div style="margin-left: 40px;"><strong>Key Procurement Takeaway</strong> &ndash; Most marketers are naturally optimistic, and therefore the expectations for budget increases next year may be a little overdone. In its survey report, Gartner observed that many economists have noted that global economic growth is slowing and is likely to remain slow in 2020. So, marketing procurement professionals should prepare for some level of marketing budget uncertainty in the coming year.</div> <div>&nbsp;</div> <div> <h2>Technology Spending Remains Robust</h2> </div> <div>Marketing has become increasingly dependent on technology over the past several years, and that is not likely to change in 2020. Therefore, spending on marketing technology is likely to remain robust next year.</div> <div>&nbsp;</div> <div>Gartner&rsquo;s CMO spend survey found that on average, marketers are spending 26% of their total budget on technology. To put this in perspective, the survey indicates that on average, marketers are spending as much on technology as they are on media, and they are spending more on technology than they spend with agencies (26% vs. 22%)</div> <div>&nbsp;</div> <div>In the WARC/BDO survey, respondents from North American companies reported spending 30% of their 2019 marketing budget on technology.</div> <div>&nbsp;</div> <div style="margin-left: 40px;"><strong>Key Procurement Takeaway</strong> &ndash; For most of its history, much of the conversation about marketing procurement has focused on its role in sourcing agency services and managing agency relationships. This is understandable because in many larger enterprises, agencies have traditionally represented one of the largest components of external marketing spend. Over the past few years, however, spending on marketing technology solutions has grown to rival agency spending in importance. Therefore, if they haven&rsquo;t already done so, marketing procurement professionals will need to become proficient at sourcing technology solutions, particularly cloud-based SaaS solutions.</div> <div>&nbsp;</div> <div> <h2>Social/Mobile Still on a Roll</h2> </div> <div>Spending on social media and mobile marketing is likely to continue growing in 2020. The CMO Survey found that on average, marketers are currently spending 11.9% of their total budget on social media marketing, and survey respondents expect that percentage to increase to 15.3% of the budget over the 12 months following the survey.</div> <div>&nbsp;</div> <div>According to The CMO Survey, spending on social media has grown steadily since 2009 even though survey respondents have not believed that it makes a significant impact on company performance. Since 2016, the survey has asked participants to rate the contribution of social media marketing to company performance using a seven-point scale, where 1 = &ldquo;not at all,&rdquo; and 7 = &ldquo;very highly.&rdquo; In the eight surveys conducted over that four-year period, the average rating given by respondents has ranged from 3.1 to 3.4.</div> <div>&nbsp;</div> <div>Spending on mobile marketing exhibits a similar growth trajectory. The CMO Survey found that on average, marketers are currently devoting 12.8% of their total budget to mobile marketing, and survey respondents expect that percentage to grow to 21.8% of the budget over the five years following the survey.</div> <div>&nbsp;</div> <div style="margin-left: 40px;"><strong>Key Procurement Takeaway</strong> &ndash; Marketers are firmly committed to both social media and mobile marketing, and that commitment is likely to remain firm in 2020. Over the longer term, mobile marketing could become more important than social media marketing. Recent <a href="https://s3.amazonaws.com/media.mediapost.com/uploads/SlashtechFutureOfMarketingReport.pdf" target="_blank">research by the New York chapter of the American Marketing Association</a> indicates that U.S. marketers may be over-investing in social media because the use of some social networks appears poised to stall or decline.</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/marketing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Marketing</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/budget" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Budget</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procurement</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/research" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Research</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/survey" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Survey</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/study" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Study</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="What Procurement Pros Need to Know About Trends in Marketing Spending for 2020 - Future of Sourcing" addthis:url="http://futureofsourcing.com/what-procurement-pros-need-to-know-about-trends-in-marketing-spending-for-2020"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 19 Nov 2019 21:04:32 +0000 Sarah Scudder 1639 at http://futureofsourcing.com http://futureofsourcing.com/what-procurement-pros-need-to-know-about-trends-in-marketing-spending-for-2020#comments Onshoring vs. Offshoring: 4 Indications the Tide is Turning in Manufacturing http://futureofsourcing.com/onshoring-vs-offshoring-4-indications-the-tide-is-turning-in-manufacturing <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/Plethora_Manufacturing.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/Plethora_Manufacturing.jpg" title="Onshoring vs. Offshoring: 4 Indications the Tide is Turning in Manufacturing" class="colorbox" rel="gallery-node-1632-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Plethora_Manufacturing.jpg?itok=pKnwgAjT" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>Uncertainty over the future of the ongoing trade war between the U.S. and China continues to take its toll on supply chains worldwide. While some companies and manufacturers are setting their sights on alternative foreign factories, such as Vietnam and Thailand, others are looking to make parts closer to home.&nbsp;</div> <div>&nbsp;</div> <div>In fact, one <a href="https://www.foxbusiness.com/economy/trade-war-companies-fleeing-china" target="_blank">report</a> claims more than 50 manufacturers have already left China, most of which are technology hardware suppliers. <a href="https://www.forbes.com/sites/sap/2019/08/07/the-long-term-impact-of-us-tariffs-on-china/#6785bd452759" target="_blank">Another</a> indicates that <a href="https://www.uschamber.com/sites/default/files/final_assessing_the_costs_of_tariffs_on_the_u.s._ict_industry.pdf" target="_blank">two in five</a> American companies with manufacturing arms in China have either relocated or are planning to relocate their production to other offshore sites. Analysts say these are not simply short-term departures nor knee-jerk reactions to the rising tariffs, but more mid-term diversions to mitigate future risks. With the <a href="https://edition.cnn.com/2019/08/23/politics/donald-trump-china-tariffs/index.html" target="_blank">threat of more tariff increases</a> coming in October, companies are considering more durable &ldquo;Plan B&rsquo;s&rdquo; for their supply chains. As such, two things are clear -- the tide is turning for traditional outsourcing, and manufacturing&rsquo;s role is evolving.</div> <div>&nbsp;</div> <div> <h2>Changing Generational Workforce and Rising Costs</h2> </div> <p>In the years I worked with both onshore and offshore sourcing teams for large corporations, including Applied Materials (2000-2004), Apple (2004-2007), Gap (2007-2011) and Fitbit (2011-2014), I experienced firsthand the complex sourcing challenges B2C and B2B companies face on an ongoing basis. When I started nearly 20 years ago, sourcing costs were much lower. Companies chose to offshore because they had more affordable access to a 24-hour employee base. They could make a change in the U.S. and have their teams overseas work on them overnight, so they could iterate faster. Companies had more flexibility and didn&rsquo;t have to invest in the capital to do the manufacturing themselves.</p> <div><a href="https://www.futureofsourcing.com/how-millennials-are-changing-the-procurement-landscape" target="_blank">Millennials are now changing the workforce</a> in China. Previously, first generational workers were coming from smaller villages to major cities and were sending their paychecks back home to their families. Now, they are second and third generation employees who have more disposable income. They can get trained at one company and choose to work at a different company with better pay. The changing face -- and age -- of the Chinese workforce is also causing a factory employee shortage. According to one recent <a href="https://www.latimes.com/world/la-fg-china-millennials-jobs-20190512-story.html" target="_blank">statistic</a>, the aging population in China is expected to cause the workforce to dwindle by 100 million every 15 years starting in 2020.&nbsp;</div> <div>&nbsp;</div> <div>The evolving workforce overseas means continued pay increases. Per the <a href="https://www2.deloitte.com/global/en/pages/manufacturing/articles/global-manufacturing-competitiveness-index.html" target="_blank">Deloitte 2016 Global Manufacturing Competitiveness Index</a>, wages around the world have risen fivefold since 2005. That, of course, drives up costs. Higher costs, combined with increased freight charges and tariff threats, are the major downsides companies currently face with offshore sourcing.</div> <div>&nbsp;</div> <div> <h2>Escalating the Speed of Innovation</h2> </div> <div>Innovation drives businesses forward. When it comes to hardware, bringing quality products to market quickly depends on fast iterations all the way from prototyping through to production. Typically, onshoring allows companies to innovate more quickly in a few key ways.</div> <div>&nbsp;</div> <div>First, there&rsquo;s less time spent with parts in transit. Today, it&rsquo;s common for high-resolution prototypes to be produced and delivered within 48 hours, which was unheard of just a few years ago. Compare this to offshore options, which can take weeks.&nbsp;</div> <div>&nbsp;</div> <div>Additionally, more than ever, manufacturers are partnering with product engineers to help problem-solve earlier in the design process. A Product Engineer can get design feedback, resolve any manufacturability issues with a supplier, and get parts into production all in the same day. Manufacturers like my current company, Plethora, are able to hit shorter lead times, in addition to the added benefit of testing it and either getting it into production or scrapping it and allowing a client to look for solutions faster, resulting in a higher quality product.&nbsp;</div> <div>&nbsp;</div> <div> <h2>Controlling Overhead Costs</h2> </div> <div>Onshoring offers companies several favorable ways of reducing overhead.</div> <div>&nbsp;</div> <ul> <li><strong>Less safety stock</strong>. The faster lead times of onshoring allow companies to reduce the amount of safety stock they must carry.</li> <li><strong>Less inventory tied up in transit</strong>. Offshore orders are typically in the tens of thousands of pieces, which leads to a significant amount of capital tied up in inventory that may not be available for weeks.</li> <li><strong>Lower E&amp;O costs</strong>. Onshoring supports smaller order quantities, paired with just-in-time delivery. Companies adopting an onshoring strategy see significant reductions in their Excess and Obsolete costs since they&rsquo;re able to order only what they need when they need it.</li> </ul> <div>When considering these reduced risks and costs, in addition to the closing wage gap with overseas production, it&rsquo;s easy to understand how companies are finding ways to compete by onshoring. It all depends on their particular margin range and the size of their production rooms.&nbsp;</div> <div>&nbsp;</div> <div>For example, a consumer electronics company could mass-produce products in the U.S. if they could set up production in a favorable economic environment with low taxes and low space costs. In order to make onshoring work, businesses must develop effective management structures to oversee the infrastructure and human capital required to run these types of facilities. And, as we continue to develop more technology in both the manufacturing sector and the consumer sector, companies can hit those costs margins they would achieve overseas here in the U.S.&nbsp;</div> <div>&nbsp;</div> <div> <h2>Manufacturing&rsquo;s Changing Role</h2> </div> <div>Ultimately, a critical key to empowering companies to diversify their supply chains and weather the current and future trade wars will also be found in manufacturing&rsquo;s changing role, specifically in Manufacturing as a Service (MaaS). This game-changer solves some of the biggest problems innovative companies face today and helps companies reduce costs, improve efficiency and make better products. Through the rise of Artificial Intelligence and smart(er) factories, companies can reduce the amount of time it takes to procure a custom and complex part, allowing them to innovate their products faster and stay ahead of the competition. This is vital for those in fields such as aerospace, robotics, electronics and health care.&nbsp;</div> <div>&nbsp;</div> <div>MaaS also reduces a company&rsquo;s manufacturing risk and cost. It provides a one-stop-shop opportunity for the full lifecycle of a part or product and diminishes or eliminates overhead -- i.e. the capital investment and salaries -- for in-house machining. By also onshoring MaaS, companies can further reduce delay risks and shipping costs, as well as ensure more efficient designs.&nbsp;</div> <div>&nbsp;</div> <div>As the trade war rages on, both MaaS and onshoring are becoming more attractive options for companies looking to navigate the uncertainty of what&rsquo;s next. The future of shifting global supply chains will most definitely include both and are a necessary reality.</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/onshoring" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Onshoring</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/offshoring" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Offshoring</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/millennials" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Millennials</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/manufacturing-as-a-service-maas" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Manufacturing as a Service (MaaS)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/trade" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Trade</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Onshoring vs. Offshoring: 4 Indications the Tide is Turning in Manufacturing - Future of Sourcing" addthis:url="http://futureofsourcing.com/onshoring-vs-offshoring-4-indications-the-tide-is-turning-in-manufacturing"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 06 Nov 2019 00:18:52 +0000 Jim Quinn 1632 at http://futureofsourcing.com http://futureofsourcing.com/onshoring-vs-offshoring-4-indications-the-tide-is-turning-in-manufacturing#comments Software Surplus! Over-Subscription Could Be Costing Your Company Millions http://futureofsourcing.com/software-surplus-over-subscription-could-be-costing-your-company-millions <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/Software_Surplus.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/Software_Surplus.jpg" title="Software Surplus! Over-Subscription Could Be Costing Your Company Millions" class="colorbox" rel="gallery-node-1599-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Software_Surplus.jpg?itok=1CSLoLsb" width="624" height="325" alt="Software Surplus! Over-Subscription Could Be Costing Your Company Millions" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>Sourcing professionals know that companies make significant investments in software to run and drive their businesses. They see first-hand how software subscription costs might run as high as hundreds of millions of dollars annually. Yes, the Office of the Chief Technology Officer and various business units collaborate to determine what software is needed, but typically it&rsquo;s the procurement office that makes the purchase, and employees that use the software. Therein lies the problem. Once the purchasing decisions have been made, and the software is purchased and deployed, rarely if ever, does anyone keep track of actual usage, and renewals continue unchecked &ndash; along with the cash flow.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div>It is in this decentralized process of software evaluation, selection, purchase and use where the wheels come off. As a result, too many companies end up purchasing too much software &ndash; software that&rsquo;s not even being used with many millions in hefty software license fees going right out the door.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div>One study of 149 organizations in the U.S. and U.K. across 16 different industries estimated the cost of unused software to be $34 billion, with an average waste per business of $7.4 million.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div>As a purchasing or procurement professional, you likely don&rsquo;t have to ask: How can this really be happening? To understand its genesis, we must look at multiple factors converging to create what I believe has led to &ldquo;software surplus,&rdquo; otherwise known as software over-subscription.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div> <h2>Who or what tracks actual software usage?</h2> </div> <div>Originally, the role of procurement was to buy &ldquo;things&rdquo; a business required, such as raw materials for manufacturing companies. But for service companies, it entails such things as office furniture and supplies, telephones, typewriters and later personal computers. These items were easily trackable via ID tags and serial numbers. Today, a large quantity of procurement purchases are invisible &ndash; software that is &ldquo;delivered&rdquo; via the stroke of keyboard.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div>It&rsquo;s relatively easy to comprehend how many widgets are needed to be procured for the upcoming year if you can see how many widgets were consumed by the business in the previous year, but software volumes are harder to track.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div>Procurement uses the basic equation of rate x quantity &ndash; and must rely on input from across the enterprise offered up by the business unit &ndash; talented individuals in their specified area of expertise, but not necessarily in determining the number of software subscriptions needed.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div> <h2>How do budgeting processes exacerbate the issue?</h2> </div> <div>Very few companies do zero-based budgeting. Most companies have a set annual budget cycle &ndash; a process that creates a culture of thinking within business units of &ldquo;I better get it now or I won&rsquo;t get it later.&rdquo; As a result, department heads are forced to look to the future, and often overestimate their needs. They may anticipate the need for a software package for a specific project that maybe later gets shuttered. Likely, no one remembers to cancel those software seats. &nbsp;</div> <div>&nbsp;&nbsp;</div> <div>And with few exceptions, because the annual budgeting process remains relatively static, overspending to the extent of several hundred percent for excess software seats can persist for years.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div> <h2>Existing remedies are ineffective.</h2> </div> <div>There are more than a dozen companies on the market that offer &ldquo;software metering&rdquo; solutions. The way they work is they have APIs to interface to software packages, which rely on software vendors to essentially &ldquo;self-report&rdquo; usage. This is akin to putting the fox in charge of the hen house. Not surprisingly, the software vendors put forward only the bare minimum of information with no rigorous analytics. So, if an employee logs in once by accident, they&rsquo;ll likely be counted in the reporting as a user.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div>Many CTOs know their organizations are over-subscribed and are over-purchasing software, whereas many Chief Procurement Officers &ndash; whose goal is to trim the overall spend of the organization &ndash; are powerless to do anything about this. Talk about opportunity lost!&nbsp;</div> <div>&nbsp;&nbsp;</div> <div> <h2>Is there a solution?</h2> </div> <div>By employing a data-driven approach to software utilization that provides real insight into what software is used at the employee level, organizations finally can put their finger on the who, what, where and when of their actual software usage. This can give procurement the number they need to negotiate software license agreements that are based on facts, not assumptions. And companies can recoup thousands, even millions, in software license leakage. &nbsp;</div> <div>&nbsp;&nbsp;</div> <div>Additionally, they can also stem yet an additional cost of software over-subscription. Every dollar wasted on unutilized software and excess software licenses erodes competitive positions with that could go to other efforts to drive top-line revenue growth, investments in the workforce, and crucial IT infrastructure upgrades and/or digital transformation initiatives.&nbsp;</div> <div>&nbsp;&nbsp;</div> <div>By reigning in runaway software subscriptions, purchasing and procurement professionals can help organizations re-appropriate these resources to drive better business outcomes. &nbsp;</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/software" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Software</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procurement</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/chief-procurement-officer-cpo" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Chief Procurement Officer (CPO)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/chief-technology-officer" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Chief Technology Officer</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Software Surplus! Over-Subscription Could Be Costing Your Company Millions - Future of Sourcing" addthis:url="http://futureofsourcing.com/software-surplus-over-subscription-could-be-costing-your-company-millions"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Mon, 07 Oct 2019 19:11:10 +0000 Bradley Killinger 1599 at http://futureofsourcing.com http://futureofsourcing.com/software-surplus-over-subscription-could-be-costing-your-company-millions#comments The Shift to a Seller’s Market http://futureofsourcing.com/the-shift-to-a-sellers-market <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/Shift_Seller_Market.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/Shift_Seller_Market.jpg" title="The Shift to a Seller’s Market " class="colorbox" rel="gallery-node-1556-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Shift_Seller_Market.jpg?itok=XydKl0xd" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>Everyone is talking about change. Transformation. Millennials. Digital. Continuous Improvement. There are likely many more words that are tossed around to explain the change everyone is either experiencing or are being told we need to do. A lot of time and effort has been spent on transforming procurement &ndash; but what about the change occurring within your supply base?&nbsp;</div> <div>&nbsp;</div> <div>The small, medium and even large suppliers in your supply chain are changing in massive ways, whether you are aware of it or not, as the world around us becomes more sophisticated and yet more complex. &nbsp;&nbsp;</div> <div>&nbsp;</div> <div>Think about the once and largely current adversarial procurement and supplier relationship, defined by price negotiation, leverage, and supplier real or perceived dependency on your business. That &ldquo;relationship&rdquo; is quickly being replaced by necessity. The same market factors impacting your organizations are also impacting and enabling suppliers&rsquo; work in new and improved ways. These market factors include technology, competition for the suppliers&rsquo; scarce capabilities with your market competitors, social media and a new generation of more inclusive <a href="https://futureofsourcing.com/how-millennials-are-changing-the-procurement-landscape" target="_blank">millennial leaders</a>. All of these factors are leading to a world growing more collaborative and strategic every day.&nbsp;</div> <div>&nbsp;</div> <div>In the not too distant future, suppliers will be selecting you vs. procurement selecting suppliers. It is the evolutionary nature of transactional business relationships when the power moves (from time to time) to those once less powerful. Some of the realizations that suppliers are coming to recognize include : &nbsp;</div> <div>&nbsp;</div> <ul> <li>They know they hold the keys to the kingdom given that they offer something needed and valuable to a larger entity;&nbsp;</li> <li>They have a marketplace that is nearly limitless due to new-found marketing abilities through the internet and social media;&nbsp;</li> <li>They honor relationships that are highly collaborative and encourage innovative solutioning.&nbsp;</li> </ul> <div>All of these realizations will dramatically alter suppliers&rsquo; relationships with the biggest companies around the world. &nbsp;</div> <div>&nbsp;</div> <div>Imagine what this means for you, a procurement professional. If you want to add maximum value, get the best total cost of ownership and create a competitive advantage through your supply chain, gone are the days of price-only negotiations. In many markets now, if you just want to obtain sources of supply, one cannot compete solely on price. What happens when supply is scarce &ndash; which company will a supplier choose to supply? The company that is adversarial and has a low price point where no margins are earned? Nope. The supplier has a choice and they will choose the companies where there is a mutual investment in success, a trusted relationship andan understanding that the supplier is an extension of the supply chain team. &nbsp;</div> <div>&nbsp;</div> <div>After spending 16 years in the world of procurement and the last year working with companies in a number of supply chains, I&rsquo;ve had an opportunity to see what I believe will be the future state of supply chain relationships, not in 10 or 20 years but in one to three years. &nbsp;This future will drastically change how procurement operates and ultimately provides value. &nbsp;&nbsp;</div> <div>&nbsp;</div> <div>Relationships with your suppliers will begin to look like relationships within your own teams. &nbsp;Think about this &ndash; are you willing to pay a little more for a super talented employee who is in high demand? Typically, the answer is yes, as you know full well an &ldquo;A player&rdquo; will return value in droves compared to the rest. What would happen if you only focused on the salary negotiation with that &ldquo;A player&rdquo; and did nothing else? Likely, you will not see their value and they will choose to leave. Sounds crazy, doesn&rsquo;t it? And, yet, we do this with suppliers all the time. That has been largely the procurement world for the last 25 years. &nbsp;&nbsp;</div> <div>&nbsp;</div> <div>To shift to value providers from price-focused organizations, procurement will have to do the following:&nbsp;</div> <div>&nbsp;</div> <ul> <li>Understand that if their suppliers are performing at their best, then everyone wins.</li> <li>Provide learning and deployment opportunities to their suppliers.</li> <li>Offer exposure to top-performing suppliers internally and externally via social media and other outlets.</li> <li>Look to suppliers as a way to differentiate in the marketplace.&nbsp;</li> <li>Extend vital aspects of their culture into the suppliers&rsquo; cultures.&nbsp;</li> <li>Focus on retaining top suppliers as the cost of change is too significant.</li> <li>Look to suppliers to collaborate and provide unique solutions to solve business problems or market opportunities.&nbsp;</li> </ul> <div>Through this type of relationship, procurement will become a customer of choice as well as becoming a destination of choice when hiring employees. Doing so requires treating your suppliers as a strategic capability to your supply chains, not merely external vendors. This new-found relationship has to be more than talk and must be supported by a culture of real care in supplier success, programs to help your suppliers grow more capable and platforms for communicating with your suppliers. &nbsp;</div> <div>&nbsp;</div> <div>The future is bright for those procurement organizations that grasp the changes that have already begun. They are the ones who are excelling in becoming value providers to their organizations, delivering on innovation, and yet are lowering the total cost of ownership in their supplier relationships.</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/suppliers" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Suppliers</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procurement</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/negotiation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Negotiation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/transformation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Transformation</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="The Shift to a Seller&amp;rsquo;s Market - Future of Sourcing" addthis:url="http://futureofsourcing.com/the-shift-to-a-sellers-market"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 21 Aug 2019 23:49:53 +0000 Amanda Prochaska 1556 at http://futureofsourcing.com http://futureofsourcing.com/the-shift-to-a-sellers-market#comments How AI Empowers Service Procurement and Adds Billions to a Company’s Bottom Line http://futureofsourcing.com/how-ai-empowers-service-procurement-and-adds-billions-to-a-companys-bottom-line <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/AI_Supplier_Savings.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/AI_Supplier_Savings.jpg" title="How AI Empowers Service Procurement and Adds Billions to a Company’s Bottom Line " class="colorbox" rel="gallery-node-1524-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/AI_Supplier_Savings.jpg?itok=Vh4ECpda" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>For the modern enterprise, services done well often drive growth. For example, quality <a href="https://futureofsourcing.com/why-nearshoring-and-ai-go-hand-in-hand" target="_blank">IT infrastructure services</a> and/or <a href="https://futureofsourcing.com/5-ways-marketing-outsourcing-can-drive-business-growth" target="_blank">outsourced marketing</a> can accelerate a company&rsquo;s competitive advantage in multiple ways. Although it&rsquo;s sometimes hard to measure the specific outcomes that services yield, they can have a major impact on a company&rsquo;s results, such as with more successful marketing campaigns, digital transformations, legal wins or other organizational efforts.&nbsp;</div> <div>&nbsp;</div> <div>That&rsquo;s why, in recent years, many Fortune 100 companies have significantly increased spend on service providers to meet competitive, productivity and business velocity demands. Companies can&rsquo;t hire and cultivate enough internal expertise as the work gets more sophisticated and specialized and the opportunities more global. Consequently, enterprise service procurement is now a highly complex and expensive undertaking. Procurement leaders must juggle precise requirements scoping, creating a request for proposal (RFP), evaluating proposals, vetting service provider candidates and negotiating across multiple business purchases. &nbsp;</div> <div>&nbsp;</div> <div><strong>The Encumbrance of Traditional Service Procurement &nbsp;</strong></div> <div>&nbsp;</div> <div>While relying more on external service providers&rsquo; expertise to achieve their desired outcomes, companies are also facing several formidable challenges. For one, even as some services are becoming more standardized, and by some measures &ldquo;productized,&rdquo; there are still variances in their approaches. Each project is delivered differently by unique providers; their teams adjust the work product to match specific customer requirements and circumstances. After agreeing to the scope of work, buyers often don&rsquo;t know enough about the service they are buying to evaluate differences among providers, and traditional RFPs struggle to generate a comparable set of proposals. It&rsquo;s quite common to run a complicated competitive bid and end up with two or three proposals that are so distinct that you end up just going with your first instinct, wasting time and effort.&nbsp;</div> <div>&nbsp;</div> <div>It&rsquo;s also frequently the case that procurement needs to choose between two deficient options: relying on the same providers they already know or undertaking the burdensome RFP process. It&rsquo;s unlikely that your go-to firm is the best one for your every need, so sticking with it for convenience means you might miss out on a provider with better niche expertise. In some cases, you might even find yourself paying more because the incumbent provider knows it can take advantage of your existing dynamic and move its best people elsewhere to impress a newer or more demanding client. &nbsp;</div> <div>&nbsp;</div> <div>The time and resources spent on traditional service RFPs also delay the business benefit of the service and consume a lot of corporate cycles that could be better applied elsewhere. In many cases, the RFP process can&rsquo;t be done fast enough, given a business&rsquo;s timeline for execution.&nbsp;</div> <div>Services are also about people&mdash;their experience, their work styles, their personalities. Who will fit well in a given situation is context-dependent. It can be challenging to accurately evaluate contextual fit regarding new providers with whom an organization has no familiarity. The quality of the service experience can also vary depending on the providers&rsquo; incentive to serve you. Do they see it as a one-time deal or building a relationship? Realistically, knowledge workers chase opportunity wherever it goes, so keeping them motivated to give you their best effort every time can be tricky.&nbsp;</div> <div>&nbsp;</div> <div><strong>AI Shifts the Procurement Dynamic&nbsp;</strong></div> <div>&nbsp;</div> <div>The advent of artificial intelligence (AI) presents a transformative paradigm shift in the service procurement dynamic. AI can cut down the time involved in procurement and improve the quality of every step in the process. For example, whenever a service provider is briefed using a digital scoping tool, the same consistent brief can be used with other providers and made available for similar projects in the future. &nbsp;</div> <div>&nbsp;</div> <div>Some AI tools can choose from a library of relevant templates so that buyers can more precisely scope needs and more efficiently write briefs. Some sophisticated tools go even further, using dynamic questions that guide buyers in creating a customized &ldquo;Smart Brief&rdquo; by using prior knowledge from similar projects. This increases the quality of proposals and enables consistency among even bespoke proposal formats that make submissions easier to compare and assess. It also inherently shortens the decision-making process; what previously might have taken weeks or months can be done in a few days.&nbsp;</div> <div>AI can also readily match the best service provider candidates to a bidding opportunity. Most of the time, new service providers are sought after when the primary user is extremely unhappy or disappointed with an incumbent. Because incumbents can be so deeply entrenched in these partnerships, it&rsquo;s often a big deal to change, even if their performances are mediocre. Better but smaller providers might often go unnoticed simply because corporate buyers have no knowledge of their performance or because the smaller businesses can&rsquo;t take on the massive administrative burden of RFPs. &nbsp;</div> <div>&nbsp;</div> <div>AI-based systems can overcome this disconnect, allowing customers to enter real-time feedback about their experiences with all providers&mdash;large and small&mdash;throughout the service engagement process. Later buyers can reference that information to know how previous assignments went&mdash;think about it like a review on Amazon. The AI engine can also use that input to rank provider suggestions and propose those providers most likely to be the best fit for each project&rsquo;s unique requirements. The continual feedback loop serves to motivate and manage service provider performance.&nbsp;</div> <div>&nbsp;</div> <div>Lest this seems too one-sided, digital sourcing offers many benefits for service providers as well. AI-based platforms can well serve any provider organization that is delivering great work for its customers. Better transparency on actual performance and skills matching can be a boon for the best service providers, regardless of their size, because expertise can be recognized at a granular level. Service Providers will be rewarded for quality or value and not sheer scale, administrative efficiency, or marketing prowess. In this dynamic, incumbent suppliers might also be more likely to up their game; they may even see increases in revenue and profit from a given customer account because digital sourcing will eliminate lots of wasteful work and enable them to win more projects faster and with fewer resources.&nbsp;</div> <div>&nbsp;</div> <div><strong>The Procurement Leadership Opportunity&nbsp;</strong></div> <div>&nbsp;</div> <div>Digitization in our lives as consumers has far outpaced that in business-to-business (B2B) commerce, but B2B will catch up in the next several years. At the cusp of this paradigm shift, procurement&rsquo;s early adoption of digitally transformative technology can have far-reaching benefits for the entire company. Beyond the direct benefits of removing inefficiencies, lowering costs and simplifying buyers&rsquo; lives, AI and digitization will free up bandwidth throughout organizations to improve the substantive quality of the work they can do for their customers. &nbsp;</div> <div>&nbsp;</div> <div>By my estimate, there is easily an opportunity to double the return on services spend while also substantially reducing costs. That means the average Fortune 500 company, which spends a few billion dollars on services, can add that to its bottom line. &nbsp;</div> <div>&nbsp;</div> <div>Although there have been massive advances in technology, many organizations are not taking advantage of them because of the associated change management challenges. Many digital transformation efforts falter because their architects hesitate to undertake big steps all at once. Fortunately, digital transformation within procurement is easier and less risky than changing; for instance, the sales or service model that involves a company&rsquo;s customers. At the same time, such procurement transformation offers large-scale rewards for both buyers and service providers. All this should embolden procurement leaders to move faster and perform better across all fronts. &nbsp;</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/artificial-intelligence-ai" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Artificial Intelligence (AI)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procurement</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/spend-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Spend Management</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/managed-service-provider-msp" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Managed Service Provider (MSP)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="How AI Empowers Service Procurement and Adds Billions to a Company&amp;rsquo;s Bottom Line - Future of Sourcing" addthis:url="http://futureofsourcing.com/how-ai-empowers-service-procurement-and-adds-billions-to-a-companys-bottom-line"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Thu, 11 Jul 2019 17:12:24 +0000 Yuval Atsmon 1524 at http://futureofsourcing.com http://futureofsourcing.com/how-ai-empowers-service-procurement-and-adds-billions-to-a-companys-bottom-line#comments How Supplier Diversity is Working in the Real World http://futureofsourcing.com/how-supplier-diversity-is-working-in-the-real-world <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/Supplier_Diversity_Sarah_Scudder.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/Supplier_Diversity_Sarah_Scudder.jpg" title="How Supplier Diversity is Working in the Real World" class="colorbox" rel="gallery-node-1514-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Supplier_Diversity_Sarah_Scudder.jpg?itok=p9cXmNVe" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>Supplier diversity has been an important topic on the corporate agenda for most of the past five decades. Formal <a href="https://futureofsourcing.com/social-sustainability-making-the-art-of-possible-possible" target="_blank">supplier diversity programs</a> began in the 1960s in response to government programs that were designed to expand economic opportunities for minority-owned businesses. Today, &ldquo;diverse suppliers&rdquo; encompass several additional types of business organizations, including:</div> <div>&nbsp;</div> <ul> <li>Woman-owned business enterprises</li> <li>Veteran-owned businesses</li> <li>Service-disabled veteran-owned businesses</li> <li>Disabled-owned businesses</li> <li>Small business enterprises</li> <li>Historically Underutilized Business Zone (or HUBZone) businesses</li> <li>LGBT-owned businesses</li> </ul> <p>Business leaders have become more focused on supplier diversity during the past few years largely because of changing customer expectations. Research indicates that today&rsquo;s consumers &ndash; especially younger consumers &ndash; are more aware of the &ldquo;social practices&rdquo; of the companies they do business with and are increasingly demanding that companies have good corporate social responsibility records in order to win their business.</p> <div><strong>The State of Supplier Diversity</strong></div> <div>&nbsp;</div> <div>A recent study by CVM Solutions provides several important insights about the current state of supplier diversity programs. The 2018 State of Supplier Diversity Report &ndash; Supplier Diversity Programs was based on a survey of supplier diversity professionals that produced 124 qualified responses. Survey respondents were drawn from companies in 18 industries/sectors and represented companies ranging in size from fewer than 1,000 employees to more than 20,000 employees.</div> <div>&nbsp;</div> <div>When survey participants were asked to identify the primary drivers of their supplier diversity programs, the most frequently selected factors were:</div> <div>&nbsp;</div> <ul> <li>Corporate social responsibility (72.3% of respondents)</li> <li>Alignment with corporate culture and workforce inclusiveness (65.8%)</li> <li>Customer requirements (55.5%)</li> </ul> <div>The CVM research also found that <a href="https://futureofsourcing.com/whats-ahead-for-2019-wrap-up" target="_blank">spending with diverse suppliers is significant</a>. About 47% of the survey respondents reported that 10% or more of their Tier 1 supplier spend is with diverse suppliers. Equally important, more than two-thirds of respondents whose companies have fewer than 1,000 employees said that at least 10% of their Tier 1 spend is with diverse suppliers.</div> <div>&nbsp;</div> <div>CVM also found that the perceived effectiveness of supplier diversity programs is increasing. In the 2018 study, 32% of the survey respondents rated their programs as very effective. That was up from 25% in the 2017 version of the survey. Another 40% of respondents in the 2018 survey said their programs are somewhat effective. So in 2018, nearly three-fourths of the respondents in the CVM research were generally satisfied with their supplier diversity efforts.</div> <div>&nbsp;</div> <div><strong>A View from the Front Lines</strong></div> <div>&nbsp;</div> <div>I recently spoke with Lamont Robinson, the founder and CEO of <a href="http://rlcdiversity.com/" target="_blank">Robinson LaRueCo Consulting (RLC)</a> to get a perspective from someone who works in the supplier diversity space on a daily basis. RLC helps companies increase diversity in their supply chains by developing and implementing effective and sustainable supplier diversity programs. Lamont Robinson has been a leader in the supplier diversity arena for the past 14 years and was the 2010 recipient of the Corris Boyd Leadership and Diversity award from the Federation of American Hospitals.</div> <div>&nbsp;</div> <div>Mr. Robinson told me that the impetus for increasing supplier diversity has evolved over the past 50 years. In the late 1960s and 1970s, the primary motivation for improving supplier diversity was compliance with governmental programs that emerged from the U.S. civil rights movement. Later, some enterprises were motivated to launch supplier diversity programs because increasing diversity was viewed as &ldquo;the right thing to do.&rdquo;</div> <div>&nbsp;</div> <div>Today, Mr. Robinson argues, supplier diversity has become a business imperative. Business leaders increasingly recognize that effective supplier diversity programs can have a significant impact on top-line and bottom-line business performance. As a result, many companies are now linking their supplier diversity efforts to their overall business strategy.</div> <div>&nbsp;</div> <div>According to Mr. Robinson, the business case for a supplier diversity program should be based on an evaluation of six related factors, which he calls the &ldquo;Six C&rsquo;s&rdquo; of supplier diversity:</div> <div>&nbsp;</div> <div style="margin-left: 40px;">1. <em><strong>Community</strong></em> &ndash; An effective supplier diversity program will be embedded in the communities the business serves, which means that the program should reflect the social interests of the community.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">2. <strong><em>Customers</em></strong> &ndash; Research indicates that consumers &ndash; particularly millennials &ndash; now expect the companies they do business with to act in ways that are socially responsible. Therefore, business leaders must consider current and emerging customer expectations when designing supplier diversity programs.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">3. <em><strong>Competition</strong></em> &ndash; Every business operates in an environment where the actions of competitors can affect company performance. So, business leaders must stay aware of what their competitors are doing to improve supplier diversity.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">4. <em><strong>Compliance</strong></em> &ndash; This is a basic but still important factor because federal and state diversity spend mandates continue to pressure some companies to implement supplier diversity programs. The key for companies is to have processes and technologies that enable them to classify diverse suppliers and track spending with those suppliers.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">5. <em><strong>Customization</strong></em> &ndash; One frequently undervalued benefit of supplier diversity is that diverse suppliers can be an important source of innovation for larger enterprises. In many cases, small firms have greater flexibility to innovate, and companies can gain the benefits of this innovation by working with small suppliers.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">6. <em><strong>Costs</strong></em> &ndash; Reducing costs will always be an important priority in most companies, and until recently, managing a large number of small suppliers would add costs to the procurement process. Today, however, digital procurement technologies can enable companies to work with small suppliers without significantly increasing indirect procurement costs. As a result, supplier diversity goals and cost savings goals are no longer necessarily incompatible.</div> <div>&nbsp;</div> <div>As far as the future is concerned, Mr. Robinson believes that supplier diversity will come to be seen as an important source of revenue, not just as a cost center. He also expects supplier diversity efforts to continue to expand on a global basis.</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-diversity" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Diversity</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Management</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/competition" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Competition</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/ethical-sourcing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Ethical Sourcing</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="How Supplier Diversity is Working in the Real World - Future of Sourcing" addthis:url="http://futureofsourcing.com/how-supplier-diversity-is-working-in-the-real-world"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div> Tue, 09 Jul 2019 18:21:46 +0000 Sarah Scudder 1514 at http://futureofsourcing.com http://futureofsourcing.com/how-supplier-diversity-is-working-in-the-real-world#comments The Real Cost of Employee Turnover http://futureofsourcing.com/the-real-cost-of-employee-turnover <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/Cost_Employee%20Turnover.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/Cost_Employee%20Turnover.jpg" title="The Real Cost of Employee Turnover " class="colorbox" rel="gallery-node-1477-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Cost_Employee%20Turnover.jpg?itok=DYfvwk4o" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>Employee turnover is one of the most expensive and difficult workforce challenges facing organisations of all sizes and industries. According to the latest Gallup research the cost of replacing an individual employee can range from one-half to two times the employee&#39;s annual salary.&nbsp;</div> <div>&nbsp;</div> <div>Gallup found that 52% of employees leaving a company voluntarily stated that their manager or organisation could have done something to prevent them from departing. What&rsquo;s even more alarming is that 51% said that during the three months before their departure neither their manager nor any other leaders talked to them about job satisfaction. The often-neglected exit experience however, is more impactful than many organisations realise - employees who have a positive exit experience are <a href="https://www.gallup.com/workplace/246203/ways-create-positive-exit-experience-employees.aspx" target="_blank">2.9 times more likely to recommend the organisation in the future</a>. &nbsp;</div> <div>&nbsp;</div> <div><strong>It&rsquo;s not just about money&nbsp;</strong></div> <div>&nbsp;</div> <div>Voluntary staff turnover accounts for over a trillion dollars every year in recruitment, hiring, training and productivity cost. LinkedIn&rsquo;s analysis found that the worldwide average turnover rate is <a href="https://learning.linkedin.com/blog/engaging-your-workforce/see-the-industries-with-the-highest-turnover--and-why-it-s-so-hi" target="_blank">10.9 percent, with technology (13.2%), retail (13%), media (11.4%) and professional services (11.4)</a> struggling with higher than average rates. &nbsp;</div> <div>&nbsp;</div> <div>When your best people leave, you are losing your most creative innovators and problem solvers. High staff turnover decreases team productivity, reduces morale and has a negative effect on recruiting, hiring, <a href="https://futureofsourcing.com/training-and-developing-procurement-professionals" target="_blank">training</a> and <a href="https://futureofsourcing.com/attracting-and-retaining-talent-in-the-face-of-low-unemployment" target="_blank">retaining talent</a>. What&rsquo;s more, the organisation is losing knowledge and established relationships with clients, which can impact business profitability, together with potential damage to brand reputation or in some cases even increased risk of litigation. By understanding the reasons behind negative employee experience and high turnover, leaders and businesses can focus on what is required to change their approach to talent management.&nbsp;</div> <div>&nbsp;</div> <div><strong>The critical role of the manager&nbsp;</strong></div> <div>&nbsp;</div> <div>Managers play a key role in the overall employee experience. Effective managers build genuine rapport and relationships with their team and are in a good position to identify risk factors that can lead to an employee departure before it&rsquo;s too late. Whilst managers are responsible for their team&rsquo;s performance, 47% of employees reports that they only receive <a href="https://www.askacumen.co.uk/single-post/2019/04/29/How-to-give-feedback-that-sticks" target="_blank">feedback from their managers</a> a few times a year or even less &ndash; for some of them the conversation only happens during annual performance reviews. &nbsp;</div> <div>&nbsp;</div> <div>To prevent high turnover, managers need to focus on having frequent conversations with their employees and continuously coach them to improve their performance and motivation. Managers who avoid micromanaging, and instead give their teams the opportunity to <a href="https://www.askacumen.co.uk/single-post/2019/03/29/How-to-create-a-culture-of-creative-problem-solving" target="_blank">solve problems and be creative</a> on their own, can drive businesses forward. For example, former PepsiCo CEO Indra Nooyi, known for her approach to creative problem solving, has given her team the permission to create new flavours of Lays crisps reflecting local flavour. This has led to the introduction of tikka masala crisps in India, seaweed crisps in China and cuttlefish crisps in Thailand.&nbsp;</div> <div>&nbsp;</div> <div>Employee turnover will continue to be an issue unless companies pay attention to why employees are voluntarily leaving. Many employees leave when they feel that they don&rsquo;t have the opportunity to take on new challenges or master new skills and knowledge. By providing professional learning and development opportunities, keeping the lines of communication open, and listening to the reasons people are leaving, organisations can create new opportunities for employees to learn and advance in their roles. &nbsp;</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/talent-retention" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Talent Retention</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/human-resources" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Human Resources</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/training" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Training</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/savings" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Savings</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/talent-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Talent Management</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="The Real Cost of Employee Turnover - Future of Sourcing" addthis:url="http://futureofsourcing.com/the-real-cost-of-employee-turnover"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 19 Jun 2019 19:11:37 +0000 Simon Cartwright 1477 at http://futureofsourcing.com http://futureofsourcing.com/the-real-cost-of-employee-turnover#comments Re-engineering a Corporate Real Estate Service Organization: Governance http://futureofsourcing.com/re-engineering-a-corporate-real-estate-service-organization-governance <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/Re-Engineering_Real_Estate_Governance.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/Re-Engineering_Real_Estate_Governance.jpg" title="Re-engineering a Corporate Real Estate Service Organization: Governance" class="colorbox" rel="gallery-node-1445-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Re-Engineering_Real_Estate_Governance.jpg?itok=TmUdw20C" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p>In <a href="https://futureofsourcing.com/re-engineering-a-corporate-real-estate-service-organization-an-operational-review" target="_blank">Part I of this series</a>, we provided insight into the key steps and success factors associated with the process of re-engineering a corporate real estate services organization. In <a href="https://futureofsourcing.com/re-engineering-a-corporate-real-estate-service-organization-strategic-sourcing" target="_blank">Part II</a>, our focus was strategic sourcing of corporate real estate and facilities services including supplier pre-qualification, bid strategy, RFP development and administration, contract negotiation and transition management.</p> </div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div>Although these processes can take months &ndash; sometimes longer, the work does not end when the contract is signed or even when the services are successfully transitioned to the outsourced partner. You don&rsquo;t simply hand over responsibility for the contracted services, schedule quarterly and annual updates and expect things to run smoothly.</div> <div>In the final segment of this series, we will examine the complex collection of topics related to governance, as well as some of the tools that support the implementation of a comprehensive supplier performance management strategy, including:</div> <div>&nbsp;</div> <ul> <li>Relationship Management Training</li> <li>Communications Strategy</li> <li>Escalation Processes and Procedures</li> <li>Performance Management</li> <li>Governance Support Platforms</li> <li>Periodic Relationship Health Checks and Contract Reviews</li> </ul> <div><strong>Relationship Management Training</strong></div> <div>&nbsp;</div> <div>Careful preparation is critical as you transition from the strategic sourcing phase into the operational phase, and training for both client and supplier stakeholders must be part of the transition. There should be initial training, of course, but don&rsquo;t overlook the need for ongoing training as well as training for new hires.</div> <div>Training should, at minimum, cover the following topics:</div> <div>&nbsp;</div> <ul> <li>All aspects of the deal itself</li> <li>Deal intent</li> <li>Performance management components</li> <li>Communication expectations and escalation procedures</li> <li>Review of governance support platforms in use</li> <li>Relationship management</li> <li>Ongoing strategy of refresher training programs for existing employees and onboarding of new employees</li> </ul> <div><strong>Communication Strategy</strong></div> <div>&nbsp;</div> <div>An effective communication strategy is essential to maintain alignment between the parties over time and establish a strong foundation for trust. A successful communications strategy will establish time-frames and cadence for formal communication for all stakeholders; foster open and honest communication; and establish expectations for bi-directional communication based on facts.&nbsp;</div> <div>&nbsp;</div> <div style="margin-left: 40px;"><strong>Guidelines for Formal Communication</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">Establish clear minimum guidelines for the type and frequency of communication. Special consideration should be given to the need for cross-functional communication, inter-departmental communication and communication between the contract parties.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;"><strong>Open and Honest Communication</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">Frequency of communication is important, but the quality of communication is even more critical. While management gurus have written entire books on the topic, there are a couple of basic things to keep in mind.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">First, even though the client and supplier are two separate organizations, it should be made clear that all the stakeholders and participants in the relationship are part of the same team, and the relationship is not a zero-sum game.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">Second, open and honest communication should be respected and valued, regardless of whether the communication is related to successes, challenges or even a crisis.&nbsp;</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;"><strong>Communicate with Facts</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">Communication should be fact-based. Beware of conversations based on opinions, hunches, or hearsay. Set the expectation among all stakeholders that verifiable facts or metrics support any claims, whether related to successes or shortcomings.</div> <div>&nbsp;</div> <div><strong>Escalation Processes and Procedures</strong></div> <div>&nbsp;</div> <div>In instances where normal lines of communication fail to resolve performance issues, conflicts or misunderstandings, clear processes and procedures must be in place for escalation and resolution of the issues. At a minimum, these policies and procedures should:</div> <div>&nbsp;</div> <ul> <li>Identify the process for each stage of escalation and each category of issue</li> <li>Identify the appropriate individual to contact</li> <li>Identify the information that should be provided</li> <li>Identify the appropriate time-frame for response</li> <li>Identify the process for communicating the outcome back to the stakeholders</li> </ul> <div><strong>Performance Management</strong></div> <div>&nbsp;</div> <div>Throughout a strategic sourcing initiative, great care is taken to develop a sound and mutually beneficial contract that specifies all the tools necessary to support a strong performance management program. The most effective contracts include the following elements.</div> <div>&nbsp;</div> <div style="margin-left: 40px;"><strong>Outcome-Based Service Level Agreements (SLAs)</strong></div> <div style="margin-left: 40px;">A well-constructed SLA sets the stage for clear client and supplier expectations, and includes:</div> <div style="margin-left: 40px;">&nbsp;</div> <ul> <li style="margin-left: 40px;">A clear definition of the function to be performed</li> <li style="margin-left: 40px;">A specific list of responsibilities related to the function</li> <li style="margin-left: 40px;">Expectations regarding workload volumes</li> <li style="margin-left: 40px;">Time-frames in which work is expected to occur</li> <li style="margin-left: 40px;">Clearly stated expectations of service levels and performance levels</li> </ul> <div style="margin-left: 40px;"><strong>Performance Based Specifications</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">The SLAs focus on the needs of the company and service levels required, but should not address the specific process used to perform the service or attain the specified service level. This is important for several reasons:</div> <div style="margin-left: 40px;">&nbsp;</div> <ol> <li style="margin-left: 40px;">The client is outsourcing to take advantage of the expertise of the supplier.</li> <li style="margin-left: 40px;">If the client specifies how work will be done, it is in effect taking on the role of employer and may be held responsible for employee benefits and liabilities related to the work of the supplier&rsquo;s employees.</li> <li style="margin-left: 40px;">Locking in a specific process may preclude the supplier from applying new innovations that could bring significant benefit to the client.</li> </ol> <div>&nbsp;</div> <div style="margin-left: 40px;"><strong>At-Risk Fee Structure</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">In a typical at-risk compensation strategy, the supplier places a portion of their management fee at risk. This percentage is held back from each payment until the end of the quarter, year or other appropriate review period. Based on the metrics and scorecard specified in the contract, the client will pay the percentage of at-risk compensation due based on the supplier&rsquo;s performance for the period.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;"><strong>Shared Saving Incentive Program</strong></div> <div style="margin-left: 40px;">Shared saving incentive programs encourage suppliers to find additional ways to reduce costs associated with the services provided. Savings are shared between the supplier and client according to a predetermined percentage on a quarterly or annual basis.</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;"> <div><strong>Performance Measures</strong></div> <div>&nbsp;</div> <div>Well-defined performance measures help suppliers understand exactly what is expected of them and how their performance will be judged. Key Performance Indicators (KPIs) are quantifiable performance measures that will be used to indicate the level of success of the supplier in meeting the goals and objectives of their contractual relationship.</div> <div>&nbsp;</div> <div><strong>Communication and Feedback</strong></div> <div>&nbsp;</div> <div>SLAs should contain reporting requirements and performance-based expectations regarding frequency and method of communication. At-risk compensation models should require both the supplier and client to provide timely feedback. This is particularly important when performance issues are identified. After all, your goal is that the performance of both parties results in:</div> <div>&nbsp;</div> <ul> <li>Services delivered at the expected level of quality and consistency</li> <li>100% of the anticipated compensation for the supplier</li> <li>Ongoing realignment of the objectives of the client with the goals of the supplier</li> </ul> </div> <div> <div><strong><span data-contrast="auto" xml:lang="EN-US">Governance Support Platforms</span>&nbsp;</strong></div> <div>&nbsp;</div> <div><span data-contrast="auto" xml:lang="EN-US">A robust and reliable governance support platform is essential to ensure that scorecards are generated on a timely basis, that&nbsp;</span><span data-contrast="auto" xml:lang="EN-US">reporting</span><span data-contrast="auto" xml:lang="EN-US">&nbsp;and benchmarking are timely and insightful and that you don&rsquo;t get bogged down in the minutiae of aggregating metrics, statistics</span><span data-contrast="auto" xml:lang="EN-US">&nbsp;and other data from multiple sources and departments across the enterprise.</span></div> <div>&nbsp;</div> <div><span data-contrast="auto" xml:lang="EN-US">A good platform supports&nbsp;</span><span data-contrast="auto" xml:lang="EN-US">sound&nbsp;</span><span data-contrast="auto" xml:lang="EN-US">governance through:</span></div> <div>&nbsp;</div> <ul> <li>Ensuring consistency in data collection and alignment with established performance measures</li> <li>Delivering standardized reporting in consistent formats</li> <li>Creating and storing a complete record and history of all interactions</li> <li>Providing a common platform for communication and issue escalation</li> <li>Securing data and sensitive information with multiple security levels and access<br />In addition, these platforms allow access using a variety of devices, from the traditional desktop or laptop to tablets and smart phones.</li> </ul> <div class="SCXW21762810 BCX4" style="-webkit-user-select: text; -webkit-user-drag: none; caret-color: rgba(0, 0, 0, 0.847059); color: rgba(0, 0, 0, 0.847059); font-family: &quot;Century Gothic&quot;, &quot;Century Gothic_MSFontService&quot;, sans-serif; font-size: 14.666666984558105px;">&nbsp;</div> <p><strong>Periodic Relationship Health Checks and Contract Reviews</strong></p> <p><span data-contrast="auto" xml:lang="EN-US">Beyond the structured aspects of relationship management and governance, periodic review and health checks can provide deeper strategic insight into critical success factors, underlying structural misalignments or fundamental changes in the contextual environment that may be eroding value. Some of the different tools that can help uncover challenges and opportunities&nbsp;</span><span data-contrast="auto" xml:lang="EN-US">are described below.</span></p> <div style="margin-left: 40px;"><strong>Compatibility and Trust Assessment (CaTTM)&nbsp;</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">The Compatibility and Trust Assessment was developed by Gerald Ledlow Ph.D. and Karl B. Manrodt Ph.D. to measure the strength of an existing business relationship between two parties. A key outcome of the CaT is to document organizational maturity across five key dimensions: trust, innovation, communication, team orientation and focus. It provides an overall &ldquo;raw score&rdquo; and highlights &ldquo;perception gaps&rdquo; between the parties. &nbsp;This tool can be a powerful support in improving the relationship between supplier and client.&nbsp;</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;"><strong>Relationship Health Check&nbsp;</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">A relationship health check looks at several different aspects of the relationship between client and supplier, including communications, decision-making, governance, innovation, metrics, mindset and trust, performance and problem-solving. The resulting report helps both parties understand the relative health of the strategic relationship, and flags potential problems and problem areas. The summary findings identify opportunities for action plans or contract modifications that address gaps and concerns.&nbsp;</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;"><strong>A Standing Neutral &ndash; Relationship Facilitation&nbsp;</strong></div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;">Where the CaT and relationship health check offer point-in-time assessments of a strategic business relationship, a &ldquo;standing neutral&rdquo; contributes to the strength of a relationship over time. The concept begins with the understanding that no contracts are perfect, and that unanticipated situations, interpretations or disputes are bound to happen. At the beginning of the relationship, both parties approve a neutral third party to stand ready to intervene when called upon at any time throughout the life of the relationship.&nbsp;</div> <div style="margin-left: 40px;">The standing neutral works as a moderator or arbitrator, but with a critical difference. Having been appointed at the beginning of the contract, before an issue or dispute arises, the standing neutral is involved as part of the governance mechanism. Parties to the contract utilize the standing neutral earlier as issues arise, and before they erupt into disputes or lawsuits. &nbsp; &nbsp;</div> <div style="margin-left: 40px;">&nbsp;</div> <div style="margin-left: 40px;"> <div><strong>Contract/Deal Review&nbsp;</strong></div> <div>&nbsp;</div> <div>The contract/ceal review is a detailed review of the contracts, exhibits, processes and governance activities of the relationship to assess:&nbsp;</div> <div>&nbsp;</div> <ul> <li>The relevant artifacts relative to the original intent of the deal if known&nbsp;</li> <li>The current desired objectives and vision for the relationship&nbsp;</li> <li>Market benchmarks and other benchmarks to specific deal strategies&nbsp;</li> </ul> <div>The review helps stakeholders to see the structural flaws in their relationship from a contractual perspective and identifies what needs to be done in order to close those gaps and strengthen the relationship going forward.&nbsp;</div> <div>&nbsp;</div> <div><img alt="" src="https://futureofsourcing.com/sites/default/files/Re-Engineering_Coroporate_Real%20Estate_Services_Organization.png" /></div> <div>&nbsp;</div> </div> <div style="margin-left: 40px;">&nbsp;</div> </div> <div>This completes our series, Re-Engineering a Corporate Real Estate Services Organization, which touched briefly on the long list of complex topics involved in a process that, when done correctly, can yield outstanding results, process improvements, innovation and savings. But the sheer scale and complexity of the process when undertaken on an enterprise scale, means that there are a multitude of opportunities for things to go awry. Hundreds of millions of dollars and the operational integrity of the business hang in the balance.&nbsp;</div> <div>&nbsp;</div> <div>The key to success is ensuring that the right resources with the necessary experience are put in place and given the level of support they require. Understand the strengths and weaknesses of your organization, the motivations of the stakeholders, and the likely pitfalls, then plan accordingly. Reinforce your team with outside resources and experienced or neutral third parties wherever it is likely to improve your chances of success. Your investment in excellence will pay off in the long run.&nbsp;</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/real-estate-services" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Real Estate Services</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/strategy" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Strategy</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/governance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Governance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/strategic-sourcing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Strategic Sourcing</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/savings" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Savings</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Re-engineering a Corporate Real Estate Service Organization: Governance - Future of Sourcing" addthis:url="http://futureofsourcing.com/re-engineering-a-corporate-real-estate-service-organization-governance"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 16 Jun 2019 21:27:55 +0000 Ingrid Fenn 1445 at http://futureofsourcing.com http://futureofsourcing.com/re-engineering-a-corporate-real-estate-service-organization-governance#comments Leaving Indirect Spend Unmanaged Means Dollars Left on the Table http://futureofsourcing.com/leaving-indirect-spend-unmanaged-means-dollars-left-on-the-table <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="http://futureofsourcing.com/sites/default/files/articles/Indirect_Spend_Money_Lost.jpg"><a href="http://futureofsourcing.com/sites/default/files/articles/Indirect_Spend_Money_Lost.jpg" title="Leaving Indirect Spend Unmanaged Means Dollars Left on the Table" class="colorbox" rel="gallery-node-1466-FmLaKiNpKyU"><img typeof="foaf:Image" src="http://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Indirect_Spend_Money_Lost.jpg?itok=W62h4D-f" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>For organizations looking to identify cost savings, increase profitability and get a leg up on the competition, <a href="https://futureofsourcing.com/sourcing-a-new-contract-centric-approach" target="_blank">indirect spend management</a> is an ideal place to look. Often considered the backend of procurement &ndash; involving expenses like IT services and equipment, professional services, office supplies and HR services &ndash; indirect spend actually accounts for a significant portion of overall spend. When left unmanaged, organizations can&rsquo;t possibly have a real understanding of spend or cash flow, which can lead to overspending given the overall lack of visibility and control for this category. The challenge is that few companies have the resources to properly manage indirect spend.&nbsp;</p> <p>Taking this into account, we recently analyzed indirect procurement data from our repository of over 125 million transactions and $140 billion in spend, with the goal of providing industry-specific reports that track how KPIs (Key Performance Indicators) and benchmarks shift over time. The first two procurement benchmark reports &ndash;&nbsp;<a href="http://hub.sievo.com/download/benchmarking/consumer-goods" target="_blank">Consumer Packaged Goods</a>&nbsp;(CPG) and&nbsp;<a href="http://hub.sievo.com/download/benchmarking/manufacturing" target="_blank">Manufacturing</a>&nbsp;&ndash; provide interesting details around KPIs like supplier counts, spend as a percentage of revenue, indirect spend per employee, purchase order coverage, payment days and more.&nbsp;</p> <p>Perhaps one of the most notable findings was that indirect spend represents 26 percent of all costs for both manufacturers and CPG companies &ndash; a huge number when left unmanaged &ndash; signaling the importance of leveraging indirect spend insights to drive value and competitive advantage.&nbsp;</p> <p>Another notable finding gave us some real-life insight into what could happen to indirect spend when the number of an organization&rsquo;s suppliers grows in a short period. From 2015 to 2017, we found facilities spend per headcount in the manufacturing industry increased by nearly 35 percent. But at the same time, the facilities supplier headcount increased by eight percent, with disproportionately more suppliers than the size of the category implies. Consolidation of suppliers is a crucial strategy for procurement organizations when looking for long-term savings. Not only will this usually lead to lower prices as you leverage your volume with fewer suppliers, but it also will allow you to spend more time focusing on other areas of the business.&nbsp;</p> <p>Surprisingly, however, the growth of suppliers didn&rsquo;t negatively affect the payment terms in the facilities category, which instead became more favorable over the last few years. Longer payment days give organizations more flexibility with your working capital &ndash; a vital part of a more efficient organization.&nbsp;</p> <p>On the flip side, we saw a significant drop in <a href="https://futureofsourcing.com/what-the-resurgence-of-print-based-marketing-means-for-procurement" target="_blank">spend within the marketing branch</a>, especially in the consumer goods industry between 2015 and 2017. This data suggests that organizations have lowered their spend on media buying, playing a big role in the decrease in marketing spend overall. Instead, CPG organizations are creating better-targeted ads, leveraging newer marketing channels and overall, doing more with less money as customer expectations mount.</p> <p>So, what do the insights provided by these benchmark reports really mean? For CPG and manufacturing organizations, spending dynamics and supplier relationships will continue to shift and margins will continue to tighten, leaving little room for error. While most of procurement&rsquo;s resources are typically dedicated to managing direct spend, the indirect side of the business presents an immediate opportunity to reduce costs and drive efficiencies.</p> <p>While this type of analysis certainly offers manufacturers and consumer goods organizations with valuable insights around current spending trends, it&rsquo;s only a moment-in-time picture. The real&nbsp;<a href="https://futureofsourcing.com/benchmarking-procurements-next-big-competitive-advantage">value of benchmarking</a>&nbsp;comes from the ability to compare your own data against your peers, category-by-category, updated every month to help drive informed decisions about your business.&nbsp;&nbsp;And now with machine learning and AI-enabled tools more readily available, organizations have a wealth of new data at their fingertips and are able to clean, analyze and act on it like never before. Benchmarking can unveil insights and opportunities driven from data that previously might not have been considered at all.&nbsp;</p> <p>As organizations continue to look for savings opportunities that truly deliver value to the bottom line, procurement organizations would be wise to not overlook their indirect spend. Managing both direct and indirect spend by leveraging AI and data-driven procurement benchmarking is what will ensure that businesses thrive in the coming years.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/indirect-spend" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Indirect Spend</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/key-performance-indicators-kpis" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Key Performance Indicators (KPIs)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/cost" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cost</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/value" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Value</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/savings" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Savings</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Leaving Indirect Spend Unmanaged Means Dollars Left on the Table - Future of Sourcing" addthis:url="http://futureofsourcing.com/leaving-indirect-spend-unmanaged-means-dollars-left-on-the-table"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 11 Jun 2019 18:35:24 +0000 Johan-Peter Teppala 1466 at http://futureofsourcing.com http://futureofsourcing.com/leaving-indirect-spend-unmanaged-means-dollars-left-on-the-table#comments