Supply chain strategy

5 Benefits of Procurement Outsourcing

square-peg-round-hole

Have you ever felt stuck to move forward on a project because the skills required was not a good fit for your resources?  Kind of like the square peg in round hole scenario.  Yet you knew that making it happen would be in the best interest of your organization?  Think about it for a second. How would you handle this at home if you had an electrical issue and you were not an electrician?  The possibility for electrocution is severe enough to call in experts for most people.

Negotiating goods and services outside of your area of expertise can be just as paralyzing.  Many organizations end up spending too much money due to outdated contracts because they are afraid of losing at the negotiation table or they just simply don’t have the resources to engage.  Markets, technology and your needs change constantly. But existing contracts seem to remain the same.  If companies really understood how much money they could save it would be impossible for them to ignore.

But how do you access the savings with limited internal resources. Fortunately, there’s procurement outsourcing.  Here are 5 key benefits of procurement outsourcing that can help any size organization:

  1. Expert talent

Major league baseball allows for the designated hitter (DH) who bats for the worst batter in the lineup. The result provided dramatic increases in home runs, RBI’s and created hall of fame credentials for some players.  Procurement outsourcing allows you similar opportunities to shine.  How many companies have the talent in house that can negotiate freight, utilities, financial services or maintenance contracts? Not many.  But like a DH, procurement outsourcing is there to give you access to the best expertise at your weakest position.

  1. Reduce risk

Procurement outsourcing can reduce your risk because it is only used on demand.  There is no need to keep full time staff. Use it as you need it.  By the project, short periods or if you just need expert help in negotiating a specific category in which you have little to no experience.  For example, transportation companies have full time staffs that do nothing but specialize in negotiation of transportation.  These negotiations come down frequently to highly experienced specialist on one side of the table vs little to no experience on the other side.  Who do you think wins that game?

  1. Reduction in overhead

The focus of procurement outsourcing is to provide added value through better contracts. But one additional benefit is that it reduces overhead costing too.  No need for training, insurance, office space, medical benefits and all the other employee related expenses.

  1. Increased opportunities for procurement solutions

Using in house procurement limits your solutions to only the skillsets and opportunities within your organization.  Procurement outsourcing has the advantage of having a greater vision to procurement solutions that go well beyond your organization.  Through strategic partnerships, ability to pool expert talent and the overall experience allows for the perfect environment for creative solutions that are not accessible through in house procurement.

  1. Core focus

Using procurement outsourcing allows your organization to focus on your core competency. It doesn’t matter if you are a restaurant, manufacturer or a law office.  Keeping your limited resources focused on your core business is crucial to your success.  Asking your procurement team to negotiate contracts outside of their expertise is just not a good fit.  Let them do their job and let experts handle the rest for you.

Just about every organization uses outsourcing services of some kind whether it is legal, payroll, IT or human resources.  Procurement outsourcing is just the next service frontier.  Competition is forcing companies to get leaner and more effective.  How can you ask more from your team that is already stretched thin?  Procurement outsourcing just might be your answer.

If you know of anyone that would like more information on how procurement outsourcing can be a fit for their organization please email info@atssoutherncal.com

Question:  Have you ever felt over matched at the negotiation table?

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The next level in the supply chain

Man in tunnel_light

It is time for supply chain professionals to shed some light on how things are made. Global economics can be a double edge sword.  It has the power to increase sales exponentially, but on the other side it has the power of to corrupt and abuse just as easily.  Business today demands companies continually look to make goods and services more cost effective or lose market share. It’s that simple in many cases.  We consumers love getting a great deal, but what’s the real cost in terms of the supply chain practices.  The fact is we know very little about those practices.

Companies that purchase goods and services have a responsibility to understand what practices are really going into their products they sell.  Due diligence in the supply chain can be daunting but worth the effort.  Languages, cultural differences, laws, business environments and many other factors play important roles in how business is awarded.  Labor practices, environmental impacts, working conditions and business practices are real concerns when awarding business to foreign companies.  Companies that profit from these arrangements have a responsibility to be aware of what they are buying.  Why is it that we consumers know more about free range cattle than free people in the supply chain?

The good news is that this awareness is beginning to ramp up.  Recent tragedies and social media are driving awareness that global supply chains won’t be able to ignore.  Unfortunately, for every abuse that has comes to light there are many more we never hear about.  The good news is there are several companies that have begun to leading the way such as Apple and Coke that have really made due diligence apart of their corporate responsibility.

Here are 5 ways to help your organization use your supply chains responsibly:

  1. It starts at the top

Executive teams must make a commitment to support fair and responsible trade throughout the entire supply chain. First level suppliers are not enough. They need to collaborate with their suppliers to go beyond just the first level and ensure all the way down to raw ingredients are made responsibly. Comprehensive policies addressing fair and responsible supplier practices need to be incorporated just like any other quality system.

  1. Transparency in the supply chain

The bottom line is that transparency creates trust.  Collaboration in the supply chain is dependent on trust.  Ensuring quality products has long been the focus for sourcing professionals but now it is time to take the supply chain to the next level and create transparent supply chains practices.

  1. Data systems

Today information is more accessible and relevant than ever before.  Organizations such Made in a Free World help put information into the hands of decision makers that award contracts to foreign suppliers.  This data is powerful and positively impacts lives across the planet.

  1. Third party inspection companies

These companies can provide on-site inspection services and can provide insight into what is taking place onsite.  They are an important part of the process as they can be your eyes when you cannot be at the supplier. It is very important to maintain they are independent from the supplier to provide objective information as to the performance of the supplier. They are beginning to provide oversight into working conditions and environmental issues.

  1. Responsible supply chain practice labels

Organic food supply has created a tremendous amount of awareness when it comes to what practices go into the food supply.  Why don’t we have that for people and the environment?  I think it is time we create labels on our packaging that let’s everyone know these products are made from a responsible supply chain practices.

Supply chains reach and impact people, countries and the environment across the world like few other disciplines.  It is our responsibility to use that influence correctly and reward those suppliers willing to offer transparency all throughout the supply chain.  We see it working with the organic food chain so it is about time we step up and make it work with people and the environment. People are worth the effort!

If you or anyone you know would like to learn more about responsible supply chain practices please email info@atssoutherncal.com for more information.

Question: Do you think adding “responsible supply chain” labels would make an impact to the end user?

4 keys why procurement’s like an ace up your sleeve

Ace up sleeve

It sure would be nice having an ace up your sleeve as part of your “go to market” strategy. Look no farther than you own procurement team.  Procurement has been working to establish itself as a worthy member of the executive team in every industry for years.  Procurement has long lived in the shadows behind sales, operations, finance and IT. Sales teams tend to get a lot of recognition for bringing in the business and it is well deserved.  Operations, finance and IT all seem to have their moments to shine too.  But procurement in general seems to get lost in the shuffle behind those other disciplines.

However, that in no way diminishes their ability to add value to the organization.  Maybe they just need a new marketing campaign.  Years ago procurement was viewed only as a necessary support function to fulfill internal requirements.  It’s continuing to evolve as more companies are seeing greater value being added than just filling a material requirement at the lowest cost.

Procurement’s strategic effect touches just about all areas of the organization.  Here are 4 key areas that procurement can effectively provide a competitive advantage for your organization:

  1. Product design

Developing products is a creative process that can consume lots of time and resources in order to maintain relevance in the marketplace.  Sales and operations typically drive the process, but don’t forget that procurement has direct communications to the supplier network.  That is an incredible resource that is easily tapped into for support to the latest technology and market solutions that extend well beyond your internal capabilities. Go ahead and invite your suppliers to be part of the process, you might be surprised what they bring to the table.

  1. Inventory strategies that increase cash flow

Investing into inventory is one of the biggest expenses for just about any company.  Unless you can turn around and sell the material without further touches, expenses quickly add up like space requirements, tracking inventory, audits, compliance, theft, packaging and support management.  Then there’s the risk of the inventory moving slowly or not at all.  Why not work with the suppliers to find solutions that minimize that risk and inventory investment?  Increasing cash flow, reducing lead time and logistics costs, what’s not to love about those benefits!

  1. Corporate social responsibility

Unfortunately as global commerce continues to expand into developing countries, corruption still exists but the good news is that information has never been more accessible.  There is so much injustice across the world, but organizations have never had as much information as they do today to make informed decisions on where they award their business.  There are major concerns when working internationally such as human rights, environmental issues or intellectual properties. How about turning those concerns around and sourcing responsible suppliers as an example of the right way to do business?  Now that’s an advantage that benefits everyone.

  1. Exclusivity

We all want to standout in the marketplace and having exclusivity in your supply chain is a very real possibility that allows you to be distinctive.  Procurement can drive this exclusivity advantage through strong relationships in the supply chain.  Keeping competitors out of your supply chain is a huge advantage that is best established right from the procurement team.

If you are tired of just being another supplier in the market place and distinction is what you want, look to your procurement solutions as a real advantage.   Advantages like this can be achieved through internal teams or through procurement outsourcing providers.  They have the experts on demand with proven concepts, experience and partnerships available to make ideas like this part of your competitive advantage.

If you know of any companies that are looking for a distinct competitive advantage through their procurement solutions, please email info@atssoutherncal.com for more information.

Question:  What creative procurement solutions have you used to develop a distinct competitive advantage in your marketplace?

Global sourcing is risky business…

Faceless man

Global sourcing is risky business. These risks come in many forms such as quality failures, environmental exploitation, supply chain delays, stolen intellectual properties, financial fraud or just plain theft. Add in language barriers and cultural issues and the process can be very complex and risky. But where there is risk, there is also reward.

The big question then is the risk worth the reward?  It certainly can be as long as you take some actions to minimize the risk.  One of the best steps you can take it is finding a global sourcing partner to help you navigate the process from beginning to end. They can be your partner behind the scenes.  Here are some great benefits why a global sourcing partner can help you reduce your risks in sourcing products overseas.

  1. Sourcing partners can help break down cultural barriers when attempting to do business overseas. They are fluent in the local language, business practices and can help represent your needs to the potential suppliers in a very professional manner.
  2. Supplier qualification is a very key step and using a global sourcing expert plays a vital role in this process. This is where the expert can pay for themselves. They help validate the supplier through certifications, production capabilities, site location, customer referrals, site visits and much more. Qualifying a supplier up front will save a ton of headaches after the fact.
  3. The type of payment method is another key area that a sourcing partner can help counsel based on the type of transaction. Wire transfer, Paypal, Letters of Credit, open accounts or cash-in-advance are all options and each option has its own set of pros and cons depending on which side of the transaction you are on.  Both sides need to be come to an agreement that facilitates doing business together and a global sourcing expert is a great resource for this.
  4. Maintaining production quality throughout is one of the riskiest parts of the entire process. Setting up the right quality parameters up front is the key to success. Defining the specifications, getting approved samples and establishing ongoing quality checks in the process help to ensure a successful outcome.  I have seen first-hand the costly mistakes of poor quality and the negative effect it can have from lost sales, a bad customer experience and tying up huge amounts of inventory dollars waiting for a resolution. This is truly a case where a dollar of prevention is worth many times the cost of the cure.

Sourcing products from overseas can seem risky but with the right partners it can add a tremendous amount of value to any company.  Global sourcing has been a way of life in business since early explorers developed trade routes around the globe hundreds, if not thousands of years ago. There is no reason to believe this practice will stop anytime soon. It is your choice whether to take advantage of the opportunity or not.

If you or anyone would like learn more about how global sourcing experts can reduce the risk in overseas sourcing, please email info@atssoutherncal.com for more information.  We would be glad to assist you in finding the right partner for your business.

Question: what were some of the cultural challenges you had to overcome when doing business overseas? 

The “people bottleneck” in the supply chain

What is a “people bottleneck”?

Where is all the supply chain talent going?  As we end the first quarter of the 2015, baby boomers across the US are focusing on retirement and taking with them decades of experience creating a “people bottleneck” in the world of supply chain.  Study after study tells us that there is a large gap in supply chain talent coming with no easy answer on how to fix it quick enough to backfill all those people retiring.  So how did we get here?

Obviously, baby boomers have an effect on every industry and supply chain is no different.  The industry can be very challenging with the international demands, technology applications, shifting demand flows and limited resources to make it all come together. Business today demands supply chains to be agile enough to handle all of these issues whether it is a multi-billion dollar corporation or just a mom and pop. Education at universities and through continuing education programs will have to increase their graduates to fill the growing demand.

However, one of the biggest challenges within the supply chain industry has been a lack of incoming talent.  I network with hundreds of people and I consistently find that most people don’t even know what supply chain is.  We need a social media star to create awareness across the board. Think about it for a second, for those people under 25, they don’t know a world that is not social media driven.  Stars have been born from social media yet how many people can name a supply chain star?  Unfortunately the supply chain world does not carry a lot of social media credibility with the under 25 crowd.  Stars transcend their industry and create awareness. People like Bill Gates helped make Silicon Valley cool for the Mark Zuckerberg’s of the world.

Effects:

Despite our ability to foresee the problem, we can’t avoid it. So what’s the effect?  Just like life, those with the greatest resources will have advantages over those without.  Due to the limited talent, the Fortune 500 companies will be able to pull the best talent from the smaller companies causing serious issues in the small to medium size companies.  As baseball season is about to start, this is just  like the NY Yankees taking the best talent from the small market teams after they have developed the talent for years.  This lack of talent at the small to medium size company will create a large lack of efficiency in the supply chain causing increases in costs and delays.  Lacking the in house talent, companies will likely have to restrict their offerings based on the limited resources.

Options:

Awareness must be at the fore front.  Who is the Mark Cuban of Supply Chain that transcends the industry and draws people to it?  Someone needs to step up and create the sizzle that sells the idea it is cool to be in supply chain.  We have technology, globalization and the ability to change in the world due to the business we transact. The education system can help train those interested people through universities and continuing education organizations.  Continuing education is a great place to learn the relevant concepts and potentially find a mentor in the process.  Corporations also have a responsibility in helping educate and need to do a better job.  They benefit the most, so those that put some skin in the game will surely reap the rewards.

Education is the long term solution but it will take years to see the effect.  How will companies deal with the reality of today when faced with a supply chain problem?  How do you fix a problem without the proper tools?  Supply chain outsourcing can be a solution to help until the talent is available. Supply chain issue experts have the ability to quickly diagnose and offer proven solutions without the risk of adding additional head count. Outsourcing can be a much needed bridge to get companies through temporary issues.

If you would like to learn more about how outsourcing can help your supply chain issues please send an email to info@atssoutherncal.com for more information.

Question:  Will the lack of supply chain talent cause you to lose business?

5 reasons why a supply chain a strategy is critical to successful companies

Blue_Chess_

How many organizations use a supply chain strategy to create competitive advantage?  In my experience, most small to medium size companies ignore the fact that a well-designed supply chain strategy can create many benefits including a competitive advantage.  The properly executed supply chain strategy has far reaching effects from the suppliers to the end customers and allows limited resources to focus on their core business function.   Direct cost reductions are just part of the benefits.  Indirect benefits can also include shorter lead times, lower cost of ownership and ultimately a competitive advantage.

Here are 5 reasons why it is important to create a supply chain strategy.

  1. Supply chain strategy sets the overall guiding foundational principles of the entire supply chain organization.  It helps define the directional strategies from people, partnerships, supplier base, capital investments, processes and goals.  Without such well-defined directional guidance your organization may find itself running down unknown, dark, dangerous paths and possibly out of control.
  2. A well-designed supply chain strategy helps to properly align the supply chain team in an efficient, creative and a collaborative environment from executives, buyers, logistics and the supplier network.  This alignment helps provide the framework to ensure all other supply chain initiatives fit together properly and are working for the same goals. If you don’t have this comprehensive alignment, then you cannot expect very much from your supply chain team when it needs to respond to unforeseen challenges and to quickly to come up with innovative solutions or new ideas.
  3. The strategic plan is based on the needs of the whole organization. The supply chain strategy must support the overall goals of the organizations and should extend all throughout the supply chain including the supplier network.   For example, if your company markets itself as a local provider of goods, sourcing from overseas is probably not a good fit.
  4. The proper supply chain strategy allows organizations to focus on their core business internally while at the same time allowing their suppliers to focus on their business.  This may seem simple, but too often companies lose sight of their core and begin to dictate to suppliers requirements that add no value and only increase costs.  Due to limited resources everyone must deal with, focusing on your strengths creates an amazing collaborative environment that can create win-win solutions.  This directly leads to cost reductions across the supply chain both internally and externally. Any organization that lacks a true strategy will likely find its’ limited resources chasing projects that do not fit into the greater strategy.
  5. Well executed supply chain strategies can be used to differentiate your company from the competition. Does your competition focus on low cost solutions?  Then maybe providing value added services such as vendor managed inventories may separate you from the competition.  Will a shorter delivery time differentiate you from the competition?  How about using environmentally friendly supply chain?  Or maybe a technology driven solution will help you stand out from the competition.   Most companies that do not have supply chain strategy fail to distinguish themselves in the industry.

If your company is ready to explore with an expert how creating a supply chain strategy can help provide competitive advantages in your industry, feel free to call or email me at your earliest convenience for a free, no-obligation supply chain assessment.