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Procurement 2020: Looking Ahead to a New Era

As Procurement and Supply Chain professionals stare down an exciting new decade, our Source-to-Pay experts are once again sharing reflections and predictions in a new whitepaper. Procurement in 2020 sees the spend management leaders comment on the last twelve months and discuss the trends and topics that will define Procurement in the 2020s.

What's Next for Procurement? 

This time around, the Supply Chain thought leaders focus on subjects including: 
  • The ongoing conversation around sustainability and the perils of inaction. 
  • Ethical sourcing and its benefits for recruitment, customer satisfaction, and company culture. 
  • Procurement's essential role in promoting ethical behavior, driving visibility, and protecting corporate reputations. 
  • The considerable benefits of purpose-driven Procurement and Supply Chain Management.
  • Procurement's various talent gaps and the ongoing battle over world-class professionals. 
  • Digital transformation, its benefits, and the numerous obstacles in Procurement's way. 
That's just a small preview. To learn more about the exciting (and uncertain) future ahead, download Procurement in 2020 today. 
Procurement News

Taking steps toward a lean supply chain

An all-too-common occurrence in the logistics industry is supply chains growing along with your company, but eventually become a bit too bloated to run at an optimal level. While there may only be some concerns here and there as supply chains evolve, it's wise for companies to do all in their power to slim down those inefficiencies and get their operations as lean as possible.

The biggest key to operating a lean supply chain and operation is for companies to make sure they build themselves out with flexibility in mind, industry expert Don Marshall told Supply Chain Digital. Every growth and investment decision should be made with the idea of being able to remain agile even as the business adapts to industry trends. That could be as simple as investing in smaller tech that's easy to build on, such as by adopting RFID tags for various aspects of your operations, or as big as moving to a building that's perhaps a bit bigger than is necessary today so the business can grow comfortably into a stronger future.

In addition, it's often a good idea to keep an employee pool relatively small, as a means of ensuring everyone is on the same page, Marshall told the site. While this obviously doesn't mean companies should cut the talent they have, being a little more cautious about undertaking temporary hiring sprees could serve them well in the future.

Look for ways to slim down logistics operations.Look for ways to slim down logistics operations.
Digging into the processes
While the above is certainly an outline for how companies can build the infrastructure needed to support themselves as they slim down their supply chain, there are many processes that go into making that a reality, according to The Balance Small Business. That starts with procurement; it's vital to ensure one hand knows what the other is doing at all times, so duplicate orders of items to ship or materials used in production are kept to a minimum and there is no wasted money or space.

Likewise, it's important to make sure warehousing practices are kept streamlined, with on-hand inventory numbers kept just-right, and everything arranged so the most wanted items are easily accessible for pickers and packers, the report said. Then, everything can be shipped out with greater efficiency, keeping transport costs to a minimum as well.

Getting it right
Of course, for companies to truly succeed in slimming down their supply chain, they need insight into - and buy-in from - every department, according to long-time industry leader Chris Anton, writing for Supply & Demand Chain Executive.

"From a warehouse and distribution center view, this would be an excellent time to actually practice another old-school management technique: management by walking around or MBWA," Anton wrote. "Take the time to explore the distribution center, looking at obvious places to evaluate."

That kind of teamwork not only makes the vision behind these changes more likely to address company-wide needs, but also requires everyone to understand the benefits they will reap from pulling in the same direction on the project from Day 1.
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3 Things P2P Pros Need to Know About AI

This blog comes to us from Ashley Brizendine, Marketing Manager at Determine, a Corcentric Company. 

Eliminating the Fear of AI.

As procurement professionals across the globe embrace the Digital Transformation and all of the changes that come with it, it would be remiss not to mention the hesitancy and scepticism that P2P pros also experience when it comes to certain advanced technologies — in particular, artificial intelligence (AI). An unfounded fear looms over this forward-thinking automation, with workers and industries alike suspecting that AI will eliminate entirely the need for a human workforce. However, a recent webinar sponsored by Corcentric reveals just the opposite. The webinar, 3 Things P2P Pros Need to Know About AI, defines artificial intelligence, breaks down its specific capabilities and uncovers the key benefits it provides to procurement.

Defined as the ‘Holy Grail of Computer Science’ by Bill Gates, AI still remains to be mysterious terrain for most. Mark Brousseau, the host of the webinar, helps clear the air by giving us an altruistic definition of AI and its purpose. According to Mark, AI enables software and machines to understand tasks — allowing technology to perform human intelligence. AI is capable of:

  • Understanding tasks
  • Analyzing data sets and patterns
  • Employing “machine learning”
  • Training itself to recognize documents
  • Information mining
  • Monitoring business processes

From this list of capabilities alone, it becomes easier for P2P pros to understand how AI might be helpful to their line of work. Let’s review some of the key benefits that make artificial intelligence a tool to be desired, not feared.

AI Improves Productivity

P2P functions remain heavily dependent on manual processes, with most of a procurement professional’s time spent processing transactions rather than working on value-added tasks like cash flow analysis or supplier management. AI works to analyze large amounts of data, identify patterns and features within the data and applies what it learns to new data. This gives precious time back to procurement, empowering P2P pros to be more strategic in nature and plug away at identifying opportunities to improve upon operational efficiencies and effectiveness.

Better Cash Management

The world of P2P comes with a lot of data, and that is an understatement. Spreadsheets upon spreadsheets, paper reports, and file cabinets full of data that we’re never quite sure what to do with, or simply don’t have the time or resources to dissect. AI captures all of this data, helps us manage and make sense of it, and is capable of integrating with an array of other systems so that the data is easily transferred and visible across the organization. In turn, this “dark data” becomes something procurement can leverage to improve cash management.

AI: The Risk Mitigator

With payment fraud on the rise and an increasing number of government mandates to follow, procurement teams are under a microscope and a great deal of pressure when it comes to monitoring transactions and mitigating risk. And chances are slim that every piece of data can be tested for potential issues. AI is continuously running the background; providing constant data testing and monitoring and identifying any compliance issues.

So have no fear, AI is not a threat to procurement professionals. Rather, it will enable us to spend more time performing tasks that create added value, while also continuously working to improve process efficiencies and the overall effectiveness of the organization. Understanding the benefits provided to us by AI and forging a symbiotic relationship between human talent and technology is fundamental as the Digital Transformation progresses.
Procurement News

Using technology to bolster your supply chain

Many experts in the supply chain sector agree that more likely needs to be done to ensure companies at every step are keeping up with changing technology and opportunities. Doing so these days is often seen as part and parcel with making sure the supply chain is as simultaneously secure and open as possible, so real-time information is shared easily but remains protected.

One of the big concerns many companies may have about implementing such technology, however, is what it might do to their workforce, according to Supply Chain Digital. However, even as automation of certain processes in the supply chain is taking hold - such as using AI to interpret large data sets in seconds, or utilizing robots to pick certain items off shelves - there is little question about the importance of the human involvement in that work to double-check computerized management efforts, make sure picking is done properly, pack shipments and more.

The warehouse of the future may not look that much different from today's.The warehouse of the near future may not look that much different from today's.
The way forward, then, is likely to make sure human skills are optimized for a more automated environment and make sure there are always non-automated tasks for them to complete, the report said. This may require companies to rejigger their training efforts or otherwise change their traditional ways of doing business, but the concern that people will be pushed out of the supply chain in favor of 100% automation, at this point, seems ill-founded.

Getting in front of the trends
Instead of investing whole-hog in automation-specific technologies these days it may be more judicious for companies to make investments in the tech that undergirds it, according to Logistics Viewpoints. For instance, companies would be wise to ensure there is a strong 5G capability and readiness within every aspect of their operations, so the sheer volume of connected devices that will likely come under their roof in the years ahead are able to get the bandwidth they need.

Combining that investment with plans for future efforts around incorporating AI and robotics will likely form a potent combination that guarantees companies remain competitive, even in the face of ever-growing competition, the report said. Once that's done, there can be other tech investment considerations made as well.

Addressing the issues
Meanwhile, it's important for companies to consider both their own needs - for instance, whether their legacy ERP needs to be updated or completely replaced - as well as industry trends like broader use of warehouse and transportation management systems, according to Packaging World. That may mean collaborating with their various partners throughout the supply chain to ensure they're all on the same page when it comes to software and hardware adoption going forward.

Certainly, the more companies can do to start planning their investment cycles for 2020 - and beyond - the better off they will be when it comes to competing in an ever-changing and evolving supply chain ecosystem.
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Infographic: Closing the Talent Gap in 2020

Throughout the decade, a "talent gap" has plagued Procurement. Most organizations simply cannot get a hold of the talent they need to make Procurement a value generator and thrive in a new digital era. Even fewer businesses can convince leading talent to stick around. According the latest Deloitte CPO survey, just 46% of Procurement leaders have faith in their teams.

To make matters worse, the "gap" is really several gaps. Organizations aren't just lacking for one set of skills. In addition to Procurement's traditional skill set, they're looking for candidates with a wealth of technological know-how as well as so-called "soft skills." They've got their work cut out for them.

Where can organizations start? Check out the infographic below for some suggestions.

Procurement's lingering talent gap is just one of the subjects Corcentric discusses in Procurement in 2020. Download the whitepaper today for a comprehensive look at the trends and topics that will define the next decade of Supply Chain Management.
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How Procurement can Go Green in 2020

I made a prediction earlier in the month that more organizations will look to become greener this year. There are plenty of things organizations can do to improve their sustainability, but Procurement pros are in an excellent position to help lead their organizations to meeting these goals. Why? Because we move beyond the confines of our facilities and can have an impact with all the suppliers our organizations choose to buy from.

So, what can Procurement do to help make our organizations more sustainable and environmentally focused, while still working to reduce costs and promote efficient purchasing?


There’s cost savings in these initiatives, but also a level of change required to make them work – and it isn’t always easy to get stakeholders onboard with these changes. Here’s a tale of two organizations’ janitorial service providers to show what I mean.

Both organizations wanted to cut costs and considered moving to linerless trach receptacles to do it. Plastic trash bags take a notoriously long time to decompose (anywhere from 10 to 1,000 years). Cutting liners out can have a huge environmental impact for a large office – but requires personal change. One organization ended up cutting 80% of their liners to get greener and cut 2.5% of their monthly janitorial costs as a bonus. But this required employees to throw away gunky garbage (think lunch waste) in the still-lined receptacles in break rooms. The other organization’s management team felt this was too much of a burden to place on employees. Liners stayed in place.

Before we can start building a green Procurement strategy, we need to get our organizations and suppliers excited about the opportunities they bring. Is 2.5% monthly savings on janitorial services “worth it?” It certainly helps to position a change on cost benefits, but ultimately there’s an attitude change that needs to take place as well.


Reducing or eliminating trash liners is just one green example. Green packaging options can cut waste while still offering exceptional protection for goods. Organizations can also push paperless initiatives. They can purchase green office and cleaning supplies, and eliminate disposable breakroom supplies in favor of reusable dishes and utensils. For organizations in deregulated areas, they can switch energy suppliers to those that offer green energy.

Procurement, naturally, has a hand in all of these decisions. As such, we should brainstorm such opportunities and propose go-to-market initiatives to bring such products in.

Even if a market event isn’t specifically focused on a green initiative, Procurement can promote sustainable purchases by including green elements in RFP documents. Ask suppliers to highlight green products in their quotes. Ask suppliers to outline their own green initiatives, and define what percent of their own suppliers offer green products and services. Make your commitment clear from the beginning.

Be a Green Advocate

Gut check question: Did you make any New Year’s resolutions this year? Follow-up: Have you already given up on any? If you have, you aren’t alone – less than 25% of people stick with resolutions after January ends.

Sticking with green initiatives will be much the same – it isn’t enough to sell green strategies once, or launch a few isolated green market events.

  • Work with management to set annual sustainability goals. Help the cause by tracking green purchases monthly as one of the overarching KPIs of this goal.
  • Work with suppliers as well. This will be particularly important for smaller suppliers that may not have much experience with sustainability initiatives, and don’t have the resources to devote to full-time team members to focus on being green. 

It Ain’t Easy Being Green

Beyond reducing environmental impact, there are certainly opportunities for cost savings from going green. But reducing an organizational environmental footprint and achieving those savings isn’t always easy.

Dedication is needed to identify green opportunities, see them through, and ensure that sustainability initiatives are a consistent focus as time goes by.

Procurement News

Supply chains still up in the air on trade war

The first phase of the trade war between the U.S. and China seems to be nearing an endpoint, but that doesn't mean the uncertainty that came with it is likely to reach a conclusion any time soon. With that in mind, many companies along the supply chain may soon find they have more complexities to deal with, plan for and overcome.

For instance, China recently announced that it will no longer buy produce and other agriculture products from U.S.-based producers, meaning that a major global customer of all these offerings is now off the table, according to Inbound Logistics. In what can only be described as a troublesome domino effect, that means producers in the U.S. will likely have more of their product on hand than they previously planned for, causing the prices for these offerings to plummet as companies try to offload them at a reasonable price rather than let them rot.

In addition, that would likely lead to a decline in equipment purchases as agribusinesses see their profits decline, and prices for those machines have likely been on the rise due to the higher cost of steel and other metals that have come as part of the trade war as well, the report said.

The trade war stretches on.The trade war stretches on.
Where the situation stands
Right now, shippers on this side of the Pacific have some serious concerns about what a lower-level trade war between the U.S. and China will have on their bottom lines, according to Supply Chain Management Review. A recent survey from Resilience360 found that two-thirds of shippers have already been affected by this conflict, and more than a quarter had suffered with no other contingency planning in place. That includes close to half of engineering and manufacturing firms, and 2 in 5 automotive companies.

As a consequence, nearly three-quarters of respondents said that the are at least considering moving their production efforts to other countries as a means of keeping costs down, the report said. Among those who have taken action to reduce their costs or risks around this trade war, the most common answer - cited by 20% of total respondents - was to simply look elsewhere for the parts and assembly efforts they needed to make their products. Almost 16% opted to apply for tariff exemptions.

Another sign of the impact
Throughout this process, there has been a notable decline in the volume of goods shipped via air as well, according to the latest data from the International Air Transport Association. In November, for instance, there was a 1% decline on an annual basis on air freight, even as the industry has continued to build out its capacity.

This marked the 13th straight month in which year-over-year declines were observed, and experts believe there may be no end in sight to this trend as long as the trade war continues, the report said. However, the rate of decline in November, which is firmly a part of the holiday shipping season, slowed in comparison with the dip seen in October.

With all these issues in mind, companies that do not have a plan in place to deal with a longer-term trade conflict may be putting themselves at risk for financial problems.
Procurement News

How can companies in the food supply chain reduce waste?

One of the biggest issues for many companies is that their supply chains aren't perfectly efficient, meaning they tend to lose track of products en route to or from their facilities, resulting in losses that can add up significantly over time. This may be even more problematic for companies that deal with perishable foodstuffs, as there is not only the risk that pallets or crates go missing, but also that food spoils on its journey through the supply chain.

For obvious reasons, then, companies that deal with perishable food items have a significant vested interest in reducing waste, according to Supply Chain Digital. It is a pervasive problem the world over - for instance, some estimates show that as much as 40% of food shipped in the European Union for grocery companies never makes it to store shelves - leading to tens of billions of tons (or more) of food going to waste each year.

Perhaps the easiest way for food companies to deal with this issue is to increase visibility in the supply chain, which many unfortunately have not been able to do - at least, not to their satisfaction, the report said. In addition, they may have to change their policies around what constitutes a sellable food item, such as putting items that are perfectly good but may not look "right" up for sale, where they previously would have been allowed to go to waste in the name of aesthetics.

Cutting down food waste is critical.Cutting down food waste is critical.
Better tracking required
Experts largely agree that better visibility starts on the farm, where companies can do more to ensure food is easier to track as it is harvested, packaged and put into trucks, according to Fast Casual. The ability of a food seller to track any individual box of apples or shipment of beef at every step of the supply chain - from the farm to the store itself - would not only reduce waste, but increase customer confidence and satisfaction.

Likewise, more advanced packaging that makes it easier for sellers or consumers to determine whether food has exceeded a certain temperature while in transit can also increase confidence in its freshness, the report said. Even more advanced options could allow companies to set shipping temperatures for individual crates, so every item is shipped at its optimal level of freshness.

Taking the next step
However, when it comes to truly cutting-edge food tech designed to tackle waste, there are numerous startups trying to take different approaches to the issue, according to Supply Chain Dive. For instance, one company has developed an invisible coating for fresh produce that is perfectly edible but dramatically shields the food from the substances that can lead to decay, while another has a device that can be inserted into larger packaging and emits a chemical spray to discourage growth of mold or bacteria.

Another company uses high-tech cameras to detect internal rot of produce that are hard to detect, like in avocados, the report said.

This innovative tech, in addition to the more standard options that can be used to improve all types of supply chains, could be the key to drastically reducing the amount of food waste seen worldwide each year.
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What's Old is New Again - Addressing Digital Transformation in the Context of Growth, Technology, Talent, and Relationships

The following blog comes to us from Constantine Limberakis, Corcentric's Senior Director of Product Marketing & Analyst Relations

As we look to the start of a new decade, the future looks bright. Much of this optimism is based on an ongoing digital revolution that started in the beginning of the 21st century. Today, the next phase, sometimes called the 4th industrial revolution, has taken shape in the form of what many have come to recognize as “digital transformation.” Any Google search on these terms will generate thousands of results that include views from pundits and non-pundits alike, on what it is and what it’s not.

Defining digital transformation and its challenges

For the futurists, a business world positively influenced by emerging technological advances is established by the ongoing and accelerated adoption of emerging technologies in the fields of Artificial Intelligence (AI), machine learning, blockchain, Internet of Things (IoT), and robotics. Driven by the dramatic increase in computing power, memory, and communications to process information, these latest technology areas demonstrate the promise for all parts of an organization to become both more effective and efficient at delivering value to its customers and internal stakeholders alike.

But the potential of digital transformation also requires the ability for organizations to adjust and advance the impact of change within the proverbial four walls. As we enter 2020, most business executives are still looking to make sense of how to best adopt rapidly emerging technologies in concert with existing technology and business process infrastructures. For fear of falling behind the competition, many organizations have rushed into digital transformation initiatives without a clear definition of what digital really means to their organizations. Recent research from McKinsey & Company shows that as much as 70 percent of complex, large-scale change programs don’t reach their stated goals.

Despite the advances in technology, the modern challenge for most, if not all, organizations remains taking a holistic approach to digital transformation by overcoming data and process constraints. In the world of procurement, we at Corcentric continue to see constraints on digital efforts through the lack of access to good data. Organizations need 100% visibility 
into their data in order to conduct the proper analysis on spend, sourcing, purchasing and financial opportunities, which, in turn, enable them to optimize operational decision making. Additionally, “source-to-pay” or “order-to-cash” processes have been improving the exchange of goods and services. However, logically taking action on these opportunities has also been bogged down by lack of the digital capabilities required to connect and enhance business processes and the relationships that bind them.

Leavitt, Harold J. (1972). Managerial Psychology. Chicago: University of Chicago Press, 1972. Print

Executing a digital strategy with organization, people, process and technology

In an age where we are always looking for something new, one approach that has stood the test of time is modeling how organizations adjust to change. Adapted from the classic model designed by Harold J. Leavitt in 1965, it’s been over half a century since the introduction of this concept as a method to identify the key components for business success and change management.

In Leavitt’s classic model, people represent the workers (i.e., talent), structure represents how a group of people is organized (i.e., organization), tasks refer to what those people do (i.e., process), and technology covers the tools that people use. Whether it be in consulting or wider business framework, we’ve all seen this model in some form or another.

Fast forward a half century and we can only be amazed by the advances that have been made since the time the model was first developed. For procurement and AP professionals, consider the innovations in the areas of spend analysis (business intelligence), strategic sourcing, contract management, and procure-to-pay.

Consider the process of digitization that has already transpired in the form of mobility and cloud computing. How organizations continue to adjust to the rapidly evolving digital business models with new emerging technologies will be the key to their success in the next decade. But for many it’s still taking the first step to advancing their digital efforts related to anything from establishing spend analytics and sourcing best practices, setting up digital contract repositories, improving PO automation to reduce maverick spend, or promoting paperless invoicing to suppliers.

If we make “digital transformation” the new change agent of today, it is clear that the principals of Leavitt’s model remain largely unchanged. From our perspective, digital transformation requires adhering to rapid change while adhering to core principles that can address a combination of growth, technology, talent, and relationships for meeting the digital demands of the future. As we enter 2020, consider Leavitt’s model as a guide for digital transformation.

(Organizational) Growth – Any digital transformation initiative should point to how it impacts the growth of the company. The question that should always be asked is “why are we here?” and “what impact does our operational role mean for the business?” In this context, digital initiatives for procurement, payables or finance should all engage in activities that can improve operational effectiveness and efficiencies that can make real and measurable bottom line impact for growing the business.

Technology – Many organizations are investing heavily in AI, machine learning, RPA and other emerging technologies, but one question that should be asked is how do emerging technologies fit with existing infrastructures. Another is how do you bring together one end-to-end journey for source-to-pay operationally across procurement and finance. How can you integrate systems with proper workflow and data management so you can better map information. In the end, it’s about having a clean process for the different channels of spend and better controls.

Talent – There is a serious talent problem in procurement. Not enough people know about emerging technologies and their potential where the expectations is that a smaller headcount will be performing higher skilled tasks in the future. In 2020 it is about awareness and being able to recruit and retain the right talent especially from those companies where they are already familiar with these skills that includes more knowledge around data science and process automation. Organizations going through the digital transformation need to strike a balance with core process on the one hand and then having a level of talent in the organizations to be able to see the opportunity and then look to deliver the value and move on to the next step.

Relationships – Before making any digital project decisions, it is essential for procurement, finance and AP to understand the potential impact on internal stakeholder customers, suppliers and enterprise goals. Digital transformation projects must satisfy some prerequisites, including improving customer experiences, operational efficiency, agility and business value contribution. Moreover it also means breaking down the traditional silos between finance and procurement and establishing better visibility for achieving common goals.

As we continue our own transformation into 2020, we are united by our company core values to – Do the Right Thing, Embrace and Drive Change, Be Empowered, and to Be Relentlessly Focused on the Customer. Through the lens of our clients, partners, and our own internal thoughts leaders, we look to a new decade with a sense of wonder and optimism, and look forward to sharing our own stories of digital transformation.

To begin your company’s process of digital transformation, download this free white paper, “Transforming Procurement and Finance to Fuel Business Growth” from CFO.com.

Will McDonald's Learn from the Popeyes Chicken Debacle?

The quick-serve industry caught a case of bird flu this summer and it all started with a tweet. On August 12, Popeyes added a new fried chicken sandwich to its menu. The item inspired little fanfare. That is, until a competitor tried to protect its territory in the chicken sandwich market. When Chick-Fil-A tweeted out an reminder (on August 19th) that it's beloved chicken sandwich was "the original," Popeyes responded and a feud was born. Soon #ChickenSandwichWars was trending and combatants on both sides were making their voices heard.

For a time, Popeyes enjoyed what looked like a decisive victory. The sandwich was a sensation. In addition to wowing scores of patrons, it even earned a write-up in The New Yorker. That august institution's Helen Rosner praised both the classic and spicy varieties. "Both sandwiches," she wrote, "stick the landing on the most important element of a fast-food sandwich: the fusion of its distinct components into an ineffable, irresistible gestalt."

They ought to have thanked their jealous competitor. Apex Marketing Group estimates that the initial battles in the #ChickenSandwichWars earned Popeyes more than $23 million in additional ad exposure.

Chick-Fil-A got the last laugh. Despite more than a year of planning, Popeyes was wildly unprepared for August's surge in demand. By the 22nd, locations around the country were reporting shortages. Long queues of hungry diners soon turned into long queues of disgruntled diners and the social media conversation shifted. For months, Popeyes restaurants everywhere were unable to satisfy cravings. The chain (and its fans) grew increasingly desperate with Popeyes (jokingly) encouraging Twitter followers to make their own sandwiches with chicken fingers and buns from home.

So what happened? Simply put, no one could have anticipated the #ChickenSandwichWars. When demand skyrocketed on August 20th, the historical trends that defined Popeyes purchasing decisions became totally irrelevant. They suffered through the consequences of the "bullwhip effect." With so many hungry diners to serve, the chain was forced to ramp up orders for its chicken, eggs, flour, and other vital ingredients. Their suppliers, in turn, had to place equally large orders further upstream. On the downstream side of things, customers had to contend with longer lines and employees had to contend with larger and angrier crowds than ever before.

While Popeyes has managed to get its sandwich back on the menu, the ordeal provides a cautionary tale to its peers. Researchers are skeptical, however, that McDonald's has taken note. The fast food titan currently plans to add a sandwich of its own to restaurant menus early this year. Investors are salivating, but Wall Street firm Stephens believes this launch date is wishful thinking.

Stephens is bullish on the sandwich's potential, contending that it should generate more traffic than McDonald's beef and make the corporation's franchisees very happy. They also acknowledge that the supply chain is not at all ready. A spokesperson notes,"there are supply chain realities that MCD has to deal with and simply not enough 5-lb.product to begin to supply the MCD system. With improvements to its supply chain, they expect McDonalds to introduce the sandwich by "early summer."

A few questions remain:

  • How will McDonald's sandwich compare to Popeyes' and Chick-Fil-A's offerings? 
  • When will we get a taste? 
  • And - most crucially - can McDonald's possibly meet demand? 

Value Chain Series Part 2: Value Chain Competencies that Matter in Procurement

In last month’s post, I provided some definitions and information around the concept of value chain management and discussed why it is becoming an increasingly important focus in order to compete in today’s business landscape. In this post, I am going to dive deeper into value chain competencies relevant to supply chain management and procurement.

In order for firm’s to provide the utmost value to customers, it is essential they adopt the end-to-end value chain model. This means not just ensuring they are integrated internally from a department-to-department point of view, but also seeking every opportunity to integrate with both their suppliers and customers. Evolving from a single company supply chain focus to an integrated value chain focus involves a couple of shifts in company philosophy:

     a. Product focus to solution focus
     b. Single company focus to multi-company focus
     c. Technology project focus to full scale multi-company digitization

What this effectively does is provide a full circle loop of complete information flows. This means businesses can receive information about changes in customer needs and at the very least respond to them immediately, if not fulfill them.

Below are five value chain competencies that when embraced and applied by supply chain and procurement business units create a tremendous competitive edge. By incorporating these competencies into organizational procurement strategy, firms create value for customers by impacting cost, quality, customer responsiveness and speed to market.

     1. Internal Integration
     2. Customer Integration
     3. Supplier Integration
     4. Integrative and Digital Technologies
     5. Risk Management

Next I am going to discuss how organizations can develop strategies and invest in technologies rooted in the above competencies to create value for their business. First and foremost I am going discuss internal integration which can be defined as a business unit’s capabilities focused on cross-functional structure and best practice procedures to help the company quickly adapt and respond to customer demand and external market changes. Advanced internal integration reduces the costs of doing business by streamlining communication and processes. It also improves customer responsiveness because all business units have access to the same information and are able to operate on the same platforms.

An obvious example is ERP software. While ERP is not a new technology and should be considered a must-have for any business looking to compete, the technology is still improving. More and more ERP softwares are coming complete with advanced agile dashboards. Organizations updating their ERP or integrating additional softwares and SaaS are gaining an edge due to increased visibility and advanced data analytics. These advanced analytics capabilities provide procurement with the ability to better anticipate demand and plan more effectively to reduce business costs which can be passed on to customers or reinvested for value-adds.

Customer integration is a business unit’s capabilities to assure customer demand is understood in order to quickly respond to ever-changing customer needs. It involves adopting technology used by customers in order increase visibility and reduce the complexity of fulfilling their demand. Additionally, customer integration can mean sharing actual resources and employees in order to ease the burden on customers, an example is vendor managed inventory. Similarly, supplier integration involves the sharing of resources and technology with suppliers in order to facilitate better service capabilities. Both customer and supplier integration can be aided by integrative and digital technologies. Integrative and digital technologies bolster a business unit’s capability to facilitate information sharing between value chain partners increasing both visibility and analytics opportunities. Procure-To-Pay software is a prime example of an integrative technology that streamlines the purchasing and payment of goods or services between customers and suppliers by digitizing the processes involved. The digitization reduces complexity and increases visibility for all parties.

Risk Management is a business unit’s capability to manage risk in order to improve and maintain integrated value chain performance. Proper risk management considers risks related to channel partners, competitors and technology when making value chain decisions. Companies should consider long term sustainability when making decisions about suppliers or other value chain partners such as technology providers. While procurement’s primary function might be considered reducing the cost of inputs in order to offer customers more competitively priced goods and services, risk management should be given nearly equal weight. Disruptions to supply chains can quickly eliminate direct material savings and cause drastic swings to gross profit margins. Controlling risk stabilizes these disruptions by making operational continuity a strategic priority. Effective risk management results in higher scores for all four customer value metrics. It reduces cost, improves quality, increases customer responsiveness and speeds time to market for new products.

In my last article I discussed Michael Porter’s value chain model which is widely accepted as the blueprint for strategically aligning an organization cross-functionally in order to deliver valuable products and services to the market. In his model procurement is considered a secondary function, a support activity rather than a primary activity for a business. Back in 1985 this was likely true, procurement had not yet become a strategic value-adding business unit. In today’s world, the rapid evolution of technology has created market conditions where consumer demands and needs are rapidly changing. Technology has also enabled procurement’s elevation to a more strategic practice. I think in today’s competitive landscape, most professionals and organizations would agree procurement should be considered a primary business activity in an organization’s value chain, even if it is included as a component of the overall supply chain. In closing, focusing on the competencies discussed in this article will allow smart organizations to increase the value of their products and services offered to customers, and thus improve their competitive position with in their market.

Procurement News

Where is the supply chain headed for 2020?

Where is the supply chain headed for 2020?

The state of the supply chain has changed a lot in the past several years and it's likely that the 2020s hold just as much upheaval in store as the 2010s did. While the long-term future of the sector may be difficult to predict, in the more immediate future there are some strong indicators of what might come next and what that will mean for companies at every step of the chain.

Perhaps the biggest overarching theme surrounding the industry in the year ahead is the fact that international trade relations still seem a bit fraught - and that more issues could arise as the months stretch on, according to Supply Chain Management Review. While the trade war between the U.S. and China seems to be cooling - as Presidents Donald Trump and Xi Jinping are poised to sign the first phase of new trade deals in the near future - it's not quite over. At the same time, other uncertainties are brewing the the Eurozone.

Conditions around the supply chain are evolving rapidly.Conditions around the supply chain are evolving rapidly.
With the course of Brexit having more or less been decided with the mid-December sweeping victory of the Tory party (and with it, the election of Prime Minister Boris Johnson), it remains to be seen how the U.K.'s withdrawal from the European Union will proceed, the report said. There may be more certainty than there was last year, but the exact course of these decisions - as well as the fallout from them - has yet to be determined.

Broader trends
Apart from the industry implications of trade deals and other global factors, many companies are looking inward for 2020 as well, according to Infor. A big part of the reason for this is businesses the world over largely see their operations as unsustainable, both for themselves and the planet. More companies as a result will likely go to greater lengths to make sure they keep their carbon footprint minimized.

Doing so is, of course, good for the environment, but it's also good for any supply chain firm's bottom line, the report said. After all, if companies can reduce the number of "empty miles" they are paying for as part of the normal processes of doing business by even 20%, that can translate to large savings over the course of one or more years.

Getting it right
With companies increasingly recognizing the opportunities available to them, more are now making big investments in the future, according to a separate report from Supply Chain Management Review. For instance, the industry consulting firm IDC predicts that half of all large manufacturers in the U.S. will have implemented automated data analysis before the year is over, leading them to enjoy a 15% increase in some aspects of productivity.

Certainly, these issues should prompt supply chain executives to take a closer look at their own companies' efforts to keep up with larger trends and plan for a more successful 2020 so that they can also have a better time in 2021 - and beyond.