Why The Future of Logistics is Dynamic – And Huge!

The market value of the logistics industry is on the rise. But in order to maximise this value, organisations need more dynamic strategies.

dynamic warehousing

Logistics has not been immune to the global changes and shake-ups during 2016. However, in spite of this volatility, the importance, and size, of the Logistics industry has continued to grow. In the era of on-demand everything, organisations need to ensure logistics strategies are able to keep up with customer requirements.

As with any other market or industry, the changes being seen bring risk and reward in equal measure. New technology, new entrants into the market, and demand can boost the agile, and bring down the inflexible. As we have seen in the shipping industry, there’s no guarantees to be had from size and longevity if you can’t meet demand.

And with the global Logistics and Transportation Industry expected to reach a market value of $15.5 trillion in the next decade, the rewards for staying on track are obvious.

Growing Global Value

The estimated increasing value was highlighted in a new study from Transparency Market Research, released last week. The current market value of the industry is estimated at $8.1 trillion, with an estimated 54.6 billion tonnes of goods handled in 2015.

From their research TMR expect this value to nearly double in the next 8 years, to $15.5 trillion, with global logistics companies handling over 90 billion tonnes of goods.

What is key to note is that the industry is not dominated by one or more major player. This makes for an attractive proposition for new players to get a slice of the pie. Currently, the big four companies – Deutsche Post DHL, Ceva Logistics, UPS, and FedEx – control less than 15 per cent of the market.

New entrants tend to enter the market with newer technologies, use of data analytics, or, for companies like Deliveroo, solve the problem of, and meet customer demand for, the so-called “last mile” logistics.

Some retailers are even choosing to move their logistics back in house thanks to new strategies available to them (more on that shortly!). There is also increasing collaboration, with larger organisations working more closely with smaller, newer companies, whose service complements their own.

Apart from being a great way of sharing best practice, it also serves as a lesson to other industries, procurement included.

Disruption on the Way

One thought that seems to be pertinent for the logistics industry is, “If you’re not disrupting, then you are being disrupted”. Companies need to be adapting to changing markets, or they face obsolescence.

PwC recently published “Shifting Patterns: The Future of the Logistics Industry“, outlining just this issue. They see four main areas for disruption in logistics: customer expectations; technology; new entrants; redefining collaboration.

The whitepaper covers what a possible future in the Logistics industry will look like. They share interesting trends across each possible future. However, one key takeaway is the Logistics could be in line for an Uber-type disruption in the near future.

Could Dynamic Strategies Be the Key?

It’s getting to that time of year again. In a little over 3 weeks it’s Thanksgiving, with Black Friday and Cyber Monday following hot on its heels. And although you might not want to think about it, Christmas is peeping over the horizon.

All of this isn’t news for the supply chain and logistics organisations (or at least, we would hope not). However, with increasing, yet still uncertain, demand at this time of year, many are looking to different strategies for their warehousing.

Dynamic, on-demand warehousing is proving to be a viable alternative for many organisations, particularly those retailers looking to change their logistics strategies.

Dynamic solutions can be particularly helping for e-commerce, as it allows companies to quickly adapt to changing demand and costs. With the growth of e-commerce, consumer wants are changing. At the top of that list is fast delivery, something that traditional warehousing solutions can hinder.

At times of peak demand, like the holiday season, organisations can increase their capacity and their coverage across a region, without a major capital outlay.

The dynamic warehousing strategy also pays dividends for warehouse owners. They can offer capacity to a number of companies at once, and are less likely to end up with spare, or unused space, which costs them money.

2016 hasn’t been the best year for Logistics and Supply Chain, but with more flexible and dynamic strategies in place, the coming 12 months, and beyond, could see a significantly more rosy picture.

Have you used dynamic warehousing for your business? How does it work from a procurement point of view? Share your story below.

e-Commerce has reminded us about our Christmas shopping. While we do that, you can look at the latest headlines in the procurement world…

Impact of Hanjin Bankruptcy Not as Severe as Feared

  • ISM has released a ‘Report on Business Special Question’, asking its panel of U.S. supply management professionals if they have been impacted by the Hanjin bankruptcy.
  • Results reveal that while Hanjin’s situation has caused some impact in the U.S., disruption was not as wide-spread as expected.
  • 51.9 per cent reported “no impacts”, 29.7 per cent reported “small, but not material” impacts.
  • 13.4 per cent have said they have experienced a “material, but management impact”, while only 0.8 per cent reported a “large material impact”. 4.2 per cent said they were unsure if they have been impacted or not.

Read more at ISM

Paris Climate Agreement Comes into Force

  • The Paris Agreement came into force on Friday 4th November, formally replacing the Kyoto Protocol.
  • The agreement aims to hold the global average temperature increase to “well below” 2 degrees Celsius above pre-industrial levels.
  • According to Sydney barrister Noel Hutley it is “conceivable that directors who fail to consider climate change risks now could be found liable for breaching their duty of care and diligence in the future.”
  • As of the 3rd of November 2016, 97 of the 193 parties who signed in Paris have ratified the agreement.

Read more at the Australian Financial Review

Philippines Government Looking for Alternative Firearms Supplier

  • The Philippines Government is looking for alternative suppliers of firearms after the U.S. blocked the sale of 26,000 weapons.
  • The U.S. State Department halted the sale due to concerns about human rights violations carried out as part of Duterte’s “war on drugs”, which has seen more than 2,300 people killed by police and vigilantes.
  • Ironically, Philippine Government procurement laws disqualify local gun makers from selling weapons at this scale domestically.
  • However, both Russia and China have offered to sell arms to the Philippines in the US’ stead.

Read more at ABC

IBM Trials Blockchain for Dispute Resolution

  • IBM has announced that it will be using blockchain technology to help resolve supply chain disputes.
  • A number of companies in finance are looking at permissioned ledgers connecting companies that know and (within limits) trust each other.
  • The blockchain could allow companies to transact, resolve disputes and settle more efficiently than current practices.
  • During IBM’s testing of the concept, it reduced resolution time, and markedly improved customer satisfaction.

Read more at Forbes

Procurement Innovation Personas Revealed: Which Are You?

Are you an ‘innovation visionary’? Or one of the other innovation ‘personas’ in procurement? Well now you can find out!

procurement innovation personas

By Daniel Ball, Director, Wax Digital.

Recent research Wax Digital has conducted has revealed that 80 per cent of procurement professionals are seeking to challenge the status quo.

However, for many their use of innovation is evolving. Fewer than one in five are seen as ‘innovation visionaries’, and many others are taking different paths.

The research shows that procurement professionals value innovation, with most working towards becoming more innovative in their role in a bid to drive the business.

Procurement Innovation Personas

However, what it also shows is that there are four distinct ‘personas’ that define how procurement professionals are driven by innovation and change.

The four different personas defining procurement innovation are:

  • High-level Visionaries

18 per cent are committed to the use of technology and using data insights to influence business innovation.

Very much about the bigger picture, they use their procurement expertise to influence top level innovation and growth, rather than being personally and practically hands on in driving that change.

  • Enlightened Activists

At 36 per cent, the most common of the ‘personas’ and the most likely to be directly driving innovation.

This group is successfully driving change and delivering business value through high technology adoption. They are focused on solving real business issues rather than departmental processes. They don’t stand still and are always on the lookout for what’s next.

  • Early Strategists

30 per cent are still sowing the early seeds of procurement innovation but realise that they have many opportunities ahead of them. Innovation is a priority, but they have some way to go before they fully embrace it.

  • Pragmatic Professionals

This final 20 per cent are less innovation focused, but still open to using it practically, to improve procurement processes. Their primary focus is on savings to the bottom line and following clear business mandates.

Seeking Value in Innovation

It’s really positive that these findings show almost all procurement professionals seeing value in innovation and involvement in it. Whether this is through changing the way they do things, or, as is increasingly the case, influencing how the business as a whole should adapt too.

While early innovators tend to be dealing with more fundamental changes, such as implementing technology for the first time, they have the biggest ambitions for innovation in the near future.

At the more experienced end of the spectrum we see a mix of procurement working hands on to drive business innovation, and senior procurement advisors consulting on the business big questions around future change.

What’s interesting is that these findings ring true with what we see working with procurement teams on a day-to-day basis. The function is shedding its stuffy and administrative reputation. It is investing in technology that integrates the whole sourcing and purchasing process, delivering valuable insight, and enabling them to be bolder in showing the business what it’s capable of.

Procurement’s path to innovation is not perfect however. There are tell-tale signs that its innovativeness could be hampered and restricted by its inherent aversion to risk.

To become real innovators, procurement professionals must foster the right business relationships, nurture the correct set of new skills and seek to break ground in their approach to technology.

If you’d like to find out which persona you are and how you can best apply innovation in your role we have created a simple quiz – What type of procurement innovator are you?

The personas are based on research conducted by MORAR Consulting with 100 senior UK procurement executives commissioned by Wax Digital.

Big Ideas Summit 2016: Big Idea #21 – Creating Global Practices

Social media has opened up a global audience to procurement. Now the profession needs to leverage this to expand its role further.

At the Big Ideas Summit 2016, we challenged our thought leaders to share their Big Ideas for the future of procurement.

From ideas that have the potential to change the very nature of the procurement profession, to ones that got the assembled minds thinking about the profession’s impact outside of the organisation, the response we received was amazing.

Global Presence, Global Strategy

Siddharth Sharma, Strategic Sourcing Manager (SCM) at KPMG, believes that social media has given procurement the power to share ideas, thoughts and best practice. However, he also believes that this needs to be taken to the next level, to create global leaders and strategy.

Siddharth talks about the role of Governance and technology in procurement, and how all three of these aspects can be leveraged together, in order to advance the profession on a global scale.

Catch up with all the delegates’ Big Ideas from the 2016 Summit at the Procurious Learning Hub.

Want to find out more about Big Ideas 2016? And maybe what we have planned for 2017? You can visit our dedicated website!

If you like this (and you haven’t done so already) join Procurious for free today. Get connected with over 17,500 like-minded procurement professionals from across the world.

Are You Sitting Comfortably? Then I’ll Begin…

Treat your next interview like you’re telling a story. Make it engaging. Make it clear. But most of all, make it memorable.

tell a career story

Once upon a time in an office block not too far away, our hero/heroine walked into the most exciting and biggest interview of their career…

For me, a successful interview is like reading an enjoyable story. Stories “create “sticky” memories by attaching emotions to things that happen. That means leaders who can create and share good stories have a powerful advantage over others”(1).

I consistently advise people that I have represented to have their own story and message when attending an interview. An engaging and memorable story resonates with the reader; it holds our attention, keeps the pages turning and becomes memorable in the mind of the reader.

Here are a few points to think about.

The beginning of the story…AKA first impressions.

A great story has a strong start. So if you get an opening question like, “So, tell me about yourself?” or, “So, why are you interested in this role/company”, then start well. Through your opening 2-5 minutes, generate interest and attention in the mind of your ‘reader’.

Use language that feels right for your career story. I think it never hurts to describe things simply but effectively. Try to use words that add zest to your experience and motivations. Just try not to over complicate the ‘plot’.

Don’t lose your reader, keep those pages turning.

What is your message in your story?

Understand what the challenges of the role are, and what are the current and future demands on the organisation. Your recruiter and your own research will help you understand this.

Settle on your ultimate message, then you can figure out the best way to illustrate it at interview. Use your career story to invoke a clear connection between what value and experience you bring and how you can harness that experience for your new prospective Employer. Make the Interviewer want to know the story behind your career. Characterise yourself positively.

Be true to your IQ and that of your audience.

It would be foolish to underestimate your audience. Your interviewer is looking to hear information on your career experience that resonates with them.

They will want to understand you as a character and what you offer and stand for, so never dumb down your message or yourself. Make your story relevant and credible.

Maintain pace, select an appropriate momentum

I’ve heard on too many occasions from hiring managers that an Interviewee started amazingly well, then petered out after 20 minutes. 10 times out of 10, the hiring manager is terribly disappointed – ”Gee, they started so well, we thought we had found our perfect candidate!”.

Like any strong story, start well, maintain the plot, maintain clarity and consistency through each chapter (or job).

Don’t lose the reader, keep those pages turning.

To do this, you must be well prepared. You must have planned your storyline, organised and detailed all sub-plots, and all the characters in your career history. It has to remain relevant to your ultimate message.

A strong ending

Many an interview can lose its way with a fluffy and overly elaborate ending. Be concise and finish strongly. Be positive, perhaps even bold. Don’t fade out with a whimper.

Ask yourself, how many times have you commented on poor or lacklustre ending to a book that you have read. I bet you can remember how that ending made your feel years after reading it. I’ll even bet you never read, or recommended, that story to anyone again!

  1. Extract from the Harvard Business Review – ‘How To Tell A Great Story‘.

The Source is a specialist Procurement mid to senior and executive recruitment and search firm with national reach. We provide tailored contract and permanent recruitment solutions to leading organisations in the Australian market.

2016 – The Year of Procurement Transformation

Transformation – the word on procurement’s lips. But when will real strategic change be realised for the profession?

transformation

If you were to pick one word to describe 2016, you could probably settle on volatile. There has been major change afoot in global markets and politics, which has lead to unprecedented volatility and upheaval.

In the past few weeks, we have been talking to some of our Procurement partners about the topic of change and transformation within their organisations, and more broadly in the market for our ‘Autumn Market Insights‘.

It prompted us to think about what has actually changed? Clearly the spectrum of change is quite varied. However, a common theme coming out of these discussions was ultimately that Procurement was, is, and always will be, about getting cost out of the bottom line of the business.

Transformation on the Procurement Agenda

How aggressively this is approached will obviously vary from business to business depending on its agenda. But surely this is why Procurement is critical to any business?

What this has allowed over time is for Procurement to have a seat at the “top table”, rather than being part of a broader function that reports into Finance.

Increasingly we are seeing businesses turning to a more category aligned approach to Procurement, bringing in experts in their field to drive category strategies forward and having the gravitas to collaborate with stakeholder groups.

However, as of one of the CPO’s we spoke to pointed out there can be risks to this approach. There can be a risk that a Procurement team member becomes so immersed within their stakeholder group that they “go native”, and move away from the Procurement agenda.

And the Buzz Word Is…?

If the buzz word for Procurement in 2015 was “strategic”, we would say 2016 is all about Procurement transformation. We are working with four large and well respected organisations at the moment in the South, supporting their transformations.

But what does Transformation truly mean? Does this simply mean a change in process or ways of working or is it something much larger? We have to consider transformation as fundamental change across the business – the processes behind procurement, the remit it covers, and the tools used. This is true transformation.

Clearly 2016 is very much about driving this Procurement transformation agenda. These are exciting times for the profession. And, as we approach the end of 2016, it can only add to Procurement being at the forefront of an organisation’s DNA.

Procurement Heads is all about getting to know great Procurement people and recruiting Senior Procurement professionals.

Procurement Heads understands the value of working in partnership, both in helping people develop their careers and in supporting organisations to build world-class teams.

3 Ways the IoT Can Benefit the Supply Chain

We’ve heard about the IoT disrupting our personal and home lives. But where will these technologies really stand up in the supply chain?

iot in supply chain

We’ve come to know the Internet of Things as a technological phenomenon that is revolutionising many ways of life. The idea is that devices and computer systems can communicate and work with each other, and make things easier. And we’re starting to see applications in all manner of places.

The IoT is making exercising more intuitive, making homes more secure, and making offices and hospitals more efficient. But these benefits are only scratching the surface. There are also many IoT benefits that are less visible to the general public. One that is becoming fairly interesting is the effect on business supply chains.

This may not be the sexiest application of the IoT, but it’s one with significant potential to change the nature of big retail companies and even lower costs for consumers. Here’s how it’s happening.

IoT In Production Plants

IoT sensors are allowing manufacturers to collect key data from various physical spaces within production plants and manufacturing facilities.

Sensors can be used to monitor machine temperatures and send automatic alerts to problems by way of changing lighting. They are also able to monitor the use of safety equipment (and the condition of that equipment) automatically.

Additionally, factory conditions such as temperature and humidity can be tracked and controlled. Individual pieces of inventory can be tagged the moment they’re created, so as to be kept track of in the future. Other functions more typical of ordinary office environments can also come into play, like security and communication measures.

It’s easy to see how basic IoT sensors can help to automate some of the trickier aspects of production that kick off the supply chain process.

IoT On The Road

Perhaps the most fascinating impact of the IoT on supply chains is occurring on the road, in shipping vehicles. Tracking sensors on individual pieces and crates of inventory help companies to “watch” those materials until they arrive at retail locations or other points of sale.

However, there are also IoT measures being put in place to keep fleet vehicles operating safely and on schedule.

By outfitting fleet vehicles with high-end GPS and WiFi, companies can provide managers with real-time sharing of vehicle diagnostics and more important data. These devices can keep track of vehicle performance, driver activity, and routing information, effectively automating the management and scheduling process that was once a headache for everyone involved.

Vehicles can be repaired precisely when needed, and be directed on the most efficient routes. Plus drivers can be kept on reasonable schedules, and held accountable for their own tendencies on the road.

IoT In Stores

Finally, once the product has been shipped to retail locations, there are also IoT-related technologies in place to monitor that selection for the sake of restocking inventory when necessary.

The IoT has the potential to drastically alter numerous aspects of the retail experience. However, when it comes to the supply chain, “smart shelves” are making the biggest difference.

These are shelves that can recognise when inventory is getting low and send automatic alerts to store managers, or even directly to production facilities, communicating orders and keeping the store in supply.

That about covers an overview of how the IoT is changing the supply chain in retail businesses. On the business end of things there’s no telling how much these changes can cut costs and improve the speed and accuracy of production.

And for consumers, those same benefits should ultimately translate to fair prices and consistently stocked store shelves. All in all, it could be one of the more impactful mainstream IoT developments.

Blaine Kelton is a programmer and freelance writer currently living in Beverly Hills. From technological advancements to new albums by favourite artists, he’s eager to just write and get his work out there.

Have Commodity Prices Finally Bottomed Out?

Rising commodity prices have the experts talking about a bull market. But what do buyers need to keep an eye on in the coming 12 months?

commodity prices

You can find and download the ‘MetalMiner’s Annual Metals Outlook Report – 2017‘ here.

MetalMiner has called it – commodity prices in the U.S. have finally bottomed after five years of a bear market. So far, we’re witnessing an uptrend, but the publication’s founder and executive editor Lisa Reisman says industrial metal buyers should continue to take a cautious approach.

“Although markets remain bullish,” she says, “rising interest rates would likely lift the U.S. dollar and depress commodity prices. In addition, Chinese demand remains tepid and a slow-down in China would also lead to lower commodity prices.”

Big 3 Commodity Price Influencers

MetalMiner’s Annual Metals Outlook Report is essential reading for metal buyers. The report speaks authoritatively about the state of the commodities market, the industrial metals market and key price drivers before diving into a detailed analysis of aluminium, copper, nickel, lead, zinc, tin, HRC, CRC HDG and plate price movements.

The big three price-influencing factors that commodity buyers must continue to keep an eye on are, as you would expect:

  1. Metals production;
  2. Demand from China; and
  3. The U.S. Dollar.

According to MetalMiner’s analysis, after commodity prices fell sharply in 2014 and 2015, producers responded by shutting down lines and curtailing capacity. These actions have helped markets maintain better supply/demand balance this year.

December 2015 saw China unleash a renewed government stimulus in the form of credit expansion and infrastructure building, which has – for now – improved demand, particularly for industrial metals.

Finally, a weakening U.S. dollar this year has had a bullish effect on commodities. Between them, these three factors have lifted metal prices across the board, with some rising more aggressively than others.

Trends in Metals

According to Reisman, the price movement in zinc and nickel took many analysts by surprise in 2016.

“We have often said that metals move in trends. In other words, if the entire industrial metal sector languished in bear mode, it might prove difficult for, say, one metal to make substantial price gains. In 2016, tin along with steel led the price rally back in March and April, respectively.

“And though we knew steel prices had support from the import blocks due to anti-dumping trade cases, we were surprised at how quickly some of the other base metals supported the bullish trend – particularly zinc, followed by nickel.”

Bull or Bear – Have a Plan

To cut to the heart of the matter, Procurious asked Reisman which metals she would recommend buying organisations keep a close watch on as we move into 2017.

“From a rising price perspective, the more bullish metals – tin, nickel, lead and zinc – deserve a close watch. In addition, many buying organisations purchase steel on longer-term forward buys.

“We would wait patiently before committing large volumes, to see when steel prices find a bottom (steel prices have been sliding since early August) and then make purchasing decisions once we see where prices will go.”

There are plenty other sage pieces of advice to be found in the report. One such nugget is that while forecasting the future of commodity prices is an impossible task for purchasing organisations, it’s not as important as knowing what to do when prices move.

Have a plan in place to hedge or buy forward in a bull market, while ensuring you stay as informed as possible.

MetalMiner is North America’s largest metals information site, providing global perspectives on the issues, trends and trade policies that impact organisations that source and trade metals. MetalMiner provides clients with custom advisory related to industrial metal prices, forecasts and benchmarks.

Download the ‘Annual Metals Outlook Report for 2017′ here.

The Business of Procurement’s Cultural Evolution

The business could benefit from seeing procurement’s value in a new light. The challenge is getting people to accept the change.

time for business change

In my previous article, I discussed the struggles procurement faces with the perception of its value. One of procurement’s key issues is that, in most cases, the cultural focus is on cost savings.

This driver is linked to the four key stakeholder groups that procurement must answer to – the CEO; business leaders; the supply chain; and the CPO.

Because culture is handed down from the CEO, the culture of savings flows down through the business and the supply chain. This can lead to business leaders and the supply chain attempting to bypass procurement. This is where the perception of value of procurement is critical.

However, all is not lost! With the stakeholder requirements in mind, we can propose an alternative cultural model that will drive benefit for all four groups, plus procurement itself.

Procurement’s Future Culture

The key change in the future culture, from the culture we have now, is that it turns the key drivers on their heads.

  • In the new structure the number one driver for procurement is the supply chain.

Procurement focuses on collaboration, innovation and becoming a customer of choiceThe relationship is built upon mutual benefit and trust. It involves procurement becoming a business partner and promoting the suppliers capabilities and successes.

  • The number two driver is the business leaders.

Procurement brings new ideas and opportunities into the business from the supply chain, resulting in procurement being recognised as a trusted advisor to the business. The business supports procurement’s focus on mutual success, collaboration and becoming a Customer of Choice.

  • The third driver is the CPO

The business leaders complement the CPO on the great value their team brings into other business areas. The business leaders desire procurement’s involvement in their areas of business and identify them as trusted advisors.

  • The final driver is the CEO

The CEO has heard about the added value procurement delivers into the business and the success it is achieving. The CEO’s main focus for procurement is to retain the value they are bringing into the business from the supply chain.

The Procurement department is still a cost centre, but cost takes second priority to the value being generated for the business.

By re-aligning priorities, we have created a culture that meets the needs, and addresses, all four groups. The new culture also takes procurement away from the perception of being price focused, to becoming a value add for its stakeholders and customers.

It is what, for many, has become the nirvana of what they desire procurement to become.

Where’s the Evidence?

The next question you may have is, how do we know this is the right direction?

Some of you may already know of Johanne Rossi who won CPO of the year 2016. In an article posted on Procurious website in June, Johanne talks about what she did to make her Procurement department a major success within the business.

Here are a few extracts from the article for you to think about:

  • “re-structuring…teams in new ways to better partner with stakeholders and supply partners” – we are seeing the first evidence of partnering with the business
  • “A procurement innovation manager has been hired to achieve benefits…such as finding new, mutual value with supply partners through innovation and efficiencies.” – the key word is mutual
  • “Building internal and external relationships, and developing stronger business and commercial skills.” – a focus on developing procurement’s commercial skills
  • “The entire focus for us is to become the customer of choice for our suppliers” – this is the killer quote. It underpins a model of building trust, collaboration and promoting joint success.

Johanne’s full article on Procurious can be found here.

Re-aligning Attitudes to Change

We have outlined a culture where many procurement individuals find themselves trapped today and offered an explanation why it occurs. We have gone on to provide an alternative model for driving culture and value, one that could bring significant benefits to both procurement and the organisation.

To undertake this re-alignment, it may require attitudes to change and potentially re-building supplier relationships. For some people this may be a step too far.

An alternative path is for procurement to remain as it is, but then don’t be surprised if your department becomes fully automated and you’re out of a job. You were warned!

To undertake this journey requires a re-assessment of procurement principles and drivers, with a greater focus on the desired outcomes from the engagement with all stakeholders.

Procurement has a magnificent opportunity to become a critical business function for an organisations success within 21st century markets. The question is, do you want to be a part of it?

“It is never too late to change. The issue is deciding if you want to.”

POD Procurement is a consultancy and advisory for Procurement Transformation. For more information, and to read more about the POD Model, visit our website.

Stop Ignoring Twitter As A Supply Chain Tool

Using social media as a supply chain tool? Don’t dismiss Twitter – it can add real value for your organisation.

twitter supply chain

Many procurement teams and companies have realised the crucial role that social media plays in their marketing efforts. However, while Facebook and LinkedIn are often used effectively, Twitter is frequently relegated to an afterthought – and it shouldn’t be.

From brand awareness to customer engagement and trend monitoring, Twitter provides many opportunities for supply chain organisations to stand out from the crowd.

In addition, the microblogging platform can be an asset that extends beyond your marketing efforts and shapes your overall business strategy.

Below are just a few ways Twitter can be a game changer for your company:

Use Hashtags To Showcase Thought Leadership And Discover New Supply Chain Trends

Twitter’s hashtags are a great way to get a pulse on the supply chain industry. In fact, there are 228 tweets per hour that include the hashtag #supplychain. Some of the other most popular supply chain hashtags include #Procurement, #SCM, and #Logistics.

Use these hashtags in your posts to showcase thought leadership and uncover potential business development opportunities. You can also follow these hashtags – and others – to uncover new trends, technologies and best practices that you can use to implement in your organisation.

Tools like Hashtagify make it easy to find hashtags relevant to your company and industry.

Recruit The Right Talent

Recruiting and retaining top supply chain talent is becoming more competitive, so companies need to find new ways to recruit the best in the industry.

Showcasing your company’s corporate culture through Twitter can entice the right supply chain talent to apply for job openings at your organisation.  

Not only can Twitter help find the right talent, it can also help your organisation research and vet candidates. Your organisation will understand the candidate’s perspective on the supply chain industry, as well as get a better sense of whether or not the candidate would be a good fit in your organisation.

Discover Potential Demands And Risks in Real Time

Twitter acts like a real-time news ticker, which can help supply chain professionals prepare for unexpected demands and risk. Twitter is able to add rich, real-time insight to operational data that can help your organisation make timely and better-informed decisions.

According to IBM, Twitter is a valuable indicator of demand for certain sectors of manufacturing. For example, if a major influencer discusses one of your products on Twitter, the awareness of your brand may skyrocket, causing a large demand for your company’s product without any warning.

By monitoring your products and services on Twitter, you’ll be able to learn about the demand as soon as you can. Social listening on Twitter can also help your organisation prepare for low-probability, high-impact risks such as natural disasters that could disrupt your supply chain.

Showcasing your knowledge, connecting with top talent and keeping your finger on the pulse of the supply chain are powerful ways to gain a competitive advantage over the competition, and Twitter makes it simple. Be sure to integrate it into your social media strategy.

Ed Edwards is Audience Outreach Manager at THOMASNET.com. He leverages his extensive experiences in engineering, manufacturing and procurement, to educate procurement and engineering professionals on how to streamline and improve their work.

Ed provides customised training to organisations’ engineering and sourcing teams and helps buyers with their challenges and finds them new opportunities.

Unpicking The Kraljic Matrix for Procurement

In 1983, the world was introduced to The Kraljic Matrix. But is it still as relevant to procurement today?

kraljic matrix

September 1983: Peter Kraljic publishes an article that will deeply change both the working methodology and concept of many Procurement departments.

The article, published in the Harvard Business Review was titled “Purchasing must become Supply Management”. It introduced a concept that has been a key tool for procurement ever since: The Kraljic Matrix.

In this article, Kraljic advocated and argued for the need for profound transformation of the Purchasing Department into a much more strategic role. He included several examples of large organisations that had already done so, and achieved excellent results.

In order to support the required change to a more strategic role, Kraljic introduced a decision matrix. In this article, we will explain how the matrix works, and how organisations can apply it in their procurement department.

Defining The Kraljic Matrix

The Kraljic Matrix classifies the sourcing scope (also known as acquisition perimeter) from a company according to two factors.

1. Financial Impact

Measures the impact on both the manufacturing costs of the product and its impact on the profit margin.

Look at the example of manufacturing a Lego brick. Plastic would have a high financial impact, both because it accounts for most of the product cost, and because the current volatility of oil (the price of which impacts directly on plastic cost) greatly affects the profit margin.

2. Complexity of Supply

Sorts the market complexity to achieve a stable and uninterrupted supply. In this case, we must consider whether there are monopolies, logistic issues, volatility, or impact of technological changes.

An example of highly complex supply would be the chipset manufacturer for mobile phones Qualcomm. The company took over Intel and Nvidia, giving them a monopoly on the market, and the ability to refuse to supply certain organisations.

Whereas some organisations, like Samsung, chose to manufacture their own chipsets. However, not all companies can do the same.

The Kraljic Matrix

By combining both factors, we produce a chart with four perfectly differentiated groups:

  • Leverage Items

Standard commodities with an abundant source of suppliers. They are usually highly standardised, and easily available, products. Supply risk is low, though there is a high impact on costs and benefits. For example, plastic or raw material for Lego bricks.

  • Strategic Items

These are critical products for a company, and are the key focus for the Procurement team. There is high risk against supply, and a high impact on cost. For example, the Qualcomm chipsets for mobile phones.

  • Non-Critical Items

Those products that have a low impact on costs, and the supply of these is low in complexity. A good example would be, for example, standard screws in a computer factory.

  • Bottleneck Items

These are products with limited source of supply. Their supply risk is high, but do not have a major financial impact. For example, an integral part of technology hardware, the power pack for a laptop.

Analysis and Strategy

Once you have classified the products, you can define the strategies to be applied on each group in order to optimise supply. While each item will likely have it’s own specific strategy, the categorisation in The Kraljic Matrix points to a common direction and goal for each, and shows common pros and cons for each group.

kraljic-categories
Adapted from ‘Purchasing Must Become Supply Management’ – Peter Kraljic, Harvard Business Review, 1983
  • Leverage Items

We are in a so-called “buyer’s market”. Because of this, we need to negotiate to achieve the best supply conditions from a dominant position. Procurement can do this through the use of tenders, reverse auctions, setting specific target prices, or framework agreements.

  • Strategic Items

In this case, the need to mitigate risk is mutual between the supplier and the buyer. The goal here is to ensure long-term availability. Therefore, procurement needs to consider suppliers as an equal and look for a “win-win” negotiation that benefits both parties.

In these cases supplier development strategies, partnerships, and supplier innovation are recommended.

  • Non-Critical Items

There are products with low economic impact and low complexity of supply. This makes them usually the lowest priority in a sourcing strategy.

Habitually supply agreements are negotiated based on high volumes, or Kanban type solutions are implemented. A good example is the screws in the computer factory described above. These would be bought in bulk, but have a variety of suppliers available in the market.

  • Bottleneck Items

These are the opposite to Leveraged Items – we are in a “Supplier’s Market.”

In this case two parallel strategies must be followed. The first is to secure supply through framework agreements, providing for penalties for the supplier due to lack of supply while maintaining good relationships with existing suppliers.

The second, which should be done at the same time, is for procurement to work with R&D or Engineering departments to establish alternative products that can be used. This enables the organisation to reduce supply risk, turning bottleneck items back to non-critical items.

Some Advice to Heed

Although the information provided by The Kraljic Matrix may seem very generalised, it’s purpose is to help set up a basis of supply strategy.

By classifying sourcing activities using the Matrix, organisations can get a clearer picture of its available resources, priorities for negotiations, and objectives it wants to achieve.

The article wouldn’t be complete without some advice. The Kraljic Matrix is a dynamic tool – it changes, so it needs to be reviewed frequently. Markets have become more dynamic, and the supply situation can change significantly in short time periods.

Being able to adapt to these changes is a critical success factor for Procurement. Therefore the tools used to develop strategies must also be dynamic and flexible, which is why the Kraljic Matrix can provide great value for organisations.