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Is Black Friday Still Important for Retailers?

Millions of consumers will be after a Black Friday bargain today. But, as a single day, is it still as important for retailers?

black friday sign

It’s that time of year again. The Thanksgiving turkey is digested, attention turns to Christmas, and Black Friday has arrived. Traditionally an American shopping day, Black Friday has expanded to hundreds of countries around the world.

An estimated £4 billion (nearly $5 billion) will be spent over the next 4 days between Black Friday and Cyber Monday. Of this, around half will be spent today, and an estimated £1.27 billion will be spent online.

However, as consumers change their shopping habits at this time of year, retailers are doing likewise. There are a couple of reasons for this, which we will have a look at now.

In Store vs. Online

The abiding image of Black Friday for most people is massive crowds, stampedes, fights over bargains (and the occasional punch up). The potential deals that stores offer are enough to turn the shoppers against one another.

And for many, this is enough to put them off leaving their house at all. In fact, the number of people heading out to the shops in the US on Black Friday has dropped to below 25 per cent, driven by more Millennials choosing to shop at home.

However, that doesn’t mean that less money is spent. In the USA, experts predict that total holiday spending (the months of November and December) will hit $632 billion. And, for the first time, over half of that money will be spent online.

Retailers are also changing their habits when it comes to opening times today. In previous years, many have started their sales at midnight, in order to maximise the shopping time available for consumers. But many stores are now choosing to revert to normal opening hours (something of a relief for staff, I’m sure!).

Surveys have shown that 59 per cent of shoppers do not agree with stores opening on Thanksgiving. But it’s not just consumer pressure, and benevolence to staff, keeping stores closed. The fall in in-store trading over the Black Friday weekend means that retailers aren’t turning as big a profit as they would like.

Add to the mix increased costs of opening (higher staff wages, security, logistics, and potential bad press), and it shows why retailers are stepping back from early opening.

Black Friday ‘Creep’

Another reason for retailers not seeing the benefits of Black Friday in store is the so-called ‘creep’. Much like adverts for Christmas 2017 started a few weeks ago (I kid you not…), online retailers have started to spread the sales out.

Amazon, largely considered to be the biggest exponent of Black Friday, started their sales in early November. And it plans to run these daily sales until the 22nd of December too. They weren’t the only ones, with Tesco amongst a host of companies starting sales earlier this week.

Some online retailers have done this to spread the logistical load of ensuring everyone gets their purchases in time for the holidays. Amazon are clearly learning their lesson from a few years ago, when it experienced serious bottlenecks in deliveries.

Bad Deals and Brexit

One thing that consumers need to be aware of before splashing the cash is that they might not be getting the best deal. A report from Which found that only half of Black Friday deals are actually cheapest on that day.

Retailers have been accused of inflating their pre-sale price to make a deal seem better. And, in fact, shoppers may have been able to find products cheaper at different times of year. The UK Government’s Pricing Practices Guidelines (PPG) states that any sale “must reflect the most recent price an item has been sold at for 28 consecutive days or more.”

So it’s worth being careful when it comes to your shopping, and not get swept up in the promotions. However, that said, UK shoppers might want to take advantage of the lower prices this year. As has already been seen this year, prices for goods and services look set to rise in 2017 as a result of Brexit and a weak pound.

The majority of rises are likely to happen in January, with Next, electronics retailer AO, Apple, Microsoft, and Dell, all either anticipating rising costs, or putting prices up already. So it might be that British shoppers won’t get the same deals this time next year.

The Last Word

Deals or no deals, I’ll be one of the Millennials shopping online today (after working hours, of course!). However, I wanted to leave the last word on Black Friday to Asda. The retail giant was one of the first UK stores to bring Black Friday deals to this country, thanks to its links to Wal-Mart.

However, following chaotic and violent scenes in 2014, the company shelved its plans last year. And for 2016, they’ve taken a novel approach to announcing a similar strategy for today, and why they’ll aim to have low prices all year round.

If nothing else, the video should make you smile. Happy shopping!

Crowdsourcing is the New Black – Use it to Your Advantage

The revolution in business financing is opening up a new world for small businesses. Here’s how to turn crowdsourcing to your advantage.

crowdsourcing

Crowdsourcing is the new black. Over the past few years, this approach has enabled organisations to not only raise working capital, but also to build brand advocates, as a marketing tool, and a way of raising additional dollars for marketing purposes.

Startups have turned to crowdsourcing as a legitimate form of capital raising for a while. However, now established brands are following their lead.

Major brands like Dodge, Honda, Kimberly-Clark, DC Entertainment, American Express, Proctor & Gamble, Phillips, Microsoft and Coca-Cola have all turned to crowdfunding.

These brands have realised that crowdsourcing is a fairly inexpensive way to quickly reach thousands of potential customers and find out what they really think. It’s a pretty incredible tool when the backer dollars start rolling in.

Coca-Cola & Crowdsourcing

Coca-Cola has undertaken a few prominent crowdfunding projects in a bid to reap the social media and branding benefits. These include projects such as one to provide more clean water resources in rural areas in Mexico.

In another example, Coca-Cola turned to crowdfunding as a way to cracking a troublesome marketing brief. The company was amazed to receive 3,600 responses, and was blown away by the quality of the submissions. It said the film quality was better than it was getting from its agency partners.

The reason crowdsourcing can be so successful for brands is that is allows customers to become part of the plot line. Instead of passively consuming your brand’s marketing material, suddenly, they’re engaged and following your brand’s story.

Giving people the opportunity to experience brands actively in this way creates a connection that stays with them, helping them to evolve into a brand advocate.

Crowdsourcing can also create a call for action and real-time story creation, which is unparalleled. And while inviting customers to participate might be unpredictable, the reward is marketing that feels genuine, memorable and two-sided.

There are a range of crowdfunding platforms to choose from, including Kickstarter, Indiegogo, GoFundMe in Australia, TeeSpring and Patreon, among others.

Harnessing social media for crowdsourcing campaigns can significantly amplify your campaign, too. Start by choosing appropriate social channels, select a memorable hashtag, create a campaign page, and leverage the community with informative posts.

Turn Crowdsourcing to Your Advantage

Here’s four ways to use crowdsourcing for your brand’s marketing:

  • Product validation and feedback: A crowd can validate a new idea, or tell you quite openly that it’s a bad idea. Either way, generating this feedback is a key component in creating something that people want.
  • Grow brand advocates: Crowdfunding can get people talking, and preferably, they’ll be saying good things. It’s a great way to cut through the clutter and tell your story. This can, in turn, create passionate brand advocates.
  • Build stronger exposure: Crowdfunding makes the news. When this exposure is harnessed, it can give projects the final nudge they need to cross into ‘viral’ territory.
  • Be loved by your customers: Utilising a crowdfunding platform as a storytelling tool helps a brand cut through the clutter and connect with existing and new brand advocates by showcasing your innovative side. When harnessed effectively, crowdfunding can enable brands to break down the corporate walls and express their uniqueness and innovative side.

Has your business dabbled in crowdfunding as a marketing tool? Tell us about it below.

How To Solve The Extended Payment Term Problem

Extended payment terms can be a huge burden for buyers and suppliers. Not to mention the negative press. But there is a solution at hand.

extended payment

In response to the financial recession of 2008, many supply chain and procurement departments began pushing their suppliers for extended payment terms as a means to improve cash flow and limit the need to acquire credit, which was in short supply.

While the recession has long since past, the practice is still very much in use today. In fact, major companies such as AB InBev, Kellogg, Diageo, and Mars commonly establish payment terms that extend anywhere from 90 to 120 days. Additionally, a 2016 study revealed that buying teams are planning to extend their payment terms even further.

This push for extended payment terms makes sense for buyers. Extra cash in the coffers can be used to fund R&D, buy back stock, and invest in strategic initiatives. It also never hurts to have more free cash as working capital.

However, while buyers benefit greatly from extended payment arrangements, they can pose a tremendous burden to suppliers – especially small- to medium-sized businesses (SMBs).

How Extended Payment Terms Hurt Suppliers (And Buyers)

Extended payment terms can be detrimental to suppliers for a variety of reasons, including:

1. Curbed Productivity

Many SMB suppliers have limited resources in terms of manpower and production capability. As a result, they can only take on so many projects and contracts at a time before reaching capacity.

When funds are tied up waiting for cash to come in, these companies are precluded from investing in new equipment, replenishing stock or adding to their workforces. This brings the company to a standstill, and could put it out of business altogether.

2. Lack of Financial Flexibility

While large corporations and buying teams have the purchasing power to demand extended payment terms, smaller suppliers do not.

As a result, these suppliers are forced to receive payments late while paying their own suppliers early. This creates a cash flow crunch in working capital that many can’t escape.

In fact, most firms operate on a month-to-month basis with cash reserves built to last only 27 days.  

3. Lower Employee Morale

In addition to the financial consequences of extending payment terms, the practice takes a human toll as well. Going three-to-four months without receiving payments from buyers makes it difficult for businesses to make their own payroll – usually the largest expense for a SMB.

As a result, small suppliers suffer from reduced morale and engagement. This can, in turn, lead to a decline in quality and production delays.

4. Limited Credit Options

With limited cash on hand, the only financial lifeline available to many SMBs is to apply for more credit. However, 50% of small businesses receive no money at all when they apply for credit loans.

SMB Credit
Source: Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia

Extended Payment Terms Can Hurt Buyers, Too

In the end, buyers end up paying the price for extended payment terms as well. That’s because it introduces risk into their supply chains. If a trusted supplier is forced out of business or suffers a decline in productivity, it hurts the procuring organisation.

In addition, suppliers have long memories. Many will compensate for extended payment terms with higher costs, while others include steep late-payment penalties in their contracts.

Lastly, a high quality supplier whose products or services are in-demand supplier may simply choose to work with other companies that offer friendlier payment terms, and forego bidding new opportunities that come with onerous payment terms.

Reverse Factoring May Be The Solution

Reverse factoring allows a buying organisation to leverage its strong credit rating to acquire favourable financing, which is used to pay suppliers in a more timely manner.

Here’s how it works:

  • Supplier submits the invoice to the buyer.
  • Buyer approves the invoice and submits it to a 3rd party financial institution or factor, who bases interest terms on creditworthiness of the buyer.
  • Financial institution pays the supplier at their desired early term of net 30 days, discounting the invoice payment by the agreed-to discount rate.
  • Buyer pays the financial institution the face value of the invoice at their agreed-upon date, say net 90 or net 120 days.

The concept is fairly new, but it is already proving to be a great solution for buyers that want to reap the cash flow benefits of extended payment terms without putting their suppliers in jeopardy.

That’s because it is beneficial to every participant in the process. It allows both buyers and suppliers maintain cash flow while forging positive working relationships in the supply chain. The financial institution also benefits by generating a return on the funds lent to the supplier and reimbursed by the buyer’s payment.

Offering friendlier payment terms is just one way to build stronger relationships with suppliers. Discover more on how to improve your relationships with SMBs in our latest tip sheet.

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.

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.

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.

The Evolution of Procurement Culture

Procurement often struggles with the perception of its value. But could the issue be traced back to the culture expected by its stakeholders?

evolution of culture

What is Procurement’s business value? Is it doing a great job and does the business agree? If the perception of procurement is less than we desire, it is possible to change it?

These are the tough questions we explore within this article. Warning…this article may offend some people! Yet, if we are to make progress, it’s time to be honest.

Procurement’s Perceived Value 

If you ask a procurement person if they are doing a great job, most will agree. They might say they are working to tight deadlines, complying to complex processes with limited resources and information, they do the best they can. Generally, it’s a fair assessment.

However if we ask the business the same question the response can be brutal, “No, they are not.”

The feeling is that procurement is driven by price, that they are reactive, and that procurement never brings new ideas into the business. Frequently procurement are used out of necessity, but their involvement is not desired.

This revelation can be upsetting to many within Procurement, especially when their is a clear desire to be considered as a trusted advisor, pro-active and a business capability that adds value.

If a negative perception of procurement is something you face within your organisation then we have some good news! It isn’t your fault, and it is possible to change it. 

Stakeholders & Customers

“Why is there such a disconnect?”

To help us identify what might be going wrong with the perception of procurement, we need to identify the main business areas involved.

There are four main groups that are important customers and/or stakeholders to procurement:

1. Head of the Business/CEO/CFO

This individual is responsible for budget approval, business strategy and might even decide if there is a procurement department. Their ability to decide Procurement’s future makes them a critical stakeholder for the function.

2. Business leaders/Budget Holders

This group are responsible for bringing requirements to procurement, and procurement needs their business. Losing the support of the business leaders could see a drive to outsource/automate the procurement department.

3. Supply Chain

The suppliers provide the solutions to the business leaders requirements. No suppliers means no business solutions.

4. Head of Procurement/CPO

This individual is responsible for employment, pay rises and promotions within the procurement team. As this person holds the career of the Procurement Practitioner in their hands, they are a key stakeholder. 

Procurement’s Culture Today

If we accept procurement’s culture largely remains focused on price, then we need to know why. Even will all the evolution in procurement, it’s clear that this is still prevalent. Here’s why:

  • The number 1 driver for the current procurement culture is the CEO (or CFO or equivalent)

Traditionally, to this individual procurement is principally a ‘cost centre’. The greatest value procurement offers them is keeping their costs to a minimum.

  • The next driver for procurement is the CPO

The CPO wants to ensure they meet the needs of the CEO/CFO. This is critical in ensuring they retain the support from the senior stakeholders.

Therefore maximising cost reductions are critical, realised through contract savings. This culture is amplified further by attaching procurement salary bonuses for achieving contract savings.

  • The third driver for procurement culture is business leaders

The culture is already firmly established on reducing costs/price to achieve a procurement agenda. The business leaders can struggle to identify any real business value in procurement engagements, resulting in a strained relationship.

  • The final group driving procurement culture is the Supply Chain

The culture of the engagement is based on a drive to reduce supplier margins. With no real focus on collaboration, promoting success, or becoming a customer of choice, it is a one way relationship focused on procurement success. This results in an engagement with little or no trust.

To recap, because the culture is coming down from the CEO/CFO it creates a culture focused on savings, which continues to flow down into the business and the supply chain and can result in the business leaders and the supply chain trying to by-pass procurement.

Culture From the Top

But all is not lost. In the second part of this article, we’ll propose an alternative cultural model that will drive benefit for all four stakeholder groups, plus procurement.

This will also help optimise procurement practitioners’ individual value, an aspect critical for attracting the best talent and talent retention.

“Perceived value can be in response to how you engage, which is a result of your culture, and is influenced by your drivers.”

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

3 Reasons Why Supply Chain Professionals Are Excited About Industry 4.0

The Industry 4.0 revolution is firmly under way. And it’s something for supply chain professionals to be excited about.

industry 4.0

Over 200 years ago, the first industrial revolution was ushered in by the roar of the steam engine. Now, thanks to advances in automation and computerisation, a new revolution is underway – Industry 4.0.

Also known as the fourth manufacturing revolution, Industry 4.0 marks the convergence of physical and digital manufacturing capabilities to create “smart factories.”

These factories empower supply chain professionals and manufacturers to digitally plan and project the entire production lifecycle. This can help to increase efficiency, minimise risks and, ultimately, drive revenues.

In fact, 35 per cent of companies adopting Industry 4.0 technologies expect to generate revenue gains of more than 20 per cent over the next five years

Picking Up Steam

The revolution is already well underway in countries with large manufacturing footprints, such as the United States, Germany and Japan.

However, now it’s starting to pick up steam around the globe. That’s because more companies want to take advantage of the tremendous business opportunity presented by Industry 4.0 adoption.

So what specific Industry 4.0 technologies have the supply chain so excited? Here are the top three:

Predictive Maintenance

Big data is playing a big role in the revolution. Predictive maintenance is one example of how it is being used.

Within smart factories, sensors are installed on every machine. These sensors produce data that can be used to accurately monitor key performance parameters. This knowledge is used to assess the probability of machine failure while allowing stakeholders to prepare accordingly.

The manufacturing personnel in the factory, as well as the supply chain professionals who are relying on them, receive continuous, up-to-date status alerts.

Armed with this information, MRO employees can make more precise repair calculations in order to prevent non-scheduled outages. At the same time, procurement and supply chain professionals can identify potential risks well in advance, allowing them to be more responsive and agile.

Additive Manufacturing

Additive manufacturing is not a new phenomena. For decades, the process was used to prototype new products before they were put in production on factory floors.

Today, however, thanks to the improved capabilities and reduced costs associated with 3D printing, additive manufacturing is being conducted on the factory floor itself.

As a result, manufacturers in smart factories need little to no lead time to fulfil spare part requirements, and design improvements and upgrades can be made on the fly. Supplies that were previously too heavy or too cost prohibitive to ship can be created on-site, reducing costs and logistic headaches for supply chain professionals.

This expansion of additive manufacturing has reduced required inventory levels and provided procurement teams with greater flexibility than ever before.

RFID Tags

Intelligent radio frequency identification (RFID) tag technology helps supply chain professionals track the status and location of each piece of inventory throughout the entire supply chain.

This technology provides procurement teams with the peace of mind that no piece of inventory will go unaccounted for. It also improves efficiency by making it easier to find specific items, no matter where they are located within a warehouse.

Lastly, RFID can prevent products from being counterfeited by verifying the authenticity of goods and products as they move through the supply chain. This helps to combat a growing concern in the industry.

Just as it has in the United States, Germany and Japan, Industry 4.0 will revolutionise the supply chain around the globe. As it does, procurement professionals will be able to understand their operations better than ever before and be empowered to make more strategic, agile decisions.

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.

10 Ideas to Encourage Suppliers to Go the Extra Mile

Are your suppliers willing to go the extra mile for you? What can you offer them to drive the extra effort?

Extra Mile

Buyers rely on suppliers to perform numerous requests from the very beginning of their relationship.

From the first RFx, to the laundry list of requests on tight timelines, suppliers play an integral role in the sourcing process. And having them wanting to help can make a huge difference.

What can supplier enablement do to encourage suppliers to meet their deadlines, and even go the extra mile beyond the bare minimum?

Here are ten potential ‘carrots’ to offer suppliers: 

1) Invite to Assist with eProcurement Pilots

Suppliers welcome getting as much exposure as possible. Particularly if they are a new supplier, or you’re rolling out a new eProcurement system.

You can let suppliers know that if they can meet or even exceed your requirements that you’ll highlight them during testing and User Acceptance Testing (UAT). You can include them in your test scripts, and call them out during demos, amongst other things.

2) Feature on eProcurement System’s Home Page

Some modern eProcurement systems give admins the ability to display whatever you’d like on the homepage using business enabled CMS blocks.

Offering this prime real estate to highlight suppliers who have excelled (e.g. provided an awesome catalogue or offered heavy discounts) would be a huge inspiration for a supplier.

3) Float Sales Items to Top of Search Results

Modern eProcurement systems allow admins to affect search results giving specific items more weight or even float to the top of search results.

Similar to how suppliers promote sales items on their B2C sites, you can offer suppliers to boost items they agree to put on sale for at least a period of time.

4) Invite Onsite for ‘Meet and Greet’

Most suppliers will welcome the opportunity to come in and informally meet with their end customers. Maybe even allow them to setup their trade show booth or a table in the office lobby.

I’ve seen some buyers even create some co-branded marketing material, including booth signs or posters, stating that the supplier’s products were available on the eProcurement platform.

5) Visit Them Onsite

When suppliers have to come in to meet with you in your office, it’s typically a nerve-racking experience for them. They’re probably all dressed up and a little nervous as they enter your, likely relatively lavish, corporate office building.

But offering to come to their office for an informal tour/meet-n-greet would likely be an enjoyable honour for them. 

6) Promote in an Email Blast

How every supplier wishes they had the ability, and their buyer’s blessing, to send even one email to all your employees.

Offer them the chance to promote their offerings in a company-wide email blast and every supplier will jump at the opportunity. 

7) Display an Ad on your Intranet

It’s in a buyer’s best interest to entice more employees to use their eProcurement system to make purchases. The buyer’s intranet is probably a popular place where employees go daily.

You can display an ad on your intranet to let employees know they can procure that supplier’s category via the eProcurement system. For example, “The New iPhone 7 – Now on eBuy!”

8) Offer a Testimonial

Suppliers are very proud of their relationship with their customers. They’re especially proud of being selected to tightly integrate with a customer’s internal eProcurement system after all the effort both have put in. 

When a buyer gives a supplier a testimonial that they can use to grow their business. It’s often a very welcome shot in the arm for the supplier’s marketing efforts.

9) Blessing for a White Paper

A step up from a testimonial would be a buyer’s blessing to allow the supplier to create a white paper on how they’ve helped you.

For example, getting the supplier to tell the story of how they exceeded requirements for the buyers on a new project. 

10) Issue a Press Release

While I’ve never heard of it being done, there is one absolute ultimate carrot (apart from a multi-million dollar contract) which would ensure the extra mile from the supplier.

This would be to give the supplier their blessing to issue a press release to let the world know about the partnership. Ideally the release could also include a quote from the buyer.

Admittedly, this would only make sense if it was a very strategic and unique arrangement, and that a press release would make BOTH companies look good.

Some of these may be out of the question for your organisation. But hopefully they’ll at least give you a sense of what’s often valuable to suppliers, and some ideas on how you can help them to help you.

What are some other examples of ways you’ve been able to encourage suppliers to go the extra mile?

Would You Couchsurf to Make Business Travel Savings?

Splitting travel savings with employees may be the best way to encourage travellers to treat every dollar of company money as their own.

Couchsurfing - Travel Savings

A New-York based consultant, Geoff, has to visit a client in Seattle. He logs onto his organisation’s travel management system to book his flight and hotels.

The app recommends a flight that’s within budget and suits his timeframe. However, Geoff ignores this, scrolls through a list of other options, and selects a flight leaving later for a cheaper price.

Similarly, he chooses not to go with the 4-star hotel recommended by the system. He instead chooses a slightly cheaper hotel that’s still convenient to his destination.

Upon arrival in Seattle, Geoff walks past the cab rank to the bus stop. He’s thinking about where he can get a cheap but healthy meal to avoid ordering room service.

As he makes each travel-related purchase, he’s scanning receipts into his travel app, which subtracts the costs from his total travel budget.

Geoff is behaving like he’s spending his own money rather than his organisation’s travel budget. Why? Because in essence, it is his own money. His company has an arrangement in place where employees are allocated 50 per cent of the savings if they come in under their allocated travel budget.

It’s entirely automated. At the end of his trip, the travel management system takes the difference between the budget and Geoff’s actual costs, splits the savings, and adds half to Geoff’s next pay check.

Sharing travel savings encourages a cost-conscious culture

Why aren’t more organisations sharing travel savings? Possibly, it’s due to a myopic attitude where travel managers are reluctant to part with any savings whatsoever, preferring to allocate every dollar straight back to the bottom line.

However, there’s a much bigger prize at stake. Building a cost-conscious culture and creating that critical mind-shift where employees start treating company money as their own.

Shared travel savings might also fix the multi-billion dollar “open booking” problem. In the US, for example, 50 per cent of hotel bookings and 24 per cent of airline bookings occur outside corporate travel programs. This presents a significant compliance challenge and visibility problem.

Creating a policy wherein shared savings can only be claimed when bookings are made through the approved system would provide a major incentive for employees to comply.

Where can employees save on travel costs?

Here are a few ideas for frugal travel across transport, meals and accommodation:

Flights

Even if your organisation allows you to fly business class, do you really need to? What about flying at a different time of day to get a cheaper fare? A common reason employees go outside approved travel management systems is a belief they can find a better deal themselves.

The TripScanner start-up (acquired last year by Coupa) provides a clever way around this issue. Employees can book travel options via any website they like, so long as they sync their purchases with TripScanner. The software then automatically checks each booking against the company’s travel policy.

Ground transport

Can you take the train or a bus rather than a taxi? How about Uber? There’s always going to be a trade-off between the convenience of being taken directly to your destination and having to walk from the bus stop. However, with the prospect of an extra $25 in your pocket, employees might just choose the bus.

Meals

Consider grabbing a cheap meal rather than paying inflated prices for room service. Keep in mind that “cheap” doesn’t necessarily have to mean “unhealthy”. Eating well and affordably takes planning, as room service is most often ordered when busy travellers run out of time.

Accommodation

This is where your company’s travel policy need to be absolutely clear, because accommodation (and to a lesser extent, transport) involves a safety factor.

Having an approved list of hotels will stop truly frugal employees from trying to save drastically by booking hotels in undesirable parts of town. Or even (in extreme cases) going for an unconventional option such as Couchsurfing.

Setting it up

There are some things to bear in mind when setting up a system such as this.

  • Better planning: Saving money when travelling takes planning, because needlessly expensive flights, taxis and meals are usually chosen due to tight schedules.
  • Get the budget right: Travel managers need to do their research to get the travel budget right for their organisation, as setting it too high will mean losing money unnecessarily. Fortunately, there’s software available to help with this task. A sophisticated travel management system will allocate a unique budget to each trip, rather than a blanket dollar figure for all travel.
  • Make sure your travel policy suits your risk appetite: Travel policies can vary wildly, from tightly-controlled lists of accommodation options, to a free system where employees can do as they like. Again, encouraging frugality may cause some employees to select unsafe options, which is why couchsurfing or ridesharing may need to be excluded from the system.
  • Frugal travelling isn’t for everyone: For some, saving money when travelling might not be a priority. Having a comfortable flight or good night’s sleep in a nice hotel might be much more important than winning back a few hundred dollars extra per month, and that’s fine. Again, it’s important to set the budget as accurately as possible, and be clear in your travel policy about what happens if employees go over budget.

Does your company share travel savings? What are your tips for beating the travel budget?

The Truth? Businesses Still Struggle with Indirect Procurement

The procurement industry is evolving at a rapid rate. But it still has broad issues with indirect procurement and how to determine value for money.

Indirect Procurement

No matter where you are in the world, indirect spend is a notoriously difficult area for CPOs to control. Because of this, it presents huge potential for savings for companies.

Direct Procurement refers to the act of acquiring raw materials and goods for production. Indirect Procurement is the act of purchasing services or supplies required to keep the day-to-day business ticking over.

However, there’s a consistent message out there that procurement, and indirect procurement in particular, is under-appreciated by the broader organisation.

Establish Internal Targets

Celia Jordaan is the founder of Australia’s Ichiban Commercial Solutions, which helps businesses with tendering, risk management and procurement solutions.

Over two decades, Jordaan has worked in a number of different countries, locations and cultures. She has experience across procurement, supply chain, contract management, law and risk.

The procurement function often influences the company budget, but doesn’t always entirely control it, she says. The difficulty with indirect procurement or procurement for internal use, is that it’s difficult to determine value for money.

“Indirect procurement is generally seen as soft services that aren’t adding direct value to the cost of production or core business. However, it’s a service that’s vital in order to be able to effectively make the business run,” Jordaan explained.

The downfall in many cases is a clear budget. Professionals need to establish their own internal targets around value created, and qualify what they do and the value they create.

“There’s no real crystal clear way to measure the cost avoidance elements of indirect procurement. It presents a lot of complexities.

Procurement professionals need to sell their own value, and put their own processes in place that helps them demonstrate the value they can create for an organisation, Jordaan says.

Procurement Outsourcing?

David Rae, editor of Procurement Leaders, wrote in ‘Procurement Outsourcing – Managing Indirect Spend’, that change will come when CPOs get involved and influence buying behaviour across the entire organisations, and in every category.

They must also apply the same rigour to the indirect categories as they do to direct materials, he wrote.

“The research shows that, while there is still much work to be done, CPOs are tackling this area. One way of doing so is to engage an outsourcing partner, who can often bring category expertise, greater buying power and improved compliance to an organisation’s indirect spend categories.

“And, while it continues to struggle to match the likes of HR and finance in terms of uptake, there are signs that procurement outsourcing is really taking off,” he wrote in the report.

Under-Investment in Indirect Procurement

Meanwhile, a research report by Proxima explores what procurement can do to redefine how it’s perceived by the broader organisation.

The report says that a vast majority of C-suite executives feel that indirect procurement is under-invested across the UK, Europe, US and further afield.

This prompted Proxima, in conjunction with NelsonHall, to run a research study to uncover perceptions, attitudes and desired outcomes of indirect procurement. It was hoped this would catalyse the common sense that procurement could and should play a greater role in most businesses.

Responses indicated that indirect procurement in some organisations is perceived to have a role that is tactical and administrative. Some respondents advised that it can create process blocks, and can, on occasion, even be antagonistic to specialist suppliers of the business.

Five Key Challenges

The research found five key challenges for the procurement function, impacting on CPOs’ ability to effectively manage indirect expenditure.

These include, as outlined here in the report:

1. Lack of capacity

The indirect procurement team has to focus on sourcing commonly purchased and high volume goods and services, as well as transaction processing.

2. Lack of political clout

CPOs involved in the research study tended to be quite self-critical. This was particularly prevalent in areas such as their ability to introduce process improvement, and to increase the level of spend under contract.

3. Lack of mandate

The primary responsibility for most indirect procurement categories often lies within the business units. For some categories, such as travel, it may not even be clear as to who actually owns the policy.

4. Lack of awareness and low visibility of indirect procurement

Indirect procurement is often seen as less important than direct procurement in the eyes of senior executives. It is seemingly even less important at the business unit level. Many stakeholders view an indirect procurement professional’s role as the ‘rubber stamper’ at the end of the process.

5. Organisations lack the skills required for effective stakeholder management

A common perception held by CPOs and CFOs is that the indirect procurement function has to find ways of working more effectively alongside the various business units and stakeholders within each business unit.