Tag Archives: amazon

Tail Spend: Are You Counting Your Losses?

Nobody said controlling tail spend was easy. But those “insignificant” purchases soon add up…

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For 35 per cent of procurement teams, tail spend – those small, ‘insignificant’ purchases that soon add up – is one of their top nuisance areas, according to research by Spend Matters.

And it’s no wonder, with a disproportionate amount of your procurement managers’ time being taken up with a small percentage of spend, staying in control of tail spend is challenging at best.

Whether it’s spot buys, commercial credit cards, non-PO invoices, expenses or rogue spending, tail spend often only makes up around 5-10 per cent of indirect spend – but comes with the overhead of managing 80-90 per cent of the total supplier count.

Controlling your tail spend isn’t necessarily easy, but it does represent a significant opportunity to cut costs and improve your processes. The key is finding something that can help.

Cost cutting and process improvement

Reducing costs is a priority in all corners of the business, but it’s right at the top of the agenda for most procurement teams. This year, 78 per cent of CPOs surveyed by Deloitte named cost reduction as their top priority going forward.

Tail spend puts the money you save through careful strategic purchasing at risk, but with research by The Hackett Group indicating that businesses save an average of 7.1% through better management of tail spend, there’s an opportunity to be had here.

To make the most of it, procurement teams should consider joining other departments in their business in digital transformation – looking to technology to help you find smarter, more streamlined and more cost-efficient ways to manage tail spend.

According to Forrester, 38 per cent of procurement managers are already handling over half of their purchases online, with estimates putting that percentage at 55 per cent by 2020. This shift is largely due to convenience: 38 per cent cite the ability to buy using online portals 24/7 as key, while 22 per cent agree that transactions are faster and easier. (There’s also the bonus of lower prices through online procurement channels.)

Digital purchasing also offers procurement managers more insight into what’s being bought, how much is being spent, and where employees are buying from. With this unprecedented level of visibility, your procurement team can take greater control of spending – particularly when it comes to tail spend.

In an independent research study commissioned by Amazon Business, 53 per cent of respondents were already using less formal, flexible procurement methods – and 59 per cent said they expected their companies to use more flexible spending processes in the next two years.

With flexible purchasing channels, your procurement team won’t just save money; they’ll also be able to spend less time micro-managing tail spend, and more time on strategic objectives. However, convenience can’t come at the cost of control. The challenge now is finding the right approach and technology that meets both needs to build these flexible processes.

Combining consumer ease with business buying

Some procurement teams are borrowing from the business-to-consumer space to change their procedures. Using the principle of guided selling, where buyers are presented with a specific selection to purchase from, they’re bringing their employees a ‘guided buying’ experience.

Guided buying connects the procurement team with other employees more directly, so they can understand exactly what kind of resources, equipment and services the organisation needs. The employees then get access to a digital catalog, which is shaped by both personalisation for the employee and the preferences of the business.

The opportunity for cost-saving here is two-fold. The company gets to outline restrictions and preferred sources for purchasing, which helps prevent tail spend from unauthorised sources, and the platform can give them increased visibility – allowing for analytics to monitor their outlay.

The most important thing for procurement teams is to be able to tighten tail spending management without making major, disruptive changes to how people work. That relies on choosing the right platform, that matches the needs and priorities of the business, and can be adopted at scale.

Introducing Amazon Business

With the Amazon Business marketplace, you can give your employees a consumer-like experience while saving your procurement team hours of supplier management time – and get visibility into your tail spend.

It gives your buyers a broad selection (approved by your organisation) that integrates with your existing procurement apps, gives you rich analytics and reporting capabilities, and can offer prices up to 9 per cent lower than average. Amazon Business can help you lower the admin burden of managing tail spend and give your team increased visibility and control.

If you’re serious about getting tighter control on your tail spend, we’d recommend digging deeper. You can learn more about the challenges and – most importantly – the opportunities in Fix the Tail to Propel Procurement: Attacking the Tail Spend Problem in B2B, a collaborative white paper by Spend Matters and Amazon Business.

A Whole (Foods) New World For Amazon

Whole Foods: it’s fresh, it’s organic and it comes with a hefty charge. So where on earth does Amazon fit in? Procurious investigates…

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Last week, to the public’s surprise and the retail world’s horror, Amazon announced that it was buying organic supermarket chain, Whole Foods. For the meagre (in Amazon terms) sum of U.S.$13.7bn the retailer will take ownership of the United States’ first certified organic grocer.

It’s a bold and unexpected move given that Amazon is well known for its cheap price points, which have traditionally  undermined brick and mortar stores. Whole Foods, by contrast, is a reasonably exclusive and fairly expensive, organic retailer.

Jeff Bezos, Amazon founder and CEO said “Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and CEO. Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”

The annoncement has sparked much discussion and speculation ; What are Amazon’s intentions? How will other supermarkets be impacted? Will Amazon reinvent Whole Food’s supply chain?

John Mackey, Whole Foods Market co-founder and CEO believes “This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers.”

What does this deal mean for other retailers?

Whole Foods is most prevalent in the U.S. with 431 supermarkets. Unsurpsingly, rival retailers were dealt a hefty blow following the announcement.. Walmart’s shares fell 4.7 per cent, Target’s fell 5.1 per cent Costco’s fell 7.2 per cent and Kroger’s  by 9.2 per cent.

The impact was even felt in the UK, despite there being only nine stores as Tesco and Sainsbury’s by some 4-5% on Friday.

Raanan Cohenn, CEO of last-mile delivery software provider Bringg asserts that “Amazon has become a leading player in the grocery industry overnight. It’s crunch time for the industry.”

“In one word, it means pressure” he continues. “Profit margins are traditionally razor-thin for grocery chains and Amazon will have a greater ability to squeeze margins throughout the supply chain even further.

Latest news implies that Walmart could enter into a bidding war; it’s certainly true that the biggest competitors will do their utmost to make this deal as tricky as possible for Amazon. Given that Whole Foods stock is trading significanlty more per share than Amazon’s $42 offer, a counter bid is entirely conceivable.

The Supply Chain challenge for Amazon

“The challenge for online grocers is that freshness and variety are hard to combine — if they sell one type of tomato, their stock will turn over fast and be very fresh. If they offer 20 types, the choice is wider but the tomatoes will sit in warehouses longer. The supply chain for groceries is trickier and costlier than for non-perishables”says , writing for the Financial Times.

It might be the cost-effective reigning champ of online efficiency but fresh, organic produce is a whole new ball game, and not one that Amazon has been good at winning in the past.

Jason Busch and Pierre Mitchell, Spend Matters, speculated that “Acquiring Whole Foods is perhaps proof that Amazon is willing to buy its way into managing adjacent supply chains in which it has struggled or not focused on yet. It also could provide a fascinating localized test-bed for Amazon Go bridging the consumer and B2B divide.”

If, bidding war allowing, the offer is accepted, Amazon is in a favourable postion to redfine the retail market. They’ll be able to sell fresh groceries online and give customers the option to collect  their deliveries from Whole Foods stores, which would  become instant fulfillment centres. Perhaps Amazon’s ultimate aim will be making same day delivery for groceries the norm.

And, as ZDNet pointed out, “Whole Foods’ roughly 30 million (typically affluent) customers are also likely to be Amazon Prime customers already, which further strengthens the connective tissue between the two brands.”

What do you think about Amazon’s purchase of Whole Foods? How will retail supply chains be affected? Let us know in the comments below. 

IBM Announces Blockchain Truck-Tracking

  • A partnership has been announced between IBM and AOS, a Colombian provider of logistics solutions, which finds the two firms developing a new blockchain and Internet of Things (IoT) solution for the logistics business
  • IBM Blockchain and IBM Watson will be able to track the provenance and status of trucks and their goods using RFID tags that contain the vehicles’ data
  • The solution integrates with IBM’s Watson IoT system to check in on factors like weather and temperature, which can impact the journey and the estimated delivery time

Read more on Coin Desk 

AI to spot Slavery Site From Satellite Images

  • Online volunteers are helping to track slavery from space. A new crowdsourcing project aims to identify South Asian brick kilns – frequently the site of forced labour – in satellite images
  • Nearly 70 per cent of the estimated 5 million brick kiln workers in South Asia are thought to be working there under force, often to pay off debts
  • So far, over 9000 potential slavery sites have been identified by volunteers taking part in the project. The volunteers are presented with a series of satellite images taken from Google Earth and they have to click on the parts of images that contain brick kilns

Read more on New Scientist

Norway Bans Palm Oil Procurement

  • The Norwegian Parliament has voted to introduce a ban on the procurement of palm oil and palm oil products for use as biofuels
  • Rainforest Coalition Norway, which had been lobbying for the ban, welcomed the move. It said: “Palm oil-based biofuel is a bad choice for the climate and drives rainforest destruction”
  • The organisation believes this is the first time a country has banned all use of palm oil biofuel by public bodies

Read more on Supply Management