Category Archives: Supply Chain

Alarmingly, There Are 419 Of These Threats Per Minute. Are Your Suppliers Protected?

Cyber crime is increasing and it could seriously impact your suppliers. Here’s how to protect yourself.

Congratulations. You’re the one millionth visitor to this site and you’ve won the jackpot! Click here to collect your prize. *Cue computer meltdown.” 

When it comes to cyber crime, we have all seen the badly-spelled emails or pop-ups, and we all think we know better. But did you know that cybercrime is becoming more sophisticated than ever, and that this year, there was a mind-boggling 419 threats recorded per minute?

For those of us who work in large organisations, fortunately we are usually well-protected (although not entirely, as the latest Russian attack on US government agencies has demonstrated. It’s always important to take precautions). Our suppliers, though, may not be able to afford the same protections, and this can have dire consequences. 

Here’s exactly why cybersecurity is so important for your suppliers, and how they can protect themselves. 

What is cyber crime? 

Cybercrime is defined as any type of criminal activity that is undertaken by computers or via the internet. It can include, but is not limited to, illegally accessing customer data or sensitive information, or stealing or otherwise obtaining funds. 

Cybercrime is a huge threat to businesses and is extremely common. Each year, cyber criminals pocket almost $1.2 trillion dollars, and benefit from (or sometimes, hold to ransom) individuals based on the acquisition of information they shouldn’t be privy to. 

Since Robert Morris created the first computer virus in 1989, there have been millions of cyber attacks on businesses that have been incredibly harmful. One such attack was the ransomware virus called WannaCry, which infected 200,000 devices in almost 150 countries. The virus infected PCs, and then uploaded a digital ransom letter. Companies such as Renault, Nissan and FedEx were impacted, as was the NHS, which had over 19,000 appointments cancelled, costing them £92 million.

How your suppliers can protect themselves

Before signing a contract, procurement teams need to do their due diligence to ensure that a supplier is taking all precautions against cyber crime, including conducting a thorough supplier risk impact assessment. Beyond that, though, precautions your supplier should be taking include: 

  1. Understanding emerging types of attacks and current trends

Cybercrime is now far more sophisticated than downloading a file from an email with poor spelling. In order for your supplier to protect themselves, they should understand current types of cybercrime, which may include hacking, phishing, social engineering (when hackers socialise with an individual to build trust), identity theft and keylogging (where software tracks your keystrokes and can even take screenshots). 

  1. Developing a security policy 

Every company, regardless of their size, needs to have a cybersecurity policy that all employees are aware of. This policy should cover social media, cloud computing and IoT, as well as the use of company IT equipment and information on how to treat sensitive data.

  1. Keeping hardware, software and security up-to-date

With hundreds of new threats every minute, cybersecurity software is only as good as its last update. For this reason, ensure your supplier always has the most up-to-date protection. 

  1. Training employees 

It only takes one download of a virus to cause immense damage. For this reason, your supplier should train all employees on cyber security protocols. In addition to the above, in order to fully protect your organisation if a supplier does suffer from a cyber attack, there are a number of clauses you should add to the contract. Discover what they are here (plus many more game-changing ideas like this one) in our compelling whitepaper 100 Big Ideas for 2021.

Negotiating With Empathy & Respect Doesn’t Make You Weak

Stop fearing negotiations! Learn how to reframe them from conflict to mutual respect and empathy, save face, and both walk out winners.

The sexy part of procurement is often seen as the negotiation phase

It’s the part of the project where the junior employees (who have done all the grunt work) are pulled off the project and senior management dusts off their suits and are rolled in for the “heavy lifting”. The outcome of which often goes one of two ways: either champagne is popped at the close of negotiations or, alternatively, someone mysteriously disappears to “seek opportunities elsewhere”.

But, negotiations are built off a myth. Let’s explore this by starting with a question.

What’s your reaction to the thought of having to lead a negotiation?

If you said “panic”, you wouldn’t be alone. 

We can all relate to this scenario: your stakeholder is happy with the procurement process that’s been completed … but there’s one thing. The pricing needs to be negotiated and some of the terms need to be pushed back on. Actually, there are a few areas the business owner has decided need to be sorted before the contract can be signed.

This is the point when terror can creep in. You don’t know if you’re ready for an all out war with the supplier – in fact, you’d be happy to concede some points if you gained ground on some of the more important areas.

Negotiation is wrapped in a myth and it’s time we bust it open.

Negotiation myth

Negotiating is typically seen as:

  • Something you have to learn through a course
  • A persona you have to become, leaving your “normal” self at the door
  • Hard, serious, take-no-prisoners approach
  • Directly correlated to your career success or failure
  • Confrontational
  • A considerable investment in time, effort and resources

Time and place

There are projects that do warrant an approach outlined above, where the stereotypical negotiation style needs to be adopted but it’s not needed for all negotiations. There are other areas of traditional negotiations that are important too, like negotiation plans, checklists and planning / rehearsing meetings.

Here’s an idea: what if we started to adopt a negotiation style that was built on mutual respect, where it doesn’t matter what the other side represents or may be plotting? What if we bring our authentic selves to the negotiation table?

Saving face

Saving face is a concept used to describe the facet of a person’s image that they want to retain: it’s connected to their identity and dignity. Nobody wants to be made a fool of or shown up. Saving face is about respecting that human desire. In negotiations, if there is awareness of saving face it can lead to better outcomes as both sides retain their image and reputation.

Negotiating with empathy

Here are some alternatives to the stereotypical negotiation blood bath:

  • Don’t call it a negotiation. Pick up the phone and structure a conversation around finalising the contract. “We’re almost at the finish line, I just want to run a couple of things by you to tidy up some loose ends so we can proceed to signing.”
  • If it’s about price, be honest. You’ll save a lot more time if you can give percentage thresholds where your business would have more comfort. “Look to be honest, you’re at least 10-20% above where our CE would feel comfortable proceeding. Other bids have come in closer to our mark but it’s your methodology and solution we’re seeking to proceed with.”
  • In New Zealand they often open meetings with the Maori custom of a mihi which shares who they are, where they come from, which acts as an offer to create a mutual meeting space where all are equal. Could you start the meeting with an informal conversation to shift the environment? Or share something from your own culture?
  • If you’re struggling with someone on the other side of the fence try something that will speak to the person they are, not the role they are playing. Flattering their experience in their field can act as a good way in “clearly you have extensive experience in this area, [begin your point]…”
  • Empathising with their view to show you hear and understand them. “We can see that it’s important to your business to guarantee continuity of supply and we can understand where you’re coming from. We need to ensure x,y,z. Is there a mutual place we can agree on?”
  • Syntax is important. An old tip from the pros is to use the word “and” instead of “but”. The latter implies that you are about to contradict what you just said and also disregard their point of view. “And” implies that you are joining two views together.
  • Research active listening and practice it for a week or so before your negotiation meeting. 

The tips for moving negotiation towards empathy and away from confrontation are centred around respect principles. Give it a try and share your tips in the comments below.

Costs Increasing? Doing This Will Show Your CPO You’re Still Adding Value

Help turn your CPO’s frown upside down by benchmarking your performance and demonstrating your value. Learn how to here.

Suppose you wanted to own the fastest car in the world. When you were shopping for that car, would you simply ask: How fast does it go? Or would you instead need to ask: How fast does it go in comparison to all other fast cars? That’s the thing about having something the fastest, or indeed, doing something well at all: it isn’t done well if it isn’t done well in comparison to something else. 

The same is absolutely true when it comes to supply chain management. 

At any one time, it’s likely that something in your supply chain will be changing in a less-than-favourable way, and this will irk your CPO. But a great way to show that you’re still adding value is to invest in supply chain benchmarking, which is critical to success and one of the big supply chain and procurement ideas.

So what is supply chain benchmarking, and how can you get started with it? 

What is supply chain benchmarking? 

When you aspire to own something like the fastest car in the world, the metric you use to measure its speed is pretty simple. The car either goes faster than all other cars, or it does not.  

Anyone who has worked in procurement and supply chain, though, knows that things in our profession are unfortunately not always that simple. At any one time, there will be a number of trade offs that make meaningful comparisons more challenging. 

Despite this, supply chain benchmarking – or the act of comparing your performance to various available indices – can help establish that even if things might not look so rosy in your category or area, they actually are. Benchmarking also has other important benefits, including helping you and your team identify gaps, innovate, and focus on continual improvement. 

One commonly used index that may help you compare your performance against others is the SCOR method (of which benchmarking is just one part). You can use the SCOR approach to assess your business based on three pillars: process modelling, performance measurement, and best practice. 

How can you get started with supply chain benchmarking? 

Benchmarking can sound daunting, and there is no doubt that it can be a little time-consuming, but the benefits are certainly worth it. In order to get started with benchmarking, experts recommend: 

  1. Start with internal benchmarking: Sometimes, excellence can be sitting right in front of you. For that reason, especially if you work in a large organisation, it’s important to start your benchmarking internally. What are other business units doing better, both locally and globally, and how can you imitate their successes? 
  2. Review available indices: There are many available indices against which you can measure your performance, and it’s important that you choose one that makes sense for your organisation. For example, Gartner offers many different indices, as does Benchmarking Success. You can also use the methodologies detailed in the Supply Chain Index.
  3. Analyse your findings: No one knows your business like you do. So after you’ve finished your benchmarking, ensure you analyse your findings. Pay attention to lessons learned, but also take the time to understand why it might not be possible to be the best of the best in every metric for your particular business. 

But should you track all of your spend when measuring against indexes? Anklesaria Group recommends you should only track a certain amount. Discover what that amount is, and many other game-changing ideas, in our compelling whitepaper 100 Big Ideas for 2021.

7 Reasons to Hire on Contract for Supply Chain!

There’s more to short-term contracts than covering someone’s maternity leave: there are very good reasons to employ contingent labour – for you and the contractor alike! Sam White from Argentus unpacks the strategies behind Contingent Staffing.

Economists have done a lot of analysis on the rise of the so-called “gig economy.” More workers are using short-term contracts and other forms of employment to provide additional income to supplement or replace permanent jobs – think Uber, DoorDash, etc.

But more and more companies in a variety of industries are also bringing on high-skilled contingent labour for white collar positions in a number of impactful business functions like Technology, Procurement and Supply Chain. 

These roles typically have similar compensation to permanent employment, with the exception that they’re on a fixed term (typically three, six, twelve, or eighteen months). Working more independently and “hitting the ground running” faster than perm employees, these workers work in consultative fashion to expand Supply Chain and Procurement capability for their clients, and then move on to the next contract.

For many of the top performers, contract work is no longer a stop-gap to permanent employment – it’s an opportunity to work in a variety of industries and projects, and broaden their experience.

So what situations are these companies using contingent staff for?

There are a variety of business cases that corporate leaders are making for contingent staffing, recognising it as a strategic and cost-effective tool in their hiring arsenal. 

We put together this infographic to show some of these use cases. It places a special focus on our recruitment specialities of Procurement and Supply Chain, where our clients have increasing needs.

We start from the less strategic, more common reasons for hiring contingent staff, and move into the strategies that the most innovative business leaders around are adopting today.

This article has been republished here with kind permission from Sam White at Argentus. What’s been your experience with contracting and the gig economy, as a worker or in hiring staff? Let us know in the comments below.

“Your Procurement Project Has No Budget. Prove You Need One.” Too Harsh Or Just Right?

Been asked to justify every single expense for your procurement project? Here’s how to implement a strategy that works to do this.

Picture this (and maybe you don’t need to because it has already happened): you’re successfully managing a procurement project – one which you consider to be critical to the organisation – then the unthinkable happens: The CPO approaches you and says “Times are tough and we’re cutting costs. As of today you have no budget. Prove to me why you need one.” 

It sounds extremely harsh; not to mention unrealistic! But is it? Reevaluating everything from the group up is one of the big supply chain and procurement ideas we think will change everything in 2021. But how do you successfully adopt such an approach, and what benefits can it bring? 

What are the benefits of working from the idea of a ‘zero budget?’ 

It’s a well-established fact that most of us in procurement are trying to save our companies’ money right now, but we’ve all equally acknowledged that simply asking our suppliers for a blanket discount is not only inappropriate, but just won’t deliver the savings we need. So what should we do instead? 

One effective cost control method is to imagine you simply don’t have a budget for the procurement project you want to undertake. To start this process, you meticulously analyse every single line item in your project, and attempt to justify its existence. This strategy, which is effectively the opposite of relying on historical purchasing patterns, enables you to rethink and justify everything you’re doing – and hopefully figure out how to control costs more effectively in the interim. 

This approach, which does require a considerable amount of time and effort, has in years gone by been dubbed ‘too harsh.’ But how about during years like the one we’ve just had? It may well be realistic, appropriate and, most of all, needed. 

How do you restart the planning process for your project with no budget?

If the idea of justifying every single line item cost in your procurement project sounds like a lot of work, it’s because it is. But it certainly isn’t no pain for no gain, as the level of analysis required enables you to innovate and cut costs in ways you never would have imagined. 

In order to implement a such a strategy, experts recommend the following: 

  1. Get into the mindset of ‘you have no budget. Prove to me you need one’: As harsh as this sounds, this is the exact mindset you will need in order to truly justify every single expense. 
  2. Get management’s buy-in: The analysis required to implement such an approach will likely take time (it may take weeks or even months), so buy-in from the CPO and above is necessary. 
  3. Know that training and dedication will be required: When committing to such an approach, there is no point trying it, and then reverting back when it’s too hard. It’s an all-or-nothing approach and you need to see it to the end for it to be effective. 

In addition to the above, there is one essential question you need to ask yourself when implementing this strategy, and it might be a truly uncomfortable one. Discover what it is, and many other game-changing ideas, in our compelling whitepaper 100 Big Ideas for 2021.

Tired Of Small Orders Delivered In Huge Boxes? Technology Has The Answer

Ever had something the size of a credit card delivered in a box that could house the whole telephone exchange? Jonnie Penn describes how AI is cutting packaging down to size, literally.

You order a new phone case online, and it arrives in a box bigger than your fridge. Then you have to dig through packaging material to find the case.

It’s a common experience. In fact, 73% of consumers have received packages that were twice as big as necessary.

Not surprising, 40% of the average shipping box is wasted space, according to one estimate.

Not only is it annoying, more than half 54% reported they would think twice before ordering again from a company that had excessive space in their packaging. 

It’s frustrating for customers, it’s expensive for businesses and terrible for the environment. Since we’re all shopping online more, isn’t it time something was done?

Luckily, technology has the answer.


One company, PackSize, created a machine that automatically detects the item you’re shipping, then folds a cardboard box to the perfect size. 

That means more boxes per truck for a more efficient load and less carbon footprint.

And the right-sized boxes cut down on packing materials, saving USD $0.50 materials per box. Goodbye plastic air pillow packaging!

Smarter boxes also means better protection and less damage, says PackSize. 

That’s important when the average package is dropped 17 times before it arrives. 

How does it work?

PackSize combines clever automation with artificial intelligence (AI). It assesses the size of a product, then chooses the best fit from hundreds of possible box dimensions.

It’s just one way AI is changing our industry for the better.

In fact, McKinsey identified supply-chain management as one of the top sectors that will benefit from significant cost decreases due to AI
Where exactly will these changes be felt? The 2019 Global AI Survey isolated spend analytics, logistics-network optimisation and sales and demand forecasting as three areas in which AI high performers have reported savings in the supply chain sector.

Customer demands are changing

The idea of this highly sophisticated technology might seem scary.

A lot of people in supply chain are worried about the robots taking their jobs. But actually, technology is needed to meet the changing consumer demand.

“Customers want products and services in their hands more quickly; they expect a more personalised experience and all this at a lower cost,” says Vikram Murthi of Llamasoft

“Which means more customised products and services, faster order fulfillment times and super efficient delivery. This will require an entirely new way to architect, design and manage supply chains across broader ecosystems, new technologies and new roles and skill sets.”

How AI is changing supply chain

Everyone throws around terms like AI, but what does that actually mean for supply chain? 

“Tech leaders herald artificial intelligence as ‘the next electricity’ or fire,” says Jonnie Penn, an artificial intelligence expert at the University of Cambridge and keynote speaker at the 2020 Big Ideas Summit. 

“These bold claims convey that AI will be disruptive, but not why or how such technological change will unfold. “

AI at work

That’s why AI makes most sense when you see it in action, Penn says.

Like Attabotics, a Canadian company specialising in high-density vertical storage using machine learning and 3D robotics. 

Their compression system reduces warehouse footprints by up to 85%, a reimagining that promises new micro-fulfillment centers around the globe. 

Or Caterpillar using ship-board sensors to calculate that cleaning the hulls of their eight ships more frequently (e.g. every six months rather than every two years) reduced drag and minimised energy waste. 

“That insight saved them five million dollars per year,” says Penn.

Saving the planet

Clever application of AI could also go a long way for sustainability.

“Since 80 percent of greenhouse-gas emissions are due to supply chain management, this pressure will not abate in the decade to come,” Penn says. 

“Even small gains made through AI could mean large steps towards the UN’s 2030 Sustainable Development Goals.”

Jonnie Penn is a Rausing, Williamson and Lipton Trust doctoral scholar researching artificial intelligence at the University of Cambridge.  Follow him on Twitter at @jonniepenn

What are the Most Valuable Tech Skills in Procurement Right Now?

The future of procurement is digital. Experts share the tech skills you need to thrive in that future.

The future of procurement is digital. How can you make sure you’re part of that future? By understanding what your company needs from procurement, then using the right digital tools to meet those needs.

Here are the most valuable tech skills in procurement:

Supplier risk management

Companies want better supplier risk management, especially in the wake of COVID-19.

Our recent Supply Chain Confidence Index showed 27% of respondents didn’t have the tools they needed to act quickly in the crisis.

That’s why supplier risk management technology is top of procurement leaders’ list of digital priorities.

Employers now expect procurement teams to move faster and mitigate risk long before another crisis hits.

End-to-end supply chain visibility

A by-product of proper supplier risk management is increased visibility, according to Hau Lee, Professor of Operations, Information and Technology at the Stanford Graduate School of Business.

“You need end-to-end visibility about your supply network (capacity, inventory, disruptions, production yields, lead time, bottlenecks, social and environmental performances, their financial conditions, etc.), and your demand network (orders, demand forecasts, backlogs, channel inventory, promotion plans, and disruptions),” Lee says. 

There are a host of tools out there to improve visibility. One is IBM Sterling Inventory Visibility, which is a cloud-based Software as a Service (SaaS). It compiles all of your inventory information from different platforms so you can see available product in real-time.

That’s just one example. Lee recommends educating yourself about other available tools that improve visibility. These harness technology like the Internet of Things (IoT), machine learning, and deep data analytics.

Reduce complexity in global sourcing

Professor Lee says understanding the intricacies of global trade, and how technology can reduce complexity, can make you an extremely valuable asset.  

“Today, you need to be aware of the tens of thousands of bilateral trade agreements that exist between some key trading countries for products and components that may affect you,” Lee says. 

And not just for minimising disruption. Where and how you source products can have a major impact on your bottom line.

Lee uses the example of breaking up a product and sourcing parts from different countries, like sourcing frames from Cambodia while the other parts from China. That way, you can use Cambodia as the country of origin instead of China, which can save you a great deal in taxes and custom duties. 

“As countries start to gradually recover from COVID-19, attention will be shifted back (it has already started) to trade wars, tariff frictions, and protectionism,” Lee says. “Databases from WTO, for example, should be useful. Some experts call this “tariff engineering,” and there can be big differences.”

Conduct due diligence on suppliers for complete transparency

Ethical sourcing is already a hot topic, and it’s even more scrutinised now. Your company’s reputation is on the line, and you are held accountable for how and where you source materials.

It’s certainly a top concern for your company’s executives. They desperately want assurance that suppliers are reputable. Luckily there are digital tools that help you do your due diligence for potential suppliers, Professor Lee says.

“For example, many big brands have already been using IPE, the Chinese website that captures environmental violations in China, as a source of data to do due diligence of their prospective suppliers,” Lee says.

In fact, companies like Nike use apps to connect with the factory workers and educate them, Lee says. “[That] allows them to have better visibility of the conditions of the factories (instead of just relying on imperfect factory audits to monitor), and at the same time help to improve productivity there.”

Interpret data in a meaningful way

Being able to understand and interpret data is sorely needed in procurement.

This is especially true before you bring in new tech systems, says Susan Walsh, Founder of The Classification Guru.

“An area that’s often neglected is data preparation or cleansing before the implementation of any new software or systems,” Walsh wrote in a recent blog. “By the time it’s discovered there are errors in the data, staff have lost faith in using the software and are disengaged, claiming it doesn’t work, or they don’t trust it because it’s wrong.” 

Research from Deloitte shows CPOs struggle with an organisation’s data complexity. If you can untangle data and whip it into something meaningful, you’ll have a job for life.

Step away from the admin

The beauty of procurement technology is cutting out admin and simplifying processes.

The ugly side of that same technology is displacing people who currently handle that admin. That’s why you need to gain useful skills beyond manual data processing if you want a future in procurement.

But where do you start, especially if new technology seems overwhelming?

Craig Carter, Professor of Supply Chain Management in the W. P. Carey School of Business at Arizona State University, says start with the basics.

“Supply management professionals need to have a general understanding of all of the technologies that are being adopted or are on the horizon – AI, blockchain, descriptive analytics, and predictive analytics,” Carter says.

But don’t panic, as Carter adds that understanding does not mean mastery. You don’t need to become an expert overnight.

Technology is coming

Don’t be surprised if this future tech is on your desk a lot sooner than you think. The pandemic has only accelerated the adoption of technology, as shown by our Supply Chain Confidence Index.

When asked which technologies show the most promise for helping to mitigate future pandemics and supply disruptions, 49% said predictive analytics and 38% said AI/ machine learning.

Ultimately, companies will do anything they can to minimise risk. Which is why procurement is so perfectly placed to contribute.

All you need to do is prove you have the answers they need, says Professor Carter.

“What is necessary is a demonstration of a procurement professional’s strategic value,” Carter says. 

“Procurement professionals who can critically analyse, think strategically, and build relationships will continue to be in demand.”

Join Procurious to connect with 40,000 other ambitious procurement professionals and get free access to networking, industry news, training and much more. 

5 Best Practices for Raw Material Procurement

How do you leverage consolidated raw materials demand for best practice procurement? Here are five industry best practices.

This article was originally published on Supply Dynamics on October 22, 2020 and is republished here with permission of the author and website.

It takes tons – both literally and figuratively – of raw material to manufacture an aircraft. From fasteners to injected molded plastics and countless variations of metals, electronic components, and resins are needed to produce the millions of individual parts required to deliver a completed aircraft on-time and on budget. Case in point: An average commercial aircraft contains approximately 387 tons of metal alone!

If you’re an Original Equipment Manufacturer (OEM) in the aerospace industry such as Boeing or Airbus, raw material procurement and sourcing for countless parts can result in chaos. And this problem isn’t unique to aerospace. It persists across industries including oil & gas, automotive, industrial equipment, among others.

At Supply Dynamics, we estimate that our customers outsource on average 50-80% of product parts and components. This trend has resulted in complex, highly fragmented supply chains, reducing transparency for the OEMs, while increasing dependence upon contract manufacturers and their ability to manage their own complex supply networks.


Raw Material Procurement

How many metals, plastics, electronics and fastener sources do your part suppliers purchase from? Five or 500? As long as you get your parts on time, does it even matter? Of course, it does.

As a procurement leader, you understand there are efficiencies in streamlining raw material procurement at all levels of the supply chain. What if OEMs could orchestrate the joint-negotiation and forecasting of such materials to eliminate waste and improve efficiency through a systemic process?

By value-stream mapping actual raw materials used in part production and linking that to the demand for those parts, Supply Dynamics can help you forecast consolidated material requirements and provide a dynamic snapshot of your sourcing strengths and vulnerabilities. Sharing this information with contract manufacturers and raw material sources then enables transformational collaboration.

After more than a decade of helping our OEM customers obtain and leverage this kind of information, we’ve learned a few things. In order to successfully leverage consolidated material demand across a supply chain, we recommend OEMs follow these procurement best practices:

1) Calculate and share detailed raw material demand forecasts at regular intervals with service centers and mills

By sharing what we call a “material demand profile” with the sources of the raw material, OEMs can reduce risk for their raw material suppliers enabling them to operate more responsively, while increasing the OEMs ability to control pricing and ensure availability. Sharing a top level forecast only, with no definition of order form preferences (i.e. sheet vs coil or bar vs plate), discrete sizes and specifications, is virtually useless to a Distributor.

With such a forecast, Service Centers avoid speculation regarding which materials will be purchased or to what sizes and specifications and which site or contract manufacturers in the supply chain will purchase it. Knowing this in advance ensures service centers can stock the appropriate inventory quantities of the correct materials at the right time. This also serves to reduce lead-times. Some of our customers see their lead time reduced by 50% or more.

2) Make sure that shared forecasts contain a level of detail that reduces risk at the raw material source

If you ask a mill, distributor or standard catalog part manufacturer what really drives material prices (whether you’re talking about metals, plastics, or printed circuit board components) the answer might surprise you. While the quantity of material purchased and number of releases over time is a factor, other factors may have equal or greater impact on price, including

  • What is the accuracy of the forecast?
  • Are there limited life considerations associated with the material?
  • Are there unique packaging requirements?
  • Are there processing requirements or unique specifications associated with the order?
  • Can the customer specify quantities required by specific user, over specific time frames, and by unique sizes and specifications?

This kind of information is the proverbial “Holy Grail” for a mill or distributor because it allows them to service your business more efficiently, reducing the risk of obsolescence and allowing them in some cases to level load production and better manage inventory levels over time.

3) Establish “directed-buy” or “right-to-buy” contracts with Mills and/or Distributors

Ideally, an OEM establishes standard raw material purchasing agreements with Mills and Distributors and allows its Contract Manufacturers to purchase off those agreements. Transparency is essential to ensure that such agreements are followed.

On the flip side, if a raw material supplier cannot fulfill orders placed down the supply chain, the OEM is aware of the situation in advance and can properly address any potential delays.

An aggregation program gives the OEM significant leverage over raw material suppliers and contract manufacturers. It goes without saying, the OEM could switch suppliers should suppliers fail to deliver the promised level of service. However, suppliers are also incentivized to participate in these programs because their costs are reduced through better planning – a win-win throughout the supply chain.

4) Enforce the agreed purchasing behavior

Aggregation programs provide considerable benefits to the OEMs, contract manufacturers, and to the raw material suppliers. However, reaping the benefits depends upon all parties within the supply chain doing what they have agreed to do and properly utilizing and executing upon the agreed “terms of engagement.”

If contract manufacturers fail to purchase forecasted materials from the agreed upon source, the value of the demand forecast is questioned and the service centers are left holding the proverbial bag when it comes to excess inventory. For this reason, it is imperative that the OEM have a robust means of monitoring and enforcing agreed upon terms of engagement (across Contract Manufacturers, Distributors and Mills.)

5) Provide a means to validate material sizes, forms and specifications while keeping bills-of material up-to-date 

No two Contract Manufacturers make a part the same way and therefore no two bills of material (even for the same part) are ever the same. For this reason, the OEM must provide a simple, easy way for Contract Manufacturers to update or “validate” bills of material.

For example: Say an OEM needs 1,600 pieces of a specific aluminum part in the coming year. The blueprint suggests that the optimal way to manufacture the part is to machined it out of an 8.0” long piece of aluminum grade 6061, 2.0” diameter round bar. However, the minute the OEM outsources that part to an external contract manufacturers, it loses visibility into the actual form and size of material actually purchased. For instance, one contract manufacturer may choose to purchase material in different form or size than another (2.25” vs. 2.0” for example).

In addition, any sustainable program will require a thoughtful and systematic way of accommodating changes in the supply chain such as:

  • New Part Introductions
  • Engineering changes to existing parts
  • Transitions of parts from on Contract manufacturer to another

So how does it work?

We understand – this sounds like an Industry 4.0 unicorn, right? Likely, you’ve been managing your raw material procurement data with a team of folks sharing a macro-crazy Excel spreadsheet. This is where Supply Dynamics can help. Our Part Attribute Characterization service and SDX multi enterprise platform enables OEMs to captures contract manufacturers’ raw material data for each part without asking the part supplier to do all the heavy lifting.

In this way, OEMs can accurately forecast raw material requirements and manage the timely purchase and supply of material requirements across the enterprise.. All of this allows for better pricing and contract terms, shorter lead-times, and higher levels of performance from the supply chain.

For too long OEMs, contract manufacturers, and raw material suppliers have relied on historical data or guesswork to forecast future raw material demand. By better understanding the raw materials used in its products and sharing information with the sources of those materials OEMs can achieve step-change improvements in their cost of doing business, and actively monitor purchases of program-related materials. In addition, they can improve overall supply chain efficiency and ultimately improve on-time delivery of more profitable products.

WARNING: Handling Dangerous Cargo

The lessons of poor transportation of dangerous or hazardous goods are obvious in hindsight. So what can be done about these supply chain failures?

This article was originally published on All Things Supply Chain on August 24, 2020 and is republished here with permission from the author and website.

On August 4th, 2,750 tonnes of ammonium nitrate – equivalent to approximately 6 million pounds – that were being stored in a facility at Beirut’s port caught fire and exploded. The human toll of the blast was enormous; the accident killed at least 163 people and injured 6,000 more. Tremendous damage was done to structures at and around the port and surrounding areas. The fact that the storage location was facing the sea is probably the only thing that saved the city of Beirut from total destruction.

The shipment originally arrived on a vessel from the country of Georgia in 2013. Although it was just pausing en route to Mozambique, it was seized and held in the port because of outstanding debts that were claimed in the Lebanese court system. The ship was deemed un-seaworthy in 2014 and the cargo was unloaded into “Hangar 12” where it would remain for nearly 6 years.

It is clear to supply chain professionals that this was a supply chain fail but rather than being one huge failure, the Beirut port explosion was the result of a chain of failures:

  • The ammonium nitrate was being stored in a large, unsecured warehouse; a highly dangerous situation given the lure of the material for terrorist groups.
  • The storage building had multiple structural and condition-based issues, including a dislodged door and a hole in its southern wall.
  • A significant quantity of fireworks was being stored in the same warehouse.
  • Workers were called in to repair the building and re-secure the doors, but they were not supervised or warned about the contents of the building.
  • Sparks from repair teams welding the hole in the wall shut are what created the fire risk. They raised the temperature in the building enough to start a fire among the fireworks, and within one hour that fire reached – and detonated – the ammonium nitrate.

It would be easy to look at what happened in Beirut and think it was an isolated string of unfortunate events. Unfortunately, the same mistakes and examples of mismanagement that led to the port explosion happen regularly in supply chains all around the world.

The lessons associated with moving and storing dangerous or hazardous goods usually seem painfully obvious in retrospect, but they have been made before, and – sadly – they will be made again. Each of these sad incidents has a different level of impact, and a range of different causes, but given the critical role that people play in supply chain operations, they almost always have a human toll.

Take the following example from the United States:

In 2018, a can of aerosol bear repellant fell off the shelf of an Amazon warehouse in New Jersey. 24 employees were sent to a local hospital, one in critical condition. Since the problem with bear repellant had happened repeatedly in the past, action had to be taken. In 2019, Amazon announced that they would build a specialized warehouse just for hazardous materials such as nail polish remover, bleach-based cleaners, and (of course) bear spray.

In recognition of the danger associated with these products – either on their own or in combination – Amazon designed the warehouse to be smaller, include additional safety mechanisms, and keep specific materials separate. They will also no doubt have to provide regular specialized training for anyone working in and around the warehouse.

While the bear spray incident pales in comparison to the explosion in Beirut, it was just as preventable. It took multiple bear repellant incidents to cause Amazon to take action, since thinking an issue is a one-time problem is the easiest mistake of all to make.

Supply chain managers need to be aware of the potential danger represented by the materials moving through their own supply chains or adjacent supply chains that share warehousing and logistics capacity. Some examples – like bear repellant and ammonium nitrate – seem like they would obviously justify additional oversight, but in a busy, distributed workforce, even the most dangerous situations can be overlooked.

Knowing what materials are being stored where, under what conditions, and with what concerns is a key safety measure. As we observed in Beirut earlier this month, it can be a lifesaver as well.

Is supply chain swallowing up procurement?

The pandemic thrust supply chain management and risk mitigation into the limelight. What happens to the procurement folks?

This article was originally published on Supply Chain Dive on October 22 2020 and is republished here with permission of the author and website.

Bonnie was quiet at dinner, and her father asked what was wrong. She said in school today, her 6th grade class was talking about careers and what their parents did for work.

Bonnie said her mother, Monica, was a senior buyer at a local electronics manufacturing plant. Other parents were small business owners, electricians, plumbers, teachers, members of local police and fire departments, and even a professional surfer. Bonnie’s friend Tyler’s father was a supply chain manager for an online marketplace, and the class voted his job “coolest and best.”

“Why can’t you get a cool job like Tyler’s dad, Mom?” asked Bonnie.

And that is one of the core problems in the procurement profession these days. The identity of the profession is changing, once again.

​Pandemic-related disruptions in consumer and industrial supply chains are making headlines, pushing the once relatively obscure work into the limelight. How companies manage their supply chains has become as important to a company’s success as financial health, market share and customer relationships.

And that is why many companies have reshuffled leadership, appointing managers from other functions to run supply chain operations. These managers often have limited or no procurement, planning or logistics background. The logic is that if the talented finance or marketing manager is now in charge of the supply chain, it must be important.

In many companies, this expanded universe of supply chain management, with leadership from finance or marketing functions, is swallowing up the somewhat independent procurement function. Rather than actively driving the supply side of the business, the function may again be relegated into a subservient support role.

But we can change that.

Acknowledge the change in the business climate

Companies have finally discovered the importance of the supply chain and are adding resources to shore it up. Supply chain management is also more customer facing these days, so adding an existing customer-facing leader may actually be the best thing for the business.

Some procurement leaders may feel they have lost influence or leadership. But the increase in importance and scope of the supply chain function should lift all participants. Consumer-facing businesses must address questions and concerns about the origins of their products. Are they sustainably sourced? Free of forced labor? Fair trade? Procurement holds the answers and can shine here.

Procurement professionals are a resilient bunch. Embrace the change and get ready to contribute in an expanded scope with certainly higher visibility.

Own procurement’s core responsibilities

Sourcing, supplier performance and managing supply chain risk are procurement responsibilities that aren’t going away. If anything, these critical functions are becoming more important.

Those new to supply chain management, or in existing functions like planning, distribution or transportation, may not fully comprehend the complexities of the procurement process and how tough it is to manage a full range of global suppliers.

This is a perfect time to reinforce our reputation in an evolving organization by doing our jobs very well and teaching others about the nuances of supply management.