SIG Speaks Blog

When Commodity Prices go South, Commodity Manufacturers get Innovative

Few areas of the economy have faced stronger headwinds over the past year than those occupied by commodity manufacturers. Chemicals, steel and plastics are all feeling the effects of China's economic slowdown in a highly competitive and price sensitive marketplace. Many of the top commodity manufacturing firms have reacted decisively to these conditions; however, after the first wave of layoffs are complete and excessive overhead costs are reined in, the prospects still remain gloomy. The sustained impact of depressed demand and oversupply are forcing executives to look inward for additional, innovative sources of cost savings. The positive news for many organizations is that the "good years" of strong demand and rising prices have left behind pockets of inefficiency and waste that can be structurally addressed in the interest of long-term corporate competitiveness. A few examples of such opportunities are as follows:

Joel Johnson, Director - GEP

Sourcing Thought Leaders...Enter the SIG U Writing Competition

As the editor of Outsource (a member of the SIG family, of course, since January this year) it’s my great privilege to publish articles by some of the best-known figures in the space: authors whose very names have become synonymous with cutting-edge thought leadership and the kind of insight which itself drives change within this dynamic, fascinating industry. However, it’s also always crucial for me to remember that great insight and high-quality communication are not the sole preserve of the established sourcing superstar; that right now, out there scattered across the wide, wild world are a host of undiscovered B2B literary marvels – as-yet-unsung thought leaders whose talents lie like diamonds, buried but waiting only for the miner’s pick to swing in the right direction.

Well, it’s time for Outsource to go mining…we’re launching a writing competition aimed at discovering those diamonds and bringing them out into the light – and, what’s more, thanks to our excellent colleagues at SIG University we’ve got the perfect prize with which to tempt the next generation of outsourcing authors to sharpen their quills: a place in the next semester of the Certified Sourcing Professional course! (And if the winner doesn’t meet SIG U’s entry criteria he or she can transfer the prize to a colleague who does; how’s that for a way to grab the attention of the top brass?)

Jamie Liddell, Editor, Outsource and Co-Head of EMEA, SIG

Seven Imperative Steps to Strategic Sourcing

Vying to become a world-class procurement agency? Not sure what competencies you need to become a leading supply chain organization? Here are seven ways to help you navigate through the complicated sourcing process from scratch:

Shruti Agrawal, Director, Excella Worldwide

Is the sharing economy changing the procurement landscape?

The digital era is creating new paradigms as it relates to commercial relationships between business and individuals. It's not a new concept, but it is getting stronger each day and changing the way people contract services and products. The sharing economy is a system in which its users share and exchange goods and services through digital platforms.

Uber and Airbnb are some of the most popular examples that are revolutionizing the market, with their respective target markets in the transportation and accommodation industry. Could this new business model also change how organizations contract services and products? Could the new sharing economy open up opportunities for organizations to achieve their constant search for cost optimization?

The benefits that emerging businesses in this space can bring include the provision of cost-effective services and products with reduced lead times. Additionally, these technological applications help to identify available resources in a certain geographic proximity that meets the needs of a company. Another benefit is to directly contract services eliminating the brokerage relationships characteristic of the truckload and 3PL Industry. The Uber model could change and replace traditional freight brokers. Right now there are some companies preparing to support this new business model which gives small truckers the opportunity to offer their spare capacity and resources.

Ana Sofia Gomez, Senior Associate, GEP

Sports Contract Negotiations: A Holdout that Worked

With global sports industry revenues over $145Bn and growing at a rate of 3.7% over the past 4 years, it is evident now more than ever, that behind the tackles and buzzer beaters, sports remains a business. Negotiations in business are usually governed by several tangible measurable data points that are indicative of future performance. Given below are a few aspects that are unique to negotiations in the sports industry:

Ajay Perumal, Senior Associate, GEP

The "Dollar Store" Phenomenon - Does it Exist in Procurement?

With kids back in school, many parents like me are reflecting on what has become an annual ritual of buying necessary school supplies and of course an equivalent amount of not-so-necessary 'things' to decorate or accessorize school lockers, shelves, backpacks, clothing, etc. So while the leading retailers like Staples...Office Depot...Walmart...Target and other cash in on this period with attractive deals, our friendly neighborhood 'fiVeBELoW' comes in very handy for all those non essentials. Don't get me wrong, sometimes compulsive bargain hunters (once a buyer always – a buyer) like me can also find deals for the back-to-school essentials and a number of other things at 'fiVeBELoW.' I often wonder if there exists a similar pattern in enterprise spending...meaning, does a similar phenomenon (the anything and everything at places like fiVeBELoW – for cheap or let us call it really low dollar spend buys) exist in enterprise buying, especially when we are talking about indirect spend. Throughout my Procurement career, I have come across companies with annual indirect spend ranging between a couple of million dollars up to and in excess of 15-20 billion (though they are very few). Spend items/services...what in old days used to be called 'petty' cash kind of spending...exist everywhere (the $$ amount may vary from a few thousand to a double digit millions), essentially exhibiting with one or more of the features as below.

Rajiv Gupta, Head of Procurement Services, Americas, Infosys

The Recipe for Successful Supply Chain Risk Management

Even if you have a resilient risk management strategy in place, situations can arise that are out of your control. On the bright side, supply chain risk management provides the opportunity to differentiate and gain a competitive advantage. Advantages may include quicker crisis response time, adherence to regulatory requirements and ethical compliance, ensured internal quality standards and avoidance of sales shortfalls and image damage. If Supply Chain Risk Management (SCRM) is an interesting topic for you, I invite you to read the following recipe that not only outlines the single ingredients needed for a comprehensive supply chain risk management process, but also highlights how you can integrate SCRM within your organization.

Ingredient 1: Selection of Relevant Supply Chains

First, define which supply chains to focus on and to include in SCRM. In principle, one of two approaches can be used: 1) monitor all supply chains or 2) monitor a very specific section of the supply chain. The following parameters can be used and taken into consideration for specifying which to select: impact on sales/image, region, customer specification, purchasing volume, regulatory requirements, etc.

Ingredient 2: Definition of Risk Inventory

Typically, the risk inventory is recorded in a risk scorecard. This scorecard includes all individual risks and indicators, which act as sensors for detecting risk changes: supplier risk (e.g., insolvency, CSR compliance), location risk (e.g., natural hazards, strikes) and country risk (e.g., political or macro-economic).

Ingredient 3: Supply Chain Visibility

Approximately 51% of all supply disruptions originate below the tier 1 supplier. It is therefore important to capture the 1st tier of the supply chain structure and the supply chain substructures including 1-n tier suppliers and supply paths.

Heiko Schwarz, Managing Director, riskmethods GmbH

Procurement for Banking: Adjusting to the New Norm

After a period of immense volatility, the banking sector appears to be reaching some level of normalcy. The financial crisis of 2008 was the trigger for drastic changes in the way the industry manages spend. As revenue streams froze and the spending behaviors of banks become front-page news, procurement was invariably thrust into the spotlight as a means of preserving the reputation and profitability of these organizations. Procurement teams operating in the banking environment face a challenging landscape when it comes to controlling spend. A great deal of change is needed, both structurally and culturally before banks can truly take control of their spend. However, procurement technology, if used effectively, can be a vital catalyst for these required changes.

What are they buying? Banks are essentially service organizations. The vast majority of their spend passes the professional service category (roughly 40%) in the form of management consultants and other temporary workers. Information technology and facilities management make up the next largest spend categories accounting for roughly 20% of total spend each. Spend on services is traditionally more difficult to analyze, understand and control than spend on goods, and this presents a challenge for a service heavy industry like banking. However, by leveraging procurement technologies, leading banks are addressing these areas with great success.

Diptarup Chakraborti, Vice President, Global Marketing, Zycus

Do Your Homework to Meet Regulatory Demands

The global regulatory environment is heating up – and not just because it's summer. As government enforcement actions capture headlines, corporate leaders are rightfully concerned about whether their due-diligence strategy can hold up to the increased scrutiny. Richard Girgenti, KPMG LLP's National and Americas leader for Forensic Advisory Services, wrote in an article in Metropolitan Corporate Counsel recently, that the rapid and ongoing nature of regulatory changes, the array of agencies involved in bringing enforcement actions and the aggressiveness with which they are enforcing such actions are resulting in "record fines and penalties, class action lawsuits, lost earnings and reputation damage." Girgenti would know, having more than three decades of experience – not just in advising organizations but in conducting investigations and overseeing policies on the enforcement agency side of the coin. So, what does he see as some of the top of mind issues for corporate leaders who want to stay out of hot water with regulators?

Three Enforcement Areas that Demand Enhanced Due Diligence

Mark Dunn, Segment Leader, Entity Due Diligence and Monitoring, LexisNexis

Beyond Buying: Automating the Transactional to Become Strategic

Dawn Tiura, SIG CEO and President recently spoke on an expert panel at Coupa Inspire, and shared her thoughts with candor and authority. Coupa interviewed Dawn shortly after the event and published a blog sharing her responses which we are publishing with Coupa's permission. The original can also be found on the Coupa website.

Thanks to Coupa for the blog interview below: One of our favorite parts of Coupa Inspire are the expert panels. There's nothing we love more than getting smart people together to talk shop. If you missed Inspire, you can read excerpts of the analyst panel and the CIO panel on our blog. Today we're talking with Dawn Tiura as a follow up to the analyst panel. Dawn is CEO of Sourcing Industry Group (SIG) and has been observing the industry for 25 years from her vantage point as a CPA turned sourcing consultant. There's no one smarter on the topic of where sourcing is heading, so when she remarked during the panel that in her opinion, the term buyer should be eradicated, that piqued our curiosity. So, we got her on the phone to learn more.

Coupa: You had some provocative things to say during our panel discussion. One was that you wished the 'buyer' title would go away. We were hoping you could expand on that.

Dawn: I sure could! To me, buyer is such a demeaning title. The only time somebody is excited to say, "I'm a buyer" is if they're in the fashion industry, because that's cool and exciting and sexy.

Coupa: You're a tastemaker.

Sarah Holliman, Chief Marketing Officer, SIG

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