Supply Chain Compliance is about to Get Tougher

As we all know managing a supply chain isn’t as easy as it sounds. Sourcing, planning, manufacturing, distribution and customer service are all important aspects of it. Each has their own business processes and issues to contend with daily. If orchestrated correctly the supply chain delivers goods that bring more revenue for the company, at a decent profit and customer satisfaction. If not, businesses can take a hit in some or all areas such as the business brand and reputation, products, and revenue and profitability.

New Legislation

With the introduction of new legislation by U.S. Representatives Carolyn Maloney (D., N.Y.) and Chris Smith (R., N.J.), businesses with over $100 million in global gross receipts are required to report to the SEC as part of their annual filings what policies they have in place to ensure their supply chains are free of slavery and human trafficking. Disclosures will need to be prominently posted on SEC and company websites for public access.
The bill was introduced following the publication of the State Department’s 2015 Trafficking in Persons report, which stressed the need for governments to “set clear expectations for businesses on human rights issues and adopt policies that promote greater transparency and better reporting on anti-trafficking efforts in supply chains.” The Wall Street Journal reported , “the bill came hours after the release of the State Department report, which upgraded Cuba and Malaysia’s status but left Thailand at the lowest level after it received a downgrade last year. Governments in the lowest tier could see the U.S. government withhold non-humanitarian, non-trade-related foreign assistance. These countries could also see the U.S. oppose giving them aid through international financial institutions like the World Bank.”

Representatives Rationale

Representative Maloney noted “there is no question that many goods being sold to American consumers are produced with slave labor, and we have a moral obligation to do something about it. This legislation simply requires businesses to publicly disclose what actions they have voluntarily undertaken to remove labor abuses from their supply chains. It is a good first step we can take to improve reporting and transparency so that we can enforce existing laws against labor abuses and allow consumers to make more informed decisions.” Representative Smith noted “some companies may participate knowingly in human trafficking to pad the bottom line; others are willfully ignorant of where and how their inexpensive products are made; and still others simply do not know.”

What It Means

Supply chains will now have to prove they have preventative measures for human trafficking, slavery and child labor in their supply chains. The law does not dictate how companies do business but does require disclosure. The disclosure requires outlining practices employed to avoid use of slavery in supply chains in the annual report to SEC. Supply chains must be transparent and maintain internal accountability standards, supply chain management and procurement systems, and procedures for employees or contractors failing to meet the company standards regarding forced labor, slavery, human trafficking and the worst forms of child labor.

A Collaboration Economy: Business and Presidential Candidates

It’s that time again! Presidential hopefuls are announcing their desires to run for the President of the United States. At present there are 22 candidates running for the US Presidency, five Democrats and 17 Republicans. Stay tuned, this could, of course, change tomorrow.

Depending upon what media station is your choice for election information your view can be enhanced, skewed or ignored. Regardless of party, even those that I didn’t list, everyone has an opinion on the candidates, what the country needs and what works and doesn’t work. Becoming the President of the US is about a collective voice, gaining momentum and setting the nation on a course for action. If this sounds like a business marketing campaign, to convince the public on the best candidate it may very well be that the winner is akin to the business sales effort.

Business is the purchase and sale of goods or services to make a profit. Profitability is critical to running a successful business as are sales and procurement. But just because you have a business doesn’t mean it has staying power. The buyers must be aware of it, must understand why it is better than other available options and ‘buy’ into the product and company.

Commonalities

The shared characteristics of Presidential candidates and business include (and are certainly not limited to):

Product: Both have or can be considered a product. The candidates themselves or a product/service may or may not be of value or use to the buyer, the end user. Both have features and functionality that will advance the product in a direction, and may also have features and functionality that may hold back or side line the product over the short and long term depending upon the direction and courses of action for each.

In the case of the Presidential candidate the product may be good for our country depending upon the issue that you want resolved, delivering a better outcome than what is in place today. Think of a selected candidate (or product) impacting budget, defense spending, economy, energy and climate change, foreign policy, immigration, internet reform, national security, tax reform, terrorism, or trade. In the business case the product is to satisfy a specific need or sometimes a multitude of needs.

Price: Both have a price – the business designates a price on their product that the market will bear. The Presidential candidate has a price on what they can bring to the market, how the market perceives their product and at what price they will continue to be a candidate. Both have tradeoffs associated with their selection including product strategy and execution, product integrity, product quality, price, and the authentic brand of the product are just some of the aspects that are all part of the price.

Data: Both have data to help identify buyers and their demographics, the reasons for interest or purchase, and even the polls or studies that highlight the concerns the buyers have that need to be resolved. Competitive data is used in both cases to strengthen the product story and outsmart the competition to win.

Support: Businesses have support functions that provide various services to keep afloat and profitable. Presidential candidates have support from their donors, followers, party affiliates and camps, news media, social media plus discussions among voters.

Marketing: Businesses and Presidential candidates utilize extensive marketing efforts to build sales by developing awareness, informing the buyers/constituents, and creating campaigns.

Finance: Businesses can’t run without sales and profitability. Presidential candidates need sales in terms of votes and donations to run their campaigns to get the votes. Money and staying afloat are critical to both.

Spending: Our country spends billions, perhaps trillions on our Presidential campaign so we can have the best leader to accomplish a grand list of actions that is important to the country. Business spends to get their product out and purchased.

Buyers: Both businesses and Presidential candidates will not survive without buyers/voters. And the latter may falter anyway because of the terms of engagement defined by the US Constitution regarding one President at a time; therefore many candidates, products, will be eliminated and only one will be elected.

So what?
Ok, so they have something in common, so what? The so what is perhaps our nation isn’t just about the best candidate for the position, but also the best running business behind the candidate so the candidate is elected. It may be more like an assortment of Presidential candidate products with a successful business behind the product to position it through to the final sale, the Presidency.

Final Thought
Welcome to the collaborative economy – sharing the best of the business and products to select a President for the US. The only thing standing in our way is a command of the issues, the population of voters and their stances on the issues, the data behind it and of course the media’s viewpoint to ‘help’ us decide on our choice.

Oh and of course the election. I guess the part’y’ing line (excuse the pun) “It’s just politics” is appropriate.

Procurement Basics: Data Is King

How much data does your organization generate?

Have you ever looked at your organization in terms of your data? This is a great place to start so you can see your spend and supply base information. Seeing is believing. The data gives you something tangible to review. Spend and supply base data can help you answer some very basic questions like:

- What is my organization spending?
- Who are we spending with?
- How much money is addressable spend?
- How much spend is under Procurement control?
- How much spend is under contract?
- How many suppliers do you have in each of the areas of spend?
- How many categories of spend are in each area noted above?
- What is uncontrolled spend and uncontrolled suppliers?

These are just a few questions you can ask to start extracting valuable information from your data. The information you are seeking provides the baseline value you need to optimize your Procurement organization.

What Does Data Provide?
Data is the key you need to zero in on the facts specific to your organization’s current health and growth potential. Data erases perception and doubt creating fact-based awareness. Without data Procurement is reacting to perceptions and noise painted by the organization. Data is the baseline to measure your work and value. It can show you inefficient and non-existent processes, force you to question and answer issues that you never really thought about and help you understand the facts so you can make better informed decisions.

Getting the Data
Finding, pulling and viewing data can be a nightmare, especially if you do it manually. Technology tools can help you quickly pull, streamline and manage the data so you can quickly find information you need and start answering the multitude of questions on spend and your supply base. Spend analysis tools are the easiest tools to identify, collect, cleanse, aggregate, enrich, categorize and analyze spend. Supply base tools are similar, however they are even more powerful when combined with spend data because they segment, show at risk, performance and compliance concerns that need to be addressed immediately.

Using the Data
Data is just data unless it is understood. Part of understanding is the process to get it and then use it. If you only grab pieces of the data you have only a small portion of the big picture which can leave you exposed to risk issues and reduce or eliminate additional value that can be derived.

After full visibility, you can zero in on facts and trends within the data to start understanding what your spend and supply base is telling you. A few questions to help you sort through it are:

- How much of our addressable spend is not tracked through Procurement?
- How much of our supply base do we not touch?
- What areas are we at risk of not meeting our stakeholders or customer’s requests?
- What areas lack proper processes to ensure compliance?
- How do we measure how well we are doing if we only see pieces of the data?

Data is a key component to solving organization issues but you need to get it, see it and use it in a defined repeatable process.

Procurement Basics: Listen, Understand and Connect

I recently enjoyed a conversation with a new Procurement Manager. This was their first managerial job and they reached out asking for some thoughts on the requirements of a great Procurement Manager. The conversation was more about me asking questions on the role, expectations, business direction, strategy, plans for current year and what thoughts the new manager had regarding role definition and direction required to succeed
The new manager is really eager, wants to perform their job well and knows if they succeed, there will be future career advancement. After my many questions I was asked why I needed so much information to help with the profile of a great Procurement Manager. To me it was simple. I could provide the individual a list of what makes a great Procurement Manager or I could help them realize that being great requires listening and understanding of the job requirements and details. It also requires he gain information on the role business expectations. And he must tie the team direction to strategy and plans so the business is positively impacted. After my explanation, this new manager was quiet and said to me, “wow this has been an eye opener for me. I thought I was just going to do all I did before by fulfilling requests, sourcing where possible and monitoring the supply base.” He told me he learned three things he hadn’t thought about: Listen, understand and connect.
Here are the three key points to success we discussed.

Listen
The manager told me he realized he shut down with the news of his promotion> He decided if he just did more of the same he would continue to do well. He hadn’t taken the time to ask what was needed by the business from the role, when it was needed and the expectations of his new role. My line of questioning helped him realize he needed to ask more questions and listen to the responses. Ernest Hemingway put it well when he said, “I like to listen. I have learned a great deal from listening carefully. Most people never listen.”

Understand
This new Procurement Manager also told me he recognized he needed to understand what was said not just hear it. He had to take time not only to listen, but to connect with his new manager, his team and stakeholders. It is important to recognize that you will lose value without connecting with your colleagues and stakeholders, and replaying back to them what you think you heard and then applying it in the way that it satisfies their needs. . Part of understanding is making sure you clarify their needs and then apply the details to what it means to you and to your role within the business. Steven Covey noted: “Seek first to understand, and then to be understood.”

Connect
The new manager thought he connected because he was selected for the job. He didn’t think about listening and understanding to make a better connection and to be understood. The solution to your business requirements will come from the creativity you use to connect to business needs. Connecting is the way to bring meaning that can make a difference to your business and your career. It reminds me of another quote by Kenneth Leithwood “Great leaders build trust and collaboration while focusing on developing people’s capacities rather than focusing on limitations.” Herein lies the path towards becoming a great Procurement Manager.

The Secret of Unlocked Procurement

Conventional procurement is a tail dragger. It brings down the organization because it exists to satisfy needs verses seeking opportunities to secure unlimited value. Unlimited value is the secret of Unlocked Procurement. Unlocked Procurement recognizes the power within procurement as it realizes unlimited value from the supply base, the organization and customers.

Sounds simple, doesn’t it? Not necessarily true. You can’t secure unlimited value without the definition of value. Value equates to worth and importance. Value is something that is desired by the organization and in this case from procurement. Procurement value may be defined as any number of the following:
• Monetary – Savings, profitability, revenue, earnings per share
• Opportunistic - Growth, market share, brand awareness
• New Product – Time to market, respect of product, differentiator
• Paradigm Shift – New application of current model, conversion to new service or product with greater offering and less money
• Relationship – Customer, suppliers, employees
• Governance – Compliance, risk, CSR

However you define procurement’s value, its significance may be for only one moment in time; it might grow, sustain, diminish or even change its attributes. It is imperative procurement’s value is captured, from its baseline through its lifecycle, monitoring the progress and providing visibility for the organization, customers and suppliers to realize unlimited value.

How do you define and measure value in your organization? I would love to hear from you.

Grabbing the Keys and Moving from Conventional to Unlocked Procurement

Last week BravoSolution rolled out Unlocked Procurement and with it came a myriad of questions. The first and most important was how do I give my organization the keys, manage the outcomes and reap the benefits of Unlocked Procurement?

Conventional Procurement is in the past. What’s changed? While a view of spend is required to gain visibility of external purchases within the organization and make plans for improvements, it isn’t the end all be all. Candidly, the process forgets the supplier or better yet, it promotes the buyer to leverage spend and become the power over the supplier. While that might be great to get the first deals for simple items like office products it doesn’t do much to promote collaboration, innovation or bring sustainable value to your more strategic suppliers.

Unlocked Procurement utilizes spend management practices where needed but puts more focus on the supplier – the reason procurement exists. It provides an avenue to grow the relationships, revenue and profitability. Moving from conventional procurement to unlocked isn’t just as easy as inserting the key and turning the lock, it also requires a prominent shift in the resources utilized, resource optimization and developing a more opportunistic attitude verses conciliatory. The key to moving to unlocked procurement is developing, acquiring and optimizing the resources within a forward driving business that hinges upon the success of value from all resources including the customers and suppliers.

Obviously the keys to success vary based upon your organization. Keep an eye out on our blog over the next few weeks and months when we will share with you important keys to move from Conventional to Unlocked Procurement.

Everything You Need to Know About BravoAdvantage

There’s big news coming from BravoSolution this week: We have officially released BravoAdvantage, our next-generation procurement platform. This platform will help take your procurement operations to the next level by enabling your procurement team to generate more value, influence innovation and reduce risk across the supply chain. Making BravoAdvantage stand out, is that unlike traditional spend management and procure-to-pay solutions, suppliers are at the core of BravoAdvantage. The platform integrates supplier lifetime value throughout the entire strategic procurement process, providing organizations with unmatched visibility into their supply base.

Most solution providers have channeled their efforts into spend management, but the fact remains that procurement covers so much more than that. Unfortunately, in other solutions, the supplier often gets lost. Yet it has been proven over and over again that by working collaboratively, buyers and suppliers can increase innovation, remove waste from business processes and reap more collective value. In fact, the best procurement teams in the world help drive growth and profitability for their organizations, which in turn creates a financial competitive advantage over competitors. Driving this growth, profitability and competitive advantage requires a platform that prioritizes supplier life time visibility and is built off strategic spend and supplier relationship management disciplines.

In talking with procurement executives across the industry, it’s clear that most procurement teams are ready to take a step forward and move beyond the conventional practices of spend management and toward a more collaborative, supplier focused path. They recognize that by increasing supplier visibility in their spend management practices, they can unlock the power of procurement and reap greater rewards for both themselves and suppliers. Are you ready to transform your procurement organization? Learn more about BravoAdvantage at www.BravoAdvantage.com

Avian Bird Flu: A Supply Chain Risk Challenge for the Food Supply Chain and the Consumer

Since late December 2014 the Avian Bird Flu has been an issue in the US. Imports from the US have been banned by Canada, Mexico and China. Commercial stocks in Iowa, Minnesota and Wisconsin been decimated with all three states declaring a state of emergency in late April and early May. The various bird flu strains have taken hold in the Midwest because of the migratory nature of the waterfowl from south to north in the spring. Experts expect it to have the same or similar impact in the fall when the birds start migrating south again. The concern is that the flu could travel to the east coast and to the south/southeast US, where the largest chicken production is located, and completely wipe out poultry production in the US.

The infected birds must be disposed of, the buildings completely disinfected and this can take months - not to mention it is a costly disposal business. Between the reduction of the poultry population and the lengthy but necessary disinfection process, the impact is an extreme slowdown in poultry production.

Supply Chain
Unfortunately the bird flu is also putting a strain on the supply chain from demand to margins. Food manufacturers are now paying more for the eggs and some like Jennie-O Turkey have announced temporary worker layoffs. Egg prices and turkey breast meat prices continues to rise while grocery stores and wholesalers are stocking up for fear that more birds will contract the virus and push prices higher. Whataburger has now limited its breakfast hours from 12 hours a day to 4 hours on weekdays and 6 hours on weekends – just so they can deliver eggs to all locations. To counteract the egg deficit the USDA is now allowing Dutch companies to ship egg products into the US.

Consumers
The risk to humans is low unless you come in direct contact with infected birds or their droppings; not from eating fully cooked chicken or their eggs. The CDC stated "People should avoid unprotected exposure to sick or dead birds, bird feces, litter or materials contaminated with suspected or confirmed highly pathogenic avian influenza H5 viruses”.

On another note, Thanksgiving is just shy of six months away, so buying a bird early and freezing it is one way to guarantee a good Tom Turkey at a decent price. Since Thanksgiving is about giving thanks, perhaps a new tradition will start as we let the turkey population come back and the bird flu fly the coop!

Honda & Toyota – Best at Automotive Supplier Relationship Management

The 15th Annual Automotive OEM-Supplier Working Relations Index Study from Planning Perspectives Inc. details how better supplier relationships adds more to profitability. Unfortunately for Ford, GM and FCA (Fiat Chrysler Automobile), they left approximately $1.7 Billion of profitability based on their supplier relationship management practices.

Honda and Toyota appear to be the best at working with their suppliers. In fact, for 14 years straight these two automakers have outperformed their automotive peers. In the measure of supplier relations on the Working Relationship Index, Honda and Toyota improved an average of 8.7% in 2014 vs. 2013. The Detroit Free Press quoted John Henke, CEO of Planning Perspectives, “Honda and Toyota traditionally stand out from their competitors because their suppliers see them as pursuing fair and equitable financial practices, consistently honoring contracts, and valuing and protecting suppliers' intellectual property”.

What is so great about these practices? They don’t focus on price alone – they understand that the supplier may be offering their best and brightest engineering talents or their latest innovations in technology, material or processes. They understand the value the supplier is giving as part of the relationship and work with them. The value is incorporated into the strategy on the front end, while also working with the supplier to execute the plan and provide some cost benefits where possible.

Good Supplier Relationship Management Critical To Automotive Profits

A few weeks ago GM announced it has evolved to longer term supplier contracts for new products in order to cut costs and gain access for advanced technologies. Formula One has a similar tact with Pirelli who was their long term supplier since 2011 (note, the contract expiration end of 2015) and is now rebidding tires for a three year period. With this rebid comes a requirement to introduce wider tires as of 2017 to speed up lap times by up to six seconds – a design enhancement.

Great news! But why the changes?
Perhaps because the automotive world is finally recognizing that supplier relationships matter. Could it be they are taking the learnings from some in the high tech and consumer products worlds? Or is it that the 15th Annual Automotive OEM-Supplier Working Relations Index Study from Planning Perspectives Inc. found better supplier relationships adds more to profitability? I would guess a combination of both. And if they aren’t starting to get the message the study spells out the lost profits and the opportunity to be gained to start building supplier relationships.

Good supplier relations from automakers include better communications, trust between both parties and collaboratively working to reduce costs. The study results found if automakers had good supplier relationships with their suppliers, companies like Ford, GM and Chrysler would have added roughly a combined $1.7 Billion to their profits in 2014. Yep, you read that right and quoted directly from the article in the Detroit News.

The Wall Street Journal broke it down even further – GM and FCA (Fiat Chrysler Automobiles) each lost $144 per vehicle while Ford lost $116 per vehicle. That is a big nugget no matter how you cut it. I can’t imagine anything more compelling than profitability to make a business start building better supplier relationships.