Our last post continued our review of Managing Indirect Spend, a new book by Joe Payne and William (Bill) Dorn of Source One that is the culmination of everything they have learned while doing nothing but Strategic Sourcing, primarily on Indirect Spend, since 1992 -- before it was cool. Specifically, it discussed the chapter on Market Intelligence, which is critical to the success of any sourcing initiative and one of the most important tools in any sourcing professional's toolkit. In this post, we review the other non-software tools at a sourcing professional's disposal that were discussed in Bill and Joe's tome on Managing Indirect Spend.

The major tools at a sourcing professional's disposal when conducting market research can generally be classified into the following categories:

• Traditional Industry Publications
  One of the first stops should be one or more traditional industry publications that publish in-depth case studies that include best practices, savings achieved, and new processes or technologies being employed by suppliers and your competition.
• Indexes
  Indexes such as the CPI (Consumer Price Index), the ISM Manufacturing Report, the ISM Non-Manufacutring Report, and speciality indexes such as the Pulp and Paper Weekly and American Metal Markets can be extremely valuable. Furthermore, for just about any commodity that can be listed, somewhere in the world is an index tracking it. For example, Mintec has over 15,000 indices in its database.
• Blogs
  Practitioner, Commodity Specific, and General Supply Management blogs can all be helpful. Of course, we agree with Bill and Joe when they indicate that you should start your search in the latter category with SM and SI.
• Import Records
  This is a great source of competitive intelligence. You can find out who your competitors are using, what types of products they are importing, and in what volumes. Sites like Panjiva, Import Genius, the Datamyne, and PIERS are great places to start for easy access.
• Search Engines
  It is surprising just how much information is available through Google, especially if one takes the time to learn advanced search capabilities, like restricting to a domain or a set of document types. There are often a considerable number of presentations in PDF and PPT format on the web which already contain the data you need free for the taking. One just has to find them.
• Social Networks
  It's amazing the information that some people will let slip on a social network or how frank they will be in a one to one discussion in a group or forum. Don't forget to use these tools as well - but be careful what you post - it may be archived for eternity.
• Research Reports
  While most research reports are sponsored and skewed towards the sponsors, the generic market data as well as the capabilities they describe are always useful, and it's especially useful to see which vendors didn't make the tragic quadrant or grave analysis. Sometimes they are just as good for your organization's needs.
• Group Purchasing Organizations
  GPOs often have oodles of benchmark data. Your organization might need to join, and use them for some non-critical spend, but a judicious use of their master contracts where other members have more volumes can often result in better rates for the organization with very little effort.
• Electronic Sourcing Tools
  Some SaaS/Cloud providers will often bake-in aggregate market intelligence into the tools they offer. If the organization is already paying for these tools, use them to their full advantage!

Another tool at the organization's disposal for a successful sourcing project is a spcialized consultancy or Procurement Services Provider (PSP). A PSP with the tools, consulting experience, and skills in the right categories can jump-start an organization's indirect sourcing efforts and get significant returns months, if not years, earlier. The key is to find the right one that is incentivized to do the job. As such, the organization should probably look for contingency providers that only get paid when hard dollar savings are realized. Providers that get paid based on man-hour effort often have no incentive to get the organizatio the best deal possible as they are paid regardless and providers that get paid based on estimated savings have no incentive to make sure the savings are actually realized. And while contingency providers that get paid on hard dollar savings may ask for a (significantly) higher percentage, it's better to pay 30% of realized savings and realize 80% of the estimated savings than to pay 15% and only realize 40% of the estimated savings. In the first case, the organization still nets 56% of the savings in its pockets while, in the second case, it only nets 34% of the savings.

However, be sure to follow the best practices outlined by the authors if engaging a (contingency) PSP, or your organization might not get what it bargained for. Specifically, don't engage an organization that

• Baits and Switches
  Insist that if the organization provides a resume, that resource actually works on the project.
• Overstretches
  Make sure the organization has the resources to complete the project - manpower and financial stability.
• Asks for Double Payments
  If the consultancy gets a commission for (re)selling a certain product or service, they aren't out to get you the best deal. Period.
• Asks for Up-Front Payments on Soft-Dollar Savings Claim
  It's not a savings until the goods are received, invoiced, and paid at the negotiated price without any extra financial gotchas tagged on.
• Bakes in Hidden Additional Costs
  Read the Fine Print. If you are responsible for travel, software, hardware, and miscellaneous expense costs, your organization could pay more than it saves.
• Makes Ridiculous Savings Claims
  If a PSP comes in and promises 30% off the board in a category where the base market index has gone up 20% over the last year, that's probably not a valid claim (unless your organization has the worst sourcing team imaginable).
• Lacks Analytical or Technical Skills
  Long-Gone are the days when hardball negotiations or reverse auctions were enough. Creativity and deep analysis are often key to uncovering new savings opportunities.
• Doesn't Include Audits in their Proposals
  How else will you insure you get the promised savings? Seriously - if the PSP forgets the audit, you forget them.

Finally, it's important to note that if the organization uses an electronic sourcing tool, it's doubly important to remember what not to do or the tool will blow up the event faster than you can read this post. Tools don't replace the necessary human contact and it is vital that the team does not neglect to:

• insure the right tool has been selected for the event
• insure the right suppliers are being invited
• personally invite suppliers
• follow up on the RFx/Auctin invitation
• insure the right specifications are included
• insure the right training is provided to supplier representatives

There are a lot of tools at a Supply Management organization's disposal for conducting market intelligence and managing indirect spend, but they have to be used wisely.

At this point SI is going to take a short break, but next month it will continue with Part III of it's review of Managing Indirect Spend and discuss some examples from the field.

It's an interesting question, especially when the U.S. doesn't have the capacity to support global operations like Apple with their manufacturing needs. There's only 83 U.S. cities with enough population to support a Foxconn-size manufacturing plant, and for the vast majority of these, only if a significant amount of the population could staff the factory. Even in New York, some estimates state that 7% of the working population would have to work in the same factory to support iPhone production. That's seven percent! Chances are that not even 0.7% of the population would be qualified without extensive training.

Based on this, despite what some articles might suggest, current generation manufacturing can not return to the US. However, that doesn't mean that next generation manufacturing, focused primarily on producing specialized high-end technology products for the medical and engineering professions, couldn't be the backbone of the US economy in the decade ahead.

Consider this recent item in Industry Week on Arrrow Gear -- A Case Study in How to Improve the U.S. Economy. According to the article, Arrow Gear increased its workforce by 35% in the face of the worst recession since the Great Depression by creating products used in high-end, high-priced systems that were being exported. A manufacturer of high precision gears for a wide range of commercial and aerospace applications, it accomplished this feat by investing millions of dollars into its state-of-the-art facility.

This would suggest that a focus on specialty products for the aerospace, health, and (green) energy sectors, in particular, could allow manufacturing to return, in at least a limited extent, to the U. S. But only if the U.S. takes a lead before another country steps up to the challenge.

Any differing thoughts?

In Part I we began our review of Managing Indirect Spend, a new book by Joe Payne and William (Bill) Dorn of Source One that is the culmination of everything they have learned while doing nothing but Strategic Sourcing, primarily on Indirect Spend, since 1992 -- before it was cool. And as SI noted in its last two posts, clocking in at 422 pages, this book is an incredible handbook for anyone who wants to get a handle on indirect spend, which has increased in organizations across the board since outsourcing and right-sizing rose to fame in the 1990s. Part I reviewed the process. Here, in Part II, we will review the tools.

The first "tool" that we are going to review is Market Intelligence. Market Intelligence can be defined as a branch of market research, involving collation and analysis of available and relevant information and data on specific market. The information that is gathered varies based on the type of product or service that your organization is purchasing and how critical that product or service is to your overall supply chain and sales of your end product. However, regardless of the product or service being researched, there are critical types of market intelligence that will always need to be collected, including intelligence on global market conditions, benchmarking data, and market pressures. For starters, a buyer needs to understand the forecasting that suppliers use to prepare for competing in a global market. For example, even though a product might be purchased for domestic usage from a domestic supplier, that supplier may be making plans based on forecasting for markets outside of your home country, because if demand for the products grows significantly in foreign markets, or if currency exchange rates shift so that it is more favourable for that supplier to sell internationally rather than domestically, it may cause a shortage off domestic supply, or higher prices.

Bill and Joe are right when they state that world class organizations spend a lot of time constantly (re)evaluating their supplier chains to identify risks and non-competitive pricing. This is how they get ahead. However, it takes a lot of time to collect intelligence, and even more time to separate bad intelligence from good. Once the global market conditions are understood, the next thing the buyers will have to sift through is benchmarking data. This can be difficult in a new, or closed, marketplace if suppliers are overprotective of their data. The best way to get this data is often by working with sales and marketing. It may sound crazy that sales and marketing should be the first stop, but when one considers that all they do is benchmark their competition every day to help with daily sales efforts, they are the perfect guides to get the market intelligence team on their way.

Market pressures are also important. Not only do they impact your organization, but they impact your suppliers' organizations as well -- and these market pressures are critical. If the supplier is cash strapped, in danger of a labor shortage, or located smack-dab in the middle of an uprising-in-the-making, that supplier could be a high risk. And since suppliers are typically an organization's biggest supply management risk, this is important intel. (Other big risks are impending government regulations, cultural shifts, and natural disasters.)

Of course, the big question on everyone's mind is how do you succeed with such a hard task? Dedication is key, but so is insuring that each of the components of success are there, including:

• Right Team
  You need a technical, analytical, and communicative cross-functional team working collaboratively.
• Sufficient Time
  Make sure everyone on the team has enough time dedicated to market research. It can't be just another task on an already full plate.
• Right Metrics
  The right hard metrics, that measure tangible things, and the right soft metrics, that analyze intangibles that can effect the end product or service, need to be defined. Hard metrics may include hard-dollar savings projections, payment term improvements, lead-time improvements, and measurable quality improvements. Soft metrics may include exclusive distribution rights, material changes that will change customer perceptions, better relationships, or process improvements.
• Right Suppliers
  Researching suppliers that cannot meet organizational needs is a waste of time.
• Component Costs
  What is driving the costs? Raw materials? Labor? Currency fluctuations? Look for, and track, appropriate indices.
• Adjacent Technologies
  If a product is too new or there is a relative lack of data, identify adjacent technologies that can provide insights into costs and supplier performance. For example, instead of trying to find iPad component pricing, you might try to find generic tablet component pricing.
• Right Questions
  Don't look for a specific part or product, look for all parts or products that could potentially meet organizational needs by describing what it should do instead of naming it.
• Know When To Stop!
  As with any investment of time, you eventually reach a point of diminishing returns. While you should have enough data to intelligently raise counterarguments with the supplier about price increases and, at a minimum, have a firm understanding of the supplier's cost models, knowing what drives the costs of a sub-component that is only 5% of the cost might be going to far. Saving 3% on 5% only saves the organization 0.15% in the long run, and will generally not be worth the investment of time to realize that savings.

It's great advice. Stick around for Part II.2 where we will dive into tools for gathering data and expediting the sourcing process and complete our review of Part II of Managing Indirect Spend.

Will Supply Management ever be the "Go-To" organization? It should be, but it many organizations it still doesn't have C-Suite visibility. That's why I found the fact that SIG recently published an article on Reinventing Procurement as the "Go-To" Organization to be quite interesting because the average organization is not yet ready for Supply Management to have the role it deserves.

SI agrees with the author who states that procurement is a vital component of any large company. It supports every department and employee in the company; it engages with every service provider the company does business with; it executes contracts that help manage the risk to the company; it commits sometimes significant financial obligations on behalf of the company; it leads supplier diversity programs; it has a holistic view of the spend of the company; and it has the ability to manage consumption. No other department has as much reach both internally and externally. But yet, it is still not seen as the "go-to" department.

Why not? The author makes some good points. Challenges include:

• transactional nature or history of the group
• perception that the group is a bottleneck
• lack of leadership or mission
• lack of technology and process investment
• perception that the group is a necessary evil

But these challenges can be overcome. The author recommends that an organization starts:

1. At the Top.
First, the organization must obtain a strong leader (if it doesn't already have one) with strong relationship, communication, and business skills to forge relationships between business units.

2. With a Mission.
A vibrant procurement organization needs a clear set of meaningful (and measurable) goals. Specifically, the procurement team needs to know what it stands for, what it is trying to accomplish, and what to communicate to the business units and service providers.

3. That Gets C-Suite Attention.
After all, a consistent executive message that declares procurement as a core resource for achieving the business imperatives will go a long way to build confidence from all realms of the enterprise.

4. That Empowers People.
Motivated individuals want to own their outcomes and be recognized for their contributions. The same motivated individuals that will achieve Supply Management success for your organization.

Collectively this transformation will help to create a new corporate reputation for Supply Management - which will start to spread when the organization become[s] known as the group to call when someone needs to get something done. And if this happens,

• the transactional nature or history of the group will be forgotten
• the perception that the group is a bottleneck will be replaced with a perception that the group is the way to clear bottlenecks
• there will be no lack of leadership or mission to hold Supply Management back
• technology and process investment will be made when it benefits Supply Management and the organization as a whole
• the perception that the group is a necessary evil will be replaced with the perception that the group is a force for good in the organization

And Supply Management will have taken the first step.

In Parts I.1 and I.2 we began our review of Managing Indirect Spend, a new book by Joe Payne and William (Bill) Dorn of Source One that is the culmination of everything they have learned while doing nothing but Strategic Sourcing, primarily on Indirect Spend, since 1992 -- before it was cool. And as SI noted in its last two posts, clocking in at 422 pages, this book is an incredible handbook for anyone who wants to get a handle on indirect spend, which has increased in organizations across the board since outsourcing and right-sizing rose to fame in the 1990s. (And if you think otherwise, download SI's free eBook white-paper on Spend Visibility: An Implementation Guide, dive into your spend, and see just how much of it is indirect.)

Today we're going to conclude our review of Part One -- The Process, as well as review the last chapter in Part Two, on building stakeholder engagement (which, in the doctor's view, is as much process as tool), and discuss implementation, stakeholder engagement, continuous improvement, and, finally, what not to do if the organization wishes to conduct a successful sourcing event.

As Bill and Joe correctly point out, the vast majority of savings opportunities are squandered because there is

• no implementation plan and
• no supplier management strategy.

And the implementation is often the biggest challenge. It must be monitored continuously because the historical volumes that analysis and award are often based on do not predict future purchases. Users may start buying new items, more items, or a combination of items that provide new savings opportunities and, more importantly, especially in categories like office supplies or electronics, vendors may substitute other items when the items that were contracted are unavailable (or discontinued) and not give the organization the agreed upon, or even market, rates. So, not only can maverick buyers endanger organizational savings opportunities (when they buy off contract), so can suppliers.

However, monitoring is a challenge because it will require the end users that are the ones using the category to do most of the monitoring -- and any appeals about organizational benefits may fall on deaf ears unless a message that resonates with the end users is given. For example, instead of talking savings numbers, which no one believes (because they were never historically achieved), talk jobs. How many jobs might the initiative save? Could it save their job(s)?

And, the organization will have to break down the traditional customer / supplier relationship view that still pervades the organization. Since most innovation will often come from outside the organization, the supplier must be viewed as a collaborator, and not an antagonist only out to get the most money from the organization for the least service possible. Treated with respect, most suppliers will rise to the challenge. Suppliers often have great ideas to reduce energy consumption, downtime, freight costs, and process slowdowns if asked. Plus, they are constantly monitoring the market to identify ways to outperform their competition. Tap into that. It's a great way to start a continuous improvement initiative.

Of course, all of this will require stakeholder engagement. A stakeholder can be defined as any person, group or department that has influence in a spend category or is influenced directly or indirectly by that spend category. Stakeholders aren't just end users or category owners. Depending on the project, they are also finance departments, management, shareholders, customers, and even marketing teams. Not only do stakeholders have to buy in for implementation success, but they are a key source of information. They are the often the best source of information on the current supplier, alternate suppliers on the market, the range of spend in the category, similar categories that may be leveraged with the supplier(s), and future requirements. Plus, stakeholders can provide the following value:

• raw data
• identification of organizational pain points and a project focus
• research support and research enhancement
• detailed business requirements
• go-to-market support in negotiation and implementation management

Finally, once there is supplier and stakeholder engagement, make sure the organization doesn't screw up and do any of the following:

• allow misinformation to spread unchecked
  misinformation can spread like wildfire through an organization and kill a project before it starts (if a rumour that only one supplier can serve organizational needs ot that the goal is to improve efficiency so jobs can be eliminated takes hold, for example, it's game over)
• create overly complex or long RFxs
  this will eliminate small suppliers without the resources to complete them or the best suppliers who won't find the business opportunity worth it when other (potential) customers are more reasonable
• target the wrong audience / spam suppliers
  make sure the suppliers are pre-qualified as capable of likely meeting organizational needs, otherwise, needs won't be met and suppliers will be alienated
• ignore suppliers during the RFx process
  make sure reach-outs are performed before and after the first RFx is sent out to ensure a response
• let the supplier write the RFx
  this is a great way to ensure no other supplier comes across as capable of meeting organizational needs as the supplier will fill the spec with useless features and functions that only they have
• over-rely on technology
  nothing can replace the competent, creative guidance of humans
• take an entitled attitude
  the organization is not entitled to the supplier's offerings
• expect a blind bid
  suppliers know that "blind bids are for suckers"; if there is no relationship before the bid, there will be no relationship after
• forget to train
  if the suppliers can't use the platform, they won't bid; if the buyers don't understand the process, they won't follow it
• ask the supplier to put skin in the game
  only desperate suppliers will pay to participate in an RFx, and all the organization will get are higher prices as a result. It's the one of the stupidest things the doctor ever heard and whoever the moron is who came up with the idea should be ashamed of himself.
• do everything on your own
  recognize when you need help -- and get it!

All in all, Part One of Managing Indirect Spend contains some great advice that every indirect category manager should heed. Our next post will tackle Part II - The Tools. Continue to stay tuned.

Even though I was browsing the HBR Bogs, I was still a little surprised to see a post titled Five Steps to Long Term Growth because, to be honest, thanks to Wall Street, I didn't think anyone knew what Long-Term Growth meant anymore. And I'm being serious here. The focus on quarterly earnings calls has gotten so intense that it's almost obscene -- the nosedive a stock takes in the market after a bad earnings call is typically so severe that one would think the world is going to end.

Not only did this intense focus on short-term profit cause the end of the famed research labs in the 1990s (like Bell Labs, Xerox Parc, Texas Instruments -- and yes, I know that Bell, PARC, and TI still exist, but what we have today is not what we had then), two major market busts in the naughts (as everyone tried to IPO at unsustainable valuations), and the loss of hundreds of thousands of jobs (because people cost money and it's more profitable to operate at skeleton crew levels and make everyone, in fear for their jobs, work unpaid overtime than actually be responsible and use the obscene amounts of profit the corporation is making to actually hire the headcount the organization should have), but it pretty much spelled the end of any thought to growth plans beyond the next year in the corporate boardroom - at least as far as I can see.

Of course, it is this lack of focus on the long term that captures everything that is wrong with the marketplace today. Once long term growth and sustainability take centre stage, short term profit becomes unimportant, Wall Street is told to go <expletive> themselves, people become as important as product, and the market changes -- for the better. If you would like the market to change for the better, and become successful beyond your wildest dreams when it does, you can start by taking Vijay Govindarajan's advice and take the following Five Steps to Long Term Growth.

1. Decide What You Are Playing For

Are you playing for the fat <expletive>s on Wall Street? Or are you playing for yourself and your stakeholders. If the latter, then you have to take a stand and do something about it. No one is going to do it for you.

2. Get Everyone Speaking the Same Language

Once you decide you're playing for the long term, the next thing you have to do is something different. Growth means fostering transformational or breakthrough innovation. This will require identifying value propositions that will expand your business into new markets with new advantages.

3. Imagine Your Future

If you want sustainable growth, you must have a sense of what the future will be, what it will require, and how you will win. Then you apply your breakthrough or transformational innovation to achieving that vision.

4. Align Your Actions With Your Intentions

As Def Leppard said in a fit of Pyromania, it's Action, Not Words. You have to remember that your people are used to hearing a lot of big talk about great new initiatives that never come to pass and without some action behind them, they will assume that your words are just another corporate fad that will be forgotten as time passes. If you say you are going to eliminate all traces of phosphate from your products, assemble teams to do it. If you say you are going to create 50 jobs with a new initiative, start hiring!

5. Do It!

Growth is hard work requiring strategy, judgment, and leadership. It involves risk. It involves you. You will have to keep doing it. Day in. Day out. Day over. Day under. Day torn asunder. And back to day in.

Without contract management, everyone is gonna need a bigger briefcase ...

In Part I.1 we began our review of Managing Indirect Spend, a new book by Joe Payne and William (Bill) Dorn of Source One that is the culmination of everything they have learned while doing nothing but Strategic Sourcing, primarily on Indirect Spend, since 1992 -- before it was cool. And as SI noted in its last post, clocking in at 422 pages, this book is an incredible handbook for anyone who wants to get a handle on indirect spend, which has increased in organizations across the board since outsourcing and right-sizing rose to fame in the 1990s. (And if you think otherwise, download SI's free eBook white-paper on Spend Visibility: An Implementation Guide, dive into your spend, and see just how much of it is indirect.)

Today we're going to continue our review of Part One -- The Process, and dive into the last three parts of Bill and Joe's excellent adventure into the strategic sourcing process and discuss:

• Scorecarding
• Negotiations
• Contracting

A Balanced Scorecard is a strategic performance management tool that tracks supplier performance against a set of metrics in order to provide a well-rounded picture of the supplier that can be used to monitor and control performance. While most organizations introduce balanced scorecards after a supplier has been selected, scorecards should also be used when determining which suppliers to invite to the table, and everything -- pricing, capabilities, past performance, market intelligence, supplier responsiveness, and employee perception -- should be built into the scorecard to help insure the most appropriate supplier is selected.

The chapter also makes some great points that are often overlooked:

• Scorecarding can be a teambuilding activity
  The entire cross-functional team can contribute to the process.
• Scorecarding fosters buy-in to the awarded supplier.
  As everyone knows that the supplier was selected only after all data and all viewpoints were carefully considered and organizational needs fully balanced.
• Scorecarding can deliver market insights not otherwise obtainable.
  Especially when supplier references are checked as part of the process.
• Insights only come when a full history of the relationship is obtained
  Suppliers only give you references they believe will be glowing and cast them in the best light. Thus, it is vital to ask the references what supplier interactions were like from day one, what issues were encountered, and how (effectively) they were resolved. How long before the customer reached its current level of satisfaction?
• A lot of questions will need to be asked!
  The authors provide a starting list of sixteen on page ninety-seven, and depending on the category and its nature, this might just be the ice-breakers.

Eventually, every process results in negotiations, which are covered extensively in Chapter 6. The authors also make some great points in this chapter that cannot be forgotten:

• Suppliers have the advantage -- ALWAYS!
  Whereas a sourcing team spends 5% of its time, or less, sourcing a specific product or service, especially in an indirect spend category, the [lead] supplier negotiator is 100% focussed on selling that category of products or services every single day. They know everything about it, and the market waters around it, while the sourcing team is struggling just to tread water in the unfamiliar territory.
• A proper negotiation strategy minimizes the chance a supplier will add extra margin in a first round bid.
  If the negotiation strategy pervades the entire process, and presents a business case to the supplier that your business is something they can't afford to lose because they will profit immensely by gaining it, the supplier will be much more aggressive with its bidding up-front.
• It's Not Getting to Yes, It's Getting to No!
  If the supplier never says no, then the sourcing team never came close to getting the supplier's best offer.

The chapter also had some great techniques a buying team can use to improve pricing, as well as some very important things that a sourcing team should never do, which include:

• no negotiating after a reverse auction
• no negotiating in contracting
• no setting artificial targets

and if it's not clear why, then you should definitely read this chapter.

The last, and final part, of the basic process is contracting -- getting it in writing. A contract should balance the need for legal protection with common sense. It should be concise and only address the relevant risks and identified resolutions. It should not be a generic -- one size fits all -- boilerplate MSA that is 100 pages in length where only 10 pages are really relevant. All that does is add time (for unnecessary review), cost (of the overpriced lawyers), and loss (while savings opportunities go unclaimed) to the process. With the exception of a few basic definitions, the only clauses that should be there besides negotiated terms and resolutions are a balanced force majeure clause, a right to audit clause, and, possibly, a right to first refusal clause. While the supplier should have the right to be late without penalty if an act of nature prevents it from business as usual, the buyer should have the right to seek alternate sources of supplier or terminate the contract if the supplier cannot recover in a certain amount of time and, especially in the case of software (maintenance) contracts, should NOT be required to make payments when the supplier is unable to perform. The right to audit should be for the life of the contract, the audit should be allowed to go all the way back to the start of the contract (even if four and a half years into a five year contract), and the buyer should have the right to recover all monies owed from overcharges, even if they were made four years ago.

The chapter also did a great job of explaining why:

• legal should be brought in even before the RFP/Q to prevent issues from arising later on,
• most favoured nations clauses, which symbolize much of what is wrong with government agencies, do nothing but bite you, and everyone else, in the @ss, and
• continuous innovation clauses all but guarantee that there will be no innovation for the lifetime of the contract.

There's some great advice in these pages -- and more to come in Part I.3 which will discuss how to truly achieve continuous innovation, how to get stakeholder buy-in, and what not to do if the goal is success. Continue to stay tuned!

If you have a significant global logistics operation, chances are that, by now, you have sophisticated tracking capabilities and can tell at any given time at least where your cargo was at one point during the last 24 hours. And this is good. But if you want to go beyond minimum import/export requirements that have emerged, and are continuing to emerge, in the US and EU, then you need more than continuous tracking and monitoring -- you need chain of custody.

Chances are that, right now, you're thinking this is nuts because "chain of custody", thanks to CSI-like forensic cop dramas, is associated in your mind as a "police" or "forensics" requirement when a crime is being investigated and has nothing to do with your supply chain, but it's a wrong association. And when one remembers that many of these laws were put in place to prevent terrorism and illegal goods (such as drugs), which regulators are expecting to occur in, or through, import/export operations, it starts to make sense. And it makes even more sense when one realizes that it's (becoming) a requirement for C-TPAT, which is crucial for efficient import/export operations given the slowdowns that have resulted by all of the additional paperwork and inspections that have been added to the import/export process over the last decade.

So what is a chain of custody? It is a process that asserts:

• the cargo is what it purports to be and in the quantity stated,
• the cargo was in the continuous possession or control by the carrier who took charge of the cargo from the time it was loaded in the container at origin until the time it is delivered at final destination, and
• there is evidence of the identify of each person or entity who had access to it during its movement and that the cargo remained in the same condition from the moment it was sealed in the container for transfer to the carrier who controlled possession until the moment that carrier released the cargo into the receipted custody of another.

This, in turn requires that the cargo is secured from the time it is packed, verified, and sealed at origin, as confirmed by an authorized agent, until the time it arrives at its final destination and is verified to have been secured the entire way. In addition, all information relating to the cargo, its container, its movement, the person(s) verifying and sealing the cargo, and the persons transporting it must be maintained securely in the container security control system.

This may require more work, and more certifications, but there are benefits to the shipper, consignee, carrier, and CBP, as discussed in this great article on Tracking and Chain of Custody: The Difference over on Maritime Executive Magazine. Select Benefits include the following

• for the shipper
  • World-wide tracking and location of container for security and asset management
  • Lower insurance costs
  • Expedited entry of cargo by CBP and faster through-port time
• for the consignee
  • Enhanced knowledge of shipper and carrier performance
  • Third-party verification of all supply chain data elements and reports
  • Increased or enhanced knowledge needed for 10+2 Program Importer Security Filings
• for the carrier
  • Protection against claims by shippers that unauthorized contents were the results of carrier action
  • Automatic transmission to CBP of container data
  • Compliance with and protection within the new Rotterdam Rules impacting vessel carriers
• for CBP
  • Knowledge of which containers need no inspection improving man-power efficiency
  • Elimination of third-party reporting of trade data
  • Evidentiary data for potential legal action

Yesterday saw the release of SI's new sponsored white-paper on the Top 10 Technologies for Supply Management Savings Today. Sponsored by BravoSolution, this new whitepaper introduces the top 10 technologies that can help a company realize the goldmine of untapped savings opportunities it is sitting on. Properly employed, these technologies could help an organization tap cost reduction and savings opportunities that could collectively add up to 30%, or more, of spend across major direct and indirect categories.

e-Auction technology, which stands for electronic reverse auction technology, is typically the second entry point for a company moving from a paper-based sourcing process to a modern technology-enabled supply management solution and an organization's second stop to supply management savings.

The savings from e-Auction technology are essentially the same direct savings, from goods and services cost reductions, and indirect savings, from process efficiency and value generated from supply base expansion, found in RFX technology, with the major difference being the speed at which the event can be conducted.

With electronic auctions, once the sourcing manager creates the specifications and sets up the auction, including the weighting and award rules, the process drives itself. The suppliers sign on at the appropriate time and place their bids. When a time-limit or bid floor is reached, the auction ends and the award is made.

The major advantages of e-Auctions are the ability to define precise lot requirements and acceptable bid ranges, which can ensure cost reductions meet a minimal threshold; the ability to define different auction types, which can drive more competitive behaviour in the supply base if properly selected; and the extreme efficiency that can allow a large number of non-strategic or low-value categories to be brought under management.

Properly applied on the right categories at the right time, e-Auctions have been generating savings for over a decade. Back in 2003, in one of the first significant studies on e-Auctions, CAPS Research found that direct cost reductions usually averaged between 10% and 20%, that cycle time reductions could be as much as 40%, and that there could be a "power shift" from strong suppliers to weaker buyers not previously attainable. One company realized 165 Million of savings on 912 Million of spend, a major service provider estimated average savings of 20% on 30 Billion of reverse auctions, and a recent report from the IBM Centre is estimating that the Federal Government could save 8.9 Billion annually through reverse auctions alone.

And this technology is only #9 on the list of the Top 10 Technologies for Supply Management Savings Today. Imagine what could be saved with the top technology, or even the third best technology. Or better yet, instead of imagining, download Top 10 Technologies for Supply Management Savings Today and find out! (Registration is required for this one but the doctor believes it's worth it!)