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Q2 - 2019

INSIGHTS FROM TODAY’S PROCUREMENT LEADERS

How to Identify The Right Cultural Fit When Hiring Procurement Leadership Where Do Good CPOs Focus Their Energy? The Complex World Of Logistics Trade


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PROCURISING Q2 - 2019

INSIGHTS FROM TODAY’S PROCUREMENT LEADERS LETTER FROM THE EDITOR

Editor-In-Chief Andy Beth Miller

Design Naomi Catalina

Writers Ronald Hedley Andy Beth Miller

Outside Contributor Geoff Peters, The Hackett Group

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procurising.com No part of this publication may be reproduced without written permission from the publisher Real Sourcing Network (RSN). This publication is intended to provide accurate, authoritative, and detailed information in regard to the subject matter covered.

Aristotle once stated, “The beginning of wisdom is to define,” and that’s exactly what we have sought to do in this issue. But, there’s a twist… It’s all about you, and me, and all of us really. Specifically, it’s about identity… Identifying (and defining) yours, and others’, then using that knowledge to create the best possible scenario for procurement success. At the end of the day, we procurement professionals are concerned with that bottom line, but what if we told you that in order to be satisfied with those stats, it’s the foundation that should be foremost in your mind? Specifically, building it strong, brick by brick, with the best that you and your colleagues have to offer. But, in order to do this, you have to decipher (and yes, define) what makes you—and them—tick, pinpointing the unique capabilities that you and each of your colleagues have to contribute. That’s why we’ve sought out four leading experts, who have graciously provided us with foolproof, proactive tips. Think of them as your Webster’s Dictionary for defining the dream procurement plan. Hiring for procurement leadership roles? Geoff Peters will teach you how to identify the right cultural fit by taking you beyond the resume to focus on (and define) the attributes that really matter in a candidate. Struggling with your current leadership role? Philip Ideson shares snippets of wisdom from his weekly podcast, so you can be a boss like a boss! Expert Sabrina Traskos tackles the tough subject of energy, specifically answering the question of where a good CPO focuses theirs. Then, get behind the wheel with Jeremiah Pomerleau as he shares about what drives him to succeed, as well as offering us a roadmap to navigate the complex world of logistics.

All written materials are disseminated with the understanding that the publisher is not engaged in rendering legal advice or other professional services. Under no circumstance should the information contained herein be relied upon as legal advice, as

Sincerely, Andy Beth Miller

it is designed to be a source of information only. ProcureRising strongly encourages the use of qualified attorneys or other qualified experts with regard to the subject matter covered. As the publication does not guarantee the accuracy of the information, it is therefore not liable.

P.S. You may have noticed a change in the name of our magazine from Procurespective to ProcuRising. There was some external confusion over our use of the old name. In order to avoid any issues, we decided to change the name.

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By Ronald Hedley “I am the boss,” announced Philip Ideson’s precocious five-year-old son to the family. “I am the boss,” he told his kindergarten teacher. “I am the boss,” he proclaimed to the world. Philip Ideson IS the boss. He is the founder and Managing Director of Art of Procurement. He hosts a weekly podcast (The Art of Procurement) for procurement leaders. Ideson knows that being the boss is, well, complicated, and not as glamorous as his son might think. Ideson also knows that being the boss involves risk. He stated, “When I started the podcast, it was meant to be an experiment. ‘I am going to try this,’ I told myself. I quit my job at Accenture to set up my own business.”

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It also requires a vision. “I was inspired by listening to podcasts in marketing and the entrepreneur space, but there was nothing in procurement. It seemed to me that podcasts would be a great way to expand my network by speaking in a way that was non-threatening. I knew that I would learn by creating a platform that would give me an excuse to talk to people that I looked up to. I knew that there was a gap here for a procurement podcast.” It takes tenacity. “I was scared stiff. I had never done any interviewing, except for interviewing people for jobs. I had never done any public speaking, but if I make a commitment, then I’m going to hold myself accountable. We are now turning the corner. It has been a three-anda-half-year journey.” It demands self-reflection. “When people asked me, ‘What do you do?’ I didn’t know whether to answer that we were a podcast, a company that inspired others, or a consulting firm and capability development company. So, over the holidays, we did a brand consolidation. We brought everything into the Art of Procurement brand. We created a new website, which focused on our consulting and our learning and development.” Lastly, it promises growth. “We used to be a podcast that happened to have a business. We wanted to change that to a business that also has a podcast.” Ideson believes he and his team have done just that. “We help procurement drive change with confidence, and we do that through consulting, learning and development, and through the podcasts.”

About the Company One rarely sees the word “art” in the same sentence with the word “procurement.” Ideson shared the importance of “art” in the company’s title. “For me, procurement is human to human. We’re basically in the business of human

relationships. Procurement, as a function, focuses a lot on the science, on the process, and on the technology. It’s not to say that those don’t matter because I think they really do matter, but the ‘art’ amplifies the science. This speaks to the importance of the human element.” Ideson added, “Procurement can be an art form, but we don’t often treat it like that. Instead, we strive for consistency. Every process has to look the same, and everyone has to do the same thing. A lot of businesses are like that, where you’re pushing people into conformity because that is the easiest way to scale. Procurement professionals who are creative, connected, commercially minded-and customer-centric, and who apply those competencies to today’s technology, create a value larger than the sum of the parts. This is the ‘art’ of procurement.” Ideson values the art of storytelling. He believes it transcends procurement. Ideson stated, “I think that it’s knowing the bigger picture. First, it’s understanding the people that you’re trying to engage with, having empathy for them, understanding their fears or their aspirations. I’m thinking about it as sharing examples. I think it’s important to share examples of successes and failures in terms of how you have helped people in the past.” Ideson believes that incorporating story structure is essential, that having a narrative arc to any conversation or presentation is important. He stated, “Make sure that you have that beginning, middle, and end, the end being a call to action—as opposed to having a meeting and telling them everything that you know.” Ideson is structuring the conversation and, at the same time, making an emotional connection with his clients. “Through storytelling, we are demonstrating to them that we are an authority on the topic.”

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“You need a compelling value proposition, and that value proposition has to be built around the needs of the business.”

Part of being a good storyteller is being a great listener. Much of what Ideson incorporates into his business model has been gleaned from listening to, and learning from, procurement professionals who share their stories with him every week on his Art of Procurement podcasts. One such influence is VSP (Vision Service Plan) CPO Greg Tennyson. “Greg has been really successful integrating procurement with his business.” Ideson loves how Tennyson and the CEO of his company have forged a partnership. Surprisingly, VSP’s CEO attends procurement conferences to talk about her relationship with procurement. Ideson commented, “In the procurement space, I have never seen that before. In procurement, we need to have that level of engagement with the CEO, where that CEO is willing to make a relationship with procurement a part of their journey, to take that time to do so. Tennyson is embodying the movement we are trying to create.” So, what exactly is Ideson trying to create? What is his business model? Ideson believes, “We should be thinking of procurement as a business within a business, rather than a function within a business. We have built a methodology that enables this approach that we call Procurement Inc.” He believes that the procurement conversation needs to change from push to pull. “You need a compelling value proposition, and that value proposition has to be built around the needs of the business.” There are multiple challenges to changing the value proposition. The first is changing the mindset. “We have conditioned our business stakeholders to only think of procurement as being able to deliver cost savings. Because that is how we’ve grown. We’ve grown saying, ‘I’m going to save you 10% on all you spend with your suppliers, therefore, give me the investment dollars to build a team to do it.’”

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Ideson added, “We have built our entire ROI proposition on cost savings. So, one has to take another look at the value prop.” He then prompts us to look forward. “The next challenge is bringing in some sales and marketing techniques: understanding your customer, knowing how you can specifically help them in a way that they want to be helped, and being able to do that and communicate that at the functional level and in individual meetings.” Ideson offers an example, “Doing things like bringing in a CRM (customer relationship management) tool is a way to keep track of your conversations with people. You can start putting your stakeholders into a pipeline and look at them as customers.” Ideson believes that procurement professionals should be adding value, starting from their initial conversation with stakeholders. He stated, “When you show up the first time, give a reason that the stakeholders would want to engage with you again.” Ideson shared some possible engaging conversation starters, including, “Here is some information about an innovative new supplier in the market,” or “Here are some benchmarking and market insights that show the value we are receiving from our current suppliers,” or “These are the approaches that other companies are taking to solve the challenges that you have.” Ideson offered this final bit of wisdom, “Don’t be someone who is just showing up to relay thoughts and process, someone who is just checking the boxes. It doesn’t need to be anything earth shattering, but you need to send a signal to the person you’re trying to influence, showing them that you are somebody who has information that is of value, who can help them.”

The Future of Procurement Ideson knows that technology is the future of procurement. He believes that procurement professionals need to embrace, not fear, new technology if they are going to succeed. “Do not fear that technology will come in and replace what we do,” he said. He then offered the following story from his past that, perhaps, portends the future:


“I used to be involved in outsourcing. I lived in India for a year, running an outsource service center for procurement. My job was to take work from our offices in the UK and the US and bring it to India. When you are doing that, the vast majority of people are scared because they think you are taking their jobs away. Some were scared because they feared for their jobs and buried their heads in the sand, hoping to survive. But, there were people who benefited from the outsourcing. Those were the people who embraced it, who wanted to make it happen, who figured a way to partner more closely with outsource teams in India. There was also a future for some who had lost their jobs because work went to India. They were able to find new positions because their skill set was in demand. Unfortunately, those that chose not to improve themselves were impacted negatively.” Ideson believes that technology will, one day, replace about 80% of what procurement does. He sees CEO’s celebrating the elimination of procurement. “There is a risk that businesses will decide that the 20% that technology doesn’t replace isn’t worth having a procurement function for.” As demonstrated in the story above, Ideson believes that the procurement professionals who don’t bury their heads in the proverbial sand will have success. He believes that the procurement professional needs to embrace the new technology and needs to see that the 80% stuff (“nuts, bolts, whatever”) isn’t important. “I want to focus on the other 20%, the stuff that is critical to the value proposition of my company,” he said. Once again, Ideson offered his advice, “The procurement professional needs to own that 20% and strive to be the commercial manager for that spend. That means going beyond procurement and looking at the whole commercial value chain and where the product or service fits. The procurement professional needs to engineer that into the operating model of the company.” Ideson believes that, if successful, more companies will invest in procurement in the future. He stated, “The number and the size of procurement teams will look a lot different. We will have smaller teams on a more senior level. However, with a broadened value proposition, I believe it will be easier for companies who have not invested in strategic procurement today to build the argument for

“Embrace the future. Don’t be held back by what procurement was or has been in the past. We are all responsible. I don’t think we know the power that exists in our own choices.

making an investment. Smaller procurement teams do not necessarily mean fewer jobs because, I believe, more companies will develop their procurement capability.” Ideson is not sure when these changes will happen, but he feels procurement needs to be ready. He said, “If I were to model things out, that’s where I see things are going. The 20% is about commercial business acumen and relational skills. Our company, ultimately, wants to help people build the infrastructure and capabilities that are needed to enable a focus on the 20%, where procurement professionals can take the technical skills that they have and apply them in new ways. It all goes back to the ‘art.’”

Final Thoughts Ideson feels that if one has the right attitude, one will succeed. He concluded by saying, “Embrace the future. Don’t be held back by what procurement was or has been in the past. We are all responsible. I don’t think we know the power that exists in our own choices. We all have the power to make a difference if we change our way of thinking and challenge the status quo and everything that comes with it. So, don’t be afraid.” Perhaps, now, when someone asks, “What is your job at Art of Procurement?” Ideson will pause for a moment and think of his five-year-old son. Perhaps he will then smile and say, “I am the boss.”

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HOW TO IDENTIFY THE RIGHT CULTURAL FIT WHEN HIRING PROCUREMENT LEADERSHIP By Geoff Peters

I was reflecting on a recent discussion with a CPO colleague, in which he was looking to hire a strong number two for his procurement team. The core deliverables for the role were meaty and required significant experience across a wide range of sourceable spend. This critical hire would play a key role in moving the team and stakeholders to a S2P technology platform, where nothing had previously existed, and would introduce the organization to a strong, centralized spend influence. The person had to be good, and they had to be a candidate who could succeed the current CPO in the future.

How do you get beyond the resume—to focus on the attributes that really matter in a candidate? The CPO and I had discussed a number of candidates, including their backgrounds and experience, and he had settled on some core attributes that I hear about often, but which are rarely explicit in a job description or even verbalized when talking about what makes a successful CPO. Let’s think through some of them and discuss how they impact the ability of a Procurement Department to drive value for an organization. After all, at the end of the day, our objective should be to create a competitive advantage for the enterprise, as well as to be able to maintain it over time. So, while the candidate’s core skills and experience can’t be overlooked, it is still our job to understand if a candidate is going to be truly successful in an assigned role. In other words, we need to identify whether a candidate will be successful within the unique characteristics of your organization’s culture.

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These four characteristics are important indicators for success:

1. An Analytical Mindset l This does not mean necessarily having the ability to do a spreadsheet, but is much more about how the individual thinks through and sets up their approach to any businessrelated issue. l “Analytical” most frequently means fact-based, prepared, and aligned with their team’s ultimate objective. l This mindset usually links savings with investment and time with money, while seeking additional value measures beyond pure cost savings. l Here is where benchmarking and assessment of a procurement department’s performance is crucial, measuring it both quantitatively and qualitatively against peers and world class performers (the top 25% of all firms in both efficiency and effectiveness) to provide specific metrics.

2. A Big Picture Perspective l Sourcing is a piece of the puzzle and part of the solution. As such, sourcing is rarely a standalone project or objective. l This perspective involves an understanding of how the procurement team delivers value to the organization, as well as what the enterprise perceives as being a value-add. l A comfort level with technology and process, as well as an awareness of how they integrate across procurement and the enterprise, is vital for achieving this perspective. Ask the tough questions, like “How do changes impact the broader stakeholder and supplier community?”


This is often one of the largest gaps, as procurement departments often think that they are doing great, while stakeholders are not as equally enamored by their performance. 3. Persistence l Many successful sourcing teams work with their stakeholders across a wide range of goods and services. This is rarely done by decree or accident, as in many cases, the procurement team has to be persistent in looking for opportunities to add value. l Persistence is an attribute that is critical when looking to expand procurement’s influence and impact across additional spend categories. l This perspective approaches an evaluation based on what an individual has accomplished on the third or fourth attempt, rather than the first.

4. Likability l In consulting, we call this “the airport test.” For example, how would you feel if you were stuck in an airport with an individual and you had 4 hours to kill because of a delayed flight? I don’t think that we can overstate just how important that test is to determine the future success of an individual and their fit within the culture of an organization. Case in point, our team needs to be likable. l Stakeholder Surveys can be an unbiased gauge of likability, where a procurement department’s perceived performance (how well they think they are doing) is compared to the stakeholders’ ratings of their performance (how well the stakeholders think they are doing). This is often one of the largest gaps, as procurement departments often think that they are doing great, while stakeholders are not as equally enamored by their performance. l We will be much less successful if clients cringe when they see us coming, or as I hear all too frequently, “so and so doesn’t want to work with ‘Fred.’” You must ask yourself, “Is your candidate somebody who you will be comfortable traveling with, and perhaps even socializing with on occasion?”

So, we now have a candidate who has passed muster with our HR Sourcing or Recruiting Team and who has an impressive list of accomplishments. In fact, they show a 22% savings in sourcing specific indirect categories! Now, let’s put the sourcing success on a candidate’s resume in perspective. After all, they did save 22%! But, let’s have a conversation with the candidate that focuses on what happens “between the accomplishments,” mainly focusing on these core questions: l Was it one of the larger and more strategic spend commodities of the organization? l Was the candidate able to grow the sourcing effort beyond a contract renewal into a true, category management review that looked across the enterprise, while working with multiple stakeholders?

l Did they approach the sourcing effort analytically and do their homework to understand the underlying cost drivers and the future business requirements, not just the historical spent volume? l And, of course, where did the effort require additional review in order to ultimately arrive at an optimal solution for the organization?

Asking such probing questions that center around analytics, the environment, and problems that had to be tackled is critical to understanding how this individual will create future value for your organization. Other questions include: “Can they talk about relationships they have developed over time that allow them to access data and insight because they are someone that people want to work with?” And, of course, “Will this person fit in with your co-workers, being someone they could go out for a drink or dinner with at some point in the future?”

If your HR and recruiting teams have done their homework, all of your candidates should meet the minimum requirements that would allow them to perform the job. In the example that we started with, the candidates were subjected to interviews with stakeholders who were outside of procurement and were looking for somebody with unique expertise who would benefit their specific business’ requirements. In this type of external interview gauntlet, few candidates are going to be successful, since there are many people who can say no, and it is difficult for each of them to adopt the big picture perspective that allows them to see value across the organization. For this reason, at the potential risk of some stakeholders being excluded, it is critical to keep the interviews at a senior-enough level, so that the interviewer can be looking for possession of critical attributes versus a disqualification based on their particular bias. This company failed to do so in this example, and because of that, they did not make an offer to an outstanding candidate. Bottom Line: If your HR and recruiting teams have done their homework, all of your candidates should meet the minimum requirements that would allow them to perform the job. However, to be truly successful, your procurement team needs to have an analytical mindset, a big picture perspective, persistence and likability, as only those characteristics will truly set your team apart and make it successful within the culture of your organization. Geoff Peters is a Principal with The Hackett Group, an IPbased Consultancy. His teams specialize in procurement assessments, benchmarks, and transformation. His industry background includes work at SC Johnson, Chase Bank, and Sears Holdings, and his clients include some of the largest and most successful manufacturing, financial services, and technology companies in the world.

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Where Do Good CPOs Focus Their Energy? By Andy Beth Miller We all know Henry Ford as the world famous business magnate who founded the Ford Motor Company. In fact, many of us drive around in his fourwheeled creations on a daily basis. However, while we may know his name, few of us know what truly made this automobile mogul tick, much less what made his company thrive.

“If you communicate to everyone what the destination is at the beginning, and keep doing that consistently throughout the project, you have a much better chance of getting where you want to be,” she says. So, tell us more Sabrina, where should we row—or go— from here?

Although Ford was obviously unable to meet for an interview in order to enlighten us, we were delighted that, amid her busy schedule, performing a plethora of duties as SVP of Procurement and Real Estate at Dentsu Aegis Network, Sabrina Traskos graciously sat down with us to delve into the sometimes baffling world of procurement, while even giving a nod to Mr. Ford, as well the diva Janet Jackson herself. But more on that that later…

Traskos doesn’t beat around the bush (she obviously knows a cry for help when she sees one). Instead, she jumps right in, giving us the top four traits of a superlative CPO:

I lead off by asking Traskos her thoughts on my favorite Ford quote: “If everyone is moving forward together, then success takes care of itself.” Traskos offers a profound and relevant perspective on Mr. Ford’s philosophy. “Every time I hear this quote, I don’t picture cars. I picture rowing sculls going horizontally, vertically, and diagonally. To be a truly successful CPO, you have to get a lot of people rowing in the same forward direction,” shares Traskos, who goes on to specify that, in order for this rowing team to perform well, everyone from subject matter experts to lawyers, project managers, suppliers, accountants and the whole procurement team must move and operate as one fluid entity. With so many roles involved, this may seem a nearly impossible feat. However, Traskos says this isn’t beyond our reach, or at least it doesn’t have to be…

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Diplomacy: “Procurement has to apply principles consistently to make things work across a lot of different types of stakeholders. You have to be deliberate in your messaging, but deliver it in a way that resonates with all types of teams.”

Inspiration: “It would be nice if every supplier could deliver exactly what you need on time, but we live in a world of changing trade treaties, corporate social responsibility, and an emphasis on delivering profits to shareholders. So, you have to be able to guide all the different participants through all stages of procurement in a way that encourages them to do more than just meet the SLAs.”

Focus: “At all times, your eye must be on delivering your savings on time and in a way that is meaningful to the business. You also have to balance that with flexibility to help the business as changes manifest.”

Tenacity: “Not everyone you meet has had positive procurement experiences, so they may be reluctant to partner with your team. A lot of people don’t even understand that


procurement helps the business’ bottom line. You have to commit to showing them the value of procurement and educating them on how and when to collaborate.” Now that we’d been given the personal qualities to focus on exuding, we wanted to know what exactly we need to focus on doing in order to shine as CPOs. Traskos shared these insightful tips:

Pump up your PR and Branding Efforts: Taking a cue from diva Janet Jackson, whose lyrics ask, “What have you done for me lately?” Traskos urges us to make sure our clients know just that—what we can do (and have done) for them. “You have to let people know what they are getting out of their procurement relationship, or they will stop putting time into it.”

Implement Plans for Compliance: “This is where I see companies with mostly indirect spend or lots of M&A activity falling short. Your team can negotiate the

best deals with the lowest pricing, but it doesn’t help the company if people are doing their own thing. Compliance is a key tenet to savings, and you have to project manage the adoption of new suppliers into the purchasing system.”

Listen: “I have seen new CPOs come in and promise savings, only to roll out the exact same plan as the last one. No stakeholder will buy in. You need to listen to your colleagues, then see what works for them and what doesn’t. No one will partner with you if they think you are arrogant and incapable of hearing their needs or working towards their goals.” Be Strategic from the Start: ”You need to know exactly where your CEO and CFO want to go in the short run and in the long run. Your plans and negotiations should push them towards those goals.” Ford also said, “You can’t build a reputation on what you are going to do…” So, we’d better start rowing.

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THE COMPLEX WORLD OF LOGISTICS AND TRADE By Ronald Hedley I recently sat down with Jeremiah Pomerleau, who is currently the Head of Logistics & Supply Chain at Puls Technologies, an on-demand uber-like tech and home repair services company based in San Francisco. Previously, he served as the Senior Manager, Transportation & Trade Compliance at GoPro.

His passion for our interview topic was established early on in our conversation as he said, “I have always been fascinated by logistics, transportation in particular. Luckily, I grew up in Pennsylvania, home of Penn State University, the top logistics program in the country. I pursued a degree in logistics without any indecision.” Pomerleau earned his Bachelor of Science degree in Business Logistics. Even as a young boy, Pomerleau had a fascination with logistics. When he spotted a jet traversing the ubiquitous blue sky, he would wonder, “Where is the pilot going? Where is he or she coming from? What cargo is in the plane’s belly?” Clearly, Pomerleau was no ordinary kid. He is no ordinary adult either. Pomerleau opined, “Logistics surrounds us: the chair you’re sitting in, the desk you’re using, the pencil in your hand, the lighting overhead. Everything was produced somewhere and had to be sourced, shipped (perhaps exported and imported), customs cleared, and delivered to you.”

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Logistics Pomerleau started working at GoPro in 2012. They hired him to build and manage the transportation and trade compliance functions. “I conducted a comprehensive assessment of their supply chain, which typically includes evaluating their domestic and international supply sources, points of distribution, customer locations, trade lanes, volumes, logistics partners, spend, freight modes and service levels utilized,” he explained. Pomerleau discovered a tremendous opportunity to reduce spend, especially with transportation across all modes, both domestic and international. “The logistics operations team had selected competent transportation partners and had sound operational procedures in place, but, in terms of what GoPro was paying for those services, it was way above market,” he explained.


After Pomerleau completed his assessment, he formulated a transportation sourcing strategy and began to conduct competitive bids for air, ocean, truck and small package freight services on a global scale.

and were well-positioned to submit a formidable proposal.” He added, “This gave me, my team, and many internal stakeholders increased confidence in the procurement process and provided for a fair and equitable contest.”

Upon tendering the business, he assembled a comprehensive bid package that included an overview of the company’s supply chain, logistics objectives, trade lanes, volumes, pricing quotation form, bid timeline and criteria for selection. Specifically, he detailed where the company aspired to be from a logistics and trade compliance perspective.

Soon after Pomerleau’s contribution, things were quite different at GoPro. The proverbial tail was no longer wagging the dog.

Pomerleau commented, “My RFP’s for transportation services, especially for international air and ocean freight were, on average, 15 pages long. [The RFP’s] were not all words; [they also had] lots of figures and facts, services requirements, charts and graphs, information that people could easily glean.” Pomerleau stated that his purpose was, “to ensure the invited service providers understood GoPro’s requirements

RFP Best Practices Pomerleau’s led his final freight services bid at GoPro in December of 2017. After completing the vetting process, he invited 20 freight forwarders to compete for the company’s air and ocean business. In keeping with his structured RFP cadence, he furnished a freight services agreement (FSA) that detailed the company’s terms and conditions pertaining to invoicing, payment and, most importantly, its service level requirements and performance management controls.

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I need to verify that the freight forwarder can actually move it. They can give us a wonderful price, but if our space is not confirmed, our product won’t move.

Pomerleau stated, “I wanted their acceptance and/or feedback on all terms and conditions at the time of proposal submission.” He elaborated, “Pricing is only one factor in the decision. A service provider must deliver on their space capacity commitment without compromising service. A freight forwarder’s commitment to space capacity is critical, especially for air freight movements during peak season (late July through December).” Pomerleau knows that in transportation, especially international freight, he must get the forwarder’s acceptance upfront.

He stated, “Forwarders must offer a healthy mix of firm and soft block space allocations (BSA) and commit to handle our volume. “If we are exporting 50 tons of volume from Hong Kong to Los Angeles and Amsterdam in August, I need to verify that the freight forwarder can actually move it. They can give us a wonderful price, but if our space is not confirmed, our product won’t move.”

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Since there are hundreds of freight forwarders in the business, a company needs to vet them carefully. Pomerleau said, “Forwarders are middlemen between you and the carrier. You need to make sure that the forwarders possess strategic relationships with the carrier community (Air Cathay Pacific, Singapore Airlines, Lufthansa, etc.) with dedicated BSA’s throughout both cargo and passenger segments.”

Naturally, I had to ask, “How do you do that?” Pomerleau explained, “We ask them to show us their space allocations. If they say they possess 200 tons available exShanghai to Frankfurt, we want to see their allocations per month, per week, and per day. We also want to know what percentage they can guarantee.” Pomerleau then explained how transparency is vital, “They can show you their total allocation, but we want to see our slice of the pie. They may support 20 other shippers on a


particular trade lane, where they have a daily allocation of 10,000 kilograms. Can they lock 30% for our cargo? I often find that shippers partner with a forwarder for a great price only to encounter delays to move their cargo, and they will wonder why [the delays].”

Fixed Pricing Model

With flat rates, shippers can easily project spend for budgeting, forecasting, and total landed cost modeling, not to mention simplifying the invoice audit process.

Pomerleau knows that a fixed or flat pricing model is essential. He explained that transportation services have many components that are comprised of freight and associated accessorial costs, such as fuel, security surcharges, and terminal handling fees.

Pomerleau explained that there are a host of fees that may apply that can generate an invoice with 15-16 charge lines, “These invoices can be quite complicated to comprehend, especially when the costs are variable.” Because fuel costs are constantly floating, as are fees that are charged by third party intermediaries, Pomerleau seeks cost stability. He stated, “I negotiate fixed pricing for a year. That means that all the fees, including fuel, security, and others get rolled up into one. When they propose a rate, they complete a quotation grid that I furnish during an RFP, which lists our trade-lanes line by line.” Pomerleau believes that it is essential to shift the responsibility of managing cost back to the transportation service providers. “Fixed pricing models remove the unnecessary complexity of variable rates, thereby empowering shippers to regain control of their freight spend,” he explained. With flat rates, shippers can easily project spend for budgeting, forecasting, and total landed cost modeling, not to mention simplifying the invoice audit process. Pomerleau then asked, “How would you react if an Apple store associate requested that you pay a 7% fuel surcharge on

your new iPhone X due to increased jet fuels prices from ex-Asia? I want Apple to manage their costs, just like I want freight forwarders to manage their costs. I’m not buying fuel, I’m buying space.”

A Bit of Advice “Limited knowledge produces bad results.” --Jeremiah Pomerleau

Pomerleau believes that logistic and supply chain professionals should immerse themselves in international trade. By understanding the fundamental regulations and trade programs available, shippers can take advantage of tremendous cost savings and better vet the companies who might manage their freight. Pomerleau explained, “Whoever is responsible for logistics as a function in a company needs to either work very closely with their legal or trade compliance teams, or partner with customs brokers, attorneys or consultants to help them navigate the complex world of logistics and trade.”

Final Thoughts “Patience and diligence, like faith, remove mountains.” --William Penn Pomerleau grew up in the Quaker State, loving airplanes and planning his future in logistics. While attending Penn State University, he worked 30-40 hours per week as a busboy, a bartender, and a valet attendant. He was also the official campus AV guy. “I worked and studied hard,” he recalled. Today, Pomerleau continues to work long hours. At present, he spends 50, 60, or 70 hours per week at Puls and supporting clients as an independent consultant, working to improve, well, everything. After all, logistics and trade are in his blood.

PROCURISING 13 INSIGHTS FROM TODAY’S PROCUREMENT LEADERS


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ProcuRising Q2 2019  

ProcuRising gives you insights from today's procurement leaders. Learn the art of procurement and how to focus your energy like great CPOs.

ProcuRising Q2 2019  

ProcuRising gives you insights from today's procurement leaders. Learn the art of procurement and how to focus your energy like great CPOs.

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