Transit in trouble

on Tuesday, May 26, 2015

Transit in trouble

The common person may only consider the state of highways and main streets when they are in shambles after a long winter or ruined during a natural disaster of some sort. For instance, New Englanders despise the potholes and frost heaves left by Father Winter and his army of snow plows, while tornadoes, flooding and snow are the perfect combination for terrible road conditions in the Midwest.

Though we know the roads need a lot of work and we see road crews working tirelessly in the summer heat to smooth out the streets, there always seems to be something left undone. This leaves us with many questions: Why exactly are the roadways in the United States so neglected? Are these state-level issues or is it one of national importance? How can we get the roads up to proper standards and why does it seem to be taking so long? What sort of effect will this have on the supply chain as a whole?

Finally on the road to success?

There's actually been a lot of talk in the higher levels of American government concerning transportation infrastructure recently, although it's mostly about how the May 31 deadline for extending the federal transportation funds is quickly approaching. Unfortunately, there doesn't seem to have been much progress in Congress or the House of Representatives, although a proposed $10 billion extension that could last until the end of the year, reported SupplyChain247. While that budget might seem like a good solution, many believe that it's time to start investing in long-term options and do away with extended funding.

"We just ought to be embarrassed that we have potholes in this country that aren't filled; we have bridges that are crumbling; we have roads that need to be done; we have transit systems that are in a state of disrepair and others that we could be expanding; and we're twisting in the wind," Transportation Secretary Anthony Foxx stated in response to the approaching May deadline.

The issue at hand is not just a matter of money spent by the government, but also a question of how to go about putting money back into the hands of the people and into the economy as a whole. After all, the nation's roads are paths for products to get from one coast to another and for consumers to travel and purchase gas and goods along the way.

Rethinking the roadways

While these roads are integral to the economy of the U.S. and there's no chance that we'll abandon them in our lifetime, perhaps it's time we look at the crumbling infrastructure in the context of the century in which we live.

According to the Harvard Business Review, infrastructure is a bipartisan issue and should be reconfigured for the today's technologies and needs. The budget to fix up the roads and bridges that are nearly too dangerous for human passage should go elsewhere, maybe to more efficient means of transportation and greener methods that are more sustainable in the long run.

These new projects could open a lot of doors for the supply chain. Since the roads will need to be improved anyway, supplies and workers will be in demand regardless. But if bullet trains or other forms of transport become more viable options for the country, there will undoubtedly be a supply to meet the demand for these new forms of transportation. We need to see the roads as an opportunity for growth, not a burden that needs to be dealt with in a blase manner.


What's the buzz? Honey bees in serious danger

on Friday, May 22, 2015

What's the buzz? Honey bees in serious danger

Creepy-crawlies don't really register as an entity that needs to be protected. Those of us with misgivings or phobias about our multi-legged friends would prefer to have them out of sight, out of mind and out of the way, but many who dislike or fear such things as beetles, ants and spiders do not consider the ecological repercussions should an event actually wipe out an entire species.

Unfortunately, since many people choose not put much stock into issues pertaining to bugs or other small creatures, the situation with honey bees has gotten a little out of control. Those who are allergic or unsettled by the thought of bees might be glad to hear that there will be fewer of them buzzing around flower gardens and unsuspecting perfumed individuals this summer, but this is in fact a very big problem for anyone who enjoys fruits, vegetables, flowers and other products that require pollination. The major decrease in honeybees this year will lead to untold and severe problems for many industries around the world.

Not so sweet

Whether we want to admit it or not, we need bees. We need honey bees so earnestly, because 30 percent of everything we eat needs an insect to pollinate it, and that insect is almost always the Apis, or honeybee, reported Forbes. These little farmers travel from plant to plant, minding their own business and making it possible for us to operate multi-billion dollar industries  based on their activities.

Over the past few years, however, these precious little resources have been rapidly disappearing. In an interview with National Public Radio, beekeepers reported that they lost nearly half of their colonies last summer. While it's common for some bees to die off in the colder winter months and the arduous working months of spring and summer, these new numbers are unheard of and could very well lead to issues in agriculture.

While we have been assured that honeybees are not going to be going extinct any time soon, we will probably see an increase in price of some of the goods that rely on honeybee pollination. noted that bees add $15 billion to the United States economy each year, so what can we do to protect these buzzing boons?

Bring back our bees

Experts have been speculating for quite a few years about what could be causing colony collapse disorder, the name of the phenomenon behind the disappearing bees. At first, people blamed the pesticides and other chemicals that farmers put on their crops to keep harmful bugs at bay. However, Forbes noted that the experts are still not sure what exactly is causing all these bees to die off. Scientists have also considered shortages of the nutrients and pollen that bees need to survive. The source indicated that humans plant row after row of crops but don't bother with wildflowers, which sustain bees for longer.

Thought the specific cause or combination of causes is still unknown, we can be sure that the honeybees are no longer buzzing in abundance due to human interference. Moving forward, we should try to facilitate bee population growth by planting more wildflowers and using fewer chemicals on our plants. In the end, we could have healthier food, bigger gardens and more bees to make everything grow big and strong. Seems like this counts as a triple-win situation.


How can unemployment fall but layoffs rise?

on Thursday, May 21, 2015

How can unemployment fall but layoffs rise?

We are no strangers to the economic hardships that the United States has been facing economic hardships since the Great Recession in 2008. Since then, Americans have been fighting tooth and nail to return the country to the economic greatness it experienced in the years before the severe dips hit the stock market. The past seven years have been a long road, but with tenacity and wherewithal, we've climbed out of the pit of job loss and a weak American dollar to emerge on the other side with high hopes and an even stronger national dream.

However, not everything has returned to normal, despite the efforts of the American people to fight against the odds and claim back the lives they knew. Even though unemployment is sinking, the U.S. is seeing fewer jobs created and more layoffs - what's the deal?

Unemployment is down

After seven years in an economic slump that displaced thousands of people across the nation, the U.S. is seeing the lowest unemployment rate since before the recession hit, reported Jeffry Bartash for MarketWatch. This gargantuan feat is thanks to the government, which created hundreds of thousands of jobs in all sectors to support the American people in their time of need. Though some months have been weaker than others since the efforts began, unemployment is currently at 5.4 percent, which seems like a major accomplishment in light of the much higher rate of unemployment in 2009 and 2010.

Unfortunately, the rate at which jobs are being created seems to be slowing down considerably. In a separate MarketWatch article, Bartash outlined some of the problems that the country is facing in regard to slow job creation. The source indicated that the Federal Reserve's index of labor market conditions fell into the negatives two months in a row for the first time since 2012. Even though the dollar is strong and many more people have jobs than they did just a few years ago, people are wary about spending their money and putting it back into the economy. These issues cannot fix themselves, though the government is certain that the end of 2015 will see unemployment near the 5 percent mark.

Layoffs abound

While the market is not always responsible for various layoffs that occur around the country, these are still happening at an increasing rate. Long-standing companies such as Blue Bell have had to let some of their employees go in response to contaminated food products, reported While the numbers of Blue Bell layoffs don't necessarily reach the numbers seen during the recession, they deeply impact the community in which the factory resides.

According to a recent report by Challenger, Gray & Christmas, Inc., April 2015 saw the highest number of job cuts in the past three years. The surge topped out at over 61,000 jobs lost in a single month, up a considerable amount from March. Experts explained that the huge drop in oil prices is to blame for the layoffs in Q1, even though gas and oil prices increased later in the quarter.

It appears that no industry is safe from the sinking oil prices and subsequent job loss, but the national government is confident that these setbacks are merely temporary. Perhaps the American people are just wary of the sudden decrease in unemployment and will wait to celebrate the return of our economy.


Thoughts on the pharmaceutical supply chain

on Wednesday, May 20, 2015

Thoughts on the pharmaceutical supply chain
Regardless of the industry in which we find ourselves, it's important to have a competitive edge over other companies in the same field. On a larger scale, for separate sectors of commerce that can range anywhere from avocados to zebra-print textiles, having a unified supply chain in place is not only better for business, but forces the rest of the players in the game to rethink their methods.
One supply chain in particular is especially dexterous in maneuvering through the sometimes perilous waters of supply and demand: that of the pharmaceutical supply chain industry. Ads for pharmaceuticals are everywhere in the United States - on our televisions, in our magazines, on the sides of buses, on benches - promoting the various pills and potions that nearly 7 in 10 Americans take, according to the Mayo Clinic. And if you thought that the sector's advertising was effective, the supply chain to deliver medication to the nearly 70 percent of Americans is even more so.
Even though the pharmaceutical industry is a competitive player in the business, there are still some issues that need to be worked out in order for its supply chain to be as effective as possible.

Top-shelf performances

What determines the best performers in the supply chain can sometimes seem arbitrary. As long as consumers get their goods in a timely manner, the materials were sourced in an effective fashion and there are as few extraneous costs as possible, then the supply chain has done its job well. However, Supply Chain Quarterly does its best to measure what makes a certain supply chain excellent or not.
Based on the metrics of  its operating margin, inventory turns and the like, Supply Chain Quarterly was able to discern which pharma company's supply chain was the most effective over the period of years between 2006 to 2013 and 2009 to 2013. Despite the fact that there have been many mergers, acquisitions and new regulations that can be difficult to keep progress up, the numbers show positive growth of the supply chain even if they're slowing down a bit.

Paring down procedures

The pharmaceutical supply chain is a truly complex enigma. Researchers and doctors are always looking for the newest miracle pill that will change health care altogether. Unfortunately, this means that there is a lot more time and energy spent on procuring supplies and testing out new formulas than there is on delivery to the customer.

Supply​ Management suggested that pharma companies should focus more on the consuming customer rather than the self-sufficient scientists, as the customer is the end result, not the person who made the medication.

What can be difficult about this, the source indicated, is that the supply chains can feel convoluted when they involved so many small processes. That's not to say that there should be fewer regulations or more shortcuts to get the products into the bloodstreams of people across the nation, but taking out extraneous steps and reorganizing the focus may get the pharmaceutical supply chain up to where it could be.

While there are quite a few people around the world who maybe take too many medications, it is important that this supply chain is as effective as possible to ensure the delivery of life-saving medicines. Over the course of the next few years, we can expect to see a more trimmed-down supply chain and satisfied customers, without the supply chain losing the edge that pharmaceutical companies need to stay on top of their game.

Moves to make manufacturing safer for all

on Tuesday, May 19, 2015

Moves to make manufacturing safer for all

The world of the supply chain is massive. With all the sectors involved from beginning to delivery, products, materials, tools and everything in between go through many set of hands. When you think about it, there is even a supply chain for the machines and vehicles that will eventually help make and transport other items that are sold around the globe. Supply chain operations represent a large circle of commerce that is highly dependent on the other people in the industry doing their jobs to the best of their ability.

What happens, though, when employees at factories, plants, farms or refineries are put at risk? The well-being of humans should never come behind the desire for a thriving economy, but should a certain sector fail to produce its load, what are the repercussions? There are so many steps that need to be taken in order to protect everyone involved in the supply chain, but hopefully the actions that lawmakers take will be long-lasting and safe for all parties, from production to procurement.

Factory fires and Manila mishaps

Conditions at factories located in remote parts of the globe have been a topic of discussion that has made international headlines and been the subject of many news programs from early morning to late night television. Though efforts to shake up the old ways in favor of safer and more humane workplace environments have been made, there have yet to be any real regulations that protect the people making our clothes, toys and electronics.

Just after the two-year anniversary of the factory tragedy in Bangladesh that claimed over 1,000 lives, a slipper factory in Manila caught on fire and claimed the lives of 72 workers due to the low safety standards that exist for buildings in the city, reported ChannelNewsAsia. This is just the latest in what seems to be a fire epidemic for Manila. The city's risk of fatal fires has increased by 20 percent in the past two years alone, noted the source. Many of the recent victims could have been saved if there were proper fire exits in place, but sadly there were no escape routes for the building.

The fires were mostly caused by faulty wiring and neglected heat sources, the article continued, which could have easily been remedied with regular inspections and enforced safety regulations.

On the home front

Far-flung parts of the globe are not the only areas of the world to be plagued by poor safety standards. In fact, we are still fighting to ensure safe working conditions for United States citizens coming into contact with beryllium. This dangerous metal-turned-dust causes a fatal lung disease that could be avoided if there were more precautions in place to eradicate the health threat.

According to the International Business Times, the Office of Management and Budget is delaying making a decision about a proposal to help keep workers healthy and safe. The agency is five months past the deadline, putting countless people at risk. The Occupational Safety and Health Administration is trying hard to fix the problems that stand in the way of enacting humane working conditions.

Even though there is still a long way to go to ensure the safety of all members of the supply chain, there is now a bigger spotlight on the issue. Brushing the problem under the rug and hoping it will go away will never fix the problem, but keeping it at the forefront of the public's awareness will hopefully lead to a better future for the ever-important supply chain. 


Piracy increases, supply chain at risk


Piracy increases, supply chain at risk

When you think of pirates, your mind probably conjures the image of swashbuckling and bearded men, clad in tunics and leather, possibly sporting eye patches and pointed hats. While these adventurers of yesteryear seem like nothing more than romanticized stories these days, piracy is still a prevalent issue for procurement services around the globe. Modern-day pirates have traded in their swords and ships for military-grade firearms and attack tactics that involve taking the cargo ships and their inhabitants captive.

The threat in both Asian and African waters is very real, and something that needs to be considered when companies rely on global sourcing. How is piracy affecting the supply chain and what can we do to protect the men and women aboard the cargo ships from harm while ensuring the safe passage of the goods they are transporting?

Escalating threats

Piracy has been around for hundreds of years, if not longer, but these seafaring criminals have only changed their weaponry, tactics and targeted loot over the centuries. Today, at-risk cargo ranges anywhere from oil and fuel to scrap metal. According to Maritime Executive, 2015 has already seen five major incidents of piracy and general attacks have increased from 29 to 38 over a two-year period.

Most of these attacks took place in the South China Sea and off the coasts of Singapore and Vietnam. The severity of the incidents varies, and pirate attacks have become so commonplace that they are now considered normal to some governments. However, the Chief of Navy for Singapore issued a warning against terrorist activity, which may look strikingly similar to piracy despite having stark differences in intention.

Since the threats on the ocean show no signs of easing up or going away, many companies have taken the safety of crew and cargo into their own hands - much to the chagrin of governing bodies adjacent to the dangerous waters.

Safety first

While it's a smart investment to hire personnel from private security firms to accompany products on the voyage from point A to point B, these professionals do not always practice within the limits of the law. At times, it seems as though the sea is a vast and lawless entity, but those who traditionally operate within the bounds of the law back on land are still required to conduct themselves legally at sea.

SeatradeGlobal reported that security contractors are becoming increasingly popular in at-risk areas such as West Africa and Southeast Asia. There have been multiple issues concerning the legality of the weapons on board these vessels traveling through nearby waters, as well as the practices in which they are used. In various cases, the firearms that security professionals have could get them arrested in some countries, leaving them to fend for themselves since insurance doesn't cover illegal practices in international waters.

Piracy and the safety of cargo and crew is an issue that is being taken seriously, but also one that could go seriously wrong if ship owners resort to questionable security practices. It is the duty of the supply chain managers, procurement specialists and government agencies to work together and figure out the best way to conduct business and keep safe from pirates while still remaining lawful. Yes, of course it's important to protect the people and products on these ships, it's a matter of integrity and the vessels must also operate under the law, even if there are dangerous groups who decide to defy it.


Verizon buys AOL for $4.4 billion...Really?

on Monday, May 18, 2015

It felt like yesterday I was making sure that no one in my family needed the phone for an hour so I could go online to check out myspace to see what my friends were writing about or check out a new band I just heard about. After checking out myspace I may have strolled over to altavista or askjeeves or mapquest.

I needed an hour because it took almost half as long to connect onto the Internet using 
America Online. We were using dial-up then and in those days no one used Google because it was too plain looking. There was no such thing as Instagram or Twitter or Snapchat. You also needed to write out the entire URL (

Yes, it was the 1990's and since then, the internet entered into hyper-drive, speeding away and never looking back. So what has AOL been up to since the peak of screen names, IM-ing (instant messaging), and annual install discs? Ben Rooney from CNN Money 
details what has been happening to AOL since the 1990's:

"In January of 2000, when the Internet was still relatively young and a large percentage of users depended on dial-up modems, AOL and its stock were flying high. It used that strength to strike a deal with established media giant Time Warner (
TWX), the owner of CNN, HBO, Warner Bros., and a number of other units it has since sold off. The deal was eventually judged to be among the worst mergers in corporate history. The Internet bubble soon burst and the combined AOL Time Warner reported a record corporate loss of $99 billion in 2002, just a year after the merger was completed. The conglomerate eventually dumped the AOL unit in 2009."

On Tuesday, Verizon announced the news of the acquisition of AOL for $4.4 billion, leaving all of us to ask the same question: Why? Curious, I took a look at 
AOL and to see for myself if it was worth $50/share. Like its competitors, AOL has the usual headlines from the different sections of the news, sports updates and a section for local weather, nothing out of the ordinary. Then I discovered what I had never known: A section for AOL original shows. Did you know they have over 30 original shows that have been airing since 2011?

In comparison to AOL's website, 
Verizon's site is not user friendly. The site’s interface has been designed for its members who are looking to check their email or manage their settings. Verizon's site does not seem to gather wandering eyes and clicks. Conversely, according to the CNN article brings in $600 million in advertising, most likely a result of the site’s content and layout.

Verizon is already an enormous company. Verizon posts on their 
site important facts on last year's performance including:

  • $127.1 billion in annual revenue
  • Fortune 500 rank is 16 
  • Approximately 176,320 employees

The most important fact is that Verizon is the largest US wireless company with 108.6 million retail connections. Verizon has the network to leverage based off of volume. The company knows that if they can expand their offerings they can keep sustainable growth, retain current members, and continue to rank high and bring their shareholders money. If they believe AOL is worth $50/share that is good for all AOL stockholders, but I believe it is valued lower and is currently, an inflated stock price. Net Income has staggered since 2010, peaking in 2012 at $1 billion, but only reporting $92 million in 2013 and $126 million in 2014.

Most mergers include two companies who are in competition. The merge would boost the new company's market share and the government has to decide whether that constitutes a monopoly or unfair playing field for the industry. I do not foresee any bans or restrictions on the deal due to the separate business model/customer base of Verizon and AOL.

Tim Armstrong, CEO of AOL, believes "internet companies and traditional cable, phone and media companies need to be coming together to create joint offerings, and that those who don't find a partner are in danger of being left on the sidelines without enough scale to compete." Only time will tell if he is right.


Can reducing food waste begin with the supply chain?

on Friday, May 15, 2015

Can reducing food waste begin with the supply chain?

"Waste not, want not" and "finish everything on your plate before you leave the table" are common phrases heard in homes across the country. Many people are very conscious about using the food they've purchased effectively, not letting things grow old, stale or rancid. Allowing good food go to waste seems like an unintelligent way to spend money and resources, especially when commodities such as water are so precious in states like California, where a lot of the food in the United States comes from.

It would behoove all of us to do our parts to ensure our refrigerators are only filled with products that are fresh or will not go bad. However, while we may stay on top of every expiration date on each individual label, there is still so much food that goes to waste in the course of the supply chain. How can we stop wasting products, time, money and other resources and get food into hungry bellies instead of landfills?

Not so appetizing

Many individuals enjoy imported food and exporting goods for profit. During the winter months, people in colder climates enjoy eating salads, pineapples, raspberries and avocados, despite the fact that these ingredients can be expensive. Many of our food products travel for miles and miles before ending up in our grocery stores.

Unfortunately, this means that there is a lot more time for fresh fruits, vegetables and uncured meats to spoil before even reaching our cities. According to Albawaba, over $3.5 billion worth of food is wasted in the United Arab Emirates every year. This does not just apply to products grown in the country, but to imported goods as well. The source also noted that the United Nations reported that 32.7 percent of the food produced on the planet goes uneaten and wasted every single year.

GreenBiz surmised that by the year 2050, when the planet has 9 billion people to feed, we will run into more problems of people going hungry or eating food that's heavily genetically modified or unhealthy. It's shocking that 1.3 billion tons of food goes to waste each year, a good deal of  which occurs due to from poor supply chain practices.

Food for thought

In order to prepare ourselves for the inevitable increase of population and address the sheer wastefulness that has become a component of the supply chain, there needs to be a change in the way we approach food products. Food should not be seen as something that is disposable. It serves a purpose and is a human right, but is not accessible for all. The fact that we are all right with throwing massive quantities of food away when there are starving populations across the world doesn't bode well for the future of the planet.

Since we will not give up our luxuries of raspberries in winter and star fruits in the desert, we need to change our game. Perhaps there should be more sustainable methods for transporting food - faster, colder, more efficient - to make up for the distance between farm and fridge. Perhaps we needs to examine supply and demand needs to determine what is able to be produced and try to reconcile the numbers to eliminate waste. 

There must be a way to prevent the wastefulness that's become so commonplace in our society today. Maybe we can get to the root of the problem so the supply chain will perform to the best of its ability, delivering fresh goods to every hungry tummy.


Car recalls: Supply chain to blame?


Car recalls: Supply chain to blame?

When it comes to our lives, safety is usually our top concern, yet there are so many areas in life that force us to live dangerously. We ingest chemicals, use public transportation, seal ourselves into elevators, among other dangers, and we don't even think twice about it. We expect the manufacturers and suppliers to do a quality job while making these potentially hazardous items for us and we trust them.

However, it feels that once every few weeks, we hear of some recall or another that's the result of a death or an injury. Every once in a while, these recalls pertain to a toy or some food product, but it's often a related to a vehicle. These multi-ton machines carry us from place to place, but at what risk? How often do cars, trucks and SUVs need to malfunction before the testing facilities in charge of ensuring safety for all actually make the cars safe?

A long and bumpy road

Over the past few years, there has been a lot of press about the issues that car companies have had with their products out on the road. We've heard about faulty air bags deploying incorrectly, causing grievous bodily harm and brakes that don't work, causing crashes of all magnitudes.

In the past few weeks alone, three major car companies have needed to recall hundreds of thousands of vehicles for a number of reasons. reported Mitsubishi recalling over 130,000 cars for unstable electronic control units, which could very well result in crashes.

Car and Driver reported that General Motors has recalled nearly 470,000 cars this year for seatbelt attachment failure. These features, mandatory for every car and in nearly every state, should not malfunction, yet models of the Chevy Malibu from 2011 and 2012 needed to head back to the dealerships for repair.

And finally this year, Ford Motor Company has recalled 600,000 cars, SUVs and trucks for myriad reasons including steering and light issues, noted These standard features, imperative for overall safety for the driver and other motorists on the road, should not be problems for professional car makers, yet there are problems arising every few months.

No car is perfect, and they are progressively getting safer as the years go on, but perhaps the features that need to be on every car should be the focus, as opposed to parking assist and touch screen audio controls.

Who is responsible?

The safety of all travelers should be the main concern for car companies. However, is it necessarily their full responsibility for the success of the features in a given vehicle? In the supply chain for car manufacturing, there are suppliers who make individual components like locking mechanisms and gears and bolts that allow parts to move properly. Is it their duty to ensure the proper functionality or does the responsibility lie with those who install said components into a given vehicle?

Whoever is at fault specifically, it should be the duty of all links in the supply chain to ensure the safety of the drivers. These machines have the potential to drive up to 150 miles per hour, carrying families, driving alongside others, and safety protocol should not be over looked.


Rise of Contingent Labor in Sourcing, Procurement, and Supply Chain -- Infographic

on Thursday, May 14, 2015

There’s no doubt the Great Recession added extra strain on company hiring practices, leading HR organizations to find new ways for finding and developing ideal talent. One of those approaches was hiring more and more contingent labor. As the economy slowly recovers from the recession, however, the demand for temporary staffing and contingent labor hasn't died down. In fact, it continues to rise.

Companies, and candidates alike, are seeing the mutually shared benefits of temporary staffing arrangements - including cost flexibility for employers and work/life balance for candidates. This growing trend is particularly popular in fields such as IT/ Programming, Engineering, and Multimedia/ Design.

The demand for contingent labor is also seeing an uptick in procurement, sourcing, and supply chain organizations as well. However, with limited talent pools and high competition, companies are struggling to find these types of talent on their own- a hot topic of conversation during the 2015 Annual ISM conference this past month.

But, there is hope! Procurement consulting firms (like Source One) offer all the benefits of staffing agencies PLUS a variety of agile solutions to meet varying talent needs.

Below is an infographic outlining the growing demand for contingent workers and potential solutions for finding these candidates. 


Bridging the Gap Between Engineering and Procurement (Part One)

on Wednesday, May 13, 2015

Reducing Cost of Goods Sold through Strategic Sourcing
(In Part One of this blog series, we examine the ways in which companies struggle to bridge the gap between Engineering and Procurement/Sourcing Groups. In Part Two, we’ll discuss some methods to successfully bridge that gap.)

In today’s world of economic flux, global political unrest, and flash-in-the-pan technologies, it is difficult to strike the appropriate balance of factors your company can control and factors your company can’t control. For direct spend and engineered products, the factors within your control can seem few and far between. Companies toil to stay ahead of the market, to innovate, and to deliver finished products that perform well with customers. And before a product ever gets to market, so many hands across so many different departments have to touch it – increasing your costs and risks. The cost of goods sold (COGS) must be controlled to sustain profitability – but how can you control such an unruly element?

When cost savings is the prime directive, Procurement shoulders the heavy load of responsibility.  Using strategic sourcing techniques on indirect spend categories, companies have been able to realize cost savings and secure their supply chain operations. However, where the indirects supply base can be rationalized and pricing dynamics controlled, the marketplace for direct materials is much more difficult to control. For engineered products, spend analytics and going to market (RFx design, bidding processes, etc.) cannot deliver sustainable savings and increased profits.

The good news is that Procurement can tackle this problem by working hand-in-hand with Engineering to address matters of product design and assembly. The bad news is that these two groups don’t speak the same language, and seemingly don’t have the same goals. Procurement groups can struggle to gain traction with engineering groups when procurement’s focus is too much on cost. Obviously, Procurement’s focus on cost as a primary driver is appropriate. And stemming from rigidity or siloed thinking, Procurement groups may effectively live or die on the basis of costs savings alone.  If the organizational model and company goals all point to cost savings by any means possible, then Procurement groups may find “low-hanging fruit” by cutting corners in engineering and design. It’s easy to see how this creates an environment where Engineers see Procurement as “bean counters” who have little regard for the integrity, efficacy, and marketability of an end product.  

As with many things in business, a balanced approach wins out. Especially for direct spend, the best Procurement groups also focus on supplier financial viability, supply chain visibility, and ultimately end product quality – which naturally means better collaboration with Engineering. Procurement groups must work to understand Engineering’s point of view – why was the product designed this way? Why this material for this component?  True collaboration requires both sides to come to the table with open minds and an earnest desire to find common ground. Some companies have attempted to solve these issues through their hiring practices, specifically by creating hybrid positions such as “procurement engineer” or “sourcing engineer.” Such cross-pollination can be effective, but does not guarantee sustainable results as individuals settle into roles and the status quo takes hold.

Stay tuned for Part Two, where we’ll discuss the benefits of implementing cross-functional, multi-disciplinary processes to tackle this complex issue.

California drought continues, supply chains in danger

on Tuesday, May 12, 2015

California drought continues, supply chains in danger

"Rain, rain go away" is not a tune that anyone is singing in California. It's of no surprise that the drought in California is still going strong, with only a few inches of rain falling in the past six months. There have been a number of bans on water usage and what exactly can be in production while the state enters its fourth straight year of an incredibly limited water supply.

Unfortunately, it would appear that there is no end in sight for the parched regions, but the supply chain is still fighting to maintain its pre-drought production level. Not only is this not a sustainable practice for any company in a drought-stricken area, but the state is very close to running out of all its reserves. Northern California has even gone so far as to propose secession to prevent the southern regions from taking the precious resource. What's happening to the California supply chain now that the rainy season is almost over and there was barely any water to speak of?

Crops and clothes in crisis

The supply chain in California is now inundated with a great deal of problems thanks to the lack of rainfall in the past few years. While manufacturers, farmers and suppliers tried to keep a stiff upper lip about the whole situation, it most certainly began to wilt this year under the heat and pressure of failing crops and industries.

ZDNet reported that it takes 1.1 gallons of water to nourish a single almond and more than five gallons for a single head of broccoli. While the farms in California provide 90 percent of the green vegetables that the United States uses throughout the winter, it comes at a very steep price by way of water.

Crops are not the only products taking a hit during this prolonged drought, either. The denim industry in Los Angeles and the other garment manufacturers are feeling the strain from the lack of rain. TriplePundit indicated that many pieces of clothing are treated with water and companies have had to get creative to find alternate methods. Though many denim designers have been ahead of the curve by implementing water conservation efforts as far back as 2010, they will probably face more restrictions if the drought should continue for much longer, as it is expected to do.

Not a drop to drink

Bottled water, an industry that seemed ridiculous 30 years ago, has also been hit hard by the lack of resources. Ethos Water, a sustainable bottled water brand by Starbucks, will be moving its facility from California to Pennsylvania, noted MarketWatch. Though the company supports over 1 billion people worldwide with clean drinking water, it waited to move their production until there were water bans in place.

The water company will be looking to remedy its West Coast distribution efforts in the next few years, vowing to only produce in areas that can handle production on such a large scale. The bottled water industry is quite lucrative, with the whole market currently valued at $600 billion, reported the source.

The drought isn't just affecting businesses in California - the citizens who live there are placed under a strict ban that shows no sign of letting up. Fresh water can be considered the world's 21st century oil in terms of value and commodity, though it can be argued that water is more important to human survival. Hopefully the end of the drought is coming close, because California's supply chain is thirsty and is in desperate need for some water.