Ken Ballard on Wednesday, April 16, 2014
Bradley Carlson on
Many business relationships of course fail to deliver on expectations each year, so how can you avoid being another statistic? There are some key issues that tend raise their head regardless of industry or deal type and despite all parties’ best intentions.
- Contracts don’t manage themselves. You can have the most airtight well thought out contract executed, however it does little good lying the bottom of the legal departments desk drawer. Don’t be surprised that if after many months (or a year) of neglect that when you pick up the contract again, the deal has gone off the rails.
- As the deal or project expands in scope, there is sure to be concern around who will pick up the additional cost and resources for the scope creep. To compound matters, without clear decision making authority, ownership, and leadership on both sides, issues will continue to fester.
- Expectations on both sides must be carefully managed. Everyone knows to “under promise and over deliver.” That mantra applies with supplier relationships as well. And in many cases, executives all have their own opinion of what a Supplier Relationship Manager is or should do.
Strategic Sourceror on
Enlightening documentaries such as "Food, Inc." and insightful literature such as "The Omnivore's Dilemma" have shaken the global food industry. Now more than ever, consumers are looking for ways to ensure that the products they're consuming are being sustainably grown, produced and distributed, leading many corporations to include environmentally and socially responsible practices in the procurement process.
The fair treatment of livestock
Though organic, ethically grown edible material is often favored by those residing in economically developed nations, people are also paying attention to how animals are being raised and how they are killed. Due to revelations regarding inhumane practices in numerous slaughterhouses, many consumers have abstained from eating meat entirely. Those who continue to consume such products want to ensure that all livestock is being fed a proper diet and exterminated in a respectable manner.
As a result of constituent desires, many governments have even developed legislature to penalize food companies that fail to exercise humane procedures. According to Farm Weekly, the Australian Department of Agriculture is currently investigating Livestock Shipping Services' cruel treatment of cattle being shipped to Gaza after footage was leaked from an organization that enforces responsible distribution methods. In order to eliminate such unfavorable activity, federal authorities are using procurement software that can help them deduce which countries are applying best practices to their livestock acquisition processes.
Preparing for future generations
Annie Castellani, a contributor to Highbrow Magazine, noted that gimmicks such as taking a picture of executives dressed in Earth Day-themed clothing and building a garden no longer makes the cut. Instead, food companies need to implement strategic sourcing that involves sustainability throughout all facets of the edibles acquisition process. Aside from ensuring that all products are being distributed in an environmentally friendly manner, corporations are giving business to farmers who exercise responsible growing methods.
This tactic is used not only to satisfy the demands of consumers, but to ensure that future generations will be able to lead healthy lives. According to an alarming report conducted by the United Nations, an additional 2 billion people will live on earth by the year 2050, which is expected to put an enormous amount of pressure on agricultural resources. Castellani noted that food companies are responding to this statistic by outlining practices in their procurement management strategies that will reduce water usage, eliminate deforestation localize produce and livestock sourcing.
In order for the human race to survive, it's imperative that organizations begin making united commitments to responsibly obtain and distribute food.
Strategic Sourceror on
New extraction methods have bolstered the United States oil industry, opening up new prospects for exportation. This reinvigoration was unanticipated half a decade ago, and foreign competitors such as Iran are looking to maintain their stronghold on global sourcing for petroleum products. In order to gain the upper hand, many industry participants are looking to reduce distribution costs in order to provide importers with cheaper options.
North American prospects
According to US News, the U.S. federal government has a number of restrictions in place that are hindering domestic oil producers from exporting their goods. Experts such as Kyle Isakower, vice president for regulatory and economic policy at the American Petroleum Institute, claimed that increased overseas shipping could bolster the American economy by creating new jobs and strengthening the nation's energy security. In addition, Isakower noted that gas prices may go down as a result.
The Energy Department and the Federal Energy Regulatory Commission originally implemented exportation constraints in response to the Arab oil embargo of the early 1970s in an effort to burgeon the domestic oil procurement process. Now that the global political climate has largely shifted, the organizations may consider alleviating these restrictions in order to distribute more light petroleum products to European countries, which typically possess refineries equipped to process it. Paul Sullivan, a professor of economics at the National Defense University, noted that the region is largely reliant on Russia to meet its energy requirements, but that the relationship has become strained as of late.
The rise of Persian oil
Andrew Critchlow, a contributor to The Telegraph, noted that Iran's Minister of Oil Bijan Zanganeh recently set a new output target of 5.7 million barrels of crude oil per day by 2018. In order to reach this goal, Critchlow stated that the country will have to obtain assistance from international oil companies, which are currently restricted from opening up new fields in Iran as a result of nationwide sanctions aimed at restricting the Iranian government's nuclear aspirations.
Although these sanctions have been somewhat alleviated, Iran is only permitted to export an average of 1 million barrels per day under the regulations. If the embargo is lifted, contention between Tehran and D.C. may drive down the cost of oil across the globe. Many companies involved in either American or Iranian petroleum production may use procurement software in an effort to determine where shipping expenses could be reduced in order to remain competitive.
Nicholas Hamner on Tuesday, April 15, 2014
Earlier this month, Source One debuted its insight report detailing the results of Marketing and Procurement collaboration. The report, which illustrates in clear detail the numerous benefits of involving Procurement in a traditionally off-limits category like Marketing, has proven to be a hot commodity among and popular download for Procurement and Strategic Sourcing professionals, thanks in part to the positive reviews from organizations like ThomasNet.
Get your free copy of the Marketing Insights Report today at marketing.sourceoneinc.com.
NC State Supply Chain Resource Cooperative
Source One VP of Professional Services Joe Payne, who just recently penned a two-part series on supply chain's failure to implement strategic initiatives for Sourcing Innovation, will be attending NCSU's Supply Chain Resource Cooperative next week on April 23 and 24th. The topic of the event will be Managing Relationships to Drive Supplier-Led Innovation, which coincides with the rise in importance for Supplier Relationship Management initiatives in best-in-class sourcing groups.
For more information on the Supply Chain Resource Cooperative, visit the NCSU.edu page
For more information on Source One's SRM program, visit srm.sourceoneinc.com
Corporate United's Supplier Summit
Source One VP of Operations William Dorn will be attending the Corporate United Supplier Summit in Chicago on May 12th and 13th. The event, hosted by Corporate United - the nation's largest Group Purchasing Organization - will serve as a networking event. Events such as these are also one of the many ways Source One stays on top of current and future industry trends and best practices, so that we can offer our clients unparalleled insight into the industry and optimization of their own internal practices.
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Currently, China stands as the world's largest emitter of carbon dioxide and several other greenhouse gases. Though the nation is mostly associated with being both the largest producer and consumer of coal, its government is making significant investments in renewable energy. This change in policy is sure to transform the country's strategic sourcing for green technology.
A leader in renewable energy?
Although China produces much of its own renewable energy material, experts anticipate that a fair amount of the necessary products will be obtained from foreign developers. According to Clean Technica, the Federal Energy Regulatory Commission, China Electricity Council and the Chinese National Energy Administration concluded that the Southeast Asian country's critical infrastructure currently stands at 1.25 trillion watts. The source noted that the government recently prohibited power companies within the country from consuming more than 3.5 billion tons of coal.
The cap is part of an effort to curtail China's fossil fuel procurement process, as consistent consumption of these resources has led to widespread air and water pollution throughout the country. In addition, the source noted that China has become the world's largest generator of wind power, some of which is installed off-shore. Just under 30 percent of all renewable energy accounts for the country's overall electricity output.
Vying for competition
Clean Technica noted that China has surpassed the U.S. in both smart grid technology and critical infrastructure investment. In an effort to update its grid, China spent $63.5 billion in order to accommodate capacity requirements for the addition of new energies. Foreign companies dictate whether domestic or foreign materials are used to implement these improvements.
A report released by multinational, India-based wind turbine producer Suzlon Energy projected that Chinese power demand is expected to grow by 75 percent by 2035, which will account for almost a third of the world's consumption. It's possible that the rate at which China can adequately manufacture necessary materials will be outpaced by how much electricity its citizens require, driving the country to organize its procurement management around obtaining foreign goods. By 2030, the source anticipated that 400GW of wind energy will make up China's overall electric infrastructure.
As producers of solar and wind technology are distributed all over the world, it's probable that overseas companies offering cheaper or better-developed goods may find an influx of business in China's grid. Nations across the globe are implementing policies geared toward fostering renewable energy consumption, creating a burgeoning green technology manufacturing market as a result.
Strategic Sourceror on Monday, April 14, 2014
Public organizations around the globe are often criticized for lackluster spend management practices. As nationwide governments are responsible for overseeing expenses related to numerous different sectors, assiduously monitoring all assets can be an arduous task. To mitigate the issue, many are turning toward electronics and software solutions to give them a comprehensive, specified vision over all operations.
A number of government authorities have been known for their voracious appetites for the latest and greatest technologies, but many of them lack the connectivity required to make every device work together to form a compatible network. Surprisingly enough, industrial asset management could possibly resolve some of the issues these officials are facing. According to Supply Chain Brain, a disconnect between divisions, machines and other assets can greatly hinder functionality.
"From setup and planning through contract management, the functions, systems and departments are highly disaggregated," said the news source. "Fixing these fragmented processes requires first and foremost, increasing visibility into the existing installed base."
For example, military authorities charged with making sure that all necessary materials are delivered to the appropriate locations could make great use of procurement software. Such technology can connect tanks, aircraft and other machines with each other so that product acquisition officers can obtain a holistic perspective on which equipment is in demand. However, in order for the system to work effectively, it may be necessary for some authorities to attain technology capable of connecting to the Internet.
Taking a step in the right direction
Authorities are also recognizing the need to maintain a consistent view over municipalities and how they're interacting with constituents. Part of responsibly serving citizens consists of effectively managing the materials procurement process. If a public water utility doesn't possess the necessary equipment, how can it effectively accommodate denizens when their sinks run dry?
According to Jamaica Information Service, the country's Ministry of Finance and Planning will implement an electronic product obtainment system - a $102.3 million investment. Officials hope that the initiative will strengthen the efficiency and quality of Jamaica's public sector procurement strategy. Through a single platform, state authorities and suppliers will be able to submit orders and complete contracts digitally. The project is jointly supported by the Government of Jamaica and the Inter-American Development Bank through grant funding.
The willingness of the Caribbean government to improve its procurement management strategy is expected to enhance the livelihood of Jamaicans and give municipalities a better perspective of what they require in order to operate.
Strategic Sourceror on Friday, April 11, 2014
After a wave of criminal allegations swept through the Chinese pharmaceutical industry, drug companies across the globe were certain that one of the world's largest growing markets was sure to encounter a major setback. However, now that the bureaucratic storm has somewhat abated, medical companies are beginning to bring their strategic sourcing back to the southeast Asian nation.
According to The Wall Street Journal, the country's Ministry of Public Security's economic crime investigation unit detained four high-level Chinese executives working for United Kingdom-based GlaxoSmithKline last summer after authorities accused them of leveraging travel agencies to bribe government officials, hospitals and physicians in order to sell more drugs for higher prices. In addition to the detrimental financial effects such an operation would have on the global pharmaceutical procurement process, ministry official Gao Feng stated that the scandal encouraged a corrupt, economically unfair environment.
Gao told the news source that the British-based company and the travel agencies exchanged nearly $489 million between them since 2007. GSK released a public statement apologizing for the actions of its members, claiming that the corporation has a zero tolerance policy for this particular kind of conduct. Pharmaceutical sales reached nearly $82 billion in 2012, and industry professionals have claimed that the market is embroiled in rampant corruption.
Slowly gaining confidence
The Wall Street Journal noted that China has exercised a number of anti-corruption laws, but that there have been too few crackdowns on the records management procedures of drug manufacturers and distributors within the region. Many experts have claimed that leveraging software to take a closer look at their books may be in the government's best interest, but the necessary funds haven't been allocated to support such an endeavor.
However, after nearly eight months of a tempered market, the Chinese pharmaceutical industry seems to be regaining investment. According to the Financial Times, Bruno Gensburger, external affairs director for French drug company Sanofi, believes the market is returning to its formal stature.
"It has never been normal, but it does seem to be more quiet now," said Gensburger regarding the Southeast Asian drug economy, as quoted by the news source.
Despite all the trouble caused by GSK's scandal, many economists are viewing the ordeal as a minor setback. The Chinese drug market continues to grow at a profitable annual rate of 15 percent, showing that western distributors and medical companies are bringing operations back to the nation. In order to get a better overview of the products they're purchasing, some of these foreign organizations are using vendor resource management so executives can gain a broader perspective of materials acquisitions.
Sarah Tuchinsky on Thursday, April 10, 2014
Within the broader categories of internal and external benchmarking, there are several sub-categories of benchmarking. Process benchmarking involves observing the best practices from one or more benchmark firms to better your processes and weigh outsourcing as an option. Performance benchmarking refers to the process of designing new products or altering current products. Businesses can use reverse engineering to take apart a competitor's product to better understand how it works and to identify areas for improvement. Financial benchmarking is used to compare your finances to that of competitors to access your overall productivity and competitiveness.
Benchmarking suppliers on a consistent basis will provide businesses with several advantages such as staying on top of market and industry trends, identifying best practices among incumbent and competitive suppliers, and finding gaps that may exist within SLAs or resource allocation. Improving strategic parts of the organization will allow it to become more efficient and can help ensure its success in the long term. Strategic advantage is more easily achieved when you increase organizational learning. This learning is accomplished through awareness of your business and everything that encompasses it. It's important to bring new ideas to your organization and promote creativity because this helps you surpass other companies in competitiveness.
Source One recently worked on a benchmark where we compared translation rates across various suppliers. These translation rates reflected per word pricing for translation services offered over the phone. The client did not perform much market research when they selected a translation provider, so they did not end up getting the cheapest price for the most quality services. Source One reviewed internal data and marketplace data to determine the pricing that several suppliers were offering. Source One also compared the quality of these services by speaking with other clients and analyzing competitors reviews and reputation. After comparing the suppliers and choosing the most suitable translation provider, Source One was able to recommend strategic initiatives to help our client achieve an overall savings of 14% annually on translation services.
Benchmarking can be used in any industry and should be part of your organization's internal practice. Competition will always be a prevalent and deciding factor in the success of your business because it is essential to keep current with market trends and competitors. Always remember to frequently benchmark to ensure that your strategy is based on reality and not historical data. With the tips listed above, you will be on your way to improving your organization and will be more aware of all facets of your organization.
Strategic Sourceror on
In order to improve distribution operations, automotive manufacturers from the Atlantic to the Pacific are reassessing their global sourcing strategies in an effort to improve sustainability. Due to the volatile nature of the worldwide economy, these professionals have expressed a need to exercise best practices to survive.
The Automotive Industry Action Group recently released a set of guidelines sponsored by 14 of the world's largest vehicle manufacturers, Fiat, Honda, General Motors and Volvo being among them. The mission of the initiative is to improve the sustainability of the worldwide vehicular procurement process. Business ethics, employee compensation and environmental standards were cited as the chief drivers for morally sound practices.
Due to the complexity of the automotive industry's distribution process, the AIAG expressed its belief that a collaborative, transparent approach toward improving strategic sourcing is the best avenue to take. Many of the principles implemented throughout the guidelines reference the need to abide by local legislature and maintain financial and environmental integrity. Some of the protocols obligated vehicle companies to:
- Exorcize corruption throughout all levels, from warehouse management to executive surveillance
- Preserve respect for company and employee data
- Protect the sanctity of intellectual property
- Reduce energy and water consumption and increase the use of renewable power, such as solar and wind
- Conduct appropriate waste management procedures
Particular attention was given to working conditions and human rights. Participating companies are compelled to recognize local minimum wage and overtime laws, as well as provide employees with a safe and healthy work environment.
Necessary for survival
Every action a modern corporation takes, from spend management to materials acquisition, is scrutinized by the public through various media outlets. In many ways, the Internet has forced companies to adopt new ethical standards in order to maintain a loyal customer base and reputable business practices. ChainLink Research analyst Ann Grackin claimed that transparency throughout the production and distribution process is imperative for corporations to preserve their integrity.
Grackin stated that everything from a disgruntled employee letting an item slip into the hands of a criminal to a business stealing intellectual property sends rifts through global sourcing. She cited an unnamed auto manufacturer's catastrophe as an example, explaining that the anonymous corporation's employees allegedly sold critical car technology on various models to a competitor.
Ultimately, the ability to view the location of all materials, monitor employee activities and adequately secure confidential company data is essential for those participating in the automotive industry to survive. Gaining such a perspective may require the help of managed IT services specializing in the technology to make comprehensive visibility a reality.
Strategic Sourceror on Wednesday, April 9, 2014
Professionals throughout the United States are beginning to express concern over the nation's current infrastructure deployments. Economists and labor organizations alike are urging municipalities to reevaluate their financial benchmarking and deduce whether or not reconstruction of roads, substations and other assets can begin as soon as possible.
Transportation needs serious improvement
The American Society of Civil Engineers recently released a report stating that over 200 million trips are taken on a daily basis across deficient bridges in 102 U.S. metropolitan locations. The average age of the nation's 607,380 structures stands at 42 years old. The report noted that in order to resolve this issue, the U.S. would need to invest $20.5 billion annually over the next 14 years.
In addition, the ASCE noted that highways from coast to coast require significant improvement. The spend management teams of federal, state and local governments need to assess the costs of acquiring materials necessary for stronger, wider road structures. The report stated that America's major urban highways are severely congested, costing the nationwide economy nearly $101 billion in wasted time and fuel on a yearly basis. Although municipalities are investing $91 billion in reconstruction initiatives every year, the Federal Highway Administration told the ASCE that an additional $79 billion is required in order to improve conditions.
Securing energy assets
Although investments in smart grid technology and renewable energy remain steady, the U.S. electric grid isn't up to the standards engineers would like. Vendor managed inventory has given utilities a better perspective over their assets, but the rate at which these materials are being acquired isn't fast enough. Mike Collins, a contributor to Manufacturing Business Technology, identified the primary problem as being that the demand for power has surpassed the construction of transmission lines by 25 percent per year.
An increase in consumer need for electricity is intimidating, but it's the age and design of America's 300,000 mile-long grid that concerns Collins. Large sections of the architecture are tied together by electrical inter-locks in order to protect the equipment. In the event that one of these assets becomes overloaded or breaks, the infrastructure will begin shutting itself down.
In order to satisfy future demand and ensure that rolling blackouts no longer occur, it's imperative that grid participants integrate microprocessors into the procurement process. If these devices are implemented throughout all facets of the system, it could save the U.S. about $49 billion in blackout expenses a year.
Strategic Sourceror on Tuesday, April 8, 2014
Emissions regulations around the globe are motivating car manufacturers to add lightweight plastics to their procurement management strategies. In addition to keeping fuel efficiency in mind, these organizations are also concerned about maintaining the quality of their vehicles. Safety, maneuverability and robustness cannot be sacrificed when implementing materials that aren't as heavy.
Weighing the options
The opportunities for lightweight vehicles remain extensive, particularly due to new production techniques. According to Plastics Today, automotive and plastics professionals from around the world assembled at the Plastics in Automotive Engineering 2014 conference in Mannheim, Germany, in early April to showcase innovative ways to deploy the materials. Lanxess, one of globe's leading chemical-makers, adopted Bond-Laminates' fiber-reinforced thermoplastic performance composites to create a mount for a TV control unit in the Audi A6. In the past, Lanxess developed a similar mechanism made of steel with two screwed-on amplifiers, which added to the overall weight and cost of the car.
In addition, the corporation also collaborated with EconCore, a Belgian organization specializing in lightweight lattice-like sandwich cores designed to improve the function of load-bearing structural automotive parts.
Numerous other products were on display, cumulatively signifying a monumental shift in the global vehicle manufacturing industry. Cooperation between different chemical companies could ultimately affect the financial benchmarking of car producers, as some of these finished materials may prove cheaper to create.
Making a lighter hose
Plastics News reported that plastics and rubbers specialist ContiTech AG recently acquired Inotec Innovative Technologie and Präzisionstechnik Geithain, two German blow molding equipment corporations. ContiTech AG spokesperson Mario Topfer claimed that the buy is part of the company's strategic sourcing strategy to meet the automotive industry demand's for blow molded plastic turbocharger hoses, which optimize the power derived from a downsized car engine.
"In Europe, a lot of focus for improving engines has been going to adding turbocharging and also going in that similar direction here in the United States," said Kevin Riddell, a professional who forecasts powertrains for LMC Automotive, a company that issues regular reports on the current state of the worldwide vehicle market.
The news source noted that the acquisition is another sign that automotive manufacturers are beginning to replace many of the metal components of their machines with plastic ones. The idea behind this endeavor is greater fuel efficiency, a concept driven by higher gas prices and a volatile environmental climate.