Is Mexico a strategic sourcing nightmare?

on Tuesday, July 22, 2014

Is Mexico a strategic sourcing nightmare?

At first glance, sourcing goods from Mexico appears feasible for North American businesses.

Initial considerations

The country's proximity to the U.S. border, as well as its coastal ports along the Pacific and Caribbean, make it a strategic networking hub of the Americas. With the right approach to the procurement process, obtaining goods manufactured in Mexico would be a lot cheaper than acquiring materials from overseas.

However, many strategic sourcing companies have speculated as to whether Mexican infrastructure and assets can adequately handle a dramatic influx of goods. In anticipation of the re-shoring trend that is sweeping North American enterprises, transportation companies operating south of the border need to purchase the right property.

Weighing the pros and cons of outsourcing to a Mexican logistics business

Coronado Logistics CEO Matt Hamson recently spoke with SupplyChainBrain on the matter, asserting that Mexican trucks are having a difficult time handling the amount of volume they're expected to distribute. The professional acknowledged that the majority of the Mexican transportation industry is comprised of small companies - with 75 percent of entities participating in the logistics industry possessing 100 vehicles or fewer.

What's the problem with this picture? According to Hamson, these logistics businesses cannot adequately transport the amount of materials their clients require them to deliver. He cited an example of one refrigerated trucking company in the nation that turned down an average of 30 loads per day because it lacked the necessary assets.

On the other hand, there are a couple of benefits organizations should consider, not including Mexico's proximity to U.S. and Canadian consumers:

  • Despite what many may initially believe, Mexican violence is primarily influenced by the drug trade as opposed to theft, as criminals have little interest in commercial goods.
  • Another assumption is that Mexican transportation companies lack contemporary technology, such as GPS, when in fact such businesses possess digital logistics assets.

Output increasing

As more manufacturing-related investment is directed toward Mexico, managed IT services will be able to bring more advanced implementations to logistics companies. Advanced planning and distribution analysis software will likely be brought to the nation through companies interested in sourcing from the country's businesses.

The reason why this would occur? Dow Jones Business News noted that Mexican production rose 3.6 percent from May of last year, supported by growth in the country's automotive industry, which accounts for nearly a fifth of its manufacturing economy. More than 1.5 million light trucks and cars were produced as of June.

In this respect, vehicle production will likely support Mexican logistics companies that are struggling to acquire the appropriate assets.

Share/Bookmark

Is ERP an obsolete spend analysis platform?

on Monday, July 21, 2014

Is ERP an obsolete spend analysis platform?

Although software companies are working constantly to make their solutions more flexible, scalable and intelligent, many professionals remain skeptical of ERP's capabilities.

The reason why? In the traditional sense, ERP has functioned more as a spend analysis platform, used by financiers to make sure an organization isn't operating at a loss. However, the complexity of global sourcing has obligated accountants to consider three elements:

  • Manufacturing operations management
  • Demand fluctuation
  • Sales success

In regard to these three factors, enterprises with hundreds of partners distributed worldwide need to be able to swiftly collaborate and scrutinize data together. The majority of ERP systems, according to SupplyChainBrain contributor and NeoGrid CEO Paulo Viola, are incapable of doing just that.

What is e-procurement? A solution

In his article, Viola acknowledged the disparity of systems and how it negatively affects materials acquisition and liquidation. He noted the importance of operating at the speed in which contemporary consumers purchase goods, which is incredibly fast considering the technology individuals have at their disposal.

So where does the solution lie? E-procurement. Capitalizing on the benefits of business process outsourcing isn't a bad idea, all things considered. Enterprises would benefit from contracting a company that can not only provide enterprises with professional insight and expertise, but supply them with a platform through which they can:

  • Easily share information with overseas partners
  • Measure demand for goods with manufacturing capabilities
  • Map out a sustainability plan that all entities contributing to the procurement process can participate in
  • Help production enterprises measure performance against sales output
  • Organize efficient, flexible global logistics routes
  • Quickly change strategic planning based on disruptions (warfare, protests, natural disasters, etc.)

Where does it reside?

An e-procurement solution's capabilities are optimized when hosted in the cloud. Such an environment makes it easy for partners to share data, sanction meetings no matter what the distance and conduct marketing analysis endeavors in real time.

Viola outlined an example of how such a platform can streamline business processes. Suppose a manufacturer and a retailer can trade information on the same platform. Whenever the latter company's inventory reaches a certain level of deficiency, the former organization will receive a notification detailing what goods its customer requires and set up a delivery time.

Flexible operations

Manufacturing.net contributor Greg Goodwin referenced a study comprised of 56 responses, the LNS Research 2013-2014 Manufacturing Operations Management survey, which showed that production companies are still having difficulty adapting to sporadic changes in global demand, fluctuating client priorities and other such factors. A cloud-based, e-procurement solution succeeds where ERP fails in this respect, providing modern manufacturers with the connectivity necessary to prioritize responsibilities.

Share/Bookmark

How new UN food regulations may affect global sourcing

on Friday, July 18, 2014

How new UN food regulations may affect global sourcing

Feeding more than 7 billion people is one challenge, but ensuring they're receiving edibles that are safe to consume is another.

Today, food companies are heavily entrenched in global sourcing, making it difficult for them to accurately determine how produce is grown and livestock is raised. Global regulations and national standards aside, many enterprises are worried about transporting perishables to needy markets before products are tarnished.

A push to increase safety

According to AllAfrica, the United Nations Food and Agriculture Organization and World Health Organization recently concluded that no more than 0.01 milligrams per kilogram of lead should be found in baby formula. In addition, the two entities asserted that a minimum of 0.2 milligrams per kilogram of arsenic can be allowed in rice.

The standards were developed by the Codex Alimentarius Commission, which has created similar regulations in the past. Representatives from approximately 170 countries congregated at the CAO's annual meeting in mid-July, agreeing that infants are particularly vulnerable to the poisonous effects of lead.

Measures for success

The key question is, how are organizations going to be able to identify such precise measurements on a global scale? First, procurement services should identify areas where baby formula is most likely to come into contact with lead, and how arsenic can leach into rice.

For example, the news source explained that arsenic is most likely to be absorbed by rice than any other vegetable. Therefore, it is important for companies to scrutinize locations where rice production's frequency correlates with arsenic's prevalence. Where is such a relationship most likely to occur? AllAfrica maintained that those living in Asian countries are most likely to suffer from arsenic poisoning due to these two factors.

Eliminating waste via transportation

The bottom line is that food enterprises have a heavy responsibility. The problem is, the only organizations that are going to make a commitment to delivering edible products to those living in indigent countries are nonprofits. With this in mind, these particular charitable entities need to make sure they don't operate at a loss, inciting a need for corporate cost reduction.

Where do nonprofits need to focus their efforts? Devex contributor Anna Patton asserted that eliminating food waste is one of the biggest concerns the world faces today. Although many believe the problem lies with developed countries, she noted that infrastructure and logistics inefficiencies often cause produce to rot before it reaches the market.

With this considered, charitable organizations should leverage a healthy mix of technology and expert insight to network with distribution assets operating in struggling economies. If effective planning is executed, critical edibles will likely be saved from tarnishing.

Share/Bookmark

Nearshoring 101

on

When talking about low-labor costs, cheap materials and mass-production, many people immediately correlate the thought with outsourcing work to areas in the Far East, and for the most part China. However, in today’s shifting landscape, some of the most cost-efficient aspects of outsourcing to those areas are now presenting unforeseen challenges. Workers are demanding higher wages, intellectual property has been compromised, and transit times and rising fuel costs have created a burden in arranging business logistics.


With these changes among others, Source One has recognized distinct advantages in working with suppliers in Mexico and other closer to home countries. We call this practice Nearshoring. Learn more about the potential of Nearshoring for businesses in this exclusive Source One infographic:


Share/Bookmark

Finding corporate cost reduction through benchmarking

on

Finding corporate cost reduction through benchmarking

When considering the procurement process, conducting thorough benchmarking of companies offering near-identical materials can help enterprises save big in the long run. 

It's the same protocol many computer manufacturers look for when choosing whether to power their machines with CPUs produced by Intel or AMD. Affordability needs to be taken into consideration, but quality and performance can't be sacrificed. 

The weigh-in 

Scrutinizing procurement and productivity in a comprehensive manner is a good way for companies to identify ways to achieve corporate cost reduction. However, as with any sector, comparing internal operations with those of competitors is essential for winning market share. 

Take the laundry industry for example. According to American Laundry News, although factors related to geographies and climate have an impact on contention within the linens cleaning economy, because operations among sector participants are relatively the same, benchmarking presents a solid opportunity for laundromats to see whether or not they'll lose business as a result of:

  • Obtaining new washers and driers
  • Expanding facility capacity
  • Installing solar panels
  • Offering patrons the chance to purchase one-time use detergent 

Collecting and using information 

How are benchmarking tasks conducted? The source outlined the tactics used by Textile Rental Services Association, which leverages surveys and other various resources to help laundry companies develop concise, accurate comparisons between them and competitors. 

Laundry-Consulting.com Managing Director David Chadsey acknowledged the benefits of business process outsourcing to conduct cost and productivity analysis. Hiring professionals to survey expenditures and output and show where improvements can be made is profitable because they can dedicate more resources to the task and scrutinize a client's competitive pricing in an unbiased manner. 

"I think vendors are a very good source," said Chadsey, as quoted by American Laundry News. "Your chemical vendor doesn't just come into your plant - he's going into other plants that are similar to yours."

Capitalizing on opportunities 

Depending on what industry a business is in, it should consider participating in publicly sponsored initiatives that reduce the cost of conducting certain operations. 

For example, CTBR noted that the Scottish government recently gave £2.2 million to the Carbon Trust's Offshore Wind Accelerator program, which promises to reduce the expenses associated with installing turbines by 10 percent. The move was initiated in the hope of encouraging collaboration between organizations focused on eliminating costs pertaining to activities in Scottish waters. 

Most importantly, strategic benchmarking is about identifying opportunities wherever they may lie. If a new business process, supplier or operation model is recognized, then the analysis was a success. 

Share/Bookmark

IoT: Procuring the right software

on Thursday, July 17, 2014

IoT: Procuring the right software

Before manufacturers conceive of new analytical insights, optimized factory production and innovations capable of reshaping business goals, they should shift priorities toward obtaining the appropriate Internet of Things platforms. 

Cost, need and ROI 

Conducting a spend analysis on how much money a production company is likely to invest in IoT is a good first step for these organizations to take. In addition, it's imperative that these companies carry out the following activities:

  • Compare and contrast provisions from technology enterprises offering solutions applicable to IoT
  • Initiate thorough background checks pertaining to on-demand support and security protocols
  • Figure out how scalable and adaptable solutions are to more data, new applications and complex software
  • Interview users to identify key pain points

What's needed from professionals? 

In regard to the people responsible for administrating an IoT system, companies can either:

  • Hire personnel knowledgeable of such architectures
  • Train existing staff on the technology's infrastructure

What such skill sets are going to be required? According to Electronic Design, Cisco recently presented a graph pertaining to IoT's influence on contemporary enterprise needs at the Internet of Things Developers Conference, held in Santa Clara, California, in early May.

The company discovered that businesses are most likely to use "fog computing," a multi-layered implementation that operates IoT frameworks on-premise while providing network support through cloud technology. Therefore, vendor resource management tools should be geared toward looking for IT experts knowledgeable of:

  • Allocating tasks to smart objects
  • Storing and processing information on virtual environments
  • Optimizing response time to new data input by the fog network

Getting a handle on security 

Suppose a factory implements 2,000 smart sensors. At first glance, this doesn't seem too intimidating given the amount of storage a cloud environment can handle (virtually endless). However, it's important to remember that this isn't a network of assets operating at the mercy of a centralized system - it's connected to the Internet. 

So, what does the facility need to do? Procure technology capable of sanctioning communication between smart devices and the Internet while preventing malware from contaminating the network. From what InformationWeek contributor Christian Borcea would assert, either a closed-loop framework or an advanced architecture should be implemented

What's closed-loop? If the aforementioned factory wants to use Internet technology but disable the system from communicating with, say, a website user, it can launch an environment through which administrators remain in control. Manufacturers with no interest in connecting to the Web should contract companies capable of constructing such an architecture. 

Share/Bookmark

Source One Opens Newest Location in Chicago

on Wednesday, July 16, 2014

It’s no secret that Source One has been welcoming some recent expansion, both in client base and office reach. As of July 1st, Source One opened a second office in downtown Chicago, Illinois. In order to accommodate the needs of Midwest businesses, Source One has positioned themselves to offer their unique service portfolio in a local environment.

Source One CEO, Steven Belli points out that due to the large volume of clients in this area, it made sense to open an office close by. Along with the increasing client demand, he believes, it will be more efficient to provide local, on-demand resources while in the area.

Diego De La Garza, a Source One Senior Project Manager, has been the head of the new office addition and is optimistic about the value Source One is able to provide to the Chicago market. With a talented workforce dedicated to delivering value to clients, Diego believes there will be enhanced success in engagements with this new opportunity.


To learn about this development, please view our recent Press Release surrounding the topic.
Share/Bookmark

Vendor resource management: Finding unique security experts

on

Vendor resource management: Finding unique security experts

When it comes to finding the talent required to ensure IT infrastructures are secure, enterprises usually look for professionals with extensive experience regarding defensive strategies. 

However, knowing the techniques hackers are using to infiltrate databases and networks can give companies a more holistic view of IT security. Using vendor resource management tools to connect with experts possessing the wherewithal to bypass sophisticated IT protection systems is a solid first step. 

The world of white-hat hacking 

The image of a teenager glued to his or her computer screen, navigating through the Web and dismantling enterprise operations is often associated with criminal behavior. However, there's an entire contingency of such figures dedicated to helping organizations identify security faults.

Joseph Williams, a contributor to Take Part, acknowledged these IT enthusiasts as white-hat hackers - cyberwarriors who are either self-educated or instructed by a third-party in the craft of database and network infiltration. A company dedicated to providing such an unorthodox but helpful service is ESET North America, which tests business websites for defects. 

"White-hat hackers are to computer programmers as editors are to writers," said ESET North America Senior Researcher Stephen Cobb, as quoted by Williams. "If you do it yourself, you don't always see the flaws." 

Networking with budding professionals 

Given this perspective, the benefits of contracting a strategic sourcing agent to connect enterprises with potential hires specializing in hacking can be enormous. These firms can sanction communications between clients and organizations that foster interest in white-hat tactics. 

For example, Williams referenced Cyber Boot Camp, a week-long convention sponsored by ESET North America that instructs San Diego high school students in IT infiltration methodology. A procurement services provider could contact enrolled students and offer them positions at companies in need of different cybersecurity approaches. 

The aim of "Project Zero" 

Hiring white-hat hackers to identify vulnerabilities is becoming a popular practice. According to Wired, Google security engineer Chris Evans has assembled a team of former cybercriminals in order to identify security faults in Internet-based software. 

One of the team members, 17-year-old George Hotz, a hacker notorious for reverse-engineering the Playstation 3 and bypassing AT&T's lock on the iPhone in 2007, was awarded $150,000 by Google for helping the company solve the protection problems he exposed. 

Hiring experts 

Organizations with stringent cybersecurity needs, such as health care companies, the Internal Revenue Service, investment agents and others should strongly consider hiring infiltration experts. The better businesses understand database and network vulnerabilities, the more comprehensive defense strategies will be. 

Share/Bookmark

Global sourcing and labor: The other end of sustainability

on Tuesday, July 15, 2014

Global sourcing and labor: The other end of sustainability

When professionals think of global sourcing sustainability, they often regard their suppliers' environmental impact - such as water and electricity consumption.

However, there's another aspect consumers and businesses should  consider: whether or not organizations are taking appropriate measures to eliminate unsavory labor practices. People don't want to be associated with companies that have directly or indirectly contributed to poor employment initiatives.

Suspending a relationship

One mobile phone maker recently discovered its strategic sourcing initiatives didn't have the oversight necessary to encourage sustainability. According to Bloomberg, Samsung Electronics failed to recognize labor violations committed by Chinese labor relations, despite stating a commitment to root out any employment transgressions.



The South Korean company conducted an audit of 100 Chinese suppliers, discovering poor practices at 59 companies. A separate study assembled by the China Labor Watch was launched after the fact. Cumulatively, the two reports discovered that a number of manufacturers were allegedly:

  • Failing to provide personnel with proper safety gear
  • Neglecting to pay staff overtime
  • Employing workers below the age of 16

In light of these allegations, Samsung has suspended its relationship with producers accused of committing wrongdoing.



"Samsung will strengthen its hiring process not only at its production facilities but also at its suppliers to prevent such cases from reoccurring," said Samsung in an emailed statement.



Setting standards isn't enough

Using a supplier relationship management tool to set standards for global partners is a good first step, but it's not the ultimate solution to attaining social sustainability. A study conducted by Ernst and Young discovered that although corporations are taking measurable approaches to encouraging favorable labor practices in their suppliers, problems still persist.



What's causing this inconsistency? EY outlined several reasons as to why employment-focused sustainability initiatives are failing: 

  • Audits that detect the prevalence of health and safety grievances exist, but they often neglect to identify the root causes.
  • Although this is not always the case, verification agencies with personnel possessing no experience regarding human rights violations are sometimes relied on too much.
  • Surveyors and investigators may not take the time to scrutinize fraudulent claims related to best practices.
  • Some organizations remain tolerant of intermediaries that provide inconclusive reports related to factory practices.
  • Sometimes, those in the procurement process will sanction purchase orders from manufacturers that have not been properly audited. 

​Fundamental issues 

There's an underlying, more elemntal reason as to why human rights abuses are going unacknowledged. The report asserted that countries such as Bangladesh, Haiti, Lesotho and Cambodia are favored as production hubs because they all have a surplus of indigent labor. In addition, each of these nations has experienced civil war in the past 40 years. 

There's no getting around it - issuing compliance audits costs money. Although the perspective is nefarious, expense is one of the reasons why unsavory enterprises source from countries with sustainability standards less stringent than those of more developed economies. If it takes a short amount of time for a review to be completed, overhead costs can be reduced. 

Fixing the problem 

Thankfully, executives who understand the need to exercise sustainable labor practices have a number of options at their disposal. EY maintained that procurement services can not only lessen the expenses associated with conducting audits, but dedicate more resources to completing such endeavors. 

In this respect, an outsourced materials acquisition specialist may be able to better conduct covert, thorough reviews of factories without facility managers knowing. It's not uncommon for companies to prepare for monthly inspections by changing day-to-day processes for a day and then reverting back to previous practices after the fact. 

In addition, supplier relationship management software must be implemented to ensure that no unauthorized orders are submitted before a manufacturer's sustainability practices have been approved. Taking the easy way out could ultimately damage an enterprise's bottom line. 

Share/Bookmark

Source One awarded in Philadelphia Business Journal's "People on the Move"

on Monday, July 14, 2014

On July 8, 2014, Source One’s Communications team was featured in the Philadelphia Business Journal’s “People on the Move” Awards. Business Development and Marketing Manager, Rebecca Lorden, was featured for her new role within the team managing all internal/external marketing communications. Marketing Manager, Heather Grossmuller, was featured for her role in social media and strategic marketing management.

With a recent boost in hiring, Source One welcomes the recent expansion and seeks to accommodate a demand for an even larger presence. Lorden states, “We are excited to begin this new chapter of engaging further with companies that we have the opportunity to help dramatically. Source One has a ton of upward potential to provide to clients—we serve to make that fact realizable.” Grossmuller states, “With a developing business environment, we look forward to optimizing our communications to best reach clients. Along with Source One’s team of experts, Rebecca and I strive to break down the often negative connotations associated with ‘consultants’ and work to help clients understand the potential to improve their performance.”

Through enjoying a job description synonymous with their strongest passion each day, Lorden and Grossmuller seek to pave the way for additional Source One successes in the future. Read more about their recent awards here: 

Share/Bookmark

Dissecting Harley-Davidson's unanticipated business move

on

Dissecting Harley-Davidson's unanticipated business move

In regard to the procurement process and marketing analysis, it's interesting to scrutinize an unexpected move made by United States motorcycle manufacturer Harley-Davidson.

Industry Week noted the producer recently constructed an electric street bike, an approach that spawns a number of questions:

  • What happens when a company digresses from its traditional strategy?
  • How will life-long customers respond to this product?
  • How will the business's materials acquisition protocol change?
  • Can the enterprise manufacture a machine with the same power and ruggedness as its traditional models? Will consumers expect this? 

Introducing: LiveWire 

The source noted that Senior Vice President and Chief Marketing Officer Mark-Hans Richer lauded the motorcycle, dubbed LiveWire, as "an expression of individuality and iconic style that just happens to be electric," featuring:

  • 74 horsepower
  • 52 foot-pounds of torque
  • The ability to go from zero to 60 in four seconds
  • A top speed of 92 mph
  • A 53 mile range
  • A charging time of 3.5 hours  

What do the customers say? 

The interesting thing is whether or not Harley-Davidson enthusiasts will take to the new model. When an enterprise considers manufacturing a new product - one that strays away from its signature offerings - it's not uncommon for it to hire a market research analyst to deduce whether or not a return on investment will be realized. 

The Verge referenced a showcase Harley hosted just outside of its Lower Manhattan store in June, giving riders the chance to try out LiveWire for themselves. George Pelaez, a member of the Harley Owners Group's New York City chapter, regarded the technology as "unbelievable."

As opposed to worrying about the bike's specifications, Richer asserted that the initiative was geared more toward finding out who the vehicle should be marketed to. One of the biggest challenges is recreating the powerful, rebellious attitude characteristic of Harley-Davidson's V-twin engines, especially as the LiveWire is incredibly quiet. 

Procuring the appropriate materials 

Marketing analysis aside, it's a wonder how the manufacturer plans on obtaining components that can take the vehicle out of metropolitan areas and into the open road. Although a new development, Power Japan Plus's Ryden battery may be the key to making the LiveWire a success. 

CNet reported that Power Japan Plus constructed a carbon-based battery that provides the same power density offered by contemporary lithium-ion batteries, but can be charged at a much faster rate. 

The materials and production costs involved with producing a vehicle such as LiveWire is one thing, but marketing it under the Harley-Davidson brand name is certainly a challenge. 

Share/Bookmark

Is re-shoring a reality or a delusion?

on

Is re-shoring a reality or a delusion?

Aside from using outsourced services and software, the easiest way to simplify the procurement process is by sourcing from companies closer to domestic operations. The more remote suppliers are, the more complex logistics becomes. 

North American enterprises may benefit from the re-shoring trend so many executives are discussing as of late. Due to a number of factors, experts have surmised that China is losing manufacturing jobs - but where's the proof behind this assertion and how will it impact strategic sourcing? 

Not dramatic, but evident 

A boost in Western consumer confidence and the prevalence of online shopping habits has demanded that businesses within the United States and Canada respond by expediting the distribution process. This is the estimation of Michael Dominy, research director with Gartner, who recently spoke with SupplyChainBrain on the matter. 

Dominy maintained that corporations can respond to fluctuations in demand more quickly when operations are closer to their headquarters. For example, if consumer desire for jeans shoots up in January, it will be easier to adjust logistics priorities when the manufacturer producing the pants is located in Mexico as opposed to Thailand. 

In addition, procurement services are wary of how the environment affects overseas factories. Dominy referenced the tsunami in Japan and flooding in Thailand as foreshadowing an age of relentless disruption at the hands of climate change. Therefore, North American companies are moving essential operations away from areas particularly vulnerable to sustaining super storms. 

Following the trend 

As consumer confidence grows, people are more likely to spend money on large purchases, such as cars and homes. In the U.S., faith in the market is growing at a steady pace, and one vehicle brand is taking note of the nation's economic improvement. 

According to The Associated Press, Germany automotive maker BMW recently announced that it plans to invest $1 billion to construct a new luxury car facility in the Mexican state of San Luis Potosi, which is located near the nation's northern border. BMW board member Harald Kruger noted that the factory will be capable of producing 150,000 cars annually, employing 1,500 workers. 

In addition, BMW intends to spend $1 billion on its plant in Spartanburg, South Carolina, so that its manufacturing capacity increases to 450,000 vehicles by the end of 2016. The company also announced its commitment to building a production center in Santa Catarina, Brazil. 

By positioning factories closer to the North American continent, BMW is in a good position to avoid overseas shipping and consolidate logistics resources. 

Share/Bookmark