Ocean carriers strive to attain profit

on Friday, April 18, 2014

Ocean carriers strive to attain profit

Global economic growth remains steady in 2014, but ocean carriers have struggled to gain profits from increased shipping activities. Although recent alliances between a few European companies have largely mitigated this issue, spend analysis reports have shown that quarterly profits from 2013 resulted from cost reductions, slow steaming and service cutbacks. 

The current overview 

According to SupplyChainBrain contributor Robert J. Bowman, JOC Group economist Mario Moreno anticipated that the United States' containerized imports will grow by 6.7 percent over the next year, reaching a new high of 19 million 20-foot equivalent units (TEUs). In addition, American exports will most likely rise by 1.8 percent, totaling 12.4 million TEUs. Bowman noted that the activity looks promising, but whether or not carriers will be able to handle the demand is another matter entirely. 

So what's hindering the oceanic procurement process? Bowman pointed toward an increase in ship scrapping, with many of the vessels still functional. In addition, the slack demand as a result of the global economic downturn of 2008 slowed trans-Pacific and trans-Atlantic distribution, causing many carriers to scrap ships in order to make whatever money they could. Leaving liners to sit idle at foreign ports is expensive, so jettisoning the material appeared to be the best option. 

Future disruptions 

DC Velocity contributor Toby Gooley recently interviewed Brian Conrad, executive administrator for the Transpacific Stabilization Agreement, a self-proclaimed research and discussion forum that creates voluntary, optional pricing and service guidelines for ocean carriers serving trade between Asia and the U.S. Conrad noted the following factors that may disturb the 2014 contract negotiation season:

  • Alliances between different shipping companies may put independent operators out of business, as larger concords between three or more carriers result in more resources being available to efficiently transport goods across the Pacific. 
  • Though short-term rates are often viewed as ways to drive down long-term pricing, Conrad cited this technique as misguided spend management. Temporary charges won't cover lengthy rate agreements and could destabilize pricing. 
  • Budgets are expected to be constricted in 2015 and 2016, as more carriers move toward low-sulfur fuel, which costs on average $120 per metric ton more than traditional resources. 

Also, the addition of larger vessels could exceed demand in 2016, resulting in more idle ships. Though bigger ships will be able to satisfy immediate demand more efficiently than smaller counterparts, carriers should be wary of this predicted shift in demand. 

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Procurement software affected by Heartbleed Bug?

on Thursday, April 17, 2014

Procurement software affected by Heartbleed Bug?

Though the systems themselves aren't necessarily vulnerable, the data that procurement software attains from sensors located throughout all facets of the distribution process may be compromised by the Heartbleed Bug. After specialists revealed that the Open Secure Sockets Layer/Transport Layer Security protocols were unprotected, consumers expressed the most concern. However, new revelations show that manufacturers and logistics experts may also have something to worry about.

Holding on to effective programs

By integrating the Internet of Things into procurement programs, public and private organizations alike have benefited from better visibility into their materials acquisition processes. Walt Sirene, a contributor to Washington Technology, explained that the software has helped the United States federal government - as well as foreign authorities - scrutinize which aspects of product obtainment are hindering expense reduction. He also noted that spend management strategies have been optimized by the integration of data analytics tools.

"When done correctly, spend analytics can unlock valuable insights that can help federal acquisition and procurement organizations drive structured acquisition strategies and make informed decisions," noted Sirene.

As such programs utilize information that is primarily aggregated from Web-driven sources, it's possible that the Heartbleed Bug could be used to distort the intelligence being processed by the spend analytics program, which would in turn produce inaccurate, inapplicable knowledge. Executing analytics programs isn't an easy task and in the event that this distortion occurs, the resources spent collecting and processing the data would be wasted.

Securing all assets

The Heartbleed Bug allows hackers to tap into certain electronic devices used to integrate data into spend analysis programs. Any gadgets connecting to the Web could possibly be exploited to manipulate company market intelligence or even listen in on corporate video calls. According to CNN, tech companies Cisco and Juniper identified a number of networking mechanisms that have been profoundly affected by the Heartbleed Bug, servers, routers, switches, phones and video cameras among them.

  • Allowing warehouse managers to upload and access files pertaining to facility inventory is quickly becoming the norm, but malevolent figures could possibly hack into devices to view any information stored on them.
  • Select versions of Juniper's virtual private network service are exposed, meaning that anyone who managed to tap into the VPN can obtain whatever is on the user's PC's memory.
  • Though difficult to access, one type of Cisco software that operates Internet switches is at risk.

As multiple departments within a procurement agency utilize a number of Web-connected devices, critical information pertaining to the business is at risk. However, software developers and server engineers are developing ways in which Heartbleed can be addressed and resolved.

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Boeing Pushing for Major Supplier Discounts

on Wednesday, April 16, 2014


In today’s commercial aircraft production industry, Boeing is being pushed to tighten the pressure on their suppliers in order to produce higher volumes of fuel efficient planes at lower costs.  There are multiple forces at work within the industry that are causing OEM’s such as Boeing to place a microscope over their supply chain configuration. Diminished government spending has led to a sharp decrease in sales in Boeing’s Defense, Space and Security market segment, representing their second largest revenue stream. The decline of this segment, coupled with airlines demanding aircraft at lower costs, has required that Boeing lower their operating costs by making significant changes to their supplier relationships and margin strategy.

Though the aforementioned market conditions are unfavorable to Boeing, there are further reasons why Boeing has decided to rethink their supply chain strategy. Deloitte’s recently released 2014 “Global Aerospace and Defense Industry Outlook” calls for yet another record year for commercial aerospace growth.  This projected growth in global production is a result of airlines seeking to swap out older planes for more modern, fuel efficient models. Furthermore, the need to accommodate growth in passenger travel demand in the Middle East and Asia Pacific regions is also contributing to the projected increase in commercial aircraft production. Therefore, not only are declining market segments cause for internal strategic alignment, but other increasing market segments provide even more reason to increase profitability by renegotiating supplier contracts.

Historically within the Aerospace & Defense Industry, operating margins for OEM’s are very low when compared to their suppliers’. Boeing has maintained margins around 10% with its suppliers, while top tier suppliers typically make 15% and lower tier suppliers about 20%. This is unexpected considering the OEM carries the brunt of the risk with adherence to promised dates of delivery and promises of cost reductions to consumers. Seeing that Boeing carries a majority of the risk in the production of commercial aircraft, they have laid out a plan to increase their operating margins to be more in line with their suppliers’. This is yet another reason Boeing and others within the industry are opting to rationalize their supplier base and re-negotiate supplier contracts.

To address the margin structure issue with suppliers and the various other market conditions previously listed, Boeing has launched an initiative they have called their “Partnering for Success Program” in which they are targeting supplier margins that are historically higher than their own and pushing for cost savings. This new program is being implemented with suppliers as Boeing redesigns the 737 and 777 jets, two of their largest running programs. Boeing has indicated that discounts between 15 – 20% will be the starting point for these contract talks which they began in 2013. Thus far, as of mid-February 2014, about one third of contractors have locked in volumes at the requested discounted prices and the rest of the contractors are either still in talks or trying to wait for the program to go away, according to Boeing CEO Jim McNerney. To date, this effort has spawned several billion dollars in committed savings across Boeing’s supplier base.

Though programs like this generate massive savings figures, there are some potential downsides in over-valuing cost efficiency and ending supplier relationships when they are not willing to meet aggressive cost requirements, such as awarding contracts to inexperienced suppliers.  For example, Boeing awarded the landing-gear contract on the 777X jetliner in 2013 to Heroux-Devtek Inc., a Quebec based manufacturer and repairer of aerospace and industrial products. This company had no prior experience manufacturing the required landing gear systems for commercial planes and had sales of $233 million in 2013. To put his into prospective, United Technologies, the company who makes the landing gear for the current 777 model posted sales of $63 billion and has extensive experience and knowledge working with Boeing in commercial aircraft production. Switching this work from United Technologies to a company such as Heroux-Devtek Inc. is a testament to Boeing’s commitment in lowering their cost of production and ending relationships with suppliers who are not willing to get on board.

Boeing’s “partnering for success” program seems to be paying dividends with the savings locked in thus far and they continue to ensure quality by enforcing their rigorous standards with new suppliers. However, companies who are long time partners of Boeing continue to resist this unavoidable change in their operating margin structure and as a result Boeing has adopted the mantra of the “no fly list” of companies that are not willing to cooperate. With Boeing’s massive operation and volume potential, as a supplier, you would want to avoid being put on this list.   





 




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Why do some supplier relationships fail? (aka Has this happened to you?)

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We’ve all been there.  Spent months and months with a supplier talking about ‘win-win,’ ‘synergy’ and mutual strategic alignment.   Top executives on both sides talk about additional shareholder value being generated.   And then…months pass.  Not much has really changed.  In fact, there might even be an increasing level of disagreements between the two organizations.  It leaves you wondering – what happened?  Where do we go from here?

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.
Supplier relationship managers must manage expectations more craftily than Contract managers and Procurement/Sourcing managers.  As a relationship manager, one cannot simply cite regulation or policy as a reason to comply.  A Supplier Relationship Mangers must create a long-term vision of how the arrangement should benefit both sides.  Then it takes diplomacy, wile, and influence over multiple parties to motivate towards that vision.

These skills are quite different from typical Contract Management, Strategic Sourcing,  and Procurement.  There are not many best practices available as this is such a new discipline.  Source One's experts are well skilled in conducting market analyses and developing the best practices and next practices your department needs to gain a competitive advantage by implementing a proper Supplier Relationship Management (SRM) strategy. As unbiased consultants with more than two decades of experience, we have worked with tens of thousands of suppliers and fully understand what is important to them in a client supplier relationship. Our experts can work with your procurement team to pass on the knowledge and skills necessary to better your organization's supplier relationship management program. In addition to developing a supplier management strategy, Source One can serve as your Supplier Relationship Management team to identifying revenue drivers, ensuring organizational alignment, mitigating risk, reduce management costs, and developing supplier relationships that will create real value for your organization.
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Food industry pushes toward sustainable practice

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Food industry pushes toward sustainable practice

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.

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Global market for oil exports heats up

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Global market for oil exports heats up

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. 

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Source One News for April

on Tuesday, April 15, 2014

Marketing Insight Report Remains a Hot Download

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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Chinese renewable energy investment shifts green tech global sourcing

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Chinese renewable energy investment shifts green tech global sourcing

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. 

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Governments take a page from industrial asset management

on Monday, April 14, 2014

Governments take a page from industrial asset management

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. 

Obtaining technology 

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. 

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Pharmaceutical procurement process moves ahead despite scandal

on Friday, April 11, 2014

Pharmaceutical procurement process moves ahead despite scandal

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. 

The scandal

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. 

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Benchmark Ins and Outs

on Thursday, April 10, 2014

Benchmarking is a measurement of the quality of an organization's processes, policies, and programs versus those of its peers. Benchmarking allows a business to identify gaps in their organization and determine what and where improvements are necessary. It allows businesses to analyze competitors to determine how they are superior and ultimately results in improved performance through competitive intelligence. There are two primary types of benchmarking: internal and external. Internal benchmarking allows businesses to compare their performance over a number of years to identify and manage changes and trends. External benchmarking looks at the bigger picture, including your industry, your company, and all of your competitors. If you rely solely on internal benchmarking, you will never be able to get ahead of competitors because you will not be obtaining new information regarding current trends and practices.

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.
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Global auto companies seek to improve ethics

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Global auto companies seek to improve ethics

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. 

Forming alliances

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. 

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