Jennifer Ulrich on Tuesday, September 30, 2014
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For many U.S.-based farmers, procuring insecticides and herbicides to combat evolving diseases is quite a common practice.
The farmer's perspective
Fending off diseases in this manner is a yearly process that strengthens supplier relationship management practices in the agricultural industry - growers across the nation are increasingly relying on chemical producers to make more effective substances.
This situation has spawned a question to which many environmentalists already know the answer: How come the pesticides produced 50 years ago are no longer useful? The fact of the matter is that nature is much more resilient than one would think.
Although a large contingency of farmers don't possess degrees in environmental science, many have deduced that succeeding generations of insects and plant diseases have made subtle biological adjustments that render outdated chemicals incompetent.
The scientist's confirmation
Ramon Seidler, a former senior scientist at the Environmental Protection Agency, would have to agree with the aforementioned assertion. He argued that the overuse of pesticides - as opposed to ad hoc usage as is preferred - on genetically modified crops has spawned pesticide-resistant weeds and insects.
Seidler also noted a gross conflict of interest. Most chemical companies are now firmly rooted in the development weed-resistant and pest-resistant seeds, which contradicts their mission to sell more pesticides. He cited a report from the U.S. Department of Agriculture, which discovered glyphosate use has grown nearly twelvefold since 1996, rising to more than 500 million pounds. This has coincided with documented cases of weed resistance increasing on nearly 60 million U.S. farm acres.
Government intervention the solution?
Public legislature may send a rift through the agricultural industry's procurement process. Scott Smith of The Associated Press noted chlorpyrifos, a chemical used to treat grapes and almonds, has tarnished water supplies, threatened California's fish population and sickened a significant number of farmer workers.
New state regulations would require trained, accredited experts to acquire permits with their county's agricultural commissioner to use the pesticide.
A new definition of responsible use
The short answer to this problem is that farmers simply need to look toward alternative means to deterring weeds and crops. However, this is easier said than done when a small-time grower's livelihood is on the line. Yet, the fact of the matter is that chemical companies are profiting off GMOs and substances that are simply ineffective.
The best solution? Seek advice from other environmental experts. For large-scale grow operations, procurement services could direct farmers toward agriculturalists who are knowledgeable of natural insect deterrents that may be more difficult to implement, but are more effective in the long term.
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Widespread integration of Web-connected devices into the global health care industry will have a profound impact on the day-to-day operations of hospitals, care clinics and other such facilities.
However, many medical organizations are wondering whether procuring such sensors is going to be worth the cost. Having a market research analyst to scrutinize the following factors is advisable:
- When the average price for wearables and other Internet-connected devices is low
- Which manufacturers will provide the highest quality sensors for the best markup
- How other hospitals are using the Internet of Things to improve or transform their operations
- Best practices for leveraging IoT technology and what additional infrastructure is required to support it
Adding a few Web-connected machines to a hospital's supply list isn't as simple as some would think. Pre-existing IT assets need to be prepared for the introduction of these devices, as disorganized implementation can result in grievous security flaws.
How great of an impact will IoT have on hospitals?
As far as how much of an effect IoT technology will have on care centers depends on what kind of sensors facilities employ and how personnel intend to use them. To provide readers with a specific example, Forbes contributor Charlie Isaacs detailed three examples of how an Internet-connected magnetic resonance imaging machine can affect logistics, maintenance and patient care:
- The machine can be diagnosed and assessed by technicians remotely. Whenever an MRI experiences a disruption or fails, a specialist can troubleshoot issues without having to go on-site. From there, an order of needed components can be sent to administrators.
- As MRIs require helium to operate, whenever levels start to get low, a report will be sent to materials acquisition officers to order new canisters.
- Multiple MRIs can communicate with one another to balance patient scheduling. This ensures wait lists don't accrue and allows hospital visitors to receive scans as quickly as possible.
The need for marketing analysis
As far as wearables are concerned, pricing typically depends on how expensive certain raw materials are. Hanover Research noted that rising demand for such devices will incite a greater need for silicone, stainless steel and glass. The cost of these materials will also be influenced by surpluses and shortages.
Overall, the industry shows no signs of slowing down. The source noted the wearable sector is anticipated to increase at a compound annual growth rate of 18 percent, reaching $8.3 billion in 2018. As investment grows over the next four years, it's likely innovators will find ways to make such devices cheaper and more powerful.
Strategic Sourceror on Monday, September 29, 2014
India's large population can be a significant resource for enterprises in need of affordable labor, but how much red tape will said businesses have to cut through?
A culture of contradiction
When scrutinizing India's economy, procurement services acknowledge contradictory policies, practices and realities. For example, Harvard Business Review noted how several administrative programs are designed to micromanage the private sector, eliminating businesses from capitalizing on all available strategies and resources.
Why so many regulations? The source alluded to the possibility that the Indian government is attempting to make the distribution of wealth more equitable, an objective that has so far proven to be an abject failure - a huge gap between the country's rich and poor persists.
Working to make progress
The nation's public sector isn't ignorant of these factors, either. IndustryWeek noted that Prime Minister Narendra Modi's right-wing Bharatiya Janata Party recently scaled back several mandates that restricted foreign investors from starting operations in the country. The political body believes repealing many regulations will create jobs for the millions of Indians who enter the workforce on an annual basis.
This move is a positive step forward, as the World Bank recently ranked India as 134th easiest economy to do business with among 189 nations. China, India's manufacturing rival, placed 96th. As China possesses a closely regulated market (despite the fact that it's grown more flexible with its restrictions in the past 20 years), this goes to show just how arduous it is for enterprises to make a profit in India.
"Costs of production in India increase because of various government policies, procedures, regulations and the way some of the laws are implemented," said Maruti Suzuki executive Kenichi Ayukawa.
Not only manufacturing potential
The Economic Times recognized that India isn't just a huge repository of unskilled labor. There's a large contingency of well-educated Indian citizens with experience in engineering, IT and other skill sets global organizations find particularly valuable nowadays.
U.S. Secretary of Commerce Penny Pritzker and Secretary of State John Kerry, who wrote the piece for ET, maintained encouraging collaboration between American and Indian innovators is imperative for the economic success of both countries. The two politicians maintained that loosening India's tight restrictions on foreign labor is the first step that must be taken.
Whether or not India becomes a significant participant in global sourcing depends on how well the nation dissects its current mandates and defines which are progressive and which are hindering advancement.
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Building connections with tech companies typically involves employing vendor resource management strategies.
When it comes to managing IT hardware, colocation services are often feasible options. What these companies do is relocate servers purchased by their clients to their own data centers, undertaking maintenance, uptime and service responsibilities. Businesses with limited IT resources typically outsource to colocation providers.
What to look for
Before signing a service-level agreement with such an enterprise, it's important for organizations to look at the resources data center management companies have at their disposal. Data Center Journal contributor Bob DeCoufle outlined several questions that businesses must ask colocation specialists:
- What measures are taken to ensure business continuity in the event unscheduled downtime or natural disasters occur?
- Are power and cooling options provided, or are such processes predefined?
- What infrastructure configurations are employed? Stem-and-leaf? Tree plots?
- Does the prospect use up-to-date temperature management techniques or leverage legacy designs?
- What steps are taken to ensure energy efficiency is employed? Are green resources accessed to lower electricity expenses?
- How does the provider exercise security practices? Are cameras prevalent around the facility? Which employees have access to the servers? How is authorization granted?
- Are equipment expansion options available in the event more applications or storage are needed?
- Does the colocation company offer software-defined administration such as virtualization? Are these provisions included in the SLA or regarded as additional services?
These are all assessments to make during the RFP process. If comprehensive answers are given, then this signifies the vendor is reliable and good at what it does.
A different option
There's also the option of purchasing dedicated servers from colocation experts. As opposed to purchasing hardware and having another company deliver it, the latter process involves renting equipment from data center management companies.
Why would this be considered more appealing than co-locating? Upgrading hardware is the vendor's responsibility, as opposed to the client's. This eliminates the need for in-house IT teams to travel to facilities and implement new equipment whenever updates are necessary. In addition, scaling environments is much easier, as more expenses are simply added onto the monthly fees.
However, there are some downsides to renting servers from colocation businesses. According to MyHostNews, even if the leasing fees cover the initial hardware investment, the cost of the server will never change. Also, there's the possibility companies are using low-end equipment that requires frequent maintenance, which may cause colocation providers to tack on costs when upgrades are necessary.
With these two options in mind, it's important for those in strategic sourcing to assess whether expenses will decrease as time progresses, or slowly accumulate over the course of a relationship.
Strategic Sourceror on Friday, September 26, 2014
Rooting out vulnerabilities among supplier and vendor relationships is becoming imperative.
The more intricate overseas distribution and manufacturing connections become, the greater companies are at risk of sustaining major disruptions. A break in the logistics process isn't the only concern - procurement services often encounter poor labor practices, questionable sourcing tactics and even affiliations with businesses that are indirectly connected to criminal enterprises.
Abiding by Western standards
Advisors specializing in supplier relationship management are heavily involved in financial auditing. Why? Because Western consumers demand it. The European and North American markets are arguably the most influential economics in the world because their participants set standards for what defines quality goods.
The problem is, manufacturing products of the highest condition at an affordable price isn't necessarily easy when "quality" is not only defined by usability, but by whether the products were made in regard to sustainability. While satisfying these demands can be frustrating, doing so is imperative.
Assess before request
Contemporary enterprises acknowledge that haphazardly conducting reviews of potential suppliers before moving into the RFP process isn't going to cut it. Thorough assessment and scrutiny must occur before a partnership is even considered.
Han Kieftenbeld, CFO of United Kingdom-based bakery technology developer AB Mauri, spoke with The Wall Street Journal about his responsibilities, citing the following tasks:
- Settling agreements between AB Mauri and contractors, giving the former company the authority to conduct qualification surveys and audits whenever Kieftenbeld or his subordinates deem it necessary.
- Sending people to facilities and supplier-owned properties to thoroughly determine whether quality standards (including sustainability goals) are being met.
- Ensuring that constant communication is being maintained with overseas vendors, contractors, subcontractors and partners.
Four necessary steps
Manufacturing Business Technology Magazine contributor Donna Fritz advised her readers to follow a four-step process to meet consumer quality expectations and reduce supply risks:
- Start with regulations: Not only should a company comply with standards set by domestic agencies, it should ensure its suppliers' practices are meeting those defined by foreign authorities.
- Look at the accounts: In order to eliminate fraud, enterprises should strongly consider automating their accounts payable processes, which will also help them better abide by the Sarbanes-Oxley regulation.
- Move toward procurement: Create a scorecard of a logistics provider's and suppliers' practices. Are there any red flags that are going unnoticed?
- Look at the environment: Surveying the political, economical and cultural atmosphere of areas where an enterprise does business allows it to anticipate any demographic shifts that may affect operations.
The global market is one entrenched in complexity, which can make it easy for unfavorable practices to fall through the cracks. Putting every effort forward to dismantle such endeavors is incredibly important.
Rebecca Lorden on Thursday, September 25, 2014
|Adam Cooperman, ConvergeOne|
Cooperman's insight comes at a time when sourcing and IT are seeing greater collaboration and engagement among their groups. In fact, he points out three key trends in IT program management that have been directly impacting the strategic sourcing process:
1) Consolidation of suppliers: Companies are evaluating IT suppliers and see if there is a way to consolidate for efficiency and economies of scale.
2) Outsourcing Transition: Companies are becoming more strategic in their transition plans to outsource certain IT services.
3) Increased Demand for Skill: Companies are turning to suppliers for specific tech skills and resources.
Throughout this PartnerCast, it is clear that sourcing play a significant role and directly influence its impact on IT. To listen to the PartnerCast, visit SourceOne's iTunes channel and select episode 15, "PartnerCast: Interview with Adam Cooperman of ConvergeOne."
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Companies are on their way to achieving corporate cost reduction by centralizing procurement, but are they forgetting about their contacts halfway across the globe?
Centralized, but alienated?
When regarding strategic sourcing, one may conceive of a roundtable comprised of professionals, each of whom represents a different department. They express needs pertaining to business processes, materials, labor capabilities and so forth.
While they may have realized that consolidating time and resources is conducive to eliminating redundancies, the question is: Are they forgetting about the experts scrutinizing supplier practices?
The spider web structure
Revisiting the spider web analogy, it's important to think about the center of the web as the procurement team. Each member has business contacts throughout the world, enabling the enterprise as a whole to benefit from these connections if need be. Like all professional relationships, some connections are stronger than others, and a few may even operate behind a facade.
According to IndustryWeek contributor Tom Bianculli, each supplier relationship affects distribution and customer satisfaction. The more transparent connections are, the better procurement services can deduce whether or not overseas partners are detrimental or beneficial.
As one can imagine, technology plays a critical role in helping businesses achieve this level of visibility. However, clarity is only valuable when human insight is applied. For example, how does an African miner's tungsten production methods tarnish or benefit the reputation of a computer chip-maker?
What's fabricated? What's legitimate?
When engaging in conversation, it's not uncommon for some people to exaggerate or misrepresent situations to enhance their own image or manipulate others' perceptions. Unfortunately, the same can be said about a few businesses.
This doesn't mean companies are something to be feared or are harboring malicious intentions (some do, but they're few and far between). However, hiring global financial analysts and other such professionals to scrutinize each supplier connection is imperative.
A fault in the web
When an enterprise's reputation is damaged due to a fabricated or faulty connection, this could also result in unforeseen losses that impact its bottom line in a negative way. One only has to look at Apple's iPhone 6 panic, which was noted by Supply Chain Digital.
Apparently, two Apple suppliers asserted the backlight that helps illuminate the touch screen needed to be revised because it was too thin. This seemingly minor oversight sent the tech developer into a frenzy in an attempt to reconstruct the devices for a September 9 unveiling.
While manufacturers may receive most of the blame, it actually belongs to the development team - an often overlooked part of the procurement process.
Accounting for every relationship when sourcing is irrefutably important, as it can ultimately reduce a number of risks.
Strategic Sourceror on Wednesday, September 24, 2014
Whether a data center colocation provider, a health care center or business park, organizations are regarding the benefits associated with solar energy with a grain of salt.
Integrating renewable energy into the procurement process is admirable, but deducing how profitable such a move would be requires thorough analysis. While some specialists have asserted natural gas and oil prices will remain lower than the expenses associated with installing solar panels, others assert the latter power source will become more competitive in the years to come.
Which energy source is cheaper?
For enterprises, it's a simple question: "Should I continue to pay my utility bill or not?" Forbes contributor Chip Register acknowledged how five years ago, companies concluded that they were better off paying the monthly fee. Even though the U.S. federal government offered subsidies to utilities that installed solar panels, most firms still preferred to source energy derived from fossil fuels that were trading at incredibly high rates.
However, the tide seems to be turning. Despite the fact that oil, coal and natural gas prices have dropped considerably, Register maintained that Chinese photovoltaic panel production combined with new advances in production techniques have caused solar energy rates to plummet. He acknowledged the following statistics.
- Solar panels now cost 75 percent less than they did five years ago
- Citibank asserted that the average price of a PV panel falls 30 percent whenever installed solar capacity doubles within a particular region
- Citibank anticipates that by 2020, solar power will be just as, if not more, affordable than fossil fuels on an unsubsidized basis.
- Marketing analysis shows that by the end of this year, the U.S. will have installed 6.5 gigawatts of new solar energy - 40.8 percent of the total amount of solar power the U.S. currently produces.
A supplementary source
Because of solar power's volatility, businesses should be aware that current technology doesn't permit most entities from sourcing 100 percent of their power needs from PV panels. Quite often, organizations will aggregate electricity powered by utilities and green energy simultaneously, but this doesn't mean enterprises should disregard solar entirely.
According to E&E Publishing, the Plymouth, Massachusetts, public school system garners 60 percent of its 8,000-student district's electricity needs from a 5.57 MW solar facility. The source noted the procurement has saved the educational body an estimated $500,000 in annual utility expenses.
The battery conundrum
One of the biggest obstacles to installing PV panels on business park roofs is the expense posed by battery manufacturers. While these statistics apply to domestic implementations, The Week noted that each kilowatt of energy storage costs $600, meaning a 60 kilowatt hour battery will cost $36,000 dollars. Is such a battery going to last long? It will likely need to be replaced way before a solar panel's 20-year lifespan expires.
Yet, this factor has only motivated researchers to develop more reliable, affordable batteries. Product Design and Development referenced a liquid battery formula created by Donald Sadoway and other researchers at MIT that operates at 200 degrees Celsius lower than previous solutions. Sadoway and his team asserted their invention will make industrial-scale renewable energy competitive with power plants fueled by natural gas, coal and oil.
How does it work? The battery is comprised of two layers of molten metal separated by a layer of molten salt that serves as its electrolyte. Each of the three substances possesses its own density, allowing them to separate naturally. MIT's battery rivals conventional utility storage in that it doesn't require a hillside or water abundance to hold electricity (conventional systems require pumped hydro, which delivers 70 percent of power used to operate).
The conclusion? It makes sense for businesses to install solar panels to supplement power derived from fossil fuels, but solar can't be leveraged as the sole source.
Strategic Sourceror on Tuesday, September 23, 2014
When a production company sources new factory equipment, research and development professionals must be an integral part of the procurement process.
Mechanical and electrical engineers have a clear idea of how operations will transform over the next 10 years. They possess a comprehensive understanding of machinery design, which enables them to determine which suppliers develop the most reliable and progressive implementations.
A distinct advantage
Moving past the surface-level benefits of getting R&D departments on board with materials acquisition, how can these specialists specifically contribute to sourcing endeavors? Bradford Goldense of Machine Design noted four segments of R&D, each of which brings its own insight to the table:
- Basic research involves professionals scrutinizing the market for signs of progression or needs that will arise in the near future. Basically, it consists of analysts combing certain sectors, geographies and demographics for opportunities.
- Applied research occurs when a specific goal or target has been identified. Maybe a problem in a given situation exists and there are possible ways in which it can be resolved. The goal of specialists is to find a solution.
- Advanced development transpires after a resolution to a previously defined challenge has been answered. The R&D team then deduces how that finding can be applied to existing products or processes.
- Product development consists of fine-tuning revised goods in order to make them fault-tolerant and eliminate any vulnerabilities that may exist.
As one can see, the R&D team has a comprehensive understanding of all existing solutions and where opportunities for expansion or advantages reside.
Replacing old machinery
U.S. manufacturers would do well to include R&D experts in the development of suppler relationship management strategies. IndustryWeek referenced a study conducted by Morgan Stanley, which discovered the majority of industrial machinery currently used by domestic production enterprises is at least 10 years old.
Apparently, U.S. commodity-makers aren't showing any signs of procuring new equipment, as orders fell 2.7 percent in the first half of 2014.
However, North American factories are encountering greater demand. The source referenced the RBC Canadian Manufacturing Purchasing Managers' Index, which noted that Canadian production activity increased 1.5 percent in August from July of this year. The Institute of Supply Management's metric of manufacturing health in the U.S. grew 1.9 percent over the same time period.
High production rates typically translate to a need for more equipment. Before getting ahead of themselves, businesses should conduct a thorough assessment of projected material demands. This will give them a good idea of what kind of machinery is needed and whether it will grow outdated in two years' time.
Strategic Sourceror on Monday, September 22, 2014
Almost every business in the United States uses the Internet to deliver products, services and entertainment in one form or another.
Obtaining reliable Web connections has always been conducted through strategic sourcing, even if a company has branches located in different parts of the country. However, discussions regarding the Federal Communication Commission's take on net neutrality may change the way companies procure Internet access.
What is net neutrality?
According to The Washington Post, net neutrality refers to the idea that Internet service providers shouldn't slow down, speed up or adjust consumers' Web traffic. Basically, if ISPs were allowed to impose such manipulations, they could restrict people from visiting certain websites and sharing particular information.
The chief concern among neutrality advocates is that the market will make it difficult for startups and small businesses to pay for optimal service, which would temper job growth and U.S. ingenuity.
As always, both consumer groups and ISPs are willing to reach a compromise - many are simply unsure as to what that accord would be. AT&T made an interesting proposal. The news source noted that Randall Stephenson, the telecommunication company's senior vice president for regulatory policy, recently convened with FCC officials.
Stephenson suggested that AT&T offer consumers a plan that would allow them to request that some services, such as Netflix, are prioritized over other applications like online video games and email. AT&T asserted that this strategy would maintain ISPs' current ability to initiate specialized request for proposal agreements with content companies while preventing fast lane charges from occurring.
What does this mean for those procuring content delivery contracts from ISPs? If AT&T's route were taken, commercial deals between ISPs and companies could only progress at the behest of subscribers. The more requests submitted by consumers, the better off a business will be.
The debate goes on
A separate article for The Washington Post detailed how some libertarians are arguing that the FCC should not regulate ISPs as all. The main argument behind this angle is that it would prevent ISPs from delivering the best service possible to consumers.
Still, the movement - operating under the name TechFreedom - has yet to achieve a significant amount of support. This is because people want the freedom they've enjoyed for so long by using an unrestricted Internet. If ISPs are given more control over content delivery, they will hinder the progression of service improvement.
Lindsey D. on Sunday, September 21, 2014
The recommendations established in a benchmark may include a variety of solutions to help improve profitability and streamline processes. Recommendations may include direct negotiations with current providers to improve pricing, contract terms, resource allocation,supplier consolidation, or the results may indicate that based on current market conditions a full sourcing event is warranted. The results and recommendations from a benchmark need to be presented in a way that is clear, concise, and motivating to a company to gain consensus and move forward with the strategy.
Benchmarks should provide the spend owner with the leverage needed to gain buy in from different levels within a company. While a benchmark may only impact one department, having all the right levels of management involved in the implementation process can help clearly identify and define goals that will provide results and have positive financial impacts to different aspects of a company. It is also important to be prepared to present your benchmark to the non-management team that will be impacted by the recommendations since they will most likely be part of the implementation process. The spend owner that would be responsible for the implementation should be motivating in their message to all members of the team involved in the change process and ensure that they understand their involvement and how the result of the benchmark will provide an overall positive impact to them and the company.
Once you have reviewed and gained consensus from all the right parties the next step is to develop an action plan for implementing the recommendations outlined in the benchmark report. In the plan, it is important to identify a clear timeline of the actions that need to take place in addition to the people that will be responsible for completing the tasks. Each person that is part of the action plan must understand their role in the process to ensure the implementation is successful. The person spearheading the implementation process should continually monitor the progress to ensure tasks stay on track and that the recommendations of the benchmark are implemented properly.
Acting on a benchmark recommendation requires commitment. Evaluating the results of your benchmark recommendations and monitoring its success rate is a crucial component to completing the benchmark process. It is important to continually assess the improved or new program by monitoring progress, tracking results, and re-adjust as needed to make sure progress goals are met. As part of the benchmarking process, keep in mind benchmarks must be re-evaluated and updated on a regular basis to keep up with market changes and adjust company goals to continue to see successful results.