What is e-procurement? Why are governments interested?

on Friday, September 19, 2014

What is e-procurement? Why are governments interested?

Bridging connections with aerospace, transportation, utility and manufacturing companies can be a complex endeavor, especially for governments. 

Public authorities have continuously revised the way they procure goods in order to satisfy the needs of their constituents. Depending on how its economy is organized, a nation may need to provide water, electricity, transportation and health care for its citizens. 

Acquiring myriad resources requires strategic sourcing, a tactic a number of governments across the globe already employ. In light of the Digital Age, officials are beginning to migrate this approach to electronic formats. 

A computer-based procurement process 

Given the fact that enterprise resource planning - a staple solution for professionals concerned with supply chain management, material acquisition, financial forecasting and other business tasks - is delivered as software, it's only appropriate that sourcing follows suit.

Such a system enables organizations with various needs to sanction communications between departments and partners quite easily. In addition, it provides analysts with more information as to which suppliers deliver the best quality goods for the most affordable prices. Analytics, role assignments and other features are included in e-procurement deployments. 

Kenya's transition 

According to Capital FM, Kenyan President Uhuru Kenyatta recently implemented an e-procurement solution in order to promote transparency, accountability and appropriate use of public resources among officials. The leader maintained users will realize the following benefits of using the system: 

  • Supplier relationship management endeavors will be conducted more smoothly due to the ease of which information can be accessed
  • Financial authorities will have a better overview of all available funding, allowing them to deduce how capital can best be utilized
  • Youth, women and disabled citizens will receive preferential treatment when authorities carry out procurement endeavors
  • The nation will be better capable of holding suppliers accountable for their actions and scrutinizing their business practices. 

"Through the automation of public financial processes, the Integrated Financial Management Information System has provided an interlinked system of internal controls providing clear audit trails and identification of the originator of all transactions," said Kenyatta, as quoted by the source. 

Transportation woes 

One of the reasons why procurement is such a major concern in government is because many nations only have some many resources at their disposal. Developing nations usually deal with setbacks, as they're more vulnerable to economic fluctuations than their more established counterparts. An inaccurate view of the procurement process and vendor relationships could result in several instances that are detrimental to the welfare of citizens. 

FutureGov acknowledged how the city of Jakarta, Indonesia, is using e-procurement to improve its public transportation system. Incoming Governor Basuki Purnama Tjahaja acknowledged several vehicle malfunctions by TransJakarta, the city's public bus operator, have incited a need for more thorough assessments of city-vendor relationships. 

These instances aren't unheard of, either. Apparently, faults are a regular occurrence for TransJakarta, putting the 3.7 million people who use Jakarta's public transportation at risk. The metropolitan government has blamed sporadic automobile procurement and lackluster maintenance support for the problems. 

Solving the problem 

These are all signs of a poorly organized supplier relationship endeavor. It's apparent that Jakarta's officials lack the time and resources required to survey TransJakarta's operations and deduce where changes need to be made. That is why Jakarta City Transportation Council Chairman Edi Nursalam maintained comprehensive oversight of all sourcing activities is critical. 

"For this to happen we encourage policy agencies of Jakarta government to use the existing public sector e-procurement system to ensure transparency in the supply of goods and services," said Nursalam, as quoted by FutureGov. "The National Public Procurement Agency's e-catalogue system is the principal means to improve the current service failings of TransJakarta."

Bringing the RFP process and other elements of procurement into the electronic age is conducive to making the best possible use of all resources. 

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What does Google need to make Project Loon a reality?

on Thursday, September 18, 2014

What does Google need to make Project Loon a reality?

For those who haven't heard, Google is hoping to provide Internet access to the estimated 5 billion people who have yet to become connected.

Although "Project Loon" is quite ambitious, one can't ignore the materials Google will need to acquire to make this a reality. This isn't even the greatest challenge - getting Internet providers on board with the endeavor is another significant issue.

At first glance, a spend analysis may deter enterprises away from investing entirely, but further scrutiny shows Google isn't setting a tall order.

What it is, how it works

According to a video posted on Project Loon's YouTube channel, the aim is to launch multiple polyethylene-based, solar- and battery-powered balloons 20 kilometers into the sky. Each balloon is equipped with antennas, which allow them to network with each other consistently. The implementations float about 10km above air traffic, meaning they won't be disrupted by weather or airplanes.

The balloons move by catching wind in the stratosphere, allowing Google to keep them up in the air and optimize connectivity by grouping several together. Buildings and houses possessing specialized antennas communicate with signals distributed by the balloons, which are connected to ground stations owned and operated by Internet providers.

What materials are needed?

Google's YouTube video didn't divulge how many balloons the tech titan would ideally like to place in the earth's stratosphere, but it will likely need hundreds of thousands of these mechanisms at least. This means the company will have to establish supplier relationships with producers of the following materials:

  • Dynamic random-access memory
  • Advanced CPU processors capable of hyper-threading and sophisticated task provisioning
  • Polyethylene
  • Lithium-ion batteries
  • Solar panels
  • Motion control sensors

In order to reduce the cost associated with procuring these assets, Google will have to reassess its negotiation strategies at the RFP process.

Establishing key relationships

Surprisingly enough, some telecommunications providers aren't always thrilled at the prospect of ubiquitous Internet connectivity. Forbes contributor Erika Morphy noted one instance in which Tennessee State Senator Janice Bowling fought to bring high-speed Internet to the city of Tullahoma. Apparently AT&T, Charter and Comcast attempted to convince state leaders to divert Bowling's bill to a "summer study," which would effectively put an end to  the proposed initiative.

Although cable providers have quite a bit of leverage in high places, Google isn't helpless in this regard. By establishing strategic partnerships with key corporations from around the world, it will be able to fend off attempts to derail Project Loon.

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IT procurement considerations for financial services

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IT procurement considerations for financial services

Whether an investment consultant or a benchmarking advisor, financial services require robust, reliable IT assets.

While software typically receives the brunt of attention, hardware shouldn't be ignored. For example, because business analysts require both historical and real-time data in order to provide the best advice to their clients, these professionals would do well to acquire networking equipment capable of handling stem and leaf architectures.

Vendor resource management: an essential or nice-to-have? 

Outsourcing to managed IT services is a regular practice among today's enterprises. While some companies store information on hosted environments managed and secured by cloud technology developers, others hire remote database administrators to ensure data warehouses are protected and flexible. 

This behavior requires a vendor resource management plan. Procurement Leaders contributor Harry John noted that if any details within the service-level agreement are left vague or undefined, problems can be exacerbated in the future. 

The importance of clearly defining SLAs

For example, say a financial services firm contracts a remote DBA to provide protection for its relational database management systems. In an effort to collect more thorough information about gold futures, the enterprise begins collecting unstructured data. Because RDMS systems can't organize unstructured information, the firm's servers encounter bottlenecks, causing critical applications to fail.

Because the financial services company didn't include data management in the DBA SLA, the business encountered a blackout that likely cost it upward of a $100,000. This figure isn't an exaggeration. According to Datacenter Dynamics, unplanned data center outages cost $7,900 per minute on average

Is real-time visibility a necessity? 

Aggregating data as it's produced is a capability many professionals devoid of IT backgrounds take for granted. While operating at this level is beneficial for some enterprises, other companies may find the volume and variety of digital information at their disposal simply overwhelming. 

Karen Stern, a contributor to the St. Louis Business Journal, noted a survey of accountants conducted by small business accounting software creator Xero. The research discovered 75 percent of participants believed a real-time perception of their clients' actions and finances would enable them to give more thorough advice. 

Stern maintained this level of oversight enables certified personal accountants and business advisors to identify areas of high profit-yielding potential. Surveillance over tax obligations is also easier to achieve, making the late-winter/early-spring season transpire much smoothly.

Based on these findings, it can be argued that financial services would do well to source real-time data analysis software. 

As far as outsourcing is considered, implementing a robust vendor resource management strategy is conducive to ensuring all needs are met and bases are covered. 

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Source One at Rutgers Meet & Greet for Supply Chain Management Students

on Wednesday, September 17, 2014

Today, Rutgers University is holding their annual Supply Chain Management Meet and Greet in New Brunswick, NJ. This event is for students currently enrolled in the supply chain management program and who are looking for employment. A myriad of companies attend, including procurement officials from major brands such as Amazon,Colgate-Palmolive and Estee Lauder, as well as leading strategic sourcing consulting firms such as Source One.

Source One is a regular attendee of the event, having recognized the supply chain management talent that comes from the current student pool. Additionally, Source One has long been a champion of supply chain education, often speaking at colleges to help promote the strategic sourcing industry as well as engage budding procurement leaders.

If you at the event, feel free to swing by and speak to Michael Croasdale, Project Manager and Heather Grossmuller, Marketing Manager about your supply chain career goals. Source One is located at table 64.

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Africa: A major energy industry participant?

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Africa: A major energy industry participant?

Although Africa's shadow economy typically receives more attention than its counterparts, the continent's energy deposits have been gaining much attraction as of late. 

Whether businesses build supplier relationships with natural gas and oil drilling companies primarily depends on one factor: the political stability of the country in which said producer operates. While an enterprise may find it favorable to procure natural gas from Ghana, procurement services may advise that same company to refrain from establishing connections with businesses in the Democratic Republic of the Congo. 

Why this disparity? 

Before assessing Africa's potential as a global energy provider, it's important to understand why some nations are more favorable business partners than others. According to Global Issues, the DRC conflict has been fueled by myriad components. A dangerous concoction comprised of political assertions and disparate cultural priorities, among a plethora of other issues, has caused the DRC government and rebel troops to fight one another over the region's natural resources. 

Suppose an enterprise wants to source natural gas from a company in the DRC. Even if a company exercises particularly strong transparency policies in regard to procurement and the supplier complies with every possible audit, a person could still argue that the sourcing enterprise is indirectly contributing to Congolese conflict. One side of the debate could propose that the Congolese business is using a guerilla group for protection, which then profits from natural gas sales. 

While there may not be tangible proof that such a situation is transpiring, suspicion is all that takes for a foreign investor to refrain from sourcing from nations similar to the DRC. With this in mind, why is Ghana the better option? According to the Overseas Security Advisory Council, while Ghana may have its own set of problems, they are not as severe as the DRC's. Most importantly, the Ghanaian government imposes strict surveillance over natural resources, and all transactions involving such commodities must be certified by authorities. 

A place of opportunity 

While differences between varying countries may persist, Africa is a continent with a lot of potential. Industry Week noted a study conducted by PriceWaterhouseCoopers, which discovered more than 500 companies are exploring the continent for potential energy deposits. Out of the top 10 discoveries of energy reserves across the globe, six were in Africa. 

The source noted particularly large natural gas findings were made in Mozambique and Tanzania, which are located in the southern half of the continent and bordered by the Indian Ocean. In general, east Africa could become a significant player in global sourcing. Last year, an estimated $1 billion worth of transactions occurred every 17 days in Africa's oil sector.

So, what's stopping this growth? PWC maintained Tanzania and Mozambique lack the proper infrastructure required to maintain production and distribution operations. Apparently, neither country possess the capital required to construct the necessary roads and facilities, which makes them dependent on foreign investors for support. 

Where does the continent's future reside? 

Industry Week noted that African countries cumulatively produced almost 9 million barrels of crude oil every day last year, 80 percent of which originated from active participating countries such as Libya, Algeria, Egypt, Nigeria and Angola. Four of those nations are located in the northernmost part of the continent. 

Regional disparities aside, what about the role of renewable energy? How will Africa support the estimated 76 percent of Africans who don't have access to electricity? Forbes cited the latter statistic, which was developed by American University adjunct professor Caleb Rossiter. 

Before these other considerations can be seriously assessed, African countries - particularly Mozambique and Tanzania - need foreign investment to support lackluster infrastructures. Outside influence will foster domestic production. 

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Why sourcing new technology may be more reward than risk

on Tuesday, September 16, 2014

Why sourcing new technology may be more reward than risk

When the printing press was invented in 1445, it effectively put scribes out of business. 

Although this innovation contributed to unemployment, it enabled people to spread and share information faster than previously possible. Essentially, it enhanced humanity's capabilities. Arguably, the same process occurs when a company procures new technology its competitors have failed to obtain. 

IT and strategic sourcing 

Take, for example, how technology developers and large entities intend to use quantum computing to further advance their capabilities. Some specialists have asserted that quantum computers are capable of solving an equation so complex that it would take a classic computer the length of the entire history of the universe to solve. 

While this assertion may be an imprecise estimation, it goes to show why enterprises participating in a wide range of industries are interested in the technology. MIT Technology Review noted tech giant Google intends to construct its own quantum computer, which would significantly improve the search engine's ability to deliver highly accurate results. 

According to the source, Google recently hired University of California, Santa Barbara professor John Martinis, who intends to construct a computer chip that is based on the intricate, often confounding concepts of quantum physics. D-Wave Systems, a startup based in Canada, has asserted that its machines abide by quantum principles, but critics have asserted the company's computers operate according to conventional physics.

Why procure new technology?

The question is: why has D-Wave Systems received millions of dollars in funding for its effort? Why bother directing supplier relationship management toward establishing strong connections with technology developers that are pushing the limits of today's IT implementations?

Manufacturing Business Technology Magazine referenced a study conducted by Harvard Business Review Analytic Services, which surveyed 672 business and technology decision-makers from across the globe on how mobile, social, cloud computing, advanced analytics and machine-to-machine communications have affected their enterprises. 

The research categorized participants into three categories: 

  • Pioneers: Companies that are the first to adopt new technologies in order to gain a competitive advantage. 
  • Followers: Those who recognize the success of pioneers and then leverage solutions those businesses previously employed.
  • Cautious: Enterprises that are hesitant to follow technology trends due to perceived issues and concerns.

Overall, 54 percent of organizations labeled as pioneers maintained technology adoption led to significant changes throughout their business models. 

With this all considered, business leaders must also exercise ways to convince their subordinates to adopt solutions. Software can induce company-wide transformations, but only if it's used in a meaningful way. 

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What does the ASEAN Economic Community mean for global sourcing?

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What does the ASEAN Economic Community mean for global sourcing?

The Association of Southeast Asian Nations recently brought a vision to the region's economy that will play out over the next 11 years. 

According to the organization's website, ASEAN was established in Bangkok, Thailand in 1967 to improve Southeast Asia's economic, political and social growth. Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Lao PDR, Myanmar and Cambodia are all members of the association. 

Setting up a plan 

The ASEAN Experts Group on Competition (AEGC) convened at ASEAN Secretariat between September 9-10 in order to establish a strategy for a post-2015 world. Southeast Asia is expected to be a major participant in global sourcing, offering Western businesses the chance to benefit from labor that's more affordable than what China has to offer. 

The main focus of the meeting was to establish competition laws. AEGC asserted its intention to establish institutions that will define and regulate fair economic policies across nations, although the source didn't provide further details regarding the matter. It's likely ASEAN will implement regulations that prevent monopolies from occurring, primarily because so many different companies will work to participate in several industries. 

What's the perception of western businesses? 

So far, there have been mixed reactions regarding ASEAN's initiative. IndustryWeek noted that many people residing in ASEAN member nations remain skeptical about whether the establishment will be capable of meeting all of the goals it outlined for 2016-2025. 

However, Thai business executives remained the most optimistic, with 78 percent of the country's professionals  believing that participating in ASEAN will help Thailand establish itself as an active part of global sourcing. American Chambers of Commerce Board of Governors President Darren Buckley concurred, maintaining Thailand possesses strong economic foundations and its enterprise leaders are eager to expand. 

"As the political situation stabilizes, businesses are experiencing higher degrees of optimism and foreign investors' confidence return," said Buckley, as quoted by the source. 

Fair competition and business expansion 

As ASEAN focuses on making member nation economies competition-friendly, western organizations will attempt to capitalize on this environment. The more competitive a market is, the more its participants seek to enhance service quality and reduce prices. For a company operating under ASEAN mandates, the goal is to make it profitable for foreign investors, subsequently yielding stronger relationships. 

In addition, it's important to note many professionals in Thailand (62 percent) plan on expanding their businesses. Furthermore, 82 percent expect to encounter greater profits over the next several years. This means investment in the region already exists, and the infrastructure needed to support large-scale manufacturing is ready. 

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One of the primary reasons why companies turn to vendors

on Monday, September 15, 2014

One of the primary reasons why companies turn to vendors

There's a reason why vendor resource management is currently becoming a necessity for enterprises. 

When a business encounters a lack of talent, whether it be in procurement, IT, marketing or some other discipline, outsourcing responsibilities to a third party appears to be the safest option. However, it's important to ask a critical question: Why is it that organizations are finding they don't have the employees needed to perform key jobs?

Salary

Corporations typically point to an absence of in-house training as the problem, but Manufacturing.net contributor Chris Fox believes salary has a lot to do with the shortage. The United States government, private enterprises and universities have been working together to provide apprenticeships and specialized programs to mitigate the situation, but these may not even be necessary. 

One of the first challenges associated with this issue is that millennials entering the workforce cumulatively find themselves with an exorbitant amount of student loans to pay off. Attending a reputed engineering or computer science school isn't cheap, and graduates favor well-paying positions that allow them to pay back their debt as quickly as possible. 

Job security 

Contracting a cloud service provider, database administration firm or other company to provide a particular service is a growing practice among organizations. There are three possible reasons why this trend persists:

  • A lack of in-house talent (as noted above)
  • A "They can do it better than we can" attitude
  • A shortage of in-house time, resources and knowledge

The general consensus is that in-house IT departments are considered a cost because they're not producing any profits. Professionals entering the field are recognizing this perception and seeking positions at managed IT services companies, primarily because they know they'll be regarded as revenue-generating assets. This means they don't have to worry about being let go due to an outsourcing move. 

Where's the resolution? 

First off, it's imperative for manufacturing companies to prepare themselves to train a generation of workers who have demonstrated their ability and willingness to learn a particular craft. They understand engineering concepts, so instructing them on how to apply this knowledge to the actual trade must become perfunctory. 

In addition, Industry Week noted millennials need to be more resourceful and enter the prospect of working in manufacturing with an open mind. Factories are looking for specialists who will take production to the next level - their job descriptions don't involve standing in front of a machine all day.

Yet, this points to the issue of miscommunication. Millennials assume accepting mundane work is conducive to landing a position in a factory. Companies need to acknowledge this perception and turn it on its head. 

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Why Vendor-Managed Inventory Programs Are Worth It

on Friday, September 12, 2014

Often within the maintenance, repair, and operations (MRO) space, inventory management is a recurring and commonplace issue. In many cases, companies are operating purely on a tactical basis. As parts run out, the buyer reorders. Even worse, when a part that is needed to maintain facility operations runs out, the buyer or warehouse manager has to halt production while attempting to obtain it.

This is the norm in the manufacturing and industrial space, and it produces countless wasted hours - and businesses know time equals money. Throw poor record-keeping of purchasing history into the mix and you have a whole myriad of problems.

For these reasons and many others, companies have set up vendor-managed inventory programs (VMI). In a perfect world, facilities could get exactly what they need when and where they need it without maintaining excess inventory and while keeping an accurate record of the transaction. These are the solutions VMI attempts to establish.

In a typical warehouse, MRO supplies are managed centrally by warehouse managers who are in charge of overseeing your inventory storeroom or tool crib. The tool crib is set up to facilitate the parts needed for the 100-plus employees who maintain the facilities operation. However, there is only one tool crib for the 100,000-square-foot-plus warehouse that is divided into separate areas by operation. This methodology causes employees to preemptively grab excess supplies to store on their own floor areas and, in turn, creates overstocking of inventory within the tool crib because of supposed "low inventory."

The company is now looking for a long-term solution, which in most cases can be facilitated by an incumbent MRO supplier, and that supplier is happy to oblige. It is simple if the supplier is assisting in the management of the inventory and establishing reorder points.

For this particular situations, the MRO supplier would work with the company to set up bins or cabinets with restricted access by operation. When an item is taken out of stock, the transaction is logged electronically and processed by the supplier. The supplier creates a database of the items by manufacturer part number tied to client part number along with the bin or cabinet in which the item is stored.

When a specific preset volume reorder point is reached, the system alerts the supplier that the item needs to be restocked. The supplier sends a representative out weekly to restock items that have hit the reorder point,

Conversely, if the buyer would like to keep it in-house, the system can be configured to either automatically send out a purchase order request or alert the warehouse manager that an item needs to be reordered. The product is then shipped out from the warehouse to the facility. All transactions are recorded by the supplier and readily available for the client to view.

This is just one of many industrial VMI solutions. Each solution can be custom-tailored to the company's needs and operations. Industrial vending machines are another common form of VMI for smaller, common-use products such as gloves, disposable ear plugs, etc, providing another form of efficient, controlled, just-in-time automatic replenishment.

VMI might not be the answer for every business, but it does provide a simple solution to an aggravating inventory problem.

This blog can also be viewed on ThomasNet.com, a leading product sourcing and supplier discovery platform for procurement professional.
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Reducing the Environmental Impact of your Supply Chain

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Implementing environmentally friendly and socially responsible supply chains has been a recent focus in various industries but especially in consumer electronics. Many manufacturers have received bad publicity for poor labor practices and unsafe working conditions in overseas manufacturing facilities. Out of all the big tech companies, Apple has been at the center of attention for many of these issues and must continually makes changes to improve their supply chain and maintain a positive brand image. Although the treatments of workers, compensation, and living conditions have been called into question; the materials used in the manufacturing process are also an issue for workers, consumers, and the environment.

After receiving pressure from environmental and labor groups, Apple has recently banned the use of the toxic chemicals benzene and n-hexane in its late stage manufacturing process. These chemicals are commonly found in industrial cleaners and could cause health issues for workers regularly exposed to them.  According to a report by Apple, the chemicals were in use at 4 out of 22 factories but at levels within accordance to Apple’s “Regulated Substances Specification” and "found no evidence of workers' health being put at risk." This follows an earlier change in Apple’s supply chain in 2009 when Apple eliminated polyvinyl chloride (PVC) and brominated flame retardant (BFR) from laptops after Greenpeace targeted Apple over their recycling polices and toxic substances used in manufacturing. The heavy metals mercury and arsenic have also been removed from their products over the past few years as well as the toxic element bromine.

While most of the harmful elements of a smartphone or other electronic device are not exposed while in use, the main issue surfaces when the item is no longer needed and discarded. When exposed to high heat and broken down in landfills, electronic devices release harmful chemicals that can work their way into water supplies. This is why Apple and many other companies have implemented recycling programs to help combat this problem and keep these old devices out of landfills. Aside from free recycling programs, there are also multiple ways for consumers to sell their old devices to resellers, third party recyclers, and even cell phone carriers such as Verizon. Despite these efforts, many devices still end up in the trash and the recycling programs are sometimes questioned by environmental groups. According to a 2010 study by the EPA, only 8% of mobile devices are recycled.  The EPA also reports that 50 to 80 percent of electronics that are collected for recycling in the U.S. are shipped to developing countries where child labor and unhealthy practices are used to remove valuable metals from the e-waste.


Waiting for an activist group to petition your company or an undercover employee to reveal unsafe working conditions and harmful materials is not the best way to find opportunities for improvement.  In order to stay up to date on sourcing and manufacturing practices, companies need to constantly evaluate their supply chain for potential hazards that would cause harm to their employees and brand image. In order to accomplish this, companies must dedicate time to market research and stay up to date on manufacturing trends, environmental and health studies, new manufacturing processes, and what other industry leaders are doing.  Attending industry events, subscribing to blogs and newsletters, and having a strong supplier relationship which allows for an open dialogue with suppliers are all good ways to stay up to date on the current trends. Proactively identifying a need for change allows companies to identify alternate materials or suppliers that can provide environmentally safe product components for manufacturing electronic devices. 
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Why strategic sourcing is necessary for corporate IT departments

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Why strategic sourcing is necessary for corporate IT departments

Between cloud services and outsourced database administration support, public organizations and private enterprises have more than enough options to choose from.



An unfavorable situation

Large entities with departments spread across the globe are at risk of suffering from redundancies. For example, a North American shoe retailer with 2,000 locations may leave it to branch managers to procure customer relationship management software.

Not only does the merchant fail to benefit from bundle deals characteristic of large software procurement deals, its IT budget is likely losing millions of dollars it could use to upgrade legacy hardware or hire more knowledgeable cybersecurity professionals.



That's where strategic sourcing comes into play. This tactic centralizes technology acquisition, allowing professionals working at headquarters to assess the needs of their subordinates and find the best software or hardware solution for the entire company as opposed to a disparate set of departments.



How much is wasteful?

Before scrutinizing the spending habits of enterprises with pressing IT concerns, it's important to look at an example of how much capital can be lost due to inefficient procurement practices. Fierce Government contributor Ryan McDermott noted a report conducted by the Environmental Protection Agency's inspector general, which discovered the EPA could save anywhere between $30 million to $60 million a year by fully centralizing its procurement process.



The report, which was instigated by a memo sent by the Office of Management and Budget, said spend analysis endeavors need to be conducted more frequently, allowing the EPA to free up much-needed capital for IT.



"The agency has been slow in implementing strategic sourcing due to a lack of commitment in the initial stages of the initiative and by proceeding cautiously as experience was gained," stated the report, as quoted by McDermott.



How much do businesses plan on spending?

Gartner recently conducted a study on global IT spending, showing the consumption of organizations of every ilk will reach $3.8 trillion this year - a 3.2 percent increase from 2013. The research firm's Managing Vice President Richard Gordon noted that enterprises view IT assets as the tools with which they can expand their businesses. In regard to organizations, Gartner made the following discoveries:

  • Spending on data center systems is expected to reach $143 billion, a 2.3 percent rise from last year
  • The enterprise software market is anticipated to total $320 billion, 6.9 percent greater than 2013
  • IT services remain incredibly healthy, with $964 billion in spending in 2014, growing at a 4.6 percent rate

Considering all assets

A particular facet of IT that has garnered an incredible amount of attention is big data. Manufacturing, retail, health care and a collection of other industries can make use of technologies designed to help businesses better collect complex information sets, as well as store and analyze such data.

The problem is, sourcing specialists who know little about big data and how it can be used often regard it as an unbelievable phenomenon only the most expensive, complex architectures can handle. However, before investing in a multi-million dollar software solution that's going to require staff training and possibly expensive implementation costs, CIOs should strongly consider the benefits of open source technology.

Open source is a name assigned to software for which the original developers released the source code to the public, meaning it's available for government and private organizations alike to use free of charge. Hadoop, an open source architecture designed specifically for handling big data, has been favored by companies headquartered in different parts of the world.

The only expense associated with utilizing Hadoop is that the software requires specific data center configurations and programmers with a thorough knowledge of the infrastructure.

As one can see, centralizing procurement to identify any hidden or redundant costs is important, especially in regard to such a resource-heavy industry as IT.

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Why strategic sourcing is vital in health care

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Why strategic sourcing is vital in health care

At a time when U.S. health care organizations are seeking to reduce costs, many are executing poor sourcing practices that are contributing to superfluous expenses.

Administrators aren't the only ones at fault, though - physicians are prescribing medications that aren't needed to deliver successful patient treatment. In order to get everybody on the same page, centralizing the procurement process appears to be the best solution.

Overcompensation leads to waste

The Centers for Disease Control and Prevention collaborated with Premier on a new study, which charted how U.S. hospitals are procuring materials based on the perceived needs of those receiving treatment. Overall, the research discovered many facilities are ordering and using an unnecessary amount of identical antibiotics, which costs the industry nearly $163 million in frivolous expenses.

For example, Premier and the CDC found 70 percent of therapies that may not be necessary to a patient's health use three specific drug combinations when treating people with anaerobic infections. As far as intravenous pharmaceutical care is concerned, 32,507 cases of redundant antibiotics treatments occurred between 2008-2011.

"The overuse of antibiotics is an industry-wide public health issue that is occurring across all care settings," said lead author and Premier Safety Institute Director Leslie Schultz. "Sometimes in an effort to 'do whatever it takes' to fight a serious infection, clinicians use multiple antibiotics to treat the same infection. This practice can contribute to antimicrobial resistance, put patient safety at risk and increase costs."

A new take on strategic sourcing

Not only must hospitals combine their departmental procurement initiatives, they must also factor patient needs into the process. Having physicians and other experts collaborate to deduce which antibiotics and other medicines are best suited to treat certain conditions is a necessity.

This approach to achieve corporate cost reduction also ensures hospitals abide by standards defined by the Office of the Inspector General and other regulatory authorities. Supply & Demand Chain Executive Gary Johnson asserted governance, risk and compliance should be an integral part of materials acquisition.

For instance, when a hospital uses patient data and runs analysis tools, it must ensure all digital information is being transferred over a secure environment. The Health Insurance Portability and Accountability Act obligates all organizations participating in the medical industry to adhere to this regulation. Those that fail to do so may be subject to fines or prosecution.

Health care isn't getting cheaper, and that's a huge problem for a nation in which many people cannot afford to seek proper care when they need it.

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