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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What North America needs to manufacture consumer electronics

on Thursday, September 11, 2014

What North America needs to manufacture consumer electronics

For professionals in supplier relationship management, the idea of sourcing consumer electronics from the U.S. or Canada appears impractical, even laughable. 

While the North American economy is on the road to recovery, business leaders are trying to find ways to expedite the process in whatever way they can. However, a combination of public policies and a lack of skilled labor are making it difficult for progressive actors to procure consumer electronics from domestic factories. 

What Shenzhen has 

Phil Baker, a contributor to The Daily Transcript, noted his first visit to the Chinese city of Shenzhen as being one of apprehension: Homeless people scoured the streets, the metropolis' infrastructure was poor and taxi drivers could barely see what was in front of them.

Upon visiting Shenzhen not too long ago, Baker arrived in a contemporary city comparable to Hong Kong or Shanghai. Shenzhen is now regarded as the world's premier consumer electronics manufacturer, bringing the designs fabricated by experts in Silicon Valley to life. Baker noted the following characteristics that make the city the perfect place for tech production:

  • The city's production businesses have a huge network of similar companies, which provides two benefits. First, it reduces the time it takes to assemble components significantly. Second, other relationships can be established in the event that a primary supplier's operations are disrupted. 
  • The people behind these enterprises have an indefatigable work ethic as well as a can-do attitude. Baker noted it's rare for a Shenzhen factory to turn down a job or contract, meaning competition among these organizations is quite high, which motivates them to present more cost-cognizant proposals at the time of the RFP process. 

What the U.S. doesn't 

Whether or not America's work ethic is parallel to that of Shenzhen is a debate that typically ends with either an ambiguous or biased answer. Baker noted the main issue with making smartphones, media players, tablets and other devices in the U.S. is a lack of factories that produce essential parts such as batteries, speakers and other necessities. 

It appears the U.S. will continue to be involved in the development aspect of consumer electronics. Haier America recently announced plans to construct a 30,000 square-foot research and development technology center in Evansville, Indiana, Area Development Online reported. 

Until organizations feel confident enough about the U.S.' ability to produce required electronics components flexibly and efficiently, assembling the products domestically does not seem to be a viable possibility. 

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How the procurement process can boost data center efficiency

on Wednesday, September 10, 2014

How the procurement process can boost data center efficiency

Transportation and manufacturing typically receive the most attention when discussions about climate change arise, but data centers contribute to ecological damage as well. 

In order to reduce the impact these facilities have on the environment, enterprises can leverage procurement services to help them find hyper-efficient servers and virtualization software. Choosing the optimal equipment and pairing it with world-class programs can go a long way. 

Who's to blame? Why? 

The Natural Resources Defense Council recently conducted a study on the matter, discovering that large operations sanctioned by tech companies often employ best practices when it comes to data center efficiency. However, this particular contingency represents a small fraction of the data centers currently online in the U.S. 

Overall, the report discovered the nation's data centers consumed about 91 billion kilowatt-hours of electricity last year. Further investigation showed the average server runs at around 12 to 18 percent of its capacity. Up to 30 percent of those machines receive power, but are not being used to host applications, store information, etc.

Run a spend analysis 

The NRDC maintained organizations should use metrics to help them deduce how much equipment is being used and whether extraneous servers can be removed from facilities. From there, decision-makers need to review internal processes to better fit server usage strategies going forward. 

While these processes are useful, virtualization and advanced machinery must also be considered. 

Why virtualization? 

What this particular technique does is take a physical server and segregate it into two or more virtual versions of itself. This enables one tangible machine to handle multiple different tasks. For example, a server operating at 15 percent capacity could be virtualized so that it runs an enterprise resource planning solution and a data visualization program. 

A number of companies, most notably VMware, provide virtualization tools that offer this type of capability. Choosing the right pricing plan requires the expertise of financial analysts and operations specialists cognizant of corporate needs. 

Looking at the hardware 

In addition to procuring software, IT sourcing experts must acknowledge how hardware can ultimately lead to corporate cost reduction. Bloomberg noted Intel recently unveiled the Xeon E5 V3 processors, which Intel Head of Server Business Diane Bryant has lauded as more power-efficient and containing considerably better memory performance than their predecessors. 

Attaining data center efficiency involves much more than acquiring new assets. IT departments and facility administration teams must undergo a fundamental assessment of their processes in order to determine what they could be doing better. 

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The Decoupling Debate - A Source One Marketing Category Blog Series - Part 2 - The Evolution of Decoupling Agency Services

on Tuesday, September 9, 2014

As the relationship between Procurement and Marketing groups continues to evolve, decoupling becomes a more frequent discussion point amongst the two parties. Sourcing professionals are typically tasked with identifying cost savings opportunities and Marketers are expected to always be aware of the latest trends in their field in order to stay ahead or keep up with competition. If executed properly, decoupling is a strategy that can help both groups meet their objectives. Last week, The Strategic Sourceror introduced the topic of decoupling in the first installment of this blog series, explaining why it's something worth talking about (and debating). Today's post will cover the history of decoupling in advertising and how it currently applies to an advertiser.

First, a quick overview of what was covered in the first post of this series: What is decoupling? Decoupling is when an advertiser chooses to separate the production (and/or media) components of a campaign from the creative or strategic portion. Rather than utilize one agency for all marketing activities from soup-to-nuts, advertisers may choose to decouple their production activities and engage with specialized shops and studios to develop these elements, which can range from standard print jobs to digital assets like software applications.

Decoupling has been around for longer than many may realize - originating over 20 years ago in Europe when advertisers began to take a closer look at their advertising budgets. Advertisers began to compare production costs across agencies to identify savings opportunities by segmenting out these services to a lower-cost alternative. Decoupling started with the movement of print production services from advertising agencies to specialized print shops. When print was a primary advertising tactic, printers who could produce high quality print work were sought after. Print production agencies are stand-alone agencies that emerged to fill this demand for high quality print services but at a lower cost than advertising agencies. While the advertising agency develops the creative concepts, the print production agency is completely dedicated to the production of these concepts. As broadcast media gained popularity as an advertising medium, media agencies were formed to execute broadcast media concepts. Media agencies gained their strength in the market because of the relationships media buyers were able to establish with media outlets, which could be leveraged to achieve savings for clients.

Now, one of the most popular services to decouple is digital work. The digital landscape is constantly changing as new technologies come to market and yesterday's technologies become outdated. With each new update or technological advancement, advertisers rely on their agency to react quickly and develop the skills and expertise needed to handle these new technologies and eventually incorporate them into a campaign. Your one-stop-shop advertising agency may not have the ability to dedicate resources to stay on top of the latest digital trends. Digital shops are often better positioned to adapt as they are leaner and more proactive. As a result, we have seen a shift in which advertisers are engaging their advertising agency to develop the overall strategy and concepts behind a digital campaign, and then move the actual production of the concept to a digital agency with the strongest technical expertise.

In general, decoupling is frequently born from the demand for technical expertise in a particular area of marketing which may not be cost-effective for larger advertising agencies to acquire. Today, the latest trends in decoupling are focused on digital services, which mainly include website and software application development and digital media. Many advertisers and sourcing professionals also debate about having digital media stand alone as a service offering considering its complexities. Depending on your target marketing and their presence in the digital space, it may be highly beneficial to have three agencies collaborate to execute a successful digital marketing campaign - one focused on creative and strategy, a second focused on development and build, and a third focused on media. To some, this may seem excessive, but to others, it may be necessary to ensure product/brand relevance and growth.

Regardless of the strategy employed by an advertiser in building their agency network, Procurement can serve as a decision support and help identify the agencies and production houses best suited to meet and advertiser's needs. Procurement is also known for its analytical mindset which can help marketers understand the cost benefit tied to decoupling.

Stay tuned for our next post where we'll discuss further the cost benefits of decoupling and other advantages it can deliver as a sourcing strategy. And we'll also explore the other side of the coin and call out some disadvantages. There are many considerations when deciding whether or not to decouple and we'll walk you through the most import ones. Also still to come, an overview of scenarios where it makes the most sense to decouple.
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