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Evan Wolkin on Thursday, November 20, 2014
Heather Grossmuller on Tuesday, November 18, 2014
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The components used to create complex medical machinery are produced by hundreds of companies distributed across the globe. Knowing whether or not these implementations were produced ethically or were transported under unfavorable conditions is a challenge for procurement officers in the health care industry.
Devices aren't the only component of the medical sector about which purchasing professionals are concerned. While the chemical processes used to make particular drugs are one consideration, another is deducing how the materials used to create these drugs were transported between facilities. Not to mention, sourcing managers want to know whether logistics partners distributed finished products appropriately.
Radio-frequency identification and Internet-connected smart devices can provide clarity in regard to these questions, but a number of challenges are preventing organizations from implementing the assets and platforms necessary to support them. Before scrutinizing these problem areas, it's important to detail how the aforementioned technology can provide health care enterprises with supply chain visibility.
RFID: The foundation of transparency
While barcodes provide warehouse managers and others with adequate information, it's not as detailed as the kind that RFID tags hold. In addition, orders can't be expedited as quickly with barcodes because personnel must physically walk up to items possessing these labels to register information. What's different about RFID?
A report conducted by Transparency Market Research noted that RFID as a whole is comprised of tags, middleware and readers. Whenever a reader passes by a package equipped with a tag, the tag's microprocessor exchanges information with the reader. Tags can hold a wide variety of data, such as where certain products were produced, which facilities the items were stored in throughout the distribution channel and so on.
Usage rates of RFID
The research firm discovered that RFID use in the health care sector can be seen in medical reporting, blood transfer surveillance, pharmaceutical monitoring, human resources identification and, of course, distribution tracking. However, Transparency maintained barcode technology has hindered RFID growth, primarily due to its pre-established use throughout the industry.
That doesn't mean it isn't feasible to use RFID technology. Smaller tags are more convenient for hospitals to attach to devices and pharmaceutical packages. Overall, RFID systems are expected to become more affordable, as instances of theft, a rise in drug counterfeiting and a universal need for more efficient supply chain practices are increasing demand for such solutions.
A notable challenge
As almost every global sourcing expert knows, it's incredibly difficult to account for every indirect and direct supplier relationship. The comprehensive visibility associated with RFID is only possible if each partner cooperates with the organization that initiates the technology's implementation.
How can this problem be resolved? Start at the very beginning of the supply chain. This will obligate companies down the line to use RFID technology, as it will be the only way they can register when products were received and transferred. Even if a company that failed to use an RFID system employed workers attempting to commit fraud, it would be incredibly difficult for them to do so because their employer would be the first partner to receive scrutiny.
Why the cloud is necessary
Health IT Analytics contributor Jennifer Bresnick acknowledged how cloud infrastructures provide organizations with the platforms necessary to aggregate, process and use data produced by Internet-connected devices. As cloud technology provides professionals with the means to access applications and data from any place possessing Web access, it makes sense to deploy RFID solutions through the cloud.
Of course, this presents a challenge in and of itself. How does a hospital get each of its partners to use the same cloud platform? Is it optimal to simply leverage RFID as a service instead? What does this mean for purchasing? These are other concerns that must be properly assessed.
Source One Provides Sustainable Sourcing Solutions; Wins S&DCE Green Supply Chain Award Third Year in a Row
Rebecca Lorden on Monday, November 17, 2014
If you are considering going green, here are some tips on managing that within your supply chain:
One of the first steps into "greening" your company is to prioritize goals. Your procurement and sourcing groups can give insight into what green strategic sourcing initiatives are quick hits and what other projects are more long-term investments that require will require change management planning.
Additionally, some environmentally friendly objectives might align with existing spend management goals. For example, companies that are looking to reduce spend in office supplies can often find substitutions that are inexpensive and made from recyclable materials.
Secondly, it is important to take the time and assess your existing supply base. Some suppliers are just not the right fit for green programs, but very often suppliers do have sustainability policies that they neglected to discuss with you previously.
For those companies who believe green suppliers tend to be more expensive, it is important to realize sustainable providers are often aligned with market prices. If you are dealing with skeptics, a benchmarking report can provide the market data regarding green supplier costs, help gain buy-in from stakeholders.
Ultimately, sustainability is not just a trend, but a growing business practice. If you company is looking to be more environmentally friendly, utilizing green sourcing methods will not only help reduce your costs, but also achieve your goals.
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When it comes to finding personnel with the skills needed to keep state-of-the-art manufacturing plants operating effectively, strategic sourcing specialists should direct their focus toward hiring the young.
This, of course, is easier said than done. However, industry-wide concerns about a growing labor shortage have caused many private enterprises to take their own initiatives, implementing in-house education programs. In addition, public school systems are taking note of the troubles the production economy is facing.
Gearing up for a bountiful career
It's quite possible that one of the reasons why manufacturers have failed to attract young individuals into taking up the trade is that many people entering the workforce perceive factory jobs as low-paying. However, USA Today noted that machinists and other specialists focusing on production equipment, development and maintenance earn upward of $80,000 annually.
Those are the kinds of positions Wheeling High School in Illinois are preparing its students to fill. The source noted the institution has offered production economy training to pupils for six years. Wheeling High is a member of Project Lead the Way, which designs curricula for schools providing manufacturing training to enrollees.
Changing popular impressions
Project Lead the Way was implemented in response to the hundreds of thousands of positions U.S. manufacturers are working assiduously to fill. Manufacturing Institute Vice President Gardner Carrick noted this and other programs work against the popular concept that manufacturing provides people with no career advancement, and is associated with dirty, arduous work.
In contrast to this perception, Carrick maintained that modern production jobs are of a different ilk, asserting that today's professionals are "working with computers and robots that are doing what you used to do by hand," he told USA Today.
Capitalizing on a convenient location
IndustryWeek referenced a three-year, $32 million investment by General Electric that will be put toward constructing an advanced manufacturing facility minutes outside of Pittsburgh, Pennsylvania. The finished building will employ 50 positions requiring knowledge of high-tech engineering technologies. GE stated its hope that graduates of local colleges and universities will find work there.
"It is how we will compete and win in the future," said GE Vice Chairman Dan Heintzelman, as quoted by the source. "We can more efficiently invent and build products for our customers, while driving better margins for our investors."
Commitments such as GE's position the U.S. to be a viable manufacturing competitor.
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The technology and energy industries will likely be profoundly affected by agreements between the U.S. and China.
The manner in which enterprises participate in global sourcing is partially dictated by relationships between the nations they're based in. As China and U.S. are two of the world's largest economies, it makes sense for their leaders to collaborate for the benefit of both nations.
For the benefit of technology
Marley Jay, a business writer for The Associated Press, acknowledged a trade agreement between China and the U.S. that could abolish tariffs on $1 trillion in global purchases of semiconductors, MRI machines, GPS devices, printer ink cartridges and other high-tech goods. Jay noted that U.S. President Obama traveled to Beijing for the Asia-Pacific Economic Cooperation Summit, at which he and Chinese leaders discussed the expansion of the Information Technology Agreement of 1996.
The ITA prohibits tariffs on IT products, as they provide domestic items a price advantage over imported counterparts. Although the agreement wasn't finalized, it's expected the accord will officially be implemented at the World Trade Organization congregation, which will take place in Geneva later this year.
In light of this development, purchasing management professionals working at major tech companies will be able to establish relationships with manufacturers that produce higher-end, more expensive materials, because they won't have to consider the tariffs associated with procuring IT goods.
Commitment to the environment
The U.S. and Chinese economies are bound to feel the impact of emissions agreements between the two nations. The Washington Post maintained the plan states that the U.S. will double the pace of its carbon reduction initiatives before 2025, reducing levels to 28 percent below 2005 output.
In turn, China will put a cap on its carbon dioxide emissions sometime around 2030. The nation will cease its rising emissions production by increasing investment in nuclear, hydroelectric, wind and solar energy, which currently accounts for 20 percent of its total power usage.
What are the implications for procurement officers working in the energy sector? The prospect of carbon taxes has been discussed among both Chinese and U.S. lawmakers, requiring those concerned with spend management to deduce how these mandates will impact corporate budgets. In turn, these analysts may advice their employers to take advantage of federal subsidies provided to enterprises that make tangible investments in renewable energy.
Strategic Sourceror on Friday, November 14, 2014
One particular issue that recently received a lot of attention from procurement management experts is involved the setbacks Apple encountered in regard to its supply chain.
First, the hardware developer's suppliers experienced a problem in which the iPhone 6 and iPhone 6 Plus failed to emit the appropriate amount of light. Then, after the two smartphones were released, Apple customers discovered the devices were bending in their pockets.
The two primary issues
Now, according to Manufacturing Business Technology contributor Paul Noël, Apple is finding its partners aren't producing the iPhone 6 and iPhone 6 Plus in tandem with consumer demand, resulting in shortages across the board. With this factor considered, it can be concluded that Apple is facing two central problems:
- Quality control: Not too long ago, Apple had a reputation for producing near-flawless goods that operated on a superb level. The latest reports regarding the new iPhone seem to contradict this image, signaling that Apple's development and quality assurance teams aren't paying as much attention as they used to.
- Purchasing: One can perceive Apple's product shortages as a problem rooted in two issues. In one respect, it's possible that the company's procurement officers aren't aligning themselves with Apple's sales department, meaning they're not receiving accurate demand reports on which to construct device orders. From a different angle, it's possible that Apple's purchasing division is overlooking factors that are preventing its suppliers from producing goods at the optimal rate.
With respect to both points, it may benefit Apple to consider the benefits of business process outsourcing to conduct a thorough review of the enterprise's supply chain. Such companies can serve as quality control experts, as well as investigators that can identify which partners are unintentionally causing shortages to occur.
Ready for a new device?
Amid these concerns are tangible signs that Apple is preparing to unveil new products within the next three to four months, and the hardware developer's manufacturing partners are gearing up. Apple Insider noted the company's chip suppliers are preparing to initially turn out 30 million to 40 million Apple Watches. The source noted the following supply-related concerns:
- The Apple Watch will run on advanced system-in-package (SiP) technology that allows entire computing systems to reside on a single chip.
- The device will be equipped with a Force Touch Retina surface that is able to identify the differences between a tap and a press.
- Wi-Fi and Bluetooth connectivity are expected to be a part of the final package.
- Near-field communication will assist those using Apple Pay.
Apple Insider acknowledged recent rumors that Apple Watch will debut on Feb. 14 of next year, but this estimate has largely been regarded as speculation. As one can see, a fair number of components are categorized as being the "latest and greatest," which means that Apple's supply chain may be sacrificing quality control to ensure the device functions adequately, as opposed to optimally.
Future supplier concerns
In order to avoid future shortages, Noël recommended that Apple diversify its supplier portfolio, alleviating primary partners of production demands that, in some cases, are unrealistic. According to Noël, one of the reasons why the iPhone 5S and 5C didn't encounter the deficit woes associated with the latest iPhone releases is that Apple used two different manufacturers, Foxconn and Pegatron, to handle the assembly of the 5S and 5C respectively.
Now, Foxconn is handling much of the iPhone 6's production on top of managing all of the manufacturing needs of the iPhone 6 Plus. Alleviating some of the pressure on Foxconn will mitigate the shortage issues with which Apple is currently contending. As far as quality assurance goes, it's best if Apple sends development professionals to manufacturing.
Strategic Sourceror on Thursday, November 13, 2014
Globalization opened up the Western world to the Eastern and vice versa. With this dismantlement of borders came a whole new set of risks, concerns and opportunities.
The nature of spend management didn't necessarily change, but professionals concerned with the practice learned to take advantage of favorable circumstances when these were presented to them. Building relationships with overseas or nearshore suppliers involved deducing not how much a company would save, but how much it would gain.
Outside looking in
Arguably, globalization also gave birth to business process outsourcing. All too often, enterprise leaders who have been working at their companies for some time are emotionally invested in the decisions they make, hindering their ability to make critical decisions, a few of which may or may not "fit protocol."
SupplyChainBrain noted that, on average, spend management entities can deliver up to $6 million in savings to their clients, providing services at expenses 19 percent lower than in-house teams. While the statistics shouldn't be negated, it's important to analyze why these cost reductions are apparent. Those at procurement firms bring a number of different factors to the table when scrutinizing the sourcing concerns of their clients, such as:
- A diverse partnership portfolio: Vendors connect with hundreds of different organizations or more every year. With this networking comes a fundamental knowledge of what specific enterprises have to offer. Recommending certain suppliers based on past, thorough experience is a capability in-house teams can't necessarily offer.
- Knowing what's best: As was mentioned above, it's sometimes difficult for in-house teams to view situations without some level of emotional investment. In addition, professionals used to operating in a particular manner for an extensive period of time are typically hesitant to implement change. Outsourced procurement officers can objectively view situations, deduce which protocols are working and which are not, and then make calculated recommendations based on their conclusions.
An example of flexibility with critical assessment
One particular part of the world that is receiving an incredible amount of investment is the Middle East, especially around the Gulf region. Supply Management contributor Helen Gilbert noted that firms based in the region have many opportunities to expand portfolios, but the pace at which procurement teams must be developed isn't up to par.
Gilbert noted a survey of 100 chief procurement officers and directors throughout firms conducting business in the region, which discovered 95 percent of respondents believed strategic assessment will improve the Middle East's ability to add value.
Strategic Sourceror on Wednesday, November 12, 2014
The current generation of procurement officers are being viewed as pseudo-investigators.
The intention isn't to write a ground-breaking dissertation on India's manufacturing economy - rather, it is to determine which partnerships and supplier relationships befit company requirements and standards. Due to the vastness of the average supply chain, purchasing experts need to scrutinize every line for a number of reasons, including, but not limited to:
- Detecting fraud and other unfavorable financial activity
- Ensuring raw materials are being acquired by suppliers through ethical means
- Deducing whether partners are treating their employees fairly
- Identifying problem areas in which distribution costs are getting out of hand
What's to expect from the future
The present character of procurement management is one that favors holistic oversight of all assets and relationships. This approach will have a profound effect on the way in which professionals working in this field will conduct themselves in the near future. Supply Chain Digital contributor Mickey Rizza named five trends that will define purchasing in 2015:
- Achieving holistic, transparent inventory management is a goal many enterprises, particularly those in the retail industry, will strive to attain. The Internet of Things and analytics tools enables supply chain experts to develop more accurate demand forecasts, quickly liquidate returns and adjust tactical strategies in the blink of an eye.
- Procurement teams will become more acquainted with other departments. Each team has its own needs, and developing an understanding of what those necessities are will help purchasing officers acquire materials and services with regard to what an organization requires as a whole.
- Real-time performance monitoring will become a regular practice. Being able to look at a vast chart displaying how each supplier and partner is contributing to the success of a business is a capability of the near future. This will enable professionals to not only identify problem areas, but figure out how and why issues are occurring in particular sectors. Acknowledging a dilemma is one thing, being able to zero in on the root cause is another.
- Trusted partners will become suppliers. As it's a "who you know" world, it makes sense that companies will be looking to build economic relationships with enterprises they have conducted transactions with in the past. This trend will be driven by pre-established connections among professionals. Furthermore, Rizza noted businesses will be more likely to plan meetings between prospective suppliers and research and development teams to collaboratively figure out ways in which operations can be improved.
- Sourcing from Latin America and Asia Pacific will increase. These two markets are home to some of the world's most esteemed burgeoning economies. As investment ramps up in these regions, organizations will look to throw support behind fledgling manufacturers with a lot of potential. In turn, this will have an impact on the supply chain. Rail transportation between Latin America and North America is due to increase if this trend persists.
What's the general message?
Each of the aforementioned trends pertains to a competitive advantage. If Supplier A can develop higher quality goods at a minimal markup while Supplier B fabricates products of average condition, then contracting the former company is more beneficial because it's worth it for organizations to pay a little more for superior materials.
Product quality is just one facet of a successful supplier relationship. Profitable connections depend on how efficiently products can be delivered and whether those goods are being produced with ethical practices in mind.
Above all, the chief reason why procurement behavior will encounter a shift in 2015 is that outsourcing is such a popular practice. Sigi Osagie, a contributor to Procurement Leaders, noted the Internet, the jet engine and decreasing telecommunications expenses have spawned a global economy that, now more than ever, favors holistic oversight and better shareholder returns. Deducing which relationships will support these goals is a responsibility that lies with purchasing departments.
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Rebecca Lorden on Tuesday, November 11, 2014
To read the white paper, visit http://sourceoneinc.com/sourcing_whitepapers.html#benchmarking_white_paper.
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Given the advent of the Internet of Things, personalization and an overall need to reduce distribution risk, procurement officers aren't necessarily crossing off reshoring as an option.
In fact, many analysts would assert that the U.S. and the global manufacturing industry as a whole is due for an industrial revolution. To some, what the new age of production will look like is somewhat of a mystery. Will factories be completely devoid of human labor? Is a new form of "raw" materials to be established? How can artificial intelligence contribute to future development?
A need for ascension
There's no doubt that globalization transformed the conventional supply chain model. Instead of purchasing materials produced at factories distributed across North America, sourcing specialists were obligated to set up logistics models that included overseas manufacturing facilities, oceanic shipping companies and hundreds of partners.
These types of operations have made spend management and other tasks associated with procurement much more complex. They inherently carry risks that can obstruct or delay shipments and even result in criminal investigations.
MAPI Director of Economic Studies Cliff Waldman wrote a piece detailing what the "new factory" will look like in the near future and beyond. He maintained the aforementioned factors, in addition to the ubiquitous need to lower the costs with which goods are produced, have incited a need for an industrial revolution. It's more convenient for a U.S. company to source items that are produced domestically for a few reasons, such as:
- It's easier to build relationships with suppliers. Just because airlines provide professionals with the ability to fly across the Pacific, doesn't mean doing so is convenient.
- Maintaining quality control isn't as arduous. Apple is one company that's known for putting a lot of effort into R&D, but needs to send personnel overseas to ensure its production partners are making devices up to pre-established standards.
- It costs less to distribute goods across a continent than it does to transport them halfway around the globe. The longer a logistics chain, the more vulnerable it is to sustaining disruptions.
Technology to be a main driver
In order for reshoring to become a reality, U.S. manufacturers will not only have integrate technology into existing processes, but make it the basis of the way in which goods are fabricated. While advanced machinery and robotics is certainly a part of this revolution, professionals such as Accenture Strategy Managing Director and IndustryWeek contributor Cv Ramachandran maintained that software is going to be essential for the success of U.S. manufacturing.
Although there are many dimensions to production's use of applications, there are two ways in which digital assets will be leveraged to further the industry's progression:
- Reliability and performance: Using data analysis software to deduce how well implementations are performing will show managers ways in which processes can be adjusted or transformed to improve their functionality. Predictive maintenance is a popular topic among industrialists, as it allows them to fix issues before they exacerbate.
- Centralized administration: Being able to control the way in which dozens of factories behave from a single location is a powerful capability. Imagine receiving a sales forecast for January 2015 and programing facilities to either scale back or increase production based on those statistics.
What's preventing the U.S. manufacturing economy from jumping feet first into this digital environment? A skills shortage. Ramachandran noted a survey conducted by The Manufacturing Institute, which found 60 percent of the 300 surveyed U.S. fabrication leaders asserted trying to find the appropriate people to fill essential positions was difficult.
To allay the severity of this situation, it's possible that U.S. production companies may find the required talent through vendors, but a need for permanent personnel will persist nonetheless. As such, industrialists should increase efforts to attract college students and recent graduates.