Heather Grossmuller on Friday, October 31, 2014
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When a brand labels itself as sustainable, potential customers will likely take measures to see whether it's putting its money where its mouth is.
Procurement management consultants are master investigators in their own right, and the Internet only makes their jobs that much easier. Never mind if these professionals are hired to scrutinize a company's supply chain, the Web has given average consumers the wherewithal to do their own digging.
A blatant lie?
Take the jargon employed by the food industry, for example. According to Reuters, a large contingency of U.S. foods labeled as "natural" actually contain ingredients that were genetically modified. The news source referenced a study conducted by Consumer Reports, which discovered that the way in which brands leverage wording allows them to use language that is misleading.
For example, if a product sporting a "non-GMO" sticker is truly devoid of any genetically modified substances, then it's operating within completely legal parameters. However, the same rule applies to a product that is labeled as "natural," because the U.S. Food and Drug Administration has not assigned a clear definition to the word.
Although some companies have been sued over labeling GMO-containing goods as "all natural," these cases can be disputed in most states because there's no rule that brands must refrain from doing so. Even so, if a consumer wants to deduce whether or not an item is truly "all natural," it doesn't take a lot of effort to do so.
IKEA United Kingdom's Environment and Sustainable Development Manager Charlie Browne advised organizations against "greenwashing" their public images, saying consumers, businesses and colleagues will be aware whether or not sustainable claims are fraudulent or not.
Supply Management contributor Rebecca Tyler acknowledged Browne's assertion that if a brand deludes its customers into believing it partakes in environmentally friendly practices but in fact does not, it loses positive general sentiment unless its leaders come up with a valid response "within 24 hours." Note: There's no room for excuses.
What can be done to drive green practices? Browne maintained having procurement officers assess every action's projected carbon emissions output is a good start. If the results aren't favorable, those professionals must find alternative practices that align with the public's definition of sustainability.
Above all, he maintained such initiatives require more than passion and affirmation, which can only get businesses so far. Decision-makers must be committed to making sustainable projects work.
Strategic Sourceror on Thursday, October 30, 2014
Hiring managed IT services is a decision many executives at health care organizations regard as favorable, but there are times when doing so to satisfy a temporary or long-term need isn't financially advantageous.
A large part of what procurement management services do is scrutinize how investments in third-party vendors will play out in the long run. Thorough investigations into these entities' previous customer relationships must be undertaken. By approaching outsourcing from this angle, those in the medical industry will develop clear perceptions regarding the following factors:
- Which technology companies are known for falling back on their promises
- Whether certain firms offer a diverse range of provisions on top of a flat or flexible rate
- How successful previous clients were after hiring particular IT services businesses
Overall, a comprehensive financial breakdown of each vendor's program will be provided to those who hire purchasing officers. That way, health care organizations can enter service-level agreements with a clear perception of what to expect.
Is outsourcing really that popular?
Apparently, professionals in the health care industry are deducing their institutions are better off relying on third parties than in-house departments. Nearshore Americas cited a study conducted by Everest Group, which discovered the global health care IT outsourcing market is increasing at a compound annual growth rate of 12 percent and will likely be worth $68 billion in 2020. A number of elements are influencing this activity, such as:
- The consumerization of IT, which involves employees accessing company networks through personal devices and leveraging easy-to-use applications with out the workplaces' consent.
- The need for accuracy and transparency when presenting patients with finances pertaining to certain treatments and insurance plans.
- New regulations are obligating medical organizations to become more IT-heavy, causing them to switch to electronic systems.
"Two significant forces are fundamentally altering health plan business models. First, the health care industry is grappling with the uncertainty of reform mandates such as the [Patient Protection and Affordable Care Act] and the transition to ICD-10," said Everest Group VP Jimit Arora, as quoted by the source.
What to outsource, what to provide training for
There are some technologies and IT-related processes that in-house departments should handle, but there are others that must be carried out by third parties. Steven Heck, a contributor to InformationWeek, acknowledged two "obvious" areas in which health care enterprises should look for assistance:
- Software development: It will likely take a long time for in-house staff members to learn everything there is to know about C++, Java or some other programming language. If software must be adjusted, customized or developed, rely on a proprietary manufacturer or a group that specializes in creating new systems. Assigning this task to system or database administrators will only make development more arduous than it needs to be.
- Data centers and business continuity: Heck noted that a lot of resources are required to implement, maintain or expand data centers. Hiring a colocation provider to host data centers allows such facilities to receive the attention they require on a consistent basis, allowing in-house capital to be directed toward more constructive endeavors.
With outsourcing considered, it's important health care professionals consider the benefits associated with training in-house IT employees in certain aspects of IT. Database and network administration are two fields that must be handled independently, as this enables departments to better architect systems based on changing business needs.
In addition, it's advisable those in the medical industry resist the urge to outsource cybersecurity responsibilities. Heck maintained that consultation and third-party reviews are beneficial, but ensuring data and network protection is a task that should be undertaken holistically, by specialists who are familiar with the infrastructures.
If there are particular skill sets in-house IT professionals need to possess, enrolling them in instruction programs is the best course of action.
Strategic Sourceror on Wednesday, October 29, 2014
If there's one continent of which many investors remain skeptical, it's Africa. While some countries on the continent offer stable economies with the workforce needed to thrive, others are plagued by rampant political corruption.
Get more comfortable
One factor that's discouraging people from investing in Africa is its unreliable infrastructure. If a company in Russia were to procure goods from a factory in Kenya, distributing those products to various relay points would be a serious consideration. The fact that such a basic necessity such as logistics is a concern is a real worry.
Why such an underdeveloped transportation environment? DHL posted results of a study it conducted on Sub-Saharan Africa on SupplyChainBrain, calling the region "the world's least connected continent when considering the ease of moving people, trade, information and finance." The report cited issues regarding telecommunications, public transit and trading.
A procurement conundrum?
A large issue that's hindering development is the lack of tangible trade agreements among African countries. DHL's research found that 80 percent of goods produced in Africa are exported to the European Union, China or the United States.
This means that many Africans are not benefiting from products that are improving the economies and standards of living in those three regions. Once commerce accords are put into action, the continent will likely be able to mitigate this issue. Until that happens, purchasing management professionals will probably advise interested parties to avoid the logistics costs associated with obtaining products from Africa.
Why China benefits from doing business in Africa
China, however, hasn't been deterred by reports such as DHL's. Bloomberg Businessweek contributor Howard French named three aspects that have made Africa appealing to Beijing:
- Raw materials
- Global connectivity
- A growing population
The second pillar benefits China in that its business leaders can gain the beneficial experience associated with conducting trade in a difficult market. It's not easy setting up operations in Africa, but that only makes Chinese executives more savvy in regard to profiting in volatile environments.
The third pillar refers to the fact that the majority of the world's population growth will come from Africa, meaning companies are going to need to satisfy the demands placed by more consumers and have access to a larger labor pool.
"China is making a long bet on the emergence of vibrant, high-consuming middle classes there, and with each year this wage is looking smarter and smarter," noted French.
While some Western investors may view Africa as a mess they would rather avoid, they could be missing out on the opportunities upon which China is capitalizing.
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Purchasing electricity from renewable energy sources is regarded as socially and environmentally progressive, but some utilities are wondering whether consumers are willing to pay extra for it.
In addition, some experts have maintained that there needs to be more clarity throughout the green power RFP process. At times, contracts aren't as thorough as electricity providers would like them to be, spawning unforeseen costs that can be avoided.
Looking out for the interest of consumers
The United Kingdom has been heightening decarbonization efforts, but has let several oversights fall through the cracks in its contracting. Business Green noted that the country's Public Accounts Committee said the British government failed to factor competition into its decision to fund eight renewable energy endeavors cumulatively worth $26.84 billion.
When the accords were announced in April, the U.K. Department of Energy and Climate Change expressed concerns regarding a 2017 phase-out of the nation's Renewable Obligation, which bolsters agreements applicable to green energy initiatives. Therefore, the contracts were fast-tracked. Now, the PAC and National Audit Office are accusing the government of disacknowledging the interests of taxpayers by failing to:
- Pressure energy suppliers into providing accurate production data regarding wind turbines, biomass fuel and other technologies
- Implement clauses in contracts that reduce exorbitant developer profits
"Yet again, the consumer has been left to pick up the bill for poorly conceived and managed contracts," said PAC Chair Margaret Hodge, as quoted by Business Green. "If the Department had used price competition, it should have led to lower energy prices for consumers who are already facing hefty charges."
Not willing to pay
Purchasing management isn't just a concern of the public sector, either. Many private utilities are offering green pricing programs, which provide consumers with the option to purchase electricity derived from renewable resources. Some energy companies are fairly skeptical of this tactic, however, as some consumers are unwilling to pay for the service, Heartland reported.
The news source referenced a study conducted by the Institute for Energy Research, which surveyed 31 utilities dispersed across the U.S. Apparently, only 2.1 percent of utility customers participate in GPPs. A number of factors dictated consumer interest, such as:
- Income: Those making more money participated 176 percent more than people who were less fortunate
- Pricing: While some GPPs charged .33 cents per kilowatt hour, others set models at 5.0 cents per kWh.
Until utilities know how to find more affordable ways to provide consumers with clean energy, it's unlikely that popular sentiment will spontaneously flip on its head.
Strategic Sourceror on Tuesday, October 28, 2014
Procurement management is a multi-faceted practice, involving accounting, risk assessment, distribution planning and other factors.
Diverse processes can breed complications, especially when companies are trying to get accurate answers to the following questions:
- How likely is it that a supplier will sustain operation setbacks due to social or political fluctuations, infrastructure disruptions or consumer demand?
- In the long term, how much is it going to cost to produce, market and sell particular goods?
These queries can be better assessed with data analysis software.
Taking a predictive approach
Supply chain leaders want to be able to precisely anticipate demand before it even occurs. It's a capability that seems supernatural, but one shouldn't underestimate just how refined today's analytics programs really are.
Apparel Magazine contributor and GS1 US VP of Apparel and General Merchandise Melanie Nuce noted that gaining insight into which products will be popular among target audiences involves scrutinizing not only sales, but a variety of elements, such as:
- Cultural fluctuations regarding certain demographics
- Social media posts that comment on particular goods and services
- Location-based hardware that measures how certain people browse for items
- Loyalty programs capable of displaying which products people tend to use rewards on
Basically, there are innumerable sources from which organizations can aggregate data. When scrutinized from the appropriate angle, retailers can learn from the information presented to them and put those realizations into action.
Consider how enterprises are using in-store mobile coupons to generate revenue. Experts didn't simply decide on a whim to implement such a service, they anticipated that consumers would like to receive them. Nuce referenced a study conducted by Accenture, which surveyed 6,000 consumers from eight countries. A large majority (88 percent) asserted they wouldn't be opposed to aggregating loyalty points as they shopped.
Deployment is becoming a priority
Mark Peason, senior managing director at Accenture and contributor to IndustryWeek, noted 97 percent of executives comprehend how data analytics will impact their procurement and distribution operations. Although only 17 percent of those surveyed noted they already have an analytics strategy implemented, three out of 10 executives intend to deploy such an approach in their organizations.
Interest in the technology is burgeoning because of how diverse supplier relationships are becoming. A manufacturer may procure products from as many as 1,000 companies both directly and indirectly. With this complex web of connections comes different sets of concerns and considerations. Weighing them to determine how they'll affect profits is easier with the help of advanced computing algorithms.
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IT procurement is a complicated landscape. Those responsible for purchasing hardware and software need to be cognizant of the best options available, current and future asset demands and how technology will change as time progresses.
Software-defined networking is one component of IT that is further complicating acquisition considerations. While often mistaken with network virtualization, the technology offers organizations several advantages.
Why SDN is necessary
The Internet of Things and cloud services are increasing demand for better network manageability. Ensuring that thousands of hardware assets can transfer data efficiently used to require a lot of man hours and attention that was usually one step behind the needs of interconnected machines.
Mike Shevenell, a contributor to CA technologies and software architect at Spectrum Infrastructure Manager Group, and Jason Normandin, CA Technologies' principal product manager, noted that SDN allows specialists to determine how networks behave. IT separates the control plane and the data plane. While the latter physically transports digital information among devices, the former dictates how data will be routed and forwarded. Thus, SDN provides professionals with the ability to manage the control plane either remotely or from a centralized environment.
What does it cost to implement?
Next to nothing, if anything at all. According to Shevenell and Normandin, one of the most popular SDN protocols, OpenFlow, is an open-source "communication interface defined between the control and forwarding layers of an SDN architecture." Although it's not the only protocol enterprises can use to centrally manage their networks, the two experts noted that OpenFlow has "become synonymous" with SDN.
It should be acknowledged that OpenFlow does not provide network abstraction, control and visibility. Rather, it supplies professionals with rules that allow users to sanction communications with SDN-compliant switches. Because OpenFlow is open-source, the application is free for download.
SDN's effect on procurement
Assertions that SDN will render network hardware obsolete are incorrect. As noted above, the data plane will always be necessary, whether it be comprised of Ethernet configurations, routers or other implementations. However, procurement management professionals used to have to acquire hardware based on the vendor that produced it.
CRN contributor Joseph Kovar noted that, in the past, architectures could only run on one collection of systems, as Juniper creates different programming interfaces than Cisco, and so on. SDN disregards this factor by providing organizations with a single platform that can enable communications between devices produced by different vendors. In conclusion, this gives purchasing officers more flexibility, allowing them to select miscellaneous hardware based on quality.
Heather Grossmuller on Monday, October 27, 2014
- Establish the value that strategic sourcing can bring to marketing
- Address initial marketing categories for strategic sourcing to consider
- Familiarize participants with the five phases of strategic sourcing for marketing
- Outline the five best practices of sourcing marketing effectively
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Colocation services, public cloud providers and a wide range of organizations that rely on data centers to run critical applications prioritize uptime and continuity, requiring consistent power access.
When such entities weigh the feasibility of purchasing solar energy to power their data centers, procurement specialists generally assess three critical factors:
- Property: In order to keep a data center with tens of thousands of servers running 24/7/365, building managers need to consider how many solar panels would be required to do so. As one can imagine, 50 photovoltaic panels aren't going to cut it.
- Efficiency: According to The Data Center Journal, the majority of solar panels are only capable of converting well less than 50 percent of the rays produced by the sun into electricity. Not to mention, these units aren't necessarily cheap, so cost vs. output is a huge consideration during the materials acquisition process.
- Use: That's not to say companies couldn't power portions of their data centers with solar energy, say 30 percent. While some consumers may bemoan the fact that they're not deriving all electricity through renewable energy, they also don't have to worry about maintaining operability in a cost-efficient manner.
Could new materials be the answer?
The Data Center Journal pointed to a research endeavor by scientists working at the Massachusetts Institute of Technology who developed a two-dimensional metallic/dielectric photonic crystal that is capable of absorbing sun rays from multiple angles and sustaining incredibly high temperatures. The best part? It's affordable to make large amounts of the mineral.
How does MIT's solution work? It uses material that matches the sun's radiation, allowing it to convert the produced energy to a type of light that can more easily be turned into electricity. Apparently, the conversion process is what's causing the biggest problem for the research team.
Too much space
Given the fact that solar panels aren't as efficient as some believe them to be, a data center sourcing 100 percent of its energy from PV panels would need an incredible number of them to remain operable. Data Center Knowledge noted that a 50-acre solar farm is used to power a QTC Princeton data center, amounting to more than 57,000 panels in total. All in all, it generates 14.1 megawatts of power.
From an environmental progress standpoint, this feat is amazing and sets a tone of optimism. In contrast, financially, such an array probably wasn't easy on the wallet, and there's no guarantee it will produce a consistent amount of energy on a day-to-day basis.
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Every facet of an organization's supply chain can end up in the media one way or another. Various forms of labor discrimination can damage a company's reputation, even if such practices aren't occurring in-house.
Global sourcing has created a business world in which every entity is held accountable. Enterprises are expected to know everything about their partners, and if the appropriate level of oversight isn't employed, PR nightmares can ensue.
In addition, legal investigations can cause major disruptions. Imagine a factory having to suspend production for a full week so an auditor can thoroughly interview each worker. Such an event can cause partners to seek other suppliers that provide them with the goods they need to conduct business.
According to The Associated Press, the state of Oregon is assessing discrimination allegations at a truck-making plant in Portland owned by German vehicle producer Daimler AG. The investigation was initiated after more than four employees cited claims of racial harassment, bringing the number of civil rights complaints against the plant to nine, all of which were filed in October. Those who submitted the accusations asserted African-American workers received unfair treatment and encountered physical threats from their colleagues.
Daimler Trucks noted in a statement that it is cooperating with Oregon's Bureau of Labor and Industries department, and that it doesn't tolerate any form of discrimination.
A discrimination conundrum
Some forms of inequity aren't as black and white as racial or gender intolerance. At times, a company's recruitment practices may be tainted by how it vets potential employees.
The Wall Street Journal noted that more organizations are using personality tests to determine how well a person will fit into company culture, and the practice is growing 10 to 15 percent on a yearly basis. One of the reasons why entities are employing this method is because leaders believe it reduces attrition.
Personality tests have also been leveraged to assess people's skills. Dialog Direct, a company based in Highland Park, Michigan, maintained such programs give call center operators the ability to more accurately determine which laborers will perform highest among their peers.
Yet, some analysts, such as Federal Trade Commission member Julie Brill, speculate that such exams may "have the effect of creating a new kind of discrimination." A person's ability to do his or her job, in many cases, is not impacted by the individual's personality. It's an argument that could cause major disruptions in some instances.
Strategic Sourceror on Friday, October 24, 2014
Unfortunately, intimidation, bribery and fraud can plague the procurement process if assiduous surveillance isn't in place.
At times, it's not uncommon for sourcing specialists to encounter instances in which a client was told that certain goods were manufactured with one type of material when in fact they were produced with another kind.
Although there are laws protecting companies against such duplicitous behavior, it could take years for an international case to unfold. Between the investigation and the prosecution, the process is so arduous that some may deduce that engaging in such legal battles isn't worth it because there's no guarantee the end result will be favorable.
While this situation is more consumer-focused, it's an example of how hidden procurement practices can breed falsehoods. Shanken News Daily acknowledged a lawsuit that accused Iowa's Templeton Rye of consumer fraud. The whiskey producer advertised its products as Iowa-made, when in fact it's sourcing its rye rom an Indiana distillery, MGP Ingredients.
The lawsuit was filed by Christopher McNair of Chicago, who was a customer of Templeton Rye. He maintained that the company's advertising was intentionally misleading in order to get consumers to pay more for a beverage they believed was locally produced.
Infrastructure gets hit
Consumer concerns aside, fraud can be life-threatening in regard to infrastructure. Imagine a contractor agrees to procure four tons of 4-inch perforated sewer drainage pipes, when in fact the company receives 2.5-inch pipes. To the uninitiated, this isn't much of a big deal, but a well-seasoned waste management professional would recognize that a number of factors could cause the pipe to break under pressure.
The Hindu Business Line noted a study conducted by Deloitte, which maintained that procurement fraud often occurs because expansive infrastructure projects depend on local third parties to acquire necessary materials on an ad-hoc basis. Why? Sometimes, blueprints change or unforeseen issues transpire that require additional materials. There are dozens of situations that could induce such reliance.
What's wrong with small-scale operations that claim to be procurement experts? It's more difficult to validate their relationships. Depending on where they're operating out of, it may not be necessary for them to obtain accreditation from governing bodies.
Also, it's important to point out that nearly 50 percent of survey respondents asserted they were tempted to use back channels, bribery and facilitation payments to expedite the procurement process.
The best solution? Strategic sourcing. Centralizing every acquisition endeavor to ensure unfavorable practices aren't occurring is a practical solution to this persistent issue.
Strategic Sourceror on Thursday, October 23, 2014
Between hazmat suits and various medications, organizations across the globe are scrambling to procure assets and pharmaceuticals that will help them in the fight against Ebola.
In order to conserve resources and deliver much-needed materials to impacted areas, entities working assiduously to combat the virus should consider employing strategic sourcing. If multiple organizations working to find a solution to the Ebola crisis collaborate, pool their resources and coordinate acquisition plans, then the costs associated with delivering quality, consistent treatment will decrease.
How the disease affects the global economy
While containment strategies have proven effective, there's no doubt that Ebola is one of the world's most deadly diseases. Kewill contributor Larry Lewis noted the virus claims the lives of 90 percent of those who contract it. So far, Ebola has claimed more than 4,000 lives, and an official cure has yet to be discovered.
Aside from the fact that Ebola is now being considered by many as a worldwide pandemic, the global economy is sure to be detrimentally affected if a cure isn't discovered. Africa is a key contributor to North American and European trade. Last year, the U.S. imported $39.3 billion in goods and exported $24 billion in materials. During the same time frame, the European Union's export and import statistics were quite similar.
In addition to production cutbacks, numerous customs regulations are appearing in order to stunt the spread of Ebola. Lewis asserted that the following issues are impacting purchasing endeavors:
- The International Air Transport Association recently outlined mandates on how materials should be handled, stored and shipped throughout certain parts of the world. While these may not cause significant disruptions, they are sure to impact logistics operations one way or another.
- Personnel working in affected areas are receiving training on safety measures. The duration of these instruction sessions likely varies, but it's probable that many air-based logistics operations will be hampered.
Shortages already occurring
These setbacks in the supply chain couldn't have come at a worse time. According to The Hill, a shortage of hazmat suits is already apparent due to Ebola's penetration of the U.S. Tony Baumgartner, president of DQE, a company that sells protective gear to health care providers, noted the DQE decision-makers recently chose to limit deliveries of apparel to emergency response teams.
"We have historically been open to anyone who wants to call and buy their own suit," said Baumgartner, as quoted by the news source. "In this case, the supply chains for the garments are starting to become strained."
Baumgartner acknowledged that two weeks before he was interviewed (around Oct. 2), no shortages of materials persisted.
In order to mitigate this issue and allow DQE and other protective apparel providers such as Lakeland Industries to provide adequate support to those who need it, health care associations with personnel operating in regions that have been impacted by the virus should seriously consider working together and pooling their procurement resources. Such a tactic ensures that no hidden acquisition endeavors are purchasing more materials than required. Of course, consideration for those with critical needs is important.
Reacting to demand
Even companies based in countries that have yet to register infections are stocking up on influenza medicine. Fujifilm, a Japanese enterprise, announced on Oct. 20 that it would increase its inventory of Avigan, which was provided to a number of patients who were transferred from West Africa to Europe.
Although Avigan is not a licensed treatment, Fujifilm says that it currently has enough to help 20,000 people. The World Health Organization recently noted that France and Guinea intend to carry out clinical trials with Avigan in the middle of November. The entity maintained that if the tests prove save and effective, Fujifilm can expect "to receive requests to provide the products for large-scale clinical use."