Union Strike for West Coast Ports Teaches Suppliers and Businesses about Risk Management

on Thursday, July 24, 2014

U.S. businesses and their suppliers are facing a major threat to revenue – a union worker strike at U.S. ports on the west coast. These ports happen to handle 40% of all U.S. container imports. As a result, the Canadian National Railway is seeing a significant bump in their cargo, specifically within U.S.-bound imports. Alternatives like this are effective while precipitating a major change in operations, but redirects to Canada are not a full proof contingency plan. How can suppliers and businesses better manage risk?

One major tactic to offset risk is to consider business interruption insurance. Business interruption insurance offers some protection from unforeseen circumstances. In this case where union workers go on strike, this insurance in theory would grant the supplier and buyer the ability to reassess their logistics without a significant financial loss during the disruption.

Additional protection can be possible through a force majeure clause in contracts. As mentioned in Source One’s all-you-need guide to procurement, Managing Indirect Spend, this clause provides an exemption from liability in the case of extraordinary events, such as war, natural disaster, or even a union strike. For example, in the Summer of 2010 some suppliers affected by the closure of European airports due to the ash from an Icelandic volcano relied on force majeure because they could not supply goods in a timely manner. This was not ideal for buyers, but many were able to terminate the agreement and seek other suppliers to avoid a financial crisis.

Proactively managing risk can also involve establishing manufacturing closer to the U.S. In a practice known as nearshoring, many U.S. companies have been seeing benefits from working with Mexico and other Latin American manufacturers. This option offers lower shipping (by sea and land) and labor costs. Previously, China was a target for a large portion of U.S. outsourcing; however with a drastic shift in wages demanded, intellectual property compromises, and rising fuel and shipping costs, Mexico is becoming a more enticing option.

Although every supply chain is different, there are a great deal of scenarios where proper risk management can lead to cost efficiency and savings in unpredictable scenarios. Through prepping for the unexpected, companies and suppliers that utilize the U.S. west coast ports can secure profits and the public opinion of their brand can be protected.

News courtesy of: http://www.cnbc.com/id/101844372
Photo courtesy of: www.dredingtoday.com

Four strategic sourcing guidelines for public sector IT departments


Four strategic sourcing guidelines for public sector IT departments

It's a rare thing to come across a news story detailing how a government organization is increasing its budget.

Nowadays, authorities are looking to cut costs in a number of ways, one of which involves purchasing software capable of optimizing certain practices. However, spend analysis endeavors hamper the procurement of technology necessary for the public sector to keep up with the pace of enterprises.

So, where do government CIOs start? There are a number of steps these professionals should take in order to acquire the necessary hardware and software to advance operations without exceeding budgets.

1. Keep a sustainable mindset

Eric Gies, a contributor to The Guardian, noted that procuring assets or services that were responsibly manufactured (with regard to environmental and sociological factors) will not only improve a public authority's perception, but also enable the utilization of best-in-class, affordable technology.

For example, say the U.S. Department of Defense contracts a managed IT service provider to create a scalable, secure private cloud environment. Sourcing an environment from a company known for powering its data centers with green energy will help the organization save on what would be exorbitant energy costs in the long run. Not to mention, taxpayers will favor an institution that makes a commitment to reducing its carbon footprint.

2. Search for the lowest risk

News Factor referenced a study conducted by research firm Gartner, which asserted that CIOs and IT asset managers should work together to look for the most secure solutions. Security doesn't only pertain to protecting databases from cybercriminals either, as the study maintained that new software or hardware implementations should be easily manageable.

In other words, procuring advanced software isn't the same as acquiring complicated implementations.

3. Look for flexibility

Gartner also regarded the importance of searching for malleable service-level agreements. The more accommodating an IT services provider can be to a public organization, the greater the return on investment will be. However, that's not to say organizations should get lost in the number of provisions offered - only invest in those applicable to operations.

4. Look for additional financing

Although one branch of the DoD may only have a certain amount of money to allocate for a certain project, procurement process specialists should network with other teams that may benefit from using a specific IT implementation. Sharing information regarding a supplier is the first step to making this process a success. It's important not to push the idea on parties - investment should be seen as an opportunity, not an obligation.


Oil regulations may disrupt fossil fuel procurement process

on Wednesday, July 23, 2014

Oil regulations may disrupt fossil fuel procurement process

While oil companies want to continue to deliver the resource to refineries throughout the United States, government regulators are calling for more stringent safety regulations.

If recent proposals are implemented, procurement services may have to help energy businesses reorganize distribution routes to help flow remain consistent. Despite the fact that it's the middle of the summer, organizations are thinking ahead in anticipation of the upcoming winter. Two seasons ago, U.S. power prices rose as transporters struggled to satisfy demand.

Replacing old equipment

Employing strategic sourcing professionals to recycle old assets and purchase new property is likely to become a common practice. According to The Wall Street Journal, U.S. legislators recently presented a rule that would force transportation enterprises to rotate out tens of thousands of DOT-111 tank cars with upgraded models over the next two years.

The proposed measure is a year shorter than Canada's identical law. The two pieces of legislature apply to containers that carry ethanol, oil and other hazardous liquids. In addition to this mandate, discussions regarding a 40 mph speed limit would be enforced until existing railcars can be updated.

The two rules were developed in light of an accident that occurred in Lac-Mégantic, Quebec, in which 47 people were killed as a result of a derailed train carrying Bakken crude oil from North Dakota.

Switching up tactics

Marketing analysis reports have shown that transporting oil by pipeline is cheaper and safer than delivering the substance by rail. With this in consideration, it's important to regard the costs associated with constructing a feasible, continental pipeline network - some of which are politically motivated:

  • Procuring the property and land necessary to construct the pipelines
  • The materials required to build the infrastructure
  • The skilled labor needed to oversee the operation's completion

It turns out companies are already making the transition. According to NGI's Shale Daily, crude oil rail transportation from North Dakota decreased 59 percent in May. North Dakota Pipeline Authority Director Justin Kringstad stated in a webinar that pipeline traffic increased 41 percent during the same month.

Energy Transfer Partners LP, a company based out of Dallas, proposed the construction of a 30-inch diameter, 1,100-mile pipeline that would transport light sweet crude oil from Bakken to the Gulf Coast. Kringstad noted that the endeavor is still being developed, but remained optimistic about the project.

Drafting and putting the initiative into action may require the logistical expertise of a strategic sourcing company - one capable of predicting the anticipated output of and demand for Bakken oil.


How Well is Your Wellness Program?


As more insurers incorporate fitness and wellness programs into senior health insurance plans, there are several factors to address internally to ensure that these plans run smoothly. With complex plan payment structures and arrangements involving multiple parties, it can be overwhelming for an insurer to assess new strategies while they are trying to promote a new program and ensure its success. This is why Source One serves to assist health insurers in managing their Wellness Programs and driving the most value to members. In realigning structures and tightening controls, Source One works with wellness program providers to reduce costs of healthcare plans, optimize partnerships for a strong, sustainable future, and increase membership levels.

Based on a changing healthcare environment, no insurer is the same; however, Source One is able to assess the current landscape to achieve efficiency and profitability in essential areas for wellness program providers. Learn more about how to strengthen your wellness program’s value in the below Source One infographic.


How strategic sourcing can mitigate pharmaceutical concerns


How strategic sourcing can mitigate pharmaceutical concerns

There are two concerns procurement services have regarding the pharmaceutical supply chain:

  1. That the drugs they sell can be legally distributed in certain countries
  2. That logistics companies are assigning an equal amount of attention to regulations

Being able to connect the dots between medicine manufacturers and pharmacies selling the products is imperative. Organizations such as the U.S. Food and Drug Administration enforce stringent standards regarding the sale of drugs, and failing to comply with these codes can result in grievous consequences for enterprises.

Attention to illicit distribution

According to Supply Chain Digital, logistics company FedEx was recently indicted by the U.S. Justice Department for allegedly transporting drugs sold by illicit online pharmacies. The source noted that authorities had repeatedly warned the distribution giant of several organizations that were not allowed to market goods in the U.S.

"From as early as 2004 the indictment alleges, federal authorities and members of Congress informed FedEx that illegal Internet pharmacies were using its shipping services," said a statement from the Justice Department, as quoted by the source.

As opposed to abiding by these regulations, the government agency asserted that FedEx would deliver packages assembled by illegal shippers to designated locations at which customers could pick up the items. This process not only put FedEx employees at risk, but arguably exposed consumers to potentially dangerous substances.

How does this affect strategic sourcing? Companies that chose FedEx as a primary distributor are now likely to be associated with such activities. Pharmaceutical companies selling authorized, legal drugs may have to comply with investigations to ensure that none of their shipments were harboring illicit substances - a lengthy and expensive process to satisfy.

Holistic oversight

Therefore, it's important for such organizations to conduct research of their own regarding potential distributors. Susan Haigney, a contributor to Pharmaceutical Technology, acknowledged the FDA Safety and Innovation Act, which requires drug enterprises to divulge the contents of controlled substances, as well as how they're manufactured. The Act authorizes the FDA to:

  • Aggregate and scrutinize information from companies to assess the risk of sourcing unfavorable products
  • Share and collaborate with foreign authorities to trace the origins of fabricated pharmaceuticals
  • Conduct domestic and overseas inspections of facilities

A global sourcing strategy that can be easily scrutinized by authorities is essential to have. Not only will it help entities satisfy audits, but it will enable them to identify which distributors are most likely to be involved in unsavory practices.


How to respond to environmental hindrances with strategic sourcing

on Tuesday, July 22, 2014

How to respond to environmental hindrances with strategic sourcing

There's been a lot of talk regarding sustainable strategic sourcing, but what about the impact environmental changes have on the procurement of materials?

Droughts, severe summer storms, winter blizzards, rising temperatures and a number of other ecological factors can hinder the distribution of goods destined for manufacturers across the globe. The key to mitigating the effects of these deterrents? Networking. 

Keeping options open 

Melissa Clow, a contributor to The 21st Century Supply Chain, acknowledged a report conducted by Aberdeen Group, titled "The Chief Supply Chain Officer's View of Supply Chain Disruptions: How the Best-in-Class Respond." After receiving responses from 151 logistics professionals, the researchers discovered an overall willingness to advance operations on a constant basis.

The study found that the cream of the crop are:

  • 50 percent more likely to assign resources toward improving distribution visibility
  • 37 percent more likely to communicate with suppliers than others. 

It's a "who you know" world 

Of the aforementioned conclusions, the latter point remains essential. Having a holistic perception of global sourcing is a good start, but actively using supplier relationship management tools to strengthen connectivity with critical logistics partners is imperative to adequately respond to environmental fluctuations. 

Worldwide operations are comprised of thousands of relationships. Therefore, if one manufacturer, resource provider or distribution expert cannot fabricate or deliver goods due to a climate-related issue, another company of the same ilk can be contracted.

The concept of never burning bridges goes far beyond maintaining friendships and ventures into the world of providing products to consumers or businesses. 

Pivoting priorities 

What happens if an environmental fluctuation impacts an operation model? The San Francisco Gate recognized California's struggle to use hydroelectric dams to power its cities due to a pervasive drought that has plagued the state for the past three winters. 

The prolonged dry spell has ultimately hindered California from reaching its emissions goals - reducing output to 431 million metric tons by 2020. In addition, the closing of the San Onofre Nuclear Generating Station has contributed to the rise of greenhouse gases as utilities have been forced to source energy from conventional sources, such as coal-fired facilities. 

Essentially, what the state needs to do now is jumpstart initiatives geared toward getting wind and solar farms online. California law obligates utilities to source 33 percent of their electricity from green resources by 2020, but this recent drought could cause legislators to raise that bar. 

How does this relate to procurement? Sourcing wind turbine and photovoltaic panel components from manufacturers throughout the globe remains California's best option. 


Is Mexico a strategic sourcing nightmare?


Is Mexico a strategic sourcing nightmare?

At first glance, sourcing goods from Mexico appears feasible for North American businesses.

Initial considerations

The country's proximity to the U.S. border, as well as its coastal ports along the Pacific and Caribbean, make it a strategic networking hub of the Americas. With the right approach to the procurement process, obtaining goods manufactured in Mexico would be a lot cheaper than acquiring materials from overseas.

However, many strategic sourcing companies have speculated as to whether Mexican infrastructure and assets can adequately handle a dramatic influx of goods. In anticipation of the re-shoring trend that is sweeping North American enterprises, transportation companies operating south of the border need to purchase the right property.

Weighing the pros and cons of outsourcing to a Mexican logistics business

Coronado Logistics CEO Matt Hamson recently spoke with SupplyChainBrain on the matter, asserting that Mexican trucks are having a difficult time handling the amount of volume they're expected to distribute. The professional acknowledged that the majority of the Mexican transportation industry is comprised of small companies - with 75 percent of entities participating in the logistics industry possessing 100 vehicles or fewer.

What's the problem with this picture? According to Hamson, these logistics businesses cannot adequately transport the amount of materials their clients require them to deliver. He cited an example of one refrigerated trucking company in the nation that turned down an average of 30 loads per day because it lacked the necessary assets.

On the other hand, there are a couple of benefits organizations should consider, not including Mexico's proximity to U.S. and Canadian consumers:

  • Despite what many may initially believe, Mexican violence is primarily influenced by the drug trade as opposed to theft, as criminals have little interest in commercial goods.
  • Another assumption is that Mexican transportation companies lack contemporary technology, such as GPS, when in fact such businesses possess digital logistics assets.

Output increasing

As more manufacturing-related investment is directed toward Mexico, managed IT services will be able to bring more advanced implementations to logistics companies. Advanced planning and distribution analysis software will likely be brought to the nation through companies interested in sourcing from the country's businesses.

The reason why this would occur? Dow Jones Business News noted that Mexican production rose 3.6 percent from May of last year, supported by growth in the country's automotive industry, which accounts for nearly a fifth of its manufacturing economy. More than 1.5 million light trucks and cars were produced as of June.

In this respect, vehicle production will likely support Mexican logistics companies that are struggling to acquire the appropriate assets.


Is ERP an obsolete spend analysis platform?

on Monday, July 21, 2014

Is ERP an obsolete spend analysis platform?

Although software companies are working constantly to make their solutions more flexible, scalable and intelligent, many professionals remain skeptical of ERP's capabilities.

The reason why? In the traditional sense, ERP has functioned more as a spend analysis platform, used by financiers to make sure an organization isn't operating at a loss. However, the complexity of global sourcing has obligated accountants to consider three elements:

  • Manufacturing operations management
  • Demand fluctuation
  • Sales success

In regard to these three factors, enterprises with hundreds of partners distributed worldwide need to be able to swiftly collaborate and scrutinize data together. The majority of ERP systems, according to SupplyChainBrain contributor and NeoGrid CEO Paulo Viola, are incapable of doing just that.

What is e-procurement? A solution

In his article, Viola acknowledged the disparity of systems and how it negatively affects materials acquisition and liquidation. He noted the importance of operating at the speed in which contemporary consumers purchase goods, which is incredibly fast considering the technology individuals have at their disposal.

So where does the solution lie? E-procurement. Capitalizing on the benefits of business process outsourcing isn't a bad idea, all things considered. Enterprises would benefit from contracting a company that can not only provide enterprises with professional insight and expertise, but supply them with a platform through which they can:

  • Easily share information with overseas partners
  • Measure demand for goods with manufacturing capabilities
  • Map out a sustainability plan that all entities contributing to the procurement process can participate in
  • Help production enterprises measure performance against sales output
  • Organize efficient, flexible global logistics routes
  • Quickly change strategic planning based on disruptions (warfare, protests, natural disasters, etc.)

Where does it reside?

An e-procurement solution's capabilities are optimized when hosted in the cloud. Such an environment makes it easy for partners to share data, sanction meetings no matter what the distance and conduct marketing analysis endeavors in real time.

Viola outlined an example of how such a platform can streamline business processes. Suppose a manufacturer and a retailer can trade information on the same platform. Whenever the latter company's inventory reaches a certain level of deficiency, the former organization will receive a notification detailing what goods its customer requires and set up a delivery time.

Flexible operations

Manufacturing.net contributor Greg Goodwin referenced a study comprised of 56 responses, the LNS Research 2013-2014 Manufacturing Operations Management survey, which showed that production companies are still having difficulty adapting to sporadic changes in global demand, fluctuating client priorities and other such factors. A cloud-based, e-procurement solution succeeds where ERP fails in this respect, providing modern manufacturers with the connectivity necessary to prioritize responsibilities.


How new UN food regulations may affect global sourcing

on Friday, July 18, 2014

How new UN food regulations may affect global sourcing

Feeding more than 7 billion people is one challenge, but ensuring they're receiving edibles that are safe to consume is another.

Today, food companies are heavily entrenched in global sourcing, making it difficult for them to accurately determine how produce is grown and livestock is raised. Global regulations and national standards aside, many enterprises are worried about transporting perishables to needy markets before products are tarnished.

A push to increase safety

According to AllAfrica, the United Nations Food and Agriculture Organization and World Health Organization recently concluded that no more than 0.01 milligrams per kilogram of lead should be found in baby formula. In addition, the two entities asserted that a minimum of 0.2 milligrams per kilogram of arsenic can be allowed in rice.

The standards were developed by the Codex Alimentarius Commission, which has created similar regulations in the past. Representatives from approximately 170 countries congregated at the CAO's annual meeting in mid-July, agreeing that infants are particularly vulnerable to the poisonous effects of lead.

Measures for success

The key question is, how are organizations going to be able to identify such precise measurements on a global scale? First, procurement services should identify areas where baby formula is most likely to come into contact with lead, and how arsenic can leach into rice.

For example, the news source explained that arsenic is most likely to be absorbed by rice than any other vegetable. Therefore, it is important for companies to scrutinize locations where rice production's frequency correlates with arsenic's prevalence. Where is such a relationship most likely to occur? AllAfrica maintained that those living in Asian countries are most likely to suffer from arsenic poisoning due to these two factors.

Eliminating waste via transportation

The bottom line is that food enterprises have a heavy responsibility. The problem is, the only organizations that are going to make a commitment to delivering edible products to those living in indigent countries are nonprofits. With this in mind, these particular charitable entities need to make sure they don't operate at a loss, inciting a need for corporate cost reduction.

Where do nonprofits need to focus their efforts? Devex contributor Anna Patton asserted that eliminating food waste is one of the biggest concerns the world faces today. Although many believe the problem lies with developed countries, she noted that infrastructure and logistics inefficiencies often cause produce to rot before it reaches the market.

With this considered, charitable organizations should leverage a healthy mix of technology and expert insight to network with distribution assets operating in struggling economies. If effective planning is executed, critical edibles will likely be saved from tarnishing.


Nearshoring 101


When talking about low-labor costs, cheap materials and mass-production, many people immediately correlate the thought with outsourcing work to areas in the Far East, and for the most part China. However, in today’s shifting landscape, some of the most cost-efficient aspects of outsourcing to those areas are now presenting unforeseen challenges. Workers are demanding higher wages, intellectual property has been compromised, and transit times and rising fuel costs have created a burden in arranging business logistics.

With these changes among others, Source One has recognized distinct advantages in working with suppliers in Mexico and other closer to home countries. We call this practice Nearshoring. Learn more about the potential of Nearshoring for businesses in this exclusive Source One infographic:


Finding corporate cost reduction through benchmarking


Finding corporate cost reduction through benchmarking

When considering the procurement process, conducting thorough benchmarking of companies offering near-identical materials can help enterprises save big in the long run. 

It's the same protocol many computer manufacturers look for when choosing whether to power their machines with CPUs produced by Intel or AMD. Affordability needs to be taken into consideration, but quality and performance can't be sacrificed. 

The weigh-in 

Scrutinizing procurement and productivity in a comprehensive manner is a good way for companies to identify ways to achieve corporate cost reduction. However, as with any sector, comparing internal operations with those of competitors is essential for winning market share. 

Take the laundry industry for example. According to American Laundry News, although factors related to geographies and climate have an impact on contention within the linens cleaning economy, because operations among sector participants are relatively the same, benchmarking presents a solid opportunity for laundromats to see whether or not they'll lose business as a result of:

  • Obtaining new washers and driers
  • Expanding facility capacity
  • Installing solar panels
  • Offering patrons the chance to purchase one-time use detergent 

Collecting and using information 

How are benchmarking tasks conducted? The source outlined the tactics used by Textile Rental Services Association, which leverages surveys and other various resources to help laundry companies develop concise, accurate comparisons between them and competitors. 

Laundry-Consulting.com Managing Director David Chadsey acknowledged the benefits of business process outsourcing to conduct cost and productivity analysis. Hiring professionals to survey expenditures and output and show where improvements can be made is profitable because they can dedicate more resources to the task and scrutinize a client's competitive pricing in an unbiased manner. 

"I think vendors are a very good source," said Chadsey, as quoted by American Laundry News. "Your chemical vendor doesn't just come into your plant - he's going into other plants that are similar to yours."

Capitalizing on opportunities 

Depending on what industry a business is in, it should consider participating in publicly sponsored initiatives that reduce the cost of conducting certain operations. 

For example, CTBR noted that the Scottish government recently gave £2.2 million to the Carbon Trust's Offshore Wind Accelerator program, which promises to reduce the expenses associated with installing turbines by 10 percent. The move was initiated in the hope of encouraging collaboration between organizations focused on eliminating costs pertaining to activities in Scottish waters. 

Most importantly, strategic benchmarking is about identifying opportunities wherever they may lie. If a new business process, supplier or operation model is recognized, then the analysis was a success. 


IoT: Procuring the right software

on Thursday, July 17, 2014

IoT: Procuring the right software

Before manufacturers conceive of new analytical insights, optimized factory production and innovations capable of reshaping business goals, they should shift priorities toward obtaining the appropriate Internet of Things platforms. 

Cost, need and ROI 

Conducting a spend analysis on how much money a production company is likely to invest in IoT is a good first step for these organizations to take. In addition, it's imperative that these companies carry out the following activities:

  • Compare and contrast provisions from technology enterprises offering solutions applicable to IoT
  • Initiate thorough background checks pertaining to on-demand support and security protocols
  • Figure out how scalable and adaptable solutions are to more data, new applications and complex software
  • Interview users to identify key pain points

What's needed from professionals? 

In regard to the people responsible for administrating an IoT system, companies can either:

  • Hire personnel knowledgeable of such architectures
  • Train existing staff on the technology's infrastructure

What such skill sets are going to be required? According to Electronic Design, Cisco recently presented a graph pertaining to IoT's influence on contemporary enterprise needs at the Internet of Things Developers Conference, held in Santa Clara, California, in early May.

The company discovered that businesses are most likely to use "fog computing," a multi-layered implementation that operates IoT frameworks on-premise while providing network support through cloud technology. Therefore, vendor resource management tools should be geared toward looking for IT experts knowledgeable of:

  • Allocating tasks to smart objects
  • Storing and processing information on virtual environments
  • Optimizing response time to new data input by the fog network

Getting a handle on security 

Suppose a factory implements 2,000 smart sensors. At first glance, this doesn't seem too intimidating given the amount of storage a cloud environment can handle (virtually endless). However, it's important to remember that this isn't a network of assets operating at the mercy of a centralized system - it's connected to the Internet. 

So, what does the facility need to do? Procure technology capable of sanctioning communication between smart devices and the Internet while preventing malware from contaminating the network. From what InformationWeek contributor Christian Borcea would assert, either a closed-loop framework or an advanced architecture should be implemented

What's closed-loop? If the aforementioned factory wants to use Internet technology but disable the system from communicating with, say, a website user, it can launch an environment through which administrators remain in control. Manufacturers with no interest in connecting to the Web should contract companies capable of constructing such an architecture.