Procurement services wonder if China is losing its luster

on Wednesday, August 27, 2014

Procurement services wonder if China is losing its luster

Whether companies headquartered in North American and Europe will continue to source from Chinese manufacturers is up for debate.

Over time, spend analysis has shown the cost of producing goods in China is growing more expensive. Some professionals have even asserted the nation's enterprises aren't focusing on quality. 

Not impressed 

At least, that's what Australian entrepreneur Amanda Bennett believes. BRW spoke with the former business owner, who asserted she had to liquidate her company as an direct result of doing business with Chinese production companies. 

The concept behind Bennetts Boots was to create footwear for people with wider calves. Initially, the finished goods Bennett received from China were a hit with Australian consumers. Upon opening a store in Melbourne, she sold $700,000 worth of merchandise in the first six weeks. 

However, in 2011, the quality of the apparel began declining. Bennett recalls one shipment of boots that were literally falling apart. About 80 percent of the units were unsaleable. This trend continued, and despite cutting staff, running a leaner business and taking other measures to achieve corporate cost reduction, Bennetts Boots ultimately had to shut down. 

A poor way of doing business? 

BRW acknowledged the findings of Chris O'Halloran, a procurement process specialist who assists Australian enterprises in doing business with Chinese manufacturers. He noted the disparity between two types of production companies the country harbors: Those that are completely automated and others that seek to improve profits wherever possible. 

"The Chinese do business by going in cheap and then try (sic) to recover margins by cutting corners, hoping no one notices," said O'Halloran, as quoted by the source. "To the Chinese, if it looks the same to them, then it is the same. They're not trying to be nasty; it's just the way they do business." 

China beginning to outsource

Speaking of footwear, some Chinese production companies are finding doing business domestically isn't as feasible anymore. The Week noted that, although China bereaved the U.S. of about 2.4 million jobs over the last decade, companies such as Huajian Shoes are outsourcing operations to Africa. 

"Ethiopia is exactly like China 30 years ago," said Huajian Shoes President Zhang Huarong, as quoted by the source. 

Huarong noted that Ethiopia has a high unemployment rate, which makes the country perfect as a strategic sourcing partner. China's average manufacturing wage dwarfs Ethiopia's by approximately $530, so the profits associated with procuring goods from the latter country are enormous. 

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Strengthen supplier relationships to improve production quality

on Tuesday, August 26, 2014

Strengthen supplier relationships to improve production quality

As product release dates are central components of retail marketing strategies, those managing the procurement process need to ensure items are operable when they arrive to market. 

Manufacturing delays and mishaps can offset distribution, in turn causing disappointment among consumers. If a new item is set to be unveiled in October 2014 but won't arrive in select stores until the following month, there's a fair chance sales may suffer. 

Mitigating errors 

Apple may encounter just such a setback. According to Reuters, the reputed software and hardware manufacturer is working frantically to assess a critical screen glitch that may postpone the iPhone 6's September 9 media event. This particular model is anticipated to have a wider display than its predecessors - the iPhone 5S and 5C. 

Two Apple suppliers informed the source that the backlight illuminating the screen had to be redesigned. In an effort to create a thinner screen, Apple blueprinted the iPhone 6 to possess one layer of backlight film. As a result, the display wasn't as bright as the manufacturer hoped it would be, obligating Apple to revamp the smartphone to fit an additional layer of film. 

What's to be learned?

It's unlikely that Apple's initial iPhone 6 prototype didn't coincide with its designers' expectations, but there's no way of validating this assertion. Product teams are typically a collection of professionals specializing in disparate fields, which can cause confusion if department organization isn't employed. 

Yet, one still can't turn away from supplier relationship management concerns. In this regard, Apple actually did a fantastic job of making the most out of an unfavorable situation. Tight, comprehensive communication between blueprinting specialists in headquarters and manufacturers across the globe was maintained, allowing the company to implement changes swiftly. 

The manufacturer's input 

What defines a strong supplier connection? Supply Management spoke with Planning Perspectives CEO John Henke, who authored a report titled "OEM Profitability and Supplier Relations." The general sentiment is that greater profits can be achieved when production companies are regarded as partners as opposed to simply sources. 

"It doesn't matter what business you're in," Henke told the source. "If you want to maximize the opportunity to make a profit it is absolutely important that you develop the best possible relationships you can with your suppliers."

For instance, if Company A spends more time communicating and collaborating with Manufacturer C than Company B, Manufacturer C will likely keep Company A informed on the best hardware. From there, designers can integrate such implementations into their products, improving quality and therefore customer opinion. 

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Creating Synergy in Procurement

on Monday, August 25, 2014

With a new presence in downtown Chicago,  Source One is excited to attend Corporate United’s 2014 Synergy Conference on September 15th & 16th and network within the Chicago community. The SYNERGY 2014 Conference was designed to provide the tools and insights to help teams overcome age-old challenges and lay the foundation for the procurement of tomorrow through the “Four Ps of Procurement”:  People, Priorities, Progress and Promotion. As thought leaders in the procurement and strategic sourcing space, Source One is attending with the goal of learning about diverse needs of the market and ways to optimize work based around those items.
As Source One, the industry, and general business climates continually shift, Synergy strives to approach the issues procurement executives and practitioners believe remain key areas worthy of attention. Whether it’s a lack of category knowledge, inability to achieve buy-in, or difficulty creating more value from supplier relationships, the challenges consistently remain the same. A main emphasis of the conference is that innovative solutions are the cure for advancing through these unchanging problems.
As a sponsor of the event, Source One stands by this emphasis on the need for innovation and distinct market intelligence in order to overcome procurement obstacles. With a talented workforce dedicated to delivering value to clients, Source One believes there will be enhanced success in engagements from learning new strategies at the conference. While becoming accustomed to a new area, Synergy will also serve as a good way to develop connections and learn how our services can support the Chicago market further.

If you plan to attend the conference and would like to meet with Source One to exchange thoughts or ideas, we would love to set up some time to make this a reality. Please contact Heather Grossmuller at hgrossmuller@sourceoneinc.com with any requests. 
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NLPA Emphasizes How SRM Can Transform Your Business

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Next Level Purchasing Association (NLPA), a global organization that helps clients establish procurement best practices and supports the education of procurement professionals, holds its annual conference September 15-17 in Pittsburgh, PA. Source One Director, Brad Carlson, will be at the event on an interactive panel to share insights for improving procurement performance.

A key topic of this panel, which happens to be Carlson’s area of expertise, is supplier relationship management. Supplier relationship management programs can help businesses optimize and generate additional value from their supplier base post-contract signature. In June, Source One released its SRM Insights Report, which outlines the business case for implementing such a program.

Why SRM?

In truth, many companies spend valuable time and energy finding best-fit suppliers and negotiating cost-effective contracts.  However, that investment is often neglected or mismanaged once the deal is completed. In the SRM Insights Report, it shows three distinct paths that supplier relations can take after the contract has been signed. Suppliers can be essentially ignored (1), even after long and timely negotiations; suppliers can be somewhat managed (2), but not enough to sustain any long-term value; or suppliers can be (3) setup to succeed through SRM. SRM programs support collaboration efforts and put processes in place so that suppliers are engaged and aligned with your business objectives at all times.

Though there are some SRM skeptics in the world, studies show that without rigorous contract management, 75% of sourcing savings can disappear within 18 months. [1] Some sourcing and procurement departments are resistant, purely due to a lack of understanding of such a program. Carlson hopes that he can illuminate those business professionals and help them realize that SRM can produce continuous improvements in supplier customer service, quality, overall costs, and material flow. The NLPA Conference panel should be an interesting and lively discussion on the topic, but for those not attending you can learn more at srm.sourceoneinc.com.

As an evolving area, we recognize that the most innovative ideas pertaining to SRM involve diverse input. We would love to combine ideas and have a conversation with anyone who is attending the conference and would like to meet. Please contact Heather Grossmuller with any requests at hgrossmuller@sourceoneinc.com. For more information about the conference, visit the NLPA Conference webpage. Don’t miss this great event!

[1] The Corporate Executive Board Company, Create Value Through Productive Supplier Partnerships and Become a “Customer of Choice, http://www.executiveboard.com/exbd/procurement-operations/transformation/supplier-management/index.page (last accessed May 1, 2014)
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Rare earths: Strategic sourcing considerations

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Rare earths: Strategic sourcing considerations

Those in the tech industry, particularly companies manufacturing central processing units, are quite familiar with procuring rare earth minerals. 

IT hardware producers belong to just one contingency out of the many kinds of businesses that source such materials. As these commodities are of incredibly high value, some enterprises employ supplier relationship management tools to ensure the following:

  • Miners aren't cutting corners and acquiring the minerals from insurgents
  • Distribution routes are secured to reduce the chances of thievery 
  • Producers aren't smuggling rare earths to terrorists or criminal syndicates

Conducting a thorough assessment of supplier practices requires companies to review policies, practices and finances. 

Defining rare earths 

According to InformationWeek, assigning the name "rare earth" to a particular mineral doesn't necessarily mean it's rare, but simply cannot be found in concentrated forms. Extracting these metals often requires complex mining processes, and refining them typically has a detrimental affect on the environment. 

The source listed the rare earths, several of which are outlined below, along with what they're used to create:

  • Scandium: Aerospace components with light aluminum
  • Lanthium: Hydrogen storage, battery electrodes and camera lenses
  • Gadolinium: Computer memory (RAM), MRI contrast agents and X-ray tubes
  • Erbium: Infrared lasers, fiber-optic cables 
  • Ytterbium: Stainless steel, stress gauges

Scrutinizing "the largest player" 

Investor Intel contributor Christopher Ecclestone wrote China is the largest participant in rare earths global sourcing, producing an estimated 90 percent of such materials mined throughout the world. The writer noted that despite the nation's heavy involvement in the industry, measuring price, volume and vendor output rate has proven quite vexing for those specializing in the procurement process. 

Ecclestone acknowledged one particular instance in which the country reported a 3.5 percent drop in rare earths exports from 2011 to 2012, or 16,855 tons to 16,265 tons. However, this statistic contradicted an estimate released by the vice director of the Chinese Ministry of Industry and Information Technology in 2013, which asserted China exported 18,600 tons in 2011. 

What does this discrepancy show? Ecclestone believes this ambiguity is a sign of smuggling. For example, while the country's mines that were taking advantage of Ionic Adsorption clays were reportedly shut down four years ago, procurement officers can only truly rely on the good word of the Chinese government. 

He noted another instance in 2011, when Burma (now Myanmar) exported nearly 14,000 terapascals of antimony concentrate to China, with an undetermined amount being smuggled by rebel tribes who mined the mineral. In other words, Ecclestone believed China was importing conflict metals. 

Being able to navigate through the opaque, befuddling trade of rare earths can be quite difficult. Procurement services and other such professionals have the knowledge, resources and time to do so successfully. 

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8 Resources Needed to Keep Current with the Medical Imaging Industry

on Friday, August 22, 2014

In a highly specialized and technical field keeping up to date may seem like climbing Mt. Everest. As a follow-up to the Keeping up with Pharma: Resources Strategic Sourcing Experts Use to Stay Informed I'd like to provide a simplified roadmap and several examples to navigate the closely related medical imaging device field. This includes an introduction to terminology, what areas of focus are commonly presented, and a look at the leading societies and online news sources.

Getting familiar with terminology is the key step to abate confusion before it starts. Although, this can pose quite a learning curve if not focused on a specific area of interest. The terms biophotonics, biomedical imaging or optics, medical imaging, and bioMEMS have very specific interpretations, but can be considered as simple search keywords for the first pass. It helps to associate imaging with the traditional approaches of light microscopy, x-ray, ultrasound, and MRI. While, photonics and optics are usually related to new and emerging technologies such as laser and fluorescence microscopy, fiber-optic instruments, and microfluidics and microelectromechanical methods.

The search for information is simplified by relating the area of interest to the commonly presented divisions within the field. Science (research), medicine, techniques, tools, and business trends provide common categories. For example, if considering melanoma diagnosis and treatment BioOptics World, and Medical Physics are good first stops.

For in-depth reviews of current techniques and tools review articles are indispensable. The Society of Photo-Optical Instrumentation Engineers (SPIE) publishes several journals related to biomedical and medical imaging. The Optical Society of America (OSA) is widely recognized for its optics journals, but also publishes biomedical optics express to highlight evolving technology in the field. Open access information is available from both societies.

Well organized databases are critical, such as the The National Center for Biotechnology Information (NCBI) which provides access to biomedical and genomic articles in the health and science fields from the U.S. National Institutes of Health's National Library of Medicine (NIH/NLM). PubMed Central (PMC) serves as the free full-text archive of NIH/NML journal literature.

For everyday updates, short descriptions of innovations in the field, and business news the sites from Photonics Media, and PennWell Corp. relate the technical aspects of the field to the activities of the leading companies.

Although, Photonics is the most well known site from Photonics Media, the BioPhotonics portal filters articles centered on the biomedical industry. They present short descriptions of recent research, product, and business news with a link to the original journal and author's site. The buyer's guide can be very useful when searching for suppliers in a specific area.

BioOptics World is PennWell's site for the biomedical community. They also separate research, medicine, techniques, and tools while linking advancements in the field to business trends. Laser Focus World and Strategies Unlimited serve as links to the optics and market intelligence communities. Although reports are offered for a fee, viewpoints are given from both the supply and demand side of the market and are based on in-house data collection efforts. This helps when trying to predict the market directions of new technologies or applications.

Gathering news articles, and keeping track of trends in technical fields can be a daunting prospect, but a systematic approach along with dependable publications can ease the introduction. By concentrating on getting familiar with the field's terminology trade publications and journal articles will become more accessible. With the wide availability of open-access literature a thorough and focused research initiative can then be carried out utilizing the associated society publications, databases, and market intelligence reports.

Image courtesy of http://www.ryerson.ca.

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Use supplier relationship management to prevent poor labor practices

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Use supplier relationship management to prevent poor labor practices

While strategic sourcing is typically characterized by the material acquisition process, the approach can also be directed toward scrutinizing supplier employment protocols.

Modern consumerism is obligating enterprises to fully comprehend how raw commodities are harvested, delivered to factories, manufactured and finally transported to the market. Lackadaisical procurement oversight can lead to a tarnished reputation or, in a worst-case scenario, a federal indictment.

Still not enough?

Despite its commitment to the Fair Labor Association and its creation of a Supplier Responsibility initiative, popular electronics manufacturer Apple Inc. has yet to bring its factories up to FLA standards, according to Inside Counsel. The source noted that the FLA recently conducted an analysis of two Apple overseas plants, the results of which were released on August 15. Although the FLA is not a government body, and can therefore not enforce fines, it does offer comprehensive advice on how to mitigate any problems that may arise.

The factories, which are located in Shanghai and Changshu, China, and operated by Quanta Computer, received citations pertaining to overtime protocols, health and safety violations, and poor recruitment practices. For instance, just over four-fifths of the workers interviewed by the FLA stated they had to pay a fee just to work in the facility.

Apple responded to the findings by saying it will "work closely with Quanta and our other suppliers to prevent [excessive overtime]," as quoted by Inside Counsel.

Modern-day slavery?

The expense associated with personnel wages is often taken into account with a comprehensive spend analysis. When exceptionally low figures are reported, the first impulse is to marvel at how productive a certain supplier is. However, failing to bring context to those numbers can result in unsavory or even illicit practices going unacknowledged.

The Guardian referenced a study formulated by the Chartered Institute of Purchasing and Supply, which discovered an alarming 11 percent of enterprises headquartered in the United Kingdom believed it "likely" that a collection of their indirect suppliers are using some form of modern-day slavery.

Although the CIPS reported consistent reduction in its global supply chain risk metric, the assumption that some businesses are underpaying workers - or failing to provide them with any wage at all - is astounding.

It may seem like an over-the-top tactic, but in order to validate or discredit such estimation, firms should consider the pros and cons of outsourcing to procurement specialists to carry out covert audits of both direct and indirect suppliers. Otherwise, grievous human rights abuses will continue to go unacknowledged.

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Strategic sourcing for data center management: Where's the hardware?

on Thursday, August 21, 2014

Strategic sourcing for data center management: Where's the hardware?

The cloud, big data analysis and seemingly limitless Internet connectivity are powered by data centers and the personnel who manage them.

Over the next decade, billions of Internet-connected devices are expected to come online, which will require a level of support the PCs of the early 2000s did not. For tech enterprises, the procurement process and talent management are going to be essential in meeting the demands of future businesses and consumers. 

Advancing data center technology involves a symbiotic combination of optimal hardware, but rising to the next level doesn't only involve creating a faster Web. 

A smarter Internet 

In an effort to compete with search engine giant Google, Microsoft researchers and a team from Bing collaborated to create a specialized computer chip that expedites Bing's delivery time, according to TechNet. 

The mechanism, appropriately named "Catapult," was unveiled in a paper at the 41st International Symposium on Computer Architecture in Minneapolis on June 16. Microsoft scientist Doug Burger outlined the project's capabilities, which are supported by field-programmable gate arrays that can be reconfigured by software residing in the cloud. 

The implementation was demonstrated on a collection of 1,632 servers, improving throughput by 95 percent and effectively reducing the number of machines Bing's data centers need to power the programs. 

Reinventing the wheel 

Procurement services working for tech companies, as well as experts within the computer science industry, have foreshadowed the eventual demise of Moore's Law. This concept asserts that the size of computer chip transistors will decrease twofold every two years while simultaneously doubling processing speed. 

Now, IBM has abandoned the classic CPU design for a microprocessor that mimics the architecture of the brain. The device is as small as a postage stamp and requires the same amount of power used by conventional hearing aids. Dubbed SyNAPSE, it uses 4096 neurosynaptic cores, with each combining computation, memory and communication.

Greener facilities 

Managed IT services and other tech companies are interested in procuring energy derived from renewable resources to power their data centers. According to Data Center Knowledge, Green House Data recently unveiled a facility in Cheyenne, Wyoming, that derives its power entirely from green power credit purchases.

Although the source didn't specify which resources were supporting the data center (wind, solar, geothermal, etc.), it did note a similar endeavor by Microsoft. The Redmond, Washington-based software giant unveiled a proof-of-concept implementation that uses fuel cells to convert methane gas output into electricity. 

Procuring new technology and implementing revolutionary techniques are becoming regular parts of the tech industry. For example, how a firm leverages strategic sourcing may define its success in appealing to customers. 

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How to Beat the New Jersey Casino Cash-Out Trend

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It seems like every day there is a new casino in AC declaring bankruptcy or closing its doors to gamblers. With tremendous debt burden and the competitive casino market straining to turn a profit, many casinos are doing anything to avoid the downward spiral. In the last decade, 26 casinos opened in Pennsylvania alone, creating a distinct challenge for New Jersey to compete with casinos offering close-to-home convenience. Especially with the addition of online outlets that don’t require leaving home, New Jersey is no longer a place gamblers need to travel consistently. Complimentary hotel stays may fill casino penny slot seats but to gain a substantial advantage, resorts need to begin to consider reevaluating their purchasing process during slumps like the present. For the casinos that are still hanging on, reducing operating costs may not spare a declining gambling market, but it can allow a rise above stressed competitors.

Whether it’s surrounding hotel amenities, marketing and advertising, or casino floor machines and equipment, casino purchasing managers have the potential to widen their budgets while strengthening supplier relationships through enabling a thorough strategic sourcing initiative. The same cost savings and relationship reinforcement can be extended to food entities within casino resorts to source quality, cost-efficient ingredients, supplies, and staff. Through granting this visibility into total spend, some of the discrepancies within casinos’ control can be addressed. 

According to the American Gaming Association, the commercial casino industry has been a long-time proponent of diversity in all aspects of its business, from internal hiring and human resources policies to purchasing and contracting practices. Since many casinos seek suppliers who employ staff of diverse backgrounds, a supplier diversity program may aid in consolidating those needs in a way that can prevent overextending budget to achieve a certain level of diversity spend. A comprehensive supplier diversity program can not only help a casino to be ethically bound, but also improve their bottom line while realizing undiscovered suppliers. After establishing selection criteria and training around acquiring diverse suppliers, the benefits of maintaining these relationships can be realized.

Especially following the release of the luxurious Revel casino’s closing, investors and gamblers alike remain skeptical about the future outlook of Atlantic City. "Atlantic City is undergoing a massive economic transition," Atlantic City Mayor Don Guardian said at a news conference. "We know it is painful for those who are losing their casino jobs." Liza Cartmell, chief executive officer of the nonprofit Atlantic City Alliance, was a bit blunter. "Recent developments in Atlantic City are part of the larger picture of excess gaming across the United States that's leading to painful economic decisions," she said.

Although the failure of casinos in New Jersey is tied into the government and some uncontrollable forces, the remaining resorts can be strategic in how they stage their operations going forward. With limited projected future growth in AC, casinos that employ strategic sourcing and supplier relationship management have the opportunity to remain competitive in a struggling industry.

Photo Courtesy of: newsworks.org

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How will Analytics 3.0 change the procurement process?

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How will Analytics 3.0 change the procurement process?

Data analytics has helped procurement services weigh the risk of sourcing from particular overseas manufacturers, scrutinize production output, forecast yearly food deliveries and a wealth of other factors. 

Analysis is an integral part of every business, but even the sophisticated visualization tools of today can only be used by departmental teams. Empowering the average worker with software capable of scrutinizing unstructured and structured data in real time isn't necessarily feasible. 

The uses of the future 

However, a future in which even minimum-wage workers are equipped with such tools may not be too far off. Thomas Davenport, a renowned author and contributor to The Wall Street Journal, detailed three generations of data analysis protocols, forecasting a future in which analytics are considered a fundamental part of business practices. 

  • Analytics 1.0: A generation of tools that could only scrutinize structured, historical data that was produced internally. Models and representations took months to formulate. The task of analyzing information wasn't regarded as essential. 
  • Analytics 2.0: Programs began processing external, unstructured data. Managed IT services provided Hadoop and open source databases were capable of quickly inputting information. Data scientists were more involved with the business, instead of working behind the scenes. 
  • Analytics 3.0: In-database and in-memory analytics expedite information processing. Prescriptive and predictive analysis models mature and become a central part of enterprise decision-making. Entire departments are created to support data analysis endeavors. 

Above all, Davenport maintained 3.0 will be a combination of its predecessors. Unstructured, structured, internal and external data will all be regarded as a single cohesive data set. It can be imagined these programs will be able to answer more specific questions, as well. 

Already at work 

Davenport recently spoke at CIO.com's CIO 100 Symposium and Awards ceremony in Rancho Palos Verdes, California, acknowledging how Cisco, Ford, General Electric, Monsanto and a few others are leading the way into Analytics 3.0, the magazine reported. The way they're doing this? 

  • GE is intends to develop its concept of an "Industrial Internet" through which it can sell predictive maintenance information regarding its jet engines
  • Ford envisions a fleet of vehicles possessing multiple sensors that cohesively produce data 
  • Monsanto wants to create predictive tools for farmers to use to optimize crop yields 

Basically, enterprises are leveraging analysis products as additional customer service provisions. Monsanto's development is particularly interesting, at it sanctions the symbiosis of a seemingly anachronistic industry with sophisticated business intelligence programs. 

Analytics 3.0 isn't just about a more data-intensive world, it involves putting advanced software in the hands of average consumers. 

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When is it time to source overseas?

on Wednesday, August 20, 2014

When is it time to source overseas?

North American companies often grapple with the prospect of reshoring manufacturing. 

Options and questions 

However, there's one key question that always appears during the RFP process: Is reshoring profitable?

As of now, nearshoring to Mexico and other Latin American countries appears to be the safest bet - their proximity to the U.S. border reduces logistical risk and enables procurement professionals to visit facilities more frequently. However, this isn't to say outsourcing to overseas enterprises is out of the question. 

A domestic dilemma 

The Portland Press Herald referenced statistics produced by the American Apparel and Footwear Association, which found only 2.5 percent of the clothing bought by U.S. consumers in 2013 was produced domestically. That's a sharp drop from 56 percent in 1991. The downturn was induced by a series of trade agreements that occurred over the mid-1990s through the 2000s and eliminated various restrictions that caused high overseas production costs. 

However, the tide seams to be changing at a tempered pace. Procurement services and other professionals have cited labor grievances transpiring in overseas production facilities, prompting people to refrain from purchasing goods manufactured in certain countries. 

Strictly by the numbers

Sourcing specialist and IndustryWeek contributor Paul Ericksen noted weighing the cost of producing goods overseas or domestically depends on measuring a supplier's manufacturing critical-path time (MCT). He defined this metric as a deduction of the time it takes for a production company to deliver to the customer's point of use. 

As one can observe, the calculation depends on the industry in which the merchant and manufacturer operate. For example, retail professionals know they can sell a smartphone quicker during the time of its original public release, because consumer hype regarding the product remains healthy. 

At first glance, it would appear overseas producers are at a disadvantage because of the time it takes to deliver goods across the Pacific - but this doesn't matter seeing how logistics isn't entered into the equation. What it comes down to is measuring material variance, which is typically used by manufacturers to deduce the performance of each of their departments. 

In other words, the goal isn't to measure how many units a company can produce in a single hour with a predetermined budget. Instead, it's a complex measurement of how a business performs as a cohesive unit - this includes human resources, sales and other seemingly disparate teams. 

Finally, it's also important to acknowledged the business environment of particular countries. For example, does a scattered network of specialist contractors muddle the logistics process? 

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Marketing analysis shows opportunity in Sub-Saharan Africa

on Tuesday, August 19, 2014

Marketing analysis shows opportunity in Sub-Saharan Africa

When global sourcing enters a boardroom conversation, much of the discussion focuses on Southeast Asian and Latin American manufacturing.

Yet, there's untapped opportunity in Sub-Saharan African. Before organizations pack up shop in other production economies and start constructing thousands of factories throughout the region, there are several factors enterprises need to consider.

Tenuous physical support

The labor exists, but the infrastructure is still being developed. General Electric noted that only three in 10 Africans have electricity in their homes. The source referenced a statistic by the World Bank, which asserted manufacturers operating on the continent have to contend with an average of 56 days a year without power. 

These factors are no reason for investors to turn their backs and run. In fact, great opportunities exist for renewable energy companies to install windmills, geothermal plans and other such implementations on the continent simply because the demand for electricity is so high. The Bisasar Road project in South Africa, for example, uses seven Jenbacher engines to burn biogas produced by the nation's waste. 

A long term endeavor 

When a company directs its strategic sourcing to the continent, the likelihood of it witnessing large returns is pretty tame. Forbes contributor Alejandro Lago maintained that time and persistence are going to be required to do three things successfully:

  • Navigate the complex, intensely regulated political nature of select nations
  • Attract and foster local talent 
  • Establish boundaries for near-future operations and set a tempered plan for growth

In this respect, it should be noted GE plans to invest more than $2 billion in Africa to construct new plants and support skills training programs, as well as sustainability projects.

Foster connections 

As every good business professional and college professor would assert, networking is essential to successfully initiating operations in Africa. In order to do this, connect with investors who were born and raised within specific countries. 

This should go without saying, but don't treat the continent as one huge country - one only has to look at the number of native languages spoken in Africa to understand how culturally diverse it really is. Procurement professionals should be cognizant of this fact and acknowledge the needs and desires of different businessmen. 

Remember: Setting up operations in Botswana has different repercussions than establishing connections in Ghana. 

Depending on how an enterprise approaches the situation, bringing manufacturing to Africa has the potential to be a winning situation. With more concentrated investment being focused toward the continent, its infrastructure is likely to improve. 

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