Good News for Airlines

on Thursday, June 30, 2011

With summer in full swing and several weddings in the pipeline, I’ve started to do some hotel shopping only to find that hotels are implementing some new tricks to help their bottom line. I guess you could say they are taking after the airline industry when it comes to charging penalties when your plans change. However, hotels are making airlines look like the good guys when it comes to accommodating changes and being more flexible with our travel plans.

The Wall Street Journal shares the experience of one individual, Cy Yavuzturk, who was charged $868 when he cancelled his three-day reservation for a hotel stay in Washington, D.C. He did not even receive the option to change his reservation to a later date. Apparently, this policy is not anything new. The article states that “hotel chains and independent hotels have been adding nonrefundable restrictions to their normal discounted rates for several years, industry executives say.” However, recently this trend has picked up some steam.

Expedia, Travelocity, and Orbitz are a few online travel sites that offer discounted hotel rooms in the form of special deals. When advertising these discounted rates, the nonrefundable stipulation is not mentioned. Another misleading part of the whole scheme is that “Expedia and Orbitz say on their websites that they don’t charge reservation cancellation or change fees. They don’t – it’s the hotels that impose the nonrefundable rules and collect the cash when someone does cancel.” Hotels argue and say that the only way they are able to offer discounted rooms is if they are pre-paid for and nonrefundable. There are some hotel chains that choose not to follow suit and do not charge a nonrefundable rate. They are most likely the same ones not offering discounts.

Some hotel chains should reconsider this cancellation policy, or it might not sit well with loyal customers. Airlines at least offer you the option to change your flight to a later date. Hotels should accommodate this request as well. In a follow up article to the original story, it was reported that in 2010 “U.S. airlines collected $2.3 billion in reservation change and cancellation penalties.” I wonder what 2011’s numbers will be for hotels.

Hotels and online travel sites are pretty much left saying caveat emptor. It’s up to us the customers to pick the rate we want and deal with the consequences. If we want to save 20% on a hotel room, we better not cancel. If we have even the slightest inkling that a change might be needed, we should reconsider and be willing to pay a higher rate with a 24-hour cancellation window. Mr. Yavuzturk thinks that “penalizing a traveler at full cost without the traveler having used any portion of a service is unreasonable.” I agree. Usually when a deal seems too good to be true is because it is. When taking advantage of a discount, be sure not to discount any of the fine print.
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Need help paying bills? The government will give you $50K to help pay them!

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Last week the government started a new program called the Emergency Homeowners Loan Program (EHLP). According to the Department of Housing and Urban Development, or HUD, the purpose of the program is to try and slow down the flood of home foreclosures and therefore help the severely ailing housing market. The program will cost tax payers about $1 billion and offers loans up to $50,000. The amazing part, as long as you meet certain requirements, you don’t have to pay the loan back. It would just be free money. Those behind the program say the goal is to offer aid to those individuals who look like they will be back on their feet soon.

In order to qualify, homeowners must have lost income and be at risk of foreclosure due to involuntary job loss, underemployment or a medical or other economic conditions. “Other economic conditions” seems fairly vague to me.

The loans would be interest free and payments would go directly to the homeowner for a portion of their monthly mortgage, including missed payments or past due charges. This would last for 2 years and give up to $50K. When the assistance period ends, 20%of the loan is forgiven with every passing year. So for those people who stay in their homes for at least five years after they receive the monthly payments they will not have to repay the money.

Some critics, however say the loans may leave homeowners worse off in the long run and get them further into debt. If they sell their house before the 5 years or fall behind on their mortgage payments again they'll need to repay the remaining balance of the loan. Furthermore, borrowers aren't required to have equity in their home to receive this free money, so someone who has to repay the loan risks owing more on the home later than they already do.

Considering there are around 4 million borrowers who are behind on their mortgages by at least 90 days or are already in foreclosure, this $1 billion is just a drop in the bucket. So far other federal assistance programs, like the Home Affordable Modification Program, haven't impacted a significant number of borrowers at all. Essentially, the government’s plan is to keeping throwing tax payer dollars to people who can’t keep up on their bills and just cross their fingers it is going to help the housing market. Sure, there are people out there that have lost their jobs and legitimately just need a little help until they are able to catch up. However the majority of this money is going to people that live completely out of their means, make unnecessary purchases, and are unable to manage their money appropriately.

So what the government is telling us is that if we go around buying more of all the junk we don’t need and then can’t pay our bills – don’t worry – we’ll make those idiots that are financially responsible pay the bills for you!

I think with the next few months of mortgage payments I’ll go buy 87 copies of Waterworld on DVD and a jet ski! So what if I live in a row home in the city. Have you ever been on a jet ski? They’re sweet.
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USDA reports send corn futures tumbling

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USDA reports send corn futures tumbling  Though corn futures have surged over the past 12 months, a new report on domestic supplies served to allay concerns, sending prices down in trading.

According to the Wall Street Journal, a report issued by the U.S. Department of Agriculture (USDA) indicated that U.S. stockpiles are at larger-than-expected levels. What's more, the USDA raised its outlook for the fall harvest, which is a reversal of earlier reports from the agency that stated supplies would likely fall amid burgeoning demand.

The two USDA reports caught investors off guard, according to industry analysts, as one of them estimated U.S. farmers will plant 92.3 million acres of corn this spring. That figure is up 1.7 percent from an estimate the USDA gave only three weeks ago. The other report stated that U.S. corn inventories as of June 1 were at 3.67 billion bushels. While that number is 15 percent lower than year-ago levels, it still was well above many analysts' expectations.

Since the beginning of this year, corn futures - like many other commodities - have soared in value as supply outlooks remained far below global consumption rates. Corn futures hit record prices in early June as investors feared global demand would far outpace supplies, but the USDA's most recent reports helped to temper those concerns.

"This is a definitely a shock to the system. We had two whammies with acreage and stocks," North America Risk Management Services analyst Jerry Gidel told the WSJ.

According to USDA projections, corn plantings this year will likely hit their second-highest levels in nearly 65 years. Earlier reports had forecast lower plantings because of the inclement weather that many corn-producing countries - including the U.S. - endured recently. Though seed planting was delayed in early May in a majority of Midwest states, the USDA affirmed that "planting conditions improved during May in most of the corn-producing areas of the country."

"The USDA again surprised the market," Prime Agricultural Consultants Inc. market analyst Chad Henderson told Bloomberg News. "Rising acreage will add 200 million bushels to this year's corn crop. Demand rationing has taken place, and supplies are much more comfortable for 2012."

On the Chicago Board of Trade on Thursday at 1 p.m., corn futures for December delivery declined by 4.6 percent, or 30 cents, to trade at $6.20 per bushel. 
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Chevy car sales climb as consumers covet fuel efficiency

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Chevy car sales climb as consumers covet fuel efficiency  General Motors has risen from insolvency to reclaim its position as one of the globe's biggest automakers. According to a published report, car sales of the company's Chevrolet brand are soaring this year.

Reuters reports that compared to its truck sales, Chevrolet car sales in the first half of this year are on pace to reach their highest market share for the brand in two decades. In June, car sales at Chevy represented slightly more than 50 percent of total U.S. sales, according to the company. That serves as the third consecutive month in which car sales eclipsed those of trucks.

Thus far this year, Chevy car sales have accounted for 47 percent of all the company's vehicle sales, affirmed Chevy vice president of sales and service Alan Batey.

"You'll see continued strength in passenger cars, particularly in the compact and mid-car segments," Batey said.

Global automobile sales have soared during the nascent economic recovery, with sales of smaller cars leading the way, according to industry analysts. Amid high energy prices - oil continues to hover near $100 per barrel - many consumers are shunning larger trucks for their smaller counterparts as they endeavor to cut costs.
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Telecom Is Like a Picnic Table

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Building a new picnic table has been like planning a network migration. One of the biggest challenges in telecommunications and IT is scope creep. There always seems to be too many factors to consider and technology and service offerings change so rapidly that failure to consider all factors in the beginning of an initiative can significantly and adversely influence previous strategic decisions.

I decided I wanted to build a picnic table. When you think about it, a lot of considerations and decisions are apparent and can be easily identified initially.

  • What type of material?
  • What type of design? One piece, table and benches, etc.?
  • What type of fasteners?
  • What dimensions?

These sorts of questions have analogues in the telecommunications world. As a quick example, a data network:

  • What type of access?
  • What type of design? Hub and spoke, fully meshed, etc.
  • What type of redundancy?
  • What bandwidth will each node need?

Of course, each of these lists go on much more extensively. But then there are less apparent options that may be overlooked initially. Those other factors begin to influence decisions you thought you already finalized. A quick trip to the hardware store -much like market research in the telecom arena- can be very educational. Instead of making a decision between pressure treated lumber and standard lumber, several all-weather composite options exist. If you choose to go with one of those, suddenly specialized fasteners are more optimal than the ones you previously anticipated using. Both the materials and the fasteners are more expensive, though. But those same, more expensive materials will also take you further into the future without needing to repurchase or upgrade what you are investing in today.

Then you may realize that if you would like to be able to push your separate benches in under the table, the leg design needs to change which will increase the amount of material you need to use. Suddenly the already over budget project becomes uncomfortably over budget and you begin backtracking to your original design.

This can be a long, frustrating and tedious process, especially if you have made, remade, and undone some of your previous decisions. It may involve returning and exchanging items and potentially disassembling and reworking portions you have already built.

All of this seems to happen all too often on telecommunications projects. Unfortunately, the returning and exchanging of materials, or reworking already built components are the equivalencies to renegotiating and pursuing further, additional proposals from vendors, prolonging your timeline and complicating the project. In both scenarios it is critical to identify the objectives of the project early and consider what factors may influence the decision. Ensuring the inclusion of all technologies and offerings in your consideration is a challenge, especially if you have not spent much time in the market since your last contract was signed 3 years ago. In the same way, identifying potential obstacles and impediments, whether they are technological, operational, financial or contractual can be equally tricky. Efforts towards preventing scope creep via research, design and planning can pay enormous dividends in shortened timeline, appropriate solutions for your organization and its future, costs within budget and better relationships with your suppliers.

For help developing and implementing a strategic telecommunications plan, contact Source One.
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Request For Proposal Communications

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Here at Source One, we have been discussing the importance of proper communication a lot lately, and for good reason. Effective business communication translates into dollars, especially when it comes to developing a Request For Proposal (RFP). Here are some best practices for communication during the RFP process:

1. Standardize the methods and processes used for publication of the RFP. This may include creating a style guide or category templates for your business to utilize for each RFP. Consider using an e-procurement tool such as WhyAbe.com for your RFP administration.
2. Provide rules and procedures for any communication between bidders and individuals other than the RFP administrator. When suppliers circumvent the established lines of communication, it can confuse the process. All communication from the buyer side should be agreed upon beforehand by the participating suppliers and run through those established methods of communication.
3. Identify the preferred or common communication methods of bidders. This will ensure a proactive approach in their responses. For example, not every supplier may be tech-savvy, or a supplier may respond more promptly to emails rather than phone calls.
4. Clearly mark the bidding instructions. It is amazing how often bidders do not carefully read the bid instructions. Make sure they are prominent and clearly defined. Follow-up communications with bidders should address any questions on the instructions.
5. If you are purchasing in a consulting role, proactively schedule regular updates with your internal customers or clients. This will ensure that they are up-to-date on the latest information. Consider a weekly or bi-weekly status meeting.
6. Clearly communicate in the RFP your general criteria for the Proposal Evaluation process. If demonstrations or site visits are part of the proposal evaluation, include this information.
7. Document any unethical communications from bidders, such as personal gift offers or bribes.

The RFP brings structure to the sourcing process and is critical to helping both buyers and suppliers develop an understanding of the category. Without proper communication, suppliers will not properly address the scope of services and pricing requirements desired by the buyer, which can skew the evaluation process. The time, money, and other resources spent correcting communication breakdowns and misunderstandings can diminish the value of a properly executed sourcing event. A properly-planned and constructed RFP can actually improve the sourcing process and lead to even greater savings.
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Toyota recalls 82,000 hybrid vehicles

on Wednesday, June 29, 2011

Toyota recalls 82,000 hybrid vehiclesAlready reeling from supply chain disruptions emanating from the natural disasters that hit Japan on March 11, Toyota Motor announced that it will now recall some of its hybrid sport utility vehicles (SUVs) after a stalling problem was found, according to a published report.

The New York Times reports that Toyota will recall 82,000 of its hybrid SUVs after an investigation by the National Highway Traffic Safety Administration (NHTSA) discovered the flaw. The recall affects about 45,500 Highlander hybrid models, and 36,700 Lexus RX 400h models from the 2006-2007 model years, according to the news source.

Toyota said in a statement that the Intelligent Power Module (IPM) located inside its hybrid system inverter contains a control board with transistors, some of which were inadequately soldered. Some of the transistors have the potential to be damaged by heat during a large current flow, company engineers said.

Toyota spokesman Brian Lyons said in an email that the carmaker is thus far unaware of the manufacturing defect resulting in any accidents. What's more, he said Toyota was already in the midst of its own investigation into the matter when the NHTSA announced that it was looking into the problem in February.
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APPetite for Destruction

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With the explosion of mobile applications, games, entertainment and daily deal options on your cell phone, it is no surprise that people are spending more time on their devices than staying focused in the real world…and at what cost?

In a blog posted on crs.com, a study performed at the University of Alabama found that 1/3 of students use smartphone applications while driving. Although 33 states banned texting while driving, the use of mobile aps is not clearly identified. I recently blogged about how there are so many car accidents caused by motorists texting while driving. Well imagine what will happen while someone is playing a game or watching a YouTube video.

In a story on psfk.com it is expressed by the mobile analytics firm Flurry, that “the average user spends 9% more time using mobile apps than the Internet”.

Although I understand the obsession with Angry Birds or turning your friends into Zombies on Zombie Booth, I thought Smartphones/Blackberrys were created for cell phone use and PC-like functionality.

When I am in a meeting with a client or supplier and I see them plugging away on their device, I wonder if they are checking email or playing Words with Friends.

It is a great thing that technology has advanced so significantly. However, I still think about the days when playing outside with your friends riding bikes or playing tennis with an actual racket and ball was a popular thing to do. Now our eyes and ears are focused on these 4+inch screens and verbal/physical contact is a thing of the past.
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Near-Shoring the 4th of July

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"The day will be the most memorable in America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival.... It ought to be solemnized with pomp and parade... bonfires and illuminations from one end of this continent to the other, from this day forward, forevermore."

That is what John Adams penned in a letter to his wife after the Continental Congress proclaimed the American colonies independent from Britain. Since then, Americans have celebrated the fourth of July with tremendous displays of fireworks across the country. It has become one of the greatest and most popular American traditions, and it is not uncommon to see fireworks cracking and illuminating the skies even in places where they are illegal. [Their legal status is regulated everywhere, to some degree or another]

Every year fervent patriots begin an early hunt for fireworks, as the date approaches to keep this American tradition alive and make it bigger and better than the year before. Proof of this is that fireworks have exploded to close to a billion-dollar industry in recent years, doubling its revenues from ten years ago. Surprisingly enough, this spectacular component of this great American tradition is not American, but foreign in origin instead; most fireworks are manufactured in China, Mexico and some places in Europe. Little production is American, mainly due to the excruciating local and federal regulations and high insurance premiums associated with manufacturing what are technically “ordnance”. The stringent regulations include special types of coverage for workers compensation and transportation and storage that may cause costs to skyrocket. In the U.S., only five companies account for eighty percent of the national production, which adds another barrier to entry for those domestic companies that want to compete for a share of the market.

Beyond Fourth of July celebrations, fireworks have started to play a big role in showcasing many other events and celebrations. Disney World has being using fireworks since the ‘50s for major productions and has been a pioneer in using compressed air launchers and timers to synchronize explosions. As of today Disney is the largest consumer of fireworks in the U.S. and a benchmark for the industry, although the record for the largest display belongs to the Kentucky Derby Festival with the “Thunder Over Louisville” event, whose pyrotechnic show lasts for over half an hour, and estimated attendance size approaches the one-million mark every year.

With shows of this caliber, which can cost up to a half-million dollars per show, and the thousands of smaller displays across the nation, such as concerts and sporting events, there is no doubt that the industry is gaining momentum, although at the same time costs are increasing and regulations are tightening. This is why many productions are reverting to alternative resources (such as lasers, projectors and music) that, combined with smaller pyrotechnical displays, can generate more complex and diverse sequences that amaze and entertain the crowds as much as any fireworks-only show.

Shows organizers have also found solutions to abate the spiraling costs in near shoring; Mexico is becoming a major supplier of fireworks to the U.S. by reducing lead times and risks and the cost and complexity of shipping, in contrast to the ramifications of shipping from China. Mexico offers better solutions, as there is no need to consolidate shipments with other merchandise coming in big container ships and exposing the rest of the cargo to a major explosion during a thirty-day trip. Instead, fireworks can be transported much more safely by road in smaller trailer shipments, which reduces insurance premiums and risks by traveling fewer miles in only a couple of days.

Regardless of how fireworks get here, they will continue to rocket up as crowd pleasers at many events, so, for this coming 4th of July, don’t forget the great words of James Sousa: “"You can look up at the stars and every night they're going to be in the same place, but you can launch a six-inch shell and you don't really know what it's going to look like until it actually performs."
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Siemens Industry Introduces Plantville

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Gamers – now is your chance to be part of the action. Siemens Industry has developed Plantville, a new online game that allows you the experience of being a plant manager and running a successful bottling, vitamin, or plant that builds trains. The goal of the game is to run a successful plant while increasing your productivity, efficiencies, and improving the overall health of the plant. “Plant Managers” have to apply industrial and infrastructure products from Siemens to improve the health of the plant and solve plant challenges. As you solve plant problems, the plant manager improves the plant’s Key Performance Indicators (KPIs). Gamers are measured on KPIs including safety, delivery, quality, and energy. The game allows you to go head to head with other gamers, it keeps track of the leaders at each level, and it also provides help and best practices through “Pete the Plant Manager”. This is just another opportunity to connect with customers and showcase product lines. Siemen's also believes this game will encourage a new generation of plant managers and engineers. I am not sure if this will be the case, but I do think it’s a good approach to bring more exposure to the brand and insight into the industry.
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To achieve business cost reductions, Campbell Soup plans to lay off workers

on Tuesday, June 28, 2011

To achieve business cost reductions, Campbell Soup plans to lay off workers  As it grapples with quickly-rising commodity costs that are eating into its profit margins and hurting revenue, Campbell Soup Co. announced that it will cut some of its workforce to achieve business cost reductions, according to a published report.

Reuters reports that Campbell Soup, which is one of the biggest manufacturers of prepared foods in the U.S., will layoff roughly 800 employees as part of a series of planned cost-cutting measures. What's more, the food company said it will close an office in Russia and an automating operations facility in Australia, illustrating the efforts it is taking to trim its business costs.

Following the announcement, the company's stock edged up 1 percent in after-hours trading. Campbell Soup has more than 18,000 employees in its global workforce. According to company officials, the layoffs and closing are projected to save the company as much as $60 million per year beginning in the fiscal year 2012, and more than $70 million in the fiscal year 2014.

The company said it will complete the phasing out of certain employees in the fiscal year 2013. The company added, however, that the moves will initially cost about $75 million.
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Commodity futures could surge on tight supply outlook

on Monday, June 27, 2011

Commodity futures could surge on tight supply outlook  Over the past 12 months, commodity prices have surged as burgeoning global demand has reduced stockpiles to historically low levels. Futures have recently slid, but according to a published report, they will soon climb again, which could fuel global unrest and potentially food shortages.

Bloomberg reports that the Standard & Poor's GSCI index, which monitors fluctuations in price for 19 commodities, is headed for its second straight monthly drop. Nonetheless, such reductions could soon reverse if history is any guide - and it usually is. The last time the GSCI index fell for two consecutive months, it then increased more than 36 percent over the following six months.

A number of economic factors have coalesced to send futures lower in recent months. The ongoing sovereign debt crisis in Europe, along with the slowdown in the global economy and reduced demand from certain countries like China has helped to depress prices. Industry analysts, however, contend that underlying supply and demand fundamentals indicate that future price hikes could be inevitable.

"The long-term perspective is that many commodities have supply constraints," BB&T Wealth Management asset manager Walter Hellwig told the news source. "That's an environment where you want commodities in your portfolio."

The S&P GSCI declined by 12 percent during the most recent quarter, but the index is still up a scant 1.3 percent since the beginning of the year. Many industry watchers affirm that commodities will likely increase during the second half of this year as economic growth is forecast to speed up, and with it demand is similarly projected to climb.

According to a Bloomberg survey of more than 100 analysts and traders, the best performing agricultural items will likely be corn and wheat, which have skyrocketed in value over the past few years. As demand increases in emerging economies like Russia, China, Brazil and India, producers will struggle to keep harvests up, analysts assert. As a result, the surveyed traders said that wheat and corn futures could surge 30 percent by the end of the year.

Food staples are not the only commodities that are forecast to climb higher, according to MarketWatch. Many industry analysts are bullish on certain precious metals like palladium and silver as well. Palladium is used in the assembly of catalytic converters and with the worldwide automobile market heating up - even amid supply chain disruptions emanating from Japan - demand for the metal will likely rise, according to Reuters.

Barclays Capital analysts stated in a report that the supply of palladium will fall about 112,000 ounces short of demand this year on high demand. What's more, the bank also forecast a 728,000-ton copper shortage for the year, which is equal to about 3.6 percent of total consumption. That figure also serves as more than 18 times the total of the prior year's deficit.

Moreover, as Chinese officials battle soaring inflation rates as they endeavor to slow growth and prevent civil unrest, the country is still exceeding prior projections for demand for a number of commodities from copper to wheat, which could put further pressure on commodity prices going into the second half of this year.

Many government officials and analysts are also worried about the inclement weather events that have hurt crop yields throughout the globe. Russia instituted a grain export ban last year to shore up its domestic supplies following damage to crops, and weather could potentially hurt crops in the U.S. and European crops this year.

"Commodity prices are going to continue to go higher. Worldwide, the economy continues to grow and monetary policy is going to stay relatively consistent with no changes," Permanent Portfolio fund manager Michael Cuggino said. "I still like the growth story." 
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Source One is at the HFMA Conference Today

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If you are a healthcare financial professional and will be attending the annual HFMA Conference in Orlando, Florida this week, please stop by and say hello.  Representatives from Source One will be at booth 2039 and will be available to speak about strategic sourcing for healthcare and life sciences companies.

Feel free to ask about specific examples of categories we have sourced for hospitals and healthcare institutions.  From telecommunications to blood to medical transcription services; we have produced substantial savings in dozens of healthcare categories.

More Information on the HFMA's 2011 ANI - Healthcare Finance Conference
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Alcoa, Airbus ink supply chain deal

on Friday, June 24, 2011

Alcoa, Airbus ink supply chain deal  A new deal between two of the world's biggest players in their respective industries is aimed at cutting business costs and represents an achievement in strategic sourcing, according to a published report.

The Wall Street Journal reports that Alcoa Inc. and Airbus have entered into a multi-year supply chain agreement that will see Alcoa supplying Airbus with its aluminum sheet and plate products. The deal, which is reportedly worth more than $1 billion, will help Airbus to build more fuel- efficient aircrafts, along with a host of other benefits, according to industry analysts.

Alcoa will supply Airbus with its current and advanced-generation aluminum alloys, which analysts affirm are utilized in the construction of fuel efficient aircraft and other emerging technologies that Airbus is working on developing. The companies agreed to the new supply chain deal at this week's Paris Air Show.

According to the news source, Alcoa's products will be used in virtually all of Airbus' commercial aircraft programs. Alcoa's researchers have, over the past few years, developed metal alloys that are more than 10 percent lighter than older materials.
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New data indicates U.S. manufacturing sector remains strong

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New data indicates U.S. manufacturing sector remains strong  Though concerns have emerged recently that the robust U.S. manufacturing sector could be slowing, new data indicates that new orders for U.S. manufactured goods climbed in May, helping to allay those fears.

Reuters reports that a gauge of business spending plans also jumped in May, which industry analysts said was welcome news. According to the U.S. Commerce Department, durable goods orders climbed 1.9 percent in May after falling by 2.7 percent in April. The uptick in orders illustrates the ongoing strength within the sector, according to officials.

What's more, that figure beat economists' estimates; they had projected a 1.5 percent rise. The Commerce Department also upwardly revised its April figures, pointing to the continued strength of U.S. manufacturers even amid a tepid economic recovery.

According to IHS Global Insight chief economist Nigel Gault, the report was "a little better than you might have expected given the gloomy news that's coming out of the manufacturing surveys. So that's a small plus."

The report also served to bolster analysts' projections that the U.S. economy will continue to improve as the year goes on. 
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Strategic Sourcing Careers

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Source One Management Services, LLC is an industry leading Procurement Services Provider and is, of course, the owner of The Strategic Sourceror.

We are experiencing strong demand for our strategic sourcing services and are actively looking for "A" players to join our team in the role of Strategic Sourcing Analysts and Telecommunications Analysts. 

Whether you are a polished professional or just getting started in your career, there may be a fit for you. 

Please see our current openings here: Strategic Sourcing Careers.

Please do not attempt to contact anyone directly!
(Follow application instructions on website)
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High business costs hurt ConAgra as commodity prices climb

on Thursday, June 23, 2011

High business costs hurt ConAgra as commodity prices climb  Analysts are concerned about growth at ConAgra Foods as commodity prices have climbed so precipitously over the past 12 months, according to a published report.

Reuters reports that ConAgra recently reported its fourth quarter earnings, which disappointed investors. The company has had to grapple with soaring food prices that have eaten into its profit margins and put a damper on its cost reduction plans. What's more, ConAgra said that profit growth during its current fiscal year, which began in May, will fall below its long-term goal.

ConAgra makes, among other food products, Hunt's ketchup, Chef Boyardee canned foods and Pam cooking spray. The company has thus far been unable to keep pace with surging commodity costs, and its price increases have done little to help boost its deflating profit margins.

Still, ConAgra chief executive Gary Rodkin said that the company expects long-term earnings growth of between 6 to 8 percent. During its recently ended fourth quarter of the 2011 fiscal year, net income jumped to around $255 million from only $90.6 million during the same period in 2010.
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Nissan CEO expects record sales, but tumbling profit

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Nissan CEO expects record sales, but tumbling profit  Supply chain disruptions emanating from Japan have caused significant damage to the global economy as the country is responsible for supplying a high percentage of critical components for automobiles and other industries. According to a published report, Japan-based Nissan expects its profit to plummet as a result of the halts to production. 

On Thursday, Nissan said it projects sales to hit record levels this year, but that its net profit could fall to $3.4 billion, which is 15.4 percent lower than the year prior. Still, revenue is forecast to climb around 7 percent to around $116 billion.

Nissan chief executive Carlos Ghosn said that the company was nearly at full production capacity once again following disruptions it faced in the wake of the 9.0-magnitude earthquake and tsunami that struck on March 11. Areas of growth in the company's portfolio include China, Russia and India, he said.

Surprising analysts, Ghosn said that sales for the 2011-2012 business year would likely rise from the year prior by just under 10 percent to 4.6 million vehicles. Production similarly is forecast to climb by 11.2 percent to 4.613 million cars. 
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Airbus receives record number of orders for its A320neo

on Wednesday, June 22, 2011

Airbus receives record number of orders for its A320neo  U.S.-based Boeing's biggest competitor Airbus said this week that it has received a record number of orders for its fuel efficient jetliners, putting pressure on Boeing to deliver its long-delayed Dreamliner, according to a published report.

The Associated Press reports that Airbus received a huge number of orders for its fuel-saving jetliner, the A320neo this week at the Paris Air Show. In fact, the number of orders was so high that Airbus said it represents the biggest-ever single sale in aviation history. The announcement from Europe-based Airbus underscored the supply chain disruptions that have plagued Boeing's development of its energy- efficient 787 Dreamliner.

Energy prices have climbed more than 340 percent since 2002, and a barrel of oil is hovering around $95, which is increasing demand for energy efficient jetliners, industry analysts assert. The Airbus A320neo is 15 percent more fuel efficient than the Dreamliner, according to the company, and wowed aviation professionals at this month's show.

Airbus said that Indian low-cost carrier IndiGo ordered 180 of the fuel efficient aircrafts, representing the single biggest order in the company's history.
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Rumor: iPhone 5 to debut in September

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Rumor: iPhone 5 to debut in September  The technology rumor mill was pulsating on Wednesday as speculation grows over the release date of the next iteration of Apple's iPhone, according to a published report.

Bloomberg reports that Apple could introduce the iPhone 5 in September of this year. The smartphone, which has helped fuel the company's rapid growth over the past five years, would come equipped with a stronger chip for processing data and a more advanced camera, two people familiar with the product told the news source.

According to the two sources, the iPhone 5 will feature the same A5 processor that the company implemented in its iPad 2. What's more, it will also have an 8-megapixel camera, which is significantly more powerful than the 5-megapixel camera used on the iPhone 4.

The iPhone is Apple's most popular gadget, and during the company's most recent fiscal quarter it accounted for roughly 50 percent of revenue. The phone will also run on Apple's iOS 5 operating system, which Apple showed to industry insiders at a developer's conference it held this month. 
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Government ethanol incentive to end this summer

on Tuesday, June 21, 2011

Government ethanol incentive to end this summer  The government currently subsidizes the ethanol industry, which analysts assert has contributed to the surge in corn prices over the past year. The multi-billion dollar program is likely to end this year, according to a published report.

The New York Times reports that the $5 billion-a-year ethanol subsidy program will likely end as it becomes yet another casualty of the ongoing budget deficit talks in Washington D.C. Still, analysts assert that the end of the program won't likely cause corn prices to drop that much, and that it will also not have an effect on the supply of ethanol.

Ethanol, which is a fuel additive that is made from corn and was considered an environmentally friendly additive, has been assailed over the past few years by consumer watchdog groups who have charged officials with pandering in their strong charge for the financing. While roughly 10 percent of fuel used to power cars is comprised of the additive, many experts have doubted whether it has done much to reduce greenhouse gases.

In fact, large amounts of corn are used to create ethanol, meaning that the food source doesn't find its way to people throughout the world. With global food demand and prices surging simultaneously, analysts and officials are increasingly concerned about dwindling corn stockpiles.

At the end of this year, a tax of 45 cents per gallon will expire. Though the tax didn't directly go to ethanol providers, it was used to incentivize big oil companies like BP, Valero Energy and ExxonMobil to buy ethanol and blend it with gasoline. Analysts affirm that such tax incentives were unnecessary from the beginning, as the government mandates that the country produce an ever-increasing amount of renewable fuels such as ethanol.

"What do you need a tax credit for when you have this built-in huge market in the United States?" Iowa State University economist Bruce Babcock asked. "The U.S. ethanol industry is very competitive; they don't need the [subsidy]."

Last week, the U.S. Senate voted to end ethanol subsidies and the U.S. tariff on ethanol imports by July - more than a year-and-a-half ahead of schedule. The Volumetric Ethanol Excise Tax Credit (VEETC), was created back in 2004 to spur the use of ethanol, but many critics contend all it served to do was drive up corn prices and contribute to food shortages.

Corn is the biggest U.S. crop, followed by soybeans. 
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Airline prices continue to climb

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Airline prices continue to climb  It's getting more expensive to fly on a commercial airline, according to a published report.

The Los Angeles Times reports that air travel is becoming increasingly expensive as oil prices continue to hover around $100 per barrel and demand jumps. What's more, airlines are also contributing to the price hikes as they are enforcing strict limits on the number of passengers and flights they book.

During the first three months of this year, the average domestic airfare hit $247, which represents a 10 percent uptick from the same period the year prior. The global recession that struck in 2007 wreaked havoc on airlines' bottom lines, and the last time average ticket prices hit such high levels was during the first three months of 2008 when they averaged $233 per ticket.

The outlook is not good for business and leisure travelers, affirmed American Express Global Business Travel research director Christa Degnan Manning. She told The Times that data indicates ticket prices could continue their upward trajectory.

"If I shook my magic eight ball to the question, 'Are the prices business travelers are expected to pay this summer going up?' the answer would be, 'All signs point to yes,' " Manning said. "It will likely be true compared to the prices they paid last year and the year before that."
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In cost-cutting measure, automakers shun spare tires - but at what price to consumers?

on Monday, June 20, 2011

In cost-cutting measure, automakers shun spare tires - but at what price to consumers?  Though car sales slowed in May because of supply chain disruptions emanating from Japan, the rebound in the global auto industry has been one of the bright spots of the nascent economic recovery. According to a published report, automakers are cutting business costs by eliminating spare tires from new car models.

The Los Angeles Times reports that carmakers are increasingly shunning the spare tire and are scaling back the product's incorporation into vehicle design. The reduced weight that results from the removal of the spare tire has helped engineers to improve gas mileage and contributed to manufacturing cost reductions, industry analysts assert.

What happens, though, if a car gets a flat tire?

Carmakers have thought out the solution to that problem as well, and some are equipping their cars with run-flat tires while others place flat-fixing repair kits in the trunks of the new vehicle models. Still, the trend is worrying some safety experts who assert that such kits are not as effective as the spare tire.

"I like the security of having a spare. It gives you peace of mind," Mary Beth Wasmer, who recently purchased a used BMW 335, told the news source. She almost changed her mind about buying the vehicle when she could not find a spare tire. "I couldn't find it. I opened the trunk, I looked underneath and there was no spare or even a compartment to put one in."

While consumers may have their reservations about the removal of spare tires, it's a trend that is seemingly catching on within the industry. In 2008, nearly all new cars had spare tires, but of the more than 1 million cars sold in the U.S. in May, more than 13 percent did not come equipped with a spare tire.

Carmakers across the globe are embracing the trend, according to Cars.com, with brands as diverse as Hyundai, General Motors and BMW all quickly - and rather quietly - abandoning the spare tire.

By inserting an inflator-type kit into its new cars instead of spare tires, Hyundai saves more than $22 per vehicle. This year, the automaker, which said car sales increased by more than 35 percent this May from 2010, plans to sell 200,000 Elantras. In total, the company can achieve a business cost reduction of more than $4.4 million with the loss of spare tires.

The extra weight of the spare tire affects overall performance, and even a slight reduction in a car's total weight can result in an uptick in the miles per gallon sticker that adorns every new car sold in the U.S. For example, automakers that have gotten rid of the spare tire in certain models and subsequently have it assessed by the government are thrilled if it adds even one-tenth of a mile of efficiency to their fuel economy tests.

According to Edmunds.com director of vehicle testing Don Edmunds, that's because it allows automakers to hit numbers like 19.5 miles per gallon, which they can then round up - legally - to 20 miles per gallon when they market the cars.

"Manufacturers do a lot of little things to squeeze more of the last bits of toothpaste out of the tube," Edmunds affirmed. "Weight reduction is just one of them and spare tires are a tempting target." What's more, with commodity prices soaring over the past year, the money saved on the strategic sourcing of rubber helps increase profit margins.

Nonetheless, safety officials and consumers alike worry that such moves will result in more accidents and additional costs down the road. 
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Surging corn demand erodes global stockpiles

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Surging corn demand erodes global stockpiles  Global corn stockpiles are set to sink to their lowest levels in more than 30 years, according to a published report.

Bloomberg reports that record global corn production for the fifth consecutive year will not be enough to satiate burgeoning demand for the food source. This year, industry analysts project that harvests will fail  to meet demand for food, fuel and livestock feed, and will contribute to higher prices.

In the next marketing year, corn consumption will increase three percent, which represents the 16th consecutive annual gain. The U.S. Department of Agriculture estimates that corn stockpiles will plummet to 47 days of use, which represents the lowest such figure since 1974. Inclement weather around the globe - especially in the U.S., which is the world's biggest producer - has resulted in reduced harvests this year.

What's more, surging demand from so-called emerging economies like China and Brazil has squeezed farmers, UBS global head of commodities Jean Bourlot affirmed.

"There is a storm developing in agriculture," Bourlot said. "If we have the slightest disruption in any part of the world, the effect on the price will be considerable."

On the Chicago Board of Trade on Monday, corn futures for December delivery climbed 0.8 percent to settle at $6.60 per bushel. Analysts contend that surging demand could push futures as high as $9 per bushel over the next year. 
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Electric bus could help companies cut business costs

on Friday, June 17, 2011

Electric bus could help companies cut business costs  A new electric bus developed by a team of researchers funded by General Motors (GM) could help transit agencies to slash their fuel bills, according to a published report.

The MIT Technology Review reports that the electric bus, designed by Proterra, is one of the first large electric vehicles developed. To keep costs down and allow for quick recharges, engineers designed the bus to run on small battery packs that are intended for rapid charges and can be replenished in under 10 minutes.

Energy prices have soared since the beginning of the year, and with a barrel of oil hovering around $100, transit agencies are searching for ways to cut costs, Proterra chief executive Jeff Granato affirmed. The electric buses are projected to save more than $600,000 in fuel costs over their 12-year lifespan.

Furthermore, the electric buses require less maintenance than those fueled by diesel, contributing an additional $70,000 to $95,000 in business cost reductions. Its designers concede, however, that it has a driving range of only between 30 and 40 miles.

Though lithium titanate batteries used in the bus require frequent charges, they still last more than eight years.
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Prices of some rare earth metals double in two weeks

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Prices of some rare earth metals double in two weeks  China controls more than 95 percent of the globe's rare earth metal supplies, and it appears to be tightening its grip on the critical metals, according to a published report.

Bloomberg reports that the prices of some rare earths have surged more than 100 percent over the past two weeks as China's government moved to increase its control of domestic supplies. The price of rare earths, which are used in a myriad of products including smartphones and personal computers, could rise even higher over the coming months, industry analysts assert.

"Prices of heavy rare earths have surged since the start of the month as the Chinese government announced further plans to centralize control over the country’s mining assets," Industrial Minerals editor Mark Watts said.

China used its stranglehold on rare earth production to enforce embargoes on Japan, the U.S. and Western European countries late last year, though the government never admitted to those charges.

For their part, Chinese officials had previously said they would curb rare earth production because of its deleterious environmental effects. The government also said it would raise standards for exporters and would not plan new project expansions to slow overcapacity.
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Capital One to buy ING for $9 billion

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Capital One to buy ING for $9 billion  In a deal that illustrates the ongoing consolidation among big financial firms, Capital One announced this week that it plans to purchase ING Direct. 

Capital One said it will buy ING Direct for $9 billion in stock and cash as it looks to expand its customer network. ING Direct was valuable to Capital One because of its national direct deposit franchise and its 7 million customers, who are mostly young and high-income, the company said.

Capital One is the top performer in the KBW Bank Index this year and with its acquisition will become the sixth-largest lender by deposits in the U.S. What's more, the company's decision to take over ING represents the biggest bank takeover since 2008. It will also help the Virginia-based company to diversify its funding base, Bloomberg reports.

ING has a business model that largely promotes business through the Internet and has only seven locations in the U.S.

Jefferies Group analyst Jonathan Hatcher told the news source "the strategy is deposits," affirming that Capital One is courting young affluent customers with the acquisition. "ING Direct had gained great traction in the U.S., and obviously it’s a low-cost way of gathering deposits. For younger people it’s not as important to have a bricks-and-mortar branch."
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In first quarter, solar panel installations at U.S. businesses soared

on Thursday, June 16, 2011

In first quarter, solar panel installations at U.S. businesses soared  As U.S. businesses are pressed by investors to achieve business cost reductions and improve their spend management practices, they are increasingly turning toward procurement consultants and other experts who can help them to increase profit margins. Many U.S. businesses have installed solar panel systems in an attempt to cut costs, according to a new report.

The Wall Street Journal reports that a new study released by Boston, Massachusetts-based GTM Research stated that the U.S. installed 252 megawatts of solar panel modules during the first three months of this year. That figure is up precipitously from the same period in 2010, and illustrates how electricity sourcing is saving companies money.

According to the report, solar panel installations during the first quarter increased by more than 60 percent from 2010. Furthermore, U.S. factories boosted their manufacturing capacity to help satiate burgeoning demand. During the first quarter of this year, U.S. manufacturing facilities produced 348 megawatts of solar panels, which was up more than 30 percent from 2010.

While residential photovoltaic system installations increased during the first quarter, the overall upward shift was influenced by non-residential construction, GTM concluded. Solar panel system installations for companies, government organizations and other non-residential projects jumped more than 100 percent from 2010 levels.

Increasingly, companies are recognizing the long-term cost savings that can be achieved through such systems and are taking advantage of government incentives that are set to expire at the end of this year to finance the installations, industry experts affirmed.

The solar boom is benefiting factories and the economy in the Midwest, the report found. Production facilities in the Midwest ratcheted up manufacturing to meet the soaring demand, with those serving the domestic market reporting an uptick in activity.

GTM forecasts that solar panel installations will likely double from 2010 to 1,800 megawatts through the end of this year. Still, that figure does not include the more than 60 megawatts of solar thermal power currently in development.

The domestic solar power industry has continued to see strong growth even during the financial crisis. In 2010, for example, solar power installations reached $6 billion, which was up more than 65 percent from 2009. With growth this year expected to reach even higher levels, many experts contend that solar power could become one of the top energy sources for the U.S. in the coming decades as the technology improves and costs come down. 
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"Big dreams start with little ideas"

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Is what Chris Crockett, acting deputy commissioner of environmental services for the Water Department said in reference to the new emergence of green roofs in Philadelphia and other metropolitan cities. This new idea consists of installing roofs on various types of buildings in and around the city of Philadelphia in an effort to collect data on the effects of storm water and prevent the damage that occurs as a result of storm water runoff. “Storm water is a historic problem for Philadelphia because most of the city's underground pipes combine rainwater and sewage. During storms, the system becomes overwhelmed and water polluted with raw sewage and road dirt overflows into streams and basements.” Green roof construction includes removing the current roof and replaces it with slanted sheets of aluminum that allow for excess water to flow through the roof’s ecosystem. Next they layer fabric and barrier cloth and then soil is laid. They place the vegetation layer that is pre-grown and is made up of various types of sedum species and perennial plant life.

These roof tops are popping up all over. “Green roofs top sites including the main Philadelphia Free Library, the Peco building, the Friends Center, Drexel University dorms, the Curtis Institute of Music, the Penn Charter Performing Arts Center, the new Kensington High School for the Creative and Performing Arts, the Urban Outfitters corporate headquarters, and numerous private homes.” At St Joseph’s University researchers have installed a green roof on the science building and are tracking water absorption and temperature differentials among other effects that the roof tops can produce.

Again this is just one step towards a more efficient green world. Applying simple ideas to a great cause can lead people all over to make changes in their lifestyles that will help sustainability efforts.
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Dish Network bids $1.37 billion for TerreStar

on Wednesday, June 15, 2011

Dish Network bids $1.37 billion for TerreStar  This week, satellite television provider Dish Network bid $1.37 billion for TerreStar Networks, according to a bankruptcy filing.

The New York Times reports that Dish Network has been an active bidder in bankruptcies over the past year, and this week moved to acquire TerreStar in a deal that has left some analysts scratching their heads.

In April, Dish purchased Blockbuster after the company faced insolvency, and in March it acquired fellow satellite provider DBSD North America. According to The Times, Dish is favored to win the auction to buy TerreStar, which is undergoing bankruptcy proceedings. Dish is the "stalking horse" bidder, meaning it is the bidder others must try to top.

The $1.375 billion that Dish is offering "represents a significant achievement," TerreStar said, because it is in cash and $90 million more than the company's total amount of secured debt.

Analysts assert, though, that TerreStar and DBSD were both prime for acquisition because they offer increased broadband spectrum amid burgeoning demand.

The bidding deadline is set for June 27, with an auction scheduled for June 30.
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U.S. consumer prices rose 0.2 percent in May

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U.S. consumer prices rose 0.2 percent in May  In May, the U.S. Consumer Price Index (CPI) increased, the U.S. Bureau of Labor Statistics said on Wednesday.

According to the government agency, the CPI in the U.S. climbed 0.2 percent in May on a seasonally adjusted basis. Over the course of the last 12 months, the index jumped 3.6 percent before seasonal adjustment was accounted for.

Analysts are worried about the uptick in food and energy costs, and though officials like Federal Reserve chairman Ben Bernanke had largely cast aside inflation fears, some experts are concerned about the high prices.

When food and energy were removed, the index rose 0.3 percent in May, which represents its largest jump since July 2008. The food index also rose in the month, with prices for meats, poultry, fish and eggs all increasing. On the other hand, energy prices, which have been soaring since the beginning of the year, retreated in May. The gasoline index fell for the first time since last June, serving as a bright spot in the report.

The 12-month increases of major indexes continued to shift upward in May, when the month change in the all items index hit 3.6 percent in the month. 
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GE: High oil costs to fuel record jet engine production

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GE: High oil costs to fuel record jet engine production  General Electric (GE) said this week that it expects demand for its jet engines to hit record levels over the coming year, according to a published report.

Bloomberg reports that GE said its jet engine manufacturing would likely reach record levels over the next 18 months as exceedingly high oil prices prompt airlines to seek out the latest and most fuel efficient jet engines. Currently, the price of a barrel of crude oil is hovering around $100, hurting profit margins and leading to increased business costs.

As they seek out business cost reductions, airlines are turning toward innovative technologies, GE aviation chief executive David Joyce said recently.

"In this kind of environment it's almost Darwinian - the best equipment will survive," Joyce affirmed.

GE projects jet engine production for commercial planes will climb by 13 percent to 2,480 in 2012. What's more, when military models are included, output could rise 5 percent to a record 3,370. GE is the world's biggest manufacturer of jet engines, and its order book is "very strong" across all regions of the globe, Joyce said. 
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Increased Brazilian sugar supply sends futures lower

on Tuesday, June 14, 2011

Increased Brazilian sugar supply sends futures lower  On Tuesday in trading, sugar futures fell to their lowest levels in four days after reports surfaced that showed production in the main producing region in Brazil increased, according to a published report.

Bloomberg reports that Brazil, which is the world's biggest producer of the commodity, will likely have a larger sugar crop than was earlier forecast. Sugar output in Brazil's Center South jumped 6.8 percent in the second half of May as farmers accelerated the harvest on persistent dry weather, according to industry group Unica.

Still, sugar output in the region had plummeted by more than 45 percent from the beginning of the harvest in the middle of March to May 16 after inclement weather had hurt crop yields, Rabobank International analyst Keith Flury affirmed.

"The report does indicate progress is being made in the Center South, and that’s driving prices lower today," Flury affirmed. "Yet, the market still has a number of concerns about output and yield, which may further support the rally."

On the New York Mercantile Exchange on Tuesday, sugar futures for July delivery declined 2 percent to trade at 25 cents per pound. 
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U.S. retail sales fall for first time in 11 months

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U.S. retail sales fall for first time in 11 months  In May, U.S. retail sales declined for the first time in 11 months, though many industry analysts attribute the fall to supply chain disruptions emanating from the ongoing crisis in Japan, Reuters reports. 

The Commerce Department said on Tuesday that retail sales in the U.S. declined by 0.2 percent in May, which follows a 0.3 percent rise in April. Still, many economists had expected the drop to be 0.4 percent, and the lower-than-expected fall sent the Dow up more than 100 points in trading on Tuesday as many investors were emboldened by the stronger-than-expected  data.

Nonetheless, the slowdown at U.S. retail stores was likely caused by the ongoing supply chain disruptions in Japan. Many automakers around the world are still reeling as Japanese businesses endeavor to get operations back online following the devastation sustained after a 9.0-magnitude earthquake and tsunami battered the country.

Illustrating the slowdown in consumer spending, which historically contributes more than 70 percent of the U.S. GDP, was Best Buy, which reported same-store sales fell 1.7 percent in its first quarter that ended May 28. Similarly, Toys "R" Us Inc. said its U.S. same-store sales declined by 2.1 percent in its first quarter.
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Ericsson to buy Telcordia in deal worth $1.15 billion

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Ericsson to buy Telcordia in deal worth $1.15 billion  Ericsson, the telecommunications giant, said it will buy Telcordia for $1.15 billion, the New York Times reports.

Ericsson has set out to increase its telecommunications software division over the past year, and the company said Telcordia was strategically chosen because of its superior products. Telcordia, which is owned by a private equity company, is a remnant of the AT&T breakup that occurred in 1999; it had revenue of $739 million in 2010.

Providence Equity Partners and Warburg Pincus bought Telcordia in 2005 from Science Applications International Corporation. According to Ericsson chief executive Hans Vestberg, the deal will enable Ericsson to expand its telecommunications business through a business that can be easily integrated into the company's overall business model.

"The importance of operations and business support systems will continue to grow as more and more devices are connected, services become mobile and new business models for mobile broadband are introduced," Vestberg said in a statement.

Telcordia chief executive Mark Greenquist affirmed that the deal was ideal and would result in improved products that merged the two technologies the companies currently produce. He also said it would benefit consumers by offering new services and expanded capabilities.
 
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VF to buy Timberland for $2 billion

on Monday, June 13, 2011

VF to buy Timberland for $2 billion  In news that is sure to have far-reaching consequences within the apparel industry, VF Corp. said this week that it will acquire Timberland Co. as it endeavors to expand outdoor goods sales.

According to a report from Bloomberg, the deal is worth an estimated $2 billion, with VF agreeing to pay about 12 times Timberland's earnings before interest, taxes, depreciation and amortization (ITDA). That figure is higher than the 9.7 median multiple in nine footwear and apparel deals since 2006, the news source reports.

The acquisition is significant because it represents the biggest such move in the industry in at least five years. What's more, the deal will allow VF to expand its outdoor apparel offerings, which include the popular North Face brand. The company said it would increase Timberland's revenue by more than 10 percent each year by aggressively pursuing international markets the company has heretofore been shut out of, and by focusing on business cost reductions.

"It's a fantastic deal strategically and valuation-wise for VF Corp," affirmed Wall Street Strategies retail analyst Brian Sozzi. He noted that the Timberland brand "has global awareness" that VF covets.
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Transatlantic, Allied World Assurance to merge

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Transatlantic, Allied World Assurance to merge  In a move that illustrates the push for business cost reductions in the healthcare industry, two insurers announced this week that they plan to merge to more aggressively pursue business within the specialty and reinsurance sectors.

According to The New York Times' Deal Book, Transatlantic Holdings and Allied World Assurance announced Sunday they would merge in a deal worth a reported $3.2 billion. Transatlantic, which was previously a reinsurance component of American International Group (AIG) prior to its collapse, will gain more exposure to international business and specialty products through the deal.

The newly formed entity will be called TransAllied Group Holdings, but it will continue to sell products and services through the Transatlantic and Allied World Insurance namebrands, the companies said in a statement. Transatlantic shareholders will own a nearly 60 percent stake in the new company.

Current Transatlantic chief executive Robert Orlich, who will retire when the deal is closed, said that the deal was strategic and would benefit both companies.

"Transatlantic and Allied World make great merger partners in every sense of the term," he said. "For Transatlantic in particular, the transaction delivers strategic and financial benefits, including primary insurance operations, a Lloyd’s presence and a bigger capital base outside the U.S., allowing for greater capital allocation flexibility."
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Analysts fear rains arrived too late to save U.S, French wheat crops

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Analysts fear rains arrived too late to save U.S, French wheat crops  Wheat futures, along with nearly all food and energy commodities, have soared over the past year as demand has outpaced supplies. On Monday, wheat futures climbed then fell as fears arose that rain in the U.S. and France came too late to reverse earlier crop damage.

According to Bloomberg, wheat plantings in southern Kansas through Texas have been hurt by drought-like conditions, as well as inclement weather. Though rain is forecast in the region this week, agricultural analysts said it is likely arriving too late to help reverse damage already inflicted on crops.

Similarly, crops in France have likely suffered irreversible damage from drought conditions even as rain storms hit growing regions over the past week, according to the farm advisor Offre et Demande Agricole.

"The supply condition in the world is not that optimistic," Phillip Futures Pte analyst Ker Chung Yang told the news service.

Monday on the Chicago Board of Trade, wheat futures for July delivery were down 1.8 percent, or 14 cents, to trade at $7.45 per bushel.

Still, though wheat futures were down in mid-day in trading, analysts contend that as reports come over the coming days that more accurately tell of current crop conditions, they could surge higher. 
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Manufacturing cost reductions lead businesses to invest in equipment, shun hiring new workers

on Friday, June 10, 2011

Manufacturing cost reductions lead businesses to invest in equipment, shun hiring new workers  The recession that struck the U.S. financial and housing markets in 2008 has - like those that came before it - fundamentally changed the way businesses operate. According to a published report, U.S. companies are increasingly focused on cost reductions, and they're achieving them by spending more on technology and less on workers.

The New York Times reports that businesses are working to increase their profit margins amid a tepid economic climate, and they are overhauling their pre-recession spend management operations to cut costs. As a result, they are investing in equipment and foregoing the hiring process, leading to a robust manufacturing sector, but a beleaguered job market.

In fact, since the recovery began U.S. businesses have increased spending on employees by two percent, but their investment on new equipment and software has skyrocketed 26 percent. This, according to the Commerce Department, is partly to blame for the more than 7 million jobs that have been lost in the wake of the most significant economic contraction since the Great Depression.

Technological advancements have helped the U.S. manufacturing sector to increase its efficiency over the past few decades, and though manufacturing activity has slowed from its rapid growth pace over the past two months according to the Institute for Supply Management (ISM), it has helped drive overall economic growth.

Dan Mishek, the managing director of Minnesota-based Vista Technologies, is representative of this new trend to invest in equipment over workers.

"I want to have as few people touching our products as possible," Mishek affirmed. "Everything should be as automated as it can be. We just can’t afford to compete with countries like China on labor costs, especially when workers are getting even more expensive."

In 2010, Vista spent $450,000 on new technology, but only hired two new employees whose combined salary and benefits amount to about $160,000 per year.

The U.S. manufacturing sector is responsible for more than $1.6 trillion of productivity each year, and is responsible for employing more than 10 percent of the nation's workers. What's more, the manufacturing sector has experienced huge gains in productivity over the past 50 years, with efficiency surging.

Still, industry analysts worry that the U.S. reliance on continued investment in technology - when it comes at the expense of jobs - could cause the job market to remain depressed for the foreseeable future.

U.S. businesses have sharply increased their capital spending during the nascent economic recovery, but their reticence to hire new workers is reminiscent of the recovery that followed the 1982 recession. Businesses, however, assert that the generous tax subsidies and falling equipment prices are leading them to invest in equipment that can fuel manufacturing cost reductions in the future.

Barclays Capital U.S. chief economist Dean Maki said that companies are just doing what makes fiscal sense: They are working to achieve business cost reductions and using federal and state incentives to do so.

"Firms are just responding to incentives," Maki asserted. "And capital has gotten much cheaper relative to labor."

This is evident in new data recently released from the Labor Department that shows equipment and software prices have dropped 2.4 percent since the recovery began, while labor costs have climbed by 6.7 percent. The uptick in costs associated with workers, though, is mostly related to soaring healthcare costs, and is not really benefiting newly hired employees.

Meanwhile, companies like Apple and Google are sitting on record piles of cash, and are reporting record profits amid sweeping cost cutting measures. Many companies that are hiring are only seeking out highly skilled workers with degrees in engineering and other specific disciplines, analysts assert.

Furthermore, while historically capital investments have led to increased hiring, this economic recovery has resulted in no such relationship. Companies are getting increasingly savvy at utilizing a complex tax code to write off many of their new equipment purchases, and they are buying devices that do not need workers to operate.

Some economists theorize that the U.S. could be undergoing a systematic shift with its labor force, much like ones that have occurred in the past. While more than 40 percent of the American work force in the early 20th century worked in the farming sector, that has plummeted because of technological advancements. Farmers found new careers to break into, and new industries emerged.

No president has ever been re-elected with an unemployment rate above 7.2 percent, and President Obama has his work cut out for him as he begins to campaign for 2012. Mishek sums up his desire to buy machines over hiring new workers, and in doing so illustrates the uphill battle the government faces as it looks to lower the unemployment rate.

"You don't have to train machines," he said. 
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Citing supply chain woes, Saab moves to halt production

on Thursday, June 9, 2011

Citing supply chain woes, Saab moves to halt productionThe Swedish carmaker Saab was forced to shutter its manufacturing facilities for a third straight day this week as it wrangles with suppliers to establish new contracts, according to a published report.

The Wall Street Journal reports that Saab's output was suspended two months ago after parent company Spyker ran out of money to pay its suppliers, forcing the company to overhaul its strategic sourcing strategy. However, its manufacturing was restarted in May after Chinese car distributor Pang Da Automobile Trade Co. bought more than 1,300 Saab cars, paying for the order in cash.

While Saab works for procurement cost reductions, many industry analysts said the automaker's complex supply chain was creating headaches for the company and curtailing previous progress. The latest shutdown was caused by Saab's inability to pay suppliers and settle its debts, according to FKG head Svenake Berglie.

"It's surprising that the company has not been able to make a better forecast for its future financial requirements," Berglie said.

Spyker chief executive Victor Muller acknowledged that it has defaulted on payments to some suppliers, but said that Saab was working to establish new contract terms with a myriad of international suppliers.

"We have a few thousand suppliers world-wide, with each of whom we have to reach acceptable terms and conditions to resume production of parts and subsequent deliveries," he said in a statement. "Many suppliers are located outside Europe and restocking inevitably takes time."

Japan is home to a large number of automobile component suppliers, but companies there have had to scale back manufacturing in the wake of the 9.0-magnitude earthquake and subsequent tsunami that hit the island nation on March 11. While Saab executives are aiming for cost reductions with their suppliers, they must also face the daunting task of overhauling nearly all of their purchasing services.

For his part, Muller did not gloss over the significant troubles the carmaker faces as it looks to resume full production capacity at its manufacturing facilities, warning that there would be "production hiccups in the near future until the supply chain is fully back to normal."

Saab executives said they could not say at this time how long production will be halted for.

"It takes time to negotiate with suppliers and the process continues," Saab spokeswoman Gunilla Gustavs said. "It's important that we continue to strengthen our financial position." 
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