Panda Express eyes growth outside of the food court

on Wednesday, February 29, 2012

Panda Express eyes growth outside of the food court Panda Express is the latest food company to change its business model in an effort to increase revenue and drive profitability.

The ubiquitous fast food restaurant is a staple in malls across the U.S., but company officials are spearheading a plan to overhaul food offerings in a bid to compete against large competitors such as McDonald's, which has unveiled a line of healthy options as a means of attracting more customers.

NPR reports that the Panda Express is not only seeking to change its menu offerings, but also to move the locations of its outlets. The company is working to entice Americans who are increasingly concerned about their health, and executives at the firm said that opening stand-alone restaurants would help them tap into an entirely new demographic.

Still, shifting a company's established business model is no easy feat, and analysts said Panda Express had its work cut out for it as it augments menu items and opens new stores. The fast food player will need to implement cost reduction measures to keep profits from falling during its investment into new stores, for example, and it may have to work with procurement consultants to assist in the strategic sourcing of new fruits and vegetables.

Panda Express first opened its doors in the U.S. 28 years ago, and its popularity has rapidly increased since then. The company is one of the fastest growing chains in the nation, according to the news provider, though executives are not comfortable to simply rest on their laurels amid mounting competition from big-name players in the restaurant space.

"Before, I just gave customers a big chunk of meat," Panda Express head chef Andy Kao said in an interview. "Now I need to make sure [the] nutrition's good."

The company's path away from processed foods and toward fresh ingredients first began in 2007, when it introduced a campaign to serve 20 different kinds of vegetables all chopped in-house each day. The company is endeavoring to change its public perception from that of a fast food chain to an upscale dining experience. In effect, Panda Express executives are hoping to shift into the so-called "fast casual" space, next to the likes of Chipotle and Panera.

While the U.S. restaurant sector has experienced sluggish growth in the wake of the recession, fast casual eateries have witnessed their revenue climb as consumers increasingly flock to them. The niche market, however, is exceedingly difficult to break into, as brands must craft an identity that is both ethnically authentic and affordable. Some companies working to break into the market have kept costs down through business cost reduction campaigns and rehashing contract supplier negotiations.

Experts contend that the key to succeeding within the space is offering delicious food that customers will not be able to purchase elsewhere. That is why Panda Express executives said the company is poised to succeed, as its orange chicken entrée is one of the most popular items on its menu. Last year, the restaurant chain sold 60 million pounds of it, according to Panda Express product manager Patricia Lui.

"Sweet and sharp and salty," she said, referring to the orange chicken. "You don't want any flavor to stand out. You want it to be balanced."

The company is also testing a number of other potential new menu items as it courts growth amid what economists say could be a sustained U.S. economic recovery. While the path may be crowded, Panda Express is confident it can successfully break into the niche of the restaurant industry.
 
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Cablevision predicts reduced cash flow in 2012, citing capital expenditures

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Cablevision predicts reduced cash flow in 2012, citing capital expendituresOfficials from the Cablevision Systems Corporation said this week that the company's fourth quarter earnings were down from the year prior, a result of its aggressive investment strategy.

Company executives reported this week that the firm recorded a 47 percent drop in its fourth quarter net income. Cablevision chief financial officer Gregg Seibert said that the media company also expects its free cash flow to fall in 2012, as it substantially increases payments toward capital expenses.

Bloomberg reports the company does not plan to raise subscriber rates this year, even as it faces mounting competition and squeezed operating margins. Seibert affirmed Cablevision would increase efficiency and work to augment profits through business cost reduction initiatives, among other campaigns.

On a more positive note, the company reported that its consolidated net revenues climbed 7.3 percent to $1.69 billion in the fourth quarter. Moreover, its adjusted operating cash flow increased 21 percent to $626 million, while its consolidated operating income jumped 28.3 percent to $346 million. Cablevision chief executive James L. Dolan conceded the company spent heavily last year, but he said its strategic investment would help drive future revenue and profit growth.

The company's last fiscal year "was an important year for Cablevision as it marked the culmination of several multi-year initiatives to enhance shareholder value," Dolan said in a statement. "Those efforts have included spinning off MSG and AMC, completing the Bresnan acquisition, paying quarterly cash dividends, and actively conducting a share buyback program. We remain confident in the strength of our underlying business and in our ability to deliver industry-leading products. Looking ahead, we will continue to improve on those offerings while we remain focused on enhancing shareholder returns and building the company for the long term."

The company failed to achieve cost reduction targets as it invested in cable set-top box inventories. Moreover, the media giant spent aggressively to upgrade its networks over the past year, a move that some analysts said could have been offset by raising customer rates. Seibert noted the company had bolstered its long-term growth potential through the strategic investments. Analysts noted the firm could boost profits in the future through supply chain management initiatives.

"The main theme that people should take away from the call today is that we continue to be focused on moving the business in a direction where we both retain existing subscribers and have attractive, economically sensible offers for new subscribers," Seibert said.

 
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Struggling, Peugeot plans GM partnership in effort to drive earnings

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Struggling, Peugeot plans GM partnership in effort to drive earnings In an effort to raise cash, PSA Peugeot Citroen said recently it would offer a 1 billion-euro rights offering as a part of a newly announced partnership with General Motors.

European automakers have struggled to implement cost reduction measures over the past year. While carmakers throughout the world were negatively impacted by the effects of damage sustained to component suppliers in Japan last year, European companies have also had to contend with an exceptionally weak economic climate. Some automakers worked with supply chain consulting shops in an effort to improve efficiency, but France-based Peugeot is struggling to compete.

Bloomberg reports that the car company will sell GM a 7 percent stake as a part of its rights offering. The Peugeot family is still the company's largest shareholder, with family members commanding 30 percent of its total available shares. The family is expected to participate in the carmaker's latest ploy to raise cash, according to the news provider.

The deal between GM and Peugeot will bolster both automakers' bottom lines, but it will also result in the closure of certain production facilities and planned layoffs of employees, according to some analysts. The two companies have not formally announced the details surrounding the deal, and they could wait weeks – or potentially months – before revealing them, according to Bloomberg.

Peugeot is the second-largest automaker in Europe, trailing only Volkswagen. However, while Volkswagen has managed to maneuver the post-recessionary economic climate through deft supply chain management and aggressive marketing campaigns, Peugot has struggled. Peugeot's debt load has more than doubled over the past year, surpassing $4 billion.

Analysts and carmaker executives such as Fiat SpA chief executive Sergio Marchionne said that the proposed deal could benefit both GM and Peugeot.

"If the Peugeot-GM hypothetical tie up becomes a reality, I sincerely hope it deals with the overcapacity issue," he said. "It's essential that the European situation will be addressed, whether I address it or other people address it, I don’t particularly care."

Manufacturing plants in Europe have been overproducing cars over the past year, as levels have remained elevated even amid dwindling demand. Marchionne said he pegged excess European automobile capacity at 20 percent, but some analysts called such an estimate conservative.
 
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Netflix? More like NetTV.

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With the Oscars behind us, we can now look forward to a whole new set of movies to wow us in 2012. However, Netflix has learned that TV shows are becoming more popular than feature films among its customers. The New York Times reported that “TV series now account for more than half of all Netflix viewing.” As Netflix continues to focus more on TV series as its core business, its current agreement with Starz will not be renewed. This means that starting today, the streaming service will no longer offer movies like “Scarface” and “Toy Story 3.” It can be totally devastating for someone either absorbed in a TV series or looking to watch their favorite movie tonight that they just watched last week, and they eventually find that it has vanished from the streaming service. My coworker was up in arms when this happened to her while watching “Lost” which led her to sign up with Hulu only to find that “Lost” reappeared the week later. I can’t recall the reason why the TV series vanished for a week, but I digress. I guess I wanted to share the only connection I have ever had to Netflix as I am not a subscriber. If I were to subscribe though, I probably would do so mainly to watch old TV reruns. And that same reasoning is why Netflix did not renew its 3.5 year old deal with Starz. The irony of it all is the fact that Netflix’s deal with Starz is what helped Netflix gain Internet streaming subscribers.

About a year ago, Netflix determined that the deal would not be renewed. Many were concerned it would be “doomsday” but Netflix strengthened its TV offering and the end of the Starz deal is not the end of Netflix or the world after all. “Analysts say the prioritizing of television partly explains why the company has been able to retain about 21.7 million streaming subscribers in the United States.” In fact, The New York Times article goes on to share that “the new-release movies provided by Starz account for just 2 percent of all viewing, Netflix says, down from 8 percent a year ago.”

Netflix didn't start broadening its TV offering just to prepare for the end of the Starz agreement. Another reason they worked to strengthen their TV programs were the rising prices charged by major movie studies for films and shows. Studios are fearful that Netflix might become too powerful and who can blame them? Check out the Strategic Sourceror’s post yesterday about DreamWorks who appears to be struggling partly because of Netflix's success.

The New York Times also discusses where the future of Netflix should go from here. Its next challenge should be to become a direct competitor to HBO and create original shows of its own rather than reruns. In fact, “a show from Norway, “Lilyhammer,” had its American debut on Netflix earlier this month, and an ambitious drama made just for Netflix, “House of Cards,” will have its debut later in the year. A revival of the Fox sitcom “Arrested Development” will also come out sometime next year.” It will be interesting to see how this next phase of Netflix pans out.

In the meantime, for those “Toy Story 3” and “Scarface” fans, this is a heads up that you need to find another favorite movie to watch next week. If you wait about six months, you’ll be able to view “The Artist,” the winner of best picture at the Oscars.
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Banking Fees in 2012

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As the U.S. economy is slowly recovering from the recession, banks are trying to pick up the pieces of their bankrupt laden industry. They are looking to recover the estimated $10 billion lose in revenue they received from new laws and regulations any way they can. So of course they look to us, the consumers, to assist in this. You probably didn’t notice, but most banks throughout the country are increasing fees or creating new ones in order to offset revenue losses from the 2009 Credit Card Accountability, Responsibility and Disclosure Act. The Act's main purpose was to establish fair and transparent practices relating to consumer credit plans. It basically tried to stop banks from taking advantage of consumers. So what do they do? They find new ways to take advantage of us.

Here are some of the changes many banks will be making in 2012, if they haven’t already.

Monthly minimums – Citibank’s EZ checking, which is now no longer available to new customers, requires a minimum balance of $6,000 or charges a monthly penalty fee of $15. This is an increase from last year of a minimum of $1,500 to avoid a $7.50 penalty fee. That doesn’t sound too “EZ” to me.

Overdraft fees – last year the average overdraft fee was $27.50. This year banks could be raising this as high as $45. That is a 64% increase. To avoid this, many banks allow you to set up your account on line to e-mail you a warning when your account goes lower than a certain amount you can set.

To help with both monthly minimums and avoid overdraft fees, you could consolidate your accounts with the same bank and link your savings and checking accounts to automatically pull from your savings if you overdraft. This still might not help if you’re as broke as some of the people I know and have less in your savings than they do their checking.

Card replacement – losing your card can be really annoying, especially when you start imagining the ridiculous things that the person who found/stole it could be using it for. Bank of America, which is the card I have, now charges $5 for a lost card where they charged $2 last year.

Wiring Money – Most banks allowed for free incoming money transfers as long as you had an account with them. Well – not any more. For example, TD Bank is now charging $15 for an incoming wire which was free last year.

Early closure – in order to retain customers and avoid people switching banks, some banks like PNC now charge $25 if you close your account within 6 months of opening it.

Online/Paperless – I’m sure you have seen the signs and advertisements for “go paperless!” Banks have been pushing this for a few years now to reduce costs. Well, banks like PNC are now charging $5 to have funds transferred over the phone but don’t charge anything to do it on-line. Banks may also begin charging a monthly fee if you want to continue getting paper statements.

The best thing to do is make sure you understand the fees associated with your accounts and watch your account closely for any fees the bank may charge you for. Sometimes you can get them waived just by asking. Never hurts to ask right?
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Pinterest …. Have you read the fine print?

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If you’re not living under a rock then I imagine you have heard of Pinterest.  It’s the newest form of social media allowing users to post their interests on an online pin board as well as “like” and comment on various photos, DIY ideas, recipes, etc.  I have to say that it is quite addictive, and for the most part from what I have experienced the pins are linked to blogs or websites that promote that item or recipe or whatever.  It all seems harmless, right?  I thought so too until I just read this article posted on Facebook about copyright violations and how it affects the users of Pinterest. Of course I had to look into it a little more before deciding to delete my account.  As they say, the most commonly told lie is, “I have read and understood the terms and conditions”.

Under the About section on Pinterest there are sections labeled Terms and Copyright.  In both of these sections the terms and conditions regarding copyright infringement are detailed very thoroughly.  You will also find that the site takes this very seriously and even promotes awareness of what your rights are and those of the content owners. They are also very clear about where the responsibility and liabilities lie. So basically all this article does really is bring to light that people never really read or understand the terms and conditions before agreeing to them.  As with any website where you plan to create or distribute content you should take the time to understand the implications of your actions before creating a world of trouble for yourself. Pinteresting….don’t you think?
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Joseph Payne Named One of Supply & Demand Chain Executive’s Pros to Know for 2012

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Joseph Payne, Vice President of Professional Services at Source One Management Services, LLC, was recognized in the 2012 edition of Supply & Demand Chain Executive’s Pros to Know as a Provider who offers thought-leadership that is shaping the supply chain industry and advancing it as a respected discipline. Payne will be listed as an awardee in the March issue of the magazine both in print and online.

 Supply & Demand Chain Executive’s Pros to Know edition recognizes many exceptional supply chain executives at manufacturing and non-manufacturing enterprises who are leading initiatives to help prepare their companies’ supply chains for the significant challenges ahead. The men and women included in the 2012 Pros to Know exemplify the talent, knowledge, skills, and effort necessary for supply chain leadership. Supply & Demand Chain Executive covers the entire global supply chain, focusing on ROI, professional development, and change management, all in a solutions-based format. It helps readers navigate the complex supply chain world through hard-hitting analysis, viewpoints, and unbiased case studies.

 “Joe is a great asset to our company and we congratulate him on this respected honor. His knowledge and dedication to his craft makes him an excellent leader in our organization. He plays an integral role in moving our company into the future and truly deserves this industry recognition,” said Steven Belli, Chief Executive Officer of Source One Management Services, LLC.

 Payne, a resident of East Norriton, helps companies reduce costs and manage change. He leads a team of project managers and analysts, developing insights into the challenges organizations face when undertaking initiatives to reduce costs through strategic sourcing and negotiation best practices. His areas of expertise include strategic sourcing, supplier relationship management, business process reengineering, and financial reporting. Payne has extensive experience helping Fortune 500 companies and large healthcare organizations implement sustainable cost savings programs.

Payne’s previous experience includes process and technology consulting with Accenture. His work at Accenture was focused in the insurance industry, helping companies develop customized IT solutions to integrate systems and make business processes more efficient. He holds a Bachelor's Degree in Operations and Information Management from the University of Scranton.

 Payne is a co-author of the book titled: “Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing,” published by John Wiley & Sons in 2011.
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The Good and Bad of Leap Day

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Leap day was introduced by Julius Caesar in the Roman Empire and is needed to keep our calendar in alignment of the Earth’s rotations around the sun. For most businesses the extra day this month will be fairly insignificant. For example, some businesses that have hourly employees will have to adjust their expenses for Leap day. Also, all businesses will have to increase their utility budgets to account for the additional day in February. In this area, the extra day for utilities probably does not have much significance for businesses considering the mild winter weather we had.

Although there is an extra day of expenses to account for, there is also a positive to Leap day. The extra day is another opportunity to gain revenue for your business in a short month. Businesses are set to offer Leap Day sales to consumers in an attempt to gain additional revenue. Check your local listings.

Finally, Leap Day is also a chance to kick back and enjoy the day (even if it’s not your birthday). It’s a chance to break from the norm. The Washington Post provides some tips for enjoying the day. Happy Leap Day!
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Airlines using cost reduction measures, added fees and other tactics in effort to drive revenue

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Airlines using cost reduction measures, added fees and other tactics in effort to drive revenue Amid volatile gas prices, airlines are working to drive earnings growth through added fees and other measures, The New York Times reports.

Since the government officially deregulated the airline industry more than 20 years ago, airline companies have struggled to maintain profitability. Volatile energy prices have been the biggest single contributor to their poor financial performance over the past decade or so, but many major carriers have implemented business cost reduction measures and other initiatives aimed at bolstering profits.

While the fees airlines now charge for checked bags and in-flight beverages and snacks are a nuisance for travelers, they have largely helped fuel an uptick in profit growth over the past few years. Such campaigns have helped airlines deliver net income gains even as oil prices shot up in 2011. However, such initiatives have been so successful that airlines are now beginning to mull additional fees for services.

Airlines are aware of the substantial amount of money they have made from revenue generated by nonticket items, and they are increasingly searching for other areas where such fees can be applied to raise earnings. Carriers are unveiling a myriad of new potential revenue drivers, including the sale of branded merchandise.

Nonticket items have become one of the airlines' most successful money drivers, according to the Times. In 2011, carriers recorded more than $32.5 billion worldwide from levying such charges. That figure represents a nearly 44 percent surge from the $22.6 billion nonticket items and fees earned airlines in 2010. While cost reduction campaigns were once airlines' sole means of combating dwindling profits, fees and other initiatives are also buttressing earnings.

Carriers charge passengers assorted fees for a number of services, but their future growth is contingent on developing additional ways to drive revenue and profits, Airsavings revenue specialist Raphael Bejar said. Airlines must increasingly shift their business models, and concurrently focus on improving efficiency through strategic sourcing and supply chain management, in addition to charging for new products and services.

Airlines must "transform themselves from airline companies to retailers," Bejar said. "As long as the airline is thinking the old way, it will die. The airlines moving up and transforming themselves will succeed," he added.

Some airlines are venturing far outside the realm of traditional carriers' core businesses, with Air New Zealand recently opening its own banking segment. The company is converting certain members of its frequent-flier club into customers of its fledgling bank operations.  Some of the airline's customers will receive its own branded debit card that stores cash, accrued airline miles and foreign currency. Air New Zealand loyalty director Simon Pomeroy said the card would help drive earnings.

"It gives us the opportunity to build a larger revenue channel, the ability to make money from foreign revenue conversion," he said. "We make money off the individual as well as the collective use of the card every day. If fuel goes up we will still be making money."

Rising oil prices are among the most significant concerns looming on the minds of airlines executives across the globe. On the New York Mercantile Exchange in New York on Tuesday, oil futures for April delivery traded at approximately $106.55 per barrel, a figure that is more than 10 percent higher than at the same point the year prior.

As airlines increasingly focus their attention to driving revenue through alternative fees and nonticket items, they are helping ensure they will survive – even as some major players stand on the brink of bankruptcy.

 
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Without Shrek, Dreamworks struggles to fuel earnings

on Tuesday, February 28, 2012

Without Shrek, Dreamworks struggles to fuel earningsMovie studio Dreamworks Animation said this week that its fourth quarter earnings fell, citing lower ticket sales from its film offerings.

The animation company, a competitor of Disney's Pixar, said Tuesday its net income in the fourth quarter fell to $24.3 million. For the full-year, the company said its net income was $86.8 million. In the year prior, the company reported net income of $85.2 million in its fourth fiscal quarter, but the studio said it lacked the same big-name films that helped drive ticket sales in the past.

Last year, the film studio released the final installment of the massively popular "Shrek" series. Moreover, company executives said that a number of its other movies released the year before, including "How to Train Your Dragon" and "Megamind," helped bolster profits through high DVD sales and merchandise tie-ins.

Dreamworks fourth quarter revenue, on the other hand, did beat analysts' expectations. The studio said it logged $219 million in revenue in the quarter, a figure that was down 21 percent from the $276 million it reported in the same quarter a year prior. The Associated Press reports that analysts had previously estimated the company would report $206 million in quarterly revenue.

Film studios such as Dreamworks and Universal have had to overhaul their strategies over the past few years in an effort to drive profitability. While DVD sales once fueled movie studio earnings, they have decreased significantly as competition from Netflix and other online-streaming services has eroded demand. Film studios had to implement ambitious cost reduction measures as they sought to buttress earnings, but they have garnered mixed results through such initiatives.

Dreamworks chief executive Jeffrey Katzenberg, who co-founded the studio with Steven Spielberg and David Geffen, noted that the company's theatrical releases in 2011 were successful at the worldwide box office. By more closely monitoring spend management and indirect spend, the film studio could potentially increase earnings, some experts said.

"DreamWorks Animation's two feature films in 2011 achieved a high level of commercial and critical success, as Kung Fu Panda 2 and Puss In Boots together reached $1.2 billion at the worldwide box office and each received an Academy Award nomination for Best Animated Feature Film," Katzenberg said in a statement. "After its initial weekend, Puss In Boots is off to an excellent start in its domestic home video release and we are now looking ahead to the next big event for the Company: the theatrical release of Madagascar 3."

 
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Major fast food giant eyes growth outside of U.S.

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Major fast food giant eyes growth outside of U.S.One of the world's largest food companies is eyeing India as it works to maintain its torrid pace of growth.

Reuters reports that Yum Brands Inc. is hoping to repeat its success in China as it enters India, home to one of the world's fastest-growing economies. Yum, the parent company of KFC and Pizza Hut, has increasingly relied on China as a source of net income, with the world's second largest economy currently contributing more than 50 percent of total company profits.

Yum executives are betting that they can continue their win streak in India, aggressively charting growth in the Far East nation. The company is targeting Indian students and members of its burgeoning middle class in its latest effort, as it works to compel Indians to spend more money on classic American staples – with decidedly Indian influences.

There are millions of vegetarians in India, which is one of the many obstacles Yum faces on the path toward market dominance there. The company must also ensure it is abiding by procurement best practices and paying close attention to the strategic sourcing of food products. The opportunity to expand its business in India is so significant that Yum is hoping to avoid any kind of bad public relations debacle that could turn off potential customers to its stores.

As it did in China, Yum is endeavoring to rapidly grow its restaurant base in India. In total, the company plans to have at least 2,000 eating establishments in India by 2020. The goal is exceedingly ambitious as it only currently operates 374 stores, but analysts said the food giant is capable of expanding at such a quick pace, citing its success in China, the U.S. and elsewhere.

"I look at India as the most dynamic market for us in the 21st century," Yum chief financial officer Richard Carucci told the news provider recently.

Experts say the path toward increased profitability and exposure in India will likely differ from its success in China, however. Yum opened its first KFC in China in 1987, and its growth in the country was largely uninterrupted over the next few decades. It now operates more than 4,500 stores in China and earns a substantial return on investment, underscoring how deft supply chain management can enable a multinational firm to succeed.

Yum has already undertaken steps in India that will help focus its attention on driving sales and earnings gains. The company has separated its Indian segment from its core international unit, allowing it to report its own separate financial results. Yum's bold strategy in India is prompted by the continued strength of its economic ascent and demographics.

Although China's population is quickly aging, India – currently the world's second most populous country – is markedly younger. In fact, 60 percent of India's 1.2 billion people are under the age of 30, an age group that is the bread-and-butter of the fast food restaurant industry.

Moreover, Yum is bullish on India because Indians spend less on fast food than their Chinese counterparts. With the nation's economic growth rate forecast to surpass that of China within the decade, that figure is expected to rise precipitously.

While there are certainly challenges facing Yum in India, the company is prepared to combat them as it looks to continue its streak of expanding in untested markets. Yum executives have largely brushed aside criticisms over the company's growth plan, noting it faced the same kind of opposition when it first entered China. That bet worked out for them, and the company is confident its expansion in India will, too.
 
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Adidas Banks on Continued Lin Success

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Fans are not the only ones that have caught hold of the February’s Jeremy Lin explosion into NBA stardom.  Homemade Lin jerseys and fanatical declarations filled social networking sites following his February 4th breakout game against the New Jersey Nets.  The subsequent appearance of available official Lin NBA gear was inevitable, but came to the market in startling speed.  

Adidas, official apparel provider of the NBA, is looking to capitalize on Lin’s outbreak performances by providing replica jerseys and apparel offerings within weeks of the players booming debut.  Adidas entered into an 11 year contract with the NBA in 2006.  The sporting goods giant is no stranger to banking on young athletes across several sporting categories and the international buzz of Lin fans will certainly provide the demand they need to kick start the investment in this new sensation.

Due to the timeliness of the appearance of the apparel offerings to the market, it is speculated that Adidas looked to customizable products as an early outlet to hungry consumers.  Number 17 jerseys were the soonest to hit web retail and were conceivably the easiest to manufacture on such short lead-times.

Individually stylized apparel creations have also made their way to the NBA’s official store only weeks later and speak to the investment Adidas has made that goes beyond the satisfaction of an immediate demand.  Though banking on fashionable and quick to market trends does historically yield lower sell through quantities, the creation of additional apparel offerings does suggest that Adidas will continue to manufacture for this un-forecasted niche market.  As these products have certainly spun the Adidas supply chain and development teams into a high octane frenzy, the sporting goods leader must be looking for a continued Lin performance to fuel its investment.
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Save Money At College

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More and more publishers are migrating to books online saving students and other readers a lot of money. Traditional University text books cost well over $100. I went to school for Apparel Design and even buying used books, I spent thousands of $ each semester. Potentially I could have shared a book with some classmates, but some classes required books be brought to each session and assignments were derived from the material.

An article on ChinaDaily.com.cn expresses the savings opportunity and shift in technology use by readers; “Price differences for e-books vary depending on publisher and demand. At a Northwestern University bookstore, a new printed microeconomics textbook costs 94 dollars while its digital alternative is more than 30 percent cheaper at 62 dollars. Currently textbooks in prints still dominate the market, but statistics collected by the Pew Research Center, a Washington based think tank, indicate the market is poised for a digital textbook revolution. According to Pew's recent study on tablet ownership, the share of adults in the US owning tablets or e-book devices nearly doubled from 10 percent to 19 percent from November to mid-December last year and bumped up again to 29 percent in mid-January this year.”

When I was in college, we did not have the option of printing our materials out of the text book for a small one-time fee. Not only would this have saved me money, but it would have been extremely Eco-friendly to not print the entire book…some books being 1,000+ pages. Homework assignments could be printed off when needed or just looked at online, then completed. Students have the opportunity to bring their laptop or tablet devices to class as well…a one stop shop for note taking and reading.

Universities are working with publishers to encourage this change that will result in lower overall costs for students and more effective learning options. Mary Beth Marklein states in USA Today, “In a plan funded by the Bill & Melinda Gates Foundation and other non-profit groups, Rice University this month announced it will provide free online textbooks for five of the nation's most-attended college courses. Rice officials estimate students in the USA could save $90 million over the next five years.”

I wish I was still in college when this opportunity was available and implemented. I think about all of the art supplies I could have purchased with the money I saved…well my parents saved!
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My Supply Chain has a Twitter Account?!?!?

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As the social media craze only gains more momentum, one has to wonder the effects a well-managed social network can have on a business’ success. When I think of how a Twitter or Facebook account would help a company, I immediately think of marketing and penetrating to the end consumer. What better way to get into the heads of your customers than to bombard them with advertisements as they “like” a picture of their friend’s cat, dressed like a leprechaun? In reality, social media offers marketers the unparalleled opportunity to be relevant, and participate in an open environment where they and consumers are encouraged to share. An astute organization may gain the ability to infer consumer suggestions and reactions in real time. But how can this tool be leveraged to improve our supply processes?


To effectively answer this question, we must ask another: What factor contributes most heavily to an effectively managed Supply Chain? The most difficult aspect of a Supply Chain to control is the members themselves. Full cooperation and business transparency is often difficult to get from all parts of any organization, as the rallying call is often diluted across functional departments.


What social media offers to organizations is an avenue for collaboration, and a level of transparency that is non-existent in any other communications method. With the explosion of networking sites like LinkedIn and Facebook, supply chain leaders have the ability to collaborate with suppliers, outsourced manufacturers, logistics service providers, and other partners on an individual level, while also creating a visible and accessible representation of the company itself.


The benefits of incorporating social media into business processes do not stop there. There is considerable opportunity to improve internal communications, and generate collaboration between co-workers and across functional groups where oftentimes, very real barriers to communication exist.


The social network has exploded into a way of life for some, and has become a strong indicator of the norms of future of business-to-consumer, and business to business communications. It is not a case of IF social networks will be affecting our business and supply network, but WHEN!
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Moving Forward

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Last Sunday night during the Oscars, I noticed an interesting Lexus commercial. An eclectic collection of has-been technology was getting pulled back by some mysterious force, while the technologically-advanced Lexus drove proudly forward. The phrase went something like, "Anything not moving forward, is moving backward." This of course referred to the fact that constant innovation and updating is essential in technology today to stay ahead of the copy-cat, follower products that lag behind the innovation curve (See Blackberry) and suffer huge revenue losses as a result. Any company that is resting on their laurels or past successes is already sealing their fate.

The same can be said about procurement. If you aren't consistently refreshing your sourcing efforts on each category, it can pass you by and leave a great deal of savings on the table. Businesses and Procurement departments often have a myriad of reasons why they may delay or resist a sourcing effort. Some of the most common include:

  • "That category was just sourced three years ago." - That is positive that sourcing is taking place, however, a great deal of market forces can act upon pricing even in a very short period of time. Setting a regular schedule for sourcing a category is helpful, and beyond that keeping up with the category's market and trends in between RFP events can uncover key points of leverage and pricing fluctuations in the market.
  • "We are in a contract in this category for a long time." - This can be difficult, however, in many cases leveraging market data with the incumbent supplier even while under contract can prove fruitful. Beyond market pricing and benchmarking, discussing ways to improve servicing or lead times can lead to soft cost savings and examining operational process changes can uncover vast inefficiencies and costly mistakes in the Procure-to-pay lifecycle.
  • "Our supplier hasn't raised pricing for five years, and we have never found better pricing." - It is encouraging when a supplier doesn't increase pricing, however, if pricing has had no check against the market, and no check against the real cost driver of a product such as an index, the pricing has been in a "bubble." This is especially true if there was no sourcing effort to begin the relationship and purchases with the supplier in the first place. If a supplier and manufacturer are both already making a killing on your business, why would they need to increase prices? A supplier may not conduct their own negotiations or sourcing efforts with their manufacturer-suppliers and thus, you end up at their mercy. Additionally, businesses may not be aware of how the pricing is even determined. Beyond the price the supplier pays to the manufacturer being above market, the margin or markup on the item (the suppliers cut) may be out of line with the industry standard as well.

These are just a few examples demonstrating why consistent strategic sourcing efforts can make a huge difference in optimizing the bottom line. Procurement Service Providers can take the burden off of procurement teams to deliver continuous improvement and regular, timely sourcing efforts for indirect spend categories.
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Volkswagen wows with record earnings, but European carmakers continue to struggle

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Volkswagen wows with record earnings, but European carmakers continue to struggleVolkswagen said this month its financial results in 2011 were the best in its storied history.

Though Volkswagen is based in Europe, the carmaker was easily able to sidestep the ongoing troubles plaguing the continent. The company said its net income more than doubled to roughly $20.6 billion last year, underscoring how the firm's commitment to strategic sourcing and supply chain management enabled it to bolster its operating margins.

Moreover, the company's full-year revenue also jumped by nearly 26 percent, hitting roughly $212 billion. The automaker's profits were bolstered by, among other factors, its Porsche brand and the effects of cost reduction measures implemented over the past few years. The company's earnings performance easily outpaced analysts' expectations.

Volkswagen also noted unit sales rose approximately 15 percent from 2010, underscoring its sustained pace of growth. The company sold 8.3 million vehicles in 2011, with its various brands – of which Audi and Porsche are included – reporting sales hikes. The unit sales, revenue and profit figures were all records for the venerable automaker.

Volkswagen is now the world's second-largest carmaker, rising a spot to sit just behind U.S.-based rival General Motors. Though Toyota had occupied the title for the past few years, the Japanese automaker's sales were significantly impacted by damage resulting from the 9.0-magnitude earthquake and subsequent tsunami that battered the island nation in March last year. GM sold 9.03 million vehicles in 2011, placing Volkswagen within striking distance of the company.

The New York Times reports that although Volkswagen may trail GM in total worldwide sales figures, the company is substantially more profitable than the American carmaker, which recently reported a full-year profit of $7.6 billion for its fiscal year. Though policy makers in Europe project the euro zone will experience a slight recession in 2012, analysts are still bullish on Volkswagen's growth prospects for the year, particularly after officials said sales climbed 1.3 percent in January from the year prior.

U.S. carmakers also reported better-than-expected financial results for the 2011 fiscal year, but their European counterparts were far less fortunate. French automaker Peugot recently said it had lost money, and officials from the company said they are mulling a number of business cost reduction initiatives as they work to boost profits. Renault, another French car manufacturer, is struggling to maintain its slim margin of profitability.
 
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In major deal, consortium buys El Paso's production and exploration division

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In major deal, consortium buys El Paso's production and exploration divisionThe El Paso Corporation announced recently it would sell its exploration and production businesses to a consortium headed by Apollo Global Management.

Officials from El Paso Corp. said that the move would generate roughly $7.15 billion, a figure that serves as one of the most significant since the recession struck in 2007, The New York Times reports. What's more, the sale will give the consortium access to some of the nation's gas and oil fields in the U.S., lending them an advantage in the strategic sourcing of the naturally occurring fuel sources.

Mergers and acquisitions activity has been lower thus far this year than in recent years, according to experts. However, the latest deal has helped move the market, which Thomson Reuters estimates is down 35 percent from the same point in 2011. The tepid economic environment in Europe, coupled with fears about growth in the U.S. and emerging economies such as Brazil, Russia, India and China (BRIC), has prompted many companies to forestall planned buyouts and sales.

However, economic data out of the U.S. has increasingly emboldened economists that the latest recovery will be sustained. That has likely injected a bit of confidence into companies mulling either sales or purchases, experts said. With oil prices rising precipitously since the beginning of the year, the consortium is hoping to take advantage of that jump through expanded exploration in the U.S.

Kinder Morgan purchased El Paso outright for more than $21.1 billion, but the company is hoping to construct the largest and most expansive pipeline system in North America. Officials from Kinder Morgan said that the sale of El Paso's natural gas and oil exploration portfolio would help finance its own transaction, leading the way for the consortium to sweep in.

The U.S. has become a hotbed of natural gas drilling over the past years, as hydraulic fracturing – more commonly known as fracking – has enabled energy companies to tap previously unreachable stores of the hydrocarbon. The U.S. has rapidly become the world's largest producer of natural gas, and experts contend that one of the single biggest contributors to the plummeting price of the commodity is the uptick in production from the U.S.

Still, there has been controversy surrounding how extensive El Paso's U.S. reserves actually are, with some scientists speculating they contain far less natural gas and oil than originally estimated. Still, Apollo senior managing director Josh Harris said the company was confident in its purchase.

"Apollo is acquiring a company with an impressive portfolio of valuable natural resource assets, a talented management team and a remarkable group of highly skilled employees. We look forward to building on El Paso's impressive track record of success in partnership with Apollo’s natural resources expertise," he said.

The strategic sourcing of oil and natural gas has become exceedingly important to energy companies over the past few years. They have increasingly spent more money on searching for and identifying new sources of oil and natural gas, but their return on investment has continued to drop, prompting many such firms to reevaluate their strategy.

By investing in El Paso's exploration and production portfolio, Apollo is betting that fracking and other technologically-advanced extraction methods will help bolster natural gas and oil reserves.

On the New York Mercantile Exchange Monday afternoon, natural gas and oil prices both declined. Oil futures for April delivery fell 0.97 percent to trade at $108.70 per barrel. Natural gas futures dropped 2.16 percent to hit $2.50 per million BTUs. Mild winter temperatures throughout the U.S. have also helped suppress natural gas prices thus far this year, according to experts.

 
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High gas prices prompt businesses, consumers to rethink spend management

on Monday, February 27, 2012

High gas prices prompt businesses, consumers to rethink spend management Carmakers are anxiously eying the rising price of gas, but experts contend that if they continue their upward trend it could drive sales of hybrid and electric cars.

The cost of gas in the U.S. has surged since the beginning of the year. If they continue to climb, which most experts say they could, they are likely to hurt President Obama's re-election hopes, as Americans struggle to pay to fill up at the pump. The average price of gas differs among states, but they have crept past $3.65 in large swaths of the nation, edging precariously close to what strategists say is a critical threshold of around $4.

When gas prices top $4 per gallon, there tends to be a significant backlash among the electorate, Democratic pollster Geoff Garin told The New York Times. With prices currently 12 percent higher than they were at the same point a year earlier, the president has had to respond to mounting criticism from GOP presidential candidates.

"Four dollars per gallon has typically been the tipping point when people go from complacency to exasperation," Garin said.

That gas prices have risen so precipitously over the past few months is largely outside of the president's control, but that has not stopped anxious voters from articulating their fears to the president at events he stages throughout the U.S. The uptick in prices has largely resulted from geopolitical tensions emanating from the Middle East, particularly as the West has increased its criticism of Iran, which is moving forward with its condemned nuclear power program.

Moreover, burgeoning demand from China and other emergent economies has outstripped supplies, spurring the price gains. High energy prices are eating into consumers' disposable incomes and businesses' profits, but Marketplace reports that they could fuel sales of hybrid and electric vehicles if they continue to climb. While such automobiles tend to be more expensive than other kinds of car models, they can generate long-term cost reductions.

Economists and public officials are concerned the steep rise in gas prices will have a serious impact on overall spending. At current prices, the U.S. will spend $55 billion more this year than in 2011 on gas. Companies are increasingly eying supply chain management and overall spend management as a means of combating the rise in gas prices, but experts affirm investing in efficient vehicles and other technologies could significantly reduce the long-term burden of volatile energy prices.

With energy prices forecast to remain elevated at least over the short-term, experts contend that sales of hybrid and electric vehicles will start to rise over the coming months. Fortune Magazine editor-at-large Allan Sloan told Marketplace that Americans are likely to increase purchases of such cars if they grow increasingly confident that prices will remain high.

Tensions with Iran have only intensified over the past few weeks, and economic growth in Brazil, Russia, India and China (BRIC) has continued to increase at a torrid pace, leaving little doubt that demand will remain robust. Iran's defiance in the face of economic sanctions over its nuclear program and its insistence that it will cut off oil shipments to Europe could further spur higher prices – and as a result, prompt more consumers to opt for fuel-efficient cars over their gas-guzzling SUV counterparts.

 
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Ford eyes technology to improve efficiency, prevent traffic jams

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Ford eyes technology to improve efficiency, prevent traffic jamsAs automakers prepare for a burgeoning global population, they are increasingly investing in technologies that will help improve efficiency and allow for enhanced traffic navigation.

Ford Motor Group, which was the only member of the Big Three automakers to not receive a bailout from the federal government, hopes to keep its recent momentum through its coordinated investment in the research and development of technologies that will help cars navigate through even highly congested metropolitan areas.

Bill Ford Jr. spoke this week at the Mobile World Congress conference, affirming that while advances in technology have helped revolutionize the automaking sector, carmakers must adapt to a shifting global environment. Car companies have increased their presence in foreign nations, expanding their manufacturing and distribution networks as they endeavored to tap into the huge amounts of cash flowing to and from emerging economies.

The ever-changing world landscape has prompted Ford and its competitors to overhaul their supply chain management, and it is prompting an entirely new set of concerns among executives, Ford said. For example, the strategic sourcing of certain car components has become exceedingly critical in the wake of widespread shortages that erupted in 2011 following the shocks to Japan's economy.

Car companies were forced to quickly tweak their sweeping supply chains, reworking supplier contract negotiations and identifying new potential suppliers in the wake of procurement auditing. Ford cautioned carmakers must now develop new systems that will enable drivers to more easily navigate crowded metropolitan areas. Experts project the global population will continue to surge over the coming decades, with billions of people living in major urban centers such as New York City, Tokyo and Paris by the middle of the century.

"What I'm really worried about is the role of the car in the long-term," Ford asserted. "If we do nothing, it will limit the number of vehicles we can sell. If we can solve this problem of urban mobility, I think there's a great business opportunity for us."

In an effort to tap into the burgeoning middle classes of the world's emerging economies, Ford and other carmakers have unveiled newly-designed vehicle models that are highly fuel-efficient and significantly smaller than standard sedans.

Moreover, Ford is hoping to continue to work with telecommunications companies as it seeks to develop systems that will effectively enable vehicle systems to communicate with one another, helping allay traffic congestion. Daily Tech News reports that such smart road technology could shift how drivers interact with their cars, and it could also fuel future carmaker sales.

U.S. carmakers have been at the forefront of the movement to develop new technological advances in their model offerings, particularly in the wake of the near collapse of the domestic automobile sector. Ford, General Motors and Chrysler were all in dire financial straits in the lead-up to the recession, but the economic contraction simply decimated their finances, prompting the government to loan both GM and Chrysler billions of dollars in an attempt to stave off bankruptcy.

The three automakers have since charged back, but they have emerged as fundamentally different companies. GM, for example, has emphasized cost reduction initiatives in an effort to bolster profitability, while Chrysler and Ford have adopted procurement best practices and business cost reduction initiatives as they seek sustained growth.

Ford affirmed that the company's research and development team is confident that the development and strategic investment in next generation technologies will enable cars to drive exceptionally close to one another within 10 to 15 years. Advanced parking systems will also enable cars to more compactly fit in parking lots, further saving space and time. Realizing such goals, however, will take a coordinated effort, he said.

"Even if the technology is there, there's still going to have to be tremendous thought by urban planners," Ford noted. "That [driving] freedom has been threatened unless we redefine what personal mobility can be in a congested urbanized world."
 
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Google Pays to Invade Your Privacy Through Market Research Effort

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In order for companies to keep up with our ever-changing society, they must know what consumers really want. Recently, Google announced that it has begun to put together a program where they will track individuals’ online activity. Now, one may think who would feel comfortable allowing a company to watch their every move online? The answer - people who don’t mind giving up some privacy rights for the greater good and ones who also shop on Amazon!  Google has agreed to pay each user $5 to $25 in Amazon giftcards in exchange for participating in the panel. Since Google is competing against other web browsers such as Yahoo and Bing, they are hoping that this program will provide them with the insight necessary to set them apart from the others.

With Google  generating over a billion dollars a year in revenue from products such as email services and cell phone and computer applications, constantly improving their products is critical. That being said, this initiative, if conducted properly, will be extremely beneficial in finding what modifications are needed to stay up to date with user preferences. According to Google, the program, called Screenwise, will consist of a panel of about a few thousand people. All participants must have a Google account and use the Google Chrome web browser. They will receive $5 up front for installing the browser extension that will allow all data from their browser to be collected and monitored. Then, for every three months that they continue to participate in the program, they will receive an additional $5, up to a year. While many people may feel like this is harmful and an invasion of privacy, Google looks at it as necessary in order to deliver a product of high quality. Whether invading the privacy of users or not, this is a classic example of market research.

Market research is often overlooked as being one of the major steps in sourcing. The purpose of the research phase of any sourcing initiative is to gain market intelligence by identifying potential opportunities to reduce costs based on the data collected.  Though Google’s overall objective for their use of market research is slightly different, like sourcing, the company will be able to sift through data collected through the browser extension and find ways to improve their site and the way it’s used based on overall consumer behavior. For instance, they may realize that they should invest less capitol in banner ads based on minimal usage or that users prefer web results with more information rather than one with a general overview of the site. Once realizing what changes need to be made, they’ll conduct further research on ways to implement the idea and add it to their overall strategy in improving the web site.

Google’s use of market research will hopefully produce the results needed to in tailor their web browser to one that provides tools and applications that most users prefer. This could be seen as an invasion of privacy, but at least it may produce some good in terms of the way users browse on the Google site and they’re getting paid for it!
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With focus on improving earnings, Sears eyes cost reduction measures, real estate sales

on Friday, February 24, 2012

With focus on improving earnings, Sears eyes cost reduction measures, real estate salesSears Holding Corp. announced recently a new ambitious plan it plans to undertake that will enable it to raise badly needed cash, Bloomberg reports.

Sears has struggled over the past decade as it faced mounting competition from rivals such as Target and Wal-Mart, and as its business model failed to generate results in an increasingly digital landscape. Hedge fund executive Edward Lampert currently controls the company, and he is championing its continued push toward profitability.

In a cost reduction measure that will also help generate millions of dollars, Illinois-based Sears said this week it would sell 11 store sites. What's more, the company plans to separate some of its other businesses as a means of driving profitability. The retailer is under intense scrutiny from investors and analysts, particularly following the announcement of its latest quarterly results, in which it reported its biggest loss in approximately nine years.

Low- and mid-tier retail chains – a group in which Sears competes – struggled to drive shoppers to their stores over the past few years. The retrenchment in consumer spending, coupled with a tepid economic climate and a murky jobs outlook, have hurt earnings at stores throughout the U.S. Retail executives have combated such negative market forces by implementing business cost reduction initiatives, scrutinizing supply chain consulting and overhauling strategic sourcing, but results have been decidedly mixed.

Sears is embracing an altogether different strategy in its own quest to improve sales and its financial performance. Selling the 11 sites could potentially generate as much as $270 million, with the company already negotiating a deal with General Growth Properties. Its decision to separate the company's Hometown and Outlet shops and a small number of hardware stores would also help its bottom line, with the move set to bring in anywhere between $400 million and $500 million.

The company reported a fourth quarter net loss of $2.4 billion on Thursday, underscoring the significant hurdles it must cross as it works to return to profitability. The retailer also said sales during the holiday shopping season dropped 4 percent to roughly $12.5 billion. Still, Sears chief executive Lou D'Ambrosio affirmed the company has already begun other initiatives aimed at bolstering profitability.

"We are taking immediate actions to address our fourth quarter performance including cost and inventory reductions, honed and targeted marketing, margin actions, and bringing in new talent to strengthen our merchandising and leadership team, like Ron Boire, who was recently named chief merchant and president, Sears and Kmart Formats," he said in a statement.
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Procter & Gamble announces job layoffs in cost reduction campaign

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Procter & Gamble announces job layoffs in cost reduction campaignThe consumer products giant Procter & Gamble said this week it would lay off thousands of workers as it works to improve its overall financial performance.

Officials from the company said Thursday that they would eliminate 5,700 positions over the next 18 months in a strategic business cost reduction initiative. Coupled with other ongoing cost-cutting measures, the planned layoffs will help Procter & Gamble save an estimated $10 billion by the end of the company's 2016 fiscal year, officials asserted.

Procter & Gamble has witnessed mounting competition in its core consumer products market, and has been adversely affected by volatile commodity prices. The company has also had to contend with a lackluster economic climate in the U.S., which has prompted a contraction in consumer spending that has hurt earnings.

The cost reduction initiative will help Procter & Gamble improve efficiency and boost profitability over the next four years, according to analysts. Moreover, experts said that a renewed focus on supply chain management would also bolster earnings over the short- and long-term. The Associated Press reports that the Cincinnati, Ohio-based company will complete the announced layoffs by the end of its 2013 fiscal year. 

 
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Copper prices on the rise

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Copper prices on the rise Copper traders have grown increasingly bullish on the commodity's future growth prospects as global demand continues to outpace supply.

Copper demand has surged in both the U.S. and China over the past few years, its rise fueled by an uptick in economic output in the former and ongoing construction projects in the latter. Bloomberg reports that traders are emboldened by such a confluence of circumstances, and they are forecasting prices will continue to rise this year.

Global copper inventories monitored by the world's largest metals exchange are currently at their lowest levels in more than 2.5 years, with those tracked by the London Metal Exchange poised to decline for the fifth consecutive month. Of the 29 analysts polled by the news provider, 14 said they believed the metal would gain in value next week, with 10 remaining neutral.

Economic reports recently released in both the U.S. and China have also fueled analysts' bullish outlook on the commodity. Jobless claims in the U.S. have fallen to their lowest level in years, and Chinese officials said late last week it planned to lower banks' reserve requirements in an effort to stimulate economic activity. What's more, copper sourcing has become increasingly difficult for a large number of companies in the wake of falling stockpiles, which according to Barclays Capital will likely cause a shortage of the commodity for the third year in a row.

Demand for copper tends to ebb and flow with the strength of the worldwide economy. China's rapid ascent over the past few decades has fueled demand for the metal throughout the Asian nation, as it is used in construction and the manufacturing of appliances and electronics equipment, among other consumer items. Some Chinese companies have had such difficulty securing copper supplies that they have turned toward procurement consultants and strategic sourcing experts in their pursuit of the commodity.

Amid surging investor sentiment, copper prices closed higher on Friday on the New York Mercantile Exchange. Copper rose 1.5 percent to close at $3.86 per pound. The metal has jumped 10 percent on the London Metal Exchange thus far this year, rising to approximately $8,358 per metric ton.


 
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Target's earnings on point

on Thursday, February 23, 2012

Target's earnings on point Retail chain Target posted earnings this week that surprised analysts, driving shares higher.

U.S. retailers were preparing for the worst this past holiday season. With consumer confidence ebbing and flowing last year amid market volatility and a tepid labor economy, retailers across the nation aggressively slashed prices in an effort to attract shoppers to their brick and mortar stores.

Economists and industry forecasters were bearish on the overall holiday shopping season, with discount chains significantly impacted by a retrenchment in consumer spending. Target, which competes against Wal-Mart and other low-cost brands, endeavored to increase store traffic through its continued use of sales and discount specials. With the release of its better-than-expected earnings report on Thursday, it seems its approach paid off.

Target posted net earnings in its last fiscal quarter of $1.03 billion. That figure was up from the $936 million the company reported in the same period the year prior. Moreover, Target's earnings per share jumped 17 percent from last year, while its full-year earnings per share also rose 21 percent.

The Minnesota-based retailer instituted a number of cost reduction measures as a means of offsetting its aggressive discounting policy. Enhanced supply chain management and strategic sourcing further improved efficiency. The company said sales climbed 2.8 percent in the last quarter to $20.3 billion, and its comparable-store sales – which experts assert is a true indicator of a retailer's overall success – rose 2.4 percent.

Target's retail segment earnings before interest expense and income taxes (EBIT) increased 3.1 percent to $1.608 billion. The retailer did post a decline in its quarterly gross margin rate, a reflection of the hit it took from offering steep discounts. Target reported a gross margin rate of 28.7 percent in the quarter, representing a slight drop from the 29.1 percent rate logged the year prior.

Nevertheless, Target chief executive Gregg Steinhafel said that the company was pleased with its latest quarterly performance, especially considering the circumstances under which it is operating.

"We're very pleased with our fourth quarter and full-year 2010 financial results, which reflect strong performance in both of our business segments," he said in a statement. "In 2011, we will continue to focus on driving sales and traffic and providing an enhanced shopping experience through key strategic initiatives that include our ambitious remodel program, 5 percent REDcard Rewards and the launch of our new Target.com platform. Beyond 2011, we plan to expand our store footprint in new ways, opening our first City Target stores in 2012."

Target surpassed analysts' expectation, according to Reuters, but an uncertain economic climate is fueling concern about future earnings. Target and other low-priced retailers that dropped prices to attract shoppers will not be able to continue to offer such exceedingly steep discounts, as their operating margins would continue to decline.

U.S. retail chains are carefully eying new economic reports as they devise new ways to draw consumers to their stores. Many such businesses are expanding their online presence, a move they hope will aid in business cost reduction initiatives and fuel sales.

 
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HP profit falls as company adjusts to changing consumer tastes

on Wednesday, February 22, 2012

HP profit falls as company adjusts to changing consumer tastesHewlett-Packard reported disappointing earnings this week, as the company's personal computing and printing segments failed to ignite growth.

HP is a staple in Silicon Valley, a particularly impressive feat considering its position as a destination for start-ups. Unlike its rivals, HP thrived over the past few decades, even as competition mounted amid a number of technology bubbles. However, the company has reached a crossroads, as its bread-and-butter printing and personal computing divisions are no longer fueling overall growth.

HP posted a 44 percent drop in its quarterly profit on Wednesday, citing the effects of a slowdown in sales of PCs and printers. Increasing digitization and the emergence of the tablet over the past few years have hurt sales of printers and PCs, respectively, and HP is currently working to improve profitability through business cost reduction programs and enhanced supply chain management.

Newly appointed HP chief executive Meg Whitman - whose prior managerial background included her exceedingly successful stint at eBay - is working to enhance the company's product and service offerings. With HP's net revenue declining 7 percent to $30 billion compared to the year prior, the company is feeling the effects of a contraction in business and consumer spending on computers and printers.

Whitman noted earlier in the year that she plans on improving HP's profitability through a variety of measures, including a renewed focus on spend management and indirect spend. While HP's earnings report missed analysts' expectations and underscored the challenges it faces, the company is focused firmly on the long-term, Whitman asserted.

"In the first quarter, we delivered on our Q1 outlook and remained focused on the fundamentals to drive long-term sustainable returns," she said in a statement. "We are taking the necessary steps to improve execution, increase effectiveness and capitalize on emerging opportunities to reassert HP's technology leadership."

Nevertheless, analysts and a growing number of industry experts have questioned whether the company can return to earnings growth as competition from Apple and other technology giants heats up. Tablet sales are forecast to continue to eat into those of PCs, and HP's personal computing segment is struggling under such a crowded market place. Sales at the firm's personal systems group fell 15 percent last quarter.

What's more, while HP's printing division has historically bolstered company earnings, the segment is showing signs of slowing, with the company's printing group reporting a 7 percent drop. With Whitman at the helm, HP is hoping to stage a comeback , but its future - at least now - is teeming with seemingly insurmountable obstacles, experts say.

 
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FDA utilizes supply chain management to fix cancer drug shortage

on Tuesday, February 21, 2012

FDA utilizes supply chain management to fix cancer drug shortage  The Food and Drug Administration (FDA) announced on February 21 that it plans to use effective supply chain management to compensate for a shortage of certain cancer drugs, according to a statement.

"A drug shortage can be a frightening prospect for patients and President Obama made it clear that preventing these shortages from happening is a top priority of his administration," FDA Commissioner Margaret A. Hamburg, M.D., said in the statement. "Through the collaborative work of FDA, industry, and other stakeholders, patients and families waiting for these products or anxious about their availability should now be able to get the medication they need."

The FDA responded to a dire shortage of Doxil by importing of a substitute called Lipodox. This drug has not received approval from the FDA, and its importation is only temporary, according to CNN Health. This strategy of temporarily allowing importation is generally only utilized when a drug experiences a critical shortage and FDA-approved medications cannot compensate for the deficient supply.

The government agency has conducted some evaluation of the potential health problems that could be created by the drug, the media outlet reports. The government agency expressed confidence that offering the replacement drug should eliminate the shortage within a week. Patients have been unable to obtain the drug for month, The Los Angeles Times reports. It is used to treat various types of cancers including ovarian.

Supplies of methotrexate have been dwindling as well, and the FDA has granted a new manufacturer with approval to supply the market with a formulation of the drug that is free of preservatives. APP Pharmaceuticals, the drugmaker, has stated that it expects its new product to be available to the market in March, according to CNN Health.

Drug delivery company Hospira released additional supplies of the medication, which resulted in 31,000 vials of the product being transported to healthcare facilities. The drug has encountered supply problems since around 2008, and is used to treat bone cancer and a type of leukemia, the media outlet reports.

"The actions announced today will help to boost the supply of some of the most badly needed cancer drugs by patients across the country," Dr. J. Leonard Lichtenfeld, deputy chief medical officer of the American Cancer Society stated, according to the media outlet. "It is critical that the FDA ensure that the added supply of these drugs is safe and made easily available to the patients who urgently need them." 
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Sourcing the iPad 3 – Seriously, who wouldn’t want to be a Mac supplier?

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Competition in the tablet market is fiercer than ever and only weeks away from the release of the new “iPad 3”, anticipation has been building up on the new features the newest Mac tablet will include. As a consumer, is hard to believe that it has been only a few months since I purchased my iPad 2 when rumors are already surfacing about an iPad 3. This got me thinking about how incredibly efficient Mac’s sourcing capabilities must be so a significantly improved product can be released with such frequency.

As a sourcing professional, I believe that the leverage power Mac has of negotiating best quality services at the best prices must be tremendous. The iPad 3 release rumors alone have fueled Apple’s stock price to break the $500 mark ($513.70 as of 2/21) which represents over a 20% increase since the beginning of the year; such reputation, a market capitalization of almost $500 billion and a market share that is overtaking the entire PC market, confirm Mac as a company that continues to outperform the industry every year.

A company with such profile and the thirst of adding more complex features to its products (such as the highly speculated 2048 x 1536 retina display and a new processor for the iPad 3) allows Mac to build a portfolio of integrated circuit suppliers eager to work with them; and truth be told, who would want to be a Mac supplier? With a client like this, current suppliers have little to worry about; I mean, as long as they are industry compliant, I’m sure they will have steady business for quite some time.

However, not a lot of companies get to work with the tech giant. Behind Mac products there is a list of tight supplier selection standards that need to be met before setting up a supply deal with Apple. For the iPad 3 and other iDevices (iPod, iPhone, etc.), during 2011, Apple conducted over 229 auditing process along their production lines. These audits include issues that go from job safety to financial performance to waste disposal procedures. The goal is to provide technology products that are safe, clean and reputable from the conception of the idea to the hands of the final user.

These ambitious goals bring to mind the next question: How much does this cost, and how does this cost impact the final price of the product? In other words, what do these efforts represent to the consumer? Well, the answer rests in the sourcing strategy. The iPad 3 will be facing competition from tablets like the Amazon Kindle Fire and the Windows 8 tablets which may not present the impressive specs of the iPad 3 but affordability instead; this means that the iPad 3 must present a significant set of upgrades at even more competitive prices than its competitors to entice the market. However, it is highly unlikely that the iPad 3 be released with a lower price; and we also know Apple will not compromise quality either. So, what can Mac do retain its current market while competing with cheaper products? Well, some analysts are already speculating about the iPad Mini. The underlying strategy is simple: Offering an alternate product to its already popular selection of high end gadgets to compete with any device in the market. Whether the product will work or not is for the market to decide, but there is no question that the strategic approach makes sense.

However, despite Apple’s negotiating power, high quality standards and efficient strategic positioning, I believe there is far more fundamental reason of why any supplier would want to work with a company like this. The reality is that like other companies such as Google, YouTube or Facebook, Apple is one of today’s corporations defining the industrial market place of this generation, spawning superstar companies out of nowhere and redefining business models that for decades dominated our system. What these companies have in common is their ability to create and sustain partnerships effectively; switching strategic sourcing models from mere vendor selection to partnership management.

Seriously, who wouldn’t want to work with a client who makes you a reputable partner rather than just another supplier?
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The BRIC, the MIKT and the Next Eleven – the new generation of strategic sourcing and near shoring destinations: Part 1 - The Overview. (In Spanish)

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They are not political blocs or formal commercial associations; however, much has been said about the relevance of the “BRICs” of the new economic wall. Who are the countries behind the new macro-economic trends and how did they become so crucial to our future? A prelude to what will be a more thorough analysis of the new world order is provided today…in Spanish.

Recientemente se habla mucho de las nuevas economías para los próximos cuarenta o cincuenta años, tanto ha sido el interés por encontrar nuevas oportunidades de inversión y desarrollo, que neologismos han sido creados para hacer referencia a crecientes bloques económicos mas que a naciones independientes.

A principios de la década pasada se empezó a hacer referencia a las nuevas promesas económicas bajo el termino BRIC, inicialmente presentado por Jim O’Neal en su estudio titulado “Building Better Global Economic BRIC’s”; el acrónimo hacia referencia a Brasil, Rusia, India y China, convirtiéndose en un popular termino macroeconómico del cual muchas otras naciones querían formar parte. El término simbolizaba el cambio del paradigma global en el que el poder económico se centralizaría en países en desarrollo y se alejaría de las economías del G7 durante las próximas décadas. El término no agrupa a un bloque económico ni comercial, sino que únicamente hace referencia a naciones con el potencial de desarrollo económico suficiente como para eclipsar a las grandes potencias económicas de esta década.

Aun cuando el termino BRIC ha ganado gran popularidad, no puede ser limitado únicamente a los países que refriere, es decir, fuera de los cuatro países integrantes del termino original, existen países que no pueden ser descartados como potencias económicas igualmente destacables. Tal es el caso de México, Corea del Sur y Sudáfrica. Inicialmente Corea del Sur y México no fueron integrados como parte del BRIC pues estaban consideradas como economías más desarrolladas pues ya formaban parte de la OECD. Poco después Sudáfrica fue añadida a los países BRIC formando el acrónimo BRICS.

Eventualmente, el mismo Jim O’Neal y Goldman Sachs crearon el termino MIKT el cual incluiría a México y Corea del Sur (junto a Indonesia y Turquía) que a diferencia del BRIC se enfoca en el sector de inversiones, mercados de capital y bonos. De manera similar surgió el termino Next-11 en el cual se listan las economías mas prometedoras para la inversión y el comercio.

En la práctica, estos términos sirven como punto de referencia a los cambios y tendencias de la economía mundial. Los países incluidos en estas listas son el punto de partida para buscar nuevas oportunidades de desarrollo el día de hoy. La nueva generación de potencias mundiales se esta gestando en esta década y con ella el desarrollo de mercados mas abiertos y competitivos. Se argumenta el potencial económico del BRIC es tal que para el 2050 las cuatro naciones integrantes podrían ser de las mas dominantes del globo. Se predice que para el 2020 el PIB de India se cuadriplicara y rebasara a la economía de USA para el 2040, así mismo se proyecta que China será la economía independiente mas grande del planeta para el 2030. Fuera del BRIC se proyecta que para el 2050 México tendrá un PIB per cápita mayor a todos los países de Europa excepto a tres y Corea del Sur se proyecta a ser la sexta economía mas grande para el 2016. Por esta razón, Jim O’Neal, el mismo creador del termino original ha propuesto los términos BRIMC y BRICK para incluir a estas naciones, pues bajo su propio argumento, estos países no pueden ser definidos como mercados emergentes en el sentido clásico sino como componentes críticos para la economía global moderna y tan centrales como lo que el día de hoy integra al G7.

La economía global esta cambiado el paradigma comercial que conocemos; el entender mas a fondo las economías que gobernaran el panorama mundial en los próximos años es vital para desarrollar la visión adecuada para encontrar oportunidades de inversión y el desarrollo e incubación de nuevas ideas, subsecuente a este breve resumen, revisaremos a algunas de estas “nuevas economías emergentes”.
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