Knowing Your Tools...

on Friday, March 30, 2012

Doing some projects around the house over the last few weeks has made me realize a few things about my clients as well as myself in terms of how to achieve optimal results quickly and with minimal pain and effort. A big part of completing any project is knowing what tools you have available. Not only that, it's also knowing how to use those tools properly. This is true whether you are partitioning a room or sourcing telecommunications.

One of the values Source One brings to its clients is its tools, whether it's its proprietary databases of contracts, price points, and categorization mechanisims or its sourcing tools at www.WhyAbe.com. Further, other tools and solutions that are available to the client that they otherwise may not be aware of but we see other clients in their position using successfully. There are other tools out there, that are often overlooked as well such as stakeholder engagement and internal process documents and document management tools the organization may be using for non-sourcing purposes. Not only can these types of things have a huge impact on the timeline and success of a project, they're free!

Often we find ourselves doing what we have always done and achieving OK results and not taking the time to dig a bit deeper and find the right tool for the job. Can you pound in the nail with the handle of a screwdriver because you are too lazy to go looking for a hammer? Sure, but it'll take longer, probably marr your screwdriver handle, maybe injur your hand and possibly not even get the nail the whole way in and straight. I see situations similar to this in sourcing all of the time. Many just get used to doing what they have always done, or what the organization has always done, that they forget how easy it can be do do a nice, quick job of hammering in a nail if they just take the time to go grab a hammer.

The other thing I get some criticism for from friends is buying tools I don't have an immediate need for. This can sometimes come back to bite me but I find that if I am judicious in my seeking and procuring of tools, they will ultimately provide me far more value than if I went on without them. In other words, I can get really good at working with what I have available, say, sawing wood with a handsaw very nicely, but I can work much more quickly and achieve the same (or better) results with a power saw. Both tools do the same job, but if I don't take a chance and buy that power saw, I will be achieving a good result, but at the expense of a very elongated timeline compared to the better result I'll achieve with my fancy new power tools.

A susccessful strategic sourcing initiative will include three things: 1. Knowing the tools you have 2. Knowing the tools you need 3. Knowing if there are better, worthwhile alternatives to #1. In most cases you will be able to get the job done with the tools you have (even if you have to pound in a nail with a screwdriver handle). In some cases, you will absolutely need a new tool (why buy a drain snake if your sink never has clogged?). And in almost every single case, there is a better tool for the job and just knowing it exists puts you in a unique position to obtain it and acheive far better results, far faster than you would have otherwise.

Certain jobs are better left to the professionals either because the tradeoff for doing it yourself is not advantageous or because it is an area in which you do not have expertise. I won't touch electrical or plumbing. I very likely could do an OK job on most small household electric or plumbing work, but it's not worth the risk in the results of subpar work. For categories where your organization does not have subject matter expertise, it may be beneficial to hire consultants who can provide or obtain the best tools and resources to do the best job possible for your organization. This leaves you with the peace of mind that the job will get done right and you can focus on other more pressing matters.

Another area outside help can be enormously beneficial is in tool identification and guidance. Sure, you may own a drain snake, but do you know how to use it? Consultants can help you refine and improve your process, engage your stakeholders, and motivate suppliers with best practices they have developed from working on projects day in and day out that your organization may only see every few months or years. With proper knowledge transfer, you and your team can learn the skills required to tackle similar projects in the future on your own.

For help identifying tools you already have and tools you may need to achieve better, faster results, visit www.SourceOneInc.com.
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CVS to close Beauty 360 stores in cost reduction move

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CVS to close Beauty 360 stores in cost reduction move Drugstore giant CVS Caremark Corp. said this week it would shutter some of its upscale stores in a cost reduction campaign.

CVS said that it would close all 25 of its upscale Beauty 360 stores over the course of the year. The company is eyeing growth in other beauty segments, and analysts said the stores had underperformed over the past few years. CVS has faced mounting competition from Walgreens and local chains, as a retrenchment in consumer spending has impacted businesses across the U.S. in the wake of the recession.

"We have learned a great deal about our beauty customer through our experience with Beauty 360 and plan to apply many of these learnings to future enhancements within our beauty department," CBS public relations director Erin Pensa said.

The Los Angeles Times reports 23 of the Beauty 360 stores are located in California. The pharmacy giant said it plans to completely close the stores by mid-May. CVS founded its Beauty 360 offshoot in 2008 as a means of attracting a more upscale clientele. The stores featured high-end products not available at most CVS locations, and offered spa services aimed at driving revenue.

However, the stores struggled following the financial and housing crises, as shoppers opted to frequent established firms such as Sephora.

 
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American Airlines lost $619 million in February

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American Airlines lost $619 million in February American Airlines is continuing to struggle to boost  earnings amid soaring fuel prices and heightened competition.

The Dallas, Texas-based AMR Corp., American Airlines' parent company, said this week that it lost hundreds of millions of dollars in February. The airline filed for bankruptcy protection late last year and like many carriers, it has suffered under the weight of soaring fuel prices. While many carriers have fueled revenue by levying fees on formerly free services such as baggage checks and in-flight meals, American Airlines has experienced middling results in its business cost reduction and strategic sourcing efforts.

AMR officials told a bankruptcy court this week that it lost $619 million in February, The Associated Press reports. The company said fuel and labor costs continued to weigh most heavily on profitability, with the price of oil surging since the beginning of the year amid geopolitical unrest and robust demand from emerging economies.

AMR logged revenue of $1.81 billion in February, a drop from the $2.03 billion it posted in the month prior. The company is planning to cut as many as 13,000 jobs in a cost reduction initiative, but is still struggling amid ongoing supplier contract negotiations.

 
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BMW recalls 1.3 million cars

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BMW recalls 1.3 million cars One of the world's largest automakers issued a major recall this week, in response to potential safety concerns.

Germany-based BMW, the world's largest luxury carmaker, said this week it would recall more than 1.3 million vehicles in one of its largest such recalls in years. The automaker said the recall would affect certain models of its 5- and 6-series cars that were manufactured between 2003 and 2010.

BMW has faced mounting competition from other luxury automakers over the past few years as it sought to maintain its dominance in the global auto market. The company said it issued the recall because in rare cases, a batter cable covering the trunk was incorrectly installed in certain vehicle models. The defect could potentially prevent affected cars from starting, while it may also spark a fire in other models, the company said.

The luxury carmaker has improved supply chain management over the past year in an effort to improve reliability and quality. The Associated Press reports the company plans to notify owners by letter and will pay for the repairs, which should only take roughly 30 minutes.

 
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The Winners of Mega Millions Mania

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Tonight, the country will sit silently as they await their fate, hoping that six lucky numbers will change their lives. With the Mega Millions lottery jackpot reaching an unprecedented $640 MILLION, the multistate jackpot is being called the largest lottery jackpot in the world. A whopping 400 million tickets have been sold in the last 48 hours, with some people purchasing hundreds and thousands of tickets at a time. When thinking of the winner, one naturally thinks of the person or people with the winning lottery ticket, however, there are other players who benefit considerably from lottery fever.

Although the chance of winning the grand prize is 1 in 176 million, that hasn’t stopped ticket sale from skyrocketing. According to ABC News, just hours ago, the jackpot was valued at $540 million, but increased $100 million dollars due to overwhelming ticket sales. All across the country, hopefuls have been standing on what seems like never ending lines – some waiting for hours – to purchase their chance at winning over a half billion dollars. With that amount at stake, people like me who rarely, if ever, buy lottery tickets have been coming out woodwork. Whoever wins the jackpot, whether it’s a first-timer or one who plays the lottery daily, they are indeed the biggest winner of the drawing, but you can’t forget about the others who benefit.

Convenience stores throughout the country have been flooded with people purchasing tickets, which is extremely advantageous for the store. First, for each lottery ticket sold, retailers receive 5.5 cents for each $1 ticket sold, 1 percent of every prize they pay at their store, and a cash bonus for selling top prizes ($50,000 for Mega Millions). Also, while purchasing lottery tickets, customers will most likely buy other items such as snacks and beverages at the store as well. Two streams of income per one customer visit – not bad. The state also gains from lottery fever. Once the jackpot winner has come forward, they have the option of receiving their winnings in quarterly payments or in one lump sum. If they choose the lump sum option, which a lot of people do, that will mean millions of dollars in taxes paid instantly to the state. These extra funds could then be allocated to education budgets and parks. So while the state receives additional taxes, it also provides much needed resources to schools and other organizations.

A single lottery ticket owner has a greater chance at being struck by lightning than winning tonight’s jackpot. Those odds would make one think twice before buying thousands of tickets, but people seem to be extremely optimistic. If they don’t possess that winning lottery ticket, at least they can rest knowing that part of that money will be put to good use.
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Fighting Over Tebow

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Now that the fight for Peyton Manning is past us and Tim Tebow has been traded to the Jets, another fight begins. This time it’s not between football teams but instead, Nike and Reebok. Earlier this week, according to The Wall Street Journal and several other sources, Reebok has been ordered to stop producing and selling Tebow-related New York Jets merchandise. This court order is the result of Nike suing Reebok and claiming that Reebok was selling “unauthorized” Tebow gear based on the premise that “Reebok’s license with the NFL Players Association for player-related apparel expired prior to March 1st.”

April 1st marks the beginning of Nike’s five-year deal with the NFL to become the league’s official jersey supplier and the end of Reebok’s ten-year contract. Nike reportedly paid the NFL $1.1 billion for the right to take over Reebok’s responsibilities. Through this new deal, Nike was looking forward to the opportunity to sell “the first Tebow-identified Jets apparel” which Nike considered to be “a unique and short-lived opportunity” that Reebok benefited from.

Tebow was a Heisman Trophy winner and led the University of Florida to two national champions; and this past NFL season, his popularity grew even more after becoming the Denver Broncos starting quarterback and leading the club to its first playoff appearance since 2005. WSJ also reported that Tebow’s “Broncos jersey was the second highest-selling on the NFL’s website last season, according to the league, and is expected to be a hot seller this year despite being the backup quarterback for the Jets” behind Mark Sanchez. No wonder why Reebok went ahead and manufactured New York Jets apparel with Tebow’s name and number and why Nike’s lawsuit is seeking damages. And what added fuel to the fire is the fact that, according to ESPN, demand for Tebow-related Jets items peaked last week at a time when NFL merchandise sales are typically slow, especially since most sports fans this time of year are talking about March Madness and the start of the baseball season.

Reebok also did not receive permission from Tebow before launching the apparel line. ESPN reported that Reebok did not take any action after a “Tebow representative sent a letter to the company March 23rd” requesting that Reebok stop all sales. Nike’s complaint was also filed due to the fact that retailers were “reluctant to place orders with Nike for Tebow merchandise because of pending orders they already have with Reebok and they ‘want to sell through such inventory before placing orders with Nike.’”

U.S. District Judge P. Kevin Castel’s ruling forces Reebok to not only stop manufacturing and taking orders for Tebow-related Jets merchandise but to also recall any apparel in its supply chain including what has already been sold to retailers.

As mentioned, April 1st marks the day that Nike will officially replace Reebok as the new uniform provider for the NFL. Nike has plans to unveil its line of apparel for all 32 teams at an event in New York on April 3rd. The day after, Reebok will be given the opportunity to present its case at a hearing in Manhattan. At that time, Reebok will present evidence it believes will change the court’s ruling. In the meantime, I suggest Reebok starts “tebowing” that this one goes in its favor.
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Survey: Challenges abound as companies seek growth in China

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Survey: Challenges abound as companies seek growth in China U.S. companies operating in China are beginning to encounter obstacles to growth in the country, according to the results of a new study.

U.S. firms have increasingly targeted growth in China and elsewhere in the so-called BRIC economies, also comprised of Brazil, Russia and India. Though the U.S. and European economies were battered by the financial and housing crises that struck in 2007, a number of businesses were able to maintain – and in many cases, improve – profitability as a result of torrid demand in China.

However, it seems the opportunities for business growth in China have fallen over the past year, according to the results of a survey conducted by the American Chamber of Commerce. U.S. companies had enjoyed several years of robust expansion in China, the result of the nation's burgeoning middle class and its increasing purchasing power. Still, economic conditions in China have shifted over the past year or so, affecting firms' ability to continually grow profits there, the poll determined.

The American Chamber of Commerce had conducted its survey for the past 14 years, and this year's iteration polled 390 firms operating in the world's second largest economy. Of those surveyed in the 2012 Business Climate Survey, a growing number cited rising costs and a weaker economic climate as some of the factors slowing revenue and profit growth this year.

While companies said challenges are mounting in China, a high number noted they remain confident they can drive earnings there in 2012. Of those polled, 66 percent said their goal is to produce goods or services for China this year. That figure represents an uptick from 2010, when only 58 percent of respondents affirmed such a priority. As growth has slowed in traditional markets such as Western Europe and the U.S., businesses have had to look outside of their old markets as they eyed future growth.

Moreover, a significant number of companies are enjoying solid earnings growth in China, according to the poll. Thirty-nine percent of respondents said their profit margins in China were higher than those in other regions around the world. More than 75 percent of those polled also asserted they expect revenues in 2012 to be higher than the year prior.

Nonetheless, survey authors noted companies are increasingly becoming less optimistic about future growth prospects in China. Many are eyeing cost reduction there, as inflation has risen at a rapid clip, the result of the nation's torrid pace of economic expansion over the past three decades. Firms have also emphasized supply chain management and spend management as they contend with a bureaucratic business environment.

The survey also found companies are most concerned about the lack of a clear regulatory framework in China. Poll respondents said the nation's unclear and inconsistent laws are some of the most substantial obstacles they have had to overcome, according to American Chamber of Commerce chairman Ted Dean.

"Our members view China as a critical long-term growth market, and over 80 percent of them plan to increase investment in their operations this year," he said. "However, China's increasingly advanced economy requires a more open, transparent and market-oriented regulatory regime. Promoting greater government transparency and more vibrant market competition would benefit Chinese as well as foreign companies."

Though businesses are increasingly encountering challenges in their pursuit of growth in China, 82 percent of poll respondents said they plan to increase investment in their operations in the country in 2012. Still, if China hopes to maintain its position as a growing world power, it will likely need to alter its regulatory course, as 79 percent of those surveyed said China's enforcement of intellectual property laws is ineffective.


 
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Best Buy announces new cost reduction campaign

on Thursday, March 29, 2012

Best Buy announces new cost reduction campaignIn an effort to bolster profitability, Best Buy announced this week it would close stores and trim its staff.

The electronics giant has struggled mightily over the past few years as it faced mounting competition from both brick-and-mortar and online rivals. The Financial Times reports Best Buy will shutter 50 big box stores in the U.S. and reduce its workforce by 400 through its latest cost reduction initiative.

Best Buy's market share has continued to erode as Amazon and Wal-Mart, among other retailers, continue to eat into sales. Best Buy said the business cost reduction campaign could save as much as $800 million by 2015. The electronics purveyor is experiencing difficulty driving sales at its U.S. outposts that are at least one year old, as sales fell 2.2 percent at such stores in its latest fiscal quarter.

Consumers have increasingly sought out bargains in the wake of the worst economic contraction in nearly a century. The fundamental shift in spending habits has left retailers such as Best Buy scratching their heads over how, exactly, they can lure shoppers without sacrificing profits. Low-cost retail chains like Target have slashed prices in an effort to draw consumers to their stores, but Best Buy has experienced only middling results with its own initiatives.

Best Buy is working to completely overhaul its own business model as it endeavors to convince jittery investors it is capable of surviving amid mounting competition and a retraction in consumer spending. The electronics purveyor is fighting a difficult battle, analysts said, as shoppers are routinely testing electronics at brick-and-mortar stores and subsequently purchasing them online at significantly cheaper prices.

Brian Dunn, Best Buy's chief executive, said this week the cost reduction campaign resulted from the company's slow expansion. He said company executives are scrutinizing spend management and supply chain management in their cost reduction initiatives, asserting such strategic changes would likely drive future profit gains.

"I'm not satisfied with the pace or degree of improvement in our performance and transformation, especially given the opportunities we have in the marketplace," he said.

However, investors were less enthusiastic about how successful the business cost reduction campaign will be. Shares of the company were down 7 percent in New York on Thursday following the announcement. Analysts were also skeptical, as they expressed disappointment with the company's projection that sales would fall between 2 and 4 percent over the next 12 months.

Best Buy has already begun a broad restructuring of its business operations in the United Kingdom and Europe, according to the FT. Best Buy has moved to decrease the size of its brick-and-mortar stores throughout Europe. Moreover, it has shifted its product offerings, as it works to attract a younger, wider customer base by increasing its lineup of mobile communications services and devices.

Independent retail analyst Stacey Wildlitz said Best Buy has struggled for such an extended period of time that it is unlikely its latest business cost reduction plans will actually improve efficiency and fuel an uptick in profits over the coming years. With online companies continuing to encroach on the company's traditional bread-and-butter market, Best Buy could continue to shed customers and revenue over the next few years.

"Best Buy has gone through cost cutting motions before. However, this time around there is little reason to believe the top line will turn around after three years of [like-for-like sales] declines," she told the FT.

Best Buy and other retail chains are at a crossroads as they plan for future revenue and profit growth. With the internet continuing to democratize the ways in which shoppers search and pay for consumer items, big players could witness their market share erode even further over the coming decade, experts contend.

 
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New Way to Avoid ATM Fees

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My last blog I discussed how banks are rolling out all new or increased surcharges and fees in 2012 in order to recover lost revenue from the recession. One of those fees that affects most of us is the $2-$5 surcharge we get hit with every time we use the ATM. Banks even “double dip” with the bank that is maintaining the ATM charging you and then your bank charging you for using another bank’s ATM. These fees could add up to over $300 a year depending on how often you need an ATM.

People will often go to great lengths to avoid these superfluous fees. I know any time I need some cash money I keep a close eye out for a Wawa, which has become a great business decision for them and drives a lot of traffic into their locations. Well if there isn’t a Wawa to be found, there may be a new option coming to an ATM in your area. A company in New York City, Free ATM’s NYC, has created an ATM that uses targeted advertisements to cover the costs of the surcharge. While banks already show advertisements on the tops and sides of ATM’s to promote their products and services, these ads would be on-screen and for local businesses. How it would work is during the time the screen’s message says the transaction is processing, which is usually 10 seconds or less, an advertisement would play.

They currently have 2 models. One has a normal 10-inch main screen where transactions are conducted and the quick advertisement would play. The other has a 15-inch LCD screen above it that shows a looping ad.

They don’t want to force users to see more ads so they will have the option of watching it while they are waiting anyway or pay the normal $2 - $5 surcharge. They will also give users the option to donate a portion of their fee to a charity. Furthermore, at the bottom of the ATM receipt, where you can see what little money you actually have left in your account, there could be a coupon that could be ripped off and used at a local business - $2 off pork chops at Phil’s Pork Chop Emporium. Now that’s a deal.
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In fight to woo shoppers, retailers shifting pricing strategies

on Wednesday, March 28, 2012

In fight to woo shoppers, retailers shifting pricing strategies A new trend has emerged in the retail sector over the past few years as consumers increasingly seek out bargains.

The New York Times reports that although retailers have historically held the upper hand in pricing goods, shoppers are more and more flexing their bargaining powers in an effort to maximize their disposable income. The financial and housing crises, and the resulting recession, fundamentally altered the ways in which stores and their customers interact.

While, for example, haggling was once only common in markets with fluid pricing models, shoppers are using technology and their competitive advantage to pay less for more. Start-ups have sprung up around the U.S. that are helping consumers compare pricing in brick-and-mortar stores with items online, and in an effort to maintain relationships with buyers, retail chains are negotiating item prices, according to The Times.

Seattle, Washington-based online retailing giant Amazon is benefiting from such a shift in consumer interactions. The company recently offered shoppers the ability to scan barcodes on books at stores such as Barnes and Noble, and it promised to beat prices charged by such firms. Apps for smartphones that also allow consumers to scan product barcodes have become more common, helping swing the pendulum of bargaining power away from stores and toward shoppers.

The industry-wide shift has left some stores scrambling to keep pace, according to analysts. Retail chains have unveiled a variety of strategies to ingratiate themselves to shoppers, though some have yielded middling results. Wal-Mart has slashed prices across the board as it works to keep its core group of shoppers from flocking to Amazon and other low-cost competitors, while J.C. Penney also overhauled its own pricing schemes in an effort to woo back jaded shoppers.

Shoppers, however, are enjoying the shift in power dynamics. Though consumer spending has slowly crept up over the past year or so, Americans as a whole remain cautious about future growth prospects. When coupled with the effects of volatile energy prices and stagnating wages, such factors have created a new kind of retail environment where pricing is fluid.

"The customer knows the right price," J.C. Penney chief executive Ron Johnson said. "We can raise the price all we want; she's only going to pay the right price. And why is that? Because she's an expert."

Johnson, who only recently took over the helm at the national retail giant, has tried to reinvigorate the struggling brand. Like many of its rivals, J.C. Penney has historically offered discounts and sales throughout the course of the year, but Johnson has instead instituted a policy that streamlined discounting. The company has also overhauled supply chain management and reworked strategic sourcing, decisions analysts say will help fuel future growth.

Luxury brands have seen sales and overall revenue jump over the past year, as high-end buyers have increased their personal expenditures after a downturn following the recession. Their low-cost counterparts, on the other hand, are fighting to lure shoppers who have an inordinate number of stores – both brick-and-mortar and online – among which they can choose.

Many retail chains have also had to overhaul their approach to sales pricing because consumers have become savvier to traditional models, according to Marcum LLP head Ronald Friedman.

"The shopper knows to wait for the sale," he said. "They know the prices are inflated when they first come out."

J.C. Penney has cut prices by roughly 40 percent as a result, while Wal-Mart has also slashed prices as it works to prevent an exodus of shoppers. Still, with online firms continuing to attract customers away from traditional retail giants, the war to woo consumers is only just beginning, experts say.

 
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The World's Only Completely Free Sourcing Tool Just Got Better - WhyAbe.com Launches New Features

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March 28th, 2012 - Willow Grove, Pennsylvania
Nearly seven years after its initial debut, WhyAbe.com reinvents itself with a completely redesigned interface, new tools, new features and improved navigation.  WhyAbe provides free electronic sourcing tools to buyers of all sizes from all industries, and provides suppliers with free marketing tools and the ability to win new business opportunities.  Launched in 2005 by Source One Management Services, LLC; WhyAbe.com was designed partly with the intention of upsetting the existing eSourcing tools marketplace, which were traditionally so expensive that only the largest corporations could afford them.  Now, in 2012, seven years after most industry pundits said it would not succeed, the site is still growing its user membership and has seen adoption from corporate, residential and government users alike. 
WhyAbe continues to grow its feature set and tool portfolio.  The enhancements and features are added based on the demand of its user community.  The most requested features are added first, and this newest release is just the initial debut of new functionalities that will be released on a much more rapid schedule moving forward.

Whats New with WhyAbe.com?
  •  A completely revamped user interface.  Get the information you need much faster and easier with new navigation and an improved dashboard.
  • A new series of of Reverse Auction types.  These new event types satisfy certain government requirements for having a sealed bid (tender opener) during an event.
  • A new supplier catalog system.  Suppliers can now build a company profile card, and showcase their products or services, all at no cost.
  • Tie-ins with social media.  Now you can promote your RFX events as a buyer, or catalogs as a supplier with easy to use social media sharing buttons.  Buyers can even configure the buttons to allow other users to promote their events.
  • Greater customization of user preferences, such as default images, personalized timezones and more; to help cut down on the time it takes to create a sourcing event.
  • An improved "About Me" functionality that now allows users to interact socially and make share profile links to other social media sites such as Facebook, Google+ and LinkedIn.
  • A Supplier List building functionality, which allows buyers the ability to build supplier lists over time and use that list in an eSourcing event at a later date.
  • Automatic event refreshes.  Now you can watch your sourcing event in real time, watch bid pricing or auction ranks update in real time, whithout having to refresh your browser.
  • And More!

“We are extremely pleased with our newest release of WhyAbe.com. Our new design and user interface makes it much easier to use, and our new features have been created specifically at the request of our existing end users. More importantly, our latest release has now laid the groundwork for many exciting new features and enhancements which will be rolling out in greater frequency in the near future,” said William Dorn, Vice President of Operations for Source One Management Services, LLC and WhyAbe.com.

So what are you waiting for, register on WhyAbe.com and start collaborating with your supply chain.


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High Gas Prices...Again

on Tuesday, March 27, 2012

It is that time of the year again. The inevitable period every year or two in America where gas prices get high, but seemingly never too high that we can't collectively buckle down and get through it. High gas prices can be caused by speculation, refinery output adjustments, and there is no doubt that interruptions such as what we've seen recently in the Middle East can have a huge impact on world markets as well. In any case, commodities markets are subject to many changes that are out of your control. If you are purchasing goods or services that are based on commodity markets or indices, it is important to be aware of where they are moving in general when formulating a strategic sourcing plan or negotiating pricing.

Suppliers may offer a pricing structure for goods or services that adjusts along with a given commodity index, consumer price index, or producer price index. For example, I have recently been looking at the market on a product which is heavily reliant on polypropylene. Polypropylene pricing moves along with petroleum (traded on NYMEX, ICE, etc.), one of the most visible and important commodities traded in the world.

When evaluating pricing structures based on an index, the pricing should work in favor of the market characteristics and expected market direction. This can be accomplished by including the following in due diligence with commodity sourcing:


  • Risk Factors to Market Volatility - What factors primarily impact the index pricing, and what factors, if any can you have an impact on? If the price of the commodity built into your pricing varies wildly, it can impact budgeting decisions and cash flow.
  • Pricing Date & Time Period - Will your pricing utilize a moving average, specific date, or another time period in the market as its basis? This may lead to an opportunity to lock in pricing when the market is towards its bottom or smooth out the volatility using an average.
  • Cyclical Markets - Markets can be up or down for long periods based on seasonal supply & demand factors. Negotiate commodity pricing in periods of lower than average demand or oversupply.
  • Technology & Innovation - Technological advances may have a permanent impact on a commodity price. For example, a recent advancement in genetic engineering or harvesting technology may increase yields on a certain grain crop, lowering its price. If commodity pricing is expected to be significantly lowered by a coming innovation, locking in pricing before this may be detrimental.
  • Index Weighting - Different price structures may heavily rely on a commodity market index or not. In some cases a supplier may base your pricing on the actual cost per unit of the material, then factor in a markup or margin. Alternatively, the index may only constitute a small portion of the final unit price. Further processing, overhead, and other fees or expenses may then make up the majority of the price.
These may seem like common knowledge but having commodity market intelligence as leverage for negotiations can provide significant cost savings. A Procurement Service Provider like Source One can provide the expertise and resources to properly evaluate your procurement profile as it relates to commodity markets and indices.
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U.S. firms increasingly picking up the tab for recycling costs, though opposition mounts

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U.S. firms increasingly picking up the tab for recycling costs, though opposition mounts Companies in the U.S. are increasingly incorporating the costs of recycling items they produce into manufacturing, the result of a number of factors.

Recycling initiatives in the U.S. have actually gained traction over the past few years, even in the wake of the worst financial contraction since the Great Depression. Businesses are increasingly assuming the costs of recycling their packaging after consumers are done using it, according to The New York Times. Firms elsewhere in the world, including those operating in Europe, have long done so, but companies in the U.S., Latin America and Asia are more and more doing the same.

It may seem counterintuitive that in a time when businesses are focused on cost reduction they are paying more to account for recycling, but there are a number of variables that have coalesced to drive such a trend, according to The Times. For one, cash-strapped local and state governments across the U.S. have worked to offset costs amid a slowdown in tax revenue and federal assistance by charging companies for services for which they formerly paid.

"Local governments are literally going broke and so are looking for ways to shift the costs of recycling off onto someone, and companies that make the packaging are logical candidates," Starbucks environmental impact director Jim Hanna said recently. "More environmentally conscious consumers are demanding that companies share their values, too."

Moreover, although some companies are simply reacting to new rules and regulations, others are increasingly eyeing the limited availability of resources as a future obstacle to growth. Hanna said "companies are becoming more aware that resources are limited and what they've traditionally thrown away … has value." For firms scrutinizing spend management and indirect spend, they are working to keep costs down, especially amid volatile commodities.

It is currently less expensive to recycle an aluminum can into a new one than to produce the alloy from scratch, according to experts. The same is also true for other raw materials, a fact that is not lost on cost-conscious company executives. Although spending more on recycling could initially hurt profitability, experts assert over the long term it will help drive efficiency and potentially augment earnings.

"Shredding, melting, recasting and rerolling used aluminum beverage cans into new aluminum can sheet saves 95 percent of the energy that it takes to make can sheet from raw ore," Alcoa recycling director Beth Schmitt noted.

Companies in the U.S. are currently absorbing recycling costs because of corporate initiatives. While Maine has enacted legislation that allows lawmakers to force firms to pay for the costs of recycling, the state has thus far not moved forward with plans to do so. Other states require companies to foot the bill for the removal of batteries and mercury, but there is no comprehensive federal law mandating businesses pay for recycling and repackaging costs.

Nevertheless, not every business in the U.S. is paying for the costs of recycling – nor do they want to. There has been mounting opposition to laws aimed at mandating firms to do so. The Grocery Manufacturers Association, for example, a consortium representing more than 300 food and beverage firms, has pushed back against proposed legislation in the U.S.

"We're not convinced there's compelling evidence that it's the most appropriate solution for the U.S.," affirmed Meghan Stasz, the group's sustainability director.

Amid a tepid U.S. economic climate and a focus on procurement cost reduction, many businesses are maintaining such payments are unfair and potentially useless. Still, proponents, particularly those from larger companies, are moving forward with such programs as they work to keep raw materials costs down in the future by recycling in the present.

 
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Cost reduction through robots? Amazon's purchase of Kive Systems sparks controversy

on Monday, March 26, 2012

Cost reduction through robots? Amazon's purchase of Kive Systems sparks controversy Amazon recently used some of its mountains of cash to purchase a company that manufactures robots, a move that will help improve efficiency in its warehouses and distribution centers, The New York Times Bits Blog reports.

Under chief executive Jeff Bezos, the Seattle, Washington-based company has continually worked to stay ahead of its heavy online competition through its strategic investment in emerging technologies and systems. Over the past decade, Amazon has demonstrated it is not afraid to spend aggressively – and even log losses in the short term – if it expects a substantial return on investment.

With its purchase of Kiva Systems, Amazon has once again demonstrated its indefatigable desire to secure its position as the leading global online purveyor of, well, pretty much everything. Amazon currently employs thousands of workers in its warehouses across the U.S. and elsewhere throughout the world, and some have argued its decision to buy Kiva could indicate it hopes to move away from human workers and toward computers.

Though sales and revenue at Amazon have continually surged over the past few years, the retailer has come under fire from shareholders concerned about its relatively slim operating margins. While a majority of analysts and investors contend the firm's profit margins are poised to surge in the future thanks to its substantial research and development expenditures, Amazon's relatively weak results in its most recent fiscal quarter prompted a fiery debate over its long term growth strategy.

Unlike companies such as Apple, which accrue significant profits from producing a relatively small number of items, Amazon has only recently entered the production segment. Its Kindle devices, including its recently launched Fire tablet, represented the company's first foray into designing and producing its own lineup of consumer products. Analysts believe the company is logging a loss on sales of the Fire, but Amazon is likely to profit handsomely from them over the next few years, as shoppers use them at Amazon's online store.

With its latest purchase of Kiva, Amazon is once again endeavoring to improve supply chain management as it eyes cost reduction. Labor costs have risen for the company over the past few years, as it opened an increasing number of distribution facilities, and using robots in place of humans could help improve profit margins and procurement cost reduction, some analysts say.

Nevertheless, while critics assert the robots will likely replace human workers, experts said they are designed to work in conjunction with them. Johns Hopkins University robotics researchers Michael Kutzer and Christopher Brown told The Times the majority of robots require the guiding touch of a human worker to function optimally.

"It is much more likely, for now, that robots will help augment people's abilities, allowing us to use robots for things humans can't do," Brown said.

Former Treasury Secretary Lawrence Summers corroborated such an assertion, affirming humans have long been skeptical about the increasing use of technology in the labor force. He noted workers feared the implementation of such systems in the midst of the Industrial Revolution. Skepticism of technology has remained ever since, he added.

"There has long been a mentality that we're going to run out of work to do and there is going to be an absence of work for people," according to Summers. "Both have been asserted in every generation and always historically been wrong. In reality, if people are freed up from one thing they are able to do something different."

Nonetheless, the battle rages over whether Amazon's decision to buy Kiva underscores the company's commitment to replacing workers. With the U.S. economy still struggling in the wake of the recession, such fears are understandable – although unsubstantiated, some argue.

 
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Become an Active Participant to Improve Your Supplier Relationship

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There are several reasons why a company might decide to end services with their current supplier.  A reoccurring answer to this question is that it became a “bad relationship”.  Of course a desirable working agreement would be one that is reciprocally beneficial, but a misbelief still exists that it is solely the supplier who needs to drive the relationship.  The truth is a relationship between a supplier and a customer is mutually entered into and is fostered by both parties.  By enhancing your relationship with your supplier early on, you may be able to discover some easy changes that could generate savings potential and other value added services down the line.
Once a new contract is signed and the business has been secured, the sales representative that promised excellent service and seemed to know the details of your business may no longer be your main line of contact.  These responsibilities are often moved to an account manager or are shared by a customer service team.  The relationship that you thought you would experience has been pushed into the hands of someone you have never met.  Though an account manager is privy to some information about your company, they may not know the ins and outs of what you need and when you need it. 
It is important to treat this as a new relationship, not one that is simply carried over from a sales rep.  Be sure to address your company’s needs and requirements up front to the person that will be touching your account most often.  It is also important to conversely understand the supplier’s needs.  Are there pieces of information that they need from you in order to make things run more smoothly on their end?
Establishing regular requirements and upfront expectations with your supplier contact will kick-start your relationship.  The ability to maintain this relationship and create an open line of communication will take effort from both parties. 
Try to keep consistent in the way you communicate with your account rep.  Most service representatives are managing accounts on a regional basis.  They are much more likely to provide speedy and accurate service to an account that they remain in contact with.  So when it does come down to crunch time and you need a special service offering your company will be remembered in favorable terms.  A service rep is much more likely to go out of their way for a customer that they know than for one that only calls with problem after problem.
Once a supplier relationship is running smoothly, it is worth engaging your account rep to help with process improvements.  Your account rep will not only know the details of your business, but they will be able to give you an accurate picture of their own company’s future offerings and where they could add value to your business.
Your relationship with your supplier does not need to end at a sales call.  Participate in the relationship with your account manager and help guarantee the service levels your company signed on for.
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Manufacturing data fuels copper selloff, but some investors still bullish on the metal

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Manufacturing data fuels copper selloff, but some investors still bullish on the metal Copper prices continued to fall this week, as demand from China falls amid weakening growth in the world's second largest economy.

According to the results of a Bloomberg survey, 12 of 29 analysts polled said copper prices would likely continue to fall next week. Seven of those surveyed were neutral, but experts said there are mounting signs of a bear market. Inventories at bonded warehouses in Shanghai have more than doubled since the fourth quarter, while stockpiles elsewhere in the world hit their highest levels in nearly a decade.

Copper is routinely used in construction projects and manufacturing, serving as a critical component in appliances and other household products. China's voracious appetite for the metal drove prices higher over the past decade, but officials there are now targeting annual economic expansion of less than 8 percent, down significantly from its double-digit growth pace of the past few decades.

Although 7.5 percent annual GDP growth is still exceedingly strong, particularly when compared to the tepid economic conditions in Europe and North America, the drop in output and construction in China could dictate the copper market for the next few years, experts say.

China currently consumes approximately 40 percent of the world's copper, and a drop in demand is having far-reaching repercussions across the globe. Europe, whose sovereign debt crisis has engulfed the continent for more than two years, hampering economic activity, is poised to experience a recession this year, economists say. In March, factory output in both France and Germany – by far the two strongest economies in the euro zone – fell unexpectedly, exacerbating worries that copper prices will continue to decline.

"A slowdown in Europe and China is not good for the long term outlook," DoubleLine Capital asset manager Jeffrey Sherman told Bloomberg. "It feels that we could repeat 2011, where had a good first half and then there was a correction."

If market conditions continue on the same trajectory, they could benefit companies' copper sourcing initiatives. Still, because copper is used so heavily in industrial production and construction, falling demand for the commodity could portend a slowdown in future worldwide economic growth, Sherman said.

On the London Metal Exchange thus far this year, copper has climbed 10 percent to roughly $8,400 per metric ton. Through the first six months of 2011, copper prices remained largely consistent, although they slumped 26 percent in the third quarter, as investors feared contagion would continue to spread across the euro zone, effectively eroding demand for the metal and other commodities.

Copper prices have climbed since the beginning of the year amid hope of a sustained global economic recovery, but Chinese officials have continued to target swiftly rising inflation rates over the past year, enacting policies aimed at slowing the nation's torrid rate of GDP growth in an effort to curb surging food and energy prices. Nonetheless, some analysts and investors are still bullish on the metal, affirming fears are overblown.

"The recent China-related selloff was overdone," Logic Advisors partner William O'Neill said. "I see U.S. and European demand gradually improving."

Bullish copper investors have raised their bets that the price of the metal will rise this year, with hedge funds and asset managers contending the European and U.S. economies will continually improve throughout the end of the year.

On the New York Mercantile Exchange on Friday afternoon, copper futures were up 1.14 percent to trade at $3.81 per pound. The metal reached its highest level in nearly five months on February 9, though it has declined 4.2 percent since then.

 
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Companies shift focus from cost reduction to mergers and acquisitions, with market poised for growth

on Friday, March 23, 2012

Companies shift focus from cost reduction to mergers and acquisitions, with market poised for growthThough mergers and acquisitions activity slowed in the wake of the recession, companies are once again looking to expand amid a sustained economic recovery, according to KPMG's Rob Coble.

Businesses throughout the U.S. and elsewhere in the world were loath to acquire other firms in the aftermath of the worst economic contraction since the Great Depression. Many companies were able to weather the effects of the recession by focusing on business cost reduction campaigns and overhauling supply chain management and direct spend.

However, the U.S. labor market has continued to gain strength since the beginning of the year, and economic indicators are steadily growing more positive, bolstering business and consumer sentiment. Amid such a shift in outlook, companies are once again eyeing mergers and acquisitions as a means of expanding, with many aggressively pursuing growth through discounted buyouts.

According to Coble, who heads the consumer markets line of business for KPMG's transactions and restructuring segment, the mergers and acquisitions environment for consumer markets companies is poised for significant growth over the next two to three years. He said that although firms were able to improve profit margins over the past few years, they are increasingly looking to grow revenue as pressure mounts from shareholders.

"Consumer markets companies are motivated again by their expansion goals after hunkering down for the last two or three years to cut costs, remain profitable, and keep their stock prices up," Coble said. "Company leaders are looking for ways to create revenue growth and expand their customer base, leading to increased M&A."

Moreover, Coble contended the market would likely continue to improve over the next few years, driving companies to more aggressively chart growth. He said the hefty cash hoards many firms have accrued over the past five years, coupled with favorable debt markets and pent up demand for deals, would drive the M&A segment – even if the economic landscape shifts.

"We have a lot of companies confident about the deal market and the need to grow," he noted. "While they wait for more solid footing with the economy, they are being active in pursuing strategic acquisitions that complete a product line, add innovation, or expand to an emerging markets country."

Coble asserted a recent KPMG survey that polled finance executives of food and beverage companies found 41 percent of respondents affirmed mergers and acquisitions would have the most significant impact on overall revenue growth. Sixty-one percent of those surveyed also said they were targeting overseas growth over domestic markets, meaning M&A activity in the global landscape will likely benefit.

The global financial crisis prompted a marked shift in consumer sentiment, according to Coble. He said it caused many to scrutinize purchases more thoroughly, with shoppers increasingly focusing on the value of goods and services. As a result, Coble contended companies must continue to augment their product offerings to lure consumers, a feat more easily achieved through mergers and acquisitions than by expanding organically.

"Companies will have to offer new products or more products to deliver greater value at cheaper price points," he said.  "We think that more consumer market companies will have to consolidate in the future to provide their customer base with that value."

U.S. M&A activity has heated up since the beginning of the year. Just this week, UPS announced it had reached an agreement with Dutch company TNT Express in a move that will give the logistics and supply chain management giant a greater foothold in the European, Latin American and Asian markets. The technology and healthcare sectors are also poised to undergo a consolidation, experts say, as they work to bolster earnings amid scorching demand.

 
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FedEx posts strong earnings

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FedEx posts strong earningsFedEx enjoyed a strong quarter thanks to a robust holiday season and mild winter conditions in the U.S., but company executives warned that weakening global demand could hurt earnings through the remainder of the year.

FedEx said Thursday its third quarter revenue climbed to $10.56 billion, up 9 percent from the $9.66 billion it logged in the same period the year prior. Its operating income surged 107 percent to $813 million, and net income also jumped 126 percent to $521 million. The results beat analysts' projections, though FedEx warned that earnings growth may not be as strong in 2012, as Europe totters on the verge of a recession and demand ebbs elsewhere in the world.

Operating income benefitted from successful cost reduction and supply chain management campaigns. FedEx Freight's "significantly improved results" helped drive the uptick in operating income, the company said in a statement. FedEx chairman Frederick Smith said he expected the company to post strong results in its fourth fiscal quarter, though analysts warned growth could taper off as the year progresses.

"FedEx Corp. results were driven by improving yields, record holiday package shipping and exceptional performance at FedEx Ground," Smith noted. "We expect our solid performance to continue in our fourth quarter, capping off a strong fiscal year."

FedEx also settled with the federal government this week over charges that two of its subsidiaries, FedEx Ground and FedEx SmartPost, had discriminated against thousands of job applicants because of their race or gender. The supply chain and logistics firm will pay $3 million in the settlement, according to the Los Angeles Times, a figure that serves as the largest for any settlement in the history of the Labor Department's Office of the Federal Contract Compliance Programs.

FedEx was not immune to volatile energy prices in its last quarter, as its FedEx Express division was forced to raise fees on packages to offset an increase in fuel expenditures. Though the uptick in pricing caused a 4 percent drop in volume in the subsidiary, revenue rose 8 percent, according to the company.

FedEx projected that a "mild recession in the eurozone" could hurt its prospects in the second half of the year. What's more, the company noted high oil prices remained a concern.

 
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Nike earnings beat forecast, mounting costs still worrying investors

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Nike earnings beat forecast, mounting costs still worrying investors Nike, the global apparel and sporting equipment giant, reported earnings this week that topped estimates, but the company's gross profit margin took a hit amid high raw material costs.

The Oregon-based company said earnings per share increased 11 percent in its third fiscal quarter, beating analysts' projections. Revenue was also up, rising 15 percent from the year prior to $5.8 billion, with inventories jumping precipitously. The company noted the growth in revenue was promising, as it increased in all of its markets aside from Japan.

However, Nike's gross margin declined 200 basis points to 43.8 percent, the result of the high costs the company has had to pay for raw materials. Volatile commodity prices have affected businesses operating across a wide array of sectors. Nike endeavored to offset the effects of such rising raw material expenditures through aggressive business cost reduction initiatives and a hike in retail prices, though the jump in commodities still negatively impacted profitability.

Nike's net income increased 7 percent to $560 million, a figure that topped expectations and underscored the success of the sporting giant's marketing and consumer campaigns. Nike inventories registered $3.4 billion in its third quarter, a 32 percent jump. Company executives said roughly 20 percentage points of the increase in inventories could be attributed to substantially higher input costs and a shift in product offerings. Robust demand from wholesalers accounted for the 12 remaining percentage points of the increase, Nike noted.

Nike has overhauled supply chain management in the wake of the recession, and the company said its current unit inventories remain "broadly consistent" with figures reported prior to the economic contraction. Many apparel companies have worked with procurement consultant firms to implement strategic sourcing best practices in an effort to bolster profitability since the financial and housing crises struck in 2007.

Nike chief executive Mark Parker said the company's strong third quarter earnings underscored how it has deftly navigated the post-recessionary economic climate. He conceded future growth prospects were murky, as Europe continues to totter on the edge of a recession and amid worries the nascent economic recovery in the U.S. will be ephemeral. Like most companies, Nike is remaining cautiously optimistic about growth prospects in the second half of the year.

"We had a strong third quarter. Our relentless focus on innovation delivered powerful new products and services for athletes and consumers, and continues to drive value to our shareholders," Parker said in a statement. "The environment remains volatile, but I'm optimistic about the future. We're starting a great season of major sports events and we have a pipeline full of innovation to fuel growth over the long term."

The Associated Press reports analysts are concerned mounting costs will continue to erode Nike's profitability over the duration of 2012. Aside from paying more for labor and materials, the company was also impacted by surging oil prices, with freight costs rising significantly from the year prior. Parker said cost pressure was easing, though he added it would not likely fall to prior lows, at least in the short term.

Moreover, analysts cautioned Nike and many of its competitors could only raise retail prices to a certain extent before they risk alienating their customer base. Although luxury spending has remained strong over the past few years, other segments have not fared as well.

"Margins are expected to remain surprisingly choppy as high inventory and continued input cost increases pressure gross margin, and event-driven marketing drives [expenses] higher," Susquehanna Financial Group analyst Christopher Svezia told the AP.

Shares of Nike closed roughly 3 percent lower Thursday following the release of the earnings report, although they had climbed 15 percent since the beginning of the year amid an overall rally in equities.
 
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Lululemon eyes continued jump in sales

on Thursday, March 22, 2012

Lululemon eyes continued jump in sales Who knew that yoga gear was so popular? Lululemon Athletica, the purveyor of expensive yoga products, is one of the most successful retail companies of the past few years, thanks in no small part to its chief executive.

Lululemon, based in Vancouver, Canada, employs a markedly different retail strategy from many of its competitors. The company is known for the pricey yoga mats, clothing and accessories it sells at store locations throughout North America, but it has been able to accomplish something few chains have over the past few years: it has continued to post record sales gains.

The Wall Street Journal reports that Lululemon now boasts a market value of approximately $10.4 billion. In 2011, it reported sales of $712 million, representing a significant jump from the year prior. Lululemon has successfully cultivated a reputation as a premier shopping destination when its sales per square foot – an important indicator of profitability – hit $1,800 in its last quarter. Recording such a figure is impressive for any kind of retail store, and it is more than 300 percent higher than that of Neiman Marcus, one of the most prominent luxury brands in the world.

Yoga may not be considered a niche activity in the U.S. anymore, as more than 20 million Americans practice. However, it is altogether remarkable that a retail chain that sells only a select number of items could achieve such a torrid rate of sales growth over the past few years, particularly considering the tepid economic climate that has dominated in the post-recession U.S.

According to Lululemon executives, the company's strategic sourcing and superior supply chain management have enabled it to outpace its rivals. Under chief executive Christine Day, Lululemon has executed a strategy that relies on close contact with customers as a means of understanding what, exactly, they are searching for when they shop at Lululemon.

Moreover, unlike chains such as Target and Wal-Mart that have aggressively cut prices in an effort to drive traffic, Lululemon has largely bucked such a sales-driven retail approach. The company employs pricing power to help fuel sales, and it intentionally stocks less inventory than it is capable of holding on shelves in its brick-and-mortar stores, a move that has helped fuel the brand's mystique.

Lululemon has posted nine quarters over the past three years in which sales have risen by more than 30 percent, according to the WSJ. While other retail chains have introduced discount and sale campaigns to lure shoppers to their stores, Lululemon has merely kept up contact with its core group of patrons, according to company executives.

This week, Lululemon posted a fourth quarter profit of $73.5 million, representing a 34 percent jump from the same period the year prior. What's more, Lululemon's revenue also increased 51 percent to $371.5 million, underscoring how its unique approach has helped fuel its ascent.

Still, critics contend that the winning streak will inevitably end, as the company continually targets double-digit sales increases. NBG Inc. chief equities analyst Brian Sozzi said Lululemon cannot escape the fate of every super successful business.

"I think across the board it's going to slow – earnings, revenue and margins – just because of how fast and how quickly this brand has grown," he said. "The law of large numbers eventually catches up to these retailers."

Lululemon is charging ahead in its latest fiscal year, and the retailer continues to eye a significant rise in sales and revenue. Day is confident the retailer can record more than $1.3 billion in revenue in its current fiscal year.


 

 
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Airlines luring business travelers with improved meals

on Wednesday, March 21, 2012

Airlines luring business travelers with improved mealsAs airlines struggle to return to profitability amid volatile energy prices, they are increasingly focusing on improving services for passengers. In an effort to lure discerning travelers, carriers are eyeing their food offerings as a means of driving revenue and bolstering lagging earnings.

Though airline meals are hardly known as culinary masterpieces, they were once a major part of any plane ride. Before the U.S. deregulated the airline sector in the 1970s, carriers routinely worked with some of the best known and respected chefs as they sought to stand out among the competition.

Over the past few years, carriers have witnessed their profits climb – albeit modestly – thanks to the myriad new fees they levy for formerly free services. Nearly all carriers currently charge passengers for checking bags and eating onboard meals, and the revenue they garner from them has helped offset the surging cost of oil and other expenses.

While carriers have no intention of backtracking on the fees that have now become a routine part of the flying experience, they are also endeavoring to drive revenue through a number of other measures. Like businesses operating in nearly every industry, carriers are working to attract business travelers, particularly those willing to pay more money for added services and benefits.

To do so, they are harking back to the days of yore, when carriers routinely served full-service meals during flights. However, there are a number of obstacles they must overcome as they endeavor to create the tastiest, most cost-efficient meals they can muster, The New York Times reports.

Airline executives are focusing on the strategic sourcing of particular foods as they strive to concoct the perfect onboard meal. Moreover, they are working with scientists in an effort to engineer food that actually tastes good at high altitudes. While anyone who has ever traveled on a plane before can attest to the fact that almost all foods taste bland, there is actually a science underlying the overwhelming sense of indifference that most passengers experience while eating a cold turkey sandwich during a flight.

The atmosphere inside the cabin of a plane dries out passengers' noses, even before takeoff. Compounding the loss of the sense of smell, a major contributor to the sense of taste, is that the high altitudes reached by planes effectively numb more than one-third of a person's taste buds. As a result, passengers crave acidic foods, even if they would normally not indulge in such items while at sea level.

Carriers must balance the shifting needs of the palate with financial constraints. A number of airlines are now working with celebrity chefs as they strive to strike the perfect balance between cost and taste, with Delta recently hiring Michael Chiarello to help devise its new menu strategy.

Chiarello spent the better part of six months testing a number of food combinations that airline passengers would enjoy, even without the full use of their taste buds. Delta carefully monitors its food catering division, as the carrier emphasized supply chain management and cost reduction campaigns as a means of reducing food expenditures.

While Chiarello recently unveiled a number of potential meal ideas to Delta executives, the carrier was quick to focus on the potential costs of each dish. Even subtle changes to a meal can help airlines carry out business cost reduction initiatives, as Delta learned a few years ago when it reduced the size of one of its steak offerings by one ounce – a move that has saved the company more than $250,000 annually.

As airlines continue to compete for business travelers, they are overhauling programs and services. Amid record oil prices, they nonetheless remain committed to bolstering profit margins.

Bon appétit.

 
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BPO: How to Do It Successfully

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In today’s economy, being efficient and operating at a low cost is no longer considered a competitive advantage; it’s a requirement to survive. While Business Process Outsourcing (BPO) is widely used across all industries as a revenue enabler, many companies who don’t implement their BPO strategy properly end up backing themselves into a corner…or a bad contract with the wrong partner. 

Source One has teamed with noted BPO expert, George Brooke, and has released a new whitepaper providing a high-level outline of the processes necessary to ensure a successful BPO implementation. This whitepaper outlines seven steps, starting with internal evaluation and ending with negotiation and implementation. “Seven Steps to BPO Success” details the questions companies need to ask themselves when they are looking to outsource a business process and helps them to recognize when doing so would be  advantageous to their business.

“BPO providers that also propose to host and license the enabling applications on which the in-scope transactions are performed may be of great convenience and benefit, but require a much more comprehensive, two-phased evaluation. We strongly recommend an evaluation of the application “fit” first and then a separate evaluation of the competitiveness of the BPO capabilities.”

- Seven Steps to BPO Success, Step #5: Selection of “Best Fit” Provider  
To request your free copy of “Seven Steps to BPO Success,” visit our Contact Us page, complete the form at the bottom, and select BPO Whitepaper from the drop-down menu, or simply email us at info {at} sourceoneinc.com and provide your name, title and company.
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Wal-Mart, Amazon battling for online customers

on Tuesday, March 20, 2012

Wal-Mart, Amazon battling for online customers Increasing competition in the e-commerce space has put pressure on Wal-Mart, which is losing customers to online discount retailers.

Wal-Mart's customer base has only recently embraced online shopping, but they are quickly making up for lost time, Bloomberg reports. The world's largest discount retailer is rapidly losing customers to the leader in the online space, Amazon, which has aggressively courted such consumers as it works to defy analysts' expectations amid a period of tepid consumer spending.

The rapid shift in consumers' spending habits has caught Wal-Mart off guard, according to experts. As few as five years ago, only 25 percent of the Arkansas-based company's customer base shopped at Amazon. However, that figure has jumped to more than 50 percent, according to data from research firm Kantar Retail. The shift away from shopping at brick-and-mortar stores and toward purchasing items online is indicative of an overarching theme within the industry, retail analysts say.

Online purchases have continued to jump over the past few years, particularly in the wake of the recession. Americans are increasingly scrutinizing their spending, and they spent more online over the past holiday shopping season than in any other in history. Amazon has courted such consumers for years, and its efforts appear to be paying off, as more and more defect to the Seattle-based online giant.

According to Kantar analyst Bryan Gildenberg, there are a few factors pushing consumers toward Amazon. He said that Wal-Mart's prototypical customer – one who makes less than $50,000 per year – is becoming increasingly tech savvy. What's more, he contended that consumers who embraced Wal-Mart during and in the wake of the financial and housing crises are rediscovering Amazon.

For its part, Amazon has worked tirelessly over the past decade to continually expand its vast system of distribution and packaging warehouses. The company has employed business cost reduction campaigns in an effort to offset its aggressive spending, but investors have – at least thus far – largely withheld criticism. Amazon chief executive Jeff Bezos has sought to ensure future growth through the company's line of Kindle e-readers, and with its new tablet, the Fire.

"Amazon has moved from being this unusual niche competitor for Wal-Mart to a force that can reinvent the industry," Gildenberg said. "Young people are tech savvy and they’re unemployed, too. The affluent shopper is trading back out of Wal-Mart and Amazon is a bigger part of their life than before."

During its last fiscal year, online sales accounted for only 2 percent of Wal-Mart's total revenue. While Wal-Mart's revenue grew 8 percent in its 2011 fiscal year, Amazon's jumped 41 percent, as the online retailer ratcheted up its efforts to woo new customers and glean additional revenue from existing ones through discounted shipping and other promotional items.

Executives at Wal-Mart, however, are not willing to wave a white flag in the mounting online battle. The company has spent more than $300 million over the past 10 months in an effort to bolster its online store through mergers and acquisitions, as well as through procuring top talent in the field. Like Amazon, Wal-Mart excels in supply chain management and strategic sourcing, and the company is also working to use its physical stores to outmaneuver Amazon.

While consumers inevitably have to wait – even if it is only 12 hours – to receive a package from Amazon, they will soon be able to order nearly any item through Wal-Mart's e-commerce platform and have same-day pickup at a local store. Experts contend Wal-Mart will continue to exploit that advantage over Amazon, especially as it works to reclaim customers that have embraced Amazon's online store.


 
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Muffin Top Makeover

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Now that St. Patty’s day is over, and the thousands of calories from alcohol and food have been packed on, it is time to get back into the diet regime. I am always looking for the best way to diet and exercise but do not always have the patience to read a book about it or speak with a specialist. I do, however always have a few minutes to check out applications on my smartphone and see what new technology is available.

In the past, my nutritionist said the first step is identifying what you are eating and how much so you can narrow down what is causing the problem. There are so many innovative applications and devices that I can now keep my ‘diet diary’ readily available and it only take a minute to update daily and get some feedback.

Studies explore how people who take advantage of these devices to manage their eating, track their progress and provide daily feedback are more inclined to keep exercising, eat better, and stay on track to having a fit and active lifestyle. A perfect example would be a SMART (Self-Monitoring and Recording with Technology) device. A recent study of 210 obese adults performed in Alabama proved that the people who used the devices lost more weight than those who did not. They took it a step further and mentioned people who took advantage of the daily feedback feature stayed on track and continued to lose weight; “The devices people used provided personalized dietary and exercise feedback messages to better their weight loss goals. They adhered to five treatment factors for weight loss including attending group sessions, meeting daily calorie goals, reaching weekly exercise goals, meeting daily fat intake goals, and monitoring eating and exercise.” cbs42.com

There are also so many applications on smartphones providing quick dieting tips and healthy planning guides. The Food on the Table application available on IPhone and Android devices and allows you to find cheap healthy recipes while directing you what to buy and where to shop locally. This takes Rachael Ray’s 30 Minute Meals to the next level!
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UPS reaches deal to buy TNT Express

on Monday, March 19, 2012

UPS reaches deal to buy TNT ExpressUPS is poised to expand in Europe after it inked a deal to purchase TNT Express.

CNNMoney reports that UPS will purchase the logistics and supply chain management company in a deal worth a reported $6.8 billion. UPS was rumored to have been mulling such an agreement with the Europe-based company, and the announcement underscores its commitment to expanding in the continent – even during a time of tepid economic growth on the continent.

Atlanta, Georgia-based UPS will pay roughly $12.50 in cash per share for TNT Express. That figure represents a jump of more than 50 percent since negotiations between the two firms began on February 16. Though the price tag is steep, experts said the move would give UPS an advantage in strategic sourcing, among other divisions.

UPS will expand its presence in Europe, Latin America and Asia with its latest acquisition, according to the news provider. UPS currently derives approximately 26 percent of its total revenue outside of the U.S., but company executives said they are hoping the deal would help that figure rise to 35 percent.

 
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Sears to close 62 stores in business cost reduction initiative

on Friday, March 16, 2012

Sears to close 62 stores in business cost reduction initiative In a major cost reduction initiative, retailer Sears Holdings Corp. said this week it would close a number of stores.

The retail chain store was once a dominant player in the sector, but competition from Wal-Mart and Target and mistakes in its business strategy have hurt Sears over the past decade. Bloomberg reports Sears will close 62 of its stores in an effort to bolster profitability and satisfy anxious shareholders.

Sears, controlled by hedge fund executive Edward Lampert, will close 43 Sears Hometown stores, 10 Sears Hardware stores and 9 The Great Indoors stores, according to company executives. The company did not detail what stores, exactly, would shut down, and it did not release a timeline specifying its plans, according to the news provider.

The company announced earlier in the year it would move forward with an ambitious business cost reduction campaign as it worked to recover from its largest quarterly loss in nearly a decade. Sears, which also owns Kmart, is hoping to raise hundreds of millions of dollars through real estate sales, with Lampert eyeing an eventual payoff of more than $750 million.

 
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When do negotiations take too long?... When you run out of toilet paper!

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Some of you might have heard by now, as this has become quite the story, that several Trenton, NJ public buildings are either running very low or are completely out of paper products. The Trenton police station has been without paper towels for weeks and just this week exhausted their supply of toilet. Officers are using external facilities for their needs including local businesses and hotels. City council members were expected to vote this week on a $42K order for disposable paper goods in the city.  

So how do things get that bad? Apparently this particular feud started with a potentially inflated order for paper cups in November due to the suspicion that employees were taking stock home. This is not an uncommon accusation from employers. Sometimes this may very well be the case, but other instances may just require better controls around the use of supplies. Employees need to understand that management has to factor in tactical costs like consumables, and while toilet paper is something of a necessity, paper cups are not.

The story’s global reach has even prompted support and offers from manufacturers and other organizations. Marcal Manufacturing LLC offered to supplier toilet paper for free to the city’s employees. Even PETA (People for the Ethical Treatment of Animals), offered a free six month supply of toilet paper, of course that came with the condition that the council promote the discontinued use of animal related products.

Situations like this do not need to get to this point. With the appropriate level of tracking and reporting of purchases, usage and costs associated, management and purchasing can address the small issues before they turn into a big mess!
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BMW eyes record profit in 2012

on Thursday, March 15, 2012

BMW eyes record profit in 2012 The global automobile market is booming, and an uptick in sales has emboldened executives at Germany-based BMW, as the carmaker recently projected record earnings for its latest fiscal year.

BMW, which is currently the world's largest luxury automaker, said it is poised to surpass its 2011-year profit, which served as the company's highest ever. The carmaker said that burgeoning demand for its new vehicle models, particularly in emerging economies such as Brazil, Russia, India and China (BRIC), would help fuel sales in its current fiscal year.

Unlike other European automakers have that have had to implement cost reduction initiatives and overhaul supply chain management in an effort to bolster profitability, BMW has benefited from a worldwide jump in sales of luxury goods. Citing a favorable global environment, BMW chief executive Norbert Reithofer said that the carmaker is aggressively courting record profits this year, Bloomberg reports.

"We are targeting new highs in sales volume and pretax earnings for 2012," he said, adding the automaker is "off to a promising start."

BMW delivered more than 1.67 million vehicles in 2011, but the carmaker is hoping to increase that figure to more than 2 million by 2016, according to Reithofer.

 
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