Jennifer Ulrich on Friday, November 30, 2012
Strategic Sourceror on
Many companies engage in offshore manufacturing, especially major corporations and electronics companies. In countries in locations like Southeast Asia, manufacturing labor costs are often much lower than they would be in other parts of the world, making them attractive locations for global companies to set up shop.
However, placing manufacturing operations overseas often means a company has less oversight into how its facilities are being run and managed. News of labor unrest has become more frequent, and a recent riot at Apple supplier Foxconn's facility was noted by many. These problems are not limited to China; a recent fire that killed more than 100 in an Indonesian factory also resulted in protests from workers demanding better working conditions and benefits.
Labor problems such as this have the potential to hinder a company's production, making it impossible for them to provide consumers with a consistent supply of products, especially during busy times such as the holiday season.
Through the supply chain
Issues with labor don't just occur on one end of the supply chain. Even if raw materials are procured, manufactured and shipped without a problem, worker protests or strikes can still delay the products from getting to store shelves or to consumers.
A labor strike has had an enormous impact the busiest shipping port complex in the U.S., costing an estimated $1 billion per day, according to the Los Angeles Times. Ships attempting to unload cargo are forced to leave these California ports, meaning there could be delays in getting the products they are delivering to market. The strike doesn't just impact the logistical process - it also has the potential to disrupt other aspects of the supply chain as well.
"The longer it goes, the more the impacts increase," said Paul Bingham, an economist with CDM Smith, according to the Los Angeles Times. "Retailers will have stock outages, lost sales for products not delivered. There will be shutdowns in factories, in manufacturing when they run out of parts."
Scott Decker on
Nick Haneiko on
Well what happens to all that stuff after the election and someone loses? You don’t see too many people running out to pick up their Romney 2012 magnets.
When sports teams go to the championship they print thousands of hats and t-shirts for both teams in order to meet the immediate demand of the frenzied fans. So what do they do with 20,000 t-shirts declaring the New England Patriots the winners of Super Bowl XLVI? Well it used to all end up in the incinerator. A few years back though the major sports teams agreed to donate all of them to impoverished nations like Zambia and El Salvador. They want all that licensed stuff out of the country. I don’t think the same thing is going to happen with all of the Romney merchandise.
I was in an airport recently and walked past one of those “America” stores that sell all of that junk. They actually had a clearance table and were trying to get rid of the remaining Romney merchandise - offering 75% off everything. Romney 2012 button for $1 - that's a deal. Wal-Mart’s website provided 35% off Romney’s books.
Surprisingly the Romney Campaign’s website isn’t currently offering any discounts off of their merchandise. Maybe they might want to consider marking it down 47%?
Strategic Sourceror on
This failure to address inefficient warehouse practices could result in the loss of nearly 3,000 hours per year for a company with 50 employees according to the study, and this number could be much larger for businesses with a greater number of employees. This amounts to each worker losing 15 minutes of productivity over the course of an eight hour shift.
"Warehouse managers are faced with significant cost saving challenges, which means they can't afford to let such levels of time wastage continue," said Bruce Stubbs, Intermec's industry marketing director for distribution center operations. "Businesses should be looking at every workflow in detail on a regular basis to claim back the minutes and seconds they need to achieve these savings."
Reasoning behind losses
Participants were divided in explaining their reasoning for the lost time. Twenty-six percent of respondents believed poor inventory control was responsible for the inefficiencies, while 20 percent thought packing and loading were to blame.
Some warehouse managers are taking action to gain better control over their processes and increase worker productivity. Fifty-three percent of survey respondents claimed they were working to improve inventory control. This method was believed to be the best for warehouses looking to improve worker productivity and increase cost savings. Keeping expenses to a minimum is important for respondents, as 79 percent of them claimed to have been asked to find areas in which it would be possible to trim costs.
Plans for the future
While many managers may not have performed reviews in recent months, they seem to have strong ideas about which tactics would make their operations more successful and productive in the future. Eighty-nine percent of respondents believed investing in new technology would help their warehouse enhance its efficiency, and 60 percent agreed that time and money can be saved by making processes simpler by merely a few seconds. For companies looking to increase the productivity of their warehousing operations, these processes may be vital to business cost reduction initiatives.
Diego De la Garza on
While drug related violence is in fact a major detriment to the country’s outlook, its economy has reached a solid pace of growth for the last decade, largely driven by international trading that has sustained growth rates at about 4% every year and projecting similar growth levels for 2013.
Speaking of international trading, let’s focus on exports for a minute. Over the last year Mexico became the world's largest exporter of flat-screen televisions and the fourth’s larger automobile exporter in the world, with companies like Nissan, Lincoln, BMW and Audi opening facilities or expanding on existing plants. You may wonder how these (among many other) industry sectors are growing so fast; the reality is that a combination of several factors has contributed to such prowess.
While many materials and components for these and other manufacturing industries come from Asia, Europe and other regions in the world, final assembly is completed in Mexico. Some 80% of Mexican exports are shipped to the United States mainly because of the North American Free Trade Agreement which allows products assembled in Mexico to enter the United States for free. Items imported from China or Asia are typically subject to taxes, fees or import tariffs that increase the cost of the goods, which makes the Mexican marketplace much more attractive.
While free-trade is one of the fundamentals of “Nearshoring”, location, is by definition another key element. In todays’ global economy, even when any product can be bought and shipped anywhere, the fact Mexico is located next to the largest consumer market in the world doesn’t hurt. Lower freight and logistics costs and shorter transit times are becoming a priority for many businesses that want not only to reduce costs but to improve efficiency on their processes. These two ingredients alone, have some analysts projecting that in less than a decade, the U.S. will import higher volumes from Mexico than from China.
The third ingredient to this equation involves resources and adequate financial planning. State-owned PEMEX, the world eight-largest oil producer in the world by output, recently announced the discovery of an oil deposit with a size that could provide about 500 million barrels with another 500 million barrels estimated to lie in the nearby areas, which represents the largest oil discovery made in the country in the last 10 years. Newly proposed partnerships that allow the company to be receptive to private investments have been proposed, which are expected to foster government revenues.
Lastly, improvements on financial regulations have maintained the country’s economic situation in a solid position to withstand the global economic crisis, Mexican president Calderon recently stated that “While in the United States, the crisis started in the financial markets, in Mexico the financial sector was not part of the problem but part of the solution”, the reality is that banks in Mexico have been able to double their projections on capitalization and many of them will be fully implementing Basel III standards early next year, well ahead those of other countries including China and even the US.
At this rate and despite the cost that crime and violence has over the economy, some projections indicated that Mexico may overtake Brazil as the largest economy in Latin America and will become the fifth largest economy in the world within the next decade. We’ll see.
Strategic Sourceror on
The U.K. previously relied on companies located in Germany and Denmark to supply it with turbines, but according to the source, several of these companies have not received an order for turbines since October 2011.
The questions regarding the future of sustainable energy in the U.K. has led some manufacturers to have doubts as to whether or not it will comply with European Union goals that aim to have 20 percent of power generated from renewable sources by 2020. However, experts told the Huffington Post U.K. that the slowdown won't kill the wind energy manufacturing industry, but that such slow periods are normal.
Even though the U.K. may be slow to enact new policies regarding wind energy, other EU countries are taking steps to make up for the slowdown in manufacturing. According to Sustainable Business, other EU countries are expected to plan and build a large number of wind farms, which could help boost manufacturing in this sustainable energy sector.
1. Be as patient and pleasant as you can
Try working with the employee explaining your problem. This can motivate a potential incentive such as a discount on a future purchase, free shipping, no restocking fees (technology items etc.) or something else that will make you want to continue your relationship with the specific retailer.
2. Work with a supervisor and don’t be afraid to ask for what you want
Some return policies only allow 30-90 days for a full refund with a receipt. If you are past this date and the first time you ask you are denied the return, speak with a supervisor and explain your situation. They may be inclined to at least give you store credit.
I will definitely be going back to Harbor Freight and specifically to this store!
David Pastore on
The first priority is to integrate networks and data centers so the legacy and acquired locations can all begin to talk the same language and utilize the same systems. Accomplishing this interoperability and beginning transition steps can typically be done very quickly and easily. The problem arises in managing the transitioning of services and operations. A detailed assessment of all services and contracts needs to be conducted to ensure contracts do not lapse causing a rate increase, or worse, auto-renew. Further, existing contracts and services need to be carefully considered as well. What's best for the company may not be status quo but to transition to services like those with the acquired organization. This evaluation can be time consuming and extremely complex depending on the network topology, configuration, contractual landscape, and future vision of the organization.
In order to overcome these obstacles, it is critical to begin due diligence as soon as possible. This includes developing close relationships with the acquired organization's IT/telecom team and their carrier account teams. In many cases, these individuals can assist to significantly increase your ability to get up to speed. The primary intial focal point needs to be on contracts and identification of services so you can gain an understanding of the pieces you have to work with and sort out the various permutations in which they can fit together. Finally, understanding your current and new costs for all services will give you an idea where you may want to focus your efforts for assimilation. With this information, you can make informed decisions about the future of your voice and data networks.
The due diligence required to effectively and efficiently manage an acquisition and merge your telecom infrastructure with your acquired company can payoff substantially. The difference between successfully managing a transition and failing to do so can be the difference between savings 90%+ of potential costs vs. overpaying manyfold. For help navigating your telecommunications invoices and contracts and developing a strategy to improve performance and manageability while reducing cost, contact Source One at www.sourceoneinc.com
Strategic Sourceror on Thursday, November 29, 2012
According to survey data, 58 percent of respondents most respected Amazon for its handling of its complex supply chain. Only 37 percent thought Apple's supply chain was better managed.
Amazon beat Apple in three supply chain-related aspects: agility, collaboration and execution. In terms of "agility" Amazon won 62 percent of the vote, for "collaboration" it earned 59 percent and for "execution" it managed to win with 57 percent. However, Apple did come out on top in one category - innovation - where it earned 78 percent of the vote.
"The purpose of our research was to establish which of these two leading companies is most admired by the global supply chain community for the way it manages its supply chain, and to understand what lessons they have to teach other companies," said Kevin O'Marah, head of faculty at SCM World and co-author of the report. "The results show clearly that the majority of supply chain professionals believe that Amazon - and not Apple - is the master of supply chain excellence."
Strategic Sourceror on Wednesday, November 28, 2012
The financial benefits
Many businesses are discovering that by switching out older practices with new, sustainable techniques, they can reduce spending within the supply chain and cut back on expenses. Businesses that want to use less natural gas, whether in their production and manufacturing processes or their logistics operations, can implement green energy technology, such as wind and solar power, to power their facilities or vehicles. This insulates businesses from the ever-changing cost of natural gas and cuts down on the direct material cost of alternative fueling option. Companies that aren't ready to go completely green can reduce their fuel use by simply streamlining transportation routes and making them more efficient.
Other companies are cutting costs by strategically sourcing closer to their manufacturing operations to avoid spending more on logistical costs, while more are limiting the amount spend on paper and plastic packaging.
Energy independence a reality for some
Some companies, such as IKEA, have plans to be completely energy independent in the future. While a plan of this magnitude may not be the path every company is able to take, small steps can help companies become less reliant upon energy sources and better able to focus on their operations. Businesses using even a small amount of sustainable energy may be able to cut energy suppliers, and additional costs out of their supply chain.
Some companies have announced their plans to go green in an effort to preserve the natural environment, while others are doing to in an effort to prevent problems in the future. Some environmental activists are claiming the devastating Hurricane Sandy, which disrupted supply chains across the East Coast, was caused by global warming. This has led some businesses to reconsider green policies in hopes to prevent future disasters that could wreak havoc on their operations once again. According to Environmental Leader, this strategy could help mitigate supply chain risk in the future and keep an organization running smoothly and trying to prevent costly disasters that result in business disruptions.
Strategic Sourceror on
Samsung revealed that it found several unfavorable practices being regularly used in its suppliers' manufacturing process, including employees working excessive overtime and being forced to pay fines when arriving late or absent from work. The company is now investigating 144 additional suppliers located in China, and it anticipates having the results of this audit before the end of the year. Samsung has claimed it will take the necessary steps to eliminate inadequate practices in all facilities as soon as possible, and has developed new guidelines to ensure no supplier or manufacturer takes part in unapproved hiring techniques or enforces unapproved rules.
Despite the fact that it found no instances of child labor being used in supplier facilities, Samsung has strengthened its commitment to ethical labor practices and will require all suppliers to adopt new guidelines in regard to child labor immediately. All potential employees must now be interviewed in person and review Samsung's new special guidelines on how to prevent child labor. All the company's suppliers will also be required to purchase a device that will better detect fake IDs and determine if a potential worker is of legal age.
However, child labor is not the only issue Samsung is concerned about. The company will require its suppliers and manufacturers to take steps to implement new work policies by the end of the year. Facilities will no longer be able to charge their employees fines for showing up late or missing a shift, and all employees will be provided with information on where to turn if they suspect their employer is violating labor laws. All workers must undergo adequate safety training to ensure no accidents occur while they are on the job, and first-aid kits will be provided to facilities and dormitories. Additionally, the company is seeking ways to reduce the number of hours worked by employees, and has announced it will develop a plan by the end of the year.
Implementing these new policies may have the potential to raise manufacturing costs for Samsung, but the company has voiced concern about the working conditions it discovered through the audit, and aims to ensure its supply chain will soon be free from the unethical practices it found.
Strategic Sourceror on Tuesday, November 27, 2012
Disruption can occur at any point throughout the supply chain, and it is essential for organizations to keep track of exactly where and how their problems are occurring. This can help them eliminate the issue and take measures to ensure it doesn't continue to happen in the future, eliminating risk down the line.
The largest cause of disruption was unplanned IT outages, and these situations affected 52 percent of companies surveyed. This problem was followed by problematic weather, and 48 percent of organizations that took part in the survey had their supply chains negatively impacted by hurricanes, storms, earthquakes or flooding.
The survey results show that problems due to outsourcing now amount for a significant portion of all problems, and the issue jumped to third place in the list of largest supply chain disruptions. In fact, it has increased 17 percent and now responsible for 35 percent of problems or delays in the supply chain.
The cost of disruption
Dealing with supply chain problems isn't just a minor irritant; in fact, it can have a serious impact on a company's bottom line. Issues such as IT problems, inclement weather and outsourcing dilemmas are now most costly than they were in the past, with one in five companies reporting a single incident loss of more than $1.277 million. However, these issues don't just negatively impact a company while they are occurring. They also cost businesses significant funds in the long run, as consumer confidence wavers, investors lose confidence and an enterprise's reputation is damaged.
Companies must work harder to ensure they are mitigating risk wherever possible in their supply chains to limit the chance of monetary loss, negative press and low consumer confidence. By thoroughly examining each component of its supply chain, including strategic sourcing, manufacturing operations, logistical challenges and warehousing, a company can better determine how it can reduce its risk of encountering devastating supply chain disruptions.
Strategic Sourceror on
A more concise supply chain
In an effort to increase customer satisfaction and tighten its supply chain, Amazon is developing a plan to construct new warehouses and implement new distribution networks to ensure products are delivered quickly. With new warehouses, the company will be able store merchandise in locations closer to its customers and be certain packages are shipped as quickly as possible.
While Amazon may once have been content to construct its warehouses in areas where land and operating costs were inexpensive, that is no longer the case, and the cost savings may not be making up for consumer frustration. The company can no longer build its storage facilities in remote corners and assume customers will be satisfied with shipping that takes three, four or even five days. Customers are increasingly demanding purchases almost immediately, so having distribution centers closer to more highly populated areas may be more expensive, but it could also result in much faster package arrival times, leading to increased consumer loyalty.
Bringing distribution centers closer to consumers won't just cut down on shipping time. It also can limit potential supply chain disruptions and ensure that most customers receive the products they ordered on time, even if a natural disaster, terrorist attack or unplanned system outages disrupt the supply chain.
Plans in motion
However, Amazon is still working out kinks in its plan to bring warehouses closer to purchasers. The company, which has thus far tried to avoid paying sales tax in states which it doesn't have a physical presence, may find constructing these warehouses in order to shorten its supply chain could be a bit of an investment. The company is trying to avoid paying this tax by asking states in which it plans to open warehouses for deferrals of tax enforcement in return for bringing jobs to the state. It remains to be seen whether the company will succeed, but its plans for a shortened and more concise supply chain may help it win over once hesitant consumers.
Strategic Sourceror on Monday, November 26, 2012
Over the next 10 years, the company has plans to invest $400 million to improve its supply chain's sustainability and increase the green efforts of its suppliers. The project, known as "Cocoa Life," will help as many as 75,000 cocoa farmers in Côte d'Ivoire, one of the largest cocoa-producing regions in the world, and 200,000 workers globally.
Besides farmers in the Côte d'Ivoire, the company will also focus its efforts in Indonesia, Brazil, Ghana, India and the Dominican Republic. Aside from helping farmers increase their quality of life, the program will also aim to cut down on the amount of child labor used in the chocolate industry.
Cocoa Life will do more than help workers earn more with more efficient farming practices - the program also aims to increase the sustainability of farming practices used across the globe. Cocoa Life will help promote biodiversity and help to eliminate the loss of valuable wildlife, while also helping farmers use practices that will help reduce water use, soil erosion and waste less energy.
"I'm proud of Mondel?z International's $400 million investment in Cocoa Life – a distinctive, holistic approach to cocoa sustainability that will create a cycle of growth from bean to bar," said Tim Cofer, executive vice president for Mondel?z Europe, according to GreenBiz.com. "Our mission is to create thriving cocoa communities and help secure the future of the cocoa industry."
Sustainability a key concern
Green technology, more efficient supply chains and a better quality of life for workers has long been a concern for companies. With less money going to energy costs with the advent of sustainable technology, businesses can further invest in new products, manufacturing advancements and growth. With more efficient and well-run supply chains, a company can cut down on its shipping expenses, unexpected delays and procurement policies, saving costs and making the logistical portion of the business much easier to manage. This makes supply chain optimization a cost-efficient policy for many companies to develop and implement, especially for companies with operations on a global scale.
Strategic Sourceror on
The importance of trucking
Trucking is an important component of many supply chains, as it is an efficient and quick way to get goods from ports, airports or warehouses to consumers or store shelves. It is predominantly the method companies use to transport their products, and the ATA reported that 67 percent of tonnage shipped is transported via truck - a number that amounted to 9.2 billion tons of freight in 2011.
This number is enormous, especially during the months leading up to the holiday season as companies practice procurement in order to have a sufficient number of products in stock and effectively serve customers.
Potential reasons for the decline
Even though it could be impossible to determine why trucking tonnage was down in October, some speculation includes the effects of Hurricane Sandy, which closed roads and shipping routes along the East Coast, making logistical operations difficult for many companies.
The decrease could also be due to more companies investing in new shipping methods, such as ocean freight. Recent research from market research firm Lucintel revealed that the demand for marine shipping will increase through the remainder of 2012 and the total volume of ocean freight is expected to double within the next 20 years. Ocean freight is becoming more appealing to companies looking to enjoy greater cost savings and have less of an impact on the environment.
Some believe the slowdown could be due to the struggling economy, as manufacturers have slowed their production and consumers are buying less.
"I'd expect some positive impact on truck tonnage as the rebuilding starts in the areas impacted by Sandy, although that boost may only be modest in November and December," said Bob Costello, the ATA's chief economist. "Excluding the hurricane impacts, I still think truck tonnage is decelerating along with factory output and consumer spending on tangible goods."
Strategic Sourceror on Wednesday, November 21, 2012
Increasing ocean freight
According to a research conducted by consulting firm Lucintel, companies are expected to increase their demand for ocean shipping services in the near future, and the international marine trade industry is expected to more than double within the next 20 years. This spike takes into account a growing United States economy and increasing shipments worldwide.
This increase in ocean shipping could be partially a result of the decreasing amount of cargo being transported by air. Survey data from investment firm Stifel, Nicolaus & Co. and research enterprise Transport Intelligence revealed corporations are attempting to drive down their logistical expenses by choosing less costly shipping methods such as marine freight. Companies were more confident about the future of ocean freight than air transport in November.
Besides business cost reduction concerns, companies have other reasons for choosing marine freight, according to Lucintel's report. Terrorism and the hijacking of cargo planes is one concern leading businesses to opt for slower ocean shipping methods, and another is environmental concerns. With more companies voicing support for sustainable technology and business practices, more are choosing company policies that are more green than those of the past.
Making changes to accommodate more ocean freight
Businesses that decide to increase their ocean shipping may need to make changes to their supply chains in order to make this switch possible. If a manufacturing facility or raw material supplier is not near a large port, it may be necessary for a company to find a new supplier or manufacturer to ensure products get on a cargo ship and to market as quickly as possible.
When dealing with ocean freight, shipping time is already much longer than air transport, meaning it is essential for businesses to ensure there are no holdups that could push back anticipated arrival time even further. This makes it important for a supply chain to function smoothly and be able to handle the time delays brought on by using ships to transport cargo rather than planes.
Strategic Sourceror on
Those companies that have not effectively prepared for the increased amount of inventory, customer concerns or shipping delays that often plague the holiday season may anticipate seeing some problems coming their way. Those who have failed to order all the product the need to get them through the end of the year may find that special products are unavailable for order or cannot be manufactured and shipped in time to make it to their store shelves. Others may be able to still order merchandise, but have a difficult time finding overbooked trucks or couriers to get the products to a warehouse or shipping center. Some may have ordered too much of something, and run out of room in their storage centers for highly in-demand products.
While planning in advance can be difficult, it is essential for a successful holiday season. According to Retail Times, many businesses have methods to track their anticipated holiday needs throughout the year, but these can be updated on a more frequent basis as shopping picks up in the final months of the year. Companies that fail to plan correctly could suffer the consequences by not having in-demand merchandise in stock, failing to provide customers with the service they expect or dealing with lower sales than expected.
It appears as though holiday preparation has been underway for several months. According to The Trucker, August, September and October are typically the busy months for logistics operators, as they ship orders to retailers across the country in preparation for holiday shopping. The source reported that November is also expected to be a big month for retail logistics, and import cargo at retail container ports is anticipated to increase by 5.9 percent.
With correct preparation strategies and continually updated data on inventory levels, customer demand and shipping estimates, merchants can better manage their supply chains and have a more successful and less stressful holiday season.
Strategic Sourceror on Tuesday, November 20, 2012
Because the company has experienced problems producing the latest iPhones and iPad Minis, consumers have been waiting longer to receive the products they ordered, and it appears that the release of highly anticipated new products has been delayed. If the announcement of new merchandise has indeed been pushed back, Apple may be struggling to manufacture all the inventory it needs for a successful release.
According to Silicon Valley Mercury News, the problems within Apple's supply chain have changed over the past several months. Upon the initial release of the new iPhone, Apple manufacturer Foxconn was having difficulty procuring necessary components, while the company is now having problems actually producing the device.
These issues could reflect on Apple's stock prices, which have fluctuated widely in the past several weeks, Forbes reported. If the company is able to get its procurement and manufacturing strategies back on track, it may be able to see a more steady future in the stock market.
Strategic Sourceror on
The results of the survey indicated that 56 percent of shoppers who spent more than two hours per week shopping online decided to rescind an order because of an error or slow response time from the company.
As one of the largest online shopping days of the year, Cyber Monday, approaches, it may be important for merchants to step up their customer service and efficiency to ensure no orders are canceled after a purchase has been made. This is especially important because customer loyalty is uncommon for those who frequently shop online. Seventy-four percent of those surveyed would make their purchases from a different vendor if they found that retailer offered a better user experience.
With the holiday shopping season fast approaching, merchants may find they need to increase their retail logistics in order to get purchases to their customers in a more timely and efficient manner, as to not lose orders and future sales.
Strategic Sourceror on Monday, November 19, 2012
Sourcing to cut costs
Because much of the sourcing and manufacturing of pharmaceuticals used in the United States is conducted overseas, some companies are becoming concerned with their policies in regard to these issues. According to Pharm Pro, many companies are beginning to look into strategic sourcing initiatives to lower their direct material cost on ingredients necessary to make pharmaceuticals sold in the U.S. By investigating new suppliers, shipping routes and purchasing activities, some companies can identify areas in which they can save.
Manufacturing is also a concern for those companies looking to find more cost savings while still providing quality products. Increased oversight in the industry makes it essential that manufacturing facilities comply with industry regulations and ensure their plants are up-to-date and using the highest-quality ingredients and processes. Because upgrades and heightened employee training can add up, keeping sourcing costs low is essential. Many businesses are also looking into more sustainable sourcing techniques. Some may want to ensure their ingredients come from a certain area, don't harm the environment or use ethical labor practices.
New logistical concerns
With more concerns arising about sustainability, companies with manufacturing operations overseas are looking for additional ways to save on expensive shipping costs. By better managing their supply chains, pharmaceutical companies can better track and save on essential logistical operations.
Many businesses are looking into more sustainable logistics operations, such as using green energy such as solar or wind power as part of their shipping routes. Others are looking to cut expenses by simply streamlining their logistical operations, which can cut down on fuel expenses. While these can be ways for a company to save on on shipping, they can also be a way for a business to promote its sustainability plans.
However, pharmaceutical corporations searching to save on expenses need to first identify the areas in which they can improve and cut back on costs before determining where to slash expenses. By examining sourcing policies, manufacturing capabilities and logistics, a company can determine how it can best change its organization to slash expenses while still operating smoothly.
Strategic Sourceror on Friday, November 16, 2012
The Deloitte Index, which tracks tax burden, initial unemployment claims, real wages and housing prices, jumped in October, implying customers are prepared to spend money on retail goods this holiday season. With employment numbers indicating hiring is on the rise, more people may have money to spend on products this year.
"Rising consumer confidence should give retailers reason to celebrate during the holiday season, but the winds may shift in January, which should encourage retailers to make the most of this good news now," said Allison Paul, vice chairman at Deloitte and retail & distribution sector leader.
However, not all businesses are as confident as many consumers. Bloomberg reported that merchant inventories have been moving sluggishly following Hurricane Sandy, indicating some businesses on the East Coast may still be having trouble with retail logistics in the wake of the storm. Many merchants lost inventory due to storm damage or had shipments go missing when the harbor, airports and roads were closed.
However, the hurricane isn't the only reason behind the low inventories. Many businesses are fearful of the fiscal cliff, a combination of tax hikes and spending cuts that will kick in automatically if the federal government fails to reach a budget deal by the end of the year. If this event occurs, retailers may be hesitant to keep large inventories because of fears the products may not sell. Bloomberg reported that businesses had enough stock to keep up with consumer demand for 1.28 months in September, down from August's number of 1.29.
As a result of keeping inventories low, it is possible that some retailers could end up with product shortages during a busy holiday shopping season. This late in the year, procuring more products from overseas could prove to be difficult for companies that lack warehouses or storage centers in the United States.
As the holiday season continues, it remains to be seen whether retailers will have enough product on hand to satisfy consumer demand, or whether the retail supply chain will be strained as merchants place last minute orders to boost their inventory in response to excessive customer requests.
Strategic Sourceror on
Making supply chains easier to manage
UPS Supplier Management will be updated and will improve customers' ability to manage suppliers and international bookings, show near real-time shipment progress, optimize shipping plans and improve internal operations.
With this cloud-based technology, customers also be able to ensure their vendors are keeping up with requirements and provide an online approval system. This will reduce the need for client-supplier emails and record keeping and ensure the procurement process runs more smoothly.
These improvements increase the control UPS customers have over their supply chains and supplier management. With the enhanced visibility that comes with the updates to the UPS Supplier Management system, consumers will be better able to view their orders and have an increased level of control in determining how late or incorrect shipments are managed, saving the time and money it would cost to have the product resent or expedited halfway through the shipping process.
Managing global logistics
As more companies become global, sourcing and manufacturing from countries across the world is now common. However, this can lead to supply chain inefficiencies if not managed correctly, and logistical expenses can become enormous if processes are not watched closely and streamlined. Therefore, it has become more important for companies to track their logistical operations and ensure things are running smoothly.
"Companies are beginning to look to the cloud for opportunities to improve supply chain collaboration and reduce operational inefficiencies," said Tom Boike, the company's vice president of supplier management. "Through scalable cloud-based supply chain management technologies such as UPS Order Watch, companies are not only able to streamline management of vendors, but also manage all of their inbound shipments via a single platform. This can provide opportunities to consolidate ocean freight shipments and improve container usage to realize cost savings, which is increasingly important as COOs are looking for ways to mitigate ocean transportation costs following the ocean carrier rate increases in 2012."
Strategic Sourceror on Thursday, November 15, 2012
The popularity of showrooming
As more products are made available online, consumers are increasingly browsing brick-and-mortar stores to look at and test the products they are interested in, then using their smartphones to search the web for reviews, similar merchandise and better prices.
Internet Retailer reported on an IDC Retail Insights survey that revealed this holiday season, 48 million shoppers are expected to use their mobile devices to research products while shopping at another store. This number is a 134 percent increase from the number of people who engaged in the practice in 2011, meaning the prevalence of showrooming is increasing quickly, and consumers are taking advantage of the technique to save on all types of goods. The most popular items for customers to showroom are electronics, apparel and footwear, but many do their research on basic purchases as well, such as groceries.
Showrooming can save consumers money and lead them to find valuable information about a product, therefore, it isn't a habit they're likely to cease anytime soon. However, retailers are attempting to cut down on the practice in their stores, as they can lose out on sales to other merchants or ecommerce websites that offer better deals.
Preventing the practice
Retailers are frantically trying to implement policies that will curb the popularity of showrooming in their stores to ensure consumers spend money at the brick-and-mortar location, rather than losing money to an online retailer such as Amazon. Many are increasing the customer service experience by giving employees tablets and smartphones with the ability to complete quick transactions at any point in the store. This means customers don't need to wait in long holiday lines or search for a register, and decreases the time they could spend seeking out a cheaper price online.
Merchants concerned about cutting prices even further to keep consumers from finding a better deal are sometimes switching up their retail supply chain by streamlining their logistics processes and finding cheaper suppliers to cut costs and lower their prices. With the advent of increased price comparison for consumers, it is essential for retailers to ensure their supply chains and sourcing practices are as cost-effective as possible so they are able to provide consumers with the best possible deals.
Maddy Miller on
"As Source One celebrates its 20th Anniversary this year, we are honored to receive the Green Supply Chain Award and we are proud to be recognized as a leader in helping companies drive savings and sustainable supply chains," said Steven Belli, Chief Executive Officer of Source One.Supply and Demand Chain Executive granted their Green Supply Chain Award to Source One in recognition its recent work with a national retailer, known for its socially conscious practices. Source One's team identified green office product suppliers as well as developed an online ordering tool for the retailer's employees to use when ordering their green supplies including janitorial, cleaning, and office supplies. The success of this project has lead to Source One continuing the relationship with the client, actively implementing savings in many other categories.
"We not only identify green alternatives to the products and services our clients already buy, but we also ensure they are of the highest quality standard. Our team even offers educational opportunities regarding sustainable procurement practices as well as change management assistance to help train employees on new green initiatives," said Joe Payne, Vice President of Professional Services.Supply and Demand Chain Executive awarded the Green Supply Chain Award to service providers helping implement green supply chain solutions and achieving measurable sustainability goals.
Strategic Sourceror on
"With over 770 million visitors to our stores, we are excited by the opportunity to help our customers fulfill their dreams at home with beautiful products that help them save money on their household bills by reducing energy and water use, as well as reducing waste," said Steve Howard, the company's chief sustainability officer. "People & Planet Positive will also enable us to take our responsibilities in the supply chain further over the coming years by, for example, only using renewable energy to power our buildings and advocating for children’s rights."
Energy independence could cut costs
In the past several years, IKEA has already addressed renewable energy issues by installing solar panels on its retail stores and distribution centers and purchasing wind farms in Europe. However, its new sustainability initiatives take green energy concerns to the next level.
With its new plan, IKEA has pledged to produce as least as much as energy as it consumes by 2020 and will invest nearly $2 billion in solar and wind energy developments. The company plans to achieve at least 70 percent of this goal within the next three years. This would allow IKEA to be free from the volatile oil market and cut energy expenses in the long term once it no longer is subject to the direct material costs associated with nonrenewable energy sources. IKEA CEO Mikael Ohlsson told Reuters the strategy would save money for both the company and its customers.
Changing the supply chain
Using renewable energy isn't the only part of IKEA's sustainability initiatives. The retailer also has plans to rework its wood procurement and source half of its timber inventory from suppliers certified by the Forest Stewardship Council. Its packaging will be made from renewable, recyclable or recycled materials to keep lumber and plastic use to a minimum. Besides wood products, it has committed to sourcing cotton approved by the Better Cotton Initiative to ensure its bottom line, customers and the environment all experience benefits.
Strategic Sourceror on Wednesday, November 14, 2012
Low labor costs are one important thing a business often considers when beginning a search for a reliable and affordable supplier, but companies should keep an eye out for a number of other components when determining whether or not they should change up their suppliers and how they can better manage their sourcing. A company that determines it ought to procure products from one country purely because of the low labor costs may be overlooking other important aspects, such as shipping costs or logistical challenges, that could add up to be expensive in the long run.
What worked in the past may not work today
Companies that previously based their retail sourcing in emerging business hubs such as China may find that updating their sourcing could bring major cost savings. Many retailers are beginning to expand their sourcing horizons and looking to countries such as Cambodia, Vietnam, Pakistan, Egypt and Bolivia, among others. These countries have inexpensive labor markets, natural resources and governments that encourage development and manufacturing.
"Due to its success as an industrial nation, China is no longer automatically the cheapest sourcing location and companies looking only for the lowest cost are now looking at locations like India and Sri Lanka instead," said supply consultant Brian Templar, according to Retail Week.
Price one of many concerns
Retailers rethinking their sourcing strategies should consider price when searching for new suppliers, but they should also take other aspects into account as well. While a getting the best price is ideal, it may be more beneficial for companies to conduct their sourcing closer to home to avoid higher than expected shipping costs, or move their sourcing to countries that offer favorable business incentives, such as zero duty rates. While some retailers may not take these concerns into consideration initially, they can add up to be expensive.
Unexpected expenses may be one thing a business runs into when reconsidering its sourcing techniques, but it's also important to keep in mind location and potential logistical challenges. Companies that choose to procure products from suppliers located across the globe may not be able to receive in-demand products in a timely fashion and miss out on sales, and risk not being able to quickly ramp up or slow down production on a particular commodity. By considering aspects besides prices when developing a new sourcing strategy, a company could see a clearer picture of what exactly a certain sourcing strategy will entail and how it may help to slash expenses.
Environmental concerns are also motivating some companies to review their sourcing strategies in order to cut down on greenhouse gasses, use more sustainable technology or gain positive publicity and engage consumers with green practices. Taking sustainability into account can help businesses make new sourcing decisions whether they're seeking new suppliers for current products or hoping to expand their existing lines with new merchandise.
Strategic Sourceror on Tuesday, November 13, 2012
With the rise of technology such as hydraulic fracking, it has become more profitable for companies to attempt to extract oil from shale rock, a process that was previously too difficult to be considered commercially viable.
Changes in procurement and supply chains
The United States' increasing role on the global energy stage will be significant for American businesses, and many will find that rather than importing oil, they are able to get it from domestic suppliers. This may allow some companies to enjoy significant cost savings because they will no longer need to have the resource shipped from overseas to a U.S. port, then transported by truck to a manufacturing facility that could be halfway across the country. The logistical and supply chain issues that come with overseas oil procurement will also lessen, as corporations will be able to purchase oil drilled in the U.S. rather than deal with complex shipping operations resulting from obtaining oil from the Middle East.
As the U.S. increases its production, it will change how global supply chains currently operate. With more oil coming from refineries at home, Fox News reported that Middle Eastern oil exports will change and head more frequently to Asia rather than Western nations.
Difference in demand
Some companies could also begin to see a change in their oil supply chains because the demand for oil exports may increase drastically. As demand in Asia, the Middle East and India increases, companies in the U.S. could be shipping a significant amount of oil overseas to satisfy foreign demand. Fox News reported that about 60 percent of the increase in oil demand will come from these areas.
Will sustainable energy matter?
Even with government subsidies going to support green technologies and consumers taking an interest in sustainable energy, this may not have a great impact if U.S. oil production increases as much as anticipated. With plentiful oil available domestically and companies beginning to increase their drilling, green technology could be put to the side for a time. Companies may benefit from the cost reduction associated with using affordable fuel that can be supplied quickly in the short term, rather than investing in sustainable energy in the near future.
Joe Payne on
1. In 59 precincts in Philadelphia, not one person voted for Mitt Romney. There were also nine districts in Cleveland with no Romney votes.
2. According to the most recent tallies, Romney received 2 million fewer votes than John McCain did in 2008. Along those same lines, Obama received 7 million less votes than last time.
3. In Colorado, more people voted to legalize marijuana than voted for Obama, by 53,000 votes. Who are these conservative potheads?
4. The top ten best educated states (in terms of number of adults with a college degree) all voted for Obama. Out of the top ten worst educated states, nine voted for Romney.
Keep in mind that the numbers are still coming in and these stats are subject to change, but they are interesting nonetheless. Time to start speculating about 2016!
Strategic Sourceror on
However, after costing more than $1 billion since the program began in 2005 and failing to show significant promise, the Air Force canceled the program. The Dayton Business Journal reported that Air Force officials presume it would take an additional $1.1 billion to get the project to just a quarter of its original scope, and even that plan could not be implemented until about 2020.
After canceling this plan, the Air Force will now rely on its current system and modify it in order to meet 2017 auditability and financial improvement goals.
"Therefore, we are canceling the program and moving forward with other options in order to meet both requirements," a statement released by the Air Force read. "As our acquisition and logistics leadership worked through the third program to restructure in the last three years, it became apparent that the Air Force will be better served by developing an entirely new strategy versus revamping the ECSS system of record again. The scope of ECSS continues to decrease even as the costs continue to increase and the schedule continues to lengthen."
Strategic Sourceror on Monday, November 12, 2012
No official announcement has been made as to why Samsung has raised the price of these chips by approximately 20 percent, therefore, it is unknown if Samsung's manufacturing costs have increased or if the direct material cost for the chips has been raised. However, there is speculation that the increase could be a result of the lawsuits the companies have filed against each other across the globe in regard to patent violations and licensing disputes.
Manufacturing changes could be coming
Despite the ongoing battles the two companies are locked in, Samsung is still contractually obligated to supply Apple with the chips until 2014. However, recent rumors suggest that Apple has already begun searching for new suppliers, reaching out to companies such as AUO and LG Display to start producing some of its components for the iPad and iPad, according to TechEye.
There are other options for Apple's manufacturing process besides outsourcing component production to other companies. There has been speculation that the company may move some it its production in-house in the near future, which could result in significant cost savings for Apple. By not having to pay an outside enterprise to manufacture the essential parts used in the company's most popular products, the corporation could see a reduction in spending with an in-house manufacturing operation.
With in-house manufacturing services, the company also has the potential to streamline its processes and supply chain. By cutting component manufacturers out of the picture, Apple could benefit from a simplified supply chain and easier-to-manage logistical operations.
For the time being, it appears that Apple is sticking with its outsourced component manufacturing, even if future deals will exclude rival Samsung. Both companies have refused to comment on the price increase for the necessary chips, but according to MarketWatch, an anonymous source claimed Apple has accepted the higher cost for the products. However, to cut costs in the future, the company may indeed change its suppliers or develop in-house manufacturing operations.