October 2013
Toy manufacturers improve packaging through green procurement

In the fight against environmental waste and hazards, toy manufacturers are increasing their initiatives for green procurement, not only in how they approach strategic sourcing for their products but also how they generate power for their own facilities.

One way toy manufacturers are reducing waste is by making their packaging more eco-friendly, according to GreenBiz. Hasbro eliminated polyvinyl chloride (PVC) from its packaging and also reduced the amount of packaging materials for its products.

"Mattel established a sustainability target to improve our packaging material efficiency by 5 percent by 2015," a spokesperson for Mattel wrote in an email to GreenBiz. "Brands across the business have identified opportunities to reduce the amount of packaging materials used."

Play-Doh containers now have recycling symbols on the can and lid and feature printed labels on the can rather than using paper after a product design overhaul.

Lego is continuing this industry trend of more sustainable product packaging by shrinking the size of its merchandise boxes, according to Lego's site. By reducing the amount of packaging used, Lego said its carbon dioxide emissions are cut by 10 percent and its boxes use 18 percent less cardboard. This is significant considering Lego estimates 15 percent of the company's carbon dioxide emissions stem from packaging alone.

"Consumers will find it easier to handle the packaging, retailers will have space for more boxes on their shelves, and we'll use less energy in transporting the goods to the shops. So it's a win‑win situation for everybody," said John Goodwin, CFO of the LEGO Group, on Lego's website.

Lego investing in renewable energy

In a step toward making products with less environmental impact, Lego has made significant strides toward removing PVC from its toys to meet its goal of sustainable product sourcing and other renewable energy initiatives.

Morten Vestberg, sustainability communication manager for Lego, said the company recycles 90 percent of its waste with a goal of achieving zero waste in the future. Lego is also working toward improved energy efficiency. Goodwin said the company increased production energy efficiency by 4.1 percent in 2012 and said reduction in energy consumption continues to make an impact even if consumers may not be aware of it.

To help make its operations more sustainable, Lego's parent company, Kirkbi, is putting $547 million towards constructing a wind farm located off Germany's coast. The goal of this project is to generate at least the same amount of energy Lego consumes by 2020.

Supermarket chain cuts greenhouse gas emissions by 60 percent

Transportation is an essential but costly part of business operations, calling for firms to approach freight sourcing carefully. When trying to determine the best way to reduce business costs, incorporating more fuel efficient vehicles that emit less harmful gasses into the air could lessen fuel costs as well as help the environment. By investing in green technologies like selective catalytic reduction devices, companies can improve the productivity of their transportation vehicles in the long run.

The transportation sector - including the movement of people and goods by trucks, trains, planes and more - accounted for 28 percent of all U.S. greenhouse gas emissions in 2011, according to the Environmental Protection Agency. Emissions from this sector have increased almost 18 percent since 1990 as people travel more and depend on transportation of goods, while vehicle fleet efficiency has remained the same. However, companies such as supermarket chain Meijer are working to lower their environmental impact, CBS affiliate WWJ reported.

Meijer said its vehicle fleet has reduced its carbon emissions by 60 percent after following the EPA's near-zero emissions standards in 2010. Meijer has 203 stores spread out mainly in the Midwest.

"This is an extremely rewarding achievement that truly speaks to our commitment to the environment," said Rick Keyes, executive vice president of supply chain operations and manufacturing. "Not only are we integrating cutting-edge technology into our business, we're also working under the philosophy that to be a good company, we must be a good neighbor."

Using green technologies to improve fuel efficiency

In addition to cutting greenhouse gas emissions by more than half, Meijer has reduced the amount of nitrogen oxide released into the air by 55 percent or the equivalent of 525 tons. The trucks incorporate selective catalytic reduction technology, which treats engine exhaust that contains nitrogen oxides emissions and turns this gas into nitrogen and water to allow the engine to run more effectively.

The chain's fleet has 170 semi-trucks that contain fuel efficient engines, which are also made to have fewer emissions and meet or exceed the EPA"s near-zero emissions requirements. Through increasing the efficiency of its fleet, Meijer has increased its fuel economy by 5 percent. This results in an annual savings of 105,570 gallons of fuel.

"The impact is tremendous because the Meijer fleet makes deliveries to our stores 26 times each week," said David Hoover, director of outbound logistics.

In 1992, Stella Liebeck, a geriatric fan of McDonald's coffee, sat a scalding hot cup of the stuff between her legs before spilling it and burning herself. The resulting litigation and 1994 original judgment award of $2.86 million dollars (eventually reduced) gained national attention and took the issue of personal injury lawsuits and firmly rocketed it down, then off, the proverbial slippery slope.

Whether you consider them tools for the common man to find justice against corporate offenders or just a way for some slightly begrudged plaintiff to gain financial independence through litigation, twenty one years later, personal injury lawsuits are now a common financial issue for business. Working to stamp out egregious behavior is a positive step, but not an absolute defense -- suits can arise from intentional behavior, accidental negligence, or simply selling or using a faulty product (thanks McPherson v. Buick!). No matter what the cause, a suit decided in favor of the plaintiff -- and more commonly, settlements in lieu of legal proceedings -- cut a chunk of a company's bottom line.

So how can you prep your company for a judgment of this sort? Note: this information is not, and should not be construed as, legal advice. 

Liability Insurance - An effective and well-written insurance policy can protect against and pay out in the event of a judgment for a negligent act. These policies do not, as a matter of law, protect against intentional torts, which typically double as crimes against the person (trespass, assualt, etc.). As you do with any financial category, it's best to monitor these civil judgments to determine trends, and react accordingly. If you conduct business in a state that's seen an 18% rise in the judgments awarded by jurors, adjust your policies accordingly.

Additionally, these type policies typically give the insurer some insight into how these type tort cases are handled in court. They may prefer to prematurely settle due to the anticipated cost of going to court. Repeated settlements, or settlements of any kind, can negatively impact your premium payments. Like any other business product, your liability insurance can be sourced and best values can be located with these factors in mind.

Emergency Fund - While you shouldn't preemptively establish a fund for the eventual payout of personal injury judgments -- unless you're hiring every arsonist gardener and narcoleptic delivery driver in town -- every organization needs some sort of emergency fund in addition to their insurance coverage.

Lock Down Variables - The best defense is a good offense. Like we've established above, you can't prevent everything, but you can lock down loose ends. Security systems outfitted with cameras can provide valuable information and alert you not only to potential fraud but to troublesome problems that can be corrected. Monitoring devices in vehicles can slim down logistics costs and also provide excellent data in the event a driver is accused of a negligent act.

A personal injury judgment can cause significant harm to an unprepared business. While preparation will keep you from losing everything from an act of negligence, make sure you don't lose your shirt in the preparation costs.

The classic food conflict still plagues us - How do we get the food grown in the wide open farmland to the densely populated cities cheaply and efficiently? With the invention of refrigerated transportation, it became easier to transport foods farther than ever before, allowing regions with cold snowy winters year-round access to fruits and vegetables from more tropical or temperate climes. As long as you were willing to pay the out-of-season price, you could have grapes, avocados, and tomatoes whenever you wanted. This created a new era of plenty for food. While I personally wasn't alive for the previous era, my parents always seem eager to regale me with stories of how you just couldn't find certain foods in certain seasons.

New challenges also arose around the exponentially extended supply chains for this food, and while some consumers are happy to pay for the additional transportation cost, we are seeing drastic externalities in increased fuel consumption and carbon emissions which are doing long-term damage to the environment. One of the most notable examples is the new-found demand for fresh fish for sushi.

One option is for supply chains to get creative in order to counter the negative effects of these demands. Alternatively, they could eliminate the supply chain altogether, and reduce that distance down to practically nothing.

New and disruptive thinking in agriculture has fostered plans to make the most of a bad situation in modern cities. Where there is a premium on land, instead of planting out, plant up. New designs for vertical farms that could stand alongside the skyscrapers of urban skylines will radically increase arable land in urban environments.

By 2050, 80% of the world's population will live in urban environments if current trends continue. We must challenge ourselves to become creative supply chain managers, and always think of what we can do to benefit the most people and simultaneously care for our environment.

Projects that could reasonably be predecessors to massive skyline farms have already begun, such as El Paso's High Density Vertical Growth System.

The HDVG system grows plants in closely spaced pockets on clear, vertical panels that are moving on an overhead conveyor system. The system is designed to provide maximum sunlight and precisely correct nutrients to each plant. Ultraviolet light and filter systems exclude the need for herbicides and pesticides. Sophisticated control systems gain optimum growth performance through the correct misting of nutrients, the accurate balancing of PH and the delivery of the correct amount of heat, light and water. 

Vertical farming is undeniably one of those new solutions which could made a real impact in solving our food dilemma. Investments in these new projects in burgeoning urban environments could lead to better health, better access to fresh and cheap produce, and drastically diminished supply chain costs for farmers and agro-business.

Governments and private businesses like Monsanto Dow AgroSciences, DuPont, and Syngenta could provide subsidies to supplant the capital costs for the prototype structures, and we can all do our part to contact interested parties to encourage them to get behind radical new ideas like this. City counsels, agricultural associations, large companies - reaching out to them through professional or social activist networks is really the only way anyone will regard this as a possibility rather than a quaint absurdity.

In the meantime, if you manage a supply chain for food, you should have this foremost in your mind. If you need more ideas for how to break out of your mold and think creatively about the food supply chain, contact Source One Management Services.
Reports show consumer confidence, retail sales dropping

Consumer confidence in October experienced a large drop, with the government shutdown being a major factor, according to MarketWatch.

Consumer confidence decreased from 80.2 in September to 71.2 in October, according to a report issued by the Conference Board. A MarketWatch poll of economists had predicted October would have a score of 75.

"Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers' expectations," said Lynn Franco, director of economic indicators at The Conference Board.

Franco said confidence is expected to be on shaky ground for the next several months and the effect of the shutdown might even be felt in the fourth quarter, slowing growth. This might cause problems for manufacturers as a recent report showed a decrease in retail sales.

Declining auto sales cause drop in retail sales

A temporary decline in auto sales was the primary reason for the drop in retail spending in September, The Associated Press reported.

The Department of Labor said retail sales slipped 0.1 percent, which is the weakest report since March. The retail sales report for September was originally scheduled to be released on Oct. 11 but was delayed due to the government shutdown.

Auto sales decreased even more at 2.2 percent in September, which is the lowest since October 2012. However, auto manufacturers said the decrease in sales is likely temporary and August reflected Labor Day holiday weekend sales instead of September.

Without autos, gas and building supplies, retail sales increased 0.5 percent, which is an increase of 0.2 percent compared to August. Despite the auto industry and apparel and department stores experiencing declines, almost all retailers - from sellers of furniture to electronics and appliances - reported increased retail buying.

Some experts predict the impact of the shutdown and other potential political grid locks are expected to affect consumer spending into 2014. 

"The ongoing political disagreement continues to pose downside risks to consumer spending activity over the next couple of quarters," according to a research note from Wells Fargo Securities.

The recent report by the Conference Board highlights the role of market research in gauging what consumers are expected to buy in the midst of economic uncertainty. For example, respondents who said they were planning to buy an automobile decreased from 12.9 percent in September to 11.8 percent in October. However, the amount of survey takers who said they intended to buy major appliances increased from 48.8 percent in September to 50.4 percent in October.

LEED changes strategic sourcing for private and public sectors

The General Services Administration (GSA) announced it once again recommended government buildings follow the green building rating system determined by the U.S. Green Building Council's LEED program. Structures that earn LEED, or Leadership in Energy & Environmental Design, certification consume 25 percent less energy than the national average and reduced operation costs by 19 percent, according to The Pacific Northwest National Laboratory (PNNL).

"LEED continues to set a global example for market transformation," said Rick Fedrizzi, president, CEO and founding chair, USGBC, in a statement. "As the premier rating system in the world, LEED will continue to inspire people and set the bar for healthy, energy efficient and high-performing buildings."

Currently there are more than 4,000 LEED certified government projects with 8,000 more registered projects to be completed in the future. There are more than 55,000 commercial and institutional LEED projects in more than 140 countries and territories.

"At this point, it is unassailable, LEED works," said Roger Platt, senior vice president, global policy and law at USGBC. "It has played a significant role in GSA's achievement of its energy and sustainability goals. Any government agency that chooses to follow the private sector in using LEED certification does so because the result is better buildings and savings for the taxpayer."

Earlier, the National Academy of Sciences advised that the Department of Defense follow LEED's Silver standard when building its structures.

How businesses change with LEED

As the public and private sectors push for LEED certification to save on costs like electricity and raw materials, a business may need to re-evaluate it sources its energy and materials. Businesses may alter their approach to supply management while undergoing LEED sourcing, according to Green Biz.

Under LEED, manufacturers are required to report where materials were sourced and ensure suppliers are dedicated to responsible practices for 90 percent of a product's raw materials. This could encourage a more hands-on approach interacting with suppliers to ensure businesses earn their LEED certification.

Another way LEED changes strategic sourcing for businesses is how they avoid using potentially hazardous building product materials. While industries outside of food and cosmetics do not provide public data for the health consequences of common chemicals and ingredients, the Health Product Declaration - formed by NGOs and private organizations like Google and architecture firms - aims to change that.

As the public and private sectorspush toward more transparent disclosure of chemicals used in everyday products, LEED could change risk assessment for chemical usage for buildings.

How industries adapt to increased regulations

Regulatory challenges require that firms adapt. Increased regulations could impact how businesses reduce business costs as well as how they change their electricity sourcing. The amount of greenhouse gas emissions from industrial facilities decreased 4.5 percent between 2011 and 2012, The Washington Post reported.

The Environmental Protection Agency said in a new report that facilities that switched to natural gas instead of using coal were a major factor in the decline in greenhouse gas emissions. Since the EPA started gathering data on the amount of emissions released by power plants in 2010, emissions have decreased by 10 percent. In total, power plants emit 31 percent of greenhouse gases, which is more than other facilities like chemical plants, refineries and oil and gas exploration equipment.

The American Petroleum Institute said technology that involves hydraulic fracturing and horizontal drilling has been crucial in producing natural gas, leading to the decline in greenhouse gas emissions. Other industries have noted how they have done their part to reduce the amount of emissions such as carbon dioxide.

"The utility industry understands the importance of reducing emissions and has been a leader in reducing greenhouse gas emissions over the last two decades," said Tom Kuhn, president of Edison Electric Institute.

The EPA set out new regulations to limit the amount of carbon released by coal- and gas-fired facilities in order to meet its emissions target and reduce emissions 17 percent by 2020.

Manufacturing study indicates increased regulatory challenges

The manufacturing industry also faces increased regulatory hurdles compared to the previous year, which could impact the sector's growth, Modern Materials Handling reported.

A report by Manufacturers Alliance for Productivity and Innovation (MAPI) shows costs associated with manufacturing regulations grew an average of 7.6 percent per year since 1998, which dwarfs the average annual increase of 0.4 percent for output. The number of regulations applicable to the manufacturing industry grew to 2,302 this year compared to 2,187 in 2012, which averages out to about 1.5 regulations per week for 30 years. Over 10 percent of these are considered to be major regulations or those that could have an economic impact of $100 million annually.

"Each year federal agencies layer regulations onto manufacturers, one on top of another, without any transparency or any clue as to the true cost to our factory sector," said Stephen Gold, president and CEO of MAPI. "Such an inefficient system is clearly a drag on manufacturing growth, and therefore overall economic growth."

Gold said increasing the amount of regulations is a growing burden that has resulted in job loss for the manufacturing sector.

After the October 3rd announcement that Accenture was acquiring Procurian, I’ve had some time to consider the implications for the supply chain industry as a whole. Will the merging of these two giants really change the industry in any discernible way? While there is now a bigger, and more distinct, dividing line between small and large firms, no one really knows how this is going to play out. But if there is one thing I can say: the acquisition is certainly confirmation that the industry is hot.

In in the coming months, these are the four big questions that will be on my mind:

1.) What will happen to Procurian’s Bravo toolset?

Procurian is one of Bravo Solution’s customers. Will Accenture adopt Procurian’s tools, and therefore Bravo’s, as their own or will Accenture build a custom solution? Will they continue to use pieces of Ariba’s software? Afterall, they did acquire the Ariba BPO team not too long ago. Seeing the capabilities of the Bravo toolset, for specific categories at least, I think in the short-term this relationship should be safe.

2.) What will happen to Procurian’s CapGemini and Genpact’s partnerships?

In the past, Procurian has partnered with these two large firms to provide specialized, deeper procurement knowledge and BPO solutions on certain projects. Presumably, these partnerships will end with the acquisition, or at least may be rocky. Where will CapGemini and Genpact turn? What will happen to their existing clients and agreements with Procurian?

3.) Will Procurian lose customers (in the beggining)?

Some companies prefer to work with smaller more nimble solution firms, like Source One. Others want a larger player, but aren’t comfortable with the traditional giants like IBM and Accenture. Procurian offered a great stop-gap between those two mindsets. Will companies that consciously stayed away from those consulting giants be disappointed that they are now in the hands of a large firm. Will Accenture be able to keep the Procurian customer base happy? I recently attended a conference with over one hundred procurement managers and was surprised at just how many people told me that their companies are already evaluating the acquisition news carefully.

4.) Can Accenture move more easily into the midmarket?

This goes hand-in-hand with question three above. Accenture’s clients are traditionally Fortune 1000 companies and they don’t frequently pop-up as a competitor in smaller mid-market deals. On the surface, they traditionally have had some difficultly providing a measurable ROI for some of their services as compared to some of the smaller, more flexible providers. Will the Procurian relationship help Accenture expand its reach into those companies that were off-put by a larger firm?

It’s a virtual guarantee that the new Accenture will have one of the most comprehensive full-line suite of procurement-related BPO solutions. They’ll be able to now supplement their sourcing and supplier management consulting services with the transactional purchasing and procurement. The question really becomes, are companies willing to buy it?

The Washington Redskins, and primarily the team's owner Dan Snyder, have come under fire this past year for the team's name. Native American groups allege that the name is offensive, and there is a growing call from media outlets and the general public to change the team's name. Snyder so far has been adamant in his desire to keep the name (he's not exactly an easy-going man of the people), but the defenses he's used (tradition, heritage, the name not really being offensive, etc.) hide the true nature of his reluctance: money. Namely, it costs a lot of money to rename a team. And even though Washington is the richest team in professional football, Dan Snyder doesn't like to spend money.

When the NBA's Charlotte Bobcats chose to rename itself to the Charlotte Hornets for the 2014 season, team owner Michael Jordan estimated the cost to be between $3 million and $10 million. The Charlotte Observer pegged it at the low end, others peg it at the high end. For renaming a pro football team, the costs are higher. Patrick Hruby, at SportsOnEarth.com, cites sources close to the NFL estimating the cost of renaming the Redskins at as much as $20 million.

So what's in that $20 million. Hruby lists the big money going to naming consultants to help select the new name and the legal fees to secure it, the rest is towards the physical rebranding. Everything from the official signage in neon lights, to the vinyl wraps on the hot dog carts, to the letterhead, to the websites. All of it will have to be remade in the likeness of the new brand.

Luckily, these are all things that can easily be benchmarked, sourced, and negotiated for significant savings. Print services, especially those done in bulk, have been ripe sources for savings opportunities in the past few years in a wide range of industries, from healthcare to manufacturing. From the office letterhead to the wraps around the stadium itself, there are significant cost savings available that could soften the blow.

Even the large expenses, the creative agencies, can be negotiated with. Benchmarking, and the multitudes of market intelligence required to do it accurately and well, can work wonders with agencies -- validating the rate cards, the task assignments, and the statements of work to eliminate wastage. Additionally, negotiating master rate cards with parent agencies that will then apply to its subsidiaries.

Regardless of the reasons, should Dan Snyder decide to change the name of the Washington Redskins to something more culturally responsible, it's very possible to save money while doing it.

Our phone lines are open, Mr. Snyder!

Photo courtesy of BleacherReport.com
Utilities switching to telecommunications solutions for disaster preparedness

Adverse weather can greatly affect business operations, resulting in firms closing their doors and shutting down their production processes for days, weeks or even months at a time. Some companies might not be able to pick up their business where they were before. The Institute for Business and Home Safety said approximately 25 percent of businesses do not open again after a significant disaster. However, telecommunications software is becoming one of the most crucial disaster preparedness business solutions for utilities companies to help people who are impacted have access to necessary resources.

Businesses are still reeling from the effects of Superstorm Sandy after it hit the Eastern Seaboard last year. Even now, those companies may still not be prepared when the next disaster hits, according to NBC News.

After causing more than $70 billion in damages, significant weather events like Superstorm Sandy continue to catch businesses off guard. In a survey by accounting firm Anchin Block & Anchin polling New York City area businesses, less than half of small businesses said they were ready for the next storm.

Infrastructure vulnerable to natural disasters

One of the risks companies face during and after severe weather phenomena is a loss of power and other resources needed to do business, according to Green Biz. The grid is especially hit hard by disasters as people clamor to get energy in their home or business running. After Superstorm Sandy, more than 8 million people had no electricity for up to several weeks.

Jeff Sterba, CEO of American Water, said the loss in power meant crews could not provide customers with clean water and were forced to transport generators to locations that needed power, according to NBC News.

The private and public sector are starting to learn from the mistakes of disaster management and damage to infrastructures from the last major storm to hit the U.S. by using technology to develop a more reliable grid.

"It was one of those tipping points where utilities, regulators, the policymakers all agreed that there needed to be not just incremental, but significant new investments to deal with severe weather," said Rick Nicholson, vice president of transmission and distribution solutions at software company Ventyx.

To help improve grid operations, utilit​y companies are employing smart grid technology, including data analytics to project the impact of future storms and simulate disaster responses. Companies are also using systems to communicate with their customers and integrate field service software to aid workers during repairs.

Apple changing with efficient and creative electricity sourcing

When it comes to innovation, Apple has carved its spot as a leader in the tech industry with the iPhone and other products. While it's known for its popular electronics, the world's most valuable brand is also striving to operate as efficiently as possible through green electricity sourcing.

Recently, Apple introduced updated versions of the iPad and MacBook Pro right before the holiday season, Reuters reported.

This comes after Apple announced it would upgrade its Mac operating system and iWork software suite software for free to boost its appeal against competitors like Microsoft. Apple Chief Executive Tim Cook told media and technology leaders that the company wants customers to have the most recent versions of its software.

Apple's iPad Air is thinner than its previous generations in addition to containing a faster processor and the new MacBook Pro sports an improved retina display.

Earlier in May, Cook said the tech industry could see "several more game changers" from the company, which might introduce a new line of wearable computers.

"As always with Apple, expectations on systematic breakthrough hardware innovations are irrational," Thomas Husson, analyst at Forrester Research, told Reuters. "Apple is good at inventing new products and at maximizing profitability of its product range over time through software innovations and clever marketing."

Apple aims to operate with 100 percent clean energy

In creating their game changing products, Apple also strives to improve the energy efficiency of its operations, according to Forbes.

In stepping up its clean energy sourcing, Apple recently hired former Environmental Protection Agency Chief Lisa Jackson as its new environmental chief. During the VERGE conference, Jackson said the company is aiming to improve energy efficiency levels across its product portfolio.

With its goal of generating 100 percent renewable energy, Apple uses electricity produced from a combination of solar, wind, hydro and geothermal sources. Currently, Apple facilities are powered by 75 percent clean energy, including across the U.S. in Austin and Elk Grove, Ill., and internationally in Cork, Ireland, and Munich, Germany.

While other major companies like eBay have strived to increase energy efficiency by changing public policy, Apple has tried to create new ways to improve its electricity sourcing within its own power. Jackson said the company evaluates its efficiency before looking for ways to generate energy for its own purposes.

For example, for Apple's data center in North Carolina, the tech company cooperated with Duke Energy to help develop a renewable energy purchasing program. The facility also features high-efficiency LED lighting complete with motion sensors and operates power monitoring and analytics systems in real-time.

Aberdeen Group has stated that 82% of all negotiated savings from strategic sourcing initiatives go unrealized. Why are companies leaving money on the table? The fear of change. Change is universal and constant. Presidents are elected on it, the masses wish for it, and bums ask for it. And, like the other constants in life -- namely, death and taxes -- people are terrified of it.

There are plenty of phrases used in business to cover up a person's or organization's fear of change. The ones you likely hear the most often range from "We're doing that already" or "We did that already and it didn't work", and the constant "We've done it this way for X amount of years and it has worked. Why change now?".

We deal with these challenges and resistance in relation to organizations spend practices. People viewing change as an implicit accusation that they were doing something wrong, or that their work wasn't good enough. Others may see a change in a business practice as a threat to or usurping of any established or presumed authority. Dr. Steve Nguyen, in an excellent blog article detailing change in the workplace, quoted a study from Schermerhorn, Hunt & Hosborn detailing eight reasons people resist change. They are:

  1. Fear of the unknown
  2. Lack of good information
  3. Fear of loss of security
  4. No reason to change
  5. Fear of loss of power
  6. Lack of resources
  7. Bad timing
  8. Habit
The article then lists six methods to deal with this resistance to change, from the same study. 
  1. Educate people about the change prior to its implementation and help them understand the logic behind the change
  2. Form task forces and coalitions to get people involved in the design & implementation of the change
  3. Provide support, in any form necessary, for those that aren't adjusting well to the change
  4. Incentivize the changeover for the stragglers and hold-outs
  5. Work on other ways to influence minds regarding the change
  6. Use authority and clout to order people to accept change 
These solutions are very effective when trying to affect change horizontally across an organization, or down to subordinates and managed assets. Difficulties persist, however, when trying to affect change from below -- whether that's getting a superior on board with new practices or generating sponsor approval with a client. 

In instances like these, Dr. Nguyen references a Harvard report from a J.P. Kotter, which listed steps necessary to implement change. The most important of these were to 1) plan to and generate short term wins and 2) consolidate gains and produce more change. To put it bluntly, rig an initiative to produce steady periodic successes, then use each of those successes to build credibility, putting you in line to successfully pitch stronger initiatives down the road. 

Change is hard. Persuading someone to change can be even harder. It's important to remember, however, that you want to be in the position of affecting change. Its when changes affect you, or your organization fails to adapt to a changing market, that trouble comes. 

We've shown you the science, now tell us the practice. How do you successfully pitch change within your organization?

Developing a bug/issue-free website often takes several attempts, although, when you have unlimited resources, budget, and support you would  think a site would be launched flawlessly. The developers of ACA-centric Healthcare.gov saw red flags throughout the development of the site but were faced with a strict timeline for website go-live. The question is: Why would the website developers wait until so close to launch to realize there are many flaws? Were they in fear for their jobs? Or was the entire supplier process not properly conducted?

The goal for HealthCare.gov was to be a simple, easy-to-use tool for individuals without health insurance to have the ability to review and compare several healthcare options against each other. This site would enable individuals to view cost, coverage, and to eventually sign up for their preferred plan. The site was intended to launch October 1st, although, unresolved bugs and issues led to visitors experiencing error messages and long waits to be able to sign up for plans. 

Many developers involved in the design noted several warning signs prior to the October 1st launch, which included the site crashing during testing and the inability for the site to provide stability once the site hit a small number of concurrent users. One of the most important considerations to keep in mind when developing a website with a large population base is to build the site to allow for scalability and flexibility to eliminate the need for future modifications. Of the millions of people who attempted to register during the first week of the sites launch, only a merely 3% of those were successful.

Based on several reports made, rather than conducting a formal competitive bid process with several bidders, officials in the Department of Health and Human Services Center for Medicare and Medicaid selected just a sole bidder, although they are denying the accusations. CGI Federal was the main IT contractor to take on the development of the website, most of which turned out to be very flawed. CGI Federal is has been expanding their name and brand throughout the government IT contracting scene over the past few years but is not nearly the size of larger IT contractors such as Lockheed Martin. Several experts and IT firms are wondering, how did the government come to select CGI Federal as the primary contractor when it seems their company lacks extensive experience in this space?

Supplier selection is crucial in all new business needs and requirements. By conducting a formal bid process, you can ensure the correct supplier for the specific task is chosen at the most competitive cost. In a typical RFP process, several other factors play into the decision making criteria and deciding factor such as pre-existing relationships with the companies, relevant prior experience which often includes validation through reference calls, and often cost.

To the above note, a section of the bid process should include how you will score and evaluate the proposals. Outlining evaluation criteria and developing a scorecard to accurately evaluate all proposals is one of the most important aspects of the supplier selection and sourcing process. The scorecard process ties together all pieces of bidders proposals to assist in supplier selection, it should include both quantitative and qualitative information in order to measure all components of the proposal. From the quantitative side, evaluation will be based upon pricing information and ability to identify any gaps or inconsistencies among the bids. On the qualitative side, the goal is to utilize pre-established criteria in order to evaluate the proposals based on your organizations needs and requirements. Ultimately, this process will guide you in determining competitive proposals and assist in the negotiation phase to ensure the best price is given.

From my experience in conducting and evaluating proposals for extensive healthcare hubs and websites, it is hard to believe that an actual extensive and formal sourcing process was conducted due to the large price tag associated with the development and proper execution of the site. As the website continues to go through the cleanup phase and potentially increase the budget even further, I'm hoping the government will learn a lesson from this and continue to enhance features to ensure individuals are getting the most out of the site  (perhaps karma after the government shutdown debacle). Just remember, make sure you're completely vetting your suppliers and evaluating all aspects to ensure a successful website/hub launch.

Historically, automation has been the primary way the manufacturing industry achieved cost savings. You take a simple recurring task, remove the human element, put a machine in its place and voilà, automation has been implemented. According to a whitepaper from SkyBot Software, the benefits derived from automating tasks include cost reduction, increase in productivity, availability, reliability, and performance.

Cost reduction, increase in productivity, reliability, and performance are all derived from one factor, which is the removal of the human element. Once an employee is removed from performing the automated task, cost reduction can occur by either lowering the hours worked or eliminating the position completely. From this standpoint a company can save on wage expenses, healthcare expenses, and other ancillary expenses that are associated with maintaining that particular position. Because a machine does not get tired or take lunch breaks, productivity will increase because more work can be done in the same amount of time. Machines are able to be programmed to do a task within specific parameters to produce nearly identical results or products every time. This consistency in process allows a task to done reliably. Now that the human element has been removed, companies can realize gains in performance, because machines do not slow down and can work around the clock to meet any quotas. 

Automation technology is ideal for any company attempting to improve on any of the aforementioned factors. However, humans can benefit from automation just as much as the companies they work for. Every person would like to reduce the cost of items they purchase, increase their productivity, produce more reliable work, and increase their overall performance, in work or life. One company has attempted to bring the benefits of automation to the public by automating a simple task that most people waste a lot of time on. The company is Briggo and the task is getting coffee.

People waste a lot of time waiting in line for coffee: the decrease in time in a day correlates to a decrease in productivity, because people have less time to do work, a decrease in reliability because people may rush to complete work, and less productive people who rush to complete their work often do not perform well. Additionally, there is absolutely no cost savings derived from purchasing coffee, considering the average price of a cup of coffee is $2.00, not taking into account premium coffee such as a latte, which can cost an individual as much as $32,000 a over a span of a person's career. 

With a Briggo coffee kiosk, a person is able to place an order for coffee through their smartphone, which will then be ready by the time the consumer arrives. The Briggo machine adds precious minutes to an individual's day, while charging 30% less for its coffee. Quality has not been cut because of automation and price. Briggo's sourcing department features Starbucks veterans that only procure the most ideal coffee beans, which are then roasted within the machine itself.

On the production side, Briggo's automation leads to savings by removing the human component of coffee making: the barista. Like a Keurig on steroids (and about the size of a few refrigerators lined up side-by-side) the Briggo takes a user's order via the above-described methods and then robotically assembles the beverage. The same qualities that make robots so well-suited for production -- consistent quality, reliability, and performance -- make the Briggo a perfect coffee delivery system: it delivers the same product repeatedly with a consistency no human can match.

Automation has been used in the manufacturing industry to bring about a variety of positive changes. Thanks to Briggo, indivuduals are now able to see innovative automation processes brought to the general public, so that they to may realize a variety of positive changes.

Photo courtesy of CanonTradeShows.com
European Parliament warns of growing food fraud threat

As food businesses monitor their procurement operations, they should be on the look out for a growing threat: food fraud. Products that were the most likely to be misrepresented include fish, olive oil and organic foods, according to The Associated Press. In a report drafted by the European Parliament that gave insight into fraud in the food chain, officials say the incident of food fraud is rising.

Committing food fraud is tempting for producers or suppliers who want to substitute expensive ingredients for ones that are more inferior in order to reduce manufacturing costs. While these actions may cut costs, they can also put consumers' health in danger if packages do not list the actual ingredients of the product.

Food fraud is defined as substituting, counterfeiting or tampering with food or ingredients as well as misrepresenting and issuing false or misleading statements about food or food packaging for profit. Other foods that are the most at risk for fraud are milk, grains, honey and maple syrup, coffee and tea, spices, wine and fruit juices.

"The risk of fraud is highest when the risk of getting caught is small and the potential economic gain is big," the report said. "The complexity and cross-border character of the food chain, in combination with the predominant focus on food safety and the national character of controls and enforcement are often cited as contributing to a low risk of food fraud actually being detected."

European Parliament encourages private anti-fraud efforts

What is not on the top food fraud list is meat, which is surprising to European Parliament member Esther de Lange, considering the incidents involving horse meat being substituted for beef have made major headlines in the past. While the European Union has focused on food safety, it does not have specific guidelines for dealing with food fraud. The report said food fraud slips by undetected in most cases and many consumers do not trust what is listed on the package.

The report said the food sector is a major force in fighting food fraud as companies can implement anti-fraud initiatives as well as make food business operators accountable. Companies should check in with suppliers to ensure that they are not participating in food fraud. The European Parliament document calls on private organizations to report fraudulent behavior to the appropriate authorities in order to catch fraud early on before it impacts consumer health.

Campus IT budgets strained as technology use grows

Campus IT budgets continue to face pressure as more college and university classrooms become more technology-driven, according to The Campus Computing Project's 2013 National Survey of Computing and Information Technology. In the survey of CIOs and senior IT officers, almost a fifth of public universities and four-year colleges had central IT budget cuts in the last year, which is down from a third in the 2012 campus IT survey. The same number of community colleges that said they had reductions in their central IT budget remained the same as last year with a third of community colleges reporting cuts.

Despite some organizations reporting fewer instances of budget cuts, monetary problems continue to affect institutions. As students and faculty become more tech-savvy and bring their electronic devices into the classroom, this strains higher education institutions' limited or shrinking IT resources.

Kenneth Green, founding director of The Campus Computing Project, said increasing demand for various campus IT resources and services - including high speed Internet and IT user support services - pose a challenge for IT decision-makers as their campus infrastructures are continuing to age. Green said the benefit of instructional integration of IT as well as other technological solutions like mobile computing and online education is that they help support the mission of institutions and improve student success.

Campus IT problems rising as technology use grows

With many institutions facing budget crises, they also face challenges on other fronts. One of the biggest concerns for campus IT departments is aiding the faculty in using and incorporating technology into the classroom. The Chronicle of Higher Education reported. Other challenges include increasing the ability of campus IT professionals to protect personal data on devices and maintaining wireless network operations in heavy trafficked areas, such as lecture halls and common areas.

"There are campuses that have a lot more resources than other campuses," Elias Eldayrie, chief information officer at the University of Florida, told The Chronicle of Higher Education. "In some areas, I do believe higher education has made great strides. In some areas, we still have a long way to go. For the most part I think we are all in the same place trying to figure out how to leverage the technology and bring value added to our organizations and our customers."

With institutions facing the reality of shrinking budgets, they could greatly benefit from strategic sourcing to reduce operational costs while continuing to grow their IT capabilities.

While the mood of much of the U.S. was darkened by to the government shutdown, one light shone bright. The average price of gas in the United States fell $.19 in September. This was the biggest price decrease since October of last year when the average price fell $.26. AAA recently stated that it is possible gas prices could decrease $.25 to $.30 by the end of December. Gas prices have been consistently above $3.20 since October of 2012, so it will be a rare sight to see them below $3.20.

It has been speculated that the decrease in gas prices is merely due to the summer season ending because people stop traveling and vacationing, but others claim that it is directly related to the recent government shutdown. President Obama lifted the debt ceiling on the morning of Thursday, October 17, after an agreement was passed by the House of Representatives and the Senate. AAA predicted that the commodity and equity markets would lower if Congress didn't lift the debt ceiling, similar to these gas prices. It appears to be a trend that gas prices decrease when markets are lowered, as was witnessed during the economic recession that occurred in 2008. Gas prices averaged $4.12 in August of 2008, but sharply decreased to $1.70 by December of 2008.

With gas prices being surprisingly low, US citizens are hoping to avoid price increases in the near future. Higher gas prices are generally caused by commodities traders. The commodities futures market allows traders to bid up the price of gasoline, which directly affects the delivery of gas at agreed-upon prices. Supply and demand affects the market as shown by increases and decreases of future contracts. If a commodities trader thinks that gas prices will be high, they will often increase the contracts they are signing, which directly affects the market and causes gas prices to rise even more.

High gas prices can also be the result of high crude oil prices. Approximately 72% of the price of gasoline directly accounts for oil. The rest of the costs are due to taxes, refining, and distribution. These costs are fairly consistent and are required for gas to be distributed to the general public.

Increases in gas prices have a direct correlation on companies' supply chains because it increases their overall costs and can cause financial hardship. Companies that require gas to function cannot do anything to change the gas prices, so they are forced to reflect the change in their cost in their prices and deliverables. It is important to remember that markets continuously fluctuate and this will have an impact on your supply chain. The good facet of this is that you can be assured that prices will not remain drastically high forever.

While gas prices are low now, this is a fleeting scenario and they will inevitably rise again in the future. For now, we should take advantage of these low gas prices and instead hope that our government will work towards becoming more functional and agreeable.
UK grocer combats food waste by changing business strategy

When reviewing the cost of merchandise inventory for food manufacturers and grocery chains, food waste is a major problem that drives up expenses. The international supermarket Tesco, based in the U.K., aims to reduce business costs by controlling food waste, according to Waste Management World.

Tesco has a payroll of 530,000 employees and operates in several markets, including the U.S. and China in addition to the U.K., according to Tesco's site.

After publishing numbers for food waste in the U.K., the grocery chain said it had 28,500 tons of food waste in the first half of 2013 and was combating food waste by changing its retail strategy. For example, Tesco said it was taking off labels for "display until" dates for fresh fruit and vegetables.

Tesco fights waste all the way from farm to consumer

In addition to educating consumers using tips for food storage, Tesco is combining technology and training in a global effort to stop food waste, BBC reported. Tesco is putting an end to multi-buys on bags of salad in its effort to preserve produce.

"We've all got a responsibility to tackle food waste and there is no quick-fix single solution," said Matt Simister, commercial director of group food at Tesco. "Little changes can make a big difference, like storing fruit and veg​etables in the right way." 

An estimated 15 million tons of food were thrown out in the U.K. in 2010, according to Waste and Resources Action Program (Wrap). More recent figures for 2012 are expected to be released in November. With knowledge that a fifth of bananas are wasted, Tesco is installing a new temperature control system to prevent spoilage during transportation as well as trainining employees to teach customers how to make bananas last longer. Richard Swannell, director of Wrap, praised Tesco's holistic approach to preventing food waste.

According to the Tesco study, which provides insight into the amount of food waste for the U.K.'s 25 best-selling products, 40 percent of apples are wasted and a little under half of baked goods at over 600 of its stores are wasted. The supermarket firm said it will try to reduce resource waste with its suppliers, starting from the farm and ending with consumers.

"Food waste is a global issue and collaborative action is essential if we are to successfully reduce food waste and reap the financial and environmental benefits of doing so," Swannell said.

Supply risk a major concern for food and beverage companies

Food manufacturers factor in potential contamination regarding their products when planning out risk assessment procedures. As food recalls and bad press have the potential to shut down operations or drive away customers, risks related to supply management is still a major concern, according to Modern Materials Handling.

In the 2013 Grant Thornton Global Food and Beverage study, 90 percent of food and beverage firm decision-makers said they expect increases in revenue in 2014 and one-third said they expected sales to expand more than 10 percent. As companies anticipate growing profits in the next 12 months and 56 percent said they project hiring will also pick up next year, it's important for firms to stay on track of their goals through maintaining full control of their operations.

However, risks related to food manufacturing and processing continue to be a moderate to significant concern for global food and beverage companies. According to the study, 51 percent of food and beverage companies say they are worried about product safety. Around 50 percent say they are concerned about quality. Even though 35 percent of respondents said they were worried about traceability - with safety and quality getting a greater degree of focus from manufacturers - new rules under the Food Safety Modernization Act require improved abilities for traceability in supply (FSMA). As confusion about compliance and enforcement of FSMA continues, some executives might view rules and regulations under FSMA as not applicable to them or their business.

"Many companies have programs in place, and they're trying to make adjustments so their programs comply with the rules," said Dexter Manning, food and beverage practice leader of Grant Thornton. "But at the end of the day, some executives look at it and say, 'Well, Congress hasn't funded it yet, and so they may not be able to enforce it.' This means that many companies do not expect much impact, especially given U.S. budget deficits and cost-cutting."

Consequences of food supply risks

Despite this uncertainty regarding FSMA, it's crucial for food manufacturers and processors to understand the consequences of supply risks in the event of reports of insufficient product safety or quality.

Recently, a collection of consumer groups advocated for a recall by the U.S. Department of Agriculture of Foster Farms' chicken products after the company's processing plants were linked to an outbreak of Salmonella, according to Food Safety News.

The USDA previously threatened to suspend Foster Farms operations at its affected facilities. Consumer groups also sent a letter to encourage the government agency to increase the enforcement of its regulatory program.

It's fun to think in easy terms and do easy things, which is why the majority of our conversations on sourcing involve commodities and common services -- things that are easy to find from multiple manufacturers or suppliers, with pricing negotiations and robustness of the supply chain assisted by the multiple options. But what about those categories that are unsourceable -- the products that don't have a variety of sources, or are so unique there's not a whole lot of them anyway. What then?

For starters, if you're looking for information on sourcing the black market, look elsewhere. There will be no talk of procuring fake Rolexes or real AK-47s. The gray/grey market is gone as well -- given the questionable legal status of those goods. So, what's left are:

  • Capital Expenditures
  • Specialty or Custom-Made Products
  • Cartel Markets
Capital Expenditures

Source One's Kyle Evans already covered the sourcing of this market for an article published on ThomasNet's IMT Procurement Journal. As a quick summary, he cautions that firmly identifying and reporting savings on a CapEx project will remain difficult, but that the sourcing process can be used effectively starting with a needs analysis and the insight of your in-house subject matter experts. With the knowledge they provide and a comprehensive idea of what your organization really needs, the solutions may open up and more than one product may be used.

Custom-Made Products

We recently completed a project for a manufacturer that used many chemicals in its production process. Some were commodities while others were custom blends made especially for them. We were able to source the commodity chemicals very easily and identify savings. The custom blends were more difficult, due to manufacturing differences between suppliers. While we were still able to source the products, establishing a baseline with which to negotiate, cost savings had to be tempered against the losses from downtime due to testing. Often times, the downtime was more costly than the identified savings, and the opportunity was not pursued .

Cartel Markets

When dealing with a product that is available from only one region or through a single suppliers -- commonly, agricultural products -- we have found sourcing success by bringing the entire supply chain into focus. With a view of every step, from the farmer's harvest to the product's arrival at the loading dock, savings opportunities are easier to spot -- say, when there are three different importers, or any time there is a diversity in a step.

What are some other difficult-to-source areas, and how did you find success?
Risk assessment procedures must include third party risks

When businesses invest in risk management procedures, they tend to focus on their internal risks. However, businesses should shift attention to third parties, as these organizations can have significant impacts that could be felt throughout the production process. In the 2013 Third Party Risk in a Global Environment survey by NAVEX Global, fewer than 7 out of 10 U.S. companies gave their full attention to third party vendors, suppliers and agents in terms of avoiding business risks related to corruption, fraud or compliance.

Randy Stephens, vice president of advisory services with NAVEX Global, said ethics officers are often too busy concentrating on daily compliance and policy programs that they do not pay attention to risk assessment procedures and management for third parties.

"Their bandwidth issues often necessitate a high-level review of some third party relationships rather than tackling the inherent complexities of tracking and monitoring all of their often thousands of third parties at an appropriate level truly impactful in protecting the business," Stephens said.

Twenty-nine percent of U.S. firms track all of their third party relationships. Those who do monitor their third party relationships say they only do so for parties they believe are the most important. This is alarming as the use of third parties does not seem to slow down for almost all businesses in the survey. A combined 92 percent of survey takers said they would either increase their third party use in the next 12 months or were not certain whether they plan to.

Shanti Atkins, president and chief strategy officer of NAVEX Global, said many organizations are not equipped to monitor third party actions with the right technology and resources to address risks they may present.

IT security and third party monitoring

Computer security experts also remind companies of the fact that they do not do enough to assess third party risk, especially when it comes to protecting their own networks and data, according to IT security site Dark Reading.

Brad Johnson, vice president of consultancy SystemExperts, said companies tend to lose sight of the importance of monitoring their relationships with third party vendors after signing off to use their services.

"Often, once the lawyers have finally signed off on an agreement, both parties tend to have a very hands-off approach with each other and forget the details of making sure things are staying on course," Johnson said.

This lack of attention to detail could put organizations at risk, which could include data breaches of sensitive corporate information.

Researchers from the Massachusetts Institute of Technology (MIT) have developed a tool called Sourcemap that helps companies and business owners connect with people across the supply chain and provides transparency to their supply chain. The tool also allows users to visually see their supply chain's vulnerability in the event of a catastrophe.

Mr. Arntzen, a senior research director at MIT's supply chain management program said, "When a disaster happens, we want companies to instantly see a map of the potential impacts and how they might be mitigated". Free features of the tool include the ability to upload your supply chain into the map from popular ERP and DRP databases and create an easy-to-view and distribute product for transparency reasons. Paid features of the tool includes the aforementioned map of supplier locations, RFI tools, and a risk analysis system that predicts the damage caused by the natural disasters or unforeseen events such as political unrest. Revenue lost is calculated by the number of days it takes the company to find another supplier and how long their current inventory would last.

Additionally, there are real-time feeds from news outlets and an alert system that notifies businesses on the impact of potential and impending supply chain disasters. In a business world where suppliers and customers are worldwide, having transparency in the supply chain and the ability to react quickly to minimize the loss is everything.

It's been a week of transition at my house. It started with my swapping from iPhone to Android and concluded with our switching of cable providers. We went from Verizon FiOS to Xfinity. It's with this second switch that I see a lot of parallels with our work here.

The search began after we started seeing advertised rates a full third less than what we were currently paying per month. Knowing that savings opportunities were out there, we took a look at the market. If we didn't want to go FiOS, we were pretty much limited to going back to Xfinity (we had switched from Comcast TO Verizon several years ago). Since I did not like Comcast/Xfinity and wasn't really stoked about possibly returning to them, we looked at non-cable alternatives.

When you get away from the big players and the all-inclusive "triple plays", you can expect to lose out on channels, features, and services. So we threw together a list of what we needed and wanted. Did we need certain channels? Did we really need a DVR, or was it nice to have? Could we do without a home phone and rely on a cell? Could we drop it entirely -- use cells for phone, use an antenna for TV, and hit the neighbor's WiFi?

Ultimately, we decided to go back to Xfinity, namely because I need constant Internet connectivity for multiple devices, some requiring a hard line connection, and we don't need another antenna or satellite collecting snow and ripping off the side of the house to the tune of $500 in repairs (fun story).

Great choice, you might be thinking, but why are you telling me this and what are the parallels to Source One's business? I'll explain.

Sometimes, we may identify a best-fit solution that involves a supplier that our clients don't like, or they've had a previous bad experience with. In instances like this, it's the client's choice to either swallow a bitter pill or to leave money on the table. The decision-making process is the same for both, as are common persuasion points.

The money. Spending less money is always a great persuader. Here, the savings were 1/3 of our current monthly cost, which is substantial. But cost savings is commonly associated with "poor quality" and "cheap", so the next persuasion points weigh heavily.

The product. We plotted out the channel guides for all options to see that everything that we wanted would be there. We looked at performance reviews for Internet connectivity in the area. We verified our choice against every quantifiable aspect we could find to make sure we weren't losing anything in the swap. Translating this to the professional sphere, reluctance/discontent over changing to an alternate product can be soothed with hard evidence that the performance and user experience will be identical or better.

The quality. We looked at every review we could find and talked to friends & neighbors that we knew were Xfinity subscribers. We wanted to make absolutely sure that the hardware was solid, the service was good, and the customer support wasn't absolutely abhorrent (with cable, that's about the best you can hope for). Translating this one into the professional sphere, any available whitepapers, statistics, and spec sheets you can present to show that the replacement product or supplier is not going to muck up everything is a great way to smooth a transition.

The expectation. If you have a previous bad experience, you already know what to expect and can craft workarounds. In the Xfinity example here, we know they will likely mess up our bill once or twice, and will find every way to jack a rate up after the contract is up. We know to monitor our billing and prepare to ditch them at the two-year mark. Professionally, you have more options here as previous bad experiences can likely be corrected, or at least prevented from recurring, through contractual penalties.

Ultimately, if someone is strongly opposed to making a change, and they have enough anger, willpower, or clout, that change isn't happening. Still, persuasion never hurts. What's the biggest argument you've ever heard against changing products/suppliers and how was it resolved?
Congress fights over medical device tax as companies merge

As medical device companies are anticipating whether the tax on their industry products will be repealed in Congress, some are looking to expand in the future. MedPlast recently acquired Orthoplastics in its effort to grow in the European medical device and implantables market, Plastics News reported.

MedPlast, a U.S.-based medical molder and contract manufacturer that had $222 million in sales in 2012, announced it was acquiring Orthoplastics, a manufacturer of polyethylene products and parts for orthopedic device implants located in the United Kingdom. MedPlast previously acquired United Plastics Group, which makes plastic products for medical and industrial companies, last year.

While MedPlast develops medical devices used in surgery, oncology and other health applications, it aims to increase its opportunities in the orthopedic implant market, which counted on Orthoplastics as a major supplier. Harold Faig, chief executive officer of MedPlast, said the company expects that MedPlast can grow faster into the medical device assembly and implantable markets after acquiring Orthoplastics.

By combining with Orthoplastics, MedPlast can expand its existing range of processing technologies in an increasingly regulated market.

"This acquisition allows MedPlast to combine its technical capabilities with Orthoplastics' implantable technologies to become a significant player in the implantable market," David Brooks, managing director of Orthoplastics, said in a statement.

Medical device tax up for debate in Congress

Recently, the tax on medical devices was the subject of heated debate in Congress, Bloomberg reported. The Republicans planned to vote on a bill to delay the medical device tax, which is expected to generate $30 billion over a decade. The revenue from the tax would serve to help fund the Obama administration's health care programs under the Affordable Care Act. The Democrats said they intended to strike down budget resolutions or debt deals that specified a repeal of the medical device tax. Medical device manufacturers argue a tax would deter innovation. Some legal experts counter that the medical device tax would result in a drop in funds needed for the health care reform and cause the Obama administration to find other avenues for revenue.

"A repeal of the medical-device excise tax would result in large drop in tax revenues that would need to be offset by tax increases or spending cuts," Martin Milner, a tax partner in the Washington office of McDermott Will & Emery, said in an e-mail to Bloomberg. "As a result of the necessary revenue offset, I do not think the medical device excise tax will be repealed absent a grand bargain that includes fundamental tax reform."

New research aims to increase solar panel efficiency

While firms may think electricity sourcing via solar panels is expensive, a new study is developing new ways to harness the Sun's energy. Researchers are advancing the field of thermophotovoltaics to create higher efficiency solar cells, according to Stanford University.

Thermophotovoltaics work by using a heat-resistant thermal emitter to convert heat from sunlight into infrared light, which will eventually create electricity in the process. As a crucial component to reducing energy waste, the thermal emitter of the thermophotovoltaic device can withstand temperatures up to 2500 degrees F, which is double the temperature previous prototypes were able to endure without coming apart.

"This is a record performance in terms of thermal stability and a major advance for the field of thermophotovoltaics," said Shanhui Fan, a professor of electrical engineering at Stanford University.

Fan worked with with other professors at University of Illinois-Urbana Champaign (Illinois) and North Carolina State University for his research.

While regular solar cells absorb sunlight directly to transform this solar energy into electrical energy, this process cuts the amount of electrical energy that could potentially be generated because of the limitations of its silicon semiconductor to only interact with infrared light. 

Paul Braun, co-author of the study and a professor of materials science at Illinois, said conventional solar cells have an efficiency level of roughly 34 percent because the Sun's energy is wasted.

Thermophotovoltaic technology developed from this new research aims to reduce this waste through harnessing lower-energy waves that would otherwise pass through the solar panels that use silicon semiconductors. Previously, thermophotovoltaic systems have reached an efficiency level of almost 8 percent. Fan said shorter wavelengths are ideal for solar cells, and by tailoring light for this type of wavelength, the solar could theoretically reach a level of 80 percent efficiency, according to Stanford University. If this technology advances, these new solar cells could reduce operating costs for businesses.

Importance of ene​rgy efficiency

Efficiency is integral in developing renewable energy sources that one day become mainstream like petroleum, liquefied natural gas or coal.

In emphasizing the importance of efficiency in energy production, the International Energy Agency released a new report that presented energy efficiency as a commodity similar to fossil fuels, Business Green reported.

"Simply put, the cleanest megawatt hour will be the one we never need, and the most secure barrel of oil the one we never burn," Maria  van der Hoeven, executive director of IEA, said during a conference. "But energy efficiency opportunities really make up an interlinked constellation - between transport, industry, buildings and the like. And understanding that constellation as a market is a relatively new undertaking."

Source One's Bill Dorn is wrapping up the final leg of the Corporate United Synergy circuit next week when he lands in Cleveland. This is the fourth and final Synergy event for 2013, and it completes a circuit that began in Chicago before stopping off in Washington, D.C. and Minneapolis, MN. So far, Bill (and CEO Steve Belli, who is not making this trip) have been joined by more than 100 of the nation's largest, most innovative, and dynamic companies through the events, and the Cleveland show is the largest yet!

For more information on Corporate United and its Synergy program, please visit www.corporateunited.com. If you're in Cleveland and would like to chat with Bill, click here.

Finally, be sure to sign up for the Source One Newsletter. This month's will cover all the business decisions you need to make in the face of the ACA, and next month's will feature Bill's recap of the Synergy events. Don't miss out!