March 2011
Hospital merger to increase efficiency, improve patient care  Hospitals and the health care industry as a whole are being pushed to become more efficient as they prepare for the full implementation of President Obama's historic health care law over the next few years. In Illinois, the Delnor Health System and Central DuPage Health announced they have completed a merger, forming a new health system.

According to executives from the newly formed enterprise, the new hospital system will serve a patient population of more than 1 million people. The deal was first announced in October, but has been moving forward over the past few weeks after it cleared preliminary regulatory approvals; on Thursday, each of the hospital's board of directors completed its final approval of the transaction.

"Today, we have created a new health system with greater scale to provide patients with even higher quality care, access to a greater number of specialists, a broader range of clinical capabilities and a more integrated approach to health care," said Central DuPage board chairman C. William Pollard. Delnor Health System chairman William A. Wolford echoed that sentiment, affirming the "goal is to establish a healthcare system that meets our patients’ changing needs and elevates the caliber and breadth of affordable health care in the region."

With the merger, the hospitals will be able to boost efficiency and cut costs thanks to information sharing and a streamlining of patient care. Per terms of the deal, both hospitals will maintain their individual identity, but officials expect the merger to result in lowered patient costs and improved performance.
After trying to keep retail prices flat through the recession, many companies will be raising their prices from 15% to 20% by this fall, according to a recent article in the New York Times.

Copper recently hit its highest level in 40 years and steel has been continually reaching staggering prices. Cotton prices are almost at their highest levels in over a decade and prices for corn, sugar, wheat, beef, pork, and coffee are quickly rising.

Labor is becoming more expensive in low-cost countries like China and the awful environmental crisis in Japan will certainly increase prices on many electronic items throughout the world.

Many big companies, including Kraft, Polo Ralph Lauren and Hanes, say they cannot hold off any longer and must raise prices to protect some profits.

The cost of raw materials accounts for a just small portion of the cost of most consumer goods, whereas labor, processing and packaging tend to make up a larger share of the prices at the cash register. Foods like coffee, meat and milk, which are closer to raw materials, will probably show some of the biggest price jumps.

Meat prices have surged because of the cost of feed, a decision by farmers to raise fewer cattle and pigs, and strong demand worldwide as living standards rise. An epidemic of foot-and-mouth disease (YUM!) that devastated South Korean hog farms has led to a recent surge in orders for American pork.

For consumers, higher prices in stores means there will be a little less extra cash to spend. For companies, profits may be squeezed, making them a little less likely to invest in equipment or to hire more.

By the end of the year we should know what the impact of these price increases will have on the U.S. and the World economies.

Companies that try to pass on all their costs could be met with some resistance. Although consumer spending has risen, unemployment remains at 9 percent, and average hourly earnings are up less than 2 percent over the last year.

With the cost of gas already being above $3.50 a gallon (and it’s not even summer yet), I feel like I’m already dealing with higher prices.
VCU Medical Center increases efficiency with patient flow software  The Virginia Commonwealth University Medical Center is one of the best hospitals in the state of Virginia. The hospital is a model for other hospitals in the state as it has successfully worked to implement initiatives that have boosted efficiency and cut business costs. Recently, the hospital purchased software to help it improve patient flow and cut costs. 

Central Logic's ForeFront technology is a Web-based patient flow software application that helps hospitals manage inbound patient movements and all the related documents required by federal law. According to the hospital administrators, ForeFront will be used in VCU's patient transfer center and will help handle the acute care patients who come to the hospital.

The software will help the hospital more readily and efficiently handle acute care patients; moreover, it will enable the hospital to take on new patients while increasing profits. "As is often the case with regional health care providers and academic medical organizations, many patients visit VCU Medical Center for sophisticated, cutting-edge treatment that is just not available in other geographical areas," said Roberta D. Gump, director of the communications center at VCU Health System.

Nissan to resume normal car production in Japan in mid-April  The northeast part of Japan serves as the country's hub of auto manufacturing. That area, however, was also hardest hit by this month's earthquake and subsequent tsunami. Because of the damage done to its plants in the country, Nissan said this week it is working to resume production at its Japanese plants by mid-April - though production capacity could be limited at first.

Nissan is Japan's second-biggest automobile manufacturer after Toyota Motor and has been using its existing stocks of components to run its assembly lines this week, company executives said. Nonetheless, Nissan will suspend its automaking operations next week. Currently, the Japan Automobile Manufacturers Association is working to help carmakers in the country to work with their big suppliers to jump-start the production and delivery of components.

"Nissan is now capable of resuming normal operations at all of our Japanese plants except for the Iwaki engine plant," the company said in a statement. "We are aiming to resume normal operations at these facilities from mid-April. As the delivery of parts will take time to be fully re-established, operation levels will still be limited, depending on the delivery status from suppliers."

So far, supply disruptions from the quake and tsunami have resulted in the lost production of 55,000 cars, a Nissan executive affirmed.
Starbucks CEO: Supply disruptions in Japan will have little effect on company  Companies across the globe have had to deal with supply chain disruptions resulting from this month's 9.0-magnitude earthquake and subsequent tsunami that devastated Japan. Starbucks, however, is well positioned to handle the ramifications from the natural disaster, its chief executive Howard Schultz said. 

Starbucks was forced to shutter 10 percent of its stores in the island nation in the aftermath, but Schultz told reporters the company's size would help it weather the crisis more adeptly than rivals. "The impact financially will be diminished because of the size of Starbucks," Schultz said Tuesday in New York. "It's an extremely important market, not only for its size and profitability, but the emotional connection we have with the Japanese people."

Japan was the first country outside of the U.S. that Starbucks entered, arriving in the country 15 years ago. Starbucks has 900 Japanese locations and was forced to close about 100 of them in areas hard-hit by the natural disasters. Though he left his role as chief executive in 2000, Schultz returned in 2008 as the world's biggest coffee chain struggled during the recession.

Under Schultz's tutelage, Starbucks has endeavored to develop more partnership deals to bring its coffee into homes, where single-cup coffee makings are becoming increasingly popular. In the year ended October 3, profits more than doubled from the year prior, reaching $940 million.
Surgical system helps hospital cut costs, boost efficiency  As hospitals look to shore up their operations in preparation for the uptick in patients they are likely to see following the signing into law of President Obama's health care law one year ago, many hospitals are working to boost efficiency and cut excess business costs. BioDrain Medical has helped hospitals to boost their efficiency with its Streamway System. 

According to the company, its Streamway System is an automated surgical fluid disposal tool that helps maintain cleanliness and prevent infections in hospitals. So far, hospitals across the U.S. have installed the system, including a large Minnesota Hospital that has praised the system for its clinical benefits and user friendliness.

The FDA cleared Streamway System lets doctors more safely and effectively dispose of potentially infectious fluids in operating rooms. Hospitals that have used the system affirm it has resulted in fewer infections of both patients and doctors and that the reduction in illnesses has helped cut costs and ensure sterile environments remain that way.

"Due to the rapidly increasing market need for enhanced safety and compliance to Occupational Safety and Health Administration (OSHA) standards in the operating room, more and more hospitals are now leaning towards our innovative solutions to efficiently update their facilities," said BioDrain Medical president Kevin Davidson. "We are extremely excited about the installation in this Minnesota hospital and look forward to additional opportunities that may develop from this and other new relationships."
Lenovo: Supply chain disruptions could hurt tablet production  The 9.0-magnitude earthquake and subsequent tsunami that struck Japan two weeks ago has brought the country's infrastructure to a standstill. The effects of the devastation are reverberating throughout the global economy: Lenovo said its new tablet computer could face delays on tight sales of memory chips produced in the country.

Lenovo's LePad tablet is not yet available for sale in the U.S., but the company has already begun selling the device in China, where the company is based. While Lenovo said supply disruptions have so far not affected the supply of LePad, the company is wary of the rising price of memory chips after many Japanese factories were forced to shutter their doors in the wake of the devastating natural disasters; Japan accounts for a large percentage of the world's supply of electronics components.

Nonetheless, Lenovo vice president Chen Xudong said Monday that supply disruptions could cause potential supply problems in the future - though he didn't specify a time frame. Other companies like ZTE Corp, a Chinese telecommunications equipment and mobile phone maker, assert that supply chain problems emanating from Japan could last for the next three to six months. So far, shortages have affected the supply of critical components like battery cores, storage and LCD panels.
In move to challenge Amazon, eBay to purchase GSI Commerce in $2.4 billion deal  Online auction house eBay has floundered over the past few years, taking a big hit during the drop in consumer spending that resulted from the worst recession in a half-century. In a bid to reignite its once white-hot business, the company announced it has agreed to buy GSI Commerce, an Internet marketing services company.

With the deal worth a reported $2.4 billion, eBay aims to shore up its position as an online retail powerhouse. Moreover, eBay hopes that GSI will help the company become more competitive with one of its biggest rivals, Amazon. The deal is the biggest for eBay since its 2005 acquisition of Skype for $2.6 billion.

According to analysts, eBay is paying a hefty premium for GSI: The company offered shareholders a 51 percent premium over the closing price on Friday. Since the deal was announced, GSI shares soared 51 percent higher, while eBay's fell 3 percent. The company fills a big hole in eBay's services, said Stifel Nicolaus analyst Jordan Rohan.

"The acquisition gives eBay more competitive weapons to minimize the market share shift to Amazon," Rohan told The Wall Street Journal. "This is a big hole strategically that eBay is trying to plug." 
Report: Drug shortages cost over $200 million each year, pose public health risks  The historic health care act signed into law by President Obama one year ago was highly controversial, but ultimately aimed to bring down health care costs. Millions of Americans have been hurt by soaring costs and according to a recently published report, shortages of prescription drugs are driving up costs while hurting doctors' ability to treat patients effectively.

The analysis, performed by Premier, concluded that shortages of prescription medications across the U.S. resulted in hospitals incurring unexpected business costs of over $200 million. The jump in costs is attributed to hospitals purchasing more expensive generic or therapeutic substitutes in the wake of shortages, according to analysts.

While $200 million annually is a huge number, the ultimate financial toll could be even higher, experts assert, as the figure does not include indirect costs like added labor needed to manage the shortages and secure alternative supplies. In a survey of over 311 hospital pharmacy experts, over 90 percent of respondents said they had experienced a drug shortage within a six-month period in 2010 stretching from July to December.

The survey also found that over that period of time, over 240 drugs were either in short supply or completely unavailable, while more than 400 generic drugs were back-ordered for five or more days. Most worrisome, experts aver, is that shortages seem to be increasing. In fact, drugs that were most commonly cited as difficult to procure are often used to treat time-sensitive illnesses, including those needed for sedation, emergency care and chemotherapy.

According to Premier, there are myriad reasons for the shortages. First, many prescription drug manufacturers have consolidated over the past decade. The mergers and acquisitions craze that has swept the industry is largely a result of lagging profits, but the mega-corporations that have arisen are increasingly focused on developing drugs that will bring the greatest financial benefit - not necessarily those that will help the greatest number of people.

Moreover, the report asserts that unpredictable disruptions in supply chains and manufacturing have caused delays in the delivery of life-saving drugs. Meanwhile, many of the newly merged pharmaceutical companies have also stopped production of drugs that generate little or no profit, which has caused supply problems.

Per current regulations, drug manufacturers are not required to communicate drug shortages to hospitals, pharmacists or the Food and Drug Administration. According to industry watchdogs, the current regulatory climate is too kind to pharmaceutical companies and is hurting average consumers, hospitals and other health care providers.

Many lawmakers are working to ensure that new legislation is crafted to prevent such disruptions in the medical supply chain, but hurdles remain. "Physicians, pharmacists and patients are currently among the last to know when an essential drug will no longer be available - that's not right," said U.S. Senator Amy Klobuchar from Minnesota. 

"This common sense solution will help set up an early warning system so pharmacists and physicians can prepare in advance and ensure that patients continue to receive the best care possible. As we move forward, it is important that we have better coordination between the pharmaceutical industry, the FDA and health care providers so patients don't lose access to the medications they depend on," Senator Klobuchar affirmed.

Senator Klobuchar has introduced a bill that would require prescription drug manufacturers to give early notification to the FDA of any incident that would likely result in a drug shortage. If a drug manufacturer were to suspend production due to an FDA initiated review, the bill would also give the FDA the power to inspect the facility 90 days from when the problem has been rectified.
I just received yet another comical RFP request from yet another local government, playing the "CYA Game", this time in Florida. This time, we have no less than 29 Procurement Service Providers and Electronic Sourcing Tools providers in the "To:" field of the unsolicited email.

Today, we are greeted with a 23 page word document that explains insurance liabilities you must carry as well as authorization for background checks, employment checks and everything else you could possibly not want to fill out. And the real kicker: The proposal is asking for someone to provide e-sourcing solutions for FREE.

The funny thing is, my organization, Source One, actually does have an assortment of free solutions that could benefit them greatly.  However, I am not going to spend 3 hours filling out paperwork and doing everything short of giving away my first born to get someone to use them.

This method of "RFP" needs to stop.  We all know full well that you have already selected a provider and are just going through the "legal" steps to C.Y.A.; but please don't waste my bandwidth with your innefficiency.   This is one more fine example of a broken procurement process and uncontrolled spending problem within our government.

Some more rants on this topic:
California Hospital to cut costs with supply chain management system  Mountain View, California is famed for its location at the heart of Silicon Valley. Google is headquartered in the enclave and technology startups often choose the city as a base - at least initially. Situated in Mountain View, El Camino Hospital announced it has expanded its relationship with Premier health care alliance in a bid to boost efficiency and cut costs.

El Camino joins 200 other hospitals in owning Premier. According to the hospital's administration, Premier will allow the facility to significantly cut costs and support continuous improvements in patient care and satisfaction. The hospital will use Premier's supply chain improvement technology, SpendAdvisor My Spend, to help find areas where business costs can be reduced.

"Premier's understanding of what is needed to help providers address performance improvement is proven through its ownership," said El Camino Hospital chief administration service officer Ken King. "We clearly see the value of being an owner in this alliance, as Premier supports our vision to give each patient convenient, compassionate and comprehensive care every time."

El Camino has already benefited from Premier's services: The hospital partnered with the firm to transition its pharmacy department from outsourcing to insourcing, resulting in cost savings.

Anticipating smartphone market growth, 3M to boost manufacturing of touch-screen filmsSmartphones have exploded in popularity over the past few years as the iPhone and Android-based smartphones rose to prominence in a relatively short period of time. 3M is betting that market will continue to surge over the next four years, announcing it will expand production of its touch-screen films used in tablet computers, e-readers and smartphones.

The move is strategic for the company: According to 3M's business manager for electronics markets materials, Tony DeRose, the company values the market for touch-screen materials at $2 billion. "The market is just exploding, and we're ahead of it," DeRose said in an interview. The company will boost production of the optically clear adhesives - as thin-films are known - in South Korea, China, Taiwan and Singapore.

3M's films are used to join panels between the liquid crystal display on smartphones and tablets and the surface that users swipe to control the devices, Bloomberg reports. "We've had assets since 2007 for electronics, and we built those up to really grab the smartphone market," DeRose affirmed.

In the fourth quarter of 2010, smartphone sales eclipsed those of personal computers for the first time ever, and analysts assert smartphone shipments could jump by as much as 49 percent in 2011 to 452.5 million units. "It's not a landscape that's void of competitors," said DeRose. "That's why our investments are important." 
Most families try to manage their finances in a similar way. When times are good, we save for when times are bad. That way, when a recession hits or problems arise, you have a fixed budget to work from to maintain basic standards of living and comfort while doing away with the extravagances that might have been available in better times. It is not to say that all families do this well, but I think the majority would agree it is the ideal way to manage money.

Roughly speaking, Keynesian economic theory follows the same principles when dealing with governments trying to manage GDP. When times are good governments should save money by running at a surplus. Then, when times are bad they can use the surplus to provide stimulus to the economy, thereby offsetting the negative impact of private sector cutbacks.

This theory ensures a government safety net during hard economic conditions and the sustainability in funding needed for government to provide services when people need them the most. The theory so closely ties to the common practiced used in most households across America it is hard to understand why its application is still up for debate.

My state, Pennsylvania, seems to be at the forefront of ignorance to common sense economic theories. The new Governor, Tom Corbett, has decided the best way to solve our budgetary woes is through huge cuts to government services, the biggest of which is in education. Since taking office at the beginning of the year, Corbett has proposed slashing education funding in the state by billions of dollars, including cutting funds to public schools by over $1 billion, higher education by $644 million, and a 16% cut to adult education programs.

At the same time, Corbett has taken a hands off approach to finding new ways to increase state coffers which could potentially negate the need to cut “extravagances” such as basic education. The primary example of this is his policy on natural gas drilling in the state - which commonly uses a process called “fracking”. The states frackers have received free access to drill on public lands, and their revenues are not taxed by the state. This in itself is unusual, but taking into the account the massive environmental impact fracking has on water tables (it essentially makes water flammable) you have to wonder who did the cost/benefit analysis that justified allowing these companies to run unencumbered from basic taxes on revenue.

Corbett recently announced that he “might” support municipalities to impose fees on frackers, which is a step in the right direction, but still doesn’t help address state budget issues. Corbett, and other governors before him, have stated that they do not want put fees on these drilling companies for fear they will leave the state. Still, shouldn’t everyone have to share the same tax burden, particularly an industry that doesn’t create very many jobs and has a substantial negative impact on the living conditions of people in the area?

I have to wonder where these unsustainable, seat of the pants policies are going to leave our state 10 years down the road. If we keep on the same track, we are going to have a state filled with uneducated mine workers drinking water that you can light a camp fire with, and mining executives building their mansions on whatever usable land is left. That may sound like a stretch, but Pennsylvania made this mistake before, just look at Centralia.

Toyota to resume production of Prius, certain hybrid models following supply disruptions  The 9.0-magnitude earthquake and subsequent tsunami that ravaged Japan nearly two weeks ago caused a majority of the country's companies to shutter their doors temporarily in the wake of devastation. Nonetheless, in the coming week, Toyota Motor plans to resume production of the Prius and two other hybrid models in the island nation.

Toyota will restart the production of its popular Prius, Lexus HS250h and Lexus CT200h models; according to the company, it will restart production on the models because of high demand. A Toyota spokesman, however, declined to comment when asked whether the world's biggest automaker's supply chain was fully restored.

The northeast part of Japan is where auto manufacturers are mostly located; it is also the area of the country hardest hit by the tsunami. Because of disruptions to its supply chain, Toyota could lose production of 140,000 cars through Saturday, analysts assert. "They are clearly prioritizing Prius, given overseas demand," said University of Michigan engineering professor Jeff Liker.

"On the constraints for Toyota hybrids is the supply of batteries," Liker told Bloomberg. "One of three plants appears to be affected, so they may only have two-thirds of the battery supply capacity."
United Hospital to improve efficiency with diagnosis support software  Many hospitals were incentivized by the 2009 federal stimulus bill to update their patient files to electronic medical records. Electronic health records have myriad benefits including reduced costs and better patient health management. When utilized in conjunction with other electronic systems, they can also help boost efficiency and cut costs. United Hospital in Minnesota announced it will use Isabel Healthcare's software to better diagnose patients. 

Isabel's diagnosis decision support system helps doctors and nurses at hospitals to better diagnose problems their patients are experiencing; according to executives from the company, the system fully integrates with electronic health records and provides diagnostic support by illustrating potential diagnoses that otherwise may have been overlooked. Ultimately, the system improves hospital efficiency by ensuring patients are properly treated, minimizing the need for follow-up visits.

The medical director at United Hospital, Dr. Scott Tongen, said the system will help cut costs and improve patient care. "Isabel will be a great tool to assist our physicians with their diagnosis decisions, helping them research, verify and investigate patient cases more accurately," Dr. Tongen affirmed. "With mobile access and integration into our EMR system, our doctors will be able to access Isabel as part of their normal workflow, making them more efficient and accurate in their diagnoses.
Colgate-Palmolive to acquire Unilever's Sanex brand  In a bid to strengthen its business operations in Europe, consumer products giant Colgate-Palmolive announced Wednesday it will buy the Sanex brand from Unilever. 

Among other goods, Colgate-Palmolive specializes in the manufacturing of dental care and pet products. Per terms of the newly inked deal, the company will sell its laundry detergent business in Colombia to Unilever for $215 million. Latin American markets are Colgate-Palmolive's bread and butter, with the biggest portion of its sales coming from the region.

Analysts contend the deal was primarily driven by the rising commodity costs Colgate-Palmolive faces. In the past year, commodities like corn, wheat and cotton have surged in value amid burgeoning global demand and dwindling stockpiles. Unilever's decision to sell its deodorant and bath care products business was necessary for the company to achieve European Commission clearance to buy Sara Lee's personal care unit.

Asia, Africa, Latin America and the Middle East account for 50 percent of Unilever's revenue; the company asserts that while growth has been robust in those markets, mature economies like the U.S. and Western Europe are still experiencing tepid growth.
Nissan CEO: 40 Japanese auto suppliers still reeling from earthquake and tsunami  Japanese automaker Nissan Motor said this week that some of its suppliers in the country are still reeling from this month's 9.0-magnitude earthquake and tsunami that devastated the country, including the northeast region where the majority of auto manufacturing is located. 

Nissan chief executive Carlos Ghosn said that 40 component suppliers in Japan are facing disruptions to their daily activities following damage inflicted by the natural disasters. Japanese authorities are still battling fires at a nuclear facility in the hard-hit northeast part of the country and there are reports surfacing that agricultural products and some drinking water have been exposed to high doses of radiation.

According to Ghosn, electronics components, plastics and rubber are in short supply in the country and will ultimately affect Nissan's manufacturing capacity - as well as other automakers that rely on the country's manufacturing facilities. "This is serious and it's still difficult to evaluate," Ghosn said in an interview. "You have the earthquake, you have the tsunami, rolling blackouts and fuel shortages hitting at the same time, and they aren't only hitting the car manufacturers, but also the suppliers and the dealers."

Japan relies on nuclear power for about one-third of its energy, according to analysts; the country is grappling with electricity outages and transportation issues after trains and roads were hit. 
As more and more U.S. companies explore near-shore alternatives to mitigate concerns about their global supply chains, Mexico is fast becoming a prime target of interest.

Steven Belli, CEO at Source One, and William Dorn, Director of Operations, recently became the first U.S. business representatives ever invited to speak before the National Congress Manzanillo (CONAMA) 2011, a key international business conference held earlier this month in the state of Colima.

Their address looked at the growing desire by U.S. companies to identify reliable partners that can help mitigate some of the increasing risks they see in their global supply chains, as well as the range of opportunities available for Mexican business interests to fulfill that role.

Since then, fast-developing events around the world have only served to underscore that perception, notes Belli. The recent earthquake and tsunami-related crisis in Japan, as well as continued unrest across the Middle East are causing a wide range of U.S. companies to feel increasingly skittish about their supply chain risks, he says.

"The opportunities run both ways," Belli explains. "Mexican companies that can demonstrate a high level of industry expertise, creativity and reliability - and are able to market themselves effectively to prospective U.S. business partners - will find that the future is a bright one."

Following their address, Belli and Dorn also met with numerous representatives from Mexican industry, as well as government officials representing the federal Commerce Department, the Central Bank of Mexico, the Department of Tourism, and an array of top university officials who organized the international consortium.

Three Key Changes

According to Belli, there are three key changes taking place that are helping to guide the development of Mexico as a key near-shore source for supplies and manufactured products.

"First is the evolution of the maquiladoras," he explains. Beginning in the 1960s, the Mexican government attempted to foster greater industrial and jobs growth by helping to develop the maquiladora system -- assembly plants that were built along the U.S.-Mexico border, to provide U.S. manufacturers with access ability to dependable, high quality, low-cost production services.

"It's a concept with which many U.S. firms already are familiar," says Belli. "U.S. manufacturers would work with local Mexican government and business partners to essentially create their own manufacturing infrastructures so they could manufacture or assemble products and then reimport them back into the U.S.

Increasingly, however, Mexican officials at the federal level are looking to leverage the advantages that they see as inherent - its geographic proximity, the structural benefits that NAFTA provides, and a young, well-educated and English literate workforce - to develop a more powerful, long-term engine for economic development."

In many ways, Mexican officials view the recent economic expansion that has taken place in Brazil as a model for Mexico's future, Belli says.

A second key factor is a major change in the tax structure. The more traditional companies established under the maquiladora structures were governed by the older PITEX, which placed various import duties and related taxes on items as they moved among individual factories in the manufacturing process toward a finished product.

The more recently enacted IMMEX tax structure reduces or eliminates many of these taxes, thereby allowing more assembly and production to be done by communities of manufacturing facilities working together without being impacted by value-added taxes along the way.

"Obviously, the IMMEX structure represents a huge tax benefit for Mexican manufacturers," Belli says. "But in order to take leverage the greatest advantage from this opportunity, companies must make sure they meet a specific profile and also complete the necessary documentation in order to qualify."

The third key change that is helping to guide Mexico's ascension as a competitor in the global sourcing marketplace is the ongoing fine-tuning and implementation of the North American Free Trade Agreement (NAFTA), Bellis says.

When NAFTA passed in 1994, restrictions were placed on Mexican trucks that limited their movement to within 20 to 30 miles of the U.S. border, Bellis says. In retaliation, Mexico placed a number of tariffs on U.S. goods. Recently, the presidents of the U.S. and Mexico met and agreed to lift the trucking bans and tariffs. The new agreement should lead to lower costs and greater ease of movement for goods and products between the two countries.

Benefits to U.S. Partners

According to Belli, the benefits that are likely to arise from these key changes should be quite evident to potential U.S. partners:

• A reduction in the cost of manufacturing in Mexico;
• The opportunity for cheaper deliveries and a faster, more accurate quoting process;
• Greatly reduced lead times for product delivery, thereby enabling U.S. retailers, for example, to enjoy enhanced inventory planning and the ability to more readily capitalize on "hot" products; and
• Overall, an opportunity for companies to diversify their low-cost company sourcing strategy and further mitigate risk from sources in the Far East.

"There are exciting changes taking place in Mexico today," Belli notes. But in order to take advantage of them effectively, U.S. businesses need to:

1. Make sure they are working with a Mexican business that is properly registered under IMMEX;
2. Get in early to lock up existing resources that may be limited, depending on their specific focus; and
3. Make the necessary government contacts or work with a partner that has the contacts in order to take advantage of the various programs and initiatives that exist.

Source One professionals have been working with their colleagues in Mexico and Latin American to identify potential suppliers and to assess capabilities for increased business expansion, Belli notes. In addition, Source One has been working directly with potential suppliers to assist them in their efforts to reach out effectively to the U.S. marketplace.
St. Luke's Hospital in Kansas City employs patient monitoring system to boost efficiency  St. Luke's Hospital in Kansas City was looking to cut costs and boost its efficiency, but was unsure where to look. After some research, the hospital turned toward Central Logic, buying the company's flagship Central Logic ForeFront to help support its patient transfer center managed out of the facility. 

Hospital administrators at St. Lukes, which is a leader among U.S. hospitals in technology and innovation, affirm the technology will help the hospital to streamline its logistics at its 11 hospitals throughout the Kansas City metropolitan area. Central Logic chief executive Dr. Darin Vercillo said that logistics problems often result when hospitals move patients from one facility to another.

"For Saint Luke's and other regional health systems servicing large geographical areas, a patient transfer center addresses common financial, operational, and care-related issues associated with patient movements," said Dr. Vercillo. He affirms Central Logic's technology "is specifically designed to handle all of these requirements with ease and speed, and to eliminate many of the administrative headaches that typically hamper productivity or interfere with medical treatment obligations."

ForeFront gives hospitals the ability to better monitor patients and more quickly deliver information on them to their doctors. Hospitals that have used the system have reported great cost savings, increased supply efficiency and better logistics control.
Inventory control problems plague Lululemon Athletica  Athletic apparel maker Lululemon Athletica is not in a situation stores are upset about being in, but surging demand for its products has left the company with dwindling inventories, preventing the company from benefiting from surging demand for its clothing. 

The company, based in Vancouver, Canada, said same-store sales surged 28 percent in its last fiscal quarter, boosted by demand amongst fashionable gym-goers for its athletic gear. However, sales growth could slow this current quarter in the low double digits as inventories are quickly falling and its suppliers are failing to keep up with increased demand.

"The exceptionally strong sell through of our (fourth-quarter) product line leaves us with short term unmet demand in the first quarter due to a low inventory position," said Lululemon chief executive Christine Day in an earnings report. The store's inventory is hitting critically low levels which is eating into profits.

Nonetheless, the apparel maker is looking to better track its inventory and is looking to implement an inventory tracking system to better manage its supplies. While some analysts contend the dearth of merchandise can only help fuel the brand's exclusivity, it is still eating into profits.
Massachusetts hospital to trim costs with supply chain management software  Hospitals in the U.S. are under pressure to cut costs and boost efficiency as they prepare for an uptick in the amount of patients they serve following the landmark passing of the comprehensive health care bill in 2010. Saints Medical Center in Lowell, Massachusetts is implementing a supply chain solution to streamline its supply chain and bring down soaring costs.

The hospital serves a small community in the Boston suburb and affirms the inventory control system it recently bought will help it to most accurately monitor its supply chain. The Mobile Supply Chain software from Management Health Services will help the hospital to count, cleanse and optimize its supply chain by keeping accurate records and providing constant feedback to hospital administrators.

"We realized that MHS Mobile Supply Chain Software Solutions were the best-of-breed in the health care supply chain segment," said Steven Basiliere, director of supply chain management for Saints Medical Center. "By implementing MHS Mobile Supply Chain Software Solutions, we are building a great foundation and planning for success."

Within the first 18 months of implementation, the system could save hundreds of thousands of dollars in outpatient services alone, Basiliere contends; the system will also help the hospital cut its inventory stockpiles, freeing up space. 
Having recently returned from an international business trip, it didn’t take me long to realize that even nuts and pretzel bags are limited now. Not long ago a “full” meal was offered on most international flights free of charge. Not that I crave airplane food -- but it is clear evidence that most airlines are struggling as much as other industries these days. The problem is not the food or the extra charge on bags and carry-ons or the $6 M&M candy bag; it’s the price-to-service ratio.

I remember when “the adventure of flying” was an exciting part of the trip. The experience of purchasing the ticket, packing and the actual flight were things I looked forward to enthusiastically. Today that experience has changed dramatically; purchasing a ticket is now a negotiation struggle that involves tracking prices every day for a week across several different airlines in order to find the optimal seat for a reasonable price and maybe grabbing some extra leg room for an extra $35.

Packing is now an intellectual challenge that requires stuffing as many clothes as possible in the minimum space, as every extra sweater may mean an extra dollar on weight surcharge. Arriving at the airport involves the psychological thrill of having to strip halfway in public to demonstrate you are not a major threat. And finally, after all this is done and you feel ready to exhale and relax a bit, you may have a few minutes to buy a snack and a magazine before you are chained for three hours to a seat designed for a human three-quarters your size, which gives you enough time to pray and offer that sacrifice to the sky lords to ensure you make your connection in time.

The truth is that passengers only suffer a portion of what the commercial aviation industry is experiencing. Every day more sophisticated technology and complex search engines increase the already fierce competition between airlines. Airline pilots and crew members have had their salaries cut and pensions terminated and the costs and risks of flying a plane and running an airline are rising exponentially, particularly in terms of fuel and insurance.

It is noticeable how airlines have tried to cut their costs and expenses during recent years without increasing prices on tickets that are already unreasonably expensive -- not because they are deeply concerned about our wallets, but because they need to stay alive in the market. Naturally, “perks” like food or space were the first on the cutting list; but hey, we are used to that now and, it’s not like we could do something about it. I instead, the real concern of today is the price for jet fuel (oil), and how that will impact the fare cost.

Oil is a volatile commodity that dictates a huge part of the costs and prices of many industries, especially the airline industry, which had to develop protective financial instruments to secure the prices they pay for fuel. Airlines and financial institutions have created options to hedge fuel costs to prevent paying for fuel once it reaches a determined price. This “protection” works in favor of the airlines when prices of fuel are rising. The offset cost of buying the option works in the same way as a regular insurance premium and compensates for the potential cost and risk of prices going up. The problem comes when this protection works against the airlines and the intended purpose. Thus, if an airline hedges on a set price of oil and commits to pay this price regardless of the price fluctuation, it incurs the risk of the fuel prices falling below this mark and will still be locked in to pay a higher price for fuel, as well as the extra cost of setting the financial instrument. This has already happened to some airlines in recent quarters.

Despite the many hedging models developed by financial institution and airlines, the reality is that the risk of incurring i higher operative costs cannot be eradicated -- airlines fares are subject to changes on a complicated mix of commodity prices, seat demand, competition, seasonality-- and on top of that -- political stability. Most likely, we – the consumers – will soon see these risks reflected in the price of a seat. Eventually costs may pass onto us as the airline paradigm has shifted. Today the major focus for airlines is not “generating savings” …it’s simply staying alive and remaining competitive while preventing airfare costs from forcing them out of business.

Sadly, much has changed since the days when all an airline had to do to save $40,000 was to cut one olive from every salad served in first class. Airlines won’t go anyway, but the pleasant experience has faded, unless of course, that you (or better yet, your employer) can afford to cover the cost of leather seats up in first class.
AT&T to acquire T-Mobile in $39 billion deal  In a move that would effectively create far and away the biggest mobile service provider in the U.S., AT&T announced this weekend its plans to acquire T-Mobile in a deal worth a reported $39 billion. Should the merger win regulatory approval, AT&T would surpass Verizon as the telecommunications provider with the biggest subscription base.

While the deal faces an uphill battle in attaining governmental clearance, AT&T is hoping that by acquiring T-Mobile's extensive network it can begin to win back customers it has lost to other carriers over the years who have derided the company's poor service in major cities like New York City and San Francisco.

T-Mobile and AT&T both operate on the GSM network - as opposed to the CDMA network Verizon runs on - ensuring the changeover can take place quickly. Moreover, the increased capacity of T-Mobile's network will allow AT&T to circumvent the approval process for building new towers, which can take up to five years and are subject to strict environmental codes.

With T-Mobile's added network capacity, AT&T will reach an additional 46.5 million Americans, crossing a major hurdle as it endeavors to build the most comprehensive, fastest 4G network of all wireless providers.
Robots dispense medications at UCSF med center, improving efficiency  Robots dispensing medicines may seem like something out of the movie "Wall-E," but it's actually happening in San Francisco right now. Patients at the UCSF Medical Center will never come in contact with them, but robots are processing and dispensing their medications, improving the hospital's efficiency. 

The UCSF Medical Center recently opened its new automated hospital pharmacy, which some analysts say is the most technologically advanced facility of its kind in the U.S., if not the world. The goal of the robotic dispensary system is to cut down on mistakes in medication allotment, which sometimes results when humans are the ones doling out the medication.

So far, the robots are working better than expected: Of the 350,000 doses of medication prepared during the system's recent phase in, there has not been a single error recorded, according to the medical center. Aside from its proficiency, the robots also allow pharmacists and nurses to focus more on direct patient care, answering questions about medications that patients often have.

"The automated pharmacy streamlines medication delivery from prescription to patient," said Lynn Paulsen, PharmD, director of pharmaceutical services at UCSF Medical Center.
"Each step in safe, effective medication therapy is contingent on the other." The system has already helped cut business costs and is being introduced to UCSF's other medical centers throughout the Bay Area. 
Hospitals across the U.S. are working to improve their efficiency; the health care industry has faced intense scrutiny to cut costs and improve patient care. A recently released study concluded that poor care resulted in the deaths of Medicare patients. An engineer in New Hampshire has developed a hospital bed that could improve efficiency and cut patient discomfort.

Dr. John LaCourse, the chairman of the University of New Hampshire's Department of Electrical and Computer Engineering, has developed an algorithm to create a hospital bed that is "smart" and communicates with other medical devices like x-ray machines and blood pressure monitors to better monitor a patient's health; the smart bed essentially makes it easier to keep track of a patient's condition.

His software can easily be implemented in hospital beds without any modifications, providing cost savings on installation costs. "Medical errors are generated because devices don't talk to each other," Dr. LaCourse affirmed. "What we're trying to do is break down that wall, work with the manufacturers, and see if we could get the common bus to be used."

One example of the smart bed's use is its ability to determine whether a patient is at risk of apnea, when breathing stops. If a patient were to stop breathing, the bed would automatically change positions until the condition improves. Dr. Anuj K Dalal, a hospitalist at Boston's famed Brigham and Women's Hospital, said in an interview that smart beds are an "interesting concept."

"There is definitely interest in people trying to figure out how to monitor a patient's status in real time," Dr. Dalal said. 
Every year, thousands of “fake” drugs enter the U.S. market via websites that attract consumers by marketing “No Prescriptions Necessary” and competitive pricing. These pharmaceuticals are manufactured overseas and then labeled as brand name products.

A recent blogger from “The Hill” commented on CBS’s “60 Minutes” program about this topic in saying that “the program depicted consumers purchasing counterfeit medicines packaged in convincingly labeled bottles and imprinted with an authentic looking brand name like Pfizer or Baxter. In some cases the pills contained floor paint, sugar, and wax.”

It is critical to think about the risks involved when purchasing goods or services from any supplier, whether overseas or within the U.S. What are your needs and expectations, and what are you actually getting in return? Tamara Ward, a public affairs specialist for the Food and Drug Administration, provides some guidelines when purchasing drugs:

“No. 1: Purchase drugs from a state-licensed pharmacy. “

“No. 2: Steer clear of the phone. Ordering drugs over the phone opens consumers up to even more risk.”

“No 3: Take note of changes. If your drug looks like it has been tampered with, or has a different taste, smell or packaging than it has in the past, don’t take it.”

This story;, reminded me of the overall risk involved when considering a new supply base. Counterfeit drugs can negatively impact a consumer’s health and high risk suppliers can do the same for an organization’s financial health. Just as Ward offers up some guidelines to follow when purchasing medications, here are some procurement best practices that should be carried out in every sourcing initiative:

1.Look for credible vendors who are financially stable. This may include reference checks, ability to meet requested specifications and requirements, reporting capabilities, site visits, etc…

2.If you receive email advertisements, check the suffix…gmail, hotmail, and yahoo accounts can be scam deals or small non-professional organizations. If the email infrastructure has not been developed, what does this say about the company’s overall capabilities?

3.Test out products / services – Before agreeing to contract with a supplier or begin using their services, it is very common to test a product, look at samples of items, or have a trial service run. For example, when considering a new printer for marketing materials, ask for samples of artwork before going to print.

What it really boils down to is knowing your supply base. Supplier interviews, reference checks, online reviews, word of mouth are all good ways to test the waters. Remember you would not put something in your body that was poison so why do it to your business.
Coca-Cola Refreshments U.S.A., the largest manufacturer and distribution point in the world for the largest soft drink producer in the world, has implemented a VoIP system in 100 of their largest facilities for picking orders. This voice system is currently managing 3,000 employees and this is only the beginning for Coca-Cola. At all 100 facilities, employees are using voice recognition for picking, packing, and shipping all products. This not only has improved the accuracy of orders, but has also resulted in $2million savings. Off the shelf headsets and phones are purchased rather than mobile computer units throughout the distribution centers. Coca-Cola does point out that there is a cost for making sure there are enough connections needed for coverage in a VoIP system and the need to purchase headsets; however these costs were more than offset by the savings on the hardware.

For Coca-Cola, the switch to VoIP made the most sense. The company, on a corporate wide basis, already had the infrastructure in place for VoIP, and SAP was able to work with a partner to develop an application that followed their current workflow structure. Now a voice system is managing 3,000 employees at 100 facilities, and Coca-Cola is maintaining 99.8% shipping accuracy. The outcome of this successful venture is to continue to implement this program at other facilities, and extend VoIP to other processes to continue to see cost savings and improved efficiencies.
3M to increase manufacturing of safety products at Japan facility  The Japanese government is working to restore order in the country following the catastrophic damage the 9.0-magnitude earthquake and subsequent tsunami caused on Friday. Many factories are either closed or have slowed their manufacturing in the aftermath, but industrial giant 3M announced it will increase production of safety-related products to meet burgeoning demand.

3M said that all 2,700 employees in its majority-owned Japan joint venture are safe and that its facilities were mostly unharmed from the natural disasters. Japanese authorities are currently working to prevent the meltdown of four reactors at nuclear facilities in the hard-hit northeast part of the country, but high radiation levels are hindering their progress, The New York Times reports.

The company will ratchet up production of safety products like face masks which are in high demand. "We're still assessing the situation in Japan," said 3M finance chief Patrick Campbell. "In April, we'll have a little better sense of what the impact could be. This could take a while to play out. It's a large operation for us." 3M will also produce additional respiratory safety products that are in high demand in Japan as cleanup crews sort through detritus.
Volvo's inventories of Japan-supplied components critically low  Factory outages and decreased manufacturing capacity in Japan has been widely reported over the past week, but the news reports have mostly been speculative, questioning when and how supply chains would be compromised following Friday's earthquake and tsunami.

On Thursday, fears were realized when Volvo announced it has a limited supply of Japanese components left and its production could take a big hit in the coming weeks if an alternative source is not found. The Swedish carmaker said it only has about 1 week left of critical devices sourced from Japanese factories and is looking for alternative suppliers.

According to The Wall Street Journal, Volvo purchases about 10 percent of its automobile components from Japan, but many automakers have manufacturing facilities in the northeast part of the country, which was the hardest hit part of the island nation. "If we can't get a hold of these components, it will affect the production significantly," said Volvo Cars spokesman Per Ake Froberg. "Seven of our suppliers are located in the stricken areas of Japan and they have shut down production," he affirmed.

It is exceedingly difficult to form an entirely new supply chain in a short period of time and the halt in production could dig into Volvo's sales figures in 2011. In 2010, the company reported sales jumped 51 percent from the year prior.

Non-profit health insurer Blue Shield of California said it would withdraw its request seeking higher rates for individuals after receiving harsh criticism from regulators and consumers.

According to a report in The New York Times, Blue Shield’s change of heart will come as welcome relief, as some individuals would have seen their rates increase as much as 87%. The insurer’s retreat is reminiscent of last year’s move by commercial insurer WellPoint, which originally announced huge premium increases, only to reverse course after a sharp rebuke in the court of public opinion and being called out by President Obama.

Naturally, Blue Shield tried to put the best face on it: “By agreeing not to raise rates this year, we are helping to make coverage more affordable for our members during tough economic times,” its CEO said in a statement. But the flip-flop could make it difficult for other insurers in California and in other states to raise premiums sharply as well, the New York Times reports, citing various analysts and advocates.

Under the one-year-old federal health care law, state regulators must pay closer attention to what insurers charge for policies and Blue Shield’s course reversal demonstrates that the law will help keep premiums reasonable, some advocates assert. “What it shows is that scrutiny matters,” Anthony Wright, the executive director of consumer advocate Health Access California, told the Times.

At the same time, Blue Shield’s action also demonstrates that insurers are able to absorb the losses associated with selling individual coverage because they are generating profits in other markets, such as selling coverage for employers. “It’s a reflection of how well Blue Shield and the industry are doing in their overall business,” Carl McDonald, an industry analyst for Citigroup, told the Times.

While federal law allows review of proposed rates, only some states have actually enacted legislation to give regulators the authority to deny increases they consider excessive or unreasonable. California is one state still considering giving regulators a stronger hand.

Until that authority is granted, insurers can go ahead and raise rates whether or not they are justified, according to the California state insurance commissioner Dave Jones, “At the end of the day the health insurers hold all of the cards. They get to decide.”

Siding with Jones is Secretary of Health and Human Services Kathleen Sebelius, who responded to Blue Shield’s announcement by saying: “We believe that insurance commissioners should have rate approval authority and will continue to support states’ efforts to review premium increases and protect consumers.”
As you may or may not recall, my previous post on audit telecommunications provided some insight into the data collection required to properly audit telecommunications spend, contracts, and infrastructure. In this post, I will elaborate on some of the creative ways you can use the data you collect to identify cost reduction opportunities and simplify inventory and invoicing going forward to avoid paying for superfluous facilities and unnecessary spending in the future.

By collecting all or even some of this information previously discussed and cross-referencing it amongst itself you will find that you will get a fairly solid understanding of your spend from your various carriers’ customer service records. But then you will notice you have missed a few invoices that ended up categorized as facilities in the general ledger and are signed off on by plant operations because they are dedicated to alarms, for example. Walking around the facility, you might find a lit smart jack (circuit point of entry into your building) for an old Internet T1 you have not used since the company upgraded the network and centralized Internet service at headquarters. The person paying that invoice had no idea it should have been disconnected years ago. And so on.

Simply visiting the telecom closet and checking all the lit Smart Jacks might reveal an old circuit that is being paid by another department but has not been connected to anything in the building for years. Calling each phone number for each phone line that’s being billed could reveal dozens of lines that ring with no answer, many of which may not even be extended into the facility to a desk, or do not have a phone connected to the extension. Lines that are questionable but otherwise appear to be completely unused can be prudently eliminated by having it physically disconnected in the building at the point of entry before calling the phone company and ordering a formal disconnect. This way, if someone calls complaining their phone is not working, they can be quickly restored at no cost and with no risk of losing the number.

In addition to cleaning up the actual telecommunications resources, invoicing should be cleaned up, too. Unwanted third party charges, also known as cramming and slamming charges, tend to end up on invoices from time to time. How that happens is that the crammers call someone at your organization (or at least claimed they called) to get permission to add a charge to the invoice, such as a directory listing or to move the long distance service to their platform. Often, when removing and requesting credits on these third party charges, they will claim they have recorded proof that someone at the organization authorized them to make the change or add the charge, but unsurprisingly, they often have a bit of trouble finding the recording. When they are able to playback the recording, it is usually someone who is not authorized to make changes to telecommunications and can only vaguely be construed as permission to add the charge through some very creative interpretation. Regardless, these charges sometimes look legitimate but can add up quickly, especially if many local invoices exist.

The process of identifying and understanding the inventory can be somewhat slow and painful, but it is worth it. Inevitably, you will find a number of resources and charges that can be cleaned up and eliminated immediately which not only saves the company money each month going forward, but also makes auditing the invoicing against the contract simpler. Ideally new lines, circuits, and other services will be added under existing agreements and accounts. If other groups or individuals order outside of the established accounts in the future, your clean inventory and sound understanding of your spend will help you identify those new orders quickly so they may be tracked and optimal savings can be sustained without inventory creeping out of hand again.