July 2011
Volatile commodity costs weigh on VW, but company raises its proft outlook  Germany-based Volkswagen is gunning to become the world's biggest automaker and according to a published report, the company is experiencing surging demand for its vehicles.

Reuters reports that Volkswagen officials said this week that they expect the company's operating profits to jump this year. The uptick in earnings, according to industry experts, is fueled by soaring demand for its Audi and VW cars.

VW released its latest fiscal earnings report this week and reported that its second quarter operating profit surged 59 percent to roughly $4.5 billion. Even with the precipitous jump, however, VW shares still fell as analysts had projected the company's operating profit would hit $4.6 billion.

VM said that even as it experiences brisk car sales, rising commodity costs were preventing the company from achieving business cost reductions. Manufacturing cost reductions have helped to increase profit margins, but volatile price swings in critical components like metals are affecting earnings.

"While the second quarter did not show the advance that some of us were anticipating, profitability remains robust," Bernstein Research's Max Warburton affirmed.
Ford to invest $1 billion in India as it expands into country's hot car market  Global automakers have been announcing their plans recently to pursue international growth as a means of increasing sales. According to a published report, Ford Motor Company plans to invest more than $1 billion in India to ramp up production in the emerging economy. 

The New York Times reports that Ford will invest the money to build factories in the northwest region of the country. According to the news provider, the Detroit-based automaker hopes to produce more than 225,000 cars in the country per year once it has expanded its manufacturing capacity.

The strategic sourcing of suppliers and a focus on business cost reductions has led many carmakers to more aggressively pursue growth in the so-called BRIC economies of Brazil, Russia, India and China. While it nearly collapsed nearly two years ago, Ford has roared back on the strength of its small cars to become one of the globe's most profitable automakers.

Car sales surged 29 percent in India in 2010 to 2.5 million vehicles and many industry experts assert that the country will become a critical market for automakers over the course of the next decade.

Setting ideologies aside (if you are able), each side in Washington has made some serious tactical blunders in the debt ceiling debate. If we can divorce our passions and anxieties from this situation, we all may be able to learn a thing or two on how to, or how not to, go about engaging and interacting with the person or team on the other side of the table.

Obama, on his part, has been intent on maintaining his professorial "Most Reasonable Man in the Room" appearance. While that may play well for the history books someday, it does not win this battle, nor does it necessarily give him an edge in the upcoming elections. Remember Michael Dukakis? Of course you don't remember George Bush Sr.'s rival in the 1988 presidential elections, because he ran on a theme of "competence" (in contrast to Reagan's apparent bluster), which promptly and swiftly lost him the election.

The Republicans, however, may have overplayed their hand in the current debate. The Tea Party caucus, in wanting everything they're demanding, and in large part driven by the pledges they signed for Grover Norquist's organization Americans for Tax Reform, promising not to raise taxes under any circumstances, have taken an absolutist ideological gamble that risking a debt ceiling default is not going to be perceived by their electorate as more damaging than going back on their no-taxes pledge. They well remember how Bush the First, after beating Dukakis, was hammered by Clinton the next time around, by going back on his famous "Read my lips: No new taxes" pledge.

But the problem is, the debate has raged so long that the credit markets may very well reduce the U.S.'s sterling credit rating anyway, especially if any deal that comes out of this is a temporary six-month fix.

This whole scenario reminds me of a scene in the movie "Mulholland Falls" (I love it, but it got a rather poor rating on IMDB). In the film, Nick Nolte is a cop on "The Hat Squad" in 1940s Los Angeles. He uncovers a conspiracy surrounding atomic bomb testing. A girl who was dating the chief scientist of the conspiracy is killed because she knew too much. It just so happens that Nolte, who was married, had had an affair with her too, and the bad guys got a film of it. Before she died, she passed a film with incriminating evidence to Nolte. Treat Williams plays an Oliver North-type military character who will do anything to bury the conspiracy. Williams wants to swap the affair film with Nolte for the conspiracy proof film. To induce Nolte to be willing to bargain, he sent a copy of the affair film to Nolte's house, where his wife (Melanie Griffith) watched it, freaked out, and left Nolte.

Through a series of intrigues, Williams gets Nolte on a cargo plane over the Nevada desert where the testing took place. This conversation then takes place:

Williams: "You gave us the wrong film, Lieutenant.... Everything you have for everything we have; that was the understanding."

Nolte: "Well you see there's a problem. You sent the film to my house."

Williams: "That was to get your attention. No copies were sent to the press or the Los Angeles Police Department."

Nolte: "You see, the problem is, you sent the film to my house, addressed to my wife. She watched it. I don't care who sees it now. You see what I mean? I don't have anything to lose."

A fight ensues, and Nolte gets the better of Williams. Nolte gets Williams by the open door of the plane, and just before he throws him out, there is a last interchange:

Williams: "You're pathetic, Hoover! I did my job! She died because she was in the way!"

Nolte (screaming): "She died for nothing, you son of a b***h!" Nolte then tosses Williams out of the plane.

By way of analogy, we can imagine that Obama is Nolte, the Tea Party Caucus is Williams, the wife who left Nolte is the U.S.'s credit rating, and the dead girl is the dead trust and respect of the American people for their elected representatives.

If the U.S.'s credit rating gets downgraded anyway, Obama has nothing left to lose. He has already declared that "This may bring my presidency down, but I will not yield on this," meaning approving a short-term debt ceiling lift. None of the proposed plans can pass both houses, and definitely not the President's desk. More than likely, Monday will see a "clean bill" authorizing the debt ceiling increase, and the Tea Party will ultimately have acheived nothing.

The Tea Party is going to its (metaphorical) death believing it has done the right thing; I strongly believe all incumbents will be punished for this in 2012, which does not bode well for the Republicans in the House.

But Obama is severely damaged as well (Nolte lost his wife, his job, the girl he loved, and all his partners in the battle with Williams). It remains to be seen if he can rescue his presidency from this debacle. My guess is no, unless the Tea Party, not realizing the irreparable damage it has already caused itself, continues in its intransigency for the rest of this congressional term and practically begs the American voters to "kill" it.

So, what is the negotiating lesson to be learned here? Primarily, that playing a zero-sum, winner-take-all game can often inflict damage on both parties to such an extreme that both lose, as well as those for whom they were negotiating. The end result is a cheaper, meaner situation that nobody is happy with. Building trust, respect, and a multiple-win scenario is always preferable, especially if you have to deal with those parties again in the future. Remember what Grandma always told you: "You can catch more flies with honey than with vinegar." Think about this next time you find yourself across the table from suppliers, or anybody from whom you want something.

There are many more lessons to be learned here, but I leave them as exercises for the class to work out on its own.
Rains seen helping U.S. soybean, corn crops, allaying supply concerns  The soaring price of commodities over the past two years has caused inflationary pressures in countries throughout the world. In the U.S., reports of coming rains drove soybean and corn prices down as experts said they would help to increase crop yields.

Bloomberg reports that 1.5 inches of rain fell from Tuesday into Wednesday in regions of South Dakota. Following a spate of hot and humid weather, the rains are a welcome relief to farmers who were increasingly concerned about the effect the arid weather would have on upcoming harvests.

Rains predicted for large swaths of the Midwest, stretching from South Dakota to the southern region of Wisconsin, as well as from eastern Kansas to southeastern Indiana, will benefit corn and soybean crops, A/C Trading Inc. president Jim Gerlach said.

"The weather still does not look to provide any major stresses to the crops in the next week to 10 days," he told the news agency.

On the Chicago Board of Trade on Wednesday, corn futures were largely unchanged, trading at $6.86 per bushel. Soybeans futures declined by 0.5 percent to trade at $1.38 per bushel.

Corn is the biggest U.S. crop, followed by soybeans.
Durable goods orders fell in June  While the U.S. manufacturing sector has experienced steady growth over the past few years, recent reports indicate that its expansion could be slowing.

According to a report from Bloomberg, orders for U.S. durable goods fell unexpectedly in June. Industry analysts and manufacturing company officials met the news with a collective groan, as they worry that depressed business demand for new products will hurt economic growth during the latter half of this year.

According to Commerce Department data released this week, bookings for goods meant to last at least three years fell 2.1 percent in June. The downshift in demand was especially pronounced given the 1.9 percent uptick in bookings logged in May.

As businesses throughout the globe have endeavored to achieve business cost reductions and improve strategic sourcing in an effort to cut costs, their efforts have been at times negated by a contraction in consumer spending, experts affirm.

"The momentum in capital spending has slowed," HSBC Securities economist Ryan Wang said. "Unless we get a pickup in consumer demand, the overall rebound in growth is going to be pretty moderate."

The drop in durable goods bookings caught many analysts off guard. A prior survey of 76 economists by Bloomberg had projected a 0.3 percent increase in new orders.

Demand for business equipment like machinery and computers fell in the month, according to data. Transportation equipment orders inched up only slightly by 0.1 percent, while demand for transportation gear fell by 8.5 percent.

"The ups and downs over the past few months have left the level of orders relatively flat and that does not bode well for future growth," Naroff Economic Advisers president Joel Naroff told MarketWatch.

Industry experts said that the monthly durable goods report is highly volatile because certain equipment, like aircraft, is exceedingly expensive and orders can vary greatly from month to month.

In somewhat positive news, shipments of durable goods increased 0.5 percent in June, while inventories climbed 0.4 percent during the month.

"We're not looking at a robust recovery period here, but through thick and thin, it’s being sustained," ISM chairman Bradley Holcomb said of the manufacturing sector’s consistent expansion.
Amazon earnings surpass expectations as company invests in pursuit of future growth  Amazon, the world's biggest online retailer, released its latest quarterly earnings report this week, surpassing expectations.

Bloomberg reports that the Seattle, Washington-based company reported net income of $191 million in its second fiscal quarter, which was down slightly from 2010 levels. However, net sales climbed to $9.91 billion, which was ahead of analysts' expectations.

The strategic sourcing of its products, along with an emphasis on business cost reductions, helped to fuel growth during the quarter. What's more, Amazon officials said that sales of its popular Kindle e-reader and the growing popularity of its online digital media services also boosted revenue.

While Amazon's profit margins have fallen over the past few fiscal quarters, industry analysts said that the company is merely investing in its future growth, constructing additional distribution centers that will help to increase future efficiency.

"We're seeing continued robust revenue growth, better than expected," Robert W. Baird & Co. analyst Colin Sebastian told the news agency. "Amazon is running on all cylinders, despite the pressure on its margins." 

Amazon chief financial officer Tom Szkutak said that the company planned to invest in more than 15 fulfillment centers this year as it works to augment its production capacity amid surging demand.

"This is the strongest growth we've seen - both in terms of percentage growth on a dollar basis as well as local currency growth - in over 10 years," Szkutak affirmed. "Because of that, what we see looking forward is we're investing a lot in capacity." 

Manufacturing cost reductions, which Amazon has achieved through improving efficiency at its technology advanced fulfillment centers, have helped propel the company's expansion over the past few years. Amazon chief executive Jeff Bezos asserted that an amalgamation of forces has spurred the company's rapid growth this year, Reuters reports.

"Low prices, expanding selection, fast delivery and innovation are driving the fastest growth we’ve seen in over a decade," he said. 

Amazon executives also that the company's third quarter guidance had been raised based on brisk sales. Amazon expects third quarter sales to hit between $10.3 billion and $11.1 billion, which would represent a precipitous jump from the same period the year prior. 

Still, operating income will likely decline between 37 percent and 93 percent, the company projected, as it aggressively invests for future growth. 

As demand from carmakers soars, aluminum plant to expand  The manufacturing sector in the U.S. has helped to drive economic growth over the past few years, often serving as one of the lone bright spots in an otherwise murky economic picture. According to a published report, one aluminum plant in New York plans to expand. 

The Associated Press reports that an aluminum plant in northern New York run by Novelis has begun to invest some $200 million to upgrade the manufacturing facility. Sheet aluminum has become an increasingly hot commodity over the past few years as the global automobile market has rebounded from its recessionary lows.

As a result, Novelis officials said that the company needs to augment production capacity at the plant to keep up with burgeoning demand. The strategic sourcing of such metals is of the utmost importance to many carmakers and the plant is a supplier to a number of the biggest automakers.

The plant in Sriba, which is about 30 miles northwest of Syracuse, currently employs 650 people and is the world's biggest producer of rolled aluminum, according to The AP. The planned expansion will help the facility to generate 200,000 tons more aluminum sheet per year.
Nissan pursues growth in China  Nissan plans to aggressively pursue growth in China, according to a published report.

Carmakers suffered a major blow this year when their supply chains were disrupted by the 9.0-magnitude earthquake and tsunami that struck Japan on March 11. Since then, many automakers have recovered, with Toyota recently announcing it will resume full capacity ahead of schedule.

Reuters reports that Japan-based Nissan will invest roughly $7.8 billion in the world's second-biggest economy by the end of 2015 as it works to increase its market share in what has quickly become the biggest automobile market in the world.

Dongfeng Motor Co., which is Nissan's joint venture with Dongfeng Motor Group, hopes to sell 2.3 million vehicles this year. That would mark a significant increase from the 1.3 million vehicles the company sold in China in 2010, industry analysts assert. Nissan chief executive Carlos Ghosn said the move will help the carmaker to increase its global market share.

"We used to be extremely dependent on one market," he said. "The development of the Chinese market for us is making Nissan less dependent on one region, or one country, or one market." 
UPS reports higher profit amid supply chain improvements, climbing demand from China  The logistics company the United Parcel Service (UPS) reported its quarterly earnings this week, topping analysts' expectations on improved growth in China and business cost reductions, according to a published report.

The Wall Street Journal reports that UPS' second fiscal quarter profit jumped 26 percent from the same period in 2010. The uptick was fueled by an expansion in both China and Europe, according to UPS officials. Company officials warned that it faces depressed demand in the U.S. amid economic uncertainty fueled by the stalled debt talks.

"Gridlock in the nation's capitol clearly is not helping," UPS chief executive Scott Davis said. "Consumer confidence is down because of it."

While UPS expects domestic growth to be flat in the coming third quarter, the company said it expects the economy to pick up during the fourth quarter. That, of course, is dependent on officials coming to an agreement on the debt ceiling and deficit reduction packages. Profit growth in international markets, meanwhile, is expected to expand in the upper teens.

Supply chain revenue at the company grew by 7 percent during its second quarter, fueled by efficiency improvements. 
The End of the World, American Style

There was much hoopla and hullabaloo about the End of the World back in May of this year. That date came and went without an appreciable difference in the condition of the planet, although some people might try to claim we experienced Hell on Earth last week across much of America. However, no sign of the apocalypse. But now our politicians are desperately trying to create a financial End of the World, or at least the End of the American Dream, by not passing the debt ceiling.

There is plenty of blame to go around, and we will no doubt argue endlessly about who caused this, and why. But the sad fact remains, even if we avert this catastrophe in the 11th hour, the trust between the politicians, with the constituents, and with the world economic markets is already broken, and any hope of a functional U.S. government is pretty much dead, at least for a generation.

Civility and a spirit of cooperation are gone, and the Grand American Experiment of compromise and E Pluribus Unum may be irreparably wounded. Is this really the legacy we want to leave for our children?

Here is the acid test: if you would not put up with certain behavior from your children on a playground, then you should not act that way yourself in public, especially in the halls of Congress or in front of cameras.

The true losers in all this are the American people, especially the ones looking for work. The solutions either party is proposing are not going to rev up the economy and create jobs any time soon. It is all political showmanship, and while it makes for a great blood-match game (I watch politics like others watch baseball or football), it is not solving any fundamental problems.

Tom Brokaw, in his book The Greatest Generation, makes a salient point about shared sacrifice. We, the children and grandchildren of "The Greatest Generation," have lost that sense of willingness to sacrifice for the common good, because we have lost the sense of community that binds us together as Americans, 9/11 notwithstanding.

Our current societal model is more like the game of Musical Chairs we played as kids. When the music stops, push the kid next to you out of the way and grab a chair, because somebody is going to be a loser, and it's not going to be me! We have spent decades absorbing movies about political and cultural hellscapes, like Mad Max, Terminator, I Am Legend, 28 Days Later, and many, many others (anybody remember the original Death Race 2000?). Now it seems like we're hellbent on creating such a nightmarish world in reality.

That was the point several commentators were making a few months back about the loss of civility. I am an eternal optimist, and I never think it's too late to do better, to forgive and try again. But if we can't regain that sense of respect and community, that idea that we are all in this together, and pass a debt ceiling increase that is more than political Kabuki theater, then you might as well just shove somebody out of the way and grab a chair for yourself, because it will be the End of the World, as far as American economic, military, and cultural predominance in the world is concerned.
Toyota to resume full production by year's end  The natural disasters that struck Japan on March 11 caused a number of businesses operating within and outside of the country to struggle to find alternative suppliers as Japanese companies repaired damaged manufacturing facilities. According to a published report, the world's biggest automaker is nearing pre-disaster output levels after months of supply chain disruptions. 

The Wall Street Journal reports that Toyota Motor Corp. said on Monday that it is on pace to resume full production within the next few months. According to company officials, in June the carmaker's production capacity nearly reached year-ago levels, bringing it a step closer to fully recovering from the devastating earthquake and subsequent tsunami that caused significant damage to a number of its manufacturing plants.

Japanese automakers were hit hard by the natural disasters, but Nissan, Toyota and Honda have all reported in recent weeks that they are faring better as the year has gone on. Car companies were not the only businesses that were affected by the March 11 events, industry analysts assert, but the exceeding importance of Japanese companies in the global automobile market left carmakers throughout the globe reeling.

According to Toyota, its domestic output by volume dropped by roughly 16 percent in June from the same period in 2010 to 249, 660 vehicles. While the double-digit decline is still significant, it represents a big step forward from its April and May production levels. Toyota car capacity plummeted 54.4 percent in May and 78.4 percent in April from levels logged in 2010, according to data.

Toyota is benefiting from increased manufacturing capacity not only at its own production facilities, but also from its suppliers. Japanese companies are responsible for the production of a number of critical car components and while many of those firms suffered setbacks in March, they have since repaired facilities and are churning out goods at a faster clip, helping automakers around the world to recover more quickly.

Toyota is aggressively working to increase its manufacturing capacity this year as it endeavors to maintain its lead as the world's biggest carmaker. Company chief executive Akio Toyoda told investors and reporters at the company's shareholder meeting last month that he expected full capacity would be restored by as early as July.

The news from Toyota comes in the wake of similar announcements by other Japan-based carmakers, including Nissan. In May, Nissan chief executive Carlos Ghosn said that the company was set to perform a final set of fixes on its production plants and that it planned to resume full capacity before the end of the year.

Toyota is also overhauling its business operations this year as it looks to increase its market share and emerge from the crisis stronger than before.

Still, some industry analysts contend that Nissan has adeptly navigated the crisis and could within the next few years become the largest automobile manufacturer in Japan. Nissan was the only one of the big Japanese carmakers to report that its domestic production in June topped year-ago levels.

The supply chain disruptions emanating from the natural disasters in Japan caused many carmakers across the globe to overhaul their strategic sourcing as they endeavored to achieve business cost reductions in the wake of mounting expenses.

While global car sales have climbed in the aftermath of the worst economic contraction since the Great Depression, many carmakers reported a dip in sales in May and June, citing the continuing problems in Japan. 
North Dakota farmers wait as heavy rains hurt wheat crops  While many regions of the U.S. have been blanketed by an unrelenting heat wave over the past few weeks, farmers in North Dakota are concerned that heavy rains will lower wheat crop yields this season, potentially driving up prices. 

Bloomberg reports that North Dakota, which is the largest producer of wheat of any U.S. state, could have reduced crops this year amid heavy rains. Spring wheat is used to make pizza and crust and that crop is maturing at its slowest pace since 1995, according to data released by the U.S. Department of Agriculture (USDA).

USDA forecasters said previously that they expect wheat crops to fall 16 percent this year from the year prior. According to USDA officials, they might have to overhaul their previous projections following the reports of heavy rains. USDA representatives are scheduled to tour wheat fields beginning tomorrow.

The USDA predicts that North Dakota may generate 233.7 million bushels of spring wheat this year, which is far less than the 277.2 million bushels harvested in 2010. That, however, was predicted in a July 12 report.

On the Chicago Board of Trade on Monday at 12:20 p.m., wheat futures were down 2.5 percent to trade at $6.75 per bushel.
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I came upon this real short article talking about how even the most novice of couponers can get started. It was basically a five step approach that laid out how anyone can get in the habit of coupon clipping and saving.  The process starts by planning and organizing based on upcoming sales and coupon sources then actually collecting the coupons.  They suggest looking for sales first then planning out what you need based on those sales and the stores they are available within.  Next step includes leveraging the sales and coupons to work in your favor and finally being flexible with your purchases, such as not necessarily always buying branded products.
This got me thinking, especially the last two steps that involved leveraging your resources and being flexible with your purchases.  The ideas are certainly not new and can be applied to any situation in which savings is achievable.  Let’s start though with a brief history on coupons, as far back as 1887, Coca Cola was the first company to use the now renowned marketing ploy to convince people that they are getting something for nothing. They began by offering coupons for a free product sample and this, hook-line-and-sinker, led to the spread of the product nationwide in record time.  The company was able to make up the loss of those “free” samples through future purchases of the product.  It was a genius move really. To this day suppliers all over the world are using this concept to draw in new consumers and retain a loyal base of repetitive purchasers.

Just as you experience this in your personal life, your business suppliers use similar methods to acquire new consumers and win business from their competition on a daily basis.  In other words suppliers will make concessions on one product or service in order to gain the account altogether or additional business from a current customer.  Take office supplies for example, a supplier can reduce the profit margin on commonly used products such as writing utensils, mailing supplies, and the like while making fewer concessions on products that they have less control over such as commodity driven paper and technology based products. As a customer it is important for you to plan ahead and organize what areas you want to save on. Then look for opportunities within those areas that have potential for savings by collecting resources either through by using a sourcing professional or doing a little internet research on your own. Match the opportunities with your savings goal and leverage your spend with incumbent and alternate suppliers to maximize the potential opportunities.  Finally be flexible in your buying and approach to savings, a self-branded pen is just as good as a name brand pen but will cost you much less.  Understand where you have flexibility and how to use it in your buying behavior.  Also be on the lookout for “coupons” from suppliers, this can come in the form of free shipping or value-add programs that can put implemented at no cost.  Your suppliers value your business as much as, if not more than you value their products and service and it is important for you to understand how to leverage that within reason as to not damage the relationship.
In my last post I wrote about why the majority of savings opportunities - up to 66% according to an Aberdeen study - are squandered: lack of an implementation plan and lack of a supplier management strategy. The underlying root cause of both of these issues is the failure to recognize the importance of change management when engaging in a cost reduction initiative.

As the sourcing lead, one hat you wear, like it or not, is that of change manager - ensuring that if cost reduction is identified, the opportunity will not be squandered. The first step in becoming change manager is understanding the types of challenges you will encounter. In my next two posts I will outline some of the major challenges encountered during a strategic sourcing engagement. In my final post on the topic I will provide some context on how to get ahead of these challenges and ensure savings are realized.

Challenge #1: The Facts Do Not Always Speak for Themselves
Completing a solid analysis of savings identified during the strategic sourcing process does not necessarily translate into rational business decision-making. Rather than focusing on the results, many end users look for gaps in the analysis or comparisons that are not apples-to-apples. In some cases, end users are simply doing their homework, and once they have determined that the analysis is solid, they will proceed with your recommendations. Others will attempt to question anything in the hope of stalling the initiative or derailing it. For example, an end user might say, “I talked to that supplier before; I didn’t think it could handle our business.”

The facts (or savings) do not always speak for themselves, and just because hard dollars are on the table does not mean that the folks responsible for day to day activities within the category will support the outcome, or take any responsibility for it.

Challenge #2: Misinformation
As is often said in politics, perception becomes reality. Even if you provide a clear response to end-user questions and concerns, it often seems like their original premises stick. People within the organization will remember the challenges and continue to restate objections that have already been effectively addressed. Misinformation can spread like wildfire throughout an organization. If you keep your implementation timeline on track, this lack of facts can be irrelevant. People always talk and rumors always abound. However, if you find your timeline is slipping or your plan is falling off track, you need to find new ways of communicating your message to counter misinformation. It is at this stage that executive sponsorship becomes helpful. If you have a high-level sponsor who can help get your message out through the organization and cutoff rumors, now is a good time to use them.

Challenge #3: Missing the Big Picture
Along the same lines as misinformation, an end user who does not have all of the information may be as detrimental to your success as one who is simply misinformed. For example, it is very common, as implementation proceeds, to hear end users start to complain that they used to receive better pricing from a supplier that they found for a very specific item, often something as minute as a roll of toilet paper. They will prove that they were paying $.59 a roll versus the $.65 that the new supplier shows in the catalog. They then use that information to show every other user how they did a better job negotiating than the procurement team, and they may continue to purchase off-contract. The piece they are missing is that there might be a yearly rebate from the new supplier that offsets the higher unit price, or that you need to lump that spend into a larger bucket (and take a small loss) in order to adhere to a volume commitment to your new supplier that drives savings that far offsets that single loss item.

Unfortunately it is difficult, and sometimes impossible, to share the entire big picture or explain a contract to each and every end user. It is also something that usually does not show itself in the first month of an implementation; it may happen months down the road. Careful auditing can help eliminate this issue.

Challenge #4: “We tried this Before and it Didn’t Work”
End users, particularly those with years of experience or seniority within your organization, also use past experience as a justification for why change cannot happen. If at any point in the past another supplier was under contract and that supplier failed, you will likely encounter the “We tried this before and it did not work” argument. End users often use this argument to justify why the currently-utilized supplier is the only supplier in the marketplace that can properly serve your business. One way to counter this argument is by converting their subjective concerns into objective analyses. Try to discover precisely why the former supplier failed, and how the new supplier has taken care to avoid the same issues or, in the case that the new supplier is the supplier that failed, make the supplier document what has changed in their methods of doing business to address the issues.

These four challenges are all responses you will receive from those resistant to change. There are things you can do to prevent them, but more than likely you will encounter them at least once during a project. Other challenges, however, arise due to a lack of upfront investment and thought on the part of the sourcing lead. In my next post, I will discuss those challenges.
In a show of its manufacturing might, GE posts solid earnings report  In what industry analysts assert is an illustration of the ongoing strength of the U.S. industrial sector, General Electric's latest quarterly earnings report impressed shareholders this week, driving the company's stock up.

According to The New York Times, the U.S.-based industrial products conglomerate reported this week that its earnings were up from the same quarter last year. GE, which manufactures a wide array of products ranging from gas turbines to jet engines, said that growth in international markets continued to contribute to its solid performance.

According to GE, revenue in international markets jumped by 23 percent during its last fiscal quarter. International sales account for 59 percent of GE's industrial business, according to The Times.

"There has been good growth in several of the industrial businesses, and GE Capital continues to recover," Standard and Poor's analyst Richard Tortoriello said.

GE's net income climbed 20 percent to $3.8 billion, which is up from the $3.1 billion it recorded during the same quarter the year prior. The strategic sourcing of its suppliers, along with an emphasis on business cost reductions, has helped GE to emerge from the recession on solid footing. 
Tight inventories seen raising cattle prices  Rising food costs are being spurred by a shortage in supply, according to a published report.

Bloomberg reports that as of July 1, data indicates that the U.S. cattle heard likely hit its lowest levels ever. Industry analysts assert that rapidly dwindling inventories are fueling price gains across the board as herders to pay hefty feed costs.

The higher beef prices are affecting the U.S. Consumer Price Index (CPI), as well as those of a number of other countries. Companies like Wendy's and Tyson Foods that deal heavily in meats are also beginning to offset the rising price of meat onto consumers.

According to estimates by analysts, ranchers held 99.39 million head of cattle as of July 1, which is down 1.4 percent from year-ago levels. That figure is the smallest ever recorded since the U.S. Department of Agriculture (USDA) began collecting data in 1973.

The government said it will release official data on Friday afternoon.

On the Chicago Mercantile Exchange on Friday at 11:45 a.m., live cattle futures were up 0.65 percent to trade at $1.16 per pound.
Germany businesses increasingly shift manufacturing to Asia  Germany, which is by far the strongest of any of the 27 European Union (EU) economies, has moved to shift its manufacturing away from EU member nations as it works to take advantage of booming growth in China. The change, however, is hurting the overall recovery on the continent, according to a published report.

The New York Times reports that in the wake of the global recession, Germany's businesses have emerged newly strengthened by surging demand for their industrial products. While German companies used to boost the economies of countries like Italy and France as they set up manufacturing facilities and other distribution centers, a growing slice of that work is going to Asian and other emerging economies.

The shift, however, is worrying economists as Europe has historically relied on Germany to drive its overall economy. German companies are achieving business cost reductions in Asian countries where labor is cheaper and they are overhauling their strategic sourcing of goods as they endeavor to meet demand from international markets.

"It reinforces a shift that we have seen in recent years for Germany to become rather more focused on its own national interests rather than sacrificing for some defined European interest," London School of Economics professor Kevin Featherstone affirmed. "Germany is not giving up on Europe, but it is certainly frustrated."

German companies are increasing production capacity in countries aside from EU member nations. China is currently the biggest market for Germany-based carmaker Volkswagen, and analysts assert that the same could soon be true for both Mercedes and BMW.

Businesses like Fresenius, which is a healthcare company located outside Frankfurt, are reporting exceedingly strong growth in Asia, while European growth is strong but not overwhelmingly so. For example, in Asia Fresnius said sales increased by 20 percent in 2010, while European growth was up only 8 percent.

Nonetheless, experts note that European countries comprise the largest component of German businesses' revenue, though that figure is falling. In 2010, the euro zone's share of German exports hit 41 percent, which was down from 43 percent in 2008. Asia's share, on the other hand, was up to 16 percent from 12 percent.

With Germany largely funding the recent bailout package for Greece that was passed this week, the country has increasingly moved to exert its national interests. With an unemployment rate of roughly 6 percent, its economy is churning and as businesses look to continue to log hefty earnings gains, Asian countries are seen as a source of potentially huge growth. 
Space Shuttle Atlantis achieved "Wheels Down" for the last time yesterday. This has been accompanied by much wailing and gnashing of teeth, but actually, it is long past time for this co-dependent relationship between the federal government, in the cloak of NASA, and the military-aerospace-industrial complex to come to an end. President Bush, then President Obama, had the courage to conduct an intervention and break the addiction to "business-as-usual." Now perhaps we can get around to the real Space Age.

I find it exceedingly ironic that it is often Republican politicians, who love to give lip service to the power of "the invisible hand" (go look up Adam Smith on Wikipedia) of the free market, are some of the staunchest defenders of the old guard aerospace contractors, while the "socialist" Obama is the one who, with brilliant advice from NewSpace counselors, has held the course to change the course of America's foray into space.

I will bet that most of those reading this have never heard the term "NewSpace" before. It is a term coined by the Space Frontier Foundation to distinguish between private enterprise heroes who are building a true and sustainable spacefaring capacity and the "OldSpace" aerospace contractors who have been sucking at the government teat for at least as long as the Shuttle program has endured.

Those NewSpace heroes include visionary entrepreneurs like Elon Musk, who made his fortune by creating PayPal, and is now sinking his money and talents into SpaceX. The company has launched a privately-funded rocket into space, which carried an astronaut-capable capsule to orbit, then was safely returned to Earth. This is the American vehicle which will take astronauts and supplies to the International Space Station within a year or two. But such development was never going to happen while the government was focused on keeping the massive jobs program known as the Space Transporation System (Shuttle) on life support.

Another hero is Jeff Bezos, of Amazon.com fame, who is building a private rocket on his ranch in Texas. He is not doing it for publicity; in fact, it is next to impossible to get news of progress. The world will learn of it, no doubt, when the vehicle is launched into space.

Richard Branson, the Rebel Billionaire, is another champion of NewSpace. He is building Spaceport America in the New Mexico desert, where, if you have $200k to spare, he will launch you in a suborbital joyride to view the wonders of our blue planet and enjoy the rapture of weightlessness for a few minutes. "Toys for the rich," you scoff, but that's exactly how much of our indispensible technology started, from phones to cars to refrigerators to computers and many other "must-have" devices and systems.

This is all as it should be. Rick Tumlinson, one of the founders of the Space Frontier Foundation, puts it this way: "It is long past time for us to try something different, as what we have been doing in our human space program since Apollo has been a failure of epic proportions. And yet, some defend the status quo and are actually angry about the coming changes proposed by the Obama Administration.... It is heretical to say it in many quarters, but unlike its astronomy and robotic exploration programs, the current NASA operated human spaceflight program has failed by any rational measure in almost every respect to achieve Any of the milestones put forth by those who sold them to the American people so long ago.... Rather than seeing itself as the emperor of all things space, it [NASA] will have to change how it views the zone from the Earth’s surface to LEO. The agency simply cannot get it right when it comes to trying to build its own launch systems in any economic sense, and it is time it stopped trying. The agency will have to step aside in this area that it long ago pioneered. It will no longer be its own trucking service for small package delivery to space. It will have to relinquish its role as its own taxi service to LEO and leave the driving to someone else. Instead this job will be given to privately funded New Space firms across the nation that are working on a variety of rocketships that could catapult us into the space frontier and global space leadership at a fraction of the cost of any new NASA system." http://spacefrontier.org/2010/03/19/change-is-coming-to-nasa-space-launch/

So before you start weeping and wailing and gnashing your teeth about the demise of the Space Shuttle, keep this in mind: you were never going to get the chance to ride on one, which is not the case with the NewSpace offerings. This time around, we all get to go, if we want to.

The space shuttle Atlantis flew its last mission on Thursday. After 30 years, there will be no more shuttle missions as the last shuttle flight was completed. If NASA wants to fly astronauts to the Space Station, they will have to go aboard a Russian spacecraft. Forty years after President Kennedy set the goal of putting a man on the moon and safely returning him to earth, the United States is without a spacecraft.

This comes at a time when the United States is in danger of defaulting on it debt for the first time in its history. Treasury Secretary, Timothy Geithner, has repeatedly stated that the United States will not be able to fund its obligations after August 2nd unless congress raises the federal debt ceiling. Currently, the Federal debt is over $14 trillion dollars with state and local governments owing another $3 trillion. Forecasts show that the government has another $114 trillion in unfunded future liabilities unless officials can agree on reforms to social security and medicare. At the moment, this does not seem likely.

Is the last shuttle flight the definitive "Jump the Shark" moment in US history? The United States government is swimming with debt. They have ownership in a space station that they can't get to unless they hitch a ride from the Russians. It's the equivalent to building a house on an island when you don't own a boat and you're not on the best of terms with your neighbor that does have a boat.
Soaring food prices in Asian countries worry economists, policymakers  The surging price of commodities is affecting countries throughout the globe, driving inflation rates higher and leading to political instability in some cases. According to a published report, Asian countries are being adversely affected by the rising prices.

Bloomberg reports that traditional Asian cuisines like pork, rice, onions and chilies, among other food staples, have soared in price since the beginning of the year. Economists have warned that high commodity prices often lead to political as well as economic instability, with a number of the revolutions in the Middle East and North Africa triggered at least in part by the high price of food.

Asian countries, however, are starting to feel the pinch as well. China has been battling a rapidly climbing inflation rate over the past year and even though policymakers have endeavored to slow the economy's red hot pace of growth, inflation rates continue to plague the world's second biggest economy.

Pork prices in China rose precipitously in June, according to data, with the meat staple's price climbing 57 percent. What's more, India was forced to purchase onions from its fierce rival Pakistan because of supply shortages in other parts of the globe.

Food comprises more than 30 percent of the inflation index in Asia, which is far higher than the 15 percent it occupies in Europe. In the U.S., that figure is only 10 percent. Emerging economies, of which China and India are a part, often are more sensitive to fluctuations in food prices, according to industry analysts.

As a result of the higher food prices, a number of Asian countries have moved to raise interest rates as they work to rein in inflation. This, however, increases the cost of borrowing and can effectively stymie growth in many instances.

In Singapore, the government recently raised its Consumer Price Index (CPI) forecast, according to The Wall Street Journal, illustrating the growing threat of inflation in the country. Still, the government said its strong dollar policy has capped inflation - though it is not pleased with high inflation.

Nonetheless, Singapore is a more developed nation that other Asian countries, leading analysts to continue to worry about how high food prices will affect Asian economies.

"For low-income countries, food expenditures normally account for a larger share of the consumption basket," Asian Development Bank director general Yao Xianbin told Bloomberg. "As countries get wealthier, food expenditure will account for a declining share of total expenditure."
Strategic Sourcing BookSource One is proud to officially announce the upcoming release of its book: Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing.   With a release date scheduled for October 19, 2011, Source One has begun interviews and speaking events to help promote the book and to answer questions about its content, history and the authors.  The book is currently available for pre-order via Amazon.com.
The idea for the book, Managing Indirect Spend, came about when Joe Payne and William Dorn of Source One started reviewing published training materials and realized that there was very little content available (outside of direct materials) to assist procurement professionals or financial professionals in learning the best practices of strategic sourcing.  On top of that, the materials that do exist in the marketplace attempt to enforce strict processes (such as the widely known 7 step sourcing process) and do not provide for any creativity or adaption to those processes.  Ultimately, static sourcing procedures lead to mediocre results.

This book offers value to both sourcing newbies and polished professionals.  Finance, Operations, IT and other professionals new to sourcing will find a plain language guide to help in strategic sourcing projectsl from concept to team development all the way through implementation.  Experienced strategic sourcing professionals will find detailed examples, tips to solve difficult situations and specific commodity sourcing guides for common spend categories.

Save 37% on the hard copy book by pre-ordering via Amazon.com today!
A more detailed layout of the book is available here.
See our new promotional website at: www.StrategicSourcingBook.com
Industry analysts and experts are encouraged to contact Alex Howerton, Business Development Manager of Source One to arrange interviews, ask questions or to request a review copy.

To increase efficiency and make cost reductions, government seeks to close data centers  Computer centers are some of the biggest energy consumers in the world. Many businesses have worked over the past few years to reduce their computer centers' energy consumption and now the federal government is endeavoring to do the same, according to a published report.

The New York Times reports that the federal government plans to shut more than 40 percent of its computer centers over the next four years. The reasons for the move are twofold: First, it hopes to rein in its soaring technology budget, and secondly it hopes to modernize the way its computers manage data and provide services to U.S. residents.

Though analysts contend that computer centers are largely self-sufficient and do not require many workers to operate, the sheer magnitude of the closings will likely result in thousands of people losing their jobs, according to industry analysts.

The federal government spends $80 billion per year on information technology, making it the biggest purchaser of such systems in the world, according to The Times. The U.S. government currently owns about 2,000 data centers and with the announced closings, about 800 of them will shutter their doors.

That will help the government achieve cost reductions it desperately needs as contentious budget talks in Washington have ground to a halt over the past few weeks, with Republicans and Democrats squaring off. By closing such a large percentage of its data centers, the government is endeavoring to increase its efficiency and free up billions of dollars as well as prime real estate that can be sold for profit.

The government is taking its lead from the private sector, which has been at the forefront of such data center closings. Facebook, for example, has some of the most advanced data centers of any company in the world and its streamlining of their operations has served as a model for other businesses.

In a post, Facebook asserted that a small team of its engineers have spent more than two years working to scale the company computer systems in the most efficient and economical way possible.

The federal government hopes that by shifting its strategy toward cloud computing and improved efficiency, it can save over $5 billion per year in reduced software costs. What's more, the lower energy use will translate into cheaper electricity bills and fewer greenhouse gas emissions, which are all goals of the Obama Administration. 
Nissan to use Tennessee factory to manufacture Leaf engines  Nissan has emerged over the past few years as a model of strategic sourcing as it quickly recovered from the supply chain disruptions emanating from the natural disasters that struck Japan in March. This week, the company announced it will achieve business cost reductions and improve its manufacturing efficiency by shifting some of its production to the U.S.

According to a report from The Associated Press, Japan-based Nissan plans to construct motors for its electric vehicle offering, the Leaf, at its engine plant in Decherd, Tennessee. The news was greeted with cheers by a local community that suffered after the so-called Big Three U.S. automakers began to fall from their place as the largest in the world.

Since the recession, however, global auto sales have surged and for the first time ever electric vehicles like the Leaf are becoming increasingly adopted by U.S. consumers wary of volatile oil prices.

Nissan said that production of the motors at the Tennessee factory will begin in 2013 and will create up to 90 additional jobs at the plant. The project is being funded by the Department of Energy to encourage advanced clean energy technology.
Apple surpasses expectations with Apple continued to wow investors as it unveiled its latest quarterly earnings on Tuesday, far surpassing analysts' expectations.

The New York Times reports that although it did not introduce any new products during its last fiscal quarter, Apple extended its string of winning results. The Cupertino, California-based technology giant reported sales gains across the board for a number of its popular electronic products.

While many analysts had projected Apple to sell fewer iPhones during the last quarter, the company blew away expectations by selling 20.34 million of the devices. That figure represents a 100 percent uptick from the same quarter in 2010. The gain was even more impressive considering that supply chain disruptions had forced the company to overhaul its strategic sourcing, and that it will reportedly introduce a new model of the smartphone in September.

Sales of the iPad 2 also soared during the quarter, with sales reaching 9.25 million units. The company sold more than three times as many iPads as it did during the same quarter the year prior, demonstrating the dominance that its tablet offering has quickly achieved among technophiles.

The iPad 2 similarly had supply shortages following the natural disasters that struck Japan in March. Apple double- and even triple-source suppliers to make up for the dearth of critical components that affected a large number of technology companies.

"We're thrilled to deliver our best quarter ever," Apple chief executive Steve Jobs said in a statement. "Right now, we're very focused and excited about bringing iOS5 and iCloud to our users this fall."

Many analysts had expected the company to sell only around 17 million iPhones and about 7 million iPads. Its handily surpassing of expectations illustrates the dominance that Apple exerts within its industry, according to experts.

Apple said that its net income in the third fiscal quarter more than doubled to $7.31 billion, surging from the $3.25 billion it logged in the same quarter the year prior. Business cost reductions helped to increase its profit margins, as did robust sales of its personal computers.

Shares of the company soared in after-hours trading, nearing the $400 mark. 
Business cost reductions spurred by lower freight rates  Mining companies are reporting record earnings as a surge in the number of ships has translated into lower freight rates, according to a published report.

Bloomberg reports that the cost of transporting iron ore to China from Brazil, which is the world's biggest route, is now far less expensive thanks to the surge in the number of carriers willing to transport the commodity. According to data, the costs of completing the route now register as 10 percent of the value of iron ore, which is used by steelmakers; in 2003 that figure stood at 64 percent to its value.

What's more, industry analysts expect that the value should not rise much higher until 2013 at the earliest. This, according to experts, is a result of the high number of ships that are carrying the good now. Strategic sourcing by mining companies helped to achieve business cost reductions, according to the news provider, contributing the lower prices.

"It's a dream for an iron-ore mining company: the highest commodity prices and the lowest freight prices," Freight Investor Services founder John Banaszkiewicz told the news agency. "Freight used to be a critical part of the delivered cost of iron ore and now it’s almost nothing."
GM to invest $328 million to upgrade Flint, Michigan factory  Battling back from insolvency in only a few short years, General Motors (GM) has reemerged as a dominant global player in the automaking industry. According to a published report, the company plans to continue investing into upgrades at factories throughout the world, including some in the U.S.

The Associated Press reports that the Michigan-based carmaker announced this week that it will spend more than $328 million to update a factory in Flint, Michigan. That city was once a hotbed of the automaking sector in the U.S., but following the subsequent rise of foreign automakers, factories were shuttered and the unemployment rate soared.

According to the news provider, the new GM factory will build the company's pickup trucks, which have perennially been a hot seller. However, during the company's quick rise to prominence over the past few years it's actually been its smaller sized cars that have helped give a jolt to earnings as consumers fear high oil prices and have largely shunned gas-guzzling car models.

GM's investment will create or preserve 150 jobs at the site, according to the company. The factory currently employs 2,047 people.
General Dynamics buys cloud computing firm  During the first six months of this year, there was a flurry of mergers and acquisitions activity as businesses looked to profit from startups and other smaller companies that had already succeeded in making a name for themselves within their sectors. According to a published report, General Dynamics Corp. is getting in on the action.

Reuters reports that General Dynamics, which is one of the biggest government contractors, said this week it had purchased Network Connectivity Solutions Corp. The company, according to GD, is a supplier of cloud computing and other information technology services to U.S. Department of Defense agencies.

GD is already a massive player within the space and with its later purchase, it enters into the increasingly competitive world of cloud computing. Cloud computing firms have been some of the hottest commodities among private equity and venture capital firms over the past few years as more businesses offset their IT departments to the companies.

GD said the acquisition will allow it to expand its overall portfolio of services that help the Pentagon to reduce costs. A GD spokesman did not acknowledge how much the deal was worth.
Samsung files patent lawsuit against Osram, aims to keep company's products out of U.S.  The increasingly lucrative and competitive market for light-emitting diodes (LEDS) in the U.S. just got a bit more heated, according to a published report.

The Associated Press reports that South Korea-based LED manufacturer Samsung is intensifying its battle against fellow LED-maker Osram as it looks to increase its market share in the world's biggest economy.

According to the news provider, Samsung filed a petition with the U.S. International Trade Commission on Friday that seeks to bar products developed and manufactured by Osram GmbH and two units from entering the country. The suit was filed amid an ongoing patent dispute between the two companies that has pitted the two businesses against one another throughout the globe.

LEDs are more energy efficient and have a longer lifespan than traditional light bulbs. What's more, since the U.S. government passed a law in 2007 that effectively bars manufactures from developing certain outdated forms of incandescents, many industry analysts assert that there is a lot of money that could potentially be made as consumers switch to LEDs.

Samsung alleges that Osram infringed on its patent rights in its development of its own LED products. Osram has denied those claims and has counter-sued in various courts.

"Osram is well prepared regarding possible actions by Samsung," Osram head of media relations Stefan Schmidt said in a statement.

For its part, Samsung said it is merely defending its products as LEDs become more widely adopted. The U.S. is one of the globe's biggest consumer markets and many experts believe that LEDs have the ability to become the dominant light bulb choice in the country over the next decade.

"Samsung LED intends to vigorously enforce its intellectual property rights, and these lawsuits reflect Samsung LED's commitment to that enforcement," Samsung said in its own release.

According to industry experts, such disputes over technological patents are common and they often do not lead to supply chain disruptions because litigation can take years to complete. Samsung is also involved in lawsuits with other technology companies, including Apple, which it says stole some of its original ideas for smartphone and tablet technology. Apple has denied those claims. 
Many times, routine and mundane tasks that have become ritual are oftentimes performed on a regular basis with little or no thought on its affects and ramifications to the "big picture". The standard small business, retailer, and manufacturer take advantage of township and county sponsored services such as trash and recycling pick up and do not realize that they are supporting and funding a multi billion dollar industry. That is right. Consumer's trash (paid for by the consumers) are lining pockets of gurus who caught the vision.

Common commodities that are publicly traded make little mention to recycled paper or fiber. However, recycled fiber is an integral part of manufacturing industry. Recycled paper, newsprint, cardboard, etc.. are purchased by cardboard and other paper manufacturers to produce usable materials and finished goods. Buying recycled materials is an economical and environmental solution to the manufacturing process. Buying raw material requires more extensive processes and costs compared to buying recycled materials to process. This need has opened the market to a new and high demand for recycled fiber.

Recycling companies may enter into a contract with a manufacturer or retailer (terms depends on committed volumes) that include terms for a baler lease (oftentimes free monthly charge if volumes are high), a trailer located at the manufacturer or retailer, and scheduled picked frequencies. The manufacturer processes their waste paper in accordance to the terms established and call the recycling company for service. The recycling company in turn picks up the full trailer and empties it at the recycling site for processing. The recycling company then returns the empty trailer back to the manufacturer or retailer's facility. After processing, sorting, and weighing the recycled materials picked up, the recycling company will pay a buy-back rebate to the manufacturer or retailer. These rates are determined by the old board markets publications (OBM).

The demand for recycled fiber can create an income source for many small businesses, retailers, or manufacturers. Search local directory for recycling companies and start shopping for the best deal that fits the needs. Consider all avenues that comprises a good deal such as value adds. Will the recycling company include baling wire free of charge for your business? Perhaps several small retailers in the same block and "band together" to leverage enough volume for the baler and to maximize on the rebates available. Also consider any termination clauses that assess a fee if the "contract" is terminated outside of the term specified.

Recycling fiber is truly a green solution for all parties involved.
EU officials balk at China's newly raised rare earths quota  China's stranglehold on the global market for rare earth metals has resulted in many companies to seek out alternative suppliers. According to a published report, the country plans to double its export quota of the metals during this second half of 2011 - though officials assert the move will likely cause added headaches for businesses.

Bloomberg reports that following a World Trade Organization ruling that concluded China was breaking global trade regulations by limiting its raw material exports, the country announced it will raise its quota for 26 companies to 15,738 metric tons. In 2010 China's quota stood at 7,976 tons.

China's limit this year will now be 30,184 tons, which still represents only a slight drop from the 30,258-ton limit it set in 2010. While industry experts disagree on China's exact market share of global rare earth production, estimates range from 90 to 96 percent, according to he New York Times. Rare earths are an exceedingly critical component in the manufacturing of a myriad of industrial and electronic devices, including wind turbines and tablet computers.

While representing an increase from its previous estimates, the new quota will do little to satiate surging demand for rare earths, according to Matthew James, an analyst at Sydney-based rare earth developer Lynas Corp., which just inked a deal with the German engineering giant Siemens to supply rare earths.

The new figure is "below the requirements of the non-China market and will keep supplies tight," he said in an interview. "This situation could remain until new suppliers enter the market."

The European Union argued that China's latest quota will not affect the amount of rare earths shipped to its member nations. According to EU trade spokesman John Clancy, the addition of ferrous alloys will translate into more products competing for limited allowances.

"This is highly disappointing and the EU continues to encourage the Chinese authorities to revisit their export restrictions policy to ensure there is full, fair, predictable and non-discriminatory access to rare-earth supplies as well as other raw materials for EU industries," he affirmed in a statement.

For their part, Chinese officials contend that they have ordered businesses to reduce their production of rare earth metals because of the deleterious environmental effects of the mining process.
Chrysler recalls 242,000 Dodge Ram pickups  In a dose of sour news for one of the so-called Big Three U.S. automakers, Chrysler announced this week that it will recall thousands of vehicles after a manufacturing defect was discovered, according to a published report.

The Detroit Free Press reports that Chrysler will recall more than 242,000 Dodge Ram pickups after reports surfaced that some of the vehicles suffer from a defect in their steering system. According to the news provider, the recall will affect certain Ram 1500, 2500 and 3500 pickups from the 2008 to 2011 model years.

A study conducted by the National Highway Traffic Safety Administration found that a part near the left wheel can fracture, potentially causing a loss of steering control that can lead to crashes. An investigation concluded that the problem mainly occurs when drivers are operating their vehicles at low speeds and making right turns. Thus far, only a few minor crashes have occurred as a result of the defect, according to Chrysler officials, with only one minor injury reported.

The Dodge Ram is Chrysler's best-selling vehicle and the company said it will inspect the trucks and fix any defects for free.
Honda succeeds at slashing waste at its U.S. manufacturing plants  Businesses around the world are increasingly working to boost efficiency by overhauling their strategic sourcing and achieving business cost reductions. One of the most effective ways to do that is to add green production lines, and Honda is leading the industry as it streamlines its U.S. manufacturing plants, according to a published report.

The Birmingham News reports that Honda recently announced it has achieved a goal it has been working at for the better part of the decade. Honda said it has achieved zero-waste-to-landfill at 10 of its 14 North American manufacturing plants, meaning that those facilities are no longer sending waste to local landfills. The remaining four plants are operating with "virtually zero" waste, according to officials.

The first Honda plant that met the company's designation as producing no waste is its Lincoln, Alabama outfit, which accomplished the goal back in 2001, according to the news provider. It was followed by plants throughout the U.S., including one in Greensburg, Indiana, which achieved the designation in 2008.

Honda has progressively reduced the amount of waste it produces over the past 10 years. In 2001 it generated around 63 pounds of waste for every automobile it produced, but in the current fiscal year 2012 it only creates about 1.8 pounds per car manufactured.
GE's Immelt: U.S. manufacturing increasingly competitive  General Electric, the U.S.-based American engineering giant, has charged back from the depths of the recession, with its profit margins and earnings improving over the course of the past two years. According to a published report, the company expects its domestic manufacturing activity to expand this year.

The Chicago Tribune reports that even though global demand has helped to propel GE's growth over the past year or so, it expects its manufacturing footprint in the U.S. to continue to grow this year as "tremendous demand" builds for its industrial products, including its gas turbines, jet turbines and wind turbines.

The news comes amid reports from GE that more than 60 percent of its 2011 revenue is projected to come from abroad this year. GE chief executive Jeffrey Immelt, in an interview on Wednesday, said that the company expects to log more than $145 billion in revenue during its most recent fiscal year.

The increased efficiency of the U.S. manufacturing sector, along with rising commodity prices, have both helped to push down labor costs domestically, Immelt said while touring one of GE's factories in Greenville, South Carolina.

"Having a great workforce like we do can make your products higher-quality, lower-cost, more productive," he said. "In the end the amount of money we have in materials out there dwarfs the amount we have in labor."

Immelt also said that GE plans to actively increase its strategic sourcing of materials as it works to circumvent soaring commodity prices. GE expects the global wind turbine market to grow next year and it is working to augment its production of nacelles and other components used in wind farms, the MIT Technology Review reports.

Illustrating just how competitive the U.S. manufacturing sector is, Immelt said that labor costs accounted for only 10 to 20 percent of the total cost of heavy equipment like wind turbines and engines produced domestically. The factory in South Carolina he was touring this week is currently in the midst of producing 600,000-pound wind turbines that are a part of a $3 billion order form the Iraq government.

The business cost reductions that GE has witnessed in the U.S. have helped it to free up money to hire an additional 125 workers at its Greenville plant, Immelt said. Since 2009, the company has added more than 6,500 workers to its manufacturing operations.