February 2013
Supermarket Tesco vows to source more UK meat

After horse meat entered the European food supply chain and it was discovered many beef products actually contained horse, grocers pulled contaminated products, consumers were hesitant to purchase meat and governments called for investigations. The scandal has some companies vowing to change up their procurement strategies in an effort to ensure products are labeled correctly. 

British retailer Tesco recently announced it will source more meat from the U.K. to guarantee no horse meat enters beef products and shorten its supply chains. Besides preventing any future problems like the horse meat situation, the company will also have more oversight in regard to its products and build up a better reputation with consumers. According to Bloomberg Businessweek, a National Farmers Union (NFU) survey revealed more than 86 percent of U.K. consumers are now more likely to purchase food sourced domestically and another 78 percent believe supermarkets should sell more products from the U.K. 

"Where it's reasonable to do so, we will source from British producers," said Tesco's CEO Philip Clarke at an NFU conference, according to Fox Business. 

Clarke added that the company would seek to sell fresh chicken sourced solely from the U.K. starting in July. 

The company has announced that in addition to more domestic sourcing, it will also introduce a new testing procedure that will ensure its products are properly labeled and consumers are purchasing the correct merchandise. 

By shortening its sourcing processes and making its procurement easier to handle, the company may be able to enjoy greater cost savings, especially those associated with shipping product. As Tesco will no longer need to pay to source some of its meat from other countries, it could see a cost reduction in some of its processes. 

Source One Management Services, LLC is hiring in our Willow Grove, Pennsylvania office (just north of Philadelphia).

For those of you that do not know, Source One is a leading Procurement Services Provider, that specializes in strategic sourcing and market research for supply chains. Source One is also the owner and content publisher of Strategic Sourceror.

We are currently hiring for multiple positions, including: Strategic Sourcing Analyst, Telecommunications Sourcing Analyst, and IT business Analyst. 

We are particulary interested in candidates local to the PA/NJ region.

 Please see our website for more information: http://sourceoneinc.com/sourcing_careers.html

Prevalence of web could impact retail logistics

Widespread use of tablets, smartphones and internet connections has made it easier than ever for consumers to shop on multiple devices in virtually any location they choose. As this trend has become increasingly prevalent, retail stores are seeing less traffic and noticing they'll need to alter their procurement and shipping strategies to provide the online shopping and delivery services consumers are becoming accustomed to.

According to Illinois newspaper The News-Gazette, eBay CEO John Donahoe recently spoke at the University of Illinois, during which he addressed these concerns. The source reported he told an audience that consumers use the web for at lease some of their shopping experience in half of all retail transactions. While some may be conducting research, searching for better prices or reading reviews, others may end up purchasing the product on the web instead of ever going into a store. 

To still remain profitable, retailers need to embrace the web and use it to their advantage, even if it means changing up longstanding procurement and logistical processes. Because fewer consumers are shopping in-store, merchants may need to have their products shipped strategically-place warehouses, rather than individual stores, where they can be more easily shipped to customers across the country. This could force a firm to change suppliers, as with these logistical changes some shipping routes may become too expensive for retailers to justify. Merchants also need plans in place to address shipping to their consumers, whether they're sending out online purchases from store locations or larger warehouses. While some companies may find it cost effective to use other shipping services, some may discover that employing their own delivery fleet results in cost savings and enhanced customer service.  

There are many opportunities for companies to obtain a rebate for energy efficient programs and the North American electric utility budgets for efficiency has increased more than 150% from $2.7 billion in 2007 to $6.8 billion in 2011.  Utility companies are offering programs for nonresidential companies to purchase LED lights at a discounted price which can be used for general lighting in their current building or new construction.  These rebate programs not only help the businesses, but they also increase sales for the manufacturer and local distributor.  Manufacturers like Phillips have partnered with a utility company to provide their LED products at a significant discount.  In addition, local distributors are seeing increased sales from residential and non-residential customers.  Distributors may also be eligible for grants for promoting and providing lighting improvements and other energy saving programs.  Not only do these programs benefit conservation, they also help companies save money.  For example, a "Texas based United Supermarkets retrofitted more than 3,600 doors in its reach in door merchandisers in 47 of its stores with GE's Lumination LED Refrigerated Display Lighting solution.  United Supermarkets expects to save more than $633,000 annually in energy and maintenance savings".  For residential customers, don't feel left out.  There are also energy efficient program opportunities for you.  Check your local utility company for rebate offerings and additional ways to save money on your utilities. 
Cargo insurance can prove to be essential

While many companies are concerned about cost savings throughout their supply chains, many fail to consider the financial impact if something goes awry during transit. While logistical operations typically get merchandise or raw material to its intended destination without too much of a problem, there are risks associated with transporting freight, making it essential for firms to invest in cargo insurance. 

Unexpected events do happen, and they can seriously compromise business finances, in addition to entire shipments. Ocean freight can be pirated, trucks can be stolen and planes can be hijacked, having a significant impact on a firm's logistical processes as well as its entire supply chain.

According to Entrepreneur magazine, simple mistakes by business professionals can put companies at risk for a great loss. Failing to have insurance is one major mistake, while incorrectly assuming a supplier or manufacturer's insurance policy will cover losses is another huge misstep. Overlooking small things, like forgetting to sign off on a policy or check a box can also contribute to big losses down the road if a business should encounter a problem with a shipment. 

Avoiding problems with cargo insurance

It's essential for businesses to review their policies and understand exactly what their coverage consists of. This can help them from assuming a business partner's insurance policies will cover lost, stolen or ruined cargo and help cover the losses they would otherwise have to absorb. 

However, having a firm grasp on a policy isn't the only step company leaders should take to guarantee proper risk management. They should also take great pains to carefully record all cargo loads and keep detailed documentation of all shipments. This can ensure that if a problem does occur down the road, a firm has proof of its losses and can avoid any major problems with insurance companies. 

Limiting costs, disruptions of medical procurement

As medical facilities seek to implement the most cost effective and consistent strategies, they often need to alter their purchasing methods to ensure they don't run low on supplies, have to ration equipment or fail to have the life-saving resources a patient needs in stock. In doing so, they not only ensure they will have supplies on hand when necessary, they may also find opportunities for cost savings and more efficient strategies. 

When organizations review their sourcing policies, they may find a large amount of waste in regard to finances, resources and time. However, they can choose to turn things around fairly easily by reworking their procurement techniques.  Strategic sourcing, especially across multiple organizations, can help medical facilities access the proper quantity of supplies they need while also helping cut expenses, and it can also sometimes limit the amount of time resources spend in transit. 

However, addressing sourcing concerns isn't the only way the medical procurement process can be more cost effective and function properly. Those responsible for purchasing, facility supply chains or sourcing may find it beneficial to work with the professionals who use such equipment on a daily basis or review documents listing the quantity of procedures performed and what tools were necessary to complete them. Medical experts may be able to shed valuable insight on what products are used frequently, which supplies can be purchased in limited quantities and offer suggestions on alternative uses for surplus goods that can save an organization valuable resources. 

Some facilities may also find it more cost-effective to implement sustainability initiatives. By working with suppliers that choose to use less costly renewable energy sources, as opposed to more expensive natural gas or coal, firms can sometimes benefit. Some organizations may find their costs for materials goes down, as their suppliers no longer need to build the cost of transportation or more expensive materials into the final price. 

Who doesn’t love a good Groupon? Paying $15 for a $30 dinner at one of your favorite restaurants… you just can’t beat that. Groupon went public in November of 2011 and like Facebook, people had high hopes for the stock. However, since opening day, the shares have lost more than 80% of its initial value due to accounting scandals, international expansion issues, and poor business model execution. With earnings not living up to analysts’ projections, the fate of Groupon can be somewhat unclear.

Yesterday, according to Bloomberg, Groupon shares dropped more than 19 percent, which was their biggest decline since November 9, 2012. This was a result of Groupon announcing that first-quarter revenue will total about $560 million to $610 million, a vast difference in analysts’ predictions of $647 million for the quarter. Though now ex-CEO Andrew Mason recently tried to focus on retail to boost growth, demands for online discounts declined and pressure from investors and board members continued to rise. Competitors such as Living Social also do not aid the matter as they have similar offerings and programs.
Groupon’s best chance of surviving is changing its business model. Instead of offering sales through daily email advertisements, the site should serve more like a shopping mall. There, consumers can visit the site and take advantage of deals everyday instead of a 4-6 day window. Companies such as Savored, ironically a company Groupon acquired last year, has adapted this business model and have seen some success in addition to gaining a loyal customer base.

Though Groupon’s stock has a chance of bouncing back, the company will most likely have to change its business model to survive long term. By extending the length of their promotions, they allow consumers to have access to deals any time, increasing loyalty and sales.
Most of us are well aware of the financial woes of the U.S. Postal Services. It’s bad. It’s real bad. It makes Allen Iverson’s’ financial statements look spectacular.

They have been trying to cut costs everywhere – from layoffs, to facility closures, to vehicle fleet downsizing. They have cut over 35% of their workforce within the last few years.Earlier this month they made the announcement that as of August 1 of this year they will halt Saturday deliveries.

This will be for all first class mail including letters, bills, cards, and catalogs. I guess that means no more Netflix deliveries on Saturday. I’ll just have to make it through my weekends without finding out what happens on the next disc of Meerkat Manor. They are estimating that getting rid of Saturday deliveries should save them about $2 billion a year. That should help a lot right?

Well, despite all of these cutbacks and cost saving plans, they are still losing $25 million a day! That’s $175 million a week, or $9.125 billion a year for those of us with calculators! Last year alone they lost $16 billion.

In an effort to battle these mind-numbing loses, they decided to do what I’m sure any of us would – start a clothing line. The U.S. Postal Service recently announced that they have entered into a licensing agreement with the Cleveland-based Wahconah Group to market a line of men’s fashion called “Rain Heat & Snow,” which will use technology to create “smart apparel,” also known as “wearable electronics.”

The brand “Rain Heat & Snow,” plays off the postal service motto “Neither snow nor rain nor heat nor gloom of night stay these couriers from the swift completion of their appointed rounds,” according to a USPS press release. “This agreement will put the Postal Service on the cutting edge of functional fashion,” said Postal Service Corporate Licensing Manager Steven Mills in the release.

“The company is establishing a showroom in the garment district of New York City to showcase their apparel lines to the fashion industry,” according to the statement.

Some of the items included are jackets with iPod controls built into the sleeve so you can easily crank up the volume to Wham!’s “Wake me Up Before you Go-Go” or just skip right ahead to “Truly Madly Deeply” by Savage Garden.

Currently the clothing line will focus on all-weather apparel for only men. Is this because they know women are smart enough not to buy this stuff?

Has anyone told them the market is already inundated with so called “smart apparel” from over a half dozen major clothing manufacturers which have been making these products for years?

Maybe if the U.S.P.S. stuck to their main function of processing mail and hired Source One to source their millions in indirect spend they wouldn’t have to come up with ridiculous ideas such as this.

Instead they will most likely need a nice juicy government bailout. But hey - at least the male postal workers will look good while they jam out on their daily rounds.
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The government of the Bahamas is close to implementing a per-passenger value added tax on cruise lines docking in the Bahamas to make up for their budget shortcomings.  The only alternative is having to deal with across the board spending cuts.  However, critics argue that cruise lines will simply pass up the Bahamas on their routes to avoid the extra taxation.  One prominent Bahamian economics commentator and author, Dr. Johnathan Rodgers, has proposed a different solution to the Bahamian government's problems: hiring a private procurement firm to act as the Bahama's procurement bureau and cut their budget by 10% in the upcoming 2013-2014 budget year.  This critical commentary which Dr. Rodgers is known for brings up an interesting point.  What is the current role and possible potential future role of private procurement firms taking on the duties of public purchasing departments?  You can spend considerable time researching procurement services firms that the US government might utilize, but good luck finding any detailed information.  The federal government needs to make a concerted effort to utilize the skills and expertise of private procurement service providers to trim budgets, however, their own rigid regulations and procedures stifle interest and involvement from these firms in the first place.  It's a losing situation for procurement service providers, the government, and the taxpayers.

Companies like Source One are thriving on their ability to provide  managed strategic sourcing solutions for organizations in need of cost savings, supplier relationship management, procurement process improvement, and other related services.  If only the US federal government would take notice and undertake a full scale utilization of procurement service providers, we may not be talking about the mandatory cuts that are affecting so many Americans today.
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With all of the buzz about the "Cloud," it's always astonishing to see how hosting is not considered during many IT sourcing initiatives.  Cloud, by the way, means a lot of different things to a lot of different organizations and people, so I would like to start by going on the record that I am adamantly against that term and wish everyone would just describe what they mean when they are discussing hosted services.  But back to the point at hand: with so many ways to buy software today (SaaS, license only, license + support, license + support + hosting, etc.), it's easy to forget that hosting may be a component of a licensing buy.  And even when it's considered, it can be challenging to decipher and compare each supplier's various licensing models.

So why has the hosting landscape become so cumbersome and complex?  Probably because IT loves buzz words and SaaS was getting old.  Also, many software firms are leveraging the same hosting environments typical enterprise end users would in order to create new revenue streams by providing layers of value add service on top of the hosting component such as implementation services, maintenance, and support.  Irrespective, it's important to understand the hosting options you may have for each software rollout and what its implications may be on your budget and how the application will be managed.

First, it's important to understand the types of environments that may be a part of your hosting requirements.

  1. Hosted on a dedicated server: real, physical hardware will be dedicated to your application or applications.  Management and support may or may not be included in this cost and may be included by the provider or managed by your staff.  Upgrades may require significant costs for new equipment from the provider. In some cases, you may be able to choose your own third party provider.

  2. Hosted on a virtual server: your hosted environment will be virtual on a larger, physical platform.  Capacity can be scalable and elastic with incremental cost for additional capacity.  Management and support may or may not be included in this cost and may be included by the provider or managed by your staff.  In some cases, you may be able to choose your own third party provider.

  3. SaaS: Hosting, maintenance, and support will be behind the scenes and the responsibility of the provider.  Think of it as buying a login and access to an application.

  4. License only: you will be responsible for providing the hardware, power, HVAC, space, security, bandwidth, etc. to host the application.
In my next article, I will provide additional detail on what questions are important to ask when buying software in order to prepare you for the related hosting requirements and costs.  In the meantime, for help approaching your upcoming IT sourcing projects, contact Source One at www.sourceoneinc.com

The “Completely Automated Public Turing test to tell Computers and Humans Apart” better known as CAPTCHA was born around the year 2000 and since then, it has created as many frustrations as it has confusing symbol combinations. Admit it, we’ve all suffered a tiny panic attack when stumbling upon a particularly difficult array of letters and quietly questioned ourselves on why we should have to prove we are human to an object that so clearly isn’t.

CAPTCHAs were created to protect online sites from abuse by preventing automated systems (“bots”) from performing actions that would degrade the quality of service of said sites, such as preventing excessive simultaneous transactions that could quickly clog the capabilities of the hosting server. Popular websites that utilize CAPTCHAs include TicketMaster, Yahoo, Google, and many financial service institutions.

We humans intrinsically find solving games and puzzles satisfying especially when a reward is associated, and when CAPTCHA was created, the intention was to capitalize on this condition to validate transactions in a quick and simple way. The problem was that the simplicity of the designs faded quickly and more “sophisticated” combinations started to appear as a response to smarter bots being developed. For this reason, CAPTCHA puzzles were no longer a quick filter for humans, but a time consuming effort that would turn a motivation-driven activity (register to a website or get seats to an event) into frustrating abandonment. The bottom line was that businesses were alienating their own target markets.

Companies like TicketMaster didn’t take long to realize that committed customers were leaving the website after several failed attempts to solve a CAPTCHA. Consistent revenue streams 15 seconds away from materializing were evaporating rapidly. As a result, the company chose to dump the old verification system and adopted a new version that pairs questions with multiple choice answers, or words with pictures, or simply asking for the user to respond to an ad in a specific way. So while the bad news is that CAPTCHAs are not completely going away, they are evolving into friendlier puzzles that will take you half the time to figure out (about 7 seconds).

As technology evolves, so will CAPTCHAs. Hopefully, this will also improve the interactive online experience for the 2.5 billion Internet users in the world today.
Chicago area manufacturing expands

Nearshore manufacturing has become a trend in recent years and businesses continue to shift factories back to the U.S. As it becomes more expensive, time consuming and risky for companies to outsource their production to countries halfway across the world, more are bringing factories to North America. 

Even though manufacturing labor costs in the U.S. are much higher than they may be in some underdeveloped countries, making the move stateside can still result in significant cost savings for a firm. Businesses that sell the majority of their product to American consumers don't need to worry about the high logistical expenses associated with shipping goods across the globe or the weeks it may take to get products to market.

One of the regions seeing a significant increase in manufacturing is the Chicago area, which reported big gains in manufacturing jobs recently, according to a report by the University of Illinois at Chicago's Center for Urban Economic Development. The data showed the number of manufacturing workers grew 5 percent across the region from 2010 through late 2012, compared to the nationwide average of 4 percent. 

Even though growth in the region has been strong, the Chicago area still has 29 percent fewer manufacturing jobs than it did in 2001, the report revealed. The data showed the Chicago metro area lost 32 percent of its total production jobs from 2001 and 2010; however, this trend may slowly be reversing as companies continue to bring operations closer to home. Chicago's location could play a role in its prominence as a leader in domestic manufacturing; it's position in the center of the country with easy access to multiple modes of transportation help companies achieve business cost reductions as they ship product across the nation.

Suppliers fined for ignoring honey procurement rules

Two major U.S. honey companies, Honey Solutions and Groeb Farms, were recently found to be involved in a procurement scheme uncovered by an investigation by the U.S. Immigrations and Customs Enforcement and the Department of Homeland Security.

The businesses illegally imported honey from China and managed to avoid paying nearly $180 in duties, resulting in significant cost savings over the years they were involved in the scheme. According to the Financial Times, the U.S. has had anti-dumping duties imposed on honey from China since 2001 to better protect American beekeepers and product from large amounts of inexpensive foreign product. The honey is also sometimes contaminated with antibiotics not approved by the U.S. Food and Drug Administration. However, Chinese suppliers have still found ways to get their product into the country. 

The investigation discovered the Chinese honey was sometimes smuggled into the U.S. disguised as other products. In other instances, Chinese suppliers labeled their honey as having a different country of origin so it could avoid the high duties. 

"This successful sting operation is sure to be a buzz kill for would-be honey smugglers," said Chuck Schumer, U.S. senator. "For too long, foreign smuggling of this product has created a sticky situation for domestic honey producers. We need a zero-tolerance policy when it comes to honey laundering."

According to Fox News, legitimate producers and importers have the ability to source their honey and keep a trail of where it originates from, which ensures they are in compliance with any procurement requirements, pay necessary duties and aren't selling consumers a product that could be laced with unapproved drugs. 

Federal officials announced the two companies will pay millions in fines and will likely need to rework their supply chains in order to comply with requirements. 

Foxconn may shift manufacturing out of China

Electronics manufacturer Foxconn has long been a controversial fixture in China, but the corporation may be slowly moving its facilities elsewhere. The company is responsible for a huge percentage of the world's electronics, including Apple products, but has been plagued with reports of poor working conditions, employee suicides and sustainability violations.

The company recently made the decision to slow hiring in China, a move it attributed to an "unprecedented rate" of employees returning to work after the Chinese New Year. However, other signs point to the possibility the corporation is planning to shift operations elsewhere.

Manufacturing may be headed elsewhere

​According to Forbes, Foxconn founder Terry Gou announced he was looking to expand the corporation in Taiwan, Brazil and Indonesia rather than continue growth in China. While China was once the solution for companies looking for low manufacturing labor costs and relatively little oversight, it has become more expensive to operate within the country in recent years. Increased operating expenses, combined with disputes Beijing has had with companies across the globe, has made the prospect of Chinese expansion unappealing for some.

It has also been reported Foxconn is considering moving some of its facilities to the U.S. CNN reported the company already has plants in Texas and Indiana through a subsidiary, but more may be coming, especially as client Apple recently announced it will soon have some its computers produced domestically.

With the possibility of limiting Chinese manufacturing an increasingly possible option for Foxconn, the company may need to work with its clients to rework procurement, supply chains and logistical processes to ensure everything is on track for a smooth transition should a shift in production occur. However, the inconvenience of finding new suppliers or carriers may be worth the cost savings companies could enjoy from working in countries with still-low labor expenses.

Sustainable procurement has its benefits

Many agencies across the world are adding green initiatives into their supply chains and reaping the benefits sustainable measures can provide. While implementing a program may seem complex or time consuming, considering the positives of more environmentally and socially responsible procurement processes has proven to be a plus for many firms. 

Reviewing current purchasing strategies can help business leaders determine where they have opportunities to slowly phase in new policies that will do more for company growth and the firm's bottom line in the future. Staying aware of the latest sustainability practices, industry techniques and rival initiatives can also help a firm looking to become more competitive.

Developing a reputation as an industry leader 

As consumers become more aware of sustainable initiatives they are taking the time to determine what their favorite brands are doing to help preserve natural resources and help local communities. Because of this, green procurement policies can help a company develop a stronger reputation with current customers and potentially help lure in new purchasers concerned about corporate social responsibility. 

Cost savings opportunities available

A firm that takes the time to incorporate green procurement strategies such as purchasing supplies made of recycled materials or use renewable energy to get raw materials to facilities may find they can cut down on expenses. In addition, governments across the world are taking an interest in seeing businesses operate more sustainably, which could mean new taxes, fines and compliance measures for companies in the future. Seeking the best opportunities to purchase low-cost sustainable products and use less expensive renewable energy sources can help a firm limit costs and stay in line with any green regulations within the countries in which they operate. 

Glass shards enter Lean Cuisine meals

Officials at Nestle are perplexed as to how glass shards were found in some of the company's Lean Cuisine ravioli products. The corporation recently announced a voluntary recall of hundreds of thousands of its Culinary Collection Mushroom Mezzaluna Ravioli and is taking action to prevent similar problems from occurring in the future. 

The batches in question were produced during November of 2012, and Nestle fears that the product's popularity with shoppers will mean few of the contaminated packages remain on store shelves. Thus far, there have been no reports of consumers sustaining any injuries or illnesses from eating the product in question. The corporation is reaching out to consumers, urging them to check their Lean Cuisine ravioli packages for production codes 2311587812 and 2312587812, as these numbers are associated with the glass-filled batches, and return them to the company. Customers who contact the company to report a contaminated box will be provided with replacement coupons from Nestle. 

Determining how glass entered the supply chain 

While the company is working to ensure all shoppers are aware of the incident and check their packages, they're also working to figure out how the glass shards entered the food in the first place. It's unclear if the shards were already in the ingredients procured by the company, or if the glass somehow made its way into the food during the production process.

"This is an unusual complaint for us because we don't have glass in our factories," Roz O'Hearn, a Nestle spokeswoman, told The Huffington Post. "We have a no-glass policy."

MSN reported this isn't Lean Cuisine's first pasta recall; the company recalled some of its spaghetti and meatball products in 2011 after several consumers found pieces of plastic in the food. It's also not the first time in recent months a major company has had problems with glass entering its consumer products; Ranbaxy Pharmaceuticals, which manufactures a generic version of common cholesterol medication Lipitor, found glass shards in its drugs several months ago and halted production to resolve the issue.

"Nestle is dedicated to food quality, and the health and safety of its consumers," read a statement released by the company. "We apologize to our retail customers and consumers and sincerely regret any inconveniences created by this voluntary recall."

Chinese retail sales suffered during Lunar New Year

While many companies have focused on China as a fast-developing consumer market, new data indicates the country may be struggling more than it lets on. Retail sales during the Chinese New Year, a traditionally busy period, were surprisingly slow, indicating retailers, restaurants and merchants may need to rethink their procurement and production strategies to account for lower demand if the economy doesn't pick up once more. 

Slower growth could hurt business 

China's Ministry of Commerce reported retail sales climbed by 14.7 percent from last year. While this number may seem significant, it's much lower than the 16.2 percent year-over-year gain seen at the same time last year and the weakest gain since 2009, according to Bloomberg. 

Sources reported anti corruption campaigns and tight waste measures may be playing a role in the lower sales. This likely had an impact in the luxury goods market, according to Forbes.

"The slower growth, manifested in the restaurant business, was partly a result of the government crackdown on corruption and the anti-waste campaign," said Leon Zhao, a researcher at Frost & Sullivan, according to Bloomberg. "We expect overall retail sales and consumption to rise again along with the improving economy in the second and third quarters."

While some analysts expect sales to pick up as the country continues to be a strong market and experience economic growth, companies may need to adjust their outlooks for Chinese sales and adjust their retail supply chain processes accordingly. Failure to take into account recent trends could result in some firms continuing current procurement strategies, manufacturing too many consumer goods and being left with excess product and little demand. This oversupply could hurt companies looking to implement business cost reduction strategies and ensure production efficiency. 

UPS expanding Worldwide Expedited service

Logistics leader UPS recently announced that it will launch an enormous expansion of its UPS Worldwide Expedited service, which aims to provide clients with faster and more efficient transit of parcels that need to be delivered to countries across the globe. The company revealed it will now deliver packages to more than 220 countries and territories in just two to five business days, tripling the area the program previously covered.

"UPS Worldwide Expedited offers our customers a more economical, less time sensitive service that has many of the same benefits they get from our Worldwide Express service, including fast and efficient door-to-door delivery, tracking visibility and quick customs clearance provided by UPS's customs brokerage," said John Sutthoff, UPS vice president of international marketing. "Retail and consumer goods, industrial manufacturing and high-tech industry customers are finding the service especially attractive for the reliability and visibility supported by UPS's best in class IT and operating infrastructure."

These increased shipping options could have significant impacts for companies trying to enhance the logistical components of their supply chains. It could also prove to be a back-up option for firms experiencing challenges due to unexpected circumstances, such as storms or political unrest. An expedited worldwide service could allow them to get emergency shipments of raw materials or finished goods where they need to be quickly and ensure production or sales aren't held up due to transit problems. 

Having an emergency plan is critical not only to help companies avoid production issues, but also to help it enjoy greater business cost reductions. Unexpected events can make certain shipping routes become unusable or conditions could become dangerous, causing those who are willing to ship products to charge more for transportation. However, with a back-up plan in place, companies can keep logistical and supply chain expenses as low as possible, even when the unanticipated should occur. 

Ford moves production from Europe to US

After years of sending their work overseas, many large corporations are beginning to see the benefits of manufacturing domestically. More companies are moving manufacturing facilities back to the U.S. to implement greater cost savings strategies and be closer to their main consumer markets. 

Automaker Ford is the most recent example of a company which has decided to nearshore manufacturing processes and bring its production stateside. The corporation will shut down its small engine facilities in Spain and move production to a facility in Ohio. The factory already makes larger auto engines, but with this $200 million investment from Ford, it will start creating four-cylinder, two-liter EcoBoost engines and employ an additional 450 workers. 

Moving production to the US 

Smaller engines have become more in-demand in the U.S., as government standards mandate stricter fuel economy numbers from automakers; vehicles will be required to average 54.5 miles per gallon by 2025, making four-cylinder engines helpful to corporations trying to meet these standards. They're also attractive for consumers who want cars that get better gas mileage. Skyrocketing fuel prices have those in the market for new cars looking for vehicles that won't need frequent fill-ups. 

Increased American demand isn't the only factor fueling Ford's decision to move production from Europe to the U.S. Bloomberg reported weakening demand in European markets will lead the company to shut down three factories on the continent by the end of next year, further increasing the appeal of moving operations to America.

The shift to Ohio could be a business cost reduction strategy for Ford, which would no longer need to pay for overseas shipping expenses or fret about foreign currency shifts. The company could even find lower labor costs domestically; Bloomberg reported the United Auto Workers union will allow Ford to pay new entry-level workers lower wages than current factory employees. 

China File
Apple, Inc., as part of their supplier responsibility efforts, released a complete list of its global suppliers last week. This is only the second time, however, that Apple has released a list of its global suppliers that included physical addresses, releasing it for the first time last year as part of its joining the Fair Labor Association.

To illustrate the global impact of Apple's supplier network, China-focused online magazine ChinaFile.com took the individual suppliers and plotted them in one gigantic interactive map. We pored over their map, then dug into the data. The nitty-gritty?

  • You might think that all of Apple’s products are supplied from Asia. Surprise!! It’s only mostly in Asia, with more than 600 of Apple’s 748 listed suppliers being located within that continent.
  • China wins the “most Apple suppliers” award, with approximately 330 located in the country. Number two? Japan, with 148.
  • Outside of Asia, North America hosts the largest continental contingent of Apple suppliers, with 84 spread out across the U.S. and Mexico. 
  • South America? One. Foxconn opened a facility in Brazil for iPad production and assembly. Brazil just tossed Apple’s copyright for “iPhone” in the country. This facility could have an interesting life ahead of it.
  • The most isolated Apple supplier in the entire world? Arvato Digital maintains a facility in Smithfield, Australia, which places it more than 3,000 miles away from the next nearest supplier in Jakarta, Indonesia.
The only continents not represented were Africa and Antarctica. Africa is quickly becoming a center for low cost manufacturing. Antarctica… step it up, penguins!

To play with the interactive map yourself, click the picture or this link to go to ChinaFile.

For a good look at Apple’s supplier responsibility practices and for a full list of the suppliers, map-free, visit Apple.com’s Supplier Responsibility page.
Truck tonnage index reports best January ever

Companies often rely on trucking firms to procure raw materials and transport their finished goods to market, making trucks a critical component of many supply chains. It appears that some businesses are increasing their use of such transportation methods, as new data from the American Trucking Associations (ATA) indicates tonnage shipped throughout the country is on the rise.

Recently released their For-Hire Truck Tonnage Index for January, and the seasonally adjusted results of 125.2 made last month the highest January on record. Truck tonnage has gained at least 2.4 percent each month since November, resulting in a 9.1 percent increase since that time. When compared to January 2011, the seasonally adjusted index has gone up 6.5 percent.

"The trucking industry started 2013 with a bang, reflected in the best January tonnage report in five years," said Bob Costello, ATA chief economist. "While I believe that the overall economy will be sluggish in the first quarter, trucking likely benefited in January from an inventory destocking that transpired late last year, thus boosting volumes more than normal early this year as businesses replenish those lean inventories."

Another factor that could play into the continually improving index could be the slowly growing economy. Businesses are beginning to sell more as Americans find jobs and have more to spend, meaning manufacturers need to increase their procurement of raw materials, step up production and get goods to market quickly. According to the ATA, 67 percent of cargo transported in the U.S. is shipped via truck, making the industry an indicator of the overall economy, but also an important factor for firms looking to expand, change up logistical processes or alter supply chains as business picks up. Changing up shipping routes or switching from air freight to truck transit could even give businesses the opportunity to enjoy greater cost savings and increased efficiency over time. 

North American automakers produced at high capacity in 2012

Vehicle production in North America jumped in 2012 and facilities ran at near-maximum capacity, according to auto industry news source WardsAuto. Data shows manufacturers on the continent were running at more than 97 percent capacity last year. These were the highest results found since WardsAuto began tracking production numbers. 

Production capacity spiked as factories ran two shifts per day, allowing facilities to improve their production by 9.3 percent when compared to 2011. The industry has turned around drastically in just a few years; production was at just 51.9 percent of capacity in 2009, when the recession caused consumer demand to drop sharply.

Mexico and Canada leading the US 

In the U.S., capacity use jumped to 91 percent, an impressive increase over 2011's 78.2 percent. While high, that number still lags behind the productivity seen in Canada and Mexico. Canadian capacity use shot up more than 19 percent to 99.6 percent; Auto World News attributed the spike to the closure of a Ford plant located in Canada. Mexico's numbers were even higher and plants ran at 124 percent of capacity. However, these impressive numbers aren't unusual, as Mexican plants also ran at above 100 percent capacity in 2010 and 2011, as well. 

Plants, for both automobiles and other goods, may only continue to see their production numbers increase as businesses continue to nearshore manufacturing processes. Bringing production to North America allows firms to shorten their supply chains, be closer to their biggest markets and cut down on shipping expenses. While outsourcing factory jobs to less developed nations was popular for years, American manufacturers are slowly seeing more orders come their way as companies seek opportunities for cost savings. 

China takes over Pakistani port

China recently took control of Pakistan's Gwadar port, a move that could give it a strategic economic advantage for shipping products across the world and receiving raw materials from other countries. The docks were transferred to the state-owned China Overseas Ports Holding Company earlier this week, as the Chinese financed much of the nearly $250 million needed to develop the port, which will likely be used to help grow China's economy, business supply chains and aid its military growth. 

Managing this port provides Chinese boats with critical access to the Strait of Hormuz, which, according to The Associated Press, is the path nearly 20 percent of the world's oil takes on its way to market. This could give Chinese companies the potential to be able to procure energy sources more quickly and easily and ensure businesses within the country aren't limited on the natural resources they need to increase production. 

Logistical challenges could await 

However, even though China has access to this critical port, it may have difficulty shipping Chinese-made goods or sending materials shipped there back to facilities within the country. Reports indicate little of the infrastructure that would get goods from the port to Pakistan's large Indus Highway is actually in place, and The New York Times reported the port management's website revealed no ship has docked in Gwadar port since November 2012. The AP revealed one of the only routes is typically blocked by snow during the winter, which would make transporting goods from the port to China difficult for an entire season.

Pakistan's president Asif Ali Zardari disagreed and claimed the port would make Gwadar a "hub of trade and commerce in the region," according to The AP, and its management by a Chinese firm would only strengthen the relationship between China and Pakistan. 

DDR reveals 2012 CSR report

DDR, a firm that owns and manages hundreds of shopping centers across several countries, recently released its 2012 corporate social responsibility (CSR) report, which details the steps the corporation takes to report its procurement, manufacturing and logistical processes. 

"We are very pleased to offer this report as a means to demonstrate out ongoing efforts regarding corporate social responsibility, while highlighting the measurable results we have achieved to date," said Joseph Tichar, DDR's senior vice president of corporate operations. "We are committed to maintaining our distinction as a responsible corporate citizen. Whether in the form of resource reduction, employee training and development, or solidifying our role in the communities our shopping centers serve, each initiative has a positive result for our business and our stakeholders."

Projects can cut costs 

Some of the largest projects the company took on in terms of CSR over the year were related to using efficient lighting, conserving water, recycling materials and beginning to implement the use of solar energy. According to the report, DDR managed to install 8,000 solar energy panels, cut down on energy use and limit water waste with smart systems throughout its facilities.

Not only can these business decisions result in favorable press, they can also have a significant impact on the cost savings within a company's supply chain. Firms that take the initiative to cut down on more wasteful practices can cut costs, while those that implement sustainable energy policies can find their manufacturing or logistical expenses fall due to their limited use of more expensive forms of nonrenewable energy. 

As more businesses become concerned about sustainability throughout their manufacturing, logistical and procurement process, more are taking the initiative to cut resource use and limit waste, which can result in major business cost reductions both in the short and long term. 

Trucking cargo could become more expensive to haul

Lawmakers are busy trying to determine how they can increase funding to improve the nation's infrastructure, a move that could have serious implications for businesses trying to find more options for cost savings. Much of the funding for projects such as highway improvement plans comes from gasoline taxes, but because cars have become more fuel-efficient over the years and people are driving less frequently, less revenue is coming in. This makes is difficult to pay for projects necessary now, and it only appears it will become more difficult in the future; automakers will be required to produce vehicles that average 35.5 miles per gallon by 2016 and 54.5 miles per gallon by 2025, meaning people will be stopping for even fewer fill ups and paying even less in gas taxes. 

To combat this growing problem and ensure U.S. roads are in good shape, some lawmakers and groups have proposed raising fuel taxes, which are currently at 18.34 cents per gallon. Thomas Donohue, chief executive of the U.S. Chamber of Commerce recently gave congressional testimony voicing his support for an increased tax, indexed to inflation. 

However, the tax increase could have implications for businesses nationwide. Commercial carriers could see expenses jump if fuel is taxed at a higher rate, meaning they may be required to raise shipping prices in order to remain competitive and make a profit. This could result in companies paying more to have their goods or raw materials hauled across the country.

With a potential increase in logistical costs, businesses could find it beneficial to cut expenses elsewhere, something they may be able to do by employing strategic sourcing strategies, investigating different shipping options or looking into more efficient and cost effective manufacturing processes. 

Just-in-time shipping, manufacturing gaining popularity

While some businesses may find it beneficial to get ahead in some regards, others are finding it cost effective and more productive to have some of their processes employ "just-in-time" strategies. This style of manufacturing and shipping has been growing more popular in recent years, and it's proving it can provide business cost reductions, smoother operations and better risk management strategies to those who test it.

Big potential for businesses 

Planning these just-in-time strategies can help a company avoid problems with overspending on manufacturing, storing or transporting products down the line, while still ensuring its products are consistently on store shelves or in transit. 

Companies can implement these techniques to ensure they can save funds during the manufacturing process. This not only allows companies to save on production, should a product not sell well, it also lets them to keep smaller amounts of inventory on-hand, reducing the need for large storage warehouses and cutting inventory expenses. Just-in-time policies can also benefit businesses by giving them the opportunity to save on logistical costs. Goods are shipped on an as-needed basis, which can cut down on the amount of freight a firm needs to transport on a regular basis. 

Just-in-time policies do have a drawback for some companies. In the event of natural disasters or unexpected events, a business may not be able to ship more product to a certain area or continue its prior manufacturing levels - potentially resulting in a merchandise shortage. However, according to The New York Times, some firms are mitigating this risk by adding additional distribution centers and diversifying their logistical processes to ensure smaller on-site inventories won't be put at risk by disruptions that can't be prevented or worked around. 

Expect the unexpected: Preparing for logistical challenges

Most companies carefully plan their logistical operations to ensure they are cost effective, run smoothly and get products or raw materials where they need to be in a timely fashion. Developing the best strategies is critical - without proper management and optimization, operations can become too expensive or inefficient, resulting in supply chain breakdowns. 

While a business owner may believe its logistical operations are flawless and will function smoothly no matter what the future holds, executives with this view may need to take a step back and analyze the downfalls of failing to take proper risk management strategies. Every firm needs a backup plan, even if it doesn't expect any major disruptions that hurt its shipping methods or deter the operations it hires to transport cargo.

Having a plan in place allows a business to prepare for the worst, even if operations haven't ever experienced a disruption. Holdups can be extremely costly and waste an enterprise's resources while it waits for a mess to be sorted out. There's no way to prevent natural disasters, terrorist attacks or political unrest, all of which can make it impossible for companies to use their usual logistical routes or carriers to get goods to market. However, having an emergency plan helps to ensure a company's revenue stream can remain consistent and consumers will not have to wait weeks to obtain the merchandise they're seeking.

Being able to have merchandise shipped out on a continuing basis, no matter what's happening in the world, is only one of the benefits to having a backup plan. Some carriers may increase their pricing to travel through extreme conditions or dangerous routes; having another option allows a business to enjoy the greatest cost savings possible during the shipment process.

3D printing changing manufacturing industry

Companies across the world are looking to enjoy greater cost savings, and businesses in the manufacturing industry may have the opportunity to do just that as 3D printing makes a greater impact on the scene. This technique, slowly gaining popularity with firms, creates products by laying down thin layers of material based on a digital model instead of using traditional "subtractive" methods which require workers or machines to create an item out of a larger piece of material . 

Cutting manufacturing costs 

Manufacturing costs have dropped for companies in recent decades; many firms have outsourced their production to other countries to take advantage of the low manufacturing labor costs and domestic facilities have relied increasingly on automated processes, resulting in the need for fewer workers across the country. 3D printing could be the next major cost-cutting move firms make, as this increase in automated processes will likely further drive down the need for manufacturing employees. 

Not only does 3D printing have the ability to slash labor expenses, it also gives businesses the opportunity to cut costs in other areas. Because products aren't carved out of a large piece of material, such as plastic or metal, companies can find themselves more efficiently using their raw goods and disposing of less waste. This could also give firms the ability to cut down on material procurement, as they can better manage their supplies and do more with less. 

Production time also plays a role in the cost-efficiency of 3D printing. Rather than sending prototypes overseas or having large orders produced halfway across the world and shipped to the U.S., this technique allows manufacturers to have their products made much more quickly. 

In his State of the Union address, President Barack Obama brought more attention to the process, and urged Washington politicians to approve plans to bring innovative manufacturing back to the U.S. and set up "manufacturing innovation centers" domestically, which could further the technology's growth in the country. 


War Horse (2011) - From the Somme to your frozen dinner.    

The recent scandal around horsemeat-infested products – labeled as 100% beef – sold in France, Sweden, and the United Kingdom, prompted a frenzy of questions from the media, consumers, and governments about the supply chain practices and health standards of prominent companies in the food retailing and producing industry. The Economist reports that big names such as Tesco, Aldi, and Findus all inadvertently sold horse flesh, and in significant amounts as well. One sampling from Tesco products recorded that one of its burgers was comprised of 29% horsemeat, and Aldi’s Today’s Special Frozen Beef Lasagne and Today’s Special Frozen Spaghetti Bolognese were found to contain between 30% to 100% horsemeat. Governments have sent out a European Union-wide alert.

While consumers in countries like the United Kingdom are noted to react with dismay at the thought of eating their beloved Joeys and Black Beauties, properly prepared horsemeat is basically just another source of protein, more accepted in some cultures than others. However, as reported by CNN, eight out of 206 horse carcasses checked between January 30 and February 7 tested positive for the drug phenylbutazone (a painkiller also known as bute). Bute is not approved for human use in the United States, as some patients have experienced “severe toxic reactions”. This news certainly reflects a health concern, but its dangers should be kept in perspective. Calculating from the current levels of bute found in horse carcasses, an average human being would have to eat hundreds of bute-containing horsemeat burgers within a short period to experience a dose close to what the patients with negative side effects have received.

The plot thickens

The largest issue in this scandal, then, lies in the credibility of these notable food retailers and producers and the level of control over supply chains. Reuters describes how a British parliamentary report suggests that it was no accident those beef products contain horse flesh. At the moment, governments are becoming embroiled in what will appear to be a long and difficult investigation into the supply chain. Financial Times quotes Ireland’s minister for agriculture, Simon Coveney: “I suspect this is not just one rogue trader in one country…. I think there are a number of people who have been selling horsemeat as beef, so it’s taking some time to get to the bottom of it.” Harvey Morris from the New York Times discusses how a low-cost food culture and long and complex food supply chains may have enabled criminals to sneak horsemeat into the market and to reap illicit profits.

This is not the first time in 2013 that issues concerning exactly what consumers are putting on their dinner tables have come up. In January, pig DNA in beef products was discovered in the United Kingdom, which in particular raised the concerns of groups of people forbidden by religious dietary laws to eat pork.

Most media sources have pointed out that this is a matter of accountability. These wakeup calls highlight select supply chains with limited transparency and accountability, and the consequences that such gaps may bring to the public. Holistically speaking, companies like Tesco regard audits on suppliers as an important component in protecting their brands but, according to the Economist, with prices of raw materials increasing, frugal consumers are reluctant to pay more for ready-made meals. In turn, retailers are forced to apply pressure on suppliers to cut costs, which ultimately forces suppliers to seek creative avenues to save. For the time being, it looks like all parties – save for the yet-to-be-implicated horsemeat-selling profiteers – are trapped in a Catch-22 scenario.

[Update - police in the U.K. have arrested three men suspected of fraud.]
More shipping options coming to Northeast

Companies seeking to enhance their new logistical operations in the Northeastern region of the country may have a new shipping option in the months ahead. A shipping firm from Iceland recently decided to sign a contract with the Maine Port Authority to develop container freight service in one of the state's largest cities, Portland. 

New shipping hub could change logistical operations in Northeast 

Eimskip, also known as the Icelandic Steamship Company, will have a container ship make a run to Portland every two weeks, according to a report from The Associated Press, which will provide the state with increased economic activity and provide firms with new shipping options and allow them to be better connected to supply chains that operate within Canada, Europe and other regions of the Northeastern U.S. The company's goal with the port is to reduce transatlantic shipping times, and it will also allow some companies the potential to get their products to other countries at a lower cost than they may have been able to in the past.

The AP reported Portland was previously a shipping hub, but has not had a container cargo service in nearly a year. A company that previously ran routes that connected Portland with Boston and Halifax decided to stop services several months back.

"Maine's economy will be strengthened by this new service and accessibility to markets," said Maine Governor Paul LePage, "Maine produces some of the best products in the world and this investment by Eimskip is a testament to that quality."

More shipping and procurement choices for businesses

However, the deal won't just bring water freight options to businesses looking to make this hub a part of their supply chains. Eimskip will partner with Pan Am Railways as a part of the deal, which will allow companies seeking rail options additional ways to transport their products, which could result in a business cost reduction for many firms. 

The additional options companies will be offered once the plans are put into motion signals how important multiple choices are for businesses looking to enjoy greater cost savings, streamline operations and ensure their logistical strategies are as simplified as possible. With new rail and ocean shipping prospects soon to be put in place, companies could find their operations relying heavily on one - or both - of the new logistical options in the Northeast.

What used to be a simple task of distributing valentine's days cards among classmates in grade school has become a global business of logistics. Valentine’s Day celebration has been commercialized into a holiday where, not only do people think about flowers, cards, sweets, and good eats, but more importantly, whether everything will be ready on February 14th. According to the National Retail Federation, U.S consumers are expected to spend $18.6 billion for Valentine’s Day this year.

Did you know that 95 million flowers from Columbia and Ecuador arrive a week before Valentine's Day through UPS? More than 80% of all flowers come through UPS's Miami hub where 3,000 tons of flowers are transported. They are kept in coolers, checked at customs, then delivered to distribution warehouse where they are inspected, kept fresh in controlled 36 degree temperatures, before finally being delivered. This whole process takes less than 24 hours, and is necessary to ensure the flowers are fresh as they are highly perishable. This holiday alone adds about 130 additional flights to accommodate the demand of flowers, including those last-minute rush flights to accommodate all last-minute orders that are taken up until the 13th! Valentine's Day is one of the heaviest single day delivery days throughout the year and flowers are the most gifted item, of course.

Valentine's Day would not be complete without dinner plans, and UPS also provide transportation services of temperature sensitive lobsters from Maine to restaurants and households. Chicago-based companies like Lobster Gram, have been shipping Maine lobsters all over the United States since 1987. Logistics of transporting lobsters include resting them in salt water for a few hours to refresh their gills before packaging them with gel packs in shipping coolers. All that cooling is necessary, as temperatures during shipping cannot rise above 45 degrees.

That lobsters are seen as a sign of romance is a bit interesting, considering that prior to the 19th century, they were used as fertilizers, fishing bait, and poor food fed to prisoners, children, and servants. Lobsters were peasant food and not considered a delicacy until the transportation infrastructure improved
to allow for inland availability at a cost that made it exclusive.

So for those lovebirds excited to receive flowers and enjoy a nice dinner, don't thank your love. Thank logistics for making your Valentine's Day eventful.

Supply & Demand Chain Executive, a leading business magazine, has again honored Source One Management Services, LLC by naming five associates as 2013 Pros to Know. Associates were included in the list of 2013 Pros to Know for their ability to respond to challenges in the procurement & supply chain industries.

Willow Grove, PA-The individuals at Source One Management Services, LLC have been recognized for directing clients toward supply chain excellence. This is the third occasion that Source One has had its staff members recognized, but this time, Source One is proud to have five individual recipients recognized for their many successful supply chain transformation achievements.

The Source One professionals that were honored as 2013 Pros to Know by Supply & Demand Chain Executive are William Dorn, Jr., Vice President of Operations; Joe Payne, Vice President of Professional Services; Lindsey Fandozzi, Director; David Pastore, Director; and Diego De La Garza, Project Manager. This is the second award for William Dorn, and the second consecutive award for Joe Payne.

"Source One is honored to have these five professionals recognized as top industry performers for their unique supply chain solutions that optimize our clients' operations and allow them to improve profitability while ensuring quality levels of service" said Steven Belli, Chief Executive Officer at Source One Management Services, LLC.

Barry Hochfelder, Editor of Supply & Demand Chain Executive, said "The efforts that a number of the industry's leading executives continue to take to improve their business's functionality and in turn, progress the global supply chain-this was one of the main reasons we started the 'Pros to Know' awards in the first place." Nominees were evaluated based on their ability to navigate the key challenges facing their customers and their customers' supply chains. Individual programs and initiatives of each nominee were reviewed to understand the philosophies and strategies used to align individual supply chains with their broader corporate strategy.

About Supply & Demand Chain Executive

Supply & Demand Chain Executive is the executive's user manual for successful supply and demand chain transformation, utilizing hard-hitting analysis, viewpoints and unbiased case studies to steer executives and supply management professionals through the complicated, yet critical, world of supply and demand chain enablement to gain competitive advantage.

Visit Supply & Demand Chain Executive Magazine Online

About Source One Management Services, LLC

Source One Management Services, LLC is a leading procurement services consultancy, providing procurement transformation, spend management, strategic sourcing and cost reduction services since 1992. Source One helps organizations reduce the costs for the common and not-so-common products and services that they use daily to run their businesses. Source One’s services reduce the overall cost of acquisition through the application of proven sourcing and purchasing strategies, best practices, people and technologies.

HP implements strict supplier guidelines

Hewlett-Packard is joining the ranks of businesses developing new policies for overseas suppliers and the workers they employ. The company recently announced it will take action against the Chinese facilities in its supply chain that fail to properly protect workers and implement responsible, ethical business practices. The announcement comes just weeks after rival Apple conducted internal audits only to find its Chinese suppliers violating employment laws and environmental regulations, leading Apple to announce new standards all its facilities will now be required to follow.

Worker rights a major concern 

According to The New York Times, many Chinese facilities rely on high school students, vocational students and temporary workers to ensure they can meet production demands when they receive large orders they would otherwise be unable to fill. 

One of the biggest components of HP's new standards will address the employment of student and temporary workers and enforce standards in regard to local employment regulations employee treatment by facilities. HP will stress to its suppliers that all employees must work voluntarily, be free to leave as they see fit and air their grievances without fear of retaliation. Facilities must also strictly abide by local workplace regulations and enforce legislation that dictates the number of hours an employee can work, the legal employment age and working conditions. 

Practices in regard to student employment will also be updated and strictly enforced. Many students have complained that when placed in factories, the tasks they were assigned had no relevance to their degree programs. For this reason, HP has mandated students working in facilities must complete work in an area related to their field of study and should undertake only responsibilities that complement the degree they are in the process of obtaining. Factories must also limit the number of student workers they take on at one time and rework their hiring strategies to ensure their workforce primarily consists of full time, non-student workers. 

"HP has a history of leadership in proactively addressing labor issues and driving supply chain improvements," said Tony Prophet, senior vice president of HP's worldwide supply chain operations. "We have worked closely with leading Chinese stakeholders to develop our new student and temporary worker guidelines to ensure the highest standards of ethical workforce management."

In addition to worker issues, HP has announced it will also take action against those suppliers that refuse to comply with laws that mandate working hour limits and implement an auditing system to better help it ensure its facilities are compliant with expectations.

Supply chain risks growing

Every supply chain faces threats from circumstances beyond the control of company executives; however, many businesses have risk management strategies in place to mitigate these potential problems. However, not all potential issues can fully be eliminated, and firms across the globe are facing an increased number of supply chain risks as their companies grow and their supply chains continue to expand their reach. 

Risks are prevalent - and varied - in every supply chain. While some companies may be unable to procure raw materials due to political unrest in a region, others may be forced to halt production after a natural disaster limits their manufacturing capabilities. More companies may encounter limited shipping capabilities if a large storm hits, and other corporations may find themselves unable to keep up with demand after a particular product becomes unexpectedly popular. While these risks are all different, they all have significant impacts on supply chains and a company's ability to perform well and consistently increase revenue.

Executives increasingly worried 

A new survey from Deloitte indicated that not only is the scope of risks increasing, but so are concerns from supply chain executives. While many corporations have measures in place to reduce risk, 45 percent of executives surveyed believe their risk management plans are only somewhat or not at all effective. 

These problems can have a significant impact on companies trying to manage a complex or lengthy supply chain. The survey indicated 53 percent of executives think disruptions have become more expensive to rectify in the past three years, with those in the technology, industrial products and diversified manufacturing industries being more likely to have this opinion. Forty-eight percent of those surveyed thought the frequency of risky events had increased over the past three years. 

"Supply chains are increasingly complex, and their interlinked, global nature makes the vulnerable to a range of risks," said Kelly Marchese, principal for Deloitte Consulting. "This increased complexity, coupled with a greater frequency of disruptive events such as geopolitical events and natural disasters, presents a precarious situation for companies without solid risk management programs in place."

Working around potential problems 

A recent World Economic Forum report indicated 80 percent of global companies see the opportunity for increased supply chain security as a huge priority.  Unfortunately, a company can never fully prepare for and eliminate all risks. Unexpected events do occur, and there's no way to prevent natural disasters or political unrest. However, businesses can take the steps to mitigate risk and adequately prepare for any potential problems their supply chains may face. 

Some companies have worked to implement strategic sourcing policies or backup procurement practices that will ensure they are prepared in the event a major supplier is unable to provide them with essential raw materials or products. This can ensure a business has access to necessary supplies even if a natural disaster has hit their primary raw material provider allows and manufacturing to continue as usual. 

Other companies are taking the initiative to mitigate risk by moving operations back to the U.S. While some businesses can enjoy major cost savings by manufacturing products overseas, having domestic production facilities can help a company eliminate some potential risks. The U.S. typically has strong and effective disaster relief processes to help those hit by natural disasters or tragedies, meaning a factory shut down by an event typically won't be closed for too long. However, when production facilities are across the world, a company may have no idea how a country's government is prepared to deal with disasters, potentially making it more risky for firms to operate overseas. 

Auditor finds DC procurement problems

Since a recent audit revealed the District of Columbia's procurement practices have "significant deficiencies," the area's polices have been under close scrutiny. 

Procurement processes questioned 

One of the big problems discovered during this audit was related to the bidding process the District is required by law to undertake before awarding a contract. Out of the 131 competitive procurements looked into, there was evidence of bidding for only 30 contracts. Similar oversight was found in the audit of emergency procurements, which are reserved for situations such as floods, epidemics and catastrophic events. Thirteen of these purchases were reviewed by auditors, who found five had no documentation that established they were actually for emergencies. 

Besides the limited evidence of competitive bidding processes and emergency procurements, there were other problems found by auditors. Legal sufficiency reviews were determined not to be available and purchase card holders were found to have exceeded cycle limits. 

In his State of the District speech, Mayor Vincent Gray noted the problem needs to be fixed and politicians should take the initiative to reform a broken system. 

"The reform initiative will streamline our purchasing and contracting processes, eliminate confusing and outdated rules, increase faith in the process while minimizing meritless protests, and reduce the time it takes to complete procurements," he said. 

IT problems also evident 

Procurement processes were responsible for some of the deficiencies found during the audit, and even though Gray addressed the issue, other problems remain.

The audit uncovered a variety of weaknesses in the District's information technology systems. It was found District officials' restriction of financial applications was erratic and user access was inconsistently documented throughout the process. Password configurations were also discovered to be outdated and officials failed to restrict developer access to a variety of important applications. 

The District will now need to develop new policies and practices to ensure data breaches don't result in a loss of confidential information and its sensitive data in regard to procurement, sourcing and finances cannot be accessed. 

"Over the last several years, the District has engaged in an extensive remediation process to address and resolve the reported findings and to strengthen internal controls related to information technology," said a D.C. representative, according to the Washington Business Journal. "While much improvement has been made as a result of that effort, we recognize that there are areas in which improvement is still needed."