June 2013
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There are plenty of best practices for conducting an RFx, many of which become fairly routine for those who have run their fair share of them. In the past, we have blogged about what not to do when running an RFP, listing things like 'spamming' the RFx to unexpecting suppliers, running unreasonably tight timelines, or writing the RFx with a supplier already in mind and making it nearly impossible for others to compete. Recently, we came across two additional examples of what not to do when running an RFI or RFP.

The first was an RFP we had not expected but, upon review, looked like a perfect fit for our company: telecommunications audit and strategic sourcing. But then we looked a bit closer at the submission criteria and it included a mail-in only policy. Sure, we still see this as policy for some of our customers from time to time, but that's not where it ended. The submission required eight hard copies of the response, each in separate binders! Further, the RFP called for notarization of six documents, of which we needed 8 copies of each. Our decision to not pursue it basically boiled down to this: If there is such a lack of engagement and unnecessary bureaucracy during the RFP stage, what would it be like to work with the organization as a client? Then again, there might be enormous cost reduction potential on the table...

The second example of what not to do came in via RFI. The RFI came as a second round to a previous bit of business we had bid on about nine months prior, which we can refer to as Phase I. Phase I was intended to be a telecom audit to be used in preparation for a Telecommunications Expense Management (TEM) rollout. Unfortunately, we did not gain an opportunity to work on Phase I. We did keep in touch, however, with the prospect and were considered for Phase II, the TEM rollout. A simple glance at the TEM RFI showed that the RFI had clearly been written by the bidder who won the business for Phase I. The RFI was 190+ questions, many of which were written specifically to eliminate every other competitor, leaving their own tool the only solution that would fit the requirement set. The prospect did not realize that having the provider write their RFI did not give them a fair look at the marketplace at all. Hopefully they got a good deal.

Both of these situations were easily avoidable. In the former, some supplier engagement and process streamlining would have gone a long way. In the latter, the prospect relied too heavily upon their incumbent service provider to build specifications for them and draft the RFI. They would have been much better served to use the service provider as a supplement, but to define their requirement set independently if they truly wanted a clear understanding of what is available in the marketplace.

At Source One, we help our clients build requirements, identify and engage suppliers, draft RFx documents, review proposals, and negotiate final contracts. For help with any of these activities, contact Source One at www.sourceoneinc.com
Macy’s has taken advantage of the RFID movement that has allowed them to improve visibility into the organization.  RFID is known as a means for tracking pallets of product that come into a fulfillment center.  Rather than tracing pallets and boxes, Macy’s has brought RFID to the store and considers it a method to help better serve their customers.  Tracking products in the store allows for Macy’s to use its stores for potential fulfillment centers for online and phone orders.  Because the cost of this technology is better and since it is easier to incorporate this type of tracking into a business, there is more of a reason for other retailers to incorporate this technology into retail stores.  Improving the accuracy of inventory is a main goal of this system with Macys. 

Macy’s senior VP of logistics and operations indicates that “inventory accuracy deteriorates about 2-3% a month.  At the start of the holiday season in November, most retailers’ inventory is 60 to 70% accurate which means that as retailers go into their peak season they are the most inaccurate”.   Retailers tend to take inventory after the holiday season in January and again before spring.  Using RFID has allowed Macy’s to take inventory throughout the year and shows that inventory accuracy could be maintained at 97%.  Macy’s uses this technology to scan items on the floor, allowing them to know what is being stored in the back so that it can be brought to the front for sale. 

Macy’s is also working on streamlining the RFID process by implementing this with their suppliers.  Since inventory accuracy has improved greatly by tracking in store, Macy’s feels it is motivating to their suppliers to invest in the technology since Macy’s is helping them generate more sales and create more efficiency.  The senior VP of logistics and operations indicates that the cost of the tags outweighs inaccuracy, missed sales, and margin erosion when managing the inventory and implementing this system. 
Procter & Gamble shifting to green logistics

Procter & Gamble has undertaken widely publicized sustainable sourcing initiatives, but now the company is building green logistics into its supplier network. Starting in July, the company will work with its logistics providers to convert up to 20 percent of its North American truck shipments to natural gas vehicles. By reducing diesel truck shipments, P&G will cut carbon emissions by nearly 5,000 metric tons. 

"P&G is investing in carriers with a commitment to natural gas vehicles to help boost the emerging natural gas industry, while continuing to seek more sustainable options for our supply chain and operations," said Yannis Skoudalos, global product supply officer at P&G, in a statement. 

P&G has outlined long-term corporate sustainability plans, and as one of the largest shippers in the world, green logistics are an important part of increasing efficiency and reducing ecological impact. Outside the U.S., the company is switching deliveries from trucks to trains and inland delivery systems, which can significantly cut carbon emissions. P&G also aims to use 100 percent renewable energy in its plants, utilize recycled materials for packaging and eliminate its manufacturing and consumer waste in landfills. 

Mexico set to become more competitive manufacturing destination

Mexico's manufacturing advantages are growing in comparison to China, according to a new study from Boston Consulting Group. By 2015, Mexican manufacturing labor costs are expected to be 30 percent lower than China's, and Mexican workers produce more goods per hour. 

Improvements to Mexico's manufacturing sector are helping boost the country's economy, The Wall Street Journal reported. With continued investments in factories, the sector will produce an additional $60 billion worth of goods within the next five years, and much of the output will be exported to the U.S. American manufacturing firms are increasingly seeing Mexico as a more cost-effective production destination than China. Mexican products contain four times as many American-made parts than Chinese goods, so U.S. parts suppliers could boost sales.

Electronics, appliances, automobiles and equipment are the product categories with the most to gain from bringing production the Mexico. Factories in the country have focused on gaining an expertise, which means companies that move production to Mexico can potentially improve quality, Bloomberg Businessweek stated. 

Energy costs in Mexico are linked to natural gas prices in the U.S. because of the proximity, so manufacturers could take advantage of lower expenses. China has higher natural gas and electricity costs than Mexico, the source said. 

However, one of the obstacles of moving manufacturing to Mexico are concerns over security, according to The Wall Street Journal. Some companies consider shifting operations to Mexico and then decide against it because of the risks and instability. For some, the potential for cost reduction and being closer to consumers is worth investing in additional security. 

In addition to creating new opportunities for U.S. parts suppliers, increased production in Mexico could generate higher demand for American imports, Businessweek said. Manufacturing accounts for 35 percent of Mexico's gross domestic product, and more investments would lead to higher standards of living. 

Natural disasters require stronger risk assessment procedures

Economic uncertainties and the threat of natural disasters have caused many manufacturers to look at their risk assessment procedures. Manufacturing firms that rely on foreign suppliers may be at a heightened risk of production disruptions, so companies are focusing on improving enterprise agility, according to Supply House Times. Increasing agility can mitigate the risk of disruptions.

Manufacturers can prepare for natural disasters by increasing employee awareness of risks. Business continuity planning can help companies respond to unexpected production delays and disruptions. The risk management process is something that workers need to perform regularly so disruptions can be effectively handled, the source noted.

Companies often forget to consider the implications of damaged equipment after a natural disaster, EBN stated. For manufacturers, if production equipment is damaged in a storm, it can lead to serious disruptions and economic losses. After the severe floods in Thailand, the country suffered a 2.5 percent loss of gross domestic product, which amounted to approximately $9 billion. This figure did not account for lost and damaged equipment. Reverse logistics and repairs are important components of natural disaster recovery. 

After a major storm, manufacturers may need to temporarily redraw supplier networks to prevent product delays. When it comes to damaged facilities, companies often assess the impact of damages after the fact, EBN said. Firms need to establish a protocol for when parts and equipment should be scrapped after experiencing damage and when a device is considered unusable. Production companies may need to plan in advance to utilize alternative logistics methods if a severe storm or earthquake wipes out infrastructure. Firms also need to prepare an emergency inventory in case suppliers and vendors experienced a disruption. Companies of all sizes need to have strategies in place for natural disaster management. 

Reshoring is gaining popularity

Companies are analyzing costs of manufacturing, and some are reshoring production to the U.S. Many firms moved production to China based only on cost per unit, and now this may not be the most cost-effective strategy, according to Thomas Net News. Offshoring production used to allow retailers to offer items at a lower cost to consumers, but as manufacturing labor costs and logistics fees rise, companies are moving operations to locations where they can better serve their customers.

To achieve a cost advantage when doing business with China, many companies needed to purchase in bulk, which could lead to high levels of inventory and potential waste, the source said. Small-business manufacturers could end up at a disadvantage in terms of cash flow because they were forced to pay for parts before they were shipped. When quality control issues or problems during the manufacturing process arose, procurement managers were racking up travel expenses. All of these factors plus the rising labor costs in China have lead manufacturers to take another look at American manufacturing.

U.S. manufacturing labor costs are still higher than China, but North America has other advantages, such as lower energy costs due to the shale boom and sophisticated trade logistics, according to PBS Newshour. Firms can gain product design advantages by reshoring operations as life cycles of consumer goods continue to speed up. General Electric recently brought appliance production back to the U.S., and the company found having engineers, designers and factory workers in the same location could make the manufacturing process faster, leading to cost reduction. In addition to benefiting companies, manufacturing jobs tend to accelerate economic growth because each position can lead to new opportunities for suppliers and logistics providers. U.S. consumers are starting to place a greater emphasis on American-made goods and are willing to pay more. 

In a previous post by Megan Connell, Walmart’s exploration of new shipping methods as part of its expanded online shopping focus was discussed. Walmart is making a big push to try and cut transportation costs and gain an edge over Amazon and other online retailers. Walmart knows one advantage they have over online retailers is their 4,000+ physical store locations. In an effort to exploit this advantage, Walmart has decided to ship some online orders directly from these brick-and-mortar stores, which in many cases can be much closer to homes than their regional distribution centers. The company has rolled this concept out in about 25 stores thus far and plan to have it in place in over 50 stores by the end of the year.
As Megan mentioned, Walmart currently has to pay more, and thus charges more, for shipping products online, due to its use of typical carriers like FedEx and UPS to deliver goods. One way it has attempted to supplement this, and reduce some of the charges, is through the creation of their own proprietary service, called Walmart-To-Go, for same-day deliveries. This proprietary shipping system is currently being tested in five metropolitan areas and utilizes Walmart’s own delivery trucks.
In an attempt to really bring the fight to Amazon and similar competitors, Walmart wants to take its local shipping ideas one step further. It is considering a plan to have store customers themselves deliver packages to online buyers. The company is trying to capitalize on a relatively new phenomenon called “crowd sourcing.” Crowd sourcing is when a company gets a large project accomplished, not from a massive effort from a select few, but from the minimal efforts of a very large group of people -- a positive version of “death by a thousand blows”, if you will. Crowd sourcing is typically performed by an online community, and physical participation is not yet common. By inviting its shoppers to “rent out” space in their cars and deliver online purchases to their neighbors, Walmart would take a pretty big leap into unknown crowd sourcing territory. It would also offer a discount on the delivering customer’s shopping bill, which in theory would cover the cost of their gas and time. Walmart believes that, of the millions of customers that go to their stores each week, a substantial portion of them will sign up, tell Walmart where they live, and be able to drop off packages for online customers who live somewhat near their way home.
Getting involved in this type of service could additionally lower Walmart’s shipping costs as well as shorten the delivery lead times. It opens the company up to a slew of legal ramifications, however, in addition to providing plenty of opportunities for theft or fraud. Drivers for the main carriers like FedEx and UPS are fully insured, whereas these customer-delivered packages would be delivered by complete strangers, presumably bound only to a code of honor. Whether or not people would want to have their online purchases delivered by complete strangers may depend, in part, on what those items are. Certain people may not feel comfortable with having their 12 pack of Fruit of the Looms undergarments being delivered by their neighbors. But then the question arises why they are ordering those online from Walmart to begin with…
Wall-Mart plans to test this initiative out within the next two years in a metro area near you. I am excited to hear some of the stories that come from this initiative, as well as your comments on the policy in general. Feel free to leave those below.

Android has become the most popular mobile OS in the world and is the number one computing platform on new devices. News has been released that Google has begun developing its own Android-based video game console. However, this is in response to Apple whom is also beginning to develop its own game console.
These consoles will not likely compete with the Xbox One and PS4, as Microsoft and Sony have a different target market for their consoles than Google and Apple presumably would. Google and Apple consoles will not be as hardware intensive and would be designed to support popular games on the app marketplace. These consoles will offer these types of games to be played on a big screen. Ouya’s, the first Android based gaming console released, recent success is likely to have led Google and Apple into the direction of the console industry. Ouya is the first of the affordable and low-powered gaming consoles that plays phone-like games on TV. Ouya’s popularity has proved there is a want in the marketplace for such a console.
What value do these companies see in the low-end market of gaming consoles? Recent economic woes have transformed the ordinary citizen into a strategic shopper. With the prices of Xbox One and PS4 in the $300-400 range and the frequent release of games at $60 to get the latest and greatest title, these lower computing power consoles are vastly more affordable and will popular among any mobile device user. The console has the ability to play the same games on your TV as you can your phone which will become increasingly popular to the newer generation.

The question will remain, if Google or Apple realizes success in this market, do they enter the larger gaming console and compete with Sony and Microsoft? Time will tell.
Mobile technology improving manufacturing processes

Factory employees used to have to use a pen and paper to perform a quality control assessment or a floor inspection, but mobile technology is changing how firms operate. Many workers use tablets to perform these functions now helping businesses reduce costs, decrease risks and improve workplace safety, according to The Network, a technology news source. Handwritten paperwork increased the chances of mistakes, and it would take longer for errors to be discovered.

Some manufacturers are developing their own mobile applications to meet business needs, but this option can require a great deal of resources, Manufacturing.net stated. Applications are evolving faster than manufacturers can keep up. It is expected that most apps will require at least four major updates before 2014, and 70 percent of mobile apps developed between 2008 and 2011 will become obsolete. Companies that decide to design their own applications need to focus on the functionality as well as just building the software.

Mobile devices enable better product traceability, allow employees to work in real-time and achieve better logistics management, The Network said. Managers are better able to identify problems that occur during production and communicate with other departments. The added speed allows manufacturing firms to have better quality control management. 

Sustainability comes to the forefront for consumers

Consumers are expressing a higher preference for environmentally responsible products and services, so companies may need to improve their sustainable sourcing initiatives, according to a recent study from Yale University. Half of all Americans now consider environmental impacts before buying a product, meaning sustainability could have large implications for companies that are not practicing it.

People are more likely to consider whether a product can be recycled, if it harms the environment, uses many resources or contributes to global warming. The majority of American consumers have bought locally bought or produced food at least once in a while in the past year, and 40 percent have purchased organic food. Consumers tended to favor fuel-efficient vehicles. Nearly one-third of Americans said they had punished or rewarded companies for sustainability by purchasing or not buying products.

In addition to not purchasing unsustainable products, environmentally conscious consumers would respond by telling friends and family about ecologically irresponsible corporate behavior. Some shoppers would even write online reviews and lack of sustainability. 

Steps to improving sustainability initiatives

With the growing preference for sustainable product sourcing, companies need to take steps to improve efforts or risk losing customers, Business 2 Community stated. Corporate sustainability requires long-term planning to create real change. Organizations should be realistic about the timeframe needed for significant reductions of environmental impacts. 

Some sustainability efforts may be concentrated in the office, and small changes can reduce costs and a firm's carbon footprint. For environmentally responsible business policies to take off, all employees in the organization need to contribute, the source said. Some major corporations like Starbucks, Google and eBay are undertaking high-profile corporate sustainability efforts, and companies that do not keep up with consumer preferences could place themselves at a competitive disadvantage. 

Image courtesy of Walmart.com
Online sales are expected to account for 8% of US retail sales in 2013, or $262 billion dollars. In response, more stores are looking to boost their e-commerce presence. As the online shopping trend grows more and more popular, companies are looking closer at their e-commerce departments for potential profitability. Although no one has been able to catch up to industry giant Amazon, Walmart is doing their best to reduce this gap by making some changes to their online presence. Walmart’s online sales are expected to total $9 billion in 2013, merely 2% of the company’s total sales revenue, which is why they have revamped their approach to e-commerce.
So how can Walmart bridge the gap between their online sales and their store location sales? One solution has been to allow customers to pick up their online purchase at their local store, either through their free Pick Up Today or Site to Store options. It is estimated that nearly two-thirds of all US consumers live within five miles of a Walmart store, and utilizing this shopping only benefits Walmart’s bottom-line. A typical Walmart online purchase ships for between $5 and $7, while Amazon’s average shipping costs are between $3 and $4. In order to reduce shipping costs to compete with Amazon, Walmart is allowing customers to choose whether they want to follow the traditional route and have their purchase ship to their homes, or pick up their purchases from a store location, but they also have the option to pay for their orders upon pick up, rather than paying with credit cards online. 
Along with allowing customers to pick up their orders from store locations, Walmart is also building e-commerce distribution centers around the country to reduce the cost of shipping. A main reason Amazon is able to keep such low shipping costs is because they have distribution facilities positioned around the country, allowing for orders to be shipping from a facility closest to where the customer lives. One of the reasons Walmart’s shipping costs are so high is that their distribution network is built to support retail store orders, not specific customer orders. By creating more distribution centers and also using existing retail stores themselves to package and send orders to nearby customers, they are hoping to attract more customers through reduced shipping times and costs.
 Cost of shipping can be a major deterrent for online shoppers, which is why free or discounted shipping is often a sales approach taken by online retailers. Walmart’s Home Free shipping policy allows for free shipping on orders over $45, but only on designated “Home Free” items (i.e. groceries, household items, pet food, etc.). They also offer 97 Cent Shipping, but again, this only applies to specified items. Walmart has the right idea by offering discounted shipping for online purchases, but by only allowing these policies to apply to certain items they are leaving out a large portion of online shoppers. Although Walmart is known for their low prices in their stores, online shopping is a different story, but with these new initiatives things might be looking up for this industry giant. 


Despite some companies’ and agencies’ best efforts to convince people that their brands are the best choice, the image is at risk to be tarnished by a multitude of problems. The supply chain concerns of two very different companies with operations in China, Apple and Kmart, illustrate just how mis(management) can plague the appeal of the brand. Also, interestingly enough, the workers of both Apple and Kmart brought the problems to light.

In the first case, after suffering severe chemical poisoning while working in a factory to build touch screen products for Apple, Jia Jingchuan appealed directly to the company to compensate for his personal losses. NPR discusses how this case differed from that of typical labor violation situations, stating that Apple has been slow to act, with the worker’s concerns touched upon in general in a report on supplier compliance . Apple has also allowed independent inspections of its supply chain, but some have criticized the company for conducting a public relations exercise instead of providing quantifiable and significant assistance to Chinese workers. Such ambivalence certainly contrasts starkly with the (Western) image of a fresh company endorsing “disruptive innovation”, and ads that feature figures such as the Dalai Lama.

A more recent and unusual example of supply chain controversy arose when Julie Keith discovered a letter in a box of Halloween decorations purchased at Kmart. The handwritten note, in English and Chinese, was a plea for help, describing a Chinese labor camp primarily for political prisoners. While Kmart is known for products at cheap prices, such an incident, with its underlying political implications, will serve to sully the brand in the eyes of prospective customers and confirm the suspicions of those who are cynical.

As investigations are underway, brandchannel comments that supply chains in China rarely consist of a single link. Richard Locke’s recent article in the Boston Review discussing how private efforts to improve global working conditions have failed also speaks to the challenges for companies to remedy international supply chain problems. What is certain is that these incidents will affect the image of the brands.
Retailers enhancing strategic sourcing capabilities

Retailers are adopting new strategic sourcing capabilities to meet shifting pressures from increased volatility and raw material costs, according to a new study of apparel, merchandise and grocery executives from Deloitte. Many organizations have boosted their sourcing of private labels. Consumer behavior is changing as mobility and online shopping becomes more common. 

"Rapid population growth, skewed to developing regions, is increasing demand on raw material sources while providing new markets for low-cost labor," said Michael Daher, retail sourcing practice leader at Deloitte Consulting. "Additionally, online, mobile and social channels continue to disrupt the retail landscape . As low-cost online competitors continue to expand across more categories, private label provides an opportunity for retailers to defend their market share by offering products that are exclusive to their banner."

Daher added that new private label products require more advanced sourcing. Retail executives said raw material cost increases and volatility were their top market pressures, followed by higher labor costs and fuel price changes. Raw material, manufacturing labor costs and transportation fees made up around 80 percent of of total product costs. To meet new challenges, retailers were diversifying their sourcing locations, bringing production back to domestic vendors and consolidating suppliers. As costs of labor continue to rise and local currency appreciates, some organizations were seeking more cost-effective sourcing destinations, such as India, Vietnam, the Phillippines and Cambodia. Ethical product sourcing was a concern for 92 percent of organizations surveyed.

Organizations needed to realize there was not a one-size-fits-all approach to sourcing and must instead analyze their unique needs, Supply Chain Digest stated. Large companies constantly face a number of pressures, which requires sourcing strategies for change in market conditions. Reviewing operations regularly could allow executives to identify opportunities and improve areas of deficiencies. 

General Motors recently announced that they will be entering into an agreement with AT&T to have built in cellular data service on most of its models starting in 2015. GM’s current CEO and Chairman of the Board, Daniel Akerson, who is a former telecommunications executive, has long been a proponent of these type services.
The multi-year agreement calls for AT&T to enable millions of GM cars with 4G LTE mobile internet access. This could potentially offer enough bandwidth for all kinds of services including streaming audio, web access, and even live video. It could truly give new meaning to the term “mobile office.” These services would be offered through On-Star, which is a subsidiary of GM. The service would also integrate into the vehicles’ operating systems and allow drivers more efficient monitoring of their vehicle’s safety, security, and diagnostics to ensure optimal performance.
GM recently sponsored an event in Las Vegas, NV where they introduced a new set of vehicle application programming interfaces (APIs), a set of protocols typically released by hardware developers like Apple and Google allowing third party developers to create applications for that hardware. GM hopes that these APIs will enable developers to build apps primarily for their vehicles’ “infotainment” systems.  You will soon have all the entertainment you could ever want even more readily available than it already is. Are you really into the new episode of Real Housewives of Topeka? Well, the service will allow you to start TV shows at home and then continue where you left off in the car, for example, via Netflix. So now you can speed-watch the new season of Arrested Development while being arrested for speeding in a development.
In order to offset some of the initial manufacturing costs, GM is considering selling internet ads on its dashboards. So while checking the score to the big game in the car, you will get those continuous interruptions for some University nobody has heard of like we currently love hearing through Pandora.
Of course this service would come with a “reasonable” monthly fee, because all of us definitely do not have enough of those in our lives. The details are still being worked out, but GM will receive $20 per connected subscriber from AT&T along with a share of the revenue.
One of the big challenges to this will be marketing this effectively and generating the right level of demand. There is a wealth of devices capable of providing all these same services that are most likely already in your pockets and in your car. Furthermore, critics have also raised concerns that this service will increase driver distraction, which has increasingly become a big issue as web access and streaming continues to be more readily available. But honestly, what does safety have to do with catching the finale of Toddlers in Tiaras?
Sustainable sourcing of seafood is important for fishing industry health

Many supermarkets have committed to sustainably sourcing seafood, and improvements have been made in the past year, according to Greenpeace's Seafood Sustainability Scorecard. Whole Foods, Safeway and Trader Joe's took the top three spots for proving responsibly caught seafood. Trader Joe's boosted its ranking after eliminating unsustainable fish from its stores. Wal-Mart started offering pole-and-line albacore, making sustainably caught and affordable tuna more available to consumers.

Despite improvements to sustainably sourcing seafood, there is still room for the industry to make changes. Americans ate 4.7 billion pounds of seafood in 2011, USA Today stated. The U.S. is second only to China in seafood consumption, so the focus on sustainability is important. Harpooning and spear gunning are examples of responsible fishing because fishermen can only catch one fish per device, which prevents bycatch, trapping an unwanted species in a net or long line. 

Unsustainable fishing practices could have a significant impact on the health of the oceans, but some fishermen target scarce species to maximize profits, such as bluefin tuna, USA Today said. Rare species fetch a higher price. Because of tuna's popularity, it is at risk of unsustainable fishing. 

It is challenging for consumers to make responsible choices about seafood because fish are frequently mislabeled in grocery stores and restaurants, The Boston Globe stated. Escobar, an oily species of fish, is often substituted for albacore, which is a more expensive fish. The newspaper originally reported on seafood mislabeling one year ago, and few changes have been made. Massachusetts is introducing legislation that would fine retail chains and restaurants for intentionally substituting less expensive fish.

Without sustainable sourcing of seafood, certain species could be placed at risk from overfishing. Major retailers are working with suppliers to improve seafood sustainability. 

3D printed microbatteries could lead to new innovations

Scientists can now manufacture lithium ion microbatteries the size of a grain of sand through 3D printing, Forbes reported. The new development could enable a variety of robotics, medical and communications devices that were not previously possible. 

Engineers have created many tiny devices, such as medical implants and miniscule cameras and microphones. However, there was not a power source small enough to support these devices. Batteries were as large or larger than the devices, which would inhibit further developments, according to the source. Microbatteries were enabled by 3D printing because scientists were able to layer tightly interlocked, thin electrodes. 

Small batteries were traditionally made from thin strips of solid material, and they were not able to hold enough energy to power high-tech, miniscule devices, Voice of America stated. With 3D printing, layers of materials enabled the batteries to hold more power. 

The process required the development of specialized 3D printing ink. Researchers worked to create ink with the right chemical and electrical properties. For the batteries to conduct electricity, the ink needed to immediately harden upon application. The capability to develop increasingly smaller power sources could revolutionize how things are made and what is possible for manufacturing. 

Last year, Ted Leonhardt, co-founder of The Leonhardt Group, quipped in Branding Magazine, “Mr. Procurement exists for one reason only: to get the most while paying the least.” With marketing and branding results difficult to quantify, cost does play a role in the selection and negotiation process. AdvertisingAge’s survey of 113 procurement executives further supports Leonhardt’s opinion, stating that 94% of the execs agreed that cost reduction is a critical factor when conducting marketing procurement. It is important to emphasize, however, that to assume that price is the only decision-making factor would be grossly oversimplifying the process. Take for example Porsche and the automotive industry.

After a lengthy six-month pitch, Porsche recently decided to retain its incumbent, Cramer-Krasselt, as its agency of choice. The Chicago-based independent company also recently added Patron to its list of clients and has been the lead creative agency for Panera Bread. According to Adweek, after meeting with a multitude of shops early in 2013, the auto company narrowed their list to five: independents such as Droga5, Olson, as well as MDC Partners’ CP&B and Cheil’s McKinney, and the incumbent. As agencies go through a notoriously time and resource-intensive process vying to win the hearts and minds of their potential clients during the pitch process, both buyers and sellers take the opportunity to assess and reassess each agency’s understanding of the brand and cultural fit.

To note, while Porsche’s advertising spend is relatively small in the automotive industry (a meager $23 million in 2012 U.S. advertising compared to General Motor’s $1.78 billion in 2011 and Chrysler’s $1.19 billion in 2011), it is critical for Porsche to spend the money wisely, as their audience is a highly targeted group.

In a fiercely competitive industry, a practiced "Mr. Procurement" is forced to consider factors beyond saving a few cents. AdAge’s survey adds that more mature marketing-procurement groups also focus on other quantifiable metrics such as brand-health and market-share increases, to measure success. Andre Oosthuizen, vice president of marketing for Porsche Cars North America, Inc. states, "The decision to extend our partnership with Cramer-Krasselt was based on the agency's committed senior leadership, unique understanding of our brand and their innovative work. They have been a valuable, collaborative partner and we look forward to continuing to work with the team at Cramer-Krasselt."
US small businesses are partnering with Chinese manufacturers

Some U.S. small-business manufacturing firms may be boosting their businesses by partnering with Chinese companies, Fox Business reported. American startups sometimes experienced difficulty finding the right local manufacturers or could not afford to operate production in the U.S.

Companies that use specialized eco-friendly materials in their products may not be able to find them from suppliers in the U.S. The lower price points can also be advantageous to entrepreneurs who have just started a business, the source said. However, partnering with foreign suppliers is not without risks. Importing goods from China can lead to poor quality products, but sometimes Chinese companies are willing to collaborate to make improvements.

Small businesses can put themselves at risk by being too trusting of their international counterparts, so they need to find a reputable manufacturing partner. China has a bad reputation for intellectual property theft, which highlights the importance of supplier quality management, according to The Financial Times.

Establishing a face-to-face relationship with Chinese partners can be critical to the success of the enterprise, Fox Business stated. It can prevent entrepreneurs from falling victim to scams. Small businesses should always check to make sure an international supplier is legitimate.

Image courtesy of phandroid.com
Barnes & Noble released their quarterly earnings earlier this week. While the company's revenues picked up over the previous quarter, it was still the third straight quarter ending in a net loss for Barnes & Noble. To stop some of the bleeding, the company announced it would no longer produce its Nook tablet devices in-house, and instead co-brand with a third party manufacturer.

A little history on the Nook. Following Amazon.com's release of its Kindle ebook reader in late 2007, Barnes & Noble -- the largest brick-and-mortar book retailer in the U.S. -- followed up with its own ebook reader in 2009. These early devices sported 6" black-and-white e-ink screens, with the Kindle featuring a QWERTY keyboard and the Nook featuring an expandable memory slot and a small color touchscreen for navigation. Arriving two years late, the Nook was never able to garner more than 25% of the total market share for ebook readers. Following the launch of the iPad by Apple, Barnes & Noble launched the Nook Color 7" tablet in 2010, with Amazon following up with the Kindle Fire in 2011. Further tablets from both manufacturers have since followed.

Barnes & Noble has specified that these manufacturing changes will only affect the company's tablet devices, a list that currently includes the Nook HD 7" tablet, and the Nook HD+ 10" tablet. The company's traditional e-ink devices, the Nook Simple Touch and the Nook Simple Touch with GlowLight, will continue to be manufactured in-house.

The outsourced manufacturing strategy is certainly not a new one, but working with existing manufacturers in the market is a bit of a twist, though other companies have done it before. Google is a master of it. Google has maintained a line of Nexus devices, branded as their own, but none of which are manufactured by the company. Its trendsetting Nexus 7 tablet is manufactured by ASUS, and the Nexus 10 is manufactured by Samsung. Its line of Nexus smartphones have been manufactured by HTC, Samsung, and LG.

Differing slightly from Google, who uses devices developed especially for them by major market players and sells them under the Google banner, Barnes & Noble will be co-branding the devices, meaning the manufacturer's name will appear along with B&N's. Given that the company has Nook apps for iOS and Android -- thus rendering any tablet a Nook of sorts -- its given strategy is questionable.

These co-branded devices will have to establish a foothold in the market by being unique or cheap. Given the company's current financial woes, cheap might not even be an option.
Sustainability models need green procurement

Creating an eco-friendly product is not enough unless businesses focus on procurement's role in sustainability efforts. Major corporations are taking efforts to become more sustainable, but it requires working with suppliers to achieve green initiatives, according to Green Biz. A green procurement strategy needs to be aligned with the product carrier and supplier relationships.

It may be easier for companies to start small with sustainability and begin with measurable practices. Sustainable sourcing needs to be in line with the organization's strategy for green initiatives to be successful. 

Some major electronics companies are moving toward sustainable practices by working with suppliers. In AT&T's manufacturing facilities, fan belts for building mechanical equipment have been swapped out for new models with better energy efficiency, Green Biz stated. Best Buy is redesigning its in-store display units for reuse, which can reduce costs. The units contain several commodities that can be substituted for more eco-friendly materials, such as wood composites, metals and plastics. To accomplish this, the corporation would need to collaborate with key suppliers to identify sustainable replacements that would still meet the company's needs. Dell notebook computers have room for sustainability improvements as well. The laptops could be redesigned to reduce embedded energy and extend the lifecycle of the device. 

Sustainability can be rooted in self-interest

Businesses are facing greater sustainability challenges, and green initiatives are not progressing quickly enough to prevent severe environmental damage, according to a recent project from GlobeScan and SustainAbility called the Regeneration Roadmap. The private sector needs to take a greater role in reducing environmental impacts, and the key to driving sustainability may be business self-interest. Companies have low expectations for government regulations that will change sustainability. Large corporations may have a greater ability to change environmental impacts.

With consumers taking a greater interest in sustainable product sourcing, companies need to respond and adopt more eco-friendly strategies. Not acting on sustainable development challenges could put organizations at risk of losing revenue, Environmental Leader stated. Since the stakes are higher for sustainable developments, making progress will require more effort, and many organizations will need to change strategies to stay profitable. 

Two-thirds of consumers in six countries realized the need to consume less and purchase more sustainable products, according to the Regeneration Roadmap. People in developing markets like Brazil, India and China had a great understanding of the need for more sustainable consumption. More than half of consumers in developing markets said they bought products because of low environmental impact or social benefits. Only 22 percent of consumers in developed markets were likely to buy products based on environmental factors alone. 

As consumers continue to place emphasis on sustainable products, businesses that position themselves to deliver eco-friendly products and services may gain a competitive advantage. By adopting sustainable strategies, companies can improve their bottom lines, according to AmeriQuest. Green initiatives can help organizations reduce costs, minimize risks, boost revenue and drive innovation. 

Large organizations may be able to change small processes that could significantly improve business sustainability. Con Agra changed its packaging in 2012, and saved $22 million by reducing 3 million pounds of raw materials and improving logistics and water conservation, AmeriQuest said. Wal-Mart reduced plastic bag waste by 3.1 billion bags. FedEx is seeking to improve green logistics with better fuel efficiency of its fleet. Sustainability requires more effort, but businesses can reduce carbon footprint. Sustainability initiatives need a top-down approach, and collaboration between the procurement team and suppliers is critical for success. 

Image courtesy of Dan-Dare.org


For years, Netflix has dominated the online digital media streaming sector. For only $7.99 per month, you can access thousands of television shows and movies through the internet. Over the past couple of years, Netflix has seen a new competitor emerge in Amazon Prime, which also provides digital media streaming of televisions shows and movies. Because these two web services are subscription based, they must maintain extensive and desirable libraries of television/film content that will continually pique viewer interest to keep subscribers loyal. In order to provide streaming services, Netflix and Amazon must acquire the rights to each television show and movie. 

More and more, subscription services like Netflix and Amazon Prime are becoming viewed as competitors to traditional media companies, primarily the studios that are leasing their content to them. This leads to reluctance among traditional media companies to sell their content, or at the very least, reluctance to lease the content at a reasonable price. At the same time, television/film studios do enjoy the extra income and exposure from these large media distribution companies. But the added exposure has not meant that media companies are not trying to squeeze every dollar out of the streaming services that they can. Netflix recently ended their contract with Viacom over pricing disputes. Although Viacom represents a large pool of television and film media, Netflix did not feel Viacom’s content was worth the asking price. Weeks later, Viacom and Amazon reached a deal to allow for streaming of Viacom content through Amazon Prime, at a much lower asking price than Netflix.

As a way to boost subscriptions, and to break away from relying on television and movie studios for their content, Netflix and Amazon have begun producing their own original content. Netflix was the first to try this by releasing its own series “House of Cards,” an adaptation of a BBC miniseries of the same name. All 13 episodes, each an hour long and commercial free, of season one were released simultaneously on February 1, 2013. The release of “House of Cards” in an exclusively digital manner represented a major milestone in television series distribution, and it’s a method that is expected to continue. Netflix followed this up with a new season of Arrested Development, a cult classic that originally aired on the Fox network ten years ago. 

Amazon’s approach to showcasing original content is a touch different. In late May, Amazon announced that it will be pursuing the release of five original television series. Interestingly, Amazon engaged its customers by using their feedback to choose these five television series from a pool of 14 potential series. By giving their customers what they want, Amazon hopes to maintain and bring in a strong client base. 

Netflix has made the most recent power move by signing an exclusive deal with DreamWorks Studios for the rights to DreamWorks content, as well the plan to develop shows based off of some of DreamWorks’ films. This is Netflix’s largest content agreement to date, and once again solidifies the company’s effort to become less reliant on television networks for content. 

How exactly does this correlate to sourcing?  Though the industry may be different, the procurement skills and strategies remain the same. Competition among your supply base can sometimes have a direct impact on your access to certain products and services. Also, Netflix and Amazon both made original content decisions only after careful market analysis, but did this analysis in different ways. Netflix purchased the rights for Arrested Development based on its history of having a dedicated audience. Amazon directly polled its expected users for their input. Finally, Netflix’s securing of exclusive DreamWorks content is a page straight out of the modern supplier management handbook: by curating strong and effective working relationships with core suppliers, a company can secure exclusive rights to limited resources.
Logistics costs rose in 2012

Logistics prices rose to $1.33 trillion and made up 8.5 percent of U.S. gross domestic product in 2012, according to a new report from the Council of Supply Chain Management Professionals. 

Transportation rates increased only 3 percent last year as a result of inconsistent shipment volumes. The trucking industry is facing new regulations that will impact productivity. The U.S. Department of Transportation's new Federal Motor Carrier Safety Administration regulations will go into effect on July 1, 2013, and it will enforce hours of service. As productivity slows, capacity will contract. Competitive pressure from the trucking industry kept railroad logistics costs low. Rail freight sourcing traffic declined 3.1 percent.

The inland waterway network was frequently interrupted in 2012, with weather patterns affecting logistics. Providers experienced difficulties due to severe droughts that reduced river levels, which impacted navigation and led to temporary closures for emergency dredging. Part of the Mississippi River was closed in August 2012, which caused delays and lines of up to 100 tows. Each delayed tow lost $10,000 per day. The low river levels also resulted in lighter loading, so thousands of tons of products could not be moved. Agricultural shippers experienced river logistics rate increases of nearly 25 percent. 

Image courtesy of Architizer
In a professional environment, people expect rock-solid stability and reliability, and will pay a premium to get it. Business-grade data connections are more resilient than consumer levels, and cost more, because of this. The video gaming public, on the other hand, expects this level of service gratis. Both parties are having their wishes satiated by Microsoft, who announced a $700M data center being built in Iowa solely to support the cloud operations of its Office 365 package and the incoming cloud services for its XBox One entertainment console. 

For Office 365, the data center's uses will be two fold. Much like it's Outlook.com-attached SkyDrive offerings, Microsoft offers Office users between 7 and 10 GBs of cloud storage space for their various Office files, which can be shared to any person worldwide or accessed by the user across its Office-registered devices, including desktops, laptops, and iPhones. Additionally, in what has been a suspect debut for the update, Office 365 is the first edition of Microsoft Office to operate from the cloud as a Software as a Service (SaaS). The new data center will provide additional servers to help spread the workload as users continue to on-board. 

Microsoft's cloud offerings for the XBox One are more diversified and more centric to the device's operations, and given the device's importance to the company's consumer products division, much more likely to suffer a damaging PR backlash in the instance of a problem. Along with the carryover duties from the XBox 360, the XBox One will use the cloud to store and stream full games to individual consoles and serve as a game DVR, allowing users to record their gaming sessions, edit them, and share with their friends. 

Microsoft reportedly received $6M in tax incentives to locate their newest data center in Iowa, and will release more details on the center this week at its Build conference.
Food sustainability can be improved by green packaging

Many consumers are placing a growing emphasis on sustainable sourcing of food products, but green packaging is gaining popularity, according to Forbes. Tuna, which was once controversial seafood, is currently coming under fire because of the cans. Metal cans take up more raw materials than plastic pouches, so to reduce manufacturing costs and improve sustainability, some seafood producers are making the switch. 

Popcorn bags are changing to be more eco-friendly as well, Forbes reported. Most microwave popcorn bags contain a substance the U.S. Food and Drug Administration considers a toxin. Some bags may contain Teflon, and many types of popcorn have artificial butter substitutes. A new company, Quinn Popcorn emerged with a toxin-free microwave bag that is also compostable. 

While some improvements to sustainability can be made through food containers, manufacturers have to ensure packaging does not negatively impact shelf life of a product, Plastics Today stated. Packaging can reduce waste and cut raw material consumption, but research and design costs can often be high for marginal benefits. Green logistics has to work to fill some of the gap and improve food sustainability. 

Retailers that are concerned with sustainability have the additional challenge of shipping perishable items outside of local markets without compromising their green values, according to Forbes. Thermopod came up with a solution by creating biodegradable, temperature-controlled packaging from recycled textile fibers. The company offers shipping crates and envelopes of multiple sizes to sustainably ship various kinds of food. 

Food producers are placing emphasis on reducing the amount of material they use in packaging without affecting shelf life, and this will depend on integrated designs and realistic goals, Food Manufacturing said. Companies need to analyze performance requirements to improve shelf life and sustainability at the same time. 

Natural gas boom helping to reduce carbon emissions

Although greenhouse gases are high globally, U.S. emissions have dropped to their mid-1990s level. Some of the cuts in carbon emissions can be traced to the slowing of domestic manufacturing, but much of the reduction has come from the switch from coal to natural gas, according to a recent study from the Center for Climate and Energy Solutions. Natural gas was responsible for 30 percent of U.S. electricity generation in 2012, and the shale boom has created many opportunities in manufacturing and green buildings.

Natural gas releases half as much carbon dioxide as coal, so it can significantly reduce emissions. Businesses can indirectly improve sustainability efforts by replacing electric appliances, such as space and water heaters, with natural gas models. Natural gas could also lead to opportunities in green logistics, because it would decrease dependence on gasoline and diesel in heavy-duty truck fleets. Manufacturing could also become more sustainable with natural gas-powered combined heat and power systems. 

Despite the potential benefits of natural gas usage, the report found it would not create deeper emissions cuts needed in the future. Consumers and businesses would have to focus on zero-carbon energy sources like solar, wind and nuclear. There were some barriers to achieving greater natural gas use, such as funding expensive infrastructure for gas transportation. Distribution of natural gas can present the risk of methane leaks, which is a dangerous greenhouse gas, according to the Energy Collective. 

Manufacturers are starting to take notice of the opportunities created by access to cheap natural gas sources, Investor Place said. As manufacturing labor costs continue to rise overseas, firms are reshoring production to take advantage of the shale boom. Major companies like Apple, General Electric, Ford and Whirlpool are bringing production and jobs back to the U.S. because low fuel costs will help them stay competitive. 

Manufacturing entrepreneurship on the rise

Entrepreneurs may be in a position to gain a competitive advantage on offshore and domestic manufacturing companies, according to the most recent Global Entrepreneurship Monitor report. Rates of entrepreneurship are at their highest rate since GEM began tracking in 1999.

Small-business manufacturing firms are gaining an advantage as the economy continues to recover. Entrepreneurs are pursuing opportunities because they want to, not out of necessity. However, most entrepreneurs were focusing on growing their businesses within the U.S. instead of exporting products.

Demand for new high-quality items has created new opportunities for manufacturing entrepreneurs. Labor is more affordable, and the rise of automation is allowing smaller companies to innovate with fewer workers. Automation technology has reduced many of the advantages of offshoring labor to countries with lower costs, like India and China. 

The rise of 3D printing has generated new possibilities for small-business manufacturers. Entrepreneurs can use 3D printing to make products on a smaller scale while keeping production cost-effective. The new technology is mainly used for prototyping, but 3D printing allows manufacturing to be more accessible to entrepreneurs. Technology is making it easier for small-business manufacturers to introduce innovative products into the market. 

Image courtesy of Walt Disney Studios Motion Pictures

The idea of more profitable work is an alluring one for most anyone, so a phone call confirming an invitation for participation in an RFP should be something to make anyone happy. As it happens, however, a lot of people don’t like getting an RFP. A lot of people hate it. Given that they are very often the gateway to a new, potentially prosperous business opportunity, it’s strange that there is so much animosity towards these documents. The animosity likely stems from the fact that so many are assembled terribly. So let’s look at common issues with RFP’s and how to resolve them.


By now, everyone is familiar with the story of a mid-‘80s Van Halen lineup freaking out over brown M&Ms in their dressing room when their appearance contract specifically forbade them. The story is that the brown M&M’s provision was included as a quick way to see if the rest of the contract’s provisions were honored. Sort of a “gotcha” provision because they were dealing with different venues, contractors, and managers every night, some of whom might not want to do what’s required.

Thankfully, supplier selection is not like the mid-‘80s metal scene – if only for the lack of hairspray and Spandex – but also because all parties involved are professionals. An RFP with needlessly tedious requirements (e.g. submit one original proposal, 10 copies of the proposal, all mailed in separate three-ring binders plus seven digital copies enclosed on a 100MB Zip disk) or ultra-specific requests that don’t concern to the project involved (e.g. list three previous clients in the grape soda packaging industry when you’re evaluating TEM products that are in no way related to your soda business) read to the supplier as trivial. Including them under the guise of “We want to see which suppliers can actually follow instructions” indicates a lack of trust from the beginning and can create a sour start to any relationship.

Obtuse Formatting

When drafting your RFP, it’s important to remember what it’s actually meant to do and make sure the format follows suit. Your RFP can be a true request for a proposal or it can be the basis of a proposal itself. In the first instance, it should clearly outline what is needed in the proposal and provide at least a tentative Scope of Work in order to give respondents an idea of how they should respond. In the latter case, you’re actually providing questions to the suppliers, with their answers forming a sort of proposal. In either case, the answers are going to be evaluated at the same time upon submission.

Consider how your RFP is going to be read by the supplier, and used by those evaluating the responses, when drafting. Does your RFP include forms you would like included in the suppliers’ response? Don’t send it out as a PDF then. They require very expensive software to return them to Word/text format and the alternative, scanning, takes a lot of effort and never looks right. Is the RFP a series of short answer questions? Excel, or some other spreadsheet program, is likely the best way to present those questions. Presenting questions in a spreadsheet gives the responding supplier an easy way to track their answers, and those evaluating the answers an easy way to scorecard quickly. Spreadsheet-based RFPs requiring lengthy answers will annoy everyone involved due to spreadsheet programs limited abilities to wrap and format text across multiple lines.

Short version: If there are a lot of questions with short answers, Excel great. In all other cases, Word is likely the friendliest solution.

On the subject of RFPs, there’s one final way to ensure your potential suppliers get an RFP that’s not infuriating and actually identifies what you need: Make Your Own. 

The old adage goes “Never ask a barber if you need a haircut” – the implication being that a person in the trade of selling services is probably not looking out for your best interest – is definitely in play here. Having a service or product supplier prepare an RFP for you to identify services or products that they themselves offer is a recipe for a biased RFP.

To get the best results from an RFP and identify suppliers properly, a thorough audit of your organization’s processes should be conducted and a needs analysis performed to determine what type product or service your company actually needs. Having a person or company with a product in the market tell you what you need is a sure-fire way to learn you need their solution and only their solution will do.

Finally, did you know Source One wrote a book with entire chapters dedicated to optimizing RFPs?

Michael Coreleone once said “Keep your friends close and your enemies closer.” Apple and Samsung took the Godfather’s quote to heart and applied it to their business strategy. Although both companies are currently embroiled in a massive billion dollar legal battle, Apple and Samsung are dependent on one another for valuable parts of their business. Currently, all iPads and iPhone 5’s contain Samsung ARM-based processing chips. Likewise for Samsung, Apple represents 80% of their microchip revenue. 

It does not make good business sense to rely on your primary competitor for key components of your product line. Apple is beginning to realize this, they have begun move away from Samsung as a key supplier and are in the process of sourcing other suppliers for processing chips. Various online reports show the frontrunners for the creation of future Apple chips as Intel and Taiwan Semiconductor. Intel recently signed a deal with Altera, a Silicon Valley based manufacturer of integrated circuits, to develop microchips on their behalf. By partnering with Altera, Intel shows that it is able to handle large scale production of microchips, the type of scale that a partnership with Apple would require. Since 2011, rumors have circulated that Apple is pursuing a partnership with Taiwan Semiconductor as a potential replacement for Samsung. Taiwan Semiconductor is the largest contract chip manufacturer in the world, with a market capitalization of about $90 billion. According to MacRumors.com, Taiwan Semiconductor will be the manufacturer of its A7 chips, which will be used in the upcoming iPhone 6, due to debut in 2014.

Samsung has begun to counteract Apple’s decision; it is looking to establish partnerships with various technology companies to mitigate the loss of revenue from Apple’s move. Currently, the only publicly identified alternative has been NVIDIA, a top manufacturer of graphic processing units.

From a strategic partnering perspective, Samsung should consider its Apple replacements carefully. Samsung will be looking for companies that can replace the lost Apple revenue, become strategic partners (i.e. a company that can help create new opportunities for business and innovation), and have potential for rapid growth, ideally without becoming another competitor. Of course, they’d probably prefer that their next partners don’t constantly sue them either.
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There have been many recent complaints that the NSA (National Security Agency) is collecting and using personal and confidential telephone records to investigate potential domestic criminal offenses amongst other information.  Consumers are also concerned that social media outlets such as Facebook and Google not only sell our personal information to government agencies but use our search history and download information to “improve” our searches and target advertisements to our likes.
Although this may be very true and slightly concerning, how can we, the people posting pictures of our family and friends while tweeting about every second of our daily lives expect anything different? 
The time of sending letters or visiting friends and family is becoming obsolete, where now we Skype our conversations or text our neighbors instead of walking over to say hi.  Where is the balance between technology use and physical interaction?  The world is relying more on technology every day for basic needs and personal privacy is a thing of the past…if we let it be.  No one tells us to sell our information for free or share our entire lives with everyone who has a computer.
Also, if the government wants to find incriminating information about an individual, they would not rely on social media posts alone…they would endure more sophisticated surveillance activities to catch a criminal just like they do on Law & Order.
Dun Dun!