September 2013

Based on current trends, it appears that way; however, in no way will the U.S. textile and apparel industries demand the large workforce that once existed well into the 1990s before jobs began to move overseas.  In a two-part series, The New York Times features a few companies and their successes as well as challenges during this industry shift.  Overall, companies are shifting production from China back to America simply because customers are requesting American-made goods.  This growing demand for domestic products has resulted in an increased need for specialized jobs within the U.S.  In turn, manufacturers in the city of Minneapolis, as well as several other cities across the country, are working on building a skilled sewing workforce while other manufacturers are more focused on technological advancements in order to maintain a competitive edge.  Regardless of the industry, a company’s greatest assets always include its employees and its innovative technologies.  These are two assets that a company should closely evaluate when selecting a new supplier or assessing a current one.

As labor costs continue to rise in other countries and customers request more American-made goods, manufacturers are reevaluating their supply chains and making changes.  Most of these changes are in the form of relocating factories back to the U.S. and filling specialized job positions.  Many are expecting that by taking these measures, high quality will be delivered and there will be fewer safety issues to address.  In the second part of the series, which mainly discusses the current need for a skilled sewing workforce in the U.S., it is noted that “accidents, like the factory collapse in Bangladesh earlier this year, have reinforced the push for domestic production.”  In addition, “wages for cut-and-sew jobs, the core of the apparel industry’s remaining work force, have been rising fast – increasing 13.2 percent on an inflation-adjusted basis from 2007 to 2012.”  The New York Times provides a historical overview of the textile industry and its evolving workforce dating back to the 1800s.  Modernization and innovation have eliminated several jobs as automation is possible throughout the manufacturing process.  Since the primary focus for quite some time has been on automation, the skilled sewing work force has slowly dissolved and many manufacturers are struggling to attract a new wave of factory workers.

Recruitment centers have popped up across the nation, job postings can be found in churches and community centers, and ads are circulated in foreign language newspapers.  With little results being generated from these efforts, manufacturers in Minnesota decided to join efforts and form a coalition to partner with a nonprofit organization and technical college and begin building a skilled work force from “scratch.”  These three parties, the Makers Coalition, Lifetrack, “a nonprofit group in St. Paul that helps immigrants, people on welfare and those with disabilities”, and Dunwoody College of Technology, completed its first training course in June.  Improvements are currently being made to develop a more robust and applicable curriculum.  Overall, eight (8) graduates received job positions.

One company, although initially looking to rely on the results of the coalition, decided to control their own fate.  Airtex Design Group, a company that produces home textiles for Pottery Barn and other retail stores, has a factory in China.  However, it has begun to focus its efforts on its American factory floors due to increasing wages and risks abroad.  “Initially, Airtex paid $3 an hour on average for its Chinese workers; now it pays about $11.80 an hour, including benefits and housing.”  Its American workers’ wages range from $9 to $17 an hour with a benefits adder.  Airtex came to the realization that if it wanted good workers, it will have to train them and bring them in on its own.  There are sure to be upfront costs tied to this solution, but Airtex can have more control of its overall operations domestically and ensure more consistency with regards to employee performance.

Several manufacturing companies continue to make efforts to eliminate risk factors within their supply chains.  They also seek out opportunities to control costs more.  To many, these same companies are viewed as suppliers and measures should also be taken on the customer’s side to evaluate a supplier’s supply chain.  Most of the changes made by these manufacturing companies have been the result of them listening to their customer.  Customers do “not want to pay overseas freight costs to import bulky items like pillows, and they wanted more flexibility in turning around designs quickly.”  Safety and quality issues were also concerns.  Customers should certainly voice these concerns; however, it is also the supplier’s responsibility to closely monitor all operations and be aware of potential risks to ensure more stable supply chains.

Stay tuned for more details on how technological advancements have impacted the textile industry.
To offset shifts in consumer demand and rising commodity prices, many companies are scrambling to finding ways to reduce their overhead costs while, simultaneously, maintaining product standards and profits. There are several ways to accomplish this; however, one of the most important factors to consider is inventory management. By selecting the appropriate inventory management strategies and clearly understanding the cost and benefits associated with each method, a company can lesson or avoid the burdens associated with demand volatility or unexpected events like a recession.

Traditionally, many companies supply chain methodology has been to build, or hold, excessive inventory so that all fluctuations in demand were absorbed within the inventory. Unfortunately, having high levels of inventory tied up a lot of those companies cash, and had a negative effect on the businesses when consumer preference changed or a recession hit.  As companies started to experiment with other supply chain methods, the concepts of Just-In-Time inventory and Lean manufacturing emerged to help reduce inventory liabilities.  While this method did “free-up” cash, it caused major delays in the manufacturing process and was considered more of a head ache than it was worth.  For example, a Toyota facility sat idle for 20 days waiting on one of its supplier to deliver raw materials needed for production.  The delay cost the automotive giant thousands in lost time and revenue.  
What’s the proper method?  While maintaining high levels of inventory can be expensive and retaining low inventory levels can negatively impact customer service, a middle ground can be found by building carefully planned inventory levels.  By putting in measures that buffer against demand variations and harmful supply disruptions, a company can successfully mitigate and manage shifts in consumer demand and commodity prices. 

What is buffering? explains that, “The purpose of buffering is to account for variability in manufacturing processes, while also maximizing efficiency and profits. In an ideal world, buffering wouldn't be necessary because variability wouldn't exist. However, since variability does exist, it's necessary to use buffering as a means of minimizing the impact of these variables. Through buffering, manufacturers can alter their processes through manipulating inventories, capacities and times. As an example, consider a bottleneck system in which an upstream station frequently breaks down, limiting capacities. To keep the line operating efficiently, the manufacturer could place an inventory, or work-in-place, buffer at that station to maintain optimal production levels.”

To effectively “buffer” inventory against demand fluctuations, a company should identify the expected life of its product since demand volatility varies at each stage of the process.  For example, demand volatility is often at its peak during a products launch phase thus inventory levels should ensure that product availability is on par with consumer demand.  Once the product secures a spot within the market place, demand becomes stable and inventory levels should be based on the product’s importance and position within the marketplace.  Lastly, as consumers’ start to desire less of the product, inventory levels should be kept at a minimum or non-existent. 
Other factors that should be considered before selecting an inventory management level is storage location, demand variation, and the possibility of supply disruption.

Last week, New York City hosted its 10th annual Advertising Week. The weeklong event included the latest products and services offered by marketing agencies, open-forum discussions on marketing strategies and trends, not to mention it featured familiar brand characters such as Star-Kist Co.’s Charlie the Tuna and Kellogg’s Fruit Loops Toucan Sam riding on a double-decker bust through Times Squares to promote the event. As reported by The Wall Street Journal, roughly 90,000 advertising and marketing professionals were expected to participate in gathering that began on Monday and concluded on Friday.

This year, one of the main focuses of the event was on digital marketing, including its products, solutions, tools, and technologies. In just a short time, digital marketing has evolved from simply creating a company website, to a rapidly-changing and extremely targeted marketing channel. Digital marketing has become a fundamental method to sell goods and services; it has become a necessary component of almost all marketing campaigns. According to the research firm eMarketer, digital marketing continues to have a larger role in the advertising industry and is expected to grow nearly 14% in the U.S. this year to $42.26 billion.

One of the fast growing and somewhat controversial tactics and products in the digit marketing landscape is data collection and customer analytics. Now, more than ever, advertisers and marketers rely on “big data” to analyze the consumer’s purchasing trends and their online activities to lead ad-buying decisions. Some marketers have taken a step further and have started to pay attention to what people are saying about products and services on Twitter and other social media platforms. Large to small digital marketing agencies are developing products and tools to collect this vital data for their clients. For example, on Tuesday, RadiumOne Inc., an online-ad firm that targets consumers based on what they share on social media, hosted a panel to discuss how marketers are, as stated by Eric Bader, RadiumOne’s chief marketing officer, "Applying and finding golden nuggets in the data that helps them solve business problems." Acxiom Corp. showcased a new product that will allow marketers and ad firms to use more data in the media-buying and planning process in online and offline media.

This year’s Advertising Week provided great insight on the ever growing digital marketing landscape, specifically on data analytics and the impact it has made in the marketing world. With the placement of an ad on Facebook or the development of an App, digital marketing allows marketers to target customers they could have only dreamed about in the past, truly creating a world without borders. Selecting the right digital marketing company has never been more crucial for businesses today. Companies must consider numerous factors, such as strategic fit, agency competence, delivery, quality performance and digital capabilities. Furthermore, it is now important that the digital marketing agency understands the company’s values, objectives, and goals, thus targeting the right audience with the correct message. From a small digital marketing start-up to a global marketing communications corporation, connecting your business with the right digital marketing agency could be the most strategic decision your company makes.

Photo courtesy of Pleasant Morning Buzz
As more and more companies search for greener options to improve overall sustainability, HP takes the lead in becoming the first information technology (IT) company to begin an ongoing effort to reduce greenhouse gas (GHG) emissions for its first-tier manufacturing and product-transportation supply chain partners. The Senior Vice President of Operations, Printing and Personal Systems, Tony Prophet, recognizes the direct impact it has on environmental sustainability.  

“HP has one of the largest supply chains in the industry. It’s imperative to manage it not just efficiently, but also ethically and in an environmentally sustainable way. We (HP) understand the importance of reducing our carbon footprint, promoting sustainability throughout the IT supply chain and driving innovation that creates a better world and brighter future.”

Other companies have set goals similar to HP, in order to strategically align their operations with environmental sustainability. Companies such as Tesco have pledged to halve GHG emissions by 2020, while other companies like Coca-Cola have launched water-stewardship and sustainable packaging programs. 

HP calculated a baseline GHG emissions intensity for their first-tier manufacturing and product-transportation supply chain partners in 2010. The baseline calculation for emissions intensity was established using suppliers’ GHG emissions divided by HP’s annual revenue. This method was used in order to “normalize performance based on business productivity”. By 2020 HP’s goal is to reduce GHG emissions intensity off of the baseline calculations by 20%. 

In close collaboration with the World Wildlife Fund’s (WWF) Climate Savers Program HP developed a move forward strategy. But first in order to establish these goals with their supply chain partners HP looked to strengthen their existing supplier relationships by engraining their supplier base into the company culture and forming strong strategic alliances. Once strategic relationships where formed with their supply base HP was able to establish business incentives for their suppliers once GHG emissions-reduction goals are reached. If HP achieves the plans goal two million metric tons of GHG emissions will be prevented from entering the environment. Some of the specific programs HP has released include:

  • Expanding its Energy Efficiency Program (EEP) for manufacturing suppliers
  • Instituting specific emissions reduction initiatives with supplies with GHG intensive operations (for example, an LCD panel manufacturer)
  • Creating production transportation-related initiatives
  • HP plans to release its GHG emission measurements and progress towards its goal through their Global Citizenship Report

This new program extends from HP’s supplier social and environmental responsibility (SER) requirements, which apply to any supplier doing business with HP. HP’s new program will impact over 1,000 production supplies and tens of thousands of non-production suppliers spanning over six continents.

Many corporations like HP are beginning to recognize that GHG reduction is critical and extends much further than internally. More than three quarters of GHG emissions among most industry sectors stem from their supply chains. Decreasing supply chain GHG emissions has become an increasing concern for many leading companies. However, in order to work with suppliers in the reduction of GHG emissions, goals and incentives must be set on top of forming strong alliances with the current supply base.

A sheriff in Arizona came up with a way to save tax-payer dollars while at the same time potentially improving the diet of inmates/degrading their quality of life in a way that passes Constitutional muster. He recently began converting the jails’ meal options to vegetarian-only. The meat in meals like beef stew will be replaced with soy products, and the “meatloaf surprise” is now even more so. He will gradually convert the menus for each of the eight jails in his county to all-vegetarian meals.

The jail system is, by some accounts, the third largest in the country. It includes about 8,300 inmates who get two meals a day.

Despite this seeming like a health conscious or environmental move, the five-time elected sheriff has said it is all about cost savings for the county. Rising food costs have been a big concern in recent years, with budgets for the corrections department continually being stretched thin. He estimates replacing the meat for soy will save tax payers $100,000 annually. The prisons currently rely heavily on donations from food banks and other charity organizations.

For many inmates, having to spend time in a tiny cell all day with Bubba is bad enough, but having meat taken away as well? If this vegetarian policy spreads, maybe it could become another deterrent for people to stay on the path of the straight and narrow.
Green procurement a priority after California law goes into effect

California is requiring manufacturers to find less hazardous chemicals in their products after the state's Safer Consumer Products law goes into effect on Oct. 1, according to Sustainable Business News. In addition to reducing the number of toxic chemicals found in common products, the new law aims to promote green chemistry in the private sector and increase transparency in identifying what products are made of to help consumers decide what to buy.

With this emphasis on green procurement, manufacturers are expected to comply with the law through a number of steps. This includes analyzing their products to provide evidence that their current formulation is safe for consumers or creating a safer alternative.

California strict consumer safety guidelines impacts supply management for global manufacturers who sell in the Golden State.

American Chemistry Council argued the law could pose a challenge to businesses to reduce manufacturing costs and create confusion for consumers, the LA Times reported.

"At best, the proposed regulation will produce a marginal improvement in human health and environmental safety, but at great cost and lost opportunities for businesses nationwide," the chemistry association said in a statement.

The Department of Toxic Substances Control plans to eventually choose up to five "priority products" that manufacturers must reformulate to be safer for consumers by April. 

Navigating the manufacturing skills gap

When calculating manufacturing expenses, direct labor costs tend to make up a large chunk of a firm's budget. However, there are solutions that could result in lower labor costs and it starts with the workers themselves. When employees are engaged with their job, they tend to display higher levels of productivity and even improve the safety of those around them, according to Industry Market Trends.

With increased productivity from workers, businesses benefit from more output to meet growing demand from customers. Manufacturers can lower costs associated with their own workforce through motivation, according to Industry Market Trends.

When manufacturing employees are highly engaged with their work, they can increase productivity by an average of 19 percent and safety by 62 percent compared to employees who are disengaged, a Gallup poll revealed.

Since manufacturers strive to ensure safety for their workers and the surrounding public, boosting engagement could potentially decrease the number of accidents in the workplace.

High engagement can also be a factor in employee retention. When employees enjoy going to work, they are more likely to stay with a company, allowing firms to decrease their recruiting costs as well as mistakes in the production process. Motivated workers are also connected to reducing turnover and even reducing absenteeism for a company by 27 percent, according to Gallup.

To help increase engagement and shrink manufacturing labor costs, companies use employee management programs including software analytics for effective evaluation of work productivity.

Problem with manufacturing worker skill shortages

For manufacturers to keep up a high level of performance, they need to employ workers who have the right skill sets to produce items consumers want to buy. However, some experts suggest manufacturing might be struggling because the sector is experiencing a skills gap.

In a survey conducted by the Manufacturing Institute and professional services firm Deloitte, 67 percent of manufacturing executives believed they had a "moderate to severe" shortage of workers capable of filling positions. In the survey, 74 percent of respondents said not having qualified workers with specialized skills has a major effect on their ability to expand the company or improve productivity.

Manufacturing executives are not optimistic this problem will get better in the near future as 56 percent said they predict the shortage will become worse in the next three to five years.

A recent report by The Boston Consulting Group admitted a skills gap does exist but the issues related to this worker shortage will not stop manufacturing from recovering in the near future, according to Modern Materials Handling. BCG approximates the gap at 80,000 to 100,000 highly skilled manufacturing workers, which is less than 1 percent of the nation's total number of manufacturing workers. The BCG also said the scope of the skills shortage is less than feared as significant gaps are found in five of the 50 largest manufacturing centers in the U.S.

Filling the skills gap

There are some industry leaders who dispute BCG's report, saying the skills gap is higher than what is cited in the study. Douglas Woods, president of The Association for Manufacturing Technology, said there is a huge shortage of talent in the manufacturing industry. He said Bureau of Labor Statistics data indicates manufacturing openings have hit an average of 250,000 in 2013.

"There is a deficiency in properly trained workers all over, not just in those locations BCG mentioned," Woods said in an interview with MIT. "It is negatively impacting the growth potential of our manufacturing economy. Every AMT member I have talked to in the last four years has identified this as one of their top three issues.

While Woods disagrees with the shortage figures listed in the BCG report, both agree that the government and private sectors must train students with the skills necessary for manufacturing.

The smart phone market is constantly changing with new and improved technology to lure you into buying a new phone before you really need to. Some of the latest draws seem to be improved cameras and HD displays but what about a curved or flexible display? Samsung recently revealed that it will be launching a much anticipated curved display phone in the next month as reported by Reuters here.

Samsung has debuted prototype devices with curved and flexible screens, with the curved screen phone launching in South Korea sometime in October. This marks the first in what could become the next wave of development for smart phones, tablets, and other display devices. The flexible display technology is still not fully developed or economical to produce on a large scale, but these first steps are what will lead to malleable and foldable designs that will be able to wrap around your wrist and possibly be more forgiving than a rigid design in tough conditions.

It is important to stress the difference between curved screen and flexible screen technology as the two are very different and could easily be confused. Curved display technology utilizes Organic Light Emitting Diodes (OLED) to produce a fixed and rigid, but curved, display that is lightweight and provides brilliant image quality. The lightweight quality comes from the OLED display technology, which does not require a backlight. This allows an OLED-incorporating device to be lighter and thinner than traditional flat-panel displays.. This technology is currently available in a select number of large screen flat-panel TVs but is extremely expensive and out of reach to the average consumer, with prices just below an entry level sedan. The curved display advantage for a phone would be the lightweight and hard-to-break design of its plastic construction, which would help cure the common plague of smartphones: shattered screens.

Flexible screen technology is still being developed for consumers by major manufacturers like Samsung, LG, and Sony, but holds a lot of potential for the future. While there are a few specialized suppliers who make flexible LED screens presently, they are so costly that they are used only in large commercial applications. This technology builds on the OLED design but with added flexibility in the construction that allow the display to bend, twist, and even stretch in some cases.  The possibilities for this type of display are effectively endless and could open up new uses for displays that were not previously possible. As the manufacturing process for this type of display is streamlined and technology improves, the cost should come within reach of small businesses and consumers.

As with any new and potentially profitable design with multiple big name players in the mix, there have been a large number of lawsuits involving LG, Samsung, Kodak, and private companies over the OLED technology. These lawsuits argued that patents pertaining to design, construction, and intellectual property were violated by competitors, most notably the serious of lawsuits between Samsung and LG that involved dishonest employees on both sides. Lawsuits and high price tags aside, there should be some interesting innovations in the cell phone and display markets in the coming years.

Photo courtesy of
Some educational announcements for you: Source One's educational video series got a boost this week. The first of three dedicated manufacturing podcasts is now available on our video channel. This three-minute video gives an overview of a brilliant manufacturing initiative we managed as a company redesigned its products and nearshored its manufacturing from a traditional LCC to Mexico.

iTunes Podcast Channels: We debuted two podcast channels this week. Have you checked them out yet? Available exclusively on iTunes, these podcasts deliver supply chain and strategic sourcing information on an effort-free subscription basis, meaning you iDevice will be automatically updated every two weeks with the latest Source One information on a variety of topics and trends.

Back To School: Source One's Lindsey Fandozzi will be delivering a lecture to Rutgers University students on Tuesday, October 1st. She will be speaking to an Operations Analysis class in the school's highly ranked Supply Chain Management program on determining the future of the industry and navigating the internal departmental challenges that all supply chain personnel eventually face. 

Image courtesy of
                Hostels have a strong relationship with backpackers and student travelers, but recently business travelers have started to take advantage of this cheaper alternative to a hotel when traveling internationally.  As someone who has spent some time in Europe as a student traveler, I have stayed in my fair share of hostels and have noticed the diversity in the demographic of those staying in the hostel.  Hostels are no longer just a place for backpackers to rest their head before departing on the next leg of their adventure, but are a gathering place for young people, families, and business people alike who are looking for an alternative to expensive hotels in the city center. 
In a recent article in The New York Times, "Hostels Gain Popularity With Business Travelers", one man discusses his experience staying in a hostel in Copenhagen that changed how he approaches lodging when traveling abroad.  As international travel gains popularity, hostels need to find a competitive advantage to attract more customers; this has led to an increase in the number of amenities offered and an improvement in the facilities.  Previously, when you were staying at a hostel you booked a bed in room shared with anywhere from 2-20 strangers, but hostels now offer private rooms and bathrooms.  Some of the other amenities offered include free Wi-Fi, meeting rooms, and bars with an open atmosphere that is appealing to those traveling alone. 
Gone are the days of hostels being solely a backpacker’s heaven.  Now when you walk into the lobby of a hostel it would not be uncommon to see business men working on their laptops at the bar next to a group of 20 something’s hunched over a map planning their sightseeing tour.  

Most modern holidays, it seems, rely on various imports. If you do a Christmas tree, the lights and ornaments likely came from overseas, as do the wrapping paper and most of the gifts they conceal. Valentine’s Day relies on Swiss chocolates and Latin American- and Asian-grown roses. Halloween, however, remains a bastion of American-made goods.

The most iconic Halloween symbol – the pumpkin – is a North American original. The squash derivative first evolved here approximately 7,000 years ago, and the traditional Halloween-style pumpkin, the Connecticut Field pumpkin, originated (not surprisingly) in the Northeast. The carved jack-o-lantern, while derived from a long British tradition of carving lanterns from vegetables, was made fashionable in the U.S. in 1866. Furthermore, if you’d rather eat a pumpkin than cut it into a disfigured grin, you’re likely going to eat a product of Illinois. According to Illinois’ Department of Agriculture, 95% of U.S. pumpkins intended for processing are grown in the Land of Lincoln.

A number of other Halloween staples are also sourced from the good old U.S.A. Virtually everything you want to see in your trick-or-treat bag is made here. Hershey bars and Reese’s cups, both made by Hershey, likely come from the company’s plants in Hazelton, Hershey, or Lancaster, Pennsylvania or Illinois, Virginia, or Tennessee. Tootsie Rolls and Double Bubble gum are also made in plants in Illinois, Tennessee, Massachusetts, Pennsylvania, and Wisconsin. The stuff you hate to see in your trick-or-treat bag is made here, too – candy corn is an all-American product made primarily by Dallas, Texas-based Farley’s & Sather’s Candy Company and Fairfield, California-based Jelly Belly.

And finally, should you strike out on treats and find yourself forced to play tricks, keep this in mind. Popular tree drape Charmin toilet paper was first made in Green Bay, Wisconsin and is now made primarily in a facility in Box Elder, Utah.

Storage technology could meet variable energy demands
Electricity sourcing from storage technologies could be the key to solving energy supply variability, the Energy Information Administration reported.

As electricity demand fluctuates at different time periods, the EIA said improving the amount of storage capacity available could help decouple electricity supply needs from wavering energy demand.

The agency said energy supply is forced to change to match demand because the electric industry does not have large capacity storage. Since hourly demand differs depending on the day, week and year, the EIA said these time periods could be a way to shape storage capacity requirements. For example, storage can charge and discharge for consumption over a day and flattened to meet a daily average of hourly demand. The same can be said for charging and discharging over a weekly average or annual average.

To meet these requirements, there are various storage technologies including pumped storage, compressed air and flywheels. In the case of pumped storage, electricity is converted into another form of energy for storage by taking the potential energy of water and pumping it uphill to a reservoir. Storage capacity is currently below what is needed to meet periodic needs by day, week or year as well as what is needed to meet demand in real-time. However, there could be advances in technology that would allow large capacity storage of electricity to become more economical and may lead to additional cost reduction for companies regarding energy sourcing.

"In theory, it may be possible to store electricity overnight on a large scale to supply afternoon highs (daily), on weekends to supply weekday highs (weekly), and in the spring and the fall to supply summer and winter peaks (annual)," the EIA report said. "Each of these storage opportunities would likely require different storage approaches and technologies."

Solar power capacity beats wind power for first time

While electricity storage is continuing to develop to adequately meet needs of consumer demand, solar power capacity recently surpassed wind power, according to Fuel Fix.

Citing a report from Bloomberg New Energy Finance, 2013 will see an additional 36.7 gigawatts of solar globally thanks to photovoltaic panels while wind farms will see 35.5 additional gigawatts. BNEF said solar capacity is projected to increase approximately 20 percent compared to 2012.

"The dramatic cost reductions in photovoltaics, combined with new incentive regimes in Japan and China, are making possible further, strong growth in volumes," said Jenny Chase, BNEF's head of solar analysis.

Solar energy capacity is boosted by less expensive panel costs and government support.

As more competition emerges within the fighter jet market, can the military really meet their promise of focusing on affordability and sustainability?

The Scorpion was introduced as a budget-priced American fighter jet in mid-September by Textron Inc. – known primarily for its manufacture of golf carts and Cessna light aircraft -- as US Air Force leaders gathered for an annual meeting in Washington, D.C. The aircraft was designed without an order contract in place, and is intended to fill a general-purpose reconnaissance and light attack role. This makes it attractive to the US military as well as countries looking to replace older Cold War-era US- and Russian-built aircraft. Its biggest feature? While the actual expected price was never mentioned specifically, it was quoted as being  several times lower than current twin jet engine strike aircraft to produce, with an hourly operating cost 1/8th of what the Air Force currently pays to operate the aging F-16. Incidentally, the F-16 performs many of the low skill, high frequency missions that the Scorpion seeks to perform.

Textron started development of its aircraft in 2012 with an accelerated two-year design-to-production timeline and plans test flight later this year. The model shown to military leaders was a prototype indicative of the finished design.

In sharp contrast to the Scorpion stands Lockheed Martin’s F-35. True, the Scorpion is certainly not designed to be the most technologically advanced aircraft in the fleet, but its development and purchasing strategy are surprisingly compact and realistic in comparison to the F-35’s.
Lockheed Martin has been actively developing the F-35 for over 13 years and was reprimanded last year by the Pentagon’s weapons buyer Frank Kendall for focusing on short term business goals. The Pentagon’s purchasing strategy for aircraft involves manufacturing and acquiring the planes prior to their being tested. This type of purchase is dependent on the manufacturer producing a large quantity of aircraft in a short time period to reduce the unit price. This same strategy is often used in supply chain procurement with products such as nuts and bolts to secure a quantity discount from the supplier.

However, nuts and bolts are not very technologically sophisticated and do not require individual testing. The F-35, on the other hand, entered the production phase in 2007 prior to any flight-testing, and is not scheduled to complete the testing phase until 2017.

Therefore, the Pentagon will have purchased 365 planes of untested design. The three versions of the aircraft have, up to this point, suffered from a series of mechanical, electrical, software, and usability flaws and failures. Unit costs have risen from $69 million to $137 million, and the further cost of refitting the planes manufactured during the testing period is projected to reach $3.8 billion or an additional $10.4 million per plane, on average.

Not confronting the difficulties and cost overruns the F-35 has encountered directly, the Pentagon continues to fund the $392 Billion fighter jet program, announcing the further purchase of 71 fighter jets in late July.

After a six-month contract negotiation period for the new planes with Lockheed Martin, an incumbent supplier for over 12 years, the Pentagon achieved a 4% savings on 36 units and an 8% savings on 35 units. This sale continued the Pentagon’s trend of increasing order quantity to realize volume savings.

Ten allied nations have also invested in the program and committed to purchasing the F-35 fighter. Australia, Italy, Norway, and Great Britain are due to receive aircraft under the July contract. The Netherlands has also committed in mid-September to take part in the F-35 program in order to replace its fleet of aging F-16 fighter jets. However, the Dutch have reduced the order size due to increasing costs and shrinking budgets.

No customers exist yet for the low-cost, low-speed Scorpion, though the company expects to sell them domestically and internationally, making the jet’s development and sale cycle similar to the unmanned drones.

So, this is a study of two planes. One ordered before it was ever fully developed, is incredibly expensive and feature rich, and has taken a decade+ to be delivered. The other will be finished before it is ever ordered, is relatively inexpensive in terms of fighter jets, has a more limited feature set, and will be available by the end of next year.

Two planes. Two development tracks. Two theories about production and sales. Which will see more success?

Photo courtesy of  Wichita Business Journal

Source One is located just north of the city of Philadelphia, which is where I live. On my daily commute to and from work, I see multiple city facilities in a complete state of dilapidation. I am sure there are hundreds, if not thousands, more I do not see on a daily basis in the same or worse condition.

Philadelphia’s property managers, in a survey conducted last year, estimated that about 48% of the 12 million square feet of building space they currently manage, including City Hall, parks and rec areas, libraries, police and fire stations, prisons, health department facilities, and the Rocky-famous Art Museum, are not in a state of good repair.

Too many properties to manage, too few resources, and of course not enough funding, has led to what they described as “chronic deferred maintenance.” This occurs when routine maintenance is either ignored or postponed which leads to much more serious problems like leaking roofs, broken windows, and crumbling brick or concrete that then lead to more serious structural issues. The more serious the issue, the more serious the repair cost.
At its September meeting, the City Planning Commission discussed a recent project called the Capital Facility Planning Database. The database provides detailed specifications like location, acreage of the properties, square footage of any buildings, amenities, year it was built, the department currently occupying the property, etc. The database includes most of the city’s facilities and properties, including playgrounds and sports fields.

The database took city officials two years to populate, and is the first single source in the city’s history to aggregate an inventory of all the properties in the city. If utilized correctly, this database can have a lasting effect on many departments, as well as residents throughout the city. For example, city officials can evaluate which neighborhoods are not getting adequate coverage from fire and police station locations based on current changing population shifts. Many of the facility and property locations were established decades ago based on the neighborhood at that time. The Parks and Recreation department can use the database to ensure playgrounds and recreation centers are evenly disbursed. The emergency management department can use it to quickly identify which facilities can be used to store debris, supplies, or even people in case of a crisis.
The main function of the database is to help officials manage the properties effectively and optimize their space. It can provide alerts for when major equipment like boilers and cooling systems need to be cleaned or replaced. The maintenance records can track when a specific building has become just too expensive to maintain and should be sold. Furthermore, by identifying the square footage of all the buildings and determining how the space is used (or not used) they can lease significant office space to outside companies. The city estimates there are 30 significant leases that could each bring in $5 million to $25 million annually.

This data tool is so useful it makes you wonder why it took the city so long to develop it and how much of tax payer dollars could have been saved.  
The city now needs to understand that organizing this data was only the first step. What they do with this information and what actions they take based on it is where the true value begins.

The city is dynamic and evolving and the database will therefore need to be constantly maintained to reflect the ever changing population. Will the database itself have the same fate as many of the properties and go into a state of disrepair?

Earlier this month, Source One's free set of eSourcing tools,, turned eight years old. In honor of the eProcurement service's eight years, here are eight facts about and eSourcing software.


8. Some of the first items sought on WhyAbe were Sugar, heating oil, and a large quantity of GPS-equipped heart monitors.

7. Suppliers can be invited to WhyAbe on a per-event basis, or they can register on the site permanently and maintain a storefront. There are currently several hundred supplier-operated storefronts on, allowing users to quickly source everything from sneakers, to heavy mining equipment, to silicone breast implants.

6. When it debuted in 2005, WhyAbe could only be used to conduct RFX inquiries. Reverse auctions were added 13 months later in October 2006.

5.  Blind auctions, which hide suppliers' identities as required by certain government sourcing events, were added in 2012.

4.  WhyAbe knows social media. Users can share their sourcing events across Facebook, Tumblr, Pinterest, and 300+ other outlets. Even Twitter.

3.  True to form, #4 was under 140 characters. #strategicsourcing #WhyAbe #swag

2.  WhyAbe's platform is so robust and has such a lower barrier to entry in terms of user familiarity that it serves as the skeleton of many major corporations own private eSourcing solutions.

And finally, the number one fact about is...

1.  When it debuted in 2005, was the only free eSourcing solution on the market. Eight years later, it is still the only free eSourcing solution on the market.

Have a WhyAbe success story? Add it below. Interested in trying the service out for yourself? Sign up at and get started!
Nestle highlights sustainable sourcing in agriculture
Companies in the food industry are known to be the front runners in sustainable sourcing. One of these major contributors to developing sustainable agriculture worldwide is Nestle.

Hans Joehr, Nestle's corporate head of agriculture and co-founder of the Sustainable Agriculture Initiative Platform, highlights the industry's initiatives for green procurement in his interview by Nina Kruschwitz from the Massachusetts Institute of Technology's Sloan Management Review.

​The SAI Platform has over 50 members from all over the food industry, including Kellogg's, McDonald's and PepisCo, according to its website.

The group calls itself the sole global food industry initiative that aims toward sustainable agriculture. It strives toward continuous improvement to have farmers around the world have an easier time adopting more eco-friendly practices.

"SAI Platform was created with a very simple idea of putting principles and practices together on sustainable agriculture for certain crops in order to address environmental, societal and economical topics around agriculture production systems," Joehr said.

SAI Platform's work toward sustainable sourcing

Joehr said SAI Platform's member companies share with each other environmentally friendly principles and practices that are tested and constantly improved. He said these companies helped form SAI Platform over 10 years ago because of issues they commonly faced.

"We all have the same problems of quality, of scarcity, of cross-border issues from child labor to pesticide residues to contaminants," Joehr said. "A lot of things are linked to agriculture practices that may end up, at the end of the day, in your raw materials and finally in your branded product."

Hazards that companies typically encounter regarding agriculture involve land use, pollution, resource waste and biodiversity.

In Nestle's approach toward sustainable agriculture, it incorporates the concept of creating shared value rather than dictating eco-friendly practices from the top down from either the CEO or a sustainability officer. Joehr said Nestle wanted to avoid having to turn to nongovernmental organizations to fix problems regarding corporate social responsibility, according to the MIT Sloan Management Review.

Rather than having outside parties attempt to manage risks, Nestle said the company handles them internally through embedded sustainability in its business model. He said environmentally friendly practices happen from the shop floor to the top and establish it into the key performance indicators of every worker. Joehr highlighted this process by saying Nestle cooperates with farmers in order to have raw materials needed for suppliers that provide for the company's factories.
Apple is developing a new revenue stream with the introduction of their newly minted iPhone Trade-In Program. It seems as if, after watching companies like Gazelle, NextWorth, and eBay profit off iPhone resales, Apple has decided to cash in on the high resale value of the iPhone themselves. Even though this program only allows you to trade in your iPhone towards the purchase of a newer iPhone model, Apple’s new program is set to grab market share away from these industry players.

To set the background, here’s how the program works:

While other outlets like Best Buy and carrier-run stores offer iPhones for sale, Apple’s trade-in program is only available from its retail stores. The service is offered at Apple retail locations either on the store floor or at the store Genius Bar. After visiting a retail store and meeting with an Apple employee, a customer explains that they would like a new phone and are willing to trade in their old one. The Apple employee will then inspect the phone, ensuring that it powers on and is free of water damage, and then set a value for the phone based on color, physical shape, and overall cleanliness, assuming it functions properly. Apple has partnered with a repurposing company called BrightStar, who is able to provide real-time pricing information for trade-ins based on its own market analysis and forecasts; this process takes place on the EasyPay devices that all Apple employees tote around the store. Currently BrightStar is offering around $250 for a 16BG iPhone 5, and all iPhone generations, so long as they work, will generate some value. iPhones with broken displays or other significant physical defects will also generate an offer from Apple, though the value will be considerably less.

While similar in principle, there are a few differences between Apple’s new program and the existing buy-back programs from Gazelle and NextWorth. For one, Gazelle and NextWorth operate solely online; their users mail in products, receive estimates, and either request their devices back or receive an electronic payment. Apple’s program operates from physical locations, and users receive any payment via Apple credit. Consumers can get their new iPhone for a discounted price or even for free after trading it in, and any remaining balance after the purchase goes on to an Apple gift card. Secondly, and not so favorable for Apple, Apple’s new trade-in program is limited to iPhones, while Gazelle and NextWorth will purchase both Apple and non-Apple devices. Finally, and really not favorably for Apple, is the difference in the prices offered for old devices. Competitors like Amazon, Gazelle, NextWorth, and Best Buy are offering between $315 and $400 for a 16 GB iPhone 5 in good condition. How does Apple plan to compete by buying back a limited number of products compared to others in the field and offering less money for them?

For starters, Apple considers this program part of its “reuse and recycling” program. This program’s purpose is not solely to save trees; there are numerous incentives for Apple to roll-out this trade-in program.  In addition to the benefit of an environmentally responsible image, Apple, through this program, simplifies the trade process and makes it very easy for many iPhone users to stay loyal to the company. Consumers can just walk in to an Apple store, trade-in their old iPhone and walk out with a new device. Convenience is a major leg-up that Apple holds over the competition. One can utilize this program and skip out on the hassles that come with payment security, shipping and receiving, service charges, and other pain points that are associated with the online buy-back market. Yes, Apple is offering a lower price through their trade-in program, and yes, they are selective in the fact that they will only accept iPhones for trade-in, but a significant amount of consumers will choose convenience over value. Overall, the convenience and immediacy of this program will combine to drive consumers to utilize this program and companies that make profits from iPhone resale’s should definitely expect to take significant hit.
Small business manufacturing drives Made in USA trend

The "Made in USA" label is becoming more prominent in American manufacturing, according to NBC News.

Small business manufacturing and clothing companies are re-considering outsourcing their production overseas in favor of domestic manufacturing. Clothing companies attribute this decision to reshore and make clothing within the U.S. to the costs of producing internationally.

This report seems to correlate with a recent report that indicates more manufacturing executives are planning or at least considering moving production back to the U.S. A survey by The Boston Group of over 200 executives shows 54 percent of respondents may reshore, up 17 percent since February 2012 when 37 respondents gave a similar answer.

In the survey, 43 percent of respondents said labor costs was the main factor that drives their decisions for production locations, followed by proximity to customers for 35 percent and product quality for 34 percent.

Harold L. Sirkin, BCG senior partner and co-author of the study, said the firm expects U.S. manufacturing competitiveness will increase by 2015 and that the latest survey results show a shift in attitude.

"These findings confirm that the reshoring trend is more than anecdotal," said Justin Rose, BCG partner and co-author. "As the costs and benefits become more apparent, we expect more companies to consider manufacturing in the U.S. if their products are to be consumed in the U.S."

Small manufacturers are playing a larger role in improving U.S. manufacturing competitiveness. While labor costs in the U.S. are higher than in Asia or Mexico, apparel manufacturers are cutting costs by streamlining production.

"No one is predicting that we're going back to employment levels in manufacturing that we had 30 years ago," David Trumbull, consultant, textiles and U.S. manufacturing expert, told NBC News. "But 'Made in USA' is a trend we have seen and it has continued."

Survey shows gap between manufacturer and consumer priorities

A recent study shows manufacturer and consumer priorities about products greatly differ, highlighting the role of market research in determining the needs and demands of consumers.

The survey by UL, an independent safety science company, indicated some consumers found manufacturers were lacking in certain areas of production, supply management or human health and environmental concerns.

This includes product quality, which was found to have one of the biggest gaps between manufacturer and consumer beliefs. In the survey, 95 percent of manufacturers said they thought product quality was the most prominent priority while 51 percent of consumers believe manufacturers tended to use the least expensive materials for production without regard to quality.

"Our research provides insight into what we believe is a tremendous opportunity for businesses in the coming years," Keith Williams, chief executive officer of UL said. "For example, in better understanding gaps in priorities, manufacturers can uncover new ways to engage consumers in a dialogue around how their products are made and sourced to provide greater peace of mind."

Another aspect that resulted in different opinions is product safety as 84 percent of manufacturers think consumers are more assured that product safety is increasing but 58 percent of consumers think differently, saying manufacturers prioritize sales over product safety. These results reveal the importance of market research to meet consumer demand in terms of high quality yet safe products.

As for addressing the environmental effects of production, 90 percent of manufacturers said the environment is becoming more important however 40 percent of consumers responded that manufacturers are not doing enough to provide eco-friendly procedures or products.

While consumers may feel this way, more companies are ramping up their efforts to lower their environmental impact. This includes tech company Hewlett Packard, according to Sustainable Business News. HP recently announced it set greenhouse gas reduction targets for suppliers in order to meet its goal of cutting greenhouse gas emissions 20 percent by 2020.

Last month, Source One introduced a YouTube series, offering short, information-packed videos on supply chain and strategic sourcing issues, news, and concepts.

Today, we have expanded our media offerings via two new Podcast channels on iTunes. Under the title of "Spend Management Strategy", the channels -- one in English, the other in Spanish -- offer up bite-sized audio tracks on key strategic sourcing issues. These audio recordings, through the use of a Podcast app, can be automatically downloaded to your Apple device for later listening.

Check them out and let us know what you think!