Articles by "Nearshoring"
Showing posts with label Nearshoring. Show all posts

on Friday, June 28, 2019 0

The Importance of Diversifying a Multinational Large Supply Base Today


Optimizing one’s supply base to function beyond national borders is an intriguing safeguard to one’s multinational supply chain. With months of geopolitical tension in Asia centered on the issues of global markets and foreign trade policies, the turmoil has challenged buyers to strategically consider this ideal. The resulting tariffs and regulations have placed critical roadblocks for businesses that function across China and the United States. As managers try to keep their supply chain operating as smoothly as possible, executives and key stakeholders are expanding the width of their supply chain operations to overcome these possible disruptions to their procurement and strategic sourcing efforts.

For example, multinational technology company Apple recently suggested transitioning some of their production away from China. For a vast majority of its manufacturing production, Apple has leveraged its supply base in both China and Taiwan. Apple is looking at Southeast Asia as an alternative in the face of the China-United States trade dilemma in that region. Currently, in China, Apple leverages key manufacturers such as Foxconn for their extensive iPhone production with Luxshare-ICT and Geortek for AirPods production. In Taiwan, Apple also leverages Compal Electronics, Pegatron, Quanta Computer, and Wistron for their production of iPhones, MacBooks, and AirPods. Altogether, Apples engaged with these suppliers to evaluate possible options outside of the China market. Besides their crucial assembler suppliers, Apple vendors for intermediate goods, e.g. printed circuit board (PCB), are closely observing for any decision to be made. Because any shifts in production can ultimately take months to years, long-term decisions may require swift actions by all of these suppliers to capitalize on the opportunity and ensure a smooth transition to prevent hiccups in Apple’s possible implementation outside of China.

Similarly, multinational conglomerate Alphabet, Google’s parent company, is transitioning the production of their technology goods, such as their Nest thermostats and server hardware, away from the United State and China. In their stead, Taiwan and Malaysia have begun implementation of these production processes. A similar movement occurred earlier with Alphabet shifting the production of their motherboards away from China and toward Taiwan. This effort came directly from the associated 25 percent tariff imposed on Chinese motherboard hardware. It cannot be overstated that Taiwanese and Southeast Asian manufacturing companies are eager to capitalize on the divisive geopolitics, and the gradual shift in production by Alphabet is a statement about the feasibility of diversifying their supply chain.

In another case, videography technology manufacturer GoPro transitioned their Chinese production to Mexico to combat future tariffs that could hamper their supply chain. GoPro’s decision came as a means to safeguard their long-term growth by expanding outside of Asia for an entirely different continent. As a result, the company will have to face new challenges and a distinctly different geopolitical space. Nonetheless, there come substantial positives to this decision. For Mexico, metal and plastics fabrication are advanced and time-tested manufacturing spaces that have been meted by strong, economic markets for the automotive and electronics industries.

In summary, we are witnessing companies question the viability of their multinational supply chains being tied too strongly with China. China’s position as a dependable source for low-cost manufacturing and production has led companies to put all their eggs in one basket. The economic disruption by the China-United States trade war caused major problems in cost-driven strategies and outsourcing initiatives for companies. As a result, many businesses find themselves struggling to get their materials and components outside of China in an affordable manner.

Ultimately, the key is to diversify supply chains. This investment will not be affordable in most cases. However, by investing and expanding their capacity elsewhere against supply-chain disruptions, companies may find the initiative worth the price to pay.

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on Thursday, June 06, 2019 0

Imposing tariffs is not an uncommon practice, and it doesn’t always carry a negative effect.  When they are applied strategically to economic sectors that may be vulnerable or unable to compete head-to-head in regional markets given certain conditions, they can prove beneficial. For instance, China is the largest producer of steel and the industry is heavily subsidized by their government. As a result, Chinese steel tends to be rather cheap. Mexico, too, produces steel, but does so at a much lower output. Mexican manufacturers – in the automotive, aerospace, etc. industries - are heavy consumers of steel parts and products, so the Mexican government imposes tariffs on imported Chinese steel in order to equate its costs with those of Mexican-produced steel. This is intended to protect Mexico’s steel producers and enable them to compete fairly. In theory, Chinese and Mexican steel can now be compared and consumed based on quality or other specs besides just cost. In this scenario, a tariff makes sense.

But imposing "blanket" tariffs without a commercial rationale behind it is a terrible idea. If you don’t believe that, you should look at what happened to the Dow Jones last week when the now-infamous 5% tariff was announced (not imposed). Blanket, unstructured, and non-purposeful tariffs often drive speculation into panic - justified panic.

We see this everyday. Part of our work is to help North American businesses improve their supply chains, which in many instances entails supporting transitions within their manufacturing process from China to Mexico (https://www.sourceoneinc.com/consulting-tools/sourcing-and-procurement-services/low-cost-country-and-nearshoring/), a trend that started many years ago, way before the current administration imposed tariffs on China and, you guessed it, cost was a major driver for businesses considering the switch. They looked at Mexico for two major reasons. The first was proximity which created logistical advantages, and the other was the cost benefit associated with lower labor rates and a North American Free Trade Agreement that provided for a tariff-free transit of goods.

Consider this situation: in less than 36 months, massive tariffs on Chinese goods were imposed which increased costs to American business and forced them to look elsewhere, namely Mexico and Eastern Europe. Suffice it to say our practice was booming.  Next, NAFTA was dissolved and replaced with the US-Mexico-Canada Agreement which amongst other provisions (and the fact that “Free” is no longer part of the name) ensures that labor conditions are fairly balanced across all three countries – a stipulation that will likely increase labor costs in Mexico. Then, a new blanket tariff is announced on Mexican goods, meaning companies importing products from Mexico will need to absorb the increased costs. So, those US businesses that were driven out of China and into Mexico are now forced to pay more and faced with two options. They can contend with either eroding margins or increasing prices. At worst, eroding margins means companies are less profitable and more prone to financial distress. At best, they’ll be less likely to hire new talent; while increasing prices may mean reduced revenues due to a diluted consumer base.

Shifting manufacturing to the United States may not be a viable option for many either. Even if a manufacturing sector is mature enough to effectively absorb production, costs would likely be even higher than in Mexico. After all, US labor rates are as much as eight times higher than in Mexico, and remember those tariffs on Chinese parts increasing costs already? So that means someone will pay.

Many pundits say it’s the consumer, but it’s really everyone! US Businesses will pay more as they absorb higher costs and lower profits, consumers will pay more as prices go up, the US economy will slow down as consumer trust is diminished, Mexico will pay as local manufacturers will decrease their exporting activity, and the chain goes on and on. I’m not saying all these things will happen concurrently, but perfect storms do occur and as permutations and combinations of these factors pile up, everyone will feel a direct or indirect impact, whether we like it or not. This is how you fuel speculation. When the question, “How hard will this impact me?” meets the statement, “I’m not sure what to do now,” anxiety is born.  Wall Street doesn’t like when companies are anxious and, needless to say, neither should you. Ultimately, a market that feels insecure WILL underperform, so simply announcing that a tariff is coming will have a tangible, wide-reaching effect, let along actually imposing it. Remember, perception is reality.

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on Tuesday, November 06, 2018 0


Around the globe, the ongoing trade war between the United States and China has business leaders asking the same pair of questions, "How will tariffs affect us and what can we do about it?"

If your organization is just now asking these questions for the first time, then it's very, very late to the game. So late, in fact, that it probably already knows the answer. The cost of doing business and producing goods has increased. By now, consumers are starting to observe these price increases themselves. Organizations who can't or won't take action are now observing the consequences of a  disappointed consumer base. They're losing market share and - before too long - they could lose their business altogether. Worse still, organizations with flagging market share have only just begun to see the results of new legislation.

That doesn't mean they should give up hope. Admitting defeat is as foolish as waiting around for the situation to correct itself. Organizations and industry commentators alike can afford to learn this lesson. Rather than devising response plans, far too many are using this situation as an excuse to air grievances. In politically polarized times, they've got countless excuses for their lack of preparedness.

Are their gripes unfounded? No, but they're certainly unproductive. As tempting as it is to join the crowd in shooting the messenger, it's time for truly excellent Supply Chain Managers to set themselves apart by sending a message of their own. They know that failure to take action will mean lost market share. Taking action, on the other hand, presents a world of unknown possibility.

Supply Chain Management is all about agility, innovation, and quick thinking. The escalating series of tariffs provides ample opportunity for forward-thinking organizations to display all three. As they adapt to new circumstances they can write a new narrative for their organization. Rather than simply stating, "here are my specifications" they can begin to think bigger and ask, "how can I improve upon these specifications and establish a culture of adaptation and evolution?"

Business leaders have known for some time that the costs of doing in business in China were beginning to outweigh the benefits. That's why the last decade has seen more and more organizations nearshore their operations to Mexico and other locations. Though the nearshoring trend has steadily gained steam, many organizations have neglected to take part because the issues associated with Chinese supply chain operations had not yet affected them.

With patent infringements, quality control concerns, and inflated transit times, issues have piled up. For the short-sighted, however, they've long looked like someone else's problem. Now, with Trump's tariffs in play, the perils of doing establishing supply chains across the globe are inescapable. They present both a burden and an opportunity for all global organizations.

The nearshoring process is perhaps more attractive - more imperative even - than it's ever been. Writing for Forbes, Andria Cheng reports that apparel companies are particularly eager to relocate. She writes that a majority of global apparel sourcing professionals "strongly believe" they'll nearshore operations by 2025. Cheng quotes from numerous sources, but one sentiment is common among them. Conversations around relocation began long before President Trump took office. Tariffs, these executives suggest, have only accelerated them. While they represent an unexpected 'last straw,' business leaders were certainly anticipating a 'last straw' of some sort.

Nearly half of Americans oppose the new tariffs making headlines every day. More than 140 associations have joined the fight against them. One small group, however, must feel some measure of gratitude. Anyone who has struggled in vain to build the business case for a nearshoring initiative has found a new trump card. 

Surely every Procurement professional longs for a more predictable, stable global market. The events of the last year, however, should remind even the most unflappably optimistic professionals that stability is never a guarantee. Frankly, it's more reminder than anyone should have needed.

If your organization has found itself blindsided by new regulations, it's time to create systems to ensure you aren't blindsided again. You may have missed years worth of writing on the wall, but it's not too late to take action. Your organizations should look to enter new markets with the same enthusiasm that citizens carry into voting booths on Election Day.

It'll take time, and it'll occasionally look fruitless, but the right strategic action will guide your organization into a stronger, more stable future. However surprising the world around us grows, you'll enjoy the comfort of an optimized and adaptable approach to Supply Chain Management.
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on Friday, August 10, 2018 0
Tasked with performing an essential, multi-functional role, today's Procurement professionals have their hands full. Procurement's responsibilities are further complicated by inconsistent demand, crowded markets for talent and technology, and lingering misconceptions about the function's value.

As Procurement teams have evolved, traditional support models have grown less effective in serving the function's goals and objectives. While traditional Business Process Outsourcing still has its uses, best-in-class Procurement teams require a more flexible and robust offering.

The Procurement Help Desk from Source One is precisely this sort of offering. When organizations choose the Procurement Help Desk, they gain access to the spend management leader's full suite of resources. This includes a team of dedicated subject matter experts, a deep repository of market intelligence, and Source One's own proprietary Procurement technologies. Better still, clients enjoy this arsenal of Procurement support for about the price of a single hire.

Source One's spend management team recently put this support model to the test in an engagement with a North American medical device manufacturer. What started as a nearshoring project ultimately matured into a multi-year series of initiatives touching dozens of spend categories and tens of thousands in spend across three continents.

Through the Procurement Help Desk model, the medical device manufacturer not only realized considerable cost reduction in key commodity categories, but also successfully established more sustainable, efficient, and cost-effective operations. Armed with the knowledge gained throughout the engagement, the organization is now prepared to make more informed, strategic supply management decisions well into the future.

Check out the timeline below to learn more about this engagement and gain a better sense of how the Procurement Help Desk supports organizations.

To learn more about this successful spend management initiative and Source One's Procurement Help Desk model, check out Enabling the Business with On-Demand Supply Chain Support. This whitepaper outlines the benefits of the Procurement Help Desk and provides a case study its versatility and effectiveness.

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on Tuesday, June 27, 2017 0
Global manufacturing has seen many changes recently in terms of the introduction of new technology, shifting industry demands and associated production levels, as well as the preferred production locations. The latter point is what I would like to focus on in this article from a US manufacturer’s prospective. There have been many conflicting schools of thought about where the truly “low cost” production regions reside. Traditionally, Asian countries (since the 1980’s) have dominated the conversation from a low cost manufacturing standpoint. However recently there has been a lot of buzz from companies operating and distributing products in the US regarding the idea of Nearshoring. Nearshoring, from the US’ prospective, is an alternative to outsourcing to low cost countries which are located extremely far away from the US  geographically speaking. Nearshoring entails moving production, assembly and other business functions and processes to our close neighbors in Mexico. This relatively new movement has solved quite a few challenges that come along with dealing with companies who operate in opposite time-zones as that of the US.

There are many financial reasons that have led to this shift of US companies moving operations from Asian and other low cost countries to Mexico:

·         With the maturation of the Chinese manufacturing industry specifically (along with other Asian countries) and the associated implementation of labor hour restrictions, training and safety requirements and other working condition regulations they have seen an accompanying demand for a higher wage for skilled labor. Since around the year 2000 and on the Chinese labor rate has steadily increased while on the contrary the Mexican labor rate remained relatively stagnant during the same time period. In 2013, for the first time, the average Mexican labor rate fell below that of China’s.

·         The Yuan/Peso exchange rate has created another financial advantage where the Peso has continued to gradually weaken against the Yuan over the past 5-6 years making it even more affordable to produce in Mexico.

·         The shipping costs from Mexico to the US are much lower as compared to cross-continent shipments. Shipping goods across oceans costs much more in fuel, labor, and other resources to get to the end destination whether by sea or air. The cost difference is further perpetuated by the establishment of NAFTA which eliminates tariffs and duties on shipments crossing the US/MX/CA borders.

·         Energy costs, and the associated overhead of production, are steadily increasing in China while, again, Mexico remains relatively flat. In fact, the cost per MMBTU has been increasing for the past 10-15 years in China.

There are many other advantages of moving production and operations to Mexico from far away countries that are not solely financially driven, as detailed below:

·         Reduced lead times which allows for lean inventory, better planning and therefore a decreased risk of product shortages.

·         It is easier to communicate with Mexico considering our time zones are all within 3 hours of each other. In China, their day begins when our days in the US end and the opportunity for face to face or even phone call conversations are extremely rare.

·         Intellectual property is heavily protected by Mexican regulatory bodies and they enable authorities to actually enforce IP laws. When you look at China and other less developed countries, the protection of IP is a huge problem considering the lack of infrastructure, prevalence of corruption, and the general inability of Chinese authorities and agencies to enforce IP laws.

·         Mexico has strict child labor laws and enforces a 48 work week. Though China and other low cost countries are generally improving in this regard, Mexico still has superior working conditions and laws in place to protect the workers.

Overall, as companies evaluate the opportunity to move operations and production facilities to different countries, there are many factors that need to be considered and weighed before making a decision. As globalization in Supply Chain/Procurement continues to grow, and countries’ production advantages continue to change, it is important to stay informed with current events and shifting cost factors. Just because something was true today doesn’t mean it will be true the next. With changing political climates, technology, and other economic factors it is hard to say where the next popular manufacturing destination will be for many US companies.
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on Monday, June 19, 2017 0
On this day, 25 years ago, just as Source One was beginning to launch in Pennsylvania, simultaneously, Batman Returns officially debuted in theaters across America, bringing together some of 1990's Hollywood’s biggest names: Michael Keaton (of earlier Batman fame), Danny DeVito (a legendary in the TV series, Taxi), and Michelle Pfeiffer (later renowned for her work in Criminal Minds.) As the 6th highest grossing film of 1992, Batman Returns acts both as a cultural landmark in a time of grudge music and coffee shops, and as a characterization of Source One’s primary principles in Project Management and Strategic Sourcing.

To begin, one must first understand the basic premise of the film: Batman returns to the screen to fight a new arch nemesis, the Penguin, while at the same time collaborating with and fighting off a new flame, Selina Kyle, also known as Catwoman. Contrary to intuition, however, Batman is not the true star when it comes to highlighting Source One’s Project Management and Strategic Sourcing principles – it is the Penguin’s failures who prove these points.

While project management for Source One clients means utilizing strategic sourcing to develop strategic partnerships and relationships with suppliers, along with determining a strategic plan for utilizing innovative technologies to ascertain the company’s end goal, for the Penguin, project management means forging false strategic partnerships, manipulating relationships with suppliers, and misusing innovative technology to achieve his mission.

As a result of the Penguin refusing to abide by basic Source One project management and strategic sourcing principles, the Penguin is the source of his own, gradual downfall. For instance, after forging a false strategic partnership with a petty criminal named Schrek through blackmail, this partnership hurts the Penguin’s villainous projects, as Schrek is the reason for Catwoman’s inception, one of the protagonists who eventually turns on the Penguin and assists Batman.

Similarly, the Penguin’s ruin continues through his manipulated relationship with suppliers – after deciding to kill all of Gotham’s first-born sons, the Penguin turns to outside suppliers to provide him with henchmen and weapons to accomplish this project. Where the Penguin miscalculated, however, was the strength of his suppliers: the strength of his henchmen and their weapons were not wieldy enough to overcome Batman and Catwoman; had the Penguin developed legitimate relationships with his suppliers, the quality of his products and team might have been stronger.

Finally, however, the Penguin’s ultimate untimely end occurs through the Penguin’s misuse of innovative technology. After the defeat of his henchmen and their weapons, the Penguin turned to his final backup plan: using outsourced mercenaries to direct a path of missiles to destroy Gotham City. However, Batman’s strategic planning and utilization of innovative technology proved greater – using the Batmobile, Batman rerouted the Penguin’s missiles to destroy the Penguin’s lair, effectively ending the Penguin’s villainous career once and for all.

Ultimately, as the Penguin’s failures in Batman Returns highlight, it is paramount that successful companies – villainous or not – follow guidelines like those advocated for by Source One, in order to achieve the utmost success. Perhaps if the Penguin had utilized Source One’s expertise in project management and strategic sourcing to develop strategic partnerships, relationships with suppliers, and a strategic plan for utilizing innovative technologies over turning to false relationships, manipulation, and misuse of technology, things would have turned out differently for the Penguin – if only it weren’t 25 years too late for the Penguin to find out!
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on Friday, November 11, 2016 0
I recently had the opportunity to meet with the Ambassador of Mexico to the United States, Mr. Carlos Sada, in what was a very private and candid meeting near Source One’s office in Chicago. As the only representative of the procurement function and the only consultant in the room, I found the discussion extremely engaging and surprisingly timely to my company’s nearshoring undertakings.


Aside from the privilege that it was to sit and chat with such a prominent individual, the meeting was full of interesting content, especially when the discussion revolved around the industrial and economic development in Mexico and its significance to American businesses. You can learn more about his visit here: https://embamex2.sre.gob.mx/eua/index.php/en/recent/1298-ambassador-carlos-sada-pays-work-visit-to-chicago-illinois

Ambassador Sada pointed out that “numbers don’t lie” and that the US-Mexico relationship encompasses one of the most dynamic and economically significant regions in the world, which is primarily fueled by close ties between businesses - from soft commodity trading to the more recently trending automotive and aerospace industries that not only create hundreds of thousands of jobs in the region but that have become the foundation for many other industries to flourish.  

As part of Source One’s Nearshoring offering, we’ve many times reiterated that exploring Mexico as a hub of competitive labor, emerging supply base, and business prospecting is no longer a matter of “if” but of “when” for US companies; and my conversation with the Ambassador reiterated our belief. Through Source One’s network of partners we’ve helped develop synergies between local governments, academic programs and businesses to orchestrate a sustainable environment that fosters opportunity for American and international companies who seek to manufacture better quality products at competitive costs to position themselves not just in the North American market but worldwide.

Ambassador Sada’s perspective is both optimistic and cautious. He sees untapped talent and flourishing opportunity for businesses to initiate or expand operations in Mexico that could sustain long term growth for companies on both sides of the border. At the same time, he stressed that collaboration is key to finding competitive business partners and optimizing current relationships. He also indicated that the political climate surrounding the democratic process in the US will continue to play a role post-election but that private businesses will continue to be a main driver for success, and so it is critical for companies on both sides to diligently approach prospects.

And I agree, it is not uncommon for Source One’s customers to ask us to define the risk factors in pursuing nearshoring efforts. Many companies are concerned about the true costs of labor, the quality of the products, and stability of the local governments to provide a safe business environment, and when the international trade conditions are challenged, an additional variable is added to the equation of “perception”. Reality however, is sometimes much different, and we’ve been successful in proving to our clients that finding suitable suppliers who can produce innovative and quality products is not only viable, but highly probable. Therefore, it is vital for organizations to work together and manage risk adequately; by pursuing diligent strategic sourcing efforts, risks can be identified and mitigated - and successful business relationships that add value to both economies are created.

You can learn more about our nearshoring effort in our website: http://www.sourceoneinc.com/consulting-tools/sourcing-and-procurement-services/low-cost-country-and-nearshoring/
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on Friday, September 30, 2016 0
The practice of nearshoring has been on the rise in recent years in both domestic and multinational companies with operations in the US. Historically one has associated low-cost production regions with Asia (typically China, Vietnam, Philippines, etc.) where they would leverage the advantages boasted by this region to cut production cost and ship products back to the US for final assembly or distribution. Now why is this? Well the aforementioned regions have historically boasted well below market average wage rates. In addition raw materials are readily available to many Asian regions (China as a good example) and there is an abundance of skilled labor. Utility costs and other overhead fees outside of labor have also been well below that of North America and other European countries.   

However, a shift is occurring in many industries where more companies are looking towards Mexico as the new low cost production partner considering the newly developed benefits. Post 2000, China’s wage rates have been steadily increasing due to the economic and infrastructural advances made by the country – skilled laborers are now demanding higher wages. Conversely Mexico’s wage rates have remained relatively stagnant during the same time period. Many studies show that the average Mexican wage rate has fallen below that of China. The shorter lead times and economic advantages posed by the NAFTA is another factor that makes bringing foreign production “back home” to the US more attractive. I’ve outlined in detail the history and motivations to nearshoring in a previous publication found here.

Speaking more speculatively I would like to share some thoughts regarding what this movement means, and where it will be going in the future. China historically held strict restrictions and barriers against entrepreneurship and foreign investment/trade – especially as it applies to the manufacturing industry. With the relaxation of restrictions in the 1990’s as China realized the potential benefits of foreign investment came the first of many foreign companies looking to take advantage of China’s abundant raw materials and cheap, skilled labor. This untapped market quickly took off with the boom of electronics production seen in the 90’s.

Since the explosion in the Chinese outsourcing China’s infrastructure has advanced in suit, along with their standard of living, median income and GDP output. With this comes a proportionate raise in wages, improvement in working conditions and regulations, more advanced technology and robotics, and a general improvement in working conditions. China has essentially closed the gap on a lot of the pre-existing conditions that allowed for the wage disparity to persist through the 1990’s to early 2000’s. This fact, coupled with the prevailing challenges that outsourcing to China represents (i.e. long lead times, communication barriers, time zone difference, intellectual property integrity, etc.), have led to the phenomenon of nearshoring.


In the near future I anticipate the nearshoring trend to continue in terms of manufacturing operations moving to Mexico and other regions closer to the domestic US as the economic advantage to outsource to “low cost” countries decreases. Eventually I anticipate some manufacturing operations to even move back to the US since Mexico also poses some challenges A compared to domestic US operations (i.e. language barriers, lack of business development/sales in supplier organizational structures, etc.). You can read more about nearshoring challenges and warnings here.
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on Tuesday, September 27, 2016 0
The success of this year’s Council of Supply Chain Management Professionals’ Annual Conference kickoff propelled a great second day of activities. Events on the agenda included recognition of The SmartWay Excellence Award recipients, induction of members into The Supply Chain Hall of Fame, and Source One’s presentation on Sourcing from Mexico: The Supplier Development Challenge.

 The US Environmental Protection Agency’s SmartWay Program was created in 2004 to promote energy efficient transportation in supply chains. With the EPA’s assistance, companies can identify more sustainable operational strategies. The SmartWay Excellence Award formally honors program partners committed to decreasing the impact of climate change and air pollution in supply chain processes. This year’s nine recipients are Bacardi, Home Depot, HP, Johnson & Johnson, Kimberly-Clark, Lowe’s, Transportation Insight, Union Pacific Transportation Services, and Whirlpool.


A welcomed addition to the CSCMP annual event was the formation of the Supply Chain Hall of Fame. Created to recognize those who have made a lasting impact on the supply chain discipline. The first inductees distinguishes for their innovation were J.B. Hunt, Henry Ford, and Malcolm McLean, the shipping and trade revolutionary.

 A highlight of the day was Source One’s Diego De La Garza and his presentation on Nearshoring. Addressing the conference as a featured speaker, De La Garza shared his experience with assisting companies relocate their supply chain operations from Asian counties to Mexico. The talk also includes the discussion of factors that influence this nearshoring trend as well as the obstacles that often arise once a company has committed to moving their operations. Diego De La Garza was excited to address the CSCMP Annual Conference attendees so that he could share Source One’s dedication to finding innovative supply chain solutions.

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on Tuesday, September 27, 2016 0
We're ready for another exciting day of supply chain management insights at CSCMP2016! The second day of educational sessions begins with the Major General session featuring Seth Bodnar, Chief Digital Officer of GE Transportation. 

 At 10:30 AM the Educational Sessions kick off. Attendees have a fantastic selection of presentations to choose from. Penske will be presenting CSCMP's 27th Annual "State of Logistics Report". Lego Company will be leading a session titled Learning to Love and Leverage Being on a Team: Can you Build a LEGO Object in 10 Minutes with People You've Never Met? Supply Chain Quarterly is set to present Disconnected in DC: Why Metrics Matter. The list goes on and on. There's no doubt, conference-goers will have a tough choice to make when deciding which sessions to attend. 

 On thing is for sure: attendees won't want to miss Source One's session Sourcing from Mexico:The Supplier Development Challenge. Source One's Associate Director and CSCMP Emerging Leader Award Winner, Diego De la Garza will be leveraging his vast nearshoring know-how for his presentation. He'll explain the factors influencing this mass trend of companies moving supply chain operations back from countries in Asia to Mexico. In addition, he'll explain the challenges of finding and engaging suppliers in Mexico, and how to navigate the obstacles. 

 Interested in learning more about Source One during the CSCMP Annual Conference? Stop by our Booth #118! 
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on Wednesday, September 21, 2016 0
A true leader in supply chain is someone who can successfully turn aspirations, such as impacting the bottom line, into tangible results, like building stronger supplier relationships and reducing costs. While effective communication skills, confidence, and a positive attitude can be accredited for great leadership, it requires more than these aspects alone to be considered a remarkable leader.

Honesty
To be considered dependable in the supply chain management industry, a leader must be honest so stakeholders. This applies to both suppliers, as well as internal departments, to best align expectations and build strong relationships. When managers are honest about where they stand, colleagues, clients, partners, and suppliers alike will consider them a genuine individual and the relationship will benefit from this security. 

Creativity
While a supply chain leader must be able to take control in situations of chaos and serve as a central authority, they also need to be able to think outside the box. It’s important for leaders in general to be collected and sensible, and a source of reason but in order to do so effectively they must be able to think quickly. A leader who can ‘be handed lemons and make lemonade’ is someone that earns further respect by their companions.

Trust
Delegating assignments to the respected groups or individuals is a crucial responsibility of any good leader. To set up those around you for success not only guarantees an overall quality of work for yourself as the leader and your team as a whole, but it also demonstrates the trust you have in your team members. Not only will they be grateful at your attention to their strengths, but when everyone is preforming at their best it reflects positively on your organization. This can be easier said than done, but if utilized the results will be significant.

It's the combination of these qualities that are continuously applied in unison that differentiate someone who is in a leading role from a truly great leader. Each year the Council of Supply Chain Management Professionals (CSCMP) honors a select few of excelling supply chain and procurement professionals as Emerging Leaders for their outstanding contributions in the industry. This year, Source One’s Diego De La Garza is a recipient of the CSCMP Emerging Leader Award and will be recognized for his accomplishments at the annual CSCMP Annual Conference being held next week in Orlando, Florida. The CSCMP Annual Conference brings together a global community of supply chain management professionals from wide range of industries. Companies expected to attend include Blue Apron, Ciena Corporation, Johnson & Johnson, PepsiCo, Pfizer, and more. 

De la Garza is also a featured speaker during the event, presenting a session titled Sourcing from Mexico- the Supplier Development Challenge, as well as participating in the “Fact vs. Fiction- Generation Stereotypes” panel. Attendees of the conference are also welcome to stop by the Source One Booth #118 to learn more about Source One's portfolio of procurement services including Strategic Sourcing, Nearshoring, Procurement Transformation and more. 


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on Friday, September 02, 2016 0

Source One Round Up: September 2, 2016

Here's a look at where Source One's cost reduction
 experts have been featured this week!





 NEW BLOGS:

Gas Trickles Down

 Noone is complaining about the savings at the gas pump this summer! On average, the cost per gallon is only $2.14! Taking advantage of the low fuel costs, many summer vacationers are hitting the road! This week Source One's Senior Analyst Maribeth Klinger reviews how the low prices are impacting consumers, and what that could mean for businesses. 

 Building a Competitive Advantage through a Business Continuity Plan

Whether related to natural disasters, material shortages,or product recalls, staying ahead of potentially devastating scenarios to your supply chain is crucial to maintaining a competitive advantage. In those worst-case scenarios, is your company prepared to keep business operations up and running? This week Source One Project Analyst Jennifer Engel explains the importance of establishing a Business Continuity Plan and how communicating these plans to key stakeholders can give you an added competitive edge. 

 NEW PODCAST:

 A Convergence of Factors Driving the Nearshoring Trend

Moving supply chain operations from Far East countries in Asia to Mexico and South America has quickly become a major trend for North America-based companies. Offering faster lead times, cultural similarities, and competitive labor rates, Mexico has become the go-to nearshoring destination. This week Source One's Project Manager Kenneth Ballard sat down with Buyers Meeting Point's Kelly Barner to elaborate on the many factors contributing to the nearshoring trend and what companies should be aware of when considering transplanting supply chain operations to the growing country.  



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on Friday, August 12, 2016 0

Source One Round Up: August 12, 2016

Here's a look at where Source One's cost reduction
 experts have been featured this week!






NEW BLOGS:
Nearshoring Why Now? - Warnings
When you think of outsourcing manufacturing operations, what region comes to mind? Most likely Asia. While many companies in the past have chosen to outsource operations to countries like China and Vietnam, many are now choosing to move these operations closer to home - to Mexico. There are a number of reasons creating this new trend. Mexico offers US based companies faster lead times, significantly less risk of IP theft, and closer cultural alignment. Considering nearshoring supply chain operations to Mexico? Not so fast. While nearshoring offers an array of benefits, sourcing suppliers in the country can be challenging. This week, Source One Project Manager Kenneth Ballard explains the common barriers to entry that can easily halt nearshoring initiatives. Don't worry, though - Ballard also shares the solutions that will set your nearshoring initiative up for success.

3 In-Demand Skillsets for Procurement Pros
Strategic Sourcing and Procurement departments are far from the strictly tactical function of purchasing it once was. With this evolution as a strategic business partner within the organizations they serve, procurement talent is also changing. This week, Nick Lazzara of MRA Global Sourcing, a Source One partner, share the three major skillsets in high demand for companies seeking supply management talent.


UPCOMING WEBINARS:

NLPA Conference Preview
When: August 17th at 11:30 AM ET
Thinking about attending the Next Level Purchasing Conference? Get a preview of the sessions! Source One's Associate Director Jennifer Ulrich will give you a sneak peak of her session titled: Procurement's Crucial Seat at the Table. Jennifer will be taking a look at how procurement's function has evolved and what that means for the department's value proposition. The presentation will examine this and how procurement can better position itself within the organization's they serve.

Windows Server 2016 Licensing Transition
When: September 27th at 11 AM ET
Get the scoop on how to be Windows Server 2016 compliant.
What's covered:
  • Server Editions
  • Windows Server key changes
  • Cost implications
  • Transitioning planning
  • Optimization
Read more »

on Monday, August 08, 2016 0
As summer slowly comes to an end, Source One's spend management consultants welcome fall with slew of industry events. 

Ace Hardware Fall Convention - August 18th - 20th  
Source One's telecom and IT sourcing experts will be attending the Ace Hardware Fall Convention, alongside Corporate United and Clover Communications Management. Attendees are welcome to stop by the Booth #4482 to learn more about a new program to help stores cut costs on their phone and data services.

Corporate United’s Synergy 2016 - September 12th - 14th
Source One will be attending the premier indirect spend management event of the year: Synergy, hosted by Corporate United. The conference includes a blend of industry presentations and interactive workshops and category sessions with CU’s community of leading solution providers.

Council of Supply Chain Management Professionals Annual Conference - September 25th
The CSCMP Annual Conference is an event designed specifically supply management professionals as an opportunity to share knowledge and industry developments, featuring dynamic speakers and networking sessions. This year, Source One's Associate Director, Diego De la Garza will be presenting a session on Nearshoring to Mexico. De la Garza will explore the market drivers creating the growing trend, the challenges with sourcing in Mexico, and how to navigate the complexities to successfully partner with suppliers in Mexico. During the event, De la Garza will also be honored as a 2016 CSCMP Emerging Leader.CSCMP Annual Conference attendees are also welcome to stop by Booth #118 to learn more about our full suite of procurement services.

Next Level Purchasing 2016 Conference - October 24th -25th
Catch Source One's spend consultants at the 2016 Next Level Purchasing Conference. This year, Associate Director Jennifer Ulrich will be presenting a session titled Procurement’s Crucial Seat at the Table, discussing why the traditional perception of the procurement function needs to change and how procurement professionals can champion this change.

ProcureCon Pharma - October 26th -28th
Procurecon Pharma is a unique event specifically designed for pharmaceutical industry, providing attendees with strategies and insights to manage costs and drive further value from procurement operations. Stay tuned for more details on Source One’s Innovation Spotlight.
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on Friday, July 22, 2016 0

Source One Round Up: July 22, 2016

Here's a look at where Source One's cost reduction
 experts have been featured this week!





NEW BLOGS:
Four Guidelines for Suppliers Responding to an RFP
Responding to RFPs take time and effort. There are fewer more frustrating hurdles to the sourcing process than unnecessary proposal revisions. Whether it's as major as pricing discrepancies or seemingly as small as agreeing on product turn-around times, the back and forth of proposal revisions can extend the sourcing process and even negatively impact the company-supplier relationship.  As a strategic sourcing project Analyst, Nicole Mahaffey understands the headaches caused by constant back and forth of proposal revisions with suppliers. This week, she breaks down for guidelines suppliers should keep in mind when submitting request for proposals.

 To "Term" or Not to "Term"... That is the Question
Signing your company's name to the dotted line of a contract can be concerning for some organizations, leaving many to opt for suppliers that do not require having a contract in place. However, the absence of an agreement can have dire consequences. Part of the strategic sourcing process is addressing the need for contract components such as terms and ensuring stakeholders understand the associated risks of moving forward with a supplier without an agreement. Also this week, Source One IT Sourcing Project Manager Torey Guingrich explains a few of the key considerations to keep in mind when deciding contract terms and agreements as they relate to the spend category, pricing, supplier flexibility, and changeover. 
AWARDS:
Congratulations are in order for Source One's Associate Director Diego De la Garza. De la Garza was named an Emerging Leader by the Council of Supply Chain Management Professionals. He is recognized for his contributions the supply chain management profession, particularly for championing Source One's Nearshoring Practice, his role in the company's expansion in the Midwest, and his supply management thought leadership. 









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on Friday, July 22, 2016 0
This month, the Council of Supply Chain Management Professionals announced the winners of their 2016 Emerging Leader Award. Among only three winners selected this year is Source One’s very own Associate Director, Diego De la Garza. Each year the CSCMP recognizes up-and-coming leaders, ages 30 or younger, in the supply chain management profession for their contributions to the practice.

What, you may ask, was Diego recognized for?

First, let’s take a look at his contributions to Source One. Diego started his career as a strategic sourcing analyst at Source One in 2010. During this time, Diego observed a growing trend of companies looking to transplant manufacturing operations from countries in Asia to Mexico. Putting to use his language skills and vast knowledge of the Mexico market landscape, Diego became a go-to resource for Source One’s nearshoring projects. While these began as one-off projects, Diego recognized a growing shift in the industry and took the initiative to build a solidified practice around nearshoring. Diego formed relationships with key stakeholders in Mexico such as universities, business networks, and governmental agencies to forge a mutually beneficial network that eased the nearshoring process for Source One clients and enhanced the education of future supply chain professionals. Today, Diego leads Source One’s Nearshoring Advisory Practice. He and his team have helped countless companies reduce costs and realize the benefits of moving supply chain operations from Asian countries to Mexico and Latin America.

Over the years, Diego has executed and lead hundreds of strategic sourcing initiatives. His categorical expertise includes direct materials, logistics, merchant account services, and professional services. His experience enhancing supply management processes for Source One clients has allowed him to grow into a Procurement Transformation pundit. He is a regularly sought resource for optimizing procurement operations, providing strategic advice on supply management process improvement, human capital management, and tools and technology. In addition, Diego has been particularly instrumental in Source One’s expansion in the Midwest. Diego has acted as a pioneer for the company - building Source One’s Chicago office as the first employee in the Midwest to now managing the entire office and developing the team.

As for his contributions to the supply management industry, Diego is the definition of a procurement thought leader. He continuously shares his expertise at supply chain management conferences such as the Institute for Supply Management Annual Conference and UnimarketNow. He is also a member of a number of organizations for which he is also a frequent guest speaker including the Chicago chapters of the US-Mexico Chamber of Commerce and The Mexican Entrepreneur Association. He also contributes to a number of procurement and supply chain publications such as Buyers Meeting Point and Spend Matters Latin America.

Needless to say, we at Source One are so proud of Diego! He truly leads by example, continuously working to improve Source One’s procurement services offering and acting as a mentor to the team.

On behalf of all of us at Source One, congrats Diego!


This fall, Diego will be honored as a CSCMP Emerging Leader at the CSCMP Annual Conference held in Kissimmee, Florida September 25-28th. During the conference, Diego will also be presenting a session titled Sourcing from Mexico. The presentation will cover the many drivers influencing the nearshoring trend, the challenges of identifying and engaging suppliers in Mexico, and how companies can navigate these market challenges to successfully transition manufacturing operations from Asia to Mexico.
Read more »

on Friday, July 08, 2016 0

Source One Round Up: July 8, 2016

Here's a look at where Source One's cost reduction
 experts have been featured this week!





NEW BLOGS:
Nearshoring: Why Now?
This week Source One Project Manager Kenneth Ballard challenges the typical notion of outsourcing manufacturing operations to Asian countries, explaining the growing trend of nearshoring to Mexico. While Asia is typically the go-to region for outsourcing manufacturing operations, US-based companies are quickly realizing the benefits of sourcing to Mexico. Ballard explains the challenges of outsourcing to Asia and the changes to the global economic landscape that is prompting the nearshoring trend. 


Read more »

on Thursday, April 21, 2016 0
As an industry pioneer, Source One recognizes the importance of conferences, tradeshows, and networking events in the strategic sourcing, procurement, and supply management profession. Procurement professionals and executives from all industries, career levels, spend categories, and regions come together to get away from the office, network with other sourcing experts, and learn best practices and insights to bring back to their teams at home.  Industry events and conferences have the twofold advantage of advancing one’s career in supply management and growing one’s personal knowledge base for the benefit of their organization’s value delivery and company bottom line growth.

Since 1992, our sourcing experts have been featured as key sponsors, exhibitors, speakers, moderators, and presenters for dozens of industry conferences all across the US and abroad. But there is one conference that clearly stands above the others – the Institute for Supply Management’s (ISM) Annual Conference. ISM is the most unique and well-respected global organization dedicated to the advancement of procurement and supply management. They offer a variety of industry-recognized certifications, training, educational resources, and networking events. Every year, thousands of supply chain and procurement’s  best and brightest turn out to meet their fellow best and brightest – and further the progress of the Sourcing, Procurement, and Supply Management professions.

At the ISM’s annual conference in 2015 (ISM2015) held in Phoenix, Arizona – Source One’s industry-leading experts introduced ISM members to Source One’s unique Nearshoring Advisory Services, to great success. The firm’s Nearshoring practice was already booming before this presentation, but since then, company interest in Nearshoring to Mexico and Latin America has substantially increased as ISM members learned about all the gains to be had from moving operations closer to home. ISM2015 was also a time for the firm to advance its partnerships with respected organizations like MRA Global Sourcing, ThomasNet, and others.

After ISM2015, Source One’s partnership with the Institute for Supply Management has increased. Source One Associate Director and Nearshoring Expert was featured in the ISM Podcast, and Senior Project Manager Michael Croasdale was recognized by ISM and ThomasNet as a 30 under 30 Rising Supply Chain Star.  In our next post, we'll tell you all about the different opportunities to meet our cost reduction experts at ISM2016.
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on Friday, March 04, 2016 0
Of the countless client’s I’ve supported, while unique in their management style, diverse in their service offering, and varied in their key differentiators within their industry, all share a common challenge when seeking outsourced procurement support: selecting an effective billing structure. There are three main payment options when it comes to selecting a billing arrangement for your procurement initiatives: Contingency, Flat Fee, and Hourly models.

Contingency Fee structures are mutually beneficial if savings can be achieved.  If not, both parties come out on the losing end. This fee model relies heavily on an established baseline, recognized by both your organization and sourcing firm.  Some sourcing initiatives do not have quality data to produce such a baseline or are being conducted in a new category that does not have an historic baseline.  Depending on the terms of the contingency model, your organization may be put in a situation of guaranteeing steady or increasing purchase volumes to suppliers and could be on the hook to pay estimated savings figures if those volumes fall off.  At Source One, we utilize this model based on realized, hard-dollar savings and monitor those savings over the length of the engagement.      

Flat Fee projects can work for both parties, especially when the sourcing exercise is unique; take near-shoring initiatives for example.  This model allows the firm to rely less on an historic baseline and hard-dollar savings, keeping the focus on selecting the best suppliers at the best price.  The drawback for the sourcing firm is that time spent working on the project cuts into profitability margins.  These projects can be rushed, often resulting in less than ideal situations.  In addition to encouraging the least amount of effort, this fee structure doesn't necessarily allow for flexibility in project scope.  Through the sourcing process, we discover new challenges and new solutions that can very easily produce "scope creep."  Scope Creep can, and often does, cause friction between the client and consulting firm, as well as add unnecessary administrative burden to the project(s).  The desire to perform the best-in-class solution may be limited by this constraint. 

Finally, there is the Hourly Fee model.  This model allows for scope flexibility and ensures a level of profitability.  The downside, quoting these projects requires previous experience and familiarity with the client and category-specific characteristics, which can be very unique.  Without this in-depth knowledge, quoting is a stab in the dark.  You, as the astute client, are incentivized to review hour reports on a regular basis and inquire what might be taking so long or why the initial quote was incorrect.  This line of questioning can have a detrimental effect on the project, as well as, the relationship.  Often resulting in time wasted on both sides.  This model works well in staff-augmentation engagements. 

The Solution?  In my opinion, the ideal billing structure is a hybrid of the three aforementioned models.  Depending on the project and the unique needs of your organization, a fixed fee model with the option to add "hours” will work well.  Based on the scope of the project, consider including an ROI "kicker," tied to realized savings.  This hybrid model incentivizes the sourcing firm to spend the time needed on a project to achieve the optimal savings solution(s), while ensuring a reasonable level of profitability during the sourcing process and even a chance to receive future income as the savings are realized.  By combining the typical billing structures, your organization can benefit by the assurance that the firm has explored all options and is presenting the best possible solution to fit your unique needs.  Below is a simplified example of how this model could be structured:

Example:  XYZ sourcing initiative with $1,000,000 in annual spend
                $10,000 Fixed Fee for the basic scope of the initiative (50 hours of work)
                $200 Hourly Fee for additional sourcing activities identified
                Contingency Fee ROI Incentive (if no additional hours are utilized):
                                120% ROI ($12,000 in annual savings) – 10% or $1,200 bonus
                                150% ROI ($15,000 in annual savings) – 20% or $3,000 bonus
                                180% ROI ($18,000 in annual savings) – 25% or $4,500 bonus
               
In recent years, many sourcing solution providers have popped up to help fill the void companies have in their procurement/sourcing departments (if they even have a procurement/sourcing department).  Selecting the right sourcing solutions provider is the key to realizing high return on investment dollars. At Source One Management Services we have over two decades of experience in this space and are solely focused on procurement and strategic sourcing.  Identifying a provider with the right combination of knowledge, skill, and value proposition will go a long way in achieving true value for your organization.

Source One's Strategic Sourcing experts will be at ISM2016, where Source One is the exclusive sponsor of the Exec IN forum. Want to save on registration costs to attend this landmark event? Learn more over at SourceOneInc.Com. 
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