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on Friday, September 17, 2021 0



As offices across the country begin reopening, many organizations have begun the process of reengaging former facility service providers to reactivate programs that were disrupted as a result of temporary facility shutdowns.  Some examples of categories impacted by facility closures includes services such as water & coffee, food & beverage, security, and janitorial services.  While there is a lot to gain by establishing a go-to-market sourcing strategy for each of these categories, this blog will specifically focus on how to successfully source best-in-class janitorial and cleaning services. 


Identify current state vs desired future state

Before going to market it’s important to understand what’s working and not working with your current janitorial services provider.  Take the time to run an internal review and score the supplier based on factors that are important to your company, some examples may include: Is facility cleanliness acceptable, are staffing levels adequate, are response times for emergencies acceptable?  Understanding the pain-points with your current supplier will help naturally pivot the next crucial step which is updating and/or creating a Scope of Work to align with your desired future state.  The Scope of Work (SOW) should be created and included in your janitorial services contract to ensure supplier expectations are clearly established.  Any concerns regarding the requirements established in the SOW should be aligned on between both parties prior to contract execution to ensure your desired future state is fully understood.   


Request for Proposal (RFP) development

Prior to building your RFP to receive supplier pricing, it’s important to ensure you have the correct janitorial service providers invited to this sourcing event.  I highly suggest starting this process off with a Request for Information (RFI) with detailed questions submitted to a wide range of potential suitors to help identify suppliers that fit the needs and requirements within your newly updated SOW.  Once this list of potential janitorial services providers has been properly vetted, the RFP construction process can begin

When building your RFP, it’s important to arm bidders with the proper metrics to ensure an accurate bid can be delivered to help meet the requirements established within your SOW.  Some examples of metrics that will lead to a successful RFP may include: total locations in scope, cleanable sq/ft per location, supplier’s forecasted full-time employee (FTE) bid count per location, and FTE hourly rate per location.  While there are many other metrics that could also be included, these selected inputs shared by bidders will enable you to accurately understand costs by location as well as the total cost to service your janitorial services portfolio.


Holding awarded supplier accountable

Congratulations, you’ve successfully gone to market and identified your suitable janitorial services provider through a successful sourcing initiative.  While you’ve confirmed that the supplier’s price is acceptable, now is not the time to let up!  It’s important to establish processes during the contracting phase to help manage expectations of the supplier, and to ensure they are held accountable.  For instance, if you wish to establish a required cleanliness score minimum across your entire portfolio, apply language within the agreement that applies penalties associated with facility scores below a certain threshold.  Quarterly check-ins should also be a goal to ensure continuity is in place, this can be achieved by including language in the contract requiring Quarterly Business Reviews (QBRs) to be conducted.  While these suggestions may not seem like much, they can often mean the difference between a good program and a great program.  


Going out to market can be a daunting task at times, I hope this blog helps guide you and your organization along the way to successfully source best-in class janitorial and cleaning services.  


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on Thursday, February 20, 2020 0

For many organizations, Indirect spend is a challenge to understand, as much as manage. The spend is often substantial and easier left alone. On top of that, you may not have the resources to dive in and get the many categories under control. If you are beginning to dig into into your Indirect categories, or you have been with dismal results, here a 5 issues that may be beneficial to correct first.

1. Your Procurement Managers do not KNOW the categories they manage.


It is important to at least have a working knowledge of the categories you are working within. If you do not know the ins and outs, that is fine, but being able to speak the language is necessary. Not understanding a category opens you up to tougher negotiations, worse contract terms, unnecessary spending, and a negative view of Procurement from stakeholders. It is important for Procurement to be involved in any negotiation early, however, coworkers and suppliers will not demand your involvement if you slow them down.

If you are thrown into a category, be upfront and honest with stakeholders who can show you the ropes internally. This way you are taught with the bias of your company in mind. If the supplier is your source of information, you may be taught dishonestly in some, but rare, cases. For example, if once monthly HVAC maintenance is acceptable, a supplier could instruct you that twice monthly service is necessary to get double the business. With stronger category knowledge, you could avoid doubling the required maintenance expense. The same situation could apply to contract negotiations. If a supplier is aware of your lack of knowledge, you could end up with terms that do not benefit your company’s goals. Most importantly, the respect from suppliers and stakeholders to require you be present in negotiations is paramount. As the Procurement representative, you may not be a category expert, but you more than likely are a negotiating and contracting process expert. This is where you will shine, so garnering the respect to be present is extremely important.

Source One Corcentric Gears and Belts MRO Indirect Spend2. Your data tells the wrong story.


How much trust can you put in your internal reporting? How well do you know what this data represents?

Procurement Managers often believe the exact story that their reports are telling them. They choose a category, run a report, and take the total of the spend column as the exact amount of spend in that category for a time frame. However, this is often not the case. Understanding the data allows you to understand the category much better. If your company has a large amount of spend without corresponding purchase orders, be sure to understand whether you are seeing this data or not. Know whether you are looking at spend that has been received against a purchase order or matched and paid against a purchase order. If you do not know exactly what the data you are seeing is telling you, your ability to find cost saving opportunities is greatly diminished. You also risk working within a category that has little addressable spend.

3. You have too many old contracts with too many suppliers.


Contracts are one of the most relevant pieces of information for the Procurement department’s success. Many companies rely on contracts to lock in pricing, payment terms, and other legally binding agreements between the company and supplier. However, contract management is often forgot about as business goes on as usual. The clear line of communication between the supplier and company is lost as the contract renews over and over for years. The benefits the company was getting when the contract was signed are now outdated. Procurement could potentially negotiate a much stronger contract, but no longer knows the contract exists.

This is common among conglomerates and large companies with decentralized purchasing, especially when standards for contract management are not a documented company procedure. Once Procurement begins to analyze the category, it is extremely difficult to get a hold of all the contracts with all the suppliers. The easiest way to avoid this is to consolidate contracts and suppliers. This can be a great opportunity for cost savings, as well! The consolidated spend will make your contract negotiation much stronger as you drive spend to less suppliers. Finally, be careful about evergreen clauses that automatically renew contracts. Once communication breaks down between Procurement and the suppliers, the contracts become a nuisance that will not go away. If necessary, use short term evergreen clauses that renew for a year or two at the most.

4. You are concentrating on the wrong categories that are too difficult, or have too little addressable spend.


For multiple reasons, Procurement managers can have their focus on the completely wrong categories to drive cost savings. If you solely consider spend, it can mean focusing on a category with a small amount of addressable spend. Be sure the large numbers are in fact addressable. For example, freight is a high spend category for certain companies. However, the cost is often high no matter what carrier you use. A better situation could potentially be negotiated, but there is a ceiling to the savings.

Procurement should also be considering when the last time the category was taken to market. If your resources are limited, addressing a category that has not been analyzed for years may be the better decision. Finally, reflecting on whether you are addressing a category because it is one you know well may be another opportunity for improvement. I have seen this multiple times. A Procurement manager is comfortable with stakeholders in one category of spend and continues to look for savings to work with the same department. This often leads to unproductive analysis from the manager that is continued down the chain to the analyst level.

5. You are overdoing due-diligence and not “getting in and getting out”.


Perhaps the most unproductive way to handle Procurement is to overdo due diligence without making any decisions. What I mean by this is looking into spend, analyzing, meeting with suppliers, running RFP’s (Request For Proposal) or RFQ’s (Request For Quote), negotiating contracts, and then doing it over and over without making any changes. At some point, a change will need to be made to actually render savings. If you are not making any decisions, you are not affecting the organization in a positive way. Be careful not to sit in the supplier sourcing function of Procurement for too long. This can cause Procurement managers to be viewed as wasting stakeholders’ and suppliers’ time. Not everything needs multiple meetings, and everyone on the organizations’ and suppliers’ end does not have to be present to have a quick conversation.

Finally, remember what the function of Procurement is. We are here for sourcing, contract management and negotiation, and supplier management. Good Procurement is simply getting as much of your organization’s spend under control. We are not Finance, we are not Accounts Payable, and we are not IT. This is what I mean by get in and get out. Too many times, Procurement gets stuck with processes that handcuff the department from doing what it is there to do. To be effective, take on as few non-Procurement functions as possible. Since we are so hands-on in the beginning stages of a supplier relationship, we often are the ones used as a fall back for tasks other departments do not want to handle. So, when possible, get in and get out, and find the next category to get under control!
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on Thursday, January 31, 2019 0


This guest blog comes to us from Megan Ray Nichols of Schooled by Science. 

Thanks to growing economic pressures and a troubled industry, oil and gas providers must consider prioritizing their procurement functions. The massive expenditures that have been possible in the past are no longer viable. Nearly all providers must come up with cost-effective and resource-light strategies if they hope to survive going forward.

Why Procurement Is More Important Than Ever

Oil prices are relatively low, and while that could change, it will be some time before they climb again. That means oil companies must prepare to meet long-term market trends. Luckily, natural gas prices are rising, but there’s no telling how long that will last.

Conventional day-to-day operations coupled with regulatory events tend to balloon costs, especially when you factor in sub-contractors and outsourced workers. Of course, this setup is what most companies are working with, which means something has to change.

It makes sense that project work makes up a bulk of operational costs, and it follows that a focus on procurement can cut down on said costs. Optimizing the supply chains for petroleum as well as for parts, materials and services can significantly lower overall costs and increase productivity.

According to the Harvard Business Review, over 50 percent of the average oil and gas company’s costs come from purchased products and services. So, even a small reduction in purchase costs can help alleviate some of the financial burdens as well as provide higher returns and profit margins. Even one component of a drilling operation can have a substantial impact.

As an example, when using sealed bearing mud motors, you need mud motor seals to retain bearing lubricant and keep out drilling fluid and abrasive debris. These seals are essential for the reliability of the motors. They need replaced regularly, so you need a procurement protocol that ensures you always have a supply of seals available. Otherwise, you may be forced to pause drilling operations while you wait to obtain new seals. The quality of the seals procured can also significantly impact costs. Some seals have a relatively short life, while others can last for more than 500 hours. Mud motor seals are just one of many examples of components that can cause severe issues if their procurement is not managed correctly.

Identifying Procurement Efficiencies

Companies can prioritize procurement and better organize their supply chain operations to achieve optimal efficiency and lower costs. By deploying more thorough supply chain market intelligence tools, along with other newer technologies, companies can cut down on many of the associated costs. Greater intelligence means greater opportunities to find talent and strengthen materials or supplier relationships.

By focusing on the supply chain directly, it’s possible to find not only better partners and suppliers but also ways to cope with the shifting market. Things like constrained capacity, infrastructure issues, volatile markets and shifting demand all become that much more manageable.

With the right insights and intelligence, it becomes possible not just to make the right decisions but also to accurately take predictive measures. You can see at a glance where a market might be shifting and what that means for the various elements. Lower costs might mean higher demand, which would, in turn, mean sourcing more supplies in anticipation. It could also mean the exact opposite. You can use supply chain intelligence tools to uncover trends to help discern what’s happening.

With the right tools in place, there are three major ways in which procurement can become more balanced:
  • Resetting supplier relationships to negotiate better contracts and gain new insights into their internal operations. 
  • Improving capital expenditure efficiency by mitigating complexity, costs and operations requirements.
  • Transforming your business to be more cost-conscious through added transparency and data-driven infrastructure.

You may or may not have noticed that all of these areas are meant to foster a culture of cost-effectiveness. It highlights what oil and gas companies should strive towards now and into the future.

Welcome to the New Reality

For decades, the oil and gas industry has been a well-oiled machine with little to slow down its operation. Companies have had little reason to scrutinize their supply chains to lower the associated costs. Things have changed. These costs are proliferating, and many organizations need to mitigate these cost increases before things get out of hand.

Since the procurement of supplies and goods makes up a huge chunk of those operating costs, it makes sense to come up with new ways to manage it. By prioritizing the process, oil companies can discern what elements need to be optimized to improve overall efficiency. Procurement and business intelligence technologies and strategies can help with this as can new platforms, processes, and protocols.


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on Wednesday, March 21, 2018 0



It’s no surprise that one of the key variables in strategic sourcing is the suppliers a company engages with. Understanding and continuously striving to improve the relationships with your company’s suppliers will not only add value to the business, but also provide additional opportunities to implement better strategies going forward. With supplier identification being the starting place for evaluating your company’s options, your team will become aware of which suppliers have the capabilities and quality you’re looking for, and who may be a good fit for your company’s needs in the long-term.

Whether your company is working with newer suppliers or suppliers you have worked with for years, there is always room to enhance the current relationship. Several benefits can come from improving these relationships such as reduced costs, increased efficiency, and improvements in operations. Developing the lines and frequency of communication between your company and the supplier is key in improving the supplier relationship. It ensures that everyone is on the same page and minimizes the risk of having miscommunication, which can lead to saving time and money.

By working closely with the supplier and maintaining a positive working relationship, through good communication, the supplier will be more likely to provide competitive costs. If there is ever an event in which your company feels the need to test the market and see what other suppliers could offer for your business, this can be a true test to see how your supplier feels the relationship is going. Generally, when companies take their business to market, incumbent suppliers who have developed great working relationships with these companies tend to compete and fight for their business. Even if the business does not feel the need to go to market, if both parties are happy with the current relationship, suppliers will be more willing to provide cost reductions and discounts to their customers. Aside from taking your company’s business to market to achieve cost reductions, many suppliers are willing to implement incentives and tiered discount structures to good customers. Keep in mind, these are not the only types of cost reductions available, but working to improve your company’s relationship with its suppliers will unlock doors to savings opportunities.

Receiving cost reductions may be one of the most important aspects of a well-developed supplier relationship, it is not the only benefit of improving the relationship. As companies work closely with their suppliers and get to know each other, there is a better opportunity to identify ways in which both companies can grow together and develop a mutually beneficial relationship. Both parties can create strategies for improving product quality, and continuously improve operations to ensure lean and efficient production. This is key in the relationship because collaborating efforts will lead to better strategies to improve the product and production processes. Developing strategies together will instill a more efficient portion of the supply chain that can lead to greater business opportunities for both the company and the supplier.

Reducing costs, clear communication, and improving operations and efficiency are all great benefits of improving the relationships with your suppliers, however, another benefit to add to the list includes supply stability. Relationships with your suppliers will be most effective if they are built for the long-term and turn into partnerships, rather than ad-hoc relationships. With these relationships continuing to grow, there becomes a steady supply of the goods and services provided by the supplier. With a mutual understanding of the relationship and operations involved, there will be a more consistent effort to develop a more concrete supply of goods and services. This can also minimize any issues with on-time delivery, product shortages, and other supply issues.

As we wrap things up, another very important outcome of developing the relationship with a supplier is the opportunity of supplier consolidation. By working together and improving production and operations, the supplier may be able to supply items that your company currently purchases from another, similar supplier. By consolidating the supply base, your company will be able to achieve greater savings with discounts and cost reductions by giving the supplier additional business that your company had with alternative suppliers. Additionally, your company will receive great products that come from one supplier, as the supplier will most likely be appreciative of the increase in business and devotion to growing the relationship. Consolidating the supply base will also involve consolidating the lines of communication and again, minimizing risks of miscommunication. The consolidation will allow your company to streamline the supply base and implement a much more straightforward supply chain with a few strategic suppliers rather than an abundant amount of suppliers that supply similar products.

With a consistent effort to improve existing relationships with your company’s suppliers, doing business with these suppliers will become much smoother, and in most cases, cheaper. Identifying areas in which your company and the suppliers can work together to develop mutually beneficial strategies will help the businesses grow together for the long-term.
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on Thursday, August 17, 2017 0
As Jennifer mentioned in her previous blog, getting a grasp on the status of your organization prior to engaging in any sourcing event is critical to ensure that you have a sound understanding of where you stand in terms of priorities, organization, and accountability. This is especially important for larger companies with footprints spanning multiple locations and (potentially) multiple countries. Ultimately you need a plan, and without one you are setting you and your sourcing team up for headaches, inefficient practices, and money left on the table!
Facilities Management Sourcing Challenges Blog Mini Series Part 4
Once you can accurately assess the current state of your facilities, and have conducted a successful sourcing initiative, you then must determine what course of action you want to implement within your locations. There are several avenues you can pursue – ranging from purchasing facilities management software applications to help track and monitor your inventory levels, resource allocation, and labor to deploying a third party procurement team to help transform your department and prepare it for long term success.

There are dozens of management software and sourcing resources available to companies today. Whichever direction you choose to go, here are four categories you should to consider before making an investment in a facilities management program:

Essential
Every facility has a software application of some kind used to manage, monitor, and run. Whether it is a server that holds contracts, service agreements, employee records, inventory management, or time cards, you need it to run your business day to day. These essential programs are the backbone of your organization, and without them you’d cease operations.

Transactional
Transactional software applications are just how they sound – basic and straightforward. These applications will help you manage inventory levels, provide a repository for any and all contracts/service agreements, and allow your procurement team to centralized information in a single location at a tactical level.

 Functional
Functional software provides companies with a cost effective resource to manage their business. In additional to tactical organizational value, this software tracks detailed asset and equipment information, manages maintenance costs, streamlines work orders and preventative maintenance, helps maximize the useful life of assets, reduces space and maintenance costs and much more. This allows managers to manage, and employees to focus on their day to day responsibilities without having to worry about having organizational data readily available.

Strategic
Strategic software is designed to help your organization handle multiple complexities to assist your company and position it for continued growth. While these types of software can provide all the services listed in the transactional and functional categories, it also has additional capabilities that can grow with your company if you plan to expand and develop your current business. Extended offerings may not be important at first, but it is good to know the service platform you are choosing can grow alongside your business.

In a world where everything continues to become automated, there are still other options available to help get your facilities organized and on the right track that aren’t as platform oriented. Third party consulting firms (such as Source One Management Services, LLC), can work with your current teams to implement sound sourcing processes internally without investing in automation. These firms can also assess your teams and perform unbiased analysis of their strengths, weaknesses, and areas they can improve. Firms offer these services for a predetermined fee, hourly rate, or even a contingency plan based on the amount of spend your facilities generate.

Just because you have successfully sourced a category doesn’t mean the process stops there. Determining how you will implement these wholesale organizational and cultural changes in your company is just as important. Whether you choose to implement via a facilities management program, third party consulting firm, or a combination of both, it is the actions of those parties moving forward that will determine the overall success of your strategic sourcing process. Thank you for following along throughout this mini-series. Be sure to check back on TheStrategicSourcer for more featured articles on facility management, as well as a variety of other categories and subject matters!

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on Friday, December 09, 2016 0
Being conscious of the environment and aiming to ‘go green’ are undeniably becoming more of a priority for businesses throughout a wide range of industries. This shift has encouraged many companies to implement a variety of sustainable solutions beginning with their internal organization (i.e., recycling, energy efficient equipment and office routines, etc), to sustainability in supply chain (i.e., simplifying transit routes, reducing waste, etc.) By enforcing more environmentally conscious processes, companies have entered into an emerging market of consumers who demand ‘green’ standards. Despite the marketplace advantages, some organizations are still not implementing eco-friendly solutions out of fear the transition is too costly or an unaffordable venture.

The answer is Strategic Sourcing.

Source One challenges the common misconception that environmentally-friendly commodities and suppliers are more expensive than less sustainable options. For many enterprises, perceived higher costs are a deterrent to pursuing green initiatives. However, the truth is strategic sourcing makes going green a more affordable option than many anticipate. Through strategic sourcing companies can get a full perspective of viable suppliers, their capabilities, and insights into pricing, whether they’re looking to continue their mission of reducing waste or need support reengineering a product with more sustainable materials.

Simply exploring the market is the first step to seeing what sustainable options make sense for your supply chain operations. Over the years, Source One has supported a number of clients partner with suppliers that support their mission of offering their consumers sustainable and environmentally-conscious products and services. By getting a clear view of the market landscape, Source One’s cost reduction consultants were able to identify vendor aligned with our clients’ mission and leverage market intelligence to achieve a competitive agreement. In the case of a consumerpackaged goods client, this meant repurposing the agricultural bi-product that would have otherwise gone to waste. Instead, the bi-product was used to support local farms in feeding livestock.

In another scenario, Source One’s engineers were able to help a technology company reverse engineer a battery product with more environmentally friendly materials. Alongside the client’s engineering team, Source One was able to identify alternative materials for the product. In addition, they developed a unique RFP strategy centered on finding suppliers that met their sustainability requirements. The initiative not only saved the client 12%, but allowed them to deliver on their promise to provide consumers environmentally friendly products.


We’re proud to share that our commitment to sustainable sourcing for our clients has allowed us to win the SupplyChain and Demand Executive Magazine 2016 Green Supply Chain Award. The award acknowledges organizations that strive to apply discover new strategies for sourcing in an environmentally friendly way that still meets the cost-reducing goals of the company at hand. We're honored to receive the recognition and look forward to continuing to help our clients reach both their sustainability and cost reduction goals. 
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on Wednesday, December 07, 2016 0



In order to have an efficient, well run supply chain within your organization, there are a few key elements that are necessary for ensuring you are getting the most out of your people and machines. Resources need to be properly staffed, machines maintained, and WIP (Work in Progress) needs to continue to move and not get backed up a certain operation or link in the process flow. An efficient supply chain can be a work of art if properly managed. Ensuring your supply chain operations are on track, you have to start from the top – even before anything gets moving!


Semiconductor manufacturing is a prime example of an industry where truth in planning is essential for hitting lead times, improving variability, and avoiding delays that ultimately expose deliverables to the end client. Semiconductors (computer chips) have extremely long lead times compared to most manufactured consumable items. With an average lead time of six-to-seven months from order receipt to delivered goods (silicon wafer, chip, module), one would think that it would be easy to plan for the various material and capacity needs throughout the supply chain. However, in a world that is becoming more and more metric focused, supply chain leaders are finding more of their manufacturing facilities are sandbagging their production lead times, and over shipping to meet internal organizational metrics or exceed them depending on which metric they want to satisfy.


The Real Truth in Planning

What manufacturing teams fail to realize is that these inaccurate projections – while looking good on paper – cripple the downstream stages of the supply chain, and can cause massive churn. Semiconductors that are built into computer modules require several key components that make up their respective bill of material (BOM) including capacitors, lids, and laminates. Lead time for these materials can take up to six weeks, and MRP systems rely on pitched completion dates to generate purchase orders within lead time. These systems are designed to order components at lead time to avoid having too much inventory on hand prior to the rest of the materials arriving. If a wafer (manufactured silicon) arrives at a testing machine three or four weeks ahead of schedule, there is a high probability that something else is already scheduled to be run on that tester, so, the wafers will have to sit, consequently wasting the energy and time spent to move the WIP to that point. As WIP piles up at various operations, keen supply chain managers should inquire to understand why the WIP is sitting there instead of moving forward. Supply chain analysts will then highlight that components, and/or capacity is not available since the WIP arrived earlier than planned, with no advanced notice. It wasn’t supposed to be there yet…so naturally they’re not ready!


A Weak Chain

This is where inaccurate planning can break a supply chain. Whenever parts sit in queue longer than planned cycle time WIP begins to build up. MRP systems see WIP build ups and project them to close in time for quarter and year end which is actually not feasible. Other components also end up being affected. When parts arrive early, pressure mounts on missing components that are needed to continue to move WIP forward. Expedited shipping requests, expedite fees, personalized handlers, and additional unnecessary churn on all parties ends up costing time and money.


Supply chain managers and executives are then forced to prioritize this WIP over regularly scheduled deliverables in hopes of achieving revenue targets. While some additional parts may get expedited through the supply chain and additional revenue achieved, the hidden costs of that expedited energy (missed deliveries, WIP buildup, MRP ordering) sometimes prove more costly than initially thought.


Just because certain areas of your supply chain are operating more efficiently than others, does not necessarily mean the overall chain is performing well. In order to make your supply chain efficient, make sure you plan accordingly! There is something to be said when you hear “truth in planning.” Don’t be the one to get stuck in neutral when you could be moving forward with fundamental, accurate planning!
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on Thursday, June 18, 2015 0

Over the past few years, we've seen oil prices skyrocket to seemingly ridiculous heights. Many motorists remember the pain they felt when they had to pay over $10 just to get barely two gallons of fuel. The end of 2014, however, saw a steady decline of prices at the pump while United States stockpiles began to fill up to dangerously high levels. The first half of 2015 has seen moderate prices for most of the country - some places have topped off around the $3 mark, while others have sunk to nearly $2.25 per gallon.

And even though the summer season traditionally has higher gas prices due to an increase of traveling, it seems that the summer of 2015 will not see a severe jump. If anything, it looks like prices are falling even though the oil supply is falling, too. There's a supply and there's a demand, but prices continue to drop - what's the deal?

Drop by drop
So even though consumers may revel in these low prices and the benefits that come with cheaper fuel, IndustryWeek reported that U.S. reserves of crude oil and fuel are falling in tandem with the prices per barrel. At the time of this article, prices for oil have been falling consistently for seven weeks, recently closing at around $60 for a single barrel of crude, noted Market Realist.

So while Americans enjoy reaping the benefits such as cheaper airline tickets and less expensive shipping on goods, the reserves continue to empty out. Not only is this a very unusual trend, but it's one that seems to be confusing trade experts who see a high demand and falling reserves as a time to increase the prices. This healthy fluctuation happens all the time, IndustryWeek stated, but with the world so heavily stock-piled with reserves of oil, this new trend of lower prices regardless of the state of the stores could potentially be the new normal.

Economy gets a green light
With these low oil prices we are seeing an increase in activity elsewhere. According to Investor's Business Daily, the job market is steadily improving and people are loosening their purse strings and spending more money on retail items such as automobiles. After a long winter where people didn't feel like spending their hard-earned money on much of anything, this early summer reprieve is a very nice change of pace for the American economy.

Thanks to a healthy American dollar, a reinvigorated economy, low gas prices and a booming job market, U.S. citizens might experience a summer that rivals those before the Great Recession hit in 2008. And with all of these positive feelings toward the economy, supply chains for many industries may need to shift their gears into overdrive to keep up with the supply and demand of consumer goods, food services and large-ticket items such as washing machines and cars.

Of course, gas prices will not always stay this low - despite our best wishes - and this summer should be one where we revel in the opportunity to travel and purchase goods without sticker shock. How these prices will affect the market later on in the year remains a mystery, but let's hope there isn't a spike when the reserves get down too low and we're used to our national average of $2.80 per gallon. The holidays can be tough on their own and we don't need elevated gas prices after a low summer.

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on Monday, June 01, 2015 0

Gas and oil have been controversial pain points in the past 20 years or so. People are either commenting on the price per gallon or how harmful it is to the environment. Whatever your personal stance on the issue, there's no doubt that the majority of humankind is dependent to fuel. The hard truth is that we need to find an alternative that will sustain the planet longer than what fossil fuels may provide, which could be anywhere from 50 more years to a few hundred more. As responsible members of society, it should be our duty to provide future generations with energy solutions that allow for the same quality of life we desire now.

Luckily, the development of alternative solutions has been gaining prominence in both the public and private sectors. Should things go well, these new forms of energy will not be seen as a secondary selections, but as the choice that has positive long-lasting effects and doesn't cause tension between nations.

Turning up the power
One popular thought camp that has proven successful is harnessing natural and sustainable energy from sources such as sunlight, wind and water. Not only have these methods shown to be effective, but wind farms and solar panels are no longer a strange sight along highways. 

Internet billionaire and innovator Elon Musk has been using his company, Tesla Motors, to experiment with batteries as power storage solutions for more than just his electric cars. According to MiningFeeds, the single Powerwall battery will eventually be available for purchase for $3,500. No word yet on how long the lithium ion battery will last or how many devices it can support, but we are still in the preliminary phases of the project and the hard facts will emerge as more tests and adjustments are made.

The source indicated that the toughest item on the agenda will be the procurement of the proper materials. Lithium and graphite are not necessarily difficult to source, but suppliers do need to enter into trade agreements in order to secure pricing. There is yet to be any information about Tesla entering into such an agreement, but interested parties are undoubtedly making moves toward uncovering potential partnerships.

The battery's bright future
Not only is Tesla working independently on these projects, but others are taking the car's energy storage and putting it to a slightly different use. Manufacturing.net reported that there is a Florida project that has taken a battery and attached it to a massive solar panel on top of a parking garage at the University of South Florida. The power from the sun charges the battery, which then powers the entire garage facility. The left-over energy will then be stored or sent for use elsewhere.

This is the first exploration into the true power of what natural. It remains to be seen just how effective these batteries can be or what affect they will have on the oil and gas industry. It will likely take a while to get through the testing and to safely procure the materials, but many scientists and alternative energy experts are excited at the prospect of powering homes and entire communities by this method. As the field continues to grow and evolve, it's likely that there will be people who are against the technology because of preexisting business allegiances or even the general unknown nature of the batteries themselves. However, should these energy sources catch on, there's no telling what lengths people will push them to in order to power and protect the earth.

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on Wednesday, October 30, 2013 0
The classic food conflict still plagues us - How do we get the food grown in the wide open farmland to the densely populated cities cheaply and efficiently? With the invention of refrigerated transportation, it became easier to transport foods farther than ever before, allowing regions with cold snowy winters year-round access to fruits and vegetables from more tropical or temperate climes. As long as you were willing to pay the out-of-season price, you could have grapes, avocados, and tomatoes whenever you wanted. This created a new era of plenty for food. While I personally wasn't alive for the previous era, my parents always seem eager to regale me with stories of how you just couldn't find certain foods in certain seasons.

New challenges also arose around the exponentially extended supply chains for this food, and while some consumers are happy to pay for the additional transportation cost, we are seeing drastic externalities in increased fuel consumption and carbon emissions which are doing long-term damage to the environment. One of the most notable examples is the new-found demand for fresh fish for sushi.

One option is for supply chains to get creative in order to counter the negative effects of these demands. Alternatively, they could eliminate the supply chain altogether, and reduce that distance down to practically nothing.

New and disruptive thinking in agriculture has fostered plans to make the most of a bad situation in modern cities. Where there is a premium on land, instead of planting out, plant up. New designs for vertical farms that could stand alongside the skyscrapers of urban skylines will radically increase arable land in urban environments.

http://panacea-bocaf.org/verticalfarming.htm
By 2050, 80% of the world's population will live in urban environments if current trends continue. We must challenge ourselves to become creative supply chain managers, and always think of what we can do to benefit the most people and simultaneously care for our environment.

Projects that could reasonably be predecessors to massive skyline farms have already begun, such as El Paso's High Density Vertical Growth System.

The HDVG system grows plants in closely spaced pockets on clear, vertical panels that are moving on an overhead conveyor system. The system is designed to provide maximum sunlight and precisely correct nutrients to each plant. Ultraviolet light and filter systems exclude the need for herbicides and pesticides. Sophisticated control systems gain optimum growth performance through the correct misting of nutrients, the accurate balancing of PH and the delivery of the correct amount of heat, light and water. 
http://www.sott.net/image/image/10571/Veggiegrow-Oct-10--2007-012.jpg

Vertical farming is undeniably one of those new solutions which could made a real impact in solving our food dilemma. Investments in these new projects in burgeoning urban environments could lead to better health, better access to fresh and cheap produce, and drastically diminished supply chain costs for farmers and agro-business.

Governments and private businesses like Monsanto Dow AgroSciences, DuPont, and Syngenta could provide subsidies to supplant the capital costs for the prototype structures, and we can all do our part to contact interested parties to encourage them to get behind radical new ideas like this. City counsels, agricultural associations, large companies - reaching out to them through professional or social activist networks is really the only way anyone will regard this as a possibility rather than a quaint absurdity.

In the meantime, if you manage a supply chain for food, you should have this foremost in your mind. If you need more ideas for how to break out of your mold and think creatively about the food supply chain, contact Source One Management Services.
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on Monday, September 30, 2013 0
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.
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on Tuesday, August 27, 2013 0


Russia has reportedly been offered a gas deal in exchange for its support for attacks on the Assad regime in Syria

Conflict tends to cultivate oil concerns, from the fuel rations of the World Wars to the spike in gas prices that seemingly accompany every dispute in the Middle East. Remember those lovely $1.25/gallon prices prior to the Iraq War? As the issues in Syria intensify and military action is all but guaranteed, oil prices are pushing past $112/barrel. But there is another aspect to the current situation that could stand to greatly affect the oil markets.

In transcripts apparently leaked and reported by The Telegraph, secret negotiations between Saudi Arabia and Russia have occurred looking to sway support for strikes on Syria in exchange for global control of the oil markets. How's that work, you ask? Here's a rundown.

Russia has backed the Assad regime in Syria since the Syrian uprising, and in grander terms, the Arab Spring began. This is for a couple of reasons -- Syria under Assad upgraded its military with Russian product, Russia maintains a Naval base there, they have numerous long-term oil contracts signed with Assad, and they fear further inciting the spread of radical Islam. For these reasons, Russia has been the Assad regime's strongest supporter and has vehemently opposed interference in the uprising, going so far as to label the Syrian rebels as Al Qaeda agents.

Now there are rumblings of military action circulating based on the rumors that the Iraqi Syrian establishment has attempted to buy yellow cake gassed its own citizens. In order to garner Russian support, or at least acquiescence, the head of Saudi Arabian intelligence reportedly met with Russian President Vladmir Putin offering assurances that Russian interests in Syria would not be harmed and an alliance with OPEC. This alliance would presumably further Putin's calls for a global gas cartel, which he presented in his Moscow Declaration.

The oil market is volatile enough without Middle Eastern conflict. Given conflict, and a new golbal oil cartel, and oil, gas, and derivative prices could all rise in the coming months.

Hold on to your hats.
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on Wednesday, July 17, 2013 1


Recently Pacific Standard reported that Swedish furniture giant IKEA currently consumes one percent of the globe’s entire commercial wood supply -- roughly 17.8 million cubic yards -- to produce their furniture. IKEA, along with Home Depot and Lowe’s, is currently one of the three biggest consumers of commercially used wood in the world.  Although one percent may seem trivial, the impact of this number on global resources is huge. 

While it’s difficult not see red over the fact that such a vast portion of the world’s forests are being utilized for cheap, disposable furniture, IKEA is doing its part to stay green.  In the last year, IKEA has put forth serious efforts to source more sustainable materials and improve their supply chain in order to help offset their massive global resource consumption. In the beginning of 2012, IKEA began replacing its wooden pallets with corrugated cardboard. Corrugated cardboard is a highly recyclable material and has no impact on wood resources. The company’s chief sustainability officer, Steve Howard, also noted in their 2012 Sustainability Report that twenty-five percent of the wood currently utilized by IKEA for their furniture is certified by the Forest Stewardship Council (FSC), which supports forest management improvement. The company has also noted that they are currently aiming to double that percentage in the next five years.

In addition to promoting sustainable sourcing practices, IKEA has recently implemented a number of programs aimed at furthering their green initiatives and improving the company’s environmental impact. Last October, IKEA kicked off their "People and Planet Positive" strategy, the goal of which is to utilize 70 percent of the company’s energy needs from renewable resources by 2015. As of 2011, the company leveraged wind farms in 6 countries throughout Europe to generate a total of 152 gigawatt hours of electricity, or roughly 12 percent of its total electrical need. IKEA also recently completed its first round of solar initiatives, which originally began as a solo project in October 2010 at a store in Tempe, Arizona. The installation of these solar panels turned out to be so effective at keeping energy costs down at the test location that IKEA made it their goal to install solar panels at as many locations as possible. Currently 39 out of 44 IKEA stores in the U.S. are now utilizing solar panels to generate electricity.

While IKEA’s massive consumption of a single global resource is less than ideal, their commitment to help offset this intake is commendable.  Not only has the company helped to improve their environmental impact, they’ve also benefited financially from their sustainable efforts.  IKEA’s has set an exemplary model illustrating that going green can be easily achieved no matter how large, or small, the business.
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on Monday, April 22, 2013 0

In celebration of Earth Day here are 5 easy  tips you can utilize in your every day life to do your part to contribute in preserving the environment.  By implementing a few of these easy changes into your daily routine you can not only save money but also  contribute to creating a healthier environment.
 
  1. Look for foods with little or no packaging which has a two-fold benefit; healthier foods like fruits and vegetables tend  to be packaged with minimal  materials  leading to less packaging waste which makes up about one-third of non-industrial solid waste.  
  2. Utilize perennial crops  which often have extensive roots systems made for retaining water which in turn help prevent soil erosion.  Perennial's also grow back each year making them a great investment for your garden.
  3. Plan meals to cook in bulk then freeze for use later on, this method utilizes less energy during cooking and also helps prevent food waste.  Its also a great solution for freeing up more time in the evening during the hectic work week
  4. Use refillable bags at the grocery store and refillable water containers at home and in the office. Its an easy solution that significantly helps cut back on packaging waste.
  5. Educate yourself.   Green does not always guarantee sustainability. For example Hybrid cars by definition are not sustainable as they still utilize oil based fuels and contain parts that are not easily recyclable and can be often toxic to the environment.  While the impact is less than that of a regular vehicle, using a bicycle is true sustainability.

 

There are number of things you can do to make daily living more sustainable, often it is as simple as turning off a light. Take a few minutes to see where you can implement these and other tips into your lifestyle to do your part in contributing to the world around us.

 
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on Saturday, March 30, 2013 0
There are oil and gas platforms that are not in operation in the Gulf, aka "idle iron" and the government has regulations in place to remove these platforms.  It is important that these platforms are removed because they have the potential to leak petroleum especially during the hurricane season which can cause significant problems and it can be costly to the owner.  One company has a different thought on removing these platforms.  Black Elk Energy wants to save these structures as underwater habitats preserving ecosystems that have developed over time.  To do so, they have backed an organization called Save the Blue.  The reason for saving these structures and backing this organization might be that "Black Elk estimates it will have to spend more than $200 million over the next three years to plug its wells and remove its platforms that no longer produce oil and gas".  This happens to be more money than the company has made based on public filings. Larger players in the industry, like Chevron, argue that the costs for maintaining an artificial reef would quickly surpass the one-time costs of removing the structure. Government programs are discussing the opportunity to maintain some of the artificial reefs, but in the long run it may end up costing the owners of the idle platform more. The industry indicates that it costs about $4 million to remove a platform and about $250,000 a year to maintain. Black Elk has possibly gone a little overboard as a new player in this industry. It doesn't appear they are really ready to play with the big operators.
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on Friday, March 29, 2013 0

Gazprom, the world’s largest natural-gas producer and, according to the Financial Times, creator of the “best company song” (see it on YouTube), announced that in June it will be determining the price and volume with China for its gas supplies. Such a relationship would be welcome to Russia’s giant as it finds itself stumbling in the European market.

Although still the dominant player in the domestic market (producing 75% of Russia’s gas) and a significant presence in the international market (supplies approximately 25% of gas and more in former Soviet-bloc countries), Gazprom in recent years has faced falling demands and rising competition with the introduction of different gas options. Notably, buyers are less dependent on the Russian natural-gas monopoly with the option of procuring liquefied natural gas (LNG) from other suppliers in Europe as well as (potentially) from the US. The Economist has pointed out that, despite shifts in the playing field, Gazprom has stubbornly refused to sacrifice its traditional pricing and contractual structure, where customers sign expensive long-term contracts linked to the price of oil, which serves to undermine investment. Compounding Gazprom’s challenges are its outmoded facilities, an antitrust investigation conducted by the European Commission, and general inefficiencies and high costs. Furthermore, the company indicated that it has plans to invest $50 billion in gas fields, pipelines, and an LNG plant.

Eastern Promises 

Gazprom has thus turned to Asia in an effort to secure its dominance in the industry amidst its mounting difficulties. Nevertheless, price is, unsurprisingly, still a point of contention in the Sino-Russian negotiations. Gazprom remains adamant to link gas prices to oil, for fear that European parties will continue to demand greater discounts if China manages to land a better deal. Meanwhile, China insists upon paying approximately the same amount as it does for gas from Turkmenistan. With a somewhat vulnerable Gazprom, China may appear to have the advantage in this contest. Except, of course, China’s delicate situation with regards to its regional tensions – especially with Japan – may serve as an incentive for it to quickly conclude a deal with a neighboring entity.

Agreements on the amount supplied to China have been tentatively settled, but certainly a myriad of economic, geopolitical, and internal political developments will be factored in before either party settles on an agreement. Talk about sourcing negotiations on a multi-staged global scale!
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