High temperatures in Russia complicate supply chains of food around the globe

Is it global warming or just a bad year? Record temperatures in Russia this summer triggered Russian government’s response of stopping the export of wheat. As Mr. Putin put it in Russian – reserves don’t hurt ones pocket. As we live in the all connected world this decision caused significant waves in food supplies and futures trading. The decision immediately triggered a sharp rise in the value of futures for delivery of wheat in the world. At the Chicago Mercantile Exchange, the December futures on wheat rose by $ 0.6 - to $ 8.155 a bushel. The global prices on wheat rose 7.3%.

How to Conduct a Supplier Visit

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

The 20th century philosopher, Yogi Berra observed, “You can sometimes see a lot just by looking.”  Whether your task is an annual plant visit, a due diligence audit, or evaluation of a low cost country supplier, knowing the purpose, what to look for, and what to ask will produce better outcomes. 

Logistics is key for international business success

When it comes to expanding your business internationally, logistics can make or break the entire operation. You can find a great supplier, negotiate great prices, goods quality and terms of payment . But if you can’t get the goods you need shipped to the customer as expected all your efforts can end up with nothing. 

How to Rate Supplier Performance

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

                                                                                                         

Quality	Delivery	Service	Price
Rejection %	Transportation	Response time	Payment terms
Shelf life	Storage	On site rep	Price change terms
Reliability	Stocking programs	Technical ability+	Minimum orders
Useful life	On time %	Electronic ability	Discounts
MRO costs	Packaging, put up	Advertising	Lease vs. buy
Salvage or trade-in value	Drop shipments	Exclusivity	Intellectual Property Ownership
QC/QA	Remedy policy	R &D	Tooling
Testing/certification		Warranties

Avoid supplier fraud in China

So much has been written about China – some of it making the entire country sound so incredibly exciting and exotic and some of it making the area sound a little bit scary.  However, one thing can be said for sure – its culture is certainly very different from that of the one western buyers are familiar with.

The differences are not only cultural, they are also very present in any business dealings.  We have all read stories about the work ethic that seems to be embraced throughout most of the country and, it is certainly very different from the one that exists in most of North America.

While, of course, it is not a question of “good or bad” – it IS a question of clearly understanding where, how and why China’s business operates the way it does.  This is crucial information for anyone who is thinking of having any type of business transactions in that part of the world.

China itself has suffered from growing pains – having experienced substantial business growth in a relatively short time, which has resulted in many serious business issues – not the least of which is fraud.

In fact, fraud appears to be one of the biggest growing industries in many parts of the world and China has not been spared.  Of course, technology makes this type of transgression much easier, which means that any North American based company, finds itself somewhat weary of dealing with countries such as China – without first conducting a thorough investigation.

Realistically, entering into any type of business arrangement would automatically generate sound due diligence and investigation.  However, when it comes to dealings with China, it is much better to be “safe than sorry”.

This, therefore, clearly explains the need for professional firms, located in China, who specialize in dealing with western companies. They are mandated to act as representatives, ensuring that buyer business interests are thoroughly represented.

Many of these professionals are westerners residing in China, who have considerable experience in dealing with local companies and their representatives.  They are uniquely positioned to look for very specific issues and are extremely knowledgeable when it comes to detecting fraudulent activity – in all of its many forms.

As a business, you have enough to worry about – so make sure that you hire the right people to represent your business interests in China. It is the prudent and fiscally responsible thing to do.

Supplier selection process part 2 - how to select global supplier for your business

• Reliability - ability of this supplier to meet commitments and be trustworthy in the day-to-day activities.  When you are at a point of looking at new supplier your only way to make a judgment about reliability is by gathering references from this supplier that meet your own expectations.

• Financial Stability - if a supplier cannot meet obligations due to financial problems, your own reputation with customers may suffer. There are agencies that can help you investigate supplier credit history. You can also run supplier verification report to see if this company is a real business.
 
• Quality and Continuous Improvement - ultimately the quality of your product is directly impacted by the level of product quality provided by your suppliers. Given the variety of product offerings on the market, this parameter is relative to your own quality standards. You can start by ordering a sample from a supplier in question. But your much better option is to order a factory audit or product inspection service.

• Competitive Pricing - pricing of products or services when compared with other potential suppliers. You might not have enough information about other suppliers but you can certainly review several options using supplier directories or by working with sourcing agents with full representation of local suppliers.

• On-time delivery - ranks the supplier’s ability to deliver goods on time. This information is not available through negotiations and can only be received via reference checks. You should be well aware of the impact this can have on your business and the total cost of ownership.

• Customer Service and Communication - level of customer service and ongoing communication with this supplier. This is something you can make a judgment call about in the initial stages of communication.  People you communicate with during the initial engagement are typically either from sales or represent the owners. If you have any issues in the beginning, you are most likely to have issues with this supplier in the longer term. 

• Informative and functional Website. Many smaller companies do not have a well run website. This will impact you going forward because it has direct connection with your ability to see your orders being processed. It becomes especially important when working with suppliers from other countries.

• Approach to Partnership. Get a sense how much your goals are in line with the goals of this supplier. If you think of making this relationship last, you need to evaluate the importance of your business to this supplier. Don’t expect to get preferential treatment if all you are looking for is one order. Be ready to discuss your goals and get a sense of the same from this supplier.

• Environmental record and Corporate Social Responsibility of your suppliers are two important factors for your own reputation. However, these are hard to assess without actual site visits. We recommend you use services such as supplier inspections and social audits to understand this part of your supplier’s business.

 

Getting the Assistance You Deserve to Grow Your Business

Supplier selection process part 1 - - how to select global supplier for your business

If you are in the business of selecting suppliers, especially from developing countries, UK Customs Office did a lot of work to try and help you. Business Link is an impressive set of guides from export and import basics to specific supplier selection process. Many of the topics are UK specific and deal with UK taxes. But most are general purpose explanations on the topics of starting a business, finance and international trade.

• Understanding the culture. As we discussed earlier in our earlier post about doing business in China, cultural differences is a number issue when conducting business with China. Same is true with any other country. This means you have to study the country from where you want to source before plunging in.
 
• Methods of payment. You have to understand what payment methods are acceptable. For instance PayPal is not accepted in many Asian countries. On the other hand, wire transfer is a very wide spread method of payment.
 
• Shipping and logistics. You can negotiate the best price in the world but if you don’t know what it will cost to deliver goods where you need them, the total cost may be significantly higher. Working with drop ship suppliers can be a good idea.
 
• How many suppliers do you actually need? For a small company that decides on sourcing from overseas this becomes a major decision because typically small companies have limited amount of suppliers they work with. It is not just in the price. Selecting a supplier involves wide range of factors, not just price along. Based on our own experience many overseas suppliers believe that the most important thing in establishing relationship with western buyers is the price of goods sold. However, dealing with suppliers that offer the lowest cost might prove to be more costly.  
 
• Are you ready to negotiate? Negotiation styles are very different in different countries. Getting educated on this subject and getting ready might be crucial to get the deal you are looking for.

China Expo

If you are considering broadening your business base to include China, you may want to attend the 2010 Shanghai Exposition, which opened May 1, 2010 and runs through to October 31, 2010. This conference is expected to attract over 70 million attendees, most of whom will consist of business leaders, as well as professionals from around the globe. This historical event will be the first registered World Exposition in a developing country, offering unprecedented access to an overall view of China’s future development and how its people will remain an integral part of a booming market and economy.   

Sourcing 101 part 3 - good companies gone bad?

Suppliers are one eager crowd to get noticed and get new buyers, right? In this world where new factories, trading companies and warehouses pop up every day, India, China, Bangladesh, Pakistan, Vietnam, Brazil – all present both great trading opportunities and sources of supplier fraud.  In this article we’ll talk about some basic due diligence you can do avoid getting scammed and list some tools you can use to do it.

Simple scams

We see a lot of suppliers that register with our site without providing even basic information such as company address, telephone numbers or any other details that can help with due diligence. They list products, with photos and descriptions. When you review the contact information, you will often find email addresses from Yahoo, Hotmail or Gmail, but you no corporate websites and e-mail addresses.

There are many small businesses that are taking advantage of the internet to trade. If the business is registered there should be a way to verify their information. We suggest staying away from those who refuse to provide the basic business info.

Hijacked identities

In China and many other countries businesses that want to sell overseas must obtain a proper export license. Many businesses that focus on internal market have no export license, no English speaking staff and generally no data available in English. Impersonators use their info to create supplier profiles on various B2B trading sites, put unreasonably low prices, add their own contact and payment info and lure buyers to place orders.

Companies that do have export license and a website can also be a subject of such identity theft. Impersonators provide their own contact information mixed with the data from the legitimate business. The website information is real, products are real but the listed representative has nothing to do with the actual business. If you see that contact email is listed as Yahoo or Gmail while the actual business has a real business domain this is a real red flag.

What can you do to avoid these traps? 

• Use tools available at your disposal to make sure you deal with legitimate businesses and their real representatives

Supplier verifications

Factory audits

• Hire sourcing agent you trust to do the due diligence work for you. Many western professionals find opportunities in Asia these days because of the issues listed above. They often know the language, the culture and have local connections to help you get what you are looking for.

Find supplier that is right for you

Engage early and manage the project to get the product you need with the quality you want

Inspect factory and products to ensure your goals are met

 

High context in chinese business

Are you looking to do business in China? Are you looking to manufacture or buy on a regular basis? You need to realize that China is a high context country. This means that either you or someone you trust needs to be in a close contact with people you need to work with. Chinese culture is built on guanxi, a relationship building that takes a lot of time to develop.

42 rules to follow about sourcing from China

SAAS Business Intelligence solution Webinar

Being a resident of the Boston area makes one acquire certain loyalties. It goes without saying that most people from Boston are Red Sox and Patriots fans. The other part of this identity is a connection to the booming technology sector that made a difference in our nation’s life for the past 60 years. While Software As A Service (SAAS) is not a new concept, one of the Boston based companies Oco Inc. took it to the new level. The company introduced SAAS Business Intelligence solutions. You can learn about the latest developments directly from the company at the upcoming webinar.

The 25th Annual International Technology and Persons with Disabilities Conference

California State University at Northridge will open its Annual International Conference on technology and persons with disabilities at the end of this month. This annual conference attracts researchers, educators, practitioners, end users, speakers and exhibitors from all over the worlds, eager to share the latest research data, best practices, as well as preview new products and applications in their quest to provide viable solutions for the blind and visually impaired individuals. The conference will take place in San-Diego, CA on March 22-27. This year the conference celebrates its 25th anniversary.

Supplier Evaluation - key tool for supplier performance management

• Reliability - indicates supplier’s ability to meet commitments and be trustworthy in day to day activities. This parameter directly relates to the risk factor of engaging with this supplier. Higher number means less risk. 
• Financial Stability - indicates supplier’s ability to meet commitments without increasing your own risk due to their financial situation. If a supplier cannot meet obligations due to financial problems, your own reputation with customers may suffer. Higher number means less risk. 
• Quality of product or service - indicates potential fit between supplier’s quality standard and the one of your own. Ultimately the quality of your product is directly impacted by the level of product quality provided by your suppliers. Higher number means better quality.
• Competitive Pricing - indicates how much supplier pricing is in line with competition and current market conditions. In the current economic climate pricing is one of the reasons people are aggressively reviewing their supplier base. Higher number means better price benefit.
• On-time delivery - indicates supplier’s ability to meet deadlines on an on-going basis. This is where your supplier reputation defines your reputation. Today, suppliers become an extension of your own manufacturing or assembly lines. In the world of orders placed via the internet your ability to meet delivery expectations very often will determine the next purchase from this customer. This could also lead to lower carrying costs as you will require a lower safety stock and inventory investment. Higher number means higher percent of timely delivery.
• Customer Service and Communication - helps assessing how much you can rely on this supplier to address problems as they arise and have a good channel of communication on an on-going basis. Picking a supplier does not just mean buying what that supplier has to offer. It is more often about having access to the right people to address problems and ability to coordinate timely resolutions. Language and culture very often are critical for successful communication and good service. Higher number means better customer service.
• Informative and functional Website - indicates information availability on this supplier and their products and services on the web. This parameter will help you decide for yourself whether to engage with this company or not given the amount of information you can get on them. Higher number means more data is available on the web.
• Approach to Partnership - if this is about a strategic supplier choice, this parameter will help assess if your goals and the goals of this supplier can be aligned. This plays an especially important role in any plans for growth, achieving diversity and providing good service. Higher number means better alignment of long term objectives.
• Innovation - shows commitment of this supplier to innovation. Innovation is a key foundation upon which your own business can either strive or decline. When product launch times and time to market are as critical as ever innovation is key to meet these challenges. Higher number means greater dedication to innovation.
• Environmental Record - helps you assess this supplier’s environmental practices. Going green these days is not only a good practice but often times a necessity. Buying from polluters can really damage your own reputation. Higher number means better environment record and policies.
• Social Accountability - is an indicator of supplier’s labor policies, health and safety record, human rights and other factors (See http://www.sa-intl.org/_data/n_0001/resources/live/2008StdEnglishFinal.pdf for more details on social accountability standards). When picking a new supplier this should be a factor for serious consideration. Higher number means higher social accountability standards.

Business Intelligence on demand

Combination of company’s business processes, skills and motivation of its employees and ability to measure performance are in my view three most importance factors when talking about operational excellence. In my reengineering days when there was a need to understand how to resolve a specific business problem we always started from discovering the current business process in order to understand specific issues and improvement opportunities that stem from fixing these issues. A key component to quantifying the potential fix is ability to put real numbers behind both issues and solutions. There are companies out there today that offer a very interesting take on the measuring aspect. Oco Inc, a Waltham MA based company offers host of supply chain management related solutions bringing Software As A Service (SAAS) model into the supply chain world.

There are multiple ways to measure performance of a business. In business process context you have fairly clear definition for every task:

 

Toyota recalls 8 million vehicles worldwide

What happened to the famous Toyota’s commitment to quality? Is Ford closing in on the second place? The drama of the recall developed farther than anyone expected. Certainly this does not look like a carefully managed nuisance anymore. And headlines like “Auto sales up - but not for Toyota” and “Ford, GM outsell recall-wracked Toyota"  did not show for a loooong time. So what went so wrong?

 

US 2011 budget and small businesses

The evolving story of outsourcing

Like with many other trends outsourcing has a lot of supporters as well as many critics. But every trend has to be judged by its merits and outsourcing for outsourcing’s sake is only valued by investors with a very short term goals. Recently the talk of taking manufacturing back was mentioned in many headlines. Out of curiosity I went around the house to look at the labels. I found a lot of China, Thailand, India, Japan, Malaysia, but not the US.

While the push to outsource manufacturing brought a lot of good to consumers and helped with raising hopes in many developing countries, application of the same principles to the complex supply chains cannot be declared a gleaming success. I remember many articles praising Boeing’s innovative approach to the development 787 Dreamliner in which the company involved engineering teams and suppliers from all around the world to achieve the 20% cuts in the cost of development. The airline industry was clearly excited about the new plain and the expectations could not be higher.

The original idea of the new approach was to allow suppliers more autonomy by producing subassemblies that can be then shipped to the final assembly line at the company plant in Everett WA. The final assembly would have taken 25% of the time if would typically take for other models. This way suppliers and subcontractor were given much more important role in the whole process.

Pioneering any undertaking of this magnitude involves a lot of risks. But what the company did not realize is the kind of risk it was taking. With the outsourcing being so prevalent in many of the countries where Boeing’s contractors are located the war for talent is very hot. When first assemblies started to arrive, the company specialists were shocked to find huge amount of deviations, such as use of fasteners not suited for the industry. The Dreamliner was originally planned for the first flight in the summer of 2007. The actual date moved by two years which caused the company a lot of headache, millions of dollars lost on the first units that will not be used outside of testing and many problems with suppliers.

In a frank talk Mike Bair, former 787 boss said in November of 2007 that "Boeing authorized a team of parts suppliers to design and build major sections of the craft, which it planned to snap together at its Seattle-area factory. But outsourcing so much responsibility has turned out to be far more difficult than anticipated... Boeing overestimated the ability of suppliers to handle tasks that its own designers and engineers know how to do almost intuitively after decades of building jets. ... many of these handpicked suppliers, instead of using their own engineers to do the design work, farmed out this key task to even-smaller companies."

The recent acquisition by Boeing of Global Aeronautica, LLC, a South Carolina fuselage subassembly facility is a part of the company’ plan to get back full control. Let’s hope it means safe flights and great experience for all of us down the road.

New LED light in the end of the tunnel

Green tech battle for market share is on - and who is winning?

International shoppers get US discounts with International Checkout

Toyota’s demand planning in Venezuela

Economic recovery in 2010

In the past history of economic downturns whenever Western economies had hiccups the development world reacted with deep declines, political unrest and much longer recovery. This time it looks like we are in an uncharted territory because the tables have turned.

Looking at the old paradigm the economies of Brazil, China, India, Indonesia, Mexico were very likely to suffer significantly from the downturn of 2008 because of their tight relationships with the West. Most indicators recorded dramatic drop in orders and import. In many examples such as this article by the New York Times reporting on the closure of 67000 factories in China, in Q3 2008 the despair was spreading quickly. Going into 2009 most of the forecasts were doom and gloom.

Fast forward to today.  Due to unprecedented measures taken by the central banks of the US, EU, China and others to stimulate the economy the situation in emerging markets actually looks more promising that in most of their western counterparts. Countries that were looked as economic disasters in the end of 2008 turned to be a gold-rush in the end of 2009. The Institute of International Finance (IIF) forecasts capital significant increase of capital influx to the emerging markets in 2010.

Even more amazing is the political stability throughout this period. Two governments of Lithuania and Island became the only victims. Both India and Indonesia held national elections during this period. Countries with the highest populations, China and India, merely went through a slowdown of their growth while Brazil and Indonesia went through a slump of economic activity but came back.

In comparison to the Asian crisis of 1997-98 that created a wave of instability, financial collapse or Russian Ruble, default of Argentina, this time it looks very different. Based on the stock exchange numbers by Thomson Reuters Brazil is up 149% in 2009, China 125%, India 88% and Indonesia 114%. According to IIF US GDP growth was 5% in Q4 2009. Let’s hope that 2010 will confirm these trends with real recovery.

Asian carp supply pain

Back to basics value proposition

Your next laptop to consider

Freedom of energy choice

Better place for electric car

Is your roof covered?

Israeli solar technology to compete with oil

Tech Series - Sourcing meets SEO

• On and offsite optimization – must be done to use search engines to attract potential customers. Your website must have a well-written content, should be well-designed to create good visitor experience, and it must follow all the basic rules created by Search Engines. This is not a simple process and it takes considerable resources. It definitely is not about writing 5 pages and hosting it somewhere.
   
• Building inbound Links – simply put, it is about other people in the industry talking about your business on their . Good examples of inbound links would be Press Releases (one good Press Release could give you up to 500 instant and very relevant inbound links per submission), Blogging, Bookmarking, Commenting, Paid Inclusions, Media publications etc. The more relevant sources will point to your site, the better is your organic position in Search Engines results. Per Per Click, Pay Per Lead, Pay Per Call, Pay Per Meeting – these are all well accepted web marketing tools that bring real leads and business. But it takes a significant effort and a good knowledge of online promotion to set up your ad campaigns correctly. Plus these are not inexpensive and can eat your budget rather quickly.
   
• Social Media– use of social media sites such as LinkedIn, eCademy, Facebook, Twitter, Xing,  and so on really help to create an almost “Word of Mouth” buzz of your brands, products, services, or just your company.  Indeed, this is true. But it takes a constant presence, new content and a lot of communication to get real results. You must be an active membersuggesting articles, submitting news, asking and answering questions without too much self promotion. It is a very time-consuming effort, but it brings great results.
   
• Direct Advertising – place your banner or text advertising on relevant business pages to get your target customer to visit your site. Great tool, can be both effective and very expensive.

Country spotlight series - India - Gujrat

Situated in the western part of the Indian sub-continent, Gujarat has a long historical and cultural tradition dating back to the days of the Indus valley civilization.

Gujarat is the birthplace of many prominent leaders like Shri Dadabhai Navroji, Sardar Vallabhbhai Patel, the architect of a united India and Mahatma Gandhi, the father of the Nation.

Why Gujrat:

Excellent infrastructure, number of sea & air ports, peaceful labor environment, conducive industrial policy and above all entrepreneurial spirit of people of Gujrat makes it one of the attractive business destinations.

A news report recently published by The Financial Express headline says : Gujarat top investment destination in India: Deutsche Bank report

Industry in Gujrat:

Gujarat has registered an impressive industrial development since its formation as a separate state in 1960.  The industrial sector at present comprises of over 1200 large industries and over 3,45,000 micro, small and medium industries. 

Exports and Special Economic Zones ( SEZ ) :

Government of Gujarat has been encouraging promotion of Special Economic Zones . SEZs are considered growth engines that can boost manufacturing, augment exports and generate employment.

Green Energy Push by Gujarat Energy Development Agency ( GEDA ),

Energy shocks during the early 70s led to realization that dependence on fossil fuels has to be reduced, energy use efficiency has to improve and new and renewable sources of energy have to be exploited. In June 1979, Gujarat Energy Development Agency (GEDA) was established to promote and popularize renewable energy technologies and energy conservation measures, and undertake research and development in these areas.

GEDA, registered under the Charitable Societies Act of 1869, was established by the Government of Gujarat, disseminates energy information and plays a catalytic role in development and promotion of renewable energy technologies.

 RE News India is dedicated to promotion of green technologies in India.

Country spotlight series - India - the Land of Opportunities

Ashok Gulati brings 30 years of business, sales and marketing experience in variety of Indian companies. Mr. Gulati is a business consultant and he also runs RE News India, a website dedicated to development and promotion of green technologies in India. We spoke about India and the economic opportunities for small and medium companies that it offers.

Editor: Do you see rise in the entrepreneurial activity in India?

Mr. Gulati: Yes, definitely. With more and more large multinational corporations entering India, younger generation with better educational background uses this opportunity to gain business experience and start on their own. Another helping factor - many of the alma-mater companies do not mind using additional services of companies managed by the ex employees based on the established relationships.

With India growth story going strong, even people who are not well qualified but have entrepreneurship ability are finding opportunities and more people venture into starting new businesses.

Having said that, overall picture is still not comparable to the  US and EU counties mainly due to the funding constraints.

Editor: Do you see changes in commerce due to changes in the government policies?

Mr. Gulati:  Yes, indeed, both from international and national perspectives. India’s prime minister Manmohan Singh is a major driver of economic reforms. On the international front, various new Trade agreements coupled with Trade Promotion Programmes were recently announced.  On the national front Special Economic Zones, Trade Promotion assistance provided are few things worth mentioning apart from many others.

India is one of the largest economies of the world. It is a fast growing free market democracy which has come to the global forefront as a hub for manufacturing and services industry. It is the fourth largest economy in terms of purchasing power parity (PPP) and the tenth most industrialized country in the world. It’s diversified natural and human resource base & a vast consumer market places it at a competitive position on the world platform

Moreover, the process of reforms and the consequent deregulation, liberalization and globalization of the economy has unleashed the enormous growth potential of the country. This has made India a preferred destination for domestic and foreign investments. It has become the 2nd most attractive investment destination and is fast emerging as the most favoured business destination for overseas investment, an important trading partner and continues to be the most favoured back-office of the world,

Indian industry offers huge opportunity for cooperation in IT, Science & Technology, pharma, biotech, space & the energy sector, especially clean energy technologies

Editor: How can small and medium size companies from the US and EU benefit from India’s growth?

Mr. Gulati: While the 2009 outlook for global technology related spending is currently affected by the recessionary environment, there is a huge opportunity in the field of green technologies. This industry is being actively promoted by the recent changes in our economic policy. Jawaharlal Nehru National Solar Mission is one of the eight missions under ‘National Action Plan on Climate Change’. It is a major initiative to promote ecologically sustainable growth while addressing India’s energy security challenge.

The National Solar Mission aims to promote the development and use of solar energy for power generation and other off-grid uses in the country. The Mission targets 20,000 MW solar power, by 2022 which opens the market for companies with technological know-how in the areas of solar, wind power and other reusable energy technologies. From engineering, manufacturing and service prospective India offers a huge opportunity for businesses of all sizes.

 

English as a second supplier language

• logistics details -  exact geographical location, proximity to the airport, time it takes to arrive to the factory by car, description of nearest big cities
• capacity information - number of units manufactured a year/month, size of the warehouse, size of the manufacturing facilities
• promises of quality
• promises of rapid delivery
• and a lot of wishes 

• how long have you been in business
• number of  current customers, installations or past sales 
• customer references or success stories
• other verifiable data that can prove your reputation and your commitment to the customer success

• Put together a good description of your business and your products in a business language your customers will understand. And I mean English in this case.
   
• Get your current customers to tell the world how great your products and services are. This will go a long way and will bring business.

Sorry for simplification, hope it helps though.

 

Rail China - Europe - did anyone ask Russia?

 

 

Sourcing 101 Series Part 3 – Quality Management in China

In my recent conversation with Andrew Reich, Founder and General Manager of InTouch Manufacturing Services Ltd., a company that delivers quality inspections in China, we touched upon the issues facing western companies sourcing from Chinese manufacturers. Andrew who is fluent in Mandarin, has been living and working in China for the last 7 years. According to Andrew, one of the burning issues in this equation is the personal interest of the freelance inspectors, typically locals, that can be swayed to "improve" their report by sweet deals from the manufacturers. To put it bluntly - bribery.

 

Sourcing 101 Series Part 2 – Sourcing Agents

• Ability to communicate in business language to both clients and suppliers. Not all vendors or suppliers understand how purchasing organizations think and vice versa. They often times need a middle to communicate effectively.
   
• Culture is the single most common reason for western businesses failures in trading with Asian producers. Here is a simple anecdote - someone from Asia recently sent an email to their potential customer with S.P.A.M. for a title. What serious western business will even get to see such email? Here is another example. Some years ago I was dealing with a Japanese customer who was complaining about product quality from a company I was working for. We spent days trying to understand and address the problem while the customer kept on complaining. The customer was indeed sending us feedback that we simply could not understand due to the cultural barriers. We hired a cultural expert that explained the issue - we did not apologize. No matter what we did factually, not having apologized was the root cause of the relationship issue. 

Sourcing 101 Series – Sourcing Agents Part 1

• Changes in product strategy required for attacking new markets or going to low cost sourcing countries
   
• New customers with specific demands that cannot be met by the current supply chain
   
• Legislation changes. For example, ROHS standard in the electronics industry drives certain supply changes that require specialty expertise

• Having clear idea of how you can meet strategic needs of a company by utilizing sourcing expertise. Typically this would involve knowing the business from multiple perspectives – manufacturing, distribution and pricing.
   
• Having a good knowledge of the industry and suppliers. Finding solution for a particular situation is based on the product or manufacturing expertise available and knowing what it will take to incorporate this expertise into a larger supply chain.
   
• Having existing network of suppliers. Always very helpful to get things accomplished quickly and get the ultimate end result.
   
• Ability to manage a sourcing initiative as a project, from the product concept to managing suppliers and delivering products that meet expectations.
   
• Knowing the sourcing country and the culture.

read the second part of our interview in our next post

Innovation as a major driver of the economic growth - Israeli case in point

• The highest concentration of startups in the world
• The highest amount of VC investments per capita than any other country
• More NASDAQ listed companies than any country besides the US, more than all of Europe, India, China and Japan combined
• Economy barely hit by global economic crisis

• Israeli immigration and assimilation policies bring and support a highly motivated, diversified pool of talent into the country. I can personally attest to this one. I was one of many thousands of people integrated into technology incubators funded by the Israeli government. Funding was made available to get your idea from the initial stage to a prototype or a actual product. The incubator was than helping in obtaining the next round of funding from the large VC community tuned to the ideas being developed.
   
• Israel spends more as a percentage of its economy on R&D than any other country in the world and knows how to make that money relevant to startups. A lot of it has also has to with the amount of highly educated talent available for hire. I witnessed Microsoft, Cisco, Intel , Vishay and many others opening R&D facilities in all parts of the country. The government provided substantial grants in the form of tax incentives geared towards foreign investment in the country. This investment also led to a string of acquisitions by the world largest hi tech giants and allowed for this capital to be reinvested into the economy.

Things we take for granted and e-commerce in Bangladesh

In my recent conversation with M.B. Jalal, Executive Director of KR Source Ltd, a small garment supplier from Bangladesh we discussed issues facing suppliers like his company in the current economic conditions (Mr. Jalal has recently joined our community). Answering my questions about the major challenges in his business I was surprised to hear that the main one he is facing is inability to pay or get paid via the internet. Essentially he was saying that there is no e-commerce in Bangladesh. I always knew that in the US we take many things for granted but this was a very bright illustration on this topic. According to Mr. Jalal, this limitation has to do with the current and past government policies in Bangladesh. 

 

Take Control of Freight Costs

I always like to control freight costs. Whether an express shipment company, an LTL or TL carrier, or 3PL, I think it is important to control the cost of freight and indicate freight collect terms with suppliers. In addition to negotiation with carriers (an underutilized negotiation) it helps in freight claims, not matter the FOB point. Always consider the leverage.

Obama in China

I’m trying to reconcile a number of thoughts this morning and I’m not having much luck. Perhaps it is the prescription cough medicine or maybe just pre-holiday jitters after seeing my credit card bills this weekend. But, here goes.

Say Thanks to a Manufacturing Engineer Today!

Here are two great sites I’d like to call your attention to. Manufacturing is Cool is a fabulous site maintained by the Society of Manufacturing Engineers. Not only is it a great site with a lot of interesting information for us non-kids, but it is an interesting site for children as well. Please share it with a child….that is after you get done with it! Let them know that manufacturing is alive and well and is a good career. Everything gets manufactured….from burgers to basketballs to balloons. Celebrate manufacturing!

And I’d like to add my appreciation for manufacturing engineers, those hands-on folks in manufacturing companies that make things work. They are the troubleshooters and facilitators between design and manufacturing. They are the most practical, knowledgeable, and down to earth people I’ve ever worked with and solved supplier problems by the bushel.

Manufacturing engineers are like the neighbor who comes by with the knowhow and special tools that help you fix a leaky pipe, a flat tire, or broken lamp. They are the 911 of manufacturing and are often underappreciated and underpaid. I couldn’t have done my job without them.

 

Legal Issues, Contracts, and Agreements

I had the pleasure yesterday of spending the day with 35 members of the Purchasing Management Association of Western New England in Holyoke, MA. I conducted a seminar about contracts, agreements, and legal issues. This was a diverse group and represented manufacturing, service, municipal, and educational organizations.

This was an engaged, interested, and participative class. We started working on legal issues and jargon and spent a lot of time on the Uniform Commercial Code, agency and authority, offer and acceptance, service contract formation, and we tied it together with a session on negotiation. And we kept it related to working with suppliers in a relationship based environment.

One of the interesting discussions took place around agency. We are agents of the company and have been given fiduciary responsibility to spend the organization’s money. But what about requisitioners? We often drive purchases down to the lowest level and grant authority to our requisitioners to buy (credit card) or release (blanket orders) from existing agreements. But we are also bestowing on them formal agency. Can that get organizations in trouble? It depends

And it turns out ‘it depends’ was the most popular term at yesterday’s seminar. The law is tough to navigate. Thanks for a nice day.

RFID: Spy vs. Spy

With apologies to Sergio Aragones, the brilliant cartoonist of Mad Magazine’s Spy vs. Spy, I want to chat about RFID chips, those miniature devices that allow us to track the movement of inventory. I am a fan of this technology and often have my students write briefs on the integration of RFID into warehouse management systems and the retail supply chain. I even have an RFID chip in my car! It is in the toll transponder on my windshield. But are we being spied upon?

I’ve also written some about RFID and it was during one of my interviews that I ran into Katherine Albrecht, a Harvard educated RFID privacy expert. My conversation with her was years ago when RFID was really in its infancy. But, as the technology has grown so has Albrecht’s influence and reach. She feels that RFID chips are intrusive and a way for government and corporations to track our movements. She’s written a series of books called Spychips and they look to be interesting reads. If her books are as interesting as our conversation was, they are must reads.

RFID, a logistics panacea or an invasion of privacy? I’m not a conspiracy theorist, but……!

The Technology Perspective

I thought the call waiting feature on my home ‘land line’ had been dropped so I called the mega telephone company yesterday. After getting trapped in the unhelpful computer voice generated phone tree maze (“okay…let me look at your account…thanks”) I was able to opt out to a live agent and was soon connected with Mary, a pleasant person who immediately came across as sincere and likable.

I told her that it seemed that I was occasionally getting a busy signal when I called home and since we have call waiting I really shouldn’t. She mentioned that she thought the same thing was happening at her home until she realized that her kids were tying up both lines and suppressing the call waiting feature.

I told her that my kids almost exclusively use their cell phones and hardly the land lines. She laughed and I said ‘tick…tick…tick’, insinuating the impending death of the land line. She took it to mean that her kids were not old enough for cell phones yet. “Hey, I’m not that old yet”, she said. We both laughed, but at different jokes. So we both had different perspectives on a technology issue and I think we were both right. Her kids will get older and land lines will continue to be eliminated.

As for my problem? My wife had tied up both lines….and she never uses her cell. Yet another perspective!

20 years since the fall of the Berlin wall

Rare events in our recent history made more dramatic changes to the world and to the supply chains than the fall of the Berlin wall. Democratization of Eastern Europe and changes towards market economy in China opened unprecedented opportunities for economic development for a huge amount of new businesses.

I was still in the Soviet Union at that time. Being behind the Berlin wall we knew that good shoes came from Yugoslavia, good suits came from the Czechoslovakia, good furniture came from GDR, stereo recorders came from Latvia, wine came from Georgia and Armenia, and tanks and planes were made in Russia.

Suddenly everything changed. Borders opened, international travel became a reality. Thousands and thousands of people lost their traditional jobs and went to trade anything they could as a means to sustain themselves. New engineering, manufacturing, logistics companies, banks and grocery stores sprang to life all over the place. This combined with internet revolution allowed for totally different possibilities. I noticed recently, for example, that most of the glass in Crate and Barrel comes from Poland and from Czech republic, a direct attribute to what happened 20 years ago.

Change is always hard but this change made all of our lives better in the end.

 

A 90 Year History of Trucking

Perhaps it was growing up within a stone’s throw of the New Jersey Turnpike. Or, working my way through college by loading and unloading 18 wheelers, but I have always been a fan of trucks. And while some may think my black F-150 is really a toy in truck’s clothing, the smell of diesel fumes is like home cooking to me. I like trucks.

I was especially drawn to a history of trucking published by Inbound Logistics. This is a comprehensive but breezily written saga about trucking pioneers, early truck lines, and ultimately what trucking is today. You’ll find some interesting things here.

Sure, in the 1970’s we went through the ‘cowboy’ and CB radio trucking craze, but things have changed a lot since then. Trucks hold the supply chain together. Still, trucks elicit excitement in kids big and small. And, music as well. Not sure if my favorite trucking song is "Six Days on the Road" by Dave Dudley or "Keep on Truckin’ " by Eddie Kendricks.  Yours?

 

Zappos: Still Best of the Net?

I hate change. Know that I teach my business and operations students about the importance of change, how they have to embrace change, and that change is good for organizations, and people. But that doesn’t mean I have to like change. I don’t.

So I am worried about the latest change on the web: Amazon has bought Zappos. They are both long time web merchants for me. While I am not a fan of some of Amazon’s verticals they do an outstanding job in fulfillment, the most important aspect of a consumer (and industrial, I guess) site. I am a great fan of Zappos, including their next day fulfillment and free returns. I think their prices are aggressive as well. In fact, I bought a pair of shoes and a jacket this week and they were just great.

Amazon is supposedly going to keep Zappos separate. I just wonder how long this is going to last. Two of my favorite personal supply chain providers are now one. And I am not very happy about it.

 

The Magic Words in Supplier Performance

As an impetuous small child (and some say adult) I often demanded things from my mother. When I didn’t meet her requirements of polite speech, she would say “What are the magic words”? I would then say the customary ‘please and thank-you’ and I would get the piece of fruit, cookie, change for the pinball arcade or keys to the car. And not much has changed, really.

I was teaching a seminar yesterday about managing and improving supplier performance and the class and I had a discussion on politeness and courtesy in the workplace. We agreed, and lamented, that please and thank you were hardly heard these days. Now when it comes to improving supplier performance, we went over all kinds of strategies, including understanding the levels of the supply chain, negotiation, e-commerce, and all methods of internal and external communication.

These were all good solutions. But, I reminded them that in my 30 years of experience, the words of please and thank you, uttered with sincerity, most often worked the best for me. My mother taught me well.

Global Changes to the Garment Industry

Other than The Sopranos or Curb Your Enthusiasm, there is nothing much that gets my attention on HBO. But last week I stumbled onto a documentary about the garment industry in Manhattan. Schmatta: Rags to Riches to Rags captured my attention like no documentary had for a long time. I actually watched it the next day as well with members of my family. I come from a long line of dry cleaners, an adjunct to the garment industry.

This documentary, with interviews and much original footage, told of the death of the U.S. garment industry that was once based in Manhattan. We saw the path of primarily Jewish and Italian immigrants into this business in the early 1900’s, and how they, and immigrant groups that followed them, used the garment industry to climb out of poverty and assimilate into American society.

The documentary discussed and interviewed the business owners, the workers, the labor unions, and the transition to offshore sourcing. At one time 50 years ago 95% of all garments were made in the United States. Now, it is 5%.

For those of us involved in global sourcing, it was a window into some of the factories that we don’t see, or if we do, we ignore. It also told the story of the evolving regulations in offshore factories and the increase in identification and remediation of poor working conditions. Some of the issues happening now are mirroring the garment industry of the early 20th century. We need to learn from our mistakes. Watch the documentary.

 

Contract formation, negotiation and compliance in global commerce

I am in the process of preparing materials for a seminar on legal issues and contracts. While not wildly entertaining, this seminar provides legal basics for buyers including law of agency, contract formation and negotiation, breach, warranties, compliance and general legal issues. But my audience is not one of lawyers so we also discuss when to get legal help.

Yet, those instances are often few and far between. I’ve placed orders for hundreds of millions of dollars over the years with seemingly countless transactions and I’ve only been in court once. And that was unrelated to anything that I did. I was called as a witness to a situation involving the malfeasance of a manufacturer’s representative.

Sure, both buyers and sellers have long boiler plates of terms and conditions of orders and I do think they are necessary, just in case. But in actuality, most orders go through well, materials are delivered and services are provided, and invoices are paid.

Legal issues happen for sure and maybe I’ve just been lucky. Or maybe the wheels of commerce just generally work well.

The Snowed-in Supply Chain

You can’t pick up a business magazine these days without reading about supply chain risk. Defined in its global sense, supply chain risk is what could possible occur in the extended supply chain to prevent goods and services being delivered to you as required. There can be issues in manufacturing, logistics, transportation, planning, quality, or whatever. Supply chain risk is hot!

Actually, supply chain risk, in its simplest form, is cold….and white. Another huge snowstorm has belted the Denver area and has closed roads in Colorado and Wyoming. The Denver airport has been impacted and United Airlines has cancelled half of their flights.

I’ll bet if we watch the Denver news tonight we’ll see kids playing in the snow, plows carving the runway at the airport, and 18 wheelers packed in like sardines at a truck stop, waiting for the snow to stop and the roads to clear. Guess what is on those trucks? The stuff you’ve been waiting for, delayed. And that risk will remain until spring.

 

5 Tips for Choosing the Right Wholesale Suppliers

Small businesses are struggling with the challenge of how to choose the right suppliers. Many business owners are unaware of what to look for in a supplier beyond just getting the lowest price. Here are 5 tips for choosing the right supplier:

1. First determine your business’ requirements. This will help you figure out whether a supplier can meet your requirements. If you don’t know what your specific requirements are, the chances of choosing the wrong suppliers are high. If your company has to meet stringent customer standards, for example, then so will your suppliers in order for your company to be successful.

2. Look at total cost (price plus costs incurred before or after product or service delivery) instead of choosing the supplier with the lowest price, as it is important to balance other important elements such as quality, delivery, and service. You don’t want to choose the lowest-price supplier, only to discover hidden costs of doing business, such as poor quality or poor service that drive up your real costs.

3. Consider making a site visit to a potentially key or critical supplier to see their operation firsthand, meet their management, and help increase your knowledge of and comfort level with the supplier. If the supplier is located offshore and visits are not practical, then consider using local resources (who thoroughly understand your requirements, of course) to make the factory audit or baseline inspection.

4. In some cases, using a distributor may be a good option for small companies, particularly those who want to buy in smaller quantities than buying directly from manufacturers will permit. This will help keep one’s inventories lower.

5. Develop good relationships with suppliers and keep the lines of communications open to help work through changes and problems as they occur. Suppliers with whom you have developed good relationships are often more willing to work through challenges with you than those whom you either don’t know or those with whom your interactions have been adversarial. Developing relationships with your key suppliers is one of the most proactive ways to avoid risk and unpleasant surprises and sometimes even get more favorable terms.

For example, a personal protection products company was able to work out better pricing with those suppliers with whom it had developed good relationships than the suppliers with whom it had no relationships.

Supply Chain Resource: Export.gov

Ah…the internet is a wonderful thing. Within minutes today my wife found extensive information on how to attach ‘shutter dogs’ to our new shutters. At the same time, I found a wonderful site about the Harmonized Tariff System (HTS), a process that assigns a unique number for products being traded internationally. Fascinating subjects, both!

Export.gov is a comprehensive government site that supports U.S. companies that are exporting. Specific topics include international logistics, sales and marketing, and compliance and regulations. You can even get e-mail updates and opportunities to attend webinars.

Government sites like this are a wealth of information and provide excellent explanations, background, and even telephone support. Our tax dollars really at work.

 

Credit Card Lies and Games

I was outraged when I received a letter in the mail on Saturday from Citibank (disclosure: I am a stock holder) saying that the interest on my credit card was going up to 24.99% for purchases, and 29.99% for cash advances. I’m happy to say that I had cancelled this card during a recent ‘personal housekeeping’, but I was offended none the less.

Ahead of credit reform, banks are changing the rules on us….and by us I mean small business people as well. David Lazarus in the LA Times writes especially eloquently about the shenanigans going on and seriously impacting the economic recovery.

I was a strong supporter of the recent financial bailout and I still see the merits in doing so. Unfortunately, many of the financial institutions have taken my, our, money and returned to business as usual instead of opening the lending faucet as asked. Small business, really all business, is getting screwed. Again.

I have been happy with my local bank for many years, but they were just bought by a larger regional bank. I already see some of the changes coming, including the separation of some of the key managers that I have a relationship with. New fees will be coming soon. Get big or get out. Just because I understand the concept doesn’t mean I have to like it.

I don’t have a solution. I think the banks won. 

 

Giant China Logistics Conference

Transport Logistics China 2010, a massive exposition and conference, will be held from June 8-10 at the Shanghai New International Expo Center. According to conference organizers, this conference will focus on the entire value-added chain in the logistics and transport sectors.  Industries segments supported include manufacturing, retail, and the service sector.

Product demonstrations and displays at the show include telematics, logistics, e-commerce, intralogistics, warehouse management systems, auto ID, and packaging.  Freight transport and logistics services are also represented… Over 400 hundred companies will be having exhibits, including government agencies, trade associations, and colleges and universities…

The focus of this conference is on how best to manage air, land, and sea logistics with China and Asia. Attendance over the years has increased dramatically, as has exhibition space. The last show was in 2008 and there were over 11,000 visitors. Book now! 

 

China closed tap on Google… and who is to lose?

We all learned recently that China closed access to Google. This is not the first time when for political or other reason the access to information is restricted by countries that did not fully embrace democracy.

The changes in technology that happen over the last 30 years broke lots of barriers and opened a lot of doors. More then anything, they opened economic opportunities for millions around the globe by allowing people become a part of much larger community and provided leeway to the world market. From expansion of cell phone technology in India, availability of internet on computers powered by solar panels in Africa, this democratization of access to information enabled huge amount of people to come out of poverty, start new businesses and create prosperity.

I don’t believe that this news about China means it will roll back to its old ways. It does mean, however, that in the global supply chain of today such bans create losers, not winners.

 

Coracle Offers Maritime iPhone Application

I like to say that only the cool kids have iPhones. I have a ton of boating related applications on mine, including an interactive tide calendar, all nautical charts for waters east of the Mississippi, an automated knots application, NOAA marine weather, with radar (this really works well) and a couple of games.

And what about something cool for those in logistics? Here comes Coracle with a very lost cost $4.99 application that provides a glossary of over 9,000 nautical terms and abbreviations. They are also about to launch an online game that provides a ship loading scenario. This is interesting stuff for logistics professionals and shipping enthusiasts.

Looks like another trip to the app store tomorrow. 

 

Use Total Cost of Ownership in Offshore Sourcing

I am a fan of the total cost of ownership (TCO) model. Simply put, it is an assessment of all costs, both direct and indirect, that are involved with an item over its life. While many of the cost elements are estimated, you can build a pretty accurate forward looking cost model based on experience or current cost forecasts. The key is to be aware of all associated costs of a purchase.

A good example of TCO would be the purchase of an automobile. Let’s say you buy a new Ford Explorer later today at a Ford dealer. Let’s also assume that you are going to keep the car for five years, the length of the loan that you were able to get. You’d need to add in the cost of loan interest, as well as sales tax and registration fees.

Assume also some level of quarterly preventive maintenance for the first year or so, and then the cost of typical repairs including tires, brakes, and other consumable items. Add in fuel, insurance and depreciation and then you can begin to calculate the total cost of ownership. So, that new SUV that you purchased for $32,000 today new may cost you $75,000 after the five years. This doesn’t make it a bad purchase at all. But as a savvy car buyer you know there is more to the purchase than the sticker price. The same goes for no matter what you buy.

There are many excellent reasons to source internationally but often some of the tangential costs are a surprise to many. When calculating the TCO for international purchases, keep in mind some of these types of costs:

• Export taxes and fees
• Certificate of inspection
• Marine insurance premiums
• Port handling costs
• Customs brokerage fees and duties
• Inland transportation
• Financial transactions
• Additional inventory
• Travel expenses
• Currency issues

No one likes surprises in business. Analyzing your purchases from all angles will make you a better buyer. No surprise there.

Interactive Supply Chain Map

Kudos to Supply and Demand Chain Executive magazine for once again publishing their Interactive Global Supply and Demand Chain Map. With the constant rapid changes to supply chain enablement, this interactive ‘wheel’ helps to organize the various segments of e-commerce by identifying segment attributes and providing a list of suppliers in the space.

It is a good reference tool for supply chain professionals. This is version 16, so that tells you something about how quickly the space changes….or should we say evolves? Sure, that sounds better.

 

Big hopes for small business

Having lived in USSR, Israel and the United States (in this order, mind you ) I learned to appreciate the benefits offered by the free and open society. What amazed me the most is the practical implementation of the idea that personal freedom and an enterprising spirit can create wonders… and in a very short time. 

In my fairly short tenure in the US I’ve witnessed such companies as Google, Compaq, Netflix, JetBlue, Amazon and many others spring up from a great idea to become large corporations, bringing prosperity to countless families, neighborhoods, and even cities. The backbone of this phenomenon has always come on the wings of small business and the entrepreneurs who were ready to sacrifice everything for their dream. As reported by Bloomberg and  other major media outlets, US President Barak Obama, in his latest speech on small business credit crunch,  said that 65% of all new jobs created in the US in the last 15 years were created by small business. I can personally attest to this as I was a part of large number of Israeli start-ups that moved their bases to the US in the 1990s. 

However, in this current economic crisis, this engine of growth has been kept down by the credit crunch. This hurts all business, not just small businesses.  But, for small growing business this can mean closing the doors altogether. 

Lots of new ideas came to life out of economic crises. Many of today’s large corporations started in a similar situation. The difference this time is the extent of the financial meltdown and its impact on Main Street while Wall street is clearly recovering. Way too many businesses are stuck in their inability to extend credit. Way too many suppliers cannot meet their obligations. And way too many ventures cannot start because of venture capital not being available.

So I personally welcome the commitment of the US government to help small business. Being the government by the people and for the people, I really appreciate this announcement by my government today as it will impact all of us whether we care to think so or not.

 

Small Business Week in Canada

October 18-24 is Small Business Week in Canada. This country wide event is sponsored by the Canadian Trade Commission and celebrates the importance of small and mid-sized businesses in Canada. The CTC also helps SME’s find global markets for their products and services.

Most of these companies compete internationally and are supported by the CTC on a number of levels. The CTC has 150 international offices and 18 regional offices across Canada. They support Canadian SME’s in four key services: preparing for international markets, assessing market potential, finding qualified contacts, and resolving problems.

Many feel that SME’s will lead us out of the global economic doldrums. They are often more agile, responsive, innovative, and cost effective than their larger counterparts. Support them!

 

Swine Flu and the Supply Chain

The delivery of H1N1 vaccine to Massachusetts, and other states, is again delayed and that is beginning to cause some media related panic.  Clinics are being postponed and every time someone dies from the virus the media report it; closely followed by a story about the delay in the delivery of the vaccine.

The news story on the radio really got my attention today as they used the very specific supply chain words of allocation, forecasting, distribution channels, process controls, lead time, and capacity planning. To a supply chain guy, this seems to be a case of demand outstripping supply, inadequate capacity, and a distribution system based on politics and leverage.

The finger pointing has begun. Suppliers are blaming the buyers and buyers the suppliers. But we’re not talking about the allocation of electronic components. Lives are at stake here and the clock is ticking. Seems the only one properly managing their supply chain is the virus itself. 

 

Do you speak Google?

I know too well how important is to know languages in order to communicate with people of different cultures. Dreaming about world travels as a child in the former USSR I always wanted to know as many languages as possible.

Languages are my father’s passion and he instilled it in me early on, telling me that knowing languages lets you cross all boundaries even when they are closed.  Now, having lived in 3 countries, I can attest that this hunger to learn helped me a lot in my own life.

Knowing how diverse our audience is I was searching for an effective way to deliver our message in as many languages as we can. As we seek  to attract both buyers and suppliers from all parts of the globe , this ability is crucial. Imagine my amazement when on vacation in Israel I went on the local version of Google -  google.co.il, entered Supplier  Evaluations in the search and realized that right next to the link to our site there is another small link [Translate this page]. Naturally I clicked on the link and ..... I got a full translation of the page in Hebrew!

Then, to my astonishment, I noticed that all the menu items are translated as well. I continued clicking away and, ladies and gentlemen, - the entire site was translated!  Of course I had to go and try it in as many languages as I could think of. Google.ru in Russian, google.es in Spanish, google.fr in French, google.it in Italian all followed. Next, just for kicks, I tried both Japanese and Chinese versions. And Google did not let me down!

Mind you, this is a dynamic machine made translation so you can make the sport out of it and laugh your way through. But in the end, the core meaning of the information on the site was readily available for readers all around the world in their own language at a click of a mouse. All they need to do is to do a search using the same basic terms and they have it. 

Thank you Google and my compatriot Sergey Brin for this amazing achievement! 

 

Holiday Inventory Levels Down

It may be harder to find last minute holiday gifts this year as major retailers are cutting inventories in an attempt to streamline supply and demand. The Boston Globe reports that Saks Fifth Avenue is cutting holiday inventory by 20 percent, J.C. Penney by 14 percent, and Wal-Mart by 6 percent.

Last year retailers had to discount some goods up to 70 percent to move them. This year, retailers are willing to face stock outs rather than a glut in inventory and heavy discounting. Yet, this is a slippery slope. Shoppers like a selection and a full shelf to choose it from. Think about your local donut shop. Does that full display of jelly donuts entice you to buy one? How do you feel when you see just one orphan donut in the display case? Not too appetizing, is it?

I’m not saying that inventory management is wrong. We’ve been using it in manufacturing for many years and with some good results. Perhaps if retailers stocked the things that people wanted wouldn’t need to worry so much about excess inventory. More and more of us are value buyers. The big retailers need to get a handle on that. And soon.

Strikes Cause Changes in Shipping Channels

There is nothing like a strike, during a global recession no less, to anger buyers and suppliers alike. But that very well may happen in the next week as the Royal Mail goes on strike. The Economist reports that already companies like Amazon.com have already made other arrangement so their deliveries can reach their customers.

And so it starts. Channel management is quite important and buyers and sellers alike want to be confident in deliveries. Once labor unrest enters the conversation, companies get very nervous and make channel changes. Once those changes are made they are hard to undo. Companies just don’t go back to normal when the coast is clear. Permanent changes in the channel occur, and with good merit.

Several years ago there was a UPS strike and deliveries were in jeopardy. Federal Express came into the manufacturer where I was working and promised to pick up the slack by coming by at least twice a day to deliver and pick up. In addition, they lowered their prices. Their service was so good, and their prices so competitive, that they enjoyed a significant uptick in business once the strike were over.

Just the threat of a strike will get shippers moving in another direction. And sometimes that direction brings a breath of fresh air. The Royal Mail, and the CWU, should take note.

Virtual Tour: Port of Los Angeles

 

I grew up in the port city of Elizabeth, New Jersey, a stone’s throw from New York Harbor. My earliest memories were of my father bringing me to Front Street in Elizabeth to watch the tugs on the Kill Van Kull, a river separating New Jersey from New York. I’ve been a fan of ports and shipping ever since.

So I was happy when I came across a virtual tour of the Port of Los Angeles. This has a good story with some imbedded video. I hope you enjoy it. 

 

The Customer is Not Always Right

I’ve looked far and wide but I’ve never found a perfect supplier. Sure, I’ve worked with some good ones….those that do their best to deliver defect free materials and services, on time, and at a reasonable cost. Seems like an easy task. Not really.

Not that the suppliers aren’t trying. Most suppliers want to do a good job for their customers. That’s what keeps them in business. But I have found that often the customer is at fault by not being clear on their requirements, making assumptions, or only giving the supplier a portion of the information that they need. 

This happened to me this week with an online nautical chart company. I placed an online order for a custom printed and laminated NOAA chart. An avid boater, I wanted to hang this chart in my office. The order was fulfilled quickly and accurately. But I was disappointed when I received it. I was looking for ‘art’ and they provided a very good ‘working’ chart.

I called to express my disappointment and they were very gracious. My expectations and their services were never aligned. They told me their online chart viewer was not enabled yet and that I would have seen what I was buying. I failed to call to discuss my requirements. They offered me a partial credit and told me how to adapt my purchase to meet my need. We both got off the phone happy.

Seems to all boil down to communication. 

 

Let’s Hold Those Price Increases for Now

With many of those ‘green shoots’ in the economic recovery turning into small gardens, suppliers coming out of a period of poor revenue and depressed margins may try to spring a price increase on unsuspecting customers. Hold the line!

In September, U.S. consumer prices rose just 0.2%. The U.S. Labor Department’s Consumer Price Index (CPI) showed a year-over-year decline of 1.3%. They are worried about deflation and that shows we have a way to go before we begin to worry about inflation. Show your suppliers this data and ask for their pricing justification. I’ll bet many will have a hard time showing it.

Now is an excellent time to negotiate long term pricing agreements. Most suppliers are willing to lock in longer-term commitments because of market uncertainty. Trade that commitment for aggressive pricing. It will not be long until capacity begins to fill and prices begin to go up. Now is the time for action.

Time to Look in the Mirror

Who’s to blame if your supply chain falters?

As an operations management professor, I am always asking my graduate students a lot about their own companies and sometimes I am disappointed with the answers I get. Many are very good working in their own functional silos but they know little about how their jobs impact other areas of their business.

I am a fan of the holistic approach to management. We need to approach the company system as a whole and make sure all of the functions work together. Honestly, I don’t see a lot of integrated efforts. And I cannot blame it on the economy. The same dysfunction occurred even during the good times. A lack of leadership? Internal competition for resources? Petty jealousy? Poor morale? Pick one or more.

This is especially true when working in the supply chain. We are quick to blame suppliers for poor performance…..anything from late deliveries to high prices. Yet, a series of poor marketing forecasts, late payments to suppliers, uncertain design criteria, poor communication, and shifting quality requirements can significantly impact suppler performance. And poor supplier performance leads to poor customer service. Some companies never recover from this gloomy cycle.

Chicken Wing Economics

Prudent purchasing decisions have to be made with the economy in mind and buyers of chicken wings are experiencing this first hand. According to an article in the New York Times, the cost of chicken wings, often considered scrap, has now exceeded the cost of chicken breast. Wholesale buyers of chicken have never seen this pricing model before and it is significantly impacting menu prices and supermarket baskets across the United States.

Here is where supply meets demand. The growth of chicken wing restaurants, and the addition of chicken wings to many fast food menus, is driving increased demand for the product. This demand is considerably higher during the fall football season and prices are expected to fall after the Super Bowl in February. And there is a behavioral issue driving demand as well. Many of those who are cutting back on their personal budgets feel that a plate of chicken wings is a rewarding treat and an affordable luxury.

A chicken by-product, made famous at the Anchor Bar in Buffalo, is now the hottest snack around.  How is supply and demand impacting your business? I’ll bet the napkin suppliers are seeing a boost of business as well!

Mind the Gap. A story of international trade in economic downtimes

Anyone who rode the "tube" in London would certainly recognize this phrase. You have to mind the gap between the station platform and the metro wagon when entering or exiting the train in order to avoid falling in between. We can easily use the same phrase when it comes to sourcing, selecting suppliers and buying goods from overseas companies. Why? Because there is a huge gap of supplier performance data for companies overseas that no technology can bridge today. The problem is especially acute when we are talking about small and medium size companies that cannot afford spending countless dollars on supplier selection but are faced with the tough realities of dwindling customer demand and the push to reduce prices.

As Tom Friedman explains the surge in global trade over the past 20 years driven by the technology innovation in his book "The World is Flat", the current economic crisis exacerbates the need for supplier performance data more then ever. While factories are closing in China, American and European buyers are faced with the stark reality of their supplier landscape rapidly changing. In a situation like this the demand for finding new supply sources and stabilizing supplies is growing exponentially.  And hence -  "Mind the Gap".

So how do we address this gap? Unlike in many other situations before, today we have the power of knowledge accumulation and sharing that was not available a generation ago. And even more importantly, the power of community has been dramatically unleashed by variety of social networks and the new wiki world. The answer to the Gap question lies in the ability of buyer community to help itself and win. While every company is facing the issue of supplier selection individually, in today’s world the answer can come in a surprisingly collective way. Sharing the data on supplier performance among the peers can dramatically help everyone involved.

In my process reengineering days I was shown many times that if a company recognizes their competitive advantage and really focuses on what is the main added value the customers will recognize it as well and will pay premium for such products. From Cisco to AMD to Compaq the list goes on and on. In a manufacturing or integrator scenario 80% or more of the components that end up in the final product are manufactured by third parties and do not represent the actual competitive advantage. Moreover these components are often times shared and private labeled by the competitors. And despite this fact most companies do the supplier research and qualifications individually.

In retail business this would be even more relevant. I can’t help but notice the "made in…" tag really changed over the last 10 years. More and more we see China, Philippines, Indonesia, Ukraine etc. in place of these 3 dots. And yet finding a reliable, financially stable supplier that produces goods we need with the quality we need remains an issue.

I believe that the answer lies in ability of the buyer community to efficiently exchange the supplier performance data. With 1000000 buyers in supply chain companies and uncounted number of retail buyers this community can really help each other by driving a peer to peer information exchange. And this is why we created SupplierEvaluation.com, the peer to peer supplier performance information exchange.

Negotiating with the economy in mind

The economy is always the pink elephant in the room. No matter our function, we have to look at our decisions based on current and future economic conditions. The recession has created an interesting phenomenon in the area of sourcing and supply chain management. On one hand the number of purchasing transactions and the dollar amount of actual purchases has decreased dramatically following sluggish demand for goods and services. Yet, the pressures of cost cutting and negotiating better prices have increased dramatically. Some less sophisticated buyers may have felt that we have lost our leverage in negotiating with suppliers. Lower quantities mean higher prices, right? Not all the time. The economy is forcing everyone, buyers and sellers alike, to look for new ways to capture value. Creativity is key, especially in an unsettled economy.