It has been more than almost two years since my last post. In my absent, I have been engrossed in a number of supply chain and outsourcing engagements that kept me from sharing with fellow bloggers and knowledge seekers. As Arnold Schwarzenegger would say, “I’m back!”
The downward spiral of the global economy over the past year has drastically changed the sourcing landscape but not the fundamentals. In fact, these events have caused procurement organizations to exercise prudence and forethought in sourcing matters.
My blogs with appear on a monthly basis for starter and eventually increasing in frequency as time goes on. I look forward to your comments and reply.
Monday, August 10, 2009
Sunday, July 15, 2007
Strategic Factors for Logistics Network Design
From Sam Lampropoulos,
Strategic Factors for Network Design
When designing a logistics network, strategic factors such as speed to market, infrastructure and network size are pivotal to determining a network that will deliver the intended level of customer service. Managing the trade-offs among these levers properly is the key to getting it right.
Speed to Market
While many organizations outsource production to low-cost countries to have a competitive advantage, it’s important to consider what impact that has on customer service levels. If your organization is following a low-cost strategy, it makes sense to source where it is most cost effective. However, if speed to market is also a differentiator for your product as it has a very short cycle time, then sourcing facilities in close proximity to the consumer market would be a better strategy.
Zara, a Spanish clothing manufacturer, sources all of its direct materials locally from Spain. The short lead times to receive and then process raw material to finished goods enables it to react two to three times as fast as its nearest competitor to new fashion styles which has helped tremendously in its success over traditional apparel manufacturers and retailers.
Economic Factors
Economic factors such as taxes and exchange rates play a pivotal role in the location design decision. For example, one unit of measure that an apparel company used to benchmark its distribution network was units process per labor dollar. It was converting everything to US dollars for this metric. Hence, if the exchange rates are unfavorable, workers must work harder to catch up to the other DC’s that they are being benchmarked against! Many countries also offer tax incentives (example: pay no taxes for 10 years) to companies in an effort to attract them to invest in their country.
Infrastructure
Access to infrastructure must also be taken into account. Services such as water/drainage, consistent supply of electricity and the quality and proximity to main transportation routes are vital. Although they have a major cost impact, labor and land costs should not be selected simply because they are the most cost-effective. If access to a skilled work force is not available, special incentives may be required to entice workers that live further away to make a longer commute, which will result in higher labor costs.
Logistics Costs and Network Size
As the number of facilities increases, facility costs and inventory costs will increase. Transportation costs will decrease. Thus, these trade-offs must be analyzed in order to arrive at the best solution. Different scenarios may be analyzed to determine the impact on cost of changing some of the variables. Companies typically use network optimization software such as CAST for global supply chain modeling. Once the solution has been decided upon, it is also necessary to perform a capacity analysis to determine the proper sizing of the facilities.
Strategic Factors for Network Design
When designing a logistics network, strategic factors such as speed to market, infrastructure and network size are pivotal to determining a network that will deliver the intended level of customer service. Managing the trade-offs among these levers properly is the key to getting it right.
Speed to Market
While many organizations outsource production to low-cost countries to have a competitive advantage, it’s important to consider what impact that has on customer service levels. If your organization is following a low-cost strategy, it makes sense to source where it is most cost effective. However, if speed to market is also a differentiator for your product as it has a very short cycle time, then sourcing facilities in close proximity to the consumer market would be a better strategy.
Zara, a Spanish clothing manufacturer, sources all of its direct materials locally from Spain. The short lead times to receive and then process raw material to finished goods enables it to react two to three times as fast as its nearest competitor to new fashion styles which has helped tremendously in its success over traditional apparel manufacturers and retailers.
Economic Factors
Economic factors such as taxes and exchange rates play a pivotal role in the location design decision. For example, one unit of measure that an apparel company used to benchmark its distribution network was units process per labor dollar. It was converting everything to US dollars for this metric. Hence, if the exchange rates are unfavorable, workers must work harder to catch up to the other DC’s that they are being benchmarked against! Many countries also offer tax incentives (example: pay no taxes for 10 years) to companies in an effort to attract them to invest in their country.
Infrastructure
Access to infrastructure must also be taken into account. Services such as water/drainage, consistent supply of electricity and the quality and proximity to main transportation routes are vital. Although they have a major cost impact, labor and land costs should not be selected simply because they are the most cost-effective. If access to a skilled work force is not available, special incentives may be required to entice workers that live further away to make a longer commute, which will result in higher labor costs.
Logistics Costs and Network Size
As the number of facilities increases, facility costs and inventory costs will increase. Transportation costs will decrease. Thus, these trade-offs must be analyzed in order to arrive at the best solution. Different scenarios may be analyzed to determine the impact on cost of changing some of the variables. Companies typically use network optimization software such as CAST for global supply chain modeling. Once the solution has been decided upon, it is also necessary to perform a capacity analysis to determine the proper sizing of the facilities.
Friday, April 20, 2007
Looking to go “Green”
One night as I was watching Mad Money on CNBC with Jim Cramer, the subject of environmentally green businesses came up.
Going green is good public relations and companies are beginning to understand the relationship between ego-friendly companies and ego-conscience consumers. Numerous companies are becoming focused on being good stewards of the environment.
Companies are beginning rethink their position on the environment and taking a more politically correct attitude towards green. Companies like Alcoa, Caterpillar, General Electric and DuPont which are traditionally more associated with factories and chemicals than with environmentalism are setting forth initiatives to implement green environments.
If your company doesn’t have a company-wide green policy, this is a good time to put one in place. Start by developing a mission statement that addresses your position on the subject. Look at your company’s negative impact on the environment and determine how you will fix the problem. Consider using solar power, biodiesel fuels or incorporate ego-friendly products into your MRO sourcing.
By working together, businesses have an opportunity to learn, and share best practices and solutions with a diverse set of peers.
If your company is about to undertake such a project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
Going green is good public relations and companies are beginning to understand the relationship between ego-friendly companies and ego-conscience consumers. Numerous companies are becoming focused on being good stewards of the environment.
Companies are beginning rethink their position on the environment and taking a more politically correct attitude towards green. Companies like Alcoa, Caterpillar, General Electric and DuPont which are traditionally more associated with factories and chemicals than with environmentalism are setting forth initiatives to implement green environments.
If your company doesn’t have a company-wide green policy, this is a good time to put one in place. Start by developing a mission statement that addresses your position on the subject. Look at your company’s negative impact on the environment and determine how you will fix the problem. Consider using solar power, biodiesel fuels or incorporate ego-friendly products into your MRO sourcing.
By working together, businesses have an opportunity to learn, and share best practices and solutions with a diverse set of peers.
If your company is about to undertake such a project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
Outsourcing – Focus on the Fundamentals
Are you considering offshore outsourcing? If so, focusing on the fundamentals will save you a few headaches and keep your project on track.
From computers and car parts, to software development and consumer electronics, outsourcing has become a way of doing business, and it is accelerating at a quick rate. According to market research firm Meta Group, offshore outsourcing is expected to grow nearly 20 percent a year through 2008.
The fundamentals of any successful outsourcing project begin with the following:
1. Assemble a outsource project team.
2. Develop a clear and concise RFP / Statement of Work / Design specification.
3. Due diligence should be used when selecting suppliers to send RFP – a little leg upfront work goes a long ways when it comes times to form your short list. Be sure to have non-disclosures signed prior to releasing any proprietary information.
4. Evaluate all proposals for technical competency, thoroughness and understanding of the requirements.
5. Supplier selection should be based on technical capabilities, IT infrastructure, financial strength, and references. Make sure there is synergy between you and the supplier. Strong supplier relationship management will be critical.
6. Develop contracts and service level agreements that speak to your needs and expectations. – Don’t be afraid to engage your supplier on issues of concern.
7. Skillful project management will be the key to a successful outcome.
The points mention above should cover the basic frame work of your offshore outsourcing project. Please realize that every project and situation is different and will require planning and risk mitigation on your part.
If your company is about to undertake such a project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
What do you think?
From computers and car parts, to software development and consumer electronics, outsourcing has become a way of doing business, and it is accelerating at a quick rate. According to market research firm Meta Group, offshore outsourcing is expected to grow nearly 20 percent a year through 2008.
The fundamentals of any successful outsourcing project begin with the following:
1. Assemble a outsource project team.
2. Develop a clear and concise RFP / Statement of Work / Design specification.
3. Due diligence should be used when selecting suppliers to send RFP – a little leg upfront work goes a long ways when it comes times to form your short list. Be sure to have non-disclosures signed prior to releasing any proprietary information.
4. Evaluate all proposals for technical competency, thoroughness and understanding of the requirements.
5. Supplier selection should be based on technical capabilities, IT infrastructure, financial strength, and references. Make sure there is synergy between you and the supplier. Strong supplier relationship management will be critical.
6. Develop contracts and service level agreements that speak to your needs and expectations. – Don’t be afraid to engage your supplier on issues of concern.
7. Skillful project management will be the key to a successful outcome.
The points mention above should cover the basic frame work of your offshore outsourcing project. Please realize that every project and situation is different and will require planning and risk mitigation on your part.
If your company is about to undertake such a project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
What do you think?
Saturday, February 10, 2007
HR Process Re-engineering
In today’s competitive environment, companies are reviewing current HR processes and looking at way to implement best practices. If companies are going to achieve strategic goals, radical transformation initiatives must be at the top of the agenda.
The first step in the HR re-engineering process is the review and standardization of HR processes and policies. Check state and government labor laws for any changes and update current HR polices accordingly. Develop HR procedures with the thought of creating efficient processes and improved workflow. If your company has global operations, in-country labor laws may require separate policies and procedures to address those issues. Regardless of the country, keep in mind that efficient workflow will result in productivity and ultimately translate into measurable cost savings.
Successful HR transformation requires the implementation of technology that automates various HR functions and processes. Companies that are at the forefront of HR programs and processes have done so by leveraging technology and deploying best of breed HR systems. Due diligence will determine if deploying technology will be an enabler or hindrance to your re-engineering project. Forming a cross functional teaming which include IT, user groups and HR primes should be an essential part of this process.
Outsourcing or a managed service model might be another option for consideration. As companies cut cost across business organizations, outsourcing can be a cost effective alternative to in-house resources. HR functions that can easily be outsourced include recruiting, staffing, benefits, payroll, and training. Outsourcing can help HR organizations shift focus from peripheral task to driving process improvements and implementing strategy.
The HR process re-engineering is a strategy that can improve the way your organization delivers robust HR services and increase employee satisfaction. If your company is about to undertake such an project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
What do you think?
The first step in the HR re-engineering process is the review and standardization of HR processes and policies. Check state and government labor laws for any changes and update current HR polices accordingly. Develop HR procedures with the thought of creating efficient processes and improved workflow. If your company has global operations, in-country labor laws may require separate policies and procedures to address those issues. Regardless of the country, keep in mind that efficient workflow will result in productivity and ultimately translate into measurable cost savings.
Successful HR transformation requires the implementation of technology that automates various HR functions and processes. Companies that are at the forefront of HR programs and processes have done so by leveraging technology and deploying best of breed HR systems. Due diligence will determine if deploying technology will be an enabler or hindrance to your re-engineering project. Forming a cross functional teaming which include IT, user groups and HR primes should be an essential part of this process.
Outsourcing or a managed service model might be another option for consideration. As companies cut cost across business organizations, outsourcing can be a cost effective alternative to in-house resources. HR functions that can easily be outsourced include recruiting, staffing, benefits, payroll, and training. Outsourcing can help HR organizations shift focus from peripheral task to driving process improvements and implementing strategy.
The HR process re-engineering is a strategy that can improve the way your organization delivers robust HR services and increase employee satisfaction. If your company is about to undertake such an project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
What do you think?
Thursday, February 1, 2007
Is Your Supply Chain At Risk?
Supply chain risk denotes an uncertainty or unpredictable occurrence affecting one or more of the parties within the supply chain, which can (negatively) impact the success of business objectives. As the supply chain becomes global, risk management and mitigation has to be part of the sourcing strategy.
In 1995, the Kobe earthquake (M=6.9), was one of the most devastating earthquakes ever to hit Japan; killing more than 5,500 and injuring over 26,000. As a result, supply chain disruptions were felt across a numerous industries. Many companies with suppliers in the Kobe region were forced to use alternate sources of supply or wait until Kobe was back on line. Who could have predicted that such an event would happen?
The goal of any supply chain risk management strategy should be to control, monitor and evaluate supply chain risk, which will serve to safeguard continuity and maximize profitability.
Effective supply chain risk management provides the ability to anticipate and respond rapidly to external trends and developments. It places a focus on uncertainties and the unexpected. Supplier relationships must be managed to ensure that supply chain partners are committed and support the risk management program.
I’m not completely sure you can eliminate every risk associated with sourcing, but you can take a proactive approach to ensure effective management of all potential risks throughout the supply chain.
If your company is about to undertake such an project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
What do you think?
In 1995, the Kobe earthquake (M=6.9), was one of the most devastating earthquakes ever to hit Japan; killing more than 5,500 and injuring over 26,000. As a result, supply chain disruptions were felt across a numerous industries. Many companies with suppliers in the Kobe region were forced to use alternate sources of supply or wait until Kobe was back on line. Who could have predicted that such an event would happen?
The goal of any supply chain risk management strategy should be to control, monitor and evaluate supply chain risk, which will serve to safeguard continuity and maximize profitability.
Effective supply chain risk management provides the ability to anticipate and respond rapidly to external trends and developments. It places a focus on uncertainties and the unexpected. Supplier relationships must be managed to ensure that supply chain partners are committed and support the risk management program.
I’m not completely sure you can eliminate every risk associated with sourcing, but you can take a proactive approach to ensure effective management of all potential risks throughout the supply chain.
If your company is about to undertake such an project or just want consultation, give Cetera North America a call or visit us at http://www.teamcetera.com/.
What do you think?
Tuesday, January 9, 2007
Designing the Supply Chain – Technology
In designing supply chains, serious thought must be given to determining what type of technology or applications are required to support your present and future strategic initiatives.
Successful supply chains require a methodical approach to the design, vendor selection and choice of technology. What works for IBM or Dell Computers might be excess for your wholesale distribution business.
With an enormous amount of technology and vendors, what is a supply chain manager to do? Whether you’re a supply chain manager or C-level, I suggest preparing a business case analysis to zero in on your current situation and expected results.
The business case analysis will support the planning and decision making process–including decisions about which technology or applications to buy, which vendor to choose, and when to implement.
Don’t be afraid to prepare a RFP or RFI to gather information and develop a vendor short list. Many vendors publish white papers on their web sites for review by potential clients like you.
Evaluate the vendors offering by testing live data preferably your own to be sure the results meet your expectation. Review support levels and by all means contact other users of the technology or application to get their opinion. After all, it’s your investment.
Selection of the right technology and applications could never be explained in a blog so I suggest that you do lots of research and/or hire a consultant to guide you through the process.
If your company is about to undertake such an project or just want consultation, give Cetera North America a call or visit us at www.teamcetera.com.
What do you think?
Successful supply chains require a methodical approach to the design, vendor selection and choice of technology. What works for IBM or Dell Computers might be excess for your wholesale distribution business.
With an enormous amount of technology and vendors, what is a supply chain manager to do? Whether you’re a supply chain manager or C-level, I suggest preparing a business case analysis to zero in on your current situation and expected results.
The business case analysis will support the planning and decision making process–including decisions about which technology or applications to buy, which vendor to choose, and when to implement.
Don’t be afraid to prepare a RFP or RFI to gather information and develop a vendor short list. Many vendors publish white papers on their web sites for review by potential clients like you.
Evaluate the vendors offering by testing live data preferably your own to be sure the results meet your expectation. Review support levels and by all means contact other users of the technology or application to get their opinion. After all, it’s your investment.
Selection of the right technology and applications could never be explained in a blog so I suggest that you do lots of research and/or hire a consultant to guide you through the process.
If your company is about to undertake such an project or just want consultation, give Cetera North America a call or visit us at www.teamcetera.com.
What do you think?
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