Sourcing & Procurement News — April, 2009

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The Whole Supply Chain Community Is at Risk, Not Just You
When we think of supply chain "risk management" the first question that comes to mind is so obvious that most people don't even voice it: whose risk? Does the risk belong to the supply chain or brand owner? Component suppliers? Fabrication plants? In practice, it can be one, several, or all supply chain community participants.
If a company's supplier carries excess inventory cost that financial hit will inevitably make its way back to the brand owner as higher prices or more restrictive service, or if value isn't there, it just might drop the brand owner as a customer. Worse yet, if the brand owner constitutes a significant portion of the supplier's business, the brand owner's mistake could actually create such a financial burden as to put the supplier out of business.
And flip that: if a brand owner loses a customer because of poor quality or a labor practice scandal (even if it's not the brand owner's fault), then that loss of business and tarnished brand image will cast a pall through the whole community in the form of lower demand for products.
With the new community model, we've seen a power shift around who owns risk. In the past, a single leader--the supply chain gorilla--was responsible for risk. Today, risk lurks within every...
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Danger Will Robinson--Economic Trouble for Global Supply Networks?
In our 2009 Supply Chain Top 10 Predictions (Document # MI215807), we wrote about the effect the global economic slowdown would have on increasingly distributed supply networks. Specifically, that the "economic uncertainty, particularly for smaller suppliers in emerging economies, causes manufacturer 'brand owners' to consider strategic investments at critical supply points and financial support for key suppliers."
Outsourcing continues unabated in Supply Chain, and as we have observed in recent articles on the U.S. economy, given the increasing focus on cost control in a down economy, it may even pick up speed in 2009. This is not without risk, however, as the global economic slowdown will inevitably affect many smaller suppliers in emerging economies--to the point where many of them will experience severe financial distress. Prudent, strategic risk management should prohibit a large manufacturer from sourcing critical components or substantial volumes from suppliers with borderline financials, yet it clearly happens--either because financial transparency is not possible or was not requested. Interestingly, there are increasingly some effective tools available from forward-thinking vendors that offer up-front supplier assessments based on extensive analysis of customs data, but most current supplier relationships have not had the benefit of such proactive due diligence.
One of these vendors, Panjiva, recently released its updated Manufacturer Watch List where they regularly track manufacturers/suppliers who have suffered at least a 50% decline in shipment volume into the U.S. over the most recent calendar quarter. Sourced from U.S. customs data for significant export/import (from suppliers/to U.S. companies with more than 10 shipments/year), this decline is viewed as a predictive proxy for suppliers at risk. In a recent press release, Panjiva observed that:...
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GAO: DOD Has Inadequate Info on Contractors, Procurement
The Defense Department is facing critical gaps in its acquisition work force, potentially affecting its national security mission, according to the U.S. Government Accountability Office (GAO).
The GAO's report assesses DOD's ability to determine whether it has a sufficient acquisition work force, initiatives to improve and manage oversight of its existing work force and best practices that could help DOD make positive changes. In its analysis...
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How GE Manages All That Supplier Information
Having detailed and precise information from each and every one of your suppliers is a critical part of making good purchasing decisions. It can provide buyers with invaluable resources from which to see new opportunities to save time and cut costs. But if the information is not available in a clear and manageable format, those benefits could easily be overlooked.
Managing one of the most diverse and complex supply chains in the world, General Electric...
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Managing Sourcing Challenges in a Volatile Environment
The unpredictability of China, instability in the financial markets, risk to employees traveling and working overseas, and the closure of the consumer wallet are among the major concerns of supply chain executives in the retail industry....
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Combining Finance, Supply Chain and Procurement During the Credit Crunch
When the competition is no longer among individual companies but among entire supply chains, every area of end-to-end cost reduction needs to be explored. Financial supply chain optimization has helped leading companies make their whole supply chain more competitive with the introduction of more advanced supply chain finance practices and automated transaction processing. Finance, supply chain, and procurement groups need to collaboratively explore how to use supply chain finance to reduce supply chain costs.
Aberdeen Group's recent survey of working capital optimization practices at 179 companies (Working Capital Optimization: Finance and Supply Chain Strategies for Today's Business Environment, October 2008) showed that 71 percent of firms cite working capital optimization (WCO) as a high priority, up from 66 percent in 2007. The top pressure driving this focus is the mandate by financial stakeholders to improve working capital metrics. This study shows that companies are...
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