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Posted 05-07-2009 at 05:14 PM Comments 0
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ISM’s 94th Annual International Supply Management Conference and Educational Exhibit concluded this week. Over the last several days, myriad topics were covered with something for everyone to take back to their organizations.

We look forward to seeing you next year in San Diego!

Posted 05-06-2009 at 02:37 PM Comments 0
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Taking a look at the past few years, it’s clear that today’s logistical issues were yesterday’s logistics challenges, as well. In their presentation, “Combating the Logistics Perfect Storm: An Update,” Lee Buddress, Ph.D., C.P.M., Robert G. Gleason Professor and Director of the Supply and Logistics Management Program at Portland State University; and Michael E. Smith, Ph.D., associate professor of management and international business at Western Carolina University, examined a variety of transportation and global issues that will continue to plague our logistics networks.

One of the most telling signs of the volatility and uncertainty occurring in logistics is that logistics costs now represent 10.1 percent of GDP. In essence, more than 10 percent of the cost of goods sold is associated with logistics costs. The presenters recommend that supply managers share their forecasts with their carriers the same way those forecasts are shared with suppliers. By doing so, it provides carriers with enough time to ensure that the equipment is ready when the organization needs it.

What’s also clear is that the same theme appears every year in CSCMP’s “State of Logistics Report”: Something has to be done to address the nation’s infrastructure needs. It’s going to take investment from everyone to make a sustainable difference. This means more lobbying efforts and less earmarks in transportation legislation.

What are the key trends for the remainder of 2009?
1. There will be continued infrastructure deterioration. Whether it’s our highways, ports or railroads, older equipment must be repaired or replaced.
2. Population growth. By 2043, the U.S. population is expected to reach 400 million people. The implication of this type of growth is the inability to serve the needs of the population. Without more investment in infrastructure, it’s going to be difficult to move the increase demand in goods and services.
3. Reverse outsourcing. The increased logistics costs, custom clearance delays and long lead times associated with sourcing from Asia is causing organizations to reconsider those decisions and move operations closer to home.
4. Industry consolidation and privatization. Expect to see additional consolidation in various markets, such as metals and transportation, which will continue to impact pricing. Also, due to the costs associated with regulatory compliance, more publicly-traded companies are moving toward privatization.
5. Sustainability. Internationally, this is an area of great focus and attention. As issues in sustainability gain more importance, expect that to have an effect on product and transportation demands – raising the question about higher prices and greater investment in sustainability initiatives.

One thing is certain, for the United States to remain globally competitive, it must invest in education, logistics infrastructure, basic research for high-wage job creation and technology to help streamline logistics processes.

Posted 05-05-2009 at 10:43 PM Comments 0
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In their presentation, “The 7 Secrets of Strategic Sourcing,” R. David Nelson, C.P.M., senior advisor for the David Nelson Group; and Ken H. Killen, MBA, Ed.D., C.P.M., consultant for Killen Enterprises, discussed how to optimize your supply chain through supplier relationship management (SRM).

The following examines seven leading-edge SRM strategies that will enhance relationships with key suppliers and streamline the supply chain.

1. Form a team or teams (depending on resources you have) to carry out your supplier development program. Build commodity teams that include members from other business functions, such as HR and IT. A strategy for each commodity should be developed that indicates the expectations over the next few years. The expertise of members from other business units can be invaluable as specific supplier issues arise.
2. Make a Pareto Analysis of your supplier base to determine the 20 percent of the suppliers that supply 80 percent of your annual spend. According to the presenters, “When making a Pareto Analysis, one should combine like categories or commodity groups so that you can consolidate like items such as castings or electrical components. In addition, if the same part is carried in inventory under different part numbers then the parts should be renumbered so that only one part number represents all of the items.”
3. Meet with these key suppliers to see which ones seem to be the most interested in cooperating with you in your upcoming supplier development effort. It is imperative to meet with the CEOs of each major supplier to show your commitment to the relationship. Impart that the relationship will be mutually beneficial — both sides will profit from the supplier development efforts. Meet with key suppliers once per year to review the previous three year’s goals and performance, as well as establish the goals for the next three years.
4. Using a supplier matrix, reduce the number of key suppliers for each category to one or two where possible. When scoring a supplier selection matrix, use “excellent,” “needs improvement,” etc. because numbers may not carry the same weight. To move toward a negotiating rather than a bidding process and build a strategic relationship requires a drastic reduction in key suppliers. A realistic partnership includes: choosing the best suppliers, reducing the supplier base and making a friend.
5. Analyze the key suppliers to determine what and how much they need to improve. To know what your suppliers need and where challenges exist, conduct ongoing supplier plant visits to meet with the shop floor workers, engineers and organization leaders. Communication is critical.
6. Establish objectives, timelines and metrics for each. For every major supplier, there should be an up-to-date strategy to ensure everyone knows the game plan. Again, every major commodity and category should have a strategy that is shared with your suppliers. Who should create this strategy? Surprisingly, not the CPO but those who carry out the strategy such as buyers, purchasers, engineers and others in the field.
7. Have your team work with the suppliers to meet the objectives. “This may sound simple, but it’s profound,” says Killen. Collaborate with suppliers to develop goals and objectives, and help them achieve those goals and objectives. Partner with the supplier as you both work toward perfect quality.

Posted 05-05-2009 at 10:41 PM Comments 0
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Since 1931, ISM has awarded an individual annually with the profession’s highest honor, the J. Shipman Gold Medal Award. It was today during a ceremony at ISM’s 94th Annual International Supply Management Conference and Educational Exhibit that this year’s recipient accepted his award: Richard D. Rich, C.P.M., director of enterprise risk management for Seminole Electric Cooperative, Inc. in Tampa, Florida, and former president from 1998 to 1999 of what was then NAPM.

In his 35-year career, Rich has worked in a variety of purchasing and supply management positions. His early career involved managing contracts and purchases of food and pharmaceuticals for state institutions for the State of Wyoming. He later was appointed by then-New York City Mayor Edward Koch to assistant commissioner of procurement for the five boroughs of New York City. However, it was his move in 1982 to Seminole Electric Cooperative in Tampa, Florida where Rich spent the majority of his career.

Rich’s involvement at the association level is equally impressive. He was an instrumental figure in transitioning the National Association of Purchasing Management’s governance process to the current Institute for Supply Management™ governance and operating process. During his tenure as both president-elect and president of NAPM, Rich chaired the committee responsible for establishing the first-ever NAPM Five-Year Strategic Plan and spearheading the leadership that eventually adopted initiatives related to the strategic plan, including changing the name of NAPM to the Institute for Supply Management™.

The J. Shipman Gold Medal Award is the highest award within the power of ISM to confer. ISM joins the members of the 2008-2009 J. Shipman Gold Medal Award Selection Committee – Thomas H. Slaight; Aaron D. Dent; Timothy R. Fiore, C.P.M.; R. David Nelson, C.P.M., A.P.P.; and Norbert J. Ore, CPSM, C.P.M. – in congratulating Richard D. Rich, C.P.M., on this prestigious award. The J. Shipman Gold Medal Award was created by the Purchasing Management Association of New York in 1931 to honor Johnson Shipman, a pioneer in the profession.

Posted 05-05-2009 at 10:40 PM Comments 2
Posted in Uncategorized
This morning’s keynote address included manufacturing and non-manufacturing economic insights from Norbert J. Ore, CPSM, C.P.M., chair of the ISM Manufacturing Business Survey Committee; and Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee, and senior vice president — supply management for Hilton Hotels Corporation.

Additional economic perspectives were provided by notable economists Dr. Mickey D. levy, chief economist for Bank of America; and Sara Johnson, managing director, global macroeconomics for IHS Global Insight.

ISM Semiannual Economic Forecast
“What a difference a year makes,” said Ore, as he began Tuesday’s keynote address. Among the major points in his presentation, Ore offered the following insights for the manufacturing sector through the duration of 2009.
• Operating rate is currently 67 percent of normal capacity. The standard rate would have manufacturing running above 80 percent.
• Production capacity is expected to decrease 8.4 percent in 2009. This is a significant decline compared to what was forecast in December 2008, which was a 2.1 percent increase.
• Capital expenditures are expected to decrease 22.7 percent in 2009.
• Prices paid decreased 6.8 percent through the end of April 2009.
• Prices are expected to decrease a total of 5.3 percent for all of 2009, indicating an expected increase in prices of 1.5 percent for the remainder of the year.
• Manufacturing employment is expected to decrease 2.6 percent during the remainder of 2009.
• Manufacturing revenues are expected to decrease 14.7 percent in 2009.

Next to speak was Nieves, who focused on the economic impacts on the non-manufacturing sector. Among the major points of his presentation were the following:
• Operating rate is currently 80.1 percent of normal capacity (the lowest rate since 1998 when the non-manufacturing report was established).
• Production capacity is expected to decrease 2.6 percent in 2009.
• Capital expenditures are expected to decrease 13.5 percent in 2009.
• Prices paid decreased 1.3 percent through the end of April 2009.
• Prices are expected to increase 1.3 percent over the remainder of the year and to remain flat relative to price levels at the end of 2008.
• Non-manufacturing employment is expected to decrease 6.4 percent during the balance of 2009.
• Non-manufacturing revenues are expected to decrease 5.1 percent in 2009.
• Overall, non-manufacturing is declining in 2009.

The podium was turned over to Levy of Bank of America and Johnson of IHS Global Insight. Both revealed similar economic outlooks.

Levy’s presentation “Emerging from Deep Recession: Early Signs of Stabilization,” included the following outlook:
• The economy will begin to rebound in the second half of 2009.
• Probability of a slow or bumpy rebound is high, reflecting a number of obstacles, such as:
— Households need to raise savings and lower their debt.
— There’s uncertainty around the level of rebound in the housing market.
• Exports may lag.
• Potential long-run growth forecasts have been lowered for a few reasons:
— Unprecedented surge in government debt.
— Misallocation of national resources constrains productivity gains.
— Expected onslaught of government regulations.

Johnson then delivered her presentation, “The U.S. Economic Outlook: Is Recovery on the Horizon?” Her outlook included the following insights:
• The U.S. economy’s freefall is over.
• Recovery will begin in late 2009 or early 2010.
• Consumer spending and housing will lead the upturn.
• Imports will revive before exports.
• Business construction will be slow to recover.
• Excess capacity will keep wage and price inflation subdued for several years.
• A buyer’s market will persist well into 2010; now is the time to push back against suppliers.

The keynote was a well-rounded view of the economy that supply management professionals face for the remainder of the year. With some light at the end of the tunnel beginning in the third or fourth quarter of 2009, supply management executives must have their organizations ready when the recovery occurs.
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