Japan’s recovery offers opportunities for auto parts

This is a great opportunity for Canadian auto parts suppliers to demonstrate to the Japanese OEMs that they are onside, and supportive, even if they aren’t going to get ongoing business,” says APMA president Steve Rodgers.

There are currently some supply shortages that are proving to be challenging, such as mass airflow sensors. Rodgers says the Hitachi plant in Japan, which likely has 60% of the world supply, was heavily damaged.

To read more about this click on the Title.

The Future of ERP

According to CGT (Consumer Goods Technology) the top ERP providers are:

SAP
Oracle
Microsoft
Infor Global Solutions (Baan)
Lawsons

When IDC Retail Insights Group Vice President Bob Parker was asked what trends he forsees in ERP requirements he highlighted amongst other things the following:
“ Some of the trends we identified last year are ongoing, including more virtualization and cloud-based ERP, as well as integrated analytics. …..Mobile access is also an increasing trend, though sometimes the interest here is more hype than reality-driven. We caution companies to be practical in their adoption of mobile devices and apps,"

I agree that cloud computing is the way of the future and those not moving in that direction are in for a shock!

He continued to add:
“Lastly, there will be a group of companies who will want to deliver ERP to their organization on top of a private cloud infrastructure so that “virtual instances” can be provisioned. For example, the Wal-Mart team at a large consumer goods company may have its own virtual instance that accommodates Wal-Mart-specific processes while staying true to corporate information standards.”

Hmm! Interesting !

A Good Reason why SaaS is GREAT!

Have you ever goy rid of a software product because it just couldn't deliver? With on-premises upgrades constantly being delayed for internal budgetary reasons, they simply never happen, leading to outdated ‘legacy’ software in production. I know all about this! And very often, it just doesn’t compare well to the latest versions of competitive products. But does it make sense to start over from scratch?
The biggest breakthroughs with SaaS is that upgrades are expected to be part of the service. This gives the vendor the opportunity to keep the very best software always at your disposal. And since you are paying your subscription frequently, there’s plenty of opportunity to remind them of any issues you may have with their service.
Just think when you called your vendor for help on a critical bug only to be told that it's already fixed in the next version? But with SasS you're always running the best and latest e and you'll most likely never hit that bug in the first place. That is real value. Upgrades become a standard feature of the software, leading to simpler and much less risky upgrade events and they have to because they are performed on the vendor’s dollar. So this is what you can expect:
- Full value from your software investment if upgrades are applied continuously.
- All software has bugs... continuous upgrades help you avoid them by having access to the most corrective content.
- With SaaS, you never have to wait for your IT staff to upgrade in fact you don’t really need technical IT staff
- All great SaaS companies include upgrades as part of your normal fee and no hidden charges.
Take hidden risks and fear out of upgrades by using SaaS solutions.

Is China still the place to be in?

A report by Credit Suisse said the vast majority of U.S. and European companies in China are expecting a "margin hit" over the next 12 months and fear they will not be able to pass on the costs to consumers, with the biggest worries in electronics, clothing and retail. Why?

Rising wage and production costs in China are eating into the profits of Western companies and may soon set off an exodus of multinational companies to cheaper locations.

In May General Electric, said it had plans to shift production of its hybrid water heater from China back to Kentucky next year after securing lower wages from U.S. workers. The company cited the narrowing pay gap, lower transport costs and shorter delivery times.
Pay in the industrial hubs of the Pearl River and Yangtze River deltas are much higher and likely to rise further after a wave of industrial disputes at Foxconn, Honda, Toyota and Omron.

Does/ it mean that manufacturing will return to North America? Maybe

Credit Suisse's survey of executives found that 55% of foreign firms in China could relocate plants to Bangladesh, Vietnam, Indonesia or other low-cost regions relatively easily, though it would be costly.

I guess only time will tell. If we can last long enough.

Read more:

The State of the US Economy

The Bloomberg report:

The Institute for Supply Management-Chicago Inc.'s business barometer rose to 62.3 this month, exceeding the forecast of economists surveyed which anticipated the measure would drop to 56. The June reading was 59.1 and figures greater than 50 signal expansion.

The worst US recession since the 1930s was even deeper than previously estimated, reflecting bigger slumps in consumer spending and housing, according to the Commerce Department's annual revisions also issued today.

The world's largest economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009, compared with the 3.7 percent drop previously. Household spending fell 1.2 percent in 2009, twice as much as previously projected and the biggest decline since 1942.

Consumer Slowdown

Consumer spending, which accounts for about 70 percent of the economy, rose at a 1.6 percent last quarter, compared with a 1.9 percent the previous three months that was smaller than previously estimated. Job gains have been slow to take hold, curbing household purchases.

The economy lost 8.4 million jobs during the recession that began in December 2007, the biggest employment slump in the post-World War II era. So far this year, company payrolls grew by 593,000 workers, according to Labor Department figures earlier this month.

Americans are torn about whether the federal government should focus on curbing spending or creating jobs, the poll conducted July 9-12 shows. Seven of 10 Americans say reducing unemployment is the priority. With more than half saying the deficit is "dangerously out of control."

The US government owes more than it can pay. When a debt cannot be paid by the borrower, someone else must pay. Typically, it's the lender who pays when the borrower defaults. But the US government doesn't have to default. It has another alternative, the aforementioned quantitative easing - monetary inflation, in other words. Instead of defaulting on its debts directly, the federal government can inflate them away.

Do you think Canada is immune? We too are struggling to survive. Our biggest trading partner is sick and we don't have the medicine to help.

So Your thought that China was your outsourcing solution? Think Again!

Excerpt from the Toronto Star of June 8, 2010.

Suddenly, strikes are surging across China as poorly paid workers — the engine of China’s economic miracle — are demanding a bigger share of the enormous wealth the country is earning from its booming export-driven economy.

Last week much of the country’s attention focused on a strike at a Japanese-owned Honda factory in southern China — for which Chinese authorities allowed rare and open reporting. Workers there won a 24 per cent pay hike.

Foxconn responded with a 30 per cent wage increase – and announced a further 70 per cent Monday. But few in China heard about the clash in Pingdingshan — or more than 15 other strikes that spilled into the streets of China in May.

Crothall, whose organization tracks labour issues inside China, confirms that China is experiencing a noticeable surge in strikes.

“Coming out of the economic downturn last year, workers were probably more willing to bide their time and not rock the boat,” he observes. “But now they’re seeing the economy booming again and workers who are paid low wages are asking questions and demanding better compensation.”

My Comments:

SO if anyone thinks that China is a safe and secure haven for cheap products. It might have been in the past but think again. People cannot be exploited all the time. The tide is changing in China and other far eastern countries. The west by moving manufacturing jobs to east virtually killed the’ goose that lays the golden egg’. Well the goose is now starving to death but not quite dead yet. Unemployment in the west was the result of moving our manufacturing jobs to the east but it was the west and North America in particular that gave the east and China in particular the boost of kiss of life. Now the west can no longer afford to buy from itself let alone the east, so both parties suffer and that is why China has to stimulate her own economy to take up the slack, but that cost money and who is going to pay for it. Yes the likes of Honda and Foxconn and eventually all the other manufacturers. Eventually the surviving companies will have to move their operations back to the west and start to rebuild or revive and re-stimulate the ‘goose’ so as to start laying some golden eggs by providing satisfying and rewarding manufacturing jobs again. But time is running out. The goose is dying and needs immediate attention.

Is Supply Chain Risk Analysis a Waste of Time?

I hear that the China needs to maintain economic growth of 8% to stem widespread social unrest. Unrest! Yes! Listen to this:

When the state-owned Tonghua Iron & Steel was sold to a private group recently, 30,000 staff rioted in protest believing that the sale would lead to significant job losses.

The protests and subsequent riots led to the death of the steel factory's manager, Chen Goujun, who was beaten and later died in hospital. This is bad enough, but it comes on top of much more serious riots betwen Uighurs and Han Chinese over the labour problems at a Guandong province factory which led to more than 200 deaths. (See: http://www.ft.com/cms/s/0/16c24528-7a46-11de-b86f-00144feabdc0.html)

So what has this to do with supply risk?

A pharmaceutical CPO said that he saw detailed risk assessment as a waste of scarce resources. He would much rather spend the time and effort on putting in place back up plans. His reasoning? That the only certainty is that a supplier somewhere will go to the wall - which particular one isn't the important issue.

The important issue is to ensure that the company has back up plans and strategies in place. On the one hand, a consumer goods company had compiled a detailed risk assessment on every single one of its suppliers, including potential risk and alternative suppliers.

It stoked a huge amount of debate, and has proved to be one of the most popular threads on the Procurement Leaders Blog.

Now if you are dealing with a Chinese (or any other for that matter) supplier and you did not worry about what was happening with and all of a sudden your order is late. What are you going to do? The choice is yours? Do you keep abreast of what is happening WHERE YOUR MAIN SUPPLIERS ARE? You should, this is part of your risk.

China No Longer Worth it?

Who says? AMR Research’s newest quarterly report suggests companies seeking to build or enhance outsourcing operations may to be dropping out of China, citing high risk that is no longer worth the reward.
According to the survey, manufacturers are 2-3 times more likely to decrease sourcing in China. The survey found China contributes the most risk in 12 out of 15 categories. At the top of the list is Intellectual Property(IP) infringement, with 59 percent of respondents complaining that China poses the highest risk in the world for outsourcing. 55 percent of respondents saying China poses the most risk worldwide for product quality.
Now that oil is no longer selling at $150 a barrel, manufacturers are going back to what they used to worry about. “Supplier failure is an inherent problem in all supply chains,” she said.

Do you believe this or not? I have always believed this and predict that manufacturing jobs will return to NA.

The Focus of the S&OP in These Troubled Times

While the basic format of the S&OP process—that of running periodic, multi-functional planning meetings—should not change, the areas of discussion and focus should, in order to consider increased supply-demand uncertainties. In this regard, in this regard wthere are five pieces of advice to help forecast and plan with these increased risks:

Since new products and promotions are instituted to gain market share, there is a need for better forecast and planning the supply needed to make them successful. Planners need to communicate more effectively with Sales and Marketing. These promotions and new product launches must be closely monitored to ensure adequate supply.

One must be quick to detect changes in consumption. A change in consumption might come and go before it is detected if one is looking at shipment data alone. We need to better understand the impact of economic volatility on demand. Planners then need to stay abreast of what is going on in the economy to project future impacts.

Minimizing demand uncertainties by focusing on the customer, channel, and product segments that most contribute to revenues and profitability. Leverage formal risk management techniques as supply-demand risks increase. Wemust move away from the use of point forecasting to range forecasting and scenario planning to better recognize demand uncertainties.

Supply planners will need this level of recognition to mitigate risks via the implementation of hedging, buffering, and multi-sourcing strategies aimed at ensuring reliable supply.

The process of S&OP meetings should remain the same, planners can gain from following the above advice during these turbulent times. Companies that focus their S&OP in this way stand a good chance of making it over that last big wave on the way to calmer economic waters—meanwhile, their competitors that don't, might not.