So KRAFT is planning a Cleanup?

First they make an offer on Cadbury's now they decide to have a clean up. Of what? Their supplier base. Read more about it as found in Supply Excellence.

Supplier Relationship Management (SRM) - a strategic approach

Most manufacturers agree SRM is important – but do not understand what it really is?
Many see it as a mechanism for monitoring and improving suppliers' performance. This contrasts with the broader definition of SRM as 'a discipline of working collaboratively with those suppliers that are vital to the success of your organization, to maximise the potential value of those relationships.

This misconception may explain why many believe SRM only starts once a contract is signed. It should, however, be used at every stage of the procurement process.
Key suppliers critical to your business should be as important as your customer. Your success demends very much on him

Before you even identify a materials need, good relations with a strategic suppliers could help by bringing innovative ideas to you. These could result in efficiency or real cash savings, product improvements or faster times to market

For example General Motors has just announced plans to split cost savings evenly with vendors that submit successful ideas on cutting the cost of car parts.

Get your existing suppliers involved as part of a cross-functional team. “
Explore how your suppliers supply chains works, especially if you’re attempting something new. Failing to do this could make things unnecessarily difficult for the supplier and potentially add in cost for your company.

Experts advise purchasers consider approaching negotiations with strategic suppliers with one eye on the implementation stage. If you pressure vendors hard for a price cut and make tough, changing demands one day then begin working with them the next, they will not be quick to forget how you treated them.

If you come out of a negotiation being aggressive, with you beating them up one day and beginning to work with them the next it’s counter-intuitive.

Finally, implement your deal and continue to work with key suppliers, forever looking for ideas and innovation that lead to improvements for you both. Remember it is a Win Win solution we want. Have mutual respect for each other

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.

Watch Out for Counterfeiting!

(Summary of an article in eSpeak of ISM)

Shocking statistics:
· The FBI estimates that counterfeiting and piracy of intellectual property (IP) amounts to as much as US$250 billion a year. And, according to the World Customs Organization, that figure could reach as high as US$600 billion in lost sales every year.
· Counterfeiting and piracy have resulted in the loss of 750,000 jobs in the United States, according to the U.S. Customs and Border Protection Agency.
· If counterfeiting of auto parts was eliminated, the U.S. Federal Trade Commission estimates the auto industry could hire 250,000 additional workers.
· The U.S. Department of Commerce identified more than 9,000 incidents of counterfeit electronic parts in 2008.
Among the most surprising findings was a preponderance of counterfeit electronic parts incidents in the $1.01 to $10 range, followed closely by parts in the $11 to $100 range. This indicated counterfeit electronic components were showing up in small-ticket items rather than expensive parts, such as microprocessors.
According to the OET, in 2008, 50 percent of counterfeit electronic components were bought from brokers (30 percent) and unauthorized distributors (20 percent). The remaining 50 percent came from more than 13 other sources, with no single source accounting for more than 7 percent.

Action Plan:

Good supply management practice dictates buying from authorized sources:

· Assess the seller's reputation.- Does he honor warranties Does he provide technical and customer support? Even if a seller seems reputable, do you know how reputable everyone else is in its supply chain?
· Determine the seller's financial stability. Does he have sufficient financial resources to honor refunds?
· Practice quality control. Does the seller have quality control and authenticity procedures in place? particularly with regard to functionality, proper handling and storage, chemical composition and so on. Also be skeptical of random-sample testing because counterfeiters frequently “salt” genuine product with counterfeits.
· Determine the product's traceability. Can it trace the product's route back to the original manufacturer?
· Ask for documentation. Can the seller provide documentation regarding product compliance with all laws?
· Assess legal liability. Will the seller assume product liability for penalties? Remember, buying from sources not authorized by the manufacturer might absolve that manufacturer from legal liability, even if the product is genuine. And, if the product is counterfeit, there is no manufacturer liability.

Conclusion:

The best way to avoid counterfeiting risk is to buy exclusively from authorized sellers or resellers — either purchasing directly from the manufacturer or from a distributor or reseller contractually authorized by the product's manufacturer

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.