Category Archives: Market Intelligence

Banks Have A Place In The Supply Chain – But That Place is Simply Financial!

Supply chains require capital. Lots of capital. And the role of a bank is to provide that capital through financing, even though, these days, private lenders are sometimes doing more through Supply Chain Finance platforms (like those offered by Prime Revenue, Oxygen Finance, and Orbian) than the banks are.

However, and in the United States in particular, the role of a bank is not to invest in, and retain the majority control of, companies that control significant stores of commodities that drive the markets that banks run. It’s an indirect route to a price-fixing monopoly, which is a criminal federal offense under section 1 of the Sherman Antitrust Act. It seems that the banks realize this, and, according to this article on CFO.com that states “A Bank Is Hiding Inside Your Supply Chain”, they’ve found a new way to inflate commodity prices and make extra profit off of your supply chain at your expense.

According to Tim Weiner, Global Risk Manager of Commodities and Metals at MillerCoors LLC, who recently testified at a senate hearing, bank holding companies are slowing the load-out of physical aluminum from warehouses controlled and owned by these U.S. bank holding companies to ensure that they receive increased rent for an extended period of time. According to MillerCoors, they have to wait as long as 18 months for the metal (that is just sitting in a warehouse ready to be used) or pay a high premium in a market where there has been massive oversupply and record production.

And according to the article, and the hearing of the Financial Institutions and Consumer Protection Subcommittee of the Senate Committee on Banking, Housing & Urban Affairs that took place this summer on July 23, 2013, this isn’t the only instance where large U.S. banks have diversified into commodities-markets operations, stretching the limits of rules designed to separate banking and commerce to the point where part of the high prices and price volatility some commodities have experienced is likely due to the banks’ increased involvement in the storage, transportation, and trading of these physical commodities (when they are supposed to stick to the non-physical futures and options markets).

In SI’s view, banks shouldn’t own any business that has any control over a commodity. As the CFO article clearly states, through bank ownership of a commodities business, a financial institution can place its hand on the scale of supply and demand for a commodity and distort the free market. Furthermore, a bank can not only affect the price of the commodity, it can also make profitable bets on its direction in the futures markets. Plus, and this is really scary, a bank that owns a commodities business could choose to deny lending or underwriting to a competitor of that commercial business or even lend at preferential rates to its own commercial commodities business. Thus, SI is in full agreement that regulators need to force banks to be more transparent about their commodities’ operations and divest them where appropriate.

So what does this mean for your supply chain? It means you have to be ever vigilant and know where banks are in, or may be able to take, control in your supply chain and plan appropriately for the disruptive actions to cost or supply that they could take. It means that visibility is key, that transparency from your supply chain partners is more important than ever, and that good record keeping is a must. If banks start to unduly pressure your business, as they are doing to MillerCoors LLC and others, you need to have the data to stand up to them. Price-fixing and manipulation is illegal, and if enough companies stand up to it, it’s a safe bet that something will be done about it (unless the TPP passes. Then all bets are off).

Corporations Will Soon Rule the World


To the tune of Everybody Wants to Rule the World by Tears for Fears.

Welcome to our life
There’s no turning back
Even while we sleep
They’ll continue
Acting on their worst behaviour
Turn their backs on mother nature
Corporations will soon rule the world

It’s China’s design
It’s Harper’s recourse
A social divide
That will take the most (of)
our freedom and our pleasure
Nothing ever lasts forever
Corporations will soon rule the world

There’s a room where the light won’t find them
Counting money while the poor go bankrupt
When they do they’ll buy the shelters too

So sad they’ve almost made it
So bad Obama’s played it
Corporations will soon rule the world

I can’t stand this lack of vision
That will soon put us all in prison*
Corporations will soon rule the world

Say that we’ll never never never never need it
One headline why believe it ?
Corporations will soon rule the world

Our freedom and our pleasure
Nothing ever lasts forever
Corporations will soon rule the world

By now, at least 3/4ths of North Americans should know that the Trans-Pacific Partnership, which allows you to be thrown in jail simply for clicking on a hyperlink embedded in a web-page, is bad. Very bad.

But what is not so obvious, as astutely pointed out in this article over on “A Corporate Coup in Disguise” on AlterNet.org, is that the Trans-Pacific Partnership will create a virtually permanent corporate rule over the people. No wonder the US and Canada, led by the worst prime minister ever, are getting on-board. Under this wonderful trade agreement, any food safety regulations and food labelling laws stricter than “international standards” become “illegal trade barriers” and get stricken down. Exports of natural gas cannot be regulated, and un-regulated instances of destructive fracking will sky-rocket. Big Pharma will get an additional 10 years of monopoly pricing on patented drugs and the ability to block generics until the monopoly runs out. Not only would the NSA would be given legal authority to police the entire internet, but all ISPs would have to act as the NSAs private on-line police force while banking regulations designed to prevent economic collapse get thrown out the window. And Corporations get to relocate all of their factories to the lowest cost TPP member country risk free thanks to enhanced foreign-investor protections.

In other words, corporations get to go where they want, do what they want, and not give a damn about sustainability, liability, or us. For you Christians out there, I think even the devil himself would be hard-pressed to come up with such a dastardly deal. Say NO to the TPP!

*Soon all prisons will be run by corporations too!

Why Aren’t We Dealing With Extra-Planetary Supply Management on a Daily Basis? Part III

In Part I we asked Why Aren’t We Dealing With Extra-Planetary Supply Management on a Daily Basis? We decided that while it was a fair question, it wasn’t an easy one, for a number of reasons which include, but are not limited to, cost, time requirements (for a mission to Mars), and human safety (as some asteroids hurtle through space at 30 km/s, which is roughly 3 times the expected speed of a rocket-propelled shuttle). In Part II, after examining these issues, we decided that the primary reasons we aren’t yet on Mars and dealing with extra-planetary supply management on a daily basis are lack of funding and lack of focus. We also decided that both the US and China should provide this funding and this focus because it would solve a number of problems both countries are facing. Today, we explain how this focus, and a new space-race to Mars, is what is needed.

In our last post, we identified these problems facing the US and indicated that they could all be addressed, if not solved, by a nation-wide focus on a mission to Mars.

  • High Unemployment
  • Continual Decline in Manufacturing Jobs and Expertise
  • The Housing Crisis
  • Privacy Issues
  • The Drug War
  • Unfunded Liabilities
  • A Collapsing Dollar

Consider the root causes of these issues. The collapsing dollar is primarily due to the stagnating economy and lack of faith therein by the global investment community, unfunded liabilities are due to declining tax revenues, which in turn are due to economic decline and high unemployment, which is due to a lack of jobs, which is partially due to continued job loss to other countries and a lack of talent, which is due to lack of training. The housing crisis is also a result of unemployment and the economy, since it’s a result of people not being able to pay their mortgage and declining property values as a result of a weak economy. The drug war is ongoing partially due to a lack of funding but also due to a lack of technology and programs to detect and prevent drugs from entering the country, and privacy issues are due to a focus on internal vs. external surveillance, which in turn is partially due to an overfunding of military efforts.

So what if you corrected the funding, and focussed on meeting one big challenge, like the US did in the 1960s? You’d need talented people to meet this challenge, so you’d create jobs. Initially you wouldn’t have enough qualified people to fill the jobs, so you’d train them. As a result, employment would be lower and the output per person would be higher, as they’d be trained. In addition, since you’d need to create newer and better technology, and do it quickly in-house, you’d not only bring back manufacturing, but take it to a new level. The housing crisis would vanish. In addition, more employment and more innovation, which would have the side effect of developing new technologies that could be sold around the world, would prop up the economy, increase taxes, and decrease unfunded liabilities. Some of the necessary sensor technology would likely spark advances in technologies that could be applied to border security and drug tracking, without invading privacy, and advances could be made on the war on drugs. The only thing the space race wouldn’t address is the privacy issue, which could be solved simply by turning off the technology that monitors residents and citizens beyond a reasonable point and directing that funding to the new space race.

Moreover, it would also fix many of the problems facing China. As per Mitch Free’s recent article in Forbes on how Nothing Is As It Appears in China, China has some serious problems. The big ones we noted in our last post were:

  • the need to maintain an appearance of success and save face,
  • 1.3 Billion citizens to keep happy and 930 Million to keep employed,
  • population growth that can’t be adequately managed by the one-child policy,
  • factories that need to run and products that need to be consumed, and
  • corruption and the age-old tradition of bribery.

An appearance of success is important in China. That’s why the streets of Shanghai are lined with beautiful buildings, striking architecture, elaborate homes, and professionally marketed businesses even though the layouts are sparse and the offices bare or even unfinished on the inside. In addition, the government, needs to provide the appearance of stability, productivity, prosperity, and optimism in order to keep calm and order over an unprecedented population living on the edge of poverty. One has to remember that in China, the 1% control nearly 70% of the country’s wealth, which is double what the 1% control in the US. And even the one-child policy is not managing the growth the way the government wants. First of all, those that can afford to pay the fine and have a second child. Secondly, those who can’t afford to pay a fine and have a second child, especially in rural areas, will favour male children, even though families in most rural areas will be permitted a second child if their first child is a female. (This is evident by the fact that China will soon have 30 Million more men than women of marrying age.)

In addition, in order to keep its citizens working, if it has no other option, China will not only keep factories producing goods that the market doesn’t need or want, but will keep building entire cities in preparation for an urbanization that just doesn’t happen. For example, one Chinese State Owned Enterprise (SOE) produced 60,000 machines in the last year that are manually operated for a global market that only buys automated machines. Even though the market is no longer there, the machines were produced just to keep workers employed. In addition, in an effort to get rural citizens into affordable urban housing, China has been building as many as 10 new cities a year, some the size of New York and London, to accomodate hundreds of thousands or millions of residents, that never arrive. These beautifully planned, fully finished “ghost cities” designed to accomodate large populations only have a few thousand residents, who are primarily infrastructure employees and construction workers. (Forensic analyst Gillem Tulloch estimates there may be as many as 64 million empty apartments in Chinese ghost towns.)

Now imagine what would happen if China declared that its mission was to be the first country to land on Mars? It would likely start by taking all of that money being used to build “ghost cities” and directing it at R&D establishments. It would move the brighter workers out of the factories and into R&D labs and re-tool the factories producing useless machines to produce proto-types and components for rockets, shuttles, and other space vehicles. It would be able to keep just as many people employed, but it would be working towards a meaningful, useful goal. In addition, it would increase its rate of innovation, improve its GDP, and not only cement itself as the world’s second largest economy, but accelerate towards the point where it could potentially overtake the US, which would make it enormously successful in the eyes of its citizens and allow it to not only save, but gain, face in Asia (where face is important). And if it happened to figure out how to successfully create workable, maintainable artificial gravity in a manner that was hydroponic friendly, it could be the first to colonize Mars, which could help to solve its population problem (especially if it can also figure out how to mine water from asteroids).

The only problem that isn’t directly addressed is corruption, but if the population is focussed on progress, and not capital gain, corruption is less of a problem.

So bring on the space-race to Mars. The world will benefit! (A rising tide lifts all boats. And what tide is bigger than the tide that controls 1/3 of the world’s economy?)

Why Aren’t We Dealing With Extra-Planetary Supply Management on a Daily Basis? Part II

Why not? Lack of funding and focus.

It’s going to be expensive, but we have the money. Even if it costs ten times as much to put a man on Mars as it did to put a man on the moon, that’s only 4 Trillion. The annual GDP of the US is close to 16 Trillion. If the goal was to reach Mars in 10 years, that’s 160 Trillion, and only 2.5% of GDP would be required annually. The US definitely can afford this. Right now, the US is pouring its money into its military at a rate that is unfathomable given that it has not been attacked in a declared act of war on its own soil since Pearl Harbour. The US is spending close to 18% of its budget on military efforts, compared to China which is spending less than 2% of its budget on military efforts and which still has the second largest military expenditure in the world. the doctor will concede that the US has other problems to fix, and the military budget should probably be reduced by more than 2.5% so that those problems can be fixed as well, but there’s no reason that 2.5% couldn’t be redirected to this effort, especially considering it could still be considered military expenditure and employ just as many (if not more) people. This could still be a win for the US that likes it’s military, and appears to like deploying its military given the number of wars its been involved in since WWII. Furthermore, when you consider the dangerous nature of going first, the US probably wouldn’t want to send anyone but its best and brightest. And if we’re not alone, and we advance our technology to the point where inter-stellar travel becomes possible, we might attract the attention of an aggressive alien race and need the ability to defend ourselves. (Which would give the US an excuse to try and democratize space!) It would be a win for the US any way you want to look at it.

But the US isn’t the only country to blame. China, the world’s oldest culture, wants to regain its glory as the dominant empire (even though it’s been centuries since it could make that claim). As the world’s second largest economy, with a GDP exceeding 8 Trillion, and the fifth country to launch a satellite back in 1970, it should be making more efforts to establish itself as a dominant player in space, and focussing more on Mars. A target of 2040 – 2060 for a crewed mission to Mars is just too far off. If China dedicated itself to this goal, it could spark a new space race (as the US would want to be in the lead), which is just what we need to advance not only our space exploration ability, but mankind as a whole.

In addition, if one considers these big, mostly non-political, problems facing the US right now:

  • High Unemployment, partially due to a
  • Continual Decline in Manufacturing Jobs and Expertise, another impending
  • Housing Crisis,
  • Privacy Issues, the never-ending
  • Drug War and,
  • Unfunded Liabilities, partially due to the
  • Collapsing Dollar.

And if one considers these big, mostly non-political, problems facing China right now:

  • the need to maintain an appearance of success and save face,
  • 1.3 Billion citizens to keep happy and 930 Million to keep employed,
  • population growth that can’t be adequately managed by the one-child policy,
  • factories that need to run and products that need to be consumed, and
  • corruption and the age-old tradition of bribery.

And if one goes on to examine the root causes of these problems, one will find that many of them could likely be significantly addressed, if not solved, by a space race to Mars. How so? Come back next Sunday for Part III!

Why Should You Go Paperless? Paper is Very Expensive!

Hackett just released the first report in their new Category Insight Report series from their “Procurement Advisory Service” on “Commercial Print”. What did Hackett find? First of all, it found that the Commercial Print (CP) industry is shrinking in the US due to a shift toward digital-based solutions, which is in line with what we would expect as on-line advertising has been increasing. However, surprisingly, the global market is expected to grow at a 2.8% CAGR (Compound Annual Growth Rate) between 2011 and 2016, primarily as a result of expected growth in Asia-Pacific.

Thirdly, it found that the most significant costs are raw materials, which we would also expect. However, we might not expect that raw materials, and paper and ink in particular, account for nearly 60% of Commercial Printing Cost! In comparison, labour, averaging at 27%, is less than half of the cost. Thus, if you go digital, as the layout costs are probably similar, you can save 60% of the costs and spend that money on value-generating creative activities instead!

In addition, the report also highlighted that while paper accounts for approximately 50% of the costs in Asia-Pacific (AP) and Europe, ink accounts for about 44% of the costs in the United States. This is because printer ink, in the US, can cost over $5,000 a gallon, making it at least 25 times as expensive as a pint of blood (based on the average amount a hospital has to pay a provider to guarantee a tested, safe supply), and because the manufacturers design printers to reject cartridges when they are nearly, but not yet, empty. It’s ridiculous. Based on the average costs in Europe and Asia-Pacific, the cost of ink is 10 (ten) times what it should be — and it’s doing environmental damage to boot! (Because manufacturers make their money on the ink, they are making low-quality disposable printers that just end up in landfills when the drum nears the end of its useful life or it’s cheaper to buy a new printer on sale with a half-cartridge than buy a new cartridge.)

It also had a few surprising insights. For example, it found that the CP industry is experiencing a shift towards low-cost country sourcing. Traditionally, most companies printed at home, using either the printer preferred by their advertising firm or the local printer that gave them the best price, because quality control was vital (and transportation costs for paper can be high). But the internet makes project management and quality control possible from anywhere, and costs in countries (without the ink monopoly) can be significantly cheaper, especially if they are close by (like Poland, Slovenia, and Turkey are for European countries).

It also had some great insights into the dynamics of the industry, with a medium threat of potential entrants to existing suppliers (fighting for a low-growth or dwindling market), a medium to high threat of substitutes (as buyers go electronic), a high rivalry, and strong bargaining power on the buyer-side. For complete details, check out the Commercial Print report, which, like future reports in the series, in addition to the category overview and key market trends, addresses:

  • the cost structure in detail,
  • the competitive landscape and key industry players,
  • category tools,
  • the sourcing and procurement Capability Maturity Model (CMM) for the category,
  • category best practices, and
  • optimal channel design(s).

Hackett isn’t the first group to offer Category-Specific Market Intelligence, and players like the Denali Group and Mintec, have been offering it for a while, but it is one of the few research firms that have the expertise to deliver industry-leading category-specific market intelligence. If you’re already a Hackett client, and you need category-specific market intelligence, it’s probably the product you need. If you’re not a Hackett client, but need category-specific market intelligence, be sure to put Hackett on you’re shortlist!