Category Archives: Miscellaneous

Roll On! (and Keep Those Logistics Wheels Turning)

Roll on highway, roll on along
Roll on daddy till you get back home
Roll on family, roll on crew
Roll on momma like I asked you to do
And roll on eighteen-wheeler, roll on (roll on)
  Alabama, Roll On

Whether or not you like country music (as a general rule, the doctor does not), and whether or not you remember the hey-day of Alabama (where they were not confined to the country music stations, but plastered over music adverts on TV as well), without some proper planning, you too could be singing this refrain over and over if your logistics comes to a screeching halt because there’s no one to drive the truck, no fuel to gas it up, or worse yet, no truck at all – and you are unable to get your goods from the warehouse to the retailers where your customers are waiting.

The sky may not be falling, but without proper planning, given the shortage of truck drivers in North America (which is expected to skyrocket over the next five years since the number of new drivers isn’t even keeping up with demand in most places and some projections have up to 100,000 drivers retiring in the next five years in North America), constantly rising fuel prices, and increasing thefts of expensive automobile – and truck – parts (with a restricted supply) with surging scrap metal prices, without good planning, you could soon find yourself in a situation where it might as well be.

That’s why I was pleased to see AMR (acquired by Gartner) tackle the issue in one of their free research pieces a while back – Eight Ways to Keep the Supply Chain Logistics Wheels Turning even if I think it did miss a couple of tips. (It was updated with “Nine Ways To Keep the Supply Chain Logistics Wheels Turning” about a week later which was no longer free to non-subscribers.)

In the piece, Lora Cecere notes that, as per the Council of Supply Chain Management’s (CSCMP) 17th Annual Report on the Sate of U.S. Logistics, logistics costs rose 15.2% in 2005 to $1.2B, an 8.8% to 9.5% year-over-year leap beyond the nominal gross domestic product (GDP). Furthermore, total logistics costs – transportation, inventory carrying costs, and order administration – have risen more than 50% in the past decade. Thus, you should be taking whatever actions you can to help manage, offset, or absorb the costs. The recommendations provided were the following:

  • Plan Now for Tighter Capacity
    The American Trucking Association (ATA) estimates that the driver shortage will grow to 111,000 by 2014.
  • Manage Fuel as Part of Your Risk Management Strategies
    In 2005, the trucking industry spent $87.7B for diesel fuel, a year-over-year increase of $12B. The ATA forecasts diesel fuel costs will rise to $19B by the end of 2007.
  • Have the Right Supply Chain Planning (SCP) Master Data
    Lead times, transportation costs by lane, loading times, unloading times, and related data are all critical for transportation network optimization.
  • Rethink Customer-PickUp (CPU) Programs
    Customer PickUp programs are improving efficiency by use of drop trailers and scorecards.
  • Diversify Entry Ports
    Many U.S. ports are more than half a century old and showing signs of neglect or obsolescence. The World Shipping Council estimates that more than 800 ocean freight vessels make more than 22,000 calls at U.S. ports every year, which is 60 vessels a day at the nation’s 145 ports. With growth rates of over 10% projected for the next several years, investment for growth is inadequate.
  • Face Reality – Redesign Your Network
    Only 7% of companies analyze their logistics networks more frequently than annually, with 67% evaluating their networks annually and 36% redesigning every two years or more.
  • Get Help From a Good Partner
    Preferably a consulting partner with deep expertise and logistics benchmarking knowledge.
  • Make U.S. Transportation Infrastructure an Item on the National Agenda
    In 2006, the American Society of Civil Engineers gave the nation’s freight transportation system a dismal D+ on its infrastructure report card.

To this, I would add:

  • Use Decision Optimization
    Transportation Network Optimization is not something you can accomplish by hand with a spreadsheet. Make sure you have a good tool that can capture all of the costs and complexity and give you an optimal design for your current situation.
  • Don’t Forget Security
    In addition to the slew of security regulations you have to adhere to these days, especially if you are importing or exporting, depending on the goods you are carrying, both the truck and its content could be more valuable to your average thief than you might think. Make sure there is good security in place everywhere the truck is to be loaded, unloaded, or left unattended for any period of time and that the locks are recent, theft-resistant, and in working order.
  • Invest in Visibility
    Consider networked RFID technology to insure the system is immediately notified anytime something enters or leaves the truck and radio-frequency LoJack tracking technology to make sure you know where the truck is at all times.

JLP Responsible Sourcing Part IX: Wages

In our last post, we reviewed the necessity of equality of treatment, corresponding to section H of the report. In today’s post, we cover section I of The John Lewis Partnership‘s “Responsible Sourcing Supplier Workbook”, which covers wages.

Although governments set a minimum wage in most countries, which vary according to region, industry, and type of job, it is also the case that minimum wages are often not adequately enforced in many countries, especially developing ones. The most notable offenders often include:

  • informal sectors
  • suppliers who use subcontractors, homeworkers, and casual workers
  • repeated short-term or probationary contract workers
  • jobs that pay on a piece-rate basis
  • countries that dictate a minimum wage that falls (well) below the cost of living

The last two offenders are often all too common. In most countries, legislation attempts to set the piece-rate at a level that is estimated to be sufficient to ensure the worker earns the equivalent of a minimum wage in a set number of hours, however, this is hard to calculate and notoriously hard to enforce and many workers in the plants of the worst offending suppliers and countries will have to work arduously long hours to reach a wage sufficient to meet their basic cost of living. Furthermore, in the worst of the worst, some employers will not be transparent about piece rates and wage requirements and the workers will have no understanding of how their wages are calculated relative to how they should be calculated.

Furthermore, in some countries where minimum wages fall below the cost of living, their wages will be further eroded through a system of, usually illegal, fines and deductions for “misbehavior, lateness, production errors, uniforms, supplies, and accommodation”, among others.

As with the other subjects tackled by the workbook, JLP points out some startling facts:

  • Almost 10% of countries do not have a minimum wage legislation of any form
  • A recent survey in China found that 32% of workers were being paid below the legal minimum wage
  • An estimated 1.4 Billion Workers (half of the world’s working population and almost one quarter of the population) live on less than $2 / day
  • An estimated 550 million people, or 20% of total world employment, live on less than $1 / day
  • Even in the EU, minimum wage rates vary by a factor of more than 10: from 115 euros/month in Latvia to 1,500 euros/month in Luxembourg

And if this isn’t enough to force you to ensure you, your partners, and suppliers are paying fair wages, consider the following:

  • workers who cannot make a living working regular hours in one job are forced into a cycle of poverty where they have to take other jobs during evenings and weekends – this makes them tired and worried, and we already know that tired, worried, and stressed workers are less productive, more error-prone, and take significantly more time off than those who are rested and content with their jobs
  • compensation is the basis of worker loyalty; as numerous responsible sourcing studies and human resource retention studies have found
  • as Corporate Social Responsibility becomes more common and countries take action, your risk of serious fines, levies, and workforce departure will dramatically increase if you don’t take action now to ensure you are in compliance and paying, and treating, your workers fairly and equitably

Specifically, make sure that:

  • Wages meet national legal requirements and industry standards
  • Wages meet basic needs plus some discretionary income;
    the Living Wage Summit proposes the following formula to calculate your minimum wage, and you should pay this if it exceeds the legal minimum wage:
    (avg household size * avg cost basic needs per person /
    avg number adult earners per household) * 1.1
  • Wage information, clearly written and inclusive of the payment process and job requirements (hours, pieces, etc.) must be provided to workers before they agree to employment
  • Wages shall be paid directly to the worker in cash, cheque, or transfer at the agreed times and in full
  • Pay slips shall be made available
  • Deductions are not utilized as a disciplinary measure – only deductions required by law are permissible (unless they are allowed, such as 401K withholdings, and agreed to by the worker)
  • Wage records are kept for sufficient periods
  • Overtime is paid at least at the legally required premium
  • Wages are not held from workers as a deposit

In our next post, we’ll tackle the ninth major issue addressed by the workbook, regular employment. (You can access all of the posts in the series (to-date) by selecting the JLP category at any time.)

China Matters

Over on China Matters, Jason just completed his initial 27-part PBS-like Series on the hazards of China Sourcing* – which is certainly to be followed by the 27-Part PBS-like Series on the benefits of sourcing in the new China – but in the interim, I’d highly recommend you take this opportunity to catch up if you’ve missed any!

From hot-crossed Beijing Buns to the Turning-Aside of Thomas to the Perils Posed to Paris’ Poodle, this series has it all. Explore the controversy and get the full perspective in a series that even has a little hex-in it. And when the future ain’t what it used to be, why not dive in to the one place that knows you got ‘VAT!

So, in its bloggin’ brilliance, here is the 27 part PBS-like series* on the Hazards of China Sourcing:

  • Full Spend Matters Coverage: The China Sourcing Controversy by Jason Busch on July 5
  • Paris Hilton’s Dog Dead Due to Pet Food From China!!!! by Tony Poshek on July 5
  • China Sourcing: The Future Ain’t What it Used to Be (Post 1) by Lisa Reisman on July 6
  • China Sourcing: You Got ‘VAT? by Jason Busch on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 2) by Stuart Burns on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 3) by AJ Sweatt on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 4) by James Jin on July 6
  • China Sourcing: The Future Ain’t What it Used to Be (Post 5) by Jason Busch, Pat Furey, and David Morgenstern on July 9
  • Anti-China Propaganda Canada Style by Jason Busch on July 10
  • A Last Minute Webinar: What’s Really Going on in China by Jason Busch on July 11
  • MFGx — The China Debate by Jason Busch on July 12
  • Certified 100% China Free by Jason Busch on July 16
  • Steamed Corrugated — A Peking Delicacy? by Jason Busch on July 16
  • China Sourcing: The Future Ain’t What it Used to Be (Post 6) by Paul Martyn on July 17
  • Supply Now Edition 6: Outsourcing, Chinese Product Safety, and Beyond … by Jason Busch on July 17
  • Hot Crossed Beijing Buns? by Jason Busch
  • Daddy, Where’s Thomas? by Jason Busch on July 24
  • Food Safety Concerns: China’s Not the Main Problem by Jason Busch on July 26
  • Putting a Hex on Quality: In China and Beyond by Jason Busch on July 27
  • China Sourcing: The Wholesale / Distributor Perspective
  • Factory Witch Hunts in China! by Jason Busch on August 1
  • If You’re Involved in China Sourcing, Don’t Miss This Webinar by Jason Busch on August 2
  • Can Global Recycling Lead to Flashy Lead Poisoning? by Jason Busch on August 6
  • China Sourcing VAT Changes: A Complete Translated List by Jason Busch on August 9
  • Buick: Crap or Crème De La Crème? by Jason Busch on August 10
  • The Chinese Product Police: Keeping Bedrooms Safe Around the World … by Jason Busch on August 1
  • Global Sourcing: Follow the Leader, Not the Headlines by Jason Busch on August 10

    * All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Wiki Wonderland

Routers ping
are you listening
in the pane
text is glistening
A beautiful sight
awaits you tonight
browsing in the wiki wonderland

Gone away is the bluebird
here to stay is a new bird
He sings web 2-0
and along we go
browsing in the wiki wonderland

In the browser we can write an essay
Then observe that it is there for all
It’ll spread the word around
the web today
to be seen by those in
Canada and Nepal

Later on
we’ll conspire
as text flows through the wire
to consolidate
in the central place
offered by the wiki wonderland

In the browser we can record our creeds
and then observe them snowball on their own;
And collaborate with other plebes
where great works are not created on their own

When it grows
ain’t it thrilling
As your words get first billing
We’ll write and play
the web 2-0 way
browsing in the wiki wonderland

browsing in the wiki wonderland
browsing in the wiki wonderland

The e-Sourcing Wiki [WayBackMachine] is gaining momentum. As of last week, it has grown from a couple of open white-papers on strategic sourcing best practices and on-demand software as-a service to a considerable resource for sourcing professionals with 20 wiki-papers on sourcing best practices, sourcing technology, sourcing methodologies, and global trade with 8 more in the queue; a number of third party papers by leading consulting firms such as Archstone Consulting (acquired by The Hackett Group) and Aptium Global; and cached best-of blog posts from a number of leading blogs (including e-Sourcing Forum [WayBackMachine], Spend Matters, and Sourcing Innovation). It’s definitely worth spending some time on. There’s already a thick book worth of great information on the site, which is free to anyone who wants to take advantage of it, with (much) more to come!

Seven Myths about Outsourcing

Not too long ago, Business Insight ran a really great article entitled, appropriately, “Seven Myths About Outsourcing” since the goal was to elucidate seven myths about outsourcing.

The article starts off by noting that the transition of an operation to an overseas provider often proves to be much more costly and complicated than expected. It then dives right into the seven destructive myths, and how to overcome them.

We can have it all.
Firms that outsource often expect cost reductions, service improvement, and flexibility. Achieving any one of these objectives requires a trade-off in another. Throwing your operation over the wall doesn’t change that fact.

Outsourcing Services is like Buying Commodities.
Outsourcing is not a “frictionless market” without transaction costs or restraints. Outsourcing carries significant transaction costs that start day one with your search for a vendor.

We need an Ironclad Contract.
Outsourcing is not a one-time transaction – it’s a recurring transaction that needs to evolve over time. Thus, spending huge amounts of time trying to write a complex contract that protects you under every eventuality, which is impossible, ends up wasting time and money and risks souring the negotiation process. The proper way to approach the contract is to clearly spell out the roles and responsibilities of each party and the process for negotiating changes down the road if they are needed.

Contracts Don’t Matter.
While some companies try to engineer the every eventuality contract, others believe they can rush into a deal without a contract. Either they think that a memorandum of understanding or letter of intent is enough or they think that because the vendor is a “partner”, a contract is not necessary. But contracts, and more importantly, the negotiations that revolve around them, are important because they enable both the client and the vendor to understand the risks, rewards, and interests associated with both sides.

Vendors are Insurance Companies.
There is a very common – and reasonable – perception that vendors should bear greater liability for failure than regular, in-house, employees. But that does not justify an exaggerated view of risk or belief that risk can be outsourced entirely. You can specify quality standards, and penalties for failing to live up to those standards, but it still remains your responsibility to insure that those standards are met.

It’s Not Our Headache Anymore
Just because you outsource a process does not mean you can wash your hands of it. In fact, it means the opposite. You have to monitor it regularly to make sure the vendor is performing to agreed upon service levels and that you are getting the savings, service, or flexibility you expected.

Our First Failure Should Be Our Last Attempt
Very few companies report great success with their first outsourcing project. However, that does not mean you should give up. Companies that succeed are those that learn from the initial project, figure out how to improve, and try again with a vendor willing to work with them to make the relationship successful.