Procurement Management Artcles

Functioning of global sourcing mechanism faces steep challenges of intensive and competitive nature and perhaps this has heralded the introduction of internet sourcing as a viable medium to multinational purchasing, given the adaptable functionalities of electronic medium. Before anything, it is essential to focus on two issues.

1. Relationships between internet sourcing and global sourcing

2. How does internet sourcing help global sourcing to perform better

The relationships between internet sourcing and global sourcing needs to be addressed from different perspectives the multinational purchasing companies are raising.

1. Applied theories

2. The scope of business

3. The changing roles of flows

The advantages of internet sourcing for multinational purchasing over global sourcing lie in the enhancement on components internet sourcing can provide and the effects of alignment. Secondly, a platform for communication between multinational purchasing and global sourcing to facilitate interaction also holds the key role to the success of internet sourcing. Eventually, the effect and integration of global sourcing with internet sourcing can provide the multinational purchasing companies a significant improvement in terms of outcomes.

No doubt, global sourcing is capable of delivering solution based scalability requirements the multinational purchasing sector demands as the latter, multinational purchasing, benefits from the functionality the internet sourcing platform provides in terms of enhanced flexibility, added value structures and transactions between the potential partners. Strategic global sourcing by multinational purchasing companies provides the necessary wherewithal to wage price wars against powerful competitors in your domestic market.

Misconceptions by multinational purchasing managers about internet sourcing potentially prevent companies from leveraging the geographic advantages of global sourcing.

On the flip side, global sourcing, regardless of internet sourcing or traditional multinational purchasing, can have considerable ecological implications. Furthermore, the multinational purchasing companies need to remember that unproductive internet sourcing can leave a damaging effect on global sourcing. However, as truth would have it, multinational purchasing companies prepared to invest in developing the requisite internet sourcing skills to support global sourcing can succeed.

-Sourcing

The significance of internet sourcing doesn’t dwell on how and where of outsource, but more on why and what to source and using internet. Internet sourcing, like global sourcing, is much more than outsourcing is. The transformation of multinational purchasing companies from the present mindset to internet sourcing gear may be time consuming so far as the global economy continues to grow organically besides risks of cost over-runs and consequent margin erosion in global sourcing is involved. Despite glaring lacunas, global sourcing marches to adapt internet sourcing as the most popular method for multinational purchasing.

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Internet Sourcing strategies are maturing as techniques for global sourcing management proceed to the next level. Alongside, multinational purchasingompanies are actually realizing the advantages predicted a few years, such as decreased source-market cycle time and procurement costs. Savings works out to 15-20% and universal adaptation of internet sourcingan save multinational purchasing companies a whopping $690bn in global sourcing costs.

Internet sourcing helps centralize enterprise environment, integrate supply chain system and augments partnership between clients and manufacturers, through focused implementation of internet sourcing. The secure and advanced capabilities of internet sourcing can be evidenced in the burgeoning number(26.1%) of companies adapting internet sourcing for their multinational purchasing activities. On the heels of this, multinational purchasing agents are making 20% higher commission, thanks to internet sourcing platform the global sourcing companies adapted.

Strategizing Internet Sourcing and Payment Processing For Online Multinational Purchasing
Security issues in internet sourcing are being further upgraded with introduction of advanced technologies to be used for internet sourcing and purchasing. Multinational purchasing managers, to begin with, should ensure that conventional payments bind the suppliers to internet sourcing transactions. For global sourcing retailers this helps protect information regarding their card itself, whereas in a large transaction, it is wire or bank transfer that is safer for any multinational purchasing deals. Corporations that procure through global sourcing are integrating ERPs to handle internet sourcing and streamlining internet sourcing in all multinational purchasing activities as characteristics such as mass, instant interaction and the mode of corporate communication.

Multinational Purchasing through Internet Sourcing

Internet sourcing is slowly picking up in large scale transactions against predictions that it plays a critical role in multinational purchasing and global sourcing transactions, although the growth is a shade higher than being lackluster(26%). Multinational purchasing by large global sourcing corporations, purchasing at least $100mn per year, gave a surprise increase in internet sourcing; rising from the earlier 20% forestalling predicted reports of sluggish participation in internet sourcing, and forecasting that internet sourcing can provide real advantages to the multinational purchasing firms that embrace it.

Even the available data indicate the positive effects of attitudes of global sourcing firms toward internet sourcing, which in turn proves beneficial for multinational purchasing. The advantages that, with internet sourcing, multinational purchasing managers and global sourcing agents can get into instant direct communications, order taking, and technical support without supporting staff. With internet use exploding, the global sourcing companies conduct more and more of multinational purchasing electronically.

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As a purchasing manager of a manufacturing company you ought to analyze the business environment in which the company operates and identify its relevant needs. On a macro scale the manufacturing industry can be divided into low tech industry (food, consumable, home products and as such) and high tech industry, that includes electronics with its subsidiaries, advanced medical equipment, industrial digital printing, micro-electronics and as such. On the micro scale the difference between the two types of industry is prominent in the precision level, finishing quality, reliability, repeatability and general quality level.

Different manufacturing technologies tailor to different needs:

Milling operation – designed to make high precision parts, good for medium and small runs due to minimal NRE (Non-Recurring Expense). Despite that, the process is characterized as of high price due to prolonged time to manufacture one part and extensive material use.

Stamping operation – Designed to produce relatively small sheet metal parts in high quantity. Even though the NRE can reach between hundreds and thousands of dollars, the cost of producing one part is relatively small. This technology guaranties high quality and repeatability due to the use of dedicated tools. In contrast it is very hard to make complex parts and part modifications, during production.

Casting – Manufacturing technology for complex parts with special design demands that do not require a high level of precision. This technology allows for manufacturing complex parts with relatively good utilization of raw material. Similar to Stamping, this technology requires a significant NRE making the technology feasible for mainly large runs. Casting usually requires additional operation such as milling to bring the part to the required dimensions. Milling is a significant cost addition. Just like the Stamping, it is almost impossible to make modifications once the production started due to technological limitations.

Polymers – this technology is very high on the Non-Recurring Expense scale. Its advantages include the ability to provide design solutions for very unique and complex problems. This field includes areas such as blow molding, extrusion, vacuum forming, composite materials and others. Composite materials stand out as a unique technology that enables the manufacture of parts that must be tough, light weight, high temperature tolerant and live within erosive conditions. It is used mainly in the aviation and military market.

Sheet metal fabrication – This technology utilizes sheets of metal by cutting and bending, to fabricate the outer casings and the inner parts of equipment such as rack cabinets, computer terminals, electronics and such. This technology is suitable for the high-tech industry allowing the fabrication of complex elements with specific finishing requirements. It is optimal for small to medium quantity runs with high flexibility and low cost design changes and modifications. This technology allows the use of special inserts, studs and spot welding which increases further the flexibility in design wile providing better precision, for a lower price. Comparing to other technologies, this options requires lower NRE with lower cost of a single part.

Choosing the best Contract Manufacturer

Choosing the contract manufacturer one ought to consider three main parameters – service, quality and price:

• Service is the ability of the contract manufacturer to become a strategic partner, have  
   flexibility in his manufacturing process and shipments. A good partner is able to learn his
   customer’s needs and respond to them.

• Quality of the sub contractor is defined by his compliance with international quality 
  standards, repetition of rigorous quality practices, utilization of top of the line manufacturing
  and testing equipment and the employment of skilled employees.

• The price variation within the sheet manufacturing industry can fluctuate within 30% in favor 
  of the small job shops. Nevertheless, on the long run the tide favors the bigger suppliers due
  to mainly long term pricing policies and the ability to maintain higher quality level over longer 
  time period, and therefore, reducing non conformances and waist.

Recently larger sheet metal manufacturers are able to provide higher quality for lower price

• The manufacturing equipment utilized by larger organizations tends to be suitable for larger
  runs and in general more advanced, more precise and with better repeatability of results.

• A significant advantage of a big company lays in the availability of support staff such as
  planning and control, QC, QA and big engineering departments. This in turn facilitates better
  quality, more professional solutions and ultimately better service.

• A qualified employee is one of the biggest assets of a large contract manufacturer. In large
  organizations it is more common to employ and train more professional employees and  
  keep them for longer periods of time.  These companies are able to provide better working
  conditions and pay for better work force, which translates eventually in better customer
  service.

• Large sheet metal manufacturers tend to purchase better quality raw materials from
  suppliers that conform to international standards. The price issue usually becomes
  secondary in choosing a raw material supplier. Still, more quantity allows for lower prices
  and at times a big company can purchase better raw materials for lower price than a small
  manufacturer buys a lesser material. Better raw materials give the customers a higher
  quality product, with better finishing, strength and other visual aspects.

This article was written by Arie Sharvit, Manager of Sheet Metal Fabrication Operations at Nepcon Manufacturing Technologies, Yavne, Israel.

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In today’s economy with the rising costs of employee benefits and increasing pressure from international competition, U.S. manufacturers are looking for every advantage they can get. This is one of many reasons that the use of independent manufacturers’ reps, also known as sales reps, is becoming a more popular option for them.

First, manufacturers are able to save a tremendous amount of cash by alleviating the expense of health & retirement benefits that comes with hiring employees. For example, the median annual salary for a full-time sales representative employee in New York State is $60,000. In comparison, the average cost of an employee’s health and retirement benefits in New York State is an additional $15,000, roughly 25% of the employee’s actual salary. Even if your company has only one sales rep for each state within the U.S., it does not take long for these expenses to add up. When retaining the services of independent sales reps, manufacturers don’t pay for their health and retirement benefits.

Second, independent reps work on commission. And they are only paid a commission when they complete a sale. This eliminates the expenses incurred by employed sales personnel who may be underachieving as they’ve grown comfortable with their salary, but lost their motivation. Simply put, if independent sales representatives want to support themselves, they need to make sales – many sales. That is the best type of motivation sales reps have to perform or even, over achieve.

Third, recruiting independent reps costs you, the manufacturer, a fraction of what it costs to recruit and train your full-time employees. Many companies spend thousands of dollars advertising in local newspapers, on radio and expensive web sites such as Monster.com. Maybe you’re one of them. If you are, you probably discovered that these employment ads — buried among thousands of other job postings — are only seen in one specified city. Then, you are left with the time-consuming task of weeding through endless applicants that, many times, do not even meet your job requirements.

In contrast, there’s a Web site called http://www.manufacturers-representatives.com . It provides its manufacturer clients with one nationwide resource (that includes over 200 clearly defined industry categories) where they can list their sales opportunities. The Web site also goes a step further by pre-qualifying applicants for you. You select the minimum requirements for your sales opportunity. If an interested sales rep does not meet your minimum requirements, they are not able to submit their online profile (or resumé) to you.

This service is completely free to all sales reps. For manufacturers, it is the most highly targeted and lowest cost recruiting option available anywhere online or in print. A 30-day free trial allows manufacturers to post their sales opportunities at no cost and see if sales reps respond. When they do, http://www.manufacturers-representatives.com sends an e-mail to the manufacturer indicating the rep’s background and qualifications. This allows them to gauge interest in their sales opportunity.

From that point, in order to access the contact information, manufacturers need to subscribe to the service. There are 4 subscription options starting as low as $55.95 a month with a 12-month commitment or $99 for one month. This is definitely a much more cost-effective option when compared to a cost of $399 for monster.com.

What Industries Use Independent Reps

Manufacturers from virtually every industry are utilizing independent sales reps today. Any industry that utilizes sales personnel is able to take advantage of the vastly growing population of qualified independent reps working around the country. At manufacturers-representatives.com a sampling of some of the 200 industry categories they serve includes:

Aerospace

Apparel

Automobile

Beauty / Fashion

Construction

Finance / Insurance

Health Care

Industrial

Small Business

Sporting Goods

Transportation

Utilities



Businesses of All Shapes and Sizes

Manufacturers of all shapes and sizes are utilizing independent sales reps. Manufacturers-representatives.com currently serves a diverse group of clients ranging from small start-up businesses to multi-national Fortune 500 corporations. Regardless of the size of your company or the industry you are in, the advantages of utilizing a sales force of independent reps remains the same – save on advertising, recruitment, training, benefit package expenses and more.

Not Just for Manufacturers

While manufacturers have been the first group of businesses to take full advantage of the still untapped potential of independent reps, service-based businesses are also beginning to jump on the bandwagon. Whether you are selling office cleaning and maintenance services to marketing and web site design, companies like yours are utilizing independent reps to help them expand their reach, increase their clientele and therefore, their profits.

Post your sales opportunity for free on this one-stop nationwide resource and help you create a powerful sales force with a cost-effective and convenient way to recruit and pre-qualify experienced independent sales reps.

Author : Derrick Collins

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The concepts behind Lean manufacturing were built on common sense. In his book “Poor Richard’s Almanack”, Benjamin Franklin wrote “He that idly loses 5s. [shillings] worth of time, loses 5s., and might as prudently throw 5s. into the river.” If I read this right what he meant was “if you don’t need it, don’t waste your money on it.”

While it was Henry Ford who took the concept of waste reduction into the manufacturing floor, it was Toyota that concretized the practice into what we now call lean concepts.

Lean manufacturing processes have revolutionized the way many leading enterprises deliver products to their customers and manage their supplier relationships. Over the past few years, the use of Lean techniques has expanded well beyond the automotive industry to delivering dramatic results in other sectors, including aerospace, consumer goods, and industrial equipment, among others.

According to AberdeenGroup, Lean concepts have helped manufacturers streamline processes and reduce cycle times in complex manufacturing and supply chain environments. For example, when applied to product development these same concepts result in increased productivity and potentially the ability to develop more profitable products.

In “The Lean Benchmark Report, Closing the Reality Gap,” Jane Biddle, Vice President of Manufacturing Research, AberdeenGroup, notes that although C-level executives are enthusiastic about the benefits that can be derived from “Leaning out” operations. A large performance gap exists between those companies that are simply using Lean techniques on the shop floor versus those that have built a culture based on Lean thinking.

Lean manufacturing is nothing new. Some of the best run manufacturing businesses in Asia have deployed Lean manufacturing to streamline operations, reduce cost and increase operational efficiency.

Asia awareness levels
Just how familiar are manufacturers with regards to Lean concepts? Large manufacturers with multiple operations spread across different countries understand the concepts well and are in various stages of implementation (bear in mind that in the case of Toyota, adoption of lean concepts is an in-going process).

Ronald Li, Director of Industry and Product Marketing at Infor, says that the level of understanding of what constitutes “Lean” in a manufacturing sense varies by country as well as by type of industry. “Across Asia, companies that have taken the road to ‘lean’ are more likely to pursue this strategy to achieve departmental improvements. In mature countries such as Japan, manufacturers have been practicing lean for many years, especially on the manufacturing floor.

Paul Liddiatt, APAC Program Director for Oracle Commercial Applications concurs and adds his thoughts: “The application of Lean manufacturing principles to the entire supply chain is now being seen as the imperative in order to deliver the responsiveness customers require while still keeping a tight reign on costs. Once Lean manufacturing techniques are understood they are seen as the key to eliminating waste in all its forms from the supply chain. Without the burden of waste, the supply chain delivers significant competitive advantage.”

Methodologies vary
As something based on common sense, Lean implementations can come in the form of pencil and paper or entries in a spreadsheet. While workable, these are neither scalable nor sustainable. Companies that have progressed far advanced in implementing lean are likely to depend on systems that take a more holistic approach to support lean deployments.

As companies begin to extend Lean concepts across departments, integrated business applications suites are being seen as helping them to manage information more efficiently.

“These applications rely on a single, integrated source of data to connect disparate business processes, not just within the company and its factory but also throughout its entire supply chain. This may comprise multiple contract manufacturers. When users make a change to one application, every other application is notified, initiating related workflow processes automatically,” said Liddiatt.

ERP vendors have also introduced “enablers” that adapt their applications to a Lean environment, with inherent support for Kanban control, product configurators, and just-in-time materials procurement. This level of integration allows companies to compress the manufacturing process and streamline production, reducing the time for the whole order-to-delivery cycle.

Liddiatt cautions that ERP applications are just management tools that support the operations of a manufacturing plant. An ERP package helps users use information more wisely, eliminate non-value-adding activities and streamline core business processes. “To successfully implement Lean manufacturing concepts, appropriate training and resources need to be invested so users embrace the principles of Lean,” adds Liddiatt.

Lean initiatives, fat benefits
At the end of the day, companies deploy Lean initiatives because they want to save money. Call it ‘cost cutting’ or ‘waste elimination’ or ’saving pennies’ the end goal is the same: eliminate what is not necessary to get the job done and deliver the promised goods.

Biddle surmises that for companies willing to make the commitment, Lean pays dividends in both the short and long term. Successful Lean implementations have met and exceeded the performance expectations of 80 percent of best-in-class companies in areas such as customer service and supply chain flexibility.

“In many cases, technology solutions are enabling best-in-class companies to outperform their competitors by continuously measuring, monitoring, and responding to key production metrics in real-time. Additionally, ERP, Lean Specialty/MES, and homegrown solutions provide the foundation from which companies are enshrining value streams, improving productivity, preparing for new product launches, and driving culture change throughout the company and supplier base,” adds Biddle.

Role of technology
Many Lean initiatives start on paper. Over time these “technology-less” implementations become impractical for a number of reasons. According to Biddle, customer expectations continue to escalate, driving the need for additional variations to existing products, faster launches for new products, and decreased order cycle times; this requires increased flexibility in existing plants, with suppliers, and across the supply chain.

Pricing pressures have driven many manufacturers to outsource production, which has resulted in a lack of visibility into foreign operations; this is driving the need for web-based solutions that enable decision makers to see and control key operations remotely.

Finally, leading companies are scaling and extending their Lean processes beyond a single plant to encompass supply chain partner processes; this is driving the need for a technology infrastructure that facilitates the design and implementation of customer-focused business processes.

Lean technology solutions can provide a solid foundation from which manufacturers can manage Lean transactions across core value streams that extend from the customer, through production, and back to the supplier.

Lean solutions should support Toyota Production Systems (not because you work for Toyota) by dynamically managing key control points, scheduling and tracking critical resources, and promoting continuous improvement programs. In addition to managing transactions, solution technologies should facilitate the capture of standardized processes and value stream operating models.

Finally, Lean solutions should support the principles espoused in the ‘Toyota Way’ by embracing common language, promoting a shared understanding, providing tools that enable collaboration, and institutionalizing a culture of Lean for the long term.

Lean challenges persists
AberdeenGroup warns that for any manufacturer, transitioning from a traditional to a Lean manufacturing environment is a major change for many reasons. A significant cultural change needs to happen. It may be business as usual but certainly the way to go about business as usual will not be the same. People need to be willing to change the way they do things and that process of change is where much of the challenge lies.

Another challenge will be a persistent and firm commitment from senior management. Lean will mean a company’s long-term vision and senior management must not be distracted by short-term concerns when Lean initiatives are concerned.

Lean manufacturing goes against the grain of many manufacturing traditions. The old measures of success of efficiency and utilization need to be replaced with agility, lead-time, inventory turns and quality across the board.

Liddiatt warns that an upheaval inherent in Lean programs means that the engagement of senior management is required for successful implementation. “A top-down approach is necessary for adequate resources to be allocated to train employees and change the thinking within the company, and resolve is also necessary to push through reorganization in production processes and inventory management,” adds Liddiatt.

Beyond integrating legacy systems with the new Lean initiative is the necessity of integrating external partners and suppliers into the Lean program.

“Meeting customer requirements for just-in-time deliveries requires the support and cooperation of not only finance and logistics, but also the suppliers who provide the raw materials, components, and assemblies that are used early in the manufacturing process,” Biddle says.

Liddiatt agrees and adds that as Lean principles take hold, innovative companies will realize that they need to involve their suppliers and even their customers to achieve continuous improvement. “Suppliers should be considered an extension of the company, and the most successful lean companies involve their suppliers in product design in order to improve quality and simplify manufacturing. They work together to improve communication methods and shorten lead times throughout the supply chain,” says Liddiatt.

Manufacturers are constantly on the prowl to weed out waste and inactivity. As Toyota has shown, this is a continuous process with benefits trickling right across the operation. Because Lean concepts cut across functional barriers, it is entirely, some experts actually support the idea, to shift the focus from Lean manufacturing to Lean enterprise.

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