Tuesday, September 25, 2012

Produce

In 2003 a local restaurant chain found itself in the midst of a Hepatitis A outbreak that caused the restaurant to become a "former" restaurant chain. The CDC, FDA, and PaDOH were all involved on some investigatory level. The outbreak was traced to contaminated onions which were soon traced to Mexico.  However the actual supplier was never specifically pinpointed.  There also was no specific route of contamination.

Last summer I was somewhat pleasantly surprised and pleased while also a bit unnerved to receive a phone call from a grocery store saying that some item of produce I had purchased had been recalled.  Thank goodness for my supermarket scan card that allows the store to know exactly what I purchase, when, and where.

Efforts for consumers to buy local produce have increased in recent years. Some chefs desire to base their menus in part on what they can grow themselves.  These things allow for a shorter and in some instances no supply chain.

When buying prepared food at your favorite local food truck or a variety of vegetables and fruit at the weekly farmers market, how can we be certain if an issue arises, that we can trace it to where we ate or where we bought?  Should we only buy local, particularly if fresh? (If we only eat fresh fruit as opposed to canned and frozen then we are out of luck regarding variety.)  


http://www.usatoday.com/news/health/2003-11-21-onions-outbreak_x.htm
http://www.marlerclark.com/case_news/detail/tristate-company-sued-by-chi-chis

Protecting Intellectual Property in Supply Chain Systems


This weeks articles on supply chain systems suggest that the trend of offshore sourcing and manufacturing may be less profitable than in the past, suggesting that supply chain managers consider “re-shoring” to the USA or considering closer options (Goel, Moussavi, and Srivatsan couldn’t drop the Mexico hint any harder).[1] The New York Times article focuses on increasing labor costs abroad and a changing culture related to what truly benefits companies and country in China. Goel, Moussavi, and Srivatsan echo the increased labor costs but also point to increased logistical costs, especially related to energy for shipping.
            Another critical element leading some companies to consider “re-shoring” is high levels of intellectual property risk abroad. According to a Forbes article, major contributor to billion dollar losses in data protection affecting the US economy is “offshore outsourcers we contract with for product development who can then make bootlegged or pirated copies of our products.” A United States International Trade Commission Report on China “estimates that firms in the U.S. IP-intensive economy that conducted business in China in 2009 reported losses of approximately $48.2 billion in sales, royalties, or license fees due to IPR infringement in China.”[2] Many companies considering “re-shoring” have quoted increased intellectual property protection as one of many reasons (along with increasing labor costs and logistics costs) they are returning home.[3] Beyond China, where are major intellectual property thefts? What is the trade-off between “cheap labor” and property risk when chosing where to establish aspects of ones supply chain?

I may have a fun addition to this later this week that was supposed to be available today… stay tunned


[1] Time to Rethink Offshoring? (Goel, Moussavi, and Srivatsan, McKinsey
Quarterly, Winter 2008, pgs. 32-35)
[2] “China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy” http://www.usitc.gov/publications/332/pub4226.pdf

[3] Some Firms Opt to Bring Manufacturing Back to U.S.

http://online.wsj.com/article/SB10001424052702303612804577533232044873766.html?KEYWORDS=reshoring

Smarter Medicine: The next step in the CDC’s revolution in delivery of childhood vaccinations.



Vaccine: http://www.flickr.com/photos/sanofi-pasteur/5283533286/
The CDC went live with VMBIP, the Vaccine Management Business Improvement Project in Febrary 2007, deploying in a step-wise fashion over a little bit more than a year. [1] This program consolidated a scattered and inefficient supply chain into a more simple and streamlined state designed to be more responsive to providers and hopefully more fault-tolerant.

In an article on VMBIP’s genesis and deployment “Smarter Medicine” the CDC observed that there was a great deal of resistance to the notion of a centralized ordering process for vaccine. Rather than have end-point providers order directly from a single source, local health departments instead preferred to field and process orders themselves so that they could preserve direct contact with the providers and capitalize on opportunities to continue to promote new vaccine programs and evolving practice. Rather than push the issue, the CDC prudently decided to let that component of existing process remain intact. In the longer run, however, it is clear that preserving an extra step in the order process is not only inefficient but also preserves an opportunity to introduce error and delay in the process.

Unsurprisingly, the CDC appears to have seen things in a similar light, and is working actively to remove that intermediate step with their Vaccine Tracking System to which they have attached the typically unwieldy acronym “VTrckS.”

Launched December 2010, VTrckS “allows health care providers to input their vaccine requests (orders) directly online thereby improving efficiency and accountability of public dollars,” [2] that is, it does exactly what the CDC proposed initially with its centralized call center. (Italics mine.)

This system is the next step in the CDC’s transformation of its childhood vaccine supply chain allowing it more direct control over the supply process and optimal delivery sizes. Direct order entry also increases visibility of the ordering and distribution process for both supplier and recipient.

From a change management perspective, one might reasonably argue that delay in implementation of a centralized ordering clearinghouse cost the CDC nothing: it would have taken time to design the system and bring it online in any event, and clearly the first order of business was consolidation of the supply chain. Additionally, it is likely that had they pushed the issue at the outset of the VMBIP program, they would have encountered resistance from local health departments, possibly jeopardizing the entire initiative.

Question:

The CDC delayed implementation of a centralized ordering clearinghouse initially because of pushback from local health departments. How are the same departments responding now, five year later?

References:
[1] Copeland, M.V. (August 26, 2008) “Smarter Medicine” Strategy + Business. Retrieved 25 August 2012 from http://www.strategy-business.com/article/08307.
[2] CDC website: Vaccine Tracking System (VTrckS) accessed 25 August 2012.

A Green Future?

-by Whitney Coble

This post is in response to Future Supply Chain.  I recently learned about an unusual partnership between Wal-Mart and Patagonia that seems to fall in line with this article.

In Wal-Mart, Patagonia Team to Green Business, Monte Burke looks at the unusual relationship between these two well-known companies.  They seem as different as possible - Wal-Mart, for example, is 1300 times as big as Patagonia.

However, Patagonia has helped Wal-Mart decide how to green its supply chain for free with the following results:

  • Patagonia is helping Wal-Mart develop a sustainability index for its products
  • Wal-Mart eventually wants to score its products on eco-friendliness and social impact; suppliers who best comply will be chosen 
  • Patagonia has mainly helped Wal-Mart regarding the clothing supply chain (i.e. the amount of water and pesticides used in the manufacturing of garments)
Of particular interest to me is what Patagonia feels like it is getting out of this partnership.  Jill Dumain, Patagonia's environmental-strategy director said, "We're not big enough to make this the industry standard on our own.  We need them to do it, too."  In this vein, Patagonia has also forged similar relationships with Nike, the Gap, REI, North Face, Ikea, etc.

Also, of interesting note, Patagonia believes that one of the reasons that Wal-Mart is motivated to make this effort is that they want to do it before the government inflicts its own environmental standards upon them.  

What impact do you think Wal-Mart's leadership in this area will have on the rest of the market?  In what other areas (i.e., healthcare) could social enterprises or socially responsible businesses team up together to form mutually beneficial solutions?  Are there any downsides to this partnership?

Ethics, Crime, and Google: Supply Chain Networks


I recently attended a panel discussion on Human Trafficking and Modern Slavery at the 2012 Harvard Social Enterprise Conference. The panel consisted of representatives from consumer product companies, such as The The Body Shop and Goodweave, who prioritize human rights considerations in their supply chain management and procurement practices. They spoke of the difficulty in ensuring that suppliers were engaged in fair labor practices or avoiding child labor with such a complicated global web of supply flow and numerous intermediaries. They shared their respective company’s approach to tackling this issue and how it can be translated into consumer loyalty. My takeaway from their presentations was that the goodwill value associated with corporate social responsibility is tradeoff with the higher cost associated with working only with suppliers and manufacturers to guarantee fair labor practices with their employees.

The final panelist, a fellow at the Carr Center for Human Rights Policy, Sidhartha Kara, shared his research on the changing nature of human trafficking criminal networks. His primary message was that technology, lower cost of transportation/travel, and increased communication is creating a sharp increase worldwide in human trafficking. His research focused primarily on sex workers and modern slavery/indentured servitude. When envisioning supply chain networks we often consider product component logistics or final product delivery, not webs of disenfranchised humans being shuffled from one country or region to another in a life of labor or oppression. What this panelist did not present was what is being done to address this shifting nature of criminal networks. That’s where Google comes in.


The March 2012 article and video (linked above) from The Economist online details how Google has been bringing together diverse stakeholders in the issue of criminal supply chain networks: governments, law enforcement, security experts, software engineers, former victims of human trafficking, heads of ports, and former criminals themselves. Google Ideas, a new in-house think tank, has been fostering strategies about to develop new applications to disrupt criminal supply chains such as the global arms economy. In examining the sinister facets of supply chain networks, we face the following questions:

To what extent should corporations be responsible for ensuring fair labor practices or sustainable sourcing in their supply chains?

What is the role of emerging technology in combating criminal supply chain networks?

Altruism vs. Price - What will drive future supply chain networks?

Intro
In this week's reading, one particular quote from "Future Supply Chain 2016" irked me. Under Industry Trends Reporting Change, the report reads, "Consumers and shoppers will continue to become more demanding and empowered. In fact, they will become active partners in the supply chain and will directly drive product development and replenishment."[1]

When discussing environmentally sustainable practices, cooperative supply chain management, or any other altruistically based actions, I will call that view, at best, overly optimistic. Look at the facts: While American consumers have driven niche markets for environmentally sustainable products such as Seventh Generation paper, the Toyota Prius, and even Ben and Jerry's Ice Cream, price remains the determining factor for customer support.

Facts
Example 1. Electric Cars (aka the Chevy Volt). Electric cars save the environment right? Then shouldn't customers be lining up to buy the Volt? Well... A Sept 10 report from  GM indicated that it is still loosing $49,000 on each Volt it builds [2]. Why? The Volt's $40,000 price tag has discouraged consumers from making an environmentally conscious purchase.

Example 2. The Nexus Q. American made (Red, White, AND Blue). In an age where communism and socialism have become popular political slander you would think that Americans would stand in line to buy tech products designed and built in American instead of China. Right? .....Well, no. Granted, the Nexus Q did suffer from design flaws. Still, its primary flaw was that its $299 price tag was up to three times more than similar devices [3]. Americans don't like Chinese socialism but they do like the prices of Chinese made media streaming devices.

Example 3. All Apple Products. Little explanation is needed here. Apple's suppliers (at least Foxconn) are well known for treating their employees poorly, using forced unpaid "intern" labor, which result in employee suicides and now riots [4]. Yet have Americans stopped buying these unethical devices? A valuation of nearly $1 trillion dollars makes me think otherwise.

Conclusion
So will, as  "Future Supply Chain 2016" claims, firms create cooperative and environmentally friendly supply chains in response to consumer demand? I am sure that some will, but those products will remain niche products unless they can compete on price alone. In America, price is King (i.e. Walmart).

Am I wrong on this one? Will a cultural shift be needed to actually "drive" mass product development in the future or is that culture already here?


Sources:
[1] "Future Supply Chain 2016." Global Commerce Initiative Report, May 2008. Internet; Available at http://www.capgemini.com/m/en/tl/tl_Future_Supply_Chain_2016.pdf

[2] Woodall, Bernie and Paul Lienert and Ben Klayman. "Insight: GM's Volt: The ugly math of low sales, high costs." Reuters. September 10, 2012. Internet; Available at http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-idUSBRE88904J20120910

[3] Markoff, John. "Google Tries Something Retro: Made in the USA." The New York Times, 27 June, 2012. Internet; Available from http://www.nytimes.com/2012/06/28/technology/google-and-others-give-manufacturing-in-the-us-a-try.html?pagewanted=all

[4] Mozur, Paul. "Apple Supplier Foxconn Says Fight at Plant Spread Into Larger Unrest." The Wall Street Journal, September 24, 2012. Internet; Available at http://online.wsj.com/article/SB10000872396390444180004578015170427352146.html?mod=WSJ_hpp_sections_tech

Catch 22

From the readings this week, there were two components of supply chain networks that stuck out to me. The first was that SC networks are complicated and generally involve a great deal of effort to research, plan and implement. For example, it took the Center for Disease Control five years to redesign and implement their new vaccine delivery method.[1] Second was that SC networks have become increasingly exposed to volatility in the global system. In the New York Times article, labor costs in China are rising as low end manufacturing positions become less desirable, carrying implications for supply chains that have been built around low cost of labor.[2] With these two, seemingly conflicting realities of modern day supply chains (complicated, engrained systems versus volatile supply chain components), how can managers make it work? 













One method supply chain managers might assume would be helpful in tackling this problem is what we examined in last week's lecture: lean manufacturing. The key component in lean manufacturing, as defined by Taiichi Ohno of the Toyota Production System, is to cut down as much time as possible from the moment a product begins its manufacturing journey until it reaches the customer.[3] It seems entirely plausible that less waste might make it easier to adjust or manipulate processes based on the global environment.

However, as Martin Christopher of the Cranfield School of Management explains in his article, "The Agile Supply Chain: Competing in Volatile Markets", lean manufacturing "works best in high volume, low variety and predictable environments".[4] What one would actually want is agility in the supply chain network. And while there are components of lean that are helpful in an agile supply chain, many lean systems are not agile. Christopher defines agility as "the ability of an organization to respond rapidly to changes in demand both in terms of volume and variety".[5] 


Supply Chain digest editor noted that "supply chain flexibility is more important than ever".[6] However, in our rapidly changing and interconnected world, there are different ideas as to how to get there. Some of these are explored in the Global Commerce Initiative, Future Supply Chains.[7] But how would you solve this problem? Information sharing? Collaborative storage and delivery? Continual analysis? No more outsourcing? Strategic outsourcing? 

[1] Copeland, Michael V. "Smarter Medicine: How the U.S. Centers for Disease Control and Prevention revolutionized the way vaccines are delivered."
[2] Barboza, David. "Supply Chain for iPhone Highlights Costs in China." The New York Times 5 July 2010.
[3] Zak, Tim. "Lean Manufacturing and Total Quality Management." Introduction to Supply Chain Management and Systems. Carnegie Mellon University. Hamburg Hall, Pittsburgh. 18 Sept. 2012. Class lecture.
[4] Christopher, Martin. "The Agile Supply Chain: Competing in Volatile Markets." Web. 25 Sept. 2012.
[5] Ibid.
[6] "How to Build a Flexible Supply Chain Network." Supply Chain Digest. N.p., 8 Mar. 2006. Web. 25 Sept. 2012. http://www.scdigest.com/assets/newsviews/06-03-08-1.cfm>.
[7] Global Commerce Initiative. "Future Supply Chain 2016." May 2008.

Week 5 - "Reshoring"




“Reshoring” is a new trend within the manufacturing industry.  A MIT study found that 14% of U.S. companies are planning on-moving manufacturing capacity back to the U.S..  This growing trend is based on several factors.  Rising wages overseas are reducing some of the cost advantages of manufacturing in many markets.  Shipping cost are also rising further causing companies to question overseas manufacturing.  These are traditional cost concerns that companies look at.  However, the trend of “reshoring” is also based on factors that are not directly related to supply chain costs.  First, is protection of intellectual property.  Many countries that are typically strong in manufacturing do not have strong intellectual property protection laws.  U.S companies are also facing political and public pressure to move manufacturing back to the U.S..  These two factors are not supply chain or cost related yet they play an important role in companies decision making process.  “Reshoring” demonstrates that in a complex world decisions concerning supply chain management cannot be made solely on traditional factors like cost.   

Should cost be the only driver when evaluating supply chains?          




Foxconn Riots and iPhone Production

This week we read about increasing manufacturing costs in China and how they connect to iPhone production. As it turns out, this topic is very timely. The latest iPhone was released late last week and, just yesterday, major riots broke out at a major iPhone assembly plant in China.


Roughly 2,000 employees rioted at a Foxconn plant in Taiyuan, China. Ten people were killed, dozens were injured, and five thousand police officers were brought in to quell the riot after gang members joined the fray. So when this week's article mentioned "worker unrest" as a part of increasing labor costs in China, you might want to think of that as a more serious concern.

Foxconn is currently producing the aluminum backing for the iPhone. The company was expected to resume operations today, so the effect on production is probably minimal. Nonetheless, this is an important and current case that highlights the sometimes shaky balance between having low costs, maintaining security, and managing labor issues. The Foxconn plant "is notorious for its strict overtime requirements, which are reportedly forced upon it workers, although the biggest complaint has been about the abusive security personnel, which is said to be the cause of Sunday night’s riot." Is the effort to control costs and produce efficiently worth the oppression of the involved work force? The answer seems to be yes, although we like to pretend that we're offended. Ask yourself an honest question: do situations like this stop you from buying the final product?

Source:
[1] Hauk, Chris. "Report: Riots Break Out at Foxconn Factory - 10 Reported Dead." MacTrast. Accessed 9/25/12. <http://www.mactrast.com/2012/09/report-riots-break-out-at-foxconn-factory/>

Monday, September 24, 2012

The Future of Outsourcing

I very rarely dabble in politics, but given that it is an election year, and there are endless political ads everywhere, I thought it would be interesting to address outsourcing and the unemployment rates in the United States.  So many large companies choose to outsource their labor to countries such as China, India, and other South Asian countries.  As mentioned in one of the articles that we read for this week, it discusses how outsourcing is starting to become more costly with rising fuel prices and shipping costs.  Additionally, these once poorer countries are becoming more developed and workers are demanding higher wages.  This once dirt cheap work force is heading towards being equivalent to US workers.
Many political parties have argued that the opposing candidate is responsible for sending so many jobs overseas while the unemployment rate in the US remains high.  Because of the decreasing gap between other countries and the US, it is making more sense to have companies produce their products in the US.  With more jobs in the US, there are less people unemployed (and with health insurance?) which benefits everyone in the country.  The corporations are saving in fuel and shipping costs, individuals are able to work to support their families, and those who already have jobs will have less of their tax dollars going towards welfare and unemployment funds.  By altering the supply chain process in the work force shift from overseas back to the US, there is potential for long-term costs savings and improving the unemployment rate in the country.  I am also not a financial whiz but if forecasting into the future, and the trend of these underdeveloped countries improving to have higher worker wages continues, US corporations should see the benefit of keeping jobs in the US.
My question is how can we possibly leverage political candidates to encourage keeping jobs in the US?    Wouldn't this strategy provide benefits to everyone?