Liability issues and increased scrutiny by government agencies and consumer protection groups make it more critical than ever that sourced products meet your specifications and are compliant with industry standards.

Many companies have never completed an audit even visited their vendors.  For many, an “audit” is a quick plant tour, a few random questions and a thumb’s up or down.

Part of the problem is that there isn’t a widely recognized standard for factory audits. There’s a hodgepodge of audit templates out there, but none of them are recognized globally and most have major holes. There’s the factor of human relations – most people don’t want to confront a vendor with negative feedback based on subjective or unscientific factors

 We’ve arrived at a standard template that has both the teeth to hold suppliers to a high standard and the usability to be accepted by buyers and downstream customers globally.

Our program offers an affordable solution that ensures vigilant monitoring of supply chains. It requires that ISO certified auditors who are degreed engineers with significant manufacturing history conduct on-site audits of factories. The audit focuses on:

• enterprise financial health
• product inspection & safety testing
•  incoming quality control (IQC)
• employee health & safety and downstream supplier reliability verification,
• certification to international and client-specific standards
• clear audit report and vendor scorecard for our clients’ regulatory files.
•  Tracking vendors is simplified by audit reviews.   The scorecard can be updated once or twice per year and guides the monitoring process.

 For a copy of the template, contact jdaniels@buyers-bridge.com

These technologies provide real-time and up-close location-based information to go beyond “directive approaches,” i.e., sending a work order or worker to a location and waiting until a future time to see results. Instead, they offer visibility (provided by wireless, RF, sensors, lasers, and video) and a system that instantly interprets data and events to make critical decisions in the moment.

Technologies are now available on-demand, in-the-cloud. That means that users no longer have to purchase the technology (hardware and software), nor invest in the personnel to manage the technology themselves. They are free to focus on the business and how it can be more agile, perform better, and grow.

Why a new report?

Many of the analyst reports were a few years old and it was time for a fresh, updated review. In addition:

1. Many WMS reports you find on the web were written by the vendors themselves and might not be too objective.
2. New players and new technology, particularly SaaS, are in the market and the buying/end-user community should know about.
3. Warehouse strategy discussions should be accompanied by insights on how technology can support change and growth of the organization.

ChainLink’s reports are not produced in isolation, but as part of a body of research, articles, bibliographies, and webinars, to create a place for end-users to go on the web and read more about the topic.

You can access this content here: chainlinkresearch.com/wms

You can access the report here:  ChainLink Research Warehouse Management (or Warehouse Management Technology)

Supply Tech and ChainLink Research  are now offering you FREE access, for the next thirty days, to a research report entitled, Demand Management Technology Evaluation.  (A $99.00 Value)

You will get from this report:

• An Understanding of Demand Management Needs
• Innovations in Planning
• Major Demand Planning Capabilities
• Solution Evaluations
• Where the Technology is Headed

Access the report Demand Management Technology Evaluation and share your insights.

When we set out to assess and then improve a vendor on behalf of one of our clients, we refer to this as the “Japanese Model.” What this means internally at Buyers Bridge is that our client has made the strategic decision to work closely with their current vendor and find constructive solutions to delivery, quality and value challenges, rather than pitching them out and transferring the project to a new vendor.

During the last two decades, we’ve observed many Japanese industrial and technology companies adopt this approach. Remain a consistent and loyal customer-partner to your vendors, work with them to resolve production issues and avoid the often unnecessary burden and costs of qualifying a corps of new vendors. This stay-the-course approach usually produces better and more consistent products, eventually yields the lowest cost processes and builds long term relationships. Thus our designation of the “Japanese Model.”

 When our clients have ongoing client relationships that have gone off track and we’re engaged to identify and appoint a new vendor, we always propose this alternate approach. In most cases (greater than 80%) extant vendors are motivated to improve their operations, make substantive process improvements and keep the business. The cost to do this, for both parties, is less than that associated with a disrupted supply relationship and faster to implement.

 This model usually reveals three classic customer-vendor problems: the product specification is incomplete or has evolved to a soft or informal set of requirements based upon personal relationship and past history; raw materials, components or sub assemblies have changed or been sourced from alternate vendors; and key employees have departed or transferred to a new job and institutional knowledge has been lost. When our engineers unearth these factors it’s a shock to both customer and vendor, as everyone says “we’ve changed nothing.”

As all manufacturing and purchasing professionals know, everything changes over time. It’s simply a question of how much. We recommend a comprehensive audit once a year that is guided by a detailed checklist. Please let me know if you’d like a copy of our inspection template. 

Vendor Profile: Suzhou Industry Park Xieli Plastic Co., Ltd. Is located nearby to our China headquarters and is a go-to provider of high tolerance molded plastic products for electronic, industrial and medical applications. They are focused on high volume projects and oriented towards supporting export customers. With a skilled engineering team they are quite comfortable with value-added techniques such as inserts, electromechanical assembly and specialty coatings. Contact Zhu Ming Zhen at www.chinafirst-plastic.com .

 www.Buyers-Bridge.com

Materials costs are increasing in China.  There’s a labor shortage in the cities in the southeast and wages are trending upward.  And the US government is pressuring the Chinese to revalue their yuan (RMB).

Is it time to bail?

We don’t think so…

It used to be commonplace to realize a ‘China Discount’ of 65% – 80% without substantial negotiation – those days are gone (for now). Now we routinely see the discount rate on consumer and industrial products somewhere between 35% and 50%.  Not as substantial a savings as in years past, but nothing to sneeze at. Savings of approximately 40% generally aren’t conceded by existing suppliers.

But how can you maximize your company’s cost savings in this environment?

There are five sure tactics that produce results in China:

1.  Focus on products that have high labor content value. Products whose selling dominated price is by raw material costs (corrugated stock, sheet metal, bulk wire, chemical feedstock, etc.) aren’t likely to cost less in China than they do at home. The costs to install and operate automated production lines are fairly even around the globe. Instead, focus your procurement efforts on value added products that require multiple steps to manufacture and package. For example, printed knocked down corrugated packaging, formed sheet metal enclosures, cable harnesses and power distribution bus bars and polymerized plastics.

2.  Get terms. Many legacy trading relationships came with credit terms that favored the vendor abroad. Your vendor may have required cash-in-advance, 30% down and net upon shipment or payment by letter of credit (LOC). It’s time to push back. Customers with long-term trading relationships should ask for a minimum on net 30 day terms. Remember that net 30 is still the equivalent of prepayment when you factor in ocean shipping times.

3.  Deal directly with your vendors. We’re constantly surprised at the number of North American companies that place their orders through agents, brokers and trading companies. These intermediaries don’t often add tangible value and can mark-up your cost by 15% to 50%. Many buyers don’t even know that the company that’s selling them the goods isn’t the manufacturer. This isn’t sensible in tough times. Do your homework and find out exactly what’s contained (or hidden) in the commercial chain. An easy way to start is to call the factory and ask to speak to your contact. If they are not there, it’s a red flag.

4.  Negotiate the price in RMB. The Chinese yuan (alternately known as the CNY and Renminbi, or RMB) is still funny money outside of China. Most Chinese vendors don’t have the necessary licenses and permits to trade in US dollars and local banks here at home can’t make payment in yuan. Small and mid-size North American companies now have access to foreign exchange banks (more on this in next month’s newsletter) and can arrange for direct payments in RMB. You can also find effective currency hedging tools for smaller companies. Paying your vendor in yuan takes currency variation out of his court and makes you a more attractive customer.

5.  Know your vendor! Beyond the common sense benefits of establishing control over import compliance and control issues, if you don’t really know your vendor, there’s little chance that you’ll avoid that price increase letter. If you’ve never met your supplier in person, if you’ve never even spoken to them, it’s time to change that. Pick up the phone, visit, make a plan to reach out and establish a direct relationship.

Try these reliable tactics to stabilize your pricing and make the most of the ‘China Price.’

Vendor Profile: FutureStar Arts & Crafts Co., Ltd. FutureStar produces a wide range of costume accessories, promotional items and toys for the apparel, costume and gift industries. They are based in Yiwu in eastern China and take customer service seriously. FutureStar has a comprehensive new product design group and low sample charges. They also have reasonable minimums and take pride in manufacturing products that are compliant with US product safety standards. Please see: http://www.party-china.com/en/main.asp

Here are the early findings based on the 175 survey responses to date, as a precursor to the full report. The final report will be based on the end-user survey and interviews with leading vendors in the ITAD industry. The end-user survey targeted CIOs and IT Asset Managers in North America and Europe.

The Full report is scheduled to publish in November 2010.

Why Is IT Asset Disposition (ITAD) Important?

The proliferation of IT hardware assets in business environments during the past twenty years has created a plethora of end-of-life hardware assets, specifically hundreds of millions of desktop and server computers. The disposal of hardware assets or ‘e-waste’ also includes displays, keyboards, storage devices, networking equipment, printers, copiers, televisions, cell phones, and consumer electronics. The proper disposal of e-waste was largely ignored in the 1990’s during which many businesses simply disposed of hardware in dumpsters and did not formally address the security exposure of the business data contained on these assets.

E-waste contains a broad range of toxic material and compounds that have created environmental and health hazards worldwide. IT waste becomes toxic waste.

E-waste toxins include:

• Mercury
• Lead
• Cadmium
• Arsenic
• beryllium
• brominated flame retardants

When burned, the toxins become even more dangerous in the form of dioxins and polycyclic aromatic hydrocarbons (Source: e-stewards.org).

During the past five to 10 years, the environmental concerns of ITAD have been increasingly exposed, but many businesses are not aware of the extent of the global impact of the environmental and health hazards.

Business Risk: Environmental, Data and Brand

Many businesses are not fully aware of the environmental compliance requirements regarding the disposal of IT assets. As shown below, organizations are much more aware of data privacy regulations than environmental regulations, pointing to a gap in awareness and education. Environmental concerns are gaining more visibility and proper ITAD addresses both environmental and data security concerns.

Source: GITS Research

Source: GITS Research

The data security risk that businesses face is twofold. First, confidential data can end up in the wrong hands and second, business data is subject to regulatory compliance in United States and worldwide. While not all data is subject to data privacy regulations, the release of confidential data can create a variety of dire competitive and customer consequences. As a result, businesses are faced with significant brand risk based on a combination of environmental and data security consequences of improper disposal of IT assets.

What is the state of the industry?

Here is what end-users say they do with their unwanted IT assets:

Source: GITS Research

As we will detail in the full report, many of these options overlap. For example, using an established and reputable ITAD provider can enable an organization to donate unwanted assets, sell assets that have recoverable value in the market and even refurbish and redeploy them within the organization, with the burden of fulfilling the various disposition models falling on the ITAD provider.

Representative of the significant educational and awareness challenge, the survey response indicates that 10.3% of organizations admit to throwing IT assets in the trash and 25.7% recycle IT assets through their local municipal waste disposal. Throwing e-waste in the trash creates an immediate and volatile environmental and health hazard locally and downstream. And while your municipal waste disposal may have a program to accept e-waste, these local programs lack control and transparency of the downstream impact of the recycling and handling of the hazardous material and compounds.

What does it mean to be a ‘certified’ recycler?

The ITAD industry has emerged as a prominent and growing IT market segment over the past 10 years resulting in a range of established and new ITAD vendors. While country- and regional-based regulation has started to address the ITAD challenge, the regulation largely fails to address the global problem and establish clear standards and expectations for e-waste recycling by ITAD vendors.

As a result, the e-Stewards Initiative has emerged as the leading global standard and vendor certification program for e-waste recyclers. The e-Stewards Initiative is a project of the Basel Action Network (BAN).

The e-Steward standard calls for: recyclers to eliminate exports of hazardous e-wastes to developing countries; to halt the dumping of such wastes in municipal landfills or incinerators, and to cease the use of captive prison populations to manage toxic e-wastes. It also calls for strict protection of customer’s private data and occupational health safeguards to ensure that workers in recycling plants are not exposed to toxic dusts and fumes (Source: e-stewards.org).

As a preliminary step to full certification, the e-Steward program for recyclers requires an internal review by BAN and independent auditors to qualify recycling locations. Once locations are qualified recycling locations, the recycler is pledged to complete full certification by September 2011.

Join the Study Today!

We encourage your participation in the study by taking our survey of end-user businesses and organizations. In return for your participation, you will receive a complimentary copy of the study results.

The survey is available at http://www.surveymonkey.com/s/TTDWC2Q.

We are also looking to interview businesses and organization on their ITAD programs to highlight success stories for inclusion in our global study.

Join our LinkedIn group Green IT and Sustainability Research and jump into the conversation.

Thank You!

Bill Lesieur

GITS Research

Green IT and Sustainability Research

bill.lesieur@gitsresearch.com

www.linkedin.com/in/billlesieur

Join Our LinkedIn Group: Green IT and Sustainability Research

Generally speaking, these events occur as a result of a co-effect:

The vendor doesn’t have the necessary engineering discipline and resources in place; and their desire to move quickly and not disappoint their customer with a missed or late shipment.
In the end, this results in a culture where “it’s good enough” prevails. The band aid approach of granular and intense inspections of the finished goods before shipment will filter out a portion of the discrepant product, but it won’t fix the fundamental problems.

Our team of senior quality engineers specializes in helping vendors: right the course, produce and ship goods that meet our client’s written and unwritten specifications and expectations. This process begins with base lining operations by conducting a comprehensive plant audit. The audit process includes interviews of key staff, review and recording of process variables and mapping of the existing quality systems.

We then generate process recommendations and draft Standard Operating Procedures (SOP) to guide future production and testing. All SOPs are reviewed with our clients and then the vendor’s staff is trained in a classroom setting and on the shop floor.

To gain control of the supply chain it’s often necessary to work back towards the vendor’s downstream suppliers. Suppliers of relatively simple products such as adhesives, fasteners, ink and solder can have a dramatic and negative effect on quality once integrated into finished products. Establishing a robust incoming quality control (IQC) regimen is a first step towards minimizing process variables. Later, audits of downstream suppliers can have a significant impact on sustainable product quality.

Vendor Profile: Speedmark Transportation, Inc.

Speedmark is the US subsidiary of a Taiwanese freight forwarder that has operations throughout Europe, North America and the Asia-Pacific region. Specifically, they have operations in all of the export oriented zones where many of our clients are procuring products. Speedmark is responsive, reliable and fairly priced with experience in air and ocean freight and all Incoterms. You can reach find them at: www.speedmark.com

Jack Daniels is the president of Buyers Bridge Corporation. He can be reached at 617-401-7373 or jdaniels@buyers-bridge.com

www.Buyers-Bridge.com

Marked with a Crayon and Cut with an Ax

This old engineer’s adage continues to ring true when we review clients’ product requirements. Before we can research, qualify and appoint candidate vendors in Greater China, it’s critical to understand our client’s technical requirements, so we review their designs, drawings and specifications.

What we find are projects that fall into two camps. The first are products that are poorly described and barely have any specifications or tolerances. If we provide this type of documentation to a vendor, there’s no predicting what will arrive in the box. As my wife the kindergarten teacher tells her students “you get what you get and you don’t get upset.”  More on this topic in a future posting.

Presenting Useful Specifications and Product Requirements to Candidate Vendors

The second are products that are so closely specified and toleranced, there’s absolutely no way that any vendor can make the product (at a reasonable price). In an effort to be helpful, some engineers and designers call out not only the technical requirements but also the manufacturers’ part number of every nut, bolt, screw and washer. If the parts in question aren’t critical to the operation of the finished device, this level of specification adds tremendous complexity for the vendor and numerous delays and cost.

Another example is tolerances that can’t be measured or held for certain materials or parts. Recently we had a client request a three place decimal tolerance on a laminated neoprene rubber cozy. The dimensional stability of this material combined with standard manufacturing techniques simply won’t support this level of tolerance.

We recommend that engineers, industrial designers and procurement professionals define their products to the “eighty-five percent” level. This will allow the factories bidding on your project the latitude to source non-critical parts economically and the ability to use standard manufacturing processes.

 Vendor Profile: ChampionTech Enterprises, Inc.

CEI based in Hsinchu, ROC with operations in south China is an electronic contract manufacturer that specializes in microwave and RF telecommunications products. Their customer base are multinationals that design power amplifiers, low noise block down converters and active antennas. CEI’s Judge-Well subsidiary is volume oriented, with the Zhu-Chen subsidiary being custom oriented. They are ISO approved, have UL certification and customer service focused. Contact their GM, Eric Lue for more information: ericlue@ms29.hinet.net .

 Jack Daniels is the president of Buyers Bridge Corporation. He can be reached at 617-401-7373 or jdaniels@buyers-bridge.com

www.Buyers-Bridge.com

Bill Lesieur is a research analyst focused on Green IT and Sustainability and he is conducting research with Arnold Reinhold, co-author of Green IT For Dummies.

The objective is to create a report on current and best practices in IT Asset Disposal (ITAD)

• What’s ITAD got to do with Sustainability and Green IT?
• What happens to IT assets from computers to phones to copiers to printers to network equipment?
• What have you when you no longer need them?

It’s a topic on the EPA’s top agenda for 2010 and the subject of a brand new Magic Quadrant from Gartner.

Please take a minute to participate in a survey on Best Practices in IT Asset Disposal (ITAD) at

IT Asset Disposal Survey

You’ll be able to read the highlights of the published report on Jazdtech.com and Jazdsupplychain.com.

Or you may contact the author directly at bill.lesieur@gitsresearch.com for the full report.  http://www.linkedin.com/in/billlesieur

We hope you will participate.  It’s a chance to do your part on a topic of great concern.