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Sourcing goods and materials overseas is nothing new, and companies continue to recognize significant benefits through global sourcing. In fact, a recent post by David Morgenstern on supplyexcellence.com highlighted some interesting statistics around low cost country sourcing (LCCS). The most interesting figure that caught my eye was that best in class companies are spending about 40% of their direct materials dollars through low cost countries and, in doing so, are recognizing an average cost savings around 20%.

So global sourcing is a no-brainer, right? Well, yes, IF you can effectively manage the additional complexities that come with doing business in low cost countries - complexities such as extended supply chain cycles and partners that are not accustomed to following standards that you expect from your standard suppliers.

The good news is that technological tools exist that can help you clear these hurdles with limited effort. I would recommend two such tools if you are looking to start a global sourcing project, or if you are just looking to improve your existing operation.

• Supply Chain Visibility - supply chain visibility tools of today can give you unprecedented visibility into the global flow of your merchandise. Many global/low cost country suppliers have quality problems that extend beyond the product itself to the activities that surround the product’s order, fulfillment, and shipment processes. Getting the right merchandise, at the right quantities, on the right truck, train, ship, and/or airplane, at the right time can be a challenge with your best domestic suppliers. It becomes exponentially more challenging with global sourcing. Visibility tools allow you to monitor your data flow and recognize problems or, better yet, potential problems before they impact the business. You become armed with the tools necessary to prevent the problems altogether.

• Partner Certification - as mentioned previously, many global partners are not accustomed to the rigid requirements that you might have for your supplier community. Failing to certify that your global partners can indeed meet your expectations will almost certainly result in a rude (and costly) awakening. The best approach is to leverage a partner certification tool to enable your global partners to test their capabilities against your expectations. And the coolest thing about partner certification solutions today is that they are 1) self-service enabled, which means that you do not have to hand-hold each partner through the process, and 2) remediation ready, meaning when problems or gaps in the partner’s capabilities are recognized, the solution will automagically walk the partner through the necessary steps for improvement, again without you having to become involved.

So if you are serious about global sourcing, make sure you consider supply chain visibility and partner certification solutions that can help position your company for success in this initiative.

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ASC X12 has made significant strides in repositioning their go forward strategic focus to ensure support for every industry over the past year. Recent changes has included sponsoring conferences, partnering on best practice models for secure data exchange and focusing on automating processes, not just exchanging data.

The June Trimester acknowledges the 50th Anniversary of the Berlin Air lift, which was the first real use of electronic data exchange, albiet less structured. The change in X12’s mission is in direct response from industry requirements and the changes which have happen in business since the organization was originally launched in 1979 due to the increasing requirements for B2B automation and standardization of messages.

With the advent of new business models, pervasive connectivity and the increase of rich content the steering committee collectively agreed it was time to embark on a new mission, this webinar provides an overview of the new mission and is an open forum on an important change proposed which will provide for a common header across several standards. Below is an overview of what will be discussed on the call and the call of action from experts to aid in delivering on the new needs of business:

ASC X12’s New Mission & Call for Input on a New Message Envelope Structure

When: Thursday, May 15, 2008 - 3:00 PM – 4:00 PM Eastern Time

This 1-hour webinar will showcase ASC X12’s new mission to drive global adoption of business interoperability through collaborative standards creation, industry education and sustainable business practices. To advance this mission, ASC X12 leadership is initiating a dialogue with its user community and the business-to-business (B2B), business-to-consumer (B2C), and consumer-to-consumer (C2C) standards community at large to discuss and gather requirements for the potential design of a new message wrapper, which would serve as an alternative to the current envelope. A new envelope structure would accommodate standards other than X12 and result in the seamless movement of data across supply chain, health care, financial and text messaging networks around the world.

To Register: Visit https://x12.webex.com/x12/onstage/g.php?t=a&d=352493911.

Hopefully this is something you can make, if the session is full we will present again. Everyone at X12 looks forward to your input and your participation.

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I was finishing up my daily reading for the day, and came across this interesting post on Supply Chain Digest. It seems that as a green initiative, Con-Way Truckload is lowering the maximum speed from 70 to 65 for its fleet of 2700 tractors as a means to save fuel. The carrier is hoping to save 2.8 million gallons of diesel fuel annually and reduce carbon emissions by approximately 62 million pounds per year through this plan.

While this initiative sounds like an excellent play, it is not completely beneficial to all participants. The 7% speed decrease will result in longer travel times for shipments which will impact driver productivity (hours of service) and labor cost.

So, what do you think? Smart move or nice effort that might not be as beneficial as it seems?

I was watching TV this weekend and came across a “Designed to Sell” episode where an engaged couple was trying to sell their house. Here’s the funny part: the house they were trying to sell was originally purchased from a Sears catalog in 1929. I find it very interesting that the original owners of the house decided to purchase one of the biggest investments of their life through a catalog.

Just as purchasing a house through a catalog made sense for the original homeowners, so does using a data synchronization product in the retail industry. Data Synchronization products enable customers to place orders and manage products. These products further ease the business process by including standards and a common way to identify and describe items. Some of these standards are defined by GTIN (Global Trade Item Number) while others are defined by GLN (Global Location Number).

Retailers are able to view the prices, colors and sizes of all of the products that their vendors offer, and hopefully through all of this, will get the products that they want while their vendors achieve the sales.

Keeping this in mind, I pose the question I often hear: is it worth the cost and maybe the learning curve? I would have to say, “YES!” It is true that vendors may at first be overwhelmed learning all of this new information when they are used to doing business a certain way. It is important to keep in mind, however, that Data Synchronization products enable businesses to be faster and more accurate while simultaneously eliminating duplication and decreasing paper work. Imagine a business where you could reduce shipment errors, out of stock inventory, and other problems that can take away precious resources.

Global data synchronization products make it easy for retailers to get the latest product information from their vendors, and in turn, vendors are able to easily receive orders from the latest products that they have uploaded to the database.

Now could Sears have said that in 1929?

Doug Kern, Product Marketing Manager at Inovis, talks about vendor deductions and the rise of the white hat retailers.

Read an interesting post today by Jackie Huba on one of her favorite topics - J. Crew and the turn-around they have pulled off. Like a lot of other cutting edge retailers, they are truly listening to their customers, and with social computing, like blogs, looks like that attention to detail and customer focus is paying off with happy online commentary. Hey! I paid attention.

One of the really cool things about my job is that I get to hear various stories around innovation, and one of the industries that is really smack in the middle of all the Web 2.0, e-commerce, supply chain innovation is retail. Terry Lundgren, chairman of Macy’s, recently talked at a University of Arizona school of retailing conference about the My Macy’s initiative to tailor inventory in each store to the realities of each state and region. Gloves and scarves don’t sell well in Atlanta, but milk and batteries do when local weather forecasters mention the word “snow!!” I’ve been here since the late 70’s. I know! Talk about a responsive and flexible supply chain. Check out the Philip Alexander’s column in Ad Age about the My Macy’s initiative. An interesting read.

Just remember that retail is, in many ways, like other industries - follow the leader. Other retail players will sit on the sidelines and watch to see if Macy’s can pull this strategy off. I put my money on the team at Macy’s for what I think will be an interesting operational and integration feat to pull off.

And even though we all agree we’re heading into a recession, much of the research I’ve seen doesn’t indicate a huge drop off in spending - even in the retail industry. So looks like leaders, like Macy’s, understand that if they continue to focus on their convictions, they will exit the recession and enter an economic recovery that might well position them well ahead of those companies that are biting their nails, riding the pine and watching.

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The rise of inflation is impacting businesses, especially on the supply chain side. Companies are finding the increase in commodity prices, like fuel and other raw materials, difficult to deal with and painfully impacting to the bottom line. The challenge is passing all, or at least some, of these increased costs along to the customer. You see, most products have a fairly elastic demand, meaning as the price for the product increases, demand decreases. So what are companies doing to offset cost inflation?

Well, according to a recent Supply & Demand Chain Executive article, some companies are indeed passing along the increase in costs to customers through effective price increases. In fact, 44% of companies are doing this through price increases, volume/quantity decreases, or promotion reductions.

Another, more prevalent strategy (57% of companies) to combat increased costs is a focused cost reduction initiative. In the supply chain, this means taking steps to optimize logistics activities, eliminate common supply chain problems, and automate traditionally manual supply chain activities. According to AMR, on average 20% of all orders are in error and, according to GS1, the average cost of each error ranges from $40-$80. Therefore, reducing the number of orders (and shipments and invoices, etc) that are in error and minimizing the manual activities that take place when an error occurs carry a significant cost benefit. Interestingly, companies that have invested in tools such as business process management (BPM), supply chain visibility, and supply chain collaboration applications are able to leverage these investments to offset cost inflation and recognize a competitive advantage.

Inovis actively supports regional user groups and 2008 represents a new opportunity to work with NEECOM, a long standing user group which many of our customers participate in and Inovis has supported for many years. NEECOM is the New England Electronic Commerce User’s Group for B2B and EDI professional and one of the largest in the nation. NEECOM is a great venue to meet others and see how they are tackling the challenges of operating complex supply chains which are compliant to their trading partner requirements and provide increased efficiency for their businesses.

Next week is NEECOM’s spring event and Inovis is looking forward to meeting our customers, their trading partners and the industry leaders who will be at the event to ensure we can bring back the lessons learned and share them our user community.

The two day event is a mix of industry presentations and educational sessions, both of which Inovis will be taking an active role in. There are 3 presentations being done by the Inovis team during the May 15 and 16th event in Westborough MA.

On Thursday a presentation on the Greening of the Supply Chain is being done which an increasingly important theme as organizations extend their reach globally. Below is an excerpt of the presentation:

With the increasing importance of establishing sustainable business practices, the environment is moving front and center for supply chains. Materials selection, design, manufacturing and transportation are key areas of optimization for supply networks and reducing an organizations footprint on the landscape. This session with provide an overview of key trends in automation and enablement which are driving efficiencies and improvements for businesses and the environment.

The Inovis education team will also be presenting sessions on Friday the 16th. The sessions will be taught by Robert Cannon, Kay Deitz and myself. Below are the session titles:

• EDI and XML: The Differences, Opportunity and Uses
• Understanding Business Process, KPI’s and Dashboards for B2B

Hopefully if you are in the Northeast you will be able to stop by NEECOM and meet the team.

We recently made our way to Texas for the Dallas Roadshow and are on our way to Boston for our next stint July 14 through 16. Since we’ve had the Inovis Education Services Roadshow on our mind, we’ve been thinking a lot about our course offerings.

Today’s question is: What can we teach you? If you were to get training, what type of training would you be interested in?

We appreciate your feedback!

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