Skip navigation

One of U.S. President-elect Donald Trump’s main pledges on the campaign trail was to bring jobs back to the U.S. In a video-taped speech last week, Trump vowed on day one of his presidency to issue a notification of intent to withdraw from the 12-nation Trans-Pacific Partnership, which he calls “a potential disaster for our country.”


If Trump delivers on those campaign promises to get tough with China on trade, he most likely will find another opponent: U.S.-based multinational corporations. These companies have more than $228 billion in China investments at stake in the event of a trade conflict between the world’s two biggest economies. Their track record of pushing back against Washington on trade indicates they’ll back their own interests—and China’s—if enmity erupts, explains a recent Bloomberg article.


The U.S. Chamber of Commerce and other pro-trade groups have influential allies among Republicans who lead both chambers of Congress. While many say they are willing to consider Trump’s proposals, including to recraft some trade deals, they also say the see benefits to free trade in their home states and to the U.S. economy.


“My state is the No. 1 exporting state in the nation, and not coincidentally our economy tends to be doing better than a lot of the rest of the country,” John Cornyn of Texas, the No. 2 Senate Republican, told reporters this month. Furthermore, Cornyn, who leads the Senate Finance subcommittee on trade, said he views Trump’s campaign promises on trade as the starting point in a debate. “It’s a conversation,” he said. “Nobody gets to set the agenda unilaterally around here because of the separation of powers.”


It isn’t just China that draws Trump’s ire, he often targets Mexico as well. That’s interesting because today Trump and Mike Pence, Indiana’s governor and the vice-president elect, plan to appear at Carrier’s Indianapolis plant to announce they’ve struck a deal with the company to keep a majority of the jobs in the state, according to officials with the transition team.


Carrier, an Indianapolis-based heating, ventilation and air conditioning company owned by United Technologies, made news last spring when it announced that its Indianapolis plant would undergo a three-year relocation to Monterrey, Mexico, starting in 2017. As numerous news outlets reported, the announcement was met with jeering from the plant’s employees, and a video even went viral.


Earlier this week, Carrier’s PR department tweeted that the company had reached a deal with Trump to save nearly 1,000 factory jobs in Indiana from going to Mexico. Carrier’s original announcement was for the loss of 2,000 jobs in the Indianapolis plants, so it remains unclear what will happen to the other jobs. It is also worth pointing out that Vice-president elect Pence remains Indiana’s governor, so he does have a vested interest in the deal.


In exchange for keeping the factory running in Indianapolis, Trump and Pence are expected to reiterate their campaign pledges to be friendlier to business by easing regulations and overhauling the corporate tax code. In addition, Trump is expected to tone down his rhetoric threatening 35 percent tariffs on companies like Carrier that shift production to Mexico.


Nevertheless, it is impossible at this point to know what exactly the terms of the deal are. There is speculation, however, that in addition to Carrier receiving government subsidies, the citizens of Indiana will eventually pay a hefty price.


“It is impossible to assess the merits of the Carrier deal until we know why the company changed its mind—and at what cost to taxpayers?” tweeted New York Times correspondent Binyamin Appelbaum.


“Company says they’ll leave, government comes up with a big bribe to pay them to stay,” tweeted MSNBC host Chris Hayes.


What are your thoughts on Trump possibly following through on pledges to withdraw from the 12-nation Trans-Pacific Partnership? What impact would it have on supply chains?

It may be Cyber Monday, but it seems more like “Cyber Week” due to a steady barrage of emails, radio & TV commercials and print ads promoting ongoing “web deals.” With that emphasis on cyber in mind, I was interested to read about the results of a survey, in which nearly half of the surveyed manufacturing executives said they lack confidence their company’s assets are protected from cyber threats. Furthermore, according to the results from the survey, “Cyber Risk in Advanced Manufacturing,” from Deloitte and the Manufacturers Alliance for Productivity and Innovation (MAPI), nearly 40 percent of the respondents indicated their company was affected by cyber incidents in the past 12 months—and 38 percent of those respondents said each cyber breach resulted in damages of more than $1 million.


“Manufacturers are innovating at an unprecedented rate, integrating cutting-edge technologies in products, automating the shop floor, connecting supply chains and increasingly investing in valuable intellectual property,” says Trina Huelsman, vice chairman, Deloitte & Touche LLP and U.S. industrial products and services leader. “While these advancements should position them for future growth, the industry is also likely to experience an acceleration in the velocity and sophistication of associated cyber threats.”


There are two reported areas of cyber risk cited by the survey respondents I was most interested to see. The first is that although industrial control systems operate highly automated manufacturing processes to increase employee safety, environmental protection and operational efficiency, they also expose manufacturers to increasing cyber risk. Surprisingly, 50 percent of the respondents indicated their company performs vulnerability testing for industrial control systems less than once a month—and 31 percent said their company has never conducted an assessment.


“To date, many companies have attempted to isolate the networks associated with their industrial control systems with an air gap, essentially a physical barrier between the industrial control systems networks, enterprise networks and the Internet,” says Sean Peasley, partner, Deloitte & Touche LLP and cyber risk services consumer and industrial products leader. “However, if they haven’t actually tested the accessibility of these systems, they can miss hidden access points that could be vulnerable to attack. An air gap strategy is also contrary to industry trends in digital manufacturing, which are designed to generate cost-savings, automation and efficiency benefits.”


Secondly, an increasing reliance on technology-enabled connected devices also introduces significant cyber risk for manufacturers. For instance, 45 percent of the respondents said their organization uses mobile applications and 35 percent cited connected sensor controls. However, 40 percent of the respondents indicated their organization has not yet incorporated connected products into the company’s cyber incident response plan. That takes on added importance when considering that 76 percent of the respondents said their company transmits product data using Wi-Fi, and 52 percent reported that their connected products store and/or transmit confidential data, including Social Security and banking information.


The report’s authors outline several steps to mitigate cyber risk, including to perform a broad cyber risk assessment which includes the enterprise, ICS and connected product; share the results of that assessment, and recommended strategy and roadmap, with executive leadership and the board; identify and evaluate strategies to address third-party cyber risks; and evaluate top business investments in emerging manufacturing technologies, IoT and connected products. However, as the report further notes, leaders must remain vigilant in evaluating, developing and implementing the company’s cyber threat monitoring capabilities. That said, employees cannot be ignored, and it is crucial to ensure all employees are not only aware of their responsibilities to help mitigate cyber risks related to phishing or social engineering, protecting IP and sensitive data, but that they understand appropriate escalation paths to report unusual activity or other areas of concern as well.


What are your thoughts on growing cyber risk? Are you confident your organization is protecting its assets from cyber threats?

Businesses need greater visibility into the supply chain to maintain their edge in an increasingly competitive marketplace. Given that 90 percent of global trade moves on the ocean, seaports are critical nodes of the supply chain. The challenge, however, is that major ports now must serve ever-larger container ships while also addressing the complexity of handling cargo carried by vessel-sharing alliances—constantly shifting arrangements among cargo ship operators sharing space on ships as a cost-saving strategy.


With these challenges in mind, I was interested to learn that to keep cargo moving efficiently through the largest U.S. container port, the Port of Los Angeles and GE Transportation are partnering to pilot a new port information portal, which will digitize maritime shipping data and make it available to cargo owners and supply chain operators through secure, channeled access. The digital platform will provide stakeholders with greater line-of-sight and planning capabilities to more effectively service ultra-large container vessels, according to the port authority. Cargo data used in the two-month pilot project will include filtered information from the U.S. Customs and Border Protection’s Automated Commercial Environment (ACE) system.


“Over the past year, the U.S. Department of Commerce has redoubled our efforts to help strengthen the competitiveness of our ports and supply chain stakeholders through the adoption of digital solutions,” says U.S. Secretary of Commerce Penny Pritzker. “The innovative steps being taken in Los Angeles will demonstrate the value of new IT systems to ports and shippers, and help catalyze the voluntary implementation of these systems at ports throughout the U.S.”


Gene Seroka, Executive Director, Port of Los Angeles, says port executives realize that to keep pace with the rapidly changing shipping landscape, operations at ports must evolve. Digital solutions that enable supply chain partners to receive a ship’s cargo information well in advance of arrival, like with the digital portal being tested with GE Transportation, are a critical key to optimizing U.S. cargo efficiency and trade competitiveness, he says.


Ultimately, the goal for the port information portal is to improve data-flow between cargo owners, shipping lines and other stakeholders so port and terminal operators have an extended window of time to track inbound cargo to more effectively service vessels, optimize cargo movement and improve the predictability and reliability of the supply chain. Port and cargo stakeholders manually tested this advance exchange of data when the largest-ever container ship called on a U.S. port last December, when the megaship Benjamin Franklin, with a capacity of nearly 18,000 containers, arrived at the Port of Los Angeles.


Two weeks before the ship arrived, the port received detailed information regarding container count and placement on the ship, as well as a breakdown of their destinations—to the Midwest via rail, for example, or to local retailers or inland warehouses to be unloaded. Ports typically receive that information 36 to 48 hours before the vessel arrives, Seroka said in a Wall Street Journal article last December.


Knowing all that information earlier “gave us a great line of sight as to how we should plan railcar assets, truck power and longshore labor,” Seroka said.


What are your thoughts on the plans to digitize maritime shipping data and make it available to cargo owners and supply chain operators? What impact will there be on supply chains if those organizations can plan railcar assets, truck power and longshore labor weeks in advance?

While much has been said about efforts to crack down on illegal mining of “conflict minerals” in Africa, illegal gold mining and trading in Colombia, Peru and Venezuela is big business. Indeed, roughly 85 percent of the 59 tons of gold produced last year in Colombia comes from operations without government licenses or environmental permits, Santiago Angel, head of the Colombian mining association, says in a Bloomberg article. Notably, Colombia’s two main legal gold miners, Mineros SA and Gran Colombia Gold Corp., together only produced seven tons of gold last year.


It’s what Jeremy McDermott, a co-founder of the InSight Crime research institution, calls “blood gold.” Beyond financing rebel activities, the illegal mining fuels prostitution, child labor and widespread environmental destruction, according to findings by the United Nations, Bloomberg reports. What’s more, fighting among armed groups in Colombia over the gold deposits has forced hundreds of thousands of Columbians to flee their homes, contributing to the nation’s roughly seven million internally displaced people, according to findings by the United Nations.


The gold faces a long trip to market. It begins in the jungles of Colombia, where thousands of workers in small, illegal mining operations—many under the control of Marxist guerrillas or drug traffickers—work long hours to mine the gold. Next, the gold is shipped by boat, truck or small airplanes to smelters in Cali and Medellin. International gold refiners, armed with certificates of good business practices, buy the gold and, in turn, sell to U.S. corporations.


The conflict gold is unintentionally used in products ranging from smartphones to cars and even gold coins made by the U.S. Mint because corporations as well as companies that use gold for jewelry buy gold in good faith from organizations tasked with assuring the legality of the gold. Although many companies also conduct independent audits of their supply chains, including for gold and other metals, illegal gold slips through the system.


“It’s impractical and unfeasible to expect companies to trace their gold to the mine of origin,” Tyler Gillard, a legal adviser to the Organization for Economic Cooperation and Development, says in the Bloomberg article.


U.S. gold importers hold certificates of responsible business practice from organizations including the London Bullion Market Association (LBMA) and the Responsible Jewelry Council (RJC). Asahi Refining USA Inc. and Metalor Technologies USA Corp. are among the largest U.S.-based refiners buying gold from Colombia, and have those certificates.


“All LBMA accredited refiners on the Good Delivery List have set up internal-management and risk-assessment systems to avoid sourcing gold linked to conflict, human rights abuses, terrorist financing practices, as well as ensuring that they comply with high standards of anti-money laundering,” a spokesman for the association said, Bloomberg reports. “All RJC member companies are required to carry out human rights due-diligence processes to assess the heightened risks of adverse human-rights impacts,” according to a council statement.


Although Asahi Refining and Metalor Technologies say they are careful to buy only legally mined gold, each purchased more gold from Colombia last year than was legally produced, according to data from Colombia’s statistics agency, Bloomberg reports. That makes it mathematically impossible for the companies to have only purchased legitimately sourced gold, the article explains.


“You ask how much gold a company is buying and how much a country produced legally,” Quinn Kepes, program director at Verité, a U.S.-based fair-labor organization, says in the Bloomberg article. “We’ve seen a pattern of certain U.S. refineries going into areas” that others have pulled out of.


The dilemma for end users is that once gold arrives in the U.S., there is no way to know whether some of it may have been procured from illegal mines. In addition to buying gold only from refiners with certificates of good business practices, a growing number of companies conduct independent audits of the sourcing for their components. However, as would be expected, accounting for all minerals throughout company supply chains is very difficult.


What are your thoughts on illegally sourced gold? What can be done to stop its trafficking?

U.S. manufacturers face a growing shortage of skilled workers. Almost 3.5 million manufacturing positions will need to be filled over the next decade as Baby Boomers retire, and two million of those jobs could remain vacant due to manufacturing’s fading appeal to Millennials, according to a 2015 study by Deloitte and the Manufacturing Institute. As a case in point, consider Boeing, where about 35 percent of the 29,645 machinists in the company’s Seattle industrial hub are 55 or older.


The timing is particularly challenging for Boeing since the company also faces critical upgrades of its two largest profit-drivers: the 737 and 777 jetliners. Currently, approximately 10,000 mechanics are eligible to retire from the company’s Puget Sound manufacturing base alone.


Anyone can retire, of course, which increases the risk of significant shortages of skilled tradesmen. However, as an article on Bloomberg points out, memories at Boeing are still sharp concerning the cascading production issues 20 years ago after the company offered a one-time retirement incentive with few restrictions. More than 3,700 mechanics, engineers and technical workers cashed out in June and July 1995 alone, creating immediate shortages in some positions.


Earlier this year, Boeing carefully structured another voluntary layoff aimed at retirement-age workers. This time, however, the company methodically staggered the departures of 1,057 machinists to plan for their replacement and avoid massive disruptions like those in 1995, Joelle Denney, vice president for human resources at Boeing’s commercial airplane division, says in the Bloomberg article.


“We’re not expecting a big bubble or wave,” Denney says.


For the long term, Boeing is investing in education—from vocational training to programs at middle schools—in an effort to make manufacturing “cool” to a generation that has never known shop class, Denney says. In the short term, Boeing is increasing training and mentoring programs within its factories, she says.


Today being Veterans Day in the U.S., I was interested to see an op-ed piece about another pool of labor. Emily DeRocco, Director, Education and Workforce, LIFT—Lightweight Innovations for Tomorrow--and James Wall, Executive Director, National Institute for Metalworking Skills, write that the two groups believe they have “a responsibility to support U.S. military veterans and ensure the U.S. is once again a world leader in manufacturing. We believe our veterans and the manufacturing industry will be well-served by providing separating military men and women with a new model of career transition assistance.”


The problem, DeRocco and Wall write, is that the assistance currently provided veterans before they leave the service isn’t sufficient—leading to a 5.8 percent veteran unemployment rate. The groups’ vision is that a veteran with the right training, knowledge and skills will depart active duty with one or more credentials that have immediate value in the advanced manufacturing labor market, they write.


“Instead of a ‘business-as-usual’ approach, NIMS and LIFT are focusing on creating innovative solutions and developing a new model that helps prepare service members for good jobs in advanced manufacturing during their last six months of active duty,” DeRocco and Wall write. “In this model, during those hours each day after military duties are complete, service men and women can pursue both virtual and hands-on technical training and earn nationally-portable, industry-recognized credentials that set them on a path to success. Before their official separation, they can gain critical, in-demand skills for today’s most sought-after advanced manufacturing jobs.”


Finally, the authors point out that veterans have the skills, work ethic and attitudes companies need from employees to be productive and competitive. This new model, they explain, will fill the manufacturing workforce pipeline with individuals who bring the same level of commitment, leadership and dedication to their civilian careers as they demonstrated in service to our country.


What are your thoughts on providing training and certification for veterans so they can quickly begin careers in manufacturing?

World-class IT organizations are dramatically more effective than their peers at enabling the digital transformation that is central to many business strategies, according to new research from The Hackett Group. This ability plays a key role in how the IT organizations enable greater efficiency, agility and improved competitive advantage across the enterprise. World-class IT organizations also spend significantly less on IT operations than typical companies, the firm found.


“Leaders at world-class IT organizations understand that while running core information systems and providing infrastructure efficiently remain critical capabilities, digital transformation is increasingly becoming a ‘must have’ to stay relevant in the business,” says Scott Holland, Practice Leader, IT Executive Advisory Program, at The Hackett Group. “If they aren’t prepared to support this effort, companies won’t wait. Rather than allow the internal IT organization to be a bottleneck to digital transformation execution, the business will look for outside partnerships, acquire technologies directly and develop technology management capabilities themselves.”


The firm’s research, “Four Imperatives for Creating IT Agility in a Digital Age,” details four requirements for companies seeking to achieve world-class IT performance. The first is to reallocate resources from a transactional focus to one that adds value. The group explains that IT budgets are only growing modestly, so IT organizations need to self-fund the development of new competencies to support digital business transformation. To shift resources from “run” to “build” activities, IT organizations must relentlessly focus on efficiency improvements in the delivery of commodity services. Furthermore, they should consider consolidating infrastructure and service desk components to shared services or global business services, the report explains.


IT organizations must also embrace digital transformation. IT organizations are at a “crossroads,” with one foot in the new digital world of cloud, big data analytics, social media, mobile and the Internet of Things, and the other foot is in the past, constrained by legacy technologies and skill sets, says Mark Peacock, The Hackett Group’s IT Transformation Practice Leader and Principal.


“Many IT leaders are overwhelmed by this challenge, and they are likely to find themselves marginalized,” Peacock says. “But, IT leaders working for their organization to achieve world-class performance are energized by the opportunity to elevate the role of technology to a higher level, as senior management embraces digital as a cornerstone of the business strategy.”


IT organizations striving for world-class performance also need to lead the organization on the information and analytics transformation journey, the group explains. To do this, IT must take ownership of the enterprise information architecture, which has changed dramatically, The Hackett Group’s research found. Additionally, IT must support on-going business-led, data-related initiatives by providing services such as master data management, data integration and database administration.


The group’s final imperative for IT organizations is to adopt customer-centric service design and delivery principles. IT should focus on making it as easy as possible for internal associates, business partners and external customers to interact with information systems. Self-service is a prime example of the potential for customer-centric design. According to the firm’s research, world-class IT organizations see levels of self-service enablement up to six times greater than typical companies in key areas such as supplier inquiry, distributor collaboration and customer bill presentment.


What are your thoughts on world-class IT performance? Do you agree with these findings?

The prospect of a Donald Trump presidency began to sink in as U.S. citizens went to bed last night. Today, U.S. citizens, and citizens and leaders of other countries, are coming to terms with a future involving President-elect Trump.


In addressing what he called “the world community” during his acceptance speech early today, Trump said that “while we will always put America’s interests first, we will deal fairly with everyone ... all people and all other nations. We will seek common ground, not hostility; partnership, not conflict.”


Nonetheless, central facets of Trump’s campaign were vows to build a wall along the border with Mexico, deport millions of Hispanic immigrants, dismantle the North American Free Trade Agreement and begin a trade war with Mexico. The impact of such actions—if they are to actually take place—on the automotive industry, for example, would be significant. Nissan, General Motors, Fiat Chrysler Automobiles NV, Volkswagen AG, Ford and Mazda all build small cars in Mexico—and have plans for business expansion there.


Ford, in particular, has drawn Trump’s ire on the campaign trail. In September, Ford Chief Executive Officer Mark Fields announced that all of the company’s small-car production will be leaving U.S. plants and heading to lower-cost Mexico. On the campaign trail, Trump repeatedly criticized Ford’s investments in Mexico, and vowed that he would impose a 35 percent import tariff on any cars built in Mexico that Ford tries to sell in the U.S. It wasn’t surprising then, that immediately after Ford’s September announcement, Trump said in a statement that “These ridiculous, job-crushing transactions will not happen when I am president.”


The auto industry presumes that any tariff imposed on Ford will apply to all carmakers. Although permanent tariffs require congressional approval, a president can impose them unilaterally to protect domestic industries from unfair behavior by a foreign country, Donald Grimes, an economist at the Institute for Research on Labor, Employment and the Economy at the University of Michigan, says in a Bloomberg article today. Indeed, President George W. Bush took such action on imported steel, he remembers.


“Trump could impose a large tariff on vehicles and parts coming in from Mexico,” Grimes said before the election, Bloomberg reports. “This would clearly hurt the profitability of the auto industry in the short run. The companies would respond to those tariffs by moving the location of plants that mostly export to the U.S. to other countries, such as Vietnam and China. The plants would not return to the U.S. There are just too many other low-labor cost countries around the world.”


Trump hasn’t just taken aim at the automotive industry. Throughout his presidential campaign, Trump vowed to revive the U.S. economy by cutting taxes, preventing companies from making products overseas, renegotiating trade accords and imposing tariffs on imports from countries such as China. Trump’s presidential victory has consequently sent a shock through industries which rely on open trade. However, trade experts say it remains unclear how Trump’s statements in favor of protectionist trade measures and tough immigration controls could translate into policy.


“The honest answer is that no one knows; even Trump himself doesn’t know,” Bertrand Grabowski, a managing director at Germany’s DVB Bank (which specializes in financing trade), says in a Reuters article today. “He campaigned not on ideas but on anger and frustration.”


Tighter rules could even impact Indian IT services firms supporting U.S. companies. Shares in companies including Infosys and Tata Consultancy Services were sharply down as Trump closed in on his presidential victory. That said, Narayana Murthy, co-founder of Infosys and a key figure in India’s outsourcing industry, says realism will prevail.


“They may fine tune it here and there, but let’s remember that [Trump] is the president of 300 million U.S. people and I’m sure he’ll do what is in the best interest of America,” Murthy says, Reuters reports. “And what is in the best interest of America is for its corporations to succeed, for its corporations to create more jobs.”


What are your thoughts on the impact President-elect Trump will have on industry? Will he, as promised, move to dismantle the North American Free Trade Agreement?

The average organization faces more than 100 focused and targeted cybersecurity attacks each year, and respondents to a recent survey say one in three of these attacks will result in a successful security breach. That’s two to three effective cyberattacks per month. Despite that admission, 75 percent of the security executives responding to the survey said they are confident in their ability to protect their organization.


Accenture surveyed 2,000 enterprise security practitioners representing companies with annual revenues of $1 billion or more in 15 countries about their perceptions of cyber risks, the effectiveness of current cybersecurity efforts and the adequacy of existing investments. A resulting report, “Building Confidence: Facing the Cybersecurity Conundrum,” notes that, according to the survey’s respondents, the length of time taken to detect security breaches often compounds the problem. Surprisingly, more than half of the executives (51 percent) said it takes months to detect sophisticated breaches—and as many as a third of the successful breaches aren’t discovered at all by the security team.


“Cyberattacks are a constant operational reality across every industry today, and our survey reveals that catching criminal behavior requires more than the best practices and perspectives of the past,” says Kevin Richards, managing director, Accenture Security, North America. “There needs to be a fundamentally different approach to security protection, starting with identifying and prioritizing key company assets across the entire value chain. It’s also clear that the need for organizations to take a comprehensive end-to-end approach to digital security—one that integrates cyber defense deeply into the enterprise—has never been greater.”


Interestingly, even though more than half of the survey’s respondents said internal security breaches cause the most damage, two-thirds of the survey respondents said they lack confidence in their organization’s ability to monitor internal threats. What’s more, most respondents said it takes “months” to detect successful breaches, and 17 percent said the attacks were only discovered “within a year” or longer. Furthermore, 98 percent of the security breaches were reported by employees outside the security team.


High-profile cyberattacks—such as data breaches of Sony Corp., Target, Home Depot, leaks from the e-mail accounts of Democratic Party officials, and, most recently, a massive distributed denial of service attack on the servers of Dyn that shut down Twitter and other major Internet companies for several hours—have driven significant increases in cybersecurity awareness and spending, the report notes. Even so, the sentiment among the surveyed executives suggests organizations will continue to pursue the same countermeasures rather than investing in new and different cybersecurity controls to mitigate threats.


For example, given extra budget, half of the respondents indicated they would “double down” on their current cybersecurity spend priorities—even though those investments haven’t significantly deterred regular and ongoing breaches. These priorities include protecting the company’s reputation (cited by 54 percent of the respondents), safeguarding company information (47 percent), and protecting customer data (44 percent). Far fewer executives indicated they would invest the extra funds in efforts that would directly affect the organization’s bottom line, such as mitigating against financial losses (cited by 28 percent of the respondents) or investing in cybersecurity training (17 percent).


What are your thoughts on increasing cybersecurity? Do you see too much fixation on external threats and not enough attention being paid to internal threats?