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I recently interviewed Alex Curtiss who discussed how his American company remains competitive when compared to Asian outsourcing, in their case in regards to machined plastic parts.Alex is the President and CEO of Engineered Plastic Products Corporation (EPP Corporation). 



How can US companies remain competitive when compared with Asian outsourcing?



The way EPP approaches the issue of remaining competitive compared with Asian outsourcing is through supply chain management. The way EPP structures this with their customers is that once per year they come to EPP with the majority of their needs for plastic machining. They look at their EAUs. EPP then takes the requirements as literally one requirement. EPP then goes to their materials vendors to negotiate the fact that when they do receive an order it will be firm. The vendors usually will give a 15-20% discount over ‘discrete’ orders.


Traditionally, the problem when competing with Asian companies is that the manufacturers have been very hesitant to make a commitment, even if they know the commitment actually exists. In the old days 20 years ago they had something called blanked orders. No one wants to do blanket orders now because they are afraid if their business softens they will be forced to take the remainder of the requirement.

The way EPP structures things, which cannot easily be done with Asian sources, is to say “what is your EAU?” For example, if they say their EAU is 10,000 parts per year (roughly 800 per month) EPP does not force it on them. It is a pull system. The customer can save several ways:


Firstly, they save by making the commitment because EPP gets a better cost and can structure it into their manufacturing system, thus lowering the customer’s cost. EPP knows they have to run 10,000 parts at some point. They can use it as fill-in and optimize it because they know they will run it over and over again. Secondly, if the customer does not need 800 per month, EPP does not force it on them but instead allows them to communicate their needs.


Thirdly, the customer saves through inventory. EPP can literally do just in time inventory which will save significant amounts of money. The math calculations on the cost per day of holding inventory can easily be done. Fourthly, there are other side benefits including the flexibility of being able to change a part, to get some engineering assistance along the way, or whatever else is needed.


The key is a combination of commitment and flexibility. EPP has found a lot of customers come back to them to report that when things go wrong with an order language becomes a problem.  They will then have to wrestle with the supplier to determine who is at fault, and the customer usually has to pay up front.  EPP is ISO Certified and they guarantee 100% quality. When the material goes in it goes right to the line, most of their customers don’t even check their parts. If they want anything at all EPP sends a written quality report with it, but most customers don’t request this.


Why should companies consider working with domestic suppliers?


Another issue to consider if going to foreign suppliers is the copyright and legal protections which exist in the US and which don’t exist or are different overseas. There is the risk of patents being ripped off and designs being ripped off. EPP has had numerous customers tell them that they are fearful of doing that.


Also, from a financial standpoint Asia is starting to get a little more expensive. EPP can compete with the flexibility and other advantages mentioned in the previous question above. The customers can feel they have a secure situation in terms of their design – they can also easily communicate with EPP on any changes to the design. This makes it a lot easier.


However, if you are dealing with a basic commodity which is not going to change with wide tolerances and where quality isn’t particularly important, then perhaps you should go overseas. Yet, for a wide variety of things that are produced in the US they need to look at US sourcing now because we have some good tools to compete.




EPP is seeing an increasing number of people talking to them about problems with Asian sourcing. When they offer their version of the supply chain management system it becomes very attractive to them. Often when comparing costs among EPP’s type of precision products, they are within a few percent of Asian sources. In addition, the customer gets the security, flexibility and high-touch from EPP. The customer also factors in the time they have to wait for an example from an Asia supplier (between 10 and up to 20 weeks), compared with 2 days from EPP once they make their commitment.


It is important for domestic  manufacturers to embrace the idea of flexibility. Alex belongs to the GOA (Greater O’hare Association) in Chicago. Most people don’t realize that the Chicago area is the largest industrial base in North America. Alex also sits in on the Council of Manufacturing CEO’s and they talk about this issue all of the time. Alex thinks manufacturing as a whole is starting to take root in this country. Short of another recession, Alex believes US manufacturing will be a driver.


Alex also wishes there were more young people looking at manufacturing. EPP’s manufacturing group needs people badly. Alex believes we should talk more young people into studying manufacturing. This would enable EPP to fill a lot of jobs.



About Alex Curtiss


Alexcurtiss.jpgAlex Curtiss is a plastics manufacturing executive with over forty years experience and an expert in plastics material selection and manufacturing methods for custom plastic components.

Alex has authored publications on the subject of plastic materials and plastic machining. His work has been featured in Product Design & Development Magazine and Purchasing Management Magazine, among others. Alex has also been invited to speak on the subject in front of trade shows, corporations, and seminar groups.

Alex founded Engineered Plastic Products Corporation in 1976 and has since built the company into America's premier plastic machining supplier. EPP supplies the highest quality plastic parts to critical industries such as aerospace, medical, fluid and pneumatic power, scientific instrumentation, and the military.

At EPP, Alex has developed the concept of the "Plastics Application Engineer." The EPP team of plastics experts help their customers determine the proper plastic material and manufacturing methods for their custom components.  This complimentary service has helped EPP stand out as America's premier plastic machining supplier.



Alex’s background is not only materials, but in processes and design. His company helps their customers select the materials, figure out which process works best, and gives them the tools and information they need to design components for their equipment which are efficient and will do the job for fit, function, longevity, etc, all for a cost which makes sense.


EPP Corporation

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I interviewed Luke Anderson who discussed risk management. Luke is the Business Procurement Manager for Valspar General Industrial Business. He is responsible for supply chain elements within the business consisting of site purchasing, inbound freight, and also supply chain cost reduction. He works in conjunction with the lab to achieve formulated cost reduction.




Is Supply Chain Risk Increasing?



Lack of Capacity - Supply chain risk is increasing and I define risk as anything that prevents a company from getting a product to a customer. It could be material, delivery or quality related. What we’re seeing right now with our supply base is that people are simply making less, closing facilities or constricting supply to maintain pricing. This is basically due to the fact that demand is tanking. As a result we have fewer secondary sites. We have less inventory in the pipeline in case of an issue or a new product where we might have growth. Therefore, we have increased risk.



Product Quality - At the same time we have suppliers that are cutting corners with product quality. We’ve had cases where we’re seeing lots of variation within raw materials.



Freight Losses - In addition, no one in the freight business is making money right now. Therefore, carriers are less interested in our business because they’re not making money or they are going out of business. This means there are fewer people to service our needs, which makes it harder to get the product to the customer.




Globalization - The supply chain is becoming increasingly global. We have inconsistent standards around the world, as well as inconsistent expectations. For example, due to cultural factors in Brazil people tend to be less willing to be aggressive like Americans. When there is a need for something they may not be on it as quickly as an American company. When you have limited options throughout the world you typically want to have several options available for your company. This may include international sources.



How to Keep Pace with Risks?



1. Freight-   we are establishing corporate contracts with price escalator or de-escalator clauses tied to diesel. It is my assumption that pricing will go up and go down for the near future. The price escalator/de-escalator clauses help keep everyone whole.



2. Quality – is the most difficult piece. We’re increasingly sharing our expectations on standards with suppliers, targeting those companies that historically have been either more inconsistent or just naturally smaller. For example, Dow Chemical is going to have a very high level of quality and a very high level of expertise in product manufacturer. However, a little guy making a pigment in India may not have the same types of product specification controls.



3. Capacity - Related to this is qualifying more people so you have more options available in the event that someone goes down. If you work with a company that has three plants and they’ve closed two you need to qualify someone else that now has two more plants. This will give you options in the event of a disaster.


4. Globalization -  Globalization sometimes helps you to spread risk out among several options, rather than simply using one domestic source. For example, hurricanes are problematic for the the large manufacturers in the petrol chemical industry in the Gulf of Mexico. We have had Katrina and then we had a couple other hurricanes over the last few years that severely impacted their ability to supply for one-plus months at a time. Having other international options may not be the fastest to respond, but it’s better than nothing in the event of a catastrophe.



Typically, with international sources you have a lower unit cost, but you are offsetting that with more risk. It’s like playing the stock market. Do you want to invest in the little guy, small cap, or do you want to buy the large multinational? There are trade offs between high risk, high reward versus the low risk, maybe lower reward. We try to strike a balance between the two.



What is needed in the industry?



Openness to audit, openness to data sharing, and willingness to change.


It’s understanding your customers’ needs. In this case we’re the customer, and our need is to sleep better at night.



Environmental Concerns



Environmental issues are tied with government-regulated environmental issues, which would specifically be REACH in Europe. This has required us to design products that are specifically able to meet the requirements laid out by the European Union and also to adjust our global product formulas. We typically try to service customers globally with one formula, which we found to be their preference as well as ours, but that isn’t always possible with REACH. I can think of one particular product where it was banned because it was believed to be a carcinogen in Europe, but in the U.S. they’ve shown no issues. I think the FDA and a few other agencies have looked into it. However, we were basically just told, ‘Nope, you’ve gotta change.’ And that’s what it is, so it makes it more difficult. It makes you have a regional strategy rather than a global strategy in some cases.


About Luke Anderson




Business Procurement Manager


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I interviewed James Taylor who discussed supply chain risk management. James is the owner/president of Omnia Paratus Corporation and is also an independent consultant who also specializes in supply chain risk management.


Supply chain management is an intricate process that involves many different components and people to ensure that it is smoothly operated. From a program management perspective, you have to consider each component and how those factors all tie in to the desired outcome.As you begin assessing and identifying those risks involved, you then have to consider the impact that it will have on specific areas. Whenever there is a major contract awarded, it is best to perform a best value analysis in order to determine what is the best possible outcome for the project.




Calculated Risks in Risk Management



The very nature of the supply chain management industry is risk. Supply chain risk is increasing and identifying those risks is a matter of identifying the contributing factors associated with each segment of the supply chain.



The issue in terms of trying to identify risks within supply chains up front is becoming a challenge. Management and executives are beginning to realize the impact that it has on the supply chain. However, what is also an issue is the importance that the supply chain plays within a company and how they inter-correlate with other aspects of the supply management system.



My initial focal client is government contracts. Much of my experience is in the aerospace and defense industries and with NASA on large-scale programs. However, I also address any kind of potential procurement. Procurement is probably the only organization within a company that directly impacts profit dollar for dollar.



Supply chain management is an intricate process that involves many different components and people to ensure that it is smoothly operated.


Most of the top risk factors influencing supply chain strategies are directly identifiable in terms of cost, schedule, productivity and technical requirements. Many times, factoring other components into a supply chain is to determine what is going to be the most cost-effective way of doing business. What is the most cost-effective procedure that supplier’s use to procure with? There are other procedures to consider that include delivery scheduling, receiving goods, and daily operations and issues. All of these issues are inter-connected and feed into each other.



Additionally, these factors also include the challenge of technology and how it involves and works with the suppliers. In supply management, we look at what those suppliers are able to produce for a company and what technical advancements they possess. There must be the technical ability for those companies to successfully produce various types of goods so that they are a viable resource for the marketplace.



The process of utilizing a program management thought process has a large effect on the industry. There are many risks to consider that effect companies financially, through their productivity, their viability and their technical resources.



From a program management thought process, it is a multi-tiered approach. The first approach is to assess where your operational requirements are for the supply chain.



  • Where are the risks within the system?
  • Are there any risks within your inventory?
  • Do you see any potential risks with your receipt of goods?
  • Are the risks within the inventory logistical systems you’re currently using?
  • Are they not being accurately utilized?
  • Also, in terms of hard costs, you have to assess what material risks may be a factor.




For example, is the cost of steel materials fluctuating? Is there a possibility that you may lose funding if the cost does go too low? Are you possibly at a place where you may have to consider looking at cost reductions in order to make a profit?



From a technological standpoint in a program management view, what are the requirements you have? For example, commercial industries have certain requirements for the goods they’re trying to manufacture and produce to consumers from the aerospace industry aspect. With this, you would have to consider your technological requirements for the production of goods and the delivery requirements to their customers or buyers.



Therefore, from a program management perspective, you have to consider each component and how those factors all tie in to the desired outcome. As you begin assessing and identifying those risks involved, you then have to consider the impact that it will have on specific areas.




  • How is this risk going to impact you from a cost perspective at a program level? How is it going to impact my operational schedule and effective use of time?
  • How is it going to impact my technical capabilities of meeting the requirements outlined?




If these factors become real issues for the company, you then have to consider your recourse in terms of mitigation. Is it going to be cost-effective to mitigate the risk? For instance, if you have a risk that has the potential to impact your company by $1 million dollars, but it’s going to take $5 million dollars to mitigate that risk, is that really cost-effective for your corporation? And, are there alternative processes for either mitigating or avoiding that risk altogether?”




Thought leadership is a growing concept that many mainstream companies and company executives are quickly embracing. The potential for effective thought leadership can visibly impact and strengthen a company’s bottom line and operational growth.



Through my own determination as a business owner, I have seen how it is to grow a company both sound and successful. I began a career in supply chain management on the procurement side and always looked at what was the best value for a company. How do you address best value when you’re trying to assess all facets of the operation, and not just focusing on cost?


  • What are the delivery requirements?
  • What are the suppliers’ technical capabilities?
  • How will certain procedures positively or negatively affect operations?



When I got into risk management, I used something that has been successful for me before, and that was using a method of utilizing best value analysis. Whenever there is a major contract awarded, it is best to perform a best value analysis in order to determine what is the best possible outcome for the project.


Essentially, you are performing a risk analysis from the standpoint of what is the least risk associated with each supplier that we would potentially award a contract to? I’ve seen different models used on a best value analysis or procurement analysis that they would identify risks, but they would never say what is that long-term potential impact. They would just be rated in standard format of high, medium, and low and then discarded to the side.


However, such a system is counter-productive to the risk management process. In risk management, there’s something called probabilistic risk analysis where you actually take the risks and the consequences associated with those risks and tie them into a program schedule. Once the analysis has been integrated, you are then better able to see that you have potentially low risks. But, you can also see whether or not those low risks have significant potential to delay operations for a significant time period.



Therefore, the innovative idea is determining that while yes, there are risks within a bid, how do those risks impact your long term productivity and goal planning? From a supplier’s perspective, how are they also affected long-term? For instance, if a contract is awarded to Supplier X and they have identified 6 risks, those risks might end up delaying a program 3 months on their deliveries. But, once you’ve integrated those risks into a programs cost and budget, this potential issue could then translate to that project or that program losing out on award fees. While there may be risks associated with having to do additional engineering work not previously captured within a program management budget, it could also wind up delaying other areas in the program as well.



Another innovative mechanics of the issue involves the bid from a supplier. If you’ve already identified risks within their cost, within their schedule, within their technical responses, then you’ve already begun the process of reducing any surprise issues that may arise. This not only impacts the program immediately, but it can also impact it long term. One reason is that award fees are associated with meeting certain milestones. When these factors are tied together, the impact of not meeting a milestone grows and layers the issues around it.



However, if there is an award fee associated, it will not only impact the program’s budget and its profitability, but it also impacts the company’s long-term financial stability. Many times within supply chain procurement, there’s almost a narrow focus of just looking at the immediate surplus of cost savings. That cost savings may have multiple risks associated with it, and those risks could compound into a financial deficit based on having to do additional engineering work, missing out on award fees, the supplier not delivering or the inability to meet their technical capabilities. Therefore, the assessment then is really trying to analyze how the process is going to impact a program and a company long term. Then, taking that same information gathered, you can use the results to do a best value analysis or least risk adverse procurement.



What's Instore for the Future?



How do I see supply chain risk management evolving? Industries are beginning to realize that doing risk management at the supply chain level is really a forward-thinking application of risk management. It is also a definite assessment of knowing that whenever a risk associated with a supplier is identified, it’s typically after a contract has been awarded. Additionally, it may also pertain to whether or not they meet their budget, if they meet any technical requirements, or if they are going to be able to meet the delivery schedule formerly agreed to.



Identifying risks at the end stage, after a contract has already been awarded, is not truly risk management. It is actually more of an issue management because you know you’re already in a situation where there’s a possibility where there will be delays and you will then try to figure out the next step. The concept that I’ve put together from my own past experiences really encompasses a forward-thinking application of doing risk management initially. By doing this in the beginning and trying to identify and avoid those potential problem areas, you ensure that you’re operating it efficiently and as effectively as possible. Like I said earlier, supply chain programs can become narrow and too focused and hone in too quickly on attention gains of cost savings. And while cost savings off the initial contract may be appealing initially, it can also have repercussions if you don’t identify the risks associated with those cost savings. Those types of perks can eventually be a negative point because they weren’t properly addressed in the beginning.


About James Taylor




James Taylor



Supply Chain & Risk Management Consultant

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I interviewed Steve Sellas who started up a company called Internet Supply Chain Management. Internet Supply Chain Management (ISCM) is a company Steven Sellas started in April 2010. His goal with ISCM is to explore e-commerce and digital applications with supply chain management, like data mining and various opportunities in the digital realm instead of the traditional physical supply chain management.



Steven has fourteen years’ experience with Ford Motor Company and Customs House Brokerages where he had extensive supply chain management experience in traditional operations. He wanted to start exploring the digital realm and gaining experience and opportunities in e-commerce and the whole slew of technologies that are coming out right now that applies to supply chain management. He feels it is very interesting and something that he wants to pursue on a professional level.


Is there anything more you could say about your company, what you’re doing or what you plan to do?”


My company, I just started in April 2010, Internet Supply Chain Management, and the goal is to explore opportunities and, in effect, initially work on the back end as far as Internet retailing is concerned and the front end, which is involved in, gets more involved in the traditional supply chain. But also find revenue streams that are based on digital information versus a product. That’s one phase. The other phase is services that involve, for example, data mining, and other services and software programs and expertise to that of a consulting business unit of my company as well. I think that the physical movement of freights or goods is a very traditional model, but I think as we go forward, there are huge opportunities in the digital data realm to explore the same concepts but in a new format. So that’s what Internet Supply Chain Management Incorporated is all about; taking advantage of the technologies and exploring the future paradigm with which commerce is headed.


“Do you see that the physical supply chain and digital will sort of converge or that there will be some overlap between the two?”


“Actually, that’s a very good question. I see—honestly, people are still gonna be buying goods, physical goods, in the traditional way, so I don’t see that ever going away. At the same time the technologies now, like with RFID, data mining, digital, so many opportunities there to improve the current supply chain management, so you can actually focus on e-commerce, which is circumventing the traditional model, which offers the same technology and efficiencies and productivity gains in the traditional bricks and mortars supply chain, so you can really burn the candle at both ends in my opinion and it’s exciting. Technology becoming more readily available and cost-effective; that was always a barrier in my experiences. To employ some of these technologies was possible, but it was expensive or prohibited, so you can actually use technology now; for example, in cloud computing, which is the new IT infrastructure. We can actually do more things in real time and have tracking twenty-four hours a day, seven days a week anywhere in the world with satellite technology. So there’s a lot of technological advances; it’s just a matter of being cost-effective. And it can be used in the traditional supply chain or in the digital as well.”


“Do you have any final insights regarding opportunities in Digital Supply Chain?”


“That’s a very good question. I created my company, ISCM, I’ve noticed that commerce retail sales have improved five hundred ninety-four percent over the last decade as compared to a twenty-six percent improvement in traditional retail sales. So the opportunities in e-commerce are more pronounced with the Internet versus traditional bricks and mortar infrastructure. There’s a low overhead and the more flexible supply chain. At the same time technology’s more data-driven, where information is available and abundant, and tapping into this data sheds light in the specific areas of the supply chain, where better tracking throughout the supply chain can yield opportunities for significant improvement. And I believe this is a great opportunity in the future to focus on this new retail model.”


About Steven Sellas




Experienced Parts Supply and Logistics professional

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I recently interviewed Nany Faber, a retired policy analyst with 30+ years of experience in purchasing and contracting. She discussed the many factors to consider when evaluating on-shore procurement.



Nancy Faber lives in the Portland area and has bachelor degrees in both Business Administration and Psychology. She found both of these disciplines to be useful in the procurement field in dealing with the elements of a business, most importantly employees. She worked for Bonneville Power Administration for 31 years. The organization is a hydro-electric wholesale marketing utility and a Federal agency within the department of energy.


How would you decide whether to make or buy in-country versus off-shoring?


There are literally dozens of questions to be answered. A buyer should spend a fair amount of their time doing their homework before making a decision to go locally, nationally, or internationally. Questions to consider include:


  1. What is your product line?
  2. Are there component and sub-component parts that are already part of other products you manufacture, where you already have good solid relationships? This would simply require some re-tooling or modification of an existing product line.
  3. Labor costs – you can’t just measure hourly wages in the US versus hourly wages overseas. There are many additional costs that must be added into that overseas decision.
  4. What are the foreign country’s taxes, duties, etc? These can be legal government or culturally based.
  5. Are you looking to start up a completely new line where it would be an original decision for your company? This would mean you don’t have any experience on-shore off-shore. It would also mean you have many more questions to answer before you can make the decision.
  6. Is it a large piece of equipment with many components and sub-components? If so, what is the critical nature of those various elements?
  7. Can you afford to have something shipped half way across the world and suffer from potential political risks, piracy, and other general delays?
  8. Taxes and duties, trade restrictions, US Customs, Security. The Department of Homeland Security measures add additional time at the port.
  9. Environmental concerns. The US has some of the strongest environmental regulations, which adds expense to the final production process. This is not true for some other countries.
  10. Language barriers is an obvious issue. Do you want to rely on paid interpreters, or hire people who are fluent in foreign languages? Nancy thinks it would be unwise to rely solely on interpreters from the companies you are dealing with offshore.
  11. Additional government requirements imposed offshore.
  12. Quality standards. This must go with any quality detailed specs which may get complex. This would go back to language barrier and overall quality assurance programs at on or offshore manufacturing sites. Quality is an issue you should deal with regardless whether you are onshore or offshore. It should be understood and verified before you ever make a product.
  13. Locations of available suppliers. Has your buying or sourcing team done their homework to look for a full range of sources? There might be someone down the street who is ready, willing and able. We need jobs in the US and there is plenty of factory capacity to go around. This leads to a company’s social responsibility and socio-economic standards in terms of smaller minority businesses.
  14. If a large manufacturing firm in the US is doing business with the federal government they must obviously adhere to requirements for seeking out and awarding subcontracts to small and disadvantaged businesses. In fact the US government has an overall requirement for 23% of overall purchases to go through small businesses. That may be a deciding factor for a company to win a government contract.



About Nancy Faber



Retired, Former Policy Analyst

Bonneville Power Administration

LinkedIn Profile

I recently interviewed Peter Balbus who discussed the 21st century supply chain and how it is different. He is an experienced management consultant and founder of Pragmaxis, LLC with a particular interest in business innovation and operations improvement.



Peter, please provide a brief background of yourself:


·         I’ve had the privilege of serving hundreds of clients as a strategic business innovation and operations improvement consultant for more than 25 years, working for some great firms along the way like KPMG, CSC Index and Booz Allen. It’s been a great journey, working with execs and senior management in dozens of the best known global brands as well as scores of lesser-known but equally vital small and mid-sized players.


·         I left Booz Allen in 2001 as a vice president and founded Pragmaxis, LLC as an independent consulting practice so I could spend more of my time working directly with clients.  It also gave me the freedom to advance business innovation and operations practices through speaking engagements and published articles.


·         My educational foundation includes an undergraduate degree from MIT in chemical engineering and completion of the University of Chicago executive program in finance and strategy. I also hold professional certification as a master business innovator through Illinois Institute of Technology.


Thank you – let’s get right into our topic today.  What do you see as different in 21st century supply chains compared with 20th century practices?


·         Great question!  In general, it’s my contention that both supply chain and general management need to view the supply chain function in entirely new ways.  Where finance and capital management reigned supreme in the latter half of the 20th century, I see increasing evidence for strategic sourcing and supply chain management ascending in importance in the corporate hierarchy, with finance and capital management   becoming more and more of a support or enabling function.


·         Supply chain logistics have traditionally been used as a cost-cutting mechanism;   now logistics are increasingly being used as growth drivers to open up new markets, especially emerging markets, as more companies seek new revenue opportunities.


·         Overall, the objectives of supply chain management in the 21st century have become more strategic and complex.  I see four major trends driving most of this increasing complexity today:


o   First, Information Technology – especially GPS and location-based applications

o   Second, the need for enhanced security and resiliency against both natural and man-made calamities.

o   Third, on-shoring – or what some are calling RE-shoring.

o   And finally, fourth -- the convergence of supply chain management with strategic innovation sourcing.



Interesting – let’s walk through each of these at a high level and then I’m going to ask you to summarize what all of this means.


·         Great! Let’s start by pulling these 4 drivers apart to examine each one, but we’ll quickly see that they’re all intricately intertwined


·         First, continuing advances in information technology, including the declassification and commercial use of precision GPS technologies, has enabled  all kinds of tracking and position-based capabilities especially in the last five years. Concurrent advances in sensor systems enable environmental and contamination detection capabilities. Taken together, companies can now know  exactly where and what the status of inbound supplies, components and equipment are.


·         This is important, because we’ve also seen tremendous increases in the need to ensure the integrity of shipping containers and logistics chains in the face of unprecedented terrorist threats and natural disasters.  An emerging concept of the “resilient corporation” – able to cope well with unexpected supply disruptions -- is beginning to overtake just-in-time and lean manufacturing methods as the desired objective of 21st century supply chain management.


·         One of the more welcome trends I’m seeing is a significant increase in the number of companies and manufacturing facilities being repatriated, or on-shored back into the US from China and Mexico. GE, Caterpillar, NCR, and Wham-O are among scores of large companies reversing their 40-year bias towards outsourcing and are starting to bring significant levels of production back home.


·         In China, double-digit annual increases in labor costs and rising standards of living have eroded much of the cost advantage that China enjoyed a decade ago.  The costs of transportation are soaring in the face of global shipping container shortages and imbalances, upwardly spiraling fuel costs and enhanced security measures. Studies that I’ve read forecast that net labor costs in China and the US will actually converge by 2015.


·         Companies that have off-shored most of their manufacturing and supply operations away from their demand locations are increasingly finding that it hurts their ability to meet many aspects of customer expectations – especially in key areas such as rapid response and delivery times and efficiently fulfilling customer demands for customized products.


·         Finally, I’m seeing a true convergence of supply chain management with strategic innovation sourcing.  When companies get it right, their supply chains can become invaluable assets generating enormous strategic and competitive advantage.  More and more companies are looking to their supplier networks and finding key sources of strategic innovation and product development partners – as well as added resiliency to endure unexpected disruptions.



So – taken altogether, what are you advising your clients to think or do differently than they were before?


·         Perhaps more than anything, I’m advising my clients to “detect the unexpected” --    to enhance their capabilities to monitor internal and external indicators of change   as a means of identifying potential disruptions in advance.


·         Resilient organizations seek out potentially disturbing information and test it against current assumptions, management approaches and mental models.  They work diligently to detect the unexpected so they can respond quickly to exploit opportunities and prevent costly interruptions to their operations when actual disruptive events occur.


·         In these times of great uncertainty and unpredictability, it is critically important that companies use small-scale experiments to field test new ideas before they are deployed more broadly. Successful companies continuously invest  in market research, strategy refinement, product development, and ongoing operations and service improvements. They invest in small experiments and new product trials that carry low costs of failure.


·         These companies foster a culture of continuous innovation and ingenuity to solve problems and adapt to market challenges.  A side benefit is that employees who believe they can influence events that affect their work and lives are more likely to be engaged, committed, and act in positive ways associated with resilience.


·         My closing advice is to turn today’s more complex supply chain management dynamics into a winning scenario for you and your company.  Seek out challenges and convert them into opportunities. Bear in mind the classical adage,  “Fortune favors the bold.”


Peter Balbus




Pragmaxis, LLC

LinkedIn Profile

I recently interviewed Kyle Hawke who discussed how crowd sourcing can be used in for hiring supply chain talent.



Kyle started his business in late 2009 where he began by trying to do crowd sourced consulting. He discovered a number of problems with that business model and also realized what would work with it. He spent the first half of this year re-thinking and re-designing the business model and technology, based upon the lessons from 2010. He is building new technology this summer and will be rolling it out this fall.



Kyle started his career at Accenture doing IT and Supply Chain consulting with large telecom clients in the US, such as AT&T, Verizon and Comcast. While he was there he started thinking about how he could bring the big firm consulting model and the benefits that come along with it, to the small business market. Roughly 1.5 to 2 years ago Kyle started a company called Whinot that helps small business owners get business advice and help through a web platform from a community of reputable business experts.



Crowd sourcing and how it is relevant to supply chains



Crowd sourcing is a process of getting work done by a large group of people versus one individual. You can equate it to outsourcing or think about it in relative terms to outsourcing. In outsourcing your work is being done by another company because that company has a specialization or geographic benefit or cost benefit. Crowd sourcing is taking similar work, or a variety of types of work and putting it out to a community of individuals that are motivated in one way or another to get work done.



The benefits of crowd sourcing are one of two things, and sometimes both. The first is that you get more diversity in ideas or opinions. As such you can get better ideas from crowd sourcing. You may also get lower cost. With these individuals they are generally working on small tasks with little overhead in the traditional sense. Therefore, those cost savings are realized by the host of the crowd sourcing project.



Supply chain managers may be able to use crowd sourcing in a number of ways. In general, any manager, including supply chain managers, can tap into their employees or their vendors and customers to generate ideas on how to improve their supply chain processes or operations. If you think about this relevant to the current way it may be done might involve being in a conference room with a manager or a team of direct reports.



Kyle’s concept is really extending that both within the enterprise and beyond in some cases, to hopefully get better ideas in terms of how to improve things and then to leverage those same people who have ideas to implement them.



Another example would be if you are talking about inventory databases or product lists, SKU lists etc. These things can quickly get out of sync as products change or product descriptions change. You can use crowd sourcing from existing services providers on the web today to provide a way to clean up or maintain the integrity of those databases. However, for supply chain managers when it comes to kicking boxes and the physical distribution of products, it will continue to be done by the traditional employee model.



Where do you see the future of crowd sourcing?



From Kyle’s perspective, the future of crowd sourcing is in the trend we are already seeing in businesses moving to a contract labor model. Businesses want to use more flexible labor models with 1099 versus W2 employees in the US. However, that will continue to become a knowledge work model, where companies don’t pay for an 8 hour day. Rather, companies will pay for 1 hour of their time or expertise. The same thing applies to the micro-task model. The future of crowd sourcing is in the continued trend towards the contract labor model.



What should companies be doing to take advantage of the opportunities crowd sourcing has to offer?



When you are thinking about taking on a crowd sourcing project the same logic applies in terms of any new initiative. You should definitely start small. In Kyle’s opinion you should start with knowledge work where you would go to a community of people who know your business today, whether employees, partners, vendors, suppliers or customers. You use them to generate ideas on how to improve an operation. Starting small and using knowledge work as a pilot project is a low risk way to start with crowd sourcing.


Once you get comfortable with the downsides of crowd sourcing, namely loss of control and some exposure in terms of privacy. If you want to continue, start thinking about how you can benefit from getting transactional work done at a low cost, or creative and knowledge work done with a more diversity of opinion. Those are the types of processes or work that you can start to think about how to leverage crowd sourcing. There isn’t a one size fits all model in terms of how to get started with every supply chain.


There are a number of service providers who either have existing web platforms or experience setting up crowd sourcing initiatives, including Kyle. These individuals can help you think through all of the aspects of doing that specific to your business.


Just this week a book came out which Kyle has been reading called ‘The Complete Idiot’s Guide to Crowd Sourcing’. The book walks the business manager through the process of setting up a crowd sourcing project.




There isn’t a one size fits all model. It depends on where the business manager is looking to reduce costs or get better ideas. If anyone needs help in thinking through this Kyle would be happy to spend some time on the phone with them.


About Kyle Hawke




Co-Founder of

Crowdsourced business consulting.

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I recently interviewed Stewart Levine who discussed the importance of having people involved in the supply chain process receive some education in: change management, communication skills, effective collaboration and conflict resolution.



For the last few years Stewart has been developing a collaboration about high performance supply chain management. He was introduced to Bob Stahl. Bob is one of the ‘expert gurus’ in the area of Supply Chain Management and more specifically in the area of Supply Chain Planning. Stewart sent Bob some information after he talked about the importance of resolving conflict and the importance of changing mindsets.


Stewart asked Bob how to do this and found that he did it intuitively. He really didn’t have an understanding that the whole arena of how you resolve conflict, communicate more effectively and cope with change is really a skill that people can be taught and they can learn. Stewart exposed Bob to some things he had developed and Bob read a few of Stewart’s books.


Afterwards, Bob realized that we could really impact the supply chain planning process, which inherently is designed to raise conflicts between one department and another. However, people could be taught to shift their mindset and not see it as a competition, but instead see it in a cooperative way to deal with all the vectors which come to bear in any kind of effective supply chain process.


Change management applied in supply chains


To realize that as people are shifting their focus from seeing supply chain management as a competitive process where each department acts in its own silo into a much more cooperative process. The mindset of the individuals involved needs to shift. Stewart would call this a change management process. People need to be aware that as they move through change it doesn’t happen automatically. There is no magic pill that people take.


There are discrete steps in the change process. There is a letting go of the way people have been behaving and Stewart includes the way people think as a behavior. It is having a transition where people are letting go of the past. Then it is about new action, stepping into the future.


Being able to understand that process helps people move through the whole notion of change, not seeing it as a big amorphous thing, but see it as a shift of mindset and behaviors. They need to see it as something they can consciously participate in and not something that is done to them.


Recommended Communications Skills


Stewart has a whole body that he calls communication tool box. That involves being aware of critical communication skills. In his workshops Stewart often sets the goal of people to become more emotionally intelligent conscious communicators. Being a conscious communicator means being aware of what you are saying and understanding the impact it is going to have on other people. Emotional intelligence brings a level of self knowledge, self awareness, self management, self motivation, having empathy, and good interpersonal skills.


Regarding the interpersonal skills, Stewart goes back to a mantra which was taught to him by his mentor when he was in his 20s: “You cannot un-punch someone”. It is about being able to communicate in a way that is diplomatic and tactful, having an understanding of the nuances of the situation. It involves communicating in a way that doesn’t harm or offend, yet gets your message across. Most people don’t realize that about 90% of communication is non verbal. As such, we need to be extra mindful when working virtually with people. It is the mood and tone of our messages, facial expressions, the visual and use of emoticons. It is about being aware of whether or not we are reacting or responding in situations. It involves using eye messages. Are our relationships object relationships or preferable subject relationships where we care about the other people involved.




The goal of any situation where you are moving through conflict is to have an agreement for results. Stewart has a model of 10 essential elements for results, meaning where is it you want to go strategically and what are the critical elements we need to have agreement on in order to get there. Within that there is a model for resolving conflict which has 3 critical elements:


1. Make sure you have your facts on the table.

2. Deal with the emotions

3. Create an agreement for the future


If we add these principles and behaviors into the supply chain process it can be much healthier and much more effective.


About Stewart Levine





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I recently interviewed Tony Noe about locating and qualifying global sources. Tony has been in purchasing for over 35 years, a large majority of those years involved doing global and international sourcing. He has traveled to 31 countries so far, in search of that ever elusive low cost supplier. Tony has had a lot of experience with trying to find that supplier in those foreign countries.



How do you start a search for global suppliers?


One of the first criteria is to understand what you wish to buy, what are the items that make sense? Generally speaking, those will be items where there is a high labor content, or there is a raw material that is native to a particular region, which is why it would save you money to go to that region. Once you have done that, there are a number of very good sources to start with.


Economic development departments of the native governments, have offices and embassies in the United States. These are people you can contact if you know that you want to look for mahogany, for example, you would look to where mahogany is native in the world. You will find sources in few areas, such as Indonesia. Once you have determined the native growth areas you then go to the economic development departments of the embassies. They will guide you to who are the largest exporters of mahogany in their country. This then gives you a bid list.


The second way to search for global suppliers is to contact other people who may be buying similar products. Ask them for their experiences. Who do they buy from? Who have they found to be useful?


The third way to search for global suppliers would be publications such as, which is primarily focused on the Chinese market, but there are several other equivalent publications that focus on India, Malaysia, Indonesia, and Korea. It is like going a register where you have a lot of suppliers who make similar products. You can use that to research a source.


The first steps to identify the correct items and other specs for the items to quote globally


One of the things you need to ensure is that your specifications are not culturally weighted. For example, if you are buying a part and your print is in inches, understand that the entire world is in metric. You have two choices: 1. You can do the conversion to what works for you in a metric dimension, or 2. You can rely on the supplier to round to a metric standard that will work for you. Tony has found that this second option to not be a very good idea. You are better off when your specs are internationally translatable. Tony has his engineering group do the conversion to make sure that whatever they round to or come up with is something that will work for him.


Using ASTM specs tends to be a US available specification, but if you are going to a global environment where you are looking for developing country’s suppliers, they probably will not know what ASTM stands for or what the specification is. You will have to paraphrase it, or use an international standard as your specification. Or you will have to provide a copy of the ASTM along with the rest of the specs in your quote package.

All of these things are needs to make sure what you are asking for is understandable by the other party.


The other really important criteria is whether what you specify is really what you get today. Is it what you buy, or has there been undocumented changes which you have accepted in your specifications, but which your engineering or operations department has not really made a note of in the drawing. In fact that hole is no longer a 0.5 but 0.65 because they found they needed that much tolerance to make it work. However, no one updated the drawing. Now you are asking for a spec which is tighter than you are getting from your supplier. Naturally, the supplier will not be competitive.


Some of the things to watch out for when quoting globally


One of the first things you want to make sure is that the company actually exists. Tony has had more than one occasion where a supplier responded to a request for quotation when they were really pressed or he made a visit to that country to see that supplier. However, it turned out they wasn’t any supplier. It was a broker who was placing the business at multiple manufacturers.


Tony began to figure this out when he and his team noticed that for shipment to shipment to mean average of certain dimensions were shipping back and forth. They were not varying, they were mean centered depending on what shipment came in. Once they figured out the people they were working with were using multiple suppliers it made sense because they had different capabilities.


You also need to ensure, when you are working with a global supplier, is that the supplier has the capacity to take on a fairly large volume from you.


This is because American suppliers typically will build capacity and then go out and sell it. Global suppliers, on the other hand, tend to sell business and then go out and build capacity.


If your supplier has excess capacity you should ask why. Did a large customer just leave? Has his customer’s business drop off dramatically? There is some explanation and you want to know what that is before you get too far into it. If another major customer has left him because his price was not competitive, quality was not good, or delivery was not on time, that would not be the supplier you want. Make sure you know why the supplier has capacity and make sure the supplier exists.


These are important aspects to consider because for the lowest possible cost you are looking for a supplier who hasn’t done a lot of international business and he is looking for you to train him. If you want to mentor a supplier you can get much better cost but it also takes time, travel and realistically an investment to grow him to be a satisfactory supplier. You will reap the rewards. That supplier will loyal to you with the price and delivery and capacity. However, is your company willing to spend the money and time to send the right people over to help him grow and become a good supplier to you?


About Tony




Tony is part of the ISM Global Group, and is on the board of directors. He had been the chair. They are always read to assist someone doing global work.


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I recently interviewed Heather Stagl who discussed how to influence organizational change without having authority.



Heather’s background is in industrial engineering, which is her undergraduate degree. Right out of school she got a job at Solo Cup Company in the Chicago area where she was on a team implementing an MRP system throughout all their plants. Heather was what she calls a ‘change agent’, which is someone who is influencing change without authority. Heather was at Corporate and working with the people at all of the different plants, trying to get them to use the new system, showing them how to use it and showing them all of the new technology they could use.


They were all working for their plant managers and Heather was working at Corporate. Therefore, she had to use her influence in order to get them to do what they needed to do. This is where she started to become more interested in things such as change management versus industrial engineering. After a few years at Solo Cup Company Heather decided to try to use her industrial engineering degree by going to a company called the Jel Sert Company out of the Chicago area. They are the makers of Flavor Ice and other fun foods.


Heather started out as an entry level industrial engineer doing things such as systems engineering, process improvement, etc. She learned pretty quickly that you can’t just design a fancy system and say ‘here this is your new job, do it this way instead’. People don’t like that very much.

Heather started to become more interested in leadership and change management and how you get people to do things which would be better for their jobs which they may not want to do because they are resistant to the whole idea of change. Heather went back to school and got an MBA in leadership and change management at De Paul University. She started learning things which really woke her up to the way that organizations should be run. Heather looked at the organization she was working at and discovered their company was “really messed up, just like any other organization on the planet is in some way messed up”.


As a result, Heather started speaking up and asking what she could do about it. The company gave her the chance and made her the director of organizational effectiveness, which was after about 5 years at the company. She was responsible for things such as developing an innovation culture, working on balanced score cards, etc.


Her current role at the company she created, called Enclaria, is to help people who are change agents in their organizations to influence change without having authority. Heather loves people who are trying to make a difference in their companies and just need a little help to get started.


Leading Change from the Middle


Someone who leads change from the middle is what Heather calls a change agent. It is someone who is influencing change without authority. It is someone who is responsible for implementing change, but they don’t actually have the authority to get it done. Heather recognizes that you can’t just change one part of a supply chain and have it not impact other parts up and down the chain. Or if you are moving from a push system to a pull system it is an even bigger change because you are changing the way people do their jobs and make decisions. Most of the people going through the change probably don’t work for you. They work for someone else in the supply chain.


How do you lead change from the middle when the middle is between the leaders of the organization, and the people going through the change.


The Difficulties in Leading Change from the Middle


When we think about leading change we tend to think of a model which is just the leadership model. Any books which you read about leadership or change management typically use this model where you have a leader or leaders at the top of an organization, a department or whatever the scope of the change is. It is their role to get everyone on board, communicate, set the vision, and really drive the change. Then you have everyone else in the organization who are just going along with it.


The standard statistic is that 30% of change initiatives meet expectations, meaning they are on time, on budget and do what they set out to do. However, there is another statistic from Daryl Conner who wrote the book managing at the speed of change. He has an organization which does a lot of research around change management. He said the standard number is 30%, however when you have someone like a change agent influencing change from the middle it is more like a 20% success rate. It actually drops from 1/3 to 1/5 because you don’t know who is really accountable for making the change happen. Is it the leader of the organization? Is it the change agent?


You have an issue where the people going through the change don’t know who they are supposed to be looking at to see what they are supposed to do. The change agent may be saying one thing, but that person’s boss may be saying something different. If someone is in that position they are not going to look at the change agent and say “I will do what you want”. Instead they will listen to what their boss is saying.


Heather likes to say that if you are a change agent it feels like you are pushing a boulder up a hill. Other people may say “I feel like I am banging my head against the wall”, or they may say “I feel like I am swimming upstream”. People tend to feel sluggish when trying to implement change in an organization where they are not in a position of authority.


As we try to do more with less you have fewer leaders at the top of an organization who can drive change. They don’t have enough time to drive change, which is why a change agent usually is someone like a project manager who ends being delegated the job of driving change. As you have more people at that level trying to implement change the tendency is to bring it inside, rather than hire outside consultants to do it.


How to Lead Change from the Middle


You need to start by identifying the roles and relationships during change. There are leaders in the organization, department heads, vice presidents, CEOs, or even a supervisor of a production line or a warehouse. You have someone like a project manager trying to influence things from the side. You need to identify who is doing what during the change and their relationships to each other.


Someone in a leadership position should most likely be doing the communicating and making the decisions that are in favor of the change, such as assigning budget dollars to it. The person in the leadership position is also holding people accountable because the person in the leadership or authority position can only really hold someone accountable. You need to make sure that someone in the leadership position knows that that is what their role is in the change.


The role of the change agent is to provide advice about the change since they are the ‘expert’, or the ‘smartest person in the room about that change’, as Heather likes to say. They need to make sure that their role as an advisor or expert is established up front so that the leader respects that. Also, the change agent is responsible for things such as reporting and providing information and feedback to the leader, which is often something which doesn’t happen, especially if the leader is someone higher up in the org chart than they are. You need to establish up front that if the leader is doing something that is hindering change, the change agent needs to let the leader know this. You need to set up what that relationship is up front.


After this, there are so many ways you can influence change. Heather has a number of books that say there is a certain process which you follow, but it is really a lot more complicated than that. There are two main categories of influence:


1. Structural Influence – the processes, systems. These are the tools you put in place in order to influence change. They are things such as training, accountability, and incentives. It also includes any kind of process you put in place so that people know what they are supposed to do differently.


2. Personal Influence – is about how you influence change on a personal one-on-one basis or yourself to a team basis. How do you work with individuals to do what you need them to do?


Heather just published a book which discusses ways to work with individuals to get them to do what you need them to do. The book is called ‘99 Ways to Influence Change’ because she was going through many change management and influence books and discovered they all were saying different things. She was curious as to how many different ways there were. She came up with 99 ways to influence change in an organization or with individuals.


She recommends starting by identifying who is doing what in the change. What are your relationships with those people? Then look at the structural influence aspects – the processes and tools you can put in place to help people change. Finally, ask what you will personally do to influence those people to do those things.


About Heather Stagl




Coach for Organizational Change Agents

Enclaria, LLC

99 Ways to Influence Change - The Book


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I recently interviewed Michael Rada who discussed the realization of supply chain optimization through innovative packaging.



Michael Rada works for the third largest corporation of Japan. He lives in Czech Republic and works Sumisho Global Logistics Europe, which is a bit unusual. He considers himself to be more Asian than European. He studied Japanese for almost 30 years. He works as a manager with a wide range of responsibilities. Sumisho Global Logistics Europe is part of Sumitomo Corporation. Sumisho Chemical is a department of Sumito Corp. Michael finds it amazing that every day he receives 5 to 10 different pieces of news from Google regarding his company.


One of Sumisho Global Logistics’ achievements is in their packaging. Michael is developing different packaging styles. Through modification of the packaging he can save 8 trucks of 10, which of course the clients are very happy with.


They are currently concentrating on electronics manufacturers, which is one of their major clients. Sumisho slightly differentiates themselves from other logistics companies. They provide the full service in terms of optimization, but also include optimized processes and services. They step in provide a deep analysis of the supply chain itself. They then begin step by step to improve all parts of the supply chain to achieve the most efficient solution.


Packaging is one of the big issues they address. Considering that Sumisho Global Logistics can develop a package which saves 8 trucks out of 10, some assume this service goes against their main shipping business. However, this is not true because even the 2 trucks that remain can be better paid trucks and the client is much more satisfied.


Some people in Czechoslovakia are concerned about seeking consultation from Japanese companies. However, the interesting fact is that no investment is needed. Sumisho Global Logistics simply arrives with a calculator, pen, paper, camera and of course Excel. Excel in Japanese companies is a very important tool. With these tools and a lot of experience their team can implement optimization services.


Future of Packaging


Michael sees the future in returnable packaging and the extension of the life of current packaging units. For example, there is a lot of flow of one way wooden packaging units such as pallets. Almost all of the goods from Asia come on these pallets which are being thrown away in a dump after the first consumption, even being very high quality pallets. This is why Michael started a project to re-use these one-way packaging units for other clients. He creates a multiple usage tool and at the end of the life cycle of the pallet they are shredded and used for generating electricity.


The same process can be applied to cardboard and other materials, which at least in Eastern Europe very quickly end up in a dump. For Michael to develop the returnable packaging units, the current significant advantage in industrial use has a metal and textile combination. Non-woven textiles in combination with metal frames make very efficient units which are flexible, durable, and which have a cycle of roughly 5 years where they can be used easily and efficiently.


Michael recently replied to a LinkedIn question regarding whether textiles are good and someone replied saying yes they are good because it has been used in automobiles for over 10 years. As far as Michael knows the automotive sector is about the only business which uses textile packaging. All of the sectors, even audio/video, air-conditioning, white goods, etc., use card board, foam, or polystyrene, which from Michael’s point of view are not good.


Obstacles to making changes to supply chain packaging


Michael believes there is basically one obstacle; the proper calculation provided to the client which will make a different and provide a return on investment. Before launching a new project Sumisho spends at least a few months to provide full data which are analyzed based on the data from the client regarding sales etc. Sumisho always provides a guaranteed return on investment.


Last year’s return on investment was one year. This year they can even for overseas shipments realize six months or below. If you can guarantee a return on investment within a month there would not be a client who would have an objection.


Another advantage of Sumisho Corporation that the corporation itself also owns banks, insurance companies, etc, so that they can even finance if the client is not able to finance the project themselves.


With such a short time frame for a return on investment, no client says no in the end.


About Michael Rada





Project Manager


LinkedIn Profile