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Friday, April 22, 2016

The Future of Manufacturing and How to Be Ready

There are several names for the impending industrial revolution: Smart Manufacturing, Digital Enterprise, and Industry 4.0. No matter what you call it, it’s all about the rapidly-changing disruptive technologies that are already starting to churn up the waters of manufacturing.

The biggest signifier of the changes to come is the convergence of information technology (IT) and operational technology (OT), meaning that the world of the virtual is colliding with the world of the physical. This has been predicted to increase efficiency and streamline the production process, but what does the data show?

According to the American Society for Quality’s recent study, the manufacturers surveyed who have begun to implement smart tech reported the following:

82% found increased efficiency
49% found lower product defects
45% found customer satisfaction gains

It makes sense: mobile and social tech streamlined training and shop floor tracking, robotics and automation revolutionized productivity and workflow, cloud computing created a space to store massive amounts of data, 3D printing transformed production and interaction with consumers, and the Internet of Things continues to stagger with its potential to allow machines to collect and share data with each other in real time.

There is no conclusive checklist of tools that must be integrated in order for one’s company to be considered a smart manufacturer. Some companies will need to deploy many forms of new tech while others will be able to use only two or three disruptive technologies and still maintain a strong market position. The important thing is to do your research and learn about these new tools. Figure out what could help your particular shop floor and interact with your teams to see what would really help in the long run. The future is now, let’s get involved in the revolution!

Thursday, April 7, 2016

Negotiating Smarter by Focusing on Cost, not Price

Guest Blogger
Kelly Barner, Editor, Buyers Meeting Point
Anyone with procurement or purchasing experience knows that price and cost are not the same thing. Price is what the buyer pays in return for goods and services and costs are the supplier’s direct and overhead costs to produce the good or service. The difference between the two numbers is the primary focus of most negotiations. Some of it is kept by the supplier as profit margin, and some of it is claimed by procurement as savings.

The best thing procurement can do in advance of a negotiation is to research and understand all of the relevant costs. This ensures that negotiations will be fact-based rather than instinct-driven – a focus that should create an advantage for procurement.

There are multiple ways that procurement should allow a detailed understanding of costs to influence their negotiating strategy. Doing so requires procurement to dig into the details of costs, categorizing them by type and determining how much control the suppliers have over each one.

Supplier Cost Advantages
Depending on the category being sourced, some costs will be nearly the same across all qualified suppliers. Unless small players are bidding against very large ones in a product category, materials costs (especially raw materials) are likely to be comparable. These costs are often beyond the control of any one supplier and – unless they are out of line with similar costs elsewhere in the market – trying to negotiate them will not create the scale of value procurement is looking for.

It is the costs specific to each supplier that procurement should position as the focus of a negotiation. Some of these costs (such as rent, headcount, and insurance costs) are straight overhead, and they point to each supplier’s administrative efficiency. Other costs are more ‘direct’ in nature and point to the supplier’s process efficiency. Material waste is an example of a direct cost that can either create an advantage or a liability for a supplier. Another example is the direct internal labor associated with producing the product in question. Perhaps the company has invested in equipment that allows them to produce greater quantities with higher quality rates and less labor time. Looking at each supplier’s process efficiency related costs shows their abilities relative to the competition.

When procurement negotiates for price reductions alone, they are anchored to a top level point that does little to shine a light on the relative efficiency of each supplier. Conversely, when procurement negotiates those prices relative to individual supplier costs, they position their company to take advantage of significant efficiencies that allow both buyer and supplier to walk away from the negotiation satisfied.

Procurement-driven Costs
Although procurement can usually relegate the management of costs to the responsibility of the supplier, some of these costs are due to buy-side requirements or ways of doing business. Opening the door to learning about the costs driven by the buying company does not require procurement to change or sacrifice their specifications, but it does allow them to make a more informed decision about whether those requirements creates sufficient value to offset the associated cost.

Suppliers can be a wealth of information on this topic. They work with many companies across the same product categories and therefore can easily spot the differences in requirements. They also know what it costs them to meet these requirements. If procurement is truly interested in bringing prices down, they must be willing to understand what portion of the suppliers’ costs is driven by their constraints.

Making discussions of cost a two-way street provides strategic suppliers with an opportunity to shine. A good supply partner will find a way to meet requirements at a lower cost while a poor or mediocre supplier will consider it enough that they are able to meet the buyer’s unique requirements.

Prices are driven by what the market is willing to pay. They are usually not buyer-specific and leave a lot of detailed information obscured from view. Procurement may be able to negotiate decent savings by reducing prices, but this only represents the tip of their potential impact. Instead, procurement should take a cost driven approach that allows them to get a solid understanding of what it costs each supplier to provide them with a product or service. This approach ensures that the return for procurement’s effort is maximized and that they select a supplier focused on keeping costs – and not prices – low.

Buyers - Are you interested in fulfilling your procurement needs?
Suppliers - Are you interested in showcasing your capabilities to engineers and procurement professionals who are actively seeking new metalforming suppliers? 
If so...Attend Sourcing Solutions on September 29, 2016 in Indianapolis!

Top 5 reasons golf is good for business

It is springtime and the local golf clubs are gearing up for another great season.  There is an understanding that great business is done on the golf course, but why is that?  Are game-changing contracts signed on the 17th hole?  Are deals negotiated and futures changed while lining up the perfect drive?  The truth is, not usually.  However, there are many other reasons why golf is an important tool in business.  Here are the top five reasons why golf is critical to business success.

5. Anyone can play – Golf is an equal opportunity sport.  Anyone, regardless of age or athletic ability, can learn to play golf.  For that reason, it is a great form of corporate entertainment.  Thanks to the handicap, people with a variety of abilities can compete and enjoy a friendly round.  So take your client, your boss, your colleague or even your competitor to your local club for a round of golf.  If you need an effective way to entertain in business, the course is perfect.

4. You have an audience that can’t escape – Golf is a methodical, slow moving sport. A full 18 holes takes about four hours to complete.  Very little of that time is spent actually hitting the ball.  The rest of the time can be spent forging relationships with a captive audience.  Can’t get time with your boss or colleague?  Use the course as a means to get valuable face-time with them to ask advice or pitch your idea.

3. Exercise is stress relief – Physical activity is a proven method to manage stress.  Any form of exercise, even a stroll through 18 beautiful holes, can increase your endorphins, improve your mood and lower anxiety.  In the fast-paced world we live in, every opportunity to lower your stress level will improve your health.

2. Strong bonds are formed  – The time spent of the course provides you with a shared goal and conversation opener whenever you meet. Use the golf course to break the ice with business leads, clients and colleagues.  The camaraderie that can be built during a round of golf is priceless, 54 percent of business professionals see golf as the perfect networking tool.  Great relationships are forged from shared experiences. Make sure to take advantage of the time to talk between holes and in the clubhouse.

1. The course is a test of character – Players have continual opportunities to display their true character.  Make sure to observe how the other players react to bad shots, if they take the opportunity to cheat or if they take risks.  The links are an organic test of integrity and character. It is amazing what you can learn about and from one another during a round of sand traps, bad drives and ill-placed water hazards.

The Precision Metalforming Association (PMA) has 16 local districts throughout the country. Check out the local golf outings to find one in your area.  Whether you are looking for an uninterrupted audience, need to forge a relationship with a trusted colleague or simply need a little stress relief, PMA provides the opportunity for you to enjoy the beautiful afternoon of golf that you are looking for. 

Sources: Mayo Clinic,, The Economist,

Monday, April 4, 2016

The US Manufacturing Recession Seems to Be Over, According to Goldman Sachs

New data from Goldman Sachs was released this Tuesday showing a significant manufacturing rebound. Regional surveys were conducted to look at the state of factories in the Federal Reserve districts of Dallas, Kansas City, New York, Philadelphia, and Richmond, and all five showed significant improvement in March. Check out the graph below:

These results aren’t outliers, either: according to the analysts on this project, the surge shown in these surveys is supported by many other aspects of manufacturing including trucking activity, railcar volumes, and seaborne container traffic.

Goldman even predicts that the ISM Manufacturing Purchasing Managers Index will exceed 50 in the coming update to this data on Friday, April 1. (50 is the metric in the ISM scale that divides contraction and expansion.)

Our favorite way of describing this data comes courtesy of Luke Kawa in his Bloomberg article: “The U.S. manufacturing sector just batted five-for-five in its version of spring training.”

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