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Video of Ashton Udall’s Guest Lecture at Stanford University and Upcoming Inventors Alliance – Silicon Valley, Seminar Annoucement

By GSS on May 26, 2009 | Category: News | Comments Off

Here is a link to a video of a guest lecture GSS partner, Ashton Udall, made to Stanford University's Design and Manufacturing Forum last Friday. The topic was Offshore Manufacturing for Start-ups and topics of discussion included basic steps in the process of offshore manufacturing and key factors for success. Just click on View ME396 Seminars Online, and the video is Lecture 8.

Ashton Udall will be giving a similar talk this upcoming Saturday on May 30th, at 10:30am, for the Inventors Alliance of Silicon Valley. Event details can be found here.

Consumerism Rebounding? But a Different Direction?

By GSS on May 14, 2009 | Category: Product Marketing | Comments Off

There has been much discussion in the media regarding the downturn's longer term impacts on consumerism, a topic I covered in this post. Essentially, I discussed the changing of consumer habits as the downturn unfolds and what we may come away with as the consumer market as emerges. Check out this NY Times article on the topic. The articles conclusion on the impact of this experience on consumers and the changing job of marketers very much agreed with my own. Looking for evidence of new consumers?

Richard Florida, of Creative Class fame, has written two interesting blog posts (here and here) looking at signs of change in consumers. He cites a recent Pew Research Center study, which notes changing consumer perceptions towards common household items considered to be part of a core bundle of items consumers could be depended on to purchase.

For example, the study cites consumers changing regard for microwaves–an item previously considered a necessity and now more a luxury (the product manager for microwaves at XYZ Inc. just tensed up).

Next, Florida tackles an article in Esquire by Nate Silver, which inquires about the decline of car culture in American society. Silver ran some statistics, and his words:

To sort this out, I built a regression model that accounts for both
gas prices and the unemployment rate in a given month and attempts to
predict from this data how much the typical American will drive… [The
results of the model are shown for the month of January in each year
since 1980 in the graph above.]…

Americans should have driven
slightly more in January 2009 than they had a year earlier. But
instead, as we’ve described, they drove somewhat less. In fact, they
drove about 8 percent less than the model predicted.

Just as product marketers, economists, and just about everyone, is desperate for signs of the bottom and subsequent upturn, so too Florida and Silver might be stretching for signs of major societal change. But the data is compelling if not eyebrow raising.

Panjiva, Sinosure, and Historic Futures – From Knowing Your Manufacturers to Knowing Where Your Products Are, These Firms Can Tell You

By GSS on May 7, 2009 | Category: Sustainability & Transparency | Comments Off

Supply chain information coming from all angles? Information is power and these third party service and software providers are emerging to offer companies greater information about who their suppliers are and the location of their goods within them.

Three firms founded in the last 8 years are working to crack open global supply chains further to bring greater transparency. One data mines customs records. One issues credit reports on Chinese manufacturers. One traces products through the chain of custody at the batch level. When I prognosticate the statement of a supply chain executive in the near future:

I know the identities of all of the factories and suppliers
involved in the production of every product I make, from final assembly
and packaging to the materials suppliers 4 tiers deep.

I
know what customers they are all working with. I know their capacity
and exportation quantities at any given time. I know their financial
health.

…these companies are working to make it possible.

Panjiva. Founded in 2006. USA. Panjiva data mines information on manufacturers using a variety of sources, including the US Dept. of Homeland Security (Customs), General Administration of Customs of the Peoples' Republic of China, fifty-five ISO 9001 auditing firms, forty-six ISO 14001 auditing firms, and several others, to offer companies reports containing information on which products a given supplier has shipped, which customers a supplier has shipped to, the quantity a supplier is shipping, and the frequency with which they ship. The reports are designed to offer companies new methods of tracking the health and activity of their contract manufacturer base.

Sinosure. Founded in 2001. China. As described by Jason Busch at SpendMatters: "Sinosure, was set up in 2001 as the monopoly provider for export
insurance (essentially receivables insurance) for Chinese suppliers.
Run by the Chinese government, Sinosure conducts supplier financial
assessments of suppliers as part of the receivables insurance
underwriting process. They base this assessment on government data
sources as well as standard credit rating approaches (e.g., on-time
payment for phone bills)" In his posts on the topic here and here, Jason raises questions with good reason about the accuracy of information upon which Sinosure bases its credit ratings. Josh Green, founder of Panjiva, which recently announced a partnership offering with Sinosure, responded that Sinosure simply presents another source of information to cross-check supplier information they already have, and that the agency itself bases its own insurance policies on the credit information they develop.

Historic Futures. Founded in 2003. UK. Historic Futures has developed a trusted third party product traceability
system, known as MyString, to allow consumers, retailers and brands to
trace product through multiple companies in the supply chain back to
source. Historic Futures software and services allow companies much greater efficiency in the management and reporting of COO for raw materials used in their products, collection and analysis of KPIs throughout all tiers of the supply chain, such as "product miles", water use and energy consumed, and visualization/management of compliance and certification status beyond the first tier of the supply base. Walmart's LoveEarth jewelry line, launched in summer of 2008, is one of their biggest and most notable projects. Consumers can now go to Walmart's LoveEarth website, enter a batch number for a jewelry piece they purchased, and track the companies in the chain of custody from mine to retail.

The reservoir of information in global supply chains is beginning to be tapped for greater internal management, as well as social responsibility, and marketing initiatives. This is likely only the beginning.

The Wave of Supply Chain Information Coming…From All Angles

By GSS on May 5, 2009 | Category: Sustainability & Transparency | Comments Off

I know the identities of all of the factories and suppliers involved in the production of every product I make, from final assembly and packaging to the materials suppliers 4 tiers deep.

I know what customers they are all working with. I know their capacity and exportation quantities at any given time. I know their financial health.

My customers know who all of these suppliers are as well. They know the working conditions at the factories, worker wage levels, safety compliance, environmental practices, and what the bathrooms looked like…last week.

In fact, one avid customer who loves our products, took a trip to visit one of our supplier's factories, created a video documentary about their trip, and posted it on several social networking and company/product fan websites. The video was well done, and 83,344 people viewed it in the first 4 months it was online. We project it will be viewed by 1 million consumers within 2 years, and estimate a resulting increase in annual sales of $2.7 million for the product they featured.

My 7 year old daughter viewed the video and is now doing a class Twitter project with the daughter of the production manager at the factory.

Is this the future? By when, 2015? 2020?

When supply chains began to extend globally over the last several decades, barriers to visibility up and down the supply chain were erected that had not previously existed or did not exist at the level of complexity found today. Communications took place by plane, phone, fax, wire, catalog, trade show, etc.

The advent of supply chain software technologies brought about a much greater system for supply chain management and was the first step to breaking down the walls of geographical distance and the opacity of suppliers' operations. Out of Web 2.0, emerged internet portals such as Alibaba, Global Sources, and others that allowed buyers and suppliers all over the world to make contact without leaving their office chairs. Today, we're seeing the emergence of another layer of supply chain information, from within companies, from 3rd parties, and possibly…eventually, consumers of the goods produced by the supply chain?

More to come…

Global Sourcing Specialists’ Blog “Product Global” Places Just Behind Forbes Magazine and Earns #16 Spot out of 100 Blogs Listed on oDesk.com’s 100 Offshoring Resources List

By GSS on May 1, 2009 | Category: News | Comments Off

oDesk.com, a global service marketplace for small and medium sized business to hire, manage, and pay remote freelancers or teams, has announced their top 100 offshoring resources, and Global Sourcing Specialists' Product Global blog has earned the #16 spot out of 100 blogs and websites. We came in just behind Forbes Magazine (#15). According to oDesk.com:

GSS Blog It has a manufacturing focus, but this blog from Global Sourcing Specialists contains a few gems, like this is the article about the global sourcing short-term outlook.

Manufacturing the Ipod Shuffle: How Apple Produces Great Products at Great Prices

By GSS on April 30, 2009 | Category: Product Development | Comments Off

BusinessWeeks' Technology section ran an article this month, Deconstructing Apple's Tiny Ipod Shuffle (h/t Supply Excellence), that takes a shot at explaining how Apple has managed to create its latest, buttonless MP3 dynamo. Based on data supplied by ISuppli, a company which opens up consumer electronics products and estimates the cost of components (not including costs associated with design, software, manufacturing, and shipping, the hard cost of the latest Shuffle is estimated at $21.77, or 28% of retail price ($79). Some interesting points:

Apple's mp3 player competitor, Samsung, who makes semiconductors, supplies Apple with some of their most important and highest cost components: the main application chip and flash memory.
The lithium ion battery is the smallest which iSuppli analysts have ever seen and the passive components, resistors and capacitors, are exceptionally small–indicating Apple's use of cutting edge components across the board.
Except for the power switch, there are no actual buttons on the Shuffle. All volume and track controls have been moved to the headphones cord.

In my mind, these all add up to what Apple does a wonderful job of in their handhelds: making great, cutting-edge products at prices that the masses are willing to pay. Pretty simple. One of the resources they've developed which I think allows them to accomplish this is their intimate understanding of their customers. Understanding that the forfeiture of button controls on the device itself, to reduce cost/size, would be acceptable to consumers, and perhaps even seen as adding the aesthetic of the device, is impressive. "It's almost like six dollars worth of flash memory tied to some flash
and a battery and not much else," Rassweiler says (iSuppli's analyst). "It's very basic and
downsized." In a consumer electronics market where devices are usually outfitted to death with features–Apple has achieved excellence in distilling devices down to the necessary, or the few most desired features, while at the same time opening up new form factors and price points that in turn open sales up to new customers.

Perhaps I am biased, as I am a mac, Iphone, Ipod user. But, if they're making a substantial profit margin, I believe they've earned it. When I get a device that works as wonderfully and reliably as my Macbook, I am happy to pay it.

Who is Your Manufacturer? Creating Value-Added Factory Sourcing

By GSS on April 28, 2009 | Category: Product Sourcing and Strategy | Comments Off

We're preparing to sit down with a new potential client and the management of the factory which we've sourced for their project tomorrow afternoon. Every time we work on a sourcing project, we're faced with the question of how close do we bring the vendors to the customers. Many outsourcing service providers fear they'll be left out in the cold in a situation like this. But we've found it to be very helpful, in fact, necessary to always allow our customers the opportunity to meet the manufacturer that will be producing their products. The value to us in keeping everyone arms length from each other is smaller than one might think (the value essentially being mitigating the risk of being cut out of the process prematurely), and it costs us, and raises risk levels, in several ways.

Honesty and straight-dealing: It may be impossible to quantify the value, but bringing everyone into the communication loop may be one of the most important aspects of all parties knowing each other. It sets a tone. Communication and information can flow more freely. Less time and energy is spent on Prisoner's Dilemma thinking–trying to figure out how to come out ahead of the other guy in all situations, and more time is spent collaborating to figure out how to resolve problems and innovate.

I recently had an interesting conversation with a former senior exec of sourcing and manufacturing at Nike and Disney about transparency in their supply chains and working with vendors to improve their labor and environmental practices. At a time when these companies faced serious risk in consumer backlash because of the exposure of poor working conditions at factories, Nike, for example, took a hard look at their manufacturing base and changed course to focus on working more intimately with fewer suppliers. According to this gentleman, everyone opened their books, saw what each other was making, understood that everyone needed to make money for the system to work, and collaborated on resolving issues that challenged any party in the supply chain, because they could all be honest about the causes and effects of what was taking place. Nike is now known to be well out in front of the 8 ball when it comes to dealing with corporate social responsibility issues in its supply chain. Issues do and will continue to come up for them, but they are in a much better place to resolve these problems at factories. The same cannot be said for many other companies out there.

Understanding the manufacturing process: When sourcing a new manufacturer for a product, particularly when a new product is being developed, it's always helpful when a client has toured the manufacturing facility where the product is going to be made. Understanding the engineering of the production plan, seeing the machines that are used, how materials are stored, how quality control is accomplished, all offer a client the opportunity to better understand why certain issues are coming up and what can be done to resolve them. This is particularly helpful in the product design and new product development process, when the ability of a manufacturer to include certain product features, use specific materials, or provide these things at a specific cost, is challenged by what is actually feasible in the manufacturing and sourcing process. An understanding of the manufacturing process and capabilities allows all parties involved to quickly move beyond trying to understand why something is an issue, to resolving the issue.

Knowing the key players: In any organization, you will find that there are some people that really move things forward, and some that don't. Whether this is because they wield formal authority or soft power in the organization, they get up and get to work earlier than the next guy, or they aren't afraid to pick up the phone and talk to people, you want to know who are the people that really drive progress and solutions for your project in the organization. When the S hits the fan–you want to be able to reach these people.

Not all customers have the opportunity to travel to the factory location, particularly if it's overseas. It's our job to be the feet on the street, whether in China, Vietnam, Mexico, the Midwest, or southern California. But, we encourage customers to come see the manufacturing plant and meet key players in the contract manufacturing organization if they have the opportunity and motivation. Organizations relying on keeping people, and parties in the process, at arms length when designing or developing new products, sourcing new manufacturers, and managing the supply chain as a whole, do so because they lack the ability to provide strong value in other capacities. There are many ways to add value to the sourcing process. This is one simple way to make a big impact.

Making Cool Products Out of Trash, Terracycle’s Product Development and Materials Sourcing Process

By GSS on April 22, 2009 | Category: Product Innovation | Comments Off

Before the company Terracycle, the only thing that backpacks, laptop bags, and kites, had in common with Caprisun pouches, Oreo wrappers, and chips bags, is the kids that took them to school everyday. Not anymore. Terracycle is flipping this on its head, by creating products like backpacks, laptop bags, and kites out of the trash that we toss out everyday.

Founded by Tom Szaky and Jon Beyer in 2001, Terracycle started by offering composted plant food, which eventually hit shelves in Home Depot in 2004. Since then, the company is gaining steam and, according to Ecopreneurist (h/t for the story), is now exploring opportunties with Walmart and Office Max.

The above video was taken from National Geographic's show, Garbage Moguls, on Terracycle. Making trash, otherwise headed for the landfill, into a viable material for resuse in a new product, is perhaps closer to a Cradle to Cradle process than anything else I've seen in consumer products. Through Terracycle's process, the product could be considered to be up-cycled, rather than downcycled (the actual process that occurs in most "recycling", in which a product is broken up into its material components and some or all of those components are reused, or downcycled, into a product that requires a lower quality grade of material).

Although in embryonic stages at this point, could this be the next disruptor in the materials market? It will be interesting to watch as Terracycle moves to transform the prototypes developed by their teams into mass-manufacturable products. It's certainly a challenge that can be tackled by the creative minds driving innovations like this forward in the first place. I'm ready to buy my Caprisun laptop bag and to start scouting out landfills for potential sourcing and manufacturing applications.

18.2 Months to Change Consumer Habits?

By GSS on April 21, 2009 | Category: Product Marketing | Comments Off

They say it takes 3 to 4 weeks to form a new habit. How about 18.2 months? That's how long the current economic downturn has lasted. What will this do to consumer consumption and spending habits?

The NPD Group and the National Retail Federation (NRF) have released their consumer perception and retail reports for the first quarter of 2009. The gist?

NPD:

"Consumer confidence continues to decline, albeit slightly, while intent
to spend at retail remains steady, indicating that consumers may have
reached their cost cutting limits. With concern down only slightly, consumers did not dial back spending intentions. The Economy Tracker’s
Retail Response Indicator rose 0.5 points in March. “This slight rise
could be an indication that we are seeing the beginning of
stabilization,” said Cohen." (Marshall Cohen, Chief Industry Analyst of NPD Group)

NRF:

Several months of stronger-than-expected retail sales provided hope
that the industry was poised to bounce back, but March retail sales
demonstrate that the industry is continuing to struggle. According to the National Retail Federation, retail industry sales for
March (which exclude automobiles, gas stations, and restaurants)
decreased 0.6 percent seasonally adjusted from February and dropped 3.7
percent unadjusted over last year.

The NRF also issued a press release stating that "retail import volume hits the lowest level in seven years as number of cargo containers drops below 1 million mark".

Two major questions: 1) When will we hit bottom and begin our way back
up? 2) Will consumer habits be markedly different because of this most
recent recession experience?

Stimulus package, tax refunds, latest shopping indicators. Experts are looking for signs of the upturn. We're all looking for signs. But, do we really know? What we can plan for, is the longer and more painful the recession is–the greater likelihood we'll see differences in the consumer that emerges. My assumption is that a more painful experience for consumers creates greater motivation to not create the same
circumstances that lead to the pain again. That's not a great leap in logic. The generation that experienced the Great Depression, during which breadlines, shantytowns, and 1 out of 4 people were jobless, seemed to emerge with a measured approach to personal finance and consumption (in comparison to droves of people taking no down payment, interest-only, adjustable rate mortgages–like today). Of course, the Great Depression generation didn't have easy access to credit cards and 55" HD flat screens calling their name. I'm just saying grandpa…

But what if some of the experts were correct, and the economy is very close to bottom and will begin inching upwards again soon? The National Bureau of Economic Research estimates that we won't see a conclusion to this recession until the end of 2009 at the earliest. In comparing this recession to the 3 other "Bad Bears", or the last 3 major economic declines since the Great Depression, we've declined further than the tech crash of 2000 and the oil shock of 1973, but have bounced back to similar S&P 500 levels as those events in the last few months (Hat tip to Paul Kedrosky's Infectious Greed and Dshort for the graph). With respect to time, the current bear market has existed for 18.2 months so far, while the oil crisis lasted for 20.7 months and the tech crash lasted for 30.5 months. The Great Depression? Forget about it…34.2 months.

If this was the beginning of the end of rough times, would consumers look back and think that for all the doom and gloom in the media, "that wasn't so bad?" Mostly gloom–not as much doom. And if so, would we change our consumption habits for the long term? We have grown accustomed to a standard of life, or lifestyle, and to retain that lifestyle, consumers may emerge with a more discerning eye for the things that we feel are essential to our quality of life and those that are not. A recessionary education on the risks of easy credit and the prodigality of thoughtless consumption, and I believe we'll see some changes in consumer habits. We may not be able to have it all and we will be willing to cut consumption in some areas to enjoy a high level of it in others.

What does this mean for product marketing? Product sourcing and supply chains? The job of the product marketer will be tougher…requiring a greater understanding of what particular products and features specific segments will want and those they'll be willing to trade out. Supply chains will need to be more responsive, to reduce the costs of unsold inventory created by the fact that, even great product marketers may guess wrong with respect to what their choosey segments will want. Even if the economy begins recovery soon, consumers may be different–perhaps smarter and more sophisticated. Business as usual probably won't return: act accordingly.

Sourcing Overseas Manufacturers to Save US jobs. Huh?

By GSS on April 16, 2009 | Category: International Trade and Political Economy | Comments Off

It's not an oxymoron. As a great article in Forbes.com, which originated from a post by Dan Harris at Chinalawblog, explains, it's the way Douglas Smith, founder and owner of SmithCNC-USA, is working to save the US manufacturing sector. SmithCNC-USA is a North Lawrence, Ohio firm that helps midwestern manufacturers get components and raw materials abroad. Companies starring the neccessity of self-preservation in the face are finding that the path to staying alive is by sourcing and working with factories in other countries to create a business structured for competition in the global economy.

As I noted in a previous blog post, Made in the USA isn't Dead, Just Different, companies are not simply shifting everything away, but instead adopting a more global supply chain, wherein they retain higher value-added tasks and jobs here, and contract out low skill, low-value work to more cost competitive sources. Other companies are outsourcing tasks for cost purposes, but retaining local production for quick response purposes to hedge against difficulties in forecasting demand.

Like SmithCNC-USA, our clients often grow the design, engineering, sales & marketing, and administrative departments in their businesses and add jobs to these areas, by outsourcing operational duties like sourcing, some engineering tasks, manufacturing, packaging, and logistics to companies like us and our network of suppliers.

The Forbes.com article describes Smith and some of the results his clients have enjoyed:

The founder and sole owner of SmithCNC-USA is Douglas Smith, a chatty
50-year-old ex-machinist with both cost-cutting and patriotic streaks.
He says he's doing his part to preserve the shrinking U.S.
manufacturing sector, which since 2000 has shed 4 million jobs, or 27%
of its workforce. (That compares with a 2.5% decline and a 2.9%
increase, respectively, for the freshly gutted construction and
financial industries.)

Smith's customers are U.S. manufacturers doing small and medium-size
production runs, either for their own end products or as contract
suppliers to other U.S. manufacturing firms. If they are lucky, they
eke out gross profit margins between 20% and 30%. That is, after paying
for labor and raw materials, they have at best 30 cents of the revenue
dollar remaining to cover overhead and depreciation on their machinery.
Smith says that by subcontracting some of the work abroad–for example,
the intake manifold in a car's air system–these contractors can add 20
points to that gross margin, and that's after paying Smith…

These companies, who might have otherwise stagnated or folded, have been able to expand and hire in existing and new areas because of their overseas manufacturing partners.

The impacts of global supply chains are not always rosy. The dynamics are often more complex, and involve both positive and negative consequences, with an inordinate focus by pundits on the latter. US companies surviving, and often flourishing, in the face of competition inevitably coming from all parts of the world, is positive.

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