The 39 methods, techniques and methods of SCM can be used to successfully execute the 4 supply chain management (SCM) strategies: rationalisation, synchronisation, customisation and innovation. Rationalisation is aimed at containing operating costs. Synchronisation is aimed at balancing supply with demand. Customisation aims to enhance the customer interface. And innovation is focused on achieving rapid new product development and introduction.
When managed together, effective SCM offers at least a 30% potential improvement in economic value added (EVA). Rationalisation strategies can contribute 4–6%. Synchronisation strategies can generate 5–7%. Customisation can add up to 6–10%, and innovation benefits can exceed 15%.
BSI’s 8-step program of optimization initiatives can maximize your benefits:
David Steven Jacoby and the team at Boston Strategies International recently completed a policy study on clean energy value chains, which involved a comparison of the value added and levelized cost of energy for natural gas combined cycle, solar photovoltaic, wind and geothermal technologies.
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David Steven Jacoby has consulted to energy, automotive, and other clients in over 50 countries, has taught graduate Operations Management at Boston University, and serves or has served on the Board of Directors and/or committees of the North American Electric Reliability Corporation, New York Energy Week, the University of Pennsylvania (Technology & Innovation Society), APICS (President & Chair, Boston APICS); the Council of Logistics Management (President & Chair, New England Roundtable); the Institute for Supply Management’s (VP, Logistics & Transportation Group), the International Supply Chain Education Alliance (Chief Judge, Ptak Prize Selection Committee), and others. He holds an MBA from the Wharton School, a Masters in International Business from The Joseph H. Lauder Institute of International Studies, and a Bachelor of Science in Finance and Economics from the University of Pennsylvania.
For 30 years, David Steven Jacoby has advised oil, gas, power, transportation, automotive, retail and legal clients in over 50 countries on procurement, contracting, and supply chains management. A five-time author on supply chain management, he has worked with clients in the United States, Dubai, Sao Paulo, Hong Kong, Paris, and elsewhere. He also taught Operations Management at Boston University’s graduate business school, served as a contributing editor at the Economist Intelligence Unit, and consulted to the World Bank.
Counsel frequently seeks out Mr. Jacoby to serve as a consultant and expert witness. His legal work typically focuses on these major areas:
Contract interpretation, contract administration, and contract dispute
Monopoly pricing and market dominance
Procurement processes and best practices
Logistics and transportation, including pipelines and terminals
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Private Equity and Venture Capital
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The current trade policy of the current U.S. administration is inflating U.S. costs and driving away longstanding trading partners while not changing the fundamental economics of trade or the Chinese government’s protectionist approach to intellectual property. Trade wars increase the cost of production in the US, which disincentivizes American companies like Harley Davidson from manufacturing locally. They put next-generation energy companies like SunPower at risk by increasing the cost of their components. And they drive strategically important trade partners like Germany to form fresh new relationships with Asian partners instead of America. Rather than wage trade wars, the United States should build ‘platform infrastructure’ for knowledge-based high-tech solutions in clean energy, machine learning, intelligent transportation, medical solutions, education, and aerospace.
Wharton Econometrics figures that a trade war will cost world GDP 0.9% by 2027, but if the multilateral trading and commercial institutions such as the EU were to dissolve completely, possibly eventually taking the euro with them, the impact will be far more damaging. An implosion of trade agreements across the globe would cost the US 2.7% of GDP and the world 1.7% of GDP. As the US pulls out of more and more multilateral political institutions such as the Paris Accord, the U.N. Human Rights Council, and possibly NATO, the probability of a US withdrawal from the World Trade Organization (WTO) is rising. A severe isolationism scenario involving a total collapse of the world trading system would cause a 3.8% contraction in global GDP in the medium term, according to analysis presented in my book Trump, Trade, and the End of Globalization.
The United States should take the lead in redefining a new world trade system. Leadership will assure it of a long-term advantage, as it had for several generations after it took the lead in designing a new world financial and trading system after World War II, starting with the trading system that became the General Agreement on Tariffs and Trade (GATT), which was eventually folded into the World Trade Organization (WTO), and the monetary system that was agreed at Bretton Woods.
Instead of fighting over steel, aluminum and soybeans, and tearing down multilateral institutions, the United States could advance a new model centered on countries’ comparative advantages instead of “free trade for all” (traditionally defined as zero tariffs and zero subsidies across the board). A codified set of boundaries could allow, within limits, knowledge-centric companies to protect their intellectual property within their country’s national borders, industrial companies to receive subsidies, and agricultural producers to receive export exemptions, up to capped, reported, and audited levels.
For example, Baidu (China) would be allowed to mandate Chinese intellectual property in its apps within China, and Google would be allowed to erect non-tariff barriers to foreign competitors within the American market, as long as both countries agreed to transparent reporting and auditing, and the WTO quantified and policed the advantage to a maximum of 10% of the value-added. The EU’s subsidies to Airbus could be legitimate, in principle, but capped at 10% of value-added and audited, and the United States could subsidize Boeing to the same extent. Agricultural producers could receive exemption from tariffs from importing countries (up to 10% of value added), as some do today under Generalized Systems of Preferences (GSP). Companies in Thailand, India, and Brazil, for example, receive tariff exemption from wealthier countries (namely the US and the EU), which benefit from the system by accessing cheaper food products than they could produce themselves.
Antagonistic or isolationist approaches trade approaches are already prompting the Trans Pacific Partnership (TPP), from which the United States withdrew, to move ahead aggressively and fruitfully, without the US. China and the EU are forming new trade alliances together, without the United States.
World War I taught us that isolationism is politically and economically dangerous. In contrast, the leadership taken after World War II, which was defined by the establishment of today’s world trade order, led to over 50 years of growth. Today is different, so let’s adjust, but let’s not go backward.
Blaming the world for the US trade deficit misses a major opportunity: the US is already a global leader in services exports, and that leadership can provide an avenue for the country to develop a sustainable competitive advantage in knowledge-based high-tech solutions such as clean energy, machine learning, intelligent transportation, medical solutions, and educational technology.
The administration has been focusing the trade debate on the goods deficit while ignoring the fact that the United States has a positive services surplus that offsets almost three quarters of its goods deficit. The US exported $5,735 trillion of services while importing $5,125 trillion of services, for a $610 trillion trade surplus in services in 2016 (based on an analysis of 2017 mid-year data). During the same period it had an $802 trillion trade deficit in goods. The $610 trillion services surplus offset 74% of the $810 trillion goods deficit.
The US is among the world leaders in services exports. Over a third of U.S. exports are services, by value. By comparison, China’s services exports were only 6% of its total, Europe’s services exports were 22%, and Asia was 27%. Moreover, the U.S. trade surplus in services has grown in 17 of the past 24 years—from 1993 through 1997, and again from 2004 through 2015—whereas the U.S. trade deficit in goods has grown in 19 of those years.
While products are becoming commoditized via robotic manufacturing and global price competition, US companies have a secular opportunity to offer high-margin solutions comprised of services, technologies, and products. These end-to-end solutions can increase customer satisfaction and loyalty, and be gold mines for recurring revenue because they increase customer switching costs.
For example, in clean energy, Advanced Microgrid Solutions is combining energy storage and load control (technologies) with state-of-the-art data analytics (services) to operate customized fleets of energy storage (solutions) for commercial and industrial users and for utilities.
In artificial intelligence and machine learning, Google, Microsoft and others are training devices (products) to understand human language and have real, unassisted conversations (technologies) that can be used in call centers (services) and as sales tools (solutions) for businesses.
In intelligent transportation, Tesla has been installing software (technology) in its cars (products) to offer autonomous driving (solutions) that can save consumers time and eventually increase road safety (many believe).
In educational technology (Ed Tech), Pearson Education develops rights-based digital courseware (solutions) that administer examinations and other assessments (products) and provide personal adaptive feedback based on data from other students’ correct and incorrect answers (technology). Through university partnerships, teaching (services) is a critical part of the solution.
In medical solutions (Med Tech), Healthcare as a Service is rapidly transforming the medical profession. Based on big transaction data sets stored in the cloud, companies such as IBM Watson Health are offering integrated solutions consisting of Big Data (technologies), customized development and analytics (services), and, in conjunction with partners such as the cancer centers or pharmaceutical companies, treatment (more services) or drugs (products).
For these and similar industries, the US should be building the core skills into educational curricula; funding job training and retraining programs; erecting I.P. walls; and offering R&D grants, tax credits, low-interest rate loans, and export promotion support.
The United States should stop engaging in trade wars to protect its soybean, steel, and aluminum industries – unless they are redefined as globally scaleable product-service-technology solutions such as smart farming infrastructure, digital manufacturing process control systems, and robotic industrial 3D printing and construction platforms.
BSI offers end-to-end capital budgeting and capital project management, encompassing Cost Benchmarking and Estimating, Value Chain Engineering, Tender Design and Management, Contract Negotiation, Ongoing Capital Project Market Analysis & Monitoring, and Project Management.
BSI offers Major Capital Project (MCP) cost estimates based on Activity-Based Costing (ABC) and benchmarks. We verify and validate by benchmarking the projects against similar projects, and by “fitting” the cost of major components (such as hydrocracking reactors) to the specific engineering requirements of each project based on our proprietary “price cubes.” Learn More
For buyers, effective supply chain management should make operations more agile and less costly. BSI has literally “written the book” on methods and techniques to reduce cost and improve quality simultaneously by acting on the end-to-end supply chain. For suppliers, value chain design should result in delighted customers, marketing flexibility, and enhanced innovation and speed to market. Learn More
Boston Strategies International offers Project Management Consulting (PMC) services to energy and industrial projects. Our end-to-end project management assures thorough, accurate and reliable project management, assuring on-time and on-budget project execution. Learn More
Major capital projects, especially those on a larger scale than have been realized in the past, necessarily involve close coordination with likely suppliers, which complicates bidding and rules out the conventional approach of sending a full package of specifications to numerous bidders and choosing the lowest bid. The process involves dialogue and pre-qualification. Learn More
A thorough negotiating strategy can make the difference between an agreement that falls apart and a long-lasting and profitable relationship. BSI assists buyers and suppliers in negotiating thorough and comprehensive win-win agreements that survive the duration of the contract term and into multiple renewals. Learn More
Supply managers make assumptions about the future of supply markets every time they contract with suppliers, or choose not to. Understanding the outlook for key variables of a capital equipment supply market, such as lead time, capacity, price, and market competitiveness, is critical to deciding the right price and contract term. Learn More
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“Globalization is the most contested topic of our time. Jacoby tees up the right questions, and his analysis and conclusions about trade and globalization are insightful, important, and timely.”
Dr. Mauro F. GuillénDirector of The Lauder Institute and Professor of Management at The Wharton School
“The scenarios, which are interesting and present some polar positions of where the world could go, emphasize important policy decisions which could have major consequences for the US’s place in the world and its economic prospects.”
COO, Oxford Economics
“David Jacoby’s experience in international business and his insights into thepoliticsandsocialrealitiesof trade make this book credible and interesting. His assessment of the future role of multilateral trade institutions and regional trade agreements makes sense, and with proper negotiation and implementation, the “new multilateralism” that he outlines cancreate sustained and balanced economic growth.”
Dr. Oliver Massmann
General Director of Duane Morris LLC
“Jacoby’s analysis of the differing East and West trade experiences rings true based on my 21 years in China. This book offers an intelligent discussion on a new approach to global trade.”
President of Maison Global
“This book skillfully ties together today’s headline economic and trade issues with complex political and social challenges. Jacoby’s analysis of today’s globalization puzzles leads to a clearly presented vision for a prosperous new trade paradigm that can drive sustained global growth. He demonstrates convincingly how investments in infrastructure, education and technology, combined with cost-effective health care and public policies can benefit knowledge-based economies in a global setting.”
Principal of Hodge Economic Consulting
BSI is pleased to announce that we have expanded our offering to include software solutions for ensuring compliance to regulatory requirements, including REACH, RoHS, Chemicals Reporting, Corporate Social Responsibility, Human Rights, Conflict Minerals, Anti-Bribery and Anti-Corruption.
We now offer compliance solutions and expert witness services in the following areas:
REACH, RoHS, and Chemicals Reporting
Corporate Social Responsibility, Human Rights, Conflict Minerals, Anti-Bribery and Anti-Corruption
The United States has not lost international economic power because of China. Or Germany, or Mexico, or Turkey, or any other country. It’s losing because it’s bloated and rigid, which inflate US companies’ costs and make them lose business to lower-cost competitors abroad. The current administration is attacking the bloat, but until Congress tackles the deeper structural problems the nation will not be able to sustain gains in international competitiveness brought about by the recent corporate tax cuts and government downsizing. Campaign finance reform, electoral reform, and job retraining are needed to reduce the economic drag caused by dying industries and poorly structured entitlements.
The US is bloated. Its burdensomely high healthcare costs drive American companies’ prices uncompetitively high in international markets. The country spends almost three times the world average on healthcare. This factor alone puts the country at a 10% price disadvantage compared to not only developing countries but also its peer group of mature, industrialized, wealthy, and developed countries. Bureaucratic environmental and social regulatory requirements inflate corporate costs. And, until the tax reform of late 2017, the U.S. corporate tax rate was the highest in the world. Although Americans tend not to think of it this way, the United States is a welfare state like Sweden was and Germany is. However, atypical of most welfare states, high defense spending is driving unprecedentedly high debt levels and is squeezing out arts, education, and welfare budgets.
In addition, the US has even deeper structural problems which hinder its agility and resilience. The “young-pay-in/old-take-out” social security system, which at the current rate will go bust by 2034, has been politically untouchable for generations and has caused credit agencies to downgrade US debt, which increases the cost of borrowing. The ballooning national debt, which has doubled since the 2008 financial crisis and at $16 billion now exceeds GDP, is close to its World War II levels. The combination of a huge debt payment obligation and rising future interest rates could be crippling. The economy is also inflexible – neither federal nor state governments offer much in the way of job retraining for displaced workers. Immigrants, even skilled ones, are currently locked out.
These problems force US companies to charge at least 20% higher prices than their international counterparts, and far higher compared to some countries. This is not the total differential between American and overseas companies. In addition to the 20% differential, American companies sometimes price higher than their counterparts due to productivity improvements and superior intellectual property. But while price premia for efficiency and unique intellectual property can justify higher prices, inefficient structural costs cannot, so US companies frequently lose international tenders to more aggressive overseas competitors.
The Trump administration has been taking an axe to the “bloat.” The corporate tax cut, which allows companies to price lower, is a first step toward the United States regaining international trade competitiveness (although it was lowered so much as to produce a large and perpetual budget deficit that will be caused by a shortage of tax revenue). The regulatory purge, particularly in the EPA, is also making US business more cost-competitive (although it is being done to the benefit of cronies). The administration’s practice of leaving positions vacant (e.g., in the Department of Commerce) is crudely executed but has cut both fat and muscle (although this has been to some extent offset by scandalous spending by some agency heads).
The bigger and harder task will be restoring agility and innovation. To do that, we will need to overhaul social security, develop job retraining, and reform the electoral progress. The social security system needs to be replaced with one where taxpayers pay into their own personal accounts, to avoid the difference between the number of payers-in and payees-out. Job retraining needs to be offered to those in transition, especially in dying industries such as coal (the US should be building knowledge-intensive technology industries, not engaging in trade wars over its coal, soybean, or steel industries). The U.S. legislature is unlikely to come to negotiated agreements on structural issues such as healthcare or social security until: 1) there is a total financial meltdown or crisis, which would most likely be precipitated by a large-scale war; or 2) Congress acts in the interest of the broad middle of the US population.
There is hope. The spread of electoral reform at the local level is encouraging new candidates who are not beholden to the immutable extremist positions of the established party duopoly, and can confront the big issues. Ranked Choice Voting, sometimes with multi-party winners, is currently used in 11 cities and one state (Maine), and for military and overseas ballots in five additional states, and is gaining in popularity.