The U.S trade gap grew by 3.7 percent to $48.8 billion in the final month of 2011, widening slightly more than forecast by economists surveyed by MarketWatch, who had expected the deficit to hit $48.5 billion.

At $178.8 billion, total December exports were $1.2 billion more than November exports, while imports rose by $3 billion over November to $227.6 billion.

For the full year, the goods and services deficit widened 11.6 percent to $558 billion, up from $500 billion in 2010. Exports of goods and services grew 14.5 percent to a record $2.1 trillion, while imports surged 13.8 percent to a record $2.7 trillion.

"More than half that [$558 billion] figure was thanks to the politically sensitive trade deficit with China, prompting more handwringing about Beijing's huge advantage in the bilateral economic relationship," Agence France-Presse reports. "Tit-for-tat trade actions have been building since the Obama administration levied sanctions against allegedly subsidized Chinese tires in 2009."

The U.S. trade gap with China widened to $23.1 billion in December compared with $20.7 billion in the same month last year. The U.S. Census Bureau notes that the goods deficit with China rose from $273.1 billion in 2010 to $295.5 billion in 2011, as exports increased $12 billion (primarily passenger cars and copper) and imports increased $34.4 billion (primarily computers, household goods and apparel).

"The report pointed to a domestic economy that is pulling in more foreign goods to feed reviving demand. At the same time, export growth is continuing but has eased from the high levels seen early last year," the Wall Street Journal explains (subscription required). "Exports have been a driver of the U.S. recovery."

Private Companies Expecting Positive Growth
The majority of privately owned companies are expecting to post strong growth during the coming year, despite lingering uncertainty about the overall state of the U.S. economy.

According to PricewaterhouseCoopers' (PwC) latest Private Company Trendsetter Barometer, released last week, 78 percent of executives at private companies expect their business to grow over the next 12 months, with 35 percent forecasting double-digit growth and 43 percent projecting single-digit growth. Moreover, 54 percent of private firms are planning to add to their workforce in 2012, up from 48 percent the previous quarter, while only 3 percent plan to cut payrolls.

"After considerable economic misgivings in the third quarter of 2011, Trendsetter executives are increasingly optimistic," Ken Esch, a partner with PwC's Private Company Services practice, said in an announcement of the findings. "But even in the late summer and early fall, when anxiety ran high about Congressional gridlock and the potential effect of the S&P downgrade of U.S. debt, private companies didn't abandon their growth agenda. Instead, they maintained strong revenue forecasts and spending plans."

The highest growth rates are forecast for companies operating in international markets. Companies that sell in China, India and Brazil are expected to see revenue increases of 11.1 percent, compared to an 8.5 percent growth rate for private companies in general. Sales abroad are expected to contribute to 20 percent of overall revenue for businesses with international reach, and 28 percent for those selling in China, India and Brazil.

Despite the promising indicators, private companies remain doubtful about the prospects for the broader U.S. economy, with 45 percent of respondents citing uncertainty about the U.S. economy in the coming year. Although 39 percent voiced optimism regarding economic prospects, this was down from 63 percent who said the same a year ago, and 16 percent of respondents were pessimistic.

Jobless Claims Fall
New initial jobless claims decreased in the latest week reported, indicating that the U.S. labor market continues to improve. According to the U.S. Department of Labor, seasonally adjusted unemployment claims for the week ending February 4 fell by 15,000 to a total of 358,000, a nearly four-year low. Meanwhile, the four-week moving average, which smoothes out volatility, dropped by 11,000 to 366,250, the lowest level since April 2008.

The latest weekly figures exceeded expectations, as economists polled by Reuters had forecast jobless claims to increase to 370,000 for the week. The improvement "pointed to building strength in the labor market and raised the odds of another solid increase in employment this month."

"U.S. manufacturing activity grew in January at the fastest pace in seven months. Americans are buying more cars and trucks. And consumers stepped up borrowing in November and December by the most in a decade, which could indicate they are growing more confident in the economy," the Associated Press reports. "Still, the job market has a long way to go before it fully recovers from the damage of the Great Recession. Nearly 13 million people remain unemployed, and 8.3 percent unemployment is painfully high."

The rate of new jobless claims has fallen consistently below 375,000 in recent weeks, signaling that hiring has become strong enough to help drive down the unemployment rate. However, job creation still lags behind. Although the U.S. economy created an average of 201,000 new jobs per month between November and January, economists estimate that 250,000 jobs per month would need to be added continuously for several years to bring unemployment back to normal levels below 6 percent.

Employers Worry over Leadership Shortage
A lack of potential leaders is the biggest HR challenge facing organizations this year, new findings indicate.

Based on a survey of 631 senior executives and HR professionals across the U.S., Right Management has found that 31 percent of respondents consider their organization's lack of high-potential leaders as the most pressing issue in 2012, while nearly a quarter (23 percent) cited a shortage of talent across the board.

"After three years of organizational contraction and less internal investment, companies are taking a hard look at their onboard talent and aren't pleased with what they find," according to Michael Haid, senior VP of talent management for Right Management, the talent and career management experts within ManpowerGroup. "Lean times make it hard for organizations seeking to recruit, retain or develop future leaders. And they're keenly aware of the tough competitive environment they're in and the need to hold onto and build leadership."

Meanwhile, 26 percent of senior executives and HR pros point to low engagement and lagging productivity as the biggest HR challenge, and 19 percent are most worried about a defection of top talent to other organizations.

"This is the kind of concern that HR people lose sleep over," Haid says.

Researchers at Northwestern University are developing a "virtual therapist" that would function through a person's smartphone, monitoring the owner's activity over several days and making a mood assessment based on its results. The project, known as Mobilyze, is intended to provide intervention during critical moments "when a behavioral prescription is most needed."

"Mobilyze uses data from sensors already embedded in smartphones, such as GPS, Bluetooth, Wi-Fi and accelerometers," CNET News explains. "The goal is to use this data to develop an automated system to detect people's moods, which could be helpful to those who are prone to ignoring symptoms of depression."

The team is working on a set of algorithms that would analyze each user's state of mind by incorporating data such as the person's location, activity, social context and what he or she is doing to determine the specific mood that person is in, and then evaluate whether the behavior seems normal or depressive. If the person is deemed depressed, the phone will help alert family and friends, and generate an automated text message or phone call encouraging the user to get in touch with someone or simply get out of the house.

"By prompting people to increase behaviors that are pleasurable or rewarding, we believe that Mobilyze will improve mood," David Mohr, director of the Center for Behavioral Intervention Technologies and a professor of preventive medicine at Northwestern, said in an announcement of the project. "It creates a positive feedback loop. Someone is encouraged to see friends, then enjoys himself and wants to do it again. Ruminating alone at home has the opposite effect and causes a downward spiral."

The smartphone therapy system has already been tested on eight patients and been found to help ease their depression. Each subject began with a major depressive disorder, and they all displayed clinical and statistical improvement at the end of the treatment.

The Flying Robo-Swarm
Robotics scientists at the University of Pennsylvania's GRASP Laboratory have designed and built an impressive fleet of autonomous four-rotor micro-copters capable of flipping, changing direction and navigating through obstacles independently.

But their remarkable agility is only half the story. These robotic choppers can also fly in formation, performing incredibly precise maneuvers in perfect synchronization, as this video demonstrates:

Wine from Space
A good wine can carry a broad array of aromatic notes, but while fruity and woody wines are fairly common, the flavor of meteorite has been absent until now. A wine and space enthusiast has combined his two passions in a wine produced from an ancient piece of the cosmos that fell to Earth.

Astronomer and vineyard-owner Ian Hutcheon recently got his hands on a three-inch-in-diameter meteorite that is about 4.5 billion years old and crashed in Chile's Atacama Desert approximately 6,000 years ago. He marinated the space rock in a wooden barrel of red wine for 12 months.

"That's how long it took to complete something called 'malolactic fermentation': it's a process that takes place after the primary fermentation. The first stage of the wine-making process — after harvesting the grapes, that is...converts grape sugar into alcohol via yeast. This takes around 25 days," Discovery News explains. "The next stage, malolactic fermentation, is achieved by lactic acid bacteria, notably Oenococcus oeni."

The process infuses some of the meteorite's taste into the wine, enabling drinkers to sample a bit of extraterrestrial flavor. So far, Hutcheon has produced 10,000 liters of the wine, known as Meteorito. Next year, Hutcheon's observatory will host the International Astronomy Congress, and it seems pretty clear what will be served with dinner during the conference.

"I've been involved in wines and astronomy for many, many years and I wanted to find some way of combining the two. When you drink this wine, you are drinking elements from the birth of the solar system," Hutcheon told The Drinks Business. "The idea behind submerging it in wine was to give everybody the opportunity to touch something from space; the very history of the solar system, and feel it via a grand wine."


Have a great weekend, folks.

A new report from the World Economic Forum (WEF), produced in collaboration with Accenture, highlights the urgent need to review risk-management practices to keep pace with rapidly changing contingencies facing the supply chain and transport sector. The report is based on input from executives in automotive, aviation and logistics industries, as well as an interview series and survey involving industry, academic and government experts.

Approximately 93 percent of respondents indicate that supply chain and transport risk management has become a greater priority in their organization over the past five years.

According to the surveyed experts' assessments, the top management priorities today are:

• Trusted networks across business and government;
• Effective risk legislation and incentivization;
• Improved quantification metrics;
• Appropriate data and information sharing; and
• Enhanced scenario planning.

Most major organizations have some form of enterprise risk-management approach that addresses local and internal operational risks. In a 2011 survey of almost 400 executives across 10 major industries, Accenture found that more than 80 percent of respondents had an enterprise risk-management program in place, or plan to implement one within the next two years.

Although companies are placing more emphasis on risk preparedness, threats beyond an individual organization's control can have consequences that cannot be mitigated by the organization alone.

"[T]he interconnected nature of global supply chain and transport networks means modern businesses are often reliant on thousands of independent suppliers and partners located in many countries," the WEF report states. "Consequently, they both affect and are affected by risks at various stages, from the sourcing of raw materials to the destinations of goods and services, and these risks are not always within the confines of the company's control."

According to the report, systematic supply chain and transport risk should be more effectively managed through multi-stakeholder action and collaboration. The key players are the supply chain and transport industry itself, its customers and government policymakers.

Emphasizing the need for significant interaction between businesses and governments to drive improvement in various risk-management methods, the report provides the following recommendations for government and business:

• Improve international and inter-agency compatibility of resilience standards and programs;
• Explicitly assess supply chain and transport risks as part of procurement, management and governance processes;
• Develop trusted networks of suppliers, customers, competitors and government focused on risk management;
• Improve network visibility through two-way information sharing and collaborative development of standardized risk assessment and quantification tools; and
• Improve pre- and post-event communication on systematic disruptions and balance security and facilitation to bring a more balanced public- and private-sector discussion.

The WEF/Accenture study was published on the same day that the Obama administration launched the National Strategy for Global Supply Chain Security, an initiative aimed at strengthening the global supply chain to protect the American people and secure the country's economic prosperity. The new program would plan for worst-case scenarios, enabling the government and industries to respond quickly to disasters that could disrupt access to vital commodities. The National Strategy for Global Supply Chain Security outlines clear goals to promote the efficient and secure movement of goods and foster a resilient supply chain system.

"We must continue to strengthen global supply chains to ensure that they operate effectively in time of crisis; recover quickly from disruptions; and facilitate international trade and travel," Secretary of Homeland Security Janet Napolitano said in a statement.

Resources

New Models for Addressing Supply Chain and Transport Risks
World Economic Forum and Accenture, Jan. 25, 2012

New Risk Management Practices Needed to Safeguard Transport and Supply Chain Networks...
World Economic Forum, Jan. 25, 2012

2011 Global Risk Management Study
Accenture, June 29, 2011

Secretary Napolitano Unveils National Strategy for Global Supply Chain Security
U.S. Department of Homeland Security, Jan. 25, 2012

• Science's Lost Treasures | Some of the most significant artifacts in science history have been lost over the years, and the scientific community would love to have them back. New Scientist highlights nine of the most important lost science treasures, including the rare Archaeopteryx fossil that disappeared after its owner's death, lunar rock samples that President Nixon distributed as diplomatic gifts and the missing Mars Polar Lander still stranded somewhere on the red planet.
• Seeking Volunteers for Mock Mission to Mars | Most of us will never get a chance to visit Mars, but now regular citizens can come close. Cornell University and the University of Hawaii are seeking volunteers to participate in a four-month simulation of a manned mission to Mars, with a focus on food and the nutritional effects of long-term space travel. The project is currently accepting applications for six prime and two alternate crew member positions. Selected candidates will "live and work together in a small isolated Mars analogue habitat in a Mars-like environment," and receive compensation of $5,000.
• Has the Internet Ruined Super Bowl Ads? | The Super Bowl may have been more enjoyable back in the analog age. A recent article in Forbes examines how the Web's influence has undermined the entertainment value of the (usually) fun advertisements during Sunday's game, mainly by removing the element of surprise by allowing commercials to be leaked online before airing, the formulaic quality that results from every ad striving to become "viral" and the fact that many commercials are now shot in long form before being condensed into less satisfying 30-second spots for TV.
• What Hiring Managers are Looking for | What supply chain skills are hiring managers placing the most value on in job openings today? And how well are universities preparing students for a career in logistics and supply chain management? Based on the first Hiring Managers' Evaluation of Universities' Supply Chain and Logistics Curriculum report, Supply Chain Management Review spotlights the answers to these important questions in its latest issue.
• Things Workers Need Most | Business owners, want to know the way to an employee's heart? Pay and perks remain important to workers, yet when it comes to what employees need most from their employer today, certain intangible priorities are more important than a raise. Among them: freedom to work the way they work best, according to Inc.com's 8 Things Your Employees Need Most. Agree or disagree with this list?
• The 102 Percent Tax Rate | James Ross, the founder and managing member of a New York private investment firm, recently disclosed to the New York Times that he paid 102 percent of his taxable income in federal, state and local taxes for 2010. That doesn't mean he paid more in taxes than he earned — because taxable income is what's left after itemized deductions like mortgage interest are subtracted — but Ross's example illustrates one of the more baffling aspects of the U.S. tax code: people within the same income brackets being taxed at wildly unequal rates.
• How to Disagree During Meetings | Whenever you isolate many different types of people into one workspace — say, in a boardroom for a business meeting — chances are you'll have some personality clashes. Often, this results in wasting everyone's time; worse, it can sabotage jobs. Based on executive coach Joel Garfinkle's 2011 book Getting Ahead: Three Steps To Take Your Career To The Next Level, AMEX OPEN Forum provides some practical things you can do to disagree during meetings in a positive and productive way.
• 10 Inspired Mega-Engineering Projects | Geothermal power plants? A space elevator? A 3-mile-long pyramid capable of housing 750,000 people on Tokyo Bay? These and seven other ambitious — some realistic, some quite fanciful — mega-construction projects could help save not only the environment, but also the economy, according to science and sci-fi blog io9.

  
  _{Space elevator concept art
  Credit: LiftPort Group}

Global R&D spending is expected to increase 5.2 percent in 2012 to a total of $1.4 trillion, up from $1.33 trillion in 2011, according to the 2012 Global R&D Funding Forecast from independent research firm Battelle and R&D Magazine. This gain is slightly less than the 6.5 percent growth from the prior year, but R&D spending as a percentage of gross domestic product (GDP) will remain roughly the same as in 2010 and 2011, standing at a global average of 2 percent.

The report, published in December, forecast that North American R&D spending will increase 2.8 percent in 2012, while European R&D expenditure will rise 3.5 percent and Asian R&D spending will surge 9 percent. These regions account for a combined total of nearly 92 percent of global R&D funding.

The U.S. alone is expected to spend $436 billion on R&D this year, 2.1 percent more than in 2011. While the U.S. will spend the most by far in terms of absolute currency, accelerating expenditure among foreign economies, particularly emerging markets, is forecast to reduce the U.S. share of global funding to around 31 percent. Against an estimated 2 percent inflation rate in 2012, R&D investment in the U.S. is poised to remain relatively flat over the coming year.

Part of the decline may be attributed to cuts in federal R&D funding, as the U.S. government's expenditure is expected to drop to $125.6 billion in 2012, a 1.16 percent decrease from 2011. However, private industry will spend the largest amount on R&D this year, with projected growth of 3.75 percent to $279.6 billion, while academic research spending will rise 2.85 percent to $12 billion and non-profit R&D will climb 2.7 percent to $14.5 billion.

"Significant government budget reductions are responsible for the drop in federal R&D spending, although R&D is likely to decline proportionally less than the overall federal budget," Battelle explains. "R&D sponsored by the U.S. Department of Defense (DOD) will see one of the biggest declines (down $2.5 billion to $75 billion forecast for 2012) for the third consecutive year."

Another major trend emerging in 2012 is that stakeholders are increasingly expecting to see positive commercial returns and financial gains from R&D investments. According to Battelle, only 10 percent of companies evaluated the return-on-investment (ROI) for their R&D spending several years ago, whereas 40 percent do so now. Most rely on improvements in product quality, competitiveness and sales as key indicators for the success of R&D.

"The pharmaceutical industry illustrates this trend best as it faces increased scrutiny of R&D spending versus limited productivity and weak pipelines for blockbuster drugs," Martin Grueber, Battelle Research Leader and co-author of the report, said in an announcement of the findings. "However, industry isn't the only sector under the ROI microscope. There also are increasing demands that public sector R&D investments show real economic and policy outcomes."

Other countries are also ramping up their innovation efforts, but the U.S. dominates the list of top R&D economies, with $436 billion in spending projected for 2012, followed by: China ($198.9 billion); Japan ($157.6 billion); Germany ($90.6 billion); and South Korea ($56.4 billion).

China is especially focused on increasing its R&D efforts. On average, China's economy has grown between 9 percent and 10 percent over the past several years, while its R&D spending has increased an average of 12 percent annually. Battelle estimates that if forecasting criteria are maintained, China's R&D spending will match and surpass that of the U.S. by 2023.

"Chinese authorities view innovation as critical both to the domestic economy's long-term health and to the global competitiveness of Chinese companies. China has already created the seeds of 22 Silicon Valley-like innovation hubs within the life sciences and biotech industries. In semiconductors, the government has been consolidating innovation clusters to create centers of manufacturing excellence," according to a report this month from McKinsey Quarterly. "But progress isn't uniform across industries, and innovation capabilities vary significantly: several basic skills are at best nascent within a typical Chinese enterprise."

The report notes that China still faces numerous obstacles to having a successful innovation culture, including a lack of incentive for Chinese businesses to develop innovative products to sell in foreign markets; the difficulty of Chinese companies in cultivating a deeper understanding of their customers' problems and needs; and a social preference for avoiding risk-taking. Despite these hurdles, many U.S. firms are expanding their research efforts in China and other rapidly growing markets.

"Global, U.S.-based companies such as 3M Co., Caterpillar Inc. and General Electric Co. have spent billions of dollars in recent years to expand their overseas research labs," the Wall Street Journal reports. "Such companies aim to tap a broader pool of scientific talent, tailor products to overseas markets and curry favor with foreign governments by doing more research abroad."

Earlier

R&D on the Rebound

Diverse Prospects for R&D Funding

Resources

2012 Global R&D Funding Forecast
by Martin Grueber and Tim Studt
Battelle and R&D Magazine, Dec. 16, 2011

...R&D Spending Growth Will Continue While Globalization Accelerates
Battelle, Dec. 16, 2011

A CEO's Guide to Innovation in China
by Gordon Orr and Erik Roth
McKinsey Quarterly, February 2012

U.S. Loses High-Tech Jobs as R&D Shifts Toward Asia
by James R. Hagerty
The Wall Street Journal, Jan. 18, 2012

New orders for manufactured durable goods, up five of the last six months, rose 3 percent to $214.3 billion in December, following a 4.2 percent increase in November. Machinery orders had the largest gain, rising 6.7 percent to $34.2 billion, while primary metals increased 6.2 percent to $29.6 billion and transportation equipment rose 5.4 percent to $58.3 billion. Excluding the often-volatile transportation category, new orders increased 0.6 percent in December.

Orders for non-defense capital goods (excluding aircraft), which serve as a key gauge of future business investment plans, increased 3.1 percent to $68.9 billion, an all-time high.

"While some of that surge likely reflected a rush to make orders before investment tax breaks expired at the end of last year, many economists believe the boom in spending on new equipment will continue even with the tax breaks gone because there is a large amount of pent-up demand on the part of businesses to modernize their operations," the Associated Press explains. "Manufacturing has been a bright spot in the recovery, although there was a slowdown in the middle of last year as factories dealt with supply shortages caused by the Japanese natural disasters that occurred in March."

Meanwhile, shipments of factory goods, up two of the last three months, rose 2.2 percent to $207.5 billion in December, following a 0.2 percent November decrease. Primary metals shipments had the largest gain, increasing 8.7 percent to $29.2 billion. Unfilled orders for manufactured durable goods increased 1.4 percent to $911.5 billion, and inventories rose 0.3 percent to $370 billion.

"Factories boosted payrolls in January by the most in a year and the number of hours worked per week climbed to the highest in 14 years...showing how the need to rebuild inventories and replace outdated equipment will keep American industry humming," Bloomberg News reports. "Nonetheless, a slowdown in Europe may limit gains in exports, representing a risk to American manufacturers."

Consumer Confidence Dips in January
After two consecutive months of gains that had stirred hopes for a broader economic turnaround, the Conference Board's Consumer Confidence Index dipped from 64.8 in December to 61.1 in January, as views on current business conditions and employment declined.

Economists polled by Reuters and MarketWatch had expected a reading of 68. A reading of 90 generally indicates a healthy economy, a level it hasn't approached since the recession began in 2007. The December reading was upwardly revised from an original estimate of 64.5.

"Consumer confidence retreated in January, after large back-to-back gains in the final two months of 2011," Lynn Franco, director of the Conference Board's consumer research center, said in a statement. "Consumers' assessment of current business and labor market conditions turned more downbeat and is back to November 2011 levels."

The Present Situation Index, which measures how consumers currently feel about the economy, declined from 46.5 in December to 38.4 last month. The Expectations Index, which measures consumers' outlook over the next six months, edged down from 77 to 76.2.

"Regarding the short-term outlook, consumers are more upbeat about employment, but less optimistic about business conditions and their income prospects," according to Franco. "Recent increases in gasoline prices may have consumers feeling a little less confident this month."

Agence France-Presse notes that renewed consumer confidence is key to "jump-starting the spending that drives the bulk of the world's biggest economy." Consumer spending accounts for about 70 percent of U.S. economic activity.

U.S. Unemployment Rate Drops to Three-Year Low
The U.S. labor market added 243,000 non-farm jobs in January, pushing the national unemployment rate down to 8.3 percent, its lowest level since February 2009, the U.S. Department of Labor reported Friday. The unemployment rate has now declined for five consecutive months.

"The report revealed job gains not just for the last month but for previous months," the New York Times explains. "December job growth was revised to 203,000, from the original 200,000. The job gains for November, originally 100,000 jobs, were revised upward to 157,000, creating a picture of a job market that has been gathering steam."

The largest gains last month were in the professional and business services industry, which added more than 70,000 jobs, while manufacturing gained 50,000 jobs and the leisure and hospitality industry added 33,000. Employment in construction rose by 31,000 jobs and mining added 10,000 jobs.

Employers have added an average of 201,000 new jobs per month in the past three months, and economists estimate that the economy has to have gains exceeding 200,000 over a sustained period to drive down the unemployment rate a full percentage point this year.

"Some economists warn against reading too much into the January jobs report because of the benchmark changes, which revise population levels, the size of the labor force and other key data. The revisions go back five years in some cases," MarketWatch notes. "They also point out that unseasonably warm weather may have boosted employment last month beyond the usual levels in industries such as construction. Construction firms added a combined 52,000 jobs in January and December."

Meanwhile, weekly initial jobless claims totaled 367,000 for the week ending January 28, down 12,000 from the previous week's total, according to a separate report from the Labor Department. The four-week moving average — which smooths out week-to-week volatility — was 375,750, a decrease of 2,000 from the previous week.

North American Robotics Industry Breaks Record in 2011
North American robotics companies sold more robots in 2011 than ever before, according to new data from the Robotic Industries Association (RIA). Valued at $1.17 billion, the 19,337 robots sold to companies in North America topped the previous record of 18,228 robots sold in 2005.

Compared with 2010, orders for robots in North America jumped 47 percent in units and 38 percent in dollar value, the industry trade group reports. When sales by North American robot suppliers to companies outside North America are included, there were 22,126 robots sold last year, valued at $1.35 billion.

The automotive industry helped drive the uptick in demand for industrial robots: "Robots sold to automotive component suppliers in North America jumped 77 percent over 2010, while robots sold to automotive OEMs increased 59 percent," Paul Kellett, director of market analysis for the RIA, said in a statement.

"The growing interest in automation combined with the strengthening of North American manufacturing industries, particularly automotive, contributed to a great year for the robotics industry," according to RIA President Jeff Burnstein.

Sales to non-automotive customers rose 27 percent, led by metalworking industries (up 56 percent) and semiconductor/electronics/photonics (up 24 percent). In terms of applications, significant increases were seen in spot welding (up 78 percent), arc welding (up 66 percent), assembly (up 63 percent), coating and dispensing (up 42 percent) and material handling (up 30 percent).

The fourth quarter of 2011 was the strongest quarter ever since the RIA began reporting data in 1984. Units ordered totaled 5,721 robots, with a total value of $317.5 million, in Q4.

Based on responses from 1,600 U.S. and Canadian CFOs surveyed, other unexpected items ending up on expense reports were:

• A video game console;
• A trailer rental for a family reunion;
• A $12,000 family trip;
• A birthday party for the employee's son;
• A golf trip for the employee and his friends;
• A day at the spa;
• A wedding anniversary dinner;
• A hotel charge for viewing adult movies;
• A fine for crashing into a toll booth; and
• A teepee.

"While these examples may seem incredible and in some cases humorous, they highlight a serious matter which can negatively impact a company's bottom line," Paul McDonald, senior executive director of Robert Half Management Resources, said in a statement. "Companies can help the [expense reporting] process by writing clear policies, making them easy to find and keeping workers informed of any changes."

Rube Goldberg Would Be Proud
Wait for it...

People Lie More in E-mail than Face-to-Face
People lie in e-mail more than they do face-to-face, according to new research.

Based on a study of 110 same-sex pairs of college students who engaged in 15-minute conversations — either face-to-face, using e-mail or using instant messaging — University of Massachusetts Amherst researchers found that those using e-mail had five times more lies per word communicated than those speaking face-to-face. The researchers concluded that communication using computers for e-mail and instant messaging increases deception, with e-mail messages the most likely of the three forms to contain lies.

Underlying this was the concept of de-individualization, in which people grow psychologically and physically further from the person they are in communication with, increasing the likelihood of lying, according to the findings, published in the October issue of the Journal of Applied Social Psychology.

"Ultimately, the findings show how easy it is to lie when online, and that we are more likely to be the recipient of deceptive statements in online communication than when interacting with others face-to-face," one of the study's authors said in an announcement of the findings.

Meanwhile, the sky is blue, grass is green and water is wet.


Cheers.

According to the Institute for Supply Management's (ISM) latest manufacturing Report on Business, U.S. manufacturing expanded for the 30th consecutive month in January, reflecting overall growth in the U.S. economy, which grew for the 32nd consecutive month.

The ISM purchasing managers' index (PMI), a key monthly gauge for the manufacturing sector, climbed to 54.1 last month, up from 53.1 in December and marking the highest index reading since June 2011. Readings above 50 indicate overall growth for the industry. Despite the gain, January's PMI was still slightly below the 12-month average of 54.7. The index has been on a general trend of accelerating growth since October 2011.

"Stocks rose on optimism the factory reports show the world economy is withstanding fallout from Europe's debt crisis," Bloomberg News notes. "Production, led by inventory rebuilding at the end of 2011, is poised to keep expanding in the U.S. as the need to update equipment drives orders at companies like Caterpillar Inc. and demand for cars rises."

The ISM new orders index rose to 57.6 in January, up from 54.8 in December, marking the 33rd consecutive month of growth in demand and indicating that the pace of expansion is accelerating. New orders reached their highest level in nine months in January. Exports also rose, climbing to 55 from 53 in December, indicating that U.S. manufacturers haven't yet been significantly affected by a slowdown in European economic growth.

Nine of the 18 industries tracked by the ISM reported growth last month: apparel, leather and allied products; petroleum and coal products; machinery; computer and electronic products; transportation equipment; miscellaneous manufacturing; fabricated metal products; paper products; and primary metals.

Meanwhile, seven industries reported contraction: plastics and rubber products; furniture and related products; wood products; chemical products; food, beverage and tobacco products; electrical equipment, appliances and components; and textile mills.

Despite the overall growth, the latest monthly findings fell slightly short of expectations, as economists polled by MarketWatch had forecast the PMI to rise to 54.5 in January.

There were also some signs of sluggishness amid the gains last month. The ISM's production index fell from 58.9 in December to 55.7 in January, signaling a slowdown in the growth rate. Meanwhile, the prices index surged upward, climbing from 47.5 in December to 55.5 in January, raising concerns over the cost of raw materials.

The employment index posted a slight decline, dropping from 54.8 to 54.3 in January. While manufacturing businesses continue to hire, the pace has slackened a bit. However, the backlog of orders increased from 48 to 52.5, suggesting manufacturers may lack the resources to meet rising demand and that a new round of hiring could result.

The manufacturing sector is poised to continue expanding over the next quarter as long as demand for equipment and supplies remains elevated, but much of that demand depends on consumer spending rates.

"[E]conomists are concerned that a key source of factory growth could wither in the coming months. They note that a key reason the economy grew at an annual rate of 2.8 percent in the final three months of last year was that was companies restocked their supplies at a robust pace. That restocking is likely to slow in the first three months of this year," the Associated Press explains. "Unless consumer spending picks up, businesses won't be able to sell off that extra inventory, and may have to cut back on future orders."

Earlier

Manufacturing Growth Accelerates at Year's End

Manufacturing Expands at Faster Pace in November

Resources

January 2012 Manufacturing ISM Report on Business
Institute for Supply Management, Feb. 1, 2012

Manufacturing in U.S. Bolsters Global Expansion: Economy
by Shobhana Chandra
Bloomberg News, Feb. 1, 2012

ISM's U.S. Manufacturing Index Gains Momentum
by Jeffry Bartash
MarketWatch, Feb. 1, 2012

Manufacturing Expands at Fastest Pace Since June
by Christopher S. Rugaber
Associated Press, Feb. 1, 2012

• Mind Working an Extra Second this Year? | Most people know about the leap year, but fewer know that minor deviations in the Earth's rotation have forced us to add a "leap second" to the international time-keeping system, composed of atomic clocks across the globe. Scientific American explores the significance of the leap second, the curious history of annual time-keeping and how it all relates to the Mayan calendar's all-important 2012 cutoff.
• Experts on Challenges Facing Manufacturing | To encourage the opening of new factories in the U.S., the White House is proposing more training, additional education and new tax incentives. On the PBS Newshour website, the issue is discussed with Robert Reich, secretary of labor in the first Clinton administration and a professor of public policy at the University of California at Berkeley; Jack McDougle, senior VP at the Council on Competitiveness; and Martin Schmidt, associate provost at the Massachusetts Institute of Technology. Plus: Beri Fox, president and CEO of Marble King in West Virginia, and Peter Morici, a macro-economist and professor of international business at the University of Maryland, discuss the same issue on Public Radio International's The Takeway program.
• 5 Chemistry Reactions Once Considered Impossible | Chemistry can be unpredictable, and its history is full of occasions when prior assumptions were tossed out with a single discovery. New Scientist explores five chemistry reactions that were once thought impossible, including forcing noble gases to react, joining a third atom to a chemical bond and finding the quantum tunneling process through which chemical reactions can occur in the coldness of space.
• This is What a Scientist Looks Like | A new project on Tumblr is setting out to change the perception of what people imagine when they think "scientist." This is What a Scientist Looks Like explains, "There is no cookie-cutter mold of what a scientist looks like. A scientist can look like you, or can look like me. There is no rule that scientists can't be multidimensional and can't have fun. Help change the way the world views scientists." Scientists in any field can contribute. Love this idea!
• 12 IRS Audit Red Flags | Tax season is upon us again, bringing with it the threat of possible audits from the IRS. But certain things draw the dreaded agency's attention more than others, and CBS MoneyWatch offers a list of the 12 signs to watch out for when filing your return, including: large changes in income; excessive business meal and entertainment deductions; claiming rental losses; and claiming 100 percent business use of a vehicle.
• A Year on Earth in Photos | People love taking pictures, and this video from mobile device software company Triposo shows where photos were taken on Earth each day throughout 2011. Different cultural holidays are well-represented via the number of snapshots. In addition to the Fourth of July lighting up America, keep an eye out for other photo-happy celebrations, such as China's October Holiday, Brazil's Independence Day and May Day (commemorating the end of WWII) in Russia.
• From Factories to Cubicles | "What did the economy look like in the 1950s?" The Atlantic asks. "If you could organize all the jobs into buckets and compare the paper-shuffling professional services bucket to the manufacturing bucket, what would they look like around 1950, and how has the picture changed in the last 60 years." In a special report on the rise and fall (and possible rise again) of U.S. manufacturing, National Journal showed 60 years of economic change and compared employment by sector in 1947 and 2007 — in a single graphic.

  
  Image: Brian McGill and Peter Bell/National Journal

In its 2011 paper, When the Worlds of Procurement & Sales Collide, consulting firm Greybeard Advisors shows not only a disconnect between procurement and sales functions, but also that companies cling to an outdated and under-performing model that hasn't changed in three decades.

Supply & Demand Chain Executive provided survey support for the project, as did Sales & Marketing Management magazine and MAPI's Procurement and Sales councils.

Based on responses from 161 procurement professionals and 106 sales professionals, the survey results reveal that both sides view the other as knowledgeable about market and company requirements. For instance, 79 percent of procurement respondents agree or strongly agree that sales pros know their products and services; only 9 percent disagree. The sales responses also point to a respect for procurement pros' awareness of their organization's requirements, although not as strongly; 64 percent agree or strongly agree, while 22 percent disagree.

Despite evidence from both sales and procurement respondents of respect for the "other side" and working cross-functionally, this seeming mutual respect was not reflected elsewhere in the findings.

For example, nine in 10 (92 percent) sales executives are skeptical of procurement's willingness to share company requirements, business plans, processes and product usage, including information regarding current forecasts/trends. Moreover, although sales pros view procurement as being receptive to recommendations that have a positive effect on working capital and/or cash flow, procurement pros don't consider sales pros capable of delivering such proposals.

The disconnect between both functions extends to perceptions about the appropriate first point of contact when selling into a company.

Procurement pros are generally neutral (46 percent) in their view of whether sales pros make procurement the first point of contact for a sales call; 29 percent believe that sales frequently or always calls on procurement first, 53 percent say that sometimes happens and 24 percent believe that it seldom or never happens. In sharp contrast, 62 percent of sales respondents don't accept procurement as the first point of contact, compared with 17 percent agreeing that procurement should be the point of entry into an organization (another 21 percent are neutral).

The responses on the "first point of contact" issue suggest that while procurement believes that sales respects procurement as the "first point," sales believes otherwise, pointing toward a belief that there are better places to start the selling process with a potential customer.

Notably, the findings also offer evidence that total cost of ownership (TCO) and total value (TV) is taking a backseat to price-only decisions. Although Greybeard partly attributes this to the down economy — which has put a premium on delivering immediate cost savings to the bottom line — the results reflect mistrust between procurement and sales.

"Understanding of the fundamentals of Total Cost of Ownership and Total Value are shown to be in question for both sales and procurement as seen by the other side," Greybeard's report states. "Looking at both sets of responses provides evidence that neither side has a favorable opinion of the other."

When it comes to believing whether procurement understands TCO, 46 percent of sales respondents are negative ("disagree" or "strongly disagree") and just 21 percent are positive ("agree" or "strongly agree"). On the other hand, procurement pros are generally more positive, with 33 percent agreeing that sales representatives understand TCO and 35 percent disagreeing.

The findings further suggest that procurement pros aren't as interested in TCO as they should be, as a significant 77 percent of sales reps declare that procurement is more interested in price than TCO and/or TV. Only 13 percent assert that procurement is interested in proposals that go beyond price.

Continuing to focus on tactics that put price ahead of total cost often results in both job functions being prevented from engaging with each other for mutual benefit

"The reality of being in a procurement organization is that price is an element, especially in times of duress," Jim Baehr, a senior advisor with Greybeard, said in a Supply & Demand Chain Executive report. "But procurement executives need to recognize that as we move into a healthier economy, they need to start doing things differently, and they need to start thinking much more strategically."

To that end, Greybeard advises procurement and sales leadership to assess their respective teams' level of tactical behavior versus strategic behavior. If the scale tips toward tactical, leaders should consider whether making a shift toward more strategic sales or procurement approaches would benefit the company and, if action is warranted, create a roadmap for short-term and long-term transformation.

"Where organizations already take a cross-functional approach that brings together sales and procurement, Baehr says that these companies are far more likely to have a strategic, holistic, total cost of ownership approach to selling and buying, because senior management understands strategy and understands the benefit of sharing across functions," Supply & Demand Chain Executive explains. "But for the moment, Greybeard finds those companies to still be in the minority."

Resources

When the Worlds of Procurement & Sales Collide
Greybeard Advisors, 2011

When Procurement and Sales Collide
by Andrew Reese
Supply & Demand Chain Executive, March 2011

According to McGladrey's latest survey of 511 manufacturing and distribution leaders, 71 percent of respondents are exporting to foreign countries, with most exporting to Canada (82 percent) and Mexico (54 percent), and Western Europe (excluding Germany, the Netherlands or the United Kingdom at 38 percent), the U.K. (38 percent) and China (38 percent) rounding out the top five destinations.

Notable growth markets include Brazil, Central America and South America. Meanwhile, exports to China have slowed, which McGladrey ascribes to the market becoming "ever-more sophisticated and thus harder to penetrate." The accounting firm also notes that free trade agreements (FTAs) with Colombia, Panama and South Korea were signed after the period of the survey. How these FTAs will affect exports to countries remains to be seen.

Today, the companies most likely to export are in the biotech (88 percent), industrial machinery (84 percent), textiles and apparel (83 percent) and automotive (82 percent) industries, while companies dealing with building materials (59 percent), food and beverage (57 percent) and wood, paper and printing (41 percent) are in the bottom tier of exporting companies.

According to McGladrey's findings:

• Customer and/or key client demand is the most common reason for exporting;
• Interest in exporting to Central America and South America is rising, and Brazil seems to be where mid-market manufacturers see the greatest growth potential; and
• Initial forays into offshore markets tend to focus on transactional issues, while firms' subsequent moves into additional foreign markets focus more on strategic issues.

While the majority (52 percent) of respondents reported increases in exporting activities over the past year, a striking finding is the correlation between growth in exports and organizations' health: Approximately 60 percent of the companies that are thriving have increased their exports, a sign that exporting sales is recognized as a key driver for growth.

"The takeaway is if you're not exporting, you need to think about exporting," Karen Kurek, national manufacturing leader for McGladrey, recently told IndustryWeek. "And if you are exporting, you need to think about ways you can enhance that activity."

Companies looking to expand their export sales may be intimidated by such a large undertaking, but resources for research and partnership are readily available. In a separate report, IndustryWeek asked several industry leaders who focus on exports for their advice:

1. Actively select the markets you pursue. Do research and take advantage of free trade agreements the government has with nearby countries. "The decision to go into new markets should be thought of not as one big, irreversible commitment but as a series of smaller experiments from which you can learn," according to Frank Lavin and Peter Cohan, authors of Export Now: Five Keys to Entering New Markets.
2. Recognize that different markets require different approaches. SASCO Chemical Group President Marc Skalla says that people should "learn the culture of the market [they] want to enter," as foreign markets aren't always receptive to American products.
3. Establish and nurture international relationships. Kathe Falls of the Georgia Department of Economic Development noticed a trend: American companies would enter foreign markets, develop relationships with local customers, then abandon them when the U.S. economy improved. Consistent and considerate relationship maintenance is key to avoiding this misstep.
4. Develop partnerships. Developing relationships with in-country partners can help exporters avoid a multitude of worries. "Whether it's a selling agent, distributor or wholesaler, it's always a good idea to have local expertise involved when trying to penetrate new overseas markets," Daniel L. Gardner, CEO of Ocean World Lines, says.
5. Don't overlook government resources. Because government agencies already have a foot in the door in foreign countries, they can assist companies with a wide range of services, including finding booth space at foreign conventions or providing free market research.

More information on federal support can be found through the International Trade Administration. Additionally, the White House's National Export Initiative is designed to ease restrictions and provide resources to companies looking to export.

Resources

Manufacturing & Distribution Monitor: Fall 2011 Report
McGladrey, November 2011

...Business Accelerating Despite Concerns about Government Gridlock
McGladrey, Nov. 21, 2011

Survey: Healthy Manufacturers Tend to Export
by Josh Cable
IndustryWeek, Jan. 6, 2012

5 Keys to Growing Your Export Sales
by Jill Jusko
IndustryWeek, Dec. 14, 2011

"We continue to lick our wounds from the dramatic raw material price increases experienced in the first half of 2011, and even though prices have started to stabilize, most companies have not been able to pass on the pain. The perceived recovery of the automotive industry is a good sign, and it's starting to show growth in some segments of our business, but the tide has not risen yet across the whole industrial sector, so there is extreme skepticism about what 2012 will truly bring with regard to growth."

Spencer, Mass.-based FLEXcon develops and manufactures pressure-sensitive films and adhesives that are used on product labels. The company, which is family-owned and privately held, coats, laminates and embosses films.

Bennett says his firm is a good barometer for what is happening in the market "because every industrial product sold in the world needs brand identity labels, instructional labels, caution and warning labels and, in most cases, rating plates that carry a certification from either UL, the Canadian Standards Association, or both."

Bennett says he is optimistic about his firm's prospects for 2012, even though "the honest answer is, being the [market] leader, we are not experiencing the growth in this market segment that everyone expected." He says FLEXcon can rapidly respond if market demand picks up.

Some purchasing surveys show manufacturing activity is picking up. The latest Manufacturing ISM Report on Business from the Institute for Supply Management found that economic activity in the manufacturing sector expanded in December for the 29th consecutive month, and the overall economy grew for the 31st consecutive month.

PricewaterhouseCooper's (PwC) most recent Manufacturing Barometer report also had some good news for manufacturers.

"While the barometer indicates a lot of uncertainty in U.S. and world markets, it also indicates that revenue growth will continue, so the manufacturer needs to position its products in growth areas," according to Barry Misthal, global industrial manufacturing leader for PwC. "Since industrial buyers have limited capital budgets, it is important that they make strategic and impactful purchases that will enable growth."

"Things are percolating. It's not a boom year, but things are getting better for manufacturing in 2012," John Mothersole, principal economist at forecasting firm IHS Global Insight, explains.

Mothersole urges industrial buyers to keep an eye on one commodity: "We see steel prices bumping up a little bit as we move through the first half of 2012. In fact, we are already seeing signs that steel prices are starting to move, and our advice is, if you haven't already purchased or locked in for the year, you've missed the low, and if you don't move quickly, you are going to get hit with some further increases."

Steel prices, Mothersole tells IMT, are coming off their low. Hot-rolled sheet, a benchmark commodity-grade product, was selling for an average price of $757 per metric ton during the fourth quarter of 2011 in the U.S. "Our expectation is that the average price in the first quarter of 2012 is going to rise to $792 a ton, and then in the second quarter 2012, it will climb above $800 — to $847 per metric ton," Mothersole says.

"Volatility is the new normal. This is especially true in terms of predicting what will be noteworthy in commodities in 2012 as pricing could have 20 percent-plus swings," Lisa Anderson, founder and president of LMA Consulting Group, says.

"Every company that relies on components derived from oil and natural gas will need to think carefully about how much risk they're willing to absorb and develop risk mitigation strategies," Anderson adds. Her consulting practice focuses on change management (M&As and turnarounds), process control and project management.

Currency exchange rates will also be a factor in 2012 industrial buying, according to James Jenkinson, vice president at Efficio, an international procurement consultancy. "It is likely there will be significant shifts in exchange rates, given the euro situation and continued growth in developing economies putting additional pressures on exchange rates. Managing exchange rate risk is critical where it may be necessary to hedge for large spend areas and even to push suppliers to price in your primary currency (e.g. the dollar)."

On the tax front, the extension and expansion of bonus depreciation through 2012 is of high importance to industrial buyers in 2012, Andy Hammons, a principal in the federal income tax practice at Ryan, LLC, says.

"The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 permitted taxpayers to elect a bonus first-year depreciation deduction on qualified depreciable property equal to 100 percent of the adjusted basis of eligible property for the year 2011. This 100 percent rate applied to assets purchased on or after Sept. 9, 2010, and before Jan. 1, 2012," Hammons explains. "Assets purchased during the 2012 calendar year qualify for a 50 percent bonus depreciation deduction. There is no limit on the amount of the deduction, yet there are certain criteria that must be met to be eligible for it."

A couple of factors are driving companies in their purchasing approach, Hammons says. "In essence, the tax breaks and low cost of capital justifies the purchase of new machinery and equipment, as opposed to hiring new employees to utilize existing equipment."

The procurement team could see its value grow in the organization this year, according to Rosslyn Analytics' technology predictions for procurement executives in 2012.

"As executive teams realize the value that procurement has delivered for their organizations, e.g. improved profitability, finance will assert more ownership of the purchasing function. On the flip side, procurement's stature will continue to grow internally, becoming a strategic business advisor to internal stakeholders."

Rosslyn Analytics is a developer of one-click data discovery and business intelligence software.

Michael Keating is senior editor for Government Product News and a contributing editor for American City and County, both published by Penton Media Inc. Keating has written about do-it-yourself market research for manufacturers and manufacturer-distributor relationships for IMT. Find out how manufacturers will be affected by 2012 government budgets in his latest forecasts at GovPro.com and IMT. Keating has written articles on the government market for more than 100 publications, including USA Today, Sanitary Maintenance, IndustryWeek and the Costco Connection. Mike can be reached through his website, MikeKeat.net.

Book excerpt republished here with the permission of William Dorn and Joe Payne.

Getting to know your suppliers is by far the most important aspect of the RFx process. Take time to research your prospective suppliers. Treat the process like preparing for a job interview, in which you would want to know everything about the company with which you are interviewing, just as the interviewer would want to learn everything possible about you. This is important for making sure that your respective businesses are in alignment and will be able to work successfully together.

Start with basic online research. Read about the industry, review the supplier's website, research their competitors, find relevant news articles, use subscription services, if available, to understand the hierarchy and financials of the prospective suppliers, then make calls.

Identify the proper person or persons within the prospective supplier's organization who would handle your account. Make sure you are communicating at the right level; if you manage multiple locations, or have a large spend, make sure you get a senior account representative or a national/international account manager.

Take time to speak with your prospective suppliers' account managers or sales teams. Calling prospective suppliers, asking for e-mail addresses, and letting them know that they will be receiving an RFP before you hang up does not qualify as taking time to speak with a prospective supplier. After you have conducted your own research into a supplier, take at least 10 minutes to speak on the phone with the proper people there. This is the very first step in building a long-term relationship with that supplier. Make sure your prospective suppliers understand your needs and wants, and find ways to assure them that the sourcing event is a real opportunity and that they have a good chance to win your business.

Take the time to explain the process to prospective suppliers. Regardless of the type of sourcing event you are conducting (RFI, RFP, RFQ or reverse auction), inform them of the steps of the process and what they need to do at each step. Explain that you will be sending documents, whether physical or electronic, or using a sourcing software platform. Make sure they understand what is expected of them in the response. Immediately schedule a follow-up call for a time after you have sent them the RFx, during which you can walk them through the process a second time and offer them an opportunity to ask questions.

Follow up with suppliers throughout your timeline of the sourcing event. For example, if you provided 20 days to respond to an RFP, follow up regularly via e-mail, phone, or both to make sure that they are making progress and no new questions have arisen. Make sure that your follow-up calls or e-mails are more detailed than, "Just making sure you get this to me by (such-and-such) date." Continue to build the relationship by asking the supplier whether there is anything they need to assist them in preparing the response.

Training
Earlier we mentioned that improper training can often serve as the root cause of RFP spamming. Often, the problem is actually caused by having too much documentation and formal process documents. Often when new hires come into your organization, they are told to review internal process manuals to learn how the company does such things. The trainees may take matters a step further and search online for other formalized methods of sourcing a particular category. While it is important to understand how sourcing events are typically done, or how they were done in the past, rigidly following a formal policy for procurement often impedes your ability to adapt and add creativity into the strategic sourcing process.

Many sourcing professionals come from standard procurement backgrounds, in which they believe sourcing is merely the process of developing a standardly-structured (i.e. overly complex) RFP and asking three suppliers to bid. A procurement professional should understand and execute best practices for specific commodities, not just reissue a generic RFP. For instance, sourcing telecommunications is a completely different activity from sourcing office supplies. Telecommunications sourcing efforts can yield optimal savings if the sourcing team has a good familiarity with available technologies and a solid understanding of tariffs, which can be leveraged to gain improved pricing. An RFP is not always the best practice for telecommunications projects. On the other hand, sourcing office supplies requires heavy spend analysis to determine usage patterns within your organization. In most companies, a formal best practice policy manual will not get down to this level of commodity sourcing detail, and the sourcing team may end up using the wrong strategies for their sourcing events.

Get Help
Managing multiple spend categories and staying current with market intelligence is a daunting task and cannot always be accomplished with in-house resources for every single spend category. Fortunately, there are a variety of solutions, ranging from electronic marketplaces to traditional and nontraditional consulting firms, that can help manage the categories that you just do not have the time or resources to source properly or for which you require additional support. In Part 2 of this book, we cover some of those technologies as well as provide advice on engaging outside support services.

William Dorn and Joe Payne, both vice presidents of Source One, have spent the last decade providing strategic sourcing and procurement cost reduction services in all categories of spend to customers in just about every industry. They recently authored the book Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing, which is available at StrategicSourcingBook.com. Source One Management Services, LLC has been providing contingency and fee-based strategic sourcing and procurement cost reduction services since 1992, making it one of the oldest and successful companies in the industry. More information can be found at SourceOneInc.com or by calling 215-902-0200. Source One also publishes an industry-recognized blog, StrategicSourceror.com and provides free electronic sourcing tools on the web at WhyAbe.com and ThomasNet's RFP Manager.

It's not like you can make up for it by signing a contract with Target to sell discount guided missile destroyers.

But cutting the budget is what the Pentagon plans to do: some $480 billion over the next decade (2013-2022), up to a $1 trillion sequestration that would take effect if Congress does not enact a major budget reduction plan before January 2013. The military ultimately plans to eliminate about 80,000 jobs; skip future troop-intensive counterinsurgency campaigns in Iraq and Afghanistan; downsize the nuclear arsenal; trim the fat on future retirement and healthcare benefits; draw down on warships and delay the purchase of Lockheed Martin's famed but troubled F-35 Lightning II jets.

As such, a consortium calling itself the Defense Industrial Base Task Force — comprised of the Aerospace Industries Association (AIA), the National Defense Industrial Association (NDIA) and the Professional Services Council (PSC) — recently sent a joint letter to U.S. Secretary of Defense Leon Panetta to outline what the wider impact of budget cuts might be.

The consortium's forecasts, if true, are stark: Cuts beyond $480 billion, which most company executives expect in future budget requests even if sequestration is avoided, "would render major segments of the defense industry unable to produce critical products and components."

The letter and accompanying report represent a softening of projections made last fall, which were based in part on an AIA-commissioned study that measured the economic impact of DOD spending cuts on equipment such as small arms, ordnance, communications, aircraft, guided missiles, ships and armored vehicles and tanks. It concluded that for each job lost by the DOD's prime contractors, three more jobs would be lost in the U.S. economy as a whole.

The first $45 billion cut in spending on military equipment would cause losses throughout the supply chain that could cost the economy more than $164 billion. Essentially, for each $1 in military spending cuts, the broader economy would lose $2.64 in sales thanks to the ripple effect. Job losses from the cuts could exceed 1 million in both direct and indirect jobs.

But it won't stop there, the Task Force says. The proposed spending cuts would decrease the U.S. gross domestic product (GDP) by more than $86 billion, dropping the projected annual increase in GDP for 2013 by 25 percent and shaving the U.S. economic growth rate from a projected 2.3 percent to 1.7 percent.

Although the Task Force has backed away from some of the earlier projections of the AIA study, the new Defense Industrial Base Task Force report does point out even more catastrophic consequences should further cuts — the $1 trillion "doomsday" scenario — be enacted by default.

While some of the scenarios sound decidedly hyperbolic, the defense industry does have some unique characteristics not shared by other industries. Companies that rely almost entirely on DOD spending can hardly drum up new business, and the closing of manufacturing facilities could be catastrophic if the U.S. military suddenly has an urgent, unexpected need.

For companies that do have civilian business, the cuts might lead them to shutter their military production lines, leading to breaks in supply chains that could be filled abroad — not a great idea for a variety of reasons, alienating investors not the least of them. The squeeze could ultimately lead to a reduction in U.S. military technological innovation. On the flip side, maintaining a supply chain to a size that is no longer needed is a bit like the old buggy whip argument: Is it wise to continue paying for goods and services that are no longer needed, particularly when U.S. taxpayers are forking over the cash?

While the DOD has responded to the Task Force's letter and assured the industry it will continue to work with it to alleviate consequences of budget cuts, the DOD says the industry needs to "be reasonable." In turn, the defense industry has said it acknowledges that the current economic environment has led to the necessity of budget cuts. It seems likely that negotiations will continue through the year, and come to a peak prior to Election Day in November.

Resources

AIA, NDIA, PSC Release Joint Industrial Base Report
Aerospace Industries Association, National Defense Industrial Association and Professional Services Council, Jan. 6, 2012

Defense Industrial Base Task Force Letter to Leon Panetta
Aerospace Industries Association, National Defense Industrial Association and Professional Services Council, Nov. 11, 2011

...Budget Cuts: Not Just How Much, but How
Defense Industry Daily, Jan. 9, 2012

DOD Official Seeks to Reassure Industry Over Cuts
by Amber Corrin
Defense Systems, Jan 6, 2012

The U. S. Economic Impact of Approved and Projected DOD Spending Reductions on Equipment in 2013
by Stephen S. Fuller
Second to None, Oct. 24, 2011

A 2011-2012 Culpepper global salary budget survey indicates that the number of companies freezing salaries across all jobs and locations will decline to 2.9 percent in 2012 from 4.4 percent in 2011. Furthermore, certain industries experience promotion spikes year-round. Management consulting companies see a promotion peak in September, while information tech companies follow a quarterly pattern, according to LinkedIn.

Which individuals are on top of the promotion list? In addition to high-performing employees, so-called millennials — those born after 1980 — are more likely to achieve promotions throughout the year than older employees. To join the ranks of the newly promoted, and to stand out from your peers, experts advise crafting a solid strategy early on.

Specify the Type of Promotion
Speak with your manager about the type of position you want and keep in mind what might become available at a moment's notice if someone in a senior position leaves the company. You might desire a salary and title promotion from your current position or decide to switch departments in the same company, which could prove beneficial to your career.

A lateral move to a similar position in a different department might increase your appreciation for a company, and ultimately give you greater exposure, MindTools explains. "For example, if you're a communications manager and feel that there's no place to go with your job, gain experience in other areas of the company. When you have the right mix of experience and skill, a promotion to a more senior level may become a more realistic goal."

To that end, it helps to prepare ahead to know what to expect. Consult career salary sites such as PayScale.com to get a better picture of competitive salary rates in your industry. Additionally, keep in mind that most large companies have a window or quarter when they are able to promote their employees, the Wall Street Journal reports. For this reason it's imperative to discuss a promotion with a manager a few months ahead of that time.

Make Your Mission Clear
While it's always a smart move to volunteer for projects and take responsibility for your role, experts warn that employees should not shy away from self-promotion, something that can get them overlooked. "Millennials are more comfortable with using technology this way and are more willing to seek recommendations and endorsements, giving them an advantage over older generations," Matt Adler, founder of recruitment consultancy MetaShift, tells LinkedIn.

Learn to accept compliments and criticism to help you get ahead, experts advise. "While nobody likes a braggart, don't waste a compliment by deflecting credit elsewhere," the American Institute of CPAs notes, stressing that you should never downplay the significance of your accomplishments.

Learn the Good (and the Bad) from Your Colleagues
If you've been passed over for a promotion and are wondering what went wrong, seek the insights of your manager without getting upset. Addressing the situation can improve your chances for the next promotion opportunity. "You may even want to get an outside perspective from a headhunter in your industry as to whether you have the right skills and experience for the job," Harvard Business Review explains.

Strengthening your own skills can be achieved by observing your colleagues, and learning from their achievements — and mistakes. "You do not need to adopt their best traits, but you can take positive lessons from both high-performing individuals and those who are not as successful," Lexi M. Schuh writes in How to Get the Promotion You Want in 90 Days or Less. "Even those individuals whom you do not personally like will possess characteristics from which you can learn."

Avoid these Blunders at All Costs
There are certain missteps employees should always avoid when it comes to promotion time. A recent study published by CareerBuilder highlights the top reasons why employees are less likely to be promoted by their boss. The top offenders cited by 2,878 hiring managers include:

1. Piercings (37 percent);
2. Bad breath (34 percent);
3. Visible tattoo (31 percent);
4. Wrinkled clothes (31 percent); and
5. Messy hair (29 percent).

While these blunders are easily avoidable, take a step further with your appearance at the workplace. LiveCareer emphasizes that employees should dress for the job they desire, rather than their current role. Unfortunately, even the best dressed workers won't get far without an essential quality. Besides being beneficial to your career, positive energy leaves a lasting impression and is contagious to your colleagues.

Resources

Level Up! How Millennials are Changing the Promotion Game
by Monica Rogati
LinkedIn, January 26, 2011

Salary Increase Budgets Expected to Rise in 2012
Culpepper, September 2011

Get Ready for Promotion
MindTools

Most Promotions Take Place in January, Study Finds
by Joe Light
The Wall Street Journal, Jan. 26, 2011

... Best Months of the Year for Professionals to Get a Promotion
LinkedIn, Jan. 26, 2011

10 Tips for Getting that Big Promotion
American Institute of CPAs, April 7, 2010

How to Get the Promotion You Want in 90 Days or Less: A Step-by-Step Plan for Making It Happen
by Lexi M. Schuh
Atlantic Publishing Company, Oct. 31, 2008

9 Tips for Getting a Promotion
by Maria Hanson
LiveCareer, April 29, 2012

Didn't Get That Promotion?
by Amy Gallo
Harvard Business Review, Aug. 29, 2011

Bad Breath, Heavy Cologne and Wrinkled Clothes Among Factors That Can Make You Less Likely to Get Promoted...
CareerBuilder.com, June 29, 2011