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January 16, 2014
Editor's Note 
BarbaraJorgensen
 Hey buyers -- Does anyone remember what your priorities were for 2013? Do the words "flexibility" and "resilience" ring a bell? Guess what? Your new top job is cutting costs.
The Institute of Supply Management -- which represents purchasing professionals across all major industries -- surveyed about 500 of its members. The No. 1 concern among buyers isn't building resilience -- it's cutting costs. Moreover, buyers say that they didn't meet their cost-cutting goals for 2013.

I know the economy is still dragging and competition is fierce. I also know one of procurement's main responsibilities is to get the best possible pricing on components. But I have to wonder where the 2014 cuts are going to come from: hasn't the industry been in self-improvement mode for more than a decade now? Haven't we implemented LEAN, JIT, BTO, MRP, ERP, TQM and dozens of other acronyms? Aren't we already doing job of two-plus people?

Sure, there are still inefficiencies in the supply chain and LEAN, TQM etc. are ongoing practices that never really end. They are also supposed to cut costs. So if we are doing a good job with our acronyms, how come costs aren't going down? The ISM reports only 20 percent of companies substantially cut costs in 2013. In fact, most procurement executives are expecting that the total amount they saved in 2013 won't meet business expectations:
  • 60 percent expect to deliver 10 percent or less in savings.
  • 20 percent estimate 11-20 percent in reductions.
"Delivering marginal savings should be a trigger for procurement teams to take a step back and assess what's working well, what isn't and how the function can improve," said Mickey North Rizza, VP of strategic services at BravoSolution (which conducted the survey with ISM.) "If savings aren't driving the business forward, procurement needs to find new and more meaningful ways of impacting the business."
 
Wow. Good luck with that. Suppliers and distributors already feel that prices have been hammered down as far as thy can go. Automation has replaced human tasks and software can place an order for replenishment. Moving this stuff to the cloud is the next order of business and companies that have done that have cut costs. But algorithms don't form relationships and they don't negotiate very well. Short of eliminating humans altogether, you have to ask the supply chain: How low can it go?
 
Actually, the ISM report is a good read and has lots of good data. It also provides solutions to some of the supply chain' s problems. I recommend you read it -- and then get back to work.
 

Speaking of good reads, EPS Contributing Editor Douglas Alexander provides his perspective on CES in

Tech Innovation Reality vs. Fantasy as does EPS Executive Editor Gina Roos in CES 2014: It's More Than Gadgets. Also this month, EPS has new products, new profiles and updates on some key suppliers. Enjoy, and let us know what you think at editor@epsnewsonline.com.

Barbara Jorgensen

EPS Managing Editor

barbara.jorgensen@epsnewsonline.com 

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Featured Articles 
In the interconnect, passive and electromechanical (IP&E) device market, EPS readers were most interested in learning more about what's happening at Molex after the acquisition by Koch Industries. Link

  

EPS' December Hot Products 

This month's top product picks are all related to efficiency. These products, ranging from MOSFETs to transceivers, deliver energy, power or system efficiency, and in some cases, significant power savings across several industries. In addition, many of these devices are housed in small packages to save board spaceLink 

 

Top 10 Electronics Supply Chain Risks 

The global electronics supply chain will this year confront again some of its old demons and dozens of new ones, ranging from natural disasters to man-made misadventures, management blunders, troubled acquisitions and failing to anticipate and respond to changing market conditions. So far, though, nothing on the horizon indicates the electronics industry should be bracing for a major shock to the supply chain in 2014. Link

 

Distributors on the front line of the design chain are feeling optimistic about 2014. While the first half of the year might start out slowly, the second half is expected by both manufacturers and distributors to be better than the prior half - and the prior year. Link

The top 10 most read new product introductions in 2013 ranged from sensors and ferrite beads to op amps and 32-bit microcontrollers. Link 

.Xilinx Inc. (NASDAQ: XLNX) is hot with investors and the analyst community. Link

Philadelphia-based PEI-Genesis  has a highly-focused business model that the company is taking global. Link
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News 
Having established itself as a major force in the global economy, China is turning its attention to social reforms and has announced policies that will resonate throughout the electronics and other manufacturing industries. Link

In light of the snowstorm and artic cold blast that parts of the United States experienced recently, I would say that the No. 1 item on my Internet-of-things (IoT) wish list is quite practical. Link 

Although overall revenue growth in the aerospace and defense (A&D) industry is projected to grow five percent in 2014, global revenues for defense companies is on a downward trend, falling 1.3 percent in 2012 and 1.9 percent in 2011, according to Deloitte Touche Tohmatsu Limited (DTTL). The good news: Commercial aerospace demand continues to growLink  

Supply Chain 2014: Avnet's Analysis 

The electronics supply chain of course hopes that demand for products will pick up in 2014. But components and systems are only part of the story. A well-managed supply chain can cut costs and help increase profits for global electronics companies.  Link 

Readers Weigh in on Xilinx-Flex Suit 

Many readers have weighed in about the Xilinx-Flextronics suit (See: Xilinx Sues Flextronics for Alleged Fraudulent Chip Resale and The Multiple Dangers of Component Resale)and have made a number of good points I'd like to share here. Link  

News Wire
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