SUPPLY CHAIN RESOURCE COOPERATIVE

A recent report by Software Advice - a supply chain execution software reviews siteprovides insights into what a group of executives surveyed is looking for from supply chain job listings.Software Advice analyzed 200 job listings to find out what it really takes to be a supply chain manager.  Some of the highlights included the following.

  • On average, employers want a supply chain manager with 7 years of experience.  However, 40% are willing to look at new entrants that have less than 5 years of experience.  This means that students who are graduating and looking for a job should try to get at least a couple of summer’s worth of job experience, even if it is not directly job related.  For MBA students, internships are critical to finding a job!
  • 72% of job listings included a Bachelor’s degree requirement. 17% preferred candidates with an MBA. My experience is that some employers would prefer to find undergraduates for their open roles, and do some training themselves.  Others just want MBA’s.  So you need to do your homework if you are looking for a job!
  • 37% of employers wanted a supply chain manager with a professional certification. One third of employers specified an APICS certification.  Bottom line:  APICS certification is good, but working towards CSCMP or ISM certification can’t hurt either.
  • 45% of employers want undergrads with a SCM concentration – but 45% will also look for a general business degree.  25% are looking for engineers to work in SCM, and another 5% want Finance or Scientific degrees.  For example, to work in pharmaceutical industries, some companies will only look at students with a chemical engineering degree..
  • ERP or MRP experience is a plus in 40% of cases.  SAP is preferred followed by Oracle experience..
  • Hopefully you like to travel – 33% of employers say some travel is required.

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Many companies are still proclaiming that they have  “collaborative relationships”, but nowhere is this less the case then in the construction industry in oil and gas. In this environment, traditional Design-Build relationships are more risk-prone and litigious then ever.

Recently I met with a group of companies in Niagara Falls, at a meeting hosted by Aecon, a large construction company, that hosted their customers in a number of industries. Aecon is seeking to build a new method for integrative partnership development. Their founder stood up at the end, and emphasized – “Partnerships have always been a part of Aecon – the company was indeed founded on partnerships.” Some of the discussions focused on performance-based contracts, and examples were discussed. In an example of such a contract, one of the clauses that really caught my attention was the following.

Relationship of the Parties. Although this Agreement establishes a relationship of mutual trust and good faith among the Parties, who recognize that their individual success is directly tied to the performance of other Project Participants, it does not create an agency relationship, fiduciary relationship, partnership, or joint venture among or between the Parties.

If you read this clause, what it means that the parties agree that both parties are mutually accountable and agree to work together!

The Architect and Contractor are each independent contractors solely responsible for directing and managing their own forces and services within their respective area of responsibility as described in a different section of the contract.  All responsibilities are clearly laid out, and agreed to, within the context of the agreement. The Parties acknowledge that this Agreement is not a design-build agreement and that each Party, and each individual entity that is a Party, is responsible for its own errors, omissions, or construction defects to the extent provided in this Agreement. Likewise, nothing contained in this Agreement makes any Party jointly and severally liable for the negligent acts or omissions of any other Party, except that (a) the Contractor is responsible for the acts, errors, and omissions of its subcontractors, and the Architect is responsible for the acts, errors, and omissions of its consultants; and (b) the Incentive Compensation Layer (“ICL”) may be eroded if errors or omissions of Architect, Contractor, or those for whom they are responsible increase the incurred Chargeable Costs.

What a simple and well-defined statement! The description provides very clear guidelines on how to handle issues as they arise. Responsibilities are clearly laid out, and impacts understood!  This is what contracts are supposed to do – lay out responsibilities, and drive appropriate channels for review of performance metrics, drive problems to their root cause, and establish the roles and responsibilities for all parties to resolve issues.  This not only prevents problems later in the contract, but ensures continuity of the relationship and drives both parties to continuously improve it.

As one representative from Union Gas noted: “The scorecard we built for this agreement has our mutual interests at stake, and we are both invested in this.  Things happen on a major project:  permits are late, materials are changing, but we are able to keep the commitments and continue to get better despite the problems that occur.  This is what we mean when we talk about trust.”

What was also apparent in this relationship is that when problems occur, trust combined with metrics is what drives the relationship to grow.  For example, one of the contractors noted the importance of project controls in managing issues. “Trust involves on-going work, transparency, open books and being results focused.  We think about project controls, and in 2013  we really missed the mark.  We were working through the jobs and didn’t have a handle on the costs and schedule and we failed in that aspect.  We admitted this upfront, and then worked to develop a tool that would allow us to monitor and review projects costs and workflow on a more regular basis, and be able to catch problems early on to resolve them.”

The conference was not only well-attended but brought forward a number of insights on how to mange long-term partnerships in the volatile project management environment of oil and gas.

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The proceedings of the 2014 Workshop on Human Centered Big Data Research was recently posted.  At this meeting, I was selected to make a presentation on the organizational structure and application of supply market intelligence.  (My presentation was also captured in a video that you can watch if so inclined!)

My presentation presented results of a recent study on key actions that organizations are taking to improve access to supply market intelligence.  The research shows that many organizations are using haphazard approaches to drive insights into supply markets, but that there is an increasing recognition of the value of market intelligence in many industries, particularly in manufacturing.

It was also clear that the field of Big Data is expanding rapidly, and that intelligence agencies are including many different approaches to collecting data from multiple sources to drive insights.  For instance, a study by Samantha Szymzcak, Dan Elk, and William Elk  identifying human attention as the limiting resource for employing Big Data for operational use. The framework leverages prior research in attention management, sensory perception, and joint cognitive systems to lay out a Human Centered Big Data Research agenda.

Another fascinating topic was that of human “sense-making”, which means that there is not always a need for perfect data.  Alex Endert and Bill Pike discussed how many phenomena we wish to understand do not always have a  defined start and end, data about these phenomena arrive in stream over time. The challenge is to characterize the phenomena from this stream, allowing models or hypotheses that explain the phenomena to evolve over time as data arrive. Their ultimate finding – perfect data is not needed to drive the right intuition and deductive decisons in many cases!  This is good news, as many of the datasets found  in supply chains are indeed imperfect…

There are many other great presentations and abstracts that occurred at this conference that anyone interested in Big Data and intelligence should browse!

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The USDA released a new study that I worked on with Jay Golden from Duke University this past summer.  We spent a good deal of time collecting research from a variety of different sources, to put together a picture of what the biobased economy looks like.

Agrilculture Secretary notes that “This new report presents the opportunities U.S. agriculture and forests have in the emerging bioeconomy,” said Vilsack. “The recent inclusion of mature market products into the BioPreferred program strengthens our commitment to the U.S. biobased economy and brings together two of the most important economic engines for rural America: agriculture and manufacturing.”

In the next phase of our study, we will be working on the next phase of the report:  An in-depth economic study of biobased products and economic impacts, including research on job creation and economic value. It will be the first federally sponsored economic report of its kind targeting the biobased products industry in the U.S. Congress mandated the upcoming study in the 2014 Farm Bill.

The objective of the Delivery Order is to produce a final report entitled, “The Economic Impact of the Biobased Products Industry.” This final report includes six major elements, including:

  •  the quantity of biobased products sold;
  • the value of biobased products;
  • the quantity of jobs created;
  •  the quantity of petroleum displaced;
  • other environmental benefits of biobased products; and
  • areas in which the use or manufacturing of biobased products could be more effectively
  • used, including identifying any technical and economic obstacles and recommending how those obstacles can be overcome.

As part of this study, we will be interviewing subject matter experts at a variety of enterprises, and conducting a major database construction and scenario modeling activity.  A lot of work – and it has to be done by March 2015 in time for the Farm Bill deadline!

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A new Gartner 2014 Top US Supply Chain MBA Program Rankings report of top graduate supply chain programs within the United States came out yesterday – with the NC State Jenkins MBA and the Supply Chain Resource Cooperative advancing seven spots to 15th place. This follows the college’s undergraduate supply chain ranking of 24 in August, its first time in the Gartner ranking process. This is great news, considering that NC State’s business college is just over 20 years old (the college was established in 1992), and its supply chain program even younger (the SCRC was founded in early 2000).

NC State’s graduate supply chain program was also among the “biggest upward movers” since Garner’s graduate report was last published, and among those scoring the highest for internships and work experience exposure. NC State’s undergraduate supply chain program was among those scoring highest for internships.

The report notes a number of major trends that they see in the winning schools:

The broadening of supply chain curricula to reflect the reality of today’s supply chain organizations.  This most certainly applies to NC State.  Our program engages our 20 top corporate partners to develop projects across a wide variety of different areas, including market intelligence, logistics, inventory, value stream mapping, cost management, supply management, transportation, performance metrics, and others (see Project Breakdown,)

The exposure of more students to internships and co-ops, and more applied project work —often for sponsoring companies — on-site and in the classroom.  Well – we certainly blew that criteria out of the water!  At the conclusion of the Spring 2014 semester, the SCRC will have sponsored 503 graduate and undergraduate project teams, involving 1797 students and 55 industry partners since being established in 2000.  During the 2013 – 2014 academic year, the SCRC deployed 56 graduate and undergraduate practicum teams working with business & industry partners (29 Fall 2013 / 27 Spring 2014).

Dramatic increases in enrollment across the board, and new supply chain degree programs being established.  We have seen an increasing number of top level students come into both our MBA and undergraduate programs.  We have more new scholars and partner companies than ever before, and the numbers are growing.

Top students from top programs can command a 50% premium over the average and, in many programs, new supply chain graduates handily out-earn finance and accounting-focused M.B.A.s.  Ditto for NC State….our MBA graduates from our SCM program had starting salaries this year of $82,300, topping marketing and finance starting salaries handily…40% of our MBA student body now are in the supply chain concentration.  90% had internships their second year.

I am very proud of our faculty and course instructors for the incredible job they have done – but watch out for next year….we’re going for the top 10!

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Had a great time today speaking at the ProcureCon conference in Phoenix today, and spent a good deal of time talking to a number of the different solutions providers in the vendor area. I was amazed at the speed and convenience of the technical solutions emerging in the procurement area, based on the discussions I had with the individuals present.

For example, a discussion with Anu Gardiner at Docusign opened up my eyes to the technology involved in signing contracts. Anu discussed how when she signed contracts for her house she bought in 2003, it involved 80 signatures. When she sold the house last year, it was done all electronically – and even changes could be done via email. Anu formerly worked in procurement at Kaiser Permanente, and also pointed out how increasingly young physicians want to do everything on iPads (including accessing patient records) – and this will be a problem as patient confidentiality regulations can inhibit the ability of physicians to be electronically productive.

Chris Hahn from Coupa did a demo for me, showing me the ease with which Coupa software allows Accounts Payable and Sourcing groups to access all of their data online. The software was founded in 2006, and is based on the Amazon model of being able to quickly access data…because of how new the platform was, it is better able to drive solutions that are truly mobile and accessible to sourcing and contract managers from their iPhones. The solution also drives individuals to better align early payment, by ensuring the AP capability is able to convert payments within the time in the contract to take advantage of early payment dynamic discounts.

I also met Mike Erickson, who recently started up a networking group called the “American Council of Sourcing and Procurement Executives”. They have a linked in group which would be a good one to join…

Several companies are working on data readiness issues that are driving new technologies. the challenges involve ensuring data is entered correctly and also can be used to drive insight through better spend analytics, contract accessibility, and supplier scorecards. Providers in this space are all moving to mobile SAAS solutions that enable greater accessibility, including Perfect Commerce and Xeeva. Others are focused more on managing temporary work programs, such as Pontoon. I also met with a firm that specializes in negotiating third party contracts with transportation providers, AFMS.

Lots of really interesting presentations as well. The current session is talking about the difference in hiring Generation X (1961-1981) vs. Millennials (1982-today)….one issue is around Gen Xers focusing on ethics and stability, and wanting flextime and telecommuting, and allowing them to question rules and authority. Millennials on the other hand are heavily tied to social media, and often have a redefined family structure, with high debt….but many have also gone through a period of recessionary economics, and are more tied to being highly multi-task oriented….Lots to think about here!

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One of the most important themes in our recent BVL study on global supply chain trends and issues was the emerging importance of transportation management. Transportation planning is often overlooked in enterprise and supply chain strategy, and viewed as a tactical planning activity. However, recent events and research point to the increasing importance of having transportation management become part of the strategic planning agenda. This event will explore many of the emerging transportation trends and issues on the horizon:

• Increasing challenges associated with infrastructure limitations and bottlenecks impacting working capital, supply chain disruptions, and longer planning leadtimes. The highway infrastructure is bloated, and will continue to grow. Even transportation with batteries and natural gas powered engines will still have queuing issues to deal with.
• Regulatory mandates are reducing the times when distribution and trucks can access major metropolitan centers. As a result, deliveries will need to be made during off peak hours, impacting the ability of organizations to deliver packages to consumers relying on e-commerce solutions.
• New technologies are re-shaping the transportation landscape. Some of these technologies include driverless vehicles, GPS analytics, track and trace, RFID, and others that will have a major impact on how transportation is carried out in the future.
• Concurrently, numerous challenges exist with respect to the shortage of drivers. The average driver age is 55…and some reports note that for every 10 drivers that leave the workforce, they are only being replaced at 20% of this rate. We may find that major truck rates may go up in the near future.
• The impact of transportation on CO2 emissions, and the role that better and more efficient transportation planning has on the overall carbon footprint of the enterprise.
• The role of packaging and transportation will become more important. This will require early intervention and discussions between transportation and design engineers to find ways to not only improve “cube” rates on trucks and trains, but to also find ways to improve sustainable packaging, pallet return, and network design that will minimize the carbon footprint.

In exploring these issues, I will be sharing with you insights I’ve derived through interviews with several transportation subject matter experts and SCRC student projects. Additionally, we will be joined by a number of supply chain executives from other industries who will also share their insights into these questions.

More insights to come!

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Supply management research has established the axiom that firms are no longer operating independently, but indeed are part of an extended global network that is subject to high degrees of volatility, increasing customer expectations, and is subject to major forms of disruption risk. However, what is not well understood is whether supply manager behaviors have shifted to reflect this broader paradigm shift. One of the major threats to the global supply network is supplier financial default. Financial theory has explored the impact of default in the context of investments, such as when a firm suddenly defaults, investors learn about the default threshold of closely associated business partner firms. This updating leads to “contagious” jumps in credit spreads of business partners, and can rapidly spread. An example is the default of Argentina and the associated immediate spread widening on debt of other South American countries (most notably Brazil), as well in the business context of buyer and supplier firms.

The issues around supplier financial health has generated increased traction at the federal government level. Apple and Coca Cola are two of the major companies who this summer signed on to a White House program called SupplierPay, a voluntary program in which companies commit either to pay small suppliers faster or help them get access to lower-cost capital.  SupplierPay is a voluntary program in which companies commit either to pay small suppliers faster or help them get access to lower-cost capital. SupplierPay builds on the federal government’s QuickPay program started in 2011. It sets a goal of having small-business contractors get paid within 15 days of delivering a product or service. Quicker payments can strengthen small companies’ cash flows and make them less likely to need to borrow.

This first became a major issue during the 2009 global downturn.  Across multiple industries, suppliers in North America, Europe, Asia, and Latin America all experienced a sudden drop in volume, leading to a uniform financial threat and risk of default. Suddenly, the risk of massive tiers of suppliers facing obliteration became a reality. Traditional methods of supplier risk mitigation involve diversifying risk, multiple sourcing, or switching suppliers, which are not effective in situations where entire regions, industry segments, or supply chains are experiencing financial distress. This is particularly of concern in emerging countries, where major shifts in economic conditions bank lending rates, or currency issues increase the likelihood of supplier bankruptcy. Supplier default risk exposes buying organizations to higher levels of supply chain disruption, as suppliers often cannot meet contractual obligations in a state of bankruptcy.

While Supplier Pay is certainly a step in the right direction, a recent research study I’ve conducted with Marcos Paolo, a colleague at a university in Brazil, has found that supply managers need to do more than this.  One of the major issues is that suppliers may not be willing to discuss their challenges for fear of losing business, so it is up to supplier relationship managers to instigate these discussions.  Perceived supplier financial health is a measure of a responding buyer’s perception of financial health; whereas supply disruption involves a major financial incident that is discovered “after the fact”. (The most common of these during the 2008 period included disruptions to operations, sudden price increases, erratic deliveries, or layoffs that result in capacity shortfalls. Our research finds that higher levels of information exchange through direct communication can have an immediate impact on buyer’s understanding that a supplier is or is not able to withstand a major economic downturn or financial rough patch.  Perceptions may also be a function of suppliers who request contractual modifications and shorter payment periods. In cases when perceptions are modified by direct supplier intelligence, buyers can take actions to ensure risk mitigation, flexibility, and redundancy through contract renegotiations. Through cognitive processes, Yates and Stone (1992) articulate a four stage sequential process in which the situation affects judgment of loss, which influence overall evaluations of risk, which drive risk mitigation action. The converse of this is a situation is when buyers are unaware of the extent of supplier distress in an equivocal environment that is unanalyzable. In the absence of meaning, this can lead to suppliers suddenly declaring bankruptcy with no prior warning.

Supply managers should also be aware of the telltale signs: requests for early payment, delivery problems, social media activity, or other factors that may indicate a supplier may be experiencing financial difficulties. In this case, don’t be afraid to ask for a “sit down”, and have an open and frank discussion about their financial challenges. This may be well worth the time, and avoid a lot of potential problems in the long run.

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I was interviewed by Forrest Burnson from Software Advice — a company providing SCM software research and reviews – earlier this month on insights related to sustainable supply chains.

This is an area that is proving to be a challenge for marketers and supply chain types alike.  Forrest captured my thoughts and a number of other sources, combined them into a very interesting article that addresses an important question:  Will consumers be willing to pay more if the product they buy comes from an ethical supply chain?

Consider the following question:  Would you be willing to pay double for your iPhone if you knew it was produced in the US under stricter labor standards?  “Uhhhh I’m not sure”….is the typical response I get from many people.  So, maybe you wouldn’t pay double – but the research shown here suggests you might be willing to pay 20 or 30 bucks more for it!  In fact, the research suggests that consumers are more likely to buy ethical products than ever before.  For instance, the research found:

  1. On average, consumers say they would pay 27 percent more for a product normally priced at $100 if it was produced under good working conditions.
  2. Consumers were split on whether improved working conditions such as: community involvement or environmental efforts would most convince them to buy from a firm.
  3. Twenty-eight percent of consumers said reducing water usage was an environmental initiative that would make them more likely to purchase a company’s products.

All of the survey results generally point toward consumers caring most, perhaps unsurprisingly, about labor conditions for the workers who make their products. For businesses with overseas operations, labor conditions can be one of the most difficult facets of the supply chain to maintain high standards on.  

In general, these facts are surprising to many of us.  However, it is clear that this message has not yet filtered down to the people who make decisions on Wall Street.  Most of the analysts and investment types still don’t “get it”…  My initial observations are that the analysts and people who buy stocks are still buying purely based on return, regardless of the risks associated with an unethical supply chain.  There are certainly exceptions: people like Rick Frazier at Concinnity Advisors have been investing in firms that behave in a manner conducive to “conscious capitalism” for years, and his portfolio has been beating the market…

In general, people are thinking more as they become more knowledgeable about their supply chains.  Who is making their stuff is becoming more important – and people are speaking with their wallets.

So next time you buy an iPhone, a cup of coffee, or a pair of running shorts….think of the supply chain!

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NC State kicked off classes last week, and as usual our incoming group of MBA students were lined up with projects as part of their entry class into supply chain management, MBA 541.  I have been teaching this class, called Supply Chain Relationships, for the last 15 years at NC State.

This class develops major themes and strategies of supply chain relationships.  The focus is on establishing a basis for collaboration relationships with supply chain partners through focused supply market intelligence research, relationship assessment and management, negotiation, collaborative contracting, and on-going management of relationships in global supply chains.  In this context, relationships may exist between internal functional groups, as well as with suppliers and/or customers.  The curriculum emphasizes the importance of collaboration, through the application of practical tools and approaches that drive mutually beneficial outcomes.  Students will learn core processes around initial exploration and assessment of supply chain relationships, establishing metrics/ expectations for the relationship, crafting and managing contracts, and sustaining continuous performance improvement in sourcing, logistics and operations.  These concepts are based on the assumption that students graduating from the NC State MBA will enter positions where they will be managing relationships from the  “supply management” end of the relationship, with less emphasis on the marketing/ sales perspective.

MOTIVATION FOR COURSE DESIGN:

Multiple interviews with executives who recruit MBA students at the Poole College of Management have led me to design this class, based on the key skills and competencies that they tell me they are looking for in our students.  First, executives say they want students who have supply chain knowledge, business acumen, and can “speak the language” of SCM.   The first part of the class deals with the common elements of strategic supply management, including creating the vision for the organization, organizational roles and structure, and the fundamental elements of the procure-to-pay process.  Developing a deep knowledge of supply chain terms, vocabulary, analytical methods, and know-how is of primary importance in this section of the class.  To achieve this, students are given assigned readings, but are also assigned specific readings based on their assigned company project.  Class participation and discussion of concepts is an important part of the language of SCM.  But much of the learning comes through the interface with executive speakers in the classroom, as well as with dialogue with their project sponsors.  We will have speakers from John Deere, Excel Logistics, GSK, NSA, and others coming in this semester.

Second, executives say they want students who can perform supply chain analysis and have deep analytical skills.  To ensure this is the case, the class’s primary focus is on category strategy development, focusing on developing deep market intelligence, supplier evaluation, identifying appropriate performance metrics for governing the relationship, as well as structuring the relationship based on macroeconomic and industry specific market conditions.  Supply chain risk is an important subject in today’s environment, and a set of risk tools is presented and applied.  An emphasis on strategic cost modeling and contract price mechanisms is also emphasized.  The focus on execution is emphasized through a detailed discussion of negotiation, collaborative cost-based reduction, customer/supplier development, contract management, and conflict resolution.  A take-home midterm exam provides students with an opportunity to demonstrate that they can apply these principles, and that you can effectively communicate them in a written memo to be turned in for grading.

Third, executives emphasize that to succeed in internships and entry level jobs, students must have a strong knowledge of cost models, negotiation and contract management.  In the latter portion of the class, students will be involved in a comprehensive supply chain computer simulation exercise.  Students are assigned to small groups (distributors and manufacturers of a pharmaceutical supply chain), and are required over the course of the semester to develop a relationship and execute a contract with another team. The simulation effectively reflects the profit or loss outcomes of these relationships, and also identifies the participants’ tolerance for risk and the consequences of doing so.  Each team will develop a written contract with selected partner(s) that documents the agreement resulting from the negotiation process.  The student teams then experience a one year simulated environment, which requires them to think about how to deal with conflict in the supply chain over a period of time, how to manage inventory, meet customer/supplier requirements, and do so profitably.  A final presentation reflecting the final outcome of the experience will be made in class.

Finally, executives emphasize that they need people who have practical supply chain project experience.  A number of guest speakers will visit the classroom to help infuse this into the curriculum.  More importantly, a significant portion of the class requirement will therefore be dedicated to a supply management project with an SCRC partner company.  The nature of these projects will vary but they all have a common set of attributes:

- They will require that students work with the partner to convert a vaguely defined problem into a tight project scope document, with project deliverables, due dates, and a final outcome.  Bear in mind that the SCRC partner is the “client” in this case, and you need to define the project so it will meet their requirements.

- The project involves primary and secondary research, utilizing a variety of tools and techniques.  As such, students are required to develop a report and presentation to the SCRC partner, and will also develop a “gallery walk” board display summarizing the key research outcomes, that will be presented at the SCRC meeting in late April.

An example of the projects to be completed this semester reads like a lineup of problems facing many companies, but are being sponsored by the following companies:  John Deere, NACCO, Biogen Idec, GlaxoSmithKline, Quintiles, Bayer Crop Science, Laboratory for Analytic Science, and the General Services Administration.

- Best practices and trends in supply chain logistics that can be applied to a practical setting

- Researching the best approaches for identifying and developing diverse minority suppliers

- Exploring development of vendor management as a service for upstream customers

- Spend analysis for software across a major branch of government

- Identifying optimal approaches for managing leased space for new manufacturing facilities

- Developing best cost models for global manufacturing production processes

- Establishing process models for global aviation manufacturing

These and other projects will surely lead to some interesting insights for this group of bright young minds!

 

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