You may be right.

According to a mid-year review of supplier pricing and supply chain spending trends, NPI estimates that today’s manufacturers, distributors and retailers will overspend more than $415 billion in 2010.

NPI’s research included an analysis of spending trends for manufacturing, retail, industrial and other supply chain-focused organizations within the S&P 500. In addition, the firm also analyzed pricing data for top suppliers in three specific spend categories: transportation, technology and telecom, and energy.

Here are a few specific results from the research, along with NPI’s recommendations to rein in overspending:

Transportation –NPI estimates that supply chain organizations will overspend $124.5 billion on shipping and logistics services this year. For instance, companies will:

• Overpay 12-15 percent, on average, for fuel surcharges.

• Overspend on overnight air. NPI estimates that large shipping organizations are overspending 25-30 percent on overnight shipments. In many cases, they can select a less costly shipping method that meets their service requirements at a fraction of the price.

• Neglect to recover refunds. Based on NPI’s research, a large shipper typically loses 3-4 percent of its transportation budget to unclaimed refunds stemming from service failures and billing errors.

• Overpay for address correction surcharges. The surcharge for address corrections is almost 40 percent higher than it was two years ago. However, companies can achieve lower rates for this accessorial.

Technology/Telecom –According to NPI, large supply chain organizations can either overspend –or save –approximately $207.5 billion in technology and telecom expenditures. NPI’s research shows that savings can be realized in the following high-impact areas:

• Warehouse management system software. NPI found that poor pricing visibility has led to rampant overspending on WMS software. Many companies have been able to reduce the cost of their WMS systems by as much as 27 percent in 2010 through price benchmarking.

• Enterprise software support. On average, enterprises are paying 14 percent too much for support on their critical business systems (e.g. ERP, finance).

• Wireless plans. In 2010, companies will waste $4.3 billion by selecting the wrong mobile service plan for their workforce needs.

• Voice and data networks. Based on NPI’s research, today’s supply chain organizations can recoup approximately 23 percent of their telecom budget by auditing their current environment and optimizing their rates and agreements accordingly.

Energy –In this year alone, supply chain organizations will overspend on energy and utilities by $83 billion. NPI says overspending in this category can be attributed to:

• Uncompetitive rate plans. NPI found that companies often fail to conduct a detailed review and assessment of tariffs and rates, which can result in as much as 30 percent in overpayment. By reviewing their current spend and benchmarking pricing, they can identify alternative tariffs that will significantly reduce energy spend.

• Lack of comprehensive understanding of usage profile. If you don’t understand your company’s energy usage profile, how can you maximize rate reduction opportunities? In many instances, NPI’s research shows that utility companies and their clients are not in full communication with each other as to the operational capabilities and potential savings opportunities. The costly result is that a company’s load profile, equipment usage profile, and individual and combined facility profile may be misaligned with current needs.

• Supply distribution. Likewise, electricity and natural gas service configurations often do not utilize the most cost-effective delivery options. By understanding how energy is being delivered and how infrastructure charges are determined, companies can identify cost-savings potential.

Clearly, companies can do better to optimize spend management across these different categories. Also, it’s striking to see how overspending is often associated with poor communication between buyers and suppliers. This research shows once again, that building strong, collaborative relationships with your suppliers is fundamental to not only risk management, but to spend management, as well.

The counterfeiting of pharmaceuticals is growing in both scope and impact, and now manufacturers and regulators alike are searching for more sophisticated traceability systems.

One “breakthrough approach” currently in development will allow manufacturers to label their products with a two-dimensional dot-matrix that is linked to an online database. GB Innomech, the company developing the new coding system, says this new approach is low-cost and effective:

The codes can be printed or laser etched onto products, applied to virtually any substrate and can even be added onto the surface of pharmaceutical capsules or coated tablets. Matrix codes can be as small as 2 mm by 2 mm holding the code for up to 10 billion numbers. The codes can be read by widely available readers or in many cases from a picture taken with even the simplest camera phone, making them ideal in the battle against counterfeit medicines.

For example, a doctor in remotest Africa about to dispense a treatment course for malaria could take a picture of the product packaging code, send it by SMS to a centralized online database and within seconds have an auto-response to confirm the validity of the product and be sure he/she is not dispensing an ineffective or even potentially fatal counterfeit product.

According to the U.S.-based Center for Medicines in the Public Interest, counterfeit drug sales will reach $75 billion globally in 2010 –that’s an increase of more than 90 percent from just five years ago. 2005.

Back in 2006, the World Health Organization (WHO) recognized that counterfeit medical products are a major health risk for all communities and responded with the creation of a global coalition of stakeholders called IMPACT (International Medical Products Anti-Counterfeiting Taskforce).

IMPACT is a partnership comprised of all the major anti-counterfeiting players, including international organizations, non-governmental organizations, enforcement agencies, pharmaceutical manufacturers associations and drug and regulatory authorities. Its goal is to build coordinated networks across and between countries so that the production, trading and selling of fake medicines around the globe can be halted.

In one of the largest federal enforcement actions ever taken against West Coast retailers suspected of selling counterfeit designer apparel and accessories, the authorities seized approximately $100 million worth of counterfeit merchandise and charged the owners, operators and employees of eight shops in San Francisco’s Fisherman’s Wharf district with a 25-count indictment.

According to a press release, the designer fakes, which were illegally imported from China, included clothing, handbags and wallets, jewelry and watches, scarves, sunglasses and shoes –all bearing the labels of more than 70 well-known designer brands. Among the brands were a number of US-based companies like Oakley, Dooney and Bourke, Nike, Coach and Kate Spade, and foreign designers such as Armani, Burberry, Prada and Louis Vuitton. Affidavits filed in connection with the case describe multiple instances where clerks at the targeted stores acknowledged to ICE undercover agents posing as customers that the merchandise they were buying was counterfeit.

For some interesting insight into the manufacturers who supply counterfeit merchandise, check out a recent article in The New York Times, Inside the Knockoff-Tennis-Shoe Factory. The author points out that for the past four years counterfeit footwear has topped the seizure list of the US customs service –and that as the counterfeiters become more adept at their processes, it is becoming increasingly difficult to distinguish fake items from real ones. The article takes you inside a Chinese sneaker factory that “specializes” in counterfeiting. It provides an insider’s view and underscores the incredible challenge manufacturers –and federal authorities –face as they try to stay one step ahead of today’s counterfeiters.

That’s right. Nearly all of these breaches could have been avoided; only 4 percent of the breaches analyzed required difficult and expensive protective measures. In addition, most victimized organizations (87 percent) had evidence of a breach in their security logs, but overlooked these red flags due to a lack of staff, tools or processes.

The new 2010 Verizon Data Breach Investigations Report , which for the first time was prepared in collaboration with the US Secret Service, is filled with other fascinating results, too –all of which offer some important perspective about the vulnerability of business data and the most effective approaches for mitigating cybercrime threats.  For instance, the report also reveals that:

• Stolen credentials were the most common way of gaining unauthorized access into organizations in 2009, pointing once again to the importance of strong security practices both for individuals and organizations.

• Organized criminal groups were responsible for 85 percent of all stolen data last year.

• Most breaches (60 percent) were discovered by external parties –and then only after a considerable amount of time.

• External sources were responsible for 69 percent of breaches; only 11 percent were linked to business partners. Insiders caused 49 percent of breaches –and while that’s an increase over previous report findings, it’s primarily due in part to an expanded dataset and the types of cases studied by the Secret Service.

• Almost half (48 percent) of breaches were attributed to users who, for malicious purposes, abused their right to access corporate information.  Another 40 percent of breaches were the result of hacking, while 28 percent were due to social tactics and 14 percent to physical attacks.

In addition to detailing the challenges of securing cyberspace today, the report also offers suggestions to mitigate data threats at your business. The list includes:

• Restrict and monitor privileged users. According to the report, insiders, especially highly privileged ones, can be difficult to control. Use a “trust but verify” strategy that includes pre-employment screening, limited user privileges and separation of duties. Privileged use should be logged and messages detailing activity generated to management.

• Watch for ‘minor’ policy violations. The study finds a correlation between seemingly minor policy violations and more serious abuse, suggesting that organizations should be wary of and adequately respond to all violations of an organization’s policies.

• Implement measures to thwart stolen credentials. Your top priority should be protecting your systems from credential-capturing malware. Consider two-factor authentication where appropriate. If possible, implement time-of-use rules, IP blacklisting and restricting administrative connections.

• Monitor and filter outbound traffic. An organization that monitors, understands and controls outbound traffic can greatly increase its chances of mitigating malicious activity.

• Change your approach to event monitoring and log analysis. The report shows that nearly all victims have evidence of the breach in their logs. Make sure there are enough people, adequate tools and sufficient processes in place to recognize and respond to anomalies.

• Share incident information. Verizon believes the availability and sharing of information are crucial in the fight against cybercrime and the report commends all those organizations that take part in this effort, through such data-sharing programs.

A complete copy of the “2010 Data Breach Investigations Report” is available at http://www.verizonbusiness.com/go/2010databreachreport/.

Of course, that also means they’re riskier and more unpredictable than ever before.

How can supply chain managers maintain integrity, stability and clarity in what can easily become a nasty hornet’s nest? And now that many suppliers feel far-removed from their customers, how can you mitigate the risk of irresponsible suppliers –you know, the ones that put their own interests above yours?

Answers to questions like those are almost as complex as supply chains themselves, but Mark Vandenbosch and Stephen Sapp do a nice job breaking down the key issues in their article, Keep Your Suppliers Honest, published last week in The Wall Street Journal. According to the authors, mitigating risks from irresponsible suppliers boils down to four fundamental tasks.

In short, you need to:

• Constantly monitor potential risks in the market. While Vandenbosch and Sapp concede that eliminating opportunism is impossible, they point out that constant monitoring and updating of assumptions and procedures are critical to allow managers to more fully understand the risks they face. Be proactive. Stay up-to-date with current research in your field, and change your risk assessments accordingly. Don’t wait until after a failure to change your mindset.

• Make suppliers and intermediaries responsible and accountable –and not just for order volume or on-time shipments, but for quality, safety, etc. “All members along the chain need to share in the rewards—and failures—of the end product,” Vandenbosch and Sapp write.

• Change the ways you test and measure. Using a variety of testing measures makes it more difficult for opportunistic suppliers to game the system.

• Understand and accept the role of regulation. As Vandenbosch and Sapp sum it up, “Regulation adds to costs and runs counter to the goal of ever-increasing efficiency. But if the costs mitigate or dramatically reduce the risks of failure, then regulation is the most efficient way to curb opportunism and decrease costs in the long run.”

That’s a great four-point plan, to which I would add one more item:

• Build relationships. Know who you are doing business with, and make it a priority to build robust, collaborative relationships. In today’s high-tech world, sometimes we forget the fundamentals of good communication. Is it time for you to pick up the phone and connect one-to-one with companies in your supply chain? I know some corporations that find it beneficial to communicate daily with their strategic suppliers. Why? Because today’s just-in-time inventory model demands precisely that level of exchange to mitigate risks and ensure that goods and services get to market reliably and consistently.

A strategy that incorporates all five of these elements will help reduce the probability of a harmful event, and the severity of impact if one does occur. Plus, once you start beefing up your risk management strategy in this way, you can also unlock opportunities for innovation and even greater competitive advantage.

Consider this: Since 2006, more than 24,000 people have been killed in drug violence in Mexico, and as an article in The Dallas Morning News puts it:

Faced with the threat of smuggling attempts by criminal organizations in Mexico, foreign companies are simply doing more, spending more and in the process charging consumers more to shore up security in a country where killings, kidnappings and extortions have become a part of daily life.

The article then goes on to estimate that the share of operating costs dedicated to security in Mexico has risen by roughly one-third in the last two years. In particular, companies today are forced to spend more on securing distribution routes, developing contingency plans in the event of a “major development,” and ensuring that personnel are safe while working in, or traveling to and from, Mexico.

Ryder Systems Inc., one of the firms profiled in the article, uses GPS to track every one of its trucks transporting manufactured goods. In addition, private security sometimes escorts loads. Inspectors and drug-sniffing dogs check every container before it crosses the border to Texas.

Interestingly, Alberto Islas, a founding partner of Mexico City-based Risk Evaluation Ltd., also points out in the article that one of the hidden costs of Mexico’s drug war is the inability to recruit high-level, qualified management.  According to Islas, companies “start to lose competitiveness.”

In fact, in Germany, dozens of pharmacies are currently under investigation for suspected distribution of illegal and fake drugs, including painkillers, antibiotics and cancer treatments, as well as so-called “lifestyle medicines,” such as impotency drugs and bodybuilding products. This high-profile case seems especially troubling because, among other things, the pharmacists are alleged to have mixed illegally-acquired medicines with genuine product.

Meanwhile, just last week, China’s State Food and Drug Administration issued a list of 33 fake medicines known to be in general circulation in the marketplace. The list includes drugs used to treat a variety of conditions, such as diabetes, respiratory conditions, cardiovascular disease, gout, arthritis and central nervous system disorders. According to Securing Pharma, the counterfeit drugs include traditional Chinese and allopathic medicines, and they typically carry falsified trademarks of Chinese manufacturers –although multinationals are named on some labels, as well.

There’s no question that rapid globalization of pharmaceutical supply chains has created significant challenges for companies, regulatory agencies, the greater health care community and patients. Fortunately, the issue is beginning to receive the attention it deserves from a variety of fronts. For example, earlier this summer, the US Intellectual Property Enforcement Coordinator (IPEC) rolled out joint strategic plan that includes provisions to address counterfeit prescription drugs. You can read details about the strategy and watch a video of the IPEC announcement here.

The Index uses 12 criteria developed in collaboration with the World Food Programme to evaluate risks to the supply of basic food staples for 163 countries. These criteria include: the nutritional and health status of populations, cereal production and imports, GDP per capita, natural disasters, conflict, and the effectiveness of government.

Following these calculations, Maplecroft rated Afghanistan as least secure in food supplies, while also ranking the African nations of the Democratic Republic of Congo (2), Burundi (3), Eritrea (4), Sudan (5), Ethiopia (6), Angola (7), Liberia (8), Chad (9) and Zimbabwe (10) as “extreme risk.” In all, African nations make up 36 of the 50 nations most at risk in the index.

High rates of poverty, failing infrastructure, ongoing violence and extreme weather events all contribute to the food insecurity in Sub-Saharan Africa. The anticipated spike in global wheat prices following an export ban in Russia will only complicate matters further in this extremely vulnerable region.

“Food security is a critical geopolitical issue and an important factor for investors concerned with sovereign risk, food and agricultural business with respect to supply chain integrity and foreign direct investments,” says Professor Alyson Warhurst, CEO of Maplecroft. “The world will now look to China (96) as one of the biggest storage countries; however, food consumption there is on the increase and surpluses are not quantified. Traders report 200m tones are held in reserve globally – an improvement on 2008; but, this is no comfort for countries such as Haiti and Pakistan, which are heavily dependent on food aid.”

According to Maplecroft’s analysis, Finland (163) is the country considered least at risk, while the other Scandinavian countries – Sweden (162), Denmark (161) and Norway (160) – follow closely behind. Other low risk countries include Canada, (159), USA (158), Germany (156), UK (146) and France (142).

More information about the Food Security Risk Index 2010 is available at www.maplecroft.com.

The latest report from Panjiva shows that last month there was a 0.2 percent increase in the number of global manufacturers shipping to the US market, and a 0.5 percent increase in the number of US companies receiving waterborne shipments from global manufacturers. In addition, Panjiva found that:

• The number of waterborne shipments coming into the US experienced another 2 percent month-over-month increase from June to July.  Again, while that’s good news, in general, Panjiva cautions that it’s important to remember that this month-over-month increase compares unfavorably to the 12 percent June-to-July increase in 2009 and the 8 percent June-to-July increase in 2008.

• The percentage of significant manufacturers on the Panjiva Watch List declined slightly from 16 percent to 15 percent.

• The percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months held steady at 23 percent.

To add even more color, Panjiva also points out that for the past three months, there have been over one million shipments to the US — and Panjiva analysts haven’t seen a streak like that since October of 2008. Taken altogether, this data indicates that a significant amount of instability remains and that supplier risk management should continue to be a top priority in every company’s overall business strategy.

The survey–which collected responses from 72 of the nation’s largest corporations representing more than 3.7 million employees –was conducted in May and June, 2010. The results show that:

• More than half (53 percent) of respondents are still planning to make changes to their benefit plans despite the uncertainty that exists around complying with the Patient Protection and Affordable Care Act. Among this 53 percent, 70 percent said they will remove lifetime dollar limits on overall benefits while 37 percent reported they will make changes to annual or lifetime limits on specific benefits.

• Employers estimate their health care benefit costs will increase an average of 8.9 percent next year, compared with an average increase of 7 percent this year. To help control those increases, employers are planning to use a wider variety of cost-sharing strategies. The survey found 63 percent of employers plan to increase the percentage employees contribute to the premium, up from 57 percent who did so this year, while 46 percent plan to raise out-of-pocket maximums next year compared with 36 percent this year.

• More than six in ten (61 percent) employers will offer a consumer-directed health plan (CDHP) in 2011. While the most common type of plan employers will offer is a high-deductible plan combined with a health savings account (64 percent), the survey found a big spike in employers moving to a full replacement plan. Among employers offering a CDHP, the number moving to a full replacement plan doubled from 10 percent this year to 20 percent in 2011.

• With the health reform law making Medicare Part D benefits richer as the “doughnut hole” closes between now and 2020, 5 percent of employers plan to drop retiree health coverage in 2011 while 60 percent are considering doing so in the future.

• Four in ten (41 percent) of employers offered premium discounts for completing health assessments while 22 percent offered premium discounts for participating in tobacco cessation programs.

• One in four (25 percent) of employers plan to raise the co-pay or co-insurance for retail pharmacy prescription drug benefits while 21 percent plan to do the same for mail-order pharmacy benefits.

Health reform legislation has forced employers to re-evaluate their benefit strategies, but at the end of the day, it’s clear that controlling rising costs remains priority number one, as outlined in this earlier post.

The complete 22-page survey report is available here.