Summary of mass to JIT3 financial comparisons for fast-moving consumer goods.
\r\n\tIn the book the theory and practice of microwave heating are discussed. The intended scope covers the results of recent research related to the generation, transmission and reception of microwave energy, its application in the field of organic and inorganic chemistry, physics of plasma processes, industrial microwave drying and sintering, as well as in medicine for therapeutic effects on internal organs and tissues of the human body and microbiology. Both theoretical and experimental studies are anticipated.
\r\n\r\n\tThe book aims to be of interest not only for specialists in the field of theory and practice of microwave heating but also for readers of non-specialists in the field of microwave technology and those who want to study in general terms the problem of interaction of the electromagnetic field with objects of living and nonliving nature.
",isbn:"978-1-83968-227-8",printIsbn:"978-1-83968-226-1",pdfIsbn:"978-1-83968-228-5",doi:null,price:0,priceEur:0,priceUsd:0,slug:null,numberOfPages:0,isOpenForSubmission:!1,hash:"8f6a41e4f5ce0e9c48628516d7c92050",bookSignature:"Prof. Gennadiy Churyumov",publishedDate:null,coverURL:"https://cdn.intechopen.com/books/images_new/10089.jpg",keywords:"Electromagnetic Wave, Microwave Energy Application, Electromagnetic Energy Generation, Intelligent Microwave Heating, Microwave Organic Chemistry, Microwave Reactor, Microwave Discharge, Microwave Plasma, Microwave Drying System, Tissue Microwave Heating, Measurement Automation, Industrial Microwave Process",numberOfDownloads:224,numberOfWosCitations:0,numberOfCrossrefCitations:0,numberOfDimensionsCitations:0,numberOfTotalCitations:0,isAvailableForWebshopOrdering:!0,dateEndFirstStepPublish:"July 3rd 2020",dateEndSecondStepPublish:"July 24th 2020",dateEndThirdStepPublish:"September 22nd 2020",dateEndFourthStepPublish:"December 11th 2020",dateEndFifthStepPublish:"February 9th 2021",remainingDaysToSecondStep:"7 months",secondStepPassed:!0,currentStepOfPublishingProcess:5,editedByType:null,kuFlag:!1,biosketch:"Prof. Gennadiy I. Churyumov is a professor at two universities: Kharkiv National University of Radio Electronics, and Harbin Institute of Technology and a senior IEEE member.",coeditorOneBiosketch:null,coeditorTwoBiosketch:null,coeditorThreeBiosketch:null,coeditorFourBiosketch:null,coeditorFiveBiosketch:null,editors:[{id:"216155",title:"Prof.",name:"Gennadiy",middleName:null,surname:"Churyumov",slug:"gennadiy-churyumov",fullName:"Gennadiy Churyumov",profilePictureURL:"https://mts.intechopen.com/storage/users/216155/images/system/216155.jfif",biography:"Gennadiy I. Churyumov (M’96–SM’00) received the Dipl.-Ing. degree in Electronics Engineering and his Ph.D. degree from the Kharkiv Institute of Radio Electronics, Kharkiv, Ukraine, in 1974 and 1981, respectively, as well as the D.Sc. degree from the Institute of Radio Physics and Electronics, National Academy of Sciences of Ukraine, Kharkiv, Ukraine, in 1997. \n\nHe is a professor at two universities: Kharkiv National University of Radio Electronics, and Harbin Institute of Technology. \n\nHe is currently the Head of a Microwave & Optoelectronics Lab at the Department of Electronics Engineering at the Kharkiv National University of Radio Electronics. \n\nHis general research interests lie in the area of 2-D and 3-D computer modeling of electron-wave processes in vacuum tubes (magnetrons and TWTs), simulation techniques of electromagnetic problems and nonlinear phenomena, as well as high-power microwaves, including electromagnetic compatibility and survivability. \n\nHis current activity concentrates on the practical aspects of the application of microwave technologies.",institutionString:"Kharkiv National University of Radio Electronics (NURE)",position:null,outsideEditionCount:0,totalCites:0,totalAuthoredChapters:"2",totalChapterViews:"0",totalEditedBooks:"0",institution:null}],coeditorOne:null,coeditorTwo:null,coeditorThree:null,coeditorFour:null,coeditorFive:null,topics:[{id:"24",title:"Technology",slug:"technology"}],chapters:[{id:"74623",title:"Influence of the Microwaves on the Sol-Gel Syntheses and on the Properties of the Resulting Oxide Nanostructures",slug:"influence-of-the-microwaves-on-the-sol-gel-syntheses-and-on-the-properties-of-the-resulting-oxide-na",totalDownloads:94,totalCrossrefCites:0,authors:[null]},{id:"75284",title:"Microwave-Assisted Extraction of Bioactive Compounds (Review)",slug:"microwave-assisted-extraction-of-bioactive-compounds-review",totalDownloads:12,totalCrossrefCites:0,authors:[null]},{id:"75087",title:"Experimental Investigation on the Effect of Microwave Heating on Rock Cracking and Their Mechanical Properties",slug:"experimental-investigation-on-the-effect-of-microwave-heating-on-rock-cracking-and-their-mechanical-",totalDownloads:28,totalCrossrefCites:0,authors:[null]},{id:"74338",title:"Microwave Synthesized Functional Dyes",slug:"microwave-synthesized-functional-dyes",totalDownloads:21,totalCrossrefCites:0,authors:[null]},{id:"74744",title:"Doping of Semiconductors at Nanoscale with Microwave Heating (Overview)",slug:"doping-of-semiconductors-at-nanoscale-with-microwave-heating-overview",totalDownloads:45,totalCrossrefCites:0,authors:[null]},{id:"74664",title:"Microwave-Assisted Solid Extraction from Natural Matrices",slug:"microwave-assisted-solid-extraction-from-natural-matrices",totalDownloads:25,totalCrossrefCites:0,authors:[null]}],productType:{id:"1",title:"Edited Volume",chapterContentType:"chapter",authoredCaption:"Edited by"},personalPublishingAssistant:{id:"252211",firstName:"Sara",lastName:"Debeuc",middleName:null,title:"Ms.",imageUrl:"https://mts.intechopen.com/storage/users/252211/images/7239_n.png",email:"sara.d@intechopen.com",biography:"As an Author Service Manager my responsibilities include monitoring and facilitating all publishing activities for authors and editors. 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by",editors:[{id:"4782",title:"Prof.",name:"Bishnu",surname:"Pal",slug:"bishnu-pal",fullName:"Bishnu Pal"}],productType:{id:"1",chapterContentType:"chapter",authoredCaption:"Edited by"}}]},chapter:{item:{type:"chapter",id:"68064",title:"Sourcing and Manufacturing in the Market Region",doi:"10.5772/intechopen.87073",slug:"sourcing-and-manufacturing-in-the-market-region",body:'\nSome polluting or “dirty” industrial processes may be moved to other locations where environmental and health and safety legislation is not as strict [1]. Financial penalties for infringements may be inconsequential compared to massive margins. Businesses operate to create value and maximize contribution to profit. They should do so in an ethical, environmental, and resilient manner. It is purchasing responsibility to design new supply chains that enable work to be outsourced, while fulfilling all these criteria [2, 3].
\nPurchasing is based on a dyadic contract between customer and supplier. Direct comparisons between vendors supplying the same products and specification tend to be restricted to price and confidence that the delivery will be made to schedule. Purchase price can be low when most of the direct cost of production is derived from low-cost labor. With thin margins, most suppliers demand high-volume orders from their customers in order to breakeven. This can imply significant surplus inventory or increased mean inventory.
\nPurchasing agents are rewarded by reducing purchasing spend. However, once the good is bought, a significant proportion of purchase spend may end up as obsolete goods. Some orders that are placed may have delivery cancelled late, resulting in payments to suppliers under supply chain pipeline liability causes. Contract clauses allow suppliers to have placed orders for materials and incurred costs prior to payment in order to fulfill the order. The agreement may include a maximum value of inventory, an agreed tooling cost, and incurred expenses that the customer is liable to pay for in event of a cancelation.
\nLess evident is for the corporations to require purchasing agents to make positive impacts on the top line, for example by helping to reduce the number of goods sold with discounted prices, and to change focus “from price to total costs of ownership” [4]. To do this, purchasing must reappraise their impact on each line of business’ performance. Beyond financial return, purchasing may contribute economic and environmental performances that together are evaluated as overall enterprise performance [2, 3].
\nIt remains the case that high labor requirements and high wages typically are major contributors to decisions to source goods from lower labor cost regions. A significantly lower labor hour cost may become the headline figure to justify switching supplier. This research shows this may be a folly because high volumes may be delivered infrequently, resulting in increased risk to profit. The thesis of this chapter is that although lower total profits may be achievable due to more frequent deliveries using JIT and higher wages in near(er) regions, the risk to these profits is lower than sourcing from low-labor-cost regions where delivery is much less frequent and consignment volumes are much larger.
\nMaking purchasing decisions to source from any location around the world where the unit prices are lowest is a tantalizing proposition, in order to meet purchase spend on reduction targets. While low unit prices are attractive to the customer, the supplier typically compensates by demanding significant order quantities. The margin per unit may only be a few percent. Hence, to make a large profit from an order, large volumes provide many contributions to profit. The volumes demanded by the supplier may be inappropriate for the customer. They may have to stockpile finished goods and wait for orders to use up the inventory. Large corporations may force suppliers to produce and stock pile inventories for delivery on a specific date. Capacity constraints and the lead times to produce goods mean that production could have started more than half a year before the delivery date. This can create cash flow issues for the supplier. They have to buy materials, pay workers, and operating costs, while revenue is delayed by the delivery date and payment conditions that could push the payment back months.
\nWhile purchase price per unit is a headline metric, total pipeline liability based on a loaded inbound and distribution network represents a significant investment in working capital. Working capital represents the investment in materials and value-adding processes that increase the value of the material. Long pipeline lead times increase the cash-to-cash time. A related metric is inventory turns. This is the number of times inventory is bought and sold in a time period. Increased inventories reduce turnovers for a given demand per period. In order to increase the return on capital employed, managerial accounting prefers to increase inventory turns and reduce working capital. This may, however, be achieved at a higher total direct cost where labor is the most significant cost differentiator between local manufacture and outsourcing to low-labor-cost regions. The reduced profit margin may deter businesses from producing locally. Higher potential profits may be sought; however, these may be put at risk from significant obsolescence risks associated with slow end-to-end inventory turns. Profits also may not be as great as planned as a result of discounting residual inventory in order to raise revenue.
\nOutsourcing to low-labor-cost countries affects economies. The balance of payments (BOP) for a nation state is made up from exports and imports. The BOP can be either a surplus or deficit. Long-term excess of imports tends to weaken an economy. Long-term surplus can lead to economic prosperity. Workers may start to demand higher wages and a cycle of inflation can develop. Higher wages reduce the attractiveness of purchasing from such locations because it was their low-labor-cost hour rate that attracted the orders in the first place.
\nEconomic development rates in many emerging countries are astounding; however, it is important to do so with low environmental impact [5]. Development of urban living and burgeoning middle classes increase mean labor cost and reduce the number of individuals available to do manual work. Low cost is relative and increasingly temporary. Catching the wave early requires maintaining a set of back-up plans based on alternate low-cost countries. Some regions in developing countries are more advanced than others. Seeking low-cost areas in these regions can raise the mean economic power of a nation or trading block. Cultural and linguistic differences between Western customers and Eastern suppliers, lack of language abilities, and long haul travel can increase the difficulty of doing business. Making in the home market avoids currency rate variations, cultural differences, and long-distance purchasing and expediting trips. Despite McJob-type work availability, federal legislation may set a minimum on the lowest cost labor available in a nation or region. This minimum may result in monthly wages many times higher than other countries. The British Chancellor has set a gradual increase over the current UK parliament term to raise the minimum wage. This could drive down management appetite to reshore manufacturing and administrative jobs [6].
\nMaking in the home region may reduce pipeline liability at the most; however, margins may be squeezed too much due to labor rates. Buying from lower labor cost neighbor states can reduce unit costs in comparison with making in the market region where wage rates are much higher. Ultimately, quality of goods is a higher priority than cost. If lower cost goods are made to lower specifications and these are identified by customers, lower prices will be demanded to compensate. Otherwise, volume demand may reduce for consumer purchases. B2B purchases may reduce or be suspended, and claw back penalties may be imposed.
\nWhere should a company be? This question affects owned and subcontract plants. Final assembly entrepreneurs like Henri Ford, Soichiro Honda, Sir James Dyson, Sir Richard Branson, and Lord Alan Sugar grew their businesses initially inside their home economy. Ford corporation rapidly expanded internationally. Ford initially opened Dagenham and Frankfurt plants as assembly sites that were supplied with kits from Detroit. Rapidly it became clear to Ford that it was more efficient to establish end-to-end integrated product manufacture and assembly campuses. Despite the theoretical and actual efficiency performance, it was noted [7] that internal suppliers were more expensive, were of lower quality, and were less efficient than external, independently owned vendors. Vertical integration, where the corporation owned supplies, ensures that those suppliers are isolated from competitive pressures. Meeting budget rather than being an efficient and well-run business become the norm. As a result, many companies decided not to make all materials and parts themselves.
\nOutsourcing companies are focusing on their core competencies. This may be a form of “cherry-picking” whereby they choose to specialize on their strengths and competitive advantages. Other activities that are required become noncore competencies. These may be obtained from other companies that focus on providing such benefits to their clients. Specialization can reduce unit cost as a result of increased economies of scale. Companies may provide their goods and services to many clients. They in turn compete in the market place, despite having many of the same basic elements. From the perspective of small- and medium-sized enterprises, providing services and related goods to satisfy customer contracts, will find it easier to locate close to their key account customer’ sites. For purely durable, shelf-life product-based contracts, where there is no service element, production can be located offshore.
\nOffshoring: materials can be bought and delivered to virtually any site with minimal price differences due to transportation. Some materials import and export duty that may be charged, including value-added tax (VAT) and port taxes. The trade war between US President Trump and China has seen the US impose 25% duty on a wide range of goods, with threats to impose tariffs on billions of dollars more of goods.
\nEnergy may cost different rates in different locations due to the abundance of gas, coal, nuclear and noncarbon-based electricity generation. Some governments subsidize energy. Other governments levy higher prices and supplementary charges that create higher gross prices for energy. Despite the presence of open market competition in energy sectors, net prices tend to be the result of many influences including the ability to buy at higher prices. The bill of materials and energy costs of production can be insignificant in some products. Labor hour rates, therefore, become a major consideration when deciding to move production to lower cost countries. Purchasing price paid for products with high labor requirements can be reduced consecutively by undertaking searches for suitable vendors in order to buy from suppliers located in the other locations where labor is found to be cheaper. Landed piece price is the top line issue for management attention and decision making. Optimizing the price-paid criteria, purchasing typically continues to search and monitor the situation, switching whenever necessary to access the cheapest offer.
\nIt seems counter-intuitive, and therefore illogical, to make the decision to purchase from suppliers that are located considerably closer, that have much higher labor cost, that purchase higher cost energy, and that are located in high-cost industrial locations. The United States is determined to become the low-cost manufacturing country. Allen [8] reported US customers are increasingly choosing onshore suppliers. Some national governments are concerned by the de-industrialization associated with outsourcing to low-cost countries. Donati [9] found more emphasis on maintaining existing industry than on encouraging reshoring.
\nFriedman [10] reported on differences in strategy between Dell Corp and HP. Dell Corp established final assembly plants for laptops and desktop blocks close to major population regions. For mature markets where most customers already tend to have a computer to order replacements, Dell focuses on final builds using an “assemble and configure to order strategy.” Suppliers for variant modules are geographically close enough to produce and deliver overnight for next day assembly. Standard modules can be mass produced in a range of lower labor cost countries. From OEM suppliers of major modules including processors and memory systems, Dell’s supply chain can flow end to end in 11 days. The customer typically can place orders for products 8 days after the OEM released the new iteration or specification. Dell’s distribution system collects a set of boxes for delivery to the customer. Dell does have mass production facilities for emerging mass markets like India. This market by and large is made up of first-time computer purchasers.
\nBy contrast, Hewlett Packard’s supply chain for consumer units exclusively relies on production of the core computer unit in China. End-to-end supply chain flow of similar OEM parts to point of sale is in the order of 85 days. CNN reviewed the train journey taken by HP computers from China to Germany. Just that train journey takes 17 days (CCTV [11]). To reduce transport empty train returns, parts made in Europe are sent to China rather than sourcing there.
\nHP’s end-to-end time leaves Dell with a virtual monopoly on a specification release for 74 days. The net effect of this is that Dell can sell at a higher price to early adopters. HP brings the same specification to market later as a standard product made to forecast rather than assembled to order. Price decay and fewer product updates can reduce mean revenue.
\nReshoring focuses on bringing manufacturing back to the brand’s country of origin. This does not require the corporation to move back to the same city and region. Lower cost areas in the country can be identified that still yield the legitimacy of being made in that nation. Tax holidays and other capital investment subsidies may be on offer. A reverse bidding war may ensue as regions offer more and more incentives and benefits. The federal government may intervene, in much the same way as Mrs Thatcher’s government offered Nissan land to build plants and a supplier campus.
\nNearshoring focuses on locating capacity within economic zones. The aim is to benefit from tax-free border crossings and relatively faster distribution than remote manufacturing. Goods can be distributed from comparatively lower cost locations to markets in neighboring countries that are members of the same economic region. As an example, new plants established in any EU country compete against existing plants and imports for orders in the common market and as exporters to nonaffiliated countries.
\nIt is possible to offshore and near- or reshore simultaneously [12]. Some work that has been done abroad may be reintroduced. Some work that currently is done in-house or locally may be relocated to locale with lower costs.
\nUncompetitive prices within a market ensure that the work remains overseas. Full cost analyses and strategic responsiveness to market fluctuations and technology sales window closures can focus CFO’s attention on costs stemming from pipeline liability—the amount of inventory in the supply chain that has contractually to be paid for regardless of sale demand and may become obsolete. Total cost of acquisition takes into account many factors, not just the absolute lowest labor costs. Total cost can be reduced by buying from low-cost locations that geographically and logistically are nearer the market. Making fast-moving consumer goods in Eastern Europe for Western European consumption, and making in Mexico’s Yucatan for NAFTA sales are examples of production inside the trading region. These strategies take advantage of integrated logistics and distribution to deliver materials to plants and distribute finished goods across the economic zone. The relative lower costs in the production region compared to the sales region as a whole enable purchase prices per unit to be kept low, while ensuring minimized pipeline liability that is a risk to profit from obsolescence and quality problems.
\nNearshoring can aid in reducing duty overheads and charges. An example of this is Ford Motors opening of an engine assembly plant in Russia. The company aims to purchase at least 60% of requirements in the country in order to qualify for duty exemption on imported parts (Automotive [13]). Adil Shirinov, Ford Sollers’ Chief Operating Officer reportedly stated “Our main target in line with our long-term localization strategy was to launch engine production with a significant level of localization … We are fully committed to this strategy which is key for our business in the current environment” (Ibid).
\nReshoring: this strategy involves bringing manufacturing back to the brand’s home nation. They do not necessarily need to return to the same sites or cities they previously had shed. Near- and reshoring choices can carry significant risks or can provide competitive advantages. Tactics can be used to mitigate direct risks to the company. Reshoring does not imply bringing activities back in-house. As a result, capital investments can be avoided because suitable vendors already exist that can supply at lower cost, higher quality, and more responsively than internal suppliers would be able to achieve. Suppliers take the risk that demand is volatile. If they have alternate customers, this may enable released capacity to be used for such accounts.
\nTraditional purchasing focuses on purchase price paid. Lower unit prices are demanded by purchasing. To achieve this, suppliers typically require much higher volumes in order to generate viable margins. This creates an imbalance between the rate the goods are produced and the rate consumed by the customers. Large volumes ensure transportation costs that are spread across the goods. For high-value goods, transportation costs may be less than a quarter of 1%.
\nPrice of landed goods is the prime metric many purchasing departments use. This omits a significant issue: pipeline liability. Pipeline liability relates to the total amount of investment in working capital inventory, work in process, and finished goods, made by suppliers on behalf of their customer. If materials are bespoke for a client’s products, the supplier’s supplier, or lower tier materials producer, will have invested in producing and storing materials for a specific client. The immediate buyer may be tier one or tier two suppliers. Typically, it is tier one suppliers that have to reserve materials at their highest value prior to part production and subassembly. Pipeline liability is the total amount of financial exposure the brand owner has against the commitments made on their behalf by their suppliers.
\nPurchasing also wants to reduce the purchase spend. Price paid may reduce at a constant rate each month during production window. Sales price may decay equally fast. It is vital for companies to pay and ensure that they do not buy too much too early and, therefore, be left with high-cost finished goods that are commanding lower sales prices. Spot purchases at lower and lower prices can offset lowing constant spot sales prices. While price decay at the point of sale is noted, B2B contracts over as much as a 10 year horizon tend not to permit any price rises. In many cases, the aim is to reduce price per unit via total quality, supplier development, reengineering, scrum, and any other improvement scheme that is “flavor of the month.” The argument here is that by eliminating unnecessary costs, these benefits may be divided between the participants that helped achieve them. Customers that help their suppliers reduce costs can agree to share half or third of these reductions.
\nLogistics aims to transport materials and goods at the lowest cost per unit. Cost of transport for small, high value, goods can be in the order of <0.3% of the cost of the goods being transported. More costs of transportation per unit maybe incurred by the consumer going to the retail point of sale and returning home than the goods’ entire logistics costs incurred through the supply chain. In the pursuit of ever lower logistics costs per unit, greater volumes are required in order to divide the administrative and transport service costs to the desired level.
\nCosts of organizing a container movement from low-labor-cost manufacturing base to distribution center or customer in the market region can vary, typically in the region of €9000–€15,000. These costs typically include carriage and insurance elements. These costs are carried as part of the resale price or as a separate transportation contract agreed between sender and receiver. INCO terms will be agreed in advance.
\nWith potentially <10% of the pipeline liability—cost of materials in the supply chain, and many smaller deliveries, transportation costs can rise dramatically as a percentage of costs of materials in the supply chain. However, percentage is misleading. The real saving as a result of lean manufacturing is the 90%+ reduction in pipeline liability. Lean aims to reduce risk to profit, rather than increasing profit per se.
\nThe result of outsourcing to low-labor-cost countries is to turn the operation located in the original country into a reseller. Goods printed with the US’ stars and stripes, and the UK’s union flag may be made in China or other Asian countries. Moves to change the law to ensure Nations’ flags are printed only in the nation start to emerge.
\nThe Government of the nation, with massive spending power, may change purchasing policy. They may insist that purchases made on behalf of the people for the benefit of the people should have proven local content. “Local jobs for purchased goods that service local needs” can become a mantra, political, and fiscal policy.
\nLean manufacturing focuses on eliminating waste by minimizing effort, movement, space, raw materials, work-in-process materials, finished goods, human effort, rework, and scrap. There is a vast difference between lean processes and a lean supply chain. Lean processes have very small material waiting buffers, produce rapidly without defects, and have very small buffers that have undergone the process. These goods are moved to the next process in very small lots, typically one at a time. To achieve this, they may be transferred via robots, conveyors, or gravity feed. Goods may be produced in the sequence they are required, rather than produced in batches. Key to this is the ability to change the setup economically between units. Single minute exchange of dies (SMED) may be used, combined with computer numerical control (CNC) part production program direct feeds from a synchronizing controller. Use of fully integrated flexible manufacturing cells has become relatively rare. The investment cost of automated cells and systems reduces the return on investment. Use of robots continues as a means of learning how to manipulate and orientate parts. Once learned, these lessons maybe taught to people in order that they may become more efficient. Learning does not stop there. The workers in time will develop their own ways of doing the work with less effort. In effect, people can outperform robots.
\nFrom a cost perspective, employing low-labor-cost employees has been considered by offshoring proponents as a means of reducing unit costs. If suppliers exist in low-labor-cost regions, then the investment on new plant and equipment can be avoided. Unit costs come closer to the variable cost element as a result.
\nEach unit produced may have a very slight margin between costs and price they are sold for. In order for suppliers in such locations to generate profit for themselves, they must rely on multiplying the margin per unit. This is achieved by requiring their customers to place very large orders. A consequence of this strategy is that there are a lot of products to ship. This in turn requires efficient packaging and space utilization in containers and other types of vessels. The benefits of efficient interprocess movements using one-piece flow within lean manufacturing plants can be written off against the huge volumes of finished goods that are stock piled because the customer does not want delivery yet. Months of production output can be held pending the dispatch.
\nGovernments represent their electorate in constituencies located in their national boundaries. It is in the individual representative’s own self-interest to ensure that existing plants and businesses located within their constituencies remain viable and employment opportunities are not lost due to outsourcing. Corporations typically are managed by professionals that aim to maximize returns for their investors. Other stakeholders, including local and state government (tax revenue) and employees (salaries and wages) may be secondary to the commercial exploitation of opportunities.
\nOutsourcing all value-adding activities including part production, subassembling, and final assembly to low-cost countries can reduce the unit cost. Content sourced from the final market may be significantly reduced as a result. The knock-on effect of outsourcing final assembly to low-cost countries halfway round the world can also be to transfer part production work undertaken by suppliers in the market to suppliers closer to the new low-labor-cost manufacturing center. The effect is to strip out many of the supply chain jobs that had existed. If the economy is fully open for business, new jobs will emerge to replace the old ones. Entire regions may undergo periods of deindustrialization, depression, and then regeneration.
\nIntellectual property (IP) rights in the form of knowledge process may be transferred to franchisees, only to be disseminated locally without consent of the IP owner. Other risks become apparent when outsourcing to countries that have widely divergent cultures. Quality expectations may differ. Entire batches may be written off due to defects introduced by the subcontractor. To ensure they follow orders and comply with specifications, entire teams may need to jet off frequently to review what is going on and to bring the supplier back on track. Local representatives that are “on our side” and speak both languages may be recruited to undertake this vital role. Their salaries increase the overhead element on top of the purchase price. The company must aim to identify other factors that put the commercial viability at jeopardy. Risks to be mitigated include wage rises, lack of literate and skilled employees, language barriers, dishonest and unethical behavior, transport failure including train derailment, fire, ships sinking, new trade barriers, incoming border inspections, and administrative compliance issues that lead to refusal to admit the consignment.
\nA further factor that needs to be considered is the ability of the organization to respond to changes in volume demanded and sudden emergences of rival technologies and new competitor products. This can lead to significant discounting in order to sell the goods available, consignment recalls, and enforced upgrading activities. Lean aims to reduce the pipeline liability and obsolescence risk in the supply chain. If the goods are heavily discounted, revenue decreases. If they cannot be sold, their value must be paid for from profit and the goods are written off as obsolete. This can significantly reduce the viability of any business. To counter this, companies may mitigate the effects by producing a range of goods. Distance from market incurs logistics distribution time. Time-sensitive priced goods suffer from price erosion. It is necessary to ensure that goods are made, distributed, and sold as quickly as possible in order to minimize the stock holding cost associated with reducing prices. Companies like to reduce the time between placing orders with suppliers and receiving the goods. This is because the earlier they buy the parts, the higher the price that would have been paid for them. If purchase prices are high because orders were placed too early, and sale prices have dropped due to price erosion, then margins will be squeezed.
\nTo reduce the price erosion, design teams should be included throughout the production life cycle in order to supply a constant stream of product upgrades. Each variant or iteration is only produced for a short period of time. All of the goods should be designed to be produced using the same production processes and assembly sequence. This avoids constant plant redesigns. An optimum sequence from supplier to customer should be identified in each plant. Designers should be instructed to design future iterations that fit that forward flow sequence from raw materials to finished goods. Group technology concepts including rank order clustering and to/from techniques can be used to identify the most efficient process sequence. Creating manufacturing cells can allow some backward flow without incurring overly long walks between the processes; (if we are walking, we aren’t working). Minimizing the distances between processes eliminates the space beside each process to put work-in-process. One-piece flow can then be created where the material is walked from machine to machine. Some conveyor and robot movements may be permitted.
\nPlant location is a vital issue. Land cost, energy prices, average labor hour wages, and staff salaries, tax rates, transportation duration, and costs are vital pieces of the puzzle. Honda Corporation’s motto can be summed up as “make where you sell, buy where you make” (adapted from [14]). In effect, it is necessary to identify major markets, make there, and buy from suppliers that are already there or can be encouraged to install themselves there as a global partner that sets up transplants alongside the producer.
\nDifferent locations have different ethical and responsible business practices. Emphasis may range from strict compliance through completely lacking on environmental protection, emissions control, pension contributions, healthcare schemes, employee training and education, and employee family education.
\nFord Motor Company initially set up assembly plants in East London and Germany. These plants were supplied with kits from Detroit. It soon became apparent that it was more efficient to establish complete part and subassembly facilities to supply the final assembly plants. Ford’s Dagenham plant had the largest brand dedicated iron and steel foundry in Europe. It was industrial disputes, repeated strike action, and union demands for higher equal pay for women that led to Dagenham’s assembly plant being shut and production sent to Spain.
\nFour basic supply chain configurations are possible. Using a two-by-two matrix, we can map long and short inbound supply chains and outbound logistics: (1) Long inbound, long outbound is mass production; (2) Short inbound, long outbound is just in time; (3) Long inbound, short outbound is just in time; (4) Short inbound and short outbound is just in time 3.
\nStrategic financial commitment may be less than expected if most or all of the value-adding activities are undertaken in subcontractors. Empirical testing using a supply chain game [15] showed lower initial investment with JIT3, which reduces the volume required to breakeven. While salaries may be higher closer to the market, they should be few in number. Initial starting stock of 10% is achieved and maintained. Overall cost savings in terms of lower space, working capital, and cost of inventory offset the higher salaries. Profitability of a JIT3 operation is higher due to lower total costs and lower lost sales to competitors. Agile/mass production applied to the game using JIT3 enabled significantly increased capacity with the same number of people involved in JIT3, together with about 4% of the starting stock of mass production. Higher overall average revenue is achieved via more frequent product upgrade releases that maintain the sales price.
\nMany managers today believe it is cheaper to buy parts from low-labor-cost countries, import the goods, produce the finished product, and export these to the market that may be in high-labor-cost countries. Products with infinite inventory shelf lives could achieve a sustained sales price. However, overall sales volume per period may stagnate. Cost of holding the inventory may counter the savings from sourcing from low-labor-cost countries.
\n\n\nFigure 1\n shows dyads from supplier to assembler and assembler to client. Many supply chain tiers can exist that can require many inbound and outbound kilometers. Mass production is induced by long inbound and distribution chains. To make long journeys, a viable option, large volumes are transported. Large loads deliver more volume than immediately required. Lean philosophies consider this to be a waste.
\nFour general supply chain configurations.
Lean supply chains can be setup in three configurations that enable inbound JIT, outbound JIT, or both. These correspond to JIT1, JIT2 and JIT3.
\nJIT1 is typified by Toyota City. This was developed following Toyota engineer’s extensive study tours at Ford’s Crystal Palace. Suppliers are encouraged to be “close by the plant” [16]. The issue Japan had, when they were the workshop of the world from the 1970s through the 1990s, was that they produced goods in a far-away country. Japan had to import much of the ore and energy required to produce basic engineering materials. Just-in-time deliveries were achieved from part producers, through module assemblers, and on to final assembly plants. They also required huge fleets of ships to transport their goods to markets, particularly in North America and Europe. In effect, only inbound just in time was used. Downstream distribution used large container ships full of finished goods. The key metric for distribution is not just in time. Instead the metric is just on time, where the just changes meaning to “only.” Ships are expected at the docks neither too early, nor too late. If they are early, they have to wait until the current ship is off-loaded and new cargo is loaded. If they arrive too late, they use time reserved to service the next ship.
\nIn a JIT2 scenario, the factory is close to the market, including locations with much passing trade and key account high-volume customers. McDonalds is a good example of this strategy. Food must be fresh for people to eat it. Hence, the company cooks and assembles Big Mac’s only a few meters from where they are bought. While in most cases, to reduce the purchase spend, suppliers may be faraway in low-labor-cost countries, but this is not the strategy taken by McDonalds. McDo’ buy in UK and Ireland for that market. They buy in France/Belgium for that market, etc. Only two ingredients for the European market are imported in bulk. They are the sesame seeds on the buns from Mexico and the syrup for sodas that come from Atlanta.
\nJIT1 and JIT2 reduce pipeline stock and the number of people involved typically by half. However, this is not the 90%, order of magnitude [17] reduction hoped for as a result of radical supply chain reengineering.
\nTo achieve the 90% reduction in inventory espoused by just-in-time advocates, JIT3 is used. JIT3 is based on buying and making close to the point of sale. Many SMEs do this. A small-family-run bar or shop for example typically buys from cash and carry outlets. They may add value in their location and sell there.
\nThis chapter proposes that a loaded supply chain is a risk to profit. This risk trumps low labor costs when demand for the product can be switched off rapidly. To sell remaining products, companies typically reduce the price. A key performance indicator is how much of total volumes ordered are sold at less than the full price. This represents over-ordering or late deliveries to points of sale. If we take Christmas trees as an example, it takes years to grow each unit. They start to have value at the beginning of October. Peak sales price is sought from November 1 through December 24. No one is buying on December 25. They have zero value from December 26. Any residual inventory in the pipeline is 100% obsolete. Consumers may discard their tree in the street as trash. Remaining inventory must be paid for from the high margins made from goods sold. This reduces trader’s overall contribution to profit. Traders may store long-term nonperishable goods in anticipation of demand build up during next season. However, they will have incurred holding costs and the older goods shall compete against the new inventory that may be sold with a higher margin.
\nPipeline liability is the value of stock loaded into a supply chain. Orders placed with suppliers are translated into orders they then place on their suppliers. They in turn place orders with their suppliers. Despite this loading, in many cases, materials can be used for other orders and other clients. If this is not the case, the client will be liable for orders placed on their behalf up to a maximum level. The brand owner may buy materials directly and act as an agent to sell their materials to suppliers. They then buy back the finished units. They therefore can control supplier’s material costs and can gauge the supplier’s ability to efficiently transform materials into finished goods.
\nIn just in time three (JIT3), suppliers are close to the factory and the factory is close to the market. The resulting reduction in pipeline inventory, and hence reduction in risk to profit, can support higher wages. German auto workers earn ~37€/hr., compared to equivalents in Poland on 7€/hr. (Automotive News Europe). Making in Poland is “nearshoring.” Goods made there could be transported to European sales regions within 1 or 2 days, with delivery on a regular basis. Other costs including plant costs, taxes, and indirect managerial overheads significantly may be more advantageous than German sites. Achieving apparently lower unit prices by outsourcing in relatively near lower labor cost countries can become a fallacy if delivery frequency is low.
\nThe example provided in\nTable 1\n compares “as it is in Asia and Morocco” and a modified version of Moroccan initial conditions that result from supplier development and a changed ordering philosophy. The Asian purchase model uses the mass production supply chain configuration of long inbound supply pipelines and long outbound distribution. It requires suppliers to produce goods for 9 months with a single delivery date scheduled before the most significant seasonal sales period. The Moroccan supply chain initially takes the same delivery schedule as Asia. Modifying this to a short lead time and frequent delivery mode significantly reduces pipeline liability.
\n\n | Asia pacific | \nMorocco | \nMorocco improved | \n
---|---|---|---|
\n | \n | \n | weeks | \n
Customer assembler order window (w) | \n40 | \n15 | \n1.6 | \n
\n | \n | \n | days | \n
Customer assembler order window (d) | \n280 | \n105 | \n11.2 | \n
Total number of stock pipeline liability volume | \n5,580,420 | \n2,092,657 | \n223,217 | \n
Number of work days/year | \n286 | \n\n | \n |
Total number of days worked/year | \n365 | \n\n | \n |
Working hours per day | \n8 | \n\n | \n |
Number of work days/week | \n5.5 | \n\n | \n |
Efficiency factor of Asia over EU | \n0% | \n\n | \n |
\n | \n | \n | \n |
Daily production volume | \n19930 | \n\n | \n |
Avg. human time needed to prepare one unit | \n31 | \nmins | \n\n |
Annual production demand | \n5,700,000 | \nunits | \n\n |
Material BOM cost | \n€ 4.02 | \n€ 4.38 | \n€ 4.38 | \n
Transport cost percentage | \n€ 0.10 | \n€ 0.06 | \n€ 0.06 | \n
Transport cost unit | \n€ 0.10 | \n€ 0.06 | \n€ 0.06 | \n
Tax % | \n10% | \n0% | \n0% | \n
Total material cost | \n€ 22,433,286 | \n€ 9169,605 | \n€ 978,091 | \n
Total transport cost | \n€ 558,041 | \n€ 125,559 | \n€ 13,393 | \n
Total tax | \n€ 2,243,328 | \n€ 0.00 | \n€ 0.00 | \n
Total mat cost + transport + tax | \n€ 25,234657.34 | \n€ 9295165.38 | \n€ 991,484.31 | \n
Number of employees | \n1287 | \n1545 | \n1287 | \n
Mean cost per labor hour | \n€ 1.29 | \n€ 3.86 | \n€ 3.86 | \n
Total labor cost | \n€ 3,786,428 | \n€ 13,634,845 | \n€ 11,359,285 | \n
Working capital | \n€ 26,777,757 | \n€ 22,930,011 | \n€ 12,350,770 | \n
Total margin (excluding any sales or risk) | \n€ 29,729,571 | \n€ 18,046,894 | \n€ 20,322,454 | \n
\n | \n | 61% | \n68% | \n
Total margin clear of stock risk | \n€ 7,296,285 | \n€ 8,880,991 | \n€ 19,344,363 | \n
\n | \n | 122% | \n265% | \n
Summary of mass to JIT3 financial comparisons for fast-moving consumer goods.
North Africa offers a relatively low-labor-cost alternative that logistically is near Europe. Moroccan workers in a clothing company were reported by a client to earn 3.80€/hr., whereas Asian workers about 1.30€/hr. Moroccan labor initially was 20% less efficient than Asian counterparts. Thus, more workers were required at a higher wage rate. This motivated the client to source from Asia, based on a single “headline” budget line. Various minor import and export duties apply to Asia and Morocco that negate these charges. Making goods in Morocco appears expensive by comparison. Making in Poland, with labor at around 7€/hr. seems to double the cost compared to Morocco. Making in Germany at 37€/hr.—hell is not that stupid? The simple answer to that, from a total cost perspective, is a counter intuitive No. Better training is required to improve workers\' efficiency. That is half the issue. The other is pipeline liability and the consequent risk to profit.
\nThis research found that using JIT3, companies could cover wages and costs up to 60€/hr. and still make a profit, provided that productivity is equivalent to the best and providing pipeline liability dramatically is reduced. To achieve the labor productivity, benchmarking and activity training are required, together with known productivity targets.
\nGiven a JIT3 supply chain structure, greater productivity can be achieved by better line balancing. This enables JIT3 to double productivity over mass production. Using JIT3 as a basic supply chain structure, modular product assembly to reduce hand time, sharing some assembly work with suppliers and some customer co-production, and agile mass production, therefore, may double productivity again. This enables more revenue from more products being made and sold in less time. As a result, labor cost per unit is significantly reduced. Simultaneously, capacity per time period can be raised. Capacity utilization can be increased prior to major sale seasons. This approach avoids stockpiling finished goods that have been made months in advance, because capacity has not been created or is not available to respond to actual market demand.
\nFull cost analysis beyond pipeline liability, direct cost, and taxation should include other factors such as plant space costs, management overhead differential costs, legal administrative requirements and bureaucracy, healthcare and pension overheads, site security, and maintenance. These arguments are not well understood by operations managers, and even less so by managerial accountants/CFOs. This article aims to explain the logic of “making where you sell and buying where you make.” By contrast, KPMG [12] perspective is that near- and reshoring is to set up facilities near the corporate headquarters. They suggest “an ‘in country for country’ approach that encompasses not just manufacturing, but the location of product management and R&D functions.” That article is from the headquarters’ perspective of where the market is. Based on research for this article, advice proposed is “produce within or close to both large and rapidly expanding markets.” In summary, “buy, make, and sell locally.”
\nBuy locally, make locally, and sell locally—the so-called “Glocal” strategy operates by making the goods tailored for local markets. The focus should be on where the markets are rather than on the headquarters.
\nMass production configuration supply chains are operated because it seems to be obvious. Buy cheap and sell expensive. However, pipeline liability from loaded inbound supply and outbound distribution chains creates increased end-to-end times. This reduces the flexibility to respond to market changes. If the good is stable in terms of technology and design specification, with high demand and unrestricted supply, the strategy may enable organizations to achieve viable cash flow. Taking an end-to-end perspective, working capital is excessive and represents a significant risk to profit if the sales window closes.
\nJIT1 and JIT2 reduce the amount of goods in the supply chain approximately halfway between mass production and JIT3. JIT1 can make use of low-cost material and labor to produce a finished good. Logistics infrastructure may be used to transport finished goods to other regions where premium sales prices justify the extra risk from a loaded distribution network. If the goods are made and supplied to other corporations as part of agreed volume contracts, the risk to profit is minimized.
\nJIT2 can use low-cost parts from low-cost countries. Using nearshoring for final assembly and offshoring for part production is a strategy noted near Monterrey, Mexico. Between the city center and the airport, the majority of the companies are Chinese owned. Parts are produced in China. Finished goods are assembled in Mexico from these parts. Since the majority of the value add is undertaken in NAFTA, duty among Mexico, the USA, and Canada is avoided.
\nRisk to profit needs to be minimized. This is achieved by sacrificing a loaded supply chain that is filled with millions of examples of cheap goods. Instead, emphasis is placed on productive labor that is comparatively cheap compared to home markets, but may be much more expensive compared to remote low-labor-cost countries. In Europe, the highest salaries tend to be within the triangle Liverpool, Hamburg, and Paris. The further East and South the production site is located, the lower the general factory wage tends to be. A one-day distribution circumference can determine likely “nearshore” production locations. While total cost per unit may seem to increase, focusing on doubling the productivity and doubling it again should be primary design team and operations’ objectives. This can be achieved by simplifying the product, reducing hand time to make them, worker training, supplier, and customer co-production.
\nA fast-moving consumer goods case supplying own-branded sport clothing outlets is presented. Reduced end-to-end pipeline times were achieved via adopting buy, make, and sell close to market point of sales. Now, redundant continental and regional distribution centers can be converted from cost centers to profit centers by undertaking “late configurability” value-adding activities. The products must be designed to permit this and must become part of the market offering. Premium prices may be commanded, for example, The Bear Factory.
\nThe summary shown in \nTable 1\n is an example of financial effects of JIT3 versus mass production provided in Section 9 “Pipeline liability trumps low labor cost.” Financial analysis is shown highlighting critical factors that need to be managed that are force multipliers for the supply chain configurations.
\nThe analysis given in \nTable 1\n shows the ability of the client to reallocate work to Morocco from Asia. They have understood the potential risk to profit from having a loaded supply chain, and significant discounting that was required to sell remaining goods after the end of the sales window. Total margin clear of stock risk is significantly higher for the baseline Morocco “near–production” scenario. The revised plan with more frequent deliveries doubles more than that. The client adopted JIT3 strategies, making closer to reduce pipeline inventory yet not too close that skyrocket labor wages. JIT3 can be enhanced with agile/mass customization approaches. This can enable the corporation to delay the point of variation and facilitate assemble-to-order strategies.
\nMaking in country, or trading region, primarily for sales, does not prohibit sales abroad, except where they are contractually bound to do so by intellectual property owners. Excess production beyond local market absorption may be exported to other market regions. This approach differs from make in low-cost countries exclusively for export to other, richer, markets.
\nSpecification and legal compliance in sales regions imposes two options: comply with each market requirement separately or supersede requirements of both home and remote regions.
\nMass production could yield higher margins; however, this strategy has higher potential risk of obsolescence that would yield the smallest total margin. The amount of profit free from pipeline obsolescence risk is significantly higher than JIT3 supply chain configurations. Mass production in remote low-labor-cost countries would suit “pile ‘em high and sell ‘em to everyone.” This also suits undeveloped markets and monopoly technology scenarios. The results in the table indicate that nearshoring in inefficient plants yields the smallest total margin, while ensuring more than 20% higher minimum margin as a result of reduced pipeline liability. Optimizing nearshoring performance maximizes risk-free total margin, at least 250% more than the mass production model. The strategic choices must be re-evaluated as BOM cost approaches zero and as BOM costs become significantly more than total labor costs.
\nThis model is static rather than stochastic. Static models are viable when distance to market, order-fulfilment lead time, delivery duration, and price and productivity are consistent.
\nWound injuries are the most common health problem people faced in decades and continuously demand advanced wound management strategies to obtain optimal healing. Wound injuries can range from small wounds caused by daily activities to chronic or severe wounds caused by diseases or serious incidents. Besides the type of wound being treated, the effectiveness of wound management also involves a better understanding of different factors such as the healing process and the physical-chemical properties of the available dressings [1]. Mostly in small wounds, tissue injuries will heal completely with normal healing phases within weeks [2]. On the other hand, severe or chronic wounds are hard to heal within months or a year and often reoccur with persistent inflammation [3], which represent major challenges to patients medically and financially. Therefore, proper wound dressings that have the ability to accelerate the wound healing phases and reduce the healing time simultaneously are required to overcome this problem.
\nGlycosaminoglycans (GAG) are extracellular matrix molecules that have significant roles in the control of the all wound healing phases, either an acute wound or severe wound, such as an effective mediator of angiogenesis and inflammation [4, 5] and promote the wound recovery by leading to rapid granulation, vascularization, and reepithelialization [6]. As a GAG-rich content, the use of natural polysaccharide as wound dressing-based material is proposed to enhance the healing phases, especially to abridge the long-term healing mechanism in severe wound injury, determined by several studies and clinical trials. This chapter will further discuss the detail mechanisms and efficacy of natural polysaccharide in accelerating the wound healing process, thereby intended to encourage the advanced strategies for future wound management.
\nGenerally, wound healing has been represented with the complexity and overlapping of its phases. These processes integrate a dynamic interaction between cells and extracellular matrix (ECM) that trigger tissue or organ regeneration. The significant roles of ECM and its components during each stage of the healing process are represented by structural matrix provision and function of signal transduction compliance in the dynamic of biological reactions during each stage of the healing process [7, 8, 9, 10, 11].
\nECM provides structural and functional integrity to connective tissues and organs [12]; yet its synthesis and deposition mainly occur in response to growth factors, cytokines, and mechanical signals mediated via cell surface receptors [13]. In the case of wound healing, ECM consists of at least four major classes [8]: (1) structural proteins such as the collagens and elastin; (2) multidomain adhesive glycoproteins such as fibronectin, vitronectin, and laminin; (3) glycosaminoglycan (GAG) such as hyaluronic acid (HA), proteoglycans (PGs) including versican, syndecans, glypicans, aggrecan, and perlecan (chondroitin sulfate (CS)/dermatan sulfate (DS), and heparin sulfate (HS))—and keratin sulfate (KS), often in large amounts; and (4) matricellular proteins such as secreted protein acidic and rich in cysteine (SPARC, also known as osteonectin and BM-40), thrombospondins 1 and 2, tenascin C and X, and osteopontin.
\nGAG is the important constituent of the extracellular matrix found on cell surfaces [14] and widely distributed in connective tissues. GAG is composed of characteristic repeating disaccharides, with specific monosaccharides sulfated at each of C2, C3, C4, and C6 [15]. These compounds are highly anionic polymers, which interact with many cationic species (such as ions and proteins) due to the presence of the carboxylic acid and sulfate functional groups [16]. The negative ion charge of GAG molecules carries was considered substantial in many biological processes.
\nAmong the various molecules secreted by ECM, the GAG has partners that have significant roles in the control of the all wound healing phases, either acute wound or severe wound. Those molecules participate in cell-cell and cell-matrix interactions, in cell proliferation and migration, and in cytokine and growth factor signaling, thus locally modulating their biologic activities. In an acute wound, the healing progresses through the normal phases of wound healing (hemostasis, inflammation, proliferation, and remodeling) within weeks, while in a severe wound, those phases do not progress normally, mostly within months or years, thus needing an appropriate supplementary treatment to enhance the healing process. Therefore, GAG or GAG-containing material treatment is expected to become a key to turning and accelerating not only acute wound but also especially severe or chronic wound healing problems.
\nHemostasis is the beginning of the wound healing process and may be defined as the interaction between platelets and vessel of vascular injury. The vital mediators of hemostasis are fibrin, platelets, and blood vessels. In the first 1 or 2 hours after injury, wound repair starts with the formation of a fibrin matrix through the proteolytic cleavage of fibrinogen by thrombin, and fibrin directly binds to platelets to produce a clot [17, 18, 19, 20, 21]. The α granules of platelets release numerous growth factors, such as PDGF, TGF-α, TGF-β, bFGF, IGF-1, and VEGF [22, 23]. Further, PDGF and IGF-1 call up and activate the fibroblasts as well as synthesize GAG and collagen to lead the migration and proliferation of the cells into the wound site [24, 25].
\nThe enzymes of the fibrinolytic resist the clot formation. On the other hand, serpins ensure that excessive fibrinolytic activity does not occur. The ECM contains a network of scaffold proteins that are linked by GAG. GAG, especially HS, plays a key role as anticoagulants that have important acts to manage the regulations of many of the serpins [15]. HS represents 50–90% of the total GAG content [25] and is only in contact with blood when an injury occurs [26, 27]. HS has been identified binding with more than 100 proteins involved in hemostasis, many growth factors, proteins involved in lipid metabolism, and proteins of the ECM [28]. In addition, HS maintains hemostasis as an effective mediator of angiogenesis at the surface of endothelial cells [4].
\nSummarily, the hemostasis phase begins the healing process, generates blood clot formation which maintains the structure of vessels, and provides a temporary matrix, secreting cytokines and other growth factors, in order to prepare the wound bed for the next phase of the healing process.
\nThe inflammatory response is elicited by infection or tissue injury involved in the distribution of blood components (plasma and leukocytes) to the damage site [29, 30]. This phase occurs in the next 24–48 hours after injury on average accompanied by inflammation symptoms, such as redness, body heat, swelling, and pain around the wounded place [31]. Once the bleeding is controlled, the key cells of the inflammatory response such as neutrophils, macrophages, and lymphocytes assemble into the wound site, simultaneously release a large number of active mediators (cytokines and growth factors), and thus stimulate the inflammatory phase [32, 33, 34].
\nHA, a non-sulfated GAG of the ECM, is involved in a significant process of the inflammatory phase. During this phase, HA assembles in the wound bed and regulates early inflammation to modulate inflammatory cell and fibroblast cell migration, pro-inflammatory cytokine synthesis, and the phagocytosis of invading microbes [5]. Moreover, HA may bind and improve the efficiency of chemokines to neutrophils. Butler et al. revealed that HA appeared able to present stimuli to neutrophils [35]. HA on the endothelial surface was increased as well as the efficiency of recruitment of neutrophils. In the inflammatory phase, neutrophils collagenase and elastase eliminate damaged tissue from the temporary matrix of the wound site, while monocytes transform into macrophages and phagocytose fragments of denatured ECM debriding the wound site and inactivating any source of microbial infection through the activity of secreted proteases.
\nAt sites of inflammation, the low-molecular-weight HA fragments (accumulated from degradation of high-molecular-weight HA) can initiate Toll-like receptor 2 and Toll-like receptor 4 induction of pro-inflammatory cytokines IL-6, TNF-α, and IL-1β [36]. Furthermore, the growth factors and cytokines released by the inflammatory cells induce the migration and proliferation of fibroblast and keratinocyte, which synthesize the levels of HA. All along the reepithelialization process, where epithelial cells migrate across the new tissue to form a barrier between the wound and the environment, the level of HA was found significantly elevated [37]. The secretion of cytokines such as TGF-β, PDGF, FGF-2, IL-1, and TNF-α modulate collagen deposition by fibroblasts and penetration of new blood vessels into the wound site.
\nDuring the proliferation phase of wound healing, over the next 2 or 3 days and lasts for about 2 weeks thereafter, the layer of a new matrix by fibroblasts restores the tissue at the wound site. The other mesenchymal cells also enter the inflammatory site of the wound in response to growth factors that are necessary for the stimulation of cell proliferation [38]. Moreover, fibroblasts, endothelial cells, and keratinocytes produce IGF-I, FGF-2, TGF-β, PDGF, and VEGF, promoting cell migration and proliferation, matrix synthesis, and angiogenesis.
\nThe fibroblasts synthesize collagen and PGs. Both of them act to form an unstructured connective tissue medium that provides new cells to migrate. A number of PGs were presented in the wound site, and their GAG side chains were involved in the stabilization and activation of growth factors [15]. Sulfated PGs with CS and DS contribute in collagen polymerization [39], and HS PGs on cells can create anchors to the surrounding matrix [40]. The PGs provide a matrix for cellular attachment, and some PGs (hyalectans) form ternary complexes with HA hydrating the tissue promoting cell survival and migration above the granulation tissue to cover the wound site.
\nRemodeling is the final phase of wound healing which is achieved over longer periods of up to a year after the initial wound injury [41]. This phase is characterized by wound surface contraction [42]. During this phase, new epithelium forms along with the transition of granulation tissue to a mature scar. This process is accompanied by high mechanic strength of the formed tissue, reduction of capillary amounts by combining into bigger blood vessels, lowering cell density and metabolic activity of the tissue, and lowering the content of GAG [43, 44]. The mechanic strength of the formed tissue equals 25% related to the dermis and equals 80% related to the unchanged tissue after many months of reconstruction [43, 45, 46]. Considering that GAG activities are able to reduce the inflammatory responses and ECM deposition in the early phases of wound healing, a proper wound handling in the beginning of injury with a GAG-rich-containing material is expected to heal the wound more closely to normal skin and reduce the period of this phase.
\nSevere or chronic wounds, hard-to-heal wounds related to diseases or serious incidents, were also commonly encountered instead of acute wounds. Mostly, this issue has been associated with the aging of the population. Unlike acute wounds, the treatment and management of severe wounds represent major challenges to patients medically and financially, resulting in a long-term recovery.
\nSevere wounds are frequently characterized by persistent injury and prolonged inflammation, high incidence of bacterial biofilms, and excessive proteolysis [3]. Impairment of macrophage function and angiogenic response is also suggested, which are mostly related to severe wounds healing process [47, 48]. Due to the prolonged inflammation, an excessive recruitment of inflammatory cells to the wound bed will be incurred and produced by the large numbers of neutrophils. It is known that neutrophils can eliminate damaged tissue from the temporary matrix of the wound site and prevent microbial infection. On the other hand, however, the unmanageable neutrophils’ potential to kill pathogens also can lead to excessive protease production that initiates significant tissue damage to the host which is harmful to wound healing as they cause degradation of the ECM and growth factors [16]. Furthermore, the inefficient cell proliferation due to ECM molecule degradation within the wound leads to impaired angiogenesis that indicates further wound bed defacement and impaired healing. Hence, in order to conquer this issue, the prevention of prolonged inflammation is a goal strategy in severe wound therapy.
\nGAG has been found to bind to neutrophils, macrophages, and lymphocytes which are the key cells of the inflammatory response. The effect of excessive protease production caused by too many activated neutrophils in the wound site can be inhibited by electrostatic binding with certain anionic polymers such as GAG or functionalized dextrans [16]. The highly anionic nature of GAG that was expected would be ion pairing with the cationic neutrophils to interfere the activity of these cationic proteins via charge interactions. Therefore, it may be possible that by this mechanism the excessive neutrophil recruitment is reduced and the wound can pass from the inflammatory stage to the next stage of healing.
\nHowever, after serious tissue injury, the glycanases and proteases can destroy GAG [49]. The lack of GAG in severe wounds can be fixed with the addition of GAG-containing material, such as a natural polysaccharide, directly into the wound site as a wound dressing. With the rich source of GAG at the wound environment and a better understanding of GAG roles in healing processes, it has been possible to formulate therapeutic strategies which are expected to accelerate severe wound healing.
\nGlycosaminoglycan (GAG) has been shown to perform significant roles in cell signaling and development, angiogenesis, anticoagulation, and co-receptors for growth factors, which belong to the control of the all wound healing phases, both of acute wound and severe wound. GAG is an enormous complex of carbohydrate molecules that interact with several proteins involved in physiological and pathological processes [50, 51]. GAG, with a molecular weight roughly around 10–100 kDa, is a linear negatively charged polysaccharide. This electrostatic characteristic is useful for managing the excessive protease production through ion pairing with the cationic neutrophils and interfering the activity of these cationic proteins via charge interactions [16]. Once the excessive neutrophil recruitment is reduced as well as the excessive protease production, the wound can pass efficiently from the inflammatory stage to the next stage of healing, especially for severe wound injury.
\nPolysaccharides, especially natural polysaccharide, have been extensively used in wound-dressing development due to their properties such as being biocompatible, nonimmunogenic, and antimicrobial [52, 53, 54]. They appeared as abundant sources in many different forms of plants and production in the body. Based on their availability, a natural polysaccharide with different chemical structures and physical properties represents a large source of materials for progressive applications in the future, especially in the domain of biomaterials for the medical field [55, 56].
\nContaining a beta-1,3-
Alginate, chitosan, and hyaluronic acid are mainly natural polysaccharides that are considered as good candidates for the management of wounds in decades. Alginate, as a prominent example of a natural polysaccharide with the abundance of GAG, has been utilized to become platforms used for fabricating wound dressing materials. Spun as calcium alginate wound dressing, a severe wound injury in swine model treated with this material exhibited a rapid reepithelialization and less scar formation, which appeared with a smooth wound, compared to commonly used wound dressing [62]. The ability of natural polysaccharide reduces scar formation in severe wound injury due to its rich content of GAG which was known to promote wound healing and leads to rapid granulation, vascularization, and reepithelialization, thus yielding a minimum scar formation certainly [6]. As well, once the dressing is attached with the wound, an ion exchange reaction occurs between the calcium in the alginate and the sodium in the exudate, producing a soluble gel which in turn helps maintain a moist wound environment [63]. A moist wound environment will prevent the scab’s formation and facilitate the growth and migration of cells to optimize the formation of new tissues.
\nRegarding immune system activation, the release of pro-inflammatory cytokines, such as IL-1β, IL-6, IL-8, IFN-γ, and TNF-α, after wound injury also takes an important part during the wound healing process. Various crucial processes at the wound site, such as stimulation of keratinocyte and fibroblast proliferation, synthesis and breakdown of ECM proteins, and regulation of immune response, were handled with these cytokines [64]. Their expressions were shown to be intensely upregulated during the inflammatory phase of healing and strongly reduced after wound healing was impaired [65].
\nNatural polysaccharide, by its oligosaccharides (β-glucan, xyloglucan, chitin, pectin,
There are also several clinical trials of natural polysaccharide for wound repair. A natural polysaccharide that contains rich GAG has been widely used in the medical field as electrospun regenerative materials in the act of matrices that mimic tissues which are being replaced during wound healing. HA-based dressings have been used for chronic wound ulcer treatment of various etiologies, burns, and epithelial surgical wounds. The results revealed that HA significantly upgraded the healing process of wounds compared to traditional standards of care [77]. In line with this result, chitosan and alginate, fabricated as gelling fiber dressing, have been examined to accelerate the healing of patients with chronic non-healing wounds [78, 79]. This dressing has the ability to gel when in contact with wound fluid, less painful to remove, suitable for moderate to high exudate, reduced bioburden, and maintain hemostasis. Taken together, all of these benefits nominate natural polysaccharide as an advisable material in accelerating the wound healing process.
\nGenerally, natural polysaccharide has demonstrated considerable merit as a treatment for chronic wounds for their anti-inflammatory and moist wound environment preservation abilities. Despite, especially for atopy people (the people with genetic tendency to develop allergic diseases), a natural polysaccharide may induce the immune system to overreact and cause irritation due to its heterogeneous complex structure. Hence, the control of the molecular weight of natural polysaccharide is expected to overcome this limitation. Through the selection of desirable molecular weight, we could simplify or remove the excessive part of natural polysaccharide that may cause the hypersensitivity reaction. Additionally, in the dry wound, these properties may also lead to the inefficiency of the wound healing process. They may cause dehydration to the dry wound, thus reducing blood flow and the epithelial cells’ migration ability around the wound site which interrupts the creation of new tissue. As evidence, reepithelialization of the wound site is more rapid under moist conditions than under dry ones with natural polysaccharide wound dressing treatment [80, 81, 82]. With controllable molecular weight, it is probable that the potential of natural polysaccharide in accelerating the wound healing process can be utilized as well into several types of wound injury and patient background.
\nA natural polysaccharide is the element of human dermal ECM [83, 84, 85, 86]. As naturally occurring compounds, they have been demonstrated as a great potential for medical, pharmaceutical, and biomedical applications, including wound dressings, biomaterials, and tissue regeneration, due to their economical, less toxic, and favorable compatibility profile. However, possessing a lack of protein structure, natural polysaccharide exhibits a very poor bio-stability and difficulty to assemble a “matrix” to bridge the damaged tissue during wound healing process, therefore facilitating wound contraction and leading to scar formation [87, 88, 89]. To address this limitation, natural polysaccharide has been combined with the other natural polymers or synthetic polymers to yield the desired bioactive material.
\nWound dressings have a significant function in the management of wound recovery and have been continuously developed upon to improve the quality of the healing process. In this respect, a natural polysaccharide, with GAG-rich content, has been shown as a potential candidate to enhance the healing process of the wound, especially a severe wound, due to its outstanding properties. The detailed mechanism of natural polysaccharide involvement in wound healing was presented in this chapter, and it is expected to raise further wound management strategies. For example, recently, 3D bioprinting was expanded in tissue engineering for personalized regenerative medicine; hence, natural polysaccharide can be considerably utilized as the bio-ink for the printing of various types of structures as scaffolds as the desired function. The combined therapeutic potential of natural polysaccharide and proper development technique would be a promising potential not only in the wound management field but also the other medical applications.
\nThe author would like to thank Dr. Chih-Hsin Wang (Department of Plastic and Reconstructive Surgery), Dr. Cheng-Che Liu (Department and Graduate Institute of Physiology and Biophysics), and Dr. Yi-Wen Wang (Department and Graduate Institute of Biology and Anatomy) at the Tri-Service General Hospital, National Defense Medical Center, Taipei, Taiwan (ROC) for their helpful discussion during this chapter writing, as well as thanks to Dewi Sartika MS for her help in documentation.
\nThe author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
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