How To Spot Supplier Risk During On-Site Evaluations

Visiting your suppliers in person provides a great opportunity to identify potentially risky behaviour. In this article, we explore what you should look for to ensure you’re working with safe, knowledgeable, and reliable suppliers.

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Thanks to Spendrix for granting Procurious permission to republish this article. This article is the second in a series on how to identify various types of supplier risk. 

In our last post, we discussed how to spot risky behaviour when communicating with suppliers. The second article in our series on identifying supplier risk explores what to look for during on-site evaluations.

While on-site evaluations aren’t required, visiting your suppliers can help you build better relationships and improve communication. Furthermore, visiting your suppliers on-site allows you to evaluate them for risky behaviours that could potentially affect your company.

Here are some things to look for the next time you visit a supplier on-site:

Training Capabilities

When you vet your suppliers, you make sure they are qualified to do the job at hand, right? A part of this vetting process includes ensuring your supplier’s employees are proficient. Therefore, when you arrive on-site, it’s definitely important to check out your supplier’s training capabilities.

Top suppliers will have dedicated classroom space, a well thought-out training course, and experienced instructors. When you’re on-site, simply ask to review their training course to get an idea of how well it is preparing your supplier’s employees to work with your company. Does the training cover how to properly work with any equipment employees may have to use, how to properly secure and transport goods, how to check and maintain equipment to ensure it’s working properly, or what to do in the case of emergency?

Employees should understand how equipment looks, feels, and sounds when operating properly in order to act quickly if the machine becomes unsafe. Remember, your supplier is only as safe as its employees.

If your supplier can not answer simple questions about their training program or it seems their course lacks substance, you may need to ask yourself if that supplier is the best fit for your company. Overall, your suppliers represent less risk to your business the better their employees are trained.

Properly Stored & Inspected Equipment

Another crucial risk factor to look for during on-site evaluations is how your suppliers store their equipment, spare parts and securement tools. The way that a supplier stores excess equipment can tell you a lot about their attention to detail and the value that they place on having their equipment be in excellent condition.

While on-site with a transportation vendor, have a look at their inspection areas. Inspection areas should be well lit, and have spare chains and straps to replace defective securement.  It’s important that your suppliers are taking all measures to minimise violations and damage when transporting cargo.

In addition to securing cargo, also evaluate how well your supplier’s equipment is being maintained. Are tractors and trailers assessed for potential damage, parked in an organised and safe location, and repair areas kept clean? How promptly are mechanical issues taken care of? Are spare parts well organised and in safe locations for the mechanics to access them?

When visiting a manufacturing supplier, look how they treat their equipment as well. Is all the necessary Personal Protective Equipment available, clean, organised, and stored properly? Also, check their records to see if equipment is being professionally maintained and inspected on a regular basis.

Suppliers that do not properly maintain their equipment can put your company at serious risk. Poorly maintained equipment is one of largest safety concerns when working with suppliers. If your supplier neglects their equipment, this directly impacts your business.

Visual Inspections of Equipment

In addition to how your supplier stores their equipment, do they keep it up to date and safe? When performing an on-site evaluation, take an opportunity to perform your own assessment of your supplier’s equipment for physical damage.  Identify things that could lead to supplier error, and thus, put your business at risk.

When evaluating transportation vendors, check tires for adequate tread and proper inflation. Inspect trailers for any internal or external damages. Also make sure securement equipment is functioning properly. If on-site with a manufacturing supplier, examine equipment for exposed wires, burning smells, abnormal movements, or odd noises. Also, verify that the proper machine guarding equipment is being used.

Ensuring your supplier properly maintains their equipment can help to reduce the potential for errors. Therefore, it is crucial while on-site to inspect your supplier’s equipment, and in turn, protect your business.

Proper Compliance

A final way to minimise risk when performing an on-site evaluation of your supplier is by inspecting how they handle compliance. Does your supplier maintain organised and up to date logbooks? Do they have a detailed understanding of hours of service regulations, and work to avoid violations? Also, have they had any recent drug or alcohol violations? Or even worse, are there any drugs or alcohol on-site?

In addition, are there proper accident prevention signs in visible, high traffic areas? Is there easily accessible first-aid medical equipment in case of an emergency? The first-aid kit should be tailored to your supplier’s specific work environment and associated risks. It can also be necessary to have employees trained in first-aid, CPR, or responsible for certain emergencies.

By evaluating your suppliers for compliance issues, you are communicating your company’s values. You also can spot risky behaviours before they dramatically impact your company.

Overall, on-site evaluations allow you to get a closer look at your supplier’s day-to-day practices, and determine if they are the best fit for your company. If your suppliers do not have an effective training program, properly store or maintain their equipment, or follow proper compliance protocol, it may be time to look elsewhere for your business’s needs.

Ben is a business development professional currently working with Spendrix. He enjoys the challenge of helping a young company grow. Ben is passionate about risk analysis, business administration, and technology issues affecting the transportation and logistics industry.

How to get the most out of Procurious Groups

Procurious Groups are where it’s at

How to use Procurious Groups

When we quietly granted Procurious members the power to create their own Groups back in January we didn’t expect the reaction we received…

Suffice to say Groups have proved a popular addition to the site, so it’s only appropriate for us to cover them off in more detail.

Groups are the perfect haven for hanging out with likeminded professionals – each have been created around a core theme, so the key here is to join the ones that take your fancy.

In the blink of an eye one of our earliest (and vocal) supporters, Sergio Giordano – took it upon himself to set up The Italian Procurement Professional Community, before others caught on and followed. Sergio’s little piece of Italy is now almost 100 members strong.

When asked, Sergio had the following words for the Procurious community: “Italian professionals are beginning to understand that to achieve reputation you must first demonstrate your competence by helping colleagues and proving to be an expert in a specific field… However I think that the first interest in joining  the group is the uniqueness of Procurious: we all felt a great need of a specialistic network like yours or, let me say… like ours.” Sergio has brilliantly encapsulated the ethos of what Procurious is about, and we hope [that in time] all members will think of the network as theirs.

It’s easy as pie to join a Group. Just navigate to the ‘Groups’ page by following the link (it’s nestled between the Discussions and Blog items), and choose a Group from the list that takes your fancy. Depending on the membership options set by the Group owner you may have to wait a short while for them to approve your request to join.

Once you’ve pledged allegiance to a Group (or Groups) what’s next?

Think of a Group like a specialised Community Feed (but with useful extras). Dig into the Group page and you’ll see tabs for ‘Activity’, ‘Members’, ‘Documents’ (and if you’re an Admin, ‘Member Requests’).

The default view is that of the Feed – here you’ll be able to see posts by the Group’s other members, be they text or image-based. You can also insert URLs, but you won’t be able to tag other Procurious members in your updates.

The ‘Members’ tab is where you’ll be able to see who else has joined the Group. If they’re not yet part of your personal network you can send them an invitation to connect here.

‘Documents’ is slightly misleading as you can happily add any file with the following file-type:  jpg, jpeg, png, gif, pdf, doc, docx, xls, xlsx, ppt, or pptx. There’s also a maximum file size of 20MB so keep your PowerPoint presentations to a reasonable length! All we ask is that you use your common sense and don’t share material of a sensitive or confidential nature. Group Admins have the power to delete any file(s) they deem not in-keeping with the Group’s interests.

If privacy settings allow, Group members are also free to invite other Procurious members to join the Group. Suffice to say only send invites to people in your network you think will be interested, you don’t want to accused of spamming anyone!

Some Groups you might have missed

CIPS
CIPS (Chartered Institute of Procurement and Supply) have found an official home on Procurious. Join this Group to keep abreast of official news, content and ideas straight from the Institute. Visit the Group

FAPPE
We were first made aware of the excellent work FAPPE (Faster Adoption of Public E-Procurement in Europe) were doing during Procurement Week in Cardiff earlier this year. We suggest you join to discover more. Visit the Group

Portuguese Procurement Community
Procurement is taking off in Portugal! This is an opportunity to share insights and opportunities with other members within the region. Visit the Group

UK and Europe Public Procurement
Work in the UK or Europe and interested in all things Public Procurement? We have just the Group for you! Visit the Group

Procurement in Asia Pacific
Proving that regional Groups are popular, this Group is for procurement professionals to openly discuss and explore Procurement and supply chain issues in the Asia Pacific region. Visit the Group

Global Sourcing
John Zhang describes this newly created Group as a platform to discuss global sourcing challenges and opportunities mainly in emerging markets. Visit the Group

Irish Procurement Professionals Forum
This Group has sprung up in the last few days and we’re eager to help Ross grow it. So if you do business in Ireland there’s no excuse not to join. Visit the Group

Why create?

Whether you’re thinking of running a Group for a series of events, or maybe you want to fly the Procurement flag for your country – there are many good reasons to carve out your own little slice of Procurious.

To start a Group of your own just click the green ‘Create Group’ button on the Groups homepage.

More details can be found here: Want to start your own Group on Procurious?

Want us to write about your Group?

Drop us a note and tell us in 150 words why your Group deserves the attention.

Sarah Trota: How People Create Alchemy In Organisations

‘The relationship between Human Resources and Procurement is closer than people think…’

Watch our sixth Big Ideas Summit keynote (part 1 of 4)

Watch Sarah’s keynote in FULL here

Sarah Trota, founder of sarahtrotaalchemy and Personnel Today HR Director of the Year 2013, discusses her own model for how to create ‘alchemy’ within organisations. The focus of the idea is on properly engaging with employees, ensuring they are satisfied and as a result, producing better outcomes for the business.

Procurious members can find Sarah’s full keynote here. Not a member yet? Register for free.

3 Tips to Get Your Procurement Function Fit for Purpose

When making a purchase, consumer law states that the goods you buy must be fit for purpose..

This blog has been developed and published for Procurious by Proxima.

In short, this means that any goods that you purchase must be able to perform the tasks or functions that they were designed to be able to complete. But, in the wider sense, fit for purpose is also a term used to describe anything (including a business function) that is able to deliver its objectives and provide a satisfactory level of service.

Is your procurement team fit for purpose?

So what constitutes a satisfactory level of service when it comes to procurement? Is a procurement team that focuses solely on squeezing suppliers on price, continually driving bigger and bigger savings (but alienating its suppliers in the process) a satisfactory function? We think not.

Don’t get me wrong – there is no denying that a good procurement team is one that is able to meet savings targets, but a great one, well that’s slightly more complex. A great procurement team is one that recognises the importance and impact of its supply base on its own corporation’s operations. One that collaborates with its suppliers, coaching, motivating and incentivising them all towards the goal of creating a fully engaged supplier base aligned with, and able to contribute towards, the organisation’s wider corporate aims.

By this definition then, there are an alarming number of procurement functions even within some of the world’s biggest organisations that are not fit for purpose.

And with an average of 70% of a businesses’ revenues spent on suppliers, that’s a significant amount of spend that is likely not being used to the best of its ability.

Making the change

Clearly then, ensuring that your procurement team is fit for purpose, can have a dramatic impact, not just on the way that your suppliers view your organisation, but on profitability.

Below are 3 simple tips to ensure your procurement function is fit for purpose:

  1. Upskill your procurement team: With two-thirds of CPOs still citing lack of resource as one of their key challenges, it’s no surprise that the trend towards upskilling is an increasingly popular one. As a recent panel of industry experts discussed, the procurement team of the future will be one that encompasses a diverse set of people from various backgrounds, with a large and varied skill set.
  2. Communicate value upwards: Procurement professionals are no stranger to the often negative perceptions associated with the function. Overcoming this perception problem starts with communicating its true value. Sharing various achievements (outside of savings metrics) in the form of supplier-led innovations or mitigated risks with the wider business will help shift perceptions of procurement away from that of the “savings guys” toward that of a key business function capable of contributing to the corporation’s wider aims and objectives.
  3. Become a strategic partner to the wider business: A recent piece of research by The Hackett Group highlighted that “elevating the role of procurement to a trusted advisor within the business” was the key issue for procurement in 2015. How can this be achieved? Communication is key. Take the time to approach business leaders throughout the organization and learn about their challenges and strategies. By taking the time to listen to other business functions and understand what they need from procurement, you encourage the perception of procurement as a strategic partner.

So, in short, ensuring that your procurement team is fit for purpose is a complex, but achievable task. By taking into account these suggestions for expanding current capabilities, communicating achievements and aligning with the wider corporate agenda, you can elevate your procurement team beyond its conventional role – creating a function that is not just fit for purpose, but one that excels.

What steps are you taking to get your procurement function fit for purpose? Are you building the procurement team of the future or concentrating on changing negative perceptions of the function?

Proxima is a procurement specialist, offering a different approach to in-house sourcing, through close collaboration with clients across a number of industries including manufacturing, retail, financial services, engineering, FMCG, professional services and the public sector.

Airlines to seek legal advice on supplier competition

Airlines to seek legal advice on supplier competition

Willie Walsh, the head of International Consolidated Airlines Group (a parent company of British Airways) announced at the International Air Transport Association’s (IATA) annual meeting earlier this month, that airlines are actively seeking legal advice on the competitive nature of the industry’s supply market.

Two suppliers, Boeing and Airbus, dominate the aircraft production market and it is thought that this duopoly situation has led to airlines paying excessive prices for vital parts.

The airline industry has argued that the pricing disparity can be easily spelt out by comparing the profit margins of these businesses. The IATA reports that airline profits are around 4 per cent. These profit figures are significantly lower than those of the aircraft makers, who regularly report double-digit profit margins.

Mr Walsh said, “If we don’t challenge the restrictive practices that exist, we will be held captive, and costs as we’ve seen before will rise well in excess anything that is justified.”

Walsh outlined further concerns around industry developments that have seen manufacturers produce aircraft that can only accommodate one particular make of engine. In the past it was possible to use different engines in an aircraft, which brought an element of competition into the market. Walsh said the changes were a “a development that we don’t like to see.”

It is not clear whether the investigation will result in legal action; Walsh himself has stated that such measures may not in fact be warranted. He did claim however, that airlines feel they are “not getting a fair deal” from the aircraft manufacturers.

Accenture and Fast Retailing are transforming the future of customer service

Accenture and Fast Retailing want to innovate customer service – here’s how they plan on doing it.

Accenture and Fast Retailing are innovating customer service

A joint initiative aims to improve the personalised multi-channel experience for Fast Retailing’s customers.

Accenture will help Fast Retailing (who own seven major brands, including UNIQLO, Comptoir des Cotonniers, Helmut Lang, et al) to develop new digital business models that embed customer innovation, data analytics and digitized operations in product development, merchandising, production, logistics, marketing, sales and customer service. The initiative should enable consumers to select, try, purchase and receive products and services anytime and anywhere.

Accenture will help Fast Retailing build a cloud-based technology platform, including supply chain and customer relationship management systems, to collect actionable customer insights that will enable the personalization of the customer experience. The technology, including supply chain and customer relationship management systems, will be fully transformed as a cloud based infrastructure.

“We are pursuing a coherent strategy to establish an innovative business scheme that seamlessly combines real and virtual markets and to take the lead in the changing retail industry,” said Tadashi Yanai, Chairman, President and CEO, Fast Retailing. “Through this collaborative framework with Accenture, Fast Retailing will globally present and introduce the possibility of an innovative business model beyond the retail industry and accelerate developing the world’s leading direct business model. Fast Retailing, partnering with Accenture, will enhance store strategy, create a state-of-the-art supply chain network and develop innovative talent to meet the consumer demands in the era of digitalization.”

Gianfranco Casati, group chief executive – Growth Markets at Accenture, said, “Today’s retail customers are a formidable force with shifting expectations, demanding a seamless experience – whether in stores or online – that is on their terms. Leading retailers know that digital is the key to creating the seamless experience customers want, and we will work with Fast Retailing to ensure they are making smart investment choices to create new value while ensuring efficient and effective operations across their entire organization.”

 

 

US Pacific-Rim Trade Deal Hanging in the Balance

The future of a massive US trade deal looks to be in jeopardy following a US Senate vote on Friday.
United States Capitol Building

Democrats voted against a major part of the bill, despite a last-minute personal plea from the President himself. Without this bill being approved, there is a danger for Obama that the deal will fail to progress into law.

With many seeing the deal as ‘legacy defining’ for President Obama, it is clear that he will need to work hard to heal a schism in his own party before a second vote this week.

In a Nutshell

Nearly a decade in the making, the Trans-Pacific Partnership (TPP) would partner the USA with 11 other countries around the Pacific Rim, securing enhanced trade relations and lower tariffs on exports, ultimately strengthening the US economy.

Significantly, China would not be involved in this partnership, with the US aiming to increase their influence in the region and have a greater say in policies and standard. This could then be used to improve labour and environmental standards in a number of countries.

With US trade in the region valued at an estimated $1,607 billion, this would further increase the revenues US service organisations, give organisations greater access to big markets in Japan and Canada, while providing protection for holders of patents and intellectual property in a region where infringements are common.

This would be particularly good news for California, which counts trade as a key driver of its own economy. Much of California’s trade, plus exports that are shipped through its major ports, goes to the Pacific Rim region and the countries involved in the wider negotiations.

Sounds Great, What Happened?

The key component of the bill, which was ultimately passed, centred on giving ‘fast-track authority’ to the President to negotiate future trade deals. However, this was one part of a two-part bill, with both parts needing to be passed in order for legislation to be created.

The second part of the bill dealt with Trade Adjustment Assistance (TAA), assistance for retraining workers displaced or negatively affected by the movement of trade. US Democrats have traditionally been strong advocates for these provisions, but were unhappy with the strength of legislation within the bill protecting US employees.

Such weak legislation has been blamed in the past for a fall in US manufacturing and growing inequalities. Fearing similar consequences from the trade deal, the party rebelled and voted against the second half of the bill, halting its progress and creating an awkward situation for the President.

With the deal not hanging in the balance, its supporters fear that a failure will lead to countries such as Vietnam and Japan reversing economic reforms and policies allowing them entry to trade zones with the USA, as well as China strengthening its own position in the region.

All is Not Lost

There are positives to take on both sides. For the President, he has managed to pass half of the bill, for the trade deal itself, while keeping his own party on side, but at the same time garnering significant bi-partisan support from the Republican party.

This support is likely to continue this week when votes are recast. For the opponents of the bill, this allows a further week of negotiations and potentially concessions from the White House in their favour.

Whatever the outcome, the vote, and potential passing of the bill into law, will have a huge impact not only on the remainder of Obama’s presidency, but also the legacy he leaves behind.

Are you following this story in the US? Do you have an opinion on the trade deal or are you directly affected by its outcome? Get in touch with Procurious and let us know.

Meanwhile, here are the key headlines in the procurement and supply chain space this week.

Walmart’s corporate spin can’t defend shady food suppliers

  • A new report from the Food Chain Workers Alliance (FCWA) dives into the labor and environmental records of 22 of Walmart’s suppliers of popular food items, from chicken to bread to blueberries. The report, “Walmart at the Crossroads: the Environmental and Labor Impact of Its Food Supply Chain” (PDF) uncovers far more important problems than relaxing the worker dress code and increasing store temperatures…
  • According to Walmart’s “ethical sourcing” standards (PDF), all suppliers and their manufacturing facilities at a minimum “must fully comply with all applicable national and/or local laws and regulations, including but not limited to those related to labor, immigration, health and safety, and the environment.”
  • The report finds that Walmart has failed to enforce supplier compliance with its code of ethics for labor practices, environmental sustainability and local sourcing of food. Workers in Walmart’s stores and in its food supply chain endure a slew of labor abuses, including gender and racial discrimination, unfair treatment of immigrants, low pay, violations of freedom of association and even workplace accidents and fatalities.

Read more at Aljazeera America

Build Australia’s submarines in Adelaide, says former commission of audit chair

  • Tony Shepherd, a former president of the Business Council of Australia, said the government should have confidence that future submarines and frigates could be successfully built in Australia, if given the right procurement procedures and contractual arrangements and with construction in privately operated dockyards. .
  • He said it wasn’t fair to use the troubled air warfare destroyer project, running three years late and $1.2bn over budget, as the key criterion for decisions about local defence industry capability to undertake future naval construction in Australia. “We should have confidence that we can successfully build complex warships here, adding to our high technology base and giving us the intellectual property and local capability to maintain, modify and update naval vessels over a 30-year operating life,” Shepherd said in an article on the Australian Strategic Policy Institute website.
  • The government is now evaluating three international contenders for replacements of the ageing Collins-class submarines. It hasn’t stipulated that the new vessels be constructed in Australia. “The Abbott government should follow this well-proven, risk-reduction path,” he said.

Read more on The Guardian

In 2 years, 40,000 tonnes of grain went down the drain

  • At a time when fears of another drought year are looming large, an RTI application filed by TOI has revealed that the quantity of foodgrains damaged in Food Corporation of India godowns across the country recorded a drastic jump over the last two years when the country lost more than 40,000 tonnes.
  • Though the losses are attributed to natural calamities like cyclone and floods, experts say it is also an indication of poor storage facilities, pilferage and transit loss. The reply from FCI, responsible for procurement and distribution of foodgrains, shows that the damaged quantity rose threefold in five years — from 6,346 tonnes in 2010-11 to 18,847.22 tonnes in 2014-15.
  • The FCI reply is especially significant after a recent United Nations annual hunger report estimated that India had the highest number of hungry people in the world at 194 million. As on June 1, there were 568.34 lakh tonnes of foodgrains with the FCI’s central pool.
  • Former Union minister of state for food K V Thomas told TOI that the percentage of foodgrains damaged had reduced from 2.5 per cent of the total procurement in 2010 to 0.07 per cent of the total procurement in 2013. “The UPA government had taken several initiatives to bring this down. We renovated most of the existing godowns and also increased the storage capacity. The procurement rate of foodgrains was also higher compared to the current year.”

Read more at The Times of India

Boeing believed to have slashed hundreds of millions from Apache helicopter bid

  • Aerospace giant Boeing is believed to have sliced hundreds of millions of pounds off of its bid to make 50 Apache attack helicopters for the UK Ministry of Defence (MoD).
  • In a dramatic step taken to improve its chances of securing the contract, the US aircraft manufacturer has reportedly offered what is a “very significant discount”, according to sources cited by the Mail on Sunday.
  • The company has made the move in the face of a rival bid submitted by AgustaWestland, a UK company owned by Italian defence group Finmeccanica. It made the Apache helicopters that are currently used by the Army under licence from Boeing.
  • According to the newspaper, sources from Boeing said the maintenance of the helicopters could be carried out by its UK arm, ensuring the majority of the government’s spend remained in the UK.

Read more at Digital Look

CCG abandons NHS 111 procurement after being unable to find ‘acceptable’ provider

  • One of the largest NHS 111 services in the UK has had to ‘abandon’ re-procurement of its service after they were unable to attract an adequate permanent provider.
  • NHS Sandwell and West Birmingham CCG have been unable to find a NHS 111 provider to take over the service across 16 West Midlands CCGs from the local ambulance trust, which took over from NHS Direct on a temporary basis in November 2013.
  • Commissioners said that no bid – including the West Midlands Ambulance Service Trust – had demonstrated ‘value for money’ in delivering the scheme’s future ambitions, such as integrating with GP services or offering better mental health support.
  • The procurement process to deliver 111 services in the region for the next four years was launched on 28 November 2014, but now WMAST will retain the existing contract until the CCG launches its second procurement attempt this autumn.

Read more at Pulse

Procurious Big Idea #20 – Procurement’s Role in Cyber Security

The Hackett Group’s Melani Flores on this important trend that is impacting procurement.

Melani’s Big Idea revolves around Cyber Security and the need for procurement teams to manage their own data privacy risks. She also recognises that the future of efficient procurement lies in collaboration, but how secure are those flows of information?

See more Big Ideas from our 40 influencers