All posts by Jordan Early

6 Ways to Make Savings Stick

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The last article I wrote on The Faculty’s latest research paper ‘Making it Stick’ was very well received by you all, in fact, its one of my most read posts on Procurious. This strong response has encouraged me to dive back into the report to look for more gold.

As the report clearly states, more than 50 per cent of savings that are negotiated and contracted by procurement teams are not actually being realised in company accounts.

That figure staggers me a little more each time I read it.

Today I am going to outline the tips that The Faculty has suggested organisations take in order to ensure their savings stick.

1. Prove it

Savings come unstuck when projected benefits are not realised. As procurement teams, our role extends beyond merely drawing up contracts and holding negotiations with suppliers to lock-in preferable rates.

We have to take some responsibility for these savings eventuating, and this involves providing a road map for users to realise these savings and presenting management with a plan as to how savings will be captured and reported.

2. Collaborate

The great work done by procurement teams in negotiating favourable rates and contracts comes undone immediately if our internal customers in other parts of the business are not on-board with our new initiatives.

Only by creating a cross functional environment where the value of procurement’s work is clearly demonstrable to others in the business can we hope to get buy-in for our initiatives and ensure the savings we’ve promised will actually materialise.

3. Expand the Focus Beyond Costs

This point doesn’t cover new ground for procurement blogs, but the old ‘value over cost’ argument is as relevant today as it’s ever been. As we’ve already discussed, building a cost conscious culture within your organisation is critical for a benefits realisation project to thrive, but when you talk to your supply base, the focus needs to shift slightly.

This point is well summed up by Mike Blanchard, the CPO at Sydney Trains, “You can only pressure suppliers on cost up to a certain point before you risk compromising on quality and service levels. The key is to seek out different types of value in supplier relationships,” he said.

4. Align to Business Targets

By aligning your benefits realisation program directly to organisational success metrics, you increase your potential for success by an order of magnitude. Structuring your program in this way will mean that when you go to the business with new procurement initiatives, you’ll already be speaking a common language.

As David Henchliffe, CPO at Santos, stated, “How procurement measures success must be aligned to what the business views as success”.

5. Define benefits

How can you hope to measure benefits if they aren’t clearly defined? When creating definitions for your benefits realisation and savings methodology, it’s critical that you involve other functions from the business.

These are your internal customers, the people that will be using your rates and the contracts you’ve put in place, so its your job to work with them to create clear transparent definitions of what savings are and how they are realised.

6. Focus on compliance

Maverick spend and other contract non-compliance is a killer for making savings stick. The gurus at The Faculty have suggested the following steps to help improve compliance:

  • Establishing enforceable penalties for compliance breaches
  • Educating end-users during the handover process about consequences of compliance breaches
  • Creating a fool proof system (such as an ERP) that minimises opportunities for compliance breaches
  • Clearly defining roles and responsibilities
  • Monitoring and controlling maverick spend through an exceptions management signoff process.

What You Can Expect from a Procurement Job in Australia

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After three weeks, eight flights, a wedding and some workshops, I’m finally back from my trip to Australia. It was a great trip – as well as spending time with my friends and family, I had the chance to reconnect with the procurement community ‘down under’.

Australia is where I started my procurement career and I feel I know the landscape down there pretty well. So on the flight home I penned my tips for anyone considering a procurement role in the ’lucky country’.

1. You’ll land in a hotbed of procurement talent

The spotlight is shining bright on Australian procurement professionals. Kylie Towie, the CPO of WA Health, won this year’s ‘Procurement Leader of the Year’ Award. Last year’s winner was another Australian Scott Wharton, who is working in New York as the Global Head of Enterprise Supply Chain for Citi.

The Procurement Leaders Award pits the top supply chain and procurement professionals from around the globe against one another. Having Australians win the award in consecutive years is a major achievement for Australian procurement.

According to Eva Wimmers, the former CPO of Deutsche Telekom, the procurement function in Australia is in a mature state.

2. Be Wary of the Boom

Unlike the rest of the developed world, the Australian economy was, by and large, unaffected by the Global Financial Crisis. In fact, Australia has seen unbroken economic growth for the last twenty something years. Unemployment rates are enviably low (6 per cent), there is very little public debt and inflation has been stable for many years.

For procurement, huge resource and infrastructure projects over the last decade have meant that Australian companies have needed to purchase a lot of stuff.

Sounds perfect, right?

Not quite. The Australian economy weathered the financial crisis largely thanks to its enormous natural resource sector (and the Chinese appetite to consume these resources). However, 2015 has seen shaky growth figures from China, causing commodity prices to plummet, and the Australian economy is feeling the pinch.

Large resource projects have been mothballed, and will likely remain so, until commodity prices show significant signs of recovery. While the mining and resources sectors are only one part of the Australian economy, the knock-on impacts for business confidence across the country cannot be understated.

3. The supply market is shallow

Although the Australian economy is strong, it’s important to remember that it is also isolated and relatively small. As such, the depth of the supply market is not comparable to markets in Europe and the USA.

Monopoly or duopoly suppliers dominate many industries, meaning you’ll need to get creative with your category management plans. Good category managers are constantly looking to create competitive tension in the supply base. This may mean leveraging international suppliers more frequently or even producing the required product internally.

4. You’ll be part of a connected community

The Australian procurement community is well connected. There are more than 2000 Australian members of Procurious (it’s one of our strongest membership groups).

CIPS has a strong and active presence in Australia. The Institute runs events, provides certification and training and numerous networking opportunities for procurement professionals down under.

The Faculty, too, provides a number of development opportunities for procurement professionals in Australia. The company’s Roundtable acts as a forum to bring together elite procurement professionals to share their experiences and insight.

By leveraging Procurious, CIPS and The Faculty, you’ll find it very easy to connect and continue to grow as a procurement professional.

5. There is a unique industry focus

People used to say that Australia rode on the sheep’s back. While, strictly speaking, that’s not true any more, the Australian economy is certainly very heavily weighted towards primary production. The retail and services sectors are respectable, but it’s mining and oil and gas that really drive the economy.

6. The pay is good

Procurement pays well in Australia. According to recruitment firm Hudson, a full-time procurement manager in Western Australia can earn between $150 and $210k; experienced category managers can expect to earn about $120-150k. Even taking into account unfavourable exchange rates, these salaries are enviable when compared to similar positions in the US or Europe.

7. And you’ll need every cent

Australia isn’t cheap. Sydney consistently ranks amongst the world’s most expensive cities to live in. Melbourne, Brisbane, Perth and Adelaide don’t trail too far behind.

House prices in Australia have boomed in recent years. A modest, two-bedroom apartment in Paddington (a suburb in inner-city Sydney) will set you back roughly $1200 a week in rent.

If you’re buying in the same neighbourhood, you’re looking at close to $2 million. The cost of living (eating out, shopping, etc.) is also consistently high too.

8. Visas can be tricky but not Impossible

If you’re not an Australian or New Zealand national, you’ll need a visa to work in Australia. There are a number of different visa options for people looking to migrate to Australia for work, but the most common, particularly amongst senior level staff, is sponsorship.

Visa sponsorship requires commitment of both time and money from employers, but, as Brendan Turner from The Source told me, “Australian employers are open to visa sponsorship, especially for senior roles and for those candidates coming out of the UK market.”

9. It’s Fun!

There is no that opportunities for employment and personal development are abundant in Australia, but it’s the lifestyle that is the true superstar.

Whether it’s lattes in lane ways (Melbourne), surfing on the Sunshine Coast (Queensland), or barbecues in Bondi (Sydney), the Aussie way of life is second to none. We love our sport, we love our beaches, the food is fresh, the coffee is great, the air is clean and sun is almost always shining.

To quote one of our B-grade celebs…“Where the bloody hell are ya?”

Ahhh…it’s enough to make you home sick.

6 Tips To Ensure You Make The Most Of Your First Procurement Job

10-tips-for-a-successful-first-day-at-your-new-job

It was 9 years ago (almost to the day) that I applied for a job in the finance department of Alcoa (a mining company). Not long after that application, I was contacted by someone in the HR team and asked if I would be interested in interviewing for a role in procurement. I didn’t know what procurement was (it wasn’t mentioned in university courses back then), but needed a job, so I answered that question with a resounding yes.

Somehow I managed to get through the interview process and shortly after kicked off my career in the function.

My ignorance of what procurement was ensured that my learning curve would be a steep one. I have compiled my advice to procurement and supply chain graduates below, perhaps you can learn from my mistakes?

  1. Pitch up on time

This is critical. When you are the new guy (or girl), it’s inevitable that people within your organisation will be questioning your maturity, your experience and your capability. If you can’t get to a meeting on time, or haven’t prepared for the ensuing discussions, you’ll go a long way to confirming these fears. It’s simple, get there on time, be prepared and you’ll find you’ll alleviate lot of the unfounded concerns about young workers.

  1. There are no stupid questions

I spent the first two months of my procurement career not knowing the difference between direct and indirect procurement (despite the fact that it was discussed daily in my office). There were also scores of internal terminology that I didn’t understand. It took me months to figure this stuff out because I was too scared to ask my superiors questions for. It’s important to remember that you are new, you’re not meant to know everything on your fist day and while you might feel stupid asking simple questions, trust me, you’ll feel a lot more stupid when you’ve been in a role for months and still don’t know the difference between direct and indirect procurement. I found that a great way to open a dialogue and get answers to your questions is by saying “I was wondering if you could help me to understand xxx?” People like to ‘help’ one another, it gives them a chance to show off their knowledge and this makes them feel happy and important.

  1. Be confident

With all the new terminology, older co-workers and an unfamiliar corporate environment it’s easy to get intimidated in your first procurement role. But remember this, you’ve passed the exams, got through the application process and managed to impress someone enough in your interview that you warrant this position. You deserve to be where you are. Everyone started somewhere. Someone once said to me “your boss puts her pants on one leg at a time in morning just like you do”. There is no need to feel intimidated.

  1. But leave your swagger in the nightclub

There a toxic phrase that has entered the business lexicon recently (I think we’ve got Silicon Valley to thank for it) it goes like this: “fake it till you make”. I despise this expression. There is simply no faster way to isolate yourself from your co-workers (and your boss, your suppliers, your friends and actually from anyone you’ll ever meet) than to pretend you know more than you do. In a technical profession like procurement, you can’t fake experience, you’ve either ‘got it’ and you know what you’re doing, or you’re ‘learning it’. As a graduate, you fall in to the latter category. Be humble and leave the swagger and showmanship for the bar on Friday night.

  1. Do what you said you’ll do

Our founder Tania Seary recently pointed this out in her blog for those striving towards a career as a CPO, so this is sage advice to remember throughout your career. At university, it may have been possible to get around the commitments to your group assignment with a few well-positioned excuses. In the workplace, this won’t fly. If you commit to doing something, it’s your responsibility to see it through to completion, no excuses. If it looks like something is running over time or is getting derailed, it’s your job to get it back on track. Chase people up if they don’t respond to emails and communicate openly with your boss about any issues. Believe me, if a savings target looks to be in jeopardy, your boss wants to know now, not in three months time when it’s unsalvageable.

  1. Learn to answer the phone (and the other basics…)

I’m not sure if it’s still the case, but when I was at university, PowerPoint, Excel and such programs were dealt with in three 30-minute tutorials. This meant that while we could all develop a strategic plan for the corporate restructuring of a multinational company (Organisational Behaviour 243) and had memorised the date that the Corn Laws were repealed (Economic History 331), we were completely incompetent with the tools that would comprise the bulk of the first five years of our corporate existence. Learn pivot tables (and Macros if you’re a gun), figure out how to create an engaging PowerPoint presentation, learn how to answer the phone politely and how to construct an email that will lead to a positive response. This is what you’ll be doing for the next few years, so do it well. The corporate restructuring can wait until you’re the CEO.

But above all, just have fun!

It’s your first ‘real job’. Enjoy it! Enjoy the consistency of monthly salary, enjoy not having to study any more, enjoy no longer delivering pizza for a living, enjoy having a bank account that remains in the black and enjoy Friday night drinks.

Now is your time.

Talking S&OP with Patrick Vialle of Parmalat

Understanding S&OP

Based on a recommendation I got from Julie Egonidis of The Faculty off the back of its recent procurement roundtable series. I caught up with Patrick Vialle of Parmalat Australia to discuss an interesting S&OP (supply and operations planning) project the company has been working on.

Patrick has had a truly international supply chain career, having worked in France, Italy, New Caledonia and now in Australia where he’s employed as the National Demand & Supply Planning Manager for the dairy producer.

For those of you that are unfamiliar with the term, S&OP, put simply, it involves understanding the demand profile for your organisation’s end product and closely linking supply chain (and other functional) activity to mirror this demand.

It’s not just for FMCG

I was keen to get an understanding of how Parmalat was able to connect the dots between its market place demand and the supply and production of its own products. I thought, naively, that due to short shelf lives; S&OP was something that was unique (or at least more common) to the food and FMCG industry. But after chatting to Patrick I began to understand that S&OP is a solid business practice whatever industry you’re in. As Patrick points out, it’s all about being responsive rather that reactive.

Patrick explained how the theory of S&OP can be used by firms that don’t even produce a physical product. If Google, for example, is able to understand the demands that its network is likely to come under over the coming weeks and months, the company can start to make arrangements for the required storage and data processing capacity (their supply) to match these demands, hence avoiding an oversupply or worse, a crash.

Cross Functional by Nature

Speaking of his own experience at Parmalat. Patrick discussed the need for S&OP to be addressed from an organisation-wide perspective. “S&OP is, by definition, a cross functional process” he said. It might make sense that procurement or supply chain lead the project because they have close relationships with the supply base, but stakeholders from every area of the business need to be involved if the project is to be a success.

Patrick explained how the Parmalat team responsible for delivering the project was comprised of a mixture of professionals from Sales, Finance, Marketing, Engineering and Procurement. He also said the team was made up of ‘believers’ (those who were sold on the benefits of S&OP) as well as staff that needed some convincing of the project’s merit. This led to strong debate within the team and gave the group vital preparation for the sort of resistance they would face in the implementation phase.

Patrick went on to discuss that Parmalat rolled out the program initially to one category as a sort of pilot project; this process took about six months to get operational. Once the initial program was returning positive results, the firm looked to roll S&OP out across the business.

It doesn’t have to be Lean

I also questioned Patrick on the ‘lean’ aspect of S&OP projects. I feared that closely linking supply and demand could leave organisations exposed should something untoward or unplanned happen. Patrick explained that S&OP doesn’t need to be lean; you can plan for risks and have buffer stock just like before. “It’s all about being responsive to the different scenarios your business might face and having a plan to manage the impact of each of those situations,” he said.

The Benefits

Parmalat’s program has reaped huge benefits for the organisation. Numerous customer surveys have shown that customer service has improved drastically across the business. Supply is now faster and more reliable. Parmalat has not only become a better supplier, but the firm has become a better customer to its suppliers as they are now able to provide a clearer picture of what they will require and when they will need it.

The S&OP program has improved forecasting accuracy at Parmalat by a remarkable 60 per cent. This has been hugely beneficial in terms of reducing waste and optimising resourcing solutions.

Patrick’s story is another example of the truly innovative procurement work that is being discussed during The Faculty’s Roundtable sessions. If you are based in Asia or Australia and would like to get involved in their upcoming discussions, contact Max Goonan at The Faculty.

Five Reasons Why Procurement Savings Don’t Stick

How to make your savings stick

The latest research from The Faculty, which is now available for download exclusively through the Procurious community feed, has highlighted that more than 50 per cent of savings negotiated by Australian procurement teams do not make their way to company’s financial bottom line.

This raises a very simple question. Why can’t we get our savings to stick?

Below, I’ve outlined the five reasons that, according the research team at The Faculty, are causing organisations to miss out on millions of dollars of negotiated but unbanked savings.

  1. Organisations lack enterprise wide alignment and ownership with procurement targets. Without a commonly accepted benefits realisation program implemented across the organisation, procurement teams will always struggle to get buy-in and adherence to the savings they have negotiated. Eva Wimmers the CPO at Deutsche Telekom AG highlighted that at her organisation, business unit leaders and CPOs have joint benefits realisation targets,. These are agreed up-front and managed together through what she described as the “tandem principle.”
  1. Silo-style environment that stifles cross-functional collaboration. Procurement teams cannot be seen as the sole custodian of a benefits realisation program. Procurement teams need to open communication lines between all business functions. Similarly, leaders from all functions should be willing and able to highlight the benefits of instilling a cost conscious culture to their team. As a 2014 Ernst and Young report stated: “The procurement team should not be the ‘sole owners’ of savings. Instead the focus of the team should be on facilitating and driving initiatives. They should also be accountable for the governance function through recording, measuring and reporting savings.”
  1. Maverick spend and non-compliance undermines procurement gains. Maverick spend is the enemy of benefits realisation. The hard work done by a procurement function is immediately undone if staff members are spending outside of contracted or agreed rates. According to The Faculty, there are three key drivers that cause staff to spend outside of contracted rates. 1. An overly complex or manual procurement system 2. A lack of input in the process of selecting the contracted supplier 3. An ignorance of the benefits that can be realised from leveraging contracted rates and service levels.
  1. Unclear definitions measurements and validation create confusion around negotiated savings. As Andrew Bartolini commented in his 2014 CPO Rising report, savings are an inherently complex metric to understand. Today it seems there is greater disparity amongst the definitions used by procurement teams and the broader business. Until organisations can agree and work towards a clearly defined set of savings definitions and measurements, there will always be leakage between negotiated savings and what actually hits the bottom line.
  1. Immature cost conscious cultures limit CPO-level efforts to expand the value that procurement can contribute to an organisation. Implementing change across an organisation in no mean feat. The results of the “Making it Stick” research suggest that cost savings are still the primary benefit valued by procurement and its stakeholders. This demonstrates that the function’s core role is to ultimately control the commercial purse strings of the organisation. Before CPOs can broaden their function’s value offering to include strategic initiatives, an organisation-wide cost-conscious culture simply must be in place.

Understanding The Chinese Yuan And The Fluctuating Economy

 

Down, down, up. The revaluation of the Chinese Yuan…

The revaluation of the Chinese Yuan

About five years ago I stopped ‘doing’ procurement and starting writing about it.

One of the very first pieces I ever wrote was for Procurement Leaders. The article focussed on the impact the value of the Chinese currency (the Yuan) has on supply chains and more specifically the role that the Chinese government has allegedly played in manipulating this exchange rate for the benefit of its economy.

Manipulation 

China has, in the past, been accused of deliberately altering the value of the Yuan in order to make its products appear cheaper and thus more desirable in the export market. The strongest opposition to this practice has come from the US, who feel this manipulation has adversely impacted domestic suppliers as many American’s elect to buy cheap Chinese goods over US made products.

The US have also claimed the currency manipulations are anti-competitive and highlighted they have hindered the progress of US firms in China. By having a weak Yuan in relation to the US dollar, companies like Apple, that price in USD, found it more difficult to compete in the Chinese market with local suppliers who could produce a similar product at a lower price.

Despite the fact the value of the Yuan is not subject to market forces, but rather, is set by a team of economists, China has always maintained that its currency was fair and not been deliberately manipulated.

The debate continues

Jump forward five years and the value of the Yuan is once again making the front page of global business newsfeeds. Last Monday (August 10th) The People’s Bank of China announced it would make a ‘one time correction’ to the value of the Yuan.

This action, and accompanying confusion, sent global currencies into a spin. The Yuan dropped 2 per cent against the US dollar in a day.

Despite announcing only a ‘one time correction’ to the Yuan, The People’s Bank of China announced a further devaluation of the currency on Wednesday of last week. This caused analysts to fear that China’s wavering economic performance may be worse than they initially thought. Commodity prices and share values have continued to drop on the news.

To add further confusion to the situation, on Friday (August 14th) the central bank opted to raise the value of the Yuan against the dollar. The Bank has come out and stated “the market will play a bigger role in exchange rate determination.” Perhaps they were keen to show the value of the currency can go up as well as down?

For the time being, it appears Chinese goods will continue to be relatively cheap compared to the rest of the world. Some analysts have predicted that a flow of cheap Chinese made products will flood foreign markets (haven’t they already?) The uncertainty of over China and its currency is also likely to cast a continuing shadow over the tumultuous global commodity markets.

What is ‘keiretsu’ and why does it matter for supply chains?

Japanese business practices

There are numerous Japanese business terms that have made their way into the common English business lexicon. Kaizen and the 5S’s (seiton, seiri, seisou, seiketsu and shitsuke) are just a few. One that you may not be completely familiar with is ‘keiretsu’. While it doesn’t receive the same coverage as Kaizen, this practice carries significant supply chain implications.

Keiretsu occurs when a set of businesses with interlocking interests take a financial share in one another.

This practice, which is akin to a large buying organisation owning significant shares in one of its suppliers (and vice versa), is very common throughout the Japanese economy (particularly in the automotive industry). As multinational firms continue to drive towards vertical integration, we are starting to see more it in the West as well.

The successes

The interlocking structure of keiretsu is held up as one of the key factors that contributed to the immense success of Japanese carmakers through the 90’s. It was thought that by taking a financial interest in their suppliers (and by offering suppliers shares in their own business), Japanese car makers were able to diffuse the traditionally antagonistic nature of buyers/supplier relationships, allowing the two organisations to more readily reach mutually beneficial outcomes.

Acceptance in the West

Broadly speaking, the idea of keiretsu hasn’t sat well in American business circles. This is due in some part to the sense of xenophobia the term instils. Keiretsu was perceived by many in the US as a ploy by the Japanese to protect their own business interests from American competition, by only doing business with people they know.

Despite this reluctance, as western business leaders saw keiretsu succeed, they started to emulate it. In a 1997 article in The New Yorker magazine, Ken Auletta went to great lengths to point out how keiretsu practices had become common at many of the worlds leading media organisations (including Disney, Time Warner, Microsoft, NBC and News Corp).

Undoing keiretsu

Like many business mantras it appears that while keiretsu helped to solve a great number of business problems, the business practice is also responsible for creating its fair share of issues.

Concerned with some of the inefficiencies that accompany the keiretsu business practice, Toyota this year elected to unwind some of these entangled business relationships.

In April, the automaker took the bold step of instilling a former Toyota executive, Yasumori Ihara, as the CEO of one of one of its leading suppliers (and keiretsu partner) Aisin Seiki Co.

Ihara’s job… To undo some of the keiretsu practices that had formed between the two organisations.

It was feared that the close relationship that had formed between the two businesses had created lethargy in the supply market meaning that neither business was functioning optimally. Toyota was not driving the most out its supply base and Aisin’s overly comfortable relationship with the automaker meant the firm was not pursuing contracts with other car manufacturers as actively as it might.

Ihara was put in charge of the supplier and told to make the business more competitive or face losing Toyota’s business. The new CEO has also been challenged with selling Aisin’s parts into other automakers.

No silver bullet

This isn’t the first time procurement teams have reached a similar stalemate. The keiretsu vs. traditional supplier relationship discussion sounds a lot like the cost vs. value or innovation vs. price debates we often hear.

Perhaps what is most important to take away from these issues and debates is the fact that there is no silver bullet for managing a supply chain. The issues are layered; to think that a single business methodology can solve all procurement challenges is to grossly underestimate the complexities that lie with modern day supply chains. The challenge is to find a balance between co-operation, innovation and cost.

So the next time you hear of a new business methodology that’s set to change procurement for ever, I would suggest you take it with a grain of salt (or perhaps a sip of sake…)

Can Coffee Pods Ever Be Considered Sustainable?

Are coffee capsules sustainable?

Call me cynical, but am I alone in not buying into Nespresso’s sustainability spin? This article posted on Procurious highlights the great work that the coffee pod producer is doing to develop a sustainable supply base by investing in infrastructure and capability in war torn South Sudan. Those efforts are worthy of praise, no question about it, but I can’t help but feel we’re having the wool pulled over our eyes by Clooney and co.

You see, a implementing a sustainable supply chain initiative or marketing your sustainability policy does not a make a business sustainable and I’d argue that Nespresso’s core business is not in the slightest way sustainable.

Nespresso (and it’s competitors) pods have boomed in popularity in recent years. It was estimated that in 2013 Nesspresso sold 28 billion coffee pods to consumers. Annual sales figures have surely climbed further in the proceeding two years.

What’s in your morning coffee? 

But lets focus on the 2013 figures. An article on the theconversation.com suggests that producing 28 billion coffee pods would require 28 million kilograms of Aluminium. Given that most local recycling facilities are not yet able to process aluminium coffee pods, I’m willing to bet that a huge percentage of these caffeinated containers have found their way into landfill.

It’s not only bulging landfills that raise sustainability concerns around aluminium coffee pod industry. While marketing from Aluminium producers focuses on the metals’ ‘infinite recycling potential’, it fails to mention that mining, refining and smelting the metal is one of the most energy and water intensive industrial processes that humankind undertakes. Also, if we don’t recycle the Aluminium, which in Nespresso’s case, we don’t, the recyclability of the metal is inconsequential.

The fact of the matter is that a decade ago, our morning cup of coffee required no aluminium and produced next to no personal waste. Today our collective morning cuppa requires 28 million kilograms of Aluminium per year and results in us throwing something in the rubbish bin everyday. Even if the coffee is produced ethically and the farmer is receiving a fair wage, can this behaviour really be called sustainable?

Jon Dee, the head of environmental group DoSomething and founder of National Recycling Week weighed into the debate claiming that “George Clooney has almost single-handedly launched an entire new waste stream globally as a result of fronting the Nespresso adverts, it shows the Clooney effect has undoubtedly been enormous in this. But George Clooney – for a guy who is so switched on to civil rights and other issues – to lead the charge in causing such environmental damage and waste and other issues is really disappointing.’’ I’m not sure I’d go as far as holding Mr Clooney responsible for creating the waste, but the company that employ him certainly have some questions to answer.

They’ll never be recyclable

Even John Sylvan, the inventor of the Keurig K-Cup (another brand of coffee pod) has expressed regret about the product, conceding that his brainchild is expensive, addictive “like a cigarette” and will “never be recyclable”. Speaking to The Atlantic he said “I feel bad sometimes that I ever did it”.

Like most matters concerning sustainability, the power lies with the consumer. What we buy will dictate what they produce and how they produce it. At the moment we seem spellbound with convenience (or is it laziness?). Western consumers like to think they are supportive of the environment… so long as it doesn’t impact on an increasingly long list of creature comforts. Large brands are wise to this and have adapted their marketing messages accordingly.

That’s why companies like Nespresso are able to wrap a green ribbon around business that has fundamentally changed the amount of waste we produce and call it sustainable.

El Niño is coming: How it will impact your organisation

The Australian Bureau of Meteorology has called it; we’re set for an El Niño year.

El Nino could wreak havoc

When I was younger I used to love the words El Niño. Although I knew nothing about this weather event, what I did know was that when we had El Niño conditions, we had great waves to surf.

Living in Australia, as time passed, I began to see El Niño through a different lens. The weather pattern tended to be reported in the news for causing droughts and bush fires, particularly on the country’s east coast.

I never understood El Niño; I didn’t even know what the name meant. It seemed to be used as a scapegoat in Australia for when things went wrong. “Geez, it’s hot today”… “Yeah its that El Niño mate” people would joke.

The fact of the matter is that El Niño has a distinct impact on global climatic conditions and these, in turn, have an impact on our ability to produce certain raw materials. Below I have tried to explain some of these impacts*.

So what exactly is El Niño?

Let’s start with the name. Peruvian fisherman named the weather pattern that we now know as El Niño. These fishermen noticed that in certain years, normally when water temperatures were higher, the anchovies they fished for were far less prevalent.

The fish shortage was normally noticed around Christmas time, hence the name El Niño (which directly translates from Spanish to ‘the boy’ but colloquially refers to Jesus Christ and explains the Christmas link).

Incidentally, the anchovies the fishermen were seeking weren’t in fact gone, they’d merely moved into deeper, colder, more nutrient rich water.

How does it form?

While definitive proof is yet to be established, an El Niño cycle is thought to begin in the tropical waters of the Pacific Ocean. Cyclical weather changes cause prevailing westerly trade winds to dwindle and this allows warm water to amass around the equator.

This warm water then begins to move eastward towards the Americas, and in its wake, leaves a trail of climatic changes that ripple out around the globe. Broadly speaking, El Niño climate cycles tend to result in drier, hotter conditions across the Asia Pacific region and cooler, wetter and stormier conditions in the Americas.

What’s all this got to do with the price of a coffee?

Changing weather conditions are, generally speaking, not a good thing for primary producers. As I mentioned earlier, the name El Niño comes from South American fishermen who saw their yields drop as a result of the changing water temperatures.

Pastoralists too, whether in Australia or the Americas, suffer from El Niño conditions, but for different reasons. While Aussie farmers may suffer through a drought, their counterparts in Brazil and Argentina will likely face issues due to too much rainfall, which can destroy grazing lands and reduce productivity.

Weather susceptible crops like coffee and cocoa also feel the effect of El Niño conditions. Similar to pastoralists, coffee growers in Colombia (where rainfall will increase) are likely to face different issues to those in Vietnam (where rainfall is expected to decrease). The similarity these producers share is that neither face ideal growing conditions for coffee production and harvests will decrease. With lower harvests comes higher prices and this means your morning cup of Jo may get a little more expensive should the predicted El Niño pattern eventuate.

It’s not all bad

It’s easy to get gloomy about these predictions, but it’s important to remember that El Niño conditions are not always bad for farmers. California’s drought and water restrictions have been well documented over recent years; I’m sure there are Californian farmers who would be more than keen to see a year of above average rainfall. Past El Niño years have proven fruitful for dairy and wine producers in the US, as well as wheat farmers in Australia. Whilst some will lose out, others will likely gain.

It’s not only food that’s impacted

Mines too are impacted by adverse weather. Increases in rainfall brought on from past El Niño cycles have wreaked havoc with mining operations in Southern America, causing landslides and halting work. Similarly, parts of Asia that rely on hydroelectric power will likely take a hit as rainfall levels decrease across the region.

What are your thoughts on El Niño? Will it impact your organisation’s operations?

* It must be noted that this description is a broad simplification of an incredibly complex meteorologic occurrence.

Sourcemap Is Mapping The Supply Chains Of The World

Where does stuff really come from? Sourcemap has the answers...

Sourcemap is mapping the world's supply chains

Remember the first time someone tried to explain the supply chain to you? You were likely at university or perhaps it was in your first job. The whiteboard markers came out and a rudimentary picture that included farmers, factories, trucks and shops all joined up with lines and arrows were drawn.

Well, such supply chain drawings have come a long way. I was reminded of this yesterday when talking to a colleague about Sourcemap, a website I stumbled across years ago, but appears to have developed a great deal since I last checked in.

In short Sourcemap is a supply chain visualisation tool that, according to the company, allows you to map your end-to-end supply chain automatically from your purchasing data. Linking raw materials all the way through to end customers.

Not only does Sourcemap allow firms to produce a visualisation of their supply chain, it also enables supply chain analysis (such as the carbon foot print) at each supply chain node. Below is a video that summaries what Sourcemap aims to achieve.

Supply Chain Mapping for Everyone from Sourcemap on Vimeo.

In its free edition the company details the supply chain journey of some of our most frequently bought products like BIC pens, Starbucks coffee and Colgate toothpaste. It maps both the upstream and downstream activities in the supply chain as well as the complexities present along the way. The tool allows you to zoom in and out on a world map to either gain a broader or more granular perspective on a particular supply chain.

From a quick look at the site, Sourcemap appears to be a brilliant tool for summarising a supply chain while concurrently providing insights into risk profiles and supply chain performance. It would make a great icebreaker when trying to get buy-in with senior management around what exactly is happening within your supply chain.

Images are one of our most basic and effective communication methods. Children learn to draw before they write. As the saying goes, ‘a picture is worth a thousand words’ and I for one, would much rather use a fully automated, interactive picture than read a thousand words about the make up and intricacies of a supply chain, I’m sure your boss will feel the same way.