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We need you! We hope you’ve been enjoying all the great content on Procurious and the benefit of connecting with other people like you.If you’ve got a minute, we need your help to attract even more procurement professionals to become members.
By growing our community we elevate the profession: in-turn we all benefit from richer discussions, more knowledge sharing and better career prospects for Procurement.
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To be in with a chance of winning, all you need to do is invite 10 people to join Procurious before 11.59pm (GMT) on 29 April 2015.
We’ll be announcing the lucky winners live in London (and via Procurious) at our Big Ideas Summit the following day. The list of winners will also be available on this Group page and via Twitter.
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The annual survey, involving more than 3000 procurement and supply chain professionals, looks at salaries and rewards across the profession. In 2015, it found that the average pay award in procurement was 2.5 per cent, considerably higher than the national average of 1.7 per cent.
Top Salaries, No Equality
In real terms, what this means is an average salary for procurement and supply chain professionals of £41,661. When looking at the individual job roles, the average salaries are now:
Procurement Director – just over £89,000
Head of Procurement – £64,000
Category Manager – £42,000
Senior Buyer – £35,000
Buyer – £27,000
Although salaries are on the increase, there is still a lack of equality between men and women in the profession. At all levels apart from tactical roles, salaries for men were higher than those for women, with the greatest inequality at the advanced professional level, where the difference was as much as £10,300.
The salary also found that professionals who held MCIPS accreditation earned on average 23 per cent more than their peers without the qualification.
Junior Roles on the Rise
What might be surprising to many people is that the biggest annual increase was seen in junior procurement roles. Assistant Buyers gained on average a 4.2 per cent increase in their salaries, while Procurement Directors reported only a 3.3 per cent increase.
The rise in the wages of junior roles highlights an important issue for procurement, even in light of it being one of the fastest increasing professions in the world. A lack of professionals starting in the junior roles means that organisations now have to work harder to attract and retain their employees.
The War for Talent
The ‘War for Talent’, as coined by McKinsey in the 1990s, is still firmly in place in the procurement profession. The number of procurement jobs available has increased significantly, with Hays Recruitment seeing a 40 per cent increase this year alone.
This increase has left many employers struggling to find the right, skilled employees to fill these roles. Of the number of avenues open to organisations when looking to attract new talent to their organisations, social media is one of the most powerful.
Platforms like Twitter, LinkedIn and Procurious can help employers check out potential employees, get to know them in more detail and also be noticed as an ‘employer of choice’ in the industry. But social media is by no means the silver bullet for procurement recruitment. Without new ideas, the work that procurement has done to get to the executive table may be undermined.
‘People’ is one of the key topics at the Procurious Big Ideas Summit on April 30th. Procurious has gathered 40+ of the biggest influencers in procurement and will be getting their ideas on the future for ‘people’ in procurement (among a host of other topics). Join in, ask questions, watch exclusive video content and contribute to all the discussions by here.
In the meantime, here are some of the top stories making the headlines in procurement this week.
Exploitative fashion retailers named and shamed
Australian fashion companies lack transparency around their supply chain or do not have full knowledge of where their raw materials are being sourced from, leaving workers including children at risk of exploitation, an audit has found.
The Australian Fashion Report 2015, launched by international development organisations Baptist World Aid and Not For Sale, which aims to empower consumers with the knowledge needed to purchase fashion ethically – this year assessed the ethical practices of 219 clothing brands — and found that popular retailers including Rockmans and Lowes are some of the worst offenders.
Many brands now produce in Bangladesh, which in recent years has become wildly popular for ready-made garment suppliers and where the wage is approximately $39 a month, 75 per cent cheaper than China.
Corporate governance researcher with the University of Technology in Sydney and a researcher with the thinktank Catalyst Australia, Martijn Boersma, said: “For Australia, the bulk of our imports come from the Asia-Pacific region where it is estimated 78 million children are involved in child labour. The deeper supply chains are, the more difficult it is for them to be monitored.”
Hilton hotels to improve animal welfare in supply chain
Hilton Worldwide is to implement new measures to improve the welfare of animals in its global food supply chain. The hospitality company said it would begin to eliminate the use of cages for egg-laying chickens and gestation crates for breeding pigs.
All hotels in the Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton and DoubleTree by Hilton brands, will ensure that chickens are not confined in cages by 31 December 2017. By the end of the year after that, all pork products will have to be come from suppliers that house breeding pigs in groups, rather than gestation crates.
The changes, announced in conjunction with the Humane Society of the United States, will initially apply in 19 countries and will be adopted in other markets as supply becomes available. Jennifer Silberman, vice president, corporate responsibility for Hilton Worldwide, said the company was committed to addressing key issues throughout its business and supply chain.
Internet of Things will deliver US$1.9 trillion boost
DHL and Cisco have jointly released a new Trend Report focused on the Internet of Things (IoT) at the DHL Global Technology Conference in Dubai. DHL and Cisco Consulting Services are also collaborating on a joint IoT innovation project that will improve decision-making in warehouse operations with near real-time data analytics based on Wi-Fi connected devices.
Ken Allen, CEO DHL Express and board sponsor technology, said: “At Deutsche Post DHL Group we have a deeply held belief in the positive powers of global trade. There is huge potential for countries to further increase their connectedness and prosper through trade, integration and technology. We believe the Internet of Things will be a primary enabler of this transformation.”
The Trend Report, which estimates that there will be 50 billion devices connected to the Internet by 2020 compared to 15 billion, looks at the potential impact this technological revolution will have on business.
The value at stake, combination of increased revenues and lower costs that is created or will migrate among companies and industries when new connections are made, reveals the huge potential when the Internet and networks expand their connections to warehousing, freight transportation and other elements of the supply chain.
Science Warehouse is a leading provider of on-demand procurement and managed catalogue solutions that deliver purchasing efficiencies and control, spend visibility and drive savings. The Software-as-a-Service (SaaS) solution boasts dozens of clients across the UK public sector including higher education and the NHS, as well as corporate clients in the construction sector.
During the past 2 years it’s been developing a presence in Australia, working in partnership with the leading Australian spend analytics provider, Purchasing Index ANZ. The Charles Perkins Centre (CPC) at the University of Sydney has been live with the Science Warehouse solution since 2014 and has already seen CPC users buying from over 2 million live products.
In response to very positive feedback from other potential Australian customers, a new subsidiary (SWL Australia) has been formed with offices in Melbourne.
Richard Shine, Science Warehouse Sales Director said – “This is a fantastic opportunity for Science Warehouse to really showcase a market-leading solution.”
Cabinet Office procurement plans almost “perverse” and “draconian”
Reaction has been swift to a reported move by the Cabinet Office to include two subtle but radical provisions in the government’s Small Business, Enterprise and Employment Act which could shake-up local government procurement.
The Act, which became law last month, is said to contain two clauses which appear to give the Cabinet Office authority to investigate and challenge local authority procurements. The majority of the Act does not affect procurement, but two clauses appear to have relevance.
Responding to the bill’s provisions, the ICT leader at one London local authority said, “At a time when we’re looking to devolve spending decisions and empower local communities the Cabinet Office have introduced provisions which could, somewhat perversely, do exactly the opposite. Not sure why these powers were introduced.”
The National Outsourcing Association (NOA) has described the proposals as “almost draconian.” Kerry Hallard, chief executive of the NOA said, “Now that the government has the ability to implement measures relating to public procurement as it sees fit, it is imperative that this new power is not used callously.
Henderson Global is a leading independent global asset management firm. The company provides clients access to skilled investment professionals representing a broad range of asset classes.
In 2011, Henderson Global’s third party spend was valued at over £100m. However, there was no formal procurement function, with individual business areas conducting informal sourcing activities. The decision was made to create a centralised procurement function, with the aim of delivering value, increasing control and reducing risk.
The department was formed in early 2012 and handed some stiff objectives to prove its worth. It took just three months for the team to deliver significant value and savings and, in 2014, it won the CIPS ‘Most Improved Purchasing Organisation – Start-up’ award.
Nykolas Bromley, Head of Procurement at Henderson, talks to Procurious about his and the team’s journey to this award and plans for the future.
How did you get started in procurement?
After university, I applied to be a trainee buyer on the Tesco Graduate Programme. I assumed that I would end up working in one of the grocery categories, but was offered a place in their procurement function instead. I’ve worked mainly in indirect procurement ever since.
Tell us about getting the department up and running and what your successes have been?
Rather than spend months analysing and strategizing, we initially targeted quick wins in order to demonstrate that procurement can generate an immediate return on investment. By delivering benefits so soon after the function was established, we gained credibility and opened the door to involvement in much larger and more complex projects. In the three years that have followed, we have built out our systems, policies and processes, and focused heavily on developing capability within the team.
What prompted you to submit a nomination for the award?
We were genuinely proud of what we had achieved and felt we had a good story to tell.
What will the award do for you and your team?
Winning a Supply Management Award has raised the profile of the department both within the organisation and the wider procurement industry. The award is proudly displayed in the office, and should the need arise, I expect it will be easier to recruit new talent into an award-winning team.
What has been the most challenging aspect of being in a start-up/greenfield department?
Henderson celebrated its 80th anniversary in 2014, and for most of that time had existed without any form of central procurement. This created something of a communication challenge, whereby stakeholders were often unfamiliar with typical procurement terminology and processes. The steep learning curve worked both ways, as having moved from the retail industry, the language and acronyms of investment management were entirely new to me too.
Do you have any advice for someone in a similar situation?
There will always be a degree of resistance from some quarters in an organisation with no tradition of formal procurement. However, there are also likely to be areas of the business that are crying out for assistance. My advice is to concentrate on the stakeholders that want your help first. Even though they may not be the most strategic or highest value projects, it’s a great opportunity to build up allies, advocates and success stories.
What are your key aims for 2015?
This year we will complete the implementation of a new Purchase-to-Pay tool, which will transform the way that we manage our purchasing and payables processes within Henderson. This is a substantial change-management initiative, and a successful roll out of the tool is a key priority for the function.
What do you see in procurement’s future and how can social media play a role?
We are a small team with low staff turnover, so we try to utilise our external network to keep in touch with developments and best practices in the wider procurement industry. Tools that provide access to potentially thousands of procurement experts and facilitate knowledge sharing are invaluable in our situation, and in advancing the profession.
Procurious is gathering 40 of the brightest, most-influential figures across procurement, technology, and social media for the Big Ideas Summit on 30 April.
We quizzed Tim Hughes, social media extraordinaire and Go to Market in the UK for Oracle’s Cloud Accounting and Procurement solutions on the future of the sharing economy, procurement, and technology. You can follow Tim @Timothy_Hughes on Twitter.
Procurious asks: In your Twitter bio you call yourself a pioneer of Social Selling – could you distil it for the uninitiated?
Tim answers: It’s not a self proclaimed title, I’ve been called it many times. My background is 27 years in sales, so what I do (always) is try and push the Social Selling debate forward. How can I find new ways of using social and technology to forward an organisations sales strategy. At the end of the day, it is all about using Social Selling to enable a sales person over achieve their quota quicker.
Last year I was mentioned in Forbes as one of the Top 100 Global Social Sellers, this year an Influence Marketing company, Onalytica, came up with a list which positioned me as the number 2 most Influential Social Seller Worldwide. The only person from the UK on that list.
My Twitter @Timothy_Hughes has over 100,000 followers and my Blog https://timothyhughesuk.wordpress.com/ I’m told is a “must read” for people involved in Social Selling as it generates so many new ideas and debate. My most recent blog “Using Twitter to Make C-Level Meetings” went viral. Something I am very grateful for.
Procurious: Mastering social selling – if you were to promote best practice, what would be your top 5 tips?
Tim: On my blog I provide written materials and webcasts where I talk about the 5 Pillars of Social Selling to offer organisations a strategy. In terms of day to day things you can do, here are 5 suggestions.
People need to have a “Buyer Centric Profile” on LinkedIn.
People need to Identify their customers and Influencers.
Build Relationships and Engage. Don’t Spam!
Procurious: Innovation in the social space – your thoughts on the likes of Periscope and Meerkat. Will they stick around, what do they offer social storytellers etc.
Tim: I’ve not used them myself, but I’m sure they can. You always need to go to where your audience is more comfortable. With C-Level people now being on Twitter and LinkedIn, they is no reason, why a brand or a sales person does not stream video. For example, a user conference, demonstration or webinar. Video is becoming more and more a medium that people are comfortable with. I’m currently working with a sales person to use video for demand generation as inmails on LinkedIn and emails don’t get the right traction.
The Oxford and Cambridge Boat Race last weekend used Snapchat, so why not look at new ways to reach your audience or even reach a new audience?
Procurious: What else is disrupting the online, social space right now? (And how could this tie into procurement)
Tim: SMACT (Social, Mobile, Analytics (Big Data), Cloud, Internet of Things) are the main disrupters I see right now. People except to come to work and access systems the way they do at home, via mobile and for them to have the same “look and feel” as Facebook. This is causing major disruption to people that have IT systems that don’t support this. To that end, we are seeing that IT departments just cannot keep up because of the speed of innovation, that is where they are pro-actively using public cloud to support the business.
People are moving away from text to visual content. Photo and video. Instagram is the big platform for people and brands right now. At a recent procurement event I attended somebody said they couldn’t see how Instagram was relevant and I said, why send out an RFP, why you could post a photo on Instagram and say “who can supply me one of these?”.
Procurious: Gamification – is it important/how can it be used to effectively breed user loyalty?
Tim: Gamification should not be a “shoot from the hip” solution. Different people react to Gamification in different ways. While many of us are naturally competitive, often people will just “take our bat and ball and go home”. It has been used for years by Tesco (Club Card) and Sainsbury (Nectar) to enable them to understand customer behaviour. I’ve used it in the sales environment for cold calling days, I’ve also used it for Demand Generation via social media (See my blog for details).
Procurious: Why should we be encouraging procurement professionals to face their fears and get on social networks?
Tim: 20 years ago us sales people were able to talk to who we liked in an organisation. Then people introduced all kinds of technology, like voice mail to stop us getting to company executives.
I have a friend who last week made 12 appointments with C-Level people through Twitter. A number of us think it’s the “golden age” again. If executives (in any department) do use social media, how will they understand it? There was a theory it would just go away. It won’t. The argument around social media use in business and the ROI of social media was won two years ago. We use social media internally, it gives us Competitive Advantage and has increased employee efficiency by 25 per cent. Why wouldn’t you?
Procurious: Can you recommend some actions to help social-networking newbies spread and grow their online influence?
Tim: The first thing when you get online is to breath. You don’t have to be somebody you are not, just be yourself. If you are using social media just to get a hang of it, then just do, post photos of what interests you; sailing, cars, book reading. If you want to grow your influence then be interesting, add value and engage. Find influencers and engage with them.
And finally, look forward to 2030. How will the social landscape have changed, what’s your Big idea for social?
Tim: Change will accelerate, as mobiles get faster, can hold more data and the battery live is longer. Wearables will move from watches and bracelets to be woven into the fabric of your clothing. Through the Internet of Things (IOT) everything will be connected to the internet and will collect data. The amount of data we store will get bigger and bigger. The decision making from this data will revolutionize society and the way we think and act. This is already being used by Netflix and dating sites.
The Sharing Economy will move from the edges to be the “norm” with 25 per cent of the NASDAQ having disappeared already, more company will go as new entrants will take their place. Uber has no taxis, AirBnB has no rooms. The first question VCs ask start ups now is “What Industry will you Kill?”.
But this will all be surpassed by Artificial Intelligence (AI), while sensors are being seen as the fourth wave of the Industrial Revolution, AI is the 5th.
Want to hear what Tim has to say at the Big Ideas Summit? Follow along by joining this Group.
It’s an age-old story of supply and demand… so on the eve of Record Store Day we’re bringing our record player out of storage, dusting off our favourite albums and learning why vinyl is here to stay…
In 2014 something extraordinary happened… UK album sales on vinyl climaxed at a 20-year high, following seven years of sustained growth (after even more years in the doldrums). Recently released figures from the Official Charts Company reveal that sales of vinyl LPs are continuing the trend in 2015– up a whole 69 per cent during the first quarter (compared to the same period in 2014).
Happily this has led to the creation of the Official Vinyl Albums Chart Top 40 and Official Vinyl Singles Chart Top 40 (combining sales of 7” and 12” singles) – musicians and retailers alike have welcomed the announcement with open arms, like UK vinyl retailer Phil Barton of Sister Ray Records, Soho, London:
“The resurgence in vinyl sales has been a great boost for the independent trade. The launch of the Official Vinyl Charts tells the world that a format that is loved and revered is more relevant now than ever – far from being a curiosity, vinyl is the go-to format for many music fans.”
So all signs are pointing to a resurgence of the once-beloved format, but do we have the infrastructure to keep up with the newfound surge in demand?
Back in Black (red, gold, green, and even white too…)
Vinyl LP sales stood at 1.4 million in 1995 (1.60 per cent of the UK album market) – in the years that followed sales dipped dramatically, finally reaching rock-bottom in 2007 with sales of just 205k (and a dismal market share of 0.10 per cent). With such a dismal performance it looked as though the beleaguered format had nowhere left to go – it was as good as dead…
But that hasn’t stopped those passionate and protective of the format from striving to restore the vinyl LP’s rightful place in our record collections – enter Record Store Day…
From its humble origins in the US, Record Store Day (or RSD for short) has since become a significant event in the musical calendar.
Megan Page , Communications and Marketing Assistant for the Entertainment Retailers Association, provides us with a potted history of Record Store Day and its origins.
“RSD is a celebration of the culture of independent record shops that aims to appeal not to just vinyl enthusiasts but also introduces a new generation to the joys of vinyl. Stores stock a range of exclusive product and host a range of events to celebrate.
“Record Store Day was conceived 9 years ago in the USA and was brought to the UK a year later. It’s now in its 8th year in the UK and co-ordinated by the Entertainment Retailers Association and Spencer Hickman. In 2014, over 220 independent record shops across the country signed up as labels produced over 270 exclusive album releases and 340 singles on vinyl. Now a global event, Record Store Day is celebrated in territories all over the world, including France, Germany, Netherlands and Spain.”
“…Watch the reverence they have as they handle their Beatles vinyl. How carefully they replace the albums into their sleeves, making sure they’re placed back onto the shelf in the proper sequence…”
Due to the complex logistics involved in such an initiative, orders are placed at the record factories as far back as December to ensure the production runs are completed in time. But park that thought for a bit, first we need to discuss vinyl’s phoenix-like rise from the flames…
I Am The Resurrection
During 2014 record sales hit a 20-year high – bolstered by the likes of Pink Floyd and Arctic Monkeys. But if we had to play Devil’s Advocate, is this all just a flash in the pan, a passing fad perhaps?
“It certainly helps having a big year of releases that would include Pink Floyd but from a personal point of view even the smallest of artists/fanbases can add their own mark on sales which keeps this trend continuing.”
Megan adds: “The growth of vinyl has been incredible and its sales figures reflect year on year growth. In 2014, vinyl album sales passed the 1million mark for the first time since the Britpop era. This is more than four times than the level as recently as 2008.”
We quizzed Martin on the factors that have contributed to vinyl’s return – what caused it to come back into fashion?
“Customers/consumers have always wanted something tangible and collectable. Vinyl is nice to look at, the artwork was really made for this format and you get a feeling of experiencing the record more.”
Earlier this year we also saw Neil Young weighing in on vinyl’s rise in popularity –Martin reckons that Neil Young had his own agenda to peddle here, commenting: “Very recently he’s launched a multi-million pound digital system (the PONO) that various people have already poked holes in, so that anything that deflects back onto vinyl helps his cause.”
We asked Megan whether there’s been a visible knock-on effect from such initiatives as RSD with record stores sales and vinyl releases?
“RSD itself has become such a popular initiative – sales of LPs alone last year generated more than £2m in retail for record stores. Because of its success, we are now seeing that not only heritage acts are releasing material on the format, but a new generation of artists such as Jake Bugg and the Arctic Monkeys are releasing music on vinyl. This also allows teenagers to discover the sound of vinyl of first time.”
Megan adds: “The great thing about the inclusion of bands like 1D and 5sos etc. is that for the first time it is recruiting a younger, female generation of music lovers to independent record shops who are discovering music on the vinyl format for the first time! Hopefully we’ll see more and more mainstream bands releasing material on vinyl too.”
Raging Against The Machine
Certainly on the strength of this you’d be forgiven for thinking that the future of the vinyl is as shiny as its glossy black exterior. However, it’s a different story behind the scenes, as aging factories are struggling to keep pace.
The Wall Street Journal reported that pressing plants (in the US) are being run flat-out to keep up with demand. And although there has been some investment in increasing capacity across Europe, more investment needs to be pumped into production facilities.
“The creaky machines that make them haven’t been manufactured for decades, and just one company supplies an estimated 90 per cent of the raw vinyl that the industry needs” – WSJ.
Chris Ruff, Marketing at Atlantic Records, thinks that there is a similar story in the UK: “Vinyl pressing time now is well over 8 weeks something that used to be almost half that. This is due to millions (literally) of repressing’s of classic albums.
“Depending on artist we usually do a pressing of 2k and then repress if any is needed. For reissues it is usually 5k… As a standard now for bands and indie acts we press all albums on vinyl.”
It’s not delays that have the potential to derail this creaky supply chain… The WSJ reports that record labels are sometimes waiting months for orders that used to be filled in mere weeks. In an effort to boost production, the machines are being run harder (and longer) than ever before, which is increasing the risk of break-downs – leaving record factories to foot hefty repair bills. The labour-intensive nature of the pressing process itself – the creation of the master record – all of these considerations pile on to the complicated, archaic procedure.
Chris sees the biggest obstacle will be trying to keep pressing in the UK (noting that Atlantic may look to Europe to press if they are quicker).
Such is the demand that factory owners are embarking on globetrotting voyages of discovery in order to procure scrapped presses. Paying anywhere in the region of £10-25k for the privilege – and that’s before adding the costs to transform them back into their previously (working) glory.
Placing increased pressure on plants when it comes to readying special (weird) releases. Limited runs of splatter, coloured, glow-in-the-dark, even scented vinyl means that invariably pressings take longer.
As a retailer Martin offers an alternative viewpoint when it comes to vinyl’s challenges:
“Pricing very much depends on how many of each album/single is pressed. This affects myself as retailer (the cost to me) and the customer (the cost to them). Moving forward we could certainly use more pressing plants in the world to ease delays!”
“I believe that the power of the record store to inspire is still alive and well, and that their importance to our next generation of musicians is crucial.” Dave Grohl – Foo Fighters frontman and ambassador of Record Store Day 2015
How an efficient supply chain can transform innovation on both the individual and industry levels.
Thanks to David Berry for granting Procurious permission to republish this article. David is a partner at the venture capital firm Flagship Ventures.
As a graduate student at MIT, I had the opportunity to work with Professors Robert Langer and Ram Sasisekharan in an environment rife with innovative thinking. We asked what could be possible, and were driven to pursue revolutionary technologies that were widely considered impossible. This experience instilled in me a simple but powerful credo: think big.
Innovation is difficult. If one is willing to traverse the boundary of the unknown, one should pursue the course that promises the greatest potential impact.
In exploring a wide range of subjects – energy, agriculture, medicine, and more – one approach has, in my experience, emerged as the most effective: begin with the end in mind. By identifying the problems and envisioning the preferred solution, one can define the set of constraints into which technological innovation fits, and establish a clear, albeit often difficult, path to its realization.
A fundamental requirement of this approach is an open mind, unconstrained by the subject’s idiosyncratic dogma. Those who are immersed in a field have an established view of what is possible, based on some combination of previous successes, citation bias, current limits of knowledge, and truth – and it is often difficult to distinguish these sources. But the newcomer asking the most basic questions begins to notice logical inconsistencies, from which the real constraints on solutions and technological limits arise.
Breakthroughs lie at the intersection of technological possibility and market pull. An understanding of these forces enables innovators to optimize the direction of invention. With well-defined constraints, a clear path for developing innovative technologies – one that accounts for both the known and the unknown – can be planned. This unconventional approach has consistently produced groundbreaking technologies that, if successfully implemented, revolutionize a field.
What might be more interesting, however, is the response that such progress often elicits: “This seems so obvious. Why hasn’t someone done it before?” Early in my career, this reaction troubled me; it made me wonder whether I had, in fact, overlooked something obvious. But, as my experience with entrepreneurial innovation has grown, I have realized that the response is rooted in the fact that most people are trapped in a specific doctrine, which obscures the innovative solutions that lie beyond its borders.
Companies exhibit similar behavior when it comes to acquiring innovative technologies, adhering to ineffective, restrictive processes, despite an ostensibly obvious alternative: the efficient systems that manufacturers use to secure inputs for production. In order to establish a clear, low-risk path to producing their goods at a predictable (and profitable) cost, companies employ teams dedicated to securing the relevant supply chains, controlling inventory, managing the production process, and so on – from the point of origin to the point of consumption.
In many cases, this involves maintaining relationships with a dedicated network of suppliers, with which producers share detailed product specifications. Doing so ensures that producers get exactly what they need, and that suppliers are able to deliver the correct inputs. The result is a well-defined, highly productive, and mutually beneficial working relationship.
By contrast, the innovation supply chain (the process by which companies obtain and/or develop future products and improve on their current products) tends to be characterized by inefficiency, ambiguity, and competition. And, in many cases, no supply chain is in place.
Most pharmaceutical companies, for example, lack effective innovation supply chains. But only about 15% of the drugs that the US Food and Drug Administration has approved recently were developed by the same company that markets and sells them, meaning that many major pharmaceutical companies depend on the innovation ecosystem to advance their products.
Drug companies often lament that the firms from which they are sourcing innovations do not perform clinical trials to their specifications, forcing them to repeat the work. Nevertheless, they are reticent about providing such specifications in advance – even when innovators request them – perhaps to protect their market position or internal efforts. Moreover, the same companies compete directly in the supply of innovative technologies. The result is a broken supply chain.
Just as individual innovators must challenge conventional wisdom, companies must replace the established approach to the innovation supply chain with one that more closely resembles how they create and maintain a manufacturing supply chain.
If market incumbents are willing to share “innovation specifications” (which should not be confused with innovation methods), they can develop an effective network of innovation suppliers, thereby increasing the reliability of the product-development engine. And, as with effective manufacturing supply chains, the supplier and the purchaser must build a reciprocal relationship, in which they do not compete with each other, practically or economically, in the specific activities that they are performing.
An efficient supply chain can transform innovation on both the individual and industry levels. Indeed, a common approach – defining key market needs, coupling them with solution constraints, and pushing the boundaries of current thinking – applies to all kinds of innovation. With an innovation ecosystem organized along these lines, “obvious” advances could occur significantly faster. How obvious is that?
Procurious has gathered 40+ of the biggest influencers in procurement and will be discussing innovation (among a host of other topics) at the Big Ideas Summit 2015 on 30 April. Join in, ask questions, watch exclusive video content, and contribute to all the discussions by RSVP’ing here.
Are you prepared to manage (and ultimately overcome) these challenges head-on?
Today we’re talking risk…
As a profession we’re getting better at managing common supply chain disruptions – supplier performance management and demand forecasting used to be the cause of week-long headaches… But the advent of new technology and implementation of streamlined processes are taking some of that strain. However we are not (yet) very effective at managing the less frequent, higher impact events that effect our operations.
On Thursday 30 April, Procurious will host a world-first cost leadership think-tank at The Soho Hotel in London that will be amplified online to our 4500 members across 100 countries through a mixture of videos, interviews, social media and feature-writing. Follow along on Procurious by RSVP’ing here, then get ready to Tweet your questions and join-in with the discussion!
Below we’ve listed 5 key risks that procurement and supply chain staff face in 2015 and beyond.
2014 was the year that cyber attacks got real. The recent attacks on Sony Pictures exemplified that hacking has moved from a nuisance to a full-scale criminal operation. Cyber attacks not only cause significant business interruptions they also have an extremely detrimental effect on brand reputation. According to the Edelman Privacy Risk Index 71 per cent of customers say they would leave an organisation after a data breach.
We’re not only seeing a increase in the frequency and severity of cyber attacks, but companies appear to be grossly underestimating the risks attached to these attacks. The Allianz Risk Barometer suggests that 29 per cent of organisations are ill prepared to deal with cyber threats – a figure that is significantly higher than any other risk category.
2014 saw the largest outbreak of Ebola in written history. Over 10,000 deaths were recorded over the course of a few short months. In addition to the horrific human cost of this epidemic, it provided us with a sobering glimpse into what a global health pandemic might actually mean for our supply chains. While Ebola was contained largely to a small number of West African nations, cases began to show up in Spain, United Kingdom and the USA. Fortunately Ebola, while an incredibly deadly disease, is not highly contagious and the outbreaks were all suitably contained.
Had the outbreaks taken hold and spread further around the world, it would have likely had crippling effects on economic activity and trade flows. Nations may have been forced (as Sierra Leone was) to enforce lock-down periods where highly populated areas like shops, markets, and places of worship were shut down and people ordered to stay at home for significant periods of time.
As well as the human and economic impact of diseases, procurement and supply chain managers should also consider the impact these events have on the security of commodity supplies. The troubles in West Africa last year impacted the supply of raw materials such as cacao, rubber and aluminium ore.
Extreme weather slows procurement progress. The economic impact of last years extreme weather events are summarised brilliantly in this chart produced by the Bank of America for the World Economic Forum in Davos. For some sense of perspective, the combined financial impact of 2014’s 10 most extreme weather events totalled more than $27 billion USD (that’s just slightly more than the GDP of Ecuador).
With extreme weather events apparently occurring more frequently and causing more harm to our operations, what exactly are procurement teams doing to plan for these sort of events?
Brand reputation and value
Consumers are taking a far greater interest in where their products are coming from. As a result, organisations and indeed procurement and supply chain professionals are increasingly vulnerable to public scrutiny of their corporate practices.
A recent Chartered Global Management Accountant survey highlighted that 76 per cent of global finance chiefs now say that their company is prepared to lose short-term profit in order to protect its long-term reputation. The same number suggested there should be more emphasis placed on reputational risk this year. This is in stark contrast to responses collected in previous years.
Despite these suggested commitments there appears to be gap between the promise and the practice of brand protection. 60 per cent of those surveyed admitted they had no formal processes or models in place to calculate the financial impact of not managing reputational risk.
Political instability and war continue to pose threats for organisations with international operations. Events in the Ukraine, Russia, the Middle East (and a normally peaceful Hong Kong) have gone some way to destabilise the confidence of business operations in those regions.
Being the naturally curious sort we’re on the lookout for the hot topics, and big questions that influence the decisions supply chain managers will be making over the coming year. We want to know how the corruption allegations in Brazil will play out, what the drop in oil prices mean for the conflict in the Ukraine, and whether election results in Israel will bring stability to the region?
In its recently-published Reliance Index, FM Global listed Venezuela as bottom, while Norway came out on top. Read more on this story here.
Whether it’s war, hacking, weather, terrorism or brand destruction, risk will continue to play a pivotal role in the success of supply chains and indeed organisations as a whole. The question is are you prepared to manage (and ultimately overcome) these challenges head-on?
The International Monetary Fund (IMF) has released its latest report and with it come grave warnings for China, Brazil and others. However, the UK comes bottom of the pile when it comes to measuring productivity.
According to the new World Economic Outlook:
[The] analysis suggests that potential output growth in advanced economies is likely to increase slightly from current rates… In contrast, in emerging market economies, potential output growth is expected to decline further, owing to ageing populations, weaker investment, and lower total factor productivity growth as these economies catch up to the technological frontier.
Yes, although demographics are catching up with some of the larger developing economies, China’s working-age population is set to shrink rapidly – to cite but one example.
As much as technology gives – it too takes away. In fact the report claims that it’s one of overriding factors contributing to falling productivity levels around the world.
When advanced economies once saw a boost in productivity through the use of technology, the effects of such a boost have been in decline for a long time since (even before the economic crisis). Now however, emerging markets are becoming more turned on to technology – which, the IMF noted may curb the potential for new growth.
The Economist notes: Productivity growth will also weaken in future, both because the developing world has less room to catch up with rich economies and because productivity slowdowns in America tend to spill over to other countries. Economic disappointment is an increasingly global affair.
The latest [March] findings from BDO’s Business Trends Report compounds matters further, revealing that productivity in the UK is 21 per cent lower than the average amongst the G7 countries, including Germany, the US and France. Stating that Britain’s workers were less productive in the final quarter of 2014, with output per worker falling 0.2 per cent.
On the UK’s continuing poor labour productivity performance, BDO partner Peter Hemington said:
“While it is encouraging to see strong business confidence, the UK’s continuing poor labour productivity performance is a very significant concern.”
“Although employment growth in recent years has been strong, much of this has been in part-time jobs,” he said. “Productivity ultimately determines our prosperity so it is a crucial area that must be addressed. Policymakers of all persuasions must take on this productivity puzzle.”
The Daily Telegraph’s assistant editor Jeremy Warner makes the controversial point that: “the fall in productivity might have something to do with an apparently inexhaustible supply of cheap workers, both from mass immigration and greater employment participation, particularly among the elderly. Employers have chosen cheap and easy-to-get-rid-of man hours over the capital cost of investment. In this sense there is a downside to Britain’s flexible labour market.”
He further compares the predicament to that of the United Kingdom’s closest European neighbours – France. “One of the reasons for relatively high rates of French productivity is that the labour market is so hedged around by protections that there is a positive incentive for French companies to employ as few people as possible. The costs of making workers redundant act as a powerful deterrent to taking them on in the first place. This is not an affliction that British businesses are likely to suffer from.”
This is a guest post by Sigi Osagie – Sigi is a leading expert on effectiveness in Procurement & Supply Chain Management. He helps organisations and individuals achieve enhanced performance growth to accomplish their business and career goals.
A recent post by Stephen Ashcroft reminded me of a point I raised at a leadership round-table discussion a while ago. I smiled to myself as I remembered the looks on the faces of my co-panellists when I started talking about the ubiquitous phrase, “Our people are our greatest asset”.
It’s one of the most common statements found in company annual reports and regurgitated by many senior executives. Yet, as soon as those same companies hit financial difficulties their people are the first thing they jettison, typically through redundancies, plant closures, etc.
Strange. And interesting.
Why would you get rid of your “greatest asset” so readily in difficult times?
It’s a bit like me being in a canoe on a river, paddling along merrily with my super-duper 4K-UHD TV and my wife, who I claim is my greatest asset*. And then I discover that the canoe has a hole and is taking on water – we risk getting submerged and drowned with the weight the canoe is carrying. I need to reduce the weight quickly for any chance of survival!
What do I get rid of: my 4K-UHD TV or my wife? Hmm… she does weigh more than the TV… but she’s my “greatest asset”…
Financial difficulties are often complex challenges for most organisations. And I’m sure quite a few resort to headcount reductions only as a last resort. But, perhaps, it’d be better for more companies to be more honest and say that their people are their “most dispensable assets”.
Actions do speak louder than words. So if people are really companies’ greatest assets, companies must demonstrate this not in words but in actions: let your corporate mandates and leadership actions show what you truly think of your people.
CPOs may not be the executives who make such “greatest asset” claims in company annual reports. But they face the same challenges of balancing ethical leadership sensibilities with the realities of organisational life. Procurement leaders at all levels must ponder key underlying questions, like;
Are my people really my greatest asset in my Procurement function?
How vital are my people to my personal success and the success of the enterprise, relative to other things like strategy, processes and systems?
How do I show that I value my people and their contribution to our collective success in my everyday leadership style?
These may be difficult probes for some Procurement leaders to contend with. Others may feel confident and justified in their personal modus operandi. Whatever the case, it’s a truism that most of us will spend the majority of our lifetime at work. So finding our mojo, or bringing out our best selves, in the work we do is a big part of our fulfilment and success.
Leaders have a unique role to play in helping people reveal their abilities to excel and succeed. This holds true for whole enterprises as for functional areas like Procurement. Yet, sadly, but in truth, majority of organisations don’t do enough to expose and leverage the capabilities of their people.
When we manage Procurement functions, or any other organisations, in ways that don’t release people’s enthusiasm, energy, excitement, emotion, effort and expertise – what Charles Handy called the ‘E’ factors – we fail the individuals and we fail the organisation. An effective leadership approach that nurtures individuals’ talents and provides opportunities to grow is one of the critical conduits to sustain the psychological contract between employee and employer. It’s a vital mechanism to foster staff motivation and engagement, which, ultimately, fuel performance success.
Procurement organisations that are able to unlock the performance capabilities of their people are always places of great effervescence. They fizz with the collective passion of the purchasing people, the same people who do the work and deliver performance outcomes that enhance Procurement’s enduring success.
People are indeed the greatest asset of any Procurement organisation. And their harnessed talent is the lifeblood of the function. But ask yourself this: Does our approach to managing our Procurement function bring out the best in our people?
*In truth, my wife is not and never will be “my asset”; she’s my co-pilot in life.
We’ve identified Sigi as one of procurement’s key influencers – he will be appearing at our inaugural Big Ideas Summit 2015 on 30 April in London. We hope you can join (digitally!) – catch all of the day’s action here on Procurious and get access to exclusive interviews, video content and discussions. RSVP now and get ready to submit your questions.
The case of the 550 fishermen freed from slavery conditions in Indonesia (as reported on Procurious), highlights a wider issue of slavery in supply chains across the globe.
We might think that slavery is a thing of the past, or limited to the developing world, but increasingly that’s not the case. A few weeks back, Procurious highlighted the issue of apparent ‘sweatshop’ conditions here in the UK in the fashion industry, where workers with poor English skills are being paid less than half of the minimum wage to produce garments for high street stores.
Not many people realise that the clothes they wear, the mobile phone they use and the food they eat can often come from supply chains where there are conditions of slavery or forced labour. And as demand for products grows, along with the expectation of paying lower prices on the high street, these incidence of these conditions is increasing.
The issue of modern day slavery is being given focus at the highest level of government in the UK. The Modern Day Slavery Bill is currently being debated in the UK parliament and is aimed at forcing large companies to disclose the actions they have taken to ensure that their supply chains are free from slavery, trafficking and child and forced labour.
However, there are criticisms that the bill doesn’t cover everything it needs to. According to an article in The Guardian newspaper at the end of March, the current wording of the bill only requires the large companies to report on supply chains which have parts in the UK, or where products are brought back to the UK for sale.
This omission potentially renders the bill powerless to stop UK-based companies profiting from slavery in overseas supply chains, particularly where there are wholly owned subsidiaries in other countries. There are also criticisms over a lack of consistency in reporting, as firms will not be told what to include, as well as how this law would be enforced.
While it will be interesting to watch the debate on the new bill in the UK, particularly as the General Election approaches, there is also an argument for individual and organisational responsibility.
According to CIPS, businesses can take three basic actions to combat slavery in their supply chains:
Understanding and commitment – know what modern day slavery is and commit to taking a proactive role to end it.
Leadership on auditing – engage in rigorous audits of supply chains.
Accountability – be accountable for business relationships and work to eliminate vulnerabilities in supply chains.
As Procurement professionals, we have the ability to influence what is happening in this particular area through our interactions with supply chains and second and third tier suppliers.
Putting into place POLICIES to prevent, detect and eradicate modern slavery within their own operations
Establishing PROCESSES to identify vulnerabilities
PLANNING for situations where corrective action is needed
Supply Chain Risk
So why are we focusing on this? At the Big Ideas Summit on April 30, some of the leading procurement influencers will be discussing Risk and what the ‘blind spots’ are for the profession. In looking ahead towards 2030 and beyond, it’s worth considering that that modern day slavery could still be something that is present in supply chains and something that organisations will have to deal with.
Is this a risk that can be mitigated? Can it be passed on to someone else? From our point of view as procurement professionals, the answer to both of these questions has to be ‘no’. The only way to look at and tackle a risk like slavery is to meet it head on. And this can come down to taking responsibility at a personal and organisational level.
Next time you’re in the shops, think about where that t-shirt was made or where that coffee came from. When you’re dealing with suppliers, do you know what their suppliers are doing? What are the policies you have in place and are you collaborating with suppliers closely enough?
This won’t be solved overnight, but if each individual takes responsibility, then it can be beaten in time.
Have you got any thoughts on supply chain risk and modern day slavery? Why not pose a question to our experts at the Big Ideas Summit on this and see what they think? Get involved at www.bigideassummit.com, join the Procurious Group, or add to the conversation on social media using the hashtag #BigIdeas2015.
In the meantime, here are some of the top stories making the headlines in procurement this week.
Fashion brands make positive strides towards detoxing supply chains
In an update of its Detox Catwalk campaign, which charts the progress by 18 companies, Greenpeace East Asia has listed their achievements and commitments over the past four years.
The companies represent 10 per cent of the $1.7 trillion dollar apparel and footwear industry, the environmental campaign group said. Brands including Adidas, Benetton and Limited Brands, the parent company of Victoria’s Secret, were praised for ensuring data on hazardous chemicals in their supply chains is published on the global online platform IPE.
C&A and H&M are among brands that have eliminated PFCs, while Levi Strauss, Mango, and Marks and Spencer are among fashion companies working towards the elimination of APEOs and phthalates in their supply chain.
However, Nike and Li-Ning were criticised for not doing enough to ‘detox’.
JD.com, China’s largest online direct sales company, is set to be the new challenger to ecommerce giant Alibaba. It has announced UNIQLO as the newest international brand to partner with the company by opening a flagship store on its marketplace platform, enhancing its reputation further within the industry.
The new UNIQLO flagship store is part of JD.com’s industry-leading marketplace, which is increasingly becoming the platform of choice for both domestic and internationally renowned brands and manufacturers seeking to reach the company’s massive base of active Chinese shoppers. The addition of UNIQLO adds to JD.com’s growing reputation as the go-to destination for shoppers looking for authentic, high-quality goods in a broad and growing range of categories.
UNIQLO will also become the first international clothing brand on JD.com’s marketplace platform to warehouse its merchandise in the company’s facilities. By using JD.com’s complete logistics solution, UNIQLO is enabling customers in eligible areas to take advantage of JD.com’s unparalleled same- and next-day delivery service.
JD.com is the largest online direct sales company in China. The company operates 7 fulfilment centres and a total of 123 warehouses in 40 cities, and in total 3,210 delivery stations and pickup stations in 1,862 counties and districts across China, staffed by its own employees. The Company provided same-day delivery in 134 counties and districts under its 211 program and next-day delivery in another 866 counties and districts across China as of December 31, 2014.
Bulgaria among Top 10 in EU by Transparency in Public Procurement
Bulgaria is among the top 10 in the EU by transparency in public procurement and among the top 5 by electronization of the process, according to Economy Minister Bozhidar Lukarski.
Citing statistics of the Sofia-based office of the European Commission, Lukarski noted that Bulgaria was among the top 10 in the EU by transparency in public procurement and among the top 5 by electronization of the process.
Lukarski vowed that e-public procurement would be universally available in the EU by 2020.
He expressed satisfaction that the European Commission had backed the attempts of Bulgaria to boost the development of the country’s northwestern region, the poorest region in the EU.
Basware, a provider of P2P, e-invoicing and network connectivity solutions (and now trade financing as well), said the deal with public sector e-procurement vendor Procserve “significantly strengthens Basware’s position in the public sector, combining Procserve’s UK government experience with Basware’s established global expertise in purchase-to-pay and e-invoicing.”
Spend Matters offered their thoughts on the acquisition, saying: ‘It is smart for Basware to use its appreciating currency and balance sheet to acquire volume, but also to purchase technology that could potentially be used elsewhere in its solution portfolio (outside of just targeted efforts in the UK public sector).
‘On a comparative basis, Basware has continued to struggle to date on the e-procurement side of P2P, and while Procserve has focused on the UK public sector, there might be elements of the solution that architecturally and on the product-level could improve Basware’s overall capabilities to more effectively compete against providers like Coupa, Ariba, SAP and Oracle on a global footing for integrated P2P deals.’