All posts by Procurious HQ

Airlines to seek legal advice on supplier competition

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

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

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

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

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

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

Accenture and Fast Retailing are transforming the future of customer service

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

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

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

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

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

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

 

 

US Pacific-Rim Trade Deal Hanging in the Balance

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

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

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

In a Nutshell

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

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

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

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

Sounds Great, What Happened?

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

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

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

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

All is Not Lost

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

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

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

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

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

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

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

Read more at Aljazeera America

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

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

Read more on The Guardian

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

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

Read more at The Times of India

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

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

Read more at Digital Look

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

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

Read more at Pulse

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

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

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

See more Big Ideas from our 40 influencers

Lenovo expands commitment to supply chain visibility

Lenovo has run its supply chain on GT Nexus since 2010.

GT Nexus has renewed its cloud supply chain commitment to support business growth on the GT Nexus platform.

Supply chain visibility combined with analytics, rooted in deep trading partner connectivity on GT Nexus, enables Lenovo to operate a customer-centric supply chain and drive data and analytics in the chain, while continually identifying opportunities to improve performance and reduce cost. 

A $39 billion global Fortune 500 company, Lenovo is the world’s No. 1 PC manufacturer and a leader in providing innovative consumer, commercial, and enterprise technology. 

In comments supplied to Procurious Gareth Davies, director of Global Provider Management – Lenovo, said “GT Nexus gives us greater visibility and insights into the supply chain, enabling us to reduce transportation lead time variability, decrease in-transit inventory, and improve our customer centric perfect order fulfillment goals.” He continued: “Operating smarter and more efficiently through cloud based connectivity helps us better serve our customers.”

Lenovo tracks products as they move from manufacturing locations to retailers and end-consumers, using GT Nexus. Visibility spans transportation modes, geographies and business lines, enabling Lenovo to more accurately manage supply chain performance and segmentation. Orders often consisting of dozens of units are organised and tracked to provide the end customer direct visibility into expected arrival time.

“Supply chain visibility and intelligence are essential attributes at Lenovo, but the real competitive weapon is the ability to rapidly execute on this intelligence,” said Sean Feeney, CEO of GT Nexus. “Operating as a network allows Lenovo to be agile, responsive and adaptive to changes on both the supply and demand side. This is essential in the high tech industry where challenges such as product obsolescence, complex outsourced supply chains and demanding customers are prevalent.”  

Procurious Big Idea #19 – Purity of the Supply Chain

Listen to Danielle Stewart, Chartered Accountant (an interloper by her own admission), tell how her Big Idea was borne out of a shopping trip to London’s Westfield Shopping Centre with her daughters…

More needs to be done to combat this so-called fast fashion culture, measures need to be put in place to ensure the workers that manufactured the goods are well looked after.

See more Big Ideas from our 40 influencers

Collaborative robots will soon support human workers

The ground-breaking humanoid robot will increase safety, efficiency and productivity in the workplace.

Development of one of the world’s most advanced collaborative robots begins today as part of an EU-wide initiative involving Ocado Technology and four of Europe’s leading technology research institutions.

Under the SecondHands project, Ocado Technology is coordinating a consortium of universities to create an autonomous humanoid robot. It will use artificial intelligence, machine learning and advanced vision systems to understand what human workers want and offer assistance with difficult maintenance jobs. For example, it will hand tools to human maintenance technicians and manipulate objects like ladders, pneumatic cylinders and bolts, abilities which cannot be found in any commercial robot. The objective is to increase safety, efficiency and productivity in the workplace.

“The ultimate aim is for humans to end up relying on collaborative robots because they have become an active participant in their daily tasks,” explained Dr Graham Deacon, Robotics Research Team Leader at Ocado Technology. “In essence the SecondHands robot will know what to do, when to do it and how to do it in a manner that a human can depend on.”

The initiative, which will span five years, and is expected to use seventy two person years (equivalent to 855 person months) of research effort to complete, aims to break new ground in robotics. Key areas of focus, include: 

  • Proactive assistance: the robot developed under the SecondHands project will have cognitive and perceptive ability to understand when the operator is in need of help, understand how this help can be given and provide relevant assistance
  • Artificial intelligence: The team will enable the robot to progressively acquire skills and knowledge needed to provide assistance. In fact, it will even anticipate the needs of the maintenance technician and execute the appropriate tasks without prompting
  • 3D perception: Advanced 3D vision systems will allow the robot to estimate the 3D articulated pose of humans and offer support when it is needed without being asked
  • Humanoid form and flexibility: A humanoid shape and human-like flexibility will enable natural collaboration between humans and the robot. It will feature an active sensor head, two redundant torque controlled arms, two anthropomorphic hands, bendable and extendable torso and a wheeled mobile platform

The SecondHands project, so-called because the robot will literally provide a second pair of hands to human workers, is part of the European Union’s Horizon 2020 Research and Innovation programme, which includes one of the worlds largest civilian robotics programs.

As coordinator of the project, Ocado Technology will work alongside University College London, Karlsruhe Institute of Technology, La Sapienza University of Rome and Ecole Polytechnique Federale de Lausanne. The technology firm, which powers Ocado.com, will build a special testing facility in Hatfield where the robot will be subjected to rigorous real-world trials.

UK’s competitive position in advanced robotics research strengthened

The development of one of the world’s first autonomous robots comes amidst research by Boston Consulting Group that identifies the UK as a leading adopter of industrial robots over the next decade. The BCG research complements findings by the International Federation of Robotics, estimating that the global market for industrial robots was worth $9.5bn in 2013.

Ocado Technology taking a lead in robotics research in the UK

The development of this bleeding edge robot puts Ocado Technology at the forefront of companies working on advanced robotics in the UK. The company currently employs ten robotics experts, from leading robotics research institutions, such as The University of Edinburgh and Imperial College London.

‘Soft hand’ grasping skills

In addition to the SecondHands project, Ocado Technology is also working on a second, complementary, Horizon 2020 project: ΣΩMA (pronounced “SOMA”) will see the firm partner with a number of universities to explore new ways for robots to physically interact with their environment. It is hoped this will create a ground-breaking robotic hand which can be used in conjunction with SecondHands.

Emulating a human hand, the robotic gripper will know when to grasp softly – such as when picking an apple – or to grip more tightly, such as when lifting a bottle of water.

Chris Sawchuk: How Procurement Is Elevating Its Role

‘We have to be more flexible, we have to be more agile, to react to these sorts of things…’

Watch our third Big Ideas Summit keynote (part 1 of 3)

Watch Chris’ keynote in FULL here

Looking to the future, Chris Sawchuk, Principle and Global Procurement Advisory Practice Leader at The Hackett Group, spoke about organisational agility and the need for organisations to adapt and move quickly in a constantly-changing business environment.

From a procurement standpoint, Chris argued that it means learning from the likes of Uber and being more customer centric and delivering value beyond cost savings, while being more active in promoting itself as a function.

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