All posts by Procurious HQ

Understanding the Alternatives to Temporary Labour

The hiring and management of temporary labour can be an expensive business. However, there are alternative ways to bolster your workforce, explains Jon Milton, Business Development Director at Comensura.

Temporary Labour

Temporary labour comes in many forms, sometimes to cover permanent workers absent from work, or to fulfil short-term demand. In each case, the hiring manager’s default position will be to hire this resource from an agency. However, just because the need is temporary and use of an agency has always been a sensible approach in the past, doesn’t mean that it’s the way it always needs to be done.

In certain situations there can be more cost effective and flexible alternatives to temporary labour, to supplement the use of agency workers. Here we highlight various options for consideration.

Reassigning a permanent worker

There may be one or more existing permanent employees who can be reassigned, seconded or trained to provide short-term cover. If it’s an important role, some businesses have permanent workers trained to step up when the need arises and their role is then back-filled with a temporary worker.

Your business may also have a number of employees currently facing redeployment or redundancy that may be also seeking new opportunities. Alternatively, the demand from across your business may be stable and large enough to justify and sustain an increase in the number of permanent workers.

Fixed term contracts

The demand for temporary workers may be stable and consistent for a set period of time in the year. In this scenario, recruiting employees to the business on fixed-term contracts may be a viable alternative to temporary labour.

Direct workers

Your organisation may be able to create a database of people who are ready-to-work on a temporary basis when called upon. This approach can be referred to as the ‘staff bank’, ‘internal resourcing pool’ or ‘benched resource.’ It typically uses an internal agency approach and contracts workers to temporary or flexible roles.

This can work well in areas of your business where your need for temporary labour is low but with spikes in demand throughout the year. From a worker perspective it can be a beneficial way to retain the skills and experience of older, possibly retired workers, who want to continue working on a temporary, part-time or flexible basis.

Limited Company Contractors

Another alternative is to contract with workers who set themselves up as a limited company. This works best for highly skilled or project-led assignments where a defined scope of needs can be set and the worker measured and paid against milestones and deliverables, rather than salaried costs. It is important to note that in some sectors, such as IT, the best qualified and skilled workers may only work on a limited company basis.

Welfare to work

Your business may be able to work with Jobcentre Plus and welfare-to-work agencies to offer employment opportunities to long-term unemployed people. These agencies focus on getting candidates job-ready, typically by assessing the specific skills you require and then providing potential candidates with the relevant training and support. This approach can be a useful way to fill entry-level positions.

Apprenticeships

If your business has an apprenticeship programme you may be able to assign the apprentice to a relevant task.

Use of agencies remains a sure fire way of meeting significant temporary staffing demand but it doesn’t have to be your only strategy. These alternative approaches can help remove or reduce demand for pure temporary labour too. The key is to plan for your workforce requirements with an open-mind and evaluate the merits of how and when you use the non-permanent workforce.

How Do You Survive a Zombie Apocalypse? Ask Amazon

Amazon has been keeping us on our toes throughout the last fortnight. There have been rumours about their intention to open hundreds of bookstores, not to mention the white bald eagles that are being trained to keep control of the company’s drone deliveries.

Amazon in the News

However, I’m not sure any of us could have predicted that the next Amazon news story to hit headlines would entail self-preservation in the event of a zombie apocalypse.

The retail giant also plans to build a global shipping business to rival those of UPS and Fedex.

Amazon Terms of Service

Amazon made an intriguing alteration to its terms of service this week following the release of its new Lumberyard Materials development tools.

Lumberyard is a game engine and development environment designed for professional developers. It supports the development of high-quality, cross-platform games, which can be run on Amazon’s AWS servers.

Clause 57.10 of the organisation’s Terms of Service, which refers to Lumberyard, states that the Materials tools should not be used with systems such as nuclear facilities, manned spacecraft, or military use in connection with live combat.

Fortunately, there is one, potentially useful, exception. The clause states that “this restriction will not apply in the event of the occurrence of a widespread viral infection, transmitted via bites or contact with bodily fluids, that causes human corpses to reanimate and seek to consume living human flesh, blood, brain or nerve tissue, and is likely to result in the fall of organised civilisation.”

So, if you think that you can utilise a game engine to your advantage in the event of a zombie apocalypse, you’re in luck. But, as The Guardian rightly points out, we’ve learnt from Shaun of the Dead that a cricket bat to the head works best of all.

Global Shipping Business

Bloomberg News revealed this week that Amazon plans to expand its ‘Fulfilment By Amazon’ service to directly rival FedEx and UPS, a claim that the company has repeatedly denied in the past.

The service, which could potentially launch a global shipping and logistics operation later this year has been named “Dragon Boat”.

Bloomberg claims that there are documents detailing Dragon Boat as a “revolutionary system that will automate the entire international supply chain, and eliminate much of the legacy waste associated with document handling and freight booking.”

‘Fulfilment By Amazon’ currently oversees storage, packing and shipping for third-party merchants on the site. Dragon Boat, however will enable these sellers to use Amazon to deliver products from warehouse to customer.

There are also plans to remove further intermediaries from the shipping process, theoretically simplifying things and further reducing prices in Amazon’s supply chain.

This move will put Amazon in the position to rival Chinese e-commerce powerhouse Alibaba, as well as Fedex and UPS.

Colin Sebastian from Baird Capital commented, “Amazon may be the only company with the fulfilment/distribution sophistication and scale to compete effectively with incumbent service providers [UPS, FedEx].” His thoughts reinforce what most of us already believe, if anyone can do it, Amazon can.

We’ve been keeping up to date with the other top procurement news stories from the past week. Check out what’s been going on.

Deloitte Global CPO Survey 2016

  • Almost two-thirds of CPOs do not believe their teams have the skills and capabilities to deliver their procurement strategy according to Deloitte’s 2016 CPO survey.
  • The survey profiles the views of senior procurement leaders from around the world on key issues facing the procurement function.
  • The survey, involving 324 responses from 33 countries, also found 45 per cent of CPOs reported a rise in procurement related risk, such as volatility in emerging markets and geopolitical uncertainty affecting supply chains.
  • CPOs are primarily focusing on consolidating spend, increasing supplier collaboration and restructuring existing supplier relationships to deliver value over the coming year, the survey found.

Read more at Supply Management and check out the full CPO Survey 2016 here

Lord Carter Review Promotes Procurement Transformation

  • A report on Productivity in the NHS, published by the UK Department of Health, has highlighted the need for procurement transformation across NHS Trusts.
  • Lord Carter, the report’s author, that although some trusts are doing well, others “still don’t know what they buy, how much they buy and what they pay for goods and services”.
  • The report recommends the implementation of a new Purchasing Price Index (PPI) for all NHS Trusts in England from April 2016
  • It also recommends that Trusts collaborate more to “aggregate sourcing work and reduce variety”

Read more at Future Purchasing

Pentagon Reduces Aviation Procurement Budget

  • The Pentagon has reduced aviation procurement by 7.2 per cent to $45.3 billion in its fiscal year 2017 budget submission.
  • This lower funding level buys eight fewer fixed-wing aircraft, and 35 fewer rotorcraft for the US Army and Navy.
  • The budget has been designed to offset perceived threats by Russia, China, Iran, North Korea and global terrorist organisations that are running amok in Iraq, Syria and now Libya.
  • Deputy Secretary of Defence, Robert Work, says in crafting the budget, the Pentagon focused on shape, not size, and modernisation versus readiness for today’s conflicts.

Read more at Flight Global

The ICC Academy Announces Speakers

  • The International Chamber of Commerce (ICC) Academy has announced its keynote speaker lineup for the 4th annual Supply Chain Finance Summit in Singapore on 9-10 March.
  • The Summit will gather over 50 speakers and 150 participants from across Asia, and will focus on topics such as supply chain financing in Asia, and the global growth of supply chain finance.
  • This year’s speaker lineup features leading players and industry experts from some of the largest organisations in the region, including ANZ and Standard Chartered Bank.
  • The ICC have said that the speakers have been selected to reflect “the progress of the industry, and provide unique insights into the trends, opportunities, and challenges affecting supply chain finance”.

Read more at ICC

Make 2016 Your Year for Personal Development

Are you someone who always needs to be learning something new? Or do you need to find the right personal development topic before your motivation kicks in?

Personal-Development

Whichever group you fall into, you should always be on the look out for new opportunities for personal development. Whether it’s a course on bike maintenance, learning how to do that bit of DIY that’s been sitting since last Christmas or expanding your knowledge in your professional field.

The good news is that Procurious has the answer for you (well for expanding your professional knowledge at least…), with over 80 free eLearning modules on a variety of topics in the procurement and supply chain space.

Getting Started

And where better to start than at the beginning? If you are just starting out in procurement, or are one of the many procurement and supply chain students at universities around the world, Procurious’ ‘Introduction to Procurement’ series is the one for you.

The series starts with “What is Procurement?“, running through the important foundations of procurement knowledge in stakeholder management, negotiation, specifications and much more.

And if you think you know it all already, why not take the chance to refresh your skills? Or, as many Procurious members have done in the past, share it with suppliers or stakeholders to clue them in about the function’s role.

Or, even better, share it with friends and family who, even after hundreds of explanations, still aren’t sure what it is you do for a living!

Whatever you choose to do, make sure you are looking for opportunities for personal development and learning.

Stay tuned in the coming weeks as we highlight more of our great learning content!

Like this? Join Procurious for FREE and meet like-minded procurement professionals from across the world.

3 Key Steps to Effectively Improve Manufacturing Operations

As the name suggests, reducing manufacturing complexity is no simple task. Success in this area requires careful planning, analysis and implementation.

Manufacturing Operations

Simplifying manufacturing operations should always be done in a way that doesn’t adversely impact product performance or customer preferences. Top performing organisations typically take the following three key steps to identify opportunities to reduce complexity:

  1. Analyse drivers of complexity and key market trends

Higher customer expectations for customisation and service have increased manufacturing complexity. These expectations demand greater flexibility in operations, but can also improve overall revenue opportunities.

However, increasing complexity has also been highlighted as the cause of  significant cost increases. These cost increases can be attributed to lower performance levels, or increased inventories of materials or finished goods.

In order to reduce complexity, it is important for organisations to understand the key market trends that are driving demand. Once trends are understood, they can then be analysed in order to develop new manufacturing strategies.

  1. Examine best practices of top performing organisations

Understanding what top performing organisations are doing is a key way to establish industry best practice. However, best practice should typically act as a guideline rather than a hard rule. Any strategy for complexity reduction should be tailored to fit an individual organisation. What works for one organisation may not necessarily work for another.

It is often difficult to replicate the best practices of top performing organisations, as best practice will be linked to a number of factors. However, by using this as a guideline, organisations will be able to identify where changes can be made.

Data on best practice is not always readily available. You can use the Hackett Group’s repository of key best practices is a good place to start gathering data. This will ultimately allow you to carry out your analysis and plan new strategies.

  1. Benchmarking against Key Performance Indicators

Many potential metrics and KPIs are available to measure the performance of an organisation’s manufacturing complexity. Using these KPIs will allow organisations to benchmark themselves against industry leaders.

Of all the available metrics, there are several that The Hackett Group recommends using to indicate the overall effectiveness of complexity reduction initiatives:

  1. Production Rate as a percentage of Maximum Capacity
  2. Total Inventory Turns (Raw, Work in Process (WIP), Finished Goods)
  3. Finished-Product First-pass Quality Yield
  4. Scrap and rework costs as a percentage of sales (see below)

Manufacturing Complexity Reduction_Slide 6

As with all metrics, it’s important to be measuring the right things. The SMART (Specific, Measurable, Achievable, Relevant, Timely) rule will also help you ensure that good data is output from them. You should be looking to limit the number of KPIs to around 6 or 7.

The Hackett Group’s Perspective

Reducing manufacturing complexity is a crucial element of a successful supply chain. Through reducing complexity, organisations will typically see a number of improvements. These include:

  • Reduced overall product cost
  • Stock Keeping Unit rationalisation
  • Improved product performance
  • Reduced product development cycle
  • More motivated and specialised workforce
  • Increased manufacturing flexibility
  • Better product planning and scheduling
  • Improved supplier relationships and performance

Reducing manufacturing complexity is a crucial performance indicator in itself for the supply chain. By driving changes across operations, organisations will start to see improvements in their supply chains, and will move towards being a top performing organisation.

If you want to learn more about trends, best practices and metrics you can use in manufacturing complexity reduction, download the Hackett Group Supply Chain Insight Report here.

Marcos Cominasa is a Director in The Hackett Group’s Strategy and Business Transformation Practice. He has over 18 years of management consulting experience, and specialises in improving supply chain operations for Fortune 500 companies.

How is Big Data Relevant to Procurement?

Or perhaps better still – what on earth is big data?

Big Data

Open up any industry magazine and you’ll inevitably find a story referencing Big Data or the ‘Internet of Things’. Consultants use the terms in their sales pitches and product offerings, but there’s frequently a lack of understanding of exactly what Big Data is, and how it is relevant in a procurement context.

In this series of articles, we are looking at a few questions which should serve to give us a better understanding of this topic, and why and how it is relevant in the procurement environment.

But let’s start at the beginning…

Can Anyone Properly Define Big Data?

After a little research, it seems the answer to our first question is a resounding “No”.

If you were to ask ten procurement professionals what big data is, the likelihood is that you’ll get ten different responses. Ask ten IT professionals, and chances are you’ll get another ten, completely different, responses.

There is a great article by Gil Press on Forbes titled ’12 Big Data Definitions: What’s Yours?’. The crux of this article is that Big Data is, by its very nature, a subjective term.

While writing a much quoted research paper, US-based global consultancy firm McKinsey offered the following definition:

“Datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyze,”

This definition came with the following caveat: “This definition is intentionally subjective and incorporates a moving definition of how big a dataset needs to be in order to be considered big data.”

The Oxford dictionary has defined the term as “data of a very large size, typically to the extent that its manipulation and management present significant logistical challenges.”

But the question here remains: what is a “very large size” and who determines if its “manipulation and management present significant logistical challenges”?

Agree to disagree

Regardless of how we define big data, there is a common understanding that over the last decade there has been an explosion of information (most of it digital). As we continue to do business and live our through digital interfaces, that volume of data is only going to grow.

Whether we call it ‘big data’, or simply ‘data’ as we have for the previous few hundred years, is a question for the marketers and tech journalists out there. The fact is that today we have access to more data about more people in more places than ever before.

The challenge is, how do we harness this mountain of data into information that we can use to make better business (or procurement decisions)?

This point was highlighted expertly by group of computer science researchers back in 2008 in this paper. While failing to define what big data actually is, the paper highlights that big data computing will “transform the activities of companies, scientific researchers, medical practitioners, and our nation’s defense and intelligence operations.” Evidently they were correct.

If that hasn’t brought us closer to understanding exactly what big data is, it’s certainly given a broad foundation on which to work. But how does this all relate to the procurement profession? That’s the question we’ll be answering in the next part of the series.

The Cost of Breaking Health and Safety Laws Just Went Up

It might seem like a fairly obvious objective for organisations, but ensuring the health and safety of employees pays off.

Health and Safety Worker

As of the 1st of February, Crown and Magistrates Courts in England and Wales are bound by tough new guidelines when sentencing offenders who have been convicted of breaking health and safety law.

For the first time, courts in England and Wales will be required to follow comprehensive sentencing guidelines. They will be required to take into consideration a new set of factors to determine the level of fines for offenders: the degree of harm caused, the culpability of the offender, and the turnover of the offending organisation.

The new legislation has been described as the biggest change in Health and Safety legislation since the introduction of the ‘Health and Safety at Work Act’ in 1974.

Increasing Fines

The changes will also result in increased fines for offenders, although not across all organisations and all prosecuted cases. Instead, fines will be proportionate to the size of the organisation and their financial means.

For large organisations with a turnover of £50 million or more, penalties for health and safety breaches could total in excess of £10 million, with companies found guilty of corporate manslaughter facing fines of upwards of £20 million.

Neal Stone, Policy and Standards Director at the British Safety Council, said: “We broadly welcome the new guidelines and in particular that in future that three factors will be key in determining fines for health and safety offences: the degree of harm caused, the culpability of the offender, and the turnover of the offending organisation.

“Having consulted our members we were able to say in response to the Sentencing Council’s proposals that there was overwhelming support for this change which would help ensure greater consistency in the sentencing practice of our courts and a level of fines that fit the crime.”

Long Overdue

Stone continued by stating that there was a consensus that the changes to the regulations were “long overdue”, particularly when in the past the fines that have been handed down have not matched the seriousness of the offence.

In the UK, the largest fine handed out for breaking existing health and safety legislation is £15 million, given to Transco in 2005, following an explosion in Larkhall, South Lanarkshire, which caused the deaths of four people. With these changes now in place, this fine may be exceeded in the near future.

Business have been urged to make changes to the way they deal with health and safety procedures, especially to those firms which have cut training budgets as a way of cutting costs. As a result of potentially larger fines, businesses can no longer rely on paying a small fine occasionally versus proper investment in H&S training.

Stone concluded, “The new guidelines, which will in some cases, result in far greater fines than courts are currently imposing, reflects a shift in not only public opinion but concerns among certain members of the judiciary, including Lord Thomas, the Lord Chief Justice. As he has made clear in recent appeal court decisions the purpose of fines is to reduce criminal offences, reform and rehabilitate the offender and protect the public. 

“If the changes in sentencing practice do not help achieve these objectives – particularly ensuring compliance and discouraging law breaking – then they count for nothing. What we will need to see is clear evidence that the new guidelines have played their part in improving health and safety. Extra money through increased fines going into Treasury coffers should not be the name of the game. The objective must be to reduce the deficit of fatal and major injuries and occupational ill health.”

Building Capabilities to Do Business in Diverse Cultures

How an Australian Procurement and Supply Chain Management specialist has built the qualities and capabilities to do business in diverse cultures.

Diverse Cultures

With incredible business opportunities offered to Australia by a growing regional supplier base, developing the capabilities required to drive personal and business conversation with traders from diverse cultures is key in enabling successful negotiations.

Ahead of the 2nd annual Women in Procurement 2016 conference, we have interviewed Nelli Kim, an Australian supplier management specialist based in Hong Kong (and keynote speaker at the event) with up close and personal experience operating in a very different and challenging culture.

Nelli has excelled in her career and in 2015 was nominated as the CIPS Young Procurement Professional of the Year. She will be sharing her experiences at the event on 21 – 23 March 2016 in Melbourne. Read her interview below:

WiP: How have you approached your career progression? And what qualities and capabilities have you built that supported you in doing business in a male dominated culture?

NK: “My approach to career progression has been to ensure that I propagate my own agility, allowing me to not only respond positively to opportunities as they present themselves but also to seek opportunity in my chosen directions.  The qualities and capabilities that I have built over the last twelve months in particular are resilience, flexibility and boldness.”

WiP: What are the biggest challenges you and your organisation are facing in procurement at the moment?

NK: “The biggest challenges I face in procurement at the moment are about ensuring that my responses to situations, requests, requirements and demands of my position are proportionate to the potential outcome.  It’s not just about prioritising but also about the amount of time I can realistically assign to each task while maximising returns for Telstra and our stakeholders.”

WiP: How can attendees benefit from your presentation at the Women in Procurement 2016 conference?

NK: “Attendees can benefit from my presentation at the Women in Procurement 2016 Conference by coming with an open mind about my interpretation of working in an environment that may be perceived as male dominated.  I hope to challenge attendees to connect with each other and grow support networks that will enable rather than block their future development.”

To read Nelli Kim’s bio and find out more about Women in Procurement 2016, please visit the website here.

Tackling Exploitative Conditions in Global Supply Chains

Hardly a week goes by in the world of procurement without news of slave labour, corruption and exploitative working conditions within supply chains and, sadly, this week is no different.

Exploitative Working Conditions

The Business & Human Rights Resource Centre has revealed that Syrian refugees, including children, are being exploited in the fashion industry in Turkey.  

The organisation has asserted that clothing brands are not doing enough to ensure supply chains are safeguarding Syrian refugees fleeing conflict into Turkey. It has urged companies to take further action, and ensure that desperate refugees are not escaping into exploitative working conditions.

No Targeted Approach

Last week, Turkey’s government decided to issue work permits to Syrian refugees in order to help minimise exploitative labour practices. However, many refugees will remain in Turkey illegally, and join the ‘informal’ workforce, where they will be at their most vulnerable.

Some of the clothing brands questioned in the survey are actively taking steps to prevent these exploitative conditions, for example, in cases of child labour. However, most do not have a targeted approach to the treatment of refugees.

The Centre has has urged brands to develop action plans, increase scrutiny, and work more closely with Turkish partners in order to protect vulnerable Syrians.

Palm Oil Supply Chains

The Guardian has also drawn our attention to the plight of palm oil workers in South-East Asia. According to research published by US-based NGO Verité, palm oil plantations are rife with exploitative practices due to their remoteness and size.

Workers on the plantations are often trafficked, undocumented individuals which makes them vulnerable to, amongst other things, being paid below minimum wage, having their passports removed, and physical abuse.

On the 17th of February at 10am, The Guardian are hosting a live chat on how to improve the livelihoods of these workers. As preparation, you can read what Procurious has written on the subject in the past.

Positive Signs

However, we are also looking to the positives, and fortunately there are a few! The UK is leading the way as one of the first nations to sign an agreement to combat exploitative conditions, such as forced labour, people trafficking and other forms of modern slavery.

The International Labour Conference’s agreement, which has also been signed by Niger and Norway, will require signatories to “take steps to prevent forced labour, provide victims with protection and access to effective remedies and to carry out due diligence to prevent and respond to the risk of forced labour.”

It’s hoped that the UK’s move will encourage other countries to get on board and sign the agreement. ILO director-general, Guy Ryder, believes that this “is a clear sign that global momentum is building in the fight against these abhorrent practices that demean and enslave millions around the world”.

Simplifying Sustainability

Alongside this, it is also fantastic to see the work that SEDEX are doing to drive change ahead of their  ‘Simplifying Supply Chain Sustainability’ conference next month.

Sedex is a not for profit organisation, which strives to improve working conditions and encourage global supply chains to share ethical data more effectively. Next month’s conference will feature speakers from the Kellogg Company and Mars, and aims to help organisations take a fresh approach to managing supply chains issues.

CEO of Sedex, Jonathan Ivelaw-Chapman, spoke with Pioneers Post this week about supply chain sustainability, cleaner supply chains and his five-year-goals. You can read the full interview here.

It’s great to see different organisations and governments contributing to ending exploitative working conditions worldwide. Hopefully these positive steps can inspire others to make changes in their supply chains.

Meanwhile, here are some of the other stories making waves in procurement and supply chain this week…

Shanghai Moving to Greener Future

  • The city of Shanghai has launched a programme calling for enterprises from all industries to work out their own plan on a green supply chain campaign
  • The programme invites multinational companies, state-owned enterprises, and private firms in Shanghai, to submit proposals for their green supply chain projects to the city’s environmental authorities before March 31st
  • Fang Fang, deputy chief of the Shanghai Environmental Protection Bureau, said “Promoting green supply chain management is an effort to use market forces to promote higher environmental standards among enterprises.”
  • Shanghai has set a goal of cutting down on the density of PM2.5 particles — a major contributor to air pollution — to 42 micrograms per cubic meter by 2020, down from 53 last year.

Read more at Shanghai Daily

New Solar Plant for Morocco

  • Morocco’s agency for solar power, Masen, has opened the tender for project developers for a 400MW solar plant in the centre of the country
  • The projected Noor Midelt site will cover around 6,000 acres 15 miles Northeast of the town of Midelt. Construction is expected to start in 2017.
  • The move comes just weeks after the completion of the first phase of the country’s ambitious project to generate half its electricity from renewable sources by 2020.
  • Simon Gray, World Bank country director for the Maghreb said “apart from creating jobs, the construction of the plant and the development of Morocco’s Solar Plan will establish a future source of reliable green energy,” Simon Gray, World Bank country director for the Maghreb.

Read more at Supply Management

Amazon Targets Bookstores and Drones

  • Amazon dipped its toe into the waters of brick-and-mortar stores with the opening of a bookstore in its home city of Seattle in November.
  • The expansion of bookstores, which the company has not confirmed, would be a surprise reversal from the online retailer credited with driving physical booksellers out of business.
  • US regulatory impediments have made it difficult for the e-retailer and others to roll out drone tests. In April, the Internet retail giant sent the Federal Aviation Administration (FAA) a letter that urged it to ease up on its drone testing regulations.
  • While the Dutch government may have agreed to allow drone testing, it has adopted an innovative approach to anyone that breaks the rules – white eagles!

Read more at Supply Chain 24/7 and Supply Chain Digital

Nigeria Introduces New Procurement Pricing Guidelines  

  • The Nigerian government hopes to save at least N12 billion annually from the services of the newly-established Efficiency Unit (E-Unit) of the Federal Ministry of Finance.
  • The head of the unit, Patience Oniha, explained that the government would introduce price guidelines and shared services policy among MDAs to increase transparency in the procurement process.
  • The E-Unit will aim to generate savings for the Government from procurement, elimination of wastage, excess capacity and minimising duplications
  • The head of the E-Unit said such savings would be channelled to priority projects, to improve infrastructure, encourage domestic production and attract fresh investors.

Read more at Premium Times

Will Online Video Trump TV Advertising at Super Bowl 50?

Global brands are beginning to question how worthwhile Super Bowl adverts are, thanks to the rising consumption of online videos.

Online Video Advertising

On Sunday, Levi’s Stadium in Santa Clara, California, will play host to arguably the biggest event in American sport. Super Bowl 50, featuring the Carolina Panthers facing off against the Denver Broncos, is expected to draw an audience of over 114 million people.

Traditionally, and as we reported this time last year, TV advertising slots during the game are a much-coveted entity. And there is plenty of opportunity with the game lasting over 3 hours, with regular breaks in play and an extended half-time interval.

However, just as technology is disrupting industries around the world, it appears that online video is changing the advertising game.

Jaw-Dropping Prices

With the main event just a few hours away, a few brands have already paid for their advertising slots. This combined spend comes in at a staggering (and record) $377 million. Each 30-second slot is costing advertisers a jaw-dropping $5 million – just over an 11 per cent increase on 2015.

And many marketers will see this as money well spent. With the size of the global TV audience, and the Super Bowl being broadcast to all corners of the earth, it represents a unique opportunity to get their brand into the public consciousness. It is also frequently referred to as the last “safe bet” in TV advertising.

The adverts themselves can make or break a marketing effort for a brand or product. Come Monday morning, anyone not talking about the final score of the match will be discussing the adverts. Do it right, like this selection from 2015, and it can have a phenomenal impact on sales.

Changing the Game

However, in the aftermath of last year’s Super Bowl, research was released showing that over half of people who viewed a Super Bowl ad, viewed it exclusively online. The findings also showed that the adverts were shared online more than ever, with the best advert getting shared 9 million times.

This disruption of how we consume advertising could potentially spell the end for the huge advertising revenues that surround the Super Bowl. Brands have now realised that there is great potential in the online market, which at the same time, saves them considerable sums of money.

By moving away from the traditional TV advertising, marketers can put their money into creating more reactive, up-to-date campaigns, directly related to the game itself.

“Dunk in the Dark”

The first brand to hit the right note when it came to the online advertising around the Super Bowl was Oreo. Back in 2013, Super Bowl 48 was halted after the lights failed in the stadium. Within minutes, Oreo had created an advert that caught people’s attention:

Super Bowl 48

Simple, catchy and very shareable, Oreo’s advert was probably the most memorable that year. And it was only ever created for use on social media. Seeing the success of Oreo, other brands appear now to be trying to follow suit.

Christoph Pleitgen, Senior Vice President, Sales and Business Development, EMEA and APAC, of Wochit said: “Consumers, on average, watch more than five hours of video per day, making video the single most popular media activity. In addition to this, video advertising is starting to seriously threaten this status quo and is considered to be just as, if not more, effective as TV advertising, at a fraction of the cost.

“Ever since Oreo monumentally stole the online show with their simple ‘Dunk in the Dark’ Super Bowl stunt, other brands have been scrambling to follow. Many will forgo the huge costs associated with a paid-for super bowl ad-slot and instead put their budgets and efforts into ensuring they are ready to grab public attention with responsive video content, based around the game.”

 Game On

Super Bowl 50

Is this a sign of the times? Or will marketing and advertising cope with the disruption and come out stronger? It remains to be seen whether or not this will create a trend. There is always a possibility that savvy advertisers will work out how to best leverage both channels within their budget.

After all, it’s the biggest party of the year, and you wouldn’t want to be the only brand not attending.

Did the CFO set Procurement up for Failure in Marketing?

The news last year that Pepsico had disbanded its Marketing Procurement function has been met with mixed reactions.

Marketing Procurement

This article has been reproduced with kind permission from Darren Woolley, Founder & Global CEO of TrinityP3 Marketing Consultants.

The ANA was quick to explain that this was not evidence of the failure of Procurement in marketing, which they said from their polling “was here to stay”. Likewise the WFA said that the Pepsico move was evidence of the need for a more responsive and customer centric focus to their strategy.

And while I do not believe this is the end, it does concern me that in the past 15 years there are a number of examples which suggest procurement has often been set up for failure when it comes to marketing. And I believe the person responsible is usually the Chief Financial Officer. The CFO is, after all, responsible for the financial management of any organisation, and is often the C-suite executive the procurement team report to.

Not the first marketing procurement function to disappear

While the Pepsico decision is the most high profile example of a marketing procurement function disappearing, it is not the first, and likely not to be the last. During 2007, we were working with a procurement team of a food company, who were recruiting to build a specialist marketing procurement function within procurement.

The team of three were very successful in the first year of engaging with marketing and identifying a number of major projects that resulted in significant savings including packaging design and print, media and agency fees.

In the second year, the team delivered only moderate savings as their focus shifted to process optimisation and risk mitigation as further cost cutting alone was agreed to be potentially detrimental to marketing effectiveness. In the third year they were disbanded. The reason given was the projected savings did not justify the cost of maintaining the procurement team.

The short termism of a savings focus strategy

I remember one of our procurement clients providing me with their contract that they were intending to use with the successful agency of the tender they were managing. They asked us to review the contract to see if it was suitable.

I noticed that there was a clause that the agency was responsible for identifying and delivering a 5 per cent improvement in efficiency each year of the contract with a corresponding reduction in fees and costs.

When I bought this to their attention and the fact that the efficiency of the process depended on the brand team as well, considering it was a co-creation process, they looked quizzical. They explained that this was a fairly standard manufacturing clause and wasn’t the agency manufacturing advertising?

In our discussion I was able to highlight where this metaphor did not hold up to interrogation. If you consider it to be a manufacturing process, then it is one where the product goes through iterations of design until the final product design is approved. Then a prototype is produced which again goes through iterations of approval before the project is delivered. Then the whole slate is wiped clean and the process starts again from scratch.

Ultimately, while I made the point well, it failed, as the 5 per cent reduction was already budgeted by finance to be delivered no matter if the agency was able to deliver it or not.

Is there no value in performance management?

We have found that where procurement is focused on delivering cost reduction, either to justify their existence and ensure their survival, or to deliver the objectives of the CFO, there is an underlying belief that the marketing function is a cost and not an investment.

But the fact is that technology, and especially digital marketing, means there are increasing ways to be able to track and manage the performance of the marketing plan against marketing and business objectives.

Giving procurement a broader commercial focus, and not just a cost reduction focus, would position the function as the ideal commercial partner in this accountable marketing world. The procurement team could be aligned to marketing, to manage the measurement and optimisation of the marketing function, to improve performance and return on marketing investment.

Who is focusing on risk management and contract compliance?

Technology has had another impact on marketing and that is an increase in workload. This comes as marketers are often increasing the number of specialist agencies and suppliers to implement the marketing plan across and increasing number of channels.

With a growing roster of suppliers, it means that the marketers also have an increased burden in managing the agencies and their contracts. Compounding this is the increased burden of managing issues such as intellectual property issues, consumer legislation compliance and the like.

Again, procurement as a commercial partner is ideally placed to assist marketing manage these issues to minimise risk by ensuring compliance to contracts and government legislation. It means that instead of just counting savings, there is an opportunity to account for the avoided costs that would arise through poor or non-existent compliance management.

Before anyone says it is not a big issue, most commercial lawyers will tell you that these issues are on the rise, it is just that the advertisers involved will pay significant sums and take extraordinary measures to ensure the issue does not become public.

The role of Math Men and Mad Men in marketing today?

There has been a lot of discussion about the rise of the Math Men, replacing the traditional Mad Men (and Women of course) of advertising. This conversation usually relates to rise of data scientists and econometric modelling. But in fact there is a role for a more commercially focused function within marketing.

Procurement is usually positioned within organisations as the sourcing function, but increasingly procurement has a broader role of identifying commercial opportunities to improve the financial performance of the organisation, while identifying and mitigating risk and ensuring compliance.

That is until it comes to marketing, where it appears that the CFO agenda is to use procurement simply as a razor gang on the marketer’s budget. The problem is this focus on costs is, as we have shown, is a short term strategy and overlooks the wider opportunity of having procurement act as the analytical and commercially focus partner to the marketing team. In a way they become part of the Math Men within marketing to complement the Mad Men.

Procurement is a commercial function not simply a financial one

The increasing complexity of marketing and the impact of technology has already seen the rise in the need for a more analytical approach. Rather than the CFO using procurement as a razor gang on marketing, beyond the first cut to remove obvious excesses, the role should be to assist marketing in managing and measuring performance.

After all, who better to work in partnership with marketing and help report the effectiveness of the marketing investment to the CFO and the C-suite than the procurement team? The best procurement professionals are commercially aware and analytical and able to work with their marketing colleagues to provide the increased level of analysis required in this digital and data driven world.

Ultimately it achieves the longer-term goals of any business in driving profit as no-one is able to slash their cost to growth.