All posts by Procurious HQ

4 Key Collaboration Takeaways That Will Make Your Job Easier

One of the key topics at the Big Ideas Summit 2015 was the concept of innovation in procurement and the supply chain. Many organisations look for innovative solutions from suppliers, but how easy are these to come by? And are suppliers rewarded for this?

4 key takeaways for successful collaboration

Saying that innovation is a key pillar for an organisation, and actually being able to successfully embed an innovation strategy, are two very different things. Supplier innovation can be tricky to nail down and many procurement departments are not looking in the right areas.

How it can work

For some organisations, it’s about working with the right suppliers. Craig Muhlhauser, CEO of Celestica, spoke at the Procurement Leaders ‘Ovation’ event in July, and spoke about how he brings about innovations for his organisation and for the companies they supply to.

According to Muhlhauser, both organisations need to be open to change in ways of working and ask questions in order to understand the other party’s point of view. Where procurement is concerned, Muhlhauser believes that the profession needs to be less prescriptive to suppliers, leave specifications more open and use the expertise of the supplier to uncover innovation.

This collaborative working relationship has successfully borne fruit across a number of industries. In the automotive industry, Brose, a German-based supplier, worked closely with its customers to produce a new door unit, way ahead of its rivals in terms of quality and innovation.

The key for Brose had been procurement on two sides – their customer, but also internally in order to allow them to build collaboration and trust with their own suppliers to make innovation a reality. Supplier collaboration has also helped to improve supply chain sustainability in the NHS in the UK and led to GAP Inc. being named the winner of the GT Nexus Innovation Award 2015.

Both positive examples have highlighted the work of procurement in supporting the innovation.

Why it fails

Failure to generate innovation, or sustain innovation in the supply chain can come down to a number of factors, although it would be hard to pinpoint one in particular as a key culprit.

A common issue can be with one or both parties not fully engaging in the process. In the Brose example, one supplier involved had to make a financial commitment before a production contract was signed. Payments like this are certainly not common, but here help to build the commitment and trust between the two parties.

Strategy is another common issue. Where strategy is too rigid, or where the strategy is simply pointing to procurement savings, innovation will suffer as the parties in question have approached it with the wrong mind-set. Where innovation is seen as a step to future learning and opportunity, research has shown that it is more likely to endure.

The other side to the strategy argument is that often procurement functions do not formalise the innovation process. Formal programmes are often reliant on senior stakeholder buy-in, something that procurement may struggle with if they lack credibility in the organisation.

Just Reward

While formal programmes and investment can help to drive innovation, it’s worth remembering that rewards or incentives for innovation will help the process. In some cases, procurement has been tasked with saving money, so spending more to achieve innovation is not rewarded.

Suppliers who feel like they will be supported and rewarded are more likely to go the extra mile and suggest innovation to procurement. Building incentivisation into contracts can help to formalise the relationship and underline the support on both sides.

The Real Question

“Is procurement open to innovation?”

That’s the real question. There are good examples of innovation in procurement and supply chains, but plenty more where there is inactivity or hesitance. Have we as procurement professionals been painted into a corner, where savings and the bottom line are the only things that are considered?

We better hope not, or, as Craig Muhlhauser argued, it’s adapt or cease to exist.

Have you got any good examples of innovation in your procurement department or supply chain? How do you encourage it? Let us know on Procurious!

Here are some other stories that are vying for our attention this week:

FTSE edges towards 6,000 after China shock

  • The FTSE 100 was down 2.9 per cent in the first minutes of trading this morning, after stocks in China closed more than eight per cent lower. The market was at 6,014 points, its lowest this year. If it falls below 6,000, it would be the first time it has fallen that low since the end of 2012.
  • The selloff came after a chaotic day of trading on Friday, when weaker than expected manufacturing data caused European markets to plummet. The FTSE closed 2.8 per cent lower, while the S&P 500 crashed below 2,000 points for the first time since February this year.
  • Meanwhile the Vix volatility index, also known as the “fear index”, spiked 16 per cent to 22.2 points. The Chicago Board Option Exchange Volatility Index is thought to be a gauge of investors’ nerves.
  • Markets had spent the past few days falling steadily, as investors worried the Chinese central bank would stop its support of the stock markets.

Read more on City A.M.

Hills chief defends close links with Woolworths’ Masters hardware chain

  • The new chief executive of battling Hills Ltd has defended an outsourcing deal for the company’s iconic Hills hoist clotheslines and garden products that means a large chunk of the range is sold through Woolworths’ ailing Masters hardware chain.
  • Grant Logan, who took over as chief executive of Hills from Ted Pretty in May 2015, says Hills shareholders will need to be patient as the company marks its 70th anniversary because it will take time to restore profits across the company to an acceptable level after major upheaval and transformation, which have resulted in the Hills share price tumbling to a record low.
  • Mr Logan also admitted that the integration of some of the businesses that Hills bought over the past couple of years had been handled poorly and exacerbated problems as the company transformed from an old-world manufacturer to one focused on security systems, communications and health services. “We moved too quickly and as a result, we wobbled our supply chain,” Mr Logan said on Monday.
  • Heavy write-downs foreshadowed on August 7 triggered a slide to a bottom-line loss of $86 million for 2014-15. This compared with a net profit after tax of $24.8 million a year ago.

Read more at The Sydney Morning Herald

Gap to test ‘Fast Fashion’ model in select stores

  • The San Francisco-based apparel retailer said it plans to test small batches of product in its Gap stores this spring and then quickly buy more if the goods are selling.
  • Popularised by fast-fashion chains like H&M, the model allows retailers to jump on trends and quickly adapt to changing shopper behaviour. The strategy has underpinned a turnaround at Gap’s Old Navy unit, which has posted a string of sales gains. This spring will mark the first time the retailer is using it at its namesake division, where sales have slumped. Gap Chief Executive Art Peck said on a conference call that the company was trying to build this capability as quickly as it can.
  • In addition to sourcing goods faster, Gap has hired new executives and closed underperforming stores. Profit fell to $219 million for the three months to Aug. 1, from $332 million a year ago, partly because of charges related to the Gap brand overhaul. The company said it expects to record $130 million to $140 million in restructuring charges for the year, including for the store closures.

Read more at The Wall Street Journal

 

GCC airport construction 2015-19 to grow by 8 per cent

  • The GCC’s airport construction market will grow at a compound annual growth rate (CAGR) of 7.86 per cent between 2014 and 2019, a report has found. TechNavio’s report, Airport Construction Market in the GCC Countries 2015-2019, states that airports offer numerous economic benefits to the region.
  • “GCC countries are well-known worldwide for the infrastructural achievements” provided by airports, such as job creation, tourism, and the facilitation of imports and exports.
  • “The oil-rich countries, in their efforts toward economic diversification, are investing heavily in transport infrastructure, such as roads, railroads, and airports,” the report continues.
  • Additionally, international events such as World Expo 2020 in Dubai, Qatar National Vision 2030, and 2022 FIFA World Cup in Qatar, “considered as brand-building events by the respective nations, have necessitated massive airport construction activity in these countries”, the report adds.

Read more at Arabian Supply Chain

NHS competition could waste millions says Labour, after Care UK complaints

  • Labour has warned that the NHS could be forced to spend millions on competition lawyers after the UK’s biggest private healthcare provider demanded an immediate investigation into a decision to award an elective care contract to a local health trust.
  • Care UK has been branded a bad loser after lodging a complaint with the NHS watchdog Monitor over the management of a contract by commissioners in north London.
  • Monitor has now begun an investigation into the decision by four GP-led clinical commissioning groups (CCGs) to award a contract to the Barking, Havering and Redbridge University Hospitals NHS Trust. The trust said it was extremely disappointed by the investigation and warned that it would delay the opening of a care centre.
  • Andrew Gwynne, the shadow health minister, said the new competition rules could force the NHS to waste millions on competition lawyers.

Read more at The Guardian

What’s In A Name?

If you want to become the top dog you had better change your name to Andrew…

What's in a name? Andrew comes top for UK bosses

As the ONS announces its annual list of most popular baby names for 2015, research from workwear manufacturer Stormline has revealed that when it comes to Britain’s bosses, there’s little variety and originality, as an homogenise collection of traditionally-named boys take up their seats in the UK’s board rooms for another day in the office.

The research shows that there are more men called Andrew than there are women running the UK’s top firms.

There’s a definite lack of diversity at the top, with the following seven names – Andrew or Andy, James, John, Peter, Ian, Mark or Marc or Richard  – representing 32 per cent of all UK bosses at top firms.

Just 6 per cent of Britain’s biggest 100 firms are women with bosses called Alison (Cooper, Imperial Tobacco), Melissa (Potter, Clarks Shoes), Lindsey (Pownall, Samworth Brothers) Theresa (T.J Morris), Anna (Stewart, Laing O’Rourke) and Veronique (Laury, Kingfisher PLC) representing female CEOs.

If you’ve got your eyes on running one of Britain’s biggest companies, it might help if you’ve got a traditional Hebrew (John, Ian) Greek (Andrew, Peter) or Latin (James, Mark) name. Your odds will also increase to better than 9/1 if you are a man.

Of the names on display in the 100 top board rooms around the UK, more than half (53 per cent) were one-offs; ranging from a Merlin, Jebb, Nicandro, Zameer and Pascal to Ralph, Jason, Nigel, Norman and Bob.

Men called Andrew currently bossing it in the UK’s biggest firms 

Andrew Witty – CEO, GlaxoSmithKline
Andy Hornby – Chief Executive, Gala Coral Group
Andy Harrison – CEO, Whitbread
Andy Parker – Chief Executive Capita
Andy Street – Managing Director John Lewis
Andy Long – CEO of Pentland Group (the Chairman is Andy Rubin)
Andrew Goodsell – CEO, Acromas Holdings (Saga Group & The AA)
Andrew Mackenzie – CEO, BHP Billiton 

Zameer (Choudrey, boss of Bestway Group), Jebb (Kitchen, boss of Bibby Line), Merlin (Bingham Swire, boss of Swire Group) and Nicandro (Durante, boss of British American Tobacco) make up the pick of most original boy’s names.

And although this survey is skewed towards the UK market, we’d be interested to learn what the name game is like elsewhere in the world. Can this oddity be repeated in your country?

National Coalition for Public Procurement formed in the US

A coalition for public procurement has been formed in the US.

Public procurement coalition formed in the US

Volunteers from three of the largest U.S. procurement programs for public agencies, educational institutions and nonprofit organisations have joined together to establish The National Coalition for Public Procurement (NCPP)

The NCPP will serve to drive best practices in public cooperative procurement, focusing on transparency, competition, integrity, auditability and process.

Marc Selvitelli (who will serve as NCPP’s Executive Director) said: “NCPP was founded on the belief that uniting customers and potential customers with national and regional purchasing organisations will ensure the most ethical and best business practices.”

NCPP’s founding organisations include the National Intergovernmental Purchasing Alliance Company, the National Joint Powers Alliance and The Cooperative Purchasing Network.

In addition to regular interactions with public procurement practitioners and contract purchasing organisations, NCPP will provide an independent forum for members to collectively address cooperative contract procurement concerns. Members also will have the opportunity to participate in advocacy issues with a united voice, and they will have access to a variety of resources to advance best practices in public procurement.

“A major factor in selecting SmithBucklin was its expertise in starting and managing a new organisation,” said Todd Abner, NCPP Chairman. “Additionally, SmithBucklin has substantial experience in managing associations that are active in procurement and supply chain.”

“It is a privilege to help launch NCPP,” said Matt Sanderson, Executive Vice President & Chief Executive, Business + Trade Industry Practice. “We look forward to helping establish NCPP as a powerful voice in advocating excellence in public procurement.”

How Can We Better Manage Compliance Across The Supply Chain?

New research states that half of global firms have faced supplier non-compliance challenges.

Don't be the odd one out... comply!

2014 was a year marred by risk… Whether we’re talking about plentiful product recalls, compliance and environmental issues, or devastating data security breaches – it seemed supplier compliance management was never far from the spotlight.

Today, companies are increasingly being held responsible for the actions of their suppliers, thus breaking the long-held tradition of the buyer turning a blind eye. Ultimately the blame and consequences of the actions lay at the gates of both parties – forcing buyer and supplier to tackle tricky compliance issues head-on.

At the same time supply chains are growing larger, heightening both the impact and odds of non-compliance incidents. As a result companies, customers, NGOs, and regulators are rapidly stepping up their efforts to manage and monitor compliance across their suppliers. The expectation for companies to develop comprehensive supplier compliance policies,  along with regular audits and inspections to evaluate supplier compliance is a heavy cross to bear…

In order to gauge the challenges presented MetricStream conducted an in-depth survey that looked into the ways organisations across industries are managing, measuring, and monitoring supplier compliance. Respondents were made up of 100 supplier compliance and governance professionals from various industries.

The survey found…

The survey contains seven main areas of concern. We’ve highlighted some of key the findings below.

Non-compliance issues around management systems and documentation are widespread

The most common area of non-compliance was around management systems and documentation (59.5 per cent). This highlights non-compliance with a company’s internal documentation such as product specifications and quality policies; or, absence of systems and processes at the supplier’s end to ensure compliance with external regulations.

The other dominant area of supplier non-compliance pertains to Environment, Health, and Safety (EHS) standards (29 per cent). In the last few years, some of the world’s most reputed brands have been criticised after their suppliers were found to be violating environmental norms, or running factories that were unsafe and exploitative.  Companies will need to find ways to strengthen supplier compliance with EHS standards, keep pace with new regulations and guidelines in the field, and resolve or mitigate compliance issues before they occur.

Local laws are often overlooked

Only 43 per cent of respondents focus on local laws while drafting supplier policies. This could be a cause for concern, especially since local laws vary from one region to the next. For instance, the minimum age for employment in China is different from that in the US. If companies overlook these differences when drafting supplier compliance policies, they could face regulatory penalties.

Compliance information is only gathered when potential suppliers are being evaluated

Most of the respondents indicated that their organisations gather supplier compliance information either when evaluating a potential supplier (50 per cent), or while onboarding a supplier (26 per cent). Only 19 per cent of organisations gather supplier compliance information when adding a new product or service to the supplier’s portfolio.

To read the full findings you can download the report from here.

Procurious talks to Mark Lamb of CIPS Australasia

Procurious interviews the mastermind behind CIPS Australasia – Mark Lamb.

Mark Lamb CIPS Australasia

Ahead of the CIPS Australasia 2015 Conference on 17 Sept, Procurious posed some brain-teasers to Mark Lamb, General Manager – Australasia.

Are you attending? We’ve created a CIPS Australasia Group to gather all the discussion from the day and Awards.

This is what Mark had to say:

Procurious asks: This year CIPS is running with a common theme – ‘Raise your game, raise your voice’. What’s the idea behind this, what messages are you hoping to convey?

Mark Lamb: ‘Raise your game, raise your voice’ will cover the capabilities you need to get out of your comfort zone and face future challenges head-on. The world is changing at such a pace, this profession has to evolve with it. Individually we are challenging professionals to ensure they have the right set of skills to be fit for the future. In addition we want this profession to raise its collective voice and start shouting about our success, about the true value we bring and the real difference we make.

We recognise that people require many difference aspects from conference. It’s important we offer practical advice, as well as inspiration and insight to help advance the profession and for our delegates and members to achieve personal success. 

Procurious: Does more need to be done to promote, encourage and develop pathways into a procurement career?

Mark: CIPS has done a huge amount of work in this area – the Be a Buyer website has given us a great platform to help direct people and showcase the exciting opportunities this profession has to offer them. We also encourage members to do their bit and become advocates. We have packs and presentations available so volunteers can go and deliver their own workshops in their local schools and colleges. CIPS has also been involved in the UK to develop the current level 3 Advanced Apprenticeship in Procurement and there is work underway to extend that now to level 4.

Procurious: Have you noticed a change in the CIPS membership in recent years, are the skills being brought to the table different to those from 5, 10 years prior?

Mark: Skill sets are changing all the time – again this fits with the Conference theme. We have to stay relevant – react to the world around us or we will cease to be a success differentiator and have other functions move in to our space. So yes we do see skill sets change – hence the reason we regularly review our own syllabus.

Procurious: What do supply chains have to do to ensure they avoid another Nannas Berries scandal?

Mark: In order to avoid such scandals, we all need to look beyond the first tier of our supply chain and ensure we have clear visibility of the second tier and beyond. Many organisations report that they only have sight over the first tier – this clearly is no longer enough.

Procurious: Speaking of ‘raising your voice’ do you think social media can play an important role in (dare we say it) modernising the profession?

Mark: I’m not sure that I would say social media will ‘modernise’ the profession, I happen to think the profession is already moving forward at a lightening pace. However, social media is a crucial business tool that we can embrace and use to enhance our communications, our building of communities and contacts and sharing of information generally. As a profession, or world never stops – we work across continents and time zones, our suppliers can be based anywhere in the world – social media can connect us all.

Are you attending the CIPS conference on 17 Sept? Join the discussion and meet fellow delegates on our CIPS Australasia Group page.

Supply Chain Disruption and Risk Mitigation in Tianjin Explosion

Two enormous explosions ripped through the Chinese port city of Tianjin last week, killing 112 people, hospitalising hundreds and leaving thousands of local residents homeless.

Explosion in Tianjin, China. Reuters

 

While nothing can be compared to the tragic loss of human life, businesses look set to have to deal with major disruptions to their supply chains, with logistics issues for some and significant loss of goods that were at the port when the explosions occurred.

Safety Fears

The blasts, which occurred in a warehouse storing hazardous chemicals, were large enough to be seen from space and also register as seismic activity in Beijing (over 75 miles away). Investigations have been started as to the cause of the explosions, but are being hampered by safety concerns at the site.

Residents in a 3km radius were evacuated on Saturday after it was found that sodium cyanide was present at the site. The volatile powder can be fatal if inhaled and, when mixed with water or burned, produced hydrogen cyanide, a highly poisonous gas.

Business Impact

The current situation, as well as the inability to get people on the ground at the port, has made it difficult for businesses to quantify the losses they have suffered. Tianjin is the world’s 10th busiest port and China’s largest hub for the import of vehicles, which means organisations will be dealing with the future impact as well until the port returns to full capacity.

Mitsubishi have estimated a total of 600 cars were damaged in the blasts, while Renault and VW have also stated that they have lost cars that were being stored in warehouses at the port. Toyota has suspended production at two of its Chinese facilities for three days due to logistics issues caused by disruption to port services.

And it’s not just auto-manufacturers that are affected. The port also handles large quantities of metal ore, coal and steel, with Australian mining giant Rio Tinto stating that shipments had been disrupted, although no products had been damaged.

A number of Chinese technology organisations have also reported interruption to operations. Tencent, Liepin and 58.com were among the companies with facilities within the blast radius and are returning operations to normal wherever possible.

Analysts estimate that the incident could generate total insurance losses of between $1-1.5 billion.

Risk Mitigation

While situations as extreme as this are fairly uncommon, disruptions in the supply chain are something that organisations need to deal with on a regular basis. Around China, shippers and maritime logistics organisations have begun to route freight through other ports, while others have begun to look at using airfreight.

Having good contingency plans in place for your supply chain allow you to cope with the unexpected risks and outcomes. Scenario planning can be used to reduce uncertainty and mitigate risks. You can get some good tips for that here.

From identifying alternatives methods of transportation to creating supplier panels to ensure continuity of supply for critical items and engaging openly with stakeholders, there are a number of options open to organisations to allow them to adequately deal with disruptions in the supply chain.

You can keep track of potential risks through a variety of tools, including the BSI Risk Index and the CIPS Risk Index. These organisations will publish research based on the indices that can help to shape organisational strategies for the mitigation and management of risk.

You can also always check out the eLearning available on Procurious for a selection of free videos on risk and crisis management, which should help you build a foundation in the understanding of the topic.

Is your organisation impacted by the situation in China? Do you have any great risk mitigation tips you can share with your peers? Let us know or get involved on the Procurious community.

If you haven’t had time to check out the big stories in the procurement and supply chain space this week, here are some of the main headlines.

Calais crisis: freight costs could rise ‘significantly’ 

  • Unless the ongoing crisis at Calais is resolved, freight prices could rise significantly in the next few weeks according to Rhenus Logistics UK. The company said the operational impact that French strikers and migrant incursions at the port were having on the UK’s import and export trade was concerning.
  • Managing director David Williams said drivers were resigning from the route due to the stress of getting through the port, and the risk of fines because of stowaways. “The decision by drivers to step away from this route has already seen a number of freight businesses introducing surcharges of between 1-2 per cent,” he said. “The rise in costs, due to increased fuel bills, man hours and required rest break, is now becoming a very serious issue for the logistics industry.”
  • Separately, global supply chain consultancy Crimson & Co warned that the continuing disruption at Calais highlighted the need for UK businesses to review their risk strategies. The firm said exporters and importers across the UK were reporting losses and were being forced to either find alternative but more expensive routes or stop deliveries altogether.

Read more at Supply Management

Apple confirmed to be working on self-driving car

  • Apple is working on a self-driving car project, and may have made more progress on the car than previously thought, according to documents seen by the Guardian. The UK newspaper said it has seen correspondence between Apple and a high-security test site near San Francisco, regarding a test location.
  • Apple is rumoured to be working on a self-driving car, apparently under the code name ‘Project Titan’ and has held meetings with automotive manufacturers and recruited engineers in this field, but the test site communication is the first confirmation of the project.
  • The Special Project group at Apple had contacted the test centre, GoMentum Station, a former weapons testing facility. It has over 20 miles of paved roads and streets for testing, and is still guarded by the military, offering a high degree of privacy and security.
  • Tim Cook, CEO of Apple has reportedly met with executives from a number of car companies recently, including Fiat-Chrysler, and it has also hired engineers from Tesla Motors, Mercedes-Benz, and electric car battery maker A123 Systems.

Read more at Arabian Supply Chain

Cutting out the middleman – milk price row

  • Consumers are being urged to boycott supermarkets and buy milk direct from farmers, to ensure producers receive a fair price. More than half a century after their heyday, local milk producers are back in fashion. After a collapse in the price they receive from retailers and processors for their milk, dairy farmers – who protested in large numbers over the past week – are turning to selling their milk directly to consumers.
  • While the number of dairy farmers in the UK continues to fall, from 200,000 in the 1950s to fewer than 10,000 today, a growing number are now cutting out the retailers and middlemen and once again offering up their milk locally.
  • It marks the revival of market that was lost with the emergence of refrigerated lorries and supermarkets in the second half of the last century. The use of milk as a loss leader by supermarkets to draw customers in made it impossible for a locally based dairy market to compete. But consumers and caterers are now being urged to boycott retail milk and buy direct from farms to help struggling dairy farmers receive a fair deal.
  • Although retailers and milk processors blame the falling price of milk on global markets, dairy farmers say they are being unfairly affected. They say supermarkets sell milk too cheaply as part of their price wars, and that farmers don’t receive a fair proportion of the final retail price.

Read more (and view the milk infographic) at The Guardian

Infor Buys Supply Chain Management Firm GT Nexus

  • Enterprise software firm Infor Inc. has agreed to acquire cloud-based supply chain management firm GT Nexus Inc. for $675 million, the company said Tuesday, as business solution providers race to accommodate the changing needs of supply chain executives.
  • New York-based Infor, which is one of the world’s largest suppliers of enterprise resource planning, or ERP, software, helps companies including aerospace, technology and pharmaceutical companies to track various components of their business. Oakland, Calif.-based GT Nexus provides cloud-based services, or software hosted on the remote servers, that allow companies to manage inventory and orders, and help companies communicate up and down the supply chain.
  • GT Nexus facilitates more than $20 billion in payments between buyers and their suppliers across 90 countries in eight currencies, according to a Tuesday release. Clients include Adidas AG, Caterpillar Inc., Deutsche Post DHL, A.P. Møller-Maersk, PfizerInc. and many manufacturers and retailers.
  • The deal comes as more companies are relying on technology to better manage, and gain more visibility, into the various functions within their supply chains, from sourcing to distribution. Sales of supply chain management software grew 10.8 per cent in 2014 to $9.9 billion.

Read more at The Wall Street Journal

New report raises alarm of modern slavery in supply chains

Tackling slavery in supply chains

The latest Risk Index Report from BSI identifies China, India, Vietnam, Bangladesh and Myanmar as the five highest risk countries for human rights violations.

The report highlights the significant rise in organisations breaching international human rights regulations over the last quarter as key Asian economies adapt to tougher economic conditions.

Rising labour costs in China have led companies to diversify their supply chains into other high-risk countries that now account for 48 per cent of global apparel production, 53 per cent of global apparel exports, and 26 per cent of global electronics exports.

The latest BSI Risk Index report warns that efforts by Asian governments to boost their economies are having the unintended consequence of allowing child labour abuses to become more present in supply chains. Also highlighted were proposed changes to labour laws that may incentivise firms to restructure as “family enterprises”, making it easier to employ under-age workers in a country where 4.4 million children are already put to work. Two thirds of child workers are found in agriculture (69.5 per cent), and 17.5 per cent in industries such as garment manufacturing.

The Quarterly BSI Risk Index is based on intelligence from BSI’s Supply Chain Risk Exposure Evaluation Network (SCREEN) tool. The tool identifies major CSR concerns, such as brand protection risks and changes to global regulation including the US legislation aimed at eliminating forced child labour, EU draft conflict minerals law, and the UK’s Modern Slavery Act.  All of which relate directly to complex supply chains worldwide and can subject an organisation to prosecution if their suppliers exploit human rights.

Those companies found in breach (legal repercussions notwithstanding), will also have to worry about brand reputation and the compromise of consumer trust. The latest generation of consumers, millennials, are focused on buying from ethical and responsible businesses, thus highlighting the increased importance for organisations to adopt a supply chain risk management program and implement risk-based sourcing strategies.

Modern incidents of slavery

 

Likewise the ability to ascertain country-level threats provides the needed intelligence to filter risk to underpin a socially compliant and responsible supply chain. On this very subject Mike Bailey, EMEA Director of Professional Services, BSI commented: “Some organisations underestimate the damage that can be caused by not adopting and enforcing ethical practices across their supply chain. Command and control from the centre means nothing if it is not rigorously monitored and enforced. For too long, extended supply chains have obscured ethically questionable practices, tools such as SCREEN highlight country level corporate social responsibility risks helping increase visibility and awareness, and enforce a responsible and ethical supply chain.”

Mike continued: “Organisations can no longer turn a blind eye to the actions of their suppliers. The laws we are seeing today may only apply to larger firms, but they set a benchmark for the industry and smaller organizations will be forced to comply to work with the larger companies, by default. Products assembled or services provided by child labour or depending on minerals from conflict zones have no place in the modern world.”

Premium payments are empowering cocoa farmers in Brazil

Under the Cargill Cocoa Promise, the livelihoods of cocoa farmers are being improved.

Empowering Brazil's cocoa farmers

In 2014 a total of $19 million was paid to farmers in Cote d’Ivoire, Brazil, Cameroon, Ghana and Indonesia, bringing the total to $44 million paid to date under the Cargill Cocoa Promise. The premiums, which are achieved by farmers for selling their UTZ, Rainforest Alliance and Fairtrade certified cocoa beans, are funded by confectionery and food manufacturers and retailers and are positively supporting the ongoing development of a sustainable cocoa supply chain.

Premium payments for certified sustainable cocoa are not only helping with meeting the growing demand for sustainably sourced cocoa and chocolate, but continuing to make a significant contribution to improving the livelihoods of cocoa farmers and their communities.

“Premium payments and cocoa certification remain a valuable catalyst in making progress toward a sustainable cocoa supply chain,” said Taco Terheijden, Director Cocoa Sustainability at Cargill – a provider of food, agriculture, financial and industrial products.

“We are proud to be part of this process and to see the positive developments in the sector. Not only are cocoa farmers and their communities benefitting from higher incomes and better health and education, at the same time manufacturers, retailers and consumers can be confident about where their cocoa is coming from and how it is being produced.”

The premium payments are made to certified farmer cooperatives with 50 per cent going directly to individual farmer members, and the remainder being invested in projects by the farmer organisation to boost productivity, farm development and benefit the community. The premiums are an incentive to adopt good agricultural practices and directly support improvements to make a positive difference to local communities.

Demonstrable progress can be observed  in Cote d’Ivoire, where a first of its kind public-private partnership between the Conseil du Cafe-Cacoa, Cargill and CARE has enabled 14 farmer cooperatives to use their premium payments to access additional funding.  With this they have built 11 new schools and three new health centres – teaching over 1650 children and providing access to healthcare for 25000 people.