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Working Capital: The Role of Procurement

Procurement has a central role to play in the effective management of working capital, enabling investment, growth and supply chain efficiency.

This article has been written by Neil Ross, Regional Manager, EMEA Trade Credit.

Working capital is the fuel behind any successful mid-market organisation, representing the amount of cash available at any one time. If managed effectively, it ensures the business is able to invest in new products and services, optimising its existing operations, while also shoring up against future risks. Failure to maintain control of working capital will inevitably force companies to rely on borrowing, often through expensive bank finance, putting further pressure on the business.

There are three primary factors dictating working capital – Days Sales Outstanding (DSO), Days Payable Outstanding (DPO) and Days Inventory Outstanding (DIO). Essentially, if DSO and DIO are too high and DPO is too low, then companies will encounter cash flow issues. Simple economics mean money will be going out of the business faster than it is coming in, so striking the right balance between these three factors is imperative.

The Role of Procurement

Responsibility for the day-to-day management of working capital ultimately sits with the treasurer, whose role it is to ensure the company has the necessary funds to operate and meet its objectives for the months and years ahead. But the treasurer cannot work alone. He or she must collaborate closely with numerous departments across the business to ensure working capital is maximised. The procurement team forms a crucial part of this network.

As the primary interface between a business and its supply chain, procurement can make or break an organisation’s working capital strategy. Procurement has numerous factors to consider within its remit, not least management of cost vs. value from suppliers. However, a fixation on costs alone can be a mistake, masking other factors which can also seriously impact working capital.

For example, high logistics and warehousing costs can make working with a particular supplier unviable. Similarly, the ease of doing business with suppliers is a prime consideration – if their contractual terms or the process of purchasing are overly complex, this will eat up hours of administration time that could be better used elsewhere.

Favourable Payment Terms?

But perhaps the most important working capital consideration for procurement is the ability to negotiate favourable payment terms with suppliers, ensuring that money isn’t leaving the company bank account until it absolutely has to.

Extending payment terms is a popular method used by large and increasingly by mid-market companies to maximise their working capital and cash flow. Research by YouGov on behalf of PrimeRevenue and AIG[1] found that over three quarters of supplier businesses have been asked to accept longer payment terms, potentially holding up over £29bn.

A smart move by buyers you might think? Well not necessarily, when you consider the impact this could be having on the supply chain. YouGov’s research found that these longer payment terms are affecting suppliers’ cash flow (55 per cent), leading to additional administration (33 per cent) and putting a strain on client relationships (29 per cent).

The knock on effects can be huge, forcing suppliers to borrow money at a high cost, or to cut costs in production and investment. These issues ultimately drive up prices or impact quality, potentially reducing efficiency and sales, while increasing risk all along the chain.

Supply Chain Finance

Procurement professionals are now waking up to this dichotomy and looking at a more holistic solution to the problem. This means building greater collaboration with suppliers, fostering mutually beneficial relationships, and minimising the risk for the supply chain in the long term.

One key aspect to this more holistic approach is supply chain finance, a financing tool that enables businesses to offer their suppliers early payment, while retaining their own longer payment terms. This is possible through third party financing based on the credit rating of the larger buyer organisation.

Until recently, supply chain finance platforms have been limited to supporting the largest, investment grade businesses. However, innovative online and credit insurance backed solutions mean that it is now an option for thousands of mid-market, non-investment grade companies. This can offer a working capital ‘win-win’, while also helping to streamline processes for all involved.

With the economy on strong footing, many businesses are in growth mode, with ambitious plans for investment and expansion. But these plans won’t be possible without a comprehensive and strategic approach to working capital management. Procurement has a central role in making that happen. The tools and technology now available mean it has never been easier to optimise working capital, across both individual businesses and the broader supply chain.

Supply Chain Finance from PrimeRevenue and AIG frees up significant funding for mid-market (£100m+ turnover), non-investment grade companies and their suppliers, providing low cost access to working capital on both sides of the transaction. More information can be found here.

[1] AIG and PrimeRevenue research carried out by YouGov. Total sample size was 250 adults with responsibility for invoicing and payment terms within businesses which provide goods and services to large organisations (with revenues of £100m or more).

Businesses were asked how much of their revenue is currently tied up in invoices with payment terms longer than the standard. If these results were replicated across all businesses in the UK which provide goods or services to large organisations they suggest that around £29 billion is tied up in this way.

Can Procurement Set an Example on KPIs?

Metrics, Key Performance Indicators (KPIs), Performance Management – whatever your organisation calls them, it’s almost certain that your procurement team are both measuring and being measured on performance. But are organisations measuring the right areas?

Every week in the procurement and supply chain news, we read reports and headlines focusing on savings and supply chain practices, often highlighting the work organisations are doing to measure these performance areas.

Knowing which elements to measure is tricky, as no two sources will agree on what the ‘best’ metrics are to use. A quick Google search for ‘Procurement KPIs’ comes up with over 400,000 results, with a variety of links to organisations, articles and journals with different views on what constitutes ‘best practice’.

What is clear is from what we read, see and encounter in organisations is that there is a huge volume of resources (time, people, money) being devoted to managing these metrics, but frequently the data produced is poor or the metrics themselves are flawed from the outset.

Defining a Purpose

Anyone in procurement will be able to tell you that the purpose of KPIs is to measure internal and supplier performance across a number of areas. Most of these elements stem from the classic concepts of cost, quality and service. Each indicator focuses on a specific aspect of a contract, has defined what success and failure look like, and should service an organisational need or requirement.

The ‘SMART’ acronym (Specific, Measureable, Achievable, Realistic and Timely) is frequently used in conjunction with the creation of KPIs. Following these steps, the theory is that the KPIs will be both useful and successful and, what’s more, encourage behaviours that drive value.

The Reality

Far too often, however, KPIs in organisations fall short of this. Sometimes it’s because they are poorly defined, other times that they are unrealistic, and frequently that they are measuring the wrong thing entirely. From a procurement point of view, this generally means the focus is on savings and little else.

Externally, suppliers can be given huge lists of KPIs that they are expected to report on as part of their contract. This in turn makes meeting and reporting on KPIs onerous, putting the supplier off focusing on them, and potentially driving behaviours that are carried out to ‘tick off’ the KPIs in order to get paid.

Measuring Intangibles

But examples of good practice are out there. When Ben & Jerry sold their ice-cream brand to Unilever, they were eager for their brand to continue to be associated with the environmental and social activities for which they had gained a great reputation for. This involved the creation of “Social Metrics” – aimed at measuring the social and environmental performance of the brand under Unilever’s auspices.

A difficult task, but one that the organisations stuck with, ultimately creating the concept of “multicapitalism”, a performance accounting system measuring economic, social, and environmental impacts in an integrated way. So far it has been a success, and is setting the bar high for the use of metrics.

This is a good example of performance metrics being used to measure an area that often has intangible outputs.

Taking the Lead

So how can procurement take the lead on creating metrics and measuring performance? If procurement departments are keen to be measured on more than savings, then the organisations need to get their own house in order and create better KPIs for their suppliers.

A recent discussion on Procurious asked about other KPIs to use beyond tracking savings for high value projects. One key point made was to workshop metrics with internal customers to increase engagement. This holds true for suppliers too, and should help to ensure that the right areas of the contract are being measured.

We are not saying that savings trackers should be dropped, but procurement needs to focus on other value areas with suppliers. Once the profession leads by example and stops putting such a high importance on savings externally, the chances are good that this will also happen internally.

Is your organisation setting a good example on KPIs? Tell us what you think and get involved with our discussions.

We’ve scoured the headlines this week and picked out the main ones for you to digest with your morning coffee.

Nations Sign Historic Climate Agreement

  • The COP 21 event in Paris drew to a close last week, with nearly 200 countries signing a new agreement to reduce global emissions
  • The agreement sets a new goal for all countries to collectively reach net zero emissions in the second half of the century
  • The deal includes provision for rich countries agreed to raise $100bn (£66bn) a year by 2020 to help poor countries transform their economies and reduce emissions
  • The deal has been hailed as a significant step in the right direction by global leaders and environmental campaigners

Read more at The Guardian

Jaguar Land Rover Sees Resurgence

  • Jaguar Land Rover reported its best ever November sales, with volumes up by 27 per cent on the same period last year
  • The UK has taken over from China as JLR’s main market, with sales up 70 per cent, but also partly due to the slowdown in China’s economy
  • The high sales in Europe and North America have helped to offset the slower Chinese market, which had been responsible for a weak start to the 2015/16 financial year
  • The organisation is expanding production facilities into Slovakia, with the new plant expected to open in 2018 in order to help meet increasing demand

Read more at Forbes

Twitter fined in Turkey

  • Turkey’s communications technologies authority, the BTK, has fined Twitter 150,000 lira ($51,000.) for not removing content it says is “terrorist propaganda”
  • Although there were no further details on the content in question, it is not the first time Twitter has fallen foul of the Turkish Government
  • In the past, the site has been temporarily banned after failing to remove content following requests, although this is the first time a fine has been levied

Read more at Reuters

Tokyo Police to Launch “Drone Squad”

  • Police in Tokyo are to launch a specialist squad tasked with locating and, if necessary, capturing drones in the city
  • The squad has been set up following a number of incidents involving drones in the city, including a drone landing on the roof of the Prime Minister’s office carrying radioactive material in April
  • The police will use drones themselves to track down possible threats and nuisances, and will patrol high-profile buildings in Tokyo
  • The police drones will be equipped with nets in order to bring down other drones if required

Read more at the BBC

Catalytics – The Next Generation of Procurement

Catalytics® is a business concept that powers Proxima’s new suite of procurement services, delivering triple bottom line outcomes: people, profit and planet.

45 per cent of consumers have revealed that they would stop spending with a company whose supplier practices are called into question. With so much at stake, Proxima the procurement services provider, today announces the launch of Catalytics®, a refreshing approach to managing a complex network of suppliers. 

Working with leading minds in business and academia Proxima has constructed a framework for Catalytics® built on five pillars – Strategy, Structure, Mastery, Culture and Enablers. The Catalytics® framework changes the conventional approach to managing supplier relationships, moving away from the heavy focus on financial metrics and instead focussing more on long-term value-creation.

Risk in the Supply Chain

Jonathan Cooper-Bagnall, Executive Vice President, Commercial Director at Proxima, comments: “Wider forces such as risk, innovation and sustainability critically influence the success or demise of businesses today. Seemingly indestructible brands have shown themselves extremely vulnerable in recent years.”

“Following horse meat scandals, uncapped oil-wells and garment factory disasters; even major European car manufacturers can witness their reputation and finances holed by the risks buried in the chain of command or hidden in the supply chain.”

The reliance on external suppliers for goods and services shows no sign of slowing down. Additional research conducted by Proxima found that the average FTSE 350 organisation spent 69.9 per cent of its revenue with outside agencies, and only 12.9 per cent spent on the in-house workforce in salaries and benefits.

Further, 46 per cent of risk managers in global businesses say supply chain failure is their number one risk. A Catalytics® approach will help to mitigate against supply led risks and, conversely, help businesses drive more value out of their supplier relationships.

 Triple Bottom Line

Catalytics® allows businesses to rethink how they manage complex supply chains in line with Triple Bottom Line (TBL) outcomes – looking beyond the transactions of buying goods or services.

With almost 70 per cent of operational activity performed by suppliers, businesses stand to receive significant benefits from taking a more strategic approach to their supplier ecosystems. 

Catalytics® accepts that companies today cannot isolate themselves from financial, operational and reputational risks in their extended supply ecosystem, and that those same suppliers are a valuable source of competitive advantage.

Cooper-Bagnall concludes, “Organisations must look beyond profit to evaluate their performance and direct their operations. Long-term value creation – for shareholders and other stakeholders – requires leaders to deliver on triple bottom line outcomes: people, profit and planet. Failure to align operations with the principles of TBL outcomes can have serious effects on brand reputation and market position. Thinking differently about supplier ecosystems will allow business leaders to reshape their entire business to meet the new realities of modern business.”

For more information about Proxima’s Catalytics® framework, visit www.proximagroup.com/what-is-catalytics  

Procurious Big Ideas Keynote #3 – How Procurement is Elevating its role

Looking to the future in the Big Ideas Summit third keynote was Chris Sawchuk, Principle and Global Procurement Advisory Practice Leader at The Hackett Group.

Chris 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.

Watch the full keynote here.

See all the keynotes and panel discussions from the Big Ideas Summit, plus Big Ideas from our 40+ Influencers.

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

Marketing Procurement – The Most Popular Concepts

Darren Woolley, CEO and founder of marketing consultancy TrinityP3, freely admits that 15 years ago he had no idea what marketing procurement was. Now, curator of a renowned blog on the subject, he is here with a great offer for Procurious members.

William Ju/Shutterstock.com

When I started TrinityP3 Marketing Management Consultants in January 2000 I had never heard of marketing procurement and only had the most peripheral understanding of the procurement function. What led me to starting my own marketing procurement consultancy 15 years ago was a Bachelor of Applied Science degree, five years in medical research and then 15 years as a copywriter and then a Creative Director in advertising agencies.

So I guess, as I have since discovered, probably the typical career path into procurement, meaning typically atypical.

Efficiency and Effectiveness

In April 2006 I started a blog as part of our website. Mostly the posts were opinion pieces based on observations about the industry. If you look back to those days, the articles were short, not particularly in-depth or, for that matter, insightful. It was also irregular and inconsistent. But it was nine years ago. If you are interested, check out the early posts on the TrinityP3 blog here.

Around this time was also when we discovered the marketing procurement function within some of our larger multinational clients. It was interesting to meet people whose job it was to identify ways to ‘assist in managing the marketing process for greater efficiency and effectiveness’.

I use that phrase as it is how we describe what we do at TrinityP3 and what we have found the best marketing procurement people do within their own organisations. It is also why we call ourselves Marketing Management Consultants and not Marketing Procurement.

Strength to Strength

In 2011 we noticed a growing interest in the content on the blog and so made a strategic business commitment to make the blog the centrepiece of our content marketing efforts. This included making sure we regularly published, in fact three times every week, all year round. Okay, we take a week or two off for the holidays.

Within a year the number of people visiting the blog increased 300 per cent and today there is more than 12,000 people reading the blog every week and they come from every continent, except Antarctica of course.

In the early days I was writing most of the posts, but quickly the TrinityP3 consultants began to offer posts on their core competencies such as media, agency remuneration, roster management, digital and data and production. And such is the reputation of the blog, we also have an increasing number of industry thought leaders offered guest posts.

In 2012, we noticed that some articles were getting a much higher readership, sharing on social media and comments. When we looked at the topics that were the most popular, they reflected the issues that were either high profile news or trend in the industry or offered a significant insights or a fresh perspective to common issues. In amongst these were gems on pitches, pitch practice, agency remuneration, including value based, incentive and performance based, scope of work, billable hours and so much more.

Into Print

We decided to capture these popular posts by publishing it as a book. In paperback and e-book, it provided particularly popular. So the following year we did the same. And this year we have done it again. The Top 50 Marketing Management Posts of the Year captures the best and most popular.

But don’t take my word for it. Here is what some of the industry leaders think of the Top 50 Marketing Management Books of the Year:

“Darren Woolley’s Top 50 Marketing Management Post of the Year is a remarkable mosaic of must-read articles and expert opinions that will open your mind, offer new perspectives and challenge you in the process.” – Bruno Gralpois, Author of “Agency Mania” and Co-Founder and Principal, Agency Mania Solutions

“Trinity P3’s Top 50 Marketing Management Posts is a wonderful collection of well-written, insightful blog posts by Darren, his team, and guest writers. They deal head-on with some of the most timely and on point challenges in the industry. Whether you’re a client leader, an agency leader, or industry consultant, this book is a “must read”. – Debra Giampoli, Director, Global Strategic Agency Relations, Mondelez International

“The posts by Darren Woolley and the TrinityP3 team are critical insight. First of all, they provide a glimpse from a unique place in the world — Asia – and yet are truly universal. The collection of top posts gives professionals in our industry fantastic “food for thought” as we go about our hectic lives. He and the team are truly well respected experts and their intelligence is world class.” Sopan Shah, VP Procurement, InterContinental Hotels Group

Exclusive Offer

If you want to lay your hands on this highly-regarded book, follow this link and a free copy is yours when you use the code: Procurious15 (only open to Procurious members).

Happy reading!

Darren Woolley is a scientist by training and a former creative director of JWT. Woolley is the CEO and founder of marketing consultancy TrinityP3.

TrinityP3 is a marketing management consultancy. We challenge our clients, and ourselves, to continuously evolve in thought and approach.

What are the 7 Challenges Keeping PSCM Managers Up at Night?

As the modern procurement division advances to become a part of the whole organisation innovation process, so does the expectations around supply chain and procurement professionals’ performance.

Having a deep understanding of the challenges facing executives who are ascending the procurement ladder is the first step to find strategies and inspiration to overcome them.

Research completed ahead of the Women in Procurement 2016 conference, with Purchasing and Supply Chain Managers from across a variety of sectors, has identified 7 main challenges the modern supply chain and procurement professional must break through in order to achieve the department expected results. Here is a list:

  1. Aligning procurement’s vision with the organisation’s strategy and communicating its value to the entire company
  2. Understanding how technology and processes support supplier relationships and how to lift enterprise innovation
  3. Identifying how to deliver more value to your organisation through strategic procurement
  4. Developing a winning strategy by creating a value oriented procurement department
  5. Inspiring leadership and building meaningful capabilities and skills for your team
  6. Developing the competencies to do business with international partners in challenging cultures
  7. Retaining your best talents

If some, or all of these challenges are keeping you up at night, then you are not alone.Purchasing and Supply Chain Managers managers across the country are looking for solutions to these issues right now.

The Women in Procurement 2016 conference is bringing together a panel of experts to give all in attendance some insights into how leading organisations are addressing these issues. To find out more, download a brochure here.

Future Proofing Procurement – Social Sourcing and Supplier Networks

Traditional procurement processes and methods are being overtaken and replaced. While they still have a role to play, how can you make sure your procurement organisation is ready to meet the future head-on?

A few weeks ago, I was involved in a Twitter chat on behalf of Procurious on the subject of social media, supplier networks and social sourcing. It got me thinking about how procurement can prepare for an expanding strategic role in the coming years.

Social media is well established for connections and networking for individuals, and forward-thinking procurement teams are ensuring that their brands are positioned to take advantage. But where should they be going next?

Supplier Networks

Supplier Networks are built on the premise of using social media to create a pool of organisations, which have the same or very similar requirements, and combine resources in order to achieve favourable rates on large-scale purchases.

The favourable conditions are not just for the buying organisations. Suppliers who are part of the network are able to access more organisations, combine orders (allowing for more efficient manufacturing or production processes) and reduce their own costs too. Think of this as a ‘win-win’ situation.

It was on this thinking that Innovo was created. Innovo is a free online business-to-business (B2B) marketplace for all goods and services. The platform aims to connect buyers and suppliers on the basis of requirements.

Buyers outline what they need and suppliers are notified when buyers are looking for their products. The site then facilitates volume sharing between buyers, rebating savings for bulk purchasing across the group, and enables suppliers also to share volumes and reduce their own prices.

While not directly linked to the ‘traditional’ social media platforms, sites like Innovo are facilitating online relationships and allowing procurement to both add value for organisations through improved supplier relationships, but also deliver savings for the bottom line.

Social Sourcing

Social sourcing is defined as buyers or purchasing organisations using social media platforms, such as Twitter and LinkedIn, to access a wider supplier market, where new solutions, supplier innovation and alternative products can be found.

What may be holding procurement back in this regard is the need to be open in a public environment with requirements or products issues. While this is not something that has been widely done in the past, there are a few organisations that are using social media to good effect in this regard.

This openness tends to be around lower value, non-critical products currently, but the possibilities of using this more widely will grow as more organisations become comfortable with it.

Currently there are a few examples of good practice in the market, but we’ve highlighted two of the best here.

  • LV= (Liverpool Victoria): The UK-based financial services organisation realised that they could use social media to share issues and ideas and attract responses from a wider community of small to medium sized suppliers.

This approach, seen as less formal and more flexible, has enabled LV= to have more collaborative discussions with a much wider community and benefit from innovative thinking.

  • GE and Quirky: General Electric and Quirky, a crowd-sourced innovation platform, to create a new platform to enable innovation. The platform enables crowd submission of new products and small-team designs, giving suppliers access to GE and GE a ‘renewable’ source of crowd innovation.

These smaller organisations also have the advantage of being able to access retail relationships that would have been difficult previously, as now they have the support of GE.

(Note – Quirky filed for Chapter 11 bankruptcy this year. However, their innovation journey continues on Wink.)

Securing Procurement’s Future?

Procurious are big advocates of using social media as part of the procurement process. Through conversations we have been having with procurement professionals around the world, as well as technological and industry experts, we believe that these are the conditions the majority of procurement will be carried out in the future.

Adopting a new approach to procurement is a big transformation for organisations, however, in order to ensure that procurement remains relevant, adds value for organisations and retains a strategic presence, the profession needs to keep up with the times.

The benefits of social media are there to see – you don’t need to jump in with both feet straight away, but can ease into it slowly in order to make a smoother transition. Our challenge to you would be – what could you be doing differently in your procurement process? Why not be the one to take the first step and ultimately get ahead of your competitors and up your social media game.

If these organisations are leading by example, what is yours doing? Is your organisation future-proofed? We’d love to hear more from you if you have a great example to share!

New FSB Service Could Help SMEs Cut Energy Bills

Small businesses can reduce average energy bills by almost a quarter with the new FSB Energy service.

K. Geijer/Shutterstock.com
  • FSB launches new service where members could reduce the cost of gas and electricity bills by 23 per cent, shaving nearly £1,000 per year off the average company bill
  • 70 per cent of businesses experience difficulty comparing energy tariffs and 43 per cent have never switched supplier
  • Main obstacles to businesses becoming energy efficient are working from leased or rented premises, lack of concern around energy costs and lack of capital for energy efficiency investment

Experts in business, the Federation of Small Businesses (FSB), is launching a new service to help its members reduce their gas and electricity bills. Members using the service could cut approximately a quarter (23 per cent) off their annual energy bill.

FSB’s new Energy Service (www.fsbenergy.org.uk) is part of a concerted drive by FSB to help smaller businesses reduce their energy costs. The organisation is also representing the interests of smaller businesses by responding to the Competition & Markets Authority’s (CMA) investigation into the energy market and creating a resource hub on its new website offering advice on energy efficiency measures.

Making Energy Easier 

The new service enables FSB members to obtain advice on competitive rates for their utilities, identify the annual saving achievable by switching tariffs and even have new contracts arranged for them if requested. It is born out of research suggesting that smaller businesses are being failed by the energy market, with 70 per cent of these businesses experiencing difficulty comparing energy tariffs and 43 per cent saying they have never switched supplier.

The new service will be run on behalf of FSB by business cost saving champion ‘Make it Cheaper‘.  It could generate annual average savings of 23 per cent for new customers switching their gas and electricity provider, equivalent to £973 off the £4,243 average annual energy bill of an FSB member. 

FSB Energy will also take care of the paperwork involved in switching – such as terminating existing contracts on behalf of members – saving them time and hassle in the process. And the service reminds members when their fixed price periods end to make sure they never ‘default’ on to more expensive rates.

SMEs Suffer Higher Costs

The CMA, which is preparing to conclude its investigation into the energy market, says SMEs in the UK pay around £500 million more a year than if competition was functioning effectively. It has voiced concern that 45 per cent of SMEs have been placed on a default tariff – one that has not been actively negotiated – which can be more than twice as expensive as a negotiated tariff. 

Dave Stallon, Operations Director at FSB, said: “Energy is an increasingly important issue for smaller businesses. There are many ways they can make substantial savings through the implementation of energy efficiency measures as well as ensuring they get the best tariff they can on their gas and electricity. Many smaller businesses, however, either don’t believe they can make substantial savings or haven’t trusted the market and the system enough to engage in the process.

“Our new service is designed to give smaller business owners easy to use advice they can trust, to enable them to make savings with the minimum of fuss. We are also very actively engaged with the CMA to improve the energy market for smaller businesses and are offering resources and advice on energy efficiency. In combination, we are confident that our initiatives can help to make a significant difference to smaller businesses’ energy bills.”

Energy Efficiency

In parallel with the establishment of FSB’s new Energy service, the organisation is promoting the benefits of smaller businesses introducing energy efficiency measures. The Department of Energy and Climate Change (DECC) estimates that the average SME could reduce its energy bill by 18-25 per cent by installing energy efficiency measures with an average payback of less than 1.5 years. 

However, while FSB research demonstrates that 90 per cent of businesses want to be energy efficient and 58 per cent of businesses surveyed have already made changes to improve their energy efficiency, there are major obstacles that need to be overcome. 

Almost half (45 per cent) of businesses identified operating from leased or rented premises as one of the biggest obstacles preventing companies becoming energy efficient.  Other barriers identified include a lack of concern around energy costs (45 per cent) and a lack of capital for energy efficiency investment (29 per cent).

The most widely reported energy efficiency measures already taken were: the installation of more efficient lights, lamps and bulbs (40 per cent); the introduction of switch off/turn down policies (23 per cent); and improved insulation (23 per cent). 

For the high level details on the research, check out the infographic below:

20151201 Energy Efficiency infographic FINAL

Established over 40 years ago to help its members succeed in business, FSB is a non-profit making organisation that’s run by members, for members.

FSB offers membership packages from £130. Members get an exclusive package of great value business services including advice, financial products and support. These cover a wide range of benefits such as tax, legal and HR, local network groups, business banking and mentoring.

Paris Climate Conference Emits Cautious Optimism

As the twenty-first session of the Conference of the Parties (COP) rolls into its second week, there is a sense of cautious optimism that the meeting in Paris may produce a global agreement on climate change.

VladisChern/Shutterstock.com

The meeting kicked off last week with 190 countries in attendance, with the aim of coming to a universal agreement on climate change and how to handle it. This might seem like a big, if not impossible, ask, but it’s important to remember that this is a world problem and ten years of collaboration has produced some positive results.

Positive Steps

In the past, outputs from the Climate Conference have suffered due to the high number of diverse interests from different countries. When the meeting was held in Copenhagen in 2009, strong differences between the US and China on commitments to minimise rising global temperatures caused a breakdown in negotiations.

However, many observers have said that the countries are in a much better position this year than in many previous years, but also that there is greater collaboration between cities, collectively known as the C40, who are sharing information and achieving outcomes on issues such as food waste collection and urban climate change.

Michael Bloomberg, former Mayor of New York City and UN Special Envoy for Cities and Climate Change, stated, “We’re in better shape going into Paris than we were going into Copenhagen, largely because of the progress cities have made, and C40 cities have helped lead the way. It’s a great example of the power of cooperation.”

And this spirit of collaboration has been seen in the talks between the key countries, with representatives already issuing a first draft of the agreement, leaving a full week for negotiations to take place and the agreement to be finalised.

The ministerial negotiations are where the real challenge lies, as each country approaches them with different goals in mind. Negotiations will focus on helping poorer countries reduce their emissions, how richer countries can contribute financially to make this work, and how global temperature rises can be capped or reduced.

Action Stations

What has been agreed upon is that it is time to act. The meeting has representatives from Kiribati and the Marshall Islands, both countries where rising sea levels have submerged large areas of land. With a focus on the future, it’s now down to see what the actions need to look like.

Alexander Howard, Senior Editor for Technology and Society at The Huffington Post,  notes that much of the focus thus far has been on ‘response’ (e.g. developing crisis management systems), rather working towards low-carbon cities. He acknowledges that this is a difficult goal which could potentially mean, amongst other things, spending a fortune to incentivise the public to alter their lifestyles.

This week will be vital in ensuring the future of countries’ actions against climate change, as any agreement will still have to be implemented. And this is where procurement should come into play.

Howard goes on to explain how “…tech giants like Apple have worked to shift to renewable energy sources. Cities can do the same. Mayors and city councils can use procurement reform to ensure that vendors compete to host the next generation of digital city services in greener data centres powered by clean energy sources instead of coal-fired plants.”

There is potentially a major role for procurement organisations to play in any implementation. It’s now time for procurement to be looking fully ahead to the future and ensuring that sustainability is embedded in processes, helping to support ongoing initiatives.

What are your thoughts on the issue of Climate Change and how it relates to procurement? Get involved on Procurious today!

We’ve also compiled a short selection of the top headlines in procurement and supply chain this week to share with your friends over morning coffee…

Trinidad and Tobago Under Pressure to Reform Procurement Laws

  • Purchasing legislation introduced by Trinidad and Tobago’s government less than a year ago has already faced criticism due to its perceived loopholes and limitations
  • The law, which aimed to create a “comprehensive database of information on public procurement” and “set training standards and competence levels for procurement professionals” was implemented by former Prime minister Kamla Persad-Bissessar, but has since been challenged by the People’s National Movement
  • The amended bill will be put to a committee, with revisions seeking to establish a Public Procurement Review Board, with the role of reviewing decisions made by the Office of Procurement Regulation
  • It is hoped that changes will help to strengthen the existing laws

Read more at Supply Management

LAX Announces $5 billion Procurement Programme

  • The procurement programme seeks to modernise the Los Angeles airport, the fifth busiest in the world
  • The Landside Access Modernisation Programme will include an automated people mover covering 2.25 miles, which will connect the central terminal area with a car rental area and a station connecting the airport to the LA Metro
  • The eight-year programme aims to relieve traffic congestion within the terminal area and on surrounding streets
  • It is hoped that using a strategy of “Design, Build, Finance, Operate, Maintain” (DBFOM) will help with efficiencies in running the project

Read more at Airports International

Department for Transport (DfT) Receives CIPS Certification

  • The DfT recently transformed their procurement function which has seen procurement’s profile raised across the DfT
  • A “Procurement Centre of Excellence”, which operates across the entire department, was also created and procurement governance processes were strengthened, with new guidance issued across the organisation.
  • Melinda Johnson, director of group commercial services at the department said the ‘achievement of this certification has enabled us to assure our ‘best practice’ guidance, make changes as necessary and given us pointers for further improvement.’

Read more at Supply Management

Samsung/Apple Patent Dispute Continues

  • Samsung has agreed to pay Apple $548 million in court ordered damages in their long-running patent dispute
  • It is the first meaningful transfer of money as part of the dispute, which began when Apple sued Samsung for perceived copyright infringements relating to the iPhone
  • Following a jury ruling in Apple’s favour, the US-based organisation were awarded over $1 billion in damages
  • There is a further case pending next year, worth $400 million, relating to the same charges

Read more at The Wall Street Journal

Procurious Big Ideas Keynote #2 – Big Ideas in Big Companies

The second keynote from the Big Ideas Summit was delivered by Chris Lynch, CFO at Rio Tinto, who picked out the key theme of risks and blind spots in procurement.

Chris spoke about fostering a culture of “intrapreneurship” within large organisations and understanding that the bigger your idea is, the more resistance it will face.

However he went on to state that by persisting with your idea, taking ideas from other sources, including suppliers, and showing the outcomes, you are more likely to succeed.

Watch the full keynote here.

See all the keynotes and panel discussions from the Big Ideas Summit, plus Big Ideas from our 40+ Influencers.

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