All posts by Procurious HQ

Fallout Still Being Felt After Strikes At Port of Los Angeles

West Coast Port Strikes Start to Play Out

Port of Los Angeles Strike Effects

Earlier this year we covered a story about delays caused by industrial action at ports on the US West Coast. This week, the Port of Los Angeles has released some troubling statistics that point to the long-term impact of this action.

Despite a significant rise in container volumes for the month of March, cargo volumes at the port have dropped drastically in April.

Expectations of a full recovery were bolstered by strong showings in the month of March, after an agreement was finally reached with West Coast port employees and the longshore workers union. The agreement led to the clearance of a backlog of ships that had been present at the Los Angeles port for months.

March was in fact, the second busiest month in history for the Los Angeles Port facility. However, the huge 11.8 per cent drop in cargo volume recorded in April suggests that the increased activity was merely clearing the backlog and that cargo figures may remain low on an ongoing basis.

Major US ports have long been seen as an indicator of the health of the US retail sector. Normally, when shipping volumes are decreasing the retail sector follows and starts to slow. However, further highlighting the concerns of West Coast ports, is the fact that cargo volumes at Los Angeles are falling at a far greater rate than at other ports across the nation. This suggests that rather than broad sectoral problems, this issue is specific to the port and the industrial action.

It is thought that during the months-long dispute (where work essentially ground to a halt), many firms made alternate arrangements and instead shipped into Mexico, Canada or ports on the US east coast.

It will likely take some time to determine exactly where the chips will fall in this matter. Major importers will be reluctant to walk away from the huge infrastructure and warehousing investments they’ve made near the Port of Los Angeles and will likely return to shipping goods through the port. However, the many small and medium sized firms that established alternate shipping routes to deal with the delays brought on by industrial action may be less inclined to return to the port.

David Noble: Ethics In The Profession

“I do believe the impact of our profession – we underestimate it…”

Watch our fourth Big Ideas Summit keynote (part 1 of 4)

Watch David’s keynote in FULL here

David Noble, Group Chief Executive of The Chartered Institute of Procurement & Supply (CIPS), provides a fascinating insight into the profession from the point of view of the chartered body.

Addressing and shifting some paradigms about procurement first, David then goes on to speak about the importance of ethics and compliance and how licensing the profession helps professionals in their day-to-day roles.

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

Watch: See more Big Ideas from our 40 influencers

4 challenges procurement faces & how to overcome them

Results from a newly published study shine a light on an assortment of internal challenges facing the procurement function, as well as its changing role as we enter an uncertain future.

4 challenges procurement must overcome

Xchanging has issued the first results from its 2015 Global Procurement Study of more than 800 procurement decision makers. 

These first set of results look at internal challenges and the new role of procurement, covering misaligned KPIs, lack of internal engagement, capacity issues and skills gaps.

Challenge #1: Misaligned KPIs

Despite the now wide ranging responsibilities of procurement decision makers, 47 per cent name ‘cost savings realised’ as their number one KPI. The top four KPIs listed are all cost related. CSR/Sustainability impact, by comparison, is ranked as the least important at just 1 per cent.

Chirag Shah, Executive Director, Xchanging Procurement comments: “These results strongly indicate that there is a problem with the current KPI structure. Procurement teams are responsible for many business critical functions. From risk management to sustainability impact, procurement is engaged in activities that far surpass its cost-cutter legacy. The metrics against which organisations track procurement’s performance do not line up with what procurement actually delivers.”

Challenge #2: Lack of Internal Engagement

63 per cent of procurement decision makers globally identify ‘internal stakeholder engagement’ as a challenge, with 14 per cent claiming it is as an extreme challenge.

Shah explains: “Procurement’s strategic capability isn’t being understood and because of that, it isn’t appropriately valued. Not only is this causing problems for procurement performance, it is also restricting business success; by not engaging with the procurement team and fully understanding what it can deliver as a strategic partner, companies are limiting their potential for growth.”

CPOs clearly feel more internally valued than procurement middle management; 60 per cent of CPOs feel that procurement is a C-level priority in their organisations compared to 37 per cent of procurement middle managers.

Shah makes a number of recommendations based on the findings: “To improve internal engagement, and properly communicate the value of procurement, procurement departments need to consider tactics such as introducing governance boards, using score cards to track deliverables, leveraging analytics and reporting tools to demonstrate results and even re labelling team members with non-cost centric job titles that relate to their roles, for example ‘Risk Manager’ or ‘International Consultant’”. 

Challenge #3: Capacity Issues

According to Xchanging’s numbers – 80 per cent of procurement decision makers identify ‘procurement team time pressures’ as a challenge, and 20 per cent as a major challenge – implying that the majority of procurement departments are facing major capacity issues.

Surprisingly, in comparison, ‘talent shortage’ is considered an operational challenge by far less respondents, with 59 per cent citing it as a challenge and only 12 per cent as a major challenge.

The number citing talent shortage as a concern drops to less than half (40 per cent) when asked if it’s a problem for the industry as a whole.

xchanging

Challenge #4: Skills Gap

The skills considered most important for procurement professionals are ‘relationship management’ (88 per cent consider important, 59 per cent very important) and ‘negotiation skills’ (88 per cent and 58 per cent).

Significantly, these are also the areas where procurement decision makers identify the greatest gaps in skill set provision; around a quarter cite ‘relationship management’ (26 per cent) and ‘negotiation skills’ (23 per cent) as areas with the greatest gap in skill set provision. 23 per cent also name ‘project management’.

Want to read more? The full report can be downloaded here.

Supply Chain Disruption – When Rockets Blow Up

Stick a rocket up your supply chain…

Exploding rockets in your supply chain

When we talk about supply chains, we often discuss the ‘critical path’. The term is used to give firms an understanding of the earliest and latest a certain activity can take place without having an impact on a projects overall timeline. It is also used to point out areas of importance and concern within a supply chain.

Earlier this week, Inmarsat, a British provider of global satellite communications, saw a significant issue reoccur on its critical path. The rockets the firm uses to deliver its satellites into space keep blowing up!

On Monday, the firm was forced to announce a further delay to the launch of a third satellite for its global broadband service, Global Xpress, (designed to provide high speed broadband to users at sea, in the air, and in remote regions). The delay was due to an ongoing investigation into a Russian supplier that provides the firm with the rockets used to put its satellites into orbit.

The supplier has faced numerous issues with its 53m tall Proton-M rocket in the last five years. The most recent of which occurred last week when a Proton-M rocket (the same model used by Inmarsat), carrying a Mexican satellite, exploded shortly (eight minutes) after take off. Fortunately, the explosion took place at an altitude where any debris was burnt off before returning to earth.

This is the third time Inmarsat has faced delays due to issues with Russian rockets. In 2013 the second satellite in the program was delayed after a similar explosion cast doubt over the mission.

The recent issues have forced the Russian Space Agency to postpone all activities until a full investigation has been carried out. As suggested by Inmarsat CEO, Rupert Pearce, these investigations could take some time and will have a significant impact on when the Global Xpress programme can resume.

“This is the third time our Global Xpress programme has suffered launch delays because of Proton launch failures. Although in the past, Proton has returned to flight within a few months of a launch failure, it will not be possible to determine the length of the delay in the launch of I-5 F3 until the cause of the Centenario launch failure is established. Customers are understandably anxious to see the delivery of GX services on a global basis, and as soon as we have sufficient information to ascertain the new launch date for I-5 F3, we will make the information public, as well as comment further on the impact of the delayed launch of I-5 F3.” He said.

The issues and delays caused by the faulty rockets have caused the organisation’s share price to slip and no doubt are causing significant headaches for the company’s operational team.

Why your CPO is key to the future of the profession

As Procurement continues to take steps towards showing its value to organisations, the role of the Chief Procurement Officer (CPO) is becoming more and more critical to its success…

Why your CPO is key to the future of the profession

The future of procurement was a key focus of the Big Ideas Summit on the 30th of April, and continues to be so as more of the content and Big Ideas are shared across the wider procurement community.

In the past week alone, not one but two procurement experts, Jonathan Betts from Science Warehouse, and Peter Smith of Spend Matters UK, have both hypothesised that procurement will be ‘dead’ or will have ‘disappeared’ by 2030. This doesn’t mean the function will cease to exist entirely, but more that what we currently view as procurement will change to something completely new.

The Chief Procurement Officer

It’s against this backdrop that the CPO comes to the fore. At the head of a function that is constantly reinventing itself (for good or bad, we’ll let you decide), finding the right strategy to lead effectively is a tricky prospect.

To make it trickier still, a CPO can then be faced with numerous individuals, both inside and outside their organisations, second-guessing their moves and strategies. If you’re looking for what a CPO needs, a thick skin is a good place to start!

But it’s not all about the negatives for the CPO. They stand at the head of a developing function and have the power and influence to craft something that will bring value to their organisation. Whether it is in driving down cost or supporting their teams by spending time on professional development, these are other key aspects of the CPO’s role. 

The Challenges

Plenty articles are written about CPOs and the challenges that face them. Additionally, it has become more common for CPOs to be surveyed on what they consider to be the major issues facing them and the function. Since the end of 2014, the following have been highlighted as areas of concern and consideration for CPOs:

As expectations of procurement rise and the overall procurement agenda become wider, a CPO needs to ensure that they have the correct strategies in place, but also plans on how they are going to achieve them. This includes key steps, such as training for teams, but also how they are going to communicate their plans.

Community and Awards

What has become clearer in the past year is that willing communities exist to help CPOs in driving the procurement brand on. Campaigns such as the ‘I am a Procurement Leader’ from Procurement Leaders, which aim to highlight the great work that leaders in the profession are doing also offer a level of support to the senior professionals.

And awards also help to showcase the success stories from the profession that have often gone unnoticed in the past. The CIPS Supply Management Awards highlight best practice, while recognition for individual CPOs helps to set the bar that bit higher.

Last week, Richard Allen, CPO and Executive Director of Enterprise Services at Telstra (Australia), was named CPO of the Year by The Faculty Management Consultants. The annual award helps to highlight the importance of the CPO role in organisations and recognises CPOs who, amongst other things, demonstrate leadership influence within their organisations.

Initiatives such as this one show that the role of procurement is much broader than sourcing or cost saving, but is critical to the wider success of the organisation.

What do you think – can CPOs help to secure the future of the procurement function? Does your CPO deserve some good press for their work? Get in touch with Procurious and make sure you don’t go unheard! 

Meanwhile, here are some of the stories making headlines this week in procurement and supply chain.

Gartner announces rankings of its 2015 Supply Chain Top 25

  • Gartner, Inc. has released the findings from its 11th annual Supply Chain Top 25, identifying global supply chain leaders and highlighting their best practices. Analysts announced the findings from this year’s research at the Gartner Supply Chain Executive Conference.
  • “2015 marks the 11th year of our annual Supply Chain Top 25 ranking,” said Stan Aronow, research vice president at Gartner. “In this edition of the Supply Chain Top 25, we have several longtime leaders with new lessons to share and a number of more recent entrants from the high-tech, consumer products, retail and industrial sectors.”
  • The top five include three from last year — Amazon, McDonald’s and Unilever — one returning leader, Intel, and a newcomer to this elite group, Inditex (see Table 1). Three companies rejoined the list this year after a lengthy hiatus, with L’Oréal at No. 22, Toyota at No. 24 and Home Depot at No. 25. Those familiar with Gartner’s Supply Chain Top 25 may wonder why perennial leaders Apple and P&G are not included on this year’s list.

Read more at Virtual Strategy.com

Cisco Tests ‘Internet of Things’ in its Supply Chain

  • In one of the latest initiatives to get its own supply chain fully wired, Cisco has been installing thousands of sensors in a plant in Malaysia to monitor and reduce energy consumption. Mr. Kern said in an interview with The Wall Street Journal that the team leading the project believes that implementing the system throughout Cisco’s worldwide production sites will help reduce energy consumption by 20 to 30 per cent, translating into tens of millions of dollars in cost savings. “In 60 to 90 days we’re hoping to prove it,” he said.
  • Cisco has been looking at broader supply chains as a part of its efforts to spread the idea of Internet of Things, the term for the web-enabled connections that can allow devices to transmit information about such things as energy consumption or productivity. Cisco’s Consulting Services group, for instance, is working with logistics provider DHL on a project to send real-time data on warehouse operations, for instance.
  • The Malaysia project is a pilot program that is part of a $4 million fund the company established in which employees brainstorm and test projects to make the company more productive. The projects cover a wide range of supply chain issues and are relatively small-scale for a $47 billion company—the energy management project in Malaysia cost less than $700,000—with the understanding that most will fail. But those that succeed can provide innovative solutions and major savings, Mr. Kern said.

Read more at The Wall Street Journal

Europe’s Fast Fashion King clips Carlos Slim to become world’s third-richest person

  • Amancio Ortega, Europe’s richest man, has become the third-richest person in the world, passing Mexico’s Carlos Slim for the second time this year. The founder of Inditex SA, the world’s largest fashion retailer, has increased his fortune to $68 billion. It’s up 79 per cent since March 2012, when the Bloomberg Billionaires Index debuted. Inditex operates more than 6,600 stores under brands that include Zara, Massimo Dutti and Pull&Bear.
  • Sales at the Spanish company have increased 31 per cent since 2012 to $24 billion in the year ended January 2015. Since Inditex’s 2001 initial public offering, Ortega has received more than $3 billion in dividends and has invested the proceeds in commercial properties in major cities across Europe and the U.S.
  • The billionaire’s performance has eclipsed that of the three other richest people on the planet: Slim, and U.S. billionaires Bill Gates and Warren Buffett. Slim’s fortune has declined 1 per cent, to $67.3 billion, since the index debuted while Gates has increased 38 per cent and Buffett 62 per cent. Ortega has added $7 billion to his fortune since Jan. 1, while Buffett, Gates and Slim have lost a combined $8 billion.

Read more at Bloomberg Business

L’Oreal USA tracks lofty sustainability goals in annual report

  • L’Oreal USA, the largest subsidiary of the L’Oreal Group, reduced carbon emissions by 57 per cent last year.
  • The company’s 2014 Progress report, titled Sharing Beauty With All, attributes the reduction to projects put in place last year to cut carbon impact. One of those projects is a new biomass power plant in its Burgos, Spain, factory.
  • The L’Oreal Group sets lofty 2020 targets in the report that work toward its main goal: ensuring 100 per cent of its products have a positive environmental or social benefit. The company is well on its way to meeting that goal, as the report reveals.
  • Here is an overview of the L’Oreal Group’s progress:
    • 67 per cent of new products that have been screened have either an improved environmental or social profile
    • 46 per cent of new or renovated products have a new formula using renewable raw materials that are sustainably sourced or raw material from green chemistry
    • 54 per cent of new or renovated products have an improved environmental profile
    • 17 per cent of new or renovated products have an improved social profile

Read more at Triple Pundit

SMEs plan to spend average of $30,000 on supply chain software in 2015

  • Software Advice, an advisory that matches SCM software buyers and vendors, found small businesses – with revenues of less than $50 million (£31 million) – are preparing to invest an average of $30,000 (£19,000) on commercial supply chain management software this year. Medium size and large firms will spend an average of $171,000 (£109,000) for new software.
  • The research found that 21 per cent of large firms use supply chain management software, 6 per cent of SMEs do so but this is up from 2 per cent in 2013. Software Advice said software manufacturers were increasingly providing smaller businesses with lower cost solutions and subscription-based services.
  • Software Advice said the software was being used to strengthen supply chains, increase transparency and visibility, harmonise data flowing in and out through multiple channels and eliminate manual tasks, data entry or more complex warehousing operations.
  • The report said supply chain management software could streamline the purchasing workflow. “Procurement systems generally offer multi-currency support as well as tools that can automate purchases and purchasing approvals. These systems can also connect users with vast networks of qualified suppliers – a critical capability for supply chain professionals who are trying to identify the most reliable raw materials suppliers at the best price, wherever they might be sourced from.”

Read more at Supply Management

The challenges holding back true collaborative working in enterprise

Challenges must be overcome before true collaborative working becomes a reality in the enterprise

There is a growing awareness in the enterprise that collaborative working could deliver business benefits such as greater agility and reduced time to market. But there are challenges that first need to be overcome, and the first concerns what we really mean by collaborative working…

Facebook inside your business is not the answer. And neither is Yammer or any other Enterprise Social Network. They have their place in certain use cases, but they were not built to change how we work; just offer an alternative communication channel. To change how we work in the enterprise today is a far more challenging subject to tackle.

Change Managers are hampered by the fact that for the last 25 years, workers have been conditioned to working on a desktop PC; a pre-internet invention. The desktop and its attendant file and folder based working approach actively prevent collaboration, as content authoring is done in a silo before the secondary act of sharing occurs.

The second big issue to consider concerns organisational structure and the relationship desktop working has with it.

Teams within an organisation are tasked with specific remits and outputs, but they are also part of the same common goal; the company output. Often referred to as the Critical Path, the process of coordinating different teams’ activities to deliver company output reliably and on time can be a fraught process as, too often, one team doesn’t know what another is doing. This lack of visibility, despite ongoing efforts to restructure team reporting, can be traced to a body of critical work being authored in silos, with no obvious way of sharing in real time changes in plans and processes that often occur in day to day business.

Start with selfishness

In order for the promise of “collaboration” to be delivered on, it needs to be clear what specific collaborative processes need to be introduced and for whom. How can we recreate a sense of ‘synchronicity’ for businesses that have teams in different offices, often spread across multiple sites, and maybe even different countries?

It is not enough for just one team to introduce a collaborative working platform; the whole business needs to be networked in order to work synchronously and deliver on an optimum Critical Path. In order to create this ‘network effect’ businesses need to appeal to their employees’ most selfish instincts.

Before they change their behaviour, most individuals will want to know what’s in it for them – so businesses need to promote the benefits of collaborative working not just for the group, but for each employee. Start by showing how these new tools can make each person’s workload easier, for example, and how it can support their learning and development. More effective collaboration will also make them more productive and showcase their personal successes more clearly.

Forget about the file

The modern workplace also needs to reflect the world it operates in. Internet connectivity and speed have improved significantly in recent years, paving the way for on-demand content services and cloud storage. Firms like Spotify and Netflix have already smashed Apple’s iTunes dominance of the music and film market by negating the need to download a file before playing it. You just stream it when you want it.

We have this reality in our personal lives, and as a result, employees are starting to expect an application to deliver their work directly to the audience that needs to see and interact with it. Imagine if you had to write a Facebook update, upload it, notify people that it is available and then send them a link to go and read it – who would bother? Today’s workers want to work within a ‘followable’ environment that enables seamless, real-time information sharing automatically.

Share actions, not words

Businesses need to appreciate that collaboration is a behaviour, but one that struggles to work well with the wrong tools. Teams working within the same business are completely dependent on each other, and ‘cc’ emails, file sharing and social network postings are all blunt tools for keeping everyone up to date on what has been done and, more importantly, what needs to be done.

These forms of communication can lead to information overload via cc’ing, version control confusion through file sharing and channel fatigue through another social network. As a result some employees are left out of the loop and others buried under a deluge of information they don’t actually need to see. The next step along this inefficient path is then the ‘team meeting’, which tends to focus on what teams have been doing, rather than what they are doing or need to do.

Effective collaborative working removes communication lag and enables teams to see what is happening right now. It also has the knock-on effect of making it much easier to measure performance of teams across the enterprise. After all, it’s nearly impossible to measure productivity and effectiveness accurately when work is only being shared after it is completed. By comparison, if work is being measured and evaluated in real-time, within a cloud-base working environment, it is very easy to gain useful and actionable business intelligence.

The main benefit of this approach, however, is that more work actually gets done, instead of just being talked about. By having immediate access to different teams’ knowledge, work and progress, it is possible to create a truly dynamic working environment on a global scale. Businesses that are ready, willing and able to adopt this enlightened approach to collaboration will therefore continue to grow and flourish in the years ahead. Alternatively, you could just post an update about this article to your Enterprise Social Network.

The article was written exclusively for Procurious by Tristan Rogers, CEO of Concrete, the global enterprise collaboration platform used by retailers including J Crew, Gap, Kate Spade, Tesco F&F, George and Marks & Spencer.

Will consumers punish companies involved in supplier-driven scandals?

Survey finds that 74 per cent of respondents would be unlikely to buy products or services from a company involved in controversial supplier practices.

Consumers intend to punish companies involved in supplier-driven scandals

A newly published survey suggests that companies who are not actively monitoring the business practices of their suppliers, or who are engaged in questionable supplier practices themselves, are placing their reputations and their balance sheets in harm’s way.

The study of typical American consumers, commissioned by sourcing and procurement specialist Proxima, reveals that 74 per cent of respondents stated they would be unlikely to buy products or services from a company involved in controversial supplier practices. Furthermore, nearly 66 per cent would stop giving such a company their business even if that company was the most convenient and cheapest option.

“In recent years, we’ve seen a tremendous shift as companies are relying more heavily on suppliers for everything from their core offering to the market to back office services,” said Jonathan Cooper-Bagnall, EVP & Commercial Director of Proxima. “With this increased reliance comes increased risk and a requirement to engage suppliers with ethical and responsible track records. The results of this study suggest that companies who fail to appreciably vet and monitor their suppliers are at risk for significant commercial consequences.”

The survey, commissioned by Proxima and executed by Kelton Global, gauged the views of more than 1,000 American consumers over the age of 18 in March of this year. Other key findings of note include:

  • Even among financially-strained consumers (respondents with less than $35,000 a year in income), one in three would spend more money elsewhere to avoid patronizing a scandal-ridden company
  • Nearly a third of respondents indicated that they would proactively tell friends and family to stop spending their money with a company involved in controversial supplier practices

Cooper-Bagnall continued, “In recent years, supplier driven scandals have tainted the reputations and bottom lines of a number of well-known companies around the world. Yet, when these scandals arise, consumers are not drawing a distinction between company and supplier and are placing as much blame, if not more, squarely at the feet of the company. It is, therefore, critically necessary that companies not only vet suppliers properly before engaging them, but create a monitoring program to catch and address any improprieties before they result in public scandals.”

Walmart cops criticism over sourcing practices

WALMART criticised for sourcing water from California

Retail giant Walmart has come under fire in the US over claims the firm is sourcing water used for its bottled water products from drought stricken regions in California.

A report, compiled by a CBS affiliate in Sacramento, suggests that Walmart is sourcing bottled water stocks from Sacramento’s municipal water supply. The world’s largest retailer has drawn stern criticism for this practice given the region is in midst of a crippling four year drought that is devastating crops and forcing residents to face water restrictions.

Similar complaints have been made of coffee chain Starbucks, who were called out in a report in the Mother Jones magazine for sourcing bottled water stocks in parts of California the government has deemed as being in areas of “exceptional drought”. Since the report’s release, Starbucks has announced it will cease sourcing water from the troubled Californian regions, a commitment that Walmart is yet to have made. This lack of commitment was highlighted in the following email statement from Walmart spokesman John Forrest Ales, who outlined the company’s concerns over the drought, but stopped short of altering sourcing practices.

“The drought in California is very concerning for many of our customers and our associates. We share those concerns and are tracking it closely. Our commitment to sustainability includes efforts to minimize water use in our facilities. We have and continue to work with our suppliers to act responsibly while meeting the needs of customers who count on us across California.”

While the public outcry over this issue has been significant (a petition demanding Walmart take its activities elsewhere has garnered over 11,000 signatures), the International Bottled Water Association has been quick to stifle the issue, pointing out that bottled water accounts for less than 0.01 per cent of all water used in the US each year.