All posts by Procurious HQ

Is Your Organisation’s Sustainability Program As Good As This?

The Fruits Of Nespresso’s Sustainability Program Revealed.

Nespresso's Sustainability Program

On the one-year anniversary of The Positive Cup, Nespresso’s 2020 sustainability strategy, Jean-Marc Duvoisin, CEO of Nestlé Nespresso, has announced that significant progress had been made towards improving the lives of thousands of coffee farmers.

The Nespresso AAA Sustainable Quality Program was developed with the NGO the Rainforest Alliance to secure the supply of highest quality coffees, protect the environment and improve farmer welfare. Over 63000 farmers are now taking part in the program in 11 countries, benefiting from technical assistance, trainings, price premiums and investments in infrastructures.

Over the past two years Nespresso has been working with its partner TechnoServe to help rebuild the coffee sector in South Sudan, resulting in the country’s first-ever coffee exports in 2013, and its first non-oil export to Europe. Nespresso aims to produce a new rare coffee from South Sudan, while providing alternative sources of sustainable income to local farmers.

The fruits of the Nespresso AAA Program are already being felt, as Joseph Malish Thomas, a South Sudanese farmer, attests: “I have seen that there is great change within the community. We want to produce the right quality. People now have hope. We will be able to pay school fees for children and in the end develop the country.”

Nespresso aims to source 100 per cent of its coffee from its AAA Sustainable Quality Program by 2020. This depends heavily on the extension of the program into Kenya and Ethiopia, to support a more skilled, self-sufficient and sustainable farming community. In the last 12 months Nespresso and TechnoServe have provided training and technical assistance to over 10000 farmers, and will reach 50000 farmers by 2020.

Nespresso has also progressed with its agroforestry plan. The reintroduction of trees in coffee producing regions helps protect natural ecosystems, thereby strengthening coffee farms’ resilience to climate change and ensuring sustainable coffee production for the future. Around 130000 trees were planted in 2014 in Guatemala and Colombia as part of pilot programs. In the first half of 2015, approximately 200000 trees have been planted in Ethiopia and Guatemala, and another 300000 will be planted by the end of 2015 in Mexico and Colombia.

“The Rainforest Alliance has been working with Nespresso and the AAA Program since it was first created in 2003.  Together we have seen great achievements that have delivered tangible improvement to lives of coffee farmers, families and communities, as well as environmental and biodiversity benefits,” said Tensie Whelan, President of the Rainforest Alliance. “The progress being delivered by Nespresso, the Rainforest Alliance and Pur Projet through the agroforestry plan is building on that success, helping farmers to improve their resilience to the real and present threat that is climate change.  Working together we are showing that care for the environment and for coffee farmers is a fundamental part of supplying the highest quality coffee to Nespresso’s consumers around the world.”

Are Business Costs Too High or Too Low?

Watch the Procurious Big Ideas Panel Discussion on Business Costs.

In the third of the panel discussions from the Big Ideas Summit, Dr Jules Goddard chairs a ‘fishbowl’ discussion where participants are asked to argue both sides of the question, ‘Are business costs too high or too low?’.

Watch a sample below

The panel started with Chris Lynch, Theano Liakopoulou, Chris Sawchuk and David Noble, gradually interchanging the other thought leaders as the discussion progressed. In an often heated environment, a number of hot topics were raised and some great insights released.

Procurious members can view the full panel discussion here. Not a member yet? Register for free.

ISM Reports US Manufacturing Has Risen To Five-Month High

The Institute of Supply Management sheds some light on the current state of manufacturing in the United States.

ISM Reports US Manufacturing Has Risen To Five-Month High

The Manufacturing ISM Report On Business is based on data compiled from purchasing and supply executives nationwide

In general respondents were upbeat about the economy. Some of the key insights from its June report include:

  • “Avian flu is having a huge effect on egg pricing and items manufactured with eggs.” (Food, Beverage & Tobacco Products)
  • “Automotive industry remains strong and is expected to stay that way through 2015.” (Fabricated Metal Products)
  • “Business continues to hold in the U.S., [but is] soft in Europe and in decline in Asia.” (Transportation Equipment)
  • “Manufacturing business has improved slightly.” (Chemical Products)
  • “Slight improvement in defense spending on future business.” (Computer & Electronic Products)
  • “Most prices are stable and business is stable.” (Nonmetallic Mineral Products)
  • “Downturn in oil and gas markets impacting demand.” (Miscellaneous Manufacturing)
  • “Stable. Extra capacity available if more orders come in.” (Textile Mills)
  • “A bit slow. Sales down from last year.” (Machinery)
  • “Business continues to be strong, with housing starts being up in our markets driving cabinet sales.” (Furniture and Related Products)

Barclays economists distributed the following note to clients following the release: “Looking ahead, the recent pickup in the forward-looking survey components suggests a modest improvement in output and employment for domestic manufacturing… We do not expect a robust rebound given the lingering effects of a stronger dollar and lower oil prices; however, we view a modest H2 manufacturing rebound as increasingly likely.”

Procurious Big Idea #29 – Buying The Right Expertise

Murray Chenery, Executive General Manager of Brand for CPA Australia, highlights the importance of having procurement onside as a partner.

Murray, having purchased over $1.8 billion of marketing communication, talks about the importance of procurement as a partner to marketing, but also ensuring that the best marketing expertise is bought, not necessarily the cheapest.

See more Big Ideas from our 40 influencers

IT Spend – Do You Know Who’s Calling The Shots?

Do you know who’s responsible for your organisation’s IT spend?

Spiceworks - IT decision makers report

As you well know, Procurious is the home of the procurement and supply chain functions on the Internet. We’re not alone in the world of niche social networks however. Spiceworks is a vertical social media site for IT professionals. It functions in much the same way as a Procurious does. A repository for knowledge sharing, a place to get questions answered and somewhere to connect with the global IT community.

Spiceworks recently released a report that we believe the Procurious audience will find interesting. The report is pitched at those marketing to IT decision makers and details who has the final say on IT purchasing decisions at different sized organisations. Perhaps naïvely, there is no reference procurement’s role in the IT purchasing cycle, but its findings (listed below) are none the less interesting.

Home office market

1-10 Employees.

Generally in organisations of this size, either office managers or company owners themselves make IT purchasing decisions. Purchasing processes tend to be unsophisticated or non-existent. Purchasing tends to take place at retail stores and is based on driving events like a new employee starting or current equipment breaking down.

The ’S’ in SMB (Small to medium businesses)

10-250 employees.

Organisations of this size will tend to have at least one IT generalist that is responsible for making IT sourcing decisions. These organisations don’t posses the bulk buying power of larger companies and hence, are very careful with their IT budgets. Decision making power likely still lies with non-IT management, but close attention is paid to the advice provided by IT staff members.

The ‘M’ in SMB

250-500 employees.

As companies grow in size, so too does the complexity of their IT requirements. Firms of this size will generally have a small but highly skilled IT team, led by an IT director (or equivalent). Purchasing power will tend to reside with the head of the IT function. These companies are purchasing IT products and services on a regular basis and are generally looking to establish close, ongoing relationships with suppliers. The relationships these firms have with their suppliers tend to be collaborative, with the IT team often asking suppliers for information and advice on IT investments.

The Large SMB

501 – 1000 employees.

The sheer size of these organisations requires a well structured IT team. It is not uncommon for IT functions in businesses of this size to run to 20 people. Generally, a sound hierarchy of responsibly and purchasing authority has been established. The team will often be led by an IT director or VP that is viewed as a senior executive within the business. This IT director, will still likely maintain a hands-on role in delivering IT solutions within the business.

The Enterprise Market

Over 1000 employees.

Enter the CIO. Throughout the report, Spiceworks touches on the fact that many marketers target the CIO as the key to unlocking IT spend. At the smaller firms, this isn’t exactly true as many wont even have a position of CIO. However, at the enterprise level the CIO is well and truly present.

A good CIO will have strong relationships with the supply market, both with his current suppliers and the external market. He will understand what is current in the IT space and will have final say on any major IT purchases. He should not be the only point of contact for IT marketers however. IT decisions in these large organisations are often made by staff a few rungs down the IT corporate ladder.

What are your thoughts about this split? In your experience, is this where the decision making power lies within IT departments? And the big question, where does procurement fit in to all of this?

H&M Struggle with Strong US Dollar

Fashion retailer H&M’s profits miss forecasts thanks to might of US dollar.

H&M hit by strong US dollar

The world’s second largest fashion retailer, H&M, is facing a significant reduction in its profit outlook. The bleak outlook is due largely to changing currency valuations and their impact on the firm’s supply chain.

Despite rapidly increasing sales figures, the firm has warned of a “very negative” impact to its bottom line based on the growing strength of the US dollar.

H&M has suggested that the strengthening US dollar will cause second quarter profit figures to take a significant hit. It’s also likely that these troubles will continue into the second half of the year as analysts suggest the value of the US dollar will continue to improve against most other currencies.

The currency exposure the firm is facing is due to the structure of its supply contracts. H&M sources the majority of its products from Asian markets. The contracts for these garments are agreed and signed in US dollars. However most of the retailer’s sales take place in the European market and are conducted in either Euros or Pounds.

It therefore follows that as the value of the US dollar increases against the Euro and the Pound, the cost of H&M’s garments and raw materials experience a relative increase. This means that unless the firm elects to increase in-store pricing, the margin it makes from selling each garment reduces. Clearly, this has a detrimental impact on the firm’s profitability.

One would imagine that the procurement and supply chain departments at H&M identified this currency exposure some time ago and have established a form of currency hedging as means to minimise its impact. But, it should certainly prompt questions in the minds of procurement and supply chain managers with cross currency operations to take a closer look at their currency exposure.

New Runway Offers Freight Potential, While US Investigates ‘Collusion’

The airline industry is a popular news topic, appearing on two fronts this past week. The decision on a new runway for London got people talking about airfreight, while in the US, an investigation was announced by the Department of Justice into alleged collusion.

All eyes on Heathrow expansion plans

New Runway Plans

Last week, a UK Government commission selected Heathrow as the preferred location for a new runway to be built in London. Following the publishing of the report, UK Prime Minister, David Cameron, confirmed that a final decision would be made by the end of the year.

The plans for Heathrow, already the busiest passenger airport in Europe and third busiest in the world, appear to have beaten competition from London Gatwick and a proposal for a brand new airport in the Thames estuary.

While it appears that the debate will rage on until the final decision is made at the end of the year, business leaders and UK organisations have welcomed the decision. With Heathrow currently operating at 98 per cent capacity, many think that this is directly impacting business and freight.

‘Importance of air freight’

The freight industry believes that additional runway capacity at Heathrow is required in order to service new markets in Asia, South America and the Indian sub-continent.

The Chief Executive of the UK’s Freight Transport Association (FTA), David Wells, stated that, “80% of freight is carried in the holds of scheduled passenger aircraft using Heathrow Airport.”

“Whereas passengers could be persuaded to use a different airport, the diminution of Heathrow as an international air cargo hub favours neither the country nor the economy,” Wells concluded.

Future Exports

The commission report highlighted future exports for the UK as a reason for their decision. The report stated, “By 2030 advanced manufacturing industries such as pharmaceuticals or chemicals, whose components and products are predominately moved by air, are expected to be among the top five UK export markets by their share of value.”

Sir Howard Davies, Chairman of the Airports Commission, who compiled the report, went on to say that the Heathrow option provided the “greatest benefits for business passengers, freight operators and the wider economy”.

While it remains to be seen if the UK Government will go along with the Commission recommendation, it does appear that business might benefit from a new runway at Heathrow.

Collusion Investigation

Over in US, the industry is in the news for less positive reasons, with the Department of Justice (DoJ) announcing a new investigation into alleged collusion between some of America’s biggest airlines.

United Airlines, Delta Air Lines, American Airlines and Southwest Airlines have all confirmed that they are part of the investigation, which will focus on whether the airlines have been coordinating to keep tickets available at a steady number, artificially increasing demand and driving up prices.

The four airlines account for 85 per cent of the domestic routes across America, partly due to two high-profile mergers in the past year. The investigation also comes at a time when airlines are posting huge profits due to the falling oil prices.

Questionable Outcomes

However, many commentators believe that the investigation will not produce outcomes that will be of benefit to consumers. For one, it is hard to prove that airlines are actually colluding to keep availability low, as with better technology, information on both capacity and pricing can be found easily and immediately.

There is also an argument to say that it would be just as effective to let markets sort out collusive behaviour on their own. There are other ways to ‘collude’ beyond pricing, but ultimately, if inefficiencies appear in the market, new competitors will emerge or consumers will look elsewhere to satisfy their needs.

Whatever the final outcome of the investigation, it looks as though there will be greater scrutiny on the airlines in the coming months. While it may not lower prices in time for the busy summer holiday period, there is a chance it may push the airlines to be more transparent and act in a favourable way for consumers.

Do you live near Heathrow or commute through there regularly? What do you make of the decision for a third runway? Do you think the DoJ investigation will make any impact? Let Procurious know what you think.

While you think about that summer sunshine, have a read through the headlines from the procurement and supply chain world this week.

BP agrees to $18.7 Billion payout for deadly 2010 oil spill

  • BP agreed on Thursday to pay $18.7 billion for damages caused by its oil rig explosion in the Gulf of Mexico in 2010, an accident that resulted in the deaths of 11 people and the largest marine oil spill in history.
  • The settlement covers lawsuits filed by parties including the U.S. government, five U.S. states that were affected by the spill, and several hundred local government organisations. It also includes a civil penalty of $5.5 billion under the U.S. Clean Water Act.
  • The settlement, which comes in addition to the hefty sums that BP has already had to pay in legal and clean-up fees over the last few years, will be paid over 18 years and is expected to end the majority of BP’s litigation wars over the accident, though the company still faces shareholder lawsuits and some outstanding costs from a 2012 class action settlement.
  • With this new settlement, BP’s total bill for the spill climbs to $53.8 billion—a number that exceeds the company’s profits in the last three years.
  • Carl-Henric Svanberg, BP’s chairman, said in a statement that the agreement offers “a path to closure” for BP and the Gulf. “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise,” he said.

Read more on Slate.com

Fast fashion retail market trends and opportunities 2015-2019 shared in new research report

  • The report titled “Fast Fashion Retail Market: Trends and Opportunities (2015-2019)” analyzes the potential opportunities, challenges, demand drivers and significant trends representing fast fashion industry in the world.
  • The report gives valuable insight into various types of brands of fast fashion such as ZARA, H&M, Uniqlo and GAP.  It profiles and analyzes the leading five companies operating in this industry with an overview of their business and finance structure along with a brief discussion of their future business strategies.
  • The report also studies the growth pattern in the fast fashion retail market and the latest trends concerning fast fashion. Further, the report analyzes the current market size and project future market size of the overall fast fashion retail business for the years to come.

The complete report is available to download here

From trash to treasure: Adidas designs shoes made of ocean garbage

  • German sportswear brand Adidas has joined forces with Parley for the Oceans, an organisation formed in 2013 dedicated to undertaking projects to protect and conserve the Earth’s oceans.
  • To raise awareness about ocean pollution, Adidas has designed a prototype pair of sneakers with an upper made entirely from recycled ocean waste and illegal deep-sea gillnets.
  • These gillnets were retrieved by Parley for the Oceans partner Sea Shepherd, which spent 110 days tracking an illegal poaching vessel, finally catching it off the coast of West Africa.
  • “We are incredibly excited to join Parley for the Oceans as they bring the cause of the oceans to the attention of the United Nations,” said Adidas’ Eric Liedtke. “Adidas has long been a leader in sustainability, but this partnership allows us to tap into new areas and create innovative materials and products for our athletes. We invite everyone to join us on this journey to clean up the oceans.”

Read more at CNET

Supply chain workers urge Walmart to act on supplier standards

  • Walmart must do more to improve supply chain transparency and hold its suppliers accountable, according to a study from the Food Chain Workers Alliance. The report includes research on 11 different food-related industries in the retail giant’s supply chain, as well as on the corporation’s impact on local farmers.
  • The alliance said the retailer should do more to hold suppliers accountable to labour and environmental standards. The report, Walmart at the Crossroads: the Environmental and Labor Impact of Its Food Supply Chain, calls on the company to enforce its existing labour and environmental standards and fulfil its goals for local food purchases.
  • The report also contains a raft of recommendations for the supply chain. It said Walmart should improve its supply chain transparency by requiring suppliers to identify the names and addresses of all factories, farms, fishing vessels, or other entities that contribute to the product being purchased before a supplier contract is awarded. This information should be made public, the organisation which represents workers in the food supply chain said.
  • The study also called for an independent, third party body to monitor and verify supplier compliance with Walmart’s labour and environmental standards. Suppliers should have long-term contracts and be paid fairly, and should pay workers fairly.

Read more at Supply Management

Procurious Big Idea #28 – Meeting Suppliers Face-To-Face

Marisa Menezes, Managing Director for The Source, believes that there’s a lot to be gained by conducting face-to-face meetings with your suppliers.

Here Marisa focuses on the hot topic of Supplier Relationship Management and how spending face-to-face time with suppliers and getting to know each other’s organisations can help to build closer relationships.

See more Big Ideas from our 40 influencers

Amazon Prime Now Will Shake-Up Logistics Strategies

Amazon Prime Now will force retailers to reassess existing delivery strategies.

Amazon Prime Now will change the logistics industry

The success of Amazon’s new one-hour delivery service will depend on a number of factors, notably product availability, as well as the customer’s willingness to pay inflated delivery prices to secure a product and have it in their hands within 60 minutes. However, if it proves popular, it will up-the-ante on fellow retailers and put pressure on competitors to reassess their existing delivery strategies. The warning comes from Jon Gibson, Head of Logistics at global supply chain consultancy Crimson & Co, in comments supplied to Procurious.

Jon believes the key to the service, will be the retailers ability to balance additional delivery costs alongside speed of service. Critical to this will be the need to forge new relationships with unconventional partners, which can ultimately deliver the products to the consumer faster, more conveniently and at an affordable price.

Following success in the US, Amazon has recently announced that it would be launching Amazon Prime Now, a one-hour delivery service for UK Prime subscribers in designated London postcodes. If successful, further rollout will follow across the country. The launch is expected to raise the stakes amongst other online retailers keen to grab market share from bricks and mortar competitors.

Jon states that in order to compete with the new service retailers will be forced to rethink current delivery strategies. Over the last year the growth in click & collect services has seen many consumers favour convenience over speed. The move by Amazon could buck this trend and it will be the job of the retailers to react accordingly:

Speaking to Procurious Jon commented: “Historically, delivery strategies have always been a challenge for retailers. The proliferation of tablets and smartphone devices puts the emphasis very much on speed of service giving consumers instant visibility over a far wider range. Visibility of the range has driven a desire for quick access. Reacting quickly and efficiently has always been difficult for retailers, either because they are often serving the online market from retail outlets, which puts pressures on stock, or the massive peaks in online demand surges that have recently been driven by events such as Black Friday being too great for traditional transport methods to cover.  

“The emergence last year of click & collect changed that, (although, Black Friday was still a challenge many retailers failed to cope with effectively), with greater emphasis on convenience for the consumer. They can choose a destination point close to their home or work and collect their item at their leisure, often a lot quicker then if they had arranged a home delivery. This is both more convenient and cost effective for the retailer, as it leads to consolidation of delivery and fewer occasions when a delivery cannot be completed because the intended recipient is not available. Amazon’s launch of a new one-hour delivery service, however, could flip that trend.”

He continues: “For a consumer, the opportunity to buy a product online and have it in your hands within an hour is hugely appealing. The biggest barriers for uptake of this service will be the associated costs. Products will be delivered by Amazon Logistics, its own delivery business, from an east London warehouse, at a premium delivery price. Savvy retailers should therefore look at how they can compete with this.

“Key will be addressing relationships with existing suppliers as well as forming new ones with unconventional partners. Local transport businesses such as taxi firms, and even fast food delivery services could all potentially be used to maximise speed of service for the consumer at a price which is competitive against other retailers. The pressure will very much be on the retailer to ensure this is carried out effectively – those that don’t are at risk of being left behind by their more progressive competitors.”