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5 critical ways the UK needs to view supply chains differently

Jan Godsell on keeping Britain at the heart of global manufacturing with the help of supply chain companies.

Keeping Britain at the heart of global manufacturing with the help of supply chain companies

Jan Godsell, Professor of Operations and Supply Chain, WMG at University of Warwick, has provided Procurious with her thoughts on the importance of Britain needing to have a greater understanding of its supply chains across industry.

Jan says: “Today, many supply chains are misunderstood, neglected but brimming with potential, much to the detriment of the UK’s entire industrial base. Big opportunities that could set the UK on the path to becoming an important hub for international supply chains are currently being ignored.”

As evidence continues to mount that production is increasingly being re-shored back to the UK, certain questions spring to mind: Does Britain have the right logistical and communication structures in place to support a new wave of manufacturing activity? Are supply chains integrated and streamlined enough for smaller companies to operate leanly and efficiently? What are the restrictions on the supply side and how can they be broken down? And, what are the opportunities in the UK and abroad if businesses develop their supply chain capacity to reach their full potential?

Professor Jan Godsell covered these key issues during the Crimson & Co’s annual supply chain academy on 27 April, which is dedicated to sharing worldwide best practice across the end-to-end supply chain. Jan also noted her insights on the issues affecting global supply chains in the recent APMG Term Paper.

“The supply chain has been de-scoped to focus primarily on procurement and supply management. In today’s globalised world, such a narrow perspective can be damaging to the UK industry. It’s about recognising global demand and configuring the right global supply chains to meet this demand effectively (meeting the customer requirements in terms of cost, quality, time and increasingly environmental and social sustainability). Failure to do so will see the UK become increasingly marginalised with no recognised role or expertise to contribute to the global supply chain network. The good news is that it’s not too late for the UK.”

Godsell explains that with the aftershock of the global financial crisis still reverberating and traditional models being challenged by the internet, the time is right to revisit the role that the UK plays in global supply networks. Whether this be local supply to meet the demands of the UK market, regional supply for the European market or global supply for the world. To capitalise on this opportunity and redefine the UK’s role at the heart of the global supply chain network, there are five critical ways in which the UK needs to view supply chain’s differently.

Jan continues:

1. Functional to holistic perspective

“The UK needs to return to the origins of the supply chain and view it more holistically. Within a company, this means recognising the full scope of all the operational processes that define the supply chain. The core processes are Planning, Procurement, Manufacturing, Logistics and Return (which covers reverse logistics, repair, remanufacture and recycling). These processes are used to understand customer demand and translate it into effective and efficient supply.

2. Manufacturing to planning centric

“If the UK wishes to maximise the role that it plays within a global supply chain network, it needs to consider the different ways in which the UK can contribute to manufacturing. The success of a global supply chain network relies on the correct positioning of the factories, suppliers and warehouses around the globe, to serve different markets. Planning is the “glue” that holds the supply chain together yet it is poorly represented. There is a huge opportunity for the UK to continue to develop a full range of supply chain planning capabilities, and to position the UK as the supply chain planning hub of the world.

3. Re-shoring to right-shoring

“Manufacturing is returning to the UK and one of the main reasons why this is happening is because businesses have started to look at their cost base more holistically and in relation to their competitive priorities. They are no longer fixated with production costs (and labour costs in particular) but are taking a more holistic view of the total cost of sourcing. The challenge for organisations is identifying the most appropriate supply chain network to support their business in order to determine which elements of their production should be made locally, regionally and indeed globally. It’s not about re-shoring but right-shoring. We should enable our businesses to right-shore, as it allows them to understand their strategic priorities and core capabilities, to develop the right global supply chain network and essentially to ensure the success of individual businesses and the UK economy.

4. ‘After thought’ to an integral part of strategy

“UK businesses need to ensure that supply chain strategy is an integral part of their business strategy and find innovative ways to both increase sales today and reduce costs tomorrow. This will require increased presence of those with supply chain expertise at the board level.

5. Specialist function to a pervasive part of our social fabric

“All roles in the supply chain are equal, as a supply chain is only as strong as its weakest link. We need a nation where our boards have good supply chain representation and have congruent strategies to enable competitiveness today whilst building capability for tomorrow, where everyone in the UK understands the importance of our supply chains and the critical role that each and everyone plays in supporting our nation. Together, we have the opportunity to put the UK back at the heart of the network of global supply chains, back at the heart of the global economy.” 

What can bitcoin do to support supply chain transparency?

Most people have heard of bitcoin as a digital currency, used by individuals and organisations to pay for goods, services and other items online. What you might not have heard of is how bitcoin technology could aid supply chain transparency.

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Ethics and sustainability in the supply chain have been talked about at length, with organisations being pushed to ensure that they are operating correctly. However, what is less clear is how organisations can do this to the end of each of their supply chains, for all their products.

And this, according to a number of thought leaders, is where bitcoin technology can play a role.

What are ‘bitcoins’ and ‘blockchains’?

For those of you who are unsure what bitcoins are, it is an online payment system supported by open source software, described as the first decentralised digital currency. For more detail, there are a number of good videos available, like this one.

Supported by open source technology, bitcoin is not owned or operated by one individual or organisation. It is free to use (apart from an optional transaction fee) and can reduce the costs of transactions for merchants compared to credit cards.

The technology behind it is referred to as ‘blockchain’. The blockchain records all the transactions in a publicly available ledger. The ledger keeps track of what users are spending, provides authentication and keeps track of where the currency is.

Applicability in Supply Chains

There are two key ways in which the blockchain technology can be applied in a supply chain. First, the same technology could be used to track products and inventory through a supply chain, confirming receipts and automatically releasing payments to suppliers. This could help to trace items across a decentralised network.

The technology could also help to reduce transaction fees for organisations in their supply chains, as well as speed up payment, with a transaction normally processed within an hour, compared to the usual two to three days.

The second aspect is to aid transparency within supply chains. Blockchains can be adapted to keep track of what is going into a product, who has handled it, ultimately revealing publicly the full supply chain.

Using an app or website, an individual could stand in a shop holding a piece of clothing and be able to trace it all the way back to the farm that supplied the cotton. The information could be used to highlight working practices on the farm, use of pesticides, Fairtrade considerations and more, leading to far greater transparency.

Tracing the supply chain through the use of a ‘product passport’, showing the change of ownership of items through the supply chain and highlighting each step in the process. This would help to facilitate an understanding of the transactions from end to end.

The Challenge

The immediate challenge for this is being able to supply the information that would support a supply chain blockchain. The highly complex nature of organisational supply chains and the large number of suppliers mean that, although this technology could be used to increase transparency, there would be considerable work required in advance of opening this up.

This is a challenge that can also be seen as a call to action for the procurement and supply chain profession. Gordon Donovan, Principle Consultant for The Faculty, talks about creating a ‘supplier wiki’ to build the knowledge of the entire supply chain.

By getting the profession involved to fill in the whole picture, a database could be created, allowing the support for the supply chain blockchain. This could be the future, but procurement needs to be involved to ensure that the right information is made available.

If you have any thoughts on the creation of the supplier wiki, or how we could kick this off, please get in touch. We’d love to hear your thoughts!

In the meantime, here are some of the key procurement and supply chain headlines this week.

Corruption in African Procurement

  • Eighty per cent of South African companies consider political interference in the public procurement process in Zimbabwe to be a regular occurrence
  • The University of Stellenbosch survey also reported that 60 per cent of respondents thought the same was true in South Africa
  • Issues highlighted included bribery of public officials and corruption in the awarding of government tenders
  • The survey said awareness campaigns and training or policy development should be encouraged to help companies overcome these issues

Read more at Supply Management

Hi-tech Firms ‘Right-Shoring’ Supply Chains

  • The fifth annual UPS ‘Change in the (Supply) Chain survey’ has highlighted an increase in ‘right-shoring’ in manufacturing supply chains
  • The survey polled 516 senior supply chain executives in the high-tech industry in North America, Europe, Asia, the Pacific and Latin America.
  • While many firms still operate a strategy of low cost labour, an increasing number of hi-tech firms are bringing supply chains closer to home
  • It is thought greater flexibility in supply chains is behind the increase in both ‘right-shoring’ and ‘near-shoring’

Read more at TT News

British Manufacturing Rises in May

  • After a seven-month low in April, British manufacturing experienced a slight increase during the month of May
  • The Purchasing Managers’ Index (PMI) for manufacturing rose from 51.8 to 52.0 in May due to strong domestic demand
  • However, weak exports and the effects of the weak oil and gas sector have caused the annual predictions to be revised
  • In the UK, the strongest market was consumer goods, with investment in the economy also rising slightly

Read more at Reuters

Amazon Starts Hiring Push in US

  • The online retail giant is hiring 6,000 workers to staff its distribution centres across the country
  • These new workers will join Amazon’s current 50,000 US-based workers across a number of states
  • The hiring push comes as Amazon opens new centres to speed up delivery times, particularly for its ‘Prime’ service

Read more at Supply Chain Digital

Transforming Sustainability Strategy Into Action

At Procurement Leaders World Procurement Congress 15 Shelley Stewart, CPO – DuPont, talked about the challenges of embedding sustainability into procurement processes.

Transforming Sustainability Strategy Into Action At World Procurement Congress 15

Why care about sustainability at all? That was the question posed by Shelley’s thought-provoking opening, before making the observation that although different places in the world feel differently about sustainability – ultimately it is an issue that affects all supply chains.

As evidenced by the following statement, sustainability is already hard-baked into DuPont and reflected in its core values: “DuPont is a science company. We work collaboratively to find sustainable, innovative, market-driven solutions to solve some of the world’s biggest challenges, making lives better, safer, and healthier for people everywhere.”

But while it’s nice to be sustainable, is there a real business value, after-all how do you quantify the value of sustainability?

Shelley points out that sustainability provides your business with mitigation strategies to risks in your supply chain. If we’re not doing much for sustainability then it creates a risk in itself.

Shelley says that at DuPont there was a sharp focus on saving targets, and conversely sustainability was in the distant background. Crucially, there was no one in the business for the CSO to call in the procurement organisation to talk to about supplier sustainability. In DuPont’s case they didn’t have a unified approach.

Happily this has since changed and you only need look as far as the company’s EHS programming slogan which once read ‘the goal is zero’ – and now ‘committed to zero’ for evidence of this fact. Shelley notes that DuPont has also appointed a single person to a centralised position to manage sustainability.

What lessons has DuPont learnt?

First you must learn what sustainability really means for you (in the context of your supply chain). However you must appreciate that the answer may be different for each one of your supply chains.

It’s also important to take onboard external perspectives – you will benefit greatly from peer to peer learning.

Specifically in DuPont’s case it was important to remind people that the work wasn’t being started from scratch. There was a foundation to build on, no matter how tentative that may have been.

It’s imperative that you create a unified approach and save yourself a lot of extra work by doing something ten different ways. At the same time “one size doesn’t fit all” – you’ll need to adopt a certain amount of flexibility to be able to understand changes in your supply chains.

Of course you might find that your supply chain and your suppliers are already ahead you in the sustainability stakes. Why not use their learnings to better realise your own initiatives? It is important to stress that sustainability is a mindset, not a checklist – we must encourage people to think differently if we are going to succeed.

10 tips for procurement professionals from a brand wizard

What Procurement can learn from CPA Australia

10 tips for procurement professionals from a brand wizard

According to Murray Chenery, Executive Marketing Manager, Brand, CPA Australia, procurement professionals cannot afford to ignore their business’ brand.

Speaking at the 8th Asia-Pacific CPO Forum, Chenery who for 12 years was marketing director of Target, one of the country’s most recognisable brands, guiding the retailer through the process of Coles Group selling to Wesfarmers, detailed that ignoring a business’ brand affects a company’s ability to do business.

Chenery highlighted that managing a business’ brand can help grow an organisation into a global player and detailed that this process has a direct effect on recruitment pipelines. Bad decisions in procurement can deal enormous damage to a companies’ brand, meaning brand risk needs to be constantly top-of-mind for every decision made.

It’s no accident that CPA Australia is a brand powerhouse. Under Chenery’s guidance, the accounting body has followed a clearly defined roadmap to success. Chenery highlighted the most important points of what he called “building brand DNA”: know your core business, protect it, nurture it and resource it. Define the brand by understanding your purpose, points of difference, your organisation’s personality and the customer promise.

Chenery stressed the importance of brand differentiation and the value of putting time into finding, understanding and amplifying what makes you stand out from your competitors. Importantly, your competitive advantage must be sustainable to establish and maintain your edge. CPA also places a big focus on customer centricity with an enviable growth market in young professionals between 24 and 32 years of age. His advice on “being where your customers are” to connect with this generation is 100 per cent relevant for the procurement profession and its ongoing challenge of securing the talent bank of future business leaders. Chenery also shared some valuable advice on the need to avoid internal-gazing, the importance of creativity and the immense opportunities for Australian businesses to push into the Asian market, where CPA Australia currently boasts 40,000 members.

To close his speech, Chenery gave the audience his top ten tips for good procurement practice. He’s not a CPO, but his background as a risk-averse brand expert makes his advice valuable and extremely relevant to the assembled procurement professionals.

  1. Recognise that marketing is a creative process.
  2. Treat suppliers as strategic partners.
  3. Understand your brand’s DNA and strategy.
  4. Understand the dynamics of the market in which you are buying.
  5. Appreciate the history of relationships.
  6. Be as clear as possible in your briefings.
  7. Understand the processes being bought.
  8. If you don’t measure, things don’t get done.
  9. Evaluate partners by visiting their operations.
  10. Use flexible, longer contracts to build partner loyalty leading to better deals.

The 9th Asia-Pacific CPO Forum will be held in May 2016. To ensure you receive an invitation, register your interest in attending here ([email protected])

 

5 Megatrends In Technology

At Procurement Leaders World Procurement Congress 15 David Rowan, Editor of Wired – offered a fascinating insight into the megatrends that are making waves in the technology space.

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The emergence of virtual currencies

What does a Video Games company, a Travel company and a Cable network all have in common? You can pay for all their products using a new kind of currency called Bitcoin. It exists only in the Cloud, meaning there’s no central bank. And (as David notes) although much of the news coverage surrounding Bitcoin is focused on the volatility of the prices, virtual currencies like Bitcoin are going to be something quite important. There’s a backbone to the Bitcoin/crypto  currencies called the Blockchain – it’s like a repository of trust, that keeps a record of all transactions.

Decentralised community ownership

Crowdsourcing is big business. Just look to online initiatives like Kickstarter and Indiegogo to see the already game-changing impact these platforms are having. Ideas that would once be looked upon as impossible challenges are now becoming reality in a matter of years, months, even weeks…

As a direct consequence we are seeing a power shift from traditional factories. Communities are now crowdsourcing their own manufacturing, creating  entirely new kinds of businesses. You no longer need to own your own factories, just access to someone with one.

From software to hardware

In recent years 3D printing has exploded. What started as a technicolour fantasy is now being realised the world over – in David’s view, the kitchen is where the 3D printer will really make an impact.

The beauty of 3D printing lies in its immediacy. It turns the imaginable into the tangible – if an idea pops into your head, all you need is a design in order to physically make it.

David makes the point that surprisingly for something so new, 3D printing is already being disrupted. As advancements are made in technology, availability of materials improves, speed of processes increases and costs come down – the 3D printing playing field is shifting and changing.

Internet of Things

You’ll have heard a lot in the press about the Internet of Things (or IoT for short). Hardware is increasingly moving online, aided by the convergence of wireless technology. This all plays into the scenario that IoT presents, and effectively removes the need for human-computer, human-human interaction. As a consequence companies are making connections for things that were once offline.

Due to the rise in availability of ubiquitous, embedded sensors, and as prices continue to fall – everything is now connected and being put online.

Logistics already use sensors in their pallet boxes to track location data, or to issue an alert if goods are tampered with during transport.

Humans becoming machines

Artificial intelligence is turning into a thing – it’s becoming real. A company in London’s King Cross has taught a computer how to not only play Space Invaders, but master it to become the best player in the world. Although it’s not been designed to generate any revenue, it didn’t stop Google from buying the company (and the idea) last year for £400m.

What if your devices could read your emotions? Another innovative startup is answering that call – machines are starting to become more intelligent, and as a result AI is starting to understand what you’re feeling and not typing. You only to have to look as far as apps like Swiftkey to start to see this advance in action – it’s not such a far-flung notion.

What will the Enterprise Bill mean for SMEs?

Tracy Ewen, managing director of IGF Invoice Finance, has provided Procurious with her comments on the announcement of a new Enterprise Bill in today’s Queen’s Speech.

Enterprise Bill announced in 2015's Queens Speech

“Measures will also be introduced to reduce regulation on small businesses so they can create jobs.”

The purpose of the Bill is to:

  • Cement the UK’s position as the best place in Europe to start and grow a business, by cutting red tape and making it easier for small businesses to resolve disputes quickly and easily.
  • Reward entrepreneurship, generate jobs and higher wages for all, and offer people opportunity at every stage of their lives.

Tracy says: “The announcement in the Queens speech today introducing a new Enterprise Bill – giving additional support to SMEs to settle payment disputes – ought to be welcomed by businesses across the UK. To have this Bill included in the speech should give hope to many struggling businesses that the government is serious about the need to protect SMEs and bring an end to the issue of late payments. 

The current payment terms that many suppliers in the UK are subjected to mean that goods delivered today wouldn’t need to be paid for until long after summer is over; a practice that isn’t sustainable, but it is a reality that, until now, SMEs have had very little power to change. The implementation of a Small Business Conciliation Service should protect SMEs against larger and more powerful entities, and should reduce the number of SMEs that fold due to intense cashflow problems.

Whilst acknowledgment in the Queen’s speech has symbolic importance, businesses have been waiting for support from Government to tackle this issue for a long time, so will be watching the progression of this Bill with care and limited expectation.

In the meantime, there are options available that cover the gap between work completed and money in the bank. It’s therefore important for firms to thoroughly review their options and make use of any free financial advice that their own financial partners and suppliers can offer before pressure from large customers impacts their growth or operations.”

How to Re-Energise Your Procurement Strategy In 100 Days

Steen Karstensen, CPO – Maersk, on re-energising your procurement strategy.

Maersk CPO Steen Karstensen

Steen was speaking at Procurement Leaders World Procurement Congress 15 in London.

At Maersk there is a vision, and that vision is represented by the following mantra: “Every dollar spent is spent professionally”.

Maersk believe that in order to be competitive and stay ahead of your contemporaries you need to constantly reinvent yourself. To that end the conglomerate follows a bi-yearly strategy: every second year it takes a long-term view of the business. Steen says that it’s imperative to keep momentum going – you’re either ahead of the game or dead in the water…

Maersk needed to ask “What would my successor do differently?” So we approached Rick Hughes, Procter & Gamble’s Chief Procurement Officer, to create a ‘CPO 100 day plan’. Rick would assess the organisation and come up with a list of actions.

Rick conducted a study that gathered a 360-degree view from Maersk management figures (CEO, COO, Group Strategy Officer), 30+ procurement staff and key suppliers. He brought with him a fresh, candid and apolitical mindset – he was the sort of person that could leverage insights from his vast experience, and had the appetite to change the business.

Maersk also approached the University of Bath to get a theoretical reading of the procurement strategy.

And what did they learn?

There were definite signs of “big corporate syndrome” – Maersk would need to take some of its own cost medicine. How? It would need to simplify work processes as well as organisation.

With the CAPEX Procurement model, the right structure was in place, but now was the time to deliver results.

In terms of category management there was a requirement to upgrade processes, roles and capabilities. Plus a call for investment of senior resources in SRM.

And finally it was noted that important procurement prerequisites were not properly in order, thus an obvious need to standardise and document all core processes going forward.

Success in all of these areas would only be truly possible with deep business integration. Having both the technical function and procurement community reporting into the same place encourages both alignment and innovation.

The challenges re-energised their strategy process and in-turn generated three main (actionable) take-aways:

1. Take a 360-degree view on the organisation

2. Be open to reveal and discuss weaknesses

3. Be bold on actions – also in previously failed areas.

Leniency for Corrupt Petrobras Suppliers?

Petrobras, a Brazilian state owned oil company

Earlier this year Petrobras, a Brazilian state owned oil company, became involved in court action over questionable activities within its supply chain. Executives at the company were accused of accepting bribes, rigging bidding processes and facilitating overcharging in return from kickbacks from suppliers.

The resultant actions have had a marked effect on Brazil’s economic fortunes. After the scandal broke Petrobras elected to freeze all activity with the suppliers involved in the controversy. This decision has sent ripples through Petrobras’ supply chain resulting in bankruptcies and staff layoffs at a number of Brazilian firms. To put some scale to the project, it is estimated that Petrobras accounts for 10 per cent of all capital spending in Brazil. The slowing of work at Petrobras is thought to be one of the key factors contributing to Brazil’s economy shrinking by 1 per cent this year.

In response to the slowdown, the Brazilian government is considering a path of courtroom leniency for the embattled suppliers. In a bid to re-spark the country’s flailing oil and gas industry and kick-start its economy, the comptroller general is in discussions with five of the 30 suppliers caught up in the scandal. It is thought that should these firms accept responsibility for their wrongdoing, pay fines and commit to compliance measures, their exclusion from participating government contracts will be lifted.

It’s important to note that the proposed moves will not have any impact on the criminal trials faced by the executives of Petrobras and its suppliers. One of whom, Nestor Cervero, was sentenced to five years in prison yesterday for allegedly using money received from bribes to purchase an apartment. Cervero is the second Petrobras executive to receive a jail sentence for his role in scandal. Last month, Paulo Roberto Costa, former Petrobras director of refining and supply, was sentenced to seven and a half years in prison. However, after signing a plea bargain he will serve only one year under house arrest.