All posts by Procurious HQ

WHY And HOW Procurement Must Change

‘Innovation’ – the action or process of innovating.
“Innovation is crucial to the continuing success of any organisation” – it’s a new method, idea, product, etc.
We’re here at eWorld Procurement & Supply in London and Alex Saric – Global Vice President, Marketing, Ariba, wants to talk about innovation…

While ‘The Innovation Imperative’ sounds like an episode title from The Big Bang Theory, today we were told about a different sort of evolution. Alex wanted to drive home the message that in order to truly transform the function into a strategic value driver, procurement leaders need to innovate.

And while it’s all well and good that we toot our own horn, when we’re talking about innovation it is critical that everybody thinks about procurement, and in-turn goes about their job differently.

Why now? The screws are tightening… Today there’s increasing pressure on companies thanks to increased competition. Just look at new players like Uber who have introduced wildly new business models. But, as Alex notes, whenever there is a great challenge, there’s also great opportunities. As such there is a need to embrace these changes, but to do so, procurement needs to rethink its entire approach.

Crucially procurement (as a function) is in a prime position to take advantage, it needs to strike while the iron’s hot as no-one else has really stepped up to the challenge (yet).

What can procurement learn from Uber?

In order to successfully innovate we need to recognise that procurement is becoming embedded in other parts of our organisations – and in doing so, it is also playing a more strategic role.

Here Alex pinpoints four areas where we can add value:

  • Product innovation
  • Market expansion
  • Working capital management
  • CSR/Regulatory compliance

With all these in mind, what do we need to enable procurement innovation?

People: people need to want to develop. Here we are provided with the example of people not willing to use social media at work, while they are more than happy at home (in personal time). It’s this shift in attitudes that needs to be addressed and adjusted in order to progress.

Automation: the automation of processes will enable you to free your capacity to concentrate on other things.

Connections: in order to drive innovation you are going to be talking to a lot of suppliers (but you need to be talking to the WORLD). Expand your connections by whatever means necessary.

Business networks: Business networks are simplifying business collaboration and delivering benefits across all network participants. In this example procurement isn’t the only function that wins, benefits will be felt across the entire organisation when you open up the communication channels.

Wrapping up a very packed session, Alex reminded us that innovators are already starting to reap the rewards. For instance, Staples has reduced its processing costs and Cisco is making savings across its services. Along with the aforementioned Uber and Amazon, innovation is starting to drive key changes across the world’s stage… The question is what are you doing to follow suit? Isn’t it about time you caught the innovation bug too?

Tackling the Supply Chain – Rugby World Cup 2015

On Friday night, the eighth Rugby World Cup kicked off with a hard fought win for tournament hosts England over Fiji at Twickenham. With over £1bn expected to be added to the UK economy over the next 6 weeks, how will supply chains cope with, and ultimately benefit from, increased demand?

Over the course of 44 days, 48 matches will be played out in front of a global television audience expected to surpass 4 billion people across 207 countries. It is also estimated that over 466,000 international fans will visit one or more of the 14 cities where matches are staged or fan zones are in operation.

Investment, Jobs and Opportunities

In preparation for the tournament, over £85m has been invested in infrastructure around the UK, with further investment expected in creating a ‘legacy’ for rugby around the country. Over 41,000 jobs will be created, including 16,000 related to the tournament and over 12,000 along the supply chain. In total, outputs are expected to surpass all previous tournaments at £2.2bn.

UK businesses will also see a legacy from the tournament. At the 2011 tournament in New Zealand, 52 per cent of businesses increased their international networks, and the same is expected this year in the UK.

The British Beer and Pub Association (BBPA) anticipates an additional 25 million pints will be drunk during the tournament, bringing over £86m into an industry that has been struggling in recent years.

However, it’s not good news for all companies. Thanks to a £20 million pound sponsorship deal for Heineken, Guinness has been removed from all 13 host stadia. No small matter, given that Guinness accounts for half of all pints sold at Twickenham in recent years.

Procurement and Supply Chain Matters

With the increased tourism to the host cities, there is a positive knock-on effect for supply chains across the UK too. Businesses have been encouraged to work directly with organisers and tourist boards in order to ensure that they are ready for the influx of extra customers.

As might also be expected, there have been a considerable number of opportunities for businesses to get involved with supplying the tournament itself, as well as the teams. A dedicated tender portal was set up for all official opportunities and advice given to businesses to enable them to boost their chances of winning business.

England Rugby 2015 Chief Executive Debbie Jevans was quoted in 2014 as saying that companies need to be aware of the attributes England Rugby 2015 look for when deciding on procurement options.

“Awards will generally be given to companies that are suitably qualified and can provide a competitive commercial proposal, as well as a compelling service proposition,” she said.

And with awards made for all manner of things, including security, fleet management and medal making, there is huge potential for UK business to take advantage of this great opportunity and get their slice of the pie.

And We’re Off

So, with the tournament firmly up and running, and team Procurious collectively supporting Scotland, England and Australia (or if you are like this writer, hoping Scotland don’t perform as abjectly as in 2011), it’s either time to kick back and watch some matches, or avoid them at all costs.

Just don’t be one of the anticipated 4.4 million workers who will skip work just to take in a match…

Is your business benefitting from the Rugby World Cup? What does the tournament mean for you? Let us know and tell us your stories of this, and past, World Cups.

For those of you needing something other than rugby to talk about this week, here are the big headlines in procurement and supply chain…

Plunging oil prices put question mark over $1.5tn of projects

  • Plunging oil prices have rendered more than a trillion dollars of future spending on energy projects uneconomic, according to a study that suggests that the impact on industry operators is worsening.
  • A report published Monday says $1.5tn of potential investment globally — including in North America’s shale-producing heartlands — is “out of the money” at current oil prices close to $50 a barrel and unlikely to go ahead.
  • Industry operators expect capital spending on new projects to decline by between 20 and 30 per cent on average in the wake of the price slide, says Wood Mackenzie, the energy consultancy. It calculates that $220bn of investment has been cut so far, about $20bn more than it estimated two months ago and much of it the result of projects being deferred.
  • Such a decline in spending means that the price crash since last summer — the result of weaker Chinese demand, record US production and Saudi Arabia’s decision not to cut output — could resemble the savage downturn of the mid-1980s.

Read more at the Financial Times

Target supply chain woes get serious

  • Target is now taking its supply chain problems seriously. The major retailer has been struggling with running out of stock and even having empty shelves in stores. But last week, John Mulligan, the newly appointed chief operating officer, called the company’s woes “unacceptable.”
  • “We’ve been asking our supply chain to move well beyond its original design and become more flexible in the way we serve our guests,” Mulligan said. “However, while we understand the reasons, the simple fact is that our current performance is unacceptable.”
  • Target’s online ordering and in-store pickup options have reportedly magnified the retailer’s supply chain problems. The growth in online ordering could have more widespread impacts in the retail sector, where other companies’ supply chains might not be up to the task.

Read more at Spend Matters

European auditors warn over public procurement errors

  • The European Commission and member states must do more to address problems with public procurement in EU cohesion spending. The European Court of Auditors said failure to comply with public procurement rules has been a “perennial and significant source of error in EU cohesion expenditure”.
  • It also recommended payments to member states should be suspended if shortcomings on public procurement were not rectified.
  • €349 billion (£395 billion) was allocated in the area of cohesion policy through the European Regional Development Fund (ERDF), the Cohesion Fund (CF) and the European Social Fund (ESF), between 2007 and 2013. A significant part of this money was spent through public procurement, which is governed by the EU purchasing regulations.
  • The auditors’ Special Report assessed whether the European Commission and member states were taking steps to address the problem of public procurement errors in the area of cohesion policy. It examined more than 1,400 transactions between 2009 and 2013 and detected errors relating to public procurement in around 40 per cent of all projects.

Read more at Supply Management

Canada’s biggest-ever military procurement at ‘very high risk’

  • Documents obtained by CTV News suggest that the Conservative government’s plan to overhaul the Royal Canadian Navy with a multi-billion dollar procurement to replace frigates and destroyers may be in trouble.
  • According to internal documents obtained by CTV News’ Mercedes Stephenson, the “Canadian Surface Combatant” program is at “very high risk” of running over budget, behind schedule, lacking skilled manpower, and producing inadequate capabilities.
  • The documents warn there is a risk the project, “may be unable to deliver the optimal number of ships with the capabilities necessary to meet operational requirements” and that may, in turn, lead to the navy’s “inability to deliver operational effect and/or a failed procurement.”
  • Sources tell CTV News that a fixed budget, combined with increasing costs and procurement delays, mean the navy has likely already lost one or two of the promised 15 ships.

Read more at CTV News

Chill, China’s economy isn’t collapsing: China Beige Book

  • Current market perceptions of China are “thoroughly divorced” from the reality on the ground, according to the latest China Beige Book (CCB) survey, which has found that while the economy slowed in the third quarter, there are no signs of an impending growth collapse.
  • “In the aftermath of the stock market collapse and a surprise currency action in August, global sentiment on China has veered sharply bearish—too bearish,” Leland Miller, president of CBB said. “While we have long cautioned clients against relying on rosy official views of the Chinese economy, we believe sentiment has swung substantially too far in the opposite direction,” he said.
  • Corporate revenue growth, although weaker than the second quarter, actually improved over the first quarter, and was stable in on-year terms, according to CBB.
  • While manufacturing saw its weakest performance in two years, as indicated by recent purchasing managers’ index (PMI) surveys, other sectors buoyed the economy.

Read more at CNBC

Predictions For The Next Decade Of Payment Innovation

Industry experts predict how we will pay (and be paid) in 2025.

A UK payment infrastructure provider has published a collaborative whitepaper – titled Moving Money 2025 – which has gathered the leading voices in the payments industry together to predict how payments could change by 2025. 

Contributors who gave their views to this report included Nationwide, Toynbee Hall, Tooley Street Research, Consult Hyperion, Financial Fraud Action UK and the UK Cards Association

The results have clearly demonstrated that, whilst we are a nation that is still getting to grips with a whole host of new ways to pay, the appetite for innovation is accelerating.  

Greater security demanded – but flexibility over identity authentication is expected

However we end up paying for things in 2025, security is the number one concern for consumers – 65 per cent identified this as their number one priority when it comes to financial transactions. Contributing experts to the paper agreed, predicting that by 2025 there will be multiple ways of authenticating identity before payment can be made. In fact, as smartphone security increases, physical payment cards are expected to become obsolete since account details will be stored on the device itself. We’ve already seen a glimpse of the impact that biometrics-initiated mobile payments could have in the future and VocaLink’s research has found 1 in 4 UK consumers would consider using biometric technology to access banking or payment services.

Advanced biometric authentication and dominance of real time payments expected to become the norm in ten years.

However, by 2025, some experts believe biometrics will be the principle method to authenticate our identities, with the usage of facial recognition in particular significantly reducing fraud and time/hassle constraints in making payments.

Real-time payments will offer certainty

Over the next ten years we will likely see an increase in adoption of immediate payments, via the Faster Payments system, as well as new innovations which build on this existing infrastructure. Larger transactions will become available on an immediate basis, particularly as the value limit on transactions rises past the current level of £100,000. This has obvious benefits for SMEs who will make and receive payment quicker, providing greater cashflow certainty and enhancing growth potential. Paying staff salaries will also be increasingly easy, as a payment can be made at the end of a week to reflect the exact hours worked with the employee receiving their salary immediately.

Empowering payers to make informed purchases in a way that suits them  

Flexibility in how we pay is already an acute need for many today. The employment market is changing with a growing number of workers reliant on multiple income flows, rather than having one steady and periodic source of income. One prediction regarding this issue is that by 2025 incomes could become even more erratic so should be met with technology that offers the necessary agility to accommodate these customers.

Similarly, another contributor to the Moving Money whitepaper believes that one of the most successful future innovations will be to make it easier to quickly ‘undo’ payments made in error to the wrong person or organisation.  This is a problem nearly 1 in 4 people in the UK, (rising to 1 in 3 for those under 45), have already experienced according to VocaLink’s consumer research. Of these, approximately three quarters eventually got their cash back whilst the rest simply did not see their money again, highlighting the need for a universal process to be devised and adopted in the event of erroneous payments.

Chris Dunne – Director at VocaLink commented: “The UK is in a fantastic position to make real time payments and all these other predictions a reality over the next decade. We have a world class digital payments infrastructure and this puts us at a distinct advantage – however if we are to stay ahead of the crowd, it is vital we start laying groundwork for the future now.”

“The collective insight of this whitepaper has shown us what we could and should be able to achieve in the payments sphere. Disparate corners of the UK’s society and economy will benefit hugely if we can map their needs against the evolution of the UK’s payment system and the burgeoning technology that supports it. This collaborative effort is only the beginning; we are keen to catalyse discussion across all relevant parties about what comes next and set the wheels in motion to make future payment technology a reality.”

Market Intelligence: How to Find Information to Supercharge Your Sourcing

By Connor Cantrell, The Hackett Group Strategy & Operations Consultant.

Gaining market intelligence is a recognised way to both develop and support strategic sourcing decisions that will ultimately pay dividends for an organisation. However, the ability to gather market, supplier and industry information that is both accurate and timely is a challenge many organisations face. Understanding the core components, and creating a library of tools and resources to effectively collect this information, will enable an organisation to promote a culture of informed decision-making and support efficient third-party supplier relationships.

Core Components of Market Intelligence

Three types of intelligence can be collected to optimise your strategic sourcing and business performance: market research, competitive intelligence and market intelligence. Market research covers a broad range of applications and techniques for gathering, storing, analysing and providing access to data, while competitive intelligence is the process of obtaining information for strategic purposes. Although, understanding and applying all 3 areas will ensure optimised decision-making, for purposes of supercharging a company’s sourcing processes, this article will focus on market intelligence.

Market Intelligence

Developing market intelligence includes elements of market research and competitive intelligence, but is largely defined by the process of gathering and analysing information relevant to a company’s supply markets, specifically for the purpose of supporting accurate and confident decision-making in the procurement process.

The potential benefits can be “bucketed” into 2 main categories: gaining external awareness and developing data to better support internal planning. It is imperative that an organisation has the ability to view the external marketplace in order to gather data on supply market capabilities, observe how the competition is developing and managing their supply base and supply chain, as well as understand key trends impacting or occurring within the market. On the flip side, it’s critical that an organisation effectively synthesises the external environment to refine internal product plans, identify competitive opportunities and execute enhanced sourcing strategies in support of the organisation’s stated strategy and business requirements.

The ability to simultaneously pair the external awareness capability with internal planning allows an organisation to effectively leverage buying power, which in turn will provide a competitive edge in the marketplace.

Market Intelligence: How to Find Information to Supercharge Your Sourcing

Library of Tools

While the benefits of market intelligence are visible and apparent, a common struggle for many organisations is finding pertinent information from credible sources. These difficulties may include: supply data for spend categories not readily available, biased information or a lack of knowledge on where to begin. Luckily, market research sources exist across multiple dimensions and avenues. There is not a “golden rule” on how to start or where to research. Several examples of sources and types of research are outlined below:

Market Intelligence: How to Find Information to Supercharge Your Sourcing

These resources are not all-inclusive, and as you define your research process, you can customise the process to fit your organisation’s needs and extend your reach. A great way to grow your resource base is to review known sources for additional material. For example, what sources are cited in a quarterly report on a particular commodity or service – where do they get their data? However, it is important to keep in mind not all of these resources will be in-scope. Also, remember to prioritise resources in a way that enables you to identify useful, timely research in a cost-effective manner.

Market Intelligence: How to Find Information to Supercharge Your Sourcing

Going Forward

Market intelligence allows category managers to make credible, data-driven strategic sourcing and supply base decisions by leveraging a wealth of market facts and data. We can’t do our jobs effectively without constantly staying abreast of relevant industry, market and competitive developments. If you want to test your knowledge on a particular commodity – go back to the home page of Spend Matters and type the commodity name (goods or services) into the search bar. See what comes up, who is publishing it, and what is happening that is relevant to your work. It’s a great starting point for developing your subject matter expertise!

In summary, it’s important to explore the plethora of resources available in order to categorise and tailor your research to meet the specific requirements of both your commodity/service and the organisation. Your team will increase its strategic sourcing capabilities and buying power by supercharging your market intelligence and continuously updating its market, industry and competitive knowledge to create value for the organisation.

2015 Dow Jones Sustainability Index (DJSI) Results Revealed

24 companies have been named as Industry Group Leaders – but who made the cut?

The first Dow Jones Sustainability indices (DJSI) date back to 1999, and have been compiled annually by S&P Dow Jones and RobecoSAM (a sustainable investment specialty firm) ever since.

The three largest additions and deletions to the DJSI World this year include:

Additions: Bank of America Corp, Telefonica SA, BHP Billiton Ltd Deletions: Cisco Systems Inc, PepsiCo Inc, Royal Bank of Canada

Guido Giese – Head of Indices, RobecoSAM, commented: “Over the years the DJSI index family has not only come to be the gold standard for corporate sustainability but has also become a competitive platform where companies receive recognition for their sustainability practices. The CSA is a state of the art, in-depth sustainability performance assessment methodology. Thanks to its broad reach, the results of the CSA are one of the leading sources of information on how listed companies around the globe are exercising financially material ESG practices. The entire DJSI index family benefits from that.”

And the Corporate Sustainability Leaders of 2015-2016 are…

The Dow Jones Sustainability World Index tracks the financial performance of companies that lead their respective industries in managing economic, environmental and social issues with a strong focus on long-term shareholder value. It focuses specifically on the top 10 per cent of the 2,500 largest companies in the S&P Global Broad Market Index.

For each of the 24 industry groups represented in the Index, one organisation is crowned leader. The 2015-2016 leaders are shown below:

Dow Jones Industry Leaders

 

Out of the results, Unilever put on the most impressive show –  leading or jointly leading the industry in eight of the 23 Food Products criteria, including: Innovation Management; Strategy for Emerging Markets; Climate Strategy; Packaging; and Talent Attraction & Retention.

Action needs an audience

One of the companies involved – AkzoNobel, penned an article on the importance of being represented in the DJSI.  Citing it provides them with a useful roadmap for where to drive improvements, and aids in advancing areas like innovation, resource efficiency, product safety, customer focus and commercial excellence.

Furthermore: “It promotes internal collaboration helping to start conversations across different departments and functions that might not otherwise have happened. This involves leaders and experts coming together from across the business to exchange ideas, helping to spark new ideas for sustainable solutions… It is important to take action, because if companies don’t make progress and adopt a continuous improvement mindset, they’ll drop down the list or fall off it altogether”. The company also offers other incentives, like renumeration packages for executives involved in the work.

David Blitzer – Managing Director and Chairman of the Index
Committee at S&P Dow Jones Indices, added: “More and more investors look at companies’ environmental policies and track records in making their investment decisions. The Dow Jones Sustainability Indices are comprehensive benchmarks that allow investors to gauge the collective performance of those companies that meet the RobecoSAM standard for corporate sustainability and to formulate global allocations consistent with sustainable investment standards and practices.”

Inside China’s Red Supply Chain

Does China’s emerging ‘red supply chain’ pose a threat to the wider tech industry?

The emergence of a ‘red supply chain’ in China is exerting increasing pressure on existing suppliers in the fiercely-competitive technology sector. The move to cultivate a domestic supply chain is the brainchild of Chinese authorities and is looked upon as providing a much-needed shot in the arm to the country’s tech manufacturing sector.  Great news for China and its economy, less so for the countries that rely on China’s trade such as Taiwan.

Do you prefer your chips salty… or with an added sprinkle of competition?

Taiwan is feeling particularly threatened as this means China will depend less and less on imported parts (such as semiconductors and their ilk). And while predictions from some quarters point to Taiwan’s IT industry being replaced in the near future, others are confident in Taiwanese companies’ ability to sustain lead with smart manufacturing technologies.

Plans were also unveiled in May to set a 10-year plan in motion that would revolutionise manufacturing. The “Made In China 2025” initiative will be underpinned by smart technology and help China to shed its tired image and repackage itself as a respected player on the world’s stage.  With $20 billion already in the pot, a further $161 billion investment over the next decade will help to move China further away from its dependence on imported chips.

Earlier this year Chinese Vice Premier Ma Kai – speaking at CeBit, the world’s largest ICT trade fair, commented: “China intends to implement Made in China 2025 – which will change it from being just a big production country to a very powerful production country… Support for ICT, and innovative breakthroughs in ICT, will be an important link in this chain.”

China’s ability to manufacture chips on its own doorstep will no doubt send shockwaves through PC, smartphone, and tablet supply chains. Taiwan has long been the go-to for semiconductors, and is a highly profitable sector of the Taiwanese economy. The sector is currently valued at $70 billion and is expected to grow a further 5.5 per cent over the coming year.

In quotes obtained by Taiwan Business TOPICS Magazine, Christopher Thomas – co-head of consultancy McKinsey & Company’s Asia semiconductor practice, said that: “China’s increasing importance as a designer and manufacturer of ICs will not necessarily displace other semiconductor centers of excellence.” Adding that while Chinese IC firms enjoy important advantages, such as state support and proximity to a big mainland customer base, they are also “built for speed.”. He goes on to comment: “Chinese semiconductor makers are nimble, responsive, and with rapid design cycles, a good fit for the fast-moving mobile phone and consumer electronics markets.”

In a further twist of intrigue Taiwan has relaxed curbs on its own companies setting up semiconductor manufacturing plants in China, – a move that enables them to better compete for mainland clients.

According to Reuters, the Taiwanese economics ministry is now allowing a maximum of three wholly-owned 12-inch wafer foundries to be set up in China by Taiwanese companies, easing previous rules that limited such investments to mostly older technology and to joint ventures.

With global technology powerhouses like Samsung and Qualcomm already setting out stalls in China, along with Dell’s recently announced plans to invest $125 billion over the next 5 years – it is set to be an interesting few years indeed…

More information on the issues highlighted in this story can be found in a newly-published report that analyses the driving factors behind China’s red supply chain, along with Taiwan’s view on the emerging situation. 

What Can Olympians Teach CPOs About Leadership?

CPOs and Olympians gather to discuss leadership.

During the month of August, The Faculty Roundtable once again took to the road. Sessions were held with leading Australian CPO’s in Melbourne, Sydney, Brisbane and Perth. What stood out from this series of events was the changing role of the CPO. As we highlighted in this article, the rapid change of pace in the procurement landscape is challenging CPOs to lead and motivate their teams in entirely new ways.

During its August session, The Faculty Roundtable brought together a group of elite Australian CPOs as well leaders from the business world and the sports field to discuss the changing face of leadership in Australian procurement.

The points below present a summary of these discussions.

An Olympic Perspective

Jenn Morris, the guest speaker at our Perth event, has a truly impressive record in leadership. Jenn is currently a partner at Deloitte, a director at the Fremantle Dockers Football Club, the Commissioner of the Australian Sports Commission and a dual Olympic gold medallist. So when Jenn speaks about leadership, she is provocative, challenging and it pays to listen.

Drawing on fascinating examples from both her corporate career and time with the Olympic gold medal winning Australian hockey team, Morris’s discussion on leadership highlighted some truly valuable lessons for Australian CPOs. She spoke on the importance of leaders setting the bar for performance within an organisation. It is the responsibility of CPOs to define what ‘high performance’ is and ensure the workplace is structured in a way to deliver this kind of performance.

Morris also described the importance of leaders sticking to their guns, suggesting that it takes courage to develop a plan and stick it through thick and thin. This statement was given some context with the example of the Fremantle Football Club, a team that for 15 years was perceived to be underperforming. The organisation undertook a top-to-bottom strategy change. Many of the decisions made in this process drew criticism from the clubs fans and footballing media. However the leadership team stuck to their plan and this year the team has finished the season on top of the ladder. Morris, a director at the club, emphasised the importance of not being distracted as a leader, suggesting that success is about setting a path that you believe in and having the courage and faith to stick to it.

New Projects that Challenge Procurement’s Traditional Modus Operandi 

Perhaps one of the most innovative initiatives we’ve seen come out of the Roundtable in recent times was a project that saw a number of firms in the same industry (traditional competitors) working together to develop a joint supplier pre-qualification process. The CPOs involved in this fascinating project were able to put traditional rivalries behind them and work together on a project that would be mutually beneficial for all involved.  This project perfectly highlighted the need for CPOs to challenge their traditional thinking to come up with solutions that will provide optimal benefit for the business.

Hurdles to effective leadership

A dramatic discussion in Sydney led by managing director of Transfield Holdings, Luca Belgiorno-Nettis, highlighted the role that external forces (such as governments) play both in hindering and enabling corporate leadership in Australia. Belgiono-Nettis is a passionate follower of disruptive models and spoke of his work in exploring random citizen selection as a community change tool that challenges traditional notions of power in the political process.

CPOs discussed the challenges that they felt stood in the way between themselves and optimal leadership. Belgiorno-Nettis challenged CPOs to try and understand what is was that brought people together in a collaborative manner and to harness a culture that encouraged this. Also highlighted, was the fact that true leaders are unfazed by taking new approaches to old problems. Drawing references to current political systems, Belgiorno-Nettis suggested that sometimes a complete rethink of power and leadership structures is necessary to impact positive change.

Linking Procurement Activity with Board Strategy

Annabel Chaplain, a non-executive director at Downer, highlighted that as procurement continues to move into the corporate spotlight, the function’s leaders are realising the importance of taking actions towards achieving corporate objectives set by the board rather than their own ‘procurement objectives’. Knowledgeable boards are now seeing procurement as a legitimate avenue for competitive advantage and the CPO is viewed as the conduit between board level objectives and procurement activity. It is the leadership of CPOs that will ensure corporate objectives are met.

Chaplain’s presentation pointed out that the leadership qualities shown by CPOs need to go both up and down the chain. Truly successful CPOs are able to lead their teams to achieve corporate goals but are also able to educate board members about the opportunities and challenges that lie within the businesses they are tasked with guiding.

2015 FLiP Ambassador Talks Future Of The Procurement Function

Procurious interviews 2015 FLiP Ambassador – Ryan Kirgan.

Ryan Kirgan is a Portfolio Category Manager at Downer, a leading provider of services to customers in markets including Transportation, Mining, Energy and Industrial Engineering, Utilities, Communications and Facilities.

At the recent Future Leaders in Procurement (FLiP) event, Ryan was awarded the position of FLiP Ambassador for 2015. Procurious recently caught up with Ryan to discuss his ambassadorship, the FLiP event and the future of the procurement function. 

Procurious asks: Ryan firstly, congratulations on being recognised as the FLiP (Future Leaders in Procurement) 2015 ambassador and carrying the flag for the next generation of procurement leaders. Could you give us some background into the FLiP group and what it hopes to achieve?

Ryan answers: The FliP group is a collection of young leaders in the procurement function. Our meetings are held in conjunction with The Faculty’s CPO Forum. When we meet, we undertake an intensive program of discussions, presentations and networking with the ultimate goal of developing the next generation of procurement leaders and furthering the procurement profession.

FLiP put on a fantastic series of events. Through the relationship with The Faculty, we are able to attract a good number of truly outstanding speakers. This, and the chance to network with our peers in other businesses, presents a fantastic opportunity to develop our skills not only as procurement professionals, but also as leaders.

Procurious: How have the FLiP events helped develop you as a leader within your business?

Ryan: The most critical link I think, in developing the functions future leaders has been the access FLiP has granted us all to senior procurement leaders.

We have been given backstage access to a huge number of influential CPOs. All of these leaders have been very approachable and accessible. They’ve opened up on discussions and events that are impacting the function at the moment. To have access to this level of seniority has been huge. We’ve all been able to benefit from people who have already had long and successful careers in procurement.

What has been really great is that rather than discussing the technical capabilities of procurement staff, which most other conferences do, FLiP is pitched much more around soft skills with a younger audience in mind. That’s something I haven’t come across at other conferences. The program is really tailored to what we’re doing as young procurement professionals.

Procurious: Aside from the speakers and CPO access, were there any other intangibles you were able to take away from the event?

Ryan: The event was fantastic for market intelligence. When you put people who are making similar decisions in the same room you’re bound to learn something.

It was a great opportunity to understand my suppliers, not just from a procurement perspective, but also more broadly around what they are trying to achieve as a company. That sort of insight is priceless.

The general openness and willingness to impart knowledge and help out as much as possible is fantastic. It’s not like you’re making a cold call and asking for insight. It is senior level procurement professionals who are there with a genuine interest in helping out and developing the function.

Obviously, networking is what you make of it, but I’ve had great engagements off the back of the conference. A few days after the event, another delegate contacted me to discuss fleet management, a category that my organisation sources well. I was happy to share my experiences. A few weeks later my help was reciprocated when the person I spoke to was able to assist me with some queries I had about supplier relationship management.

Procurious: Have you been able to transfer any of the learnings from the FLiP conference into your job at Downer?

Ryan: At the end of the conference Gordon Donovan (Principal Consultant at The Faculty at the time) challenged us by saying that he would be calling each attendee 50 days after the conference to see what changes we’ve made based on what we took away from the conference.

This is something that I got down to right away. The day I got back to the office, I called a meeting with the corporate affairs manager. We spoke a lot about alignment with corporate objectives at the conference and I wanted to ensure my activities were contributing directly towards our corporate success.

Downer has recently refreshed its corporate identity. This has involved a shift towards a greater customer focus. Our tagline is “relationships creating success”.

During this discussion I found myself asking, “how does my work as a procurement professional align to the corporate vision?” I quickly realised that I had a fairly deep understanding of our relationships with our top 100 suppliers, however knew little about our engagement with all but a handful of our key customers. This seemed ridiculous.

I grabbed all the guys in the team and went through a process of aligning each of our category plans to the corporate vision and to our end customers. I also initiated our team’s ownership of managing revenue data reporting in addition to spend data; all of which helps bolster our presence as commercial leaders within the company. Unless I’d gone to the conference, I don’t think we would have gone through that process.

Procurious: As part of your ambassadorship you were given the opportunity to take part in a panel discussion at The Faculty CPO Forum. Can you tell us about that experience?

Ryan: It was a great opportunity to speak in front of such an experienced procurement audience. I feel that those sorts of opportunities are a valuable part of our professional development as leaders.

To sit alongside three highly experienced CPOs and to come off the stage and be told that I didn’t seem out of place up there was very humbling and flattering.

We spoke about ensuring alignment of procurement activities to the wider business. It was reassuring to see that across industries, procurement teams are taking on similar programs and facing similar challenges. As I mentioned earlier, this initiative is something that I acted on as soon as I got back to the office.

Procurious: At Procurious we’re passionate about social media and its role in the development of the procurement function. What have been your experiences as a procurement professional on social media?

Ryan: The opportunities that lie within social media are truly eye opening. I think the biggest challenge is staying on top of everything. The speed that things are changing is so rapid.

Social media is becoming standard practice for procurement; it’s no longer a fringe activity. We need to leverage our relationships with suppliers, co-workers and colleagues and social media is the most effective way to do this.

Social media gives us access to knowledge sharing and best practice thinking from across the globe. All of this builds out our capability as professionals.

Access to sites like Procurious means that good ideas don’t remain hidden for very long. If one person asks a question, you’ll get 30 people responding. There is so much knowledge and wisdom out there and Procurious is connecting all of that.

At Downer, we use Yammer as well and I’d be one of our most active Yammer users. I’ve established a group to discuss our fleet services; the 80 stakeholders across the business for fleet services are in this group. It’s a brilliant way for us educate and connect with the stakeholders. We get great engagement on there.

Procurious: Thank you for taking the time to speak with Procurious and again, congratulations on your ambassadorship for 2015. Any final thoughts you’d like to leave us with?

Ryan: I’d like to thank FLiP and The Faculty for the opportunity they’ve given me. The exposure to all of The Faculty’s programs has given an insight into just how switched on they are. Having programs that develop procurement people at each stage of their professional development is brilliant. They are great advocates for the profession.

Smart Supply Chains – Gazing Into The Not-So Distant Future

The term ‘Smart Supply Chain’ might not be that familiar to you, but most people will have heard of, and understand, the Internet of Things (IoT) and Big Data. With the supply chain, and the processes within it, evolving, what are the key trends you need to be aware of?

The topics of Big Data, 3D Printing and Technological Change have been discussed on Procurious independently recently, but it is the connection between these concepts within the Smart Supply Chain that organisations will be able to take advantage of over the next 12-18 months.

Some of these concepts demonstrate supply chain thinking coming full circle, while others are newer and yet to be fully embraced by organisations on the whole.

Keeping ahead of, or at least up to date with, these trends will be crucial for supply chains in order to remain flexible and competitive globally. We consider the three outlined below to be the most interesting for supply chain development, however there are many others that also could be considered.

Distributed Manufacturing

More recently, organisations have begun to bring much of their manufacturing back in house, reversing the trend for outsourcing to low cost regions. The next step in this process for many is the idea of Distributed Manufacturing.

In Distributed Manufacturing, products are manufactured across multiple geographical locations by either the primary organisation or a local partner. These locations are closer to key consumer markets, and make use of local experts for the final assembly stage of production.

Key advantages of this approach include a reduction in logistics costs, a more agile supply chain and access to a global network of experts. In late 2014, Jaguar Land Rover opened a plant in Changsu in China, aimed specifically as servicing the Chinese market. This allows a better service to a major market for Jaguar, but enables them to ensure that production quality remains high.

Additive Manufacturing

Additive Manufacturing is essentially 3D Printing by another name. Although still more expensive in comparison to traditional methods, the AM process allows for faster creation of prototypes, greater tailoring of sizes and shapes of products and much lower scrap rates.

Earlier this year, Rolls Royce announced plans to flight-test the largest ever 3D-Printed aerospace component. The company have said that the process has cut like-for-like manufacturing lead times by 30 per cent, representing a considerable saving in terms of time and cost.

A combination of Distributed Manufacturing and Additive Manufacturing could potentially allow organisations a considerable competitive advantage in a supply chain, with faster, more agile manufacturing allied with shorter lead times to consumer markets.

However, to make this a reality, we need to consider the impact of the third of our trends.

IoT, Big Data and Demand

Consumer demand is a tricky beast to pin down. With consumer behaviours constantly changing and the increased availability of products online, which can then be delivered the following day, simply using historical trends to predict demand is no longer an option for supply chains.

Now, organisations are looking towards connected networks and systems, capturing up to the minute data on where, when and how products are bought and which markets are the most profitable to service. The use of the IoT and Big Data is opening up a new way of predicting demand.

Big Data is being used in the automotive industry to do just that. Now, sales can be seen anywhere in the world instantly and companies who have traditionally operated ‘Just-in-Time’ systems now can keep up with this, ensuring the right parts are in the right place at the right time.

Distributed Manufacturing relies on this interconnected network of systems for exactly this reason. This improved demand planning can then be used to reduce excess stock and wastage and at the same time, provide all the data required for effective Additive Manufacturing.

The Not-So Distant Future

As these technologies advance further, and organisations become more adept at using them effectively, there is a potential for a major change to the way supply chains are organised.

And what will this mean for procurement? Beyond the increased complexity of providing for a global supply chain, could we see the advent of Distributed or Remote Procurement? Or will the profession be split up and placed wherever the need is greatest? It’s certainly a question worth considering.

Have we missed any game-changing supply chain trends? Are you working in an organisation where Distributed Manufacturing is a reality? Procurious would love to hear your experiences!

Eyes down for the other big stories we think you should be aware of this week…

Oil prices steady after U.S. drilling cut but oversupply still weighs

  • U.S. crude futures were trading at $44.67 per barrel at 8:00 IST, up 4 cents from their last settlement, pushed by a slight fall in drilling activity. “Baker Hughes reported US oil rig count fell 10 to 652 last week. The consecutive second decline suggests a low price environment coupled with low oil price hedge is starting to impact U.S. supply,” ANZ bank said.
  • The International Energy Agency (IEA) said on Friday that a cut in production from non-OPEC suppliers, especially from the United States, would lead to a rebalancing of the market by next year.
  • Despite this, the outlook for global oil markets remained weak due to strong production clashing with stalling demand, creating a market in which more oil is produced than needed.
  • The global crude benchmark Brent was trading at $48.95 a barrel, virtually flat from its last close.
  • ANZ said strong supply from the Middle East remained a concern on the supply side, while Macquarie bank noted that falling auto sales in August were acting as a drag on demand.

Read more at The Economic Times/IndiaTimes

Allianz warns of storm impact on transport and supply chains

  • With a severe El Nino event forecast and the cyclone season approaching, insurer Allianz has highlighted transport and supply chain interruption as a consequent threat for international and domestic transport and logistics. The global insurer’s Allianz Global Corporate & Specialty (AGCS) section has marked the recent 10th anniversary of Hurricane Katrina in the US with an analysis of storm-related losses, trends and global businesses preparedness for such events in future.
  • But its local operation points to issues here and in Asia that have the potential to cause financial hardship, particularly for the unprepared. “The general consensus of scientists is for an increased severity rather than frequency of windstorm events, such as Australia has experienced this year,” Allianz Risk Consulting Pacific regional manager Iain Ritchie says. “Further, with the current growing El Nino in the Pacific, climatologists are predicting even more intense weather phenomena in the immediate future, which requires risk assessment and planning.”
  • Ritchie adds that “not only is pre- and post-loss risk management crucial in mitigating the impact of increasing windstorm losses, risk management should also focus on loss minimisation during windstorm events. “Business continuity planning must also incorporate direct as well as indirect supply chain exposures to be effective.”

Read more at Fully Loaded

Tianjin explosions to affect supply chains for months

  • The deadly explosions that rocked Tianjin could create logistical delays and other supply chain problems for months to come, even as operations at the port itself return to normal, according to a new report by Resilinc, a supply chain technology firm.
  • Day-to-day operations have largely resumed at Tianjin’s port, roughly a month after two explosions killed over 100 people and caused widespread damage. However, Resilinc found a number of factors that will have a lasting impact on companies with supply chains tied to Tainjin. Chief among them: uncertainty over how China’s government will respond to the incident, which was caused by the improper storage of hazardous chemicals and is still being investigated.
  • Shippers of materials classified as hazardous should expect delays from additional scrutiny of their cargo, and stricter regulation and punishments, Resilinc said.
  • A logistics center that processed much of the port’s paperwork suffered severe damage from the explosions, causing forwarders, haulers and other logistics players to deal separately with individual terminals, putting a strain on those terminals’ capacities to handle administrative tasks. And blockages are preventing the delivery of in-bound raw materials, which impact local factories, and effects could last longer than six to eight weeks on companies within a ten-mile radius of the blast.

Read more at The Wall Street Journal

Glencore Queensland to save AUS$300 million through procurement outsourcing

  • Glencore has hired Accenture to provide sourcing and procurement services for its Australian copper and zinc business.
  • The six-year contract with Glencore Queensland, a subsidiary of the diversified natural resource company, is expected to deliver cost savings of more than $300 million over the period.
  • Under the deal, Accenture will provide end-to-end sourcing and procurement services including cloud-based sourcing, category management and procure-to-pay tools, as well as market sourcing insights and analytics to help Glencore maximise procurement and sourcing benefits. “Mining clients continue to grapple with cost pressure in the ongoing environment of low commodity prices,” said Joost van de Meent, managing director, resources, at Accenture. “Our solution will extend Glencore’s existing procurement capability to improve spend management and reduce transaction costs, while improving visibility across Glencore’s businesses.”

Read more at Supply Management

Why the threat from avian influenza isn’t just a load of hogwash

Pigs might fly, but when it comes to avian flu… it’s no laughing matter.

Pigs and poultry might be more closely linked than you realised… discover how they are impacting supply chains on a global level.

China’s incredible shrinking hog herd

The astonishing drop of the Chinese hog and sow herd is expected to impact the entire global pork market for the remainder of 2015 and into 2016 according to a recently published report by Rabobank Group.

Chinese pork production is forecast to plummet by 3.7 million tonnes (6.5 per cent), to 53 million tonnes in 2015.

Over the last 18 months, China’s pork industry has experienced one of the largest culls on record—the ramifications of which are just now being felt globally. To put this change into perspective: the decline of nearly 100 million head in China’s hog herd and 10 million in its breeding herd is equivalent to the U.S., Canadian and Mexican pork sectors all disappearing from global supply in a span of less than two years.

However, explains Rabobank Animal Protein Analyst William Sawyer – “This will be supported by a 600,000 tonne increase in imports – primarily from the EU, the U.S. and Canada – in the second half of 2015… This surge in pork trade could not come at a better time, as the global pork sector is in the midst of a supply glut after many regions have recovered from the porcine epidemic diarrhoea virus outbreak of 2014, and a number of trade bans have depressed pork prices and producer margins.”

Indeed, this export opportunity is very attractive to a sector that has been under pressure in recent times. Capitalising on the opportunity will require processors and traders who have the right product at a competitive price; who can deliver in the coming months; and who can readily mobilise their supply chain.

Avian influenza outbreak to hit regional markets

China’s porcine problem might also have knock-on effects for poultry production…

In a separate report from Rabobank, analysts believe the outlook for late 2015 and 2016 is bullish. Feed prices are still expected to remain at low pricing levels, and global breeding stock supply will be very low in regions with avian influenza-related import restrictions, such as China and South-East Asia. The expectation that China will face a shortage in poultry and pork supply next year could especially become a major swing factor for the global poultry industry. The expected further spread of AI to key U.S. chicken production areas is a major wild card for the industry outlook in the second half of this year.

The report states: “The performance in most regions is currently improving, but the industry should have optimal biosecurity as its first priority, as avian influenza pressure is still significant. Any new case can have a big impact on regional and global trade streams, as we have seen in the past months, in which Brazil and Thailand have taken further market share in global poultry trade from the U.S. and China”. Yet it notes that both Australia and South America have yet to fall foul of new outbreaks.