Category Archives: In The Press

Tackling Exploitative Conditions in Global Supply Chains

Hardly a week goes by in the world of procurement without news of slave labour, corruption and exploitative working conditions within supply chains and, sadly, this week is no different.

Exploitative Working Conditions

The Business & Human Rights Resource Centre has revealed that Syrian refugees, including children, are being exploited in the fashion industry in Turkey.  

The organisation has asserted that clothing brands are not doing enough to ensure supply chains are safeguarding Syrian refugees fleeing conflict into Turkey. It has urged companies to take further action, and ensure that desperate refugees are not escaping into exploitative working conditions.

No Targeted Approach

Last week, Turkey’s government decided to issue work permits to Syrian refugees in order to help minimise exploitative labour practices. However, many refugees will remain in Turkey illegally, and join the ‘informal’ workforce, where they will be at their most vulnerable.

Some of the clothing brands questioned in the survey are actively taking steps to prevent these exploitative conditions, for example, in cases of child labour. However, most do not have a targeted approach to the treatment of refugees.

The Centre has has urged brands to develop action plans, increase scrutiny, and work more closely with Turkish partners in order to protect vulnerable Syrians.

Palm Oil Supply Chains

The Guardian has also drawn our attention to the plight of palm oil workers in South-East Asia. According to research published by US-based NGO Verité, palm oil plantations are rife with exploitative practices due to their remoteness and size.

Workers on the plantations are often trafficked, undocumented individuals which makes them vulnerable to, amongst other things, being paid below minimum wage, having their passports removed, and physical abuse.

On the 17th of February at 10am, The Guardian are hosting a live chat on how to improve the livelihoods of these workers. As preparation, you can read what Procurious has written on the subject in the past.

Positive Signs

However, we are also looking to the positives, and fortunately there are a few! The UK is leading the way as one of the first nations to sign an agreement to combat exploitative conditions, such as forced labour, people trafficking and other forms of modern slavery.

The International Labour Conference’s agreement, which has also been signed by Niger and Norway, will require signatories to “take steps to prevent forced labour, provide victims with protection and access to effective remedies and to carry out due diligence to prevent and respond to the risk of forced labour.”

It’s hoped that the UK’s move will encourage other countries to get on board and sign the agreement. ILO director-general, Guy Ryder, believes that this “is a clear sign that global momentum is building in the fight against these abhorrent practices that demean and enslave millions around the world”.

Simplifying Sustainability

Alongside this, it is also fantastic to see the work that SEDEX are doing to drive change ahead of their  ‘Simplifying Supply Chain Sustainability’ conference next month.

Sedex is a not for profit organisation, which strives to improve working conditions and encourage global supply chains to share ethical data more effectively. Next month’s conference will feature speakers from the Kellogg Company and Mars, and aims to help organisations take a fresh approach to managing supply chains issues.

CEO of Sedex, Jonathan Ivelaw-Chapman, spoke with Pioneers Post this week about supply chain sustainability, cleaner supply chains and his five-year-goals. You can read the full interview here.

It’s great to see different organisations and governments contributing to ending exploitative working conditions worldwide. Hopefully these positive steps can inspire others to make changes in their supply chains.

Meanwhile, here are some of the other stories making waves in procurement and supply chain this week…

Shanghai Moving to Greener Future

  • The city of Shanghai has launched a programme calling for enterprises from all industries to work out their own plan on a green supply chain campaign
  • The programme invites multinational companies, state-owned enterprises, and private firms in Shanghai, to submit proposals for their green supply chain projects to the city’s environmental authorities before March 31st
  • Fang Fang, deputy chief of the Shanghai Environmental Protection Bureau, said “Promoting green supply chain management is an effort to use market forces to promote higher environmental standards among enterprises.”
  • Shanghai has set a goal of cutting down on the density of PM2.5 particles — a major contributor to air pollution — to 42 micrograms per cubic meter by 2020, down from 53 last year.

Read more at Shanghai Daily

New Solar Plant for Morocco

  • Morocco’s agency for solar power, Masen, has opened the tender for project developers for a 400MW solar plant in the centre of the country
  • The projected Noor Midelt site will cover around 6,000 acres 15 miles Northeast of the town of Midelt. Construction is expected to start in 2017.
  • The move comes just weeks after the completion of the first phase of the country’s ambitious project to generate half its electricity from renewable sources by 2020.
  • Simon Gray, World Bank country director for the Maghreb said “apart from creating jobs, the construction of the plant and the development of Morocco’s Solar Plan will establish a future source of reliable green energy,” Simon Gray, World Bank country director for the Maghreb.

Read more at Supply Management

Amazon Targets Bookstores and Drones

  • Amazon dipped its toe into the waters of brick-and-mortar stores with the opening of a bookstore in its home city of Seattle in November.
  • The expansion of bookstores, which the company has not confirmed, would be a surprise reversal from the online retailer credited with driving physical booksellers out of business.
  • US regulatory impediments have made it difficult for the e-retailer and others to roll out drone tests. In April, the Internet retail giant sent the Federal Aviation Administration (FAA) a letter that urged it to ease up on its drone testing regulations.
  • While the Dutch government may have agreed to allow drone testing, it has adopted an innovative approach to anyone that breaks the rules – white eagles!

Read more at Supply Chain 24/7 and Supply Chain Digital

Nigeria Introduces New Procurement Pricing Guidelines  

  • The Nigerian government hopes to save at least N12 billion annually from the services of the newly-established Efficiency Unit (E-Unit) of the Federal Ministry of Finance.
  • The head of the unit, Patience Oniha, explained that the government would introduce price guidelines and shared services policy among MDAs to increase transparency in the procurement process.
  • The E-Unit will aim to generate savings for the Government from procurement, elimination of wastage, excess capacity and minimising duplications
  • The head of the E-Unit said such savings would be channelled to priority projects, to improve infrastructure, encourage domestic production and attract fresh investors.

Read more at Premium Times

Will Online Video Trump TV Advertising at Super Bowl 50?

Global brands are beginning to question how worthwhile Super Bowl adverts are, thanks to the rising consumption of online videos.

Online Video Advertising

On Sunday, Levi’s Stadium in Santa Clara, California, will play host to arguably the biggest event in American sport. Super Bowl 50, featuring the Carolina Panthers facing off against the Denver Broncos, is expected to draw an audience of over 114 million people.

Traditionally, and as we reported this time last year, TV advertising slots during the game are a much-coveted entity. And there is plenty of opportunity with the game lasting over 3 hours, with regular breaks in play and an extended half-time interval.

However, just as technology is disrupting industries around the world, it appears that online video is changing the advertising game.

Jaw-Dropping Prices

With the main event just a few hours away, a few brands have already paid for their advertising slots. This combined spend comes in at a staggering (and record) $377 million. Each 30-second slot is costing advertisers a jaw-dropping $5 million – just over an 11 per cent increase on 2015.

And many marketers will see this as money well spent. With the size of the global TV audience, and the Super Bowl being broadcast to all corners of the earth, it represents a unique opportunity to get their brand into the public consciousness. It is also frequently referred to as the last “safe bet” in TV advertising.

The adverts themselves can make or break a marketing effort for a brand or product. Come Monday morning, anyone not talking about the final score of the match will be discussing the adverts. Do it right, like this selection from 2015, and it can have a phenomenal impact on sales.

Changing the Game

However, in the aftermath of last year’s Super Bowl, research was released showing that over half of people who viewed a Super Bowl ad, viewed it exclusively online. The findings also showed that the adverts were shared online more than ever, with the best advert getting shared 9 million times.

This disruption of how we consume advertising could potentially spell the end for the huge advertising revenues that surround the Super Bowl. Brands have now realised that there is great potential in the online market, which at the same time, saves them considerable sums of money.

By moving away from the traditional TV advertising, marketers can put their money into creating more reactive, up-to-date campaigns, directly related to the game itself.

“Dunk in the Dark”

The first brand to hit the right note when it came to the online advertising around the Super Bowl was Oreo. Back in 2013, Super Bowl 48 was halted after the lights failed in the stadium. Within minutes, Oreo had created an advert that caught people’s attention:

Super Bowl 48

Simple, catchy and very shareable, Oreo’s advert was probably the most memorable that year. And it was only ever created for use on social media. Seeing the success of Oreo, other brands appear now to be trying to follow suit.

Christoph Pleitgen, Senior Vice President, Sales and Business Development, EMEA and APAC, of Wochit said: “Consumers, on average, watch more than five hours of video per day, making video the single most popular media activity. In addition to this, video advertising is starting to seriously threaten this status quo and is considered to be just as, if not more, effective as TV advertising, at a fraction of the cost.

“Ever since Oreo monumentally stole the online show with their simple ‘Dunk in the Dark’ Super Bowl stunt, other brands have been scrambling to follow. Many will forgo the huge costs associated with a paid-for super bowl ad-slot and instead put their budgets and efforts into ensuring they are ready to grab public attention with responsive video content, based around the game.”

 Game On

Super Bowl 50

Is this a sign of the times? Or will marketing and advertising cope with the disruption and come out stronger? It remains to be seen whether or not this will create a trend. There is always a possibility that savvy advertisers will work out how to best leverage both channels within their budget.

After all, it’s the biggest party of the year, and you wouldn’t want to be the only brand not attending.

Chinese New Year – Avoid a New Year Dip in Profits

Chinese New Year is just around the corner, but is your supply chain prepared for the impact of a national holiday like no other?

Chinese New Year

First here are some facts about Chinese New Year 2016:

  • Chinese New Year will be celebrated on February the 8th
  • Estimates forecast 350 million people will travel in China during this period – an increase of 8.2 per cent over 2015
  • It’s the largest migration of people in the world at any one time
  • Many workers started their holiday before February 8th and many will extend it until after February 13th
  • Effects from reducing production during January, as well as ongoing issues, run until March
  • The event is calculated on the lunar calendar and dates change each year (Chinese New Year 2017 is January 28th)

You cannot avoid Chinese New Year – you have no other option than to plan ahead. The event is often a topic of conversation when companies are hiring Supply Chain Specialists. There is a lot to discuss, plus details on steps to take to avoid supply problems. Here are some of my observations and recommendations.

What are the Effects?

The Chinese New Year celebrations run from February 7th to February 13th. This period is also known as the Lunar New Year or Spring Festival. It is the most important Chinese celebration of the year. But its effects can be seen over a far longer period, and these add significantly to any financial impact. 

Travel for the 2016 celebrations started on January 24th and will last until March 3, meaning your supply chain will almost certainly be disrupted. Production sites will be closed for the entire week, but disruptions will last significantly longer.

Most workers travelled far to find their work, and their families still live far away, so they extend their holiday to spend more time back home. Travel by these workers to their home regions creates an enormous movement of people, and places huge strain on the rail network in China.

Companies often allow staff to leave work well in advance, sometimes up to two weeks before the New Year. Some companies also allow a holiday extension for a further week after New Year. This means many factories are not up to full production until late February or even March. This can mean 4 weeks or more of production outages.

There are also reports of workers not returning following the celebrations. This can lead to reduced production runs, as well as product delays and production quality issues.

Delivery Delays, Price Rises, No Product

Global carriers expect a reduced volume over this period. This is reflected in their shipping capacities, which can be cut by nearly 40 per cent. You should contact your logistics company and reserve space for your needs.

Companies who completed this task in advance, and secured their products at the port ready for shipping by no later than the middle of January, prevented many problems. Ports do stay open over Chinese New Year, but only with a skeleton staff. Prior to New Year congestion grows.

Review your other delivery options – even if they are more expensive, at least you can supply your customers and retain their goodwill. However, airports will look abandoned as ground staff and air crews are at home. No freight company can get over these issues. All the while you need to watch carefully for changes in transport rates. If there are price rises in this period, check they return to ‘normal’ in due course.

Lessons learnt from Chinese New Year also apply for holiday periods in other parts of the world. After all, supply chains often demand a global focus. Here, while we normally see the well oiled just-in-time ordering system working well, there is a spike in production (and demand) as New Year comes closer.

Production staff work hard to get ahead of demand and attempt to reduce future supply problems. Suppliers in the USA have taken more notice of Chinese New Year recently, as other labour issues in China, such as overall costs and labour shortages are amplified at this time. Unfulfilled orders damage profits – so ordering well in advance is important.

Cashflow

Like anyone else, Chinese workers value their holidays. They are seen as a really good benefit, especially when compared to US companies. Workers’ journeys home can take a number of days, but employers pay a bonus of one month’s salary. However, this may also impact your organisation, as your suppliers in China may ask for payment of all invoices before Chinese New Year.

You should also be aware that any e-mails you send to suppliers during the week of the celebrations will go unanswered. Senior staff do usually live closer to the workplace, but nevertheless you should plan for this email silence.

The Holiday Cost

Putting a cost figure on the national economy for a holiday in any country is not practical. It depends a lot on the sector. Production revenues suffer, but leisure, travel and tourism should benefit. In the retail sector, there may be purchases that are just delayed to the next day. There is also a potential positive result when workers work faster in the run up to the holiday in anticipation of the closure.

It also depends on the number of holidays per year in individual countries. In the UK, estimated costs for one extra national holiday vary – some predict a loss of £3 billion, while others showed a gain of £1 billion.

Long term impact for China?

There are those who report a change in demand, moving away from Chinese manufacturing. This is often reported to be due to increased prices and/or issues during and after Chinese New Year, which disrupts deliveries. But it is hard to quantify the real cost for this period.

A global view is required. This annual event has been clearly marked in diaries across China, but it is now recognised by more companies worldwide. The solutions to Chinese New Year logistics issues are not hidden and complex, but measures do need to be implemented.

We wish all those travelling a safe journey and a wonderful Chinese New Year.

Corruption Perceptions Index – A Procurement Must-Read

The Corruption Perceptions Index (CPI) is a must-read annual report for procurement professionals that source internationally.

Bribery

Why? Because with a greater focus on risk, you need to know if your supply chain is contributing to the serious corruption problems, endemic in so many of the world’s poorest countries.

Clean vs. Dirty

There’s a running joke in Paraguay about the country’s entrenched corruption problem, exposed and broadcast year after year by Transparency International’s Corruption Perceptions Index (CPI). With a score of 130 out of 168, it’s one of the most corrupt countries in the world, but locals say that the reason it didn’t come in last is because “somebody must have bribed the judges”.

Corruption-Map

Transparency International ‘Corruption Heat Map

Highlights from the report include the top ten “cleanest” countries. It’s important to note that no single country anywhere in the world is corruption free:

  • 1. Denmark
  • 2. Finland
  • 3. Sweden
  • 4. New Zealand
  • 5. Netherlands, Norway
  • 7. Switzerland
  • 8. Singapore
  • 9. Canada
  • 10. Germany, Luxembourg, UK

It’s no surprise that the lowest-scoring countries include war-torn states that have suffered from decades of conflict, such as Iraq, Syria and Afghanistan.

  • 150 – Burundi, Cambodia, Zimbabwe
  • 153 – Uzbekistan
  • 154 – Eritrea, Syria, Turkmenistan, Yemen
  • 158 – Haiti
  • 159 – Guinea-Bissau, Venezuela
  • 161 – Iraq, Libya
  • 163 – Angola, South Sudan
  • 165 – Sudan
  • 166 – Afghanistan
  • 167 – North Korea, Somalia

Other interesting results include the USA in 16th place; Australia slipping to 13th place; Greece improving its performance to reach 58th place (in all likelihood due to international scrutiny during the Greek financial crisis); and China in 83rd place.

Exporting Corruption

Northern European countries were ranked as the “cleanest” states, most free of corruption. However, Transparency International suggests that their records aren’t as clean as the scores would indicate, and it’s all down to sourcing from corrupt countries:

“The OECD Anti-Bribery Convention, adopted in 1997, requires each signatory country to make foreign bribery a crime for which individuals and enterprises are responsible. The Convention is a key instrument for curbing the export of corruption globally because the 41 signatory countries are responsible for approximately two-thirds of world exports and almost 90 per cent of total foreign direct investment outflows.

“Foreign bribery is not an abstract phenomenon; it has damaging consequences in the form of contracts not going to the best qualified suppliers, prices often being inflated to cover bribe payments, environmental requirements not being enforced and taxes not being collected.”

The CPI report shows, however, that half of all OECD countries are violating their international obligations to crack down on bribery by their companies abroad. This includes the cleanest countries identified in the report, such as Sweden (3rd place), which is facing allegations that it paid millions of dollars in bribes in Uzbekistan (153rd place).

Procurement’s Role

Procurement professionals who source internationally have the power to halt the flow of cash moving from the cleanest to most corrupt countries, feeding the corrupt states and locking the world’s most vulnerable people into a cycle of impoverishment.

Here are three steps you can take, as a procurement professional, to ensure you do not source from a corrupt state:

  1. Be informed – read reports such as the annual CPI and research the countries you are dealing with.
  2. Understand the OECD Anti-Bribery Convention, and remember that individuals can be held responsible.
  3. Lobby your government to put in place legislation that will steer the profession away from corrupt, immoral or illegal sourcing activities. There has been some excellent progress in this area internationally, such as the US Congo Conflict Minerals Act 2009, or the UK Modern Slavery Act 2015.

10,000 Reasons to Join Procurious

Procurious is celebrating its 10,000th member months ahead of its second birthday in a milestone that has surpassed all expectations.

Procurious-10K-Banner1

We’re delighted to make this announcement and want to take the opportunity to thank all of our members for helping us to build and grow such a fantastic community.

When we launched in May 2014, we wanted to provide a hub for members to advance their careers, develop their skills and expand their professional networks. We like to think that the growth in the community suggests that we’re making a difference for procurement and supply chain professionals.

Shifting Procurement Landscape

A huge shift is in the making within the procurement/supply management profession. While cost remains important in the procurement function, professionals work at the interface of an extended global supply chain and are responsible for an ever-growing corporate spend.

Increasingly, Chief Procurement Officers (CPOs) command a seat next to the CEO in the boardroom, and successful supply management practices are seen as pivotal to corporate growth. As a result, demand for new talent is soaring, and so are advancement opportunities.

Against this backdrop, Procurious broke new ground in May 2014, when it launched as the first free online global business network for curious, ambitious procurement and supply management professionals. Building on its mission to strengthen the global supply chain community, Procurious has become a vital source of knowledge, connections, news, and advancement opportunities.

Unlike other communities, Procurious offers a powerful combination of career advancement, skill development, and professional networking, all on one platform. With more than 80 eLearning videos, discussions on everything from commodity indices to procurement systems, and a wealth of guest writers adding their voices to a twice-daily blog, Procurious is at the epicenter of the industry

Flexing Collective Muscle

“The complexities of procurement and supply management are a world away from what they were a decade ago. Executives realise the huge risk posed to their business if there are supply chain disruptions, or costly reputational damage caused by bad management and supply chain practices,” said Ms Seary.

“This means that organisations of all shapes and sizes are placing a far greater emphasis on procurement professionals, who are commanding a seat right next the CEO at the boardroom table.

“It’s a world away from the procurement function within organisations a decade ago, when procurement was still considered a backroom function. Back then, buyers struggled for influence over corporate spend, typically buying from large suppliers and sticking with long-term contractors, with the primary focus on cost.

“Many of the issues the profession faces are too big for any one person or company to address alone. It’s exciting to think what our global procurement community can achieve as we flex our collective muscle.”

Engaging the Community

Procurious members engage with the site daily to find a daily stream of highly relevant and credible procurement news and information and broader business and tech/digital news that can be difficult to locate among the noise on LinkedIn.

Procurious member, Chetan Shetty of Productivity Champion Advisory Services in New Zealand, said the site contributes to their business network efforts. “The site is very different and a refreshing approach to connecting with like-minded professionals.”

Members hail from over 140 countries and represent some of the largest organisations in the world including Visa, BHP Billiton, British Airways, Apple, IBM, Shell, HSBC, Unilever, NHS and Deloitte.

You can join the Procurious community for free today by registering at Procurious.com.

To celebrate our milestone, we’ve created a neat infographic to illustrate just how far our 10,000 members could take us…

Procurious-10K-Jan2016-infographic copy

Meanwhile, here are some of the key headlines from procurement and supply chain this week…

Child Labour Concerns in Battery Supply Chain

  • A new report from Amnesty International and African Resources Watch has raised concerns about child labour in the battery supply chain
  • The report states that “very few” companies are taking the required steps in due diligence, particularly in relation to the mining of cobalt
  • Amnesty accused major global organisations, such as Apple, Samsung and Sony, of “failing to do basic checks to ensure that cobalt mined by child labourers has not been used in their products”
  • Cobalt is not currently covered under the US Dodd-Frank Act, which is limited to tin, tantalum, tungsten and gold

Read more at The Financial Times

First Stage of “Space Data Highway” Launched

  • A node was launched into space on the back of a communications satellite on Friday, which was the first part of Europe’s new space “data highway”
  • The European Data Relay Satellite (EDRS) has been planned as a way to increase the volume and speed of data transmission, as it doesn’t require the relay from an Earth-based ground station
  • EDRS-A node will relay data, including picture and radar images, that will be used to monitor floods, sea ice and oil spills
  • The system, costing Euro 500 million ($545 million; £380 million), will also be available to paying customers once it is fully operational

Read more at Business Standard

Peugeot Signs Iran Manufacturing Deal

  • PSA Peugeot Citroën has signed a deal which will mean that three of its current models will be manufactured in Iran over the next five years
  • The deal, a Joint Venture between PSA and Iran Khodro, is expected to invest up to €400m over the next five years in manufacturing and R&D
  • Manufacturing of the latest Peugeot 208, 2008 and 301 models will take place in Tehran, with the first completed vehicles expected in 2017
  • It comes just a week after economic sanctions against Iran were lifted, and means a return for Peugeot to the country where it manufactured vehicles up until 2012

Read more at Supply Management

Google Plans to “Beam 5G” Using Drones

  • Google is building and testing a fleet of solar-powered drones capable of beaming 5G signals for mobile phone networks
  • Codenamed “Project SkyBender”, the drones will be able to transmit data up to 40 times faster than standard 4G, through the use of cutting-edge wave technology
  • The drones are being manufactured by the Google Titan part of the organisation, formed following Google’s acquisition of Titan Aerospace in 2014
  • It is hoped that these drones will enable Google, and other providers, to bring the internet to remote areas around the world

Read more at The Verge

Migration, Terrorism and Industry 4.0 – Highlights from WEF 2016

Almost a year ago to the day, Procurious published an article on the outcomes of the World Economic Forum 2015. We also took a look at the key topics that were to be discussed during the 2015 event.

WEF 2016

You might be forgiven for thinking that, since the leaders from the world’s largest economies gathered in Davos twelve months ago, very little has changed. There are still major issues with global markets, falling oil prices, interstate conflicts and climate change.

Add to these factors the growing migration from war-torn regions, and terrorism, both on the ground and cyber-related, and it was a recipe for a very busy Forum.

What Was Different?

Despite all the pressing issues highlighted above, the WEF organisers picked a different topic to be the main theme for 2016 – Industry 4.0. This topic focuses on the so-called “Fourth Industrial Revolution”, where industries are increasingly digitised, and humans are replaced in many professions by robots or AI.

While this might be a positive thing for some of the attendees, including Jack Ma (Founder of Alibaba), Sheryl Sandberg (CEO of Facebook) and Eric Schmidt (Head of Alphabet, Google’s parent company), it is potentially very bad news for both blue and white collar workers, with an estimated 7 million jobs at risk over the next 5 years in the world’s largest economies.

Klaus Schwab, founder and president of the WEF, has written a book on ‘Industry 4.0’, in which he states, “We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another.” This theme also included a discussion on ‘smart machines’ being used in war zones.

What Else Was on the Agenda?

A number of other major themes appeared on the agenda, including terrorism, the migration crisis, cybercrime, and the on-going impact of the slowdown in the Chinese economy on the financial markets of the rest of the world.

In the run up to the 2016 event, the Global Risks Report published by the WEF highlighted large-scale ‘involuntary migration’, for example from civil wars, as this year’s major risk in terms of impact, and mitigation of climate change as the most likely global risk. This is the first time that an environmental issue has topped this particular list.

Climate change was one of the hot topics of the Forum, as leaders discussed the next steps and how to build upon the COP Climate Change Agreement that was signed in Paris in December last year. Global climate change is seen as having a major impact on other risks, such as food and water shortages and regional conflict, so the topic was never far from the centre of discussions.

Anything else?

Leaders also managed to find time to talk extensively about the global markets, including the impact of the slowdown in the Chinese economy. Christine Lagarde, managing director of the IMF, spoke on Friday about the need for Chinese authorities to communicate better with global markets over moves in equities and foreign exchange markets, in order to head off any further market downturns.

However, it’s not all bad news, as Lagarde stated that China’s move from an export-led to domestic consumer market economy was “manageable”, while holding estimates for Chinese growth at 6.5 per cent. It’s hoped that this turnaround will arrest fears of another global recession.

Major Conclusions

As the Forum drew to a close on Friday, there was a sense that 2016 could be a year of major upheaval, with markets not expected to recover immediately, slow growth predicted for at least the first half of the year, and a solution still required for mass migration.

However, there also appeared to be a feeling of tangible outputs from a business point of view. The central theme of ‘Industry 4.0’ raised interesting points around the future of many industries, and in a number of sessions, there was agreement that business needed to step away from a narrow focus on profits and take steps to improve workers’ conditions, promote diversity and take a perspective that covered a wider group of stakeholders.

It will be interesting to see if we are still talking about the same issues when the 2017 Forum rolls around in 12 months.

Need some headlines and stories for your morning coffee with your friends? Procurious has got you covered…

BMW Top Sustainable Corporations List

  • BMW has topped Corporate Knights Magazine’s annual ‘Global 100’ list of sustainable corporations for 2016
  • The study looks at companies with a market valuation of $2 billion or high, and scores them against global industry peers on a list of 12 quantitative KPIs not exclusive to to environmental sustainability
  • Companies are scored on these KPIs, and the top performer from each industry outlined in the Global Industry Classification Standard goes to the final list
  • 2016’s list also included Dassault Systemes (Ranked 2nd), Outotec (3rd) and Commonwealth Bank of Australia (4th)

Read more at Corporate Knights

Thai Shrimp Migrant Workers Risk Being ‘Sold Off’

  • Following a number of high-profile reports and news headlines, the Thai shrimp industry is cleaning up its supply chain, but with unintended consequences
  • Migrant workers, the subject of many of the headlines, are being laid off without any form of compensation, leaving them at risk of being “sold off” to other companies
  • Activists claim that some workers are still in debt to their employers, and have just been moved on to another industry and face similar conditions
  • Firms are now being urged to offer these workers employment in the regulated operations

Read more at Thomson Reuters

Changing Thrift Shopping in Vancouver

  • A new business has been launched in Vancouver to change the way residents approach thrift shopping in the face of ‘fast fashion’
  • ‘My Modern Closet’, founded by Chloe Popove, is the first consignment store to offer people donating to the business a collection option, with customers then being given 20 per cent cashback or credit to shop online
  • It is hoped that the business will encourage more people to donate used or unwanted clothing and fight the impact of fast fashion
  • Any un-sold clothing is donated on to charities helping to give clothes to the homeless, and to Syrian refugees

Read more at Vancitybuzz.com

Starbucks Mobile Ordering Hits 1m Users Per Month

  • Starbucks has revealed that it is processing over 6 million transactions per month on its mobile app, as more people use it to order their coffee
  • In the final quarter of 2015, 21 per cent of all orders in the US at Starbucks were placed through the app, and this is expected to grow this year
  • First launched in Portland in 2015, the service is now widely available across the USA, Canada and the UK
  • The coffee giant is now looking to extend the service by offering delivery of coffee to users of the app

Read more at NBC News

Labour Market Figures Suggest Need for New Approach to Skills Gap

The Open University says businesses and universities must work more closely to address skills shortages.

Skills-Shortage-Graduates

Figures released today show that the UK continues to face up to a worsening skills crisis. Despite the overall rise in job creation, the vacancy rate continues to increase, and is particularly acute in specialist areas such as IT and engineering.

The latest Labour Market Figures, produced by the Office for National Statistics (ONS) reveal there are 588,000 more people in work than this time last year, but that there has been a 6 per cent increase in the number of unfilled roles over the same period, as there are now 756,000 vacancies.

Concerns for Businesses

The on-going shortage in skilled workers is increasingly causing concern for businesses. Decision makers are facing up to the effects of this market on their businesses: hard to fill vacancies can cause delays in developing new products and services, meanwhile the latest CBI/Accenture Employment Trends Survey, published last week, reveals that over half (52 per cent) of respondents believe that developing and maintaining digital skills within their organisation has a new urgency in this climate.

Despite there being over 2 million students enrolled on degree courses in 2014/15, with a 3 per cent increase in full-time first year enrolments in engineering and technology subjects, businesses often find that graduates are not adequately prepared for the workplace.

The skills gap is affecting UK productivity, for instance, engineering companies have reported an annual shortfall of 55,000 skilled workers. It has been estimated that addressing the shortage of skills in this area could generate £27 billion per year from 2020, roughly equivalent to 1,800 new secondary schools or 110 new hospitals. 

Issues for Small Business

Michael Martins, Economist at the Institute of Directors said: “These jobs figures, which show the British labour market ended 2015 strongly, could be just what the doctor ordered as we see nothing but storm clouds gathering across the global economy.

“While this is clearly good news and the increasing number of vacancies means that the unemployment rate could continue to drop, addressing the skills gap takes on a fresh importance. For small firms that employ fewer than ten employees, the struggle to find workers is particularly acute, with vacancies rising by 13.1 per cent in the last quarter.

This is another reason why employers hope the government will not follow through on suggestions to restrict skilled migration from outside the EU, especially as the monthly quota for Tier 2 visas has been shown to be inadequate in addressing skill shortages.”

An Answer in Workplace-Based Education?

The Open University is arguing that a greater emphasis on workplace-based higher education is necessary to create more value for businesses and individuals alike. Steve Hill, Director of External Engagement at The Open University, comments: “The skills gap is affecting everyone, holding back businesses and having a knock-on effect on British economic productivity.

“In most cases, the answer to this shortage is right under our noses – with up to 90 per cent of the current workforce still in work over the next decade.  With the right training and up-skilling, these individuals can become the engineers, data scientists and high-skilled digital workforce the UK needs to compete on the world stage.

The challenge now is for Governments and the academic sector to work together to develop courses that meet the needs of businesses, and provide the right support for those committed to developing their careers.”

The OU regularly supports over 1,300 organisations, including KMPG, Hay Group and the NHS, delivering flexible learning solutions at scale to address skills shortages and develop high performing workforces. With a global reach and as the UK’s leader in part time education, with 76 per cent of OU’s current students studying whilst working full or part time, the OU is well equipped to deliver consistent learning at scale to dispersed workforces.

Are Supply Chain Audits Bad for Good Business?

The line, “Quis custodiet ipsos custodes?”, first appeared in Satires by the Roman poet Juvenal, and literally means “Who will guard the guards themselves?”. The question now being asked is, “Who audits the auditors?”, and the answers don’t look good.

Modern-Day-Slavery

Research from the University of Sheffield released last week claims that supply chain auditors are actually “‘working’ for the corporations”, and ultimately failing both the supply chain workers and the environment they are supposed to be protecting.

“Ineffective Tools”

SPERI, the Sheffield Political Economic Research Institute, conducted 25 interviews over a 2-year period with auditors, business executives, NGOs and suppliers around the world, as well as visiting factories in China, before publishing their results.

The report argues that “audits are ineffective tools for detecting, reporting, or correcting environmental and labour problems in supply chains”, and that many of the problems that ethical audits were created to solve are actually being made worse by the process. This is in part down to the organisations carrying out the audits working towards the interests of businesses.

One auditor was quoted in the report as saying, “we will audit as far down as the brand wants to go”. As stakeholders and organisations, such as ISM and CIPS, focus more on the concept of the end-to-end supply chain, including all supplier and subcontractor practices, it appears that in some cases, the full chain is not being assessed.

The Auditing Industry

A quick Google search for the term ‘supply chain audit’ throws up a vast number of results. Included in these results are a considerable number of private companies who are either supply chain auditors, or offer it as part of their services. The increasing market for ethical audits has led to the creation of a booming industry.

It should be pointed out that these firms are not being accused of falsifying results or deliberately misleading the organisations who are employing them to audit supply chains. The accusations lie in the fact that some practices within the supply chain are being missed.

Apportioning blame, even taking the findings of the SPERI research into account, is not as black and white as people might think. If the organisations carrying out the audits are providing misleading findings, then action must be taken.

However, much as procurement may be bound by a specification when purchasing goods and services, auditors will be bound by what they are requested to do by the employing organisation. The auditors may be culpable for not going far enough, but the blame should be shared if organisations are seeking to limit their activities.

Governmental and Public Input

And perhaps this is part of the issue, in having auditors as commercial enterprises. These organisations will be operated as businesses with the aim of meeting customer demand, but, as a business, still need to make enough money to remain operational and satisfy investors.

The SPERI report argues that ethical audits need greater governmental involvement, both from the point of view of conducting audits, but also in enforcing the required standards for working conditions and the environment. Governmental enforcement of these regulations can be difficult, especially where organisations operate global supply chains and fall under a diverse set of jurisdictions.

Many national Governments are tightening regulations around modern slavery and the environment. The UK Government has announced a set of measures aimed at combatting modern slavery in the supply chain. The newly formed Gangmasters and Labour Abuse Authority will be able to use the measures to force organisations to take action, where there is belief that offences have occurred.

However, in order for the issues to be tackled effectively across global supply chains, similar measures need to be in place for all countries, or there will always be areas where practices will remain unchecked.

You can find a full copy of the SPERI report here. We’d love to hear your thoughts and opinions on this issue. If you work for an auditing company, let us know your experiences of this too.

In the meantime, you can check out the major headlines in procurement and supply chain this week…

EU to Scrutinise Large Company Big Data Use

  • The European Union is considering whether the way large Internet companies, such as Google or Facebook, collect vast quantities of data is in breach of antitrust rules
  • Margrethe Vestager, European Commissioner for Competition, speaking in Munich over the weekend stated that the EU would step in if Big Data usage was negatively impacting competition
  • Some experts have warned that with a few large companies controlling the data, it becomes harder for new organisations to enter markets, being too far behind to compete effectively
  • Ms. Vestager also said the EU would look into why some companies can’t acquire information that is as useful as the data that other competing firms have.

Read more at the Wall Street Journal

Wholesale Energy Prices Hit 5-Year Low in UK

  • The mild winter in the UK, combined with falling commodity prices, has led to the price of wholesale energy in the UK falling to a 5-year low
  • Electricity prices fell by 23 per cent against the previous year, while gas prices fell by 34 per cent for the same period
  • Increased production capacity in 2016, milder temperatures and increased usage of liquefied natural gas (LNG)in the UK are also thought to be part of the issue
  • However, energy companies have been accused of overcharging their customers by not passing on the reduction in the wholesale prices

Read more at Supply Management

Indian Government to Assist Start-Ups

  • The Modi Government in India has announced plans to assist start-ups in the country by only requiring the businesses to pay statutory fees for getting started
  • In a move designed to encourage innovation and entrepreneurship, the Government will cover the costs of filing of patents, trademarks or designs
  • The Government has also agreed to relax public procurement regulations for start-ups, not requiring the businesses to meet current regulations for prior experience/turnover found in the manufacturing sector
  • The Government hopes that this scheme will eventually lead to the development of start-up organisations in sectors such as agriculture, healthcare and education

Read more at Business Standard

ECHR Rules Companies Can Monitor Employee Internet Usage

  • The European Court for Human Rights has ruled that companies can monitor employees’ internet usage, providing they have given warning beforehand that personal use of facilities is forbidden
  • The ruling comes after a Romanian engineer took his employer to court after being fired for having private conversations with his family on a Yahoo Messenger site
  • The ECHR, finding in favour of the employer, noted in its ruling that “it is not disputed that the applicant’s employer’s internal regulations strictly prohibited employees from using the company’s computers and resources for personal purposes.”
  • This prior warning given to the employee played a large role in the decision, as the Court could rule that it was not a breach of his human rights

Read more at Ars Technica

Reusability – Getting to Space Just Got a Whole Lot Cheaper

Take a fresh look at the consumables in your supply chain.

SpaceX Falcon9

On December 21, 2015, SpaceX’s Falcon 9 made history. After successfully delivering 11 communications satellites into low-Earth orbit, the nine-engine booster rocket returned safely to Cape Canaveral, landing dramatically on a jet of fire.

Less than a week later, SpaceX founder Elon Musk tweeted that the Falcon 9 was “back in the hanger … no damage found, ready to fire again”.

Reusability the Key

Placing satellites into orbit is no mean feat, but the astounding, history-making part of this operation was landing the booster. It’s all about reusability. Until now, putting a rocket into space has been prohibitively expensive due to the single-use aspect of launching. In his detailed explanation of Musk’s vision, Tim Urban of the website Waitbutwhy compares single-use spacecraft to air travel:

“Imagine the current air travel industry with one key difference: an airplane works for one flight only. Each flight is on a brand new plane, and after the flight, passengers exit into the terminal and the plane is broken down into scrap metal and possibly-reusable parts that are sent off to be refurbished for use in a future plane.

An airplane costs around $300 million to build. So in this new model, in addition to paying for the crew’s time and fuel, airlines have to spend $300 million extra each flight to build a plane. How would that change things?

First, there would be very few flights available—the schedule would be limited by the pace of plane production. Second, the price of a round-trip ticket between Chicago and San Francisco would now cost about $1.5 million per person. For economy.”[1]

Musk himself has stressed that reusability is the key to making human life multi-planetary:

“If one can figure out how to effectively reuse rockets just like airplanes, the cost of access to space will be reduced by as much as a factor of a hundred.  A fully reusable vehicle has never been done before. That really is the fundamental breakthrough needed to revolutionize access to space.”[2]

Here’s how they did it: https://youtu.be/sSF81yjVbJE.

Reducing the Costs

So how will SpaceX’s achievement affect the costs of getting to space? With a human mission to Mars as the ultimate goal, back in 1989 NASA estimated it would cost $450 billion to send 4-6 astronauts, about $100 billion a seat. This was upgraded in 2004 to $50 billion, or $10 billion a seat. Musk has a per-seat goal of $500,000, 20,000 times less than NASA.[3] That’s less money than an average home loan in Australia.

The huge reduction in costs will be brought about through a combination of revolutionary improvements, including low-cost propellant, making the return propellant on Mars,[4] and having approximately 100 paying passengers per flight. The biggest saving, however, will be through the rapid reusability of rockets, where the only costs involved are maintenance, life-support and refuelling.

The closest NASA has come to reusability was through the now-retired Space Shuttle program, which was able to land the spacecraft itself but not the booster, costing over $200 million per astronaut.

What About Your Supply Chain?

The Falcon 9 story is inspirational in the sense that SpaceX has achieved something that the world’s best aeronautical engineers said could never be done. The single-usage problem has been unsurmountable for decades, but SpaceX solved the puzzle and other organisations will soon follow suit.

The message here for procurement professionals is to take a fresh look at the consumables in your supply chain that could possibly be reusable. Whether the article is as expensive as a rocket booster or as cheap as office paper, it’s worth reconsidering whether items really are only suitable for a single use. Reusability is good for the bottom line, good for the planet, and will help put humans on Mars sooner than we think.

[1] http://waitbutwhy.com/2015/08/how-and-why-spacex-will-colonize-mars.html/4#phase2

[2] http://www.spacex.com/news/2013/03/31/reusability-key-making-human-life-multi-planetary

[3] http://waitbutwhy.com/2015/08/how-and-why-spacex-will-colonize-mars.html/4#phase2

[4] Propellant can be created using Mars’ CO2 atmosphere and the H2O frozen in the soil.

Cost Control and Consolidation in Consumer Goods Supply Chain

A lack of growth in key markets will lead global players to seek opportunities in the developing world. Developing Economy

Forecasts show that 2016 will continue the trend of minimal year-on-year growth in consumer goods spending, both in the UK and across Europe. In this environment manufacturers will carry on looking for opportunities to consolidate and pare down costs, focusing on developing world markets with higher growth potential.

However, competitive pressures are substantial: manufacturers based in the developing world are leveraging their low cost base and local knowledge to win both in their home and international markets.

Slow Global Growth

2015 saw a continuation of the effects of the ‘Great Recession’ that started in 2007, with historically low revenue growth, margins and shareholder returns. In the eurozone for instance, growth slowed to 0.3 per cent in November, with growth in Italy as low as 0.2 per cent.

China has also experienced significant slow-down, with economic growth at a six-year low of 6.9 per cent in Q3 2015. The impact of the slow growth has spilled over into 2016, with continuing falls in the Chinese stock market and slow demand for commodities having an impact on the wider global economic market.

Nick Miller, head of FMCG at Crimson & Co commented: “Seemingly as a result of this growth, some of the largest acquisitions and takeovers in 2015 have focused on cutting costs in supply goods and services to market. Kraft and Heinz’s merger last July has led to multiple cost cutting measures, as has the more recent take-over of SABMiller by ABInbev.

This trend in the supply chain is surely set to continue, with larger companies merging to create greater economies of scale to further leverage low cost methods in order to reach their target audiences.

In this way, supply chain innovation will also be driven by a need to curb costs and expenditures. Small companies, that are more flexible than larger corporations, are able to react to market developments faster, changing their strategies to bring fresh ideas for supply chain excellence. Larger players, unable to invest in this dynamic way of working, have tended to buy innovation by acquiring smaller companies. Coca Cola has already purchased Innocent drinks with this aim in mind.”

Global vs. Local

Given the lack of growth in Europe and China, many organisations are looking to the developing world for growth opportunities. However, these opportunities can be difficult to tie down, with organisations typically losing out to regional players more comfortable with the local environment.

The smaller companies in the developing world have significant advantages over global organisations seeking to expand in the region. As these companies are already present in the area, they will have an existing customer base, as well as an in-depth knowledge of the market, giving them an edge over external players.

In addition, they have immediate proximity to this rapidly expanding customer base, with naturally greater flexibility to be able to react quicker to market developments. 

Miller added, “Just as with innovations in the supply chain, large businesses will likely look to purchase small companies in developing areas to speed their time to market, instead of building their own on-the-ground agencies. This will be a more cost-effective way of speeding growth in these regions, as well as providing immediate expertise into valuable areas.”