Category Archives: In The Press

Exposing the Risk of Conflict Minerals in Supply Chains

As Intel declares that its supply chain will be free from conflict minerals this year, we take a look at what other organisations are doing, and what impact these materials can have on a supply chain. Conflict-Minerals

Conflict materials are raw materials sourced from a particular part of the world where conflict, such as civil war, is occurring and affects the trading of those materials. The proceeds from the trade of these materials, such as conflict diamonds, are often used to fund armed groups in these regions.

Conflict minerals are the raw materials columbite-tantalite (coltan), cassiterite (tin), gold, wolframite (tungsten) and their derivatives, the vast majority of which are found in the Democratic Republic of Congo and adjoining countries, a region which has been ravaged by civil war and other conflicts for over 20 years.

These minerals are used in a wide variety of manufactured products, including consumer electronics such as computers, laptops, tablets, smart phones and even washing machines.

Global Regulation

In 2010, US President Barack Obama signed The Dodd-Frank Wall Street Reform and Consumer Protection Act into law. Section 1502 of the Act required all American companies to determine whether their products contained conflict minerals through due diligence carried out in their supply chain, and to report this to the US Securities and Exchange Commission (SEC).

There were criticisms of the law on both sides, with some groups arguing that it didn’t go far enough and ban the sourcing of such products entirely, while others argued that over-zealous enforcement of the law could adversely impact legitimate workers in the region, who relied on trading these materials for their livelihoods.

Since the law was passed, it has been estimated that it has helped to reduce funds going to armed groups in the DRC by up to 65 per cent.

In the UK there is no strict regulation on conflict minerals, although there are initiatives that have been created to stop these materials entering the supply chain. These initiatives require organisations to provide a ‘proof of origin’ on raw materials, or carry out similar due diligence in their supply chains to assess where funds from trading are going.

During 2015, the European Parliament voted in favour of a mandatory monitoring system for minerals originating in conflict areas, similar to the provisions in Dodd-Frank. The system suffered similar criticism to Dodd-Frank in relation to provisions for legitimate traders and miners.

Supply Chain Transparency

Growing public scrutiny of organisational practices, and the rise of consumer power when it comes to sustainably manufactured or procured products, will lead to a requirement for a vast improvement in supply chain transparency in the short-term future.

With Intel now reporting that its supply chain will be free from all conflict minerals in 2016, many other high-profile organisations, particularly those in the electronics industry, will be keen to follow suit.

Apple reported progress in the removal of conflict minerals in its product in April last year, but cannot yet claim to be ‘conflict free’ as all of their suppliers are yet to complete the auditing process. A further 120 companies,including Dell, HP, Nokia and Microsoft, have signed up as members of the Conflict-Free Smelter Program (CFSP), which aims to ensure that metals and minerals are worked with in conflict-free factories.

However, there appears to be a lot of work for a number of organisations to do. A report released by Amnesty International last year showed that 79 per cent of a sample of companies who had filed reports to the SEC in 2014, had failed to meet the minimum disclosure requirements.

Supply Chain Risk

Organisations must undertake a considerable volume of work to ensure that their supply chains are free from conflict materials of any kind, including conflict minerals. The management of this issue, and the associated risks, needs to be handled proactively, or the organisations will have to deal with any repercussions.

As political and socio-economic climates grow more unstable, global supply chains face increasing risks when doing business, and even the best prepared can fall foul of the actions or activities of a third party in the chain. However, there are steps that can be taken to minimise these risks.

Increased collaboration with suppliers and supply chain partners and creating greater visibility through the use of data, as well as policies and processes governed by procurement, can all help to reduce these risks. It’s down to the individual organisations to work out what is best for them.

Procurement risk, including supply chain transparency and ethics, will be one of the major themes at the Procurious Big Ideas Summit 2016. Stay tuned in the next couple of months for more information on the event, and learn how you can get involved.

Meanwhile, we’ve scanned the news feeds and Internet to find the major procurement and supply chain headlines this week.

‘Non-Compliance’ Issues Alleged at Co-op Group

  • Kath Harmeston, former Procurement Director at the Co-operative Group, has alleged that procurement policy non-compliance were as high as 70 per cent
  • The claims were made during an employment tribunal where Harmeston is seeking £5.2 million from the organisation for unfair dismissal
  • Harmeston alleged that staff “across the business were placing commitments with suppliers without going to the procurement department first”, including on up to 50 capital projects
  • The Co-operative Group responded that Harmeston’s claims were a “smokescreen”, covering up poor performance and the hiring of a firm of consultants who had previously been subject to whistleblowing claims
  • The case continues

Read more at Supply Management

Domain Registration Shows Apple Car Progress

  • Technology giant Apple has registered three car-related internet domains, raising speculation that they are ready to unveil plans for a driverless car
  • Reports in 2015 contained speculation that Apple would be ready to launch a driverless vehicle by 2019, fuelled by CEO Tim Cook’s comments that the automotive industry should expect “massive change”
  • The company has made a number of high-profile appointments from the car industry in the past 12 months, with new staff from the likes of Volkswagen being brought on board
  • Apple will face stiff competition in the industry from already established organisations such as Tesla and Google, both of whom have already revealed plans for similar cars

Read more at The Telegraph

Police to Save £7m with Collaborative Procurement

  • A collaborative procurement agreement on the purchase of vehicles for 34 police and emergency services organisations in the UK will create savings of up to £7m
  • The agreement, the largest of its kind ever put together in the UK, will see the supply of over 3,000 vehicles, 1,200 of which will be manufactured in the UK itself
  • The suppliers – General Motors UK trading as Vauxhall, Ford, Volvo and BMW – were selected from a list of companies on the national government framework agreement
  • David Wilkin, West Midlands Police’s director of resources and the national policing lead for the procurement of vehicles, said “All suppliers in the process had to demonstrate their working relationship with local dealerships to ensure that going forward maintenance of the vehicles such as warranty repairs are carried out locally, ensuring we continue to support the local economy”.

Read more at Supply Management

TRAFFIC Traceability Review to Show Supply Chain Tracking

  • TRAFFIC, the wildlife trade monitoring network, has conducted and released a ground-breaking traceability review of how trade in endangered species can be tracked along the supply chain
  • The tracking of products will help to ensure that all national and international legislation on the trade of wildlife is being adhered to throughout organisational supply chains
  • The traceability systems will help consumers access information on, amongst others, fisheries supply chains, to see that the products they are purchasing come from sustainable suppliers
  • It is also hoped that these systems will help to arrest the decline in shark and ray populations around the globe

Read more at Traffic.org

Deficit Reduction ‘Top Priority’ For UK Government

The Chancellor’s warning of a “cocktail of new threats” to the UK economy shows that deficit reduction must be the top priority for the UK Government, says the Institute of Directors.

UK-Coins-Budget-Deficit

A slow start to 2016 for global markets, particularly in China, Brazil and Russia, the ongoing tension in the Middle East and stock market falls were all highlighted by George Osborne in a speech made in Cardiff on Thursday.

Although only just over a week into the new year, economic alarm bells are sounding around the world, with China suspending trading on its stock market twice last week due to heavy losses, as well as the continuing fall in global oil and other commodity prices.

What is the Deficit?

The deficit is the total amount of money a national government borrows, with the UK’s current deficit estimated at just under 5 per cent of GDP. Net borrowing for the UK in 2015-16 is forecast to be £69.5 billion, which is equal to 3.7 per cent of the UK’s GDP.

However, it’s not quite as simple as being just the money that is borrowed, as the deficit can be impacted by a number of macro-economic factors, such as economic growth and the strength of overseas markets who the UK is exporting to.

The “cocktail of threats” that Osborne warned about shows a picture of the global economy that is in sharp contrast to the rosier picture painted by the Chancellor in his Autumn Statement, when he said that the UK economy was “growing fast“.

However, with planned welfare cuts set aside, and targets for borrowing exceeded in 2015, many experts are also warning that the Conservative’s plans for a budget surplus by 2020 may prove to be very difficult.

Importance of Deficit Reduction

With a less positive outlook for the coming year, the Institute of Directors has stated that reducing the UK’s deficit is now more important than ever, to allow the country to cope with any future financial crisis.

James Sproule, Chief Economist at the IoD said: “Osborne’s warning comes at an important time for the world – and British – economy. With turmoil on the stock markets, interest rates still at extraordinary lows, and various surveys painting a less than rosy – albeit more realistic – outlook for the developing world, the UK must be prepared for all eventualities. First and foremost, that means a continued focus on eradicating the deficit. 

“85 per cent of IoD members support the Chancellor’s plans to run a small budget surplus by the end of this parliament. They know that without bringing public spending under control, the UK’s debt pile will continue to grow. That means when – not if – the next crisis strikes, it is unclear how well we will be able to weather the storm. 

“The IoD warned last year that the Chancellor did not leave himself much room for manoeuvre by relying on a £27 billion accounting windfall in the Autumn Statement to balance the books. Now those concerns have come into sharper relief.

 “Without a concerted effort to bring ever rising public spending under control, tax hikes like the apprenticeship levy will always be tempting, and the promised increase in income tax thresholds and cuts to corporation tax may not materialise. The fact the sun seems to be shining a little dimmer highlights the importance of fixing the roof sooner rather than later.”

Why Social Media Will Play a Role in the War on Terror

Social media can help to facilitate global communication and information gathering, but it can also be used for illegal means such as terrorism. With Twitter being fined for non-removal of “terrorist propaganda”, we investigate what countries are doing to stem this particular use of social media. Social Media for Terror

As we reported last week, Twitter was fined in Turkey for failing to remove content that the Turkish Government said was “terrorist propaganda”. The major social media platforms have been very careful in the past to strike a balance between removing materials, while at the same time trying not to inhibit or stop legitimate political debate.

However, in light of the terrorist attacks in Paris, Lebanon and the USA, organisations and legislators are now looking at what can be done to limit access to social media for terrorist organisations, both for communication and publication.

Pressure on Platforms 

Twitter, Facebook and YouTube have recently come under more pressure from governments to closely monitor, and remove, posts, accounts and videos that are either violent or contain terrorist propaganda. However, all three platforms take a reactive stance on this, relying on their users to report content like this before it is removed.

Extending the powers that the platforms operators have to carry out removal and tracking activities on these posts has been discussed. This has raised concerns among free-speech campaigners as to where these powers would end and as to what would fall under the categories for removal, as this is frequently hard to define.

New legislation was passed last week by the US House of Representatives, which now requires the Obama administration to produce a strategy to combat terrorists’ use of social media. The legislation was passed in response to the terrorist attack in San Bernardino, California, and aims to allow for more close scrutiny of social media activities as part of visa application consideration.

Rights and Freedoms

At the same time as the legislation went to vote, the UN was holding a special meeting of its Counter-Terrorism Committee, where preventing terrorists from exploiting the Internet was also on the agenda. Prominent in the discussion was how to carry this out, without impinging on the rights and freedoms of global citizens to legitimate debate and activities.

It is suspected that ISIS/ISIL has used social media to attract over 30,000 foreign terrorist fighters, from over 100 countries, to join their fights in Syria and Iraq. However, all parties were keen to assess how terrorist activity could be halted, while at the same time ensuring that any restrictions did not create grievances that would play into the terrorist groups’ hands.

Jeffrey Feltman, UN Under-Secretary-General for Political Affairs, told the Committee, “It is precisely [the] exploitation by terrorists and violent extremists that can easily result in us restricting human rights and fundamental freedoms”. Feltman went on to say that the intention was to put “young people at the centre of these efforts”, with this generation both most comfortable with social media, as well as the most susceptible to extremist propaganda.

Immature Business Sector

In the UK, the social media companies have also been reprimanded by the county’s most senior counter-terrorism officer, Mark Rowley, who, in describing social media as an “immature business sector”, criticised some of the organisations for not co-operating fully with police investigations.

Legislation similar to that discussed in the USA doesn’t exist in the UK, creating concerns that the police are missing important intelligence on terrorist activities, and falling behind these organisations by not being able to operate in the social media environment as well as the people they were tracking.

It will be interesting to see how legislation is developed, as well as how the platforms themselves can deal more effectively with pages and information relating to terrorist activities, and having a better solution for dealing with the spread of information.

Do you think social media could or should be more closely monitored? Is there a line that can be drawn between freedom and public safety? Get involved on Procurious and join the discussion. 

Meanwhile, we have been keeping an eye on all the major headlines in procurement and supply chain this week for you to share with your friends…

Apple Price Falls on Supply Chain Concerns

  • Concerns about Apple’s supply chain data and predicted sales for the first half of 2016 have caused its price targets to be reviewed
  • Investment firm RBC Capital Markets cut its price target for Apple to $140, down from $150 (already a decrease from earlier in 2015)
  • The firm cited slower than expected sales of the iPhone 6 in the first two quarters of 2016 as the reason
  • This was also due to key organisations in Apple’s supply chain cutting estimates for business in the same period

Read more at Apple Insider

French Courier Companies Fined for “Collusion”

  • 20 competing package delivery firms in France, as well as their professional trade union, have been fined €672 million by the French Competition Authority for price collusion
  • The authorities stated that the firms had shared sensitive information about price increases during group meetings with the transport and logistics trade association, TLF, between 2004 and 2010
  • 8 of the companies, including DHL Express France, Norbert Dentressangle and Royal Mail’s French arm, General Logistics Systems, comprised 71 per cent of the French market during this period
  • The authority concluded that French SMEs had been hit hardest by the collusion activities, as they did not have the negotiating power of the largest clients to reject or renegotiate the price increases

Read more at Supply Management

Tech Companies Suffer Due to Supply Chain Disruption

  • The 2015 Global Cleantech Risk Survey has reported that 61 per cent of clean tech companies had suffered some form of supply chain disruption in the past three years
  • Of these companies, 84 per cent stated that their bottom line had suffered due to the disruptions
  • 75 per cent of the 300 organisations surveyed, who sourced products from China, said that they had suffered from a supply chain disruption
  • These disruptions resulted in delayed deliveries, eroded profit margins, brand and reputation damage and reduced revenue

See more results at My Central Jersey

Global Firms Tied to Slave Labour

  • A number of high-profile global grocery supply chains have been linked to slave and forced labour in the seafood processing industry in Burma
  • Shrimp from the suppliers is used in the USA by a number of companies, including the organisation that owns Red Lobster and Olive Garden, as well as retail chains Wal-Mart, Kroger, Whole Foods, Dollar General and Petco
  • Thai Union, the primary supplier to the American companies, has committed to cleaning up its supply chain and reduce reliance on poorly regulated contractors

Read more at The Indian Republic

Skills Shortage and Access to Finance Top Concerns for UK Entrepreneurs

Difficulty obtaining finance and a general skills shortage risk undermining Britain’s start-up revolution, the Institute of Directors has warned this week. skills_shortage

The first ever survey of the IoD 99 network – a group of more than 650 entrepreneurs under the age of 35, running businesses in every part of the country and every sector of the economy – has confirmed that finding skilled employees and accessing scale-up finance are the most important issues for Britain’s start-ups.

Barriers to Growth

Worryingly, two-fifths (42 per cent) of the entrepreneurs surveyed said they have trouble hiring people with the right skills, and 39 per cent cite difficulty accessing finance as a potential barrier to growth.

More than half (53 per cent) said that money from family members had been instrumental in getting their business off the ground, while 56 per cent had used personal unsecured finance, like credit cards, and a further 45 per cent had used money from friends.

The IoD has called for government to open up the ‘equity economy’ to make it easier for savers to invest in young companies and turn Britain’s fledgling start-ups into scale-ups. The business group has also warned politicians against imposing arbitrary restrictions on the UK immigration system, which will make it harder for growing firms to bring in skilled workers from around the world.

Positive Social Impact

The survey of 122 members of the IoD 99 network – entrepreneurs running companies across the UK in every section of the economy, also showed:

  • Six in ten (61 per cent) young entrepreneurs were in full-time work when they started their own business
  • One in five (21 per cent) said the primary reason for starting their business was to have a ‘positive social impact’, 22 per cent said they wanted to work for themselves and one-third (36 per cent) said they wanted to build a successful company
  • Difficulty hiring skilled employees was ranked as the top barrier to growth, cited by 42 per cent of entrepreneurs, followed by trouble accessing finance (39 per cent), the high cost of finance (33 per cent), business taxes (29 per cent) and personal taxes (26 per cent)
  • While money from family, friends, and unsecured loans are the most important sources of finance in an entrepreneurs’ early days, private equity, bank and non-bank debt along with private and public sector grants are all seen as important sources of scale-up finance.

The full results can be found here.

Start-Up Revolution 

Jimmy McLoughlin, Deputy Head of Policy at the IoD, said, “The start-up revolution has taken hold in Britain like nowhere else in Europe. With so many young, exciting and cutting-edge businesses having popped up in recent years, it is vital to harness their potential and create the next raft of world-leading companies. Finding people with the right skills, and tapping into the right mix of finance will be the biggest factors in achieving scale-up success. For start-ups, overcoming these obstacles can be the difference between success and failure. 

“It is a worry, therefore, that so many start-ups struggle to hire skilled employees. The push to teach children digital skills, like programming, at school is part of the long-term solution, but we must remember that start-ups face skills shortages now. Therefore, it is crucial that Britain’s immigration system is as open and easy to navigate as possible.

“The last few years have seen exciting developments in alternative finance. Businesses can access more sources of capital than ever before and innovations like crowdfunding and peer-to-peer lending are quickly becoming mainstream options. Entrepreneurs see them playing a big role over the next decade. Regulation cannot stand in the way of this growing demand. We should strip back the layers of complexity which currently stand in the way of individuals investing through schemes like the Enterprise and Seed Enterprise Investment Scheme (EIS/SEIS) to give more people across the country a stake in the success of British start-ups.”

 This view was backed up by Alex Mitchell, chair of the IoD 99 network. “More and more young people are growing up with dreams of being an entrepreneur, with millions rejecting the idea of a nine-to-five job in favour of the freedom, flexibility and control of running their own business. Little can compare to the feeling of taking an idea to market and building a successful company. With so many support schemes like the IoD 99 around the country, it has arguably never been easier to go it on your own,” said Mitchell.

“Interestingly, most entrepreneurs were employed when they launched their own enterprise, demonstrating the commitment and dedication it takes to build a successful company, often while working full-time. Young entrepreneurs also said they were motivated more by the vision of building a successful business, being their own boss and having a social impact than financial reward. This is a testament to the vibrancy and diversity of the UK’s start-up scene.”

The Institute of Directors has called on the government to make EIS and SEIS easier to use for small-stakes investors and encourage more people to invest in growing companies. The full recommendations can be found in the report, Opening the Equity Economy.

Can Procurement Set an Example on KPIs?

Metrics, Key Performance Indicators (KPIs), Performance Management – whatever your organisation calls them, it’s almost certain that your procurement team are both measuring and being measured on performance. But are organisations measuring the right areas?

Metrics

Every week in the procurement and supply chain news, we read reports and headlines focusing on savings and supply chain practices, often highlighting the work organisations are doing to measure these performance areas.

Knowing which elements to measure is tricky, as no two sources will agree on what the ‘best’ metrics are to use. A quick Google search for ‘Procurement KPIs’ comes up with over 400,000 results, with a variety of links to organisations, articles and journals with different views on what constitutes ‘best practice’.

What is clear is from what we read, see and encounter in organisations is that there is a huge volume of resources (time, people, money) being devoted to managing these metrics, but frequently the data produced is poor or the metrics themselves are flawed from the outset.

Defining a Purpose

Anyone in procurement will be able to tell you that the purpose of KPIs is to measure internal and supplier performance across a number of areas. Most of these elements stem from the classic concepts of cost, quality and service. Each indicator focuses on a specific aspect of a contract, has defined what success and failure look like, and should service an organisational need or requirement.

The ‘SMART’ acronym (Specific, Measureable, Achievable, Realistic and Timely) is frequently used in conjunction with the creation of KPIs. Following these steps, the theory is that the KPIs will be both useful and successful and, what’s more, encourage behaviours that drive value.

The Reality

Far too often, however, KPIs in organisations fall short of this. Sometimes it’s because they are poorly defined, other times that they are unrealistic, and frequently that they are measuring the wrong thing entirely. From a procurement point of view, this generally means the focus is on savings and little else.

Externally, suppliers can be given huge lists of KPIs that they are expected to report on as part of their contract. This in turn makes meeting and reporting on KPIs onerous, putting the supplier off focusing on them, and potentially driving behaviours that are carried out to ‘tick off’ the KPIs in order to get paid.

Measuring Intangibles

But examples of good practice are out there. When Ben & Jerry sold their ice-cream brand to Unilever, they were eager for their brand to continue to be associated with the environmental and social activities for which they had gained a great reputation for. This involved the creation of “Social Metrics” – aimed at measuring the social and environmental performance of the brand under Unilever’s auspices.

A difficult task, but one that the organisations stuck with, ultimately creating the concept of “multicapitalism”, a performance accounting system measuring economic, social, and environmental impacts in an integrated way. So far it has been a success, and is setting the bar high for the use of metrics.

This is a good example of performance metrics being used to measure an area that often has intangible outputs.

Taking the Lead

So how can procurement take the lead on creating metrics and measuring performance? If procurement departments are keen to be measured on more than savings, then the organisations need to get their own house in order and create better KPIs for their suppliers.

A recent discussion on Procurious asked about other KPIs to use beyond tracking savings for high value projects. One key point made was to workshop metrics with internal customers to increase engagement. This holds true for suppliers too, and should help to ensure that the right areas of the contract are being measured.

We are not saying that savings trackers should be dropped, but procurement needs to focus on other value areas with suppliers. Once the profession leads by example and stops putting such a high importance on savings externally, the chances are good that this will also happen internally.

Is your organisation setting a good example on KPIs? Tell us what you think and get involved with our discussions.

We’ve scoured the headlines this week and picked out the main ones for you to digest with your morning coffee.

Nations Sign Historic Climate Agreement

  • The COP 21 event in Paris drew to a close last week, with nearly 200 countries signing a new agreement to reduce global emissions
  • The agreement sets a new goal for all countries to collectively reach net zero emissions in the second half of the century
  • The deal includes provision for rich countries agreed to raise $100bn (£66bn) a year by 2020 to help poor countries transform their economies and reduce emissions
  • The deal has been hailed as a significant step in the right direction by global leaders and environmental campaigners

Read more at The Guardian

Jaguar Land Rover Sees Resurgence

  • Jaguar Land Rover reported its best ever November sales, with volumes up by 27 per cent on the same period last year
  • The UK has taken over from China as JLR’s main market, with sales up 70 per cent, but also partly due to the slowdown in China’s economy
  • The high sales in Europe and North America have helped to offset the slower Chinese market, which had been responsible for a weak start to the 2015/16 financial year
  • The organisation is expanding production facilities into Slovakia, with the new plant expected to open in 2018 in order to help meet increasing demand

Read more at Forbes

Twitter fined in Turkey

  • Turkey’s communications technologies authority, the BTK, has fined Twitter 150,000 lira ($51,000.) for not removing content it says is “terrorist propaganda”
  • Although there were no further details on the content in question, it is not the first time Twitter has fallen foul of the Turkish Government
  • In the past, the site has been temporarily banned after failing to remove content following requests, although this is the first time a fine has been levied

Read more at Reuters

Tokyo Police to Launch “Drone Squad”

  • Police in Tokyo are to launch a specialist squad tasked with locating and, if necessary, capturing drones in the city
  • The squad has been set up following a number of incidents involving drones in the city, including a drone landing on the roof of the Prime Minister’s office carrying radioactive material in April
  • The police will use drones themselves to track down possible threats and nuisances, and will patrol high-profile buildings in Tokyo
  • The police drones will be equipped with nets in order to bring down other drones if required

Read more at the BBC

Catalytics – The Next Generation of Procurement

Catalytics® is a business concept that powers Proxima’s new suite of procurement services, delivering triple bottom line outcomes: people, profit and planet.

Lightbulb-small

45 per cent of consumers have revealed that they would stop spending with a company whose supplier practices are called into question. With so much at stake, Proxima the procurement services provider, today announces the launch of Catalytics®, a refreshing approach to managing a complex network of suppliers. 

Working with leading minds in business and academia Proxima has constructed a framework for Catalytics® built on five pillars – Strategy, Structure, Mastery, Culture and Enablers. The Catalytics® framework changes the conventional approach to managing supplier relationships, moving away from the heavy focus on financial metrics and instead focussing more on long-term value-creation.

Risk in the Supply Chain

Jonathan Cooper-Bagnall, Executive Vice President, Commercial Director at Proxima, comments: “Wider forces such as risk, innovation and sustainability critically influence the success or demise of businesses today. Seemingly indestructible brands have shown themselves extremely vulnerable in recent years.”

“Following horse meat scandals, uncapped oil-wells and garment factory disasters; even major European car manufacturers can witness their reputation and finances holed by the risks buried in the chain of command or hidden in the supply chain.”

The reliance on external suppliers for goods and services shows no sign of slowing down. Additional research conducted by Proxima found that the average FTSE 350 organisation spent 69.9 per cent of its revenue with outside agencies, and only 12.9 per cent spent on the in-house workforce in salaries and benefits.

Further, 46 per cent of risk managers in global businesses say supply chain failure is their number one risk. A Catalytics® approach will help to mitigate against supply led risks and, conversely, help businesses drive more value out of their supplier relationships.

 Triple Bottom Line

Catalytics® allows businesses to rethink how they manage complex supply chains in line with Triple Bottom Line (TBL) outcomes – looking beyond the transactions of buying goods or services.

With almost 70 per cent of operational activity performed by suppliers, businesses stand to receive significant benefits from taking a more strategic approach to their supplier ecosystems. 

Catalytics® accepts that companies today cannot isolate themselves from financial, operational and reputational risks in their extended supply ecosystem, and that those same suppliers are a valuable source of competitive advantage.

Cooper-Bagnall concludes, “Organisations must look beyond profit to evaluate their performance and direct their operations. Long-term value creation – for shareholders and other stakeholders – requires leaders to deliver on triple bottom line outcomes: people, profit and planet. Failure to align operations with the principles of TBL outcomes can have serious effects on brand reputation and market position. Thinking differently about supplier ecosystems will allow business leaders to reshape their entire business to meet the new realities of modern business.”

For more information about Proxima’s Catalytics® framework, visit www.proximagroup.com/what-is-catalytics  

New FSB Service Could Help SMEs Cut Energy Bills

Small businesses can reduce average energy bills by almost a quarter with the new FSB Energy service.

Gas Bill

  • FSB launches new service where members could reduce the cost of gas and electricity bills by 23 per cent, shaving nearly £1,000 per year off the average company bill
  • 70 per cent of businesses experience difficulty comparing energy tariffs and 43 per cent have never switched supplier
  • Main obstacles to businesses becoming energy efficient are working from leased or rented premises, lack of concern around energy costs and lack of capital for energy efficiency investment

Experts in business, the Federation of Small Businesses (FSB), is launching a new service to help its members reduce their gas and electricity bills. Members using the service could cut approximately a quarter (23 per cent) off their annual energy bill.

FSB’s new Energy Service (www.fsbenergy.org.uk) is part of a concerted drive by FSB to help smaller businesses reduce their energy costs. The organisation is also representing the interests of smaller businesses by responding to the Competition & Markets Authority’s (CMA) investigation into the energy market and creating a resource hub on its new website offering advice on energy efficiency measures.

Making Energy Easier 

The new service enables FSB members to obtain advice on competitive rates for their utilities, identify the annual saving achievable by switching tariffs and even have new contracts arranged for them if requested. It is born out of research suggesting that smaller businesses are being failed by the energy market, with 70 per cent of these businesses experiencing difficulty comparing energy tariffs and 43 per cent saying they have never switched supplier.

The new service will be run on behalf of FSB by business cost saving champion ‘Make it Cheaper‘.  It could generate annual average savings of 23 per cent for new customers switching their gas and electricity provider, equivalent to £973 off the £4,243 average annual energy bill of an FSB member. 

FSB Energy will also take care of the paperwork involved in switching – such as terminating existing contracts on behalf of members – saving them time and hassle in the process. And the service reminds members when their fixed price periods end to make sure they never ‘default’ on to more expensive rates.

SMEs Suffer Higher Costs

The CMA, which is preparing to conclude its investigation into the energy market, says SMEs in the UK pay around £500 million more a year than if competition was functioning effectively. It has voiced concern that 45 per cent of SMEs have been placed on a default tariff – one that has not been actively negotiated – which can be more than twice as expensive as a negotiated tariff. 

Dave Stallon, Operations Director at FSB, said: “Energy is an increasingly important issue for smaller businesses. There are many ways they can make substantial savings through the implementation of energy efficiency measures as well as ensuring they get the best tariff they can on their gas and electricity. Many smaller businesses, however, either don’t believe they can make substantial savings or haven’t trusted the market and the system enough to engage in the process.

“Our new service is designed to give smaller business owners easy to use advice they can trust, to enable them to make savings with the minimum of fuss. We are also very actively engaged with the CMA to improve the energy market for smaller businesses and are offering resources and advice on energy efficiency. In combination, we are confident that our initiatives can help to make a significant difference to smaller businesses’ energy bills.”

Energy Efficiency

In parallel with the establishment of FSB’s new Energy service, the organisation is promoting the benefits of smaller businesses introducing energy efficiency measures. The Department of Energy and Climate Change (DECC) estimates that the average SME could reduce its energy bill by 18-25 per cent by installing energy efficiency measures with an average payback of less than 1.5 years. 

However, while FSB research demonstrates that 90 per cent of businesses want to be energy efficient and 58 per cent of businesses surveyed have already made changes to improve their energy efficiency, there are major obstacles that need to be overcome. 

Almost half (45 per cent) of businesses identified operating from leased or rented premises as one of the biggest obstacles preventing companies becoming energy efficient.  Other barriers identified include a lack of concern around energy costs (45 per cent) and a lack of capital for energy efficiency investment (29 per cent).

The most widely reported energy efficiency measures already taken were: the installation of more efficient lights, lamps and bulbs (40 per cent); the introduction of switch off/turn down policies (23 per cent); and improved insulation (23 per cent). 

For the high level details on the research, check out the infographic below:

20151201 Energy Efficiency infographic FINAL

Established over 40 years ago to help its members succeed in business, FSB is a non-profit making organisation that’s run by members, for members.

FSB offers membership packages from £130. Members get an exclusive package of great value business services including advice, financial products and support. These cover a wide range of benefits such as tax, legal and HR, local network groups, business banking and mentoring.

Paris Climate Conference Emits Cautious Optimism

As the twenty-first session of the Conference of the Parties (COP) rolls into its second week, there is a sense of cautious optimism that the meeting in Paris may produce a global agreement on climate change.

UN-Climate-Change-summit-graphic

The meeting kicked off last week with 190 countries in attendance, with the aim of coming to a universal agreement on climate change and how to handle it. This might seem like a big, if not impossible, ask, but it’s important to remember that this is a world problem and ten years of collaboration has produced some positive results.

Positive Steps

In the past, outputs from the Climate Conference have suffered due to the high number of diverse interests from different countries. When the meeting was held in Copenhagen in 2009, strong differences between the US and China on commitments to minimise rising global temperatures caused a breakdown in negotiations.

However, many observers have said that the countries are in a much better position this year than in many previous years, but also that there is greater collaboration between cities, collectively known as the C40, who are sharing information and achieving outcomes on issues such as food waste collection and urban climate change.

Michael Bloomberg, former Mayor of New York City and UN Special Envoy for Cities and Climate Change, stated, “We’re in better shape going into Paris than we were going into Copenhagen, largely because of the progress cities have made, and C40 cities have helped lead the way. It’s a great example of the power of cooperation.”

And this spirit of collaboration has been seen in the talks between the key countries, with representatives already issuing a first draft of the agreement, leaving a full week for negotiations to take place and the agreement to be finalised.

The ministerial negotiations are where the real challenge lies, as each country approaches them with different goals in mind. Negotiations will focus on helping poorer countries reduce their emissions, how richer countries can contribute financially to make this work, and how global temperature rises can be capped or reduced.

Action Stations

What has been agreed upon is that it is time to act. The meeting has representatives from Kiribati and the Marshall Islands, both countries where rising sea levels have submerged large areas of land. With a focus on the future, it’s now down to see what the actions need to look like.

Alexander Howard, Senior Editor for Technology and Society at The Huffington Post,  notes that much of the focus thus far has been on ‘response’ (e.g. developing crisis management systems), rather working towards low-carbon cities. He acknowledges that this is a difficult goal which could potentially mean, amongst other things, spending a fortune to incentivise the public to alter their lifestyles.

This week will be vital in ensuring the future of countries’ actions against climate change, as any agreement will still have to be implemented. And this is where procurement should come into play.

Howard goes on to explain how “…tech giants like Apple have worked to shift to renewable energy sources. Cities can do the same. Mayors and city councils can use procurement reform to ensure that vendors compete to host the next generation of digital city services in greener data centres powered by clean energy sources instead of coal-fired plants.”

There is potentially a major role for procurement organisations to play in any implementation. It’s now time for procurement to be looking fully ahead to the future and ensuring that sustainability is embedded in processes, helping to support ongoing initiatives.

What are your thoughts on the issue of Climate Change and how it relates to procurement? Get involved on Procurious today!

We’ve also compiled a short selection of the top headlines in procurement and supply chain this week to share with your friends over morning coffee…

Trinidad and Tobago Under Pressure to Reform Procurement Laws

  • Purchasing legislation introduced by Trinidad and Tobago’s government less than a year ago has already faced criticism due to its perceived loopholes and limitations
  • The law, which aimed to create a “comprehensive database of information on public procurement” and “set training standards and competence levels for procurement professionals” was implemented by former Prime minister Kamla Persad-Bissessar, but has since been challenged by the People’s National Movement
  • The amended bill will be put to a committee, with revisions seeking to establish a Public Procurement Review Board, with the role of reviewing decisions made by the Office of Procurement Regulation
  • It is hoped that changes will help to strengthen the existing laws

Read more at Supply Management

LAX Announces $5 billion Procurement Programme

  • The procurement programme seeks to modernise the Los Angeles airport, the fifth busiest in the world
  • The Landside Access Modernisation Programme will include an automated people mover covering 2.25 miles, which will connect the central terminal area with a car rental area and a station connecting the airport to the LA Metro
  • The eight-year programme aims to relieve traffic congestion within the terminal area and on surrounding streets
  • It is hoped that using a strategy of “Design, Build, Finance, Operate, Maintain” (DBFOM) will help with efficiencies in running the project

Read more at Airports International

Department for Transport (DfT) Receives CIPS Certification

  • The DfT recently transformed their procurement function which has seen procurement’s profile raised across the DfT
  • A “Procurement Centre of Excellence”, which operates across the entire department, was also created and procurement governance processes were strengthened, with new guidance issued across the organisation.
  • Melinda Johnson, director of group commercial services at the department said the ‘achievement of this certification has enabled us to assure our ‘best practice’ guidance, make changes as necessary and given us pointers for further improvement.’

Read more at Supply Management

Samsung/Apple Patent Dispute Continues

  • Samsung has agreed to pay Apple $548 million in court ordered damages in their long-running patent dispute
  • It is the first meaningful transfer of money as part of the dispute, which began when Apple sued Samsung for perceived copyright infringements relating to the iPhone
  • Following a jury ruling in Apple’s favour, the US-based organisation were awarded over $1 billion in damages
  • There is a further case pending next year, worth $400 million, relating to the same charges

Read more at The Wall Street Journal

Small Firms Plan Grand Designs on Overseas Markets

58 per cent of UK small to medium-sized firms are planning to enter new markets in the next two years.

SMMT-manufacturing

In a further sign of economic optimism, well over half of UK small to medium-sized firms (SMEs) plan to enter new markets in the next two years with the manufacturing sector leading the way, according to a new study by Albion Ventures, one of the largest independent venture capital investors in the UK.

Evidence of an export-led recovery is provided by the fact that one-in-three (34 per cent) SMEs are looking to break into new markets overseas of which 19 per cent are casting outside the EU and 15 per cent within the single market.  This is higher than the 30 per cent targeting untapped domestic markets.  A further one-in-six (15 per cent) small businesses plan to grow through launching new products and improving their online services. 

New Markets for Manufacturing

The third Albion Growth Report, designed to shed light on the factors that both create and impede growth among over 1,000 SMEs, shows that medium-sized companies are more likely to be looking to expand into new markets (77 per cent) than small businesses (53 per cent).

In sector terms, three-quarters (75 per cent) of manufacturing firms are planning to enter new markets, the highest of any sector and also top for expansion within the EU at 28 per cent. Businesses in media, marketing and advertising (68 per cent) and IT/ telecoms (56 per cent) were second and third respectively.

Entering new markets is not without its challenges; in fact over half (52 per cent) of firms who have taken the plunge reported experiencing problems, the biggest were lack of expertise (13 per cent); too many regulatory obstacles (13 per cent); strong competition (12 per cent); and lack of demand (12 per cent).

Companies in the education sector were the most likely to encounter problems (61 per cent) when trying to enter new markets, followed by those in manufacturing and transportation & distribution (59 per cent and 57 per cent respectively).

Focus Outside the UK

Patrick Reeve, Managing Partner at Albion Ventures, said: “The search for new markets among small businesses is gathering pace with much of the effort focused outside the UK.  Given the EU’s continuing economic travails, it’s of little surprise that other overseas markets are proving more popular. 

“Breaking into new markets is easier said than done and all too often small firms lack the necessary expertise to overcome established competitors.  This is an area where external equity investors such as Albion can provide valuable hands-on support; for those small firms who get it right, conquering new markets can have a transformational impact.” 

On a regional basis, London-based SMEs are the most likely to enter new markets in the next two years with 66 per cent followed by those in the South West (62 per cent) and Scotland and the North East (59 per cent). Small firms in Wales are the least inclined to break into new markets with only 50 per cent planning to do so.

Disruption, Scandal and Upheaval – A Week in Procurement

The past week in procurement and supply chain has been a busy one, and so it’s been hard to pin down just one story to kick the new week off. 

FotorCreated

Over the past seven days, a marketing procurement function for a major global brand has been scrapped, Nigeria has been gripped by a massive procurement scandal and global freight and logistics has been hit by global unrest.

So, just in case you missed all of this, we’ve decided to wrap these three of the major stories for a change.

Marketing Procurement – Beginning of the End?

One story that took many people by surprise was the news that PepsiCo had taken the decision to scrap its marketing procurement function. The firm explained the move as a way of remaining “competitive in an environment where cost cutting and value building are paramount”.

The idea that this has been done to reduce costs and increase efficiency might seem a touch strange, as this is often what procurement are tasked with doing. However, the decision by PepsiCo immediately got the procurement world wondering if this would be the first of many.

However, before all of you who work in marketing procurement start dusting off your CVs, it looks unlikely that this is the case. A survey carried out by the Association of National Advertisers (ANA) found that 68 per cent of surveyed members didn’t view PepsiCo’s actions as the start of an industry trend.

However, it does serve to highlight the frequently high tension between the procurement and marketing functions. Procurement’s role as the intermediary between the organisation and the agencies is often seen as one of cost cutting, rather than value adding.

A survey by the ANA earlier this year found that the vast majority of individuals on both sides of the agency/client relationship were unconvinced about the value that procurement added to the process.

The PepsiCo situation may serve as a warning to other marketing procurement teams, but also afford them an opportunity to shift their focus. Instead of a focus on costs, it’s perhaps time for a more strategic approach, forging stronger relationships with agencies, and establishing how to add value on both sides of the aisle.

Nigeria Hit by Arms Procurement Scandal

Early last week, the news broke of the outcome of a major procurement fraud investigation in Nigeria, implicating some of the country’s former leaders and senior figures.

Based on the investigation, Nigerian President Muhammadu Buhari ordered the arrest of Sambo Dasuki, the country’s former National Security Advisor, who has been implicated in the fraud scandal, thought to be worth in the region of $2 billion.

It has been alleged that Dasuki awarded over $2 billion worth of “phantom” contracts for vehicles, weapons and munitions, which were to be used in Nigeria’s on going fight against terrorist group, Boko Harem.

An additional sum of $142.6m was also allegedly transferred to a company with accounts in the USA, UK and West Africa, without contracts being in place, and without any goods or services being supplied.

Mr Dasuki has claimed that all due process and military procurement regulations were followed in all transactions, and indicated that, given the value of the contracts, they could only have been approved by Nigeria’s former President, Goodluck Jonathan.

Former President Jonathan has also denied any involvement, and, when questioned at an event in Washington, D.C. last week, was quoted as querying whether the contracts ever existed. Keep an eye on the Procurious news for more on this in the coming weeks.

Global Unrest Disrupting Supply Chains

Events in the past week in Paris and Lebanon, as well as the on going influx of migrants into Europe, has freight and logistics organisations counting the cost of disrupted supply chains.

In their most recent Security Risk Index, US-based supply chain consultants BSI have highlighted border closures and slower than normal freight clearances as two of the major issues in Europe.

Delays at Calais costing UK shippers an estimated $1.2 million per day, plus losses from contaminated food and pharmaceutical products, have industry experts stating that that further disruptions could mean job losses across the continent.

Supply chain issues are not limited to Europe either. In China, thieves have been targeting moving trucks and removing goods from them on the road, while in South Africa, truck hijackings have increased by 29.1 per cent over 2014.

CIPS have also argued that increasingly global supply chains has increased complexity and that disruptions could have a damaging impact for the end customers.

Increasing risk in the supply chain is the topic of a webinar that Procurious founder Tania Seary is taking part in next week. Risk analysis in procurement is a key skill, particularly in light of current disruptions to supply chains.

Get all the information on the webinar and register here.

We’ve also kept an eye on other breaking news over the weekend and here are some of the key headlines to share over a morning cup of coffee.

UK Government Boosts Defence Spend

  • UK Prime Minister, David Cameron, will announce an additional £12 billion investment in equipment spend this week
  • As part of the Government’s National Security Strategy and Strategic Defence and Security Review (SDSR), Mr Cameron will outline the UK’s strategy for the coming decade
  • This includes a new fleet of maritime patrol aircraft and two new rapid-reaction “strike brigades” to add to existing capabilities
  • The news is good for American firm Boeing, who won an industry bidding war to provide nine aircraft to the UK RAF

Read more at The Belfast Telegraph

Google Glass Used in Heart Surgery

  • A team of cardiologists from the Institute of Cardiology, Warsaw, used the new generation Google Glass as part of a heart surgery procedure
  • The doctors used the device to help control and restore the blood flow in a blocked artery in a 49-year-old male patient
  • The Glass enabled the doctors to visualise the operation, as well as control the images with voice control, allowing them both hands free to operate
  • It is hoped that more wearable technology will now be adapted for use in the medical industry

Read more at Market Business News

BBC Announce Women of 2015 List

  • The BBC’s 100 Women season has returned, and the corporation has chosen its list of inspirational women for 2015
  • The list this year focuses on “octogenarians sharing life lessons; ‘good girl’ film-makers discussing expectations; nursing; five high-profile women; and ’30 under 30′ entrepreneurs”
  • The list highlights women from around the world who have given a positive inspiration to others with their actions over the past 12 months

See who made the list at BBC News