Category Archives: In The Press

Is the UK’s position as a global innovation leader at risk?

New research shows that a majority of UK organisations suffer from “innovation inertia” or a lack of consensus in where to invest their resources. Does the UK need to re-focus its efforts so as not to be left behind?

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The research from Hitachi Data Systems found that 75 per cent of organisations are being hampered in their investment decisions by a lack of clarity and access to business data. Additionally, a staggering 90 per cent of IT leaders believed their organisation was not in a position to respond to rapid change in it industry.

Although there is a much-increased volume of data available to business leaders, it appears that many are not being able to leverage this effectively. From a long-term point of view, this leaves British organisations potentially lagging behind their global competitors.

Lack of Investment

Alongside the “inertia” caused by a lack of organisational investment appears to be a significant decrease in investment in innovation at a national level.

The Confederation of British Industry (CBI) has revealed that the UK spent the least on innovation and science of any of the G8 nations in the past year, with only 0.49 per cent of GDP invested back in these areas.

The CBI also argued that more Governmental support was required in order to make innovation more attractive for businesses, a stronger framework and a re-thinking of business rates two of its key suggestions.

Industry leaders have also warned that innovation could be harmed should the Department for Business, Innovation and Skills change innovation and R&D grants from the UK Government, to loans.

Representatives of the aerospace, automotive and pharmaceutical industries have warned that this could lead to fewer R&D projects in the UK, and organisations shifting new R&D projects abroad.

Falling Behind?

Although there is much talk about the UK falling behind, the situation is perhaps less perilous that it seems.

The 2015 Global Innovation Index (GII) places the UK as one of the world’s top five most-innovative nations, both from a volume and quality point of view. This ranks the UK alongside economic peers such as Sweden and the USA, as well as being ahead of Germany and growth economies such as China and Brazil.

It could be argued, based on the comments from the CBI, that an increase in investment in innovation is required to keep the UK in its current position, rather than have the country play catch up with its global peers.

Ambition is Key

Yet, the UK and UK-based organisations need to continue to innovate and create in order to maintain its position. How best, though, to kick-start more innovation projects?

Richard Jones, pro-vice chancellor for research and innovation at the University of Sheffield, believes that universities will play a major role in rebuilding the UK’s innovation programmes.

In a speech to the Association for University Research and Industry Links’ annual conference, Professor Jones argued that universities needed to see what they could contribute to wider society and be more “ambitious” to achieve their goals.

Lead by Example

In the past 12 months, two of the UK’s most famous innovators, James Dyson and Richard Branson, have both invested in programmes to help boost innovative and entrepreneurial activities in the country.

Having figureheads leading by example, as well as investing time and money into this, could potentially give the UK the lift it needs in the coming years to keep its place at the top of the tree.

Do you think the UK needs to be more innovative? Is the country at risk of falling behind, or are the reports over-stated? Start the discussion on Procurious!

Stuck for a conversation in the coffee queue this morning? Procurious has gathered all the big headlines in procurement and supply chain for you…

Talk Talk Boss Warns of ‘Arms Race’

  • Talk Talk Chief Executive, Dido Harding, has warned that all UK companies are under threat of a “cyber security arms race”
  • The hack on the telecommunications company happened last Wednesday and has affected millions of customers, although no losses have been directly attributed to the hack as yet
  • Harding warned that any company in the UK could be vulnerable to a cyber attack
  • She went on to say, “This is happening to a huge number of organisations all the time. The awful truth is that every company, every organisation in the UK needs to spend more money and put more focus on cyber security – it’s the crime of our era.”

Read more at BT.com

London Mayor Contradicted on Garden Bridge Procurement

  • Claims that the procurement process behind the Garden Bridge was ‘robust’ made by London mayor Boris Johnson have been directly contradicted by TfL’s director of internal audit
  • Clive Walker, the man who oversaw mayoral body Transport for London’s internal investigation, conceded that the process was neither ‘open’ nor ‘objective’
  • Critics have suggested that TfL made attempts to ‘water down’ the audit and introduce elements which reflected well on its performance

Read more at Architect’s Journal

Technology Means Traffic Jams Could Be ‘Thing of the Past’

  • Motoring and technology engineers are hard work on the next generation of connected vehicles, which could completely transform British roads.
  • The concept revolves around cars talking to the city and guiding drivers through the busy streets with minimal delay
  • Siemens and NXP are in the process of designing the in-car chips and infrastructure to build ‘intelligent road systems’, allowing drivers to be kept up to date with conditions in real time
  • The technology giants believe the systems will be ready to go in the UK by 2020

Read more at The Express

Hyperloop Test to Start within ‘Weeks’

  • Hyperloop Transportation Technologies (HTT) has announced it will start work on the $6bn Hyperloop test track within the next two to three weeks
  • The Hyperloop system, originally the concept of Elon Musk, has had to overcome a number of issues to get to this stage, aims to create super-fast, cheap transportation between major cities
  • The system, which will be solar powered, could transport over ten million passengers during testing

The Collaborative Economy – The New Globalisation?

New organisations, new social media platforms, great connectivity – all of these are expanding the wealth of knowledge and skills that individuals have access to. As this continues, are we looking at a shift in the nature of global trade?

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Ten years ago, I sat in a business lecture debating why globalisation was a good thing, and why organisations needed to be alive to the possibilities of being able to source any item, at any time, from anywhere in the world. Although I won that argument, I couldn’t have known how the world would change in the intervening decade.

Globalisation and Trade

At the time, I was young, idealistic and thought large, dominant global organisations couldn’t be a bad thing, no matter what my debate opponent said about local economies and global trade. I should say that this was also back when I drank coffee from the red, blue and green chain companies, before realising local, independent providers had them beat…

Now, reports are suggesting that traditional globalisation, the trade between countries, is decreasing. Some forecasts show that, for a third consecutive year, growth in global trade will be lower than overall economic growth, while others highlight that international capital flows are worth 10 per cent of what they were in 2007.

While it may be true that globalisation in a traditional sense may be on the wane, there is a new form of globalisation on the rise.

The Collaborative Economy

Cross-border trade is changing thanks to technological advances and increasing interconnectedness of subject matter experts and those who require specific skill-sets that they don’t already have access to. This is the Collaborative Economy.

Sites like Upwork (a combination of two pioneers of the collaborative economy, Elance and oDesk) allow organisations to ‘hire’ independent talent for one-off or short-term jobs, filling a requirement or skills gaps, without having to hire a full-time employee.

The difference in this case is that the individuals offering their expertise to meet business requirements are frequently in a different country or in a different time zone, but able to leverage technology to provide a service.

There are an estimated 80 million ‘sharers’ in the collaborative economy in the USA, as well as over 23 million in the UK and over 10 million in Canada. And with conservative estimates of investment totalling $25 billion, it appears that we are just scratching the surface.

Procurement Professionals without Borders

Procurement is very much at the start of its journey when it comes to the Collaborative Economy, but the potential is enormous. Asset sharing and transfer of knowledge could enable procurement to work across borders and access knowledge, all while reducing costs associated with travel and adding value through accessing best practice and reducing risk.

Online sharing platforms, such as FLOOW2 can assist with supply chain transparency and reduce overheads by facilitating the sharing of assets. And could we end up seeing this go one step further, with procurement professionals themselves being shared between organisations? It’s not as far-fetched as you might think.

This isn’t consultancy – this is freelance procurement. When asked about my ‘Big Idea’ for procurement, I voiced the opinion that in the next decade people wouldn’t work for one organisation or in one place, but on multiple projects and in many teams, dependent on the required skills for the job.

It has taken less than 6 months for others to talk about the same subject – how long before talk becomes reality? I’d be interested to hear what you think and if you would set yourself up as a procurement freelancer. Let’s start a debate – maybe someone else will win this time!

Is there a crisis on the horizon for Asian economies?

The old saying used to be “If America sneezes, the world catches a cold”. Times are changing and now it seems that China has caught a cold, and the rest of the Asian economies may be coming down with something worse.

chinamarket_091815 In 1997, Asia was hit by an economic crisis, sparked by, amongst other things, a series of currency devaluations. When the Thai Government took the decision to unpeg the Baht against the US Dollar, it had a knock-on effect across the rest of the region, with falling stock markets and reduced imports.

 

Back in the current day, similar issues with slow economic growth and currency valuations in the region have many investors worried that a new crisis may be on the horizon. While many economists and experts may disagree with this, there are parallels being drawn between the situation today, and the one nearly 20 years ago.

Market Instability

Asian economies have just experienced their worst collective quarter since the Global Financial Crisis. Not even the Chinese powerhouse is immune to the slump, with its main stock market posting its worst quarterly results since 2008 and growth slowing to 6.9 per cent.

Currency valuations are down too. The Malaysian Ringgit has fallen a massive 26 per cent this year; the Thai Baht has hit a five-year low; Singapore’s central bank is about to undertake its second easing of monetary policy of 2015; Japan is facing another recession.

With export markets weakening, less money available to spend on imports, and China, long since the key customer for many Asian countries, unable to help due to its own perilous situation, there are concerns that it’s only a matter of time before there is a knock-on effect around the world.

Sales Slump

Last week alone saw five major global organisations report a sharp decline in sales, tied to poor sales in Asia, which have lead to falling profits and revisions of growth forecasts.

  • A 4 per cent fall in the sales of Barbie Dolls has hit Mattel profits (down to $223.8m from $331.8m last year), as a strong US Dollar impacts overseas markets
  • Shares in Hugo Boss dropped 10 per cent, with the organisation blaming the deteriorating Asian market; it went on to cut its growth forecast for sales and core profits to 3-5 per cent
  • Shares in Burberry dropped 8 per cent on Thursday last week, with its investors focusing on a dip in Chinese sales as the primary cause
  • Casino and hotel operator, Wynn Resorts, reported a 60 per cent drop in earnings in the three months to September. Its Macau operations, traditionally a major money earner, saw a 37.9 per cent decrease in net revenues for the same period
  • Nestle, still recovering from the Maggi Noodles safety scare, cut its growth outlook to 4.5 per cent, citing slower than expected growth in China

Global Uncertainty

As the situation in Asia develops, investors around the world are nervous about what might be coming next. Decreasing export revenues, in particular to the Chinese market, are set to have an impact on growing economies like Brazil and Turkey.

There are concerns in Europe too, where exports to Asia are big business, as slow European markets aren’t able to pick up the slack in sales. Even in the USA, where growth is much healthier, long-term instability may ultimately cause problems.

Winter of Discontent?

Where does this leave procurement and supply chain? As professionals, we need to be aware of the developing situation, both from the point of view of sales and exports, but also for risk exposure for organisations.

While some organisations may be able to take advantage of the situation by sourcing cheaper products and materials, we need also to be aware of the potential risks of making changes to suppliers and across supply chains.

Where the markets go from here remains to be seen. Investors and economists will both be hoping that the coming quarter brings more stability and wards off any further talk of a second crisis.

Do you work in Asia, or have part of your organisation in Asia? What are your thoughts on the current situation? Get in touch, or leave your comments below.

Meanwhile, Procurious has scoured the web for the top headlines in procurement and supply chain this week…

New Job Creation in UK Automotive Industry

  • Up to 28,000 jobs could be created in the UK automotive industry supply chain over the next five years
  • A report from the Society of Motor Manufacturers and Traders (SMMT) estimates British car production is set to reach a record two million vehicles annually by 2020
  • This boost in output will require an additional 9,500 employees at vehicle manufacturers in the UK, along with a subsequent increase across UK-based supply chains
  • The report comes in the wake of huge investment by car-makers and supply chain companies throughout the UK

Read more at The Birmingham Post

Uber App ‘Does Not Break UK Law’

  • A ruling by the UK High Court has decreed that the Uber app does not break the law
  • The court had been asked to decide whether the company’s smartphones were considered meters, which are outlawed for private hire vehicles
  • The Licensed Taxi Drivers’ Association (LTDA), which represents many of the 25,000 licensed taxi drivers in London, asked the judge to rule it was a meter and ban its use
  • The LTDA now plans to appeal

Read more on the BBC

Nespresso updates on ‘The Positive Cup’

  • CEO of Nestlé Nespresso, Jean-Marc Duvoisin, gave an update on the progress of ‘The Positive Cup’, Nespressos 2020 sustainability strategy
  • Marking one-year since its launch, Duvoisin announced that significant progress had been made towards improving the lives of thousands of coffee farmers, as part of the company’s AAA Sustainable Quality™ Program
  • Over the past two years Nespresso has been working with its partner TechnoServe to help re-build the coffee sector in South Sudan, resulting in the country’s first-ever coffee exports in 2013
  • Nespresso aims to source 100 per cent of its coffee from its AAA Sustainable Quality™ Program by 2020

Read more at PR Newswire

Wal-Mart to add Supply Chain Capabilities

  • The US retail giant will aim to add capabilities to its supply chain in order to improve efficiency in the coming year
  • CFO Charles Holley, speaking at an investors’ day, stated an expectation of an earnings fall in the year to January 2017
  • Wal-Mart plans to extend the capabilities of its distribution warehouses to allow for shipping of individual items, rather than servicing of stores alone
  • It is expected that this will improve accuracy and efficiency, while at the same time reducing costs

Read more at Just Style

Procurement Hero Reaches For The Skies In Aid Of Cystic Fibrosis

He has recorded every single flight he has been on since he was born — an incredible 1232 flights

Every two years Matthias Fuchs has been undertaking a flying marathon challenge. The challenge is supported by Qantas and raises funds for terminally-ill children at the Children’s Hospital Westmead.

This time around Matthias will take on a record 12 days flying in economy class without ever leaving a plane or airport terminal. Qantas has already supplied Matthias with the proposed flight schedule, and we can tell you that it clocks in at around 200 flying hours, over a distance of 167,000km…

During his time spent in the air, Matthias will cross the Pacific Ocean six times, and the Indian Ocean four.

The challenge has been an enormous success in previous years, in 2013 he alone raised a whopping $140k for the Cystic Fibrosis Unit at the Children’s Hospital Westmead. This year Matthias says that the proceeds will be used to maintain the mass spectrometer machine that was bought previously, as well as fund a clinical research fellowship.

Sponsor the challenge here

Matthias says: “This is a cause very close to my heart as my 12 year old daughter Kristen has cystic fibrosis.”

Matthias loves to fly, so much so he’s kept a record of every flight he’s ever taken. That’s 1232 flights…

Will you support the good man in his noble cause, as he attempts the marathon challenge for one last time? To-date $161k has been raised, but he hopes to reach $175k-200k before it’s time to take-off.

What’s more, donate $5k and you’ll get your company logo embroidered on the shirt he’ll be wearing during the challenge.

Come on, dig deep!

Volkswagen Emissions Scandal: A Lesson In Awareness & Accountability

With Volkswagen caught cheating on emissions tests and its CEO quitting over the scandal, what can it teach us about awareness and accountability?

How will the Volkswagen scandal affect procurement?

The past few days have seen the great and good of the automotive industry waxing lyrical in the broadsheets and providing their take on events.

As the Volkswagen board gathered to appoint Porsche’s Matthias Muller as its new chief executive, and amid alarmist claims that it’s a bigger threat to the economy than the Greek debt crisis, questions are mounting over how much ministers knew in advance.

In light of such damning revelations we can expect reverberations to be felt within supply chains for months (even years) to come.

At the time of writing, US authorities predict the scandal affects over 482,000 diesel passenger cars sold in the States between 2008 and 2015. Affected models include the VW Golf, Jetta, Beetle, and Passat as well as the Audi A3. Damningly each car that violates the US Clean Air Act faces a fine equivalent to £24,000 – which equates to a £12 billion bill in US fines alone.

‘An investor’s nightmare’

Both Deutsche Bank and JPMorgan have downgraded Volkswagen -with DB cutting VW from ‘hold’ to ‘buy’ and slashing the price target target to €130 from €260. While JP downgraded its stance on VW’s preference shares to ‘neutral’ from ‘overweight’, cutting the price target to €179 from €253, saying it cannot rule out additional engine investigations and does not have visibility over the total liability for VW.

Citi said: “The regulators (not only the US ones) hold the key to answer the question of potential impact (not only on VW, but also on the global auto industry). We think regulators may not overlook the matter, given their stress on the compliance with environmental regulations.

“At this juncture, lots of uncertainties remain, but we cautiously view that some ‘spill-over’ to other regions/ auto industry is inevitable. Germany and Korea have already begun a probe into the matter for more scrutiny. Depending on the outcome, it could lead to some cost pressure and tighter regulations.

“VW commands ~25% share in the EU market, so it faces a potentially higher negative impact on sales in EU, if similar manipulations were to be found in the region.”

Kevin O’ Marah – commenting on the scandal for Forbes made the following astute observation:

For supply chain professionals however the VW scandal illuminates two important things:

  • Awareness of global operations is spiralling upward fed by digital technologies and ubiquitous information visibility.
  • Accountability for what business does, especially in terms of impacts on health, safety and the environment, is something we need to own.

But who really is accountable?

We doubt that talk of the device was included in VW’s procurement plan… Which raises even more questions – namely: who ultimately came up with the idea, and where did it come from? There has to be a paper trail back to the perpetrator, but again, was the true purpose of the device fudged? As we went to press, news sources are even reporting that a Volkswagen engineer warned the company about emissions rigging as far back as 8 years ago…

We’ve covered ethical arguments previously on Procurious – Transforming a bribery-entrenched culture, Rolls Royce accused of ‘buying the business’, Intrigue, money laundering and arrests at the Alhambra and you’ve weighed in heavily using the Discussion forums. Back to that Forbes analysis, which suggests that those involved turned a blind eye..  “Everything from child labour to adulterated foods and conflict minerals come from the same dirty bucket of extended supply chains that make it easy to ignore or even hide bad behaviour.  Accountability depends on visibility, which is expanding by leaps and bounds.”

As supply chain professionals, we together should take responsibility and own this. The buck should stop with us. Why then, didn’t this happen?

Here’s a selection of other big stories making headlines in procurement and supply chain this week…

Coca-Cola Co. is overhauling its U.S. supply chain

  • Coca-Cola said on Thursday it plans to sell nine production facilities to three of its largest independent bottlers as it seeks to unload low-margin assets and reduce manufacturing costs in the United States.
  • The bottlers, Coca-Cola Bottling Co Consolidated, Coca-Cola Bottling Company United and Swire Coca-Cola USA, will acquire the nine plants, valued at about $380 million, from Coca-Cola Refreshments, which Coke created after buying its top bottler in North America in 2010.
  • Additionally, Coke said all four entities, along with Coke’s operating group in North America, will form a new supply group to work together on decisions in areas such new packaging launches and ingredient purchases, Coke said. The new group will represent about 95 per cent of the company’s production volume in the United States.
  • The world’s largest soda maker is facing sluggish sales volumes in the U.S.. It has been selling bottling operations, which partly entail getting its products to retailers, to franchisees to shift away from the capital intensive and low-margin business of distribution.

Read more at Reuters

Chancellor George Osborne announces start of HS2 procurement

  • Announcing the bidding process for phase one of the project during a trip to China to woo investors for UK infrastructure projects, chancellor George Osborne said that at least seven new contracts would be opened up to companies, with a total combined value of £11.8 billion.
  • The government is also organising an “HS2 partnering day” to give Chinese companies an opportunity to partner with UK firms on bids.
  • HS2 will provide high-speed rail services from London to the Midlands, and the North and construction of phase one is due to start in 2017.
  • HS2 Ltd chief executive Simon Kirby said: “Together we will transform intercity rail travel in the UK, build specialist skills and expertise across the country, create at least 2,000 new apprenticeships and build a legacy to inspire the next generation of young engineers.”

Read more at Supply Management

Investors look to sew up Vietnam garment opportunities

  • There are big changes occurring in Vietnam’s bustling garment industry, as businesses and investors prepare for changes linked to the upcoming Trans-Pacific Partnership.

  • The agreement being negotiated by 12 countries, including the US, promises radical tax cuts for Vietnam’s garment exports, but only if they use fabric made locally or in other TPP countries, which excludes China.
  • For the emerging country’s thousands of small and medium-sized garment makers, however, the benefits are less certain. The 25 million garments produced every year at the Ho Guom Garment factory in northern Vietnam all bear the label “Made in Vietnam” but more than half the material used to make them comes from China.

Read more at Channel NewsAsia

Using the blockchain to fight crime and save lives

  • Blockchain technology has been described as email for money, but it has the potential to be so much more.

  • According to Blythe Masters, theblockchain represents a watershed moment in technological history. “You should be taking this technology as seriously as you should have been taking the development of the Internet in the early 1990s,” she said in an interview with Bloomberg.

  • Blockchain technology is a hyper-secure record of digital events that is distributed among many different computers. The blockchain can only be updated by consensus of a majority of the participants in the system, and once information has been entered, it can never be erased. Blockchain technology is best known for its connection to the cryptocurrency, Bitcoin. It’s what enables transactions to happen without middlemen or a central body, while protecting against duplication and fraud.

Read more at Techcrunch

2015 Dow Jones Sustainability Index (DJSI) Results Revealed

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

Results of Dow Jones Sustainability Index?

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

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

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

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

And the Corporate Sustainability Leaders of 2015-2016 are…

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

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

Dow Jones Industry Leaders

 

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

Action needs an audience

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

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

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

Inside China’s Red Supply Chain

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

China's red supply chain

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

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

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

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

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

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

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

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

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

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

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

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

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

The threat from avian influenza on supply chains

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

China’s incredible shrinking hog herd

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

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

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

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

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

Avian influenza outbreak to hit regional markets

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

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

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

Zero hours contracts represent a small but useful part of flexible labour market

Latest figures from the ONS indicate that the number of workers on zero-hours contracts has risen by 6 per cent.

The ONS has revealed a 6 per cent increase in zero-hours contracts

The Office for National Statistics (ONS) produces biannual estimates of the number of contracts that do not guarantee a minimum number of hours.

These estimates are based on a survey of businesses and the measure complements the figures from the Labour Force Survey (LFS) which indicates those workers on a “zero-hours contract”.

The latest estimates reveal that:

  • The number of people employed on a “zero-hours contract” in their main job was 744,000 for April to June 2015. This represents 2.4 per cent of all people in employment – compared to 2 per cent in the same period during 2014.
  • Number of contracts that do not guarantee a minimum number of hours where work was carried out was 1.5 million for the fortnight beginning 19 January 2015. This is some 6 per cent higher than the estimate of 1.4 million for the fortnight beginning 20 January 2014, though the increase is not statistically significant.
  • On average, someone on a “zero-hours contract” usually works 25 hours a week.
  • Around 40 per cent of people on “zero-hours contracts” want more hours, with most wanting them in their current job.
  • People on “zero-hours contracts” are more likely to be women or in full-time education. They are also more likely to be aged under 25 or 65 and over.

Commenting on official statistics  James Sproule, Director of Policy at the Institute of Directors, said:

“Although zero hours contracts have drawn much political attention, only a very small proportion of the total workforce have one for their main job, less than 2.5 per cent of the total. It is also important to note that statisticians at the ONS say it is not possible to tell whether this is simply because of increased awareness created by media exposure. 

“Zero hours contracts offer businesses and employees an important degree of flexibility. For skilled professionals, a degree of flexibility can boost their earning power, while flexibility also suits students and older people – the main users of zero hours contracts – who cannot commit to a set number of hours each and every week. 

The ONS has revealed a 6 per cent increase in zero-hours contracts

James continues: “Flexible working arrangements helped preserve jobs during the downturn and protected the UK from double-digit rates of unemployment. As businesses began to create jobs at a record pace, attention on the quality of those jobs and concerns around zero hours contracts boomed. This helped make sure practices like exclusivity clauses – something which run contrary to the very flexibility zero hours contracts were designed for – were stamped out.”

The new findings come with a caveat in that the number of people saying they are employed on “zero-hours contracts” depends on whether or not they recognise this term. It is not possible to say how much of the increase between 2014 and 2015 is due to greater recognition rather than new contracts.

Threat of extreme weather events could trigger global food shocks

The global food industry currently undergoes a production shock every 1 in 100 years. But newly published guidance claims we can expect 1 (or more) in just 30 by 2040.

Threat of extreme weather could affect food supplies

The threat of extreme weather looms large over our global food supplies…

With weather records being broken like they’re going out of fashion, it isn’t just the threat of a soggy commute or a windswept day at the beach that should be top of our concerns… Lest we forget the livelihoods of those struggling against the elements to grow crops, transport their wares and ultimately feed their families.

Traditionally the food system we’ve all come to rely on is a truly global enterprise, with extreme weather having little discernible effect on the logistics of getting produce from A to B.

However as we’re hearing more and more about the threats posed by extreme weather events, we have to ask – how prepared are we for just such an eventuality? The question is made all the more worrying when we consider our food system has become efficient to a fault, yet less resilient as a consequence.

In answer to the growing volatility, a taskforce of academics, industry and policy experts was commissioned to examine the resilience of the global food system to extreme weather. Its report is available at the following link [read the report], but the executive summary (republished below) highlights some of the overriding issues that need to be addressed.

Understand the risks better

Our knowledge of how extreme weather may be connected across the world, and hence the precise probability of multiple bread basket failures, is limited by available model simulations (therefore more research is required).

Modelling limitations also constrain our ability to understand how production shocks translate into short run price impacts.

Explore opportunities for coordinated risk management

As knowledge emerges regarding plausible worst case scenarios, it will be possible for governments, international institutions and businesses to develop contingency plans and establish early warning systems with agreed response protocols. Other opportunities include coordinated management of emergency and/or strategic reserves.

Improve the functioning of international markets

History demonstrates that the actions of market participants in response to production losses, or the behaviours of other actors, are a crucial determinant of price impacts. Other problems that can exacerbate price spikes include low levels of stocks relative to consumption, poor transparency of market information and physical limitations on trade such as infrastructural constraints.

Bolster national resilience to market shocks

Governments should also consider policies to bolster national resilience to international market shocks. This is a particularly important policy agenda for import dependent developing countries with high numbers of poor food consumers, and/or high risk of political instability. The precise mix of appropriate policy measures will vary according to national context.

Adapt agriculture for a changing climate

Agriculture faces a triple challenge. Productivity must be increased by reversing declines in yield growth and closing the gap between actual and attainable yields in the developing world, whilst also reducing its environmental impact (eg 50:1 degradation, depletion of freshwater supplies, increasing greenhouse gas emissions or eutrophication). However, given the increasing risk of extreme weather, this cannot come at the expense of production resilience. Increases in productivity, sustainability and resilience to climate change are required. This will require significant investment from the public and private sectors, as well as new cross-sector collaborations.