Category Archives: In The Press

Procurement Policy And Practice: An Evolving Landscape

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In a January 2015 report, The Smart Cube discussed key trends in corporate procurement practices, including managing increasing procurement-related risks, establishing alliances with key suppliers, and leveraging data analytics. The report also highlighted specific trends in the market that have the potential to increase or decrease in prominence.

This article continues the conversation with a focus on several key aspects of procurement policy and practice: centralised procurement, category management, stakeholder engagement, and better implementation of total cost of ownership (TCO) as a strategic sourcing tool. 

Adoption of Centralised Procurement

Many organisations are restructuring their procurement departments to favour centralised (where both decision-making and purchasing are conducted centrally) or center-led (wherein overall policy is centralised, but some freedom is given to local departments to make sourcing decisions) sourcing of both direct and indirect categories.

As shown in Figure 1, executives participating in KPMG’s July 2014 Procurement Pulse Advisory Survey foresee a shift in the structure of procurement organisations. Specifically,

  • 53 per cent believe that the adoption of a centralised procurement policy will be common or very common in 2016, up from a 40 per cent in 2014.
  • 57 per cent believe that a center-led policy will be common or very common in 2016, as opposed to 46 per cent in 2014.
  • 15 per cent believe that the adoption of decentralised procurement will be common or very common in 2016, compared with 36 per cent in 2014.

Procurious and the Smart Cube

Why is Centralised Procurement Growing in Popularity?

A centralised procurement structure offers several important benefits to organisations that want to increase competitiveness and efficiency. According to a January 2014 report by APQC, organisations with centralised structures experience:

  • Lower costs – $0.31 for every $1,000 spent on purchases.
  • Shorter supplier lead times – an average of one less day.
  • Improved purchase order processing – a median of 10 hours for centralised structures compared with 11 hours for decentralised procurement functions.

While the numbers look promising, procurement policy must always be informed by the specific needs of each organisation. For a high-tech company, for instance, cost and efficiency of the procurement function may not be as important as the speed and flexibility offered by a decentralised structure. Yet several industries are using centralised sourcing, including these examples in global healthcare:

  • Teva Pharmaceuticals expects to realise a cost savings of $2 billion by 2017 by shifting from a decentralised and regionalised procurement approach to a centralised and global one.
  • The New York City Health and Hospitals Corporation (HHC) plans to leverage the combined purchasing power of its large network of hospitals, care facilities, and community health centers to negotiate lower input prices. (Read the press release.)
  • The UK’s National Health Service (NHS) wants to achieve savings of ~$770 million over FY2014–FY2016 by purchasing everyday hospital supplies in bulk for all hospitals centrally.

Establishing Stakeholder Alliances

Companies are developing more innovative supplier incentives and supplier relationship models to gain competitive advantage. As per a 2012–2013 survey of CPOs conducted by Capgemini, 30 per cent of executives believe that supplier relationship management (SRM) will be their key focus area in the future.

The UK-based supermarket chain Sainsbury’s has developed strong supplier relationships as a result of concerted long-term effort focused on improving service quality through collaboration suppliers, incentivising supplier innovation, and sharing best practices with suppliers. This transformation in stakeholder management practices has resulted in improved sales and profitability for the company. (Read more in the May 2013 study by State of Flux).

Leveraging Category Management

Category management is used by procurement organisations to improve both the effectiveness and efficiency of purchasing activities by restructuring sourcing around specific categories of expenditures. In fact, 57 per cent of executives in the Capgemini survey believe that the introduction or extension of category management within procurement functions is a current or future focus area.

The US federal government is one of the latest organisations to embrace category management. Their procurement function is set to be divided into 10 super categories of commonly purchased goods, including IT, transportation, travel, and professional services—categories that account for $277 billion of the total federal spend. Improved coordination of purchases and sharing of best practices across various agencies are expected to make procurement more effective for the government. (Learn more in the January 2015 White House memorandum).

Total Cost of Ownership: Gulf between Theory and Practice

A cornerstone of procurement management, TCO is the cumulative cost of owning, maintaining, and utilising a product over the course of its lifetime, and helps assess the “true” cost of a product instead of only its base cost. TCO should be a critical element of strategic sourcing; however, there seems to be a gap in the potential benefits of TCO and its actual implementation.

In the Deloitte Global CPO Survey 2014, only 24 per cent respondents planned to reduce TCO over the coming year. Meanwhile, in a survey published in October 2014 by BackerSkeie—a Norwegian executive search firm—only 21 per cent companies are leveraging TCO in an optimal manner, while 66 per cent have limited or no exposure to TCO. This simply highlights the void in the procurement capabilities of many organisations.

The Way Forward

These are only a few of the many important principles to consider when formulating one’s procurement organisation and its related activities. In assessing their fit, it is important for companies to consider their internal practices and organisational maturity. They also need to study the procurement practices of companies inside and outside their industry to gain a deeper understanding of policies that they should adopt.

By Ankit Abraham Sinha, Senior Analyst, & Sidharth Sreekumar, Assistant Manager www.thesmartcube.com

Supply Chain Disruption and Risk Mitigation in Tianjin Explosion

Two enormous explosions ripped through the Chinese port city of Tianjin last week, killing 112 people, hospitalising hundreds and leaving thousands of local residents homeless.

While nothing can be compared to the tragic loss of human life, businesses look set to have to deal with major disruptions to their supply chains, with logistics issues for some and significant loss of goods that were at the port when the explosions occurred.

Safety Fears

The blasts, which occurred in a warehouse storing hazardous chemicals, were large enough to be seen from space and also register as seismic activity in Beijing (over 75 miles away). Investigations have been started as to the cause of the explosions, but are being hampered by safety concerns at the site.

Residents in a 3km radius were evacuated on Saturday after it was found that sodium cyanide was present at the site. The volatile powder can be fatal if inhaled and, when mixed with water or burned, produced hydrogen cyanide, a highly poisonous gas.

Business Impact

The current situation, as well as the inability to get people on the ground at the port, has made it difficult for businesses to quantify the losses they have suffered. Tianjin is the world’s 10th busiest port and China’s largest hub for the import of vehicles, which means organisations will be dealing with the future impact as well until the port returns to full capacity.

Mitsubishi have estimated a total of 600 cars were damaged in the blasts, while Renault and VW have also stated that they have lost cars that were being stored in warehouses at the port. Toyota has suspended production at two of its Chinese facilities for three days due to logistics issues caused by disruption to port services.

And it’s not just auto-manufacturers that are affected. The port also handles large quantities of metal ore, coal and steel, with Australian mining giant Rio Tinto stating that shipments had been disrupted, although no products had been damaged.

A number of Chinese technology organisations have also reported interruption to operations. Tencent, Liepin and 58.com were among the companies with facilities within the blast radius and are returning operations to normal wherever possible.

Analysts estimate that the incident could generate total insurance losses of between $1-1.5 billion.

Risk Mitigation

While situations as extreme as this are fairly uncommon, disruptions in the supply chain are something that organisations need to deal with on a regular basis. Around China, shippers and maritime logistics organisations have begun to route freight through other ports, while others have begun to look at using airfreight.

Having good contingency plans in place for your supply chain allow you to cope with the unexpected risks and outcomes. Scenario planning can be used to reduce uncertainty and mitigate risks. You can get some good tips for that here.

From identifying alternatives methods of transportation to creating supplier panels to ensure continuity of supply for critical items and engaging openly with stakeholders, there are a number of options open to organisations to allow them to adequately deal with disruptions in the supply chain.

You can keep track of potential risks through a variety of tools, including the BSI Risk Index and the CIPS Risk Index. These organisations will publish research based on the indices that can help to shape organisational strategies for the mitigation and management of risk.

You can also always check out the eLearning available on Procurious for a selection of free videos on risk and crisis management, which should help you build a foundation in the understanding of the topic.

Is your organisation impacted by the situation in China? Do you have any great risk mitigation tips you can share with your peers? Let us know or get involved on the Procurious community.

If you haven’t had time to check out the big stories in the procurement and supply chain space this week, here are some of the main headlines.

Calais crisis: freight costs could rise ‘significantly’ 

  • Unless the ongoing crisis at Calais is resolved, freight prices could rise significantly in the next few weeks according to Rhenus Logistics UK. The company said the operational impact that French strikers and migrant incursions at the port were having on the UK’s import and export trade was concerning.
  • Managing director David Williams said drivers were resigning from the route due to the stress of getting through the port, and the risk of fines because of stowaways. “The decision by drivers to step away from this route has already seen a number of freight businesses introducing surcharges of between 1-2 per cent,” he said. “The rise in costs, due to increased fuel bills, man hours and required rest break, is now becoming a very serious issue for the logistics industry.”
  • Separately, global supply chain consultancy Crimson & Co warned that the continuing disruption at Calais highlighted the need for UK businesses to review their risk strategies. The firm said exporters and importers across the UK were reporting losses and were being forced to either find alternative but more expensive routes or stop deliveries altogether.

Read more at Supply Management

Apple confirmed to be working on self-driving car

  • Apple is working on a self-driving car project, and may have made more progress on the car than previously thought, according to documents seen by the Guardian. The UK newspaper said it has seen correspondence between Apple and a high-security test site near San Francisco, regarding a test location.
  • Apple is rumoured to be working on a self-driving car, apparently under the code name ‘Project Titan’ and has held meetings with automotive manufacturers and recruited engineers in this field, but the test site communication is the first confirmation of the project.
  • The Special Project group at Apple had contacted the test centre, GoMentum Station, a former weapons testing facility. It has over 20 miles of paved roads and streets for testing, and is still guarded by the military, offering a high degree of privacy and security.
  • Tim Cook, CEO of Apple has reportedly met with executives from a number of car companies recently, including Fiat-Chrysler, and it has also hired engineers from Tesla Motors, Mercedes-Benz, and electric car battery maker A123 Systems.

Read more at Arabian Supply Chain

Cutting out the middleman – milk price row

  • Consumers are being urged to boycott supermarkets and buy milk direct from farmers, to ensure producers receive a fair price. More than half a century after their heyday, local milk producers are back in fashion. After a collapse in the price they receive from retailers and processors for their milk, dairy farmers – who protested in large numbers over the past week – are turning to selling their milk directly to consumers.
  • While the number of dairy farmers in the UK continues to fall, from 200,000 in the 1950s to fewer than 10,000 today, a growing number are now cutting out the retailers and middlemen and once again offering up their milk locally.
  • It marks the revival of market that was lost with the emergence of refrigerated lorries and supermarkets in the second half of the last century. The use of milk as a loss leader by supermarkets to draw customers in made it impossible for a locally based dairy market to compete. But consumers and caterers are now being urged to boycott retail milk and buy direct from farms to help struggling dairy farmers receive a fair deal.
  • Although retailers and milk processors blame the falling price of milk on global markets, dairy farmers say they are being unfairly affected. They say supermarkets sell milk too cheaply as part of their price wars, and that farmers don’t receive a fair proportion of the final retail price.

Read more (and view the milk infographic) at The Guardian

Infor Buys Supply Chain Management Firm GT Nexus

  • Enterprise software firm Infor Inc. has agreed to acquire cloud-based supply chain management firm GT Nexus Inc. for $675 million, the company said Tuesday, as business solution providers race to accommodate the changing needs of supply chain executives.
  • New York-based Infor, which is one of the world’s largest suppliers of enterprise resource planning, or ERP, software, helps companies including aerospace, technology and pharmaceutical companies to track various components of their business. Oakland, Calif.-based GT Nexus provides cloud-based services, or software hosted on the remote servers, that allow companies to manage inventory and orders, and help companies communicate up and down the supply chain.
  • GT Nexus facilitates more than $20 billion in payments between buyers and their suppliers across 90 countries in eight currencies, according to a Tuesday release. Clients include Adidas AG, Caterpillar Inc., Deutsche Post DHL, A.P. Møller-Maersk, PfizerInc. and many manufacturers and retailers.
  • The deal comes as more companies are relying on technology to better manage, and gain more visibility, into the various functions within their supply chains, from sourcing to distribution. Sales of supply chain management software grew 10.8 per cent in 2014 to $9.9 billion.

Read more at The Wall Street Journal

New report raises alarm of modern slavery in supply chains

The latest Risk Index Report from BSI identifies China, India, Vietnam, Bangladesh and Myanmar as the five highest risk countries for human rights violations.

The report highlights the significant rise in organisations breaching international human rights regulations over the last quarter as key Asian economies adapt to tougher economic conditions.

Rising labour costs in China have led companies to diversify their supply chains into other high-risk countries that now account for 48 per cent of global apparel production, 53 per cent of global apparel exports, and 26 per cent of global electronics exports.

The latest BSI Risk Index report warns that efforts by Asian governments to boost their economies are having the unintended consequence of allowing child labour abuses to become more present in supply chains. Also highlighted were proposed changes to labour laws that may incentivise firms to restructure as “family enterprises”, making it easier to employ under-age workers in a country where 4.4 million children are already put to work. Two thirds of child workers are found in agriculture (69.5 per cent), and 17.5 per cent in industries such as garment manufacturing.

The Quarterly BSI Risk Index is based on intelligence from BSI’s Supply Chain Risk Exposure Evaluation Network (SCREEN) tool. The tool identifies major CSR concerns, such as brand protection risks and changes to global regulation including the US legislation aimed at eliminating forced child labour, EU draft conflict minerals law, and the UK’s Modern Slavery Act.  All of which relate directly to complex supply chains worldwide and can subject an organisation to prosecution if their suppliers exploit human rights.

Those companies found in breach (legal repercussions notwithstanding), will also have to worry about brand reputation and the compromise of consumer trust. The latest generation of consumers, millennials, are focused on buying from ethical and responsible businesses, thus highlighting the increased importance for organisations to adopt a supply chain risk management program and implement risk-based sourcing strategies.

Modern incidents of slavery

 

Likewise the ability to ascertain country-level threats provides the needed intelligence to filter risk to underpin a socially compliant and responsible supply chain. On this very subject Mike Bailey, EMEA Director of Professional Services, BSI commented: “Some organisations underestimate the damage that can be caused by not adopting and enforcing ethical practices across their supply chain. Command and control from the centre means nothing if it is not rigorously monitored and enforced. For too long, extended supply chains have obscured ethically questionable practices, tools such as SCREEN highlight country level corporate social responsibility risks helping increase visibility and awareness, and enforce a responsible and ethical supply chain.”

Mike continued: “Organisations can no longer turn a blind eye to the actions of their suppliers. The laws we are seeing today may only apply to larger firms, but they set a benchmark for the industry and smaller organizations will be forced to comply to work with the larger companies, by default. Products assembled or services provided by child labour or depending on minerals from conflict zones have no place in the modern world.”

Premium payments are empowering cocoa farmers in Brazil

Under the Cargill Cocoa Promise, the livelihoods of cocoa farmers are being improved.

In 2014 a total of $19 million was paid to farmers in Cote d’Ivoire, Brazil, Cameroon, Ghana and Indonesia, bringing the total to $44 million paid to date under the Cargill Cocoa Promise. The premiums, which are achieved by farmers for selling their UTZ, Rainforest Alliance and Fairtrade certified cocoa beans, are funded by confectionery and food manufacturers and retailers and are positively supporting the ongoing development of a sustainable cocoa supply chain.

Premium payments for certified sustainable cocoa are not only helping with meeting the growing demand for sustainably sourced cocoa and chocolate, but continuing to make a significant contribution to improving the livelihoods of cocoa farmers and their communities.

“Premium payments and cocoa certification remain a valuable catalyst in making progress toward a sustainable cocoa supply chain,” said Taco Terheijden, Director Cocoa Sustainability at Cargill – a provider of food, agriculture, financial and industrial products.

“We are proud to be part of this process and to see the positive developments in the sector. Not only are cocoa farmers and their communities benefitting from higher incomes and better health and education, at the same time manufacturers, retailers and consumers can be confident about where their cocoa is coming from and how it is being produced.”

The premium payments are made to certified farmer cooperatives with 50 per cent going directly to individual farmer members, and the remainder being invested in projects by the farmer organisation to boost productivity, farm development and benefit the community. The premiums are an incentive to adopt good agricultural practices and directly support improvements to make a positive difference to local communities.

Demonstrable progress can be observed  in Cote d’Ivoire, where a first of its kind public-private partnership between the Conseil du Cafe-Cacoa, Cargill and CARE has enabled 14 farmer cooperatives to use their premium payments to access additional funding.  With this they have built 11 new schools and three new health centres – teaching over 1650 children and providing access to healthcare for 25000 people.

Supply chain and procurement SMEs must act to future-proof pensions

If you’re doing business in the UK, you might want to heed this new warning issued by Lighthouse Group…

Supply chain and procurement SMEs must act fast to untangle payroll data to meet pensions auto-enrolment.

Many of the country’s 1.8 million small employers  approaching their pensions auto-enrolment staging dates are in danger of missing deadlines by underestimating the amount of data needed to complete the process.

According to the financial advisors, tens of thousands of supply chain and procurement SMEs and micro employers are now starting to grapple with the complexities of employer pension schemes for the first time. The Pensions Regulator recently stated that only 29 per cent of those staging in 2016 were fully aware of their date and only 46 per cent of those staging in 2017 were aware of their responsibilities.

Pensions expert Roger Sanders, OBE, cautions business owners to familiarise themselves with the requirements and assess their business as soon as possible, even if their staging date is two years away: “Employers’ auto-enrolment duties go far beyond setting up a pension scheme and enrolling staff in it,” he said. “They must assess their workforce, work out who to enrol and decide how much they and their employees will contribute. They also need to keep records of all this information, together with any changes, all of which represents a significant amount of work for smaller employers.

Roger continues: “However, we are finding many businesses in supply chain and procurement lack the accurate, up-to-date information on employees vital to completing enrolment smoothly. Firms that leave their enrolment preparation too late will be in for a shock when they discover years of payroll and employee data needs to be sorted before they can properly begin.”

Lighthouse advises that employers who use a payroll bureau should ask whether their systems and software are geared up to deal with auto-enrolment, assessing if they can extract needed information easily, in a suitable format, and on a regular basis.

A payroll bureau generally holds information such as an employee’s full name, their salary or wages and National Insurance number, but may not have the employee’s address and other contact details such as email, which is often held by the employer. However, under auto-enrolment all this information needs to be brought together each time an employee is paid, whether monthly, fortnightly or weekly.

SMEs should begin the process at least six months before their staging date, starting with checking what data their payroll function holds and how to export it, as well as what information is missing and must be tracked down. At three months before the staging date, businesses must have a process to collate all the information needed in a suitable format and on a timely basis. Data must be in a standardised format and should cover all employees, even if they will not be enrolled automatically.

‘I Look Like An Engineer’… Machismo In The Workplace

As the dust settles around the #ilooklikeanengineer outcry, a poll reveals that macho behaviour, patronising colleagues and safety fears are putting women off working in male-dominated industries.

ilooklikeanengineer

If you’ve been on social media within the last 48 hours you may have noticed #ilooklikeanengineer trending. The trending topic is the result of the sexist reaction a female engineer received after appearing in a job ad for OneLogic.

By way of a follow-up, research conducted by foul weather clothing manufacturer Stormline reveals that a ‘macho’ atmosphere is the characteristic most likely to put a woman off a job in a traditionally male orientated industry. 

The research polled over 1000 women and found that it is the work environment – not the work itself – that has the biggest influence the attractiveness of a job. Pay levels, wording on job adverts and being asked to carry out boring work were found to be less off-putting.

A poll from February 2015 identified the ten industries perceived as most ‘manly’ among UK adults.

Poll about the 'macho' workplace

A separate poll of 1019 women conducted in April 2015 measured attitudes towards jobs in those industries by asking participants to identify the most off-putting characteristic of each industry.

Genevieve Kurilec is a commercial fishing captain and runs the Chix Who Fish Facebook group and website. She believes women are a balancing presence in dangerous, macho environments. “In my experience women tend to be more safety conscious and detail oriented, which makes us an excellent asset to any crew working in a dangerous occupation.

Genevieve says: “There will always be men in society who are patronizing towards women. The camaraderie found in the majority of the commercial fishing industry far outweighs the petty few who do not recognise the capabilities of women employed in marine occupations. If you do your job, put in your time and take care of your vessel you will earn the respect of your fellow fishermen, gender notwithstanding.”

Caroline Livesey is a geotechnical design consultant and often works on engineering projects in male-dominated environments. She believes attitudes to women’s work in general create barriers to participation in the workplace, stating: “I think societal bias tends to pigeonhole women and men into specific roles. The knock on impact of this is that both genders are inclined to assume women cannot make good engineers as it is not a role that we naturally see them in.

“The downside of this is that women continue to have to break down those barriers in order to progress in this industry. On a day-to-day basis for females in civil engineering is that they have to work far harder than their male counterparts to earn respect, to progress, and to be trusted technically.”

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Logistics, Pricing Wars and a Lack of Innovation…

The Logistics industry is lagging far behind in both innovation and price innovation a new report has said.

Simon-Kucher & Partners – a global strategy consulting firm, has published its latest Global Pricing Study. In it, it found that logistics firms succeed with only 40 per cent of their planned price increases. And almost 80 per cent of the companies are experiencing higher price pressure compared to last year. Logistics providers say these poor results are due to fierce competition and the fact that customers have more negotiating power now. As a result, the percentage of logistics companies that only compete on price is twice as high as in other industries.

Dr. Philipp Biermann – Partner, Simon-Kucher laments  that blame is quickly placed on the competitors, although the inability to raise prices is generally self-inflicted: “Logistics firms often lack confidence and negotiation tactics. They are frequently at the mercy of their customers’ professional purchasing departments. Recognising the value of your services, developing a negotiation strategy and turning this into an implementable price – logistics managers must get this into their heads!”

The price isn’t right

Kornelia Reifenberg – Senior Director, Simon-Kucher, comments that the combination of external pressure and low confidence in their own performance has caused almost two-thirds of the respondents to suffer from price wars: “The phenomenon that companies make concessions to their customers in the heat of the moment that they actually cannot justify is very widespread in the logistics industry. In the process, they often don’t see the signals that their dumping prices give to the competition. They don’t grasp that these ‘isolated cases’ ultimately have a negative impact on the market price level.” 

Top of the flops

The study also provides some colour when it comes to charting the success of new products and services. Stating that only 18 per cent of all new products achieve their profit targets, which is the lowest rate that has ever been recorded (considering that in all industries, it’s 28 per cent). And 35 per cent of logistics companies haven’t even been able to reach the anticipated profit targets for any of their new products (compared to the overall percentage of 24 per cent), although these new products and services could well be used to shift the focus of negotiations away from the price and towards value, Reifenberg says.

The results contained in the study were based on responses from approximately 1,600 managers (of which C-levels made up 39 per cent), from over 40 countries across Asia-Pacific, the Americas and Europe.

Unilever China and Alibaba are building something big together…

Unilever China and Alibaba hope to innovate in Big Data, cross border e-commerce and supply chain management.

Alibaba and Unilever China work together

We’ve been watching Alibaba with increased fascination during the last twelve months: Rakuten, Alibaba and Amazon: the battle of the electronic storefront, and Sourcing things differently: the world of alternative storefronts.  

Unilever China and Alibaba Group recently signed a Strategic Partnership Memorandum of Understanding (MOU). Under this the two companies will make a joint effort to build the biggest online and offline platform for sales, branding, cross-border ecommerce and innovation.

The partnership provides Alibaba with the opportunity to develop a full channel, whole field group corporation with a FMCG company

Marijn Van Tiggelen, Unilever North Asia President, on the announcement: “Alibaba is the leading internet company in China, with the most innovative thinking. It’s not only an online store, but also a solution platform for online payment, e-finance, and e-commerce logistics. In cooperation with Alibaba, Unilever can provide more convenient services to consumers in China.”

“We are very pleased to amplify our partnership with an industry leader such as Unilever,” said Daniel Zhang, Chief Executive Officer of Alibaba Group. “We look forward to building on our success in sales over the years and taking the collaboration to the next level. Moving forward, Alibaba Group and Unilever will jointly innovate in Big Data analytics application, cross-border e-commerce, and supply chain management. In this rapidly changing business landscape, we are committed to continually provide greater value to merchants and better experiences to shoppers.”

In the years that follow it is hoped progress will be made in the areas outlined below:

  • An improved and expanded distribution channel, which will in-turn provide consumers in rural areas with more convenient access to Unilever products.
  • Unilever and Alibaba will further develop the cross-border ecommerce business.
  • The two companies will further develop the application of big data, with which Unilever China can optimise the online advertising strategy and drive online to offline sales.
  • During a trial period special QR codes developed by Alibaba will be put on the packages of Unilever products. This will help consumers easily identify counterfeit products with its mobile app and provide a safer shopping experience.

5 Recommendations To Get The Haulage Industry Back On Track

Shortage Of Drivers Puts Transportation Industry At Risk.

Comensura has revealed to Procurious that the UK transportation industry could become gridlocked due to a growing driver shortage.

Newly-published research claims that a shortage of UK driving staff could bring £74bn transportation industry to a standstill.

Half of specialist driver recruiters cite a low candidate availability, coupled with the rising demand that creates a staffing gap in the sector. Around half of recruiters claim that the time it takes to fill a driving role has increased by over a week compared to 12 months ago, suggesting that the increasing lack of candidate availability is consuming more time for the sector and reducing efficiency.

The situation is being compounded by an ageing workforce (the average age for an LGV driver stands at 53) and the high costs (£2000) facing young candidates applying for their Driver Certificate of Professional Competence (Driver CPC).

Over half of recruiters also say that it is a challenge finding drivers able to do manual work: another factor that dissuades young people to enter the profession, in addition to uncomfortable working conditions, such as lack of lavatory facilities, and the lifestyle impacts of long and difficult shifts.

Commenting on the findings, Jon Milton, Business Development Director at Comensura, said: “The entire logistics industry is worth more than £74 billion to the UK economy and employs around 2.2 million people in over 196,000 companies, so it’s playing a big part in helping our economy recover. It seems vital that the sector attracts more young people and equips them with the skills to become competent professional drivers so that it isn’t held back in the future by a lack of skilled workers.

Comensura has therefore set out five recommendations that it believes will better help businesses narrow the gap between the supply of drivers and demand:

  1. Find a balanced pay rate: Establish what the average pay rate is for drivers and try to match it for your staff. But equally, determine how much you can afford to pay them. By finding a balance between the two, you can attract candidates while not paying them over the odds.
  2. Look at the long-term: Forecast your needs over the next 12 months, taking into account workers’ holidays and times when demand is high.
  3. Consider the company’s wider picture: Ensure that you have realistic expectations of your drivers and don’t promise your clients anything that the driving staff can’t deliver.
  4. Contact recruitment agencies promptly: Procure the candidates you need as early as possible to maintain a constant flow of staff.
  5. Look within the organisation: Instead of looking externally for candidates, see if there is anyone internal to fill the vacant roles. Carry out in-house training to make individuals who already work for you suitable, which you may be able to do by gaining support funding.

Spotlight on Logistics and Transportation – The Unseen Supply Chain

Logistics and transportation services can sometimes be overlooked in the supply chain and seen as something that ‘just happens’. However the reality is that they play a vital role in the successful working of all businesses.

A greater focus from organisations can be critical for ensuring continuity of supply and saving time and money from disruption. However, organisations also have to contend with outside influences, as these news stories indicate.

Channel Disruption Headaches

Logistics organisations in both the UK and France are counting the increasing cost of Operation Stack after another weekend of disruption. Although cross-Channel services returned to normal yesterday, some lorries were forced to wait up to two and a half hours to cross the Channel on Saturday.

A combination of migrant activity and industrial action in Calais was to blame for the delays this weekend, making it a total of 21 days in the past 3 months that Operation stack has had to be enacted. And logistics companies are beginning to feel the pinch, with costs estimated at £750,000 per day.

James Hookham, Deputy Chief Executive of the Freight Transport Association (FTA), said, “Given the value of goods lost and the subsequent cost to business, these figures show that Operation Stack is not just an issue for Kent and the south east of England but a serious national strategic problem.”

The knock-on effect of disruption to the UK economy for tourism, holidaymakers and businesses in Kent is estimated at approximately £250m per day. In order to try to mitigate further disruptions, a multi-agency meeting was held last week to discuss the issue and make recommendations to the UK Government.

US Port Report

From disruption European ports to a report on disruptions at major US ports. Earlier in the year, Procurious reported on the strikes at ports on the West Coast of America, which forced the shutdown of 29 ports and caused a flotilla of vessels to be anchored off the Californian coast.

Now, the Federal Maritime Commission (FMC) has released a report on the future of all American ports. The report outlines the requirement for investment in the port system to ensure an “efficient and reliable international ocean transportation system and the relevant supply chain”.

With US ports becoming busier and hubs for movement of increasing volumes of international freight, the report offers an overview of the causes of potential issues, as well as solutions that could be implemented.

It is hoped that the measures will help to ease congestion and get the ports operating as smoothly as possible. Download the full report here.

Concerns over New Transportation Bill

Still in the USA and there are increasing concerns over proposed changes to the trucking industry outlined as part of a new transportation bill from the US Senate.

Amongst the proposed changes are a lower age limit for interstate drivers (from 21 to 18) and a measure preventing the public from seeing federal safety rankings for trucking companies. This comes at a time when an investigation by FOX News has shown that one company, Davis Transfer, has had vehicles involved in three fatal accidents since 2014.

There are concerns that these proposed measures would adversely impact health and safety in the trucking industry with potentially more relaxed monitoring of driver logs.

Mazda and CEVA Partnership

Finally to Australia, where Mazda Australia has awarded two new contracts to CEVA Logistics, making them their sole national provider of transportation services.

CEVA, one of the world’s leading supply chain organisations, already hold contracts for transportation to dealerships from docks and storage and processing of vehicles in New South Wales and Queensland, will add the states of Victoria, South Australia, Tasmania and Western Australia to their books.

Casey Fisher, MD of CEVA in Australia and New Zealand, said her organisation was delighted with the growing relationship, seeing it as “confirmation that our past performance and future plans are meeting their needs.”

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To round off, here are some of the other major headlines in the procurement and supply chain profession this week.

UPS said to be in talks to buy Coyote Logistics for $1.8 billion

  • United Parcel Service Inc. is in talks to buy Coyote Logistics LLC for about $1.8 billion, two people with knowledge of the matter said.
  • A deal for the Chicago-based provider of transport-management services could be reached as soon as this month, said one of the people, who asked not to be identified because the information is private. No agreement has been reached and discussions could still fall apart. Coyote is backed by New York-based private equity firm Warburg Pincus, which first invested in the company in 2007.
  • A deal between Coyote and UPS would be the third-largest logistics deal this year, as the industry goes through a wave of consolidation amid rising consumer demand. In April, FedEx Corp. agreed to buy Dutch parcel-delivery company TNT Express NV for $4.8 billion. Later that month, XPO Logistics Inc. agreed to acquire European counterpart Norbert Dentressangle SA in a deal valued at $3.53 billion including debt.
  • Representatives for Warburg Pincus and Coyote declined to comment, as did a spokesman for Atlanta-based UPS.

Read more on Internet Retailer

Supply chain professionals still not fully represented at board level

  • Almost 60 per cent of logistics professionals in FMCG feel underrepresented at senior board level. A poll by The Grocer of over 150 industry professionals at the Scala Annual Logistics Debate 2015 revealed the majority feel their function in logistics is not accurately represented within the rest of their company.
  • “Influence at this level is now needed more than ever as companies have the opportunity to make, or not make, critical decisions about how they operate their supply chains,” said Scala senior consultant Simon Eagle. “The companies that are successfully innovating in collaboration and demand driven are those in which logistics have significant ‘share of voice’ and this requires board level representation.”
  • However it would seem that the voice of those in supply chain and logistics is more audible than in recent years.“If you’d have posed that question three or four years ago, you would have had an even higher percentage,” said independent logistics consultant Paul Nixon.“I think the function is better represented today and people perceive it to be better represented. As the likes of e-commerce and business to consumer fulfilment continues to grow for many retail businesses the supply-chain and logistics efficiency and effectiveness will continue to grow in importance and representation.”

Read more at The Grocer

World Bank approves new procurement framework

  • The bank said the framework, which comes into effect in 2016, would allow it to “better respond to the needs of client countries, while preserving robust procurement standards throughout bank-supported projects”. The framework replaces the previous one-size-fits-all” procurement policy with one that is tailored to the needs of individual projects.
  • The changes will:• Allow contract award decisions to be based on criteria other than cost, such as quality and sustainability, for the first time.
    • Increase support to help countries develop their own procurement systems.
    • Allow the use of procurement systems from development partners or national agencies in certain circumstances.
    • Speed up the process as reviews of contracts will be limited to those with the highest risk and biggest value.
  • The bank said it would “allocate resources to provide hands-on help to fragile countries, small states or others in the greatest need to assist them in procurements financed by the bank”. The bank’s procurement system covers a portfolio worth around $42 billion (£26.9 billion), comprising more than 1,800 projects in 172 countries.
  • Hartwig Schafer, vice president for operations policy and country services at the World Bank, said: “A portfolio this size needs a modern and nimble procurement approach that gives our clients the best value for each dollar that we invest.”

Read more at Supply Management

Gibbs S3 officially certified as an EMB (Ethnic Minority Controlled Business)

  • Gibbs S3 has become the only corporate-level business to be officially certified as an EMB (Ethnic Minority Controlled Business) by MSDUK, the country’s leading non-profit membership organisation driving inclusive procurement.

  • The certification comes as Gibbs S3 celebrates record growth in its 10th year of business, with revenue growing 38 per cent to reach £41.58m, and on track to hit £46m this year. The company has also previously been certified as a Woman-Owned Business Enterprise (WBE) by WEConnect, the leading global supplier diversity initiative connecting women-owned businesses with multinational corporations.

  • Minority-owned businesses have established a clear track record in providing stronger value to their customers. Companies with established supplier diversity programmes that include SMEs and EMBs generate 133 per cent better return on their buying operations, according to research from leading strategic consultant The Hackett Group. Companies working with smaller and more diverse suppliers were also found to spend 20 per cent less on their buying operations and secure significantly greater value.