Category Archives: In The Press

Is ethical fast fashion an oxymoron?

Is ethical fast fashion an oxymoron?

While looking through the agenda of the Procurious Big Ideas Summit, I noticed that fast fashion is one of the key topics that will be discussed on the day. Procurious has asked its members to contribute to the Summit by submitting question, opinions and ideas through the Procurious platform. Click here to find out how to get involved.

So with that in mind, here is mine.

Is there such a thing as ethical fast fashion?

On a recent long haul flight I thumbed through clothing retailer, H&M’s lengthy 2014 Sustainability Report. While the report tracks some great initiatives the company is undertaking to improve its performance from an ethical point of view, I couldn’t help but think that regardless of the steps H&M take to produce their clothes ‘more sustainably’ the very nature of its business (its modus operandi) would suggest that this business could perhaps be considered ‘more ethical’ but could never be considered ethical.

Let me explain my thoughts: H&M is a hugely successful organisation. Its success can be largely attributed to the way the firm has adapted to the recent retail revolution of fast fashion.

Fast fashion involves drastically reducing the time taken for fashion trends to move from the catwalk into stores. But perhaps more importantly, it involves leveraging vast supply chains and purchasing practices that means goods can be produced and transported quickly and cheaply, thus enabling mainstream consumers to access these products more readily.

Fast fashion has long received criticism for driving low wages, poor working conditions and questionable environmental practices in the developing world. However recently, firms (like H&M) have made undeniable improvements in these areas. A discussion around these supply chain practices is best left for another day (or another article) but today I want to take a step back and discuss the sustainability of their business model.

Efficient supply chains practices have enabled those companies involved in fast fashion to produce clothing at incredibly low prices. This, combined with intensive marketing cycles designed to encourage consumers to buy ‘the latest’ fashions at high frequency, have caused many to dub the fast fashion business model and the throwaway culture that has accompanied it as ‘disposable fashion’.

Does doing a bad thing better make it good?

So the question stands: can a company whose business model (and ultimate success) is based on consumers frequently buying high volumes of clothing that they wear for a short period of time before discarding and replacing, ever be considered sustainable or ethical?

To put some context to the numbers, it’s estimated that H&M produce over 600 million items of clothing a year. When you consider that more than 20,000 litres of water is required to produce 1kg of cotton, enough to make a t-shirt and a pair of jeans; that cotton accounts for 2.4 per cent of the world’s crop land, but 24 per cent of the world’s insecticides and 11 per cent of the world’s pesticides; and that unsustainable cotton farming has as been deemed responsible for the destruction of numerous river basins across the world. These include the Murray Darling in Australia, the Indus in Pakistan and the Rio Grande in USA/Mexico, you begin to see the enormous environmental burden borne in order to manufacture and move these products. (Figures quoted above are from the World Wildlife Fund)

As I mentioned earlier, H&M is making impressive steps towards improving its environmental and ethical impact. The firm is committing to using 100 per cent organic cotton by 2020 (currently about 13 per cent of its products are made with organic cotton), they are making commitments to using less natural resources in their manufacturing process and have even spoken with leaders in Bangladesh and Cambodia about improving minimum living wages for garment workers in those countries.

But do these measures actually have a positive environmental impact or are they just minor improvements to an ultimately unsustainable business model? It’s certainly a compelling angle for the firms marketers to play on, but is it actually doing any good?

H&M proudly promotes itself as the world’s largest user of certified organic cotton, but is this something to be proud of? Americans alone throw 10.5 million tonnes of clothing into landfill every year, would it really make a difference if those landfills were full of organic cotton?

I applaud the steps that H&M is taking to improve its performance from a sustainability standpoint, I understand that the company is merely satisfying the consumers needs (read wants) and that ultimately the buck stops with us. But I must admit, the terms fast fashion and sustainability simply don’t sit alongside each other for me.

Fast fashion is just one of a number of topics that will be discussed at the Big Ideas Summit on 30 April. Have your say and submit your questions for the 40 influential thought-leaders that will be gathering for our unique think-tank event.

4 Big Ideas That Transformed Procurement Technology

The Big Ideas that will shape the future of procurement technology will be one of the hot topics at the Procurious Big Ideas Summit in London on April 30.

4 Big Ideas in Technology that will transform supply chains

That’s why we’ve invited leading technology influencers like Tim Hughes, Lance Younger, Peter Smith, and Mark Perera to be “in the room”, and provide their views on which technologies procurement professionals should keep in their cross hairs.

I think it was Machiavelli said, “whoever wishes to foresee the future must consult the past.” My belief is also that it sometimes helps to look in the rear view mirror, to understand what is coming up on the road ahead.

In this article I look back in time and share four of the Big Ideas in technology that I believe have helped shape the procurement profession as we know it today – common protocols, online catalogues, reverse auctions and barcodes.

From the outset, let me stress that I am no technology expert and that my list of Big Ideas in Procurement Technology was conceived under the palm trees of an island in the Indian Ocean. Some may say this provided me with perspective, others may say I’m deluded. Let’s see what you think!

Common protocols – EDI & cXML

Establishing common protocols for the exchange of business transaction data (such as purchase orders, invoices, shipping notices, and many others) provided the basis for the globalization of procurement and the demise of the paper and fax era.

Electronic data interchange (EDI) emerged in the late 60’s and focused on machine-to-machine transactions, but it proved cumbersome for the internet. In light of this, in 1999, Ariba created Commerce XML (cXML), which subsequently became the primary universal protocol for B2B interactions over the Internet.

Electronic catalogues

eProcurement came about as a way to conduct all sorts of purchasing transactions over the Internet, and marked a significant turning point in the use of technology for procurement.

Sometimes I wonder whether all the major eProcurement developments happened at the same time in the late ‘90s and we’ve just spent the last twenty years working out how best to use them, with the software companies refining the offerings in line with our demands.

Electronic catalogues were one of the first of the applications to be developed in the eProcurement suite.

It is easy today to think of this as a pretty basic development, but if you put it in context, consumer online shopping sites such as Amazon and eBay were only launched in 1995. Less than five years later, the corporate world was introducing its own, business-appropriate, form of online shopping.

The subsequent difficulties with managing in-house catalogues gave rise to the outsourcing of catalogue management, the creation of eMarketplaces and a whole new category of eProcurement applications and software providers that have flourished ever since.

Online reverse auctions

I LOVE a great reverse auction. Always have.

What I love most about reverse auctions is the need to follow a disciplined sourcing process in preparation for the event. I think this is one of the great, unsung benefits of this tool for the profession. Don’t worry, I have also heard all the downsides to online auctions. I know they have their place and that’s another reason why I love them – they are a weapon to be used selectively with great effect.

I love the story behind the creation of the online reverse auction – the Glen Meakem story. I was lucky enough to be both living in Pittsburgh when FreeMarkets was it its height, and also to be one of their customers. They were an impressive organisation.

Legend has it that Meakem conceived the idea when he was at a supplier negotiation day with GE. At that time, suppliers were marched into individual rooms Wal-mart style, interrogated, sent outside, then brought back in after their competitors had finished the same meeting. Flip charts were used to track pricing as it trended downwards.

Meakem had the idea to take this practice online and allow the negotiations to take place real time. Surprisingly, GE didn’t want to invest in the idea, so Meakem went out on his own, hiring McKinsey colleague Sam Kinney, and founding FreeMarkets with the purpose of facilitating the online tender process and running global auctions.

Reverse auctions proved to be a turning point for procurement, as they reinforced to company-wide suppliers the importance, and power, of a centralised purchasing team.

However, what I think makes reverse auctions most significant for the development of our profession is that not only did they really capture the attention of the C-suite, but also the rest of the organisation.

I remember hosting boardroom parties where colleagues from all parts of the business could come and cheer as they watched the prices being bid plummet. It’s not every day your colleagues get excited and stand up and cheer for procurement. It was a nice moment, and provided a great opportunity for procurement to demonstrate its value.

The Codes – The Bar… becomes the QR

I am certainly no barcode expert, but it is quite conceivable, as one story put it, that “no event in the history of modern logistics was more important” than the invention of the barcode.

Apparently, the first retail product sold with a barcode was a single pack of chewing gum at a supermarket in Troy, Ohio on June 26, 1974.

Forty years later, the latest incarnation of the bar code is the QR code (Quick Response Code) which is the trademark for a type of matrix, or two-dimensional, barcode.

The QR code has quickly become popular due to its fast readability and greater storage capacity compared to standard barcodes.

Where this development becomes very interesting is in today’s world of supply chain disruptions, where the QR can assist with product and time tracking, item identification and more efficient document management.

Given the procurement profession’s increasing need to guarantee supply chain transparency, the QR code could help provide some of the answers we need to protect our brands in the future.

The Big Ideas that will shape the future of procurement technology will be in the spotlight on 30 April at the Big Ideas Summit.

Procurement professionals around the world can get involved, and join Procurious’ 5000 members, as digital delegates by going to the Big Ideas Summit website and tweeting your Big Idea using #BigIdeas2015

You can also share your views on the ideas you believe disrupted procurement technology in the Procurious group.

5 of the deadliest risks facing your supply chain in 2015

Are you prepared to manage (and ultimately overcome) these challenges head-on?

5 biggest supply chain risks

Today we’re talking risk…

As a profession we’re getting better at managing common supply chain disruptions – supplier performance management and demand forecasting used to be the cause of week-long headaches… But the advent of new technology and implementation of streamlined processes are taking some of that strain. However we are not (yet) very effective at managing the less frequent, higher impact events that effect our operations.

On Thursday 30 April, Procurious will host a world-first cost leadership think-tank at The Soho Hotel in London that will be amplified online to our 4500 members across 100 countries through a mixture of videos, interviews, social media and feature-writing. Follow along on Procurious by RSVP’ing here, then get ready to Tweet your questions and join-in with the discussion!

Below we’ve listed 5 key risks that procurement and supply chain staff face in 2015 and beyond.

  1. Cyber threats

2014 was the year that cyber attacks got real. The recent attacks on Sony Pictures exemplified that hacking has moved from a nuisance to a full-scale criminal operation. Cyber attacks not only cause significant business interruptions they also have an extremely detrimental effect on brand reputation. According to the Edelman Privacy Risk Index 71 per cent of customers say they would leave an organisation after a data breach.

We’re not only seeing a increase in the frequency and severity of cyber attacks, but companies appear to be grossly underestimating the risks attached to these attacks. The Allianz Risk Barometer suggests that 29 per cent of organisations are ill prepared to deal with cyber threats – a figure that is significantly higher than any other risk category.

  1. Health concerns 

2014 saw the largest outbreak of Ebola in written history. Over 10,000 deaths were recorded over the course of a few short months. In addition to the horrific human cost of this epidemic, it provided us with a sobering glimpse into what a global health pandemic might actually mean for our supply chains. While Ebola was contained largely to a small number of West African nations, cases began to show up in Spain, United Kingdom and the USA. Fortunately Ebola, while an incredibly deadly disease, is not highly contagious and the outbreaks were all suitably contained.

Had the outbreaks taken hold and spread further around the world, it would have likely had crippling effects on economic activity and trade flows. Nations may have been forced (as Sierra Leone was) to enforce lock-down periods where highly populated areas like shops, markets, and places of worship were shut down and people ordered to stay at home for significant periods of time.

As well as the human and economic impact of diseases, procurement and supply chain managers should also consider the impact these events have on the security of commodity supplies. The troubles in West Africa last year impacted the supply of raw materials such as cacao, rubber and aluminium ore.

  1. Weather

Extreme weather slows procurement progress. The economic impact of last years extreme weather events are summarised brilliantly in this chart produced by the Bank of America for the World Economic Forum in Davos. For some sense of perspective, the combined financial impact of 2014’s 10 most extreme weather events totalled more than $27 billion USD (that’s just slightly more than the GDP of Ecuador).

With extreme weather events apparently occurring more frequently and causing more harm to our operations, what exactly are procurement teams doing to plan for these sort of events?

  1. Brand reputation and value

Consumers are taking a far greater interest in where their products are coming from. As a result, organisations and indeed procurement and supply chain professionals are increasingly vulnerable to public scrutiny of their corporate practices.

A recent Chartered Global Management Accountant survey highlighted that 76 per cent of global finance chiefs now say that their company is prepared to lose short-term profit in order to protect its long-term reputation. The same number suggested there should be more emphasis placed on reputational risk this year. This is in stark contrast to responses collected in previous years.

Despite these suggested commitments there appears to be gap between the promise and the practice of brand protection. 60 per cent of those surveyed admitted they had no formal processes or models in place to calculate the financial impact of not managing reputational risk.

  1. Political instability

Political instability and war continue to pose threats for organisations with international operations. Events in the Ukraine, Russia, the Middle East (and a normally peaceful Hong Kong) have gone some way to destabilise the confidence of business operations in those regions.

Being the naturally curious sort we’re on the lookout for the hot topics, and big questions that influence the decisions supply chain managers will be making over the coming year. We want to know how the corruption allegations in Brazil will play out, what the drop in oil prices mean for the conflict in the Ukraine, and whether election results in Israel will bring stability to the region?

In its recently-published Reliance Index, FM Global listed Venezuela as bottom, while Norway came out on top. Read more on this story here.

Whether it’s war, hacking, weather, terrorism or brand destruction, risk will continue to play a pivotal role in the success of supply chains and indeed organisations as a whole. The question is are you prepared to manage (and ultimately overcome) these challenges head-on?

Are we facing a productivity crisis?

Are we suffering from a productivity crisis?

The International Monetary Fund (IMF) has released its latest report and with it come grave warnings for China, Brazil and others. However, the UK comes bottom of the pile when it comes to measuring productivity.

According to the new World Economic Outlook:

[The] analysis suggests that potential output growth in advanced economies is likely to increase slightly from current rates… In contrast, in emerging market economies, potential output growth is expected to decline further, owing to ageing populations, weaker investment, and lower total factor productivity growth as these economies catch up to the technological frontier.

Yes, although demographics are catching up with some of the larger developing economies, China’s working-age population is set to shrink rapidly – to cite but one example.

Static productivity

As much as technology gives – it too takes away. In fact the report claims that it’s one of overriding factors contributing to falling productivity levels around the world.

When advanced economies once saw a  boost in productivity through the use of technology,  the effects of such a boost have been in decline for a long time since (even before the economic crisis). Now however, emerging markets are becoming more turned on to technology – which, the IMF noted may curb the potential for new growth.

The Economist notes: Productivity growth will also weaken in future, both because the developing world has less room to catch up with rich economies and because productivity slowdowns in America tend to spill over to other countries. Economic disappointment is an increasingly global affair.

You can read the report in full here.

The latest [March] findings from BDO’s Business Trends Report compounds matters further, revealing that productivity in the UK is 21 per cent lower than the average amongst the G7 countries, including Germany, the US and France. Stating that Britain’s workers were less productive in the final quarter of 2014, with output per worker falling 0.2 per cent.

On the UK’s continuing poor labour productivity performance, BDO partner Peter Hemington said:

“While it is encouraging to see strong business confidence, the UK’s continuing poor labour productivity performance is a very significant concern.”

“Although employment growth in recent years has been strong, much of this has been in part-time jobs,” he said. “Productivity ultimately determines our prosperity so it is a crucial area that must be addressed. Policymakers of all persuasions must take on this productivity puzzle.”

The Daily Telegraph’s assistant editor Jeremy Warner makes the controversial point that: “the fall in productivity might have something to do with an apparently inexhaustible supply of cheap workers, both from mass immigration and greater employment participation, particularly among the elderly. Employers have chosen cheap and easy-to-get-rid-of man hours over the capital cost of investment. In this sense there is a downside to Britain’s flexible labour market.”

He further compares the predicament to that of the United Kingdom’s closest European neighbours – France. “One of the reasons for relatively high rates of French productivity is that the labour market is so hedged around by protections that there is a positive incentive for French companies to employ as few people as possible. The costs of making workers redundant act as a powerful deterrent to taking them on in the first place. This is not an affliction that British businesses are likely to suffer from.”

Do we have a productivity problem? Over to you!

550 enslaved fishermen freed from remote Indonesian island

Hundreds of fishermen slaves freed

The Indonesian government announced this week that it is making moves to return foreign fishermen (mostly from Myanmar) to their home country after an Associated Press (AP) report revealed they were being held under conditions of slavery.

The report detailed the plight of hundreds of men and women, who were trapped in the Indonesian village of Benjina. It is alleged that the men and woman were moved (in some cases sold by slave traders) to Indonesia to work on fishing boats. The working conditions on the Indonesian fishing vessels were dire. The AP reported that workers were not paid, were forced to drink unclean water, work 20-22 hour shifts without days off and are beaten if they try to rest or complain.

Once the boats return to port, their catch is emptied and then shipped to Thailand where it enters global seafood supply chains. The AP report highlighted several high profile American brands that were carrying products sourced from the same Thai factories that were buying seafood from the slave vessels. The organisations named included Kroger, Albertsons, Safeway, Wal-Mart, and the nation’s largest food distributor, Sysco. As well as distributing to the US the report also highlights that seafood from these factories is making its way to Europe and Asia.

US government leaps to action

This case, (one among others), has prompted action from the US government, with Barack Obama signing an executive order that recently came into effect, requiring all government contractors to ensure their supply chains did not utilise slave labour.

It also looks likely that U.S Rep. Carolyn Maloney will reintroduce her proposed legislation that will force large firms (those with over $100 million in global receipts) to spell out their policies for ensuring slave labour stays out of their supply chains.

Speaking on the complexity of managing global supply chains Jeff Tanenbaum, a partner at Nixon Peabody’s labor and employment practice said: “It is a difficult aspect of supply chain management and compliance operations. When talking about potential illegal and or horrific behaviours it can be very difficult to uncover them, and it is hard to effectively address them until they are uncovered.”

While the news that workers from Benjina are being sent home is good, it seems likely that for as long as companies and consumers in the US, Asia and Europe demand the lowest possible prices for their seafood that products sourced through slave labour will find their way into the supply chain.

Until supply managers alter their approach to purchasing seafood and create more collaborative approaches to these problems with their suppliers, it seems certain we will continue to hear reports of such incidences. The quote below sums up this sentiment effectively…

If Americans and Europeans are eating this fish, they should remember us. There must be a mountain of bones under the sea – Hlaing Min, runaway fisherman Benjina

Mergers and acquisitions in Transport sector set to supersede 2014 levels

Mergers and acquisitions within the Transport sector

In 2015, mergers and acquisitions (M&A) in the Transport and Logistics sector will supersede the levels seen in 2014, according to KPMG’s latest Transport Tracker.

The first quarter of 2015 has already seen completed global transactions worth £6.7 billion, and further acquisitions valued at £6.7 billion have already been announced. In 2014 the increase in the volume of transactions resulted in £39.6 billion worth of deals.

The report found that purchase prices rose which meant that the average business valuation of transactions in the transport sector increased in 2014 to 11.9x of EBITDA, compared to 9.0x in 2013. This was due to the increase in strategic acquisitions and the increased appetite for takeovers of transport companies combined with low availability of suitable target companies that are for sale. The trend is set to continue in 2015.

Other key trends that the analysis has revealed as drivers for the continued increase and high level of M&A activity in 2015 include:

  • Consolidation, geographical expansion and vertical specialisation remain the predominant reasons for transactions in the sector, as evidenced by the bid by FedEx for TNT Express.  This is an example of a classic geographic play to strengthen FedEx’s European ground and air network. The relatively high multiple/premium to share price suggests that FedEx sees significant synergies in this deal.
  • The increase in private investment in transport infrastructure operators in the sector will remain a key driver of business transactions. Governments in both emerging and mature markets increasingly lack the financial flexibility to ensure sufficient investment in infrastructure. This increasingly comes from private investors, who are in turn in search of stable sources of income.
  • M&A activity has evolved in the context of the increasing digitization of the transport industry and the strong influence of the growing e-commerce business. To develop new business opportunities, many large logistics companies are increasingly targeting shares into specialized IT and e-commerce enterprises. Even the more traditional maritime industry has recognized the trend for targeted investment in IT companies. In the future, transactions of this model will increasingly characterise the M&A events in the transport sector.

UK head of transport at KPMG, James Stamp, said: “Total deal values of transport & logistics transactions in 2014 amounted to £39.6 billion and we expect this figure to be superseded in 2015. In addition to high-volume transactions for the purpose of inorganic growth (particularly by US companies as a result of the strength of the US dollar) we expect selective acquisitions of specialized IT and e-commerce companies will increasingly shape the M&A strategies of transport companies.”

Secrets of the Orient: uncovering Singapore’s frothy supply chain

Singapore is consuming more wine than ever before

The popularity of booze in Asia is growing – in a recently published report it was revealed that alcohol consumption in China is increasing at such a pace it has left Britain, the US, and even the Irish in the dust.

Elsewhere within Asia, (southeast to be precise) alcohol has been hitting the headlines for similar reasons… Singapore has come a long way from Tiger beer; buoyed by a buzzing craft beer movement and the exemption of duty on imported wine and liquor in 2009, Singaporeans are quaffing back more bubbles than ever.

Evidence of such an upsurge can be observed through the announcements of policy-makers, for instance The China Morning Post reports on how Singapore is clamping down on late-night public drinking. According to Singapore’s Deputy Prime Minister Teo Chee Hean the booze controls are a response to consistent complaints from Singaporeans about drunkenness in the common areas of housing estates.

During our time at Procurement Week 2015 in Cardiff we spoke to Peter Woon about the evolving procurement landscape in Singapore and across Asia. Peter serves on a multitude of different professional boards including the Supply Chain Asia Board of Advisors, and Advisory Council for IACCM Board of Directors.

Peter on the changing face of Singapore’s supply chains

It’s a hub for almost everything – from manufacturing hi-tech goods to bio-pharmaceuticals, chemicals, aerospace, MROs, and most-recently in the last five years it has become a regional wine hub… The consumption of wine in Asia is growing, all through Hong Kong, and Singapore… It’s a very different ball game altogether.

What has caused this newfound popularity? And more importantly, why Singapore?

You have all the big players, all the logistic players, and the flagships in Singapore. Big companies are moving their central procurement teams here [from India], global headquarters, regional headquarters – they are then flying out of Singapore and moving things within the region.

As you know 40 per cent of the world’s manufacturing from Europe and the US has moved over to Asia. It has started moving to South Asia and then China, from China to India and Vietnam.

Singapore has so far done well – it has found a niche. It is smart, nimble and fast, so has developed something of a competitive edge. And it’s not just been achieved by having these hubs, to have the hubs you need to have support – the infrastructure support. Being centrally located is great, but you also need the financial support – having all of the banks in Singapore makes transactions easier. Plus all of the big insurance companies are there, so the jurisdiction, legislation, and contract management is all transparent – you’ve got everything you need to do business. If you don’t have all of this support, then you’re not attractive enough…

Digital is easy: talking digital transformation

The importance of upping your digital game

Digital transformations are underway at most large businesses as they respond to customers’ adoption of smart devices, with organisations working hard to harness the efficiency gains arising from channelling as much as possible through websites and apps.

However, in its latest research, Coeus Consulting warns that its experience shows many such initiatives are failing through too much focus on creating a shiny new veneer of webpages and apps, with not enough thought going to the core of the business, its culture and back office systems.

The research identifies four key areas that need attention in order for any organisation to execute a successful digital transformation:

  1. Legacy IT systems: legacy IT systems and the interfaces into them require transforming, to ensure new technology is not held back by slow-moving central IT.
  2. Operational change: business transformation and process change.
  3. Culture: organisational-wide cultural change is needed to support the new ways of working (including ensuring the necessary behaviours, skills and approach)
  4. Execution: strong governance, as well as project and programme management, are needed to ensure the transformation stays focussed, on track and delivers the required benefits.

Ben Barry, Head of Strategy at Coeus Consulting and co-author of the report comments, “The pace of digital transformation is moving like never before. For companies to succeed we believe they must understand their existing landscape as well as the challenges from the complexity of new interfaces into their existing IT systems, the changes needed to business processes together with employee behavioural change.

“These all need to be addressed in order to execute a digital strategy successfully. However, we have seen these elements often get looked at late in the process, or after new technology is live, meaning little or no return on the investment.”

Matthew Headford, Head of Technology and Architecture at Coeus Consulting, also warns that “the back offices which support the shiny new digital platforms are often neglected and therefore put under strain.” 

However, Coeus says that there are nonetheless huge prizes for businesses who achieve digital success. Examples of these include:

  • Bookmaker Paddy Power has transformed itself from owning a host of local gambling organisations to becoming a successful international gambling platform.
  • Tesco surpassed the expectations of its customers by providing a new iPhone bar-code scanning app. It is a great example of a brand that stretched the use of technologies to provide greater utility to customers than even they might expect.
  • Aggregators such as comparethemarket.com and moneysupermarket.com have made shopping online for highly regulated services simple and effective (and highly profitable for these businesses in the process).

Procurious will be putting technology under the spotlight on 30 April at the Big Ideas Summit. Find out how you can get involved by joining our Procurious group, and Tweeting your Big Idea using #BigIdeas2015

How do these 130 countries rank when it comes to supply chain disruption?

Taiwan has improved its commitment to managing natural hazards.

FM Global (one of the world’s largest commercial property insurers) published its Resilience Index on Tuesday.

The Resilience Index is claimed to be the first “data-driven tool and repository that ranks the business resilience of 130 countries and territories to supply chain disruption.”

The tool is intended to provide supply chain managers an understanding of the risks involved in operating a supply chain in countries they’re not familiar with.

In order to achieve a resilience score (100 being most resilient and 0 being least resilient) countries are analysed across 9 key drivers of supply chain risk. These drivers are further classified into three high level categories: Economic, Risk Quality and Supply Chain Factors.

Norway’s Up and Venezuela’s Down

This year saw Norway come out on top of the rankings and Venezuela pick-up the unfortunate 130th and final ranking. Ukraine and Kazakhstan saw the largest year-on-year falls (both dropping 31 places). The former related “directly to Russian military intervention there” according to a statement that accompanied the report. The index also highlighted the ongoing conflict in Arab region with Islamic State and the Ebola outbreak of late 2014 as areas of significant concern.

Taiwan Soars

The year’s biggest climber was Taiwan, the island nation climbed 52 spots and now sits 37th overall after improving its commitment to managing natural hazards.

“This rise shows an increased awareness of the natural hazards and fire risk exposures inherent to the country, the building of new facilities to a higher level of quality and greater acceptance of risk management measures that can better existing protect facilities,” said Bret Ahnell, executive vice president at FM Global.

Speaking on the importance and relevance of this index the vice president and manager of research of FM Global said, “All of us live in a global environment now. Our daily lives are dominated by the global economic landscape that’s become increasingly brittle. The Resilience Index has been put in place to help address this issue of global risk.”

Find out more about the Resilience Index here

Lost at sea: 4 big risks facing the maritime sector

Shipping losses lowest for 10 years but mega-ships and cyber-attacks pose new threats for maritime sector.

How many shipping containers were lost at sea?

Shipping losses continued their long-term downward trend with 75 reported worldwide in 2014, making it the safest year in shipping for 10 years, according to Allianz Global Corporate & Specialty SE’s (AGCS) third annual Safety and Shipping Review 2015.

The British Isles, North Sea, English Channel and Bay of Biscay has been the location of the most shipping casualties since 2005 (4,381). Nearly one in five of all incidents (18 per cent) have occurred in this region. It was also the scene of the second highest number of casualties during 2014 (465), up 29 per cent year-on-year. The East Mediterranean & Black Sea region was the top hotspot (490), up 5 per cent year-on-year. Total losses in the British Isles and surrounding waters doubled year-on-year during 2014.

Over reliance on electronic navigation aids has caused a number of incidents in 2014. Captain Rahul Khanna said: “Inadequate training at grass roots level is to blame for this overdependence on e-navigation tools. The minimum standards have been met, but this is not good enough. We need to go above and beyond them to give robust training.”

The most common cause of total losses is foundering (sinking/submerging), accounting for 65 per cent of losses in 2014 (49). With 13 ships wrecked or stranded, grounding was the second most common cause with fires/explosions (4) third, but significantly down year-on-year.

According to the report, there were 2,773 shipping incidents (casualties) globally (including total losses) during 2014. December is the worst month for losses in the Northern Hemisphere and August in the Southern Hemisphere. For every total loss in the Southern Hemisphere there are 7 in the Northern Hemisphere.

The most significant risks identified in the 2015 Safety & Shipping Review include:

Increased threat from cyber-attacks

Cyber risks are another new threat for a shipping sector which is highly interconnected and increasingly reliant on automation.

“Cyber risk may be in its infancy in the sector today, but ships and ports could become enticing targets for hackers in future. Companies must simulate potential scenarios and identify appropriate mitigation strategies,” said Khanna. “A cyber-attack targeting technology on board, in particular electronic navigation systems, could possibly lead to a total loss or even involve several vessels from one company,” said Gerhard.

Other scenarios include cyber criminals targeting a major port, closing terminals, or interfering with containers or confidential data. Such attacks could also result in significant business interruption costs, notwithstanding liability or reputational losses.

Condition of ship and crew

While the long-term downward trend in shipping losses is encouraging, recent casualties such as Sewol and Norman Atlantic have once again raised significant concerns over training and emergency preparedness on passenger ships three years after the Costa Concordia disaster. Seven passenger ships were lost during 2014, accounting for almost 10 per cent of total losses. “In many cases construction of the vessel is not the only weak point. These two incidents underline a worrying gap in crew training when it comes to emergency operations on ro-ro ferries or passenger ships,” says Sven Gerhard, Global Product Leader Hull & Marine Liabilities, AGCS.  

The general shipping trend for smaller crews means seafarers are being asked to do more with less. Minimum manning levels reduce the ability to train people onboard, which can provide invaluable insight and should not become the normal day-to-day level for safe operations.

Rise in geopolitical uncertainty

The recent rise in geo-political tension around the world is concerning. The increase in human trafficking of refugees by sea creates search and rescue issues. More than 207,000 migrants crossed the Mediterranean in 2014, driven by the civil war in Syria.

The International Maritime Organization estimates at least 600 merchant ships were diverted in 2014 to rescue people, stretching resources and rescue infrastructure. Conflicts in the Middle East also put increasing pressure on the supply chain. Ships should not underestimate the security risks.

Piracy risks move from Africa to Asia

Although there has been good progress tackling activity in Somalia and the Gulf of Guinea, ensuring global attacks (245) are down for a fourth year in a row, piracy thrives elsewhere. Attacks in South East Asian waters are up year-on-year, as are incidents in the Indian subcontinent, with Bangladesh a new hotspot.