Category Archives: In The Press

Accenture acquire Brazilian supply analytics firm Gapso

Accenture acquire Brazilian supply analytics firm Gapso

Management consultancy Accenture, announced last week it had acquired the Brazilian supply chain analytics firm Gapso. The merger will see the Brazilian firm’s operations integrated into Accenture’s Analytics division.

Analysts have suggested the decision by Accenture to purchase Gapso will benefit the firm in two ways. The first is that it will provide a solid foothold for the company in the rapidly growing Brazilian market, allowing the firm to explore opportunities in the region’s lucrative mining, oil and gas and agricultural sectors.

As well as opening up Latin American markets, the purchase of Gapso also points to the future of supply chain management and Accenture’s role within it. Gapso specialises in using data and advanced analytics to solve complex supply chain and logistics challenges. Accenture’s purchase of Gapso sees the firm acquiring a team of skilled data scientists, analysts and developers, suggesting the consultancy is keen to explore different approaches to supply chain management.

This position is strengthened further when you consider that less than 12 months ago Accenture acquired i4C Analytics, an Italian provider of advanced analytics software programs.

Rodolfo Eschenbach Accenture’s Digital lead in Latin America, said: “Accenture are happy to be extending its analytics reach in Brazil through the acquisition of Gapso.”

“By combining Accenture’s and Gapso’s broad analytics skills and capabilities, Brazilian companies in the natural resources and agribusiness industries will have access to the best data scientist talent and solutions in the market for driving real, data-driven, operations outcomes at scale. When businesses harness, optimise and analyse their data for insight, value in the form of improved productivity or a competitive advantage can be realised,” he said.

Oscar Porto Gapso’s Business Director, was quoted saying: “Over the past twelve years, Gapso has curated an impressive team of analytics experts and capabilities that enable faster and better outcomes in connection with a client’s most critical logistics issues.

“By joining Accenture, we will be able to build on our achievements and engage in a more powerful, broader-scope of analytics conversations with clients. I’m proud of the Gapso team and I am looking forward to taking our methodologies further and continuing to disrupt the resources and agribusiness industries through insight-enabled decision-making.”

C-Suite reluctant to stick their head in the Clouds

UK businesses are reluctant to stick their head in the Clouds, says KPMG.

Businesses scared of the Cloud

A global study of almost 2,100 contracts covering deals worth £7.8 billion suggests that Cloud-based services are failing to capture the popular imagination of UK businesses.  It also suggests that organisations are increasing the level of IT services they outsource to improve service delivery, with many investing budgets saved over the past few years on HR, sales and finance support.

Published by KPMG, the 8th annual ‘Service Provider and Performance Satisfaction’ study includes detailed analysis of current corporate IT spend in Britain, by examining more than 330 UK-based contracts.  It reveals that 71 per cent of UK organisations are spending a mere 10 per cent, or less, of their IT budget on Cloud services. Many organisations are also continuing to rely on ‘tried and tested’ outsourcing models and the survey shows that favoured destinations for IT support services remain India (51 per cent), Poland (8 per cent) and South Africa (8 per cent).

Asked why they are reticent about employing Cloud services, the top 3 reasons cited by UK C-suite respondents centred around data location, security and privacy risks (26 per cent), concerns over regulation and compliance (16 per cent) and cynicism around the ease with which Cloud services can integrate with legacy IT systems (15 per cent).

“Despite widespread acceptance that Cloud services offer access to the latest technologies, and make IT more accessible, adoption remains relatively sluggish.  While concern about the security risks surrounding new technology is understandable it may also be disproportionate, as Cloud options are just as safe as other outsourcing solutions.  Of course, investors and stakeholders will welcome caution on the part of the buyers, but they also want to see innovation, meaning that UK plc will need to find the right balance to remain competitive,” says Jason Sahota, director in KPMG’s Shared Services and Outsourcing Advisory team.

The survey goes on to reveal that, despite the economy picking up, some companies across the UK are still nervous when it comes to committing to long-term investments.  Asked about their IT outsourcing plans for the next two to three years, just 43 per cent said they plan to increase spending.  This figure contrasts with 77 per cent, this time last year.

However, where budget has been set aside for outsourcing, it is clear that organisational thinking is maturing.  When the survey was first undertaken, respondents focused primarily on cost savings as their reason to outsource – but this year’s survey shows that the search for quality improvement (20 per cent), access to skills (16 per cent) and a desire to reduce the time it takes to ‘get things to market’ (6 per cent) are driving the rationale behind IT outsourcing decisions.

The findings also suggest that satisfaction levels remain high in the UK, with 77 per cent of respondents reporting that they are comfortable with the support they receive.  Worryingly, however, the research shows inconsistencies in how businesses are approaching integration and governance of the services they outsource.  The majority (70 per cent) said that their IT function currently performs the role of service integrator, whilst only half (50 per cent) have partially met the expected benefits of service integration and management.

Sahota concludes: “As IT forms an inseparable part of the wider business strategy in many organisations, technology decisions are now rarely left to the CIO alone.  It means that, with the potential for conflict over the choices being made, organisations should dedicate a greater level of investment towards governance than they may have in the past.  If they fail to do so as they move towards more complex delivery models, poor governance can impact their ability to provide quality services, increasing risks around cost, service quality and delivery.”

China removes world’s leading technology brands from approved state purchase lists

China blocks tech brands

A Reuters report released on Friday has confirmed the Chinese government has implemented procurement restrictions on its agencies preventing them from buying US produced technology products.

The report outlined that US Companies like Apple and Cisco no longer appear on the list of approved technology vendors Chinese government agencies can purchase from.

But Why?

Two theories exist as to why these steps have been taken. The first relates to security concerns that have arisen between the US and China, particularly pertaining espionage activity between the two countries.

In 2013, the now exiled, Edward Snowden released a series of leaks that suggested the US government routinely accessed the internal data of US owned companies to gather intelligence on other nations.

Snowden also accused the NSA (an organisation he used to work for) of intercepting routers produced by Cisco that were being shipped to China and inserting surveillance devices inside that would relay data back to the agency.

Cisco remains adamant that it was unaware of this practice, however the Chinese government, with good reason, responded by removing all 60 of the previously approved Cisco products from its purchasing list.

The spying allegations prompted serious privacy concerns from the Chinese who, if the allegations are true, have every right to minimise the impact such espionage.

Tu Xinquan, the Associate Director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing highlighted Chinese concerns over the espionage allegations. “The Snowden incident, it’s become a real concern, especially for top leaders. Some sense the American government has some responsibility for that; (China’s) concerns have some legitimacy” he said.

An interesting side note that must be mentioned when discussing this case is that Chinese owned Huawei; the world’s largest network equipment provider, is banned from bidding for US government contracts over similar concerns that the firm may use its technology to spy on US government interests.

Protecting Local Interests

The second potential motivation for removing foreign companies from the approved supplier list is to strengthen China’s domestic tech industry.

IDC (a market research and advisory firm) suggests that the Chinese ITC sector is set to grow by 11.4 per cent to $465.6 billion USD in 2015. China’s technology sector is currently trailing the US both in terms of maturity and product capability, however it is understood to be catching up rapidly.

The Reuters report quotes an unnamed executive of a western technology firm who claims “There’s no doubt that the SOE segment of the market has been favouring the local indigenous content,” He went onto claim that the Snowden security concerns were merely a ‘pretext’ to support the development and growth of the Chinese technology industry.

Close the Windows

Despite these claims, Chinese government officials have pointed to weak product guarantees and poor support offered by foreign firms as the driving reason as to why the products have been removed from the list.

In 2014 the Chinese government announced that its offices would no longer be allowed to purchase any technology that runs the Windows 8 operating system, a move that was prompted by Microsoft electing to suspend support for Windows XP, a system used most in Chinese government offices. According to Chinese news agency Xinhua, the government was keen to “avoid the awkwardness of being confronted with a similar situation again.”

Whether the motivations for this move were based on security concerns or out of a desire to protect and promote local industry, we’ll likely never know. However, Chinese officials do seem to have created a policy that will support the growth and development of Chinese owned tech firms. Furthermore, it seems that US government policy, combined with the Snowden leaks, has provided ligament justification for making such moves.

Zero Hours Contracts have “protected UK from European unemployment levels”

Zero Hours Contracts have “protected UK from European unemployment levels”

Recently-released figures show the number of people reporting to be employed on a Zero Hours Contract has risen to 697,000. That’s 2.3 per cent of the workforce, in 2014…

We’ve been provided expert comment from Christian May, Head of Communications and Campaigns at the Institute of Directors – here is what Christian has to say:

“There doesn’t appear to be much difference between the Coalition and the Labour Party when it comes to Zero Hours Contracts. All parties now support a tough clamp down on the use of exclusivity clauses, and the IoD led the charge in calling for this change during the consultation process. After all, it’s the flexibility that makes these kind of contracts so valuable to the labour market and there’s nothing flexible about restricting and controlling an individual’s freedom to seek work.

“Given the consensus that now exists on ending the exploitative use of exclusivity clauses, what remains of the debate is largely semantic. Those who wish to hold up Zero Hours Contracts as a symptom of an unfair economy will continue to do so, but they must appreciate that for hundreds of thousands of workers and employers these contracts represent an extremely attractive proposition. Despite efforts to portray all those on such contacts as exploited, the truth is that there are plenty of engineers, contractors and professionals whose willingness to be flexible adds significantly to their market value and, therefore, their earning power”.

Christian adds: “It’s also worth remembering that a flexible labour market, of which Zero Hours Contracts are a vital component, has protected the UK from European levels of unemployment. Indeed, the UK’s labour market has been singled out for praise by the OECD. The alternative is a rigid labour market and high unemployment. 

“With a focus on best practice and a commitment to ending the use of exclusivity clauses, Zero Hours Contracts will remain, for some people, an attractive and convenient way into work.”

Late payments are forcing directors to take salary cuts

A new report has revealed that businesses are being paid at least one month later than agreed, and company directors are taking salary cuts to mitigate the impact.

Late payments are forcing directors to take salary cuts. Image Shutterstock

One in five directors has been forced to take a salary cut to avoid their firm going out of business due to late payments.

Tracy Ewen, managing director of IGF Invoice Finance, comments on the news: 

“The enforced wage cut taken by one in five directors is a worrying development that shows how delayed payments are bringing many small businesses close to failure. This latest news provides further evidence that urgent action is needed to force improvements among late payers. If the Prompt Payments Code isn’t working, then perhaps more stringent legislation is necessary.”

Tracy continues: “However, until this happens, there are funding measures firms can take to cover breaks in their cashflow without resorting to slashing salaries. Consequently it is important that firms thoroughly review their options and make use of any free financial advice that their own financial partners and suppliers can offer before pressure from large customers impacts their growth or operations.”

New role for former Procter and Gamble CPO

Rick Hughes, the former CPO of Procter and Gamble, has accepted a new role at GEP, a procurement software, outsourcing and consultancy firm.

Rick Hughes P&G

After a stellar 31 year career at P&G, one of the world’s most recognisable brands, Hughes will take on an advisory role with GEP that will see him provide advice on procurement transformation, supply chain innovation and global risk management to the organisation’s clients.

Subhash Makhija, CEO and co-founder of GEP, said: “Rick Hughes is one of our industry’s true stand-outs and it’s terrific having him on the GEP team. Rick’s expertise, insight and experience generates tremendous value for clients and that is very exciting for everybody who cares about procurement.”

Speaking on his appointment Hughes said: “The GEP team is well-known and well-respected for the strength and depth of its people, for its passionate commitment to clients, and for delivering results that always move the needle. This is a period of great change and possibility in the industry. I am delighted to be working with GEP, helping our friends and colleagues overcome new challenges and seize new opportunities.”

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Latest trends in the procurement outsourcing service provider landscape

Want to know the latest procurement growth and adoption trends in Europe? How about service provider positioning, and solution characteristics of Europe-focused contracts too? You can find all of that in the new report by Everest Group.

Everest Group Procurement Outsourcing report

The report, titled: “Procurement Outsourcing Service Provider Landscape for Europe with PEAKMatrix Assessment” deep-dives into the following:

  • Overview and adoption trends in the PO market in Europe
  • 2014 PO PEAK Matrix for Europe
  • Service provider delivery capability assessment
  • Solution characteristics of PO in Europe

Rajesh Ranjan, Partner and Head, Business Process Services Research, Everest Group, comments: “Europe is the second largest geography for Procurement Outsourcing, and service providers have had to ‘up their game’ in the wake of intense competition to grab new opportunities.

The multi-process PO market in Europe currently stands at US$610 million, which is nearly one-third of the global PO market, and showed 13 per cent Year over Year (YoY) growth in 2013. United Kingdom is the largest geography within Europe with a 50 per cent share. However, the service provider landscape is in stark contrast – various regional players have a more prominent standing and some of the global BPO players are yet to grab a sizeable share in Europe. In the wake of intense competition, service providers are enhancing their capabilities to grab new opportunities in Europe. This confluence of competing forces is shaping the market in various interesting ways.

A total of 16 PO service providers were analysed using the PEAK Matrix Assessment based on Performance (P), Experience (E), Ability (A) and Knowledge (K). These included: Capgemini, Genpact, GEP, Infosys, Optimum Procurement, Proxima, Wipro, and WNS to name but a few.

In the report  three PO service providers achieved the highest tier “Leader” recognition – they were: Xchanging, Accenture, and IBM. These “Leaders” were classified as having the largest PO market share and were positioned the strongest performers in their ability to deliver services successfully. Leaders outperform other players across nearly all the metrics assessed.

In addition to market success, the classification was also captured through four sub-dimensions: scale, scope, technology, and delivery footprint.

Read more: the report is available to purchase now from this link.

Rolls-Royce accused of ‘buying the business’

The Financial Times newspaper reports that a former executive of the Brazilian state owned oil company Petrobras has accused British engineering company Rolls-Royce of bribery. 

Rolls-Royce accused of bribery according to The Financial Times

The newspaper claims (with supporting court documents) that Rolls-Royce paid bribes in excess of $200,000 USD to the former Petrobras employee in order to secure lucrative engineering contracts for gas turbines used on the company’s oil rigs. The contract had an alleged value of more than $100m USD.

Rolls-Royce has released the following statement via email:

“We have not received details of the allegations made in recent press reports, nor have we been approached by the authorities in Brazil”.

The allegation levelled at Rolls-Royce falls under a larger inquiry into Petrobras. The company is currently engulfed in controversy pertaining to wide spread corruption throughout its procurement practices. It has been alleged that Petrobras has received billions of dollars in bribes from suppliers eager to secure contracts.

Rolls-Royce is also currently under investigation by Britain’s Serious Fraud Office. The investigation that began in 2013 centres on corruption and bribery claims present within the company’s operations in China and Indonesia. Such claims included the ‘gifting’ of 20 million dollars and a blue Rolls-Royce car to Tommy Suharto (son of Indonesia’s former president, General Suharto) – in a bid to persuade the national airline to use Rolls-Royce engines for its fleet.

The CIPS Risk Index Explained

Following on from our review of the Purchasing Managers Index (or PMI) last week, Procurious continues its look into procurement performance indicators. This week we are focusing on the CIPS Risk Index. 

CIPS Risk Index

The CIPS Risk Index is a tool developed by CIPS and powered by Dun and Bradstreet (D&B). It has been designed to give procurement and supply chain professionals a country-by-country understanding of the risks that exist within their supply chain.

The index is generated through a number of unique assessments that are undertaken by D&B’s economics team and provides an individual country-based score for 132 countries. CIPS suggests that these country-based scores can be aggregated to indicate overall supply chain risk.

For procurement professionals that want to understand the details behind the high level risks pointed out by risk index, CIPS provides monthly Country RiskLine reports and more detailed quarterly Country Insight reports. These reports provide a more in-depth look into the political, economic and social risks present in countries and how these impact purchasing activities.

When calculating the index, D&B takes into account the following categories:

  • Short-term economic outlook.
  • Long-term potential
  • Market potential
  • FX risk
  • Transfer risk
  • Business environment quality
  • Business continuity
  • Insecurity/civil disorder risk
  • Expropriation/nationalisation risk.

To find out more about the CIPS Risk Index click here.

Are we going to run out of chocolate?

Cacao crisis - are we running out of chocolate?

Last week I warned that the increases in value of the Swiss franc could spell troubled times for chocolate lovers. Unfortunately, this week I have more troubling news about our favourite sweet treat…

In its 2015 report, the Earth Security Group (a company that provides intelligence on managing global resource risks) points out that we are headed for global shortages in cocoa (the key ingredient in chocolate) as soon as 2020.

Where is the chocolate going?

A number of factors are thought to be contributing to the dwindling supply of cocoa. These include; increased demand from emerging markets (Indonesia’s chocolate consumption is growing at 20 per cent a year) and fears around what might happen if Ebola crossed the border from neighbouring Liberia and Guinea into the Ivory Coast. The Ivory Coast is the world’s largest producer of Cacao – boasting 38.7 per cent of global production.

However from a procurement perspective – it is the fact that cocoa farmers are shifting their efforts to other crops that I find the most interesting.

In order to understand the reasons why cocoa growers are shifting production to palm oil and rubber, we need to look at the intriguing nature of the cocoa supply market.

An agricultural oddity

The cocoa growing industry is an anomaly of sorts in modern agriculture – in that it is still dominated by small landholders rather than corporate enterprises. These small landowners produce over 85 per cent of the world’s cocoa supply.

The highly fragmented supply market for cocoa means that farmers hold little bargaining power when it comes to negotiating with the large buyers like Nestle and Barry Callebaut*.

As a result of this buyer dominated market, the price of cocoa halved between 2009 and 2011. In 2012 the Ivorian government introduced a fixed pricing scheme designed to keep its cocoa industry intact and prices started to recover.

Combine falling prices with the fact that cocoa growers are very poorly remunerated for their efforts, and the motivations for shifting production begins to become apparent.

Makechocolatefair.org suggests most cocoa farmers earn less than $1.25 USD a day, meaning they living in ‘absolute poverty’ as defined by the UN. The paltry sum they receive from large buying organisations means cocoa farmers have a high propensity to shift production to more profitable crops. It just might be what pulls them out of poverty.

Furthermore, farmers in these communities remain largely unconnected to the global information sources and the outside world. This is resulting in two worrying occurrences. The first is that sustainable farming practices and infrastructure have not been implemented in cocoa farming regions causing widespread land degradation. The second is that these small holders have no concept about the increases in the global demand for their product and the implications it could have for the price they charge.

“You can’t sustain a booming chocolate industry worth billions while the producers are living in poverty” – Alejandro Litovsky founder and chief executive Earth Security Group.

Cocoa is an old mans game

The combination of tough customers, poverty, low prices and changing climatic patterns is severely hampering the motivation of young farmers to move into producing cocoa. It is estimated that the area of world’s surface dedicated to cocoa plantations has decreased by 40 per cent in the past four decades.

Perhaps more concerning is that the Fairtrade organisation estimates the average age of a cocoa farmer is 50! If that’s not a telling sign for the future of the industry, tell me what is.

The Earth Security Group report highlights the challenge that chocolate producers face, and the need to change the dynamics of this supply market. Companies should look to spread the benefits of what is a lucrative industry downstream and back into the supply chain. Failure to do so will mean facing the future supply crisis, knowing that they hold at least some of the responsibility for the shortages.

* Never heard of Barry Callebaut? That’s where Cadburys, Hershey’s, Ben and Jerry’s and Magnum get their cocoa. The company purchases about 40 per cent of cocoa available to the open market.