Category Archives: In The Press

Dubai Securing Its Future Through Innovation

Traditionally a prime hub for trade, logistics and communications, Dubai, the UAE, are looking to secure the future as a hub of business innovation.

Innovation - Expo 2020

On the 27th of November 2013, Dubai was voted as the host city for Expo 2020, an event that aims to bring together a global audience to discuss issues pertinent to every person in the world. Based on central theme of “Connecting Minds, Creating the Future”, Expo 2020 will also cover key sub-themes of sustainability, mobility and opportunity.

While the event will place the country at the heart of an event with an estimated 25 million visitors, it also helps to cement Dubai’s place as a centre for technology and business innovation.

Smart Cities

Dubai is already well on its way to becoming a ‘smart city‘, with huge sums of money being invested in making the emirate a hub for IT and technology. In September 2015, Dubai was named as the second-best city in the world for expats wishing to start a business, while the UAE was among the top 10 countries for expats to work in.

These titles run in line with Dubai’s aim to open its doors to the best and brightest technology innovators and entrepreneurs. As part of its investment in infrastructure during its ‘Year of Innovation‘ in 2015, provisions were made to assist small to medium-sized startups with technological assistance, aimed at creating growth in this sector.

And, as part of this drive to encourage more global technology organisations to come to Dubai, Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai, announced a $544 million fund to finance innovation in the city.

While the fund doesn’t actually go live in terms of investment until later this year, it is anticipated that it will provide funding to companies based in the UAE, as well as those providing “exceptional innovative ideas“, helping to drive growth and economic development across the region.

Innovation…and Procurement

All of this comes as part of the UAE’s ‘Vision 2021‘, which aims to make the country one of the most innovative in the world. And it’s good to know that procurement and supply chain have a key role to play in this process too.

In the coming months, a huge procurement and contracting effort will be undertaken to award build work for the site, infrastructure and transportation to support the hosting of Expo 2020. Dubai is forecast to spend around $8 billion on infrastructure mega projects in the build up to Expo 2020 including hotels, new metro links and malls.

Kicking it off last week, the RTA awarded a $2.88 billion contract for the construction of its Expolink metro. This will be followed by purchase of trains to service both the new, and existing, Dubai metro lines.

It’s estimated that Dubai’s Road and Transport Authority (RTA) will look to 30 per cent of the project cost through private funding, with public-private partnerships mooted for the remainder.

Is it too much to ask for to have a little innovation in the procurement process? While traditional processes might still hold sway, we can only hope that the profession can get in on the act in the next few years.

Need something to chat about in the tea room? Or something to enjoy with your coffee? Here are the week’s big headlines…

States Come Together for Purchasing Agreement

  • TheNational Association of State Procurement Officers (NASPO) has been formulating a collective procurement agreement which is expected to benefit 34 states in America.
  • The Value Point platform will give states purchasing similar items cooperative buying power as one organisation, rather then by state basis. 
  • The Cloud-based platform will enable information storage and allow for different payment structures. 
  • The final agreement is expected to be signed off in August and will the states to move forward with a cohesive, cooperative approach to procurement.

Read more at Government Technology

Rolls-Royce Announce Robot Cargo Ships

  • The Rolls-Royce led Advanced Autonomous Waterborne Applications Initiative (AAWA) presented their vision of autonomous shipping at the Autonomous Ship Technology Symposium 2016 in Amsterdam.
  • The group is working on a series of virtual decks, where land-based crew would control every aspect of the ship
  • There will also be drones and VR cameras to assist with spotting issues that humans cannot control.
  • Rolls-Royce aims to launch first remote-controlled cargo ship by 2020, with the aim for automated fleets to follow soon after.

Read more at Futurism

New World Bank Procurement Framework Live

  • The new procurement framework at the World Bank was officially launched on the 1st of July.
  • The new Procurement Framework will allow the World Bank to better respond to the needs of client countries, while preserving robust procurement standards.
  • The Framework also enables the Bank to work more closely with country partners in improving their own procurement systems.
  • Hart Schafer, World Bank Vice President for Operations Policy and Country Services, said, “The Bank can now offer a more modern and nimble procurement system to help promote sustainable development.”

Read more at The World Bank

US-Japanese Underwater Cable Goes Online

  • A 9,000km, six-fiber cable linking the USA and Japan, and backed by Google, went online at the end of last week.
  • The $300 million ‘FASTER’ cable is a project backed by a consortium of six companies including NEC, China Mobile, China Telecom, Global Transit and KDDI, aimed at better connecting the two countries. 
  • The cable can deliver up to 60 terabits per second (Tbps) of bandwidth, about 10 millions times faster than standard cable modems.
  • The cable will support Google’s Cloud Platform East Asia region, with dedicated bandwidth supporting faster data transfer and reduced latency.

Read more at Tech Crunch

How the Leave Vote Will Impact Procurement and Supply Chain

It was an unlikely event just a week ago, but the Brexit has come to pass. Procurious looks to unpack initial thoughts on how the ‘Leave’ vote will impact both procurement and organisations as a whole.

EU Vote Leave

Last week, Procurious’ weekly news article reported on the potential impact of the UK Referendum on UK and European supply chains.

Now, with a weekend of uncertainty and speculation behind us, Procurious looks at the initial views on what the wider implications are likely to be for procurement now the ‘Leave’ vote is a reality.

Initial Response

Following the ‘Leave’ result announcement on Friday morning, the UK stock market dropped 8 per cent on opening, its worst one-day fall since 2008, although it recovered slightly during the day. The pound, too, fell dramatically in the early morning, with a 10 per cent fall taking it to an over 30 year low.

Across Europe, stock markets reacted in a similar fashion. Markets in France and Germany also fell around 8 per cent, while the Swiss Government were forced to stabilise the Franc as it dramatically appreciated in value.

Due to the unprecedented nature of the vote and the result, experts foresee a period of volatility in UK, European and World markets. The volatility has already had an impact on commodity prices, with oil prices dropping by over 5 per cent, both in Europe and the USA, while gold prices have risen by nearly 7 per cent.

In a bid to calm markets, George Osborne, Chancellor of the Exchequer, broke his silence to reassure markets that  “Britain is open for business” – but warning too “it will not be plain sailing”.

The Long Term

The long-term implications will take a while to become clear. The markets across Europe will stabilise, as will the value of the currencies of the member states. However, as has already been reported, the UK exit may precipitate other in/out referendums in Europe.

Far-right parties in France, Italy and the Netherlands were all quoted on Friday as saying that it was now time for their countries to have their own votes. Although further votes would result in increased volatility, these are unlikely to happen in the short term.

For now, all member states, the UK included, are still part of the EU, and are therefore subject to EU regulations and obligations under the single market.

Britain will most likely wait until at least October, when a new Leader of the Conservative Party is elected, to trigger Article 50 to start the EU divorce process.

Procurement, Trade and Supply Chains

Setting politics aside, and assessing the UK’s decision from a procurement and supply chain point of view, there are a number of factors businesses must consider in the short term, in the run up to the UK formally taking its leave from the EU.

Should the value of the pound remain low, this will bring both positives (think cheaper exports for British companies), and negatives (think more expensive imports of global products, and less bang for your buck in foreign currency exchange transaction), for procurement organisations.

The UK will also have to renegotiate trade deals, not only with European countries, but also with other countries around the world. Both UK imports and exports would be subject to tariffs, increasing supply chain costs of organisations with pan-European supply chains. However, it is worth noting that this will only happen in the event of the UK fully removing itself from the EU common market.

It is also worth remembering that this will not mean the end for procurement activities around Europe. Far from it. New trade deals, negotiations, supplier evaluations and supply chain changes, will all fall under procurement’s remit, making our profession as important for organisational value as it ever has been.

Prepare Now

A two-year waiting period for the UK to formally leave the EU doesn’t mean that nothing can be done in procurement. There are a number of strategies and actions that can be taken in order to prepare, and help to mitigate future risks.

Procurement professionals first need to understand if and how they are impacted within their current contracts and supply agreements. Assessing the current supplier lists to identify European suppliers, or suppliers with European Tier 2 or 3 suppliers, is a good starting point. 

It will be better to know now if critical, or bottleneck, suppliers will be impacted, so mitigations and contingencies can start to be planned. Within existing contracts, procurement must assess the potential impact of tariffs on pricing, and if they, or suppliers, will be in a position to renegotiate these contracts.

Finally, investigating alternative sources of supply for all products is a good step to take. This could be supplier based in the UK, or further afield. Another option in this regard would be assessing the possibility of exploring innovative supply solutions with existing suppliers.

UK and European businesses, including procurement departments, have time to prepare. The biggest mistake would be in leaving it too late to ensure actionable outcomes.

Are your supply chains likely to be impacted by the referendum result? How can procurement act to ensure they still have the best deals with suppliers? Let us know your thoughts.

Had your fill of politics? Need something to take your mind off it? Here are some headlines to peruse from the world of procurement & supply chain…

FAA Relaxes US Drone Regulations

  • The Federal Aviation Authority (FAA) has relaxed its regulations on the piloting of drones in US airspace.
  • Before now, operators needed to obtain a licence, requested on a case-by-case basis, to have permission to pilot a drone legally.
  • Now, the regulations state that commercial drones can be flown by pilots over the age of 16, below 400 feet, and with the drone in line of sight.
  • However, the changes will not affect the commercial drones proposed by Amazon, as the FAA is still carrying out further research on this use.

Read more at The BBC

Instagram Hits 500 Million Users

  • Social media platform Instagram has doubled its user base in the past two years, topping 500 million in the past week.
  • The last 100 million members have been added since September 2015, a considerably faster rate than the previous 100 million.
  • The site boasts 300 million daily active users, has surpassed its rival Twitter in monthly active users, and is now double the size of Snapchat.
  • The platform has further expansion plans, with much of it aimed at Instagram’s role as a platform for businesses.

Read more at Tech Crunch

Boeing Signs Deal with Iran Air

  • US-based Boeing has signed a deal with Iran Air to supply 100 jetliners.
  • It marks the first time that Boeing has done businesses in Iran since the Islamic Revolution in the country in 1979.
  • The value of the deal is unconfirmed due to a lack of information on the jetliners to be supplier, but it is estimated to be in the region of $11 billion.
  • However, any and all contracts that Boeing signs with Iran will be subject to US Governmental approval, something which could change following the November elections.

Read more on Reuters

Amazon Fined for Shipment Mishandling

  • Amazon has been fined $130,000 for two alleged incidents of mishandling of dangerous chemicals in its logistics operations.
  • The fines, one of $78,000 and one of $52,000, related to the shipment of two flammable substances by air, between Illinois and Florida in 2014.
  • This is the third fine in two weeks for Amazon from the FAA, following a $350,000 fine for a similar incident, also occurring in 2014.

Read more at the Wall Street Journal

National Women in Engineering Day – Raising Profiles

National Women in Engineering Day 2016 is all about raising profiles and showcasing why engineering is a great career for women.

NWED Raising Profiles

Thursday the 23rd of June isn’t just about the UK’s EU Referendum. In fact, there’s something happening on Thursday that it would be remiss of us to overlook, or let be completely overshadowed by the vote – National Women in Engineering Day 2016.

Building on Success

NWED 2016 is aiming to build on last year’s success, when over 400 organisations, including schools, colleges, universities and industry bodies, from across the world, got together to celebrate achievements of women engineers, and encourage more girls and women to consider a career in engineering.

But first, a bit of background. The first National Women in Engineering Day was set up by the Women’s Engineering Society (WES) as part of its 95th anniversary celebrations. The society wanted to highlight the opportunities available for women in engineering, at a time where the industry was suffering from a skills shortage.

The WES felt that by encouraging more girls and women into engineering, it would help to improve diversity, fill the skills gap and enable the  industry to cope better with future job requirements. NWED was created to support this aim, allowing organisations to set up their own events, and link together with others in order to maximise the impact of the message.

Importance of Raising Profiles

The sub-theme for this year’s NWED is ‘Raising Profiles’, something the organisers see as key to bringing more women into the profession.

Alongside the publication of the ‘Top 50 Women in Engineering‘ list in Thursday’s Daily Telegraph, institutions are being encourage to share the profiles of their female engineers, their stories and achievements.

Raising Profiles is also about changing the perceptions of engineering as a male-dominated, physical, dirty work, and showcasing the reality that not only are women just as capable as engineers as their male counterparts, but there are already examples of where women are succeeding at the top of the profession.

You can read about just a few great examples here.

Get Involved

While it might be a bit late to organise your own NWED 2016 event, there are still plenty of ways you can get involved:

  • Visit a local university to highlight engineering as a career
  • Make a plan to increase your corporate diversity and launch it today
  • Raise the profile and celebrate the achievements of your female engineers
  • Feature an article in your newsletter or on your website about your female engineers
  • Follow events, and help promote the cause, on social media at @NWED1919, and by using the hashtags #NWED2016 and #RaisingProfiles
Why Spread the Word?

You might be wondering why Procurious are profiling National Women in Engineering Day when we aren’t an engineering-related platform.

Well, besides it being a great campaign to get behind, it’s clear there is still work to be done. It’s estimated that the gender gap in engineering subjects has doubled in the past eight years.

Even with the awareness of NWED increasing, it can still fall victim to a lack of time for organisations to support it fully. As one female engineer at a global engineering organisation put it to us, “Personally I would love to see more support for it. I have supported the event in previous years and it is excellent. Unfortunately ‘business pressures’ tend to get in the way of greater support.”

We also firmly believe that procurement and supply chain could, and perhaps should, follow suit with similar events for this profession. After all, why should raising profiles be limited to engineering. We’ve talked previously about women in supply chain, and gender diversity, and NWED is a great example of getting a wide group of people involved in a common cause.

Isn’t it time to take a positive stance in procurement and supply chain? Procurious can provide the platform – can you provide the support?

The EU Referendum – Supply Chain Trade at Stake?

No matter where you are in the world, you’ll have heard about Thursday’s referendum in the UK about its EU membership. Have both sides overlooked a critical point in the debate?

EU Referendum

This article was written for Procurious by Chris Cliffe.

Procurious is a global platform, but wherever you are, you’ll have heard about this week’s referendum in the UK.  Will the UK #RemainIn or #brexit the EU this week?

Far from being specific to the EU, I think it’s a global issue. And one I find myself thinking about sitting on a train…

Referendum & the Supply Chain

No one can agree on the exact figure (£350m-£380m per day), but the UK is a ‘net contributor’ to the EU. In fact, the UK is one of the biggest net contributors along with France and Germany. But what about taking this issue in (very) simple supply chain terms?

Customers pay suppliers for products. Suppliers make profit from product sales. Therefore we can view customers as ‘net contributors’ to suppliers, much like the UK to the EU. What would happen if a supplier were to lose one of its biggest customers?

The loss of that customer’s revenue needs to be mitigated.  Replacing that customer with new business of equivalent size will be difficult, or at least take a long time. Whilst costs may have gone down through no longer servicing that customer, cost reduction is not proportionate to the lost business, leaving an increased cost to be recovered from remaining customers.

What are the options? The supplier can: take the hit; make efficiency savings; increase prices for other customers; or pass on the cost to the supply chain.

So, if the EU loses a large net contribution, other member states will either see a reduction in EU funding, as there is less money to share out, or they will have to renegotiate their contributions to the EU to make up for the shortfall.

Contributions are proportionate, so all member states will either see their contribution increase, or their share of the funding reduced. France and Germany would likely be most affected.

Shifting Issues

The UK might view this as the EU’s problem. However, all that will have happened is the ‘problem’ has just changed.

Assuming France and Germany – two of the UK’s largest trading partners – did pay more into the EU to cover the loss of the UK’s contribution, how will they take the hit? More austerity? Or will they pass on the cost to their customers – particularly if the customer caused their cost increase!

The UK will want to continue to trade with the EU member states.  That will be possible, and the member states will want to trade.  However, having left and caused those very same member states to see higher costs as a result, I’m struggling to see why we aren’t more concerned about potential ‘tariffs’ which may be applied.

The risk is that the EU will want to recover the ‘cost’ it suffers from a Brexit. Furthermore, the EU will debate and agree their stance on this. And guess what – the UK won’t be at that table.

Supplier Perspective

From a supplier perspective, losing a large customer simply to find that customer still wants your product, but just didn’t want to pay for it is frustrating enough. But what example would you set to your other customers if you actually agreed?

Of course, suppliers will be happy to supply those products, and even though the commercials of the deal might change, you’ll inevitably be charged the same (or more as the deal is no longer standard and will have introduced complexity, risk and cost). Other customers will be watching you.

But the UK isn’t just a customer, it’s a supplier too. Exiting the EU may mean higher costs for the UK’s customers, meaning they have less money to spend. They may want to trade, but could buy less, or need lower prices to compensate.

Let’s consider Framework Agreements. Frameworks are really useful commercial vehicles (a separate debate!) to access products and services without complex, lengthy advertised procedures.

Typically, a set of suppliers are appointed to a Framework for a fixed period. Suppliers who are not appointed to the framework cannot trade through it, and consequently find it more of a challenge to trade with the public sector, who want to use the ‘easy’ route.

Think of the EU as a framework, and the member states as the suppliers appointed. The UK could be about to give up its hard fought position on the framework. In doing so, the UK will be making itself more difficult to trade with, and it will be natural for current EU customers to look at other, less complex, sourcing options.

So, if the referendum goes for #Brexit, does the UK become just a country geographically in Europe, but in the ‘no longer free to trade’ area? Is the UK’s slice of the EU trade pie more at risk than either campaign have realised?

Well, I conclude that…my train has arrived on-time! Don’t forget to  vote if you’re eligible!

Want something to take your mind off the referendum? Here are the week’s procurement and supply chain headlines…

Starbucks Names New Supply Chain Chief

  • Hans Melotte, former Johnson & Johnson CPO, and current Chairman of the ISM Board of Directors, has been appointed by Starbucks as its new Executive Vice President of Global Supply Chain.  
  • Starbucks has approximately 16,000 suppliers and operates in over 70 countries and has recently announced plans to open a 20,000 square-foot roastery in New York.
  • Mr Melotte will oversee supplier relationships, distribution, transportation and store delivery, and is expected to transform stores’ distribution channels in line with company expansion.
  • Mr. Melotte also featured in Procurious’ recent article on the use of the term ‘strategic’ in the profession.

Read more at the Wall Street Journal

World Day Against Child Labour

  • The ILO’s World Day Against Child Labour took place on Sunday 12th June, with this years’ focus on child labour in supply chains.
  • An estimated 168 million children are found in supply chains across the world, in every sector and region.
  • “The time for excuses is over”, said ILO Director General Guy Ryder. “With redoubled from governments, employers, workers organisations and enterprises, child labour in supply chains can be stopped.”
  • The ILO has developed a new app designed to help business managers and auditors to create checklists that will help ensure a child labour-free operation.

Read more at the International Labour Organisation

M&S Unveils New Supply Chain Mapping Technology

  • M&S released its first online supplier map alongside its inaugural human rights report last week, showing 1,231 factories in 53 countries.
  • The interactive map has the capability to zoom in on individual facilities to see the address, number of workers on site, and gender of those workers.
  • The data for the map comes from supplier-reported information and third-party audits.
  • The mapping technology is expected to greatly improve supply chain visibility, and can be tailored to include more data.

Read more at Green Biz

Businesses Alarmed by Digital Skills Shortage

A major training effort is needed to improve digital skills, and make sure people are not left behind in the digital age, say the Institute of Directors.

Digital Skills

The Institute of Directors (IoD) have stated that a major effort is required in the UK in order to ensure that workers have the digital skills required to keep up with technological advances.

The IoD was responding to a report from the House of Commons Science and Technology Committee, which suggested that, while 90 per cent of current UK jobs required digital skills, over 12.6 million UK adults did not have the skills to allow them to perform these roles.

The report also stated that two-thirds of digital-based organisations have struggled to fill a vacancy in the past 12 months, and that 93 per cent of technology companies have seen a direct impact on commercial operations from a digital skills gap.

This is despite over 12 per cent of Computer Science graduates still being unemployed six months following graduation.

Digital Exclusion

The House of Commons report also highlighted a worrying trend in digital exclusion, with 23 per cent of the UK population lacking even basic digital skills. These include a high percentage of disabled and elderly people, as well as those without a formal education.

However, the good news on this front, is that around 4.5 million of the 12.6 million are currently in full time employment, with employers being asked to assess how to aid with digital skills education and training.

While the impact on the economy of these statistics is estimated to be in the region of £63 billion per year, in lost potential GDP, individuals also miss out on savings of £560 per year on average by not being online.

The report concludes that there is more to be done by the UK Government, both in terms of facilitating the training of digital skills, but also putting the infrastructure in place to enable the entire population to have access to the Internet.

Digital Skills Education

In April, the IoD released a major report arguing significant changes to education and life-long learning were needed to enable the UK to adapt to rapid advances in technology and automation.

The IoD’s Chairman, Lady Barbara Judge, in a piece for the Sunday Telegraph yesterday said that society needs to make “a concerted effort to upskill and reskill its population, and not leave a whole generation ill-equipped to meet the new reality”.

Seamus Nevin, Head of Employment and Skills Policy at the Institute of Directors, said of the House of Commons report: “This report shows the need for businesses to invest more in training British workers. We also must make sure tomorrow’s workforce is leaving school or university with the digital skills that employers require. Just as importantly, we must enable people already in employment to retrain or up-skill in order to meet the demands of the changing workplace.

“The IoD has called for the government to increase the use of technology in education — such as use of MOOCs (Massive Open Online Courses) — to provide training at much lower costs and improve access to learning for all. We have also suggested the creation of tax incentives to encourage and enable people at all stages of their career to return to education and learn new skills”.

“The Committee says the UK needs another three quarters of a million workers with digital skills by next year. In order to meet the immediate shortfall, businesses must be able to access workers with the right skills from abroad.”

How one tweet from Elon Musk wiped $580 million from Samsung SDI

More than half a billion dollars was wiped from Samsung SDI’s market capitalisation this week in response to a single tweet from Elon Musk about Tesla’s supply chain. 

Musk

Rumours were swirling earlier this week about Tesla’s supply chain for its lithium-ion battery packs. Investors believed that the official supplier, Panasonic, may not be able to produce enough batteries for the much-anticipated Model 3, and that Samsung SDI (Samsung’s battery and display division) would be brought in to meet production targets.

Elon Musk set the record straight on Tuesday with the following tweet, clarifying that the arrangement with Panasonic is exclusive.

Musk

The effect of Musk’s tweet was immense – Samsung SDI’s shares plummeted by US$580 million (or 8%) on Wednesday, while Panasonic added $800 million to its market value on the same day.

Tesla’s Model 3 is slated to be a comparably affordable electric car with a range of at least 215 miles (346 km) per charge. At $35,000, it’s Tesla’s first step away from the luxury space into a price range affordable by mid-level buyers. It’s expected to be an enormous success, leading to significant interest from investors who follow Tesla news very closely indeed. This has led to a situation where a single tweet from Musk can cause huge disruptions in the share market, comparable to the shockwaves caused when Apple makes announcements about its supply chain.

A similar situation occurred in April when shares for Taiwan’s Hota Industrial Manufacturing, Tesla’s sole supplier of gearboxes, plunged rapidly as news broke that Tesla may be looking for a second supply source.

Stock market shocks are compounded by Wall Street firms’ usage of high-frequency trading, where computers use algorithms to comb through the internet to read news items (including tweets), executing thousands or millions of small trades per second based on that information.

Gizmodo’s Matt Novak has observed that if Musk’s Twitter account has so much power, the consequences of a hacking could be disastrous. “We hope he has a strong password and two-factor authentication turned on … If Musk ever got hacked, it could send markets into a minor tailspin.” Novak gave the example of a fake tweet that caused a $130 billion stock market crash in 2013, when hackers used the Associated Press Twitter account to announce that Barack Obama had been injured in an explosion at the White House.

Musk has a longstanding partnership with Panasonic, which invested $30 million in Tesla in 2010. This investment is now estimated to be worth more than $300 million, and Panasonic holds a supply agreement for 1.8 billion cells through to 2017 for Tesla’s luxury Models S and X. Panasonic is also playing a significant role in Tesla’s Gigafactory in Nevada, which will supply 500,000 Tesla cars per year with lithium-ion battery packs by 2020.

Tesla has since tweeted that Samsung may still be involved in making Tesla Energy products, namely its Powerwall and Powerpacks (stationary batteries used in homes). 

We’ve been keeping track of the major stories making the procurement and supply chain news this week…

Amazon’s massive investment in logistics

  • Amazon continues to make aggressive capital investments, with some observers claiming the company is positioning itself to take over the last mile of delivery from UPS, FedEx and the U.S. Postal Service.
  • Recently, Amazon purchased an air cargo network previously owned by DHL, purchased thousands of 53-foot trailers, and is leasing 20 Boeing 767s at a cost of $300,000 per month.
  • The organisation has built over 100 global fulfilment centres between 2009 and 2016, with 125 million square feet of global warehousing. The warehouses themselves contain 30,000 Kiva Robots (acquired by Amazon for $775 million).
  • Amazon’s founder and CEO Jeff Bezos said his company’s goal is to “heavily supplement and support”, rather than take over, peak season fulfilment.

Read more: https://logisticsviewpoints.com/2016/06/06/does-amazon-have-a-first-mover-advantage-in-logistics/

 World Bank to launch modernised procurement framework

  • The World Bank will launch a new procurement policy on July 1, 2016, modernising an outdated framework that has remained unchanged for decades.
  • Moving away from a rules-based procurement system to one that focuses on performance and achieving development goals, the new framework allows for much greater flexibility.
  • Changes in the new framework include a sharper focus on achieving value-for-money, an increased number of procurement methods and approaches, greater streamlining, more attention to contract management, and enhanced support for borrowers in low-capacity environments.

Read more: http://blogs.worldbank.org/governance/imminent-transformation-world-bank-s-procurement-framework

 Johnson & Johnson: Controls need to be in place when buying digital ad placements

  • Johnson & Johnson was recently alerted by shocked customers that one of their baby product ads was played before a video about paedophilia, leading senior digital marketing strategic Louisa Thraves to comment that more responsibility needs to be taken. The issue is caused by automated keyword matching, such as “baby” or “children”, and can be remedied by creating a watch-list of topics to avoid being paired with.
  • Thraves used cold and flu remedy Codrol as an example of a brand that could be damaged by erroneous media placements, which she said could never be associated with alcohol in an advertising environment.
  • Marketing procurement professionals must ensure they know where and when digital ads will be played, and what other content they will be associated with.

Read more: https://mumbrella.com.au/jj-marketer-says-clients-need-take-responsibility-brand-safety-series-shocking-ad-placements-372929

The Double Edged Sword for Fast Fashion Brands

The impact of fast fashion can be seen on the high street and in the newspapers. But the trend may be about to take down one of the world’s most recognisable brands.

Gap Brands

There are few people in the world who wouldn’t recognise Gap’s brands on the high street, in shopping malls, or on the Internet. However, the fashion and retail giant is facing up to major issues thanks to the ever-growing fast fashion trends.

With consumers moving their shopping habits away from in-store purchasing, Gap may seek bankruptcy in order to help it transform its business model and organisational set up.

Sinking Sales

All three of Gap’s major brands – Gap, Old Navy and Banana Republic – have seen sales decrease again in the first quarter of 2016. In April 2016, Gap sales dropped by 4 per cent, Old Navy by 10 per cent, and Banana Republic by 7 per cent.

The company is now on a run of 24 straight quarters without a growth in comparable sales, and 13 straight months of declining sales. In the face of this, Gap’s shares are down by 9 per cent since the start of the year, leading many analysts to suggest that these brands still aren’t learning lessons from fast fashion retailers such as H&M, Uniqlo and Zara.

Gap is yet to successfully match the design-to-shelf timelines of fast fashion, with many of its products still taking up to nine months to hit the shops. This is roughly double the length of time that it takes fast fashion trends to reach consumers on average.

Wider Impact

It’s not just Gap who are suffering from the fast fashion spread. Other US-based brands, including J. Crew, Abercrombie & Fitch, have experienced a sales downturn, while traditional retail icons, such as Sears and Macy’s, have both closed a number of stores this year.

In Australia, Wesfarmers Ltd, the country’s biggest company by sales value, announced its worst yearly profit in two years, and looks set for its first net loss in almost 20 years. The organisation puts its decreasing sales down to the impact of fast fashion brands on its in-country discount stores.

Double-Edged Sword

However, not all is rosy in the garden for the fast fashion retailers. Uniqlo appear to be struggling to gain a foothold in the US market, opening fewer stores than anticipated, and with slower than anticipated sales.

Chief Executive, Tadashi Yanai, has gone to the USA to assess the company’s strategy and to work out how to raise the brand’s profile outside of major cities. The company has consistently lost money in its US operations since expanding there five years ago, but still maintains a plan to open over 100 stores in the country in the coming years.

Could this be a turning point for retail brands? Or is it just the natural progression of a business’ rise and fall, just sped up in line with the increasing pace of change in trends and demands? Whichever it is, it will be interesting to see how the fashion industry changes in the coming years.

We’ve been keeping track of the major stories making the procurement and supply chain news this week…

Procurement “Underpaid and Unrecognised”

  • A new salary survey report from Next Level Purchasing Association (NLPA) has suggested that procurement professionals are being underpaid.
  • The Purchasing & Supply Management Salaries 2016 report has shown that average global salaries for the profession have decreased by 7.5 per cent.
  • This leaves the average global salary around $53,000 USD, although the average covers professionals at all organisational levels, and across six continents.
  • The NLPA has suggested the best way for professionals to combat this is to get themselves recognised for value contributions to their organisation.

Read more at Supply Chain Quarterly

ISM Announces Annual Awards

  • ISM has announced its Persons of the Year, Affiliate of the Year and Affiliates of Excellence Awards at ISM2016
  • The Persons of the Year Awards sit across five categories: Education; Innovation; Leadership; Marketing & Communications; and Volunteer of the Year.
  • The Affiliate of the Year Award, won by ISM Cleveland this year, recognises excellence in core competencies, membership growth, and professional development opportunities.
  • ISM Cleveland was also one of the eight affiliates recognised with Affiliate Excellence Awards, for demonstrating an awareness and distinction in their professional operations.

Read more at ISM

Oil Settles Under $50 as Supply Worries Resurface

  • Oil prices touched  the $50-per-barrel mark on Thursday 26 May as production outages brought a faster-than-expected recovery to an oversupplied market.
  • Global benchmark Brent crude oil was down 35 cents at $49.40, having earlier risen as high as $50.51 in intraday trading.
  • Adding to outage concerns, a source at Chevron said the producer’s activities in Nigeria had been “grounded” by a militant attack, worsening a situation that had already restricted hundreds of thousands of barrels from reaching the market.
  • Investors will be watching next month’s OPEC meeting for signs of an output hike now that oil had reached $50.

Read more at CNBC

Adidas Unveils New Robotic Factory in Germany

  • Adidas, the German maker of sportswear and equipment, has announced it will start marketing its first series of shoes manufactured by robots in Germany from 2017.
  • The company is facing rising production costs in Asia where it employs around one million workers.
  • It plans to open similar factories in the UK or France following a test period in the third quarter of this year.
  • Arch-rival Nike is also reportedly developing a robot-operated factory.

Read more at The Guardian

Hyperloop Reveals New Material for Capsules

  • Hyperloop, the revolutionary transportation system and brainchild of Elon Musk, has announced more details on the manufacture of their travel pods.
  • Vibranium, more commonly known as the material used for Captain America’s shield, is the name for a new alloy created specifically for Hyperloop.
  • The material is made of woven carbon fiber, and the company claims it is ten times stronger and five times lighter than steel, and eight times stronger and 1.5 times lighter than aluminum.
  • Vibranium has also been designed to be a ‘smart’ material, able to relay real-time data on temperature, damage, structural integrity.

Read more at Futurism

Automation & Giant Aircraft – Revolutionising Logistics

As new technologies take hold across the supply chain, we take a look at the main disruptors revolutionising the logistics industry around the world.

Revolutionise Logistics

There seems to be two approaches to the next steps for organisations and disruptors revolutionising logistics – go automated, or go huge! From new technology for driverless trucks, to the soon-to-be-largest aircraft in the world taking off in the UK, there are game changing disruptions afoot in the logistics industry.

Plane vs. Blimp

In the past week, the world’s largest freight aircraft touched down in Australia, following a 14,000km journey around the world from the Czech Republic. But, even this huge plane looks set to be usurped by an even bigger aircraft, about to undergo flight tests in the UK.

The Antonov 225 Mriya, weighs in at an astonishing 175 tonnes, is 84 metres in length and needs six engines to help it get off the ground. It’s capable of carrying loads of up to 640 tonnes, and is the only one of its kind. Perhaps most surprising is that this behemoth is nearly 30 years old.

The plane has mostly been used in recent years in the logistics field to transport heavy commercial items, such as heavy mining equipment, around the world. It touched down for the first time in Australia earlier this week carrying a 117-tonnes mining generator to a customer in Western Australia.

However, it’s about to be surpassed in size (although not in load capacity) by a new aircraft hoping to carry out its first UK-based test flight in the coming weeks. The Airlander 10 stands at 92 metres long, and has required the world’s largest hangar to be constructed in order to allow it to be housed.

The key difference about the Airlander? It’s a blimp. While this currently limits its payload to 10 tonnes, it’s hoped that successful flight tests, and commercial use, will enable a larger craft, with a 50-tonnes payload to be manufactured.

While it’s never likely to rival the Antonov for capacity, the Airlander has a number of potential uses in the logistics field, including commercial, military and scientific research.

Driverless Big Rigs

From the giants of the air, to giants of the road, but with a difference. In the past 12 months, Mercedes, Volvo and Daimler have unveiled their own driverless trucks, with the intention of removing some of the potential danger from the trucking industry.

However, they may be overtaken by a new team on the market. Otto, a team formed by former engineers from Google, Apple, Tesla, and including Anthony Levandowski, the former leaders of Google’s self-driving car project, is approaching this issue from the other side.

Instead of designing autonomous trucks, the Otto team and aiming to create technology that can be fitted to trucks already on the road. The technology is aimed at increasing safety by allowing drivers the chance to sleep, while the truck drives itself along the long American highways.

While this might not seem as impressive, there are a number of benefits from this approach:

  • The technology can retrofitted to the majority of vehicles retrofitted to existing vehicles;
  • It’s cheaper than the outlay for a new truck in its own right;
  • It aims to help, rather than replace drivers, meaning there will be human control for some of the journey;
  • It doesn’t fall foul of legislation in a number of US states which require steering equipment, or a driver, to be in the vehicle cab.

The next steps in this area will be fascinating to see, particularly how the major manufacturers react to this, and potentially adapt their offerings to account for it.

Procurement Awards Season Here

We couldn’t let this week pass without congratulating some of the worthy winners of procurement awards around the world.

  • Johanne Rossi, CPO at Caltex, took home the ‘CPO of the Year‘ Award at The Faculty’s Asia-Pacific CPO Forum
  • Rising star Joanna Graham, Strategic Sourcing Manager (Asia Pacific) at BP, received the ‘Future Leaders in Procurement‘ Award at the same event
  • Timothy R Fiore, CPSM, C.P.M., was awarded the 2016 J. Shipman Gold Medal Award, by ISM, in recognition of his distinguished service for the cause and advancement of the supply management profession.
  • Volvo, Flex, Roche and J&J were among the winners at the Procurement Leaders ‘World Procurement Awards‘. See a full list here.

Is bigger necessarily better in logistics? Could we see a combination of both larger size and automation for vehicles in the future? Let us know what you think below.

We’ve been keeping an eye on the headlines this week, giving you something to share over your morning coffee…

Gartner Reveal Supply Chain Top 25

  • Research firm Gartner has revealed its annual Supply Chain Top 25 for 2016, now in its 12th year
  • For the first time, Unilever has topped the list, ahead of McDonald’s (2), Amazon (3), Intel (4), and H&M (5)
  • Previous multiple winners Apple and P&G have been awarded a place on the ‘Masters’ list by Gartner, which celebrates 10 or more years of sustained supply chain leadership
  • New entries to the list include BMW and Schneider Electric, with both HP and GlaxoSmithKline returning after a few years’ absence

Read more at Supply Chain Digital

HP Release “Large-Scale” Manufacturing 3D Printer

  • HP have announced the release of the HP Multi Jet Fusion 3D Printing Solution, the world’s first large-scale manufacturing 3D Printer.
  • The model prints items 10x faster than current machines, and one version offers an end-to-end solution (including software).
  • 9 companies, including Nike, BMW and J&J are currently testing the machines on a large scale
  • Stephen Nigro, who runs HP’s 3-D printing business, said that “Customers are looking at how to transform their (3-D printing) business from prototyping to production.”

Read more at USA Today

Procurement “Cut Off” Says Report

  • According to a new report, procurement teams in hotels are seen as not collaborating with other departments.
  • The Hotelier Middle East’s Hospitality Procurement Report 2016 shared the perception that procurement were “trying to do it cheap” from members across the region.
  • The report goes on to share some examples of best practice in getting procurement more involved.
  • These included having procurement represented at meetings with key suppliers, as well as in design meetings for major hotels.

Read more at Hotelier Middle East

UK SME Spend “Stalling”

  • A report from the Public Accounts Committee (PAC) has claimed that efforts to direct more public spending to UK SMEs has stalled.
  • The current Government set a target of 33 per cent of overall spend to be with SMEs by 2020, though despite major efforts, it doesn’t appear to be working.
  • One issue the PAC highlighted was a lack of clarity on whether the money was being spent directly with SMEs, or via larger contractors.
  • The PAC has also disputed figures stating that spend with SMEs was up from 6.8 per cent in 2010-11 to 27.1 per cent in 2014-15

Read more at Supply Management

Dynamic Discounting to Ease Payment Woes

A new report has highlighted that three quarters of UK businesses plan to use Dynamic Discounting to reduce supplier late payment woes.

Dynamic Discounting

Changing legislation, public and governmental pressure, and the threat of financial and reputational penalties are leading many businesses to use innovative new methods to ensure suppliers get paid more quickly/on time.

As many as three quarters of UK businesses plan to use the practice of Dynamic Discounting – offering suppliers the chance to accept a lower than invoiced price in return for speedier payment – potentially helping to overcome the endemic problem of unfavourable customer terms or late payments.

Cash Flow Issues

In research conducted among 100 UK procurement professionals, on behalf of procurement software provider Wax Digital, 27 per cent said that their business already used Dynamic Discounting with suppliers. Another 30 per cent said they plan to start doing so in the next 12 months and a further 20 per cent said they had it as a longer term objective.

It was also recently estimated that UK small and medium sized businesses are owed an average of £12,000 each in late payments, equating to £55 billion countrywide. 23 per cent have also considered insolvency as a result of late payment related cash flow issues, while 68 per cent wait for 60 days or more for payment.

The government’s recent enterprise bill is also designed to tackle the imbalance of bargaining power between suppliers and their customers.

But the trend of businesses taking up Dynamic Discounting suggests that suppliers and their customers are taking matters into their own hands. Dynamic Discounting systems work by offering a scaled discount for early payment at the point when invoices are issued to customers.

This has also become possible through the increased use of e-procurement software that automates and massively speeds up the matching and reconciling of supplier invoices on the customer side. Because many businesses can now process invoices in a matter of hours they are in a better position to pay the supplier early, should they choose to do so.

Cash in the Bank

Daniel Ball, business development director, Wax Digital, comments: “Serious late payment and cash flow issues are more likely to destroy a business of any size over and above anything else. It appears that the business community is now taking the bull by the horns to solve this growing problem while suppliers can use a different type of bargaining power.

“Although businesses may get paid slightly less for their products and services they gain the benefit of having the cash in the bank much more quickly.”

The research was commissioned by Wax Digital and conducted by Morar Consulting in early 2016.

How Walmart, Hanesbrands and Mattel Reduced Supply Chain Risk

It’s the million dollar question. How can corporates minimise supply chain risk, without significant disruption to their core business?

Supply Chain Risk

Global retail giants, headquartered in the US, have had to address their supply chain risk in a bid to forge ahead in the new world of corporate social responsibility. It hasn’t been an easy exercise, that’s for sure.

Retail giant Walmart, apparel brand Hanesbrands, and toy manufacturer Mattel, are among the countless others to bring about major changes within downstream manufacturing to ensure corporate risk is above board. Each turned to brand protection firm ICIX to implement a new way forward.

Management Wake-Up Call

Company founder Matt Smith explains that supply chain risk was starting to enter the corporate vocabulary in 1999.

“Companies were starting to get jittery about their corporate responsibility. Emails and back then, faxes, were being sent from management looking to address this issue, as they started to wake up to the fact that there were major risks within the supply chain that they had to actually take responsibility for. Before this time, it hadn’t really dawned on management that supply chain risk had anything to do with them,” Smith says.

Suddenly, the race was on to find a way to outsource the task of conducting factory audits and ask the hard questions. Fast forward more than a decade, and the events of 9/11 shone an even brighter spotlight on these issues and what it means for corporate entities.

Smith was at the coalface, watching the opportunity emerge. He set about creating a solution, and today ICIX remains the leading operator in this space. ICIX was born in 2004, initially to respond to the challenges faced by the food industry in securing the food supply chain, and addressing increased safety requirements of the Bioterrorism Act of 2002.

During this time, Smith worked with some of the world’s largest retailers to help them address issues of supply chain transparency and inefficient information sharing. ICIX worked to connect all trading partners into a single network to centralise collaboration, making it one of the earliest cloud-based SaaS companies.

Risk a “Complex Beast”

The company grew early food customers into other retail segments, including general merchandise and apparel and footwear. It also extended its solutions to include not just safety, but also quality, compliance and corporate social responsibility.

Today, ICIX helps companies understand where its products are coming from, streamline collaboration with trading partners, drive compliance and safety, and as a result, secure and maintain customer trust.

Smith says that those working on the risk side of a business are often frowned upon by those working on the business side, which makes it a complex beast to juggle. Frequently, the CIO within a business isn’t necessarily on the same page as someone in the CEO chair.

“I could see a really big opportunity opening up in the US, with several major retailers over here scrambling to find a solution.

“And today, businesses are spending more on managing risk than ever before. Those in procurement are battling for budget and attention, until something bad happens like people get sick or someone dies because of their product. That’s when the purse strings always open up. That’s what it often takes for people to want to solve the supply chain risk related issues.

“We realised that tackling this as a network was going to bring about far greater efficiencies, however retail is a complex industry in which to do this, which complicated the process,” Smith continues.

Role of Technology

For example, barcodes don’t match purchase orders or product numbers, and without that universal product identifier, it can be a complex process. Technology has played a huge part in bringing scale to the organisation, with cloud technology supporting a new way to assess and identify potential risk.

“Supply chain risk management is a huge area, and we were looking for ways to take that network architecture and make it accessible to everyone.”

ICIX does this by taking various feeds of information and assessing it. This could include shipping feeds, purchase feeds, ethical and responsible sourcing data and much more, and then cross-referencing all of these to determine supply chain risk.

The sheer size of retail giant Walmart put it under the consumer spotlight and forced it to look at improving supply chain transparency. Company management was eager to speak to Smith to bring about better efficiencies.

The catalyst for the changes at Walmart were the issues with Mattel matchbox cars in 2007, when consumers got wind of the fact that the children’s toys contained lead paint. New government regulations introduced as a result, required companies to act and take responsibility.

“Firstly, we see whether the vendor is meeting all their safety and testing requirements, then we can fast forward a few steps. And if they’re missing a test report, we can request that information on their behalf and rectify the situation and re-test,” Smith says.

Such solutions provide assurances that companies are ‘doing the right thing’ – that they are providing, safe, quality products that are ethically sourced and compliant. With ever increasing customer demands for transparency, information and responsibility, such programs are critical not only for companies to protect their brands and enhance their customer trust, but to survive.