Category Archives: In The Press

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.

Is Any Profession Safe From AI Disruption?

Would you trust an “artificially intelligent colleague” to solve your legal disputes? It may be closer than you think as AI and cognitive technology advances prove no industry is safe from disruption.

AI

At the end of last week, it was announced that a major US law firm, Baker & Hostetler, had hired Ross to run its bankruptcy practice. Not major news you might think, until you realise that ROSS is the world’s first “artificially intelligent attorney”.

Built upon the same concept as IBM’s Watson, and using the same cognitive technology, ROSS is another example of a major technological disruptor, and proof that no profession is safe from the advance of AI.

Setting a Precedent

In many ways, ROSS is very similar to the original Watson technology. The AI can read and understand language, generate hypotheses for questions it is asked, and can back up these hypotheses with research and citations from legal literature and cases.

The success of ROSS is centred on how it learns. As the AI interacts more with its human colleagues, it learns from its experience, getting more intelligent and faster at problem solving with each task it does.

It can also perform these tasks faster than human counterparts, examining thousands of documents in a fraction of the time it would take a person to do. It is also able to filter these results, and only presents the most relevant cases and citations from the data available.

Although Baker & Hostetler are the first to publicly announce signing up ROSS, Andrew Arruda, CEO and co-founder of ROSS Intelligence, has confirmed that a number of other law firms have already signed licences to use ROSS too.

Big Data for Recruitment

Big Data, AI and cognitive technologies all go hand in hand, with many seeing Big Data as a key driver behind the development and advancement of the technologies. At the Big Ideas Summit, Barry Ward, Procurement Brand Manager at IBM, stated that 80 per cent of the data available to us is unstructured.

Unstructured data is difficult for humans to sift through, and find relevant information with any speed. Cognitive technologies, such as IBM Watson and ROSS, have been designed specifically to work with this unstructured data. While the potential applications for procurement from Big Data have been spoken about extensively, it’s to the recruitment industry that we look now.

A recent edition of the BBC Radio 4 In Business programme highlighted the work of Bill Nowacki, MD of Decision Science at KPMG. Nowacki works with Big Data, trying to improve the way organisations work, by analysing the data available to them.

One facet of this is uncovering the so-called “data trail” left by individuals when they use electronic devices, search on the Internet, and post on social media. All this data can be pulled together to generate a picture of the individual in question.

In a corporate setting, it can show how people are performing. There are further applications in the recruitment process too. Potential candidates can be identified by on comparing them with high performers already in the organisation, as well as assessing the candidates for cultural fit.

The benefit of using Big Data and cognitive technologies in recruitment is the lack of bias in the process. Whereas human interactions can fall victim to inbuilt bias, the technology has no such issues.

And as the technologies learn from experience, it’s possible that the recruitment process may benefit from greater understanding of personality traits, individuals’ values and norms, and create a fairer process all round.

Events in Brief

A couple of final pieces of news from Procurious this week include what you’ll be seeing on the site soon. We’re attending Coupa Inspire and ISM2016 and we’ll be bringing all the major headlines and information from these great events in the coming weeks.

Last week was Coupa Inspire, where the business announced that it had connected its 2 millionth business on its Open Business Network, plus Sir Richard Branson, and his son Sam, gave a keynote address on a variety of topics including the importance of philanthropy, leadership and inspiring others. Plus Sir Richard also talked about his plans to build Virgin Hotels in space!

Stay tuned for more on these topics soon!

What do you think of the latest AI developments? Do we have anything to worry about from AI in the future, or is it just the stuff of science fiction? Let us know your thoughts.

Each week we sniff out the top procurement and supply chain headlines for you to enjoy…

Concerns over US Retail Sector Health

  • Macy’s, the largest department store chain in the US, has increased fears over the health of the US retail sector with its poor Quarter 1 results.
  • The company announced its worst quarterly sales since 2009, with sales falling 5.6 per cent, for a fifth consecutive quarterly decline.
  • A move away from traditional stores to online shopping and fast fashion has been blamed for the struggles of many companies in the retail sector.
  • With consumer demand not expected to increase for department stores, Macy’s is now intensifying its cost cutting efforts.

Read more at the Wall Street Journal

Switzerland Tops Global Supply Chain Index

  • Switzerland has taken top spot in the 2016 FM Global Resilience Index, unseating 2015 leader Norway.
  • The index ranks the supply chain resilience of 130 countries according to nine drivers that affect business vulnerability.
  • Falling oil prices have been blamed for the falling ranking of Norway and a number of other countries, including Kuwait and Venezuela.
  • Terrorism has also been a factor in the 2016 rankings, with Belgium, Pakistan and Nigeria all dropping down the list.

Read more at Supply Management

Release 15 Announced at Coupa Inspire

  • Release 15 is Coupa’s second major release of the year, delivering a number of enhancements across the platform.
  • Hyperlocalised Languages addresses local language requirements across 100 countries, along with terminology unique to individual businesses, by allowing customers to modify Coupa’s 20+ languages for their own purposes.
  • Updated Sourcing Recommendations Engine enables savings initiatives to now be recommended based on predicted trends in expenses spend.
  • The New Supplier Risk Recommendations Engine monitors supplier data and reports on risk triggers including expiring certificates and outdated information.
Read more at Coupa

£30m Reasons Why UK Businesses Should Recycle Ink Cartridges

According to new research, British businesses stand to save up to £30 million per year if they recycle their used ink and toner cartridges.

Recycle Ink Cartridges

UK printing firm CartridgePeople.com surveyed 1,000 UK workers on their recycling policies and processes within their organisations.

The research found that just 11 per cent of these organisations currently recycle ink and toner cartridges by sending them to a recycling centre, or refilling with ink to reuse in the business. This is an increase of 5 per cent from a previous survey carried out in 2014.

And, based on recycling costs provided by recycling organisation, Empties Please, these habits could be costing UK businesses approximately £30 million per year.

Business Falling Behind

More than 40 million ink cartridges are dumped each year in the UK, instead of being reused or recycled. If disposed of in general waste, ink cartridges can take up to 1,000 years to decompose.

CartridgePeople revealed that businesses in the UK are failing to reduce their carbon footprint in the office, despite the increase in household waste being recycled in the UK.

When questioned on the reasons for not recycling ink cartridges, 38 per cent of respondents confessed that there are currently no processes in place to encourage recycling at work.

The survey also revealed that 1 in 20 employees in the UK choose to ignore the recycling policies that do exist in workplaces, and put everything in general waste.

CartridgePeople.com spokesperson, Andrew Davies, said: “Many businesses and workers are unaware of the savings and extra revenue that can potentially be made from recycling ink cartridges. Ink cartridge recycling firms can pay up to 75p for original branded, or even remanufactured, ink cartridges.

“An individual ink cartridge can be reused or remanufactured by an ink cartridge recycling centre up to seven times, which reduces the amount going straight into landfill. We work with many companies in the UK to help reduce their carbon footprint and wastage, by supplying ink cartridge refill kits and tanks amongst other recyclable office supplies including LED bulbs and stationery.”

In the UK, the industries with the most green office policies are:

  • Design, Media and Marketing
  • Education
  • Manufacturing
  • Food and Catering
  • Administrative and support services

The financial and legal sectors currently have the fewest green policies of all the industries covered in the survey.

Reducing Carbon Footprint

CartridgePeople offered the following tips to businesses to help reduce their carbon footprint, and encourage recycling within the office environment.

  • Green Printing

To reduce financial and economic damage during the printing process, businesses can recycle or refill ink cartridges, use recycled paper, and keep hardware such as printers up to date. A new printer will be more energy efficient, in addition to producing an improved quality of print.

  • Switch Off and Unplug

Encourage all staff and employees to switch everything off at the end of the day, including all lights and equipment. This will not only save money on energy bills, but reduce overall consumption.

  • Which Bin Is It In

Make it easy for your company to recycle, by introducing paper and plastic bins for workers in which they can easily recycle their waste. In addition to this, businesses produce technological waste such as mobile phones, cameras, obsolete laptops and computers, which can be toxic for the environment when sent to landfill. There are many companies that will recycle and refurbish old tech.

CartridgePeople.com is a leading UK retailer of high quality printer ink cartridges, supplying home users, businesses and public sector organisations including schools and Government departments.

Small Businesses Suffering Brain Drain

A lack of employee benefits has been cited as one of the key reasons employees leave small businesses every year.

Small businesses employee benefits

Small businesses are suffering a staff brain drain, with nearly one in five workers quitting each year for new jobs blaming poor employee benefits, research from new online provider Pure Benefits shows.

The study by Pure Benefits found that 18 per cent of staff – around 450,000 a year – have switched in the past five years, saying a lack of benefits was a major reason.

Sourcing Employee Benefits

Small businesses with fewer than 50 staff employ more than 12.4 million people across the UK, and have total annual turnover of more than £1.2 trillion. However, these business often struggle to source employee benefits such as life insurance, income protection and private medical insurance for staff.

The Pure Benefits research found that 63 per cent of small business owners are confused by the employee benefits options on offer, and don’t know how to find cost-effective solutions for staff. More than a fifth of owners (22 per cent) say they do not offer any benefits.

Pure Benefits enables business owners to source cost effective benefits including life insurance, income protection, dental insurance, business travel insurance, critical illness and key person cover from leading providers including Unum, Aviva, Vitality, National Dental Plan and Millstream.

The company’s online service is designed to be quick and efficient and to address administrative and compliance issues for small companies focused on growing their businesses and protecting staff.

Employee Benefits Requirements

While there are some benefits that organisations are required by law to grant to employees, such as holiday allowance, minimum wage, working hours and sick leave, going beyond this for small businesses can be difficult.

In fact, starting this year in the UK, small businesses will be required for the first time to provide employees with a pension, something which is aimed at ensuring future provision for all workers in the country. However, in America, this still isn’t a requirement.

Other benefits, such as maternity or paternity leave, also differ from organisation to organisation, and country to country. In the UK, employees are entitled to up to 52 weeks of maternity leave, but in the USA, employees are entitled to up to 12 weeks of unpaid leave.

The strength of employee benefits will often swing a decision on where an individual’s next job is going to be. The promise of incentives (bonus, car, etc.) or benefits (pensions, leave, etc.) is said to be one of the deciding factors for employees, beyond company brand or other, intangible, factors.

Valued Staff

Stuart Gray, founder and chairman of Pure Benefits says: “The small business brain drain is a growing issue for small companies with nearly one in five staff leaving every year simply because they are not receiving the benefits the big firms provide

“That is a major brake on the ambitions of small business owners who our research shows are committed to expansion. Around 80 per cent of companies told us they want to grow, while 47 per cent say they want to protect their business.

“Well-designed and cost-effective employee benefits are a major driver in enabling businesses to grow and ensure staff feel valued and are more productive as a result.”

The table below shows the benefits on offer at firms employing up to 50 staff:

Small Businesses Employee Benefits