Category Archives: Procurement News

Boeing Acquires Robotic Aircraft Maker

Imagine an aircraft that can take off and land vertically, but isn’t a helicopter. It has an intelligent pilot, but there’s no human being sitting at the controls. Boeing has propelled itself into the world of futuristic aircraft with its acquisition of Aurora Flight Sciences.  

Boeing announced on Friday that it will acquire Aurora Flight Sciences Corporation, a company that specialises in advanced robotic aircraft. Aurora already has an impressive portfolio of autonomous aircraft, including vehicles it has been working on with Uber for its flying taxi project.

Much of Aurora’s business in the past has been with the U.S. Military, namely DARPA (The Defense Advanced Research Projects Agency) and NASA. Its aircraft have attracted interest (and funding) mainly due to its advanced Vertical Takeoff and Landing (VTOL) technology, with the small company beating out Boeing and Lockheed Martin last year to build the VTOL X-Plane for DARPA.

What does Boeing plan to do with this technology? The organisation’s press release doesn’t reveal much, but there’s speculation that the acquisition will help bolster Boeing’s own expertise in autonomous aircraft and VTOL tech, with most of that knowledge being funnelled into military aircraft. On the civilian side, the combination of autonomous piloting and VTOL technology are ideal for finally developing the drone taxis we’ve been hoping for. It is unclear whether Aurora will continue to work with Uber on this project.

A report in the Wall Street Journal notes that the acquisition is likely to have an impact on the jet maker’s supply chain long before it produces self-flying planes: “The technology includes … machine learning capability, which could be used to make industrial operations more efficient. Aurora produces composite parts for aircraft and other vehicles, potentially a big attraction to Boeing as it looks to take greater command of its supply chain.”


In other news this week:

Air France Testing Blockchain Technology

  • Air France KLM’s engineering and maintenance division is evaluating the potential for Blockchain to become its new digital ledger for managing replacement parts on in-service aircraft.
  • A spokesperson noted that Blockchain’s resilience, traceability, integrity and disintermediation are well suited to the aviation supply chain.

Elon Musk On Track To Win Solar Battery Bet

  • Elon Musk has announced that Tesla has reached the halfway point of construction on the “world’s biggest battery” in South Australia.
  • The company has a 100-day deadline to complete the construction of a 100-megawatt battery array, or it will build it for free.
  • The batteries, expected to power 30,000 homes, were commissioned as an innovative solution to an ongoing energy crisis in South Australia.

 Image credit: Aurora Flight Sciences

Take the Positive Procurement Pledge

Eight months after its launch, the International Standard for Sustainable Procurement (ISO 20400) has the potential to help procurement professionals stamp out the worst aspects of supply chains worldwide. But what can be done to create a groundswell of support for this voluntary Standard?   

ISO 20400 creates a standard that will enable every organisation in the world, regardless of size, industry, and location, to have a flexible guidance framework on sustainable procurement. The Standard includes seven core subjects, including the environment, fair operating practices, labour issues and human rights, with a range of subtopics under those such as discrimination and gender inequality.

While some businesses have jumped at the opportunity since its launch in April, the voluntary nature of the Standard has meant that many organisations are yet to do so.

Take the Pledge

Kim Andrews, Sustainability Advisor at Good Environmental Choice Australia (GECA), says that the earliest movers regarding ISO 20400 are the ones that will get ahead.

“The conversation has moved well beyond sustainability simply being the right thing to do”, Andrews says. “Business leaders now understand that there’s a whole spectrum of concrete benefits, ranging from building resilience, future-proofing your organisation, managing sustainability risks and getting ahead of future regulatory requirements.”

GECA has recognised the need to jump-start the conversation and education around ISO 20400. To do so, the organisation has launched a challenge for businesses, government agencies, industry groups and non-governmental organisations around the world to take the Positive Procurement Pledge. By taking the pledge, organisations agree to develop, document and implement a sustainable procurement policy to govern all purchasing decisions by 31 December 2020.

“This is a chance to differentiate yourself from the competition and demonstrate leadership and innovation within your sector”, says Andrews. “It makes a lot of sense from a risk-management perspective. Here in Australia, we’re dealing with gas supply problems, water shortages, rising temperatures in summer, and climate change directly affecting resources. Companies need to start looking at these factors, identifying their own risks and planning to build capacity against that, and the ISO 20400 provides the framework to do so.”

GECA provides certifications and ecolabels across a range of standards by working with organisations to ensure they comply across multiple criteria including environmental and social aspects.

“The ecolabels do the hard work for procurement”, says Andrews. “When you see our logo, it means that yes, you can trust that all of the compliance with legal aspects and international trade laws has been addressed. The global nature of supply chains means that having an internationally recognised label is crucial, which is why we’re part of the Global Ecolabelling Network (GEN) that includes 27 members spread across 57 countries and territories.”

With so many certified products available, there has never been a better time for organisations to start their positive procurement journey.

A sustainability roadmap

Complying with ISO 20400 will take time and commitment, which is why Andrews recommends that companies follow a three-year plan to do so:

Year one: Understanding ISO 20400 and how it currently aligns with your own policies. Identifying the risks in the Standard that apply most to your organisation, and how ISO 20400 can be integrated into your ways of working.

Year two: Using the tools and resources available for companies to help build new policies aligning with ISO 20400, and strengthening policies already in existence. Identifying roadblocks such as contracts, trade agreements or a lack of understanding among suppliers.

Year three: Refinement of your organisations’ policies and seeing how far you’ve come in increasing resilience and purchasing certified products.

“Sustainable products are now a $3 trillion business”, Andrews says. “Taking the Pledge gives organisations the opportunity not only to do the right thing but to get ahead of the competition as the sustainability mandate grows.”

Interested in taking the Pledge? Learn more here. Kim Andrews will introduce the Positive Procurement Pledge to attendees at GovProcure2017 in Sydney on 6 December. Click here to learn more and download an event brochure.

Spot the Signs: 9 Ways To Identify Modern Slavery

Contrary to popular belief, the victims of modern slavery are not always hidden away in secret locations. After a 126% increase in reported slavery, Crimestoppers UK has partnered with a labour abuse authority to help the public – and supply management professionals – recognise slavery taking place in their own backyard.  

As procurement professionals worldwide move to stamp out modern slavery in their supply chains, the enormity of the challenge needs to be met with every available tool. Compliance with legislation, accreditation programs, policies and procedures are all very necessary, but so, too, is simply keeping your eyes and ears open when visiting suppliers on-site.

Crimestoppers and the GLAA (Gangmasters and Labour Abuse Authority) have released nine common signs that victims of modern day slavery share. These signs are intended to raise public awareness and encourage people to report their suspicions, but many are relevant for supply managers, too. Keep an eye out for these signs when visiting your first-tier suppliers, and encourage your suppliers to do the same with their suppliers, and so on.

Nine Signs to Spot

Victims of modern slavery may:

  1. Show signs of injury, abuse and malnourishment
  2. Look unkempt, often in the same clothing and have poor hygiene
  3. Be under the control and influence of others
  4. May have inappropriate clothing for the work they are performing, and/or a lack of safety equipment
  5. Be collected very early and/or returned late at night on a regular basis
  6. May be isolated from the local community and their family
  7. Live in cramped, dirty, overcrowded accommodation
  8. Have no access or control of their passport or identity documents
  9. Appear scared, avoid eye contact, seem untrusting

Crimestoppers’ statistics in the UK alone show a 126% increase in information received on slavery in the past six months compared to the previous six-month period. It is this general rise in slavery figures nationwide which reflects why the GLAA has recently been granted a broader remit and stronger powers to tackle labour exploitation across the economy, introducing the capacity to search and seize evidence and investigate modern slavery where it relates to labour abuse and other offences.

Emily Van der Lely, Crimestoppers Lead on Slavery, said: “It’s so awful to hear that slavery is even an issue in this day and age, but we want to reassure victims that it is an issue that is taken extremely seriously, and make it clear to perpetrators that they will be found and prosecuted.

“By launching this campaign, we will educate the public as to the signs to spot and let them know that they can take action on this horrendous crime, without compromising their anonymity.”

Paul Broadbent, Chief Executive of the GLAA, said: “The public need to understand and be aware that modern slavery is happening right now, in and around the communities they live. Exploiting someone for their labour, forcing them to work, using people as commodities – these practices are abhorrent and we need the public’s help to stamp it out..”

Common industries for modern slavery:

  • Transport
  • Warehousing
  • Agriculture
  • Construction
  • Maritime
  • Restaurants/Takeaways
  • Car Washes
  • Nail Bars

 


In other news this week:

EU Data Protection Compliance: are you prepared?

  • The General Data Protection Regulation (GDPR) will come into effect in the EU on May 25th, 2018. Under the new legislation, data subjects have the right have their data erased, obtain information about exactly what data is being processed, receive a copy of personal data concerning them, and fight decision that affect them that have been made on a purely algorithmic basis.
  • Data science company, Dataiku, has published a white paper detailing how organisations that handle big data can start on the path towards GDPR compliance.
  • The report identifies the following five critical challenges: data storage, aligning teams, accommodating data subject requests, data governance and adaptability.

Click to download the report: Five Essential Pillars of Big Data GDPR Compliance

 

Chinese Supply Costs to Rise

  • An authoritative report from The Beijing Axis titled The China Compass has recommended that organisations recalibrate procurement from China as the country shifts to higher cost and higher value-add manufacturing.
  • The report recommends organisations adapt their supply focus by shifting to tier-2 suppliers in China and tier-1 suppliers in lower-cost Asian countries.
  • China is tipped to provider higher-end solutions and technology in industries where it has gained an advantage.

 

Social Procurement Platform a World First 

  • VendorPanel, an Australian Procurement technology company, has launched an online platform called ProcureForGood to drive positive social and economic change.
  • Reportedly the first such platform of its kind, ProcureForGood brings together multiple verified social procurement databases onto one marketplace platform.
  • The platform is the result of a collaboration between VendorPanel, Supply Nation, BuyAbility (National Disability Service) and Social Traders, and is predicted to be powerful for managing the large volume of low-value procurement (under $150k) that exists within government and corporate organisations.

Visit ProcureForGood.

Image credit: Thedreambuildersproject.com

The Supply Vulnerability That Could Kill The Electric Car

Nearly all the pieces are in place for the long-overdue surge in electric car production. But before the automotive industry can finally transform itself, there’s one supply challenge that remains to be solved.  

Prices for rare earth elements are rising. China holds one third of the world’s reserves, and – alarmingly – 97% of global production. Meanwhile, the demand for electric cars and other green technology has led to dramatic surges in prices. A recent report from the Nikkei Asian Review found that spot prices for neodymium (used in magnets found in electric motors) hit $95 per kg in mid-September, a 90% spike from the 2016 and an 80% jump from the beginning of 2017. Similarly, terbium is 36% up from November last year, sitting at around $600 per kg.

Reasons for the price surge include:

  • Rising demand from the U.S., Europe and Japan, particularly by manufacturers of green cars.
  • A Chinese crackdown to enforce environmental regulations at substandard rare-earth smelting works, leading to suspension of operations.
  • Traders stockpiling rare earths in anticipation of higher prices.

Concern is also rising that rare earths are now a major bargaining chip for China ahead of any potential trade war or deterioration of its relationship with the United States.

In the hybrid and electric car space, rare earth metals are typically incorporated into the magnets used in DC motors. Car-makers such as Chevrolet, Nissan and Toyota are actively working to reduce their reliance on the metals, yet will face a steep challenge as the global fleet of electric cars is estimated to grow from around 2 million today to over 14 million by 2025.

Tesla – as usual – appears to be steps ahead of the problem with their use of an AC induction motor, which doesn’t require magnets and therefore has no rare earth elements. Other parts of Tesla’s vehicle, such as the high-end sound system and specialised glass, reportedly do contain rare earth elements.

Electric car batteries are not the only items at risk. Rare earth elements are used in industrial robots, hard disk drives, cordless tools, magnetic hold-downs, jewellery clasps, wind turbines, smart phones and even smart bombs.

The good news is that although China controls 97% of production, two thirds of the world’s estimated reserves lie elsewhere. The US itself is thought to have around 13 million tonnes (the most promising area being the Mojave Desert), while Russia has around 19 million. Other large deposits can be found in Australia, India, Brazil and Malaysia, while Greenland and some parts of Africa also have untapped sources.

Japanese firm Hitachi has responded to the supply challenge by launching a recycling effort to recover rare earths from hard drives and other materials.


In other news this week:

Tech giants hit by CCleaner malware

  • An estimated 2.27 million users of CCleaner, a free software tool for optimising system performance on PCs, have been affected by malware which “piggybacked” on the software.
  • Investigators believe the attack was designed to target PC users working for specific tech firms, including Samsung, HTC, Sony, Singtel, Vodafone, Cisco, Intel, Google and Microsoft.
  • It is unclear whether the malicious code, described as “relatively complex” and “aggressive”, was designed for commercial or state-level espionage.

Read more at Tech Crunch.

Gartner releases European Supply Chain Top 15

Gartner has identified 15 supply chain leaders that have demonstrated strong growth, along with high scores in corporate social responsibility and opinion score performance. Trends across the 15 leaders include digital experimentation, speed to adaptability and a focus on sustainability.

  1. Unilever
  2. Inditex
  3. H&M
  4. Nestlé
  5. Nokia
  6. BASF
  7. Schneider Electric
  8. L’Oréal
  9. BMW
  10. Diageo
  11. Reckitt Benckiser
  12. GlaxoSmithKline
  13. Adidas
  14. Roche
  15. Siemens

Assessing the Impact of Hurricane Harvey

A special report from ISM on the impacts of Hurricane Harvey has found there will be ongoing challenges around pricing, speed of delivery and certain commodities due to the storm’s destructive path through Houston, Texas.  

Facts, not fear. Back in July 2016, ISM’s CEO Tom Derry told Procurious why his organisation had put out a special report on the impact of Brexit in the U.S. “…There has been an enormous amount of speculation … fed by a sense of unease and uncertainty. ISM was in a position to gather real data and put the information out there so businesses can make informed decisions based on facts, rather than fear, concern or emotion.”

ISM has once again demonstrated leadership when disruption hits by producing a special paper addressing the potential economic impact of Hurricane Harvey, replacing existing speculation with data-based information to help affected business plan their response and recovery.

Houston, Texas, is home to the sixth largest import terminal in the world and a nexus for shipping lanes in the gulf coast. Strong economic linkages between the gulf coast and the U.S. as a whole mean that Harvey’s impact will extend far beyond the storm-hit area.

ISM’s survey of purchasing and supply executives nationally (not just in the affected area) found that the biggest challenges are expected with pricing, supplier deliveries and commodities such as fuel and plastics. Encouragingly, the data indicates that the effect on production, new orders and employment will be minimal.

Most impacted metrics: Prices and speed of delivery

  • Two-thirds (67%) of responding supply managers believe input materials pricing will be negatively impacted to some degree over the next three months.
  • 27% anticipate input materials prices will be negatively or very negatively impacted.
  • Over half (56%) feel supplier deliveries will be negatively impacted to some degree over the next three months.
  • 19% expect deliveries to be negatively or very negatively impacted.

Moderately impacted: Production, new orders and inventory level

  • A majority feel Harvey’s impact on production, new orders and inventory will be neither positive nor negative.
  • One in five are concerned about somewhat negative impacts, but only 1 in 10 foresee more negative impacts in the next three months.

Low impact: Employment

The good news is that business will not be laying off staff as a result of the Hurricane’s impact. Over 80% of respondents feel that employment will be neither positively nor negatively impacted by Harvey.

Commodities potentially in short supply

With the Houston area known for its fuel and petrochemical production, the following commodities could be in short supply for the next three months: fuel; plastic resins; chemicals; electronic components; feedstocks, chemicals (raw); gasoline; polypropylene; resin-based products; building materials; electrical components; LDPE; plasticizer; caustic soda; ethylene; HDPE; LLDPE; methyl methacrylate; petroleum based products; and isocyanate. 27 of 36 industries report that they expect to be impact by potential shortages of the above commodities.


My Brilliant Procurement Career Survey: we have a winner!

  • Over 500 procurement professionals took Procurious’ survey on career management in the profession.
  • Congratulations to our prize-winner Steven Reddish, a commercial supply coordinator based in Waikato, New Zealand. Enjoy your quadcopter!
  • Findings from the report will be published here on Procurious in mid-October.

The Hunt Is On For 30 Under 30 Millennial Role-Models

Do you know a young gun who’s already making their mark on the supply management profession? Perhaps you’re one yourself? Nominations are now open for ISM and THOMASNET.com’s “30 Under 30” Supply Chain Stars program. 

It’s already happening. In companies large and small all over the globe, Millennials are being asked to step up into very senior roles to fill the vacuum created as an entire generation of Baby Boomers retires.

The generations in the middle, X and Y, are also moving into executive roles, but the problem is that there simply aren’t enough of them to do so. That’s why Millennials are leap-frogging through the ranks in nearly every profession – include procurement and supply management.

The talent pipeline in procurement

Back in 2014, ISM and THOMASNET.com recognised that there was a concerning gap in the talent pipeline. The 30 Under 30 award was subsequently launched to celebrate and broadcast the achievements of young professionals in an effort to bring more Millennials into the profession. The program is making headway. ISM reports that only 17% of the 2014 cohort had planned for a career in supply management, with most “falling into” the profession instead. By 2016, this figure had risen to 40% as an increasing number of school leavers began to seek out tertiary-level supply management courses.

“It’s really important to have role models in the profession”, says ISM’s Chief Content & Engagement Officer, M.L. Peck. “When young people see others their age who are receiving recognition for their contribution, it helps demonstrate that supply management is a viable and exciting career choice.”

ISM’s CEO Tom Derry encourages managers to nominate deserving superstars for the 2017 30 Under 30 award. “Our goal is to build awareness and enthusiasm for this exciting profession by showcasing the talent and accomplishments of these dedicated young professionals.”

Who can apply and what are the judges looking for?

Nominees must be 30 years of age or younger as of December 31, 2017.  Peck says that the judges will be looking for young people who are already making their mark on the profession and have demonstrated qualities such as leadership, innovation, collaboration, creativity and a contribution to supply management in their organisation or to the larger industry.

International nominations welcome

Originally for U.S. professionals only, the program was opened last year to international applicants to reflect the increasingly global nature of supply chain management. While only 3 of last year’s group of 30 were based overseas, many of the American winners had significant overseas experience.

What’s the prize? 

  • All 30 winners will receive a one-year membership to ISM, complimentary admittance to ISM2018 in Nashville (valued at $2,295), and a THOMASNET.com Team Training Package.
  • One individual will be designated as the Megawatt Winner and will also win an all-expense-paid trip (up to $5,000) to ISM2018 for themselves and their nominator.
  • For the first time, THOMASNET.com and ISM are offering a special Early Nomination incentive this year. Those who submit a nomination by Friday, October 13, 2017 at 30under30.thomasnet.com will receive a free month of ISM Just in Time Learning along with a mug and free coffee gift card from THOMASNET.com.
  • Most importantly, the winners will gain widespread recognition as their achievements are celebrated and broadcast through industry journals, blogs, magazines and newspapers locally and globally.

Do you have a Millennial supply chain star in mind for the 30 Under 30 awards? Nominations are now open – visit THOMASNET.com for more information. Nominations close Sunday December 3rd. 

Negotiation Skills? Going Once, Going Twice…Gone!

Does the rise of eAuctions mean the professions’ hard-won negotiation skills are now irrelevant? 

On Procurious, we’re keeping a close eye on the rise of procurement-related technology and what it means for roles and skill-sets across the profession. One such technology – the eAuction – has proven itself to be a highly efficient way of conducting a sourcing event and driving prices down. But does the advent of eAuctions mean that procurement professionals’ negotiation skills are no longer required?

This was one of the topics discussed at a Negotiation Roundtable organised by CABL (Conti Advanced Business Learning) and facilitated by its Founder, Giuseppe Conti.

Keep your options open

Thierry Blomet, Kemira’s Senior VP of Global Sourcing, told the roundtable that in his experience, the contract cannot always be awarded immediately after the eAuction. “We had an eAuction where it became clear that there were so many moving parts and questions that could not be answered during the event itself. We realised there’d be the need for additional discussion, so we used the outcome of the eAuction to narrow the bidders down to a small group of preferred suppliers, and continued the conversation from there.”

In other words, if you want to keep your options open, it’s important to communicate to suppliers that you may make the decision not to award at the conclusion of the eAuction. Instead, you may move the leading suppliers to a next-step status.

The nature of the eAuction itself presets your ability to negotiate during the event. There’s a bewildering array of eAuction formats – Dutch, Japanese, Brazilian, English to name a few – so it’s important to do your research. Blomet comments, “If you try to condense the event to 30 minutes, for example, you leave very little room to negotiate. A longer event leaves more room for something to happen and for you to react accordingly.”

Play fair

Francesco Lucchetta, Director of Strategic Supply at Pentair, says the ability to play with the visibility of quotes – so participants in the same eAuction can see each other’s bids – can be very helpful in encouraging competition. He warns, though, that the contract should have been established and its terms accepted by the bidders well before the eAuction takes place. “Make sure your suppliers have accepted your contractual terms, so no more discussions need to happen once the award is in place.”

Blomet notes that there are a lot of ethical aspects that need to be clearly communicated and understood before an eAuction. “You need to be able to define any red lines, and make sure participating suppliers understand. During the eAuction, ethical breaches could include inviting a fake vendor, or having a hidden way of scoring. It’s a matter of credibility.”

Tamara Taubert, Procter and Gamble’s Global Capability Purchasing Leader, comments that purchasing teams always need to behave in ways that are consistent with their values, and this includes running an eAuction. “Think about how you will behave as a company during the event. If the information about the event became public in 5, 10 or 20 years from now, would you be comfortable with that? You need to guarantee fair and ethical treatment of all participants.”

In fact, unethical behaviour by some corporations using eAuctions means that many suppliers are uncomfortable with the concept. Blomet notes that some large corporations have established that they do not participate in reverse auctions as a rule. “There have been a lot of issues in the past caused by poor communication, poor management, unethical behaviour, or suppliers simply being uncomfortable with the technology.”

This suggests there’s work to be done to improve the reputation of ethically-driven eAuctions.

Interested in attending a CABL Negotiation workshop? Click here  to find out more. The founder, Giuseppe Conti, has over 20 years of Procurement experience with leading multinationals and over 10 years of negotiation teaching experience at leading Business Schools (including Oxford, HEC Paris, IMD and ESADE).

Facebook AI Research Team Shuts Down Negotiating Robots

Facebook has shut down two robots after they abruptly stopped using English and invented their own language while conducting a negotiation exercise.

There have been a flurry of reports over the past week about Facebook’s decision to shut down two chatbots – named Bob and Alice – after they developed a coded language that was incomprehensible to humans.

The initial experiment involved a simple conversation between one human and one chatbot where they negotiated the sharing out of some items – books, hats and balls. This conversation was conducted in English, along the lines of “give me one ball, and I’ll give you the hats”.

So far, so good. But when the human was removed from the conversation and two chatbots were directed at each other, the way they communicated immediately became difficult for humans to understand.

Bob: i can i i everything else . . . . . . . . . . . . .

Alice: balls have zero to me to me to me to me to me to me to me to me to me

Bob: you i everything else . . . . . . . . . . . .

Alice: balls have a ball to me to me to me to me to me to me to me

Bob: i i can i i i everything else . . . . . . . . . . . .

Alice: balls have a ball to me to me to me to me to me to

Bob: i . . . . . . . . . . . . . . . . . . .

Some media commentators have labelled the development “sinister”, with frequent references to Terminator, Skynet and – of course – Frankenstein appearing in related coverage. But Facebook researcher Dhruv Batra told Fastco that there was simply no guidance set for the robots to stick to the English language. “Agents will drift off understandable language and invent codewords for themselves.” Essentially, the bots found a more efficient way of communicating with each other.

Setting parameters

The topic of negotiation and AI came under discussion at a recent Negotiation Roundtable organised by CABL (Conti Advanced Business Learning). The attendees agreed that if a robot is going to run a negotiation, it requires very clear guidance around the parameters and objectives.

Another concern about AI being involved in commercial negotiation is that at present, they are unable to understand emotional intelligence. Thierry Blomet, Senior VP of Global Sourcing at Kemira, says that “Until we completely remove the emotional aspect, AI cannot run negotiations. Body language and emotional reactions are intangible, and are most unlikely to be modelled by programmers.” In the case of Facebook’s Alice and Bob, the human factor was removed.

Blomet points out that AI can play a valuable role in complex scenario modelling, which would be “much more complex than even the smartest procurement brain could manage. Whatever might happen in the negotiation would be included in that model, with the answers already pre-empted.”

Laurence Pérot, Head of Global Supply Chain Procurement at Logitech, agrees. “Big Data and AI will lead to much more efficient scenario modelling, particularly with supply chain, logistics and transportation bids.”

Orestes Peristeris, Supply Chain Expert at Yale, comments that ultimately, it’s about quantification and sophistication of statistics. “Do you have the data in the same place and in one system? What can be quantified and what cannot be quantified objectively? There are some things that can be used, some things we know will happen with some certainty, and some things that can’t be quantified. Finally, we’ll always need humans to take the outcomes of Big Data and apply it to the business context.”

As for the future of procurement negotiation, perhaps one day we’ll see buyers and suppliers lining up their chatbots against each other and letting them negotiate in rapid, complex code.

May the best bot win.

In other procurement news this week:

Hackett research reveals dramatic savings from digital transformation

  • New research from The Hackett Group has shown that the potential cost take-out opportunity through digital transformation is up to 24%, through the implementation of robotic process automation, advanced analytics, cloud-based applications and other approaches.
  • The research has also revealed that world-class procurement organisation now operate at 22% lower labour costs, have 29% fewer staff, and generate more than twice the ROI of typical organisations, with over $10 in savings for every $1 of procurement operating costs.
  • The Hackett Group’s Christopher Sawchuck commented that procurement technology has reached an inflection point: “World-class organisations can continue to reduce costs by embracing digital technology, and typical procurement organisations can leverage the same technology to catch up faster at less cost.”

Download the research here: http://www.thehackettgroup.com/research/2017/wcpapr17/SalesForce-World-Class-Advantage-17Q2-PR.html

Collaborative Robots to Boost Warehouse Productivity

  • In a shift away from the apparent race to replace humans with robotic workers, firms are designing robots to work alongside people in warehouses and boost productivity.
  • “Collaborative” robots can have a variety of uses, including leading human workers to the exact location of a product, or carrying goods from one part of the warehouse to another. DHL, Bonobos and Zara are known to be experimenting with the technology.
  • The robots – costing tens of thousands of dollars – are relatively cheap when compared with the vast amount of conveyor belts and automation systems included in a typical warehouse.

Read more: The Wall Street Journal

Interested in attending a CABL Negotiation workshop? Visit http://www.cabl.ch/ to find out more. The founder, Giuseppe Conti, has over 20 years of Procurement experience with leading multinationals and over 10 years of negotiation teaching experience at leading Business Schools (including Oxford, HEC Paris, IMD and ESADE).

The Procurement Tipping Point

At what point should a growing business bite the bullet and professionalise procurement? New research from Wax Digital has found that the right time is surprisingly early in a businesses’ growth, but it’s usually done on the back foot. 

As professionals in the sector we tend to think that procurement is the sole domain of large organisations spending millions of pounds on thousands of suppliers. However, new research has found that many smaller and more formative businesses also turn to procurement.

We recently surveyed 260 UK business and procurement experts and asked them at what point organisations needed to professionalise procurement to get a firmer grip on spend, suppliers, sourcing and so on. We were surprised by how many thought the ‘tipping point’ for procurement was relatively early on in a business’ growth. The results were as follows:

  • 75% said procurement was required once a company reaches £50M turnover
  • 77% claimed to need procurement by the time a business has 100 supplier contracts
  • 72% said once 500 invoices per month are being processed, procurement was essential.

Clearly, it seems that many smaller organisations are adopting procurement, so why is this? When asked why they introduced procurement, 68% said that it was due to rising costs, while 45% said that it was due to inefficient and labour intensive processes. Being a successful, up-and-coming business means experiencing rapid growth and significant change in these areas – more so than a larger, more established business.

For example, an organisation may be undergoing a merger or be highly acquisitive, bringing in more complex supplier portfolios or increasing spend overnight. These types of events can force a business to rethink processes like procurement. The very foundations of the organisation could adjust dramatically, and existing resources may simply not be adequate enough to support it.

Quick, someone build us a procurement function

Another interesting discovery in our research was that procurement is often introduced ‘on the back foot’ as opposed to being part of a pre-planned vision. We found that procurement is implemented as a reaction to a negative situation 48% of the time, compared to 31% of the time when it’s rolled out as a proactive and positive step forward. So few businesses planning ahead with procurement suggests that it’s (wrongly) an afterthought for many. Many businesses are ‘reactively’ using procurement, suggesting that they are already experiencing issues such as a lack of spend control or inefficient processes. But pre-planning with procurement could help businesses evolve more efficiently to try and reduce these problems.

That said, rolling out procurement isn’t always plain sailing, and smaller businesses with limited resources may particularly struggle to establish this new function successfully. Gaining senior management buy-in is the most common barrier to adopting formal purchasing processes, cited by 35%. Managing cultural change and a lack of internal knowledge followed, scoring 27% and 19% respectively. Given that they work for a smaller business – perhaps with a less rigid structure – the need for a procurement function might simply not occur to some SME employees, and it may take some time to win the support of colleagues. Those in the business being hindered by the lack of procurement shouldn’t be afraid to make a case for it to senior management.

Make sure the time is right

No two businesses are the same and each will feel the need for procurement at different stages. It’s not right to see procurement as something that should only be introduced when you reach a specific size or stage in the business cycle. Instead, consider when the businesses is feeling a strain that formalised procurement could help with.

It’s time for the procurement community to help strip its perception as a function for the larger business. This way more businesses can realise its effects.

Contributed by Paul Ellis, Managing Director at Wax Digital.

There’s One Key Reason To Buy American In 2017

With the Trump administration’s “Made in America” campaign in full swing, attention has turned to the Pentagon’s global supply chain. The reasons to Buy American might be a little more compelling than you expected….

In 1933 Franklin D. Roosevelt signed into law the 1933 Buy American Act which required the Pentagon to purchase US-manufactured products for anything over a $3,500 threshold. The military supply chain looked very different to today’s, over 80 years later.

The law required that the U.S. military’s entire supply chain be sourced domestically, from the textiles that go into uniforms to the raw materials that are used to create tanks and other weaponry. Roosevelt’s intention was clear: firstly, the law was a patriotic one, with the ‘buy American’ message resonating as strongly in the 1930s as it does among voters today. More importantly, the Act was designed to ensure a strong manufacturing base, critical to the country’s recovery from the Great Depression.

Roosevelt said in 1940: “Guns, planes, ships and many other things have to be built in the factories and the arsenals of America. They have to be produced by workers and managers and engineers with the aid of machines which, in turn, have to be built by hundreds of thousands of workers throughout the land.”

Is Buy American realistic in 2017?

While the 1933 law is ostensibly still in effect, the military supply chain draws heavily on foreign materials and components. In 2013, for example, nearly $20 billion (6.4 per cent of all U.S. military spending) went to overseas entities. This is achieved through the use of exemptions or waivers, which guarantee flexibility and security of supply.

After the White House published a “Buy American” executive order in April, the Office of Management and Budget provided new guidance to federal agencies on enforcing the existing laws, limiting exemptions and maximising the procurement of U.S. products. The Pentagon’s acquisitions office has reportedly instructed its contractors to put in place a training program on how to comply with the 1933 law.

However, there are also a number of materials that simply can’t be found or manufactured domestically, such as the rare earth element needed for flame-resistant rayon fibres used in uniforms (sourced solely from Austria), night vision goggles (91 per cent of which are from China), or lithium ion batteries, semiconductors, microchips and even missile propellant.

Is cybersecurity a reason to Buy American?

Two of the reasons for the 1933 Buy American Act – building patriotism and manufacturing jobs – still remain valid and are a key focus on Trump’s administration, but in today’s world of hi-tech military hardware, there’s a third, critical factor – cybersecurity.

Commentators are alarmed by the presence of Chinese-made microchips in America’s most advanced fighter jets, while components from other foreign entities can be found in American communication satellites, unmanned drones, bomb disposal robots and other gear. Futurist and author Peter Singer, predicted that these microchips could be used to “blow American fighter jets from the sky” if the two countries were ever to go to war.

While very little can be done about the rare-earth materials and metals found only outside of the U.S., it remains to be seen whether the Made in America push will lead to supply chains for vital components including microchips and semiconductors re-shored to the U.S.

In other news this week…

Supply Chain Management software market booming

  • Analyst firm Gartner has announced that the supply chain management (SCM) software market will reach $13 billion by the end of this year, up 11% from 2016.
  • Gartner has also predicted the market will exceed $19 billion by 2021.
  • Growth is being driven by a demand for agility, as vendors move to cloud-first or could-only deployment models, while end-users are becoming more comfortable about cloud security and recognise the benefits of software-as-a-service solutions.

Read more on MH&L news 

When does an SME need a procurement function?

  • New research from Wax Digital has found that having a procurement function is just as vital for SMEs as it is for large corporates.
  • The UK-based survey found that 75% of respondents said procurement was needed once a company reaches a £50M turnover, 77% claim to need procurement by the time it has 100 supplier contracts, and 72% said that procurement was necessary once 500 invoices per month were being processed.
  • Rising costs was the most common reason for introducing procurement, followed closely by inefficient processes and increasing business risk.

For more information visit www.waxdigital.com

Elon Musk’s Hyperloop hits the news again

  • Tech entrepreneur Elon Musk made headlines on Friday when he announced via Twitter that he had “verbal approval” to build a hyperloop – an ultra-high-speed underground transport system – linking New York and Washington DC.
  • If it goes ahead, passengers and cargo would be packed into pods and shot through a system of giant vacuum tubes on magnetic cushions, cutting the current travel time from nearly three hours (high speed train) to 29 minutes for the 355km journey.
  • Musk has also been in conversation with Chicago and Los Angeles officials about hyperloops.

Read more at Financial Review