Category Archives: Procurement News

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

 

Evergreen Wisdom for a Changing Profession

When was the last time you reached out to a Procurement Guru? Although the battleground is changing, those among us with scars have a lot of relevant insights to share.

We knew we’d be in for a treat when we locked in an interview with ISM board member Ann Oka. Ann is the former senior VP of supply management (CPO) for Sodexo, Inc. in North America where she was responsible for a whopping US$5.5 billion spend.

While working, Ann believed in contributing beyond her formal role, and served on the board of trustees for the A.T. Kearney Center for Strategic Supply Leadership at ISM, the board of the Sodexo Stop Hunger Foundation, and was a member of the executive committee of the GS1 Foodservice Initiative.  She retired in June of 2014, and other than the ISM board, now occupies her time with family and leisure.

Of course, she has a wealth of knowledge to draw from thanks to decades of procurement experience but, interestingly, she’s objective about its value to the next generation of procurement professionals. “Some things don’t change over time; motivating and leading people, looking at evolving tech and enlarging the sources of value. But, whilst there might be a lot of insights those of us with scars can give, the battleground is changing.”

The battleground may well be changing but surely that means Ann’s insights, as a seasoned pro, are all the more significant? As such, we were fascinated to learn how she has seen the profession develop over time and what she believes the future holds.

The evolution of procurement

Ann explains how drastically procurement’s role has changed over the years, both in terms of job responsibilities and external perceptions of the profession. “Where people were once identified as buyers or negotiators, they became category managers as the implementation of strategic sourcing evolved. These developments redefined the role of the average procurement person – they became professionals; their strategic impact increased and they had a broader scope.”

It’s a tricky and lengthy transition to lead any team through. “There’s a big task in the up-skilling of your people, particularly when you want to bring as many of them along with you as you can.”

Of course, some things don’t change. “The major evolution of procurement that we’re currently experiencing is comparable, in many ways, to what happened twenty years ago” Ann begins. “It was in the mid-90s when I first realised the importance of systems, technology and data. There was a tremendous amount of data available to procurement and category management, but harnessing it and getting it into the hands of the supply professionals was the challenge.”

What does the future hold?

Ann believes that the most competent procurement professionals will take the onslaught of Artificial Intelligence entirely in their stride. As she puts it, in a message to “The Change Resistant”:

“The train has come to the station. You have the choice of getting on it – and we’ll help you with the ticket – or you can be run over.”

The bottom line, she says, is that “people may well have been successful in the past, but the world is changing and you need to change with it, or it will pass you by.”

As far as procurement roles being totally displaced by AI, Ann is sceptical at best. “I don’t think the advent of new technology really changes a procurement role. Those with an ability to look at the long-term picture will be able to incorporate that into their strategies. Look at how the future is evolving and the possibilities it presents and work out how you’re going to work with the firm and with your supply base to extract the maximum value.”

Permission To Fail, Please!

It’s apparent that Ann rates a good procurement leader as much as, if not more than, someone who’s AI-ready.  “The harder thing for many organisations is having a management team that allows employees room to stretch and fail, that lets them try new things without instilling a fear of repercussions. There is such a thing as a successful failure. People are loath to say a project they’ve run hasn’t worked  out, fearing they will be judged on its success or failure. But occasionally  encountering a failure is a part of the journey to improvement.”

Procurement leaders can effectively work as safety nets for their teams. They should allow enough flexibility but know when to pull the plug to avoid too much fallout.

“I was in my position at Sodexo for 11 years. It allowed us to do things like put in some industry-leading systems, change the way we worked with suppliers, and harvest a culture of continuous improvement. In this time the continuous improvement team came up with several far-fetched ideas and used the leadership  team as a sounding board. It’s useful to invite new ideas and to have an off-the-wall ways of looking at things.”

Of course, not everyone thinks in this way. The key is finding people who have strategic vision. “Leaders should be on the look out for hires who have an intellectual curiosity and the courage to tickle the edges of things that are scary.  Embracing functional diversity is important in achieving this – perhaps your next star will come from legal, or IT, or straight out of college?”

Once a CPO, always a CPO

She might be retired, but its clear to see Ann still lives and breathes procurement. “I have people from past roles who, surprisingly, come back and approach me for our old heart-to-hearts”. She holds­­ board positions and still mentors younger professionals.  Safe to say there’s a spot for her on our board any day!

We concluded the interview with a final piece of advice from Ann; “If you’re a CPO, think about how you best position your company for tomorrow. Keep an eye on emerging technologies and bring the conversation to the table.” In other words, don’t miss the train!­­

 

The Brexit Horror Show: It’s Going To Be Rocky!

We all like to watch a good horror show.. but UK customs trying to manually process our imports? Entertainment it is not!

Are you ready to watch the Brexit horror show unfold?

The National Audit Office (NAO) pubilished a report last Thursday reviewing HM Revenue & Customs’ development of the new Customs Declaration Service (CDS).  The system is being developed in an attempt to manage the predicted 255 million UK customs declarations per year (an increase from 55 million)  once the UK leaves the EU.

But, with a significant amount of work still to be completed before March  2019,  many are concerned about what chaos might ensue.

Amyas Morse,  head of the NAO, did little to disguise his own concerns when he briefed the media on the report this week. He warned of a potential “horror show” at customs if the transition to CDS is not made by January 2019.

He said “What we don’t want to find is that, at the first tap, this falls apart like a chocolate orange.”  (Yep, we were confused by this too – it’s well known that Terry’s Chocolate Oranges are not known for their fragility; hence the marketing slogan “Don’t tap it, whack it!”.)

“It needs to be coming through as uniform, a little bit more like a cricket ball” he continued.

What Is The Customs Declarations Service?

The CDS is a new system, which will be installed to manage all imports and exports post-Brexit, replacing existing system, Customs Handling of Import and Export Freight (CHIEF).

CHIEF can currently process only 100 million declarations per year.  This leaves no question that a new system is needed given that HMRC are estimating an increase to 255 million once new trade and customs agreements are made during Brexit.

Completion of the installation is forecasted for January 2019 which doesn’t allow much room for error or delay given that the UK will officially leave the EU in March 2019. Indeed, the report confirms that there is still a “significant” amount of work to complete and a number of vacancies to fill, which means there’s a pretty good chance that the full functionality of CDS won’t be ready in time.

Ironically, in 2016, the UK came fifth out of 160 countries in the World Bank’s ranking of the efficiency of the border clearance process, including customs. Time will tell if this can be maintained post-Brexit!

Why Should Businesses Be Concerned?

The National Audit Office believes the government is only just starting to realise how difficult Brexit will be.  In a worst-case scenario it would become impossible for customs to collect the £34bn of duty, excise, and VAT taken at the border every year.

Customs officials might have to manually process imports and exports if the new electronic system is not in place, which would of course be a nightmarish scenario for businesses and their supply chains.

Mike Cherry, chairman of the Federation of Small Businesses, said “It’s extremely concerning that the UK’s new customs system may not be ready in time for Brexit, potentially resulting in massive delays to trade and leaving thousands of businesses in the lurch.” And hat’s not to mention a lack of confidence businesses will feel in the UK if their flow of goods is disrupted.

“Can government actually step up in these very difficult circumstances and deliver a unified response?” Morse asked. “I’m not seeing it yet.”

The report, and the alarming comments made by Amyas Morse will no doubt increase the pressure on the prime minister to re-evaluate Brexit progress and policy, but will it be in time to stop a customs horror show?

Let us know your thoughts on the NAO report in the comments section below. 

In other procurement and supply-chain news this week….

Bangladesh Factory Blast

  • Major European buyers of apparel supplied by a Bangladesh garment plant have started investigations after a boiler explosion in the plant killed 13 people and injured dozens
  • The explosion occurred during maintenance work at the factory, whose top buyers include Finnish fashion chain Lindex, which is part of Stockmann
  • Stockmann communications manager Anna Bjarland confirmed to SM that the factory supplied garments to both Stockmann and Lindex saying that the company was investigating

Read more on Supply Management

Hazardous chemicals in Tesco’s clothing supply chain

  • Tesco has joined a growing list of major high street retailers in beginning to remove chemicals thought to be hazardous from the supply chain of its clothing brand
  • Greenpeace said Tesco will immediately begin the process of eliminating 11 groups of hazardous substances from its F&F brand, including phthalates, brominated and chlorinated flame retardants, chlorinated solvents and heavy metals
  • Alan Wragg, technical director for clothing at Tesco, said: “This commitment is part of our goal to protect the environment by sourcing products sustainably and responsibly for our customers.”

Read more on Business Reporter 

Could China lead the way with AI?

  • In the battle of technological innovation between East and West, artificial intelligence (AI) is on the front line. And China’s influence is growing
  • China has invested massively in AI research since 2013, and these efforts are yielding incredible results. China’s AI pioneers are already making great strides in core AI fields
  • It is becoming clear that belief in U.S. dominance of the tech world is flagging. As it stands, China is in the driver’s seat

Read more on Venturebeat

24 Series 9: India Plants 66 Million Trees

The following events occur in real time: India takes on the monumental challenge of planting 66 million trees in just 24 hours. And they didn’t even need Jack Bauer’s help…

The world reeled when, last month, President Trump made the decision to withdraw from the Paris Agreement. Many regarded this as the most devastating decision of his presidency so far and he has faced critisicm for his short-termism, isolationism and rejection of science.

Todd Stern, writing for The Atlantic shortly before Trump made the announcment expressed the concern of many that “the Paris regime cannot work in the long run if the world’s indispensable power has left the table.”

“The Trump administration is about to throw down the gauntlet.” He continued. “If it does, we’ll need to take up the challenge.”

If this week’s evidence is anything to go by…the challenge is very much accepted!

There are 66 million new trees in India…

An astonishing 1.5 million volunteers pledged to “Make India Green Again” as they planted 66 million trees in less than 24 hours.

Volunteers of all ages assembled along the Narmada River in Madhya Pradesh, Central India,  to plant 20 varieties of tree as part of a new Guiness World Record attempt. India holds the previous world record for planting 49.3 million trees in 24 hours last year in Uttar Pradesh. This year, they’ve gone several steps (16.7 million trees!) further and done it in just 12 hours.

India has  promised to increase forest coverage to 95 million hectares by 2030 as part of it’s role in the Paris Agreement. The Indian governement has forecasted a spend of $6.2 billion for creating new forests.

Madhya Pradesh’s government spearheaded this particualr campaign and were understandably thrilled with its success.

Shivraj Singh Chouhan, state chief minister for the region, tweeted after the event: “Thank people of Jabalpur for making tree plantation a huge success. You are not only saving Narmada, but also [the] planet.”

“We cannot be too selfish. We have to spare something for upcoming generations,” he continued.

Is planting with drones the future of sustainability?

Australia’s answer to deforestation is a little more technical than the enlisting of 1.5 million volunteers!

Dr. Susan Graham, an Australian engineer, is developing a drone that could eventually result in the planting of an additional 1 bilion trees per year, and there’s no time to waste! NASA predicts that if current deforestation levels proceed, the world’s rainforests may be completely in as little as 100 years.

The world has lost nearly half its forests for agriculture, development or resource extraction. An estimated 18 million acres are lost each year and deforestation and forest degradation are responsible for 17 per cent of all carbon emissions. The value of the benefits that standing forests provide is immense.

The planet loses 15 billion trees every year so “although we plant about 9 billion trees every year, that leaves a net loss of 6 billion trees,” Dr Graham said. “The rate of replanting is just too slow.”

The drones that Dr Graham is developing could not only plant at ten times the rate of hand planting and at 20 per cent of the cost; they can also access, and plant, in previously inacessible areas , such as mountainsides or steep hills.

The drone technology is currently being tested around the world so watch this space!

What are your views on sustainability and deforestation? What can, and should,  organisations be doing to help? Let us know in the comments section below. 

In other procurement news this week….

Japan & EU Trade Deal Snubs Trump

  • Japan took on the mantle of the global rules-based trading system, as it sidestepped a failing trade agreement with the United States to forge a historic new pact with the European Union
  • The trade deal that will cover nearly 30 percent of the global economy, 10 percent of the world’s population and 40 percent of global trade
  • The deal would lower trade barriers for a sweeping array of products, including pork, wine, cheese and automobiles. The pact would be a heavy blow to American producers of these goods/

Read more on The Washington Post

How Will Northern Ireland’s ££ Be Spent?

  • Northern Ireland is set to receive an extra £1bn over the next two years as part of a deal with the Democratic Unionist Party (DUP) to keep Theresa May’s minority government in power
  • Arlene Foster, leader of the DUP, said the deal would boost the economy and allow investment in new infrastructure, health and education
  • There are around 1.8m people in Northern Island and the headline deal equates to an extra £550 per head

Read more on Supply Management

Amazon’s latest venture is wine!

  • Amazon’s continuing quest to make and sell everything in the world has led to it branching out into a new area: overseeing the production of a new range of wines
  • Unusually for Amazon, this new brand isn’t aimed at undercutting the competition with bargain-basement prices, as with its Amazon Basics line
  • Amazon Wine’s Nick Loeffler added: “We’re thrilled to connect wineries, like King Estate, with millions of customers and give them an innovative format to launch new brands”

Read more on The Guardian 

China’s TIP Demotion: Productive ot Provocative?

2017’s Trafficking in Persons report highlights China as one of the worst global offenders of human trafficking. How does this impact your supply chain decisions? 

The U.S.  government revealed details of its annual Trafficking in Persons (TIP) report last week. The report is the government’s principal diplomatic tool to engage foreign governments on human trafficking.  Rex W. Tillerson, Secretary of State said this year’s report “highlights the successes achieved and the remaining challenges before us on this important global issue.”

The U.S department of state assigns each country to one of three tiers (Tier 1 being the best and Tier 3, the worst) based on their government’s efforts to acknowledge, combat and prosecute instances of human trafficking. Countries must consistently demonstrate improvement in these areas to maintain the highest ranking and avoid demotion.

Myanmar, for example, was one of the countries to be upgraded to Tier 2, following its efforts to reduce child recruitment for the military.

But the most controversial decision this year was China’s demotion to Tier 3, where it will join the likes of Iran, North Korea, Russia and Venezuela.

“China was downgraded to Tier 3 status in this year’s report in part because it has not taken serious steps to end its own complicity in trafficking, including forced laborers from North Korea that are located in China,” Tillerson said as he presented the report.

The demotion marks the first time that  the Trump administration has publicly criticised Beijing’s human rights record, and it prompted an unsurpringly frosty response from the Chinese, “The government’s determination in fighting human trafficking is unwavering and outcomes are there for all to see,” spokesman Lu Kang said. “China firmly opposes the US’ irresponsible remarks on other countries’ fight against human trafficking, based on its domestic laws.”

How Will This Impact China And Global Supply Chains?

There are a number of things to consider if your global supply chain extends to China or other countries ranked in Tier 3.

  • The U.S may consider imposing sanctions that limit access to US and international aid. Congressman Chris Smith said  “Hopefully, the new tier ranking coupled with robust diplomacy—including the imposition of sanctions authorised under Tier 3—will lead to systemic reforms that will save women and children’s lives and ensure that Chinese exports are not made with slave labor.”  Whilst such sanctions have often been waived in the past, it would come as no surprise if Trump decided to break with tradition. Indeed, given his vocal criticism of Chinese trade, he will be under some pressure to impose consequences.  It has been reported this week that Trump is considering trade actions against Beijing including tariffs on steel imports.
  • Suppliers operating in newly placed tier 3 countries will, appropriately, be under increased preasure to audit their supply chains. If you’re sourcing in China, it’s entirely plausible that you’re complicit in trafficking or forced labour.  With supply chains facing extra scruntiny, it would be prudent for organisations sourcing in China to have accurate information at their fingertips. Make sure you know who you are sourcing from, what’s going on behind the scenes of your product and make detailed lists of every farm, vessel or facility to which you are connected.
  • China’s demotion might prompt organisations to stop sourcing in China altogether. Will  “Made in China” labels deter consumers who want to avoid supporting slave labour and traffcking? Changing suppliers, particularly when it’s to a new country,  is time-consuming and expensive. This will be the greatest concern for procurement and supply chain pros.

You can download the TIP Report in full here

What do you think about China’s demotion in this year’s Trafficking in Persons Report? Productive or provocative? Should President Trump impose sanctions on China? Let us know what you think in the comments below. 

In other procurement news this week….

Will Supermarkets Go Uber On Us?

  • Britain’s major supermarkets are testing ‘peak time’ pricing allowing grocers to raise or cut items based on demand
  • Tesco, Morrisons and Mark & Spencer are running trials of electronic labels which allow them to change prices at the click of a button
  • Retail experts say this could spell the end of fixed prices for consumer goods and services within five years, to be replaced by an Uber-style pricing revolution
  • Morrisons said its trial was in the “early stages” and it had not yet decided whether to roll it out across the country

Read more on International Business Times.

Apple Is Moving Its Supply Chain Towards Green Energy

  • Two years ago, Apple embarked on an ambitious plan to help its biggest suppliers switch to clean power sources. As of early June, the tech giant has managed to get eight partners on board
  • According to the tech giant’s latest update on its progress toward environmental goals, integrated circuit packaging maker Ibiden will be the first partner in Japan to power its Apple-related operations completely with renewable energy
  • Apple’s $1.5 billion green bond issued in February 2016 is still the largest issued by any U.S. technology company

Read more on Green Biz.

AI that can read minds 

  • CMU scientists have been working on is a system that can apparently read complex thoughts based on brain scans, possibly even interpreting complete sentences
  • Using a smart algorithm, the team could discern what was being thought about at any given time — and even the order of a particular sentence
  • After training the algorithm on 239 of the 240 sentences and their corresponding brain scans, the researchers were able to predict the final sentence based only on the brain data

Read more on Digital Trends 

 

IIoT: Tomorrow Thinking for Supply Chain

The Internet of Things (IoT) is designed to make our data more useable. What opportunities and concerns does it present within logistics, where it is referred to as Industrial Internet of Things (IIoT) ?

The trends of Supply Chain technology are shaping the future of logistics management.

The common thread is the push toward hyper-interoperability, where technology, people and process collaborate to create true visibility, accurate orders, and happy customers.

It is impossible to ignore the pressure on retailers and distribution centre (DC) to re-engineer operations to meet the Omni-channel fulfilment mandate. The evolution of the Internet of Things (IoT), designed to make data more usable, is quickly becoming a reality across global supply chains.

The Industrial lnternet of Things

Definitions of IoT spin around connecting sensors, programmable logic controllers, and RFID data with the internet so that other systems or analytical software can respond to or make sense of the data. An RF gun, voice recognition, and RFID in the warehouse all provide IoT–style sensor data; it is called the “Industrial Internet of Things” (IIoT) to differentiate from consumer applications.

The order management system needs to orchestrate the fulfilment by interacting with inventory allocation, warehouse, management, transportation, and workforce scheduling systems using user-configurable business rule. The overall goal for Omni-channel is to satisfy more consumer demand with acceptable profit margins.

Logistics management in the warehouse

Many opportunities for improvement through smart forklifts, diagnostics of the equipment, speed controls, anti-slip technology, collision detection, fork speed optimisation, promoting new process flows, autonomously trip to a shipping dock for unloading, etc., are some of the applications and possibility a multi-channel system provides for the improvement of the overall process.

Transportation management

Tracking trucks based on RFID, GPS, RF scans, temperature, sensors embedded in the freight -all of these fit the definition of IIoT, the benefits being: improving network-based routing, the use of a smart phone for routing to determine congestion and better alternative routes.

Security

Security is the number one concern around IIoT, working hand in hand with public cloud solutions. It helps to detect Cyber attackers’ techniques quickly and avoid being tricked by them.

Inventory Management

This is a  hidden key to success. A major application of Omni-channel is a customer ordering a product and the retailer fulfilling the order from within their store network versus a distribution center. This introduces the requirement of advanced information systems to provide awareness of inventory throughout the store network. The omnichannel system would identify the stores with the right inventory and determine the most cost-effective location to fulfill from to provide the promised service level. Retailers challenge is the implementation of new order of management systems, to build a single view of inventory availability – foundation of Omni-channel fulfillment – and to recognize the new consumer’s expectation, the goal being to optimize inventory deployment so that the required inventory is where it should be to satisfy consumer demand at a lower cost.

Ordering

The first step is for the retailer to understand the Omni-channel strategies and how the customer’ buying patterns have changed (ordering an item online, by a mobile, from a store and picking it later, the item being shipped to the customer’s home, the customer calling to a call centre, etc. A fully-functional technology Omni-channel fulfilment operation has to be integrated according to the various selling systems.

Shipment and Delivery

Omni-channel technology, as the one IIoT provides,  plays a vital role in this environment by enabling store employees to efficiently navigate the store floor to find the ordered inventory. Once the item is retrieved, store employees utilize packaging stations to prepare order for shipment and utilize small parcel carriers to pick-up and deliver the orders. Using the same trailers scheduled for normal store delivery, however, separating these pre-ordered items on the trailer is the critical piece in this strategy. Loading these items at the front of the trailer, labeling them with special tags utilizing barcode-scanning technology, and using colored totes are a few ways to flag the inventory.

Returns processing

Returns processing is still an improvement opportunity for many Omni-channel retailers. The goal is to allow a consumer to return purchases to either stores or a central returns facility regardless of where the sale originates.

The top three priorities identified are inventory planning, fulfillment capabilities and returns processing. Retailers have to keep working on the enterprise-wide visibility of available inventory. Inventory must be deployed differently in an Omni-channel world; many retailers are beginning to address that challenge, developing flexible fulfillment capabilities that leverage stores, DCs, and vendors to fulfill consumer demand. However, store fulfillment processes are not as efficient as they are in a DC where conditions are more controlled. Omni- channel is having a profound impact on supply chain organizations-especially logistics across all levels of maturity, being better equipped to embrace Omni-channel from a people, process and technology perspective.

So what new approaches are you applying to your Supply Chain? Let us know in the comments below.

This article was first published on LinkedIn

From Pittsburgh to Paris – Let’s Clear the Air

It’s all very well putting Pittsburgh before Paris, but did you know that modern anti-pollution laws first started in Pennsylvania? Tania Seary gives the run-down on steel cities, “death-fogs” and Pittsburgh’s incredible transformation into an innovation hub.      

It’s not every day Pittsburgh hits the news, but it certainly did last week with the comment, “I was elected to represent the citizens of Pittsburgh, not Paris”. The subtext is that there’s an obligation to protect the steel industry before the climate.

I’m not a political analyst, nor a climate change expert, but I have lived in Pittsburgh, visited Paris and worked in the metals industry. I therefore wanted to share some of my own personal learnings (and give some historical context) for those of who are trying to catch up with all the news.    

The Donora Death Fog

Ironically, Pittsburgh is only 30 miles north of a town which famously claims to have kick-started modern anti-pollution laws.

You may not have heard of the Donora Death Fog (actually a smog), where the deadly combination of an atmospheric inversion, toxic gases from the town’s zinc and steel works led to the death of 20 people and half a town hospitalised in 1948.

Comparable to the Great Smog of London and perhaps even modern-day Shanghai, the Death Fog played a big part in opening the eyes of Americans to the hazards of air pollution. The tagline at the Donora Smog Museum is “Clean Air Started Here”, because concerted political action saw the first act concerning air pollution being put into law in 1959. Pennsylvania passed legislation that afforded the state the authority to prevent the “pollution of the air by smokes, dusts, fumes, gases, odours, mists, vapours, pollens and similar matter, or any combination thereof”.

Modern Pittsburgh is a tech hub, not a steel city

The jobs that the administration wants to save left Pittsburgh in the 1970s. Since then, Pittsburgh has built itself into a great example of a city that has thrived on new opportunities.

I had the pleasure of working in Pittsburgh for a couple of years around the turn of the century – in fact, I was there during the Y2K frenzy. For those of you who weren’t in the workforce then, the “Y2K bug” caused a panic when people thought the world’s computing systems would go into a meltdown when dates changed from 1999 to 2000. The consulting companies made a fortune!

Although it was once among the most polluted cities in the country, Pittsburgh has reinvented itself from a steel town to a centre of “eds and meds”. It has become a hub of technical innovation and medical research. The city even has its own Google outpost, along with a test track for autonomous cars.

In reinventing itself, Pittsburgh has benefited from flagship universities like Carnegie Mellon and the University of Pittsburgh, which produce their own tech entrepreneurs and medical breakthroughs.

Pittsburgh nurtures entrepreneurs

I have to mention two of the city’s most famous entrepreneurs – both named Andrew. Andrew Carnegie and Andrew Mellon were huge drivers and beneficiaries of the steel industry (like the U.S. itself) and then spent the large majority of their lives giving their money away.

Born in 1835, Andrew Carnegie was a Scottish-American industrialist who is still identified as one of the richest Americans ever. By the time he was 50, he had almost total control of steel production in Pennsylvania. He squeezed every penny out of his mills, living by a famous motto that every procurement professional can relate to: “Watch the costs, and the profits will take care of themselves.”

He sold Pittsburgh’s Carnegie Steel Company to J.P. Morgan in 1901 for half a billion dollars, propelling him to the position of richest American (surpassing even John D Rockefeller). While J.P. Morgan transformed his company into the U.S. Steel Corporation, Carnegie devoted the rest of his life to large-scale philanthropy, with Pittsburgh itself benefiting enormously with stunning libraries, a university, museums, a gilded concert hall and more.

It seems like the state governors and city mayors who are committed to upholding the 2015 Paris agreement agree with Andrew Carnegie’s quote: “Do your duty, and a little more, and the future will take care of itself.”

Or, in Andrew Mellon’s words, “Every man wants to connect his life with something he thinks eternal”.

Andrew Mellon built up a financial-industrial empire throughout the late nineteenth century by supplying capital for Pittsburgh-based corporations. He founded the Aluminium Company of America (Alcoa) and branched into industrial activities including oil, steel, shipbuilding and construction. Mellon also reformed the US Government’s tax structure while he was secretary of the treasury. Like Carnegie, he gave back an enormous amount of his wealth, with his philanthropy making possible the the building of the National Gallery of Art in Washington, D.C.

These days, Pittsburgh is home to one of the procurement profession’s all-time entrepreneurs, the legendary Glen Meakem. Meakem founded Freemarkets Inc., the first online auction technology, which was later purchased by Ariba. Keeping with tradition, Meakem has also invested a lot of his resources into philanthropy.

Giving back

The story of these entrepreneurs all point to a wider trend as Pittsburgh continues to evolve. Like Carnegie and Mellon, the city grew rich on the steel industry, but now it’s giving back. Firstly, by producing a new generation of entrepreneurs whose success ultimately benefits the community, and secondly, by being part of a climate alliance that is looking for future opportunities rather than trying to bring back the past.

Think Big, Think Business, Think People

“I’d rather regret the things I did, than the things I didn’t do.” Insights and wisdom from the career of Hans Melotte, Starbucks EVP Supply Chain and ISM Chair. 

Hans Melotte is less than one year into his “wonderful new adventure” leading Starbucks’ global supply chain. At the same time, he is nearing the end of his tenure as Chair of the ISM Board of Directors. We caught up with Melotte at #ISM2017 to discuss topics close to his heart, including the importance of intellectual curiosity for procurement and supply managers.

Melotte’s Mantra

“There’s a personal mantra I’ve always tried to adhere to,” says Melotte. “Think business, think big, think people.”

Think business: “Let’s not just daydream here – as a supply management professional, you’re not the centre of the world. Your role is all about enabling profitable growth for your company, and the only way to do that is for you to think in terms of business or customer centricity.”

Think big: “Starbucks’ aspiration is very bold, and very ambitious. If we agree our role is to help the company achieve its aspirations, then it’s up to us to be equally bold, or there will be asymmetry between the company agenda and our agenda.”

Melotte makes the point that thinking big should be inherent in any leadership position: “I don’t think any company would say it’s okay to be a mediocre leader.”

Think people:No matter what your agenda may be, everything starts and ends with people.” Melotte is delighted to see so many young professionals filling the halls of the #ISM2017 conference: “I’m so impressed by young professionals – their ambition, their resumes and their enthusiasm. It’s incredibly energising, and humbling as well.”

Moving between industries

Last year, Melotte took a significant cross-industry leap when he moved from Johnson & Johnson to Starbucks. His advice is that professionals – particularly those with high learning agility – should have confidence about moving between industries.

“There’s no right or wrong career. People have a tendency to stack-rank careers and give advice – ‘do this, don’t do that’. I believe you just have to follow your own passion and keep the fire in your belly lit. For me, this was all about starting a new adventure and seizing an opportunity that allowed me to step outside my comfort zone and grow. Life’s too short to not experiment by stepping off the proven path. I’d rather regret the things I did, than the things I didn’t do.”

The ISM Chairmanship

We asked Melotte why he took on the demanding role of ISM Chair, particularly during a time when he was transitioning his own career from J&J to Starbucks. “There was a pyramid of motives”, he replied. “I’d always recommend that people take on an outside-of-industry role. For me, one reason was that I felt grateful, and obligated to give back to the discipline. If the discipline has been good to you, be good to the discipline. Secondly, it has enabled me to access a lens to the world which allows an incredible amount of learning. The board itself is a wonderful network to be part of. Finally, there’s no denying that trying to be a worthy Chairman grows you as a person.”

What contribution is Melotte most proud of in his tenure as ISM Chair? “ISM is a well-known brand and institution, so it doesn’t need extra polish on the logo. What it does need is constant change and evolution – I took it as a great compliment from CEO Tom Derry when he told me over the phone that I’ve helped ISM think more strategically, and think more about the future.”

Intellectual curiosity

“You really owe it to yourself to constantly invest in yourself through continuous learning and continuous education,” says Melotte. “Learn from others, grow and develop. One of the pitfalls that companies step into is when they make statements like ‘we’re different, we’re unique, this doesn’t apply to us’. No matter how good you are as a company, you can always learn from other industries.”

“Intellectual curiosity means being on a learning journey that never ends. It should have no pause button.”

Image: Starbucks.com