Category Archives: Procurement News

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

 

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